2020 MidWestOne Financial Group, Inc. Annual Report

2020 ANNUAL REPORT Navigating Turbulent Times

ON THE COVER Mylene Vargas Espin and Adrian Velasco Pacheco and their children Ariana and Adrian safely enjoy a movie at FilmScene. It all started with a MidWest One Checking account. Now they have a full relationship with MidWest One . Banker Karina Beltran helped both to build their credit, buy their first car, and buy their first home.

INSIDE

MIDWEST ONE FINANCIAL GROUP, INC. AND MIDWEST ONE BANK BOARDS OF DIRECTORS

Ruth E. Stanoch: Corporate Affairs Consultant Nathaniel J. Kaeding: Director, Business Development and Client Relations, Build to Suit, Inc. Larry D. Albert: Retired Executive Vice President, MidWest One Financial Group, Inc. Matthew J. Hayek: Attorney & Partner, Hayek, Moreland, Smith & Bergus, LLP. Charles N. Funk: Chief Executive Officer and Director, MidWest One Financial Group, Inc., and Chief Executive Officer, MidWest One Bank Richard J. Hartig: Chairman, Hartig Drug Stores Douglas K. True: Retired Senior Vice President and Treasurer, University of Iowa Janet Godwin: CEO, ACT, Inc. Kevin W. Monson: Founder and Chairman Emeritus, Neumann Monson Architects: Chairman of the Board, MidWest One Financial Group, Inc. and MidWest One Bank Tracy S. McCormick: CFO and Director, Mill Creek Development Company Jennifer Leigh Hauschildt: Vice President of Human Resources, Uponor Charles J. Schrup III: Retired Bank Executive, American Trust; MidWest One Bank Board Member Richard R. Donohue: CFO, Acumen Advisors Kurt R. Weise: Retired Executive Vice President, MidWest On e Financial Group, Inc. Douglas H. Greeff: President, Greeff Advisory LLC; MidWest One Financial Group, Inc. Board Member

4 To Our Shareholders 10 Financial Highlights 11 Consolidated Balance Sheets 12 Consolidated Statements of Income 13 Consolidated Statements of Shareholders’ Equity 13 Share Price 14 Leaning in to Len 16 Navigating Turbulent Times 18 Taking Care of Customers 20 Paycheck Protection Program 22 Adaptation and Resilience 24 Taking Care of Communities 26 New Trust Team in Twin Cities

RIGHT Robert and Kelly McClean dreamed of

opening their own business. Robert’s zest for Jamaican fare grew into their family rasta-rant. MidWest One Bank helped “Island Vybz” food and catering get on the road to success.

KEVIN W. MONSON , Chairman CHARLES N. FUNK , Chief Executive Officer LEN D. DEVAISHER , President and COO

TO OUR SHAREHOLDERS

“The problem with the future is that it usually arrives before we’re ready for it.”

A rnold H. Glasow, at age 92 in 1995, wrote these words, and we can think of no better way to look back on the year 2020. Your company, MidWest One Financial Group, Inc., stood resolutely during this year and ended the year in a strong position. That said, the year was not without many struggles as we collectively faced issues and situations that we had never before seen. We began the year with optimism and momentum as we were coming off a year of record earnings in 2019. That optimism soon turned to concern and uncertainty as late February brought on the Pandemic. Little did we know then that we would be writing this 86th annual letter to our shareholders nearly one year later with COVID cases still abundant and the prospect of many months before we can truly return to “normal”. It would be an overstatement to say that our company was “ready” for the Pandemic. It would not be an overstatement to say that our company responded in a way that pleased our four core constituencies: our customers, employees, communities, and shareholders. The following list is not inclusive, but an indicator of extraordinary efforts to take care of our customers, our employees, and our communities: • We immediately supplied all employees and locations with ample supplies of sanitizer and masks. Further, we quickly implemented social distancing requirements for employees who were in our buildings. • We escalated our work from home capabilities and at one point in the year, had more than 40% of our employees working from home. In addition, after some returned to our buildings, we implemented “A” and “B” teams so that not everyone in one department would be together at the same time. • Twice during the year, we closed our lobbies due to COVID escalations in local communities and served customers who came to our offices via the drive-up lanes. For those customers who needed to come into our buildings, we required masks and prior appointments. Of course, our

technology, discussed later, allowed us to serve the majority of our customers digitally. • Thanks to our past investments in technology, we were not only able to allow our employees to work remotely, but also to accelerate the transition of our customers to digital channels. Although teller transactions have been declining at our company and in our industry for years, this accelerated in 2020 as our customers stayed in their homes. In the third quarter of 2019, we served about 650,000 transactions in our offices via the teller line. That number in 2020 was 526,000! At the same time, our digital transactions exploded. The result? We continued to serve our customers, we just served them differently in 2020. • When the U.S. Government established the Payment Protection Program, we were ready at MidWest One ! Were we ever! Over the period of a little more than a month, we were able to fund more than $345 million—roughly 10% of our loan portfolio—in PPP loans. We had about 3,500 of our customers who were served in this program and for some of them, these funds were the difference between staying open and shutting their doors. • Many of our employees are parents whose children were forced to learn at home. We supported these employees with generous and additional consideration in terms of paid time off. • In late summer, we gave all employees a “Just For You” gesture which included two additional paid time days off as well as a cash stipend. • A “hotline” was established through our Business Continuity Group (which met weekly and sometimes more frequently). All questions (there were many!) were quickly answered to assure strong communication. • In late spring, we earmarked an additional $150,000 to be given back to our communities throughout our footprint and our local leaders in each market identified worthy causes they believed to be most in need of additional funding.

4 MidWest One Financial Group, Inc. 2020 Annual Report

MidWest One Financial Group, Inc. 2020 Annual Report 5

When we consider what has been written above, we could legitimately say “that was quite a year”! But, of course, there is more, and we’ll now turn to the financial performance of the company. 2020 net income was recorded at $6.6 million and earnings per diluted share were $0.41. This compares to our record earnings of $43.63 million and earnings per diluted share of $2.93 in 2019. Two major events impacted our decline in reported earnings. • In the third quarter, we incurred a goodwill write-down charge of $31.5 million on our balance sheet. A goodwill charge is taken when the estimated fair value of the company is less than the book value. Importantly, this was measured as of September 30, 2020 when our stock price was near its low for the year. It is critical to note that a goodwill charge is a non-cash charge to earnings and, as such, has no effect on the Company’s regulatory capital ratios, liquidity, and cash. • The U.S. banking industry collectively set aside billions of dollars in credit loss reserves. At MidWest One , we bolstered our credit loss reserve during the year to account and prepare for the uncertainty of future economic losses our borrowers might incur as a result of the Pandemic. This made for a very uneven earnings trend. We took a very large credit loss provision ($21.7 million) in the first quarter and another $9.7 million in quarters two and three combined. However, we released credit loss reserves in the fourth quarter in the amount of $3 million. When all this activity is tallied, we ended the year with a credit loss reserve of 1.72% of our loan portfolio (excluding PPP loans, which have a government guarantee). We strongly believe this reserve is ample for what might be ahead of us in 2021 and 2022. Also noteworthy during the year was our company’s ability to raise more capital to weather whatever storms might be ahead. In early July, we accessed the capital markets to raise $65 million in subordinated debt. Unlike the Great Recession of 2008-10, the capital markets have been open to commercial banks during the Pandemic and this acquisition of “Tier 2” regulatory capital will serve us well in the future. Of note to readers is that MidWest One received an investment grade rating of BBB- from the Kroll Ratings Agency. As you will note elsewhere in this report, our capital ratings continue to be well in excess of regulatory minimums. To summarize, yes, a very active year and as we say, “there were many moving parts” in our financial statements. We begin 2021 in a position of strength with the ability to continue to grow and expand our market share throughout our footprint. One of the effects created by the Pandemic was a significant shift in the composition of commercial bank balance sheets. The unprecedented liquidity created by the Federal Reserve sent unexpectedly large inflows of deposits into the banking system. And, the slow economy combined with the abundant stimulus provided by the PPP program served to severely limit loan growth. This is best seen when looking at the closely watched loan to deposit ratio at MidWest One . We ended 2019 with a ratio of 92.6% and because of the deposit inflows and loan paydowns, we ended 2020 at 76.6%. Naturally, this negatively affected our net interest margin as did the zero-interest rate policy enacted by the

Federal Reserve. As such, our net interest margin declined from 3.82% in 2019 to 3.30% in 2020. We expect this margin pressure to extend to 2021 until interest rates begin to rise again. A real bright spot in our company in 2020 was the performance of our key fee producing entities. Our Home Mortgage Center was able to leverage the historically low mortgage rates to provide our customers with once in a lifetime opportunities to lock in long-term, low interest rates on their mortgages. Revenues frommortgage loan fees were $11.1 million in 2020, up from a strong 2019 number of $3.7 million. For the entire year, we closed 2,156 mortgage loans totaling $465.7 million. For perspective, we closed $254.9 million of mortgage loans in 2019. Under the leadership of Senior Vice President, R.J. Lang, our Home Mortgage Center (HMC) has made significant progress since he joined our company in 2017. Not only did we serve our customers well in 2020, but RJ and his team did a masterful job integrating new colleagues who joined through the 2019 merger with ATBancorp. The contributions from that addition were a significant driver in 2020. Our Wealth Management units are another 2020 bright light. Readers will recall that we tripled the size of our Trust Department in 2019 with the AT merger. Our Trust leaders skillfully navigated this merger and ended 2020 by slightly exceeding their budget. This was done despite a delay to collect estate fees as Iowa courts have been generally shut down by the Pandemic. In addition, in late 2020, we added three Trust professionals to serve our Twin Cities markets. These professionals have worked in this market for many years and after three years of searching for the “right” persons, we believe we are set to generate significant gains in assets under management from this part of our footprint in the years ahead. We plan to aggressively pursue this market in 2021 now that we have the right players on our team to do so. Our Investment Services unit, which is comprised of LPL Financial registered representatives, also had a record year in 2020. This group continues to gain market share and, while currently located primarily in Iowa, we see growth opportunities. We continue to be happy with the progress that has been made in newer markets like Denver. To summarize the performance from Wealth Management, top line revenues of $9.6 million exceeded 2019 by 19.8%. We are optimistic that we can continue to expand the percentage of company revenues coming from this division. Asset quality—the soundness of our loan portfolio—continues to be at the forefront of industry concerns. As mentioned above, the outlook brightened in the fourth quarter of 2020. We acknowledge the uncertainty which exists, not only for MidWest One but for all commercial banking institutions. We do not know how long the Pandemic will continue to affect vulnerable industries. We do not know when public confidence will return. We do not know the amount of future stimulus, if any, that will come from the U.S. Government. What we do know is that the effort and skill applied to the monitoring of the loan portfolio is the best it has been in our Company’s history. Long-time observers know that we encountered asset quality problems in the 2016-18 time frame. We’ve addressed these problem credits, we’ve strengthened internal processes, and we’ve also added talented individuals whose job is to

Return on Average Equity (%) r o Average Equity (%)

Price / LTM EPS (X) P i / LT EPS (X)

8.00 16.00 24.00 32.00 40.00 48.00 56.00 64.00

12.00

10.00

8.00

6.00

4.00

2.00

FY2016

FY2017

FY2018

FY2019

FY2020

0.00

FY2016

FY2017

FY2018

FY2019

FY2020

MOFG

Peer

Midwest Banks

MOFG

Peer

Midwest Banks

Dividend Payout Ratio (%) Divi yout Ratio (%)

Return on Average Assets (%) t rn on Average Assets (%)

100.00 125.00 150.00 175.00 200.00 225.00

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40

0.00 25.00 50.00 75.00

FY2016

FY2017

FY2018

FY2019

FY2020

MOFG

Peer

Midwest Banks

FY2016

FY2017

FY2018

FY2019

FY2020

MOFG

Peer

Midwest Banks

Net Interest Margin (%) Net Int rest Margin (%)

Total Return Performance T t l eturn Performance

325.00

3.20 3.30 3.40 3.50 3.60 3.70 3.80 3.90

275.00

225.00

175.00

125.00

75.00

12/31/2015

12/31/2016

12/31/2017

12/31/2018

12/31/2019

12/31/2020

FY2016

FY2017

FY2018

FY2019

FY2020

MidWestOne Financial Group, Inc.

NASDAQ Composite Index

SNLMidwest Bank Index

MOFG

Peer

Midwest Banks

Efficiency Ratio (%) Efficiency Ratio (%)

52.00 54.00 56.00 58.00 60.00 62.00 64.00 66.00 68.00

FY2016

FY2017

FY2018

FY2019

FY2020

MOFG

Peer

Midwest Banks

6 MidWest One Financial Group, Inc. 2020 Annual Report

MidWest One Financial Group, Inc. 2020 Annual Report 7

At year end, there was a growing sense of optimism that 2021 will bring new opportunities and enthusiasm as the MidWest One culture is demonstrated, understood, and practiced in all locations.

What will this look like? We must return to organic loan growth. Despite poor economic conditions in 2020’s fourth quarter, we were able to grow our core loan portfolio. In this era of very low interest rates and low net interest margins, this is a must. As stated earlier, we will continue to provide the resources necessary to grow our wealth management business. We believe this will allow us to continue to move toward our strategic goal of non-interest income rising as a percentage of total revenues. We believe 2021 will be a good year, though less robust than 2020, for the Home Mortgage Center. We continue to believe we have room to expand our reach in this unit, especially in the Twin Cities. Our expense management has been good, as evidenced by an efficiency ratio of 56.92% in 2020. We will continue to evaluate the appropriate amount of offices necessary to serve our customers. We have closed five banking offices in the last two years with very minimal customer disruption. We will exercise prudence with this analysis. One more note concerning technology: We all realize how essential good technology is to our ongoing operations. We must collectively be challenged to improve our use of technology each day. This is how a company leverages technology. We applaud and thank our staff for their hard work, perseverance, and dedication to our cause in 2020. It was not easy with many days filled with uncertainty and some, yes, with fear. But, together, we stayed the course. We stayed the course buoyed by our five Operating Principles. These Principles are discussed often and are at the core of what we do and who we are. For the eighth consecutive year, MidWest One —Iowa was named as a “Top Workplace” by the Des Moines Register . We were the highest rated commercial bank in the mid-sized company category. Our Twin Cities region received recognition as a “national standard” workplace and our engagement in this region showed good improvement from past years. And our Florida and Colorado regions recorded scores among the highest in our company. Our culture is important to us and is only strong because we have so many who model it in their daily lives. We welcomed a new President and Chief Operating Officer, Len D. Devaisher, who joined us in July. Len has won over our staff with his strong communication skills and banking acumen. He has a long and successful career in banking in the Midwest.

In October, we convened our annual Rally Day event in a remote setting. At this event, we recognized seven employees as winners of the President’s Award. These employees were: Joe McKenna, VP/ Mortgage Banker, Dubuque, IA; Joel Larsen, Regional President, Hudson, WI; Sandy Bailey, Market President, Oskaloosa, IA; Thais Winkleblack, SVP/ Trust Department Manager, Iowa City, IA; Nate Sojka, Systems Administrator II, Newport, MN; Sam Fordyce, Assistant Retail Manager, Iowa City, IA; Valerie Pullen, Trust Administrator, Dubuque, IA. We thank our Board of Directors, which has stood behind our efforts through thick and thin. This talented group spends many hours with the goal that their contributions help steer this corporate ship in the right direction. Finally, we end with a look back to last year’s letter when we wrote that the past year was “a year when MidWest One took a big step forward.” We think 2020 will someday be regarded as a year when we put our shoulder to the wheel and did what we needed to do to serve customers, employees, and communities. In 2021, we must move forward with resolve to produce good returns for our shareholders. We believe we have the team to do just that. It remains our great privilege to serve you, our loyal shareholders. Thank you for your faithful support.

protect the integrity of this portfolio. Let’s look at the numbers: • Our non-performing loans to total loans increased slightly from 1.21% at year-end 2019 to 1.23%. This flatness in ratio masks much improvement that was made during the year as we were able to resolve many problem assets. In December 2020, we added one $9.5 million hotel loan to the non-performing list that has been affected by the Pandemic. We believe we are fully reserved on this loan. • Our net charged-off loans as a percent of average loans outstanding were 0.15% in 2020, our best performance in five years. • As mentioned above, our allowance for credit losses ended the year at a strong 1.72%, ex-PPP. This is up from 0.84% a year ago. We believe these numbers combined with our staff’s vigilance will serve us well no matter what comes in 2021. As we look to the future, we begin with technology. The Pandemic forced us to re-direct our efforts to improve and enhance our technology. A new consumer banking platform was launched on September 28, 2020. No major technical issues were experienced during the conversion and services were brought online as scheduled. This implementation represented a significant commitment of resources and streamlined or provided many new features for our customers. These include improved security, new debit card controls, simpler person-to-person payment options, streamlined external transfers, self- service password resets, new personal finance tools, and more. The flexibility of the new platform ensures that as customer needs and preferences change, we will be able to change with them. This is but the beginning of this journey, and we look forward to leveraging this technology as we place increased emphasis on listening and responding to the voice of the customer.

There was also a concerted effort to rapidly adopt new customer facing systems that allowed us to efficiently administrate customer needs associated with the Payment Protection Program. The nature of this implementation demonstrated the value in maintaining a structure that can support the rapid deployment of best-in-class solutions. Additionally, our ability to remotely support customer needs and preferences using digital signatures and other tools increased dramatically. We anticipate that this digital acceleration will continue and have applied these same lessons internally. Increased emphasis was placed on a full buildout of an end-to-end workflow and electronic content management solution to improve customer service and efficiency. Adding to this, infrastructure enhancements to increase resiliency and flexibility were also completed according to schedule. We can confidently say that through the implementation of these internal technologies, we have saved many thousands of hours in staff time to perform various functions. As we move into 2021, our technology roadmap includes identification and implementation of additional virtual delivery capabilities based on customer need and preference. Our goal is to enhance engagement and personal service delivery as digital expectations grow. Other priorities include enhancements to the online account origination experience as well as mobile deposit feature enhancements. Further, we must improve our ability to access our wealth of data and improve our business intelligence function. This will allow us to evaluate data contextually in real-time. Not only will this aid in identifying customer preferences to facilitate a more personalized experience but will also improve our ability to identify which actions will support financial performance objectives. For MidWest One , 2021 shapes up to be another year of change. We’ve added management depth over the past few years and we are poised to move forward as a company.

Very sincerely yours,

Charles N. Funk Chief Executive Officer

Kevin W. Monson Chairman of the Board

Len D. Devaisher President and COO

8 MidWest One Financial Group, Inc. 2020 Annual Report

MidWest One Financial Group, Inc. 2020 Annual Report 9

CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share amounts)

FINANCIAL HIGHLIGHTS (dollars in thousands, except per share amounts)

2020

2019

2018

2017

2016

DECEMBER 31,

2020

2019

YEAR-END BALANCES Assets Investment Securities

$ 5,556,648

$ 4,653,573

$ 3,291,480

$ 3,212,271

$ 3,079,575

ASSETS

1,657,381 3,482,223 4,547,049

785,977

609,923

643,279

645,910

Cash and due from banks

$ 65,078

$ 67,174

Loans

3,451,266 3,728,655

2,398,779 2,612,929

2,286,695 2,605,319

2,165,143 2,480,448

Interest earning deposits in banks

17,409

6,112

Deposits

Federal funds sold

172

198

Shareholders’ Equity

515,250

508,982

357,067

340,304

305,456

Total cash and cash equivalents

82,659

73,484

Debt securities available for sale at fair value

1,657,381

785,977

AVERAGE BALANCES Assets Investment Securities

Loans held for sale

59,956

5,400

$ 5,135,841

$ 4,201,040

$ 3,249,718

$ 3,097,496

$ 2,993,875

Gross loans held for investment

3,496,790

3,469,236

1,139,954 3,551,945 4,184,406

669,859

636,362

641,328

551,383

Unearned income, net

(14,567)

(17,970)

Loans

3,157,127 3,362,713

2,354,354 2,608,725

2,201,364 2,503,481

2,161,376 2,445,363

Loans held for investment, net of unearned income

3,482,223

3,451,266

Total Deposits

Allowance for credit losses

(55,500)

(29,079)

Shareholders’ Equity

515,455

452,018

345,734

334,966

304,670

Total loans held for investment, net

3,426,723

3,422,187

RESULTS OF OPERATIONS Net Interest Income

Premises and equipment, net

86,401 62,477 25,242

90,723 91,918 32,218

$ 152,964

$ 143,650

$ 105,268

$ 103,781

$ 99,606

Goodwill

Credit Loss Expense Noninterest Income Noninterest Expense

28,369 38,620 149,893 13,322

7,158

7,300

17,334 22,751 80,123 29,075 18,699

7,983

Other intangible assets, net

31,246 117,535 50,203 43,630

23,215 83,215 37,968 30,351

23,434 87,806 27,251 20,391

Foreclosed assets, net

2,316

3,706

Other assets

153,493

147,960

Income Before Income Taxes

Total assets

$ 5,556,648

$ 4,653,573

Net Income

6,623

PER COMMON SHARE Net Income - Basic Net Income - Diluted

LIABILITIES AND SHAREHOLDERS’ EQUITY Noninterest bearing deposits

$

0.41 0.41 0.88

$

2.93 2.93 0.81

$

2.48 2.48 0.78

$

1.55 1.55 0.67

$

1.78 1.78 0.64

$ 910,655

$ 662,209

Interest-bearing deposits

3,636,394 4,547,049

3,066,446 3,728,655

Dividends Book Value Closing Price

Total deposits

32.17 24.50

31.49 36.23

29.32 24.83

27.85 33.53

26.71 37.60

Short-term borrowings

230,789 208,691 54,869

139,349 231,660 44,927

Long-term debt Other liabilities

ASSET QUALITY Bank Loans Past Due 30-89 Days Non-Performing Bank Loans

Total liabilities

5,041,398

4,144,591

$ 17,194

$ 12,328

$ 5,643

$ 9,252

$ 10,740

42,689

41,617

20,289

14,991 11,125

21,153

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 16,016,780 and 16,162,176

Net Charge Offs

5,265

7,386

6,052

5,560

-

-

RATIOS Return on Average Equity

1.28% 10.80% 0.13% 3.30% 56.92% 10.04%

9.65% 13.98% 1.04% 3.82% 57.56% 10.76% 0.84% 0.23% 1.21%

8.78% 11.87% 0.93% 3.60% 61.23% 10.64% 1.22% 0.26% 0.85%

5.58% 8.00% 0.60% 3.81% 58.63% 10.81% 1.23% 0.51% 0.66%

6.69% 10.13% 0.68% 3.80% 62.27% 10.18% 1.01% 0.26% 0.98%

16,581 300,137 188,191 (14,251)

16,581 297,390 201,105 (10,466)

Return on Average Tangible Equity

Additional paid-in capital

Return on Average Assets

Retained earnings

Net Interest Margin

Treasury stock at cost; 564,237 and 418,841 Accumulated other comprehensive income

Efficiency Ratio

24,592

4,372

Average Equity as a % of Average Assets Allowance for Bank Credit Losses as a % of Bank Loans (Excluding PPP Loans)

Total shareholders’ equity

515,250

508,982

Total liabilities and shareholders’ equity

$ 5,556,648

$ 4,653,573

1.72%

Net Bank Loan Charge-offs as a % of Average Bank Loans 0.15%

Non-performing Bank Loans as a % of Bank Loans

1.23%

10 MidWest One Financial Group, Inc. 2020 Annual Report

MidWest One Financial Group, Inc. 2020 Annual Report 11

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (dollars in thousands, except per share amounts)

CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share amounts)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

RETAINED EARNINGS

YEARS ENDED DECEMBER 31,

TREASURY STOCK

PAID-IN CAPITAL

COMMON STOCK

2020

2019

2018

ADDITIONAL

TOTAL

INTEREST INCOME

Loans, including fees Taxable securities

$158,656

$163,163

$111,193

Balance, December 31, 2017

$12,463

$187,486

$148,078

$(5,121)

$(2,602) $340,304

17,610

13,132

11,027

Tax-exempt investment securities

8,259

5,696

5,827

Cumulative effect of changes in accounting principle 1

- - - - - - - -

- - -

57

- - -

(57)

-

Other

262

450

62

Net income

30,351

-

30,351

Total interest income

184,787

182,441

128,109

Other comprehensive loss

- - - - -

(3,002)

(3,002)

Stock options exercised (9,700 shares)

(68)

204 547

- - - - -

136 (88)

INTEREST EXPENSE Deposits

Release/lapse of restriction on RSUs (29,715 shares) Repurchase of common stock (76,128 shares)

(635)

23,919

29,927

17,331

Short-term borrowings

914

1,847 7,017

1,315 4,195

-

(2,129)

(2,129)

Long-term debt

6,990

Share-based compensation

1,030

- -

1,030

Total interest expense Net interest income

31,823 152,964

38,791 143,650

22,841 105,268

Dividends paid on common stock ($0.78 per share)

-

(9,535)

(9,535)

Balance, December 31, 2018

$12,463

$187,813

$168,951

$(6,499)

$(5,661) $357,067

Credit loss expense

28,369

7,158

7,300

Net interest income after credit loss expense

124,595

136,492

97,968

Net income

- -

- -

43,630

- -

-

43,630 10,033

Other comprehensive income

-

10,033

NONINTEREST INCOME

Issuance of common stock for acquisition of ATBancorp (4,117,536 shares), net of offering expenses of $323 and liquidity discount of $2,355 Release/lapse of restriction on RSUs (31,354 shares) Repurchase of common stock (166,729 shares)

Investment services and trust activities

9,632 6,178 5,719

8,040 7,452 5,594 3,789 1,877

4,953 6,157 4,223 3,622 1,610 1,284

Service charges and fees

4,118

109,236

- - - -

-

113,354

Card revenue Loan revenue

- - - -

(815)

712

- - - -

(103)

10,185

-

(4,679)

(4,679)

Bank-owned life insurance Insurance commissions Investment securities gains, net

2,226

Share-based compensation

1,156

- -

1,156

-

734

Dividends paid on common stock ($0.81 per share)

-

(11,476) $201,105

(11,476)

184

90

193

Balance, December 31, 2019

$16,581

$297,390

$(10,466)

$4,372 $508,982

Other

4,496

3,670

1,173

Total noninterest income

38,620

31,246

23,215

Cumulative effect of changes in accounting principle 2

- - - - - - - -

- - -

(5,362)

- - - -

- -

(5,362)

Net income

6,623

6,623

Other comprehensive income Acquisition fair value finalization 3

- - - - -

20,220

20,220

NONINTEREST EXPENSE

2,355

- - - - -

2,355 (149)

Compensation and employee benefits Occupancy expense of premises, net

66,397

65,660

49,758

Release/lapse of restriction on RSUs (34,032 shares) Repurchase of common stock (179,428 shares)

(988)

839

9,348 7,865 6,153 5,362 3,815 6,976 1,858 1,746

8,647 7,717 8,049 4,579 3,789 5,906

7,597 5,565 4,641 2,951 2,660 2,296 1,533 1,353

-

(4,624)

(4,624)

Equipment

Share-based compensation

1,380

- -

1,380

Legal and professional

Dividends paid on common stock ($0.88 per share)

-

(14,175) $188,191

(14,175)

Data processing

Balance, December 31, 2020

$16,581

$300,137

$(14,251)

$24,592

$515,250

Marketing

Amortization of intangibles

(1) Reclassification due to adoption of ASU 2016-01, Financial Instruments - Overall, Recognition and Measurement of Financial Assets and Financial Liabilities . (2) Reclassification pursuant to adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . See Note 1. Nature of Business and Significant Accounting Policies for additional information. (3) Relates to the finalization of the purchase accounting adjustments for the ATBancorp acquisition. This purchase accounting adjustment had a $2.06 million impact on goodwill, $296 thousand impact on deferred income taxes, with the offsetting impact being to additional paid-in capital. See Note 7. Goodwill and Other Intangible Assets for additional information.

FDIC insurance Communications

690

1,701

Foreclosed assets, net Goodwill impairment

150

580

21

31,500

-

-

SHARE PRICE

Other expenses

8,723

10,217

4,840

Total noninterest expense

149,893 13,322

117,535 50,203

83,215 37,968

CASH DIVIDEND

CASH DIVIDEND

Income before income tax expense

2018

2020

HIGH $ 34.99 $ 34.75 $ 35.20 $ 34.83 HIGH $ 32.05 $ 29.54 $ 31.58 $ 37.05

LOW DECLARED

HIGH $ 35.88 $ 22.71 $ 21.24 $ 25.47

LOW DECLARED

Income tax expense

6,699

6,573

7,617

First Quarter Second Quarter Third Quarter Fourth Quarter

$ 30.70 $ 31.94 $ 31.92 $ 23.80

$ 0.195 $ 0.195 $ 0.195

First Quarter Second Quarter Third Quarter Fourth Quarter

$ 16.57 $ 16.20 $ 16.80 $ 17.78

$0.2200 $0.2200 $0.2200 $0.2200

Net income

$6,623

$43,630

$30,351

$ 0.195 CASH DIVIDEND

EARNINGS PER COMMON SHARE Basic

$0.41 $0.41

$2.93 $2.93

$2.48 $2.48

Diluted

2019

LOW DECLARED

First Quarter Second Quarter Third Quarter Fourth Quarter

$ 25.13 $ 26.02 $ 27.19 $ 29.06

$0.2025 $0.2025 $0.2025 $0.2025

12 MidWest One Financial Group, Inc. 2020 Annual Report

MidWest One Financial Group, Inc. 2020 Annual Report 13

“My role is to be someone willing to take lessons learned to think about how we future proof this organization. How do we position ourselves for continued strength?”

Leaning in to Len

— LEN DEVAISHER, PRESIDENT AND COO

T he right opportunity can come along when you least expect it. For Len Devaisher, that op- portunity arrived in the midst of a pandemic. Devaisher joined MidWest One Bank in July 2020 as President and COO. The new position is a natural next step in Devaisher’s career—a career highlighted by years of deep and varied leadership experience in banking as well as a couple of intriguing detours that add depth and texture to his résumé. “I started out working at a bank that at the time I started was not too dissimilar from where Mid- West One is today,” Devaisher says. That bank, Old National Bank, was so pleased with his work that they made him a promise when he and his family moved to Tanzania for three years for a position with Young Life. “The bank graciously told me, ‘Give us a call when you’re coming back, and we’ll have something for you.’ And I did—and they did.” In May 2016, Old National Bank relocated Devaish- er from the bank’s headquarters in Evansville, Indiana, to Madison, Wisconsin, where he became CEO for the region. In 2019, he made another move, this time to be- come the Vice President of Resource Development for the United Way of Dane County, Wisconsin. And then the MidWest One opportunity arose. “The more I looked into it, the more intriguing it became,” Devaisher says. “First, I was attracted to this company’s scale and culture. The scale presents meaningful opportunities to grow with our customers. The culture is the heart of community banking: caring commitment. Second, the opportunity to learn from Charlie Funk was very compelling. Charlie’s 20-year tenure demonstrates that a company can grow and evolve while still remaining true to its roots. Lessons from that journey are crucial for MidWest One ’s future.” If Devaisher is impressed by Funk, it is more than fair to say the feeling is mutual. “Len was a great hire,” says Funk. “He brings to our company very sound knowledge of our industry.

He’s an outstanding communicator. He’s not a good communicator. He’s an outstanding communicator. He connects well with people. He has an incredible work ethic and a tremendous capacity for the amount of work he can produce. When you combine work ethic with capacity, he hits it out of the park.” As intrigued as Devaisher was with the bank and its culture, the search committee was equally in- trigued with him. “Len was the clear choice for a whole host of rea- sons,” says board member Tracy McCormick. “He just brought so much to the table in terms of his leader- ship skill sets and banking background. But I think what the committee really liked about Len was his commitment to and belief in and support of a company’s culture. In his work with us, he really liked what he saw. And we saw in him someone who embraced our culture and brought similar values and work ethic to the table. There are many qualified candidates out there with great skills and so on, but there are not very many who can combine that with a real cultural fit. And we felt like we found that in Len.” Board chairman Kevin Monson agrees. “After an extensive national search, the bank was successful in hiring Len Devaisher as our new President and Chief Operating Officer. His extensive banking experience and clear cultural fit is evident as he energetically and effectively leads the bank. The Directors have great confidence in Len and the leader- ship he provides as we look to the future.” Asked what changes he anticipates may be coming to MidWest One under his leadership, Devaisher is quick to shift the focus to what he believes shouldn’t change. “I’m committed to continuing to nurture, to cul- tivate, to steward the legacy of the bank as it stands today. We have to understand the bedrock that we stand on: our mission and our operating principles. So that’s number one.” That’s not to say he isn’t aware of the ways in which the current moment demands change.

“I would say that the reality is that we’re a great company and a strong bank that’s operating in a changing industry—and one for which the change is accelerating. And so our company does, in fact, need to change. The mission doesn’t need to change. The values don’t need to change. But how we go about ex- ecuting what we do needs to continue to evolve. If the pace of change inside our organization isn’t matching what’s going on outside in the environment, in the market, then we’re in trouble.” Devaisher firmly believes these two ideas—hon- oring core values and embracing necessary change— can and should coexist in the bank’s operation. “My role is to be someone who understands and appreciates and values our history, our mission, our cul- ture, our operating principles and to be someone willing to take lessons learned—both internally and externally— to think about howwe future proof this organization. How do we position ourselves for continued strength?” For Devaisher, strength comes from a steadfast commitment to doing everything possible to serve the bank’s customers. “That means helping customers with the prod- ucts and services they want, with sound advice, by helping them avoid costly mistakes, and by helping them achieve their goals. If we continue to do that then we earn the right to be their bank. We know they have many choices, so I think a lot and talk a lot about earning the right to be their bank. We can never take our customers for granted.” McCormick could not be more comfortable with this approach to the future of MidWest One . “Len really believes in being involved in our com- munities, and helping people in our communities— even people who are not our customers. He seems to have all the things he needs to help us be successful and for him to be successful here.” Funk sums up that same idea evenmore succinctly: “Len Devaisher has significant upside. I’m very happy he’s here.”

14 MidWest One Financial Group, Inc. 2020 Annual Report

MidWest One Financial Group, Inc. 2020 Annual Report 15

Navigating Turbulent Times “I f I could go back and identify the biggest issue it was really that we had no real framework to depend on.”

“From the get-go, we aligned ourselves with CDC recommendations and held steady with that. That helped the employees because they always knew that’s what we were going to go back and look at,” Moore says. “The other question was when to close lobbies and what would the customer experience be if we closed the lobbies. How do we open the lobbies while protecting our employees?” And then there were the economic impact payments from the government. “There were these significant payments coming in and with them came plenty of questions from our customers. We had to make sure we had our customer service areas ramped up so that we were able to assist with questions,” says Moore. At the heart of all of these adaptive efforts was a commitment to clear communication—for employees and for customers. “Communication was key,” Moore says. “For employees, we set up a special e-mail to use if they had questions. If an employee had a concern, they had one area to reach out to and we would make sure it was addressed.” When it came to serving customers, the bank took a personal approach. “At the onset of the Pandemic, our bankers responded by proactively reaching out to their customers and trying to determine and fill their specific needs,” says Gary Sims, Executive Vice President and Chief Credit Officer. “When we all got sent home, so to speak, our bankers were out there reaching out to our customers asking, ‘What can we do to help?’ Whether it was a Paycheck Protection Program (PPP) loan, a payment deferral, or just good counsel about how to navigate the crisis, our bankers were there for our customers.”

Susan Moore, Senior Vice President and Chief Risk Officer, remembers the feeling of flux that dominated the early period of the public health emergency when each day seemed to bring some new and unanticipated challenge. “For those first fewmonths, the rules were changing every day. The recommendations from the CDC were changing every day. We operate in five states that also had new rules, it seemed, every day,” Moore recalls. “And then you add in this layer of disagreement around masks.” Moore and Soni Harney, Senior Vice President and Chief Human Resources Officer, ran point on the bank’s organization-wide response to COVID-19. In fact, CEO Charlie Funk is quick to point to Moore and Harney as emblematic of what was required for the bank to respond effectively. “We have a lot of people who demonstrate that key quality of resilience. They just kept coming back for more. And Susan and Soni really represented that,” Funk says. “They were in charge of the business continuity taskforce. Every day there would be emails from Oskaloosa and Osceola and Conrad and Parkersburg and Denver and Naples. And they would all be about what to do about this situation. There would be days when they would have 30, 40, 50 emails about what to do. Meanwhile, they kept doing their own jobs as well. They often worked late into the night and over the weekends. Those two gave it up for the company while continuing to do their jobs very well. It’s just amazing for me to think about that.” The pace of change required quick thinking, flexibility, a commitment to keeping employees informed, and close attention to the ongoing customer experience.

“From the get-go, we aligned ourselves with CDC recommendations and held steady with that. That helped the employees because they always knew that’s what we were going to go back and look at.” — SUSAN MOORE (RIGHT) SENIOR VICE PRESIDENT AND CHIEF RISK OFFICER WITH SONI HARNEY (LEFT) SENIOR VICE PRESIDENT AND CHIEF HUMAN RESOURCES OFFICER

During this challenging period, MidWest One Bank was committed to the wellbeing of our employees. That meant more than simple messages of support from leadership. It meant tangible efforts to improve a difficult situation. Efforts included:

• Providing two paid days off plus $100 to give employees a chance to relax and recharge • Creating a bank of hours that could be used for quarantine requirements and/or school and daycare closures • Providing alternative work schedules for those with ongoing significant impact from school and daycare closures • Ensuring that all employees knew of resources available to them to support mental health • Encouraging managers to keep people engaged and to be on the lookout for signs that an individual is struggling

16 MidWest One Financial Group, Inc. 2020 Annual Report

MidWest One Financial Group, Inc. 2020 Annual Report 17

Taking Care of Customers

“We asked our employees to look out for each other and to make sure that we were creating as safe of a work environment as we could.”

— DAVID LINDSTROM, EXECUTIVE VICE PRESIDENT FOR RETAIL BANKING

D uring the initial days of the public health emergency, it quickly became clear that issues of safety were of the utmost importance—including the safety of MidWest One’ s customers and employees. Limiting transmission of the COVID-19 virus was everyone’s responsibility, but just how to accomplish that was not completely clear at first. Nevertheless, MidWest One was quick to implement safety precautions across the organization while still prioritizing customer service. Achieving that balance, especially in a time of so much uncertainty, was an all-hands-on-deck endeavor. Senior Vice President and Chief Human Resources Officer Soni Harney and Senior Vice President and Chief Risk Officer Susan Moore took leading roles in coordinating that massive endeavor. In the early going, they hosted weekly phone calls with as many as 200 bank staffers from across the organization so that information and updates could be efficiently and accurately shared. That process went a long way toward keeping everyone on the same page. “It felt like a very united front and a very coordinated effort. We really tried to communicate well and often. Regardless of the line of business— whether you are a retail branch manager or you are a mortgage banker or you are a wealth advisor— our strategy was all the same,” Harney explains. “We’ve got to keep our employees safe, and we’ve also got to keep our customers safe. We all had to play by the same safety rules so that we were not bringing exposure into the workplace and we were also not, potentially, taking virus exposure out to the customers if we were going to meet with them outside bank walls.” The bank worked quickly to ensure that lobbies, which are central spaces where many people may gather at once to conduct business, were both welcoming and safe.

“With all of the uncertainty COVID introduced into our lives, from a wealth management perspective it also created great market turmoil,” says Executive Vice President for Wealth Management and Corporate Communications Greg Turner. “What we try to do with our customers is have an individual relationship based on creating a plan that’s specific to them and their needs. And so not forgetting the fact that there is all this craziness with COVID and wanting to ensure we respected all of the health related issues, there was a lot of market volatility in March. The approach I took was, let’s reach out as frequently as we can to our customers— number one to ask, ‘Are you okay?’ and number two to ask, ‘Do you have any questions about what’s going on with the market volatility?’” It was immediately clear to Turner and the wealth management staff how much their customers appreciated this personal approach and genuine interest in their wellbeing. “What was really interesting was that 10 percent of those conversations were about the market and 90 percent were about touching base with people and finding out how they were doing,” Turner says. “That was one of the really gratifying things that came out of 2020 in my mind. It was so much beyond your portfolio and your statement. It became about how people were doing. We strengthened our relationships in a really personal way.” It is no small feat for an organization with staff and facilities in five states to coordinate a response to an unprecedented event that requires quick, decisive, and flexible thinking. But the entire MidWest One team—no matter where they are located or what their job title is—rose to the occasion. “It took everybody. It took everybody. There were leaders at all levels,” Harney says. “That’s what I’m most proud of. People stepped up, and they did it to protect their coworkers and our customers and to make our buildings a safe place to be every day.”

Iowa City teller Sam Ramirez

“Our primary focus was twofold: we wanted to continue to meet our customers’ needs while also ensuring that all of the necessary precautions, per the Centers for Disease Control, were taken so that we could serve our customers in a manner that is safe for those customers and for our employees,” says Executive Vice President for Retail Banking David Lindstrom. Those precautions included requiring social distancing, installing sneeze guards at the teller line and at desks, maintaining a high level of cleanliness in public spaces, providing hand sanitizer, reserving the first hour of each business day for customers at high risk, and requiring masks for anyone working behind the teller line as well as for all bank employees who were not alone in a personal work space.

“We asked our employees to look out for each other and to make sure that we were creating as safe of a work environment as we could,” Lindstrom says. In March and November, creating a safe work environment meant taking the more aggressive step of closing the lobbies and conducting business only by appointment or via the bank’s drive-thru lanes. Even when the lobbies were open, customers were encouraged to use the drive-thru option to limit personal contact. “One of our key operating principles is working as one team,” says Lindstrom. “We really did a nice job with that. We definitely learned how to be well organized in our response to challenges. You want to make sure that calm, rational thinking prevails. It’s easy to get swept up in something like this.”

18 MidWest One Financial Group, Inc. 2020 Annual Report

MidWest One Financial Group, Inc. 2020 Annual Report 19