2020 MidWestOne Financial Group, Inc. Annual Report

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