MidWestOne Financial Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year of 2021

MidWestOne Financial Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year of 2021

GlobeNewswire

Published

*Fourth* *Quarter Summary*^*1*· Net income for the fourth quarter was $14.3 million, or $0.91 per diluted common share.

· Total revenue, net of interest expense, of $50.0 million.
· Credit loss expense of $0.6 million.
· Noninterest expense of $30.4 million.

· Excluding Paycheck Protection Program ("PPP") loans, commercial loans were $2.68 billion^2, as compared to $2.64 billion^2, an increase of 5.5% annualized.
· Efficiency ratio was 56.74%^2, an increase of 40 basis points ("bps").
· Nonperforming assets ratio declined 5 bps to 0.53% and the net charge-off ratio was a recovery of 3 bps.
· Average total deposits were $5.0 billion, as compared to $4.9 billion, an increase of 2.7%, while cost of average total deposits decreased 2 bps to 0.24% and cost of funds decreased 2 bps to 0.35%.

*Full Year 2021 Summary*^*1*

· Record net income of $69.5 million, or $4.37 per diluted common share.
· Book value and tangible book value per share grew 4.6% and 6.4%^2, respectively.
· Return on average equity and return on average tangible equity of 13.18% and 16.63%^2, respectively.
· Net charge-off ratio was a recovery of 1 basis point.
· Efficiency ratio was 54.65%^2, a decline of 227 bps from the prior year.IOWA CITY, Iowa, Jan. 27, 2022 (GLOBE NEWSWIRE) -- MidWestOne Financial Group, Inc. (Nasdaq: MOFG) (“we”, “our”, or the "Company”) today reported net income for the fourth quarter of 2021 of $14.3 million, or $0.91 per diluted common share, compared to net income of $16.3 million, or $1.03 per diluted common share, for the linked quarter. For the full year of 2021, the Company reported record earnings, with net income of $69.5 million, or $4.37 per diluted common share, compared to net income for the full year of 2020 of $6.6 million, or $0.41 per diluted common share.

*CEO COMMENTARY*

Charles Funk, Chief Executive Officer of the Company, commented, "The fourth quarter of 2021 was a solid ending to a record earnings year for MidWestOne. During the quarter, we saw good ex-PPP commercial loan growth, continued progress in wealth management, and improvements in our nonperforming loans and nonperforming assets ratios. We are pleased with the return on average tangible equity of 13.50%.

Key to continued progress in our Company is quality loan growth. We saw ex-PPP linked quarter commercial loan growth of 5.5% annualized in the fourth quarter. This is even more impressive when considering that we saw a high level of pay-offs during the fourth quarter and continued low credit line usage. We begin 2022 with a solid pipeline of new loans and optimism that this growth will continue.

The consistent improvement in overall asset quality was one of the big stories for the Company in 2021. At year-end, nonperforming loans fell below 1.0%, at 0.97% of total loans. For the quarter and for the entire year, we had a net recovery of charged-off loans. Importantly, we expect to see continued progress in nonperforming assets in 2022.

With respect to fee income, there is no doubt that our mortgage team contributed mightily to the record 2021 results. In line with the rise in long-term interest rates, we see that slowing in 2022. Our wealth management team also continued to shine as their revenue in 2021 was up $2.0 million, or 21.2%, from the prior year and we expect continued good progress.

We have continued to make headway in our previously announced acquisition of Iowa First Bancshares Corp. ("IOFB"), which is expected to close late in the first quarter or early in the second quarter of 2022. We look forward to welcoming our new customers and employees to MidWestOne.

Finally, between share repurchases and the cash dividend, we returned $25.8 million to our common shareholders in 2021. Looking ahead, our common stock dividend increase of 5.6% for 2022 reflects our confidence in continued sound financial performance."

^_________________________________
1 Fourth Quarter Summary compares to the third quarter of 2021 (the "linked quarter") unless noted. Full Year 2021 Summary compares to the full year 2020 unless noted.
^2 Non-GAAP measure. See the separate Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
       
*FINANCIAL HIGHLIGHTS*
  *Three Months Ended*   *Year Ended*
*(Dollars in thousands, except per share amounts)*   *December 31,*   September 30,   December 31,   *December 31,*   December 31,   *2021*       2021       2020       *2021*       2020  
Net interest income   *$* *38,819*     $ 40,340     $ 39,037     *$* *156,281*     $ 152,964  
Noninterest income     *11,229*       9,182       10,626       *42,453*       38,620  
Total revenue, net of interest expense     *50,048*       49,522       49,663       *198,734*       191,584  
Credit loss expense (benefit)     *622*       (1,080 )     (3,041 )     *(7,336* *)*     28,369  
Noninterest expense     *30,444*       29,778       31,915       *116,592*       149,893  
Income before income tax expense     *18,982*       20,824       20,789       *89,478*       13,322  
Income tax expense     *4,726*       4,513       4,079       *19,992*       6,699  
Net income   *$* *14,256*     $ 16,311     $ 16,710     *$* *69,486*     $ 6,623  
Diluted earnings per share   *$* *0.91*     $ 1.03     $ 1.04     *$* *4.37*     $ 0.41                      
Return on average assets     *0.95* *%*     1.11 %     1.22 %     *1.20* *%*     0.13 %
Return on average equity     *10.68* *%*     12.00 %     13.15 %     *13.18* *%*     1.28 %
Return on average tangible equity^(1)     *13.50* *%*     15.06 %     17.07 %     *16.63* *%*     10.80 %
Efficiency ratio^(1)     *56.74* *%*     56.34 %     59.69 %     *54.65* *%*     56.92 %
^(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

*INCOME STATEMENT HIGHLIGHTS *

*Net Interest Income*

Net interest income decreased to $38.8 million in the fourth quarter of 2021 from $40.3 million in the third quarter of 2021 due primarily to decreased PPP loan fee accretion stemming from loan forgiveness that continued to be robust in the fourth quarter of 2021. Net PPP loan fee accretion was $2.0 million in the fourth quarter of 2021 compared to $3.6 million in the linked quarter.

Average interest earning assets increased $117.2 million to $5.61 billion in the fourth quarter of 2021, compared to the third quarter of 2021. When adjusting for the $91.0 million reduction in average PPP loan balances due to forgiveness, average interest earning assets increased $206.9 million, primarily due to cash inflows from deposit activity that resulted in an increase in interest earning deposits in banks on the balance sheet and that were used to purchase debt securities, coupled with non-PPP loan growth.

The Company's tax equivalent net interest margin was 2.83% in the fourth quarter of 2021 compared to 3.00% in the linked quarter due to a decrease in total interest earning assets yield, partially offset by reduced funding costs. Total interest earning assets yield decreased 19 bps from the linked quarter due to the reduced benefit from PPP net loan fee accretion described above, coupled with lower loan coupon rates at origination and re-pricing, and an asset mix shift to cash and debt securities. The cost of interest bearing liabilities decreased 3 bps to 0.43%, primarily as a result of interest bearing deposits costs of 0.30%, which declined 2 bps from the linked quarter.

*Noninterest Income*

Noninterest income for the fourth quarter of 2021 increased $2.0 million, or 22.3%, from the linked quarter. The increase was primarily due to an increase of $1.2 million in loan revenue and an increase of $0.5 million in 'Other' noninterest income. The increase in loan revenue was primarily driven by a $0.9 million increase in the fair value of our mortgage servicing rights. The increase in 'Other' noninterest income partially stemmed from a $0.2 million increase in income received from our commercial loan back-to-back swap program.

The following table presents details of noninterest income for the periods indicated:
*Three Months Ended*
*Noninterest Income* *December 31,*   September 30,   December 31,
*(In thousands)*   *2021*     2021     2020
Investment services and trust activities *$* *3,115*   $ 2,915   $ 2,518
Service charges and fees   *1,684*     1,613     1,571
Card revenue   *1,746*     1,820     1,517
Loan revenue   *3,132*     1,935     3,900
Bank-owned life insurance   *550*     532     541
Investment securities gains, net   *137*     36     30
Other   *865*     331     549
Total noninterest income *$* *11,229*   $ 9,182   $ 10,626                

*Noninterest Expense*

Noninterest expense for the fourth quarter of 2021 increased $0.7 million, or 2.2%, from the linked quarter primarily due to an increase of $0.9 million in compensation and employee benefits and a $0.6 million increase in legal and professional expenses. The increase in compensation and employee benefits was primarily due to an increase of $0.5 million related to incentive and commission expense. The increase in legal and professional expenses was partially due to $0.2 million merger-related legal expenses. Partially offsetting these increases was a decrease of $0.5 million in 'other' noninterest expense. The decline in 'other' noninterest expense was primarily driven by the settlement of litigation claims totaling $0.7 million during the third quarter of 2021, which did not recur in the fourth quarter of 2021.

The increase in noninterest expense and the decline in net interest income, partially offset by the increase in noninterest income noted above, were the primary drivers of the increase in the efficiency ratio, which increased 0.40 percentage points to 56.74% from 56.34% in the linked quarter.

The following table presents details of noninterest expense for the periods indicated:
*Three Months Ended*
*Noninterest Expense* *December 31,*   September 30,   December 31,
*(In thousands)*   *2021*     2021     2020  
Compensation and employee benefits *$* *18,266*   $ 17,350   $ 17,638  
Occupancy expense of premises, net   *2,211*     2,547     2,476  
Equipment   *2,189*     1,973     2,040  
Legal and professional   *1,826*     1,272     2,052  
Data processing   *1,211*     1,406     1,460  
Marketing   *1,121*     1,022     986  
Amortization of intangibles   *1,245*     1,264     1,569  
FDIC insurance   *380*     435     495  
Communications   *277*     275     412  
Foreclosed assets, net   *7*     43     (35 )
Other   *1,711*     2,191     2,822  
Total noninterest expense *$* *30,444*   $ 29,778   $ 31,915  

The following table presents details of merger-related expenses for the periods indicated:
*Three Months Ended* *December 31,*   September 30,   December 31,
*Merger-related Expenses*   *2021*     2021     2020
*(In thousands)*          
Equipment *$* *18*   $ —   $ —
Legal and professional   *202*     —     —
Marketing   *2*     —     —
Other   *2*     —     —
Total merger-related expenses *$* *224*   $ —   $ —                

*Income Taxes*

The effective income tax rate increased to 24.9% in the fourth quarter of 2021 compared to 21.7% in the linked quarter. This increase was primarily due to the year-end adjustment to federal tax expense based upon 2021 taxable income. The Company's effective tax rate is lower than its combined statutory tax rate due to benefits related to tax-exempt interest and bank-owned life insurance. The effective income tax rate for the full year 2022 is expected to be in the range of 19.5-21.5%.

*BALANCE SHEET, LIQUIDITY AND CAPITAL HIGHLIGHTS*
*As of or for the Three Months Ended* *December 31,*   September 30,   December 31,
*(Dollars in millions, except per share amounts)*   *2021*       2021       2020  
*Ending Balance Sheet*          
Total assets *$* *6,025.1*     $ 5,875.4     $ 5,556.6  
Loans held for investment, net of unearned income   *3,245.0*       3,268.6       3,482.2  
Total securities held for investment   *2,288.1*       2,136.9       1,657.4  
Total deposits   *5,114.5*       4,957.8       4,547.0  
*Average Balance Sheet*          
Average total assets *$* *5,934.1*     $ 5,811.2     $ 5,457.9  
Average total loans   *3,268.8*       3,356.7       3,560.6  
Average total deposits   *5,015.5*       4,882.8       4,490.0  
*Funding and Liquidity*          
Short-term borrowings *$* *181.4*     $ 187.5     $ 230.8  
Long-term debt   *154.9*       154.9       208.7  
Loans to deposits ratio   *63.45* *%*     65.93 %     76.58 %
*Equity*          
Total shareholders' equity *$* *527.5*     $ 530.3     $ 515.3  
Common equity ratio   *8.75* *%*     9.03 %     9.27 %
Tangible common equity^(1)   *445.1*       446.7       427.5  
Tangible common equity ratio^(1)   *7.49* *%*     7.71 %     7.82 %
*Per Share Data*          
Book value *$* *33.66*     $ 33.71     $ 32.17  
Tangible book value^(1) *$* *28.40*     $ 28.40     $ 26.69  
(1) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

*Loans Held for Investment*

Loans held for investment, net of unearned income, decreased $23.6 million, or 0.7%, to $3.25 billion from September 30, 2021, driven primarily by PPP loan forgiveness and partially offset by new loan production during the fourth quarter of 2021. The revolving line of credit utilization was consistent with the linked quarter at 32%.

The following table presents the composition of loans held for investment, net of unearned income, as of the dates indicated:

*Loans Held for Investment* *December 31, 2021*   September 30, 2021   December 31, 2020   *Balance*
  *% of*
  Balance
  % of   Balance
  % of  
*(dollars in thousands)*   *Total*     Total     Total  
Commercial and industrial *$* *902,314*   *27.8* *%* $ 927,258   28.4 % $ 1,055,488   30.3 %
Agricultural   *103,417*   *3.2*     106,356   3.3     116,392   3.3  
Commercial real estate                        
Construction and development   *172,160*   *5.3*     146,417   4.5     181,291   5.2  
Farmland   *144,673*   *4.5*     130,936   4.0     144,970   4.2  
Multifamily   *244,503*   *7.5*     273,347   8.4     256,525   7.4  
Other   *1,143,205*   *35.2*     1,148,658   35.0     1,149,575   33.0     Total commercial real estate   *1,704,541*   *52.5*     1,699,358   51.9     1,732,361   49.8  
Residential real estate                        
One-to-four family first liens   *333,308*   *10.3*     334,267   10.2     355,684   10.2  
One-to-four family junior liens   *133,014*   *4.1*     133,869   4.1     143,422   4.1     Total residential real estate   *466,322*   *14.4*     468,136   14.3     499,106   14.3  
Consumer   *68,418*   *2.1*     67,536   2.1     78,876   2.3     Loans held for investment, net of unearned income *$* *3,245,012*   *100.0* *%* $ 3,268,644   100.0 % $ 3,482,223   100.0 %                        
Total commitments to extend credit *$* *1,014,397*       $ 950,157       $ 897,274                                    

*PPP Loans*

The following table presents PPP loan measures as of the dates indicated:
  *December 31, 2021*   *September 30, 2021*   *Round 1*^*(3)*   *Round 2*^*(3)*   *Total*   *Round 1*^*(3)*   *Round 2*^*(3)*   *Total*
*(Dollars in millions)*   *#*   *$*   *#*   *$*   *#*   *$*   *#*   *$*   *#*   *$*   *#*   *$*
Total PPP Loans Funded   *2,681*   *348.5*   *2,175*   *149.3*   *4,856*   *497.8*   2,681   348.5   2,175   149.3   4,856   497.8
PPP Loan Forgiveness^(1)   *2,609*   *334.2*   *2,009*   *122.4*   *4,618*   *456.6*   2,478   323.7   1,514   72.9   3,992   396.6
Outstanding PPP Loans^(2)   *53*   *5.6*   *164*   *25.2*   *217*   *30.8*   184   16.3   661   73.1   845   89.4                                                
Unearned Income   *$—*   *$0.9*   *$0.9*   $0.1   $2.8   $2.9
^(1) Excluded from the PPP Loan Forgiveness is $9.3 million as of December 31, 2021 and $9.1 million as of September 30, 2021 of PPP loans that were paid off by the borrower prior to forgiveness or through the SBA PPP loan guarantee.
^(2) Outstanding loans are presented net of unearned income.
^(3) Round 1 refers to PPP loan applications from the first wave of funding made available through the CARES Act, which was signed into law by President Trump in March 2020. Round 2 refers to the second wave of PPP funding made available through the Consolidated Appropriations Act, 2021, which was signed into law by President Trump in December 2020 and extended by the PPP Extension Act of 2021, which was signed into law by President Biden in March 2021.

*Credit Loss Expense & Allowance for Credit Losses*

The following table shows the activity in the allowance for credit losses for the periods indicated:
*Three Months Ended*   *Year Ended*
*Allowance for Credit Losses Roll Forward* *December 31,*   September 30,   December 31,   *December 31,*   December 31,
*(In thousands)*   *2021*       2021       2020       *2021*       2020  
Beginning balance *$* *47,900*     $ 48,000     $ 58,500     *$* *55,500*     $ 29,079  
Cumulative effect of change in accounting principle - CECL   *—*       —       —       *—*       3,984  
Charge-offs   *(255* *)*     (234 )     (1,005 )     *(2,332* *)*     (6,793 )
Recoveries   *533*       1,114       646       *2,768*       1,528   Net recoveries (charge-offs)   *278*       880       (359 )     *436*       (5,265 )
Credit loss (benefit) expense related to loans   *522*       (980 )     (2,641 )     *(7,236* *)*     27,702  
Ending balance *$* *48,700*     $ 47,900     $ 55,500     *$* *48,700*     $ 55,500  

As of December 31, 2021, the allowance for credit losses ("ACL") was $48.7 million, or 1.50% of loans held for investment, net of unearned income, compared with $47.9 million, or 1.47% of loans held for investment, net of unearned income, at September 30, 2021. The ACL declined 12.3% from the prior year-end. After excluding net PPP loans, the ACL as a percentage of loans held for investment, net of unearned income, increased to 1.52%^(1) as of December 31, 2021, from 1.51%^(1) at September 30, 2021. The increase in the ACL during the fourth quarter was primarily attributable to reserve taken to support loan growth.

^(1)Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

*Deposits*

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

*Deposit Composition* *December 31, 2021*   September 30, 2021   December 31, 2020  
*(Dollars in thousands)* *Balance*   *% of Total*   Balance   % of Total   Balance   % of Total  
Noninterest bearing deposits *$* *1,005,369*   *19.6* *%* $ 999,887   20.2 % $ 910,655   20.0 %
Interest checking deposits   *1,619,136*   *31.6*     1,464,389   29.5     1,351,641   29.7  
Money market deposits   *939,523*   *18.4*     989,095   20.0     918,654   20.2  
Savings deposits   *628,242*   *12.3*     616,924   12.4     529,751   11.7  
Total non-maturity deposits   *4,192,270*   *81.9*     4,070,295   82.1     3,710,701   81.6  
Time deposits of $250 and under   *505,392*   *9.9*     522,907   10.5     581,471   12.8  
Time deposits over $250   *416,857*   *8.2*     364,579   7.4     254,877   5.6  
Total time deposits   *922,249*   *18.1*     887,486   17.9     836,348   18.4  
Total deposits *$* *5,114,519*   *100.0* *%* $ 4,957,781   100.0 % $ 4,547,049   100.0 %                              

*CREDIT RISK PROFILE*
*As of or For the Three Months Ended*
*Highlights* *December 31,*   September 30,   December 31,
*(Dollars in thousands)*   *2021*       2021       2020  
Credit loss (benefit) expense related to loans *$* *522*     $ (980 )   $ (2,641 )
Net (recoveries) charge-offs *$* *(278* *)*   $ (880 )   $ 359  
Net (recovery) charge-off ratio^(1)   *(0.03* *)%*     (0.10 )%     0.04 %          
*At period-end*          
Pass *$* *3,013,917*     $ 3,069,314     $ 3,202,704  
Special Mention / Watch   *117,401*       82,871       157,213  
Classified   *113,694*       116,459       122,306  
Total loans held for investment, net *$* *3,245,012*     $ 3,268,644     $ 3,482,223  
Classified loans ratio^(2)   *3.50* *%*     3.56 %     3.51 %          
Nonaccrual loans held for investment *$* *31,540*     $ 33,657     $ 41,950  
Accruing loans contractually past due 90 days or more   *—*       51       739  
Total nonperforming loans   *31,540*       33,708       42,689  
Foreclosed assets, net   *357*       454       2,316  
Total nonperforming assets *$* *31,897*     $ 34,162     $ 45,005  
Nonperforming loans ratio^(3)   *0.97* *%*     1.03 %     1.23 %
Nonperforming assets ratio^(4)   *0.53* *%*     0.58 %     0.81 %
Allowance for credit losses *$* *48,700*     $ 47,900     $ 55,500  
Allowance for credit losses ratio^(5)   *1.50* *%*     1.47 %     1.59 %
Adjusted allowance for credit losses ratio^(6)   *1.52* *%*     1.51 %     1.72 %
Allowance for credit losses to nonaccrual loans ratio^(7)   *154.41* *%*     142.32 %     132.30 %
^(1) Net (recovery) charge-off ratio is calculated as annualized net (recoveries) charge-offs divided by average loans held for investment, net of unearned income, during the period.
^(2) Classified loans ratio is calculated as classified loans divided by loans held for investment, net of unearned income, at the end of the period.
^(3) 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.
^(4) Nonperforming assets ratio is calculated as total nonperforming assets divided by total assets at the end of the period.
^(5) 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.
^(6) Non-GAAP Measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.
^(7)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.

During the fourth quarter of 2021, we saw improvements in overall asset quality when compared to the linked quarter and the corresponding period in the prior year. We continued to experience net recoveries in the fourth quarter of 2021 and recorded net recoveries of $0.4 million for the year-ended December 31, 2021. Our nonperforming loans ratio of 0.97% was an improvement of 6 bps from the linked quarter and 23 bps from the prior year-end. Special mention / watch credits did increase $34.5 million from the linked quarter based upon our proactive credit monitoring processes. However, year-over-year, special mention / watch credits were down $39.8 million, or 25.3%.

The following table presents a roll forward of nonperforming loans for the period:

*Nonperforming Loans*       *90+ Days Past Due*
       
*(Dollars in thousands)* *Nonaccrual*   *& Still Accruing*     *Total*  
*Balance at September 30, 2021* *$* *33,657*     *$* *51*     *$* *33,708*  
Loans placed on nonaccrual or 90+ days past due & still accruing   512       10       522  
Repayments (including interest applied to principal)   (2,153 )     —       (2,153 )
Loans returned to accrual status or no longer past due   (312 )     (49 )     (361 )
Charge-offs   (164 )     (10 )     (174 )
Transfers to nonaccrual   —       (2 )     (2 )
*Balance at December 31, 2021* *$* *31,540*     *$* *—*     *$* *31,540*  

*CAPITAL*

Effective March 31, 2020, we elected the 5-year phase-in option allowed under the interim final rule (IFR) issued by the federal banking regulatory agencies that delays the estimated impact on regulatory capital stemming from the implementation of the current expected credit losses (CECL) accounting standard. The IFR allows the add back of 100% of the capital effect from the day one CECL transition adjustment and 25% of the capital effect from subsequent increases in the allowance for credit losses through the two-year period ending December 31, 2021. The modified CECL transitional amount of $9.4 million will then be reduced from capital over the subsequent three-year period.

*Regulatory Capital Ratios*

*December 31,*   September 30,   December 31,
*2021*^* (1)*   2021     2020  
*MidWest**One** Financial Group, Inc. Consolidated*          
Tier 1 leverage to average assets ratio *8.67* *%*   8.70 %   8.50 %
Common equity tier 1 capital to risk-weighted assets ratio *9.94* *%*   10.26 %   9.72 %
Tier 1 capital to risk-weighted assets ratio *10.83* *%*   11.20 %   10.70 %
Total capital to risk-weighted assets ratio *13.09* *%*   13.58 %   13.41 %
*MidWest**One** Bank*          
Tier 1 leverage to average assets ratio *9.25* *%*   9.41 %   9.35 %
Common equity tier 1 capital to risk-weighted assets ratio *11.58* *%*   12.14 %   11.79 %
Tier 1 capital to risk-weighted assets ratio *11.58* *%*   12.14 %   11.79 %
Total capital to risk-weighted assets ratio *12.46* *%*   13.05 %   12.89 %
(1) Capital ratios for December 31, 2021 are preliminary                    

*CORPORATE UPDATE*

*Share Repurchase Program*

Under the current repurchase program, the Company repurchased 58,900 shares of its common stock at an average price of $31.02 per share and a total cost of $1.8 million in the fourth quarter of 2021. At December 31, 2021, the total amount available under the Company's current share repurchase program was $5.8 million.

*Cash Dividend Announcement*

On January 25, 2022, the Company’s board of directors declared a quarterly cash dividend of $0.2375 per common share. The dividend is payable March 15, 2022, to shareholders of record at the close of business on March 1, 2022.

*CONFERENCE CALL DETAILS*

The Company will host a conference call for investors at 11:00 a.m. CT on Friday, January 28, 2022. To participate, you may pre-register for this call utilizing the following link: https://www.incommglobalevents.com/registration/q4inc/9571/midwestone-financial-group-inc-4th-quarter-2021-earnings-call/. After pre-registering for this event you will receive your access details via email. You are also able to on the day of the call dial 1-844-200-6205, using an access code of 306531 at least fifteen minutes before the call start time. If you are unable to participate on the call, a replay will be available until April 28, 2022, by calling 1-866-813-9403 and using the replay access code of 602023. A transcript of the call will also be available on the Company’s web site (www.midwestonefinancial.com) within three business days of the call.

*ABOUT MIDWEST**ONE** FINANCIAL GROUP, INC.*

MidWestOne Financial Group, Inc. is a financial holding company headquartered in Iowa City, Iowa. MidWestOne is the parent company of MidWestOne Bank, which operates banking offices in Iowa, Minnesota, Wisconsin, Florida, and Colorado. MidWestOne provides electronic delivery of financial services through its website, MidWestOne.bank. MidWestOne Financial Group, Inc. trades on the Nasdaq Global Select Market under the symbol “MOFG”.

*Cautionary Note Regarding Forward-Looking Statements*

This release 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,” “goals,” “intend,” “project,” “estimate,” “forecast,” “may” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Additionally, we undertake no obligation to update any statement in light of new information or future events, except as required under federal securities law.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have an impact on our ability to achieve operating results, growth plan goals and future prospects include, but are not limited to, the following: (1) effects of the COVID-19 pandemic, including its effects on the economic environment, our customers and our operations, including due to supply chain disruptions, as well as any changes to federal, state, or local government laws, regulations, or orders in connection with the pandemic; (2) government intervention in the U.S. financial system in response to the COVID-19 pandemic, including the effects of recent legislative, tax, accounting and regulatory actions and reforms; (3) the impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges; (4) the risks of mergers (including with IOFB), 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; (5) credit quality deterioration or pronounced and sustained reduction in real estate market values causing an increase in the allowance for credit losses, an increase in the credit loss expense, and a reduction in net earnings; (6) the effects of interest rates, including on our net income and the value of our securities portfolio; (7) 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; (8) fluctuations in the value of our investment securities; (9) governmental monetary and fiscal policies; (10) changes in and uncertainty related to benchmark interest rates used to price loans and deposits, including the expected elimination of LIBOR and the adoption of a substitute; (11) legislative and regulatory changes, including changes in banking, securities, trade, and tax laws and regulations and their application by our regulators; (12) the ability to attract and retain key executives and employees experienced in banking and financial services; (13) the sufficiency of the allowance for credit losses to absorb the amount of actual losses inherent in our existing loan portfolio; (14) our ability to adapt successfully to technological changes to compete effectively in the marketplace; (15) credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio; (16) 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; (17) the failure of assumptions underlying the establishment of allowances for credit losses and estimation of values of collateral and various financial assets and liabilities; (18) volatility of rate-sensitive deposits; (19) operational risks, including data processing system failures or fraud; (20) asset/liability matching risks and liquidity risks; (21) the costs, effects and outcomes of existing or future litigation; (22) changes in general economic, political, or industry conditions, nationally, internationally or in the communities in which we conduct business; (23) changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board; (24) war or terrorist activities, widespread disease or pandemic, or other adverse external events, which may cause deterioration in the economy or cause instability in credit markets; (25) the effects of cyber-attacks; (26) the imposition of tariffs or other domestic or international governmental policies impacting the value of the agricultural or other products of our borrowers; and (27) other risk factors detailed from time to time in Securities and Exchange Commission filings made by the Company.

*MIDWEST**ONE** FINANCIAL GROUP, INC. AND SUBSIDIARIES *
*FIVE QUARTER CONSOLIDATED BALANCE SHEETS*                   *December 31,*   September 30,   June 30,   March 31,   December 31,
*(In thousands)*   *2021*       2021       2021       2021       2020  
*ASSETS*                  
Cash and due from banks *$* *42,949*     $ 53,562     $ 52,297     $ 57,154     $ 65,078  
Interest earning deposits in banks   *160,881*       84,952       11,124       80,924       17,409  
Federal funds sold   *—*       —       13       7,691       172  
Total cash and cash equivalents   *203,830*       138,514       63,434       145,769       82,659  
Debt securities available for sale at fair value   *2,288,110*       2,136,902       2,072,452       1,896,894       1,657,381  
Loans held for sale   *12,917*       58,679       6,149       58,333       59,956  
Gross loans held for investment   *3,252,194*       3,278,150       3,344,156       3,374,076       3,496,790  
Unearned income, net   *(7,182* *)*     (9,506 )     (14,000 )     (15,915 )     (14,567 )
Loans held for investment, net of unearned income   *3,245,012*       3,268,644       3,330,156       3,358,161       3,482,223  
Allowance for credit losses   *(48,700* *)*     (47,900 )     (48,000 )     (50,650 )     (55,500 )
Total loans held for investment, net   *3,196,312*       3,220,744       3,282,156       3,307,511       3,426,723  
Premises and equipment, net   *83,492*       84,130       84,667       85,581       86,401  
Goodwill   *62,477*       62,477       62,477       62,477       62,477  
Other intangible assets, net   *19,885*       21,130       22,394       23,735       25,242  
Foreclosed assets, net   *357*       454       755       1,487       2,316  
Other assets   *157,748*       152,393       154,731       155,525       153,493  
Total assets *$* *6,025,128*     $ 5,875,423     $ 5,749,215     $ 5,737,312     $ 5,556,648  
*LIABILITIES* *  *                
Noninterest bearing deposits *$* *1,005,369*     $ 999,887     $ 952,764     $ 958,526     $ 910,655  
Interest bearing deposits   *4,109,150*       3,957,894       3,839,902       3,836,037       3,636,394  
Total deposits   *5,114,519*       4,957,781       4,792,666       4,794,563       4,547,049  
Short-term borrowings   *181,368*       187,508       212,261       175,785       230,789  
Long-term debt   *154,879*       154,860       169,839       201,696       208,691  
Other liabilities   *46,887*       45,010       44,156       53,948       54,869  
Total liabilities   *5,497,653*       5,345,159       5,218,922       5,225,992       5,041,398  
*SHAREHOLDERS' EQUITY* *  *                
Common stock   *16,581*       16,581       16,581       16,581       16,581  
Additional paid-in capital   *300,940*       300,327       299,888       299,747       300,137  
Retained earnings   *243,365*       232,639       219,884       206,230       188,191  
Treasury stock   *(24,546* *)*     (22,735 )     (15,888 )     (15,278 )     (14,251 )
Accumulated other comprehensive (loss) income   *(8,865* *)*     3,452       9,828       4,040       24,592  
Total shareholders' equity   *527,475*       530,264       530,293       511,320       515,250  
Total liabilities and shareholders' equity *$* *6,025,128*     $ 5,875,423     $ 5,749,215     $ 5,737,312     $ 5,556,648                                        

*MIDWEST**ONE** FINANCIAL GROUP, INC. AND SUBSIDIARIES *
*FIVE QUARTER AND YEAR TO DATE CONSOLIDATED STATEMENTS OF INCOME* *Three Months Ended*   *Year Ended*
*(In thousands, except per share** data)* *December
31,*   September
30,   June
30,   March
31,   December
31,   *December
31,*   December
31,
*2021*   2021     2021     2021     2020     *2021*    2020
Interest income                          
Loans, including fees *$* *33,643*   $ 36,115     $ 34,736     $ 36,542     $ 38,239     *$* *141,036*     $ 158,656
Taxable investment securities   *7,461*     6,655       6,483       5,093       4,673       *25,692*       17,610
Tax-exempt investment securities   *2,415*     2,428       2,549       2,555       2,529       *9,947*       8,259
Other   *37*     21       19       14       29       *91*       262
*Total interest income*   *43,556*     45,219       43,787       44,204       45,470       *176,766*       184,787
Interest expense                          
Deposits   *3,031*     3,150       3,409       3,608       4,265       *13,198*       23,919
Short-term borrowings   *130*     132       161       128       142       *551*       914
Long-term debt   *1,576*     1,597       1,712       1,851       2,026       *6,736*       6,990
*Total interest expense*   *4,737*     4,879       5,282       5,587       6,433       *20,485*       31,823
*Net interest income*   *38,819*     40,340       38,505       38,617       39,037       *156,281*       152,964
Credit loss expense (benefit)   *622*     (1,080 )     (2,144 )     (4,734 )     (3,041 )     *(7,336* *)*     28,369
*Net interest income after credit loss expense (benefit)*   *38,197*     41,420       40,649       43,351       42,078       *163,617*       124,595
Noninterest income                          
Investment services and trust activities   *3,115*     2,915       2,809       2,836       2,518       *11,675*       9,632
Service charges and fees   *1,684*     1,613       1,475       1,487       1,571       *6,259*       6,178
Card revenue   *1,746*     1,820       1,913       1,536       1,517       *7,015*       5,719
Loan revenue   *3,132*     1,935       3,151       4,730       3,900       *12,948*       10,185
Bank-owned life insurance   *550*     532       538       542       541       *2,162*       2,226
Investment securities gains, net   *137*     36       42       27       30       *242*       184
Other   *865*     331       290       666       549       *2,152*       4,496
*Total noninterest income*   *11,229*     9,182       10,218       11,824       10,626       *42,453*       38,620
Noninterest expense                          
Compensation and employee benefits   *18,266*     17,350       17,404       16,917       17,638       *69,937*       66,397
Occupancy expense of premises, net   *2,211*     2,547       2,198       2,318       2,476       *9,274*       9,348
Equipment   *2,189*     1,973       1,861       1,793       2,040       *7,816*       7,865
Legal and professional   *1,826*     1,272       1,375       783       2,052       *5,256*       6,153
Data processing   *1,211*     1,406       1,347       1,252       1,460       *5,216*       5,362
Marketing   *1,121*     1,022       873       1,006       986       *4,022*       3,815
Amortization of intangibles   *1,245*     1,264       1,341       1,507       1,569       *5,357*       6,976
FDIC insurance   *380*     435       245       512       495       *1,572*       1,858
Communications   *277*     275       371       409       412       *1,332*       1,746
Foreclosed assets, net   *7*     43       136       47       (35 )     *233*       150
Goodwill impairment   *—*     —       —       —       —       *—*       31,500
Other   *1,711*     2,191       1,519       1,156       2,822       *6,577*       8,723
*Total noninterest expense*   *30,444*     29,778       28,670       27,700       31,915       *116,592*       149,893
*Income before income tax expense*   *18,982*     20,824       22,197       27,475       20,789       *89,478*       13,322
Income tax expense   *4,726*     4,513       4,926       5,827       4,079       *19,992*       6,699
*Net income * *$* *14,256*   $ 16,311     $ 17,271     $ 21,648     $ 16,710     *$* *69,486*     $ 6,623                          
Earnings per common share                          
Basic *$* *0.91*   $ 1.03     $ 1.08     $ 1.35     $ 1.04     *$* *4.38*     $ 0.41
Diluted *$* *0.91*   $ 1.03     $ 1.08     $ 1.35     $ 1.04     *$* *4.37*     $ 0.41
Weighted average basic common shares outstanding   *15,692*     15,841       15,987       15,991       16,074       *15,877*       16,102
Weighted average diluted common shares outstanding   *15,734*     15,863       16,012       16,021       16,092       *15,905*       16,110
Dividends paid per common share *$* *0.2250*   $ 0.2250     $ 0.2250     $ 0.2250     $ 0.2200     *$* *0.9000*     $ 0.8800                                                  

*MIDWEST**ONE** FINANCIAL GROUP, INC. AND SUBSIDIARIES *
*FINANCIAL STATISTICS* *As of or for the Three Months Ended*   *As of or for the Year Ended*
*(Dollars in thousands, except per share amounts)* *December 31,*   September 30,   December 31,   *December 31,*   December 31, *2021*       2021       2020       *2021*       2020  
*Earnings:*                  
Net interest income *$* *38,819*     $ 40,340     $ 39,037     *$* *156,281*     $ 152,964  
Noninterest income   *11,229*       9,182       10,626       *42,453*       38,620  
Total revenue, net of interest expense   *50,048*       49,522       49,663       *198,734*       191,584  
Credit loss expense (benefit)   *622*       (1,080 )     (3,041 )     *(7,336* *)*     28,369  
Noninterest expense   *30,444*       29,778       31,915       *116,592*       149,893  
Income before income tax expense   *18,982*       20,824       20,789       *89,478*       13,322  
Income tax expense   *4,726*       4,513       4,079       *19,992*       6,699  
Net income *$* *14,256*     $ 16,311     $ 16,710     *$* *69,486*     $ 6,623  
*Per Share Data:*                  
Diluted earnings *$* *0.91*     $ 1.03     $ 1.04     *$* *4.37*     $ 0.41  
Book value   *33.66*       33.71       32.17       *33.66*       32.17  
Tangible book value^(1)   *28.40*       28.40       26.69       *28.40*       26.69  
*Ending Balance Sheet:*                  
Total assets *$* *6,025,128*     $ 5,875,423     $ 5,556,648     *$* *6,025,128*     $ 5,556,648  
Loans held for investment, net of unearned income   *3,245,012*       3,268,644       3,482,223       *3,245,012*       3,482,223  
Total securities held for investment   *2,288,110*       2,136,902       1,657,381       *2,288,110*       1,657,381  
Total deposits   *5,114,519*       4,957,781       4,547,049       *5,114,519*       4,547,049  
Short-term borrowings   *181,368*       187,508       230,789       *181,368*       230,789  
Long-term debt   *154,879*       154,860       208,691       *154,879*       208,691  
Total shareholders' equity   *527,475*       530,264       515,250       *527,475*       515,250  
*Average Balance Sheet:*                  
Average total assets *$* *5,934,076*     $ 5,811,228     $ 5,457,939     *$* *5,780,556*     $ 5,135,841  
Average total loans   *3,268,783*       3,356,680       3,560,632       *3,362,488*       3,551,945  
Average total deposits   *5,015,506*       4,882,835       4,490,048       *4,838,227*       4,184,406  
*Financial Ratios:*                  
Return on average assets   *0.95* *%*     1.11 %     1.22 %     *1.20* *%*     0.13 %
Return on average equity   *10.68* *%*     12.00 %     13.15 %     *13.18* *%*     1.28 %
Return on average tangible equity^(1)   *13.50* *%*     15.06 %     17.07 %     *16.63* *%*     10.80 %
Efficiency ratio^(1)   *56.74* *%*     56.34 %     59.69 %     *54.65* *%*     56.92 %
Net interest margin, tax equivalent^(1)   *2.83* *%*     3.00 %     3.13 %     *2.95* *%*     3.30 %
Loans to deposits ratio   *63.45* *%*     65.93 %     76.58 %     *63.45* *%*     76.58 %
Common equity ratio   *8.75* *%*     9.03 %     9.27 %     *8.75* *%*     9.27 %
Tangible common equity ratio^(1)   *7.49* *%*     7.71 %     7.82 %     *7.49* *%*     7.82 %
*Credit Risk Profile:*                  
Total nonperforming loans *$* *31,540*     $ 33,708     $ 42,689     *$* *31,540*     $ 42,689  
Nonperforming loans ratio   *0.97* *%*     1.03 %     1.23 %     *0.97* *%*     1.23 %
Total nonperforming assets *$* *31,897*     $ 34,162     $ 45,005     *$* *31,897*     $ 45,005  
Nonperforming assets ratio   *0.53* *%*     0.58 %     0.81 %     *0.53* *%*     0.81 %
Net (recoveries) charge-offs *$* *(278* *)*   $ (880 )   $ 359     *$* *(436* *)*   $ 5,265  
Net (recovery) charge-off ratio   *(0.03* *)%*     (0.10 )%     0.04 %     *(0.01* *)%*     0.15 %
Allowance for credit losses *$* *48,700*     $ 47,900     $ 55,500     *$* *48,700*     $ 55,500  
Allowance for credit losses ratio   *1.50* *%*     1.47 %     1.59 %     *1.50* *%*     1.59 %
Adjusted allowance for credit losses ratio^(1)   *1.52* *%*     1.51 %     1.72 %     *1.52* *%*     1.72 %
Allowance for credit losses to nonaccrual ratio   *154.41* *%*     142.32 %     132.30 %     *154.41* *%*     132.30 %
*PPP Loans:*                  
Average PPP loans *$* *52,564*     $ 143,628     $ 313,252     *$* *186,333*     $ 223,137  
Fee Income   *1,996*       3,593       2,853       *11,731*       5,228                    
^(1) Non-GAAP measure. See the Non-GAAP Measures section for a reconciliation to the most directly comparable GAAP measure.

*MIDWEST*ONE** FINANCIAL GROUP, INC. AND SUBSIDIARIES*
*AVERAGE BALANCE SHEET AND YIELD ANALYSIS** *Three Months Ended* *December 31, 2021*   *September 30, 2021*   *December 31, 2020*
*(Dollars in thousands)* *Average*
*Balance*   *Interest*
*Income/*
*Expense*   *Average*
*Yield/*
*Cost*   *Average*
*Balance*   *Interest*
*Income/*
*Expense*   *Average*
*Yield/*
*Cost*   *Average
Balance*   *Interest*
*Income/*
*Expense*   *Average*
*Yield/*
*Cost*
*ASSETS*                                  
Loans, including fees ^(1)(2)(3) *$* *3,268,783*   *$* *34,191* * * *4.15* *%*   $ 3,356,680   $ 36,622   4.33 %   $ 3,560,632   $ 38,795   4.33 %
Taxable investment securities   *1,802,349*     *7,461* * * *1.64* *%*     1,628,605     6,655   1.62 %     1,026,359     4,673   1.81 %
Tax-exempt investment securities ^(2)(4)   *455,570*     *3,026* * * *2.64* *%*     459,717     3,043   2.63 %     450,659     3,180   2.81 %
Total securities held for investment^(2)   *2,257,919*     *10,487*   *1.84* *%*     2,088,322     9,698   1.84 %     1,477,018     7,853   2.12 %
Other   *80,415*     *37* * * *0.18* *%*     44,915     21   0.19 %     80,019     29   0.14 %
Total interest earning assets^(2) *$* *5,607,117*     *44,715* * * *3.16* *%*   $ 5,489,917     46,341   3.35 %   $ 5,117,669     46,677   3.63 %
Other assets   *326,959*     * *       321,311             340,270        
Total assets *$* *5,934,076*     * *     $ 5,811,228           $ 5,457,939        
*LIABILITIES AND SHAREHOLDERS’ EQUITY*       * *                          
Interest checking deposits *$* *1,506,600*   *$* *1,065*   *0.28* *%*   $ 1,434,560   $ 1,056   0.29 %   $ 1,276,320   $ 958   0.30 %
Money market deposits   *976,018*     *520*   *0.21* *%*     955,174     506   0.21 %     931,900     544   0.23 %
Savings deposits   *621,871*     *285* * * *0.18* *%*     606,449     316   0.21 %     508,763     279   0.22 %
Time deposits   *903,765*     *1,161* * * *0.51* *%*     890,866     1,272   0.57 %     862,408     2,484   1.15 %
Total interest bearing deposits   *4,008,254*     *3,031* * * *0.30* *%*     3,887,049     3,150   0.32 %     3,579,391     4,265   0.47 %
Short-term borrowings   *190,788*     *130* * * *0.27* *%*     182,484     132   0.29 %     182,080     142   0.31 %
Long-term debt   *154,870*     *1,576* * * *4.04* *%*     163,817     1,597   3.87 %     223,407     2,026   3.61 %
Total borrowed funds   *345,658*     *1,706*   *1.96* *%*     346,301     1,729   1.98 %     405,487     2,168   2.13 %
Total interest bearing liabilities *$* *4,353,912*   *$* *4,737* * * *0.43* *%*   $ 4,233,350   $ 4,879   0.46 %   $ 3,984,878   $ 6,433   0.64 %
Noninterest bearing deposits   *1,007,252*     * *       995,786             910,657        
Other liabilities   *43,576*     * *       43,040             56,898        
Shareholders’ equity   *529,336*             539,052             505,506        
Total liabilities and shareholders’ equity *$* *5,934,076*     * *     $ 5,811,228           $ 5,457,939        
Net interest income^(2)     *$* *39,978*           $ 41,462           $ 40,244    
Net interest spread^(2)       * * *2.73* *%*           2.89 %           2.99 %
Net interest margin^(2)         *2.83* *%*           3.00 %           3.13 %                                  
Total deposits^(5) *$* *5,015,506*   *$* *3,031*   *0.24* *%*   $ 4,882,835   $ 3,150   0.26 %   $ 4,490,048   $ 4,265   0.38 %
Cost of funds^(6)         *0.35* *%*           0.37 %           0.52 %

(1) Average balance includes nonaccrual loans.
(2) Tax 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 $1.9 million, $3.5 million, and $2.5 million for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively. Loan purchase discount accretion was $599 thousand, $774 thousand, and $1.5 million for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively. Tax equivalent adjustments were $548 thousand, $507 thousand, and $556 thousand for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $611 thousand, $615 thousand, and $651 thousand for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, 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.

*MIDWEST**ONE** FINANCIAL GROUP, INC. AND SUBSIDIARIES*
*AVERAGE BALANCE SHEET AND YIELD ANALYSIS* *Year Ended* *December 31, 2021*   *December 31, 2020*
*(Dollars in thousands)* *Average*
*Balance*   *Interest*
*Income/*
*Expense*   *Average*
*Yield/*
*Cost*   *Average*
*Balance*   *Interest*
*Income/*
*Expense*   *Average*
*Yield/*
*Cost*
*ASSETS*                      
Loans, including fees ^(1)(2)(3) *$* *3,362,488*   *$* *143,141*   *4.26* *%*   $ 3,551,945   $ 160,752   4.53 %
Taxable investment securities   *1,577,146*     *25,692*   *1.63* *%*     797,954     17,610   2.21 %
Tax-exempt investment securities ^(2)(4)   *463,526*     *12,468*   *2.69* *%*     342,000     10,395   3.04 %
Total securities held for investment^(2)   *2,040,672*     *38,160*   *1.87* *%*     1,139,954     28,005   2.46 %
Other   *52,617*     *91* * * *0.17* *%*     73,255     262   0.36 %
Total interest earning assets^(2) *$* *5,455,777*     *181,392* * * *3.32* *%*   $ 4,765,154     189,019   3.97 %
Other assets   *324,779*     * *       370,687        
Total assets *$* *5,780,556*     * *     $ 5,135,841        
*LIABILITIES AND SHAREHOLDERS’ EQUITY*       * *              
Interest checking deposits *$* *1,440,585*   *$* *4,208*   *0.29* *%*   $ 1,108,997   $ 4,435   0.40 %
Money market deposits   *946,784*     *2,006*   *0.21* *%*     844,137     3,696   0.44 %
Savings deposits   *594,543*     *1,210*   *0.20* *%*     454,000     1,386   0.31 %
Time deposits   *882,271*     *5,774*   *0.65* *%*     945,234     14,402   1.52 %
Total interest bearing deposits   *3,864,183*     *13,198* * * *0.34* *%*     3,352,368     23,919   0.71 %
Short-term borrowings   *191,757*     *551* * * *0.29* *%*     157,346     914   0.58 %
Long-term debt   *178,395*     *6,736* * * *3.78* *%*     220,448     6,990   3.17 %
Total borrowed funds   *370,152*     *7,287*   *1.97* *%*     377,794     7,904   2.09 %
Total interest bearing liabilities *$* *4,234,335*   *$* *20,485* * * *0.48* *%*   $ 3,730,162   $ 31,823   0.85 %
Noninterest bearing deposits   *974,044*     * *       832,038        
Other liabilities   *45,141*     * *       58,186        
Shareholders’ equity   *527,036*             515,455        
Total liabilities and shareholders’ equity *$* *5,780,556*     * *     $ 5,135,841        
Net interest income^(2)     *$* *160,907*           $ 157,196    
Net interest spread^(2)       * * *2.84* *%*           3.12 %
Net interest margin^(2)         *2.95* *%*           3.30 %                      
Total deposits^(5) *$* *4,838,227*   *$* *13,198*   *0.27* *%*   $ 4,184,406   $ 23,919   0.57 %
Cost of funds^(6)         *0.39* *%*           0.70 %

(1) Average balance includes nonaccrual loans.
(2) Tax 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 $11.2 million and $4.4 million for the years ended December 31, 2021 and December 31, 2020, respectively. Loan purchase discount accretion was $3.3 million and $9.1 million for the years ended December 31, 2021 and December 31, 2020, respectively. Tax equivalent adjustments were $2.1 million and $2.1 million for the years ended December 31, 2021 and December 31, 2020, respectively. The federal statutory tax rate utilized was 21%.
(4) Interest income includes tax equivalent adjustments of $2.5 million and $2.1 million for the years ended December 31, 2021 and December 31, 2020, 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.

Non-GAAP Measures

This earnings release contains non-GAAP measures for tangible common equity, tangible book value per share, tangible common equity ratio, return on average tangible equity, net interest margin (tax equivalent), core net interest margin, loan yield (tax equivalent), core yield on loans, efficiency ratio, adjusted allowance for credit losses ratio, core loans, and core commercial loans. Management believes these measures 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. The following tables provide a reconciliation of each non-GAAP measure to the most comparable GAAP measure.

*Tangible Common Equity/Tangible Book Value*
*per Share/Tangible Common Equity Ratio*   *December 31,
2021**
*   September 30,
2021   June 30,
2021   March 31,
2021   December 31,  
2020
*(Dollars in thousands, except per share data)*          
Total shareholders’ equity   *$* *527,475*     $ 530,264     $ 530,293     $ 511,320     $ 515,250  
Intangible assets, net     *(82,362* *)*     (83,607 )     (84,871 )     (86,212 )     (87,719 )
Tangible common equity   *$* *445,113*     $ 446,657     $ 445,422     $ 425,108     $ 427,531                      
Total assets   *$* *6,025,128*     $ 5,875,423     $ 5,749,215     $ 5,737,312     $ 5,556,648  
Intangible assets, net     *(82,362* *)*     (83,607 )     (84,871 )     (86,212 )     (87,719 )
Tangible assets   *$* *5,942,766*     $ 5,791,816     $ 5,664,344     $ 5,651,100     $ 5,468,929                      
Book value per share   *$* *33.66*     $ 33.71     $ 33.22     $ 32.00     $ 32.17  
Tangible book value per share^(1)   *$* *28.40*     $ 28.40     $ 27.90     $ 26.60     $ 26.69  
Shares outstanding     *15,671,147*       15,729,451       15,963,468       15,981,088       16,016,780                      
Common equity ratio     *8.75* *%*     9.03 %     9.22 %     8.91 %     9.27 %
Tangible common equity ratio^(2)     *7.49* *%*     7.71 %     7.86 %     7.52 %     7.82 %

(1) Tangible common equity divided by shares outstanding.
(2) Tangible common equity divided by tangible assets.
          *Three Months Ended*   *Year Ended*
*Return on Average Tangible Equity*   *December 31,*   September 30,   December 31,   *December 31,*   December 31,
*(Dollars in thousands)*     *2021*       2021       2020       *2021*       2020  
Net income   *$* *14,256*     $ 16,311     $ 16,710     *$* *69,486*     $ 6,623  
Intangible amortization, net of tax^(1)     *934*       948       1,177       *4,018*       5,232  
Goodwill impairment     *—*       —       —       *—*       31,500  
Tangible net income   *$* *15,190*     $ 17,259     $ 17,887     *$* *73,504*     $ 43,355                      
Average shareholders’ equity   *$* *529,336*     $ 539,052     $ 505,506     *$* *527,036*     $ 515,455  
Average intangible assets, net     *(82,990* *)*     (84,288 )     (88,543 )     *(84,927* *)*     (113,978 )
Average tangible equity   *$* *446,346*     $ 454,764     $ 416,963     *$* *442,109*     $ 401,477                      
Return on average equity     *10.68* *%*     12.00 %     13.15 %     *13.18* *%*     1.28 %
Return on average tangible equity^(2)     *13.50* *%*     15.06 %     17.07 %     *16.63* *%*     10.80 %

(1) The combined income tax rate utilized was 25%.
(2) Annualized tangible net income divided by average tangible equity.
       
*Net Interest Margin, Tax Equivalent/*
*Core Net Interest Margin*
  *Three Months Ended*   *Year Ended* *December 31,*   September 30,   December 31,   *December 31,*   December 31,
*(Dollars in thousands)*     *2021*       2021       2020       *2021*       2020  
Net interest income   *$* *38,819*     $ 40,340     $ 39,037     *$* *156,281*     $ 152,964  
Tax equivalent adjustments:                    
Loans^(1)     *548*       507       556       *2,105*       2,096  
Securities^(1)     *611*       615    

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