COVID-19 RESPONSE AND

SUPPLEMENTAL FINANCIAL INFORMATION

SECOND QUARTER 2020

June 30, 2020

COVID-19 Response

2

Providing Support During COVID-19 Pandemic

Supporting our Employees:

Focus on Safety:

  • Implemented social distancing throughout our locations
  • Servicing customers through a combination of digital banking channels, drive-thru banking locations, and customer service phone lines
  • Significant expansion of work from home capabilities
  • Increased cleaning services
  • Business travel restrictions
  • Enhanced guidelines for returning to work

Employee Assistance:

  • Pandemic pay benefits for employees impacted by COVID-19
  • Accommodations for employees with pre-existing health conditions

Supporting our Customers:

Paycheck Protection Program

  • Provided customer relief through participation in the Paycheck Protection Program ("PPP") and providing subsidies for certain loan payments
  • 2,534 applications have been processed and approved, representing $345 million in client funding since we've begun to participate in the
    PPP
  • As of June 30, 2020, $2.0 million PPP loans outstanding are in the Agricultural segment, with the remaining $325.6 million in the Commercial segment

Loan Payment Deferral Program

  • Implemented a loan payment deferral program

Supporting our Communities:

  • In addition to the more than 200 organizations MidWestOne supports through its annual charitable giving, MidWestOne is donating an additional $150,000 to organizations supporting those most impacted by COVID-19.
  • MidWestOne has focused on supporting local businesses, including through employee recognition lunches from local businesses for on-site employees
  • Partnered with other local banks in the Iowa City area in the Holding our Own program. This program encourages the community to shop local, with a goal of motivating over $1M of local spending. As part of this Holding our Own program, for every $150 spent at participating businesses, customers will receive $20 in gift cards and $5 will be donated to a local program that supports and administers minority-owned business grants

3

Loan Portfolio

4

Diversified Loan Portfolio

Loan Portfolio Mix

June 30, 2020

Consumer, 2%

One-to-four family junior liens, 4%

One-to-four family first liens, 10%

CRE-Other, 32%

Loan Performance

5.20%

$4,000

Commercial and

5.10%

Industrial, 30%

4.98%

5.00%

$3,000

4.80%

$2,000

4.60%

$1,000

Agricultural, 4%

4.51%

Construction &

$3,183

$3,436

$3,634

4.40%

$-

Development, 6%

2Q.2019

1Q.2020

2Q.2020

Farmland, 5%

Average Loans

Yield on Loans, tax equivalent*

Multifamily, 7%

Average loans reported are in millions of dollars.

*Non-GAAP Measure. See the "Earnings Release" Non-GAAPMeasures section.

5

Enhanced Credit Monitoring

  • The MidWestOne strategy for the Second Quarter of 2020 was to build on our foundation of existing portfolio monitoring processes and create enhanced monitoring procedures to increase the penetration of our portfolio and ultimately the transparency of the risk profile of the portfolio.
  • In response to the current economic environment, these enhanced credit monitoring procedures will be performed on an on-going basis for the foreseeable future.

The 3 foundational monitoring processes are:

In addition to this foundation, for Q2'2020 we performed an additional risk rating

review, which encompassed the following:

  • Past Due Reviews- all loans are reported and reviewed in meetings each month by market, led by credit; as past due status is a key early warning sign of credit deterioration, these meetings are focused on resolution of the past due as well as determination of changes in risk ratings.
  • Loan Strategy- all loan relationships greater than $1 million for watch, $500k for substandard, and $250k for non-accrual are reviewed by credit each quarter; this review provides a definitive decision each quarter on risk rating, relationship strategy, accrual status, and reserves needed on an individually analyzed basis.
  • Annual Credit Reviews- all pass loan relationships greater than $1 million are reviewed by credit each year; this review provides an annual confirmation of the risk rating profile of the credit relationship.
  • All loans greater than $1 million from the vulnerable industry groups (this included healthcare / senior living and quick service restaurants, which are no longer considered to be vulnerable based upon the additional risk assessment performed during the second quarter)
  • The top 30 largest loan relationships - these relationships encompass relationships ranging in size from $16 million to $35 million

For perspective on penetration of the portfolio touched by our enhanced risk rating review, we reviewed $878 million of gross balances, or 24% of the loan portfolio

When combined with the additional $162 million of gross balances, or 4% of the portfolio, reviewed in Loan Strategy, our reviews in Q2'2020 covered $1.04 billion, or

29% of the portfolio

6

Exposure in Vulnerable Industries

Loan Portfolio

Vulnerable Industries

Vulnerable Industries

Nonessential Retail

$107.9

21%

14%

Restaurants $60.7 12%

Hotel

$122.6

24%

CRE - Retail

$208.4

40%

86%

Arts, Entertainment & Gaming $21.6 4%

$- $25.0 $50.0 $75.0 $100.0 $125.0 $150.0 $175.0 $200.0 $225.0

$ of Portfolio

All Other Loans

$ in millions, Loan balances as of 6/30/20

7

Exposure in Vulnerable Industries

Non-essential Retail

Portfolio Characteristics - Non-essential Retail

By Geography

Loan Balance Outstanding (000s)

$

107,878

Number of Loans

568

Average Loan Size (000s)

$

190

Other, -%

Average Note Term (months)

39

Colorado, 17%

Loan-to-Value (Average)

69 %

SBA PPP Loans - Number

155

SBA PPP Loans - Dollars (000s)

$

17,057

Wisconsin, 13%

Iowa, 49%

Portfolio Fundamentals

• Predominately local auto and equipment retailers which have established

positions in the community and strong brand affiliations

Minnesota, 17%

• Most auto and equipment retailers have reduced accessibility to their sales

showrooms during the COVID-19 pandemic but maintained service

Florida, 3%

department levels at full-service

  • Most auto and equipment retailers have experienced severely reduced sales during the COVID-19 pandemic and recent sales rebounds have been constrained by inventory availability
  • Most relationships have guaranties from owner-operators

8

Exposure in Vulnerable Industries

Restaurants

Portfolio Characteristics - Restaurants

Loan Balance Outstanding (000s)

$

60,668

By Geography

Number of Loans

387

Average Loan Size (000s)

$

157

Other, 1%

Average Note Term (months)

43

Colorado, 4%

Loan-to-Value (Average)

63 %

Wisconsin, 14%

SBA PPP Loans - Number

164

SBA PPP Loans - Dollars (000s)

$

15,260

Iowa, 47%

Portfolio Fundamentals

Minnesota, 22%

• Represents the Bank's full-service restaurant customers, primarily non-

franchise, local operators in casual dining

• Guaranties from owner-operators are required in most relationships

• Most restaurants during the COVID-19 pandemic have been allowed to

Florida, 13%

provide takeout and delivery services. More recently, these businesses

have re-opened but are experiencing reduced business volume

• Quick service restaurant exposures were removed from the vulnerable

restaurant industry exposures at June 30, 2020 based upon our

experience with these customers and their financial performance during

the COVID-19 pandemic

9

Exposure in Vulnerable Industries

Hotel

By Geography

Other, 6%

Colorado, 1%

Wisconsin, 4%

Minnesota, 24%

Florida, 17%

Portfolio Characteristics - Hotel

Loan Balance Outstanding (000s)

$

122,623

Number of Loans

90

Average Loan Size (000s)

$

1,362

Average Note Term (months)

58

Loan-to-Value (Average)

64 %

SBA PPP Loans - Number

26

SBA PPP Loans - Dollars (000s)

$

2,173

Portfolio Fundamentals

Iowa, 49%

  • Lending focus is on experienced, local developers within the Bank's trade areas. Approximately 80% of properties have major flags while the remainder is comprised of gaming industry related boutique hotels in the Dubuque, IA market.
  • Flagged hotels are primarily core travel hotels that are positioned close to major highways in the Bank's key metropolitan markets with no convention center exposure
  • Conservative underwriting standards include a maximum LTV of 75%
  • Guaranties from owner-operators are regularly required. Non-recourse lending is not a material exposure.
  • Occupancy was severely reduced during the COVID-19 pandemic (generally to less than 10%). Most operators have recently seen improving occupancy trends with some reporting 40% in July 2020. Hotels associated with Dubuque's gaming industry

have recently been experiencing weekend occupancy rates comparable to pre-

10

pandemic levels.

Exposure in Vulnerable Industries

CRE-Retail

By Geography

Other, 3%

Colorado, 1%

Iowa, 19%

Wisconsin, 12%

Florida, 15%

Minnesota, 50%

Portfolio Characteristics - CRE-Retail

Loan Balance Outstanding (000s)

$

208,423

Number of Loans

225

Average Loan Size (000s)

$

926

Average Note Term (months)

71

Loan-to-Value (Average)

57 %

SBA PPP Loans - Number

4

SBA PPP Loans - Dollars (000s)

$

122

Portfolio Fundamentals

  • Lending focus is on experienced, local developers and operators, with properties that are within the Bank's trade areas
  • Exposure is predominately retail strip centers with a diverse tenant base including services, restaurants, and national retailers; malls are not included within the exposure group
  • Conservative underwriting standards include a maximum LTV of 75%
  • Guaranties are regularly required; non-recourse is rare and associated with strong properties and LTV <60-65%

11

Exposure in Vulnerable Industries

Arts, Entertainment & Gaming

Portfolio Characteristics - Arts, Entertainment & Gaming

By Geography

Loan Balance Outstanding (000s)

$

21,550

Number of Loans

165

Other, 6%

Average Loan Size (000s)

$

131

Average Note Term (months)

53

Colorado, 1%

Loan-to-Value (Average)

51 %

Wisconsin, 12%

SBA PPP Loans - Number

65

SBA PPP Loans - Dollars (000s)

$

2,884

Minnesota, 23%

Florida, -%

Portfolio Fundamentals

Iowa, 57%

  • Small overall exposure relative to the portfolio; not a key focus of the Bank's lending efforts
  • Largest concentration of exposure is gaming operations in our Dubuque, IA market (in the Mississippi River Entertainment district)
  • While completely shutdown during the initial COVID-19 risk mitigation orders in Iowa, the facilities have since re-opened, with strict risk mitigation guidelines, and are experiencing a solid rebound in business volume

12

COVID-19 Loan Modification Program

Loan Modifications

  • Implemented a COVID-19 loan modification program in April 2020
  • As of June 30, 2020,13% of loans had been modified, generally for a 90-day period
  • As of July 24, 2020, 16 loans, totaling $31.2 million, were either in or being processed for a second deferral period

Interest Only vs. Principal and Interest Deferrals

June 30, 2020

32%

68%

Round 1:

  • Total number of loans with loan payment deferrals and mortgage forbearance: 959
  • Total dollar amount: $474.9 million

Round 2:

  • Total number of requests in or being processed: 16
  • Total dollar amount: $31.2 million

Interest only

Principal and Interest

13

COVID-19 Loan Modification Program

Accomodation, Food Service

Construction

Health Care

Manufacturing

Other Services

Real Estate

Retail

Other

$98.620.8%

$26.8 5.6%

$12.42.6%

$22.7 4.8% $19.8 4.2%

$213.1

44.9%

$20.0 4.2%

$61.513.0%

$-

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

$180.0

$200.0

$220.0

$240.0

$ in Millions

Deferral data as of June 30, 2020

14

CECL and Allowance for Credit Losses

15

Change in ACL and Model Assumptions

Methodology Assumptions

Discounted Cash Flow Method

  • Discounted cash flow method utilized to estimate expected credit losses for agricultural, commercial and industrial, commercial real estate, residential real estate, and consumer loan segments
  • Credit loss drivers determined by regression analysis between Company and peer historical loan loss data and multiple macroeconomic variables
  • Macroeconomic variables include Midwest unemployment, national retail sales, CRE index, US rental vacancy rate, US GDP, and national home price index
  • Reasonable and supportable forecast period of 4 quarters, with reversion back to a historical loss rates over 4 quarters on a straight-line basis
  • Adjustments to the ACL are made based upon qualitative factors, which include company, market industry or business specific data, changes in underlying loan composition of specific portfolios, trends relating to credit quality, delinquency, non-performing and adversely rated loans, and reasonable and supportable forecasts of economic conditions

Drivers of the Change in ACL:

  • Increases in Midwest unemployment
  • Decreases in CRE index, national home price index and US GDP
  • Moderate increases in the national retail sales and US rental vacancy

Allowance for Credit Losses

$ in Thousands

$60,000

$6,324

$236

$(2,103)

$40,000

$51,187

$55,644

$20,000

$-

3/31/20 Charge-offs Recoveries Credit loss 6/30/20 expense related

to loans

16

CECL Modeling Disclosure

ACL by Loan Type

Allowance for Credit Losses - by Loan Type

December 31, 2019

January 1, 2020

March 31, 2020

June 30, 2020

ALLL Balance

% of Loans

ACL Balance

% of Loans

ACL Balance

% of Loans

ACL Balance

% of Loans

(dollars in thousands)

Commercial real estate

$

13,804

0.40 %

$

15,104

0.44 %

$

23,137

0.68 %

$

28,221

0.78 %

Commercial and industrial

8,394

0.24 %

11,122

0.32 %

19,310

0.56 %

18,709

0.52 %

Agricultural

3,748

0.11 %

1,191

0.03 %

1,146

0.03 %

1,408

0.04 %

Residential real estate

2,685

0.08 %

4,735

0.14 %

6,425

0.19 %

6,074

0.17 %

Consumer

448

0.01 %

911

0.03 %

1,169

0.03 %

1,232

0.03 %

Allowance for credit losses

$

29,079

$

33,063

$

51,187

$

55,644

Liability for off-balance sheet credit exposures

$

-

$

3,433

$

5,844

$

4,205

17

Credit Quality

Nonperforming Assets Composition

June 30, 2020

dollars in thousands

Nonaccrual loans held for investment

6/30/2020 3/31/2020 6/30/2019

$

41,303

$

43,973

$

30,875

Consumer, 0%

Residential real estate, 6%

Commercial real estate, 55%

90 days+ past due

  • still accruing interest, 7%

Foreclosed assets, net, 2%

Agricultural, 7%

Commercial and industrial, 22%

Allowance for credit losses

Credit loss expense related to loans (for the quarter)

Net charge-offs (for the quarter)

Net charge-offs to average loans held for investment (for the quarter, annualized)

ACL to loans held for investment, net of unearned income

ACL to loans held for investment, net of unearned income (adjusted)(1)

ACL to nonaccrual loans held for investment, net of unearned income

Nonaccrual loans held for investment to loans held for investment, net of unearned income

$

55,644

$

51,187

$

28,691

$

6,324

$

19,322

$

696

$

1,867

$

1,198

$

1,657

0.21 %

0.14 %

0.21 %

1.55 %

1.49 %

0.81 %

1.70 %

1.49 %

0.81 %

134.72 %

116.41 %

92.93 %

1.15 %

1.28 %

0.87 %

Non-accrual loans broken out separately by segment

  1. Loans held for investment, net of unearned income was adjusted for the total amount of PPP loans. Non-GAAP Measure. See the separate Non-GAAPMeasures section in the "Earnings Release" for a reconciliation to the most directly comparable GAAP measure.

18

Digital and Branch Banking Trends

19

Digital and Branch Banking Trends

1,610,251

1,445,744

1,454,607

1,328,553

559,370

481,913

32,462

38,538

Q1'20

Q2'20

Mobile Logins

Online/Dekstop Logins

Branch/Teller Transactions

# of Mobile Deposits

QTD Totals for Digital and Branch Channels

(Q1'20 vs. Q2'20)

  • Mobile logins increased 11%
  • Online/Desktop logins increased 9%
  • Branch/Teller Transactions decreased 14%
  • Mobile Deposits increased 19%

20

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Disclaimer

MidWestOne Financial Group Inc. published this content on 31 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 July 2020 01:10:08 UTC