MidWestOne Swings to Profit on Strong Net Interest Income, Merger Ahead

TL;DR

**MidWestOne is back in the black and getting acquired, so buy the dip if you believe in the Nicolet merger premium.**

AI Summary

MidWestOne Financial Group, Inc. reported a significant turnaround, with net income reaching $17.015 million for the three months ended September 30, 2025, compared to a net loss of $95.707 million in the same period of 2024. For the nine months, net income was $42.133 million, a substantial improvement from a net loss of $76.619 million in the prior year. This positive shift was primarily driven by a dramatic increase in net interest income, which rose to $51.008 million for the quarter from $37.521 million year-over-year, and a recovery in noninterest income, which swung from a loss of $130.388 million to a gain of $10.253 million, largely due to the absence of the $140.182 million investment securities losses seen in 2024. Total assets increased slightly to $6.249 billion from $6.236 billion at December 31, 2024. Loans held for investment, net, grew to $4.367 billion from $4.260 billion, while the allowance for credit losses decreased to $51.900 million from $55.200 million. The company announced a merger agreement with Nicolet Bankshares, Inc., expected to close in the first half of 2026, indicating a strategic shift towards consolidation.

Why It Matters

This filing reveals a significant financial recovery for MidWestOne, moving from substantial losses to profitability, which is crucial for investor confidence and dividend sustainability. The announced merger with Nicolet Bankshares, Inc. signals a strategic pivot, potentially offering shareholders a premium and creating a larger, more competitive regional bank. For employees and customers, this merger could mean changes in operations, branch networks, and service offerings, while for the broader market, it reflects ongoing consolidation trends in the banking sector, driven by the need for scale and efficiency in a challenging interest rate environment. Competitively, this merger positions the combined entity to better compete with larger regional and national banks.

Risk Assessment

Risk Level: medium — While the company reported a strong return to profitability, the announced merger with Nicolet Bankshares, Inc. introduces integration risks and regulatory approval uncertainties, as detailed in Note 17. Subsequent Events. Additionally, the allowance for credit losses decreased to $51.900 million from $55.200 million, despite an increase in gross loans held for investment, which could indicate a slightly more aggressive stance on credit risk or an improvement in portfolio quality, but warrants close monitoring.

Analyst Insight

Investors should evaluate the terms of the Nicolet Bankshares merger carefully, considering the potential for a premium on MidWestOne shares. Given the return to profitability and the strategic acquisition, holding or initiating a position might be warranted for those comfortable with merger arbitrage and long-term banking sector consolidation plays. Monitor regulatory approvals and integration progress closely.

Financial Highlights

debt To Equity

0.18

revenue

$78,942,000

operating Margin

61.91%

total Assets

$6,249,752,000

total Debt

$97,973,000

net Income

$17,015,000

eps

$0.82

gross Margin

61.91%

cash Position

$272,241,000

revenue Growth

+7.12%

Revenue Breakdown

Key Numbers

• $17.015M — Net Income (Q3 2025) (Significant turnaround from a $95.707M net loss in Q3 2024.)
• $51.008M — Net Interest Income (Q3 2025) (Increased from $37.521M in Q3 2024, a key driver of profitability.)
• $10.253M — Total Noninterest Income (Q3 2025) (Reversed from a $130.388M loss in Q3 2024, largely due to absence of investment securities losses.)
• $4.367B — Total Loans Held for Investment, Net (Sep 30, 2025) (Increased from $4.260B at Dec 31, 2024, indicating loan growth.)
• $51.900M — Allowance for Credit Losses (Sep 30, 2025) (Decreased from $55.200M at Dec 31, 2024, despite loan growth.)
• $6.249B — Total Assets (Sep 30, 2025) (Slight increase from $6.236B at Dec 31, 2024.)
• $606.056M — Total Shareholders' Equity (Sep 30, 2025) (Increased from $559.696M at Dec 31, 2024, reflecting improved financial health.)
• $0.82 — Basic Earnings Per Share (Q3 2025) (Significant improvement from a loss of $6.05 per share in Q3 2024.)

Key Players & Entities

• MidWestOne Financial Group, Inc. (company) — Registrant and merging entity
• Nicolet Bankshares, Inc. (company) — Acquiring entity in merger agreement
• MidWest One Bank (company) — Wholly-owned bank subsidiary of MidWestOne Financial Group, Inc.
• Nicolet National Bank (company) — Wholly-owned bank subsidiary of Nicolet Bankshares, Inc.
• SEC (regulator) — U.S. Securities and Exchange Commission
• $17.015 million (dollar_amount) — Net income for Q3 2025
• $95.707 million (dollar_amount) — Net loss for Q3 2024
• $51.008 million (dollar_amount) — Net interest income for Q3 2025
• $130.388 million (dollar_amount) — Noninterest income loss for Q3 2024
• $6.249 billion (dollar_amount) — Total assets as of September 30, 2025

FAQ

Risk Factors

• Interest Rate Sensitivity [medium — financial]: The company's profitability is sensitive to changes in interest rates, which can affect net interest income and the fair value of investment securities. For the three months ended September 30, 2025, net interest income increased to $51.008 million from $37.521 million in the prior year, indicating a positive impact from current rate environments, but future rate shifts pose a risk.
• Credit Risk [medium — financial]: The allowance for credit losses decreased to $51.900 million from $55.200 million, despite an increase in loans held for investment to $4.367 billion. While this suggests improved credit quality or reduced expected losses, a significant economic downturn could lead to higher-than-anticipated loan defaults, impacting asset quality and profitability.
• Market Value Fluctuations of Securities [medium — market]: The company experienced a significant swing in noninterest income, recovering from a $130.388 million loss in Q3 2024 (largely due to investment securities losses) to a gain of $10.253 million in Q3 2025. Fluctuations in the fair value of investment securities, particularly debt securities available for sale ($1.176 billion as of Sep 30, 2025), can introduce volatility to earnings.
• Integration Risk from Merger [high — operational]: The announced merger with Nicolet Bankshares, Inc., expected to close in the first half of 2026, presents integration risks. Challenges in combining systems, cultures, and operations could lead to disruptions, increased costs, and failure to achieve anticipated synergies, impacting financial performance post-merger.
• Regulatory Compliance [medium — regulatory]: As a bank holding company and financial holding company, MidWestOne is subject to extensive regulation by federal and state authorities. Changes in banking laws, regulations, or supervisory policies could increase compliance costs, restrict business activities, or impact capital requirements.
• Deposit Stability [low — financial]: Total deposits remained stable at approximately $5.478 billion. However, competition for deposits and potential shifts in customer preferences or economic conditions could lead to increased funding costs or reduced deposit levels, impacting the company's liquidity and net interest margin.
• Economic Conditions [medium — market]: The company's performance is tied to the economic health of its operating regions. A slowdown in economic activity, rising unemployment, or other adverse economic trends could negatively affect loan demand, credit quality, and overall profitability.
• Cybersecurity and Data Security [medium — operational]: Like all financial institutions, MidWestOne is exposed to risks related to cybersecurity threats and data breaches. A successful cyberattack could result in financial losses, reputational damage, and regulatory penalties.

Industry Context

The banking industry is characterized by intense competition, evolving regulatory landscapes, and sensitivity to macroeconomic conditions. Consolidation, as evidenced by MidWestOne's merger with Nicolet, is a significant trend as institutions seek scale and efficiency. Interest rate movements heavily influence net interest margins, while technological advancements and cybersecurity remain critical operational considerations.

Regulatory Implications

As a regulated financial institution, MidWestOne faces ongoing scrutiny from federal and state agencies. Changes in capital requirements, lending standards, or consumer protection laws can directly impact profitability and operational flexibility. The upcoming merger will also require regulatory approval, adding another layer of compliance.

What Investors Should Do

1. Monitor merger integration progress
2. Analyze net interest income trends
3. Evaluate credit quality metrics
4. Assess noninterest income volatility
5. Review capital adequacy post-merger

Key Dates

• 2024-01-31: Acquisition of DNVB completed — Expanded the company's footprint and operations through a strategic acquisition.
• 2024-06-07: Sale of Florida banking operations completed — Divested non-core assets to focus on strategic markets.
• 2025-09-30: End of Q3 2025 — Reported significant turnaround with net income of $17.015 million, a substantial improvement from the prior year's loss.
• 2025-10-23: Entered into Merger Agreement with Nicolet Bankshares, Inc. — Announced a significant strategic move towards consolidation in the banking sector.
• 2026-01-01: Expected closing of merger with Nicolet Bankshares, Inc. (First Half) — Marks the completion of a major strategic initiative, creating a larger entity.

Glossary

ACL

Allowance for Credit Losses (Represents the amount of expected credit losses on financial assets held by the company. A decrease suggests improved credit quality or reduced future loss expectations.)

AFS

Available for Sale (Refers to debt securities that are not classified as Held to Maturity. These are reported at fair value, and unrealized gains or losses are recognized in other comprehensive income.)

AOCI

Accumulated Other Comprehensive Income (A component of shareholders' equity that includes unrealized gains and losses on AFS securities, foreign currency translation adjustments, and pension adjustments. A decrease in AOCI from a loss of $72.762 million to $49.376 million indicates an improvement in the valuation of these items.)

BHCA

Bank Holding Company Act of 1956 (Governs the activities of bank holding companies, like MidWestOne, and is a key piece of legislation for the banking industry.)

CECL

Current Expected Credit Loss (The accounting standard for estimating credit losses, requiring entities to recognize expected credit losses over the contractual term of financial assets.)

GLBA

Gramm-Leach-Bliley Act of 1999 (Allows financial holding companies to engage in a wider range of financial activities, impacting the scope of operations for companies like MidWestOne.)

HTM

Held to Maturity (Refers to debt securities that the company has the intent and ability to hold until maturity. These are typically recorded at amortized cost.)

SOFR

Secured Overnight Financing Rate (A benchmark interest rate that is expected to replace LIBOR, influencing the pricing of loans and other financial instruments.)

Year-Over-Year Comparison

MidWestOne Financial Group, Inc. has demonstrated a remarkable turnaround compared to the prior year. Total assets saw a slight increase to $6.249 billion from $6.236 billion at year-end 2024. Net income swung dramatically from a net loss of $95.707 million in Q3 2024 to a profit of $17.015 million in Q3 2025, driven by a significant rise in net interest income and a recovery in noninterest income. The allowance for credit losses decreased to $51.900 million, while loans held for investment grew to $4.367 billion, suggesting improved credit management. A new risk factor has emerged with the announcement of the merger with Nicolet Bankshares, Inc., introducing integration risks.

Key Financial Figures

• $1.00 — ange on which registered Common stock, $1.00 par value MOFG The Nasdaq Stock Market

Filing Documents

• mofg-20250930.htm (10-Q) — 4897KB
• exhibit311q32025.htm (EX-31.1) — 15KB
• exhibit312q32025.htm (EX-31.2) — 16KB
• exhibit313q32025.htm (EX-31.3) — 15KB
• exhibit321q32025.htm (EX-32.1) — 7KB
• exhibit322q32025.htm (EX-32.2) — 7KB
• exhibit323q32025.htm (EX-32.3) — 7KB
• 0001412665-25-000159.txt ( ) — 24112KB
• mofg-20250930.xsd (EX-101.SCH) — 81KB
• mofg-20250930_cal.xml (EX-101.CAL) — 192KB
• mofg-20250930_def.xml (EX-101.DEF) — 580KB
• mofg-20250930_lab.xml (EX-101.LAB) — 1115KB
• mofg-20250930_pre.xml (EX-101.PRE) — 910KB
• mofg-20250930_htm.xml (XML) — 6231KB

Financial Statements (unaudited)

Item 1. Financial Statements (unaudited) 1 Consolidated Balance Sheets 1 Consolidated Statements of Income 2 Consolidated Statements of Comprehensive Income 3 Consolidated Statements of Shareholders' Equity 4 Consolidated Statements of Cash Flows 5

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7

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

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 38

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 58

Controls and Procedures

Item 4. Controls and Procedures 61 Part II

Legal Proceedings

Item 1. Legal Proceedings 62

Risk Factors

Item 1A. Risk Factors 62

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 64

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 65

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 65

Other Information

Item 5. Other Information 65

Exhibits

Item 6. Exhibits 66

Signatures

Signatures 68 Table of Contents

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION Glossary of Acronyms, Abbreviations, and Terms As used in this report, references to "MidWest One ", "we", "our", "us", the "Company", and similar terms refer to the consolidated entity consisting of MidWest One Financial Group, Inc. and its wholly-owned subsidiaries. MidWest One Bank or the "Bank" refers to MidWest One 's bank subsidiary, MidWest One Bank. The acronyms, abbreviations, and terms listed below are used in various sections of this Quarterly Report on Form 10-Q ("Form 10-Q"), including "Item 1. Financial Statements" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations." ACL Allowance for Credit Losses FASB Financial Accounting Standards Board AFS Available for Sale FDIC Federal Deposit Insurance Corporation AOCI Accumulated Other Comprehensive Income FHLB Federal Home Loan Bank ASC Accounting Standards Codification FHLBDM Federal Home Loan Bank of Des Moines ASU Accounting Standards Update FHLMC Federal Home Loan Mortgage Corporation ATM Automated Teller Machine FRB Board of Governors of the Federal Reserve System BHCA Bank Holding Company Act of 1956, as amended GAAP U.S. Generally Accepted Accounting Principles BOD Bank of Denver GLBA Gramm-Leach-Bliley Act of 1999 BOLI Bank Owned Life Insurance HTM Held to Maturity CECL Current Expected Credit Loss MBS Mortgage-Backed Securities CMO Collateralized Mortgage Obligations RPA Credit Risk Participation Agreement CRE Commercial Real Estate RRE Residential Real Estate DNVB Denver Bankshares, Inc. SBA U.S. Small Business Administration ECL Expected Credit Losses SEC U.S. Securities and Exchange Commission EVE Economic Value of Equity SOFR Secured Overnight Financing Rate Table of Contents

Financial Statements (unaudited)

Item 1. Financial Statements (unaudited). MIDWEST ONE FINANCIAL GROUP, INC. CONSOLIDATED BALANCE SHEETS September 30, 2025 December 31, 2024 (unaudited) (in thousands, except per share amounts) ASSETS Cash and due from banks $ 67,125 $ 71,803 Interest earning deposits in banks 205,116 133,092 Total cash and cash equivalents 272,241 204,895 Debt securities available for sale at fair value 1,175,656 1,328,433 Loans held for sale 12,690 749 Gross loans held for investment 4,429,359 4,328,413 Unearned income, net ( 9,731 ) ( 12,786 ) Loans held for investment, net of unearned income 4,419,628 4,315,627 Allowance for credit losses ( 51,900 ) ( 55,200 ) Total loans held for investment, net 4,367,728 4,260,427 Premises and equipment, net 89,552 90,851 Goodwill 69,788 69,788 Other intangible assets, net 21,216 25,019 Foreclosed assets, net 3,952 3,337 Other assets 236,929 252,830 Total assets $ 6,249,752 $ 6,236,329 LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest bearing deposits $ 958,080 $ 951,423 Interest bearing deposits 4,520,916 4,526,559 Total deposits 5,478,996 5,477,982 Short-term borrowings — 3,186 Long-term debt 97,973 113,376 Other liabilities 66,727 82,089 Total liabilities 5,643,696 5,676,633 Shareholders' equity Preferred stock, no par value; authorized 500,000 shares; no shares issued and outstanding — — Common stock, $ 1.00 par value; authorized 30,000,000 shares; issued shares of 21,580,067 and 21,580,067 ; outstanding shares of 20,632,760 and 20,777,485 21,580 21,580 Additional paid-in capital 415,061 414,987 Retained earnings 244,720 217,776 Treasury stock at cost, 947,307 and 802,582 shares ( 25,929 ) ( 21,885 ) Accumulated other comprehensive loss ( 49,376 ) ( 72,762 ) Total shareholders' equity 606,056 559,696 Total liabilities and shareholders' equity $ 6,249,752 $ 6,236,329 See accompanying notes to consolidated financial statements. 1 Table of Contents MIDWEST ONE FINANCIAL GROUP, INC. CONSOLID

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) 1. Nature of Business and Significant Accounting Policies Nature of Business The Company, an Iowa corporation formed in 1983, is a bank holding company under the BHCA and a financial holding company under the GLBA. Our principal executive offices are located at 102 South Clinton Street, Iowa City, Iowa 52240. The Company owns all of the outstanding common stock of MidWest One Bank, an Iowa state non-member bank chartered in 1934 with its main office in Iowa City, Iowa. We operate primarily through MidWest One Bank, our bank subsidiary. On January 31, 2024, the Company completed the acquisition of DNVB, a bank holding company whose wholly-owned banking subsidiary was BOD. Immediately following completion of the acquisition, BOD was merged with and into the Bank. As consideration for the merger, the Company paid cash in the amount of $ 32.6 million. On June 7, 2024, MidWest One Bank completed the sale of its Florida banking operations for a 7.5 % deposit premium, which consisted of one MidWest One Bank branch in each of Naples and Ft. Myers, Florida. In the first quarter of 2025, MidWest One Bank reclassified $ 11.0 million of credit card receivables to loans held for sale. The sale closed in October 2025. On October 23, 2025, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Nicolet Bankshares, Inc. ("Nicolet"), pursuant to which the Company will merge with and into Nicolet (the "Merger"), with Nicolet as the surviving entity of the Merger. Immediately following the Merger, and subject to the occurrence of the Merger, MidWest One Bank, will merge with and into Nicolet National Bank, Nicolet's wholly-owned subsidiary bank, with Nicolet National Bank as the surviving entity of such merger. The transaction is expected to be completed in the first half of 2026 (refer to Note 17. Subsequent Events for additional information). Basis of Presentation The accompanying inter

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