Business Combinations

12 Months Ended

Dec. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Iowa First Bancshares Corp.

On June 9, 2022, the Company acquired 100% of the equity of IOFB through a merger and acquired its wholly-owned subsidiaries FNBM and FNBF for cash consideration of $46.7 million. The primary reasons for the acquisition were to enter the Muscatine, Iowa market and increase the Company’s presence in Fairfield, Iowa. Immediately following the completion of the acquisition, FNBM and FNBF were merged with and into the Bank.

The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The assets and liabilities, both tangible and intangible, were recorded at their fair values as of the June 9, 2022 acquisition date, net of any applicable tax effects using a methodology similar to the Company's legacy assets and liabilities (refer to Note 20. Estimated Fair Value of Financial Instruments and Fair Value Measurements for additional information regarding the fair value methodology). The bargain purchase gain, which is recorded in 'Other' noninterest income, was generated as a result of the estimated fair value of identifiable net assets acquired exceeding the merger consideration. Bargain purchase gains are recorded net of deferred taxes and are treated as permanent differences, resulting in a lower effective tax rate in the period recorded. The revenue and earnings amount specific to IOFB since the acquisition date that are included in the consolidated results for the year ended December 31, 2022 are not readily determinable. The disclosures of these amounts are impracticable due to the merging of certain processes and systems at the acquisition date.

The table below summarizes the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed.


(in thousands)	June 9, 2022
Merger consideration
Cash consideration	$	46,672
Identifiable net assets acquired, at fair value
Assets acquired
Cash and due from banks	$	10,192
Interest earning deposits in banks	67,855
Debt securities	119,820
Loans held for investment	281,326
Premises and equipment	7,363
Core deposit intangible	16,500
Other assets	14,140
Total assets acquired	517,196
Liabilities assumed
Deposits	$	(463,638)
Other liabilities	(3,117)
Total liabilities assumed	(466,755)
Identifiable net assets acquired, at fair value	50,441
Bargain Purchase Gain	$	3,769

Of the $281.3 million net loans acquired, $11.0 million exhibited credit deterioration on the date of purchase. The following table provides a summary of these PCD loans at acquisition:


(in thousands)	June 9, 2022

Par value of PCD loans acquired	$	15,396
PCD ACL at acquisition	(3,371)
Non-credit discount on PCD loans	(1,005)
Purchase price of PCD loans	$	11,020

For illustrative purposes only, the following table presents certain unaudited pro forma information for the years ended December 31, 2022 and 2021. This unaudited, estimated pro forma information was calculated as if IOFB had been acquired as of the beginning of the year prior to the date of acquisition. This unaudited pro forma information combines the historical results of IOFB and the Company and includes adjustments for the estimated impact of certain fair value purchase accounting, interest expense, acquisition-related expenses, and income tax expense for the respective periods. The pro forma information is not indicative of what would have occurred had the acquisition occurred as of the beginning of the year prior to the acquisition. Additionally, MidWestOne expects to achieve further operating cost savings and other business synergies, including revenue growth as a result of the acquisition, which are not reflected in the pro forma amounts that follow. As a result, actual amounts would have differed from the unaudited pro forma information presented.


	Unaudited Pro Forma for the
	Years Ended December 31,
(in thousands, except per share amounts)	2022		2021
Total revenues	$	217,157	$	223,317
Net Income	$	61,451	$	71,376
EPS - basic	$	3.93	$	4.50
EPS - diluted	$	3.91	$	4.49

The following table summarizes DNVB acquisition-related expenses incurred in the year ended December 31, 2023, and IOFB acquisition-related expenses incurred in the years ended December 31, 2022 and December 30, 2021:


	Years Ended
	December 31,
(in thousands)	2023		2022		2021
Noninterest Expense
Compensation and employee benefits	$	70	$	471	$	—
Occupancy expense of premises, net	—		1		—
Equipment	—		29		18
Legal and professional	191		948		202
Data processing	65		511		—
Marketing	38		164		2
Communications	—		3		—
Other	28		74		2
Total acquisition-related expenses	$	392	$	2,201	$	224