Charles Funk – President, Chief Executive Officer, Director Kent Jehle – Executive Vice President, Chief Credit Officer Gary Ortale – Chief Financial Officer, Executive Vice President.

Jeff Rulis – D A Davidson Brian Martin – FIG Partners Daniel Cardenas – Raymond James.

Good day everyone and welcome to the MidWestOne Financial Group, Incorporated 2015 Q1 Earnings Release Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, that today’s event is being recorded.

At this time, I would like to turn the conference call over to Mr. Charles Funk, President and CEO. Sir, please go ahead..

Thank you, Jamie. And thank you everyone for joining us this morning or this afternoon if you are on the East Coast.

I will begin as I always do with the forward-looking statements and remind everyone, this presentation contains forward-looking statements relating to the financial condition, results of operations and business of MidWestOne Financial Group.

Forward-looking statements generally include words such as believes, expects, anticipates and other similar expressions. Actual results could differ materially from those indicated among the important factors that could cause actual results to differ materially.

Our interest rates, changes in the mix of the company's business, competitive pressures, general economic conditions and the risk factors detailed in the company's periodic reports and registration statements filed with the SEC.

MOFG undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. And although [ph] our attorneys were happy on our regulators. Let me go ahead with a brief overview of what we thought was a fine first quarter.

Clearly the headline numbers are good, but with or without special charges we are very, very pleased with the quarter. Excluding the transaction costs, we had a terrific quarter $0.62 a share.

I think, the headline perhaps within the numbers is the net interest margin of 3.72%, we don’t think that sustainable February, as all of you know or many of you know is normally a month with an elevated margin.

We also had a little bit of interest recovery in the quarter, and of course the loan pools within a 11% return even with a diminished number outstanding 11% is very, very good almost three times what it was a year ago.

But, one thing that may not be quite as obvious to probably help the margin is that we’ve been shedding some higher cost liabilities as we seek to pay for the Central Bank transaction, and in that we have an amount of Federal Home Loan Bank pre-payers which tend be higher cost.

We also have less some retail CDs and jumbo CDs were often against those tend to be a little higher cost liabilities. The other headline would be $44 million of loan growth in the quarter, those are these that are followed our company for a long period of time, you know that we tend to be plotters and not put up spectacular numbers.

I don’t know if I would call this spectacular, but for our company it’s a very, very, very strong quarter. [Indiscernible] can further comment on some of the activity, all I would say is that we could see some end-market moves were larger commercial customers switched their business to MidWestOne Bank.

In our footprint, we have a lot of good community banks and they have loyal customers and we benefited during this quarter with several end-market moves. You never can predict that that will continue or not, but we’re certainly happy with what happened this quarter. We lost a few deals on pricing.

I think most of the $44 million in growth came at terms that were at or near our price, but there were number of deals that we could have booked but didn’t because we weren’t at the right price and there might have been one or two on structure, but I think most of the deals that we didn’t book were on price.

So there’s still a lot of competition out there and I think the media has played up on that a little bit as second quarter – or as first quarter earnings have been reported.

Like asset quality continues to be in good shape, I will comment within our loan loss reserve that we have a – what we’ve considered to be a required reserve inside of our reserve and the surplus over the retired – the required reserve has moved down a little bit and that’s do entirely to the long growth we’ve experienced.

We’ve certainly put more in our loan loss reserve than we have budgeted for but that’s because of the growth and the fact that we did put a little excess in and got us back over to 1.4 – over above 1.4 as a percentage of total loans.

I am very pleased as I commented in the earnings release, very pleased with NPA coverage of over 130% that as good as it’s been for several quarters in our company.

Within the balance sheet and many of you have noticed this already, but we currently have been selling investment and we’ve been selling both winners and losers but as I reflect back on the first quarter and even into April, this has been a very, very good time to sell investments. We have gotten some phenomenal bids on some of the bonds we’ve owned.

In fact, we sold a couple of mortgage backed securities, but they were shorter mortgage-backed securities but we did sell several mortgage-backed securities where the give up yield for the – the yield that we were giving up over the life of the bond, we calculated to be under 50 basis points. So clearly, based on bids very good time to sell bonds.

Non-interest income, for the most part a decent quarter, not a great quarter if I go through it by the major line items. The mortgage business is impacted a little bit by the fact that we are - our servicing rights adjustment was a negative number in this income statement.

If you take the servicing rights adjustment out, I think probably our mortgage activity was fine, we do have a nice pipeline. So the second quarter should show good results, assuming we get them all closed and closed on time.

Wealth management, I would say the rate of growth overall in wealth management has slowed a little bit, but it is still positive. And I don’t know that I would call its a trend in terms of the slowing revenue growth, part of it was we have some fresh piece that we thought we were going to collective in first quarter that we didn’t.

We expect to correct those in the second quarter and if we do, we should be back on a little bit more sustainable or little bit higher path.

Our service charge income, is continues to be up as a percentage of our – as of comparison to last year, and I’ve said the only we are noticing, there is also a nationwide trend and that is that NSF fees I think customers are much more aware of NSF fees especially those who use mobile banking and they track it a little bit closer.

We are not the only bank that has seen that still up from a year ago but behind what we advised it. Expenses appeared us to be okay, other than what you see that is tied directly to the merger. If you look around our footprint I would say the local economies are fine, certainly not a boom-time, certainly not a bust time.

We’ve talked a lot about the ag economy and Kent will comment more, but I think we made it to the agricultural loan renewal season in good shape without a large amount of carryover debt.

We continue to think that, if crop – if corn and bean prices stay at these levels that the first effects are probably going to be seen in terms of the small businesses where farmers spend their money. So there will be as many new pickup truck spot, there won’t be as many implements purchased from the implement dealers.

But in terms of our agricultural loans we didn’t see a lot of carryover debt and they appeared to be ready to go for this crop season. There continues to be a lot of competition for pricing and that’s also within the ag sector. So we’re mindful of that.

Overall I think there is good momentum in the Iowa economy but certainly not a boom and – but certainly not a bust as I said before. Before I close the short update on the merger, you all know we’ve received Federal Reserve approval we received shareholder approval yesterday with over 99% of the votes being in favor of the merger.

We still are pointing toward May 1 close we’re very excited as that traveled around and talk to folks about the merger the reception has been very good.

And my opinion is to say that is transformational for our company but it’s still all comes down to execution and management has to execute of what we’ve said we would do and that’s what we will be focused on, that’s what we have been focused on but once we get the deal closed. We’ll be very, very focused on the execution part of this transaction.

So that would be my brief overview and with that I’m happy to answer any questions that you might have. And I’ll turn it back to you Jamie..

[Operator Instructions] And our first question comes from Jeff Rulis from D A Davidson. Please go ahead with your question..

Thanks, good morning..

Good morning..

Good morning, Jeff..

Just a question on the margin and it sounds like a lot of some factors that led to the sizable jump I guess starts on core margin going forward and maybe you can give us an update on what do you think the merger how that will impact core margins as well..

Well. I can start and then perhaps others can comment we would think it would definitely come in, we’ve been running 345 to 355 I think in that range. It seems to me that that’s a reasonable run rates, as I said in the press release we were pleasantly surprised when we get the 372.

The Central Bank margin a lot will depend on purchase accounting but if you look and we can’t predict that with great accuracy but it will be predictable with some accuracy.

But if you look at there what we think their core margin is – it’s a little higher than ours, their cost of funds tends to be little lower than ours and so going forward we would think that would be accretive but that’s the right word to the margin.

But in terms of the specific number, I’m reluctant to give you on – Gary, I don’t know if you want to add anything to what said..

Yes, I don’t know that I can add anything. I think Charlie has summed that up pretty nicely, because they do have our experiences that they have had and slightly higher margin.

And we have and I think it has to do with their asset mix as well as the low cost of funds, as Charlie indicated what the impact will be able to marks on their margin going forward. Again, it’s hard to be specific as to what it might do or how it might impact our margins going forward.

But I think its safe to say that we will given that we’re slightly larger in terms of bank size that the prevailing rate that has been out there in the 350 or more likely continue..

Got it, and then on the I guess could you just update us on your expectations for additional merger related expense and maybe the timeline of the conversion and how that looks going forward..

Yes, great question. So if you look at the merger projections, there were $8 million of expense saves. We think that there will be some this year, probably in the neighborhood of $1 million. If you look probably 2016, by especially toward the end of that year is probably [indiscernible] they will start to come a little bit quicker.

The second – your second part – the second part of your question ties perfectly to the first. What we have to do is get them the banks merged together and we’ve made that clear to their employees and our own that we know that we need to move not hands to leave, but steadily toward getting that done.

Part of the problem is that when can you can get for both five served banks and when can you get the time schedule with five serves. So my bank just would be within a year and if we can get it done sooner than that, that’s great.

We’ve got a couple of days to reserve with five serve, but lot of that depends on our ability to get and analyze things and have working groups that are formed and get all that needs to be done, ready to go.

Things like payroll, payroll is the huge issue trying to get people paid on the first payroll actually do a merger like, it sounds simple to people like even I, but are you in May but that’s a very complicated things.

So that’s a long way of saying within the first year Jeff, but every bit of advice I have gotten from other CEOs around the United States, get the banks merged sooner rather than later.

And so, we know there will be people who will not want that to happen quite as quickly, but I think the best practice is to get it done sooner rather than later and you can be assured that we’ll be working very hard and that will be one of our top priorities. But, having said all that, we have to do it in a way that doesn’t upset the board..

Okay, thanks..

Jeff, this is Gary, I didn’t know, Charlie, kind of address the same but, I think your question was also about the expense side or the merger expenses and I would just add that in additions to the $8 million in saves that we’re modeled – we modeled roughly $5 million in merger related costs.

And I would suggest that $1.5 of that has already been spent. So and I would expect that the remaining $3.5 million would be certainly over the course of this year where the most of it – or a good coupled with volume in the second quarter here..

I appreciate it. Thanks, thanks for the color..

Thanks..

[Operator Instructions] Our next question comes from Brian Martin from FIG Partners. Please go ahead with your question..

Hey, guys..

Hey, Brian..

Hi, Brian..

Hey, maybe just – I joined a bit late so I just didn’t hear, the one comment in the last question just the savings Gary, when did the savings begin? I guess, I know your merge – your plan is to merger banks and you have got the dates, but when would you expect this realistic to start picking up on some of those savings, beginning to go through the P&L?.

Yes, we modeled, Brian that, a total of $8 million in saves over the next – over this year and the next too primarily, with this only maybe a $1 million of that coming in this current year, the both of that would be in 2016 and 2017 and my suggest is that even in 2016, I don’t want to imply that, you know that’s $4 million in 2016 and $3 in 2017, that’s the $4 million will be evenly throughout the year, but and maybe waited a little more towards the end of the year..

Okay, that’s perfect.

That’s helpful and then maybe just Charlie on the margins, I guess I get the lift this quarter and kind of some of the things that were going on, why would you except the margins to drift back lower to that 345 to 355 range, I mean what’s the catalyst to push it back down and now you kind of remix the little bit grown the loans and you are still kind of focused on the funding, I mean the one thing that stands out of that the loans pools, which certainly they will drop a bit conceivably, but you know why they drop all the way back down to was earlier versus just some back?.

It’s a great question and probably the two word answer is because you are speaking to a cautious banker. I just it just doesn’t seem – it doesn’t seem like we’re operating that kind of a run rate.

One thing I didn’t neglect to mention Brian and others is that I noticed in our board report from our board meeting there are investment portfolio yield is actually gone up, well, that’s helpful with our margin, because most of what's Jim has been selling, has been lower yielding bond, even though we’ve taken a lot of gains has been lower yielding bonds.

And I believe our investment portfolio yield was right at 3.5% and the duration really hasn’t changed that much. So that would also be a reason to argue for a little higher margin going forward, because we've been running in the 3.30 range and that’s the sizable portion of our balance sheet.

So I don’t really have a good counter to what you are saying, other than there was some interest recovery and there that you can’t forecast. And I don’t know how many based at this point that contributed to the margin, but it’s entirely possible that might be a higher run rate. I’m just reluctant to forecast that..

Okay. And was that is it true that I’m – I don’t recall the loan growth was more back-end loaded that sounds right..

I think the loan growth was it was back-end in the fourth quarter, but I think it was pretty consistent throughout the quarter..

Yes, Brian, this is Kent. I can jump in a little more on the loan growth Charlie go through the end market moves, which at this point in time, we don’t have any additional of those of any size in our pipeline. And also when you look at the 2014 operating lines, we didn’t see the pay down….

For ag..

For ag, as we’ve seen in the past. And that because of the branding held right now. We would anticipate that being liquidated over the next 50 days to 90 days. So we’ll see a little bit of a backlog on the totals from that. So between those two that happen the first quarter that was roughly about half of our growth.

And we take that in consideration, we’ve discussed an annual run rate about 7% plus or minus the loan growth as we go through out the rest of the year when things normalized.

Does that helpful for you?.

Yes, okay, yes, because we – and the period balance was the 1176 versus the 1154 for the average, it seem like it was more back and those are which I guess to my point in the margin it seem like it will have more favorable implications than less favorable..

Yes, part that to our 2015 operating lines ramping up and also our construction line start to kick in, in the later part of the first quarter. So as the combination of those that listed in the second half of the quarter..

Okay.

And some of those you are saying, we’ll get back in the second quarter, yes, is that right?.

Yes, some of that will related to the ag 2014 operating line..

Okay, okay. And then maybe just second question was the loan pick up this quarter and just may be the outlook over the balance of the year. It sounds like some of your comments are surely the economy is not great. This is kind of stealing some business if you will in your markets.

And I mean is it more plotting, I guess as you call it, as you go to the balance of the year, is that kind of how you would think about things?.

That’s how I think about things, but I also want to say that we think I think due to better economic conditions some of our customers are buying other businesses. In the case, one of our large borrowers buying the business in another state, so I think that reflects the growth in terms of economic vibrancy of our footprint.

But we’re most of the time it just seems to me that the Iowa part of this franchise is going to be 3% to 5% loan growth and if we happened together a quarter like we had. This past quarter that’s great, because it’s just the compounding lade upon it, add to itself..

Right, okay, that’s helpful.

And then may be we talk about last quarter Charlie, you talked little bit about turn the balance sheet we mixing some of that was done this quarter I guess, what before this deal closes I guess are there, how do we think about any other changes you make to the balance sheet, is it positions a way you want right now or is it more changes that occur within the bond portfolio and/or I guess how to think about that moving to next quarter?.

Well, yes, another good question. I think the first way to think about it would be there’s going be a $65 million cash payment that goes out of our company. The second thing would be that we have sold more investments during the month of April and I think we’re above where we need to be right now to close from a cash point of view next Friday.

So going forward and I’m just going to speak about Iowa right now, going forward, we continue to see reasonable loan demand may be not $44 million every quarter, but reasonable loan demand. Seems to me deposits are going to be hard to combined in this environment especially, rate start to trend up. There’s no guaranty they will.

But I think you could see east way the loan and deposit ratio drifts a little bit higher. We’re fine with that. Our goal is to be in the 80s we don’t – when we gets into the 90s that’s a lot of leverage for U.S. But we’re in the sweet spot right now of our loan and deposit ratio target, it wouldn’t surprise any of us, it goes little bit higher..

Okay, alright and the – alright.

How about I guess maybe the just two other questions, I mean the capital position at close here and need to add capital, I guess how are you thinking about where capital stands and anything any steps you might take are you satisfied with how long would go or should you look at adding some additional capital or?.

Yes, great question. The target – I mean the strategic target for our company and as you know, we look at TCE and we like to be in the 8, 8.5 range. And so a 10.5 plus where we are now that’s way above the range and that’s for one of the reasons, we’re so delighted that we have some weighted employee our excess, deploy our excess capital.

We from today, that numbers probably I can’t give you an exact number, but still be 7.5, 7.6, somewhere in that that range TCE. That doesn’t concern us, because we will see the earnings power and we when you preformed out we get back above 8% and we start to accumulate capital pretty quickly.

If you look at what is happen with our stock price currently, we would be – I think we would be responsible to consider what our alternatives are. So we have the chance to rise a little bit of common equity.

We might consider that depending on the price, by it would not be a big number and it would be probably a little bit just augment the current position of the company. But they really haven’t been any final decisions made on that, but it certainly something we’re considering..

Okay. And maybe just two last housekeeping things you know some of those step on the service charging, can we talked about it being up this quarter. I guess would you expectation if you look year-over-year in the second quarter, you still see some I mean this growth there as well.

I know it’s kind of a lumpy number and you look from first to second quarter. But if you just compare year-over-year, the second quarter of year-ago to the second quarter this year, I guess your expectation to see some growth..

As I recall, we roll this program out in May for the most part of last year. So when you are comparing to the prior year, we’re still going to have a little bit of a lift, but there won't be a full quarter lift.

So you are getting pretty close to that where I think you see what the run rate is the last three quarters and in terms of pick up from prior year probably two-third, let’s say one month more than this quarter and then you’ll have an apples-to-apples comparison in May and June..

Okay, alright. And the reduction in investments had occurred this quarter Charlie, is it a big number.

I guess just trying to get a idea on the size of the balance sheet for a modeling from sales in quarter-to-date?.

I don’t recall, but it’s in I think to put a number out there, but it’s, what Gary?.

$30 million, $40 million on sales, I would guess, I know we needed to do. I would guess from what I see at the end of the first quarter that it would be in that $25 million to $30 million range it’s been sold additionally..

Okay, perfect, thanks Gary. Thanks for taking the question guys..

Yes, you’re welcome, Brian..

[Operator Instructions] Our next question comes from Daniel Cardenas from Raymond James. Please go ahead with your question..

Good morning, guys..

Hello, Dan..

Hello, Dan..

Thanks for all the color so far.

Just a quick couple of question, as they look at your ag portfolio, can you may be remind us why does any type of exposure you have to the poultry industry?.

That is a question, Dan. And I can tell you we have no exposure to the poultry industry in our portfolio right now. Yes, it could ruffle in – ripple in kind of businesses that could be the case but there is nothing specific to produces that we have in the mix..

Great, great. I think that was it, most of my other questions were asked and answered, thanks guys..

You’re welcome. We just Jim, Kent, Charles struck ahead inside our conference room here and indicator, we’ve sold about $55 million in bonds this quarter. So alright, we close. [Multiple Speakers].

And ladies and gentlemen, at this time, I’m showing no additional questions. I’d like to turn the conference back over for any closing remarks..

Yes, thank you to everybody for joining the call this morning and be assured that we know that we have a lot to do over the next months ahead and to the extent, anyone needs to call or ask or have further clarification on issues, please don’t hesitate to give Gary or give me a call.

And with that, I would just wish everyone a good day and say thank you for joining the call this morning..

Ladies and gentlemen, that does conclude today’s conference call. We do thank you for attending. You may now disconnect your telephone lines..