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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

or

MIDWESTONE FINANCIAL GROUP, INC.

222 First Avenue East Oskaloosa, Iowa 52577

Registrant’s telephone number: 641-673-8448

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $5 par value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x.    No  ¨.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  ¨.    No  x.

The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2003, was $54,489,258.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most recent practicable date, March 19, 2004.

3,815,034 shares Common Stock, $5 par value

DOCUMENTS INCORPORATED BY REFERENCE

The Annual Report to Shareholders for the 2003 fiscal year is incorporated by reference into Part II hereof to the extent indicated in such Part.

The definitive proxy statement of MidWestOne Financial Group, Inc. for the 2004 annual meeting of shareholders is incorporated by reference into Part II and Part III hereof to the extent indicated in such Parts.

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PART I

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PART I

Item 1.    Business

A.  General Description

MidWestOne Financial Group, Inc. (the “Company”) is a bank holding company headquartered in Oskaloosa, Mahaska County, Iowa. The Company was incorporated in Iowa in 1973 and is a bank holding company registered under the Bank Holding Company Act of 1956 and formerly a savings and loan holding company under the Savings and Loan Holding Company Act. The Company owns 100% of the stock of four bank subsidiaries (collectively referred to as the “Banks”). These four banks are MidWestOne Bank & Trust (“MBT”), Central Valley Bank (“CVB”), Pella State Bank (“PSB”) and MidWestOne Bank (“MWB”). The Company also owns 100% of the stock of a commercial finance company MIC Financial, Inc. (“MIC Financial”). On February 1, 2003, the Company acquired all the outstanding shares of Belle Plaine Service Corp. (“BPSC”) in a 100 percent cash transaction. BPSC was the parent company of Citizens Bank & Trust of Hudson, Iowa (“CB&T”) with locations in Hudson, Belle Plaine and Waterloo, Iowa. CB&T was merged into MBT on June 14, 2003 and BPSC was dissolved.

During the Company’s annual meeting of shareholders held on April 30, 2003, the shareholders approved a proposal to change the Mahaska Investment Company name to MidWestOne Financial Group, Inc. The new name better describes the Company’s focus and enhances the opportunity for local and regional growth. In June 2003, CB&T was merged into Mahaska State Bank, with the resulting bank adopting the new name of MidWestOne Bank & Trust. Additionally, Midwest Federal Savings and Loan Association of Eastern Iowa changed its name to MidWestOne Bank, thereby strengthening the overall corporate identity.

The Bank subsidiaries engage in retail and commercial banking and related financial services, providing the usual products and services such as deposits, commercial, real estate, and consumer loans, and trust services. MIC Financial has provided factoring, equipment leasing and accounts receivable financing to small business clients. The Company is no longer offering these services and is in the process of collecting the remaining assets of MIC Financial.

Since 1988, the Company, either directly or through the Banks, has invested in loan pool participations that have been purchased by certain non-affiliated independent service corporations (collectively, the “Servicer”) from the Federal Deposit Insurance Corporation (“FDIC”) or from other sources. These loan pool investments generally consist of performing, nonperforming, or distressed loans, that have been sold at prices reflecting varying discounts from the aggregate outstanding principal amount of the underlying loans depending on the credit quality of the portfolio. The Servicer collects these loans from the borrowers.

The Company provides services to the Banks including management assistance, auditing services, human resources administration, marketing assistance and coordination, assistance with respect to accounting and operating systems and procedures, loan review, check processing and data processing. Charges for these services are based on the nature and extent of these services. The Company also provides data processing services to two non-affiliated banks.

B.  Subsidiaries

MidWestOne Bank & Trust—MBT is a full-service, commercial bank that was chartered as an Iowa state bank in 1931. MBT operates in south central and eastern Iowa and serves all of Mahaska county from its main bank and branch office in Oskaloosa, serves portions of Keokuk and Iowa counties from its branch office in North English, serves Black Hawk county from its branch offices in Hudson and Waterloo, and serves Benton county from its branch office in Belle Plaine. MBT also maintains a drive-up automated teller machine located in Oskaloosa. MBT provides a wide array of retail and commercial banking services, including demand, savings and time deposits, loans, and trust services. MBT also provides full-service brokerage services to its customers through an affiliation with an independent broker.

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Central Valley Bank—CVB is a full-service, de novo institution chartered by the Company in June 1994 as a federally chartered savings association. On January 1, 2004, CVB converted to an Iowa state chartered commercial bank. CVB operates in south central Iowa from its main office in Ottumwa, which serves Wapello County, and from its two branches located in Fairfield and one branch in Sigourney, which serve Jefferson and Keokuk counties, respectively. CVB provides retail deposit services including demand, savings, and time deposit products and offers commercial, agricultural, real estate, and consumer loans. CVB also provides crop insurance products and investment brokerage services to its customers.

Pella State Bank—PSB is a full-service, Iowa state chartered commercial bank that the Company formed as a de novo institution in December 1997. PSB mainly serves the community of Pella, Iowa and the surrounding area located in Marion County. The bank relocated its main office to a leased facility in downtown Pella early in 2001 and maintains a branch office on the south side of the community that the Company purchased and renovated in 1997. The Bank provides full retail and commercial banking services to its customers. The Bank also provides full-service brokerage services to its customers through an affiliation with an independent broker.

MidWestOne Bank—MWB is a full-service bank that was acquired by the Company on September 30, 1999 as a federally chartered savings bank. On January 1, 2004, MWB converted to a commercial bank chartered by the state of Iowa. MWB is headquartered in Burlington, located in the southeast part of Iowa. MWB serves the Des Moines county market through its main office and a branch in Burlington. MWB also serves the Lee County market through a branch in Fort Madison and the Louisa County area through a branch in Wapello. MWB is a community-oriented financial institution that offers a variety of financial services to meet the needs of the communities it serves. MWB is primarily engaged in attracting retail deposits from the general public by offering checking accounts, savings accounts, and certificates of deposit. MWB offers residential real estate and construction loans, small-business commercial loans, consumer and other loans in its market area. MWB also sells tax-deferred annuities and other financial products.

MIC Financial, Inc.—MIC Financial is an Iowa corporation that was formed by the Company in 1974 under the name of MIC Leasing Co. The company operated under the name of On-Site Commercial Services until June 1997 when the name was officially changed to On-Site Credit Services, Inc. Effective March 21, 2000, the name was changed to MIC Financial, Inc. In April 1999, the Company’s Board of Directors determined that it would discontinue the activities of MIC Financial and subsequently sold, collected, or charged-off a substantial portion of the entities’ assets. Management continues to evaluate the options and/or alternatives related to the remaining assets of the company. MIC Financial originated and serviced machinery and equipment leases to small businesses and farmers and also provided accounts receivable financing and factoring services to small businesses mainly in the state of Iowa.

C.  Loan Pool Participations

The Company, directly and through the Banks, has participation interests in pools of loans purchased at varying discounts from the aggregate outstanding principal amount of the underlying loans. The Company has been purchasing participation interests in discounted loans since 1988. These pools of loans are currently held and serviced by a separate independent servicing corporation (referred to as the “Servicer”) known as States Resources Corporation. The Company does not have any ownership interest in or control over States Resources Corporation. States Resources Corporation was founded in 1998 and is owned by Randal Vardaman. Prior to the formation of States Resources Corporation, Mr. Vardaman owned various other independent loan servicing corporations. The Company has maintained a business relationship with Mr. Vardaman and the various predecessor corporations owned by him since 1988. Mr. Vardaman has been engaged in credit analysis and loan portfolio management in various positions since 1970.

The Company has invested in loan pools purchased by the Servicer from the FDIC acting as receiver of failed banks and savings and loan institutions, and by other large nonaffiliated banking organizations. The loans comprising the pools were originated throughout the United States. As part of the agreement to purchase

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participation interests in the loan pools, the Company and its subsidiaries have contracted with the Servicer to service the underlying loans within the respective loan pools which are owned of record by the Servicer. The Servicer also evaluates various loan pools prior to purchase and makes recommendations to the Company concerning the creditworthiness of proposed loan pool purchases and proposes appropriate bids to the Company and any other potential loan pool participants.

The Servicer and its predecessor organizations have bid on loan pools from various regional offices of the FDIC and from other sources since 1988. The Company and the Banks have purchased participation interests in such pools of loans. The purchase prices paid by the Company for loan pool participations have ranged from 5.5% to 97.7% of the aggregate outstanding principal amount of the loans comprising such pools at the time of purchase. The Servicer acquires the loan pools without recourse against the sellers and, accordingly, the risk of noncollectibility is, for the most part, assumed by the Company and any other investors in a particular pool.

Each pool has a different composition and different characteristics. The composition of a loan pool is generally determined by the seller based on its desire to maximize the price it receives for all loans among the various pools. Many of the pools consist of loans primarily secured by single-family, multi-family, and small commercial real estate. Some pools may consist of a large number of small consumer loans that are secured by other assets such as automobiles or mobile homes, while other pools may consist of small to medium balance commercial loans. Some may contain a mixture of such loans and other types of loans. Most of the pools the Company is currently investing in are comprised primarily of performing loans, although some may contain a number of past-due nonperforming loans. The price bid and paid for such a loan pool is determined based on the composition of the particular pool, the amounts the Servicer believes can be collected on such a pool, and the risks associated with the collection of such amounts.

In considering an investment in a loan pool, the Servicer will evaluate loans owned and being offered and make recommendations to the Company and other prospective investors concerning the creditworthiness of the proposed loan pool purchase. The Servicer performs a comprehensive analysis of the loan pool in an attempt to ensure proper valuation and adequate safeguards in the event of default. The bid price on the loan pools will be reflective of the results of the Servicer’s pre-acquisition review of the loan files. In many cases the loan files may not be current and substantial uncertainties may exist regarding the collectibility of the various loans in the pool. Management believes that in many instances the non-current loans can be brought current once the Servicer has an opportunity to contact the debtor. The Company makes its own decisions as to whether or not to participate in a particular loan pool that has been recommended by the Servicer, based on the Company’s experience with the various categories and qualities of loans.

The sales of loan pools by the FDIC and by other sellers is generally conducted by sealed bid auction. A sealed bid auction requires each bidder to submit a confidential bid on the subject loan pool and the loan pool is awarded to the highest bidder. In recent years, the Servicer and the Company have faced increasing competition in bidding for loan pools.

Since 1988, the Servicer and its predecessor organizations, on behalf of the Company and other investors, have bid on a large number of loan pools and have been successful in purchasing 110 loan pools. The Company and other investors in the loan pools fund the purchase by the Servicer and each investor receives a percentage interest in the loan pool based on its proportional investment relative to the total purchase price of the pool. Each investor receives a loan pool participation certificate reflecting this interest.

The purchased loan pools consist, for the most part, of loans evidenced by promissory notes and secured by either real property or personal property. The value of the collateral may range from nominal to substantial and often may be impossible to establish prior to acquisition of the pools with the level of certainty that is typically required in a financial institution.

Upon the acquisition of a participation interest in a loan pool, the Company assumes the risk that the Servicer will be unable to recover an amount equal to the purchase price plus the carrying costs, if any, collection

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costs and expected profits on such accounts. The extent of such risk is dependent on a number of factors, including the Servicer’s ability to locate the debtors, the debtors’ financial condition, the possibility that a debtor may file for protection under applicable bankruptcy laws, the Servicer’s ability to locate the collateral, if any, for the loan and to obtain possession of such collateral, the value of such collateral, and the length of time it takes to realize the ultimate recovery either through collection procedures or through a resale of the loans following a restructure.

A cost “basis” is assigned to each individual loan acquired on a cents per dollar (discounted price) based on the Servicer’s assessment of the recovery potential of each such loan. This methodology assigns a higher basis to performing loans with greater potential collectibility and a lower basis to those loans identified as having little or no potential for collection.

Loan pool participations are shown on the Company’s balance sheet as a separate asset category. The original carrying value of loan pool participations represents the discounted price paid by the Company to acquire its participation interests in various loan pools purchased by the Servicer. The Company’s investment balance is reduced as the Servicer collects principal payments on the loans and remits the proportionate share of such payments to the Company.

The investment in loan pools is accounted for on a nonaccrual (or cash) basis in one of three methods, depending on the circumstances. First, if a borrower makes regular payments on a loan, the payment received is first applied to interest income in the amount of interest due at the contract rate. Further payments are applied to principal in a ratio reflecting the proportion of cost basis to loan principal amount. Payments in excess of interest and this ratio are recorded as discount income. Discount income earned over the life of a loan represents loan principal collected in excess of the price originally paid to acquire the loan from the FDIC or any other sellers, which price constitutes the cost “basis” of the loan.

Secondly, if the borrower fails to make regular payments, the Servicer evaluates the collateral supporting the loan. If the Servicer determines that the loan is well secured, then payments are applied as previously described. If the Servicer determines that the collateral is deficient, payments are applied to the principal balance of the loan with no recognition of interest due. The cost recovery method governs the application of payments received to the outstanding principal balance. Under this method, any amount received is initially applied to the cost “basis” of the loan and any additional amounts received are recognized as discount income.

Third, where the Servicer negotiates a settlement of a loan for a lump sum, the payment is first applied to principal to the extent of the assigned cost “basis” with the excess treated as discount income up to the original principal value of the loan, and any remainder is treated as interest income on loan pool participations. In each case, where changed circumstances or new information lead the Servicer to believe that collection of the note or recovery of the basis through collateral would be less than originally determined, the cost basis assigned to the loan is written down or written off through a charge against discount income.

Collection expenses incurred by the Servicer are netted against discount income. These costs include salary and benefits paid by the Servicer to its employees, legal fees, costs to maintain and insure real estate owned, and other operating expenses. Discount income is added to interest income and reflected as one amount on the Company’s consolidated statement of income. Profit (or loss) from collection activities is determined on a monthly basis for each servicing corporation from which loan pool participation interests have been purchased.

The Company does not recognize as income any accrued interest receivable on the loan pools. Interest income is only recognized when collected and actually remitted to the Company by the Servicer. Many of the pools that have been purchased by the Servicer do not include purchased interest in the cost basis; thus, interest collected does not have a cost basis and represents profit. Interest income collected by the Servicer is reflected in the Company’s consolidated financial statements as interest income included as part of interest income and discount on loan pool participations.

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The Servicer provides the Company with monthly reports detailing collections of principal and interest, face value of loans collected and those written off, actual operating expenses incurred, remaining asset balances (both in terms of cost basis and principal amount of loans), a comparison of actual collections and expenses with target collections and budgeted expenses, and summaries of remaining collection targets. The Servicer also provides aging reports and “watch lists” for the loan pools purchased by States Resources. Monthly meetings are held between the Company and representatives of the Servicer to review collection efforts and results, to discuss future plans of action, and to discuss potential opportunities. Additionally, the Company’s and the Servicer’s personnel communicate via telephone, fax, and electronic mail on a regular basis to discuss various issues regarding the loan pools. Company management personnel visit the Servicer’s operation in Omaha, Nebraska on a regular basis; and the Company’s loan review officer and its internal auditor perform asset reviews and audit procedures on a regular basis.

Beginning in 1998, all purchases of loan pools were made by the servicing organization called States Resources Corporation. This corporation was created to enable the Company and the Servicer to invest in higher-quality performing assets and still provide both parties with an acceptable return. Under the terms of the States Resources agreement, the Servicer receives a servicing fee based on one percent of the gross monthly collections of principal and interest, net of collection costs. Additionally, the Servicer receives a tiered percentage share of the recovery profit in excess of the investors’ required return on investment on each individual loan pool. In the event that the return on a particular pool does not exceed the required return on investment, the Servicer does not receive a percentage share.

The Company’s overall cost basis in its loan pool participations represents a discount from the aggregate outstanding principal amount of the loans underlying the pools. For example, as of December 31, 2003 and 2002, such cost basis was $89,059,000 and $82,341,000, respectively, while the contractual outstanding principal amounts of the underlying loans as of such dates were approximately $116,257,000 and $105,823,000, respectively. Because this discounted cost basis inherently reflects the assessed collectibility of the underlying loans and thus creates a built-in reserve against the risk of nonpayment in the loan pools, the Company has not established an allowance for loan losses relating to the loan pool participations. The Company does not include any amounts related to the loan pool participations in its totals of nonperforming loans. As part of the on-going collection process, the Servicer may, from time-to-time, foreclose on real estate mortgages and acquire title to property in satisfaction of such debts. This real estate may be held by the servicer as “real estate owned” for a period of time until it can be sold. Since the Company’s investment in loan pools are classified as participtions in pools of loans, the Company does not include the real estate owned that is held by the Servicer with the amount of any other real estate it may hold directly as a result of its own foreclosure activities.

The underlying loans in the loan pool participations include both fixed rate and variable rate instruments, but are accounted for on a nonaccrual basis, and no amounts for interest due are reflected in the carrying value of the loan pool participations. Based on historical experience, the average period of collectibility for loans underlying the Company’s loan pool participations, many of which have exceeded contractual maturity dates, is approximately three to five years. Management has reviewed the recoverability of the underlying loans and believes that the carrying value does not exceed the net realizable value of its investment in loan pool participations.

D.  Competition

The Company competes in the commercial banking and thrift industries through its subsidiary banks. These industries are highly competitive, and all the bank subsidiaries face strong direct competition for deposits, loans, and other financial-related services. The Banks in Benton, Black Hawk, Des Moines, Iowa, Jefferson, Keokuk, Lee, Louisa, Mahaska, Marion, and Wapello counties in south central and eastern Iowa compete with other commercial banks, other thrifts, credit unions, stockbrokers, finance divisions of auto and farm equipment companies, agricultural suppliers, and other agricultural-related lenders. Some of these competitors are local, while others are statewide or nationwide. The Banks compete for deposits principally by offering depositors a

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wide variety of deposit programs, convenient office locations, hours and other services, and for loan originations primarily through interest rates and loan fees they charge, the efficiency and quality of services they provide to borrowers and the variety of their loan products. Some of the financial institutions and financial service organizations with which the Banks compete are not subject to the same degree of regulation as that imposed on bank and thrift holding companies, federally insured Iowa-chartered banks, and federal savings banks. As a result, such competitors have advantages over the Banks in providing certain services. As of December 31, 2003, there were approximately 54 other banks having 159 offices or branches operating within the 11 counties that the Company has locations. Based on deposit information collected by the FDIC as of June 30, 2003, the Company maintained approximately 9 percent of the bank deposits within the 11 counties. New competitors may develop that are substantially larger and have significantly greater resources than any of the Banks. Currently, major competitors in certain of the Company’s markets include banking subsidiaries of Wells Fargo & Company, U.S. Bancorp, and Commercial Federal Bank. As a result of federal legislation to allow unlimited interstate branching, the Company may experience heightened competition from these and other major financial institutions seeking to expand their regional banking presence in Iowa.

The Company also faces competition with respect to its investments in loan pool participations. The Company’s financial success to date is largely attributable to the Servicer’s ability to determine the loan pools to bid on and ultimately purchase, the availability of assets to fund the purchases and the Servicer’s ability to collect on the underlying assets. Investments in loan pools have become increasingly popular in recent years, leading financial institutions and other competitors to become active at loan pool auctions conducted by the FDIC and other sellers. There is no assurance that the Company, through the Servicer, will be able to bid successfully in the future. Certain existing competitors of the Company are substantially larger and have significantly greater financial resources than the Company. Increased participation by new institutions or other investors may also create increased buying interest which could also result in higher bid prices for the type of loan pools considered for investment by the Company. In addition, new and existing competitors may develop due diligence procedures comparable to the Servicer’s procedures. The emergence of such competition could have a material adverse effect on the Company’s business and financial results. The Company expects that its success in the future will depend more on the performance of its bank subsidiaries and less on the investment in loan pool participations.

E.  Supervision and Regulation

Bank holding companies, banks, savings and loan holding companies, and savings and loan associations are extensively regulated under federal and state law. References under this heading to applicable statutes or regulations are brief summaries of the portions thereof which do not purport to be complete and which are qualified in their entirety by reference to those statutes and regulations. Any change in applicable laws or regulation may have a material adverse effect on the business of the Company and the Banks.

The Company, as a bank holding company, is subject to regulation under the Bank Holding Company Act of 1956 (the “Act”) and is registered with the Board of Governors of the Federal Reserve System. Under the Act, the Company is prohibited, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to affiliated banks, except that the Company may engage in and own shares of companies engaged in certain businesses found by the Board of Governors to be so closely related to banking “as to be proper incident thereto,” such as owning a savings association. The Act does not place territorial restrictions on the activities of bank-related subsidiaries of bank holding companies. The Company is required by the Act to file periodic reports of its operations with the Board of Governors and is subject to examination by the Board of Governors. Under the Act and Federal Reserve Board regulations, the Company and the Bank are prohibited from engaging in certain tie-in arrangements in connection with an extension of credit, lease, sale of property, or furnishing of services.

Iowa law permits bank holding companies domiciled in Iowa to make acquisitions throughout the state. Iowa law also permits bank holding companies located in the Midwestern Region (defined to include Illinois, Iowa, Minnesota, Missouri, Nebraska, South Dakota, and Wisconsin) to acquire banks or bank holding

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companies located in Iowa subject to approval by the Iowa Division of Banking and subject to certain statutory limitations. In addition, the Company may acquire banks or bank holding companies located in the Midwestern Region or outside the Midwestern Region, provided the Company’s principal place of business remains in the Midwestern Region and the acquisition is authorized by the laws of the state in which the acquisition is to be made.

The Company was a savings and loan holding company prior to the January 1, 2004 conversion of its savings association subsidiaries to state-chartered banks. Following the subsidiary conversion, the Company ceased being a savings and loan holding company. As a savings and loan holding company, the Company was subject to federal regulation and examination by the Office of Thrift Supervision (the “OTS”). The OTS had enforcement authority over the Company. This authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings association. Generally, the activities for a bank holding company are more limited than the authorized activities for a savings and loan holding company.

The Company and its subsidiaries are affiliates within the meaning of the Federal Reserve Act. As affiliates, they are subject to certain restrictions on loans by an affiliated bank or thrift (collectively “affiliated banks”) to the Company, other affiliated banks or such other subsidiaries, on investments by an affiliated bank in their stock or securities and on an affiliated bank taking such stock and securities as collateral for loans to any borrower. The Company is also subject to certain restrictions with respect to direct issuance, flotation, underwriting, public sale or distribution of certain securities.

Under Iowa law, the Banks are subject to supervision and examination by the Iowa Division of Banking. As an affiliate of these banks, the Company is also subject to examination by the Iowa Division of Banking.

The deposits of the Banks are insured by the Federal Deposit Insurance Corporation (the “FDIC”) and the Banks are, therefore, also subject to the supervision and examination by the FDIC. The Banks are required to maintain certain minimum capital ratios established by these regulators. The Banks are assessed fees based on the institutions’ deposits by the FDIC, to insure the funds of customers on deposit with the institutions.

In addition, Iowa state law imposes restrictions on the operations of the state-chartered banks including limitations on the amount a bank can lend to a single borrower and limitations on the nature and amount of securities in which it may invest. Among other things, Iowa law imposes restrictions on certain types of loans made by a bank, limiting the bank from making loans (or purchasing participation interests in loan pools) secured by real estate located outside Iowa and its contiguous states in amounts exceeding 25% of its regulatory capital. There can be no assurance that the Iowa or federal regulators will not in the future impose further restrictions or limits on the Company’s loan pool activities.

Iowa law strictly regulates the establishment of bank offices and thus may affect the Company’s future plans to establish additional offices of its banks. Under current Iowa law, a state bank may not establish more than three bank offices outside the corporate limits of the municipality in which the principal place of business of the state bank is located. The number of offices a state bank may establish within the municipal corporation in which the principal place of business of the bank is located is not limited. The limitations on the number of offices will cease effective July 1, 2004.

Central Valley Bank and MidWestOne Bank were subject to the supervision of and were regularly examined by the OTS and were assessed fees by the OTS based upon their individual asset totals. As savings institutions, both CVB and MWB were required to maintain certain minimum capital ratios established by the OTS and were required to meet a qualified thrift lender test (the “QTL”) to avoid certain restrictions upon its operations. The QTL was modified by the passage of the Economic Growth and Regulatory Paperwork Reduction Act of 1996. On December 31, 2003, both CVB and MWB complied with the current minimum capital guidelines and met the QTL test. On January 1, 2004 both CVB and MWB converted to commercial banks chartered as Iowa state banks.

The Company operates within a regulatory structure that continuously evolves. In the last several years significant changes have occurred that affect the Company.

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The FDIC Improvement Act of 1991 (the “FDICIA”) was primarily designed to recapitalize the FDIC’s Bank Insurance Fund (the “BIF”) and the Savings Association Insurance Fund (the “SAIF”). To accomplish this purpose the FDIC was granted additional borrowing authority, granted the power to levy emergency special assessments on all insured depository institutions, granted the power to change the BIF and SAIF rates on deposits on a semiannual basis, and directed to draft regulations that provided for a “Risk-Based Assessment System” that was implemented on January 1, 1994. The FDICIA also imposed additional regulatory safety and soundness standards upon depository institutions and granted additional authority to the FDIC. The FDICIA generally requires that all institutions be examined by the FDIC annually. Under the provisions of the FDICIA, all regulatory authorities are required to examine their regulatory accounting standards and, to the extent possible, are required to conform to generally accepted accounting principles. Finally, the FDICIA requires the federal banking regulators to take prompt corrective action with respect to depository institutions that fall below certain capital standards and prohibits any depository institution from making any capital distribution that would cause it to be undercapitalized.

Legislation became effective on September 30, 1995, which served to lessen or remove certain legal barriers to interstate banking and branching by financial institutions. The legislation has resulted in an increase in the nationwide consolidation activity occurring among financial institutions by facilitating interstate bank operations and acquisitions.

On November 2, 1999, the Gramm-Leach-Bliley Act was enacted into law. This legislation provides for significant financial services reform by repealing key provisions of the Glass Steagall Act thereby permitting commercial banks to affiliate with investment banks, it substantially modifies the Bank Holding Company Act of 1956 to permit companies that own banks to engage in any type of financial activity, and it allows subsidiaries of banks to engage in a broad range of financial activities that are not permitted for banks themselves. The effects of this legislation, both from the opportunities for new activities that the Company may undertake and from the changes in competitors’ activities, have not been fully ascertained at this time.

The earnings of the Company are affected by the policies of regulatory authorities, including the Federal Reserve System. Federal Reserve System monetary policies have had a significant effect on the operating results of banks and thrifts in the past and are expected to do so in the future. Because of changing conditions in the economy and in the money markets as a result of actions by monetary and fiscal authorities, interest rates, credit availability and deposit levels may change due to circumstances beyond the control of the Company. Future policies of the Federal Reserve System and other authorities cannot be predicted, nor can their effect on future earnings be predicted.

F.  Employees

On December 31, 2003, the Company had 178 full-time employees and 38 part-time employees of which 67 full-time and 12 part-time employees were employed by MBT, 30 full-time and 6 part-time employees were employed by CVB, 14 full-time and 5 part-time employees were employed by PSB, 37 full-time and 9 part-time employed by MWB, and 30 full-time and 6 part-time employees were employed directly by the Company. The Company provides its employees with a comprehensive program of benefits, some of which are on a contributory basis, including comprehensive medical and dental plans, life insurance, long-term and short-term disability coverage, a 401(k) plan, and an employee stock ownership plan. None of the employees are represented by unions. Management considers its relationship with its employees to be excellent.

G.  Statistical Disclosure

The following statistical disclosures relative to the consolidated operations of the Company have been prepared in accordance with Guide 3 of the Guides for the Preparation and Filing of Reports and Registration Statements under the Securities Exchange Act of 1934. Average balances were primarily calculated on a daily basis.

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I.  Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential

The following table details average balances, interest income/expense and average rates/yield for the Company’s earning assets and interest-bearing liabilities for the years ended December 31, 2003, 2002 and 2001 reported on a fully tax-equivalent basis assuming a 34% tax rate.

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The following table sets forth an analysis of volume and rate changes in interest income and interest expense of the Company’s average earning assets and average interest-bearing liabilities reported on a fully tax-equivalent basis assuming a 34% tax rate. The table distinguishes between the changes related to average outstanding balances (changes in volume holding the initial interest rate constant) and the changes related to average interest rates (changes in average rate holding the initial outstanding balance constant). The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

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Interest Rate Sensitivity Analysis

The following table sets forth the scheduled repricing or maturity of the Company’s assets and liabilities as of December 31, 2003, based on the assumptions described below. The effect of these assumptions is to quantify the dollar amount of items that are interest rate sensitive and can be repriced within each of the periods specified. The table does not necessarily indicate the impact of general interest rate movements on the Company’s net interest margin because the repricing of certain categories of assets and liabilities is subject to competitive and other pressures beyond the Company’s control. As a result, certain assets and liabilities indicated as maturing or otherwise repricing within a stated period may, in fact, mature or reprice at different times and at different volumes.

In the table above, NOW accounts and savings deposits are included as interest-bearing liabilities in the three months or less category.

Loan pool participations are included in the interest rate sensitivity analysis using an estimated three-year average life. The historical average for the return of original investment on the pools is approximately 36 months. Given the non-performing aspect of the loan pool portfolio, management feels that the use of contractual weighted-average maturity data is inappropriate.

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II.  Investment Portfolio

The following table sets forth certain information with respect to the book value of the Company’s investment portfolio as of December 31, 2003, 2002 and 2001.

The following table sets forth the contractual maturities of investment securities as of December 31, 2003, and the weighted average yields (for tax-exempt obligations on a fully tax-equivalent basis assuming as 34% tax rate) of such securities. As of December 31, 2003, the Company held no securities with a book value exceeding 10% of shareholders’ equity.

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III.  Loan Portfolio

The Company’s loan portfolio largely reflects the profile of the communities in which it operates. Approximately two-thirds of the total loans as of December 31, 2003, were agricultural, commercial or residential real estate loans. The following table shows the composition of the Company’s loan portfolio as of the dates indicated.