MidWestOne(MOFG) - 2019 Q4 - Annual Report

Employment and Workplace Recognition - The company had 771 full-time equivalent employees as of December 31, 2019, and was recognized as one of Des Moines Register's "Top Workplaces" for the 7th consecutive year[41]. Financial Structure and Capital Requirements - The company relies on deposits and external financing sources, employing various financing arrangements including term debt and subordinated debt[39]. - Regulatory capital requirements have become more stringent post-global financial crisis, affecting the company's earnings capabilities[49]. - The Dodd-Frank Act and Basel III establish capital standards that are significantly more stringent than previous requirements[50]. - The company must maintain minimum capital levels based on guidelines established by bank regulatory agencies, which have evolved to focus on the quality of capital[50]. - The Basel III Rules require a minimum Common Equity Tier 1 Capital ratio of 4.5% of risk-weighted assets, with an increase to 7% when including the capital conservation buffer[57]. - The minimum required amount of Tier 1 Capital has increased from 4% to 6% of risk-weighted assets[61]. - The minimum Total Capital ratio remains at 8% of risk-weighted assets[61]. - A well-capitalized banking organization must maintain a Common Equity Tier 1 Capital ratio of 6.5% or more[62]. - The capital conservation buffer requires institutions to maintain more than 2.5% in Common Equity Tier 1 Capital to avoid restrictions on capital distributions[58]. - As of December 31, 2019, the Bank was well-capitalized and met all Basel III Rules requirements[63]. - Community banks with total consolidated assets of less than $10 billion can elect a Community Bank Leverage Ratio (CBLR) framework between 8% and 10%[65]. - The Federal Reserve requires bank holding companies to be well-capitalized and well-managed to effect interstate mergers or acquisitions[67]. - The Federal Reserve has enforcement powers to restrict dividend payments if a bank holding company does not meet minimum regulatory capital adequacy ratios[74]. - The Bank is required to maintain adequate capital levels and is prohibited from paying dividends if it would become undercapitalized[88]. Risk Management and Compliance - The company faces risks from credit quality deterioration and fluctuations in interest rates, which could impact net earnings[14]. - The interagency guidance on incentive compensation emphasizes balancing risk and reward, effective controls, and strong corporate governance[76]. - The Bank did not exceed capital guidelines related to CRE concentration risk as of December 31, 2019[102]. - The CFPB has broad rulemaking authority affecting all consumer financial product providers, including the Bank, with enforcement over institutions with more than $10 billion in assets[103]. Regulatory Environment - The Economic Growth, Regulatory Relief and Consumer Protection Act provides regulatory relief for community banks, eliminating certain Dodd-Frank requirements[45]. - The Bank's deposit accounts are insured by the FDIC's Deposit Insurance Fund (DIF) up to $250,000 per insured depositor category[80]. - The reserve ratio of the DIF reached 1.36% as of September 30, 2018, exceeding the minimum required reserve ratio of 1.35%[82]. - The FDIC's total base assessment rates for deposit insurance premiums currently range from 1.5 basis points to 30 basis points[81]. - For 2020, the first $16.9 million of reservable balances are exempt from reserves, with a zero percent reserve requirement[98]. - The Dodd-Frank Act increased the minimum reserve ratio of the DIF from 1.15% to 1.35%[82]. Operational Adaptation and Community Engagement - The company is committed to adapting to technological changes to remain competitive in the marketplace[14]. - The Community Reinvestment Act requires the Bank to meet the credit needs of the entire community, including low- and moderate-income neighborhoods[99]. - The Dodd-Frank Act expanded underwriting requirements for loans secured by 1-4 family residential real property, impacting mortgage origination standards[104]. - The Regulatory Relief Act allows mortgages held in portfolio for the life of the loan to be considered qualified mortgages for banks with assets under $10 billion[104]. - The CFPB's rules have resulted in higher compliance costs for the Bank, but have not significantly impacted operations[105].