Audit Committee Charter of MidWestOne Financial Group, Inc.

I. Purpose
The primary purpose of the Audit Committee (the “Committee”) of the board of directors of MidWestOne Financial Group, Inc., and its subsidiaries (the “Company”) is to provide assistance to the board of directors in fulfilling its oversight responsibility to the Company’s shareholders, the investment community and others related to:

The Committee also shall provide an avenue of communication among the independent auditors, management, the director of risk management, the internal auditing department, the head of loan review and the board of directors.  In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company and the power to retain outside counsel or other experts for this purpose.

II.  Committee Composition and Procedure

The Committee shall consist of at least three members, each of whom shall be (i)Independent as defined by the rules and regulations of the Securities and Exchange Commission (the “SEC”), the NASDAQ Stock Market (or by the rules and regulations of any other exchange or national market on which the Company’s common stock is quoted or listed for trading) and any other body with regulatory authority over the Company and (ii) Free from any relationship that would interfere with the exercise of his or her independent judgment.  In addition, through the Company’s annual meeting of shareholders held in 2008 and 2009, the composition of the Committee shall be consistent with Section 3.12 of the Company’s by-laws.  All members of the Committee shall have a basic understanding of finance and accounting and be able to read and understand financial statements.  The Committee shall determine whether a member of the Committee possesses financial management expertise sufficient to qualify as an “audit committee financial expert” as defined by the rules and regulations of the SEC.

The board of directors shall appoint the members of the Committee.  The board of directors may designate a Chairman of the Committee and shall have the power to change the membership of the Committee and to fill vacancies in it, subject to Section 3.12 of the Company’s by-laws.

The Committee shall meet with such frequency and at such intervals as it shall determine necessary to carry out its duties and responsibilities, but in no event shall the Committee meet less than once quarterly.  The Chairman of the Committee shall prepare and/or approve an agenda in advance of each meeting.  The Committee should meet privately in executive session at least annually with management, the director of risk management, the director of the internal auditing department, the head of loan review and the independent auditor to discuss any matters that the Committee or each of these groups believe should be discussed.  In addition, the Committee, or at least its Chairman, should meet with management and the independent auditors quarterly to review the Company’s financial statements and significant findings based upon the auditor’s limited review procedures.  The Committee shall maintain minutes of its meetings and records relating to those meetings and the Committee’s activities and shall provide copies of such minutes and records to the board of directors.  The Committee shall determine its rules of procedure.

III. Duties and Responsibilities of the Committee

The primary, overall responsibility of the Committee is to oversee the Company’s financial reporting process on behalf of the board of directors and report the results of its activities to the board of directors.  While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or compliance examinations or to determine that the Company’s financial statements and disclosure are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations.  Management is responsible for the preparation, presentation and integrity of the Company’s financial statements and for the appropriateness of the accounting principles and reporting policies that are used by the Company.  The independent auditors are responsible for planning and conducting the audits of the Company’s financial statements and for reviewing the Company’s unaudited interim financial statements.

The Committee, in carrying out its responsibilities, believes its policies and procedures should remain flexible in order to best react to changing conditions and circumstances.  The Committee should take appropriate actions to set the overall corporate “tone” for quality financial reporting, sound business risk practices and ethical behavior.

Set forth below are the general activities to be performed by the Committee in carrying out its oversight responsibilities as well as certain specific tasks that it is directed to carry out.  The Committee may supplement these activities and tasks as appropriate.

A.  General Activities

  1. The Committee shall be directly responsible for the appointment, termination, compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work.  The independent auditor shall report directly to the Committee.

  2. The Committee shall oversee the internal audit function of the Company and the compliance function limited to activities related to the Company, including the independence of such functions, the proposed audit and compliance plans for the coming year, and the coordination of such plans with any third party internal audit and compliance firms and the independent auditors.

  3. The Committee shall oversee the loan review process of the Company’s subsidiary bank(s) and assess the integrity and performance of such process as well as compliance by the Company’s subsidiary bank(s) with internal loan policies and procedures.  The director of risk management shall report directly to the Committee.  The head of loan review generally shall report directly to the director of risk management, but also may report directly to the Committee if the circumstances warrant.

  4. The Committee shall pre-approve all audit services and any permitted non-audit services provided to the Company by the independent auditors and the fees to be paid for those services.  The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of certain audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Committee at its next scheduled meeting.

  5. The Committee shall have the authority, to the extent it deems necessary or appropriate, to retain special legal, accounting or other consultants to advise the Committee.  The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the independent auditor for the purpose of rendering or issuing an audit report or performing other permitted services and to any consultants engaged by the Committee.

  6. The Committee shall make regular reports to the board of directors.  The Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the board of directors for approval.  The Committee shall annually review the Committee’s own performance.

B. Specific Tasks
In addition to the general activities set forth above, the Committee shall, specifically:

  1. Review and discuss with the internal auditors, the director of risk management, the head of loan review, compliance officers and the independent auditor the overall scope, approach, staffing, locations and plans for their respective audits and compliance examinations, including the adequacy of staffing and compensation.  Also, the Committee shall discuss with management, the internal auditors, the director of risk management, compliance officers and independent auditor the adequacy and effectiveness of the accounting and financial controls, compliance with regulations, including the Company’s policies and procedures to assess, monitor and manage business risk, and legal and ethical compliance programs.

  2. Review and discuss with the independent auditor:  (i) any problems or difficulties encountered in the course of its audit, including any restrictions on the scope of the independent auditor’s activities or on access to requested information and management’s response, and any significant disagreements with management; (ii) any report by the independent auditor as required by Section 10A of the Exchange Act, including any report related to critical accounting policies and practices to be used, all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor, and other material written communications between the independent auditor and management; and (iii) the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work.

  3. Review and discuss with management and the independent auditor the annual audited and quarterly unaudited financial statements, including disclosures made in management’s discussion and analysis, earnings press releases and any earnings guidance provided to analysts and rating agencies, prior to the release of quarterly and annual earnings results.

  4. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles and the adequacy of the Company’s internal controls.

  5. Discuss with management and the director of risk management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies.

  6. Review the adequacy and effectiveness of the Company’s overall disclosure controls and procedures and management reports thereon.

  7. Review any disclosures made to the Committee by the Company’s Chief Executive Officer and Chief Financial Officer during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company’s internal controls.

  8. Review management’s assertion on its assignment of the effectiveness of internal controls as of the end of the most recent fiscal year and the independent auditor’s report on management’s assertion.

  9. Obtain and review a report from the independent auditor at least annually regarding:  (i) the independent auditor’s internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm; (iii) any steps taken to deal with any such issues; and (iv) all relationships between the independent auditor and the Company.

  10. Evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence and taking into account the opinions of management and internal auditors.

  11. Review and evaluate the lead partner of the independent auditor team and ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.

  12. Discuss with the independent auditor, management and the director of risk management the Company’s internal audit function and the responsibilities of those performing the internal audit, the internal audit budget, the staffing of the internal audit and any recommended changes in the scope of the internal audit function.

  13. Discuss with management, the director of risk management and the head of loan review the loan review function of the Company’s subsidiary bank(s), including the performance by the board of directors of the subsidiary bank(s) of its oversight responsibility with respect to the loan review function, and periodically assess the need for engaging a third party firm to provide credit risk reviews.

  14. Demand that the Committee receive, prior to each meeting of the Committee, a summary of findings from completed internal audits, compliance examinations and a progress report on the proposed internal audit and compliance examination plans, with explanations for any deviations from the original plan as well as disposition of audit and compliance recommendations.

  15. Establish procedures for:  (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, compliance matters; and (ii) the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.  The Committee may amend such procedures from time to time.

  16. Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding the Company’s financial statements or accounting policies.

  17. Obtain advice and assistance from the Company’s counsel as to matters that may have a material impact on the financial statements or the Company’s compliance policies.

  18. Review the status of the Information Security Program, updates to risk assessments, results of audit testing, security breaches or violations as well as any changes to the program.

  19. Review and pre-approve all material “related party transactions” that are not prohibited by the rules of the SEC, the NASDAQ Stock Market (or the requirements of any other exchange or national market on which the Company’s common stock is quoted or listed for trading) and of any other body with regulatory authority over the Company.  The term “related party transactions” shall refer to transactions required to be disclosed pursuant to Item 404 of SEC Regulation S-K.

  20. Perform any other activities consistent with this Charter, the Company’s by-laws and the rules and regulations of the SEC, the NASDAQ Stock Market (or the requirements of any other exchange or national market on which the Company’s common stock is quoted or listed for trading) and of any other body with regulatory authority over the Company, as the Committee or the board of directors deem necessary or appropriate.

IV. Formal Reporting

The Committee shall prepare, review and approve its report to be included in the Company’s annual proxy statement, as required by SEC regulations.  The report shall state whether the Committee has: (i) reviewed and discussed with management the annual audited financial statements of the Company; (ii) discussed with the independent auditors the matters required by Statement of Auditing Standards No. 61; (iii) received from the independent auditors the written disclosures required by Independence Standards Board No. 1 and discussed with them their independence from the Company; and (iv) Recommended to the board of directors that the audited financial statements be included in the Company’s Form 10-K for filing with the SEC.  The report also shall state that the Committee is governed by a formal written charter and must disclose if the Committee has determined to allow a non-independent director to serve on the Committee.