UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





**FORM
      10-Q**





x
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




For
      the
      quarterly period ended **March
      31, 2007**





OR





o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      transition period from _______ to _______





Commission
      file number 0-24630





MIDWEST *ONE* FINANCIAL GROUP, INC.


222
      First
      Avenue East


Oskaloosa,
      IA 52577





Registrant’s
      telephone number: **641-673-8448**






(State
                of Incorporation)
            
            (I.R.S.
                Employer Identification
                No.)**Iowa**
            
            **42-1003699**




Indicate
      by check mark whether the registrant (1) has filed all reports required 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
      o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
      Exchange Act).





Large
      Accelerated Filer o    Accelerated
      Filer o    Non-accelerated
      Filer x





Indicate
      by check mark whether the registrant is a shell company ( as defined in Rule
      12b-2 of the Exchange Act).





Yes
o No
x




As
      of May
      15, 2007, there were 3,693,615 shares of common stock $5 par value
      outstanding.








PART
        I -- Item 1. Financial Statements
  **MIDWEST** ***ONE*** **FINANCIAL GROUP, INC.**
 **AND
          SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF CONDITION**
  **March
                    31,**
                
                **December
                    31,****2007**
                
                **2006**(dollars
                    in thousands)
                
                (unaudited)**ASSETS**Cash
                    and due from banks
                
                $
                14,914
                
                $
                20,279Interest-bearing
                    deposits in banks
                
                
                503
                
                
                447Federal
                    funds sold
                
                
                4,665
                
                
                -Cash
                    and cash equivalents
                
                
                20,082
                
                
                20,726Investment
                    securities:Available
                    for sale at fair value
                
                
                72,329
                
                
                70,743Held
                    to maturity (fair value of $11,902 as of March 31,
                    2007and
                    $12,168 as of December 31, 2006)
                
                
                11,956
                
                
                12,220Loans
                
                
                514,668
                
                
                503,832Allowance
                    for loan losses
                
                
                (5,885
                )
                
                (5,693
                )Net
                    loans
                
                
                508,783
                
                
                498,139Loan
                    pool participations
                
                
                88,468
                
                
                98,885Premises
                    and equipment, net
                
                
                12,644
                
                
                12,327Accrued
                    interest receivable
                
                
                6,232
                
                
                6,587Goodwill
                
                
                13,405
                
                
                13,405Other
                    intangible assets, net
                
                
                1,064
                
                
                1,128Bank-owned
                    life insurance
                
                
                7,869
                
                
                7,798Other
                    real estate owned
                
                
                185
                
                
                188Other
                    assets
                
                
                2,739
                
                
                2,765Total
                    assets
                
                $
                745,756
                
                $
                744,911**LIABILITIES
                    AND SHAREHOLDERS' EQUITY**Deposits:Demand
                
                $
                50,703
                
                $
                64,291Interest-bearing
                    checking
                
                
                71,711
                
                
                65,482Savings
                
                
                105,447
                
                
                101,443Certificates
                    of deposit
                
                
                336,469
                
                
                329,399Total
                    deposits
                
                
                564,330
                
                
                560,615Federal
                    funds purchased
                
                
                -
                
                
                465Federal
                    Home Loan Bank advances
                
                
                96,600
                
                
                99,100Notes
                    payable
                
                
                4,050
                
                
                4,050Long-term
                    debt
                
                
                10,310
                
                
                10,310Accrued
                    interest payable
                
                
                3,523
                
                
                2,804Other
                    liabilities
                
                
                4,315
                
                
                5,034Total
                    liabilities
                
                
                683,128
                
                
                682,378Shareholders'
                    equity:Common
                    stock, $5 par value; authorized 20,000,000 shares;
                    issued4,912,849
                    shares as of March 31, 2007 and December 31, 2006
                
                
                24,564
                
                
                24,564Capital
                    surplus
                
                
                13,135
                
                
                13,076Treasury
                    stock at cost, 1,212,438 shares as of March 31,
                    2007,and
                    1,197,418 shares as of December 31, 2006
                
                
                (17,452
                )
                
                (17,099
                )Retained
                    earnings
                
                
                42,753
                
                
                42,447Accumulated
                    other comprehensive loss
                
                
                (372
                )
                
                (455
                )Total
                    shareholders' equity
                
                
                62,628
                
                
                62,533Total
                    liabilities and shareholders' equity
                
                $
                745,756
                
                $
                744,911
 See
          accompanying notes to consolidated financial statements.
  2
  PART
        I -- Item 1. Financial Statements, Continued
  **MIDWEST** ***ONE*** **FINANCIAL GROUP, INC.**
 **AND
            SUBSIDIARIES**
 **CONSOLIDATED
              STATEMENTS OF INCOME**
 (unaudited)
                
                **Three
                    Months Ended**(dollars
                    in thousands, except per share amounts)
                
                **March
                    31,****2007**
                
                **2006****Interest
                    income:**Interest
                    and fees on loans
                
                $
                9,331
                
                $
                7,874Interest
                    and discount on loan pool participations
                
                
                2,015
                
                
                2,609Interest
                    on bank deposits
                
                
                11
                
                
                7Interest
                    on federal funds sold
                
                
                1
                
                
                3Interest
                    on investment securities:Available
                    for sale
                
                
                767
                
                
                661Held
                    to maturity
                
                
                119
                
                
                124Total
                    interest income
                
                
                12,244
                
                
                11,278**Interest
                    expense:**Interest
                    on deposits:Interest-bearing
                    checking
                
                
                80
                
                
                86Savings
                
                
                681
                
                
                541Certificates
                    of deposit
                
                
                3,936
                
                
                2,526Interest
                    on federal funds purchased
                
                
                86
                
                
                70Interest
                    on Federal Home Loan Bank advances
                
                
                1,200
                
                
                947Interest
                    on notes payable
                
                
                80
                
                
                105Interest
                    on long-term debt
                
                
                235
                
                
                213Total
                    interest expense
                
                
                6,298
                
                
                4,488Net
                    interest income
                
                
                5,946
                
                
                6,790Provision
                    for loan losses
                
                
                397
                
                
                -Net
                    interest income after provision for loan losses
                
                
                5,549
                
                
                6,790**Noninterest
                    income:**Deposit
                    service charges
                
                
                433
                
                
                474Other
                    customer service charges and fees
                
                
                193
                
                
                156Brokerage
                      commissions
                
                
                273
                
                
                251Insurance
                      commissions
                
                
                204
                
                
                148Data
                      processing income
                
                
                56
                
                
                52Mortgage
                      origination fees
                
                
                124
                
                
                104Bank-owned life
                    insurance income
                
                
                84
                
                
                80Other
                      operating income
                
                
                166
                
                
                300Loss
                      on sale of available for sale securities
                
                
                -
                
                
                (126
                )Total
                    noninterest income
                
                
                1,533
                
                
                1,439**Noninterest
                    expense:**Salaries
                    and employee benefits
                
                
                3,453
                
                
                3,147Net
                    occupancy expense
                
                
                876
                
                
                887Professional
                    fees
                
                
                298
                
                
                176Data
                    processing expense
                
                
                89
                
                
                107Other
                    intangible asset amortization
                
                
                64
                
                
                78Other
                    operating expense
                
                
                915
                
                
                939Total
                    noninterest expense
                
                
                5,695
                
                
                5,334Income
                    before income tax expense
                
                
                1,387
                
                
                2,895Income
                    tax expense
                
                
                413
                
                
                976**Net
                    income**
                
                $
                974
                
                $
                1,919Earnings
                    per common share - basic
                
                $
                0.26
                
                $
                0.52Earnings
                    per common share - diluted
                
                $
                0.26
                
                $
                0.51Dividends
                    per common share
                
                $
                0.18
                
                $
                0.17
 See
          accompanying notes to consolidated financial statements.
  3
  PART
          I -- Item 1. Financial Statements, Continued
  **MIDWEST** ***ONE*** **FINANCIAL GROUP, INC.** **AND
            SUBSIDIARIES** **CONSOLIDATED
              STATEMENTS OF COMPREHENSIVE INCOME**
   (unaudited)
                
                **Three
                    Months Ended**(in
                    thousands)
                
                **March
                    31,****2007**
                
                **2006****Net
                    income**
                
                $
                974
                
                $
                1,919Other
                    comprehensive gain (loss):Unrealized
                    gains (losses) on securities available for sale:Unrealized
                    holding gains (losses) arising duringthe
                    period, net of tax
                
                
                83
                
                
                (124
                )Reclassification
                    adjustment for net losses includedin
                    net income, net of tax
                
                
                -
                
                
                79**Other
                    comprehensive gain (loss), net of tax**
                
                
                83
                
                
                (45
                )**Comprehensive
                    income**
                
                $
                1,057
                
                $
                1,874
  See
        accompanying notes to consolidated financial statements.
  4
  PART
        I -- Item 1. Financial Statements, Continued
  **MIDWEST** ***ONE*** **FINANCIAL GROUP, INC.**
 **AND
        SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY**
 **Accumulated****Other**(unaudited)
              
              **Common**
              
              **Capital**
              
              **Treasury**
              
              **Retained**
              
              **Comprehensive**(in
                  thousands, except per share amounts)
              
              **Stock**
              
              **Surplus**
              
              **Stock**
              
              **Earnings**
              
              **Loss**
              
              **Total**Balance
                  at December 31, 2005
              
              $
              24,564
              
              
              12,886
              
              
              (16,951
              )
              
              38,630
              
              
              (743
              )
              
              58,386Comprehensive
                  income:Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              1,919
              
              
              -
              
              
              1,919Unrealized
                    losses arising duringthe period
                    on securities available for sale
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (124
              )
              
              (124
              )Reclassification
                  adjustmentforrealized
                  losses on securities available for sale, net of tax
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              79
              
              
              79Total
                  comprehensive income
              
              
              -
              
              
              -
              
              
              -
              
              
              1,919
              
              
              (45
              )
              
              1,874Dividends
                  paid ($.17 per share)
              
              
              -
              
              
              -
              
              
              -
              
              
              (631
              )
              
              -
              
              
              (631
              )Stock
                  options exercised(5,921
                  shares)
              
              
              -
              
              
              6
              
              
              83
              
              
              -
              
              
              -
              
              
              89Balance
                  at March 31, 2006
              
              $
              24,564
              
              
              12,892
              
              
              (16,868
              )
              
              39,918
              
              
              (788
              )
              
              59,718Balance
                  at December 31, 2006
              
              $
              24,564
              
              
              13,076
              
              
              (17,099
              )
              
              42,447
              
              
              (455
              )
              
              62,533Comprehensive
                  income:Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              974
              
              
              -
              
              
              974Unrealized
                  gains arising during theperiod
                  on securities available for sale
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              83
              
              
              83Total
                  comprehensive income
              
              
              -
              
              
              -
              
              
              -
              
              
              974
              
              
              83
              
              
              1,057Dividends
                  paid ($.18 per share)
              
              
              -
              
              
              -
              
              
              -
              
              
              (668
              )
              
              -
              
              
              (668
              )Stock-based
                  compensation
              
              
              -
              
              
              51
              
              
              -
              
              
              -
              
              
              -
              
              
              51Stock
                  options exercised(14,980
                  shares)
              
              
              -
              
              
              8
              
              
              214
              
              
              -
              
              
              -
              
              
              222Treasury
                  stock purchased(30,000
                  shares)
              
              
              -
              
              
              -
              
              
              (567
              )
              
              -
              
              
              -
              
              
              (567
              )Balance
                  at March 31, 2007
              
              $
              24,564
              
              
              13,135
              
              
              (17,452
              )
              
              42,753
              
              
              (372
              )
              
              62,628
  See
          accompanying notes to consolidated financial statements.
  5
  PART
        I -- Item 1. Financial Statements, Continued
  **MIDWEST** ***ONE*** **FINANCIAL GROUP, INC.**
 **AND
        SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 
 (unaudited)
              
              **Three
                  Months Ended**(dollars
                  in thousands)
              
              **March
                  31,****2007**
              
              **2006****Cash
                  flows from operating activities:**Net
                  income
              
              $
              974
              
              $
              1,919Adjustments
                  to reconcile net income to net cashprovided
                  by operating activities:Depreciation
                  and amortization
              
              
              457
              
              
              479Provision
                  for loan losses
              
              
              397
              
              
              -Loss
                  on sale of available for sale investment securities
              
              
              -
              
              
              126Stock-based
                  compensation
              
              
              51
              
              
              -Excess
                  tax benefits related to stock options
              
              
              (26
              )
              
              (8
              )Amortization
                  of investment securities and loan premiums
              
              
              65
              
              
              107Accretion
                  of investment securities and loan discounts
              
              
              (25
              )
              
              (23
              )Decrease
                  in other assets
              
              
              313
              
              
              1,649(Decrease)
                  increase in other liabilities
              
              
              (50
              )
              
              287Net
                  cash provided by operating activities
              
              
              2,156
              
              
              4,536**Cash
                  flows from investing activities:**Investment
                  securities available for sale:Proceeds
                  from sales
              
              
              -
              
              
              6,476Proceeds
                  from maturities
              
              
              3,418
              
              
              3,145Purchases
              
              
              (4,922
              )
              
              (3,766
              )Investment
                  securities held to maturity:Proceeds
                  from maturities
              
              
              258
              
              
              159Net
                  increase in loans
              
              
              (11,024
              )
              
              (15,987
              )Purchases
                  of loan pool participations
              
              
              (8
              )
              
              (106
              )Principal
                  recovery on loan pool participations
              
              
              10,425
              
              
              12,964Purchases
                  of premises and equipment
              
              
              (710
              )
              
              (1,504
              )Net
                  cash (used in) provided by investing activities
              
              
              (2,563
              )
              
              1,381**Cash
                  flows from financing activities:**Net
                  increase in deposits
              
              
              3,715
              
              
              1,177Net
                  decrease in federal funds purchased
              
              
              (465
              )
              
              (2,985
              )Repayment
                  of Federal Home Loan Bank advances
              
              
              (2,500
              )
              
              (1,000
              )Principal
                  payments on notes payable
              
              
              -
              
              
              (1,500
              )Excess
                  tax benefits related to stock options
              
              
              26
              
              
              8Dividends
                  paid
              
              
              (668
              )
              
              (631
              )Proceeds
                  from exercise of stock options
              
              
              222
              
              
              89Purchases
                  of treasury stock
              
              
              (567
              )
              
              -Net
                  cash used in financing activities
              
              
              (237
              )
              
              (4,842
              )**Net
                  (decrease) increase in cash and cash equivalents**
              
              
              (644
              )
              
              1,075Cash
                  and cash equivalents at beginning of period
              
              
              20,726
              
              
              13,520Cash
                  and cash equivalents at end of period
              
              $
              20,082
              
              $
              14,595Supplemental
                  disclosures of cash flow information:Cash
                  paid during the period for:Interest
              
              $
              5,579
              
              $
              3,827Income
                  taxes
              
              $
              -
              
              $
              850
  See
          accompanying notes to consolidated financial
          statements.


6




1.  Basis
      of
      Presentation





The
      accompanying consolidated statements of income and the consolidated statements
      of comprehensive income for the three months ended March 31, 2007 and 2006,
      the
      consolidated statements of cash flows for the three months ended March 31,
      2007
      and 2006 and the consolidated statements of condition as of March 31, 2007
      and
      December 31, 2006 include the accounts and transactions of MidWest *One* Financial Group, Inc. (the “Company”) and its wholly-owned subsidiaries,
      MidWest *One* Bank,
      MidWest *One* Investment Services, Inc. and Cook & Son Agency, Inc. All material
      intercompany balances and transactions have been eliminated in consolidation.





The
      accompanying consolidated financial statements have been prepared by the Company
      pursuant to the rules and regulations of the Securities and Exchange Commission.
      Certain information and footnote disclosures normally included in financial
      statements prepared in accordance with U. S. generally accepted accounting
      principles have been condensed or omitted pursuant to such rules and
      regulations. Although management believes that the disclosures are adequate
      to
      make the information presented not misleading, it is suggested that these
      interim consolidated financial statements be read in conjunction with the
      Company’s most recent audited financial statements and notes thereto. In the
      opinion of management, the accompanying consolidated financial statements
      contain all adjustments (consisting of only normal recurring accruals) necessary
      to present fairly the financial position as of March 31, 2007, and the results
      of operations and cash flows for the three months ended March 31, 2007 and
      2006.





The
      results for the three months ended March 31, 2007 may not be indicative of
      results for the year ending December 31, 2007, or for any other
      period.





2.  Consolidated
      Statements of Cash Flows





In
      the
      consolidated statements of cash flows, cash and cash equivalents include cash
      and due from banks, interest-bearing deposits in banks, and federal funds
      sold.





3.  Income
      Taxes





Federal
      income tax expense for the three months ended March 31, 2007 and 2006 was
      computed using the consolidated effective federal tax rate. The Company also
      recognized income tax expense pertaining to state franchise taxes payable
      individually by the subsidiary bank. On January 1, 2007, the Company adopted
      FIN
      48, “Accounting for Uncertainty in Income Taxes.” The
      evaluation was performed for those tax years which remain open to audit. The
      Company files a consolidated tax return for federal purposes and a separate
      or
      consolidated tax return for the state of Iowa purposes dependent upon the state
      tax regulations. The tax years ended December 31, 2006, 2005, and 2004, remain
      subject to examination by the Internal Revenue Service. For state tax purposes,
      the tax years ended December 31, 2006, 2005, and 2004, remain open for
      examination. As a result of the implementation of FIN 48, the Company did not
      recognize any increase or decrease for unrecognized tax benefits.
      There were no material unrecognized tax benefits on January 1, 2007
      and March 31, 2007. No interest or penalties on these unrecognized tax benefits
      has been recorded. As of March 31, 2007, the Company does not anticipate any
      significant increase or decrease in unrecognized tax benefits during the
      remainder of 2007.




4.  Earnings
      Per Common Share





Basic
      earnings per common share computations are based on the weighted average number
      of shares of common stock actually outstanding during the period. The weighted
      average number of shares outstanding for the three-month periods ended March
      31,
      2007 and 2006 was 3,712,773 and 3,706,331 respectively. Diluted earnings per
      share amounts are computed by dividing net income by the weighted average number
      of shares outstanding and all dilutive potential shares outstanding during
      the
      period. The computation of diluted earnings per share used a weighted average
      number of shares outstanding of 3,758,782 and 3,771,216 for the three months
      ended March 31, 2007 and 2006, respectively. The following table presents the
      computation of earnings per common share for the respective
      periods:




**Three
                  Months Ended****March
                31,****2007**
            
            **2006****Earnings
                per Share Information:**Weighted
                average number of sharesoutstanding
                during the period
            
            
            3,712,773
            
            
            3,706,331Weighted
                average number of sharesoutstanding
                during the periodincluding
                all dilutive potential shares
            
            
            3,758,782
            
            
            3,771,216Net
                earnings
            
            $
            974,000
            
            $
            1,919,000Earnings
                per share - basic
            
            $
            0.26
            
            $
            0.52Earnings
                per share - diluted
            
            $
            0.26
            
            $
            0.51




5.  Effect
      of
      New Financial Accounting Standards





In
      February 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS
      No. 155”). SFAS No. 155 is an amendment of SFAS No. 133, “Accounting for
      Derivative Instruments and Hedging Activities,” and SFAS No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities.” This Statement eliminates the exemption from applying Statement
      No. 133 to interests in securitized financial assets so that similar instruments
      are accounted for similarly regardless of the form of the instruments. The
      Statement also allows an entity to elect fair value measurement at acquisition,
      at issuance or when a previously recognized financial instrument is subject
      to a
      remeasurement event, at an instrument-by-instrument basis. SFAS No. 155 was
      effective for the Company beginning January 1, 2007. The adoption of this
      Statement did not have any effect on the Company’s financial condition or
      results of operations.




7




In
      March
      2006, the FASB issued Statement No. 156, “Accounting for Servicing of Financial
      Assets” (SFAS No.156”). SFAS No. 156 is an amendment of SFAS No. 140 that
      requires an entity to recognize a servicing asset or liability each time it
      undertakes an obligation to service a financial asset and requires each
      servicing asset or liability to be initially measured at fair value. Entities
      are permitted to choose the fair value measurement method or the amortization
      method for subsequent reporting periods. SFAS No. 156 was effective for the
      Company beginning on January 1, 2007. The adoption of this statement did not
      have any effect on the Company’s financial condition or results of
      operations.





In
      July
      2006, the FASB issued Financial Interpretation No. 48 (“FIN 48”), “Accounting
      for Income Tax Uncertainties.” FIN 48 supplements SFAS No. 109, “Accounting for
      Income Taxes,” by defining the threshold for recognizing the benefits in the
      financial statements as “more-likely-than-not” to be sustained by the applicable
      taxing authority. The benefit recognized for a tax position that meets the
      “more-likely-than-not” criterion is measured based on the largest benefit that
      is more than fifty percent likely to be realized, taking into consideration
      the
      amount and probabilities of the outcome upon settlement. The Company adopted
      FIN
      48 on January 1, 2007, with no effect on its financial condition or results
      of
      operations.





In
      September 2006, the FASB issued Statement No. 157, “Fair Value Measurements”
(“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value
      in U.S. generally accepted accounting principles and expands disclosures about
      fair value measurements. It applies whenever other standards require or permit
      assets or liabilities to be measured at fair value. It does not expand the
      use
      of fair value in any new circumstances. SFAS No. 157 is effective for the
      Company beginning January 1, 2008. The Company does not expect the adoption
      of
      this statement to have a material effect on its financial condition or results
      of operations.





In
      September 2006, the Emerging Issues Task Force (“EITF”) Issue No. 06-4,
“Accounting for Deferred Compensation and Postretirement Benefit Aspects of
      Endorsement Split-Dollar Life Insurance Arrangements,” was ratified. This EITF
      Issue addresses accounting for separate agreements that split life insurance
      policy benefits between an employer and employee. The Issue requires the
      employer to recognize a liability for future benefits payable to the employee
      under these agreements. The effects of applying this Issue must be recognized
      through either a change in accounting principle through an adjustment to equity
      or through the retrospective application to all prior periods. The Issue is
      effective for the Company beginning January 1, 2008. The Company does not expect
      the adoption of the Issue to have a material effect on its financial condition
      or results of operations.





In
      September 2006, the EITF ratified Issue No. 06-5, “Accounting for Purchases of
      Life Insurance - Determining the Amount That Could Be Realized in Accordance
      with FASB Technical Bulletin No. 85-4, Accounting for Purchase of Life
      Insurance.” EITF Issue No. 06-5 addresses accounting for the amount that could
      be realized as an asset and provides clarification regarding additional amounts
      included in the contractual terms of an individual policy in determining the
      amount that could be realized under the insurance contract. The effects of
      applying this Issue must be recognized through either a change in accounting
      principle through an adjustment to equity or through the retrospective
      application to all prior periods. The Issue was effective for the Company
      beginning January 1, 2007. The adoption of the Issue did not have any effect
      on
      the Company’s financial condition or results of operations.





In
      February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159
      allows companies to elect fair-value measurement of specified financial
      instruments and warranty and insurance contracts when an eligible asset or
      liability is initially recognized or when an event, such as a business
      combination, triggers a new basis of accounting for that asset or liability.
      The
      election, called the “fair value option,” will enable some companies to reduce
      the volatility in reported earnings caused by measuring related assets and
      liabilities differently. The election is available for eligible assets or
      liabilities on a contract-by-contract basis without electing it for identical
      assets or liabilities under certain restrictions. SFAS No. 159 is effective
      as
      of the beginning of the Company’s first fiscal year beginning after November 15,
      2007. The Company does not anticipate that the adoption of SFAS No. 159 will
      have a material effect on its financial condition or results of operations.





6.  Use
      of
      Estimates in the Preparation of Financial Statements





The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reported period. Actual
      results could differ from those estimates. A significant estimate that is
      particularly sensitive to change is the allowance for loan losses.





7.  Reclassifications





Certain
      reclassifications have been made to prior year consolidated financial statements
      in order to conform to current year presentation.




8




PART
      I --
      Item 2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.





QUARTER
      ENDED March 31, 2007





OVERVIEW





The
      following discussion is provided for the consolidated operations of
      MidWest *One* Financial Group, Inc. (“Company”), which includes its wholly-owned banking
      subsidiary, MidWest *One* Bank
      (“Bank”), its wholly-owned insurance agency, Cook & Son Agency, Inc. (“Cook
& Son”) and its wholly-owned investment brokerage subsidiary,
      MidWest *One* Investment Services, Inc. (“MWI”). The discussion focuses on the consolidated
      results of operations for the three months ended March 31, 2007, compared to
      the
      same period in 2006, and on the consolidated financial condition of the Company
      and its subsidiaries as of March 31, 2007 and December 31, 2006.





The
      Company earned net income of $974,000 for the quarter ended March 31, 2007,
      compared with $1,919,000 for the quarter ended March 31, 2006, a decrease of
      49
      percent. The decrease in net income was primarily due to increased provision
      for
      loan losses and contraction in the Company’s net interest margin. On January 6,
      2006, the Company received the proceeds from the recovery of an agricultural
      loan that had been charged off in 2001. These proceeds included a loan principal
      recovery of $901,000 that was credited to the allowance for loan losses,
      $364,000 in interest that was recorded to interest income on loans and $50,000
      credited to other loan income for the reimbursement of attorney fees incurred
      by
      the Company in 2001. The interest income and fees recovered contributed $.08
      per
      share basic and diluted to the Company’s earnings in the first quarter of 2006.
      Basic earnings per share for the quarter ended March 31, 2007 were $.26 versus
      $.52 for the quarter ended March 31, 2006. Diluted earnings per share were
      $.26
      for the first quarter of 2007 and $.51 for the first quarter of 2006. The
      Company’s return on average assets for the quarter ended March 31, 2007 was .53
      percent compared with a return of 1.14 percent for the quarter ended March
      31,
      2006. The Company’s return on average equity was 6.30 percent for the three
      months ended March 31, 2007 versus 13.12 percent for the three months ended
      March 31, 2006.





The
      following table presents selected financial results and measures for the three
      months ended March 31, 2007 compared with the three months ended March 31,
      2006.


Three
                  Months Ended March 31,2007
              
              2006Net
                  Income
              
              $
              974,000
              
              $
              1,919,000Average
                  Assets
              
              
              743,434,000
              
              
              682,323,000Average
                  Shareholders’ Equity
              
              
              62,687,000
              
              
              59,322,000Return
                  on Average Assets
              
              
              .53
              %
              
              1.14
              %Return
                  on Average Equity
              
              
              6.30
              %
              
              13.12
              %Equity
                  to Assets (end of period)
              
              
              8.40
              %
              
              8.87
              %




9




RESULTS
      OF OPERATIONS





Net
      Interest Income





Net
      interest income is computed by subtracting total interest expense from total
      interest income. Fluctuations in net interest income can result from the changes
      in the volumes of assets and liabilities as well as changes in interest rates.
      The Company’s net interest income for the quarter ended March 31, 2007 decreased
      $844,000 or 12 percent to $5,946,000 from $6,790,000 for the quarter ended
      March
      31, 2006. Total interest income was $966,000 greater in the first quarter of
      2007 compared with the same period in 2006. Interest income excluding loan
      pool
      participations was $1,560,000, or 18 percent greater in the first quarter of
      2007 in comparison with the quarter ended March 31, 2006 due to an increase
      in
      the volume of loans and higher yields on loans and investment securities.
      Interest income and discount recovery on loan pool participations was $594,000
      lower in the first quarter of 2007 compared to the first quarter of 2006 as
      a
      result of reduced collections. The increase in interest income was offset by
      increased interest expense on deposits and borrowed funds. Total interest
      expense for the first quarter of 2007 increased $1,810,000 or 40 percent
      compared with the same period in 2006 due to increased volumes and a higher
      cost
      of funds, reflecting the interest rate environment. The Company’s net interest
      margin on a federal tax-equivalent basis for the first quarter of 2007 decreased
      to 3.61 percent from 4.48 percent in the first quarter of 2006. Net interest
      margin is a measure of the net return on interest-earning assets and is computed
      by dividing annualized net interest income by the average of total
      interest-earning assets for the period. Excluding the additional interest income
      associated with the charge-off loan recovery in 2006, the Company’s net interest
      margin was 4.22 percent for the first quarter of 2006. The Company’s overall
      yield on earning assets declined to 7.31 percent for the first quarter of 2007
      compared with 7.39 percent for the first quarter of 2006. The rate on
      interest-bearing liabilities increased in the first quarter of 2007 to 4.11
      percent compared to 3.25 percent for the first quarter of 2006.





The
      following table presents a comparison of the average balance of earning assets,
      interest-bearing liabilities, tax-equivalent interest income and expense,
      and tax-equivalent average yields and costs for the three months ended March
      31,
      2007 and 2006.




**Quarter
                  ended March 31,***(in
                  thousands)*
              
              **2007**
              
              **2006****Average
                  Balance**
              
              **Interest**
              
              **Average**
                **Rate**
              
              **Average
                  Balance**
              
              **Interest**
              
              **Average**
                **Rate****Average
                  earning assets:**Loans
              
              
              509,148
              
              
              9,371
              
              
              7.46
              %
              
              440,558
              
              
              7,910
              
              
              7.28
              %Loan
                  pool participations
              
              
              96,155
              
              
              2,015
              
              
              8.50
              %
              
              96,401
              
              
              2,609
              
              
              10.98
              %Interest-bearing
                  deposits
              
              
              489
              
              
              11
              
              
              8.90
              %
              
              618
              
              
              7
              
              
              4.72
              %Investment
                  securities:Available
                  for sale
              
              
              71,973
              
              
              859
              
              
              4.84
              %
              
              69,626
              
              
              698
              
              
              4.07
              %Held
                  to maurity
              
              
              12,086
              
              
              177
              
              
              5.95
              %
              
              12,836
              
              
              185
              
              
              5.83
              %Federal
                  funds sold
              
              
              125
              
              
              1
              
              
              5.17
              %
              
              6,634
              
              
              3
              
              
              0.19
              %Total
                  earning assets
              
              
              689,976
              
              
              12,434
              
              
              7.31
              %
              
              626,673
              
              
              11,412
              
              
              7.39
              %**Average
                  interest-bearing liabilities:**Interest-bearing
                  demand deposits
              
              
              64,557
              
              
              80
              
              
              0.50
              %
              
              59,440
              
              
              86
              
              
              0.58
              %Savings
                  deposits
              
              
              103,878
              
              
              681
              
              
              2.66
              %
              
              112,884
              
              
              541
              
              
              1.94
              %Certificates
                  of deposit
              
              
              335,747
              
              
              3,936
              
              
              4.75
              %
              
              276,065
              
              
              2,526
              
              
              3.71
              %Federal
                  funds purchased
              
              
              6,242
              
              
              86
              
              
              5.62
              %
              
              12,358
              
              
              70
              
              
              2.30
              %Federal
                  Home Loan Bank advances
              
              
              97,284
              
              
              1,200
              
              
              5.00
              %
              
              82,189
              
              
              947
              
              
              4.67
              %Notes
                  payable
              
              
              4,050
              
              
              80
              
              
              8.01
              %
              
              6,083
              
              
              105
              
              
              6.98
              %Long-term
                  debt
              
              
              10,310
              
              
              235
              
              
              9.24
              %
              
              10,310
              
              
              213
              
              
              8.38
              %Total
                  interest-bearing liabilities
              
              
              622,068
              
              
              6,298
              
              
              4.11
              %
              
              559,329
              
              
              4,488
              
              
              3.25
              %**Net
                  interest income**
              
              
              
              
              
              6,136
              
              
              3.20
              %
              
              
              
              
              6,924
              
              
              4.14
              %**Net
                  interest margin**
              
              
              
              
              
              
              
              
              3.61
              %
              
              
              
              
              
              
              
              4.48
              %




Interest
      income and fees on loans increased $1,457,000 or 19 percent in the first quarter of 2007 compared to
      the
      same period in 2006. Average loans were $68,589,000 or 16 percent higher in
      the
      first quarter of 2007 compared with 2006, which contributed to the growth in
      interest income. The increase in loan volume reflects new loan originations
      primarily in the Cedar Falls/Waterloo and Davenport, Iowa markets. Higher
      interest rates in the first quarter of 2007 compared with 2006 also contributed
      to the additional interest income generated in 2007. Interest income on loans
      for the first quarter of 2006 included the additional $364,000 interest income
      collected from the recovery of the previously charged off loan. Excluding the
      interest income collected on the charged off loan, the average yield on loans
      increased to 7.46 percent for the first quarter of 2007, compared to 6.91
      percent in the first quarter of 2006. The yield on the Company’s loan portfolio
      is affected by the amount of nonaccrual loans (which do not earn interest
      income), the mix of the portfolio (real estate loans generally have a lower
      overall yield than commercial and agricultural loans), the effects of
      competition and the interest rate environment on the amounts and volumes of
      new
      loan originations, and the mix of variable rate versus fixed rate loans in
      the
      Company’s portfolio. Additionally, many of the borrowers have refinanced their
      real estate mortgages outside the Company to take advantage of long-term
      fixed-rate loans. The Company has typically not retained long-term fixed rate
      loans in its portfolio in order to reduce interest rate risk. Competition in
      the
      local markets served by the Company has caused the pricing of new and many
      existing loans to be at or near the national prime rate. Historically, the
      Company had been able to price many of these loans higher than
      prime.




10




Interest
      and discount income on loan pool participations decreased $594,000 or 23 percent in the first quarter of 2007 compared with
      the
      same period in 2006. Interest income and discount collected on the loan pool
      participations for the three months ended March 31, 2007 was $2,015,000 compared
      with $2,609,000 collected in the three months ended March 31, 2006. The yield
      on
      loan pool participations was 8.50 percent for the first quarter of 2007 compared
      with 10.98 percent for the first quarter of 2006. The average loan pool
      participation investment balance was $246,000 lower in the first quarter of
      2007
      than in 2006. These loan pool participations are pools of performing and
      distressed and nonperforming loans that the Company has purchased at a discount
      from the aggregate outstanding principal amount of the underlying loans. Income
      is derived from this investment in the form of interest collected and the
      repayment of the principal in excess of the purchase cost which is herein
      referred to as “discount recovery.” The loan pool participations have
      traditionally been a high-yield activity for the Company, but this yield has
      fluctuated from period to period based on the amount of cash collections,
      discount recovery, and net collection expenses of the servicer in any given
      period. The income and yield on loan pool participations may vary in future
      periods due to the volume and discount rate on loan pools purchased. The Company
      adopted SOP 03-3 on January 1, 2005. All loans that the Company had purchased
      prior to January 1, 2005 continue to utilize the cash basis for recognition
      of
      interest income and discount recovery. The loan pool participations purchased
      subsequent to January 1, 2005 that are subject to the “accretable yield” income
      recognition requirements of SOP 03-3 have not generated amounts of income
      significantly greater than what would have been recognized under the cash basis.
      Loan pool participations that are not subject to the “accretable yield”
requirements also utilize the cash basis for recognition of interest income
      and
      discount recovery.





Interest
      income on investment securities increased $101,000 or 13 percent in the quarter ended March 31, 2007, compared
      with the quarter ended March 31, 2006 mainly due to higher yields on securities
      in the portfolio. Interest income on investment securities totaled $886,000
      in
      the first quarter of 2007 compared with $785,000 for the first quarter of 2006.
      The average balance of investments in the first quarter of 2007 was $84,059,000
      in the first quarter of 2007 compared with $82,462,000 in the first quarter
      of
      2006. The tax-equivalent yield on the Company’s investment portfolio in the
      first quarter of 2007 increased to 5.00 percent from 4.34 percent in the
      comparable period of 2006 reflecting reinvestment of maturing securities at
      higher market interest rates.





Interest
      expense on deposits was
      $1,544,000 or 49 percent greater in the first quarter of 2007 compared with
      the
      same period in 2006 mainly due to higher market interest rates and increased
      deposit volumes. The weighted average rate paid on interest-bearing deposits
      was
      3.78 percent in the first quarter of 2007 compared with 2.85 percent in the
      first quarter of 2006. Average interest-bearing deposits for the first quarter
      of 2007 were $56,793,000 greater compared with the same period in 2006. The
      Company has noted higher market rates and has increased the rates it pays on
      deposit accounts in response to the competition.





Interest
      expense on borrowed funds was
      $266,000 greater in the first quarter of 2007 compared with the same period
      in
      2006. Interest on borrowed funds totaled $1,601,000 for the first quarter of
      2007. The Company’s average borrowed funds balances were greater in the first
      quarter of 2007 resulting in additional interest expense. Higher market interest
      rates in 2007 compared with 2006 also contributed to the additional interest
      expense. Average borrowed funds for the first quarter of 2007 were $6,946,000
      greater compared to the same period in 2006. The weighted average rate paid
      on
      borrowed funds increased to 5.51 percent in the first quarter of 2007 compared
      with 4.88 percent in the first quarter of 2006.




11




Provision
      for Loan Losses





The
      Company recorded a provision for loan losses of $397,000 in the first quarter
      of
      2007 compared with zero provision in the first quarter of 2006. No provision
      for
      the first quarter of 2006 was necessary due to the recovery of the $901,000
      previously charged off agricultural loan credited to the reserve in January
      2006. Net loans charged off in the first quarter of 2007 totaled $205,000
      compared with gross charge-offs of $184,000 in the first quarter of 2006. In
      addition to the $901,000 recovery in the first quarter of 2006, other
      prior-period charge-offs of $65,000 were recovered, resulting in a net recovery
      for the period of $782,000. Additional provision for loan losses in the first
      quarter of 2007 reflected the continued growth in the loan portfolio. Management
      determines an appropriate provision based on its evaluation of the adequacy
      of
      the allowance for loan losses in relationship to a continuing review of problem
      loans, the current economic conditions, actual loss experience and industry
      trends. Management believes that the allowance for loan losses is adequate
      based
      on the inherent risk in the portfolio as of March 31, 2007; however, growth
      in
      the loan portfolio and the uncertainty of the general economy require that
      management continue to evaluate the adequacy of the allowance for loan losses
      and make additional provisions in future periods as deemed
      necessary.





Noninterest
      Income





Noninterest
      income results from the charges and fees collected by the Company from its
      customers for various services performed, data processing income received from
      nonaffiliated banks, miscellaneous other income, and gains (or losses) from
      the
      sale of investment securities held in the available for sale category. Total
      noninterest income was $94,000 or 7 percent greater in the first quarter of
      2007
      compared with the same period in 2006. Service charges on deposit accounts
      decreased $41,000 or 9 percent for the quarter ended March 31, 2007 compared
      with the quarter ended March 31, 2006 primarily due to reduced non-sufficient
      funds charges collected on deposit account overdrafts. Brokerage fees increased
      $22,000 to $273,000 for the first quarter of 2007 due to increased sales of
      securities. Property and casualty insurance income was $204,000 in the first
      quarter of 2007 compared with $148,000 in the first quarter of 2006 reflecting
      increased insurance premium volume. Loan origination fees on single-family
      real
      estate loans that were originated by the Company and sold servicing-released
      to
      the secondary market increased to $124,000 in the first quarter of 2007 compared
      to $104,000 for the first quarter of 2006 due to increased origination activity.
      Other income for the first quarter of 2007 decreased by $89,000 or 15 percent
      compared with the income for the first quarter of 2006 mainly due to the
      collection of $50,000 attorney fees associated with the charge-off recovery
      in
      the 2006 quarter. Recognized available for sale investment security losses
      totaled $126,000 in the first quarter of 2006 compared with none recognized
      in
      the first quarter of 2007.





Noninterest
      Expense





Total
      noninterest expense for the quarter ended March 31, 2007 was $361,000 or 7
      percent greater compared to noninterest expense for the quarter ended March
      31,
      2006. Noninterest expense for the first quarter of 2007 was $5,695,000 and
      includes all the costs incurred to operate the Company except for interest
      expense, the loan loss provision and income taxes. Salaries and benefits expense
      for the first quarter of 2007 was $306,000 or 10 percent higher compared with
      the same period in 2006. The increase was attributable to additional salaries
      and benefits expense for the additional staff added to the Davenport, Iowa
      branch location throughout 2006, annual compensation adjustments and increased
      health-care insurance premium costs. Average full-time equivalent employees
      increased from 215 for the three months ended March 31, 2006 to 222 for the
      three months ended March 31, 2007. Occupancy expense and intangible asset
      amortization did not change significantly from the first quarter of 2006 to
      2007. Other operating expenses rose $80,000 or 7 percent in the first quarter
      of
      2007 compared to the first quarter of 2006 with much of the additional expense
      attributable to costs associated with consultants related to the Company’s
      Sarbanes-Oxley compliance initiative.




12




Income
      Tax Expense





The
      Company incurred income tax expense of $413,000 for the three months ended
      March
      31, 2007 compared with $976,000 for the three months ended March 31, 2006.
      The
      effective income tax rate as a percent of income before taxes for the three
      months ended March 31, 2007 and 2006 was 29.8 percent and 33.7 percent,
      respectively. The effective tax rate varies from the statutory rate due to
      state
      taxes and the amount of tax-exempt income on municipal bonds earned during
      the
      period. Tax-exempt income on municipal bonds is greater in comparison to
      previous periods as the market yields on newly-purchased bonds has increased
      and
      the Company has a higher volume of municipal bonds.





On
      January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
      uncertainty in Income Taxes,” (“FIN 48”). Implementation of FIN 48 did not
      result in a cumulative effect adjustment to retained earnings.





FINANCIAL
      CONDITION





Total
      assets as of March 31, 2007 were $745,756,000 compared with $744,911,000 as
      of
      December 31, 2006, an increase of $845,000 or less than 1 percent. As of March
      31, 2007, the Company had $4,665,000 federal funds sold compared with $465,000
      purchased as of December 31, 2006. Federal funds are purchased on a short-term
      basis to meet liquidity needs. Excess funds not required to meet current day
      liquidity needs are sold on an overnight basis.





Investment
      Securities





Investment
      securities available for sale totaled $72,329,000 as of March 31, 2007. This
      is
      an increase of $1,586,000 from December 31, 2006. The proceeds from maturing
      securities were utilized to fund growth in the Company’s loan portfolio.
      Investment securities classified as held to maturity declined to $11,956,000
      as
      of March 31, 2007, compared with $12,220,000 on December 31, 2006 due to
      maturity of municipal bonds.




Loans





Total
      loans were $514,668,000 as of March 31, 2007, compared with $503,832,000 as
      of
      December 31, 2006, an increase of $10,836,000 or 2 percent. Much of the growth
      in the first quarter of 2007 came from commercial, agricultural real estate,
      agricultural operating and real estate construction loans. As of March 31,
      2007,
      the Company’s loan to deposit ratio was 91.2 percent compared with a year-end
      2006 loan to deposit ratio of 89.9 percent. As of March 31, 2007, loans secured
      by residential real estate comprised the largest category in the portfolio
      at
      approximately 25 percent of total loans. Commercial loans were the next largest
      category at 18 percent. Commercial real estate loans made up approximately
      15
      percent of the total loan portfolio. Agricultural loans were approximately
      13
      percent of the total loan portfolio. Construction and land developments loans
      comprised approximately 12 percent of the portfolio and agricultural land loans
      were 11 percent. Multifamily residential real estate and loans to individuals
      each constituted approximately 3 percent of the portfolio. The loan percentages
      did not change significantly from December 31, 2006.




13




The
      Company has very minimal exposure to subprime mortgages in its loan portfolio.
      The Company’s loan policy provides a guideline that real estate mortgage
      borrowers have a Beacon score of 640 or greater. Exceptions to the guideline
      have been noted but the overall exposure is deemed minimal by management.
      Mortgages originated by the Company and sold on the secondary market are
      typically underwritten according to the guidelines of the secondary market
      investors. These mortgages are on a non-recourse basis, thereby eliminating
      any
      subprime exposure.





Loan
      Pool
      Participations





As
      of
      March 31, 2007, the Company had loan pool participations of $88,468,000, a
      decrease of $10,417,000 or 11 percent from the December 31, 2006 balance of
      $98,885,000. The decrease in the loan pool participations is the result of
      collections of loan pool participations during the period. The loan pool
      investment balance shown as an asset on the Company’s Statement of Condition
      represents the discounted purchase cost of the loan pool participations. The
      average loan pool participation balance of $96,155,000 for the first three
      months of 2007 was $246,000 lower than the average balance of $96,401,000 for
      the first three months of 2006. The Company did not acquire any additional
      loan
      pool participations during the first quarter of 2007. As of March 31, 2007,
      the
      categories of loans by collateral type in the loan pools were commercial real
      estate - 51%, commercial loans - 18%, agricultural real estate - 13%,
      single-family residential real estate - 9% and other loans - 9%. The Company
      has
      very minimal exposure in loan pools to consumer real estate subprime credit.
      Most of the basis in loans identified with borrowers or guarantors having credit
      scores categorized as subprime relates to additional collateral taken to reduce
      exposure on commercial or commercial real estate loans. The Company does not
      actively seek to purchase consumer or consumer real estate loans characterized
      as subprime credit.





Goodwill
      and Other Intangible Assets





Goodwill
      totaled $13,405,000 as of March 31, 2007 and December 31, 2006. Goodwill is
      subject to testing at least annually for impairment in accordance with the
      provisions of Financial Accounting Standards Board Statement No. 142. No
      impairment write-down of goodwill has been recorded.





Other
      intangible assets decreased to $1,064,000 as of March 31, 2007 from the
      December 31, 2006 total of $1,128,000 reflecting the amortization of
      intangible assets. The gross carrying amount of other intangible assets and
      the
      associated accumulated amortization at March 31, 2007 and December 31, 2006
      is
      presented in the table below. Amortization expense for other intangible assets
      for the three months ended March 31, 2007 and 2006 was $64,000 and $78,000,
      respectively.


**Gross**
              
              
              
              **Unamortized****Carrying**
              
              **Accumulated**
              
              **Intangible****Amount**
              
              **Amortization**
              
              **Assets****(in
                  thousands)****March
                  31, 2007**Other
                  intangible assets:Core
                  deposit premium
              
              $
              3,281
              
              
              2,755
              
              
              526Customer
                  list intangible
              
              $
              786
              
              
              248
              
              
              538Total
              
              $
              4,067
              
              $
              3,003
              
              $
              1,064**December
                  31, 2006**Other
                  intangible assets:Core
                  deposit premium
              
              $
              3,281
              
              
              2,716
              
              
              565Customer
                  list intangible
              
              $
              786
              
              
              223
              
              
              563Total
              
              $
              4,067
              
              $
              2,939
              
              $
              1,128




Amortization
      of intangible assets is recorded using an accelerated method based on the
      estimated life of the core deposit intangible. Projections of amortization
      expense are based on existing asset balances and the remaining useful lives.
      The
      following table shows the estimated future amortization expense.




**Core**
              
              **Customer****Deposit**
              
              **List****Premium**
              
              **Intangible**
              
              **Totals****(in
                  thousands)**Nine
                  months ended December 31, 2007
              
              $
              116
              
              
              72
              
              
              188Year
                  ended December 31,2008
              
              
              156
              
              
              87
              
              
              2432009
              
              
              127
              
              
              79
              
              
              2062010
              
              
              41
              
              
              71
              
              
              1122011
              
              
              41
              
              
              62
              
              
              1032012
              
              
              41
              
              
              54
              
              
              95Thereafter
              
              
              4
              
              
              113
              
              
              117




14




Deposits





Total
      deposits as of March 31, 2007 were $564,330,000 compared with $560,615,000
      as of
      December 31, 2006, an increase of $3,715,000 or less than 1 percent.
      Certificates of deposit remain the largest category of deposits at March 31,
      2007 representing approximately 60 percent of total deposits. Based on
      historical experience, management anticipates that many of the maturing
      certificates of deposit will be renewed upon maturity. Maintaining competitive
      market interest rates will facilitate the Company’s retention of certificates of
      deposit.




Borrowed
      Funds/Notes Payable





The
      Company had no federal funds purchased on March 31, 2007. There was $465,000
      in
      federal funds purchased on December 31, 2006. During the first three months
      of
      2007, the Company had an average balance of federal funds purchased of
      $6,242,000. Advances from the Federal Home Loan Bank totaled $96,600,000 as
      of
      March 31, 2007 compared with $99,100,000 as of December 31, 2006. The Company
      utilizes Federal funds purchased and Federal Home Loan Bank advances as a
      supplement to customer deposits to fund earning assets. Notes payable remained
      unchanged at $4,050,000 on March 31, 2007 compared to December 31, 2006.
      Long-term debt in the form of a trust-preferred security was $10,310,000 as
      of
      March 31, 2007 and December 31, 2006.




Nonperforming
      Assets





The
      Company’s nonperforming assets totaled $5,577,000 (1.08 percent of total loans)
      as of March 31, 2007, compared to $5,989,000 (1.19 percent of total loans)
      as of
      December 31, 2006. All nonperforming asset totals and related ratios exclude
      the
      loan pool participations. The following table presents the categories of
      nonperforming assets as of March 31, 2007 compared with December 31,
      2006:




**March
                  31,**
              
              **December
                  31,****2007**
              
              **2006****(in
                  thousands)**Impaired
                  loans and leases:Nonaccrual
              
              $
              744
              
              
              727Restructured
              
              
              2,014
              
              
              2,014Total
                  impaired loans and leases
              
              
              2,758
              
              
              2,741Loans
                  and leases past due 90 days and more
              
              
              2,634
              
              
              3,060Total
                  nonperforming loans
              
              
              5,392
              
              
              5,801Other
                  real estate owned
              
              
              185
              
              
              188Total
                  nonperforming assets
              
              $
              5,577
              
              
              5,989





From
      December 31, 2006 to March 31, 2007, the Company’s nonaccrual loans increased
      $17,000. Loans ninety days past due decreased $426,000. Troubled debt
      restructurings remained unchanged from December 31, 2006 to March 31, 2007.
      Other real estate owned decreased $3,000 in the first quarter of 2007. The
      Company’s allowance for loan losses as of March 31, 2007 was $5,885,000, which
      was 1.14 percent of total loans as of that date. This compares with an allowance
      for loan losses of $5,693,000 as of December 31, 2006, which was 1.13 percent
      of
      total loans. As of March 31, 2007, the allowance for loan losses was 105.5
      percent of nonperforming assets compared with 95.1 percent as of
      December 31, 2006. Based on the inherent risk in the loan portfolio,
      management believes that as of March 31, 2007, the allowance for loan losses
      is
      adequate. For the three months ended March 31, 2007, the Company experienced
      net
      loan charge-offs of $205,000 compared with a net recovery of $782,000 during
      the
      three months ended March 31, 2006.





Changes
      in the allowance for loan losses for the three months ended March 31, 2007
      and
      2006 were as follows:


**2007**
              
              **2006****(in
                  thousands)**Balance
                  at beginning of year
              
              $
              5,693
              
              
              5,011Provision
                  for loan losses
              
              
              397
              
              
              -Recoveries
                  on loans previously charged off
              
              
              18
              
              
              966Loans
                  charged off
              
              
              (223
              )
              
              (184
              )Balance
                  at end of period
              
              $
              5,885
              
              
              5,793




Capital
      Resources





Total
      shareholders’ equity was 8.4 percent of total assets as of March 31, 2007 and
      was 8.4 percent as of December 31, 2006. Tangible equity to tangible assets
      was
      6.6 percent as of March 31, 2007 and December 31, 2006. The Company’s Tier 1
      Capital Ratio was 10.0 percent of risk-weighted assets as of March 31, 2007
      and
      was 10.0 percent as of December 31, 2006, compared to a 4.0 percent
      regulatory requirement. Risk-based capital guidelines require the classification
      of assets and some off-balance-sheet items in terms of credit-risk exposure
      and
      the measuring of capital as a percentage of the risk-adjusted asset totals.
      Tier
      1 Capital is the Company’s total common shareholders’ equity plus the trust
      preferred security reduced by goodwill. Management believes that, as of March
      31, 2007, the Company and its subsidiary bank meet all capital adequacy
      requirements to which they are subject. As of that date, the bank subsidiary
      was
“well capitalized” under regulatory prompt corrective action
      provisions.




15




On
      January 18, 2007, the Company’s Board of Directors authorized a stock repurchase
      of up to $2,000,000 until December 31, 2007. In accordance with this
      authorization, the Company repurchased 30,000 shares on the open market during
      the first three months of 2007 for a total of $567,300, or an average price
      per
      share of $18.91. A total of 14,980 shares were issued during the first three
      months of 2007 for options exercised under previously awarded grants. Cash
      dividends of $.18 per share were paid to shareholders on March 15, 2007.




Liquidity





Liquidity
      management involves meeting the cash flow requirements of depositors and
      borrowers. The Company conducts liquidity management on both a daily and
      long-term basis; and it adjusts its investments in liquid assets based on
      expected loan demand, projected loan maturities and payments, estimated cash
      flows from the loan pool participations, expected deposit flows, yields
      available on interest-bearing deposits, and the objectives of its
      asset/liability management program. The Company had liquid assets (cash and
      cash
      equivalents) of $20,082,000 as of March 31, 2007, compared with $20,726,000
      as
      of December 31, 2006. Investment securities classified as available for sale
      could be sold to meet liquidity needs if necessary. Additionally, the bank
      subsidiary maintains lines of credit with correspondent banks and the Federal
      Home Loan Bank that would allow it to borrow federal funds on a short-term
      basis
      if necessary. The Company also maintains a line of credit with a major
      commercial bank that provides liquidity for the purchase of loan pool
      participations and other corporate needs. Management believes that the Company
      has sufficient liquidity as of March 31, 2007 to meet the needs of borrowers
      and
      depositors.


The
        Company was not in compliance with one covenant of its loan agreement with
        Harris N. A. as of March 31, 2007. This was due to the Company not obtaining
        a
        required consolidated return on assets of .85 percent for the preceding twelve
        months. The revolving loan agreement with Harris N. A. is currently being
        renegotiated with representatives of the bank who have indicated that waiver
        for
        the noncompliance will be incorporated in the new loan
        agreement.
  Commitments
        and Contingencies





In
      the
      ordinary course of business, the Company is engaged in various issues involving
      litigation. Management believes that none of this litigation is material to
      the
      Company’s results of operations.




Critical
      Accounting Policies





The
      Company has identified two critical accounting policies and practices relative
      to the financial condition and results of operation. These two accounting
      policies relate to the allowance for loan losses and to loan pool
      accounting.





The
      allowance for loan losses is based on management’s estimate. Management believes
      the allowance for loan losses is adequate to absorb probable losses in the
      existing portfolio. In evaluating the portfolio, management takes into
      consideration numerous factors, including current economic conditions, prior
      loan loss experience, the composition of the loan portfolio, and management’s
      estimate of probable credit losses. The allowance for loan losses is established
      through a provision for loss based on management’s evaluation of the risk
      inherent in the loan portfolio, the composition of the portfolio, specific
      impaired loans, and current economic conditions. Such evaluation, which includes
      a review of all loans on which full collectibility may not be reasonably
      assured, considers among other matters, the estimated net realizable value
      or
      the fair value of the underlying collateral, economic conditions, historical
      loss experience, and other factors that warrant recognition in providing for
      an
      adequate allowance for loan losses.




16




The
      loan
      pool accounting practice relates to management’s estimate that the investment
      amount reflected on the Company’s financial statements does not exceed the
      estimated net realizable value or the fair value of the underlying collateral
      securing the purchased loans. In evaluating the purchased loan portfolio,
      management takes into consideration many factors, including the borrowers’
current financial situation, the underlying collateral, current economic
      conditions, historical collection experience, and other factors relative to
      the
      collection process.





In
      the
      event that management’s evaluation of the level of the allowance for loan losses
      is inadequate, the Company would need to increase its provision for loan losses.
      If the estimated realizable value of the loan pool participations is overstated,
      the Company’s yield on the loan pools would be reduced.




Off-Balance-Sheet
      Arrangements





The
      Company is a party to financial instruments with off-balance-sheet risk in
      the
      normal course of business to meet the financing needs of its customers, which
      include commitments to extend credit. The Company’s exposure to credit loss in
      the event of nonperformance by the other party to the commitments to extend
      credit is represented by the contractual amount of those instruments. The
      Company uses the same credit policies in making commitments as it does for
      on-balance-sheet instruments.





Commitments
      to extend credit are agreements to lend to a customer as long as there is no
      violation of any conditions established in the contract. Commitments generally
      have fixed expiration dates or other termination clauses and may require payment
      of a fee. Since many of the commitments are expected to expire without being
      drawn upon, the total commitment amounts do not necessarily represent future
      cash requirements. The Company evaluates each customer’s creditworthiness on a
      case-by-case basis. As of March 31, 2007 and December 31, 2006, outstanding
      commitments to extend credit totaled approximately $86,680,000 and $90,290,000,
      respectively.





Commitments
      under standby letters of credit outstanding aggregated $2,961,000 and $2,495,000
      as of March 31, 2007 and December 31, 2006, respectively. The Company does
      not
      anticipate any losses as a result of these transactions.





Contractual
      obligations and other commitments were presented in the Company’s Form 10-K
      Annual Report for the year ended December 31, 2006. Please refer to this
      discussion. There have been no material changes since that report was filed.
      The
      Company adopted FIN 48 on January 1, 2007. The adoption of FIN 48 did not have
      a
      material effect on the contractual obligations table presented in the Company’s
      Form 10-K Annual Report for the year ended December 31, 2006.




Part
      I -
      Item 3. Quantitative and Qualitative Disclosures about Market Risk.





Market
      risk is the risk of earnings volatility that results from adverse changes in
      interest rates and market prices. The Company’s market risk is primarily
      comprised of interest rate risk arising from its core banking activities of
      lending and deposit taking. Interest rate risk is the risk that changes in
      market interest rates may adversely affect the Company’s net interest income.
      Management continually develops and applies strategies to mitigate this risk.
      The Company has not experienced any material changes to its market risk position
      since December 31, 2006, from that disclosed in the Company’s 2006 Form 10-K
      Annual Report. Management does not believe that the Company’s primary market
      risk exposures and how those exposures were managed in the first three months
      of
      2007 changed when compared to 2006.





The
      Company uses a third-party computer software simulation modeling program to
      measure its exposure to potential interest rate changes. For various assumed
      hypothetical changes in market interest rates, numerous other assumptions are
      made such as prepayment speeds on loans and securities backed by mortgages,
      the
      slope of the Treasury yield curve, the rates and volumes of the Company’s
      deposits and the rates and volumes of the Company’s loans. This analysis
      measures the estimated change in net interest income in the event of
      hypothetical changes in interest rates. This analysis of the Company’s interest
      rate risk was presented in the Form 10-K filed by the Company for the year
      ended
      December 31, 2006.





17





Part
      I -
      Item 4. Controls and Procedures.





As
      of the
      end of the period covered by this report, an evaluation was performed under
      the
      supervision and with the participation of the Company’s Chief Executive Officer
      and Chief Financial Officer of the effectiveness of the Company’s disclosure
      controls and procedures (as defined in Exchange Act Rule 240.13a-15(e)). Based
      on that evaluation, the Chief Executive Officer and the Chief Financial Officer
      have concluded that the Company’s current disclosure controls and procedures are
      effective to ensure that information required to be disclosed by the Company
      in
      the reports that it files or submits under the Securities Exchange Act of 1934
      is recorded, processed, summarized and reported, within the time periods
      specified in the Securities and Exchange Commission’s rules and
      forms.





There
      were no changes in the Company’s internal control over financial reporting that
      occurred during the period covered by this report that have materially affected,
      or are reasonably likely to materially affect, the Company’s internal control
      over financial reporting.




*“SAFE
      HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
      ACT*





*With
      the exception of the historical information contained in this report, the
      matters described herein contain forward-looking statements that involve risk
      and uncertainties that individually or mutually impact the matters herein
      described, including but not limited to financial projections, product demand
      and market acceptance, the effect of economic conditions, the impact of
      competitive products and pricing, governmental regulations, results of
      litigation, technological difficulties and/or other factors outside the control
      of the Company, which are detailed from time to time in the Company’s SEC
      reports. The Company disclaims any intent or obligation to update these
      forward-looking statements.*





Part
      II -
      Item 1A Risk Factors.





There
      were no material changes in the risk factors previously disclosed in the
      Company’s Annual Report on Form 10-K for the year ended December 31,
      2006.





Part
      II -
      Item 2.  Unregistered
      Sales of Equity Securities and Use of Proceeds.





(a)-(b)
      Not Applicable





(c)
      Issuer Purchases of Equity Securities


Period
              
              (a)
                  Total Number of Shares (or Units) Purchased
              
              (b)
                  Average Price Paid per Share (or Unit)
              
              (c)
                  Total Number of Shares (or Units) Purchased as Part of Publicly
                  Announced
                  Plans or Programs
              
              (d)
                  Maximum Number (or Approximate Dollar Value) of Shares (or Units)
                  that May
                  Yet Be Purchased Under the Plans or ProgramsJanuary
                  2007
              
              
              15,000
              
              $
              19.440
              
              
              15,000
              
              $
              1,708,400February
                  2007
              
              
              -
              
              
              -
              
              
              -
              
              
              1,708,400March
                  2007
              
              
              15,000
              
              
              18.380
              
              
              15,000
              
              $
              1,432,700Total
              
              
              30,000
              
              $
              18.910
              
              
              30,000


On
        January 18, 2007, the Board of Directors authorized the repurchase of up
        to
        $2,000,000 of the Company's common stock
        on the open market. This repurchase authorization expires on December 31,
        2007.





Part
      II -
      Item 6. Exhibits.





(a)  The
      following exhibits and financial statement schedules are filed as part of this
      report:




18




Exhibits




3.1
              
              Articles
                  of Incorporation, as amended through April 30, 1998, of Mahaska
                  Investment
                  Company. The Articles of Incorporation, as amended, of Mahaska
                  Investment
                  Company are incorporated by reference to the Company’s quarterly report on
                  Form 10-Q for the quarter ended September 30,
                  1998.


3.1.1
                
                Amendment
                    to the Articles of Incorporation of Mahaska Investment Company
                    changing
                    the name of the corporation to MidWest*One*Financial Group, Inc. The Amendment to the Articles of Incorporation
                    of
                    Mahaska Investment Company are incorporated by reference to the
                    Company’s
                    quarterly report on Form 10-Q for the quarter ended June 30,
                    2003.
 3.2
                  
                  Bylaws
                        of MidWestOne Financial Group, Inc. (f/k/a Mahaska Investment
                        Company).
                        The Amended and Restated Bylaws of Mahaska Investment Company
                        dated July
                        23, 1998, are incorporated by reference to the Company’s quarterly report
                        on Form 10-Q for the Quarter ended September 30,
                        1998.
 10.1
                    
                    MidWestOne
                        Financial Group, Inc. Employee Stock Ownership Plan & Trust as
                        restated and amended. This Plan & Trust is incorporated by reference
                        to the Company’s Annual Report on Form 10-K for the year ended December
                        31, 2006.
 10.2.1
                      
                      1993
                          Stock Incentive Plan. This 1993 Stock Incentive Plan is
                          incorporated by
                          reference to Form S-1 Registration Number 33-81922 of Mahaska
                          Investment
                          Company.
 10.2.2
                        
                        1996
                            Stock Incentive Plan. This 1996 Stock Incentive Plan
                            is incorporated by
                            reference to the Company’s Annual Report on Form 10-K for the year ended
                            December 31, 1996.
 10.2.3
                          
                          1998
                              Stock Incentive Plan. This 1998 Stock Incentive Plan
                              is incorporated by
                              reference to the Company’s Annual Report on Form 10-K for the year ended
                              December 31, 1997.
 10.2.4
                              
                              2006
                                  Stock Incentive Plan. This 2006 Stock Incentive
                                  Plan is incorporated by
                                  reference to the Company’s Definitive Proxy Statement on Form 14A filed
                                  March 21, 2006.
 10.3
                                  
                                  States
                                        Resources Corp. Loan Participation and Servicing
                                        Agreement dated February
                                        5, 1999 between States Resources Corp. and
                                        Mahaska Investment Company.
                                        This agreement is incorporated herein by
                                        reference to the Form 10-K report
                                        filed by Mahaska Investment Company for the
                                        Year ended December 31,
                                        1999.
 10.5
                                      
                                      Second
                                            Amended and Restated Credit Agreement
                                            dated November 30, 2003 between
                                            MidWest*One*Financial Group, Inc. and Harris Trust
                                            and Savings Bank. This Agreement is
                                            incorporated herein by reference to the
                                            Form 10-K Annual Report filed by
                                            MidWest*One*Financial Group, Inc. for the Year ended
                                            December 31,
                                            2003.
 10.6
                                            
                                            Summary
                                                    Executive Performance Incentive
                                                    Plan.
 10.5.1
                                          
                                          Fifth
                                              Amendment to the Second Amended and
                                              Restated Credit Agreement dated
                                              November 27, 2006 between MidWest*One*Financial Group, Inc. and Harris N.A.
                                              This Agreement is incorporated
                                              herein by reference to the Form 10-K
                                              report filed by MidWest*One*Financial
                                              Group, Inc. for the Year ended December
                                              31,
                                              2006.
 11
                                              
                                              Computation
                                                  of Per Share
                                                  Earnings.


31.1
                    
                    Certification
                        of Chief Executive Officer pursuant to Rule 13a - 14(a) of
                        the Securities
                        Exchange Act of
                        1934
 31.2
                      
                      Certification
                            of Chief Financial Officer pursuant to Rule 13a - 14(a)
                            of the Securities
                            Exchange Act of
                            1934.
 32.1
                        
                        Certification
                              of Chief Executive Officer and Chief Financial Officer
                              pursuant to Rule
                              13a - 14(a) of the Securities Exchange Act of 1934
                              and 18 U.S.C., Section
                              1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                              Act of
                              2002.
 19


**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.




MidWest*One*Financial Group, Inc.
              (Registrant)By:
            /s/Charles
              S.
              HowardCharles
              S. HowardChairman,
              President, Chief Executive OfficerMay 15, 2007
              Dated


By:
              /s/David
                A. MeinertDavid
                A. MeinertExecutive
                  Vice
                  President
                and Chief Financial Officer
                (Principal Accounting Officer)May 15, 2007
                Dated




20