AMES NATIONAL CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

See Notes to Consolidated Financial Statements.

 

 

AMES NATIONAL CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(in thousands, except per share data)

 

 

See Notes to Consolidated Financial Statements.

 

 

AMES NATIONAL CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in thousands)

 

 

See Notes to Consolidated Financial Statements.

 

 

 

AMES NATIONAL CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

(in thousands, except share and per share data)

 

 

See Notes to Consolidated Financial Statements.

 

 

 

AMES NATIONAL CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

Three Months Ended March 31, 2025 and 2024

 

 

 

AMES NATIONAL CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (unaudited)

(in thousands)

Three Months Ended March 31, 2025 and 2024

 

 

See Notes to Consolidated Financial Statements.

 

 

AMES NATIONAL CORPORATION AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements (unaudited)

 

1.	Significant Accounting Policies

 

The accompanying unaudited consolidated financial statements have been prepared by Ames National Corporation (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these interim financial statements be read in conjunction with the year-end audited financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report”). The consolidated balance sheet of the Company as of December 31, 2024 has been derived from the audited consolidated balance sheet of the Company as of that date. In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present the financial results for the interim periods reported. Those adjustments consist only of normal recurring adjustments. The results of operations for the interim periods are not necessarily indicative of results which may be expected for an entire year. The consolidated financial statements include the accounts of the Company and its wholly-owned banking subsidiaries (the “Banks”). All significant intercompany balances and transactions have been eliminated in consolidation.

 

Subsequent Events: The Company has evaluated subsequent events through the filing date of this Quarterly Report on Form 10-Q with the SEC.

 

Goodwill: Goodwill represents the excess of cost over the fair value of net assets acquired. Goodwill resulting from acquisitions is not amortized but is tested for impairment annually or whenever events change, and circumstances indicate that it is more likely than not that an impairment loss has occurred. Goodwill is tested for impairment with an estimation of the fair value of a reporting unit.

 

The fair value of a reporting unit is the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. As none of the Company’s reporting units are publicly traded, individual reporting unit fair value determinations cannot be directly correlated to the Company’s stock price. Significant judgment is applied when goodwill is assessed for impairment. This judgment includes developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables, incorporating general economic and market conditions and selecting an appropriate control premium. The Company completed a quantitative assessment of goodwill as of October 1, 2024 which indicated that goodwill was not impaired. Subsequently, the Company determined there were no adverse changes in criteria and key considerations to the previous assessment. Accordingly, the Company concluded there is no impairment of goodwill as of March 31, 2025.

 

New and Pending Accounting Pronouncements:

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU expands segment disclosure requirements for public entities to include disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The updated guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024, and did not have a material impact on the consolidated financial statements. See Note 14 for the new interim segment disclosures.

 

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation table and income taxes paid to be disaggregated by jurisdiction. It also includes certain amendments to improve the effectiveness of income tax disclosures. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.

 

In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this ASU require public companies to disclose, in the notes to the financial statements, specified information about certain costs and expenses at each interim and annual reporting period. Additionally, in January 2025, the FASB issued ASU No. 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This ASU amends the effective date of ASU No. 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU No. 2024-03 is permitted. The Company is currently evaluating the impact of the ASU on the Company's consolidated financial statements.

 

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2.

Dividends

 

On February 12, 2025, the Company declared a cash dividend on its common stock, payable on June 13, 2025 to stockholders of record as of May 30, 2025, equal to $0.20 per share.

 

3.	Earnings Per Share

 

Earnings per share amounts were calculated using the weighted average shares outstanding during the periods presented. The weighted average outstanding shares for the three months ended March 31, 2025 and 2024 was 8,917,386 and 8,992,167, respectively. The Company had no potentially dilutive securities outstanding during the periods presented.

 

4.	Off-Balance Sheet Arrangements

 

The Company is party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheet. No material changes in the Company’s off-balance sheet arrangements have occurred since December 31, 2024.

 

5.	Fair Value Measurements

 

Assets and liabilities carried at fair value are required to be classified and disclosed according to the process for determining fair value. There are three levels of determining fair value.

 

Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets.

 

Level 2: Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatility, prepayment speeds, credit risk); or inputs derived principally from or can be corroborated by observable market data by correlation or other means.         

 

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

 

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis.

 

Securities available-for-sale: Level 1 securities include U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets. U.S. government agencies, mortgage-backed securities, state and political subdivisions, and most corporate bonds are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.

 

Derivative financial instruments and loans receivable: The Company’s derivative financial instruments and loans receivable consist of interest rate swaps on loans accounted for as fair value hedges. The Company’s derivative financial instruments also include back-to-back loan swaps to assist customers in managing their interest rate risk while executing offsetting interest rate swaps with dealer counterparties. The Company's derivative positions and related loans are classified within Level 2 of the fair value hierarchy and are valued using models generally accepted in the financial services industry and that use actively quoted or observable market input values from external market data providers and/or non-binding broker-dealer quotations. The fair value of the derivatives and loans are determined using discounted cash flow models. These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility.

 

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The following table presents the balances of assets measured at fair value on a recurring basis by level as of  March 31, 2025 and  December 31, 2024 (in thousands):

 

Description		Total				Level 1				Level 2				Level 3
2025
Assets
Securities available-for-sale
U.S. government treasuries		$	158,963			$	158,963			$	-			$	-
U.S. government agencies			86,624				-				86,624				-
U.S. government mortgage-backed securities			89,240				-				89,240				-
State and political subdivisions			245,561				-				245,561				-
Corporate bonds			60,028				-				60,028				-
Loans receivable			7,990				-				7,990				-
Derivative financial instruments			876				-				876				-
Liabilities
Derivative financial instruments		$	351			$	-			$	351			$	-
2024
Assets
Securities available-for-sale
U.S. government treasuries		$	167,715			$	167,715			$	-			$	-
U.S. government agencies			83,433				-				83,433				-
U.S. government mortgage-backed securities			91,050				-				91,050				-
State and political subdivisions			245,562				-				245,562				-
Corporate bonds			60,753				-				60,753				-
Loans receivable			7,923				-				7,923				-
Derivative financial instruments			996				-				996				-
Liabilities
Derivative financial instruments		$	248			$	-			$	248			$	-

 

Certain assets are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment or a change in previously recognized impairment).  The following table presents the assets carried on the balance sheet (after specific reserves) by caption and by level within the valuation hierarchy as of March 31, 2025 and  December 31, 2024 (in thousands):

 

Description		Total				Level 1				Level 2				Level 3
2025
Collateral dependent loans		$	-			$	-			$	-			$	-
2024
Collateral dependent loans		$	385			$	-			$	-			$	385

 

 

As of March 31, 2025, individually analyzed collateral dependent loans with a carrying value of $1.2 million were reduced by a specific reserve of $1.2 million, resulting in no reported fair value. As of December 31, 2024, individually analyzed collateral dependent loans with a carrying value of $483 thousand were reduced by a specific reserve of $98 thousand resulting in a reporting fair value of $385 thousand.

 

 

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The significant inputs used in the fair value measurements for Level 3 assets measured at fair value on a nonrecurring basis as of March 31, 2025 and  December 31, 2024 are as follows (in thousands):

 

		2025
		Estimated			Valuation	Unobservable
		Fair Value			Techniques	Inputs		Range
Collateral dependent loans		$	-		Fair value of collateral	Valuation adjustments			0% - 20%

 

		2024
		Estimated			Valuation	Unobservable
		Fair Value			Techniques	Inputs		Range
Collateral dependent loans		$	385		Fair value of collateral	Valuation adjustments			0% - 25%

 

Evaluations of the underlying assets are completed for each collateral dependent loan with a specific reserve. The types of collateral vary widely and could include accounts receivables, inventory, a variety of equipment and real estate. Collateral evaluations are reviewed and discounted as appropriate based on knowledge of the specific type of collateral and could include cost approach, sales comparison approach, or income approach. In the case of real estate, an independent appraisal may be obtained. Types of discounts considered included aging of receivables, condition of the collateral, potential market for the collateral and estimated disposal costs. These discounts will vary from loan to loan.

 

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GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or nonrecurring basis. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following table includes the carrying amounts and estimated fair values of the Company’s financial assets and liabilities as of March 31, 2025 and  December 31, 2024 (in thousands):

 

			2025								2024
	Fair Value						Estimated								Estimated
	Hierarchy		Carrying				Fair				Carrying				Fair
	Level		Amount				Value				Amount				Value
Financial assets:
Cash and cash equivalents	Level 1		$	163,391			$	163,391			$	101,227			$	101,227
Interest-bearing time deposits	Level 1			5,166				5,034				6,166				5,938
Securities available-for-sale	See previous table			640,416				640,416				648,513				648,513
FHLB and FRB stock	Level 2			3,384				3,384				3,883				3,883
Loans receivable, net	Level 3			1,306,230				1,268,007				1,303,917				1,261,703
Loans held for sale	Level 2			540				540				342				342
Accrued income receivable	Level 1			12,240				12,240				13,864				13,864
Derivative financial instruments	Level 2			876				876				996				996
Financial liabilities:
Deposits	Level 2		$	1,906,384			$	1,906,459			$	1,846,682			$	1,848,472
Securities sold under agreements to repurchase	Level 1			45,774				45,774				52,412				52,412
Other borrowings	Level 2			35,802				35,508				46,952				46,543
Accrued interest payable	Level 1			2,555				2,555				3,208				3,208
Derivative financial instruments	Level 2			351				351				248				248

 

The methodologies used to determine fair value as of  March 31, 2025 did not change from the methodologies described in the December 31, 2024 Annual Financial Statements.

 

Commitments to extend credit and standby letters of credit: The fair values of commitments to extend credit and standby letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and credit worthiness of the counterparties. The carrying value and fair value of the commitments to extend credit and standby letters of credit are not considered significant.

 

Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

 

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6.	Debt Securities

 

The amortized cost of securities available-for-sale and their approximate fair values as of March 31, 2025 and  December 31, 2024 are summarized below (in thousands):

 

2025:						Gross				Gross
		Amortized				Unrealized				Unrealized				Estimated
		Cost				Gains				Losses				Fair Value
U.S. government treasuries		$	165,789			$	55			$	(6,881	)		$	158,963
U.S. government agencies			90,704				24				(4,104	)			86,624
U.S. government mortgage-backed securities			100,340				15				(11,115	)			89,240
State and political subdivisions			262,297				57				(16,793	)			245,561
Corporate bonds			63,810				19				(3,801	)			60,028
		$	682,940			$	170			$	(42,694	)		$	640,416

 

2024:						Gross				Gross
		Amortized				Unrealized				Unrealized				Estimated
		Cost				Gains				Losses				Fair Value
U.S. government treasuries		$	176,483			$	8			$	(8,776	)		$	167,715
U.S. government agencies			88,625				2				(5,194	)			83,433
U.S. government mortgage-backed securities			103,964				6				(12,920	)			91,050
State and political subdivisions			266,118				35				(20,591	)			245,562
Corporate bonds			65,338				7				(4,592	)			60,753
		$	700,528			$	58			$	(52,073	)		$	648,513

 

The amortized cost and fair value of debt securities available-for-sale as of March 31, 2025, are shown below by expected maturity. Expected maturity will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).

 

		Amortized				Estimated
		Cost				Fair Value
Due in one year or less		$	101,088			$	99,775
Due after one year through five years			374,921				355,282
Due after five years through ten years			98,491				88,747
Due after ten years			8,100				7,372
		$	582,600			$	551,176
U.S. government mortgage-backed securities			100,340				89,240
Total		$	682,940			$	640,416

 

The Company's investment portfolio had an expected duration of 3.0 years as of March 31, 2025.

 

Securities with a carrying value of $295.0 million and $292.8 million at March 31, 2025 and  December 31, 2024, respectively, were pledged on public deposits, securities sold under agreements to repurchase, other borrowings and for other purposes as required or permitted by law.

 

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The proceeds and losses on securities available-for-sale for the three months ended March 31, 2025 and 2024 are summarized below (in thousands):

 

		Three Months Ended
		March 31,
		2025				2024
Proceeds from sales of securities available-for-sale		$	-			$	2,049
Gross realized gains on securities available-for-sale			-				-
Gross realized losses on securities available-for-sale			-				(165	)

 

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2025 and  December 31, 2024 are summarized as follows (in thousands):

 

		Less than 12 Months												12 Months or More												Total
		Estimated				Unrealized				No. of				Estimated				Unrealized				No. of				Estimated				Unrealized
2025:		Fair Value				Losses				Securities				Fair Value				Losses				Securities				Fair Value				Losses
Securities available-for-sale:
U.S. government treasuries		$	3,903			$	(3	)			3			$	143,722			$	(6,878	)			83			$	147,625			$	(6,881	)
U.S. government agencies			5,391				(42	)			4				75,426				(4,062	)			67				80,817				(4,104	)
U.S. government mortgage-backed securities			2,659				(21	)			2				85,071				(11,094	)			152				87,730				(11,115	)
State and political subdivisions			13,742				(253	)			22				223,917				(16,540	)			441				237,659				(16,793	)
Corporate bonds			2,451				(10	)			3				55,842				(3,791	)			71				58,293				(3,801	)
		$	28,146			$	(329	)			34			$	583,978			$	(42,365	)			814			$	612,124			$	(42,694	)

 

		Less than 12 Months												12 Months or More												Total
		Estimated				Unrealized				No. of				Estimated				Unrealized				No. of				Estimated				Unrealized
2024:		Fair Value				Losses				Securities				Fair Value				Losses				Securities				Fair Value				Losses
Securities available-for-sale:
U.S. government treasuries		$	5,466			$	(43	)			2			$	159,321			$	(8,733	)			94			$	164,787			$	(8,776	)
U.S. government agencies			3,953				(34	)			2				77,166				(5,160	)			70				81,119				(5,194	)
U.S. government mortgage-backed securities			3,740				(64	)			5				86,870				(12,856	)			154				90,610				(12,920	)
State and political subdivisions			13,944				(253	)			25				226,201				(20,338	)			440				240,145				(20,591	)
Corporate bonds			3,153				(27	)			4				56,604				(4,565	)			74				59,757				(4,592	)
		$	30,256			$	(421	)			38			$	606,162			$	(51,652	)			832			$	636,418			$	(52,073	)

 

Gross unrealized losses on debt securities totaled $42.7 million as of March 31, 2025. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, state or political subdivision, or corporations. Management then determines whether downgrades by bond rating agencies have occurred, and reviews industry analysts’ reports. The Company’s procedures for evaluating investments in states, municipalities and political subdivisions include but are not limited to reviewing the offering statement and the most current available financial information, comparing yields to yields of bonds of similar credit quality, confirming capacity to repay, assessing operating and financial performance, evaluating the stability of tax revenues, considering debt profiles and local demographics, and for revenue bonds, assessing the source and strength of revenue structures for municipal authorities. These procedures, as applicable, are utilized for all municipal purchases and are utilized in whole or in part for monitoring the portfolio of municipal holdings. The Company does not utilize third party credit rating agencies as a primary component of determining if the municipal issuer has an adequate capacity to meet the financial commitments under the security for the projected life of the investment, and, therefore, does not compare internal assessments to those of the credit rating agencies. Credit rating downgrades are utilized as an additional indicator of credit weakness and as a reference point for historical default rates. As of March 31, 2025 and  December 31, 2024, the Company determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses. The Company concluded that the unrealized losses were primarily attributable to increases in market interest rates since these securities were purchased and other market conditions. Furthermore, the Company does not have the intent to sell any of these AFS debt securities and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost. Accrued interest receivable on AFS debt securities totaled $3.5 million and $2.9 million as of March 31, 2025 and  December 31, 2024, respectively, and is excluded from the estimate of credit losses.

 

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7.	Loans Receivable and Credit Disclosures

 

The composition of loans receivable as of March 31, 2025 and  December 31, 2024 is as follows (in thousands):

 

		2025				2024
Real estate - construction		$	61,738			$	59,281
Real estate - 1 to 4 family residential			310,829				309,704
Real estate - multi-family			199,609				200,209
Real estate - commercial			352,259				350,493
Real estate - agricultural			160,318				159,880
Commercial			93,374				90,023
Agricultural			129,361				134,157
Consumer and other			16,529				17,066
			1,324,017				1,320,813
Unallocated portfolio layer basis adjustments1			217				162
Less allowance for credit losses			(18,004	)			(17,058	)
Loans receivable, net		$	1,306,230			$	1,303,917

 

1 This amount represents portfolio layer method basis adjustments related to loans hedged in a closed portfolio. Under the portfolio layer method basis adjustments are not allocated to individual loans, however, the amounts impact the net loan balance. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See Note 11 (“Derivative Financial Instruments”) for additional information.

 

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost net of the allowance for credit losses (ACL) and other basis adjustments. Amortized cost is the principal balance outstanding, net of deferred loan fees and costs. Interest income is accrued on the unpaid principal balance. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. Accrued interest receivable on loans held for investment totaled $8.7 million and $10.9 million as of March 31, 2025 and December 31, 2024, respectively, and is excluded from the estimate of credit losses. Nonrefundable loan fees and origination costs are deferred and recognized as a yield adjustment over the life of the related loan.

 

The policy for charging off loans is consistent throughout all loan categories. A loan is charged off based on criteria that includes but is not limited to: delinquency status, financial condition of the entire customer credit line and underlying collateral coverage, economic or external conditions that might impact full repayment of the loan, legal issues, overdrafts, and the customer’s willingness to work with the Company.

 

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Allowance for Credit Losses for Loans. The allowance for credit losses is an estimate of expected losses inherent within the Company's existing loans held for investment portfolio. Expected credit loss inherent in non-cancelable off-balance-sheet (“OBS”) credit exposures is accounted for as a separate liability on the consolidated balance sheet. The Company's allowance for credit losses for OBS credit exposures was $911 thousand and $943 thousand as of March 31, 2025 and  December 31, 2024, respectively. The allowance for credit losses for loans held for investment, as reported in our consolidated balance sheet, is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.

 

The credit loss estimation process involves procedures to appropriately consider the unique characteristics of loan portfolio segments which consist of construction real estate, 1 to 4 family residential real estate, multi-family real estate, commercial real estate, agricultural real estate, commercial, agricultural and consumer and other lending. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. The key components in this estimation process include the following:

 

●

An initial forecast period of one year for all portfolio segments and OBS credit exposures. This period reflects management's expectation of losses based on forward-looking economic scenarios over that time.

 

●

A historical loss forecast period covering the remaining contractual life, adjusted for prepayments, by portfolio segment based on the change in key historical economic variables.

 

●

A reversion period of 1 year connecting the initial loss forecast to the historical loss forecast based on economic conditions at the measurement date.

 

The Company primarily utilizes loss rate based undiscounted cash flow (UDCF) methods to estimate credit losses by portfolio segment. The UDCF methods obtain estimated life-time credit losses using the conceptual components described above.

 

Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.

 

Credit quality is assessed and monitored by evaluating various attributes and the results of those evaluations are utilized in underwriting new loans and in our process for estimation of expected credit losses. The following provides the credit quality indicators and risk elements that are most relevant and most carefully considered and monitored for each loan portfolio segment.

 

Construction loans are underwritten utilizing independent appraisals, sensitivity analysis of absorption, vacancy and lease rates and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. These estimates   may prove to be inaccurate primarily due to unforeseen circumstances beyond the control of the borrower or lender. Construction loans often involve the disbursement of funds with repayment substantially dependent on the success of the ultimate project. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. The Company  may require guarantees on these loans. The Company’s construction loans are secured primarily by properties located in its primary market area. National unemployment rate and national real gross domestic product (GDP) are key economic forecasts used in estimating expected credit losses for this segment.

 

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The Company originates 1-4 family real estate loans utilizing credit reports to supplement the underwriting process. The Company’s underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines. Properties securing 1-4 family real estate loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function and have been approved by the Board of Directors. The loan-to-value ratios normally do not exceed 90% without credit enhancements such as mortgage insurance. The Company will lend up to 100% of the lesser of the appraised value or purchase price for conventional 1-4 family real estate loans, provided private mortgage insurance is obtained. The Company’s 1-4 family real estate loans are secured primarily by properties located in its primary market area. The national unemployment rate is a key economic forecast used in estimating expected credit losses for this segment.

 

Multi-family, commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans, in addition to those unique to real estate loans. These loans are viewed primarily as cash flow loans and, secondarily, as loans secured by real estate. Multi-family, commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Loan-to-value generally does not exceed 80% of the cost or value of the assets. Loans are typically subject to interest rate adjustments between five and seven years from origination. Fully amortized monthly repayment terms normally do not exceed twenty-five years. Projections and cash flows that show ability to service debt within the amortization period are required. Property and casualty insurance is required to protect the Banks’ collateral interests. Appraisals on properties securing these loans are generally performed by fee appraisers approved by the Board of Directors. Because payments on multi-family, commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties, repayment of such loans   may be subject to adverse conditions in the real estate market or the economy. Management monitors and evaluates commercial and agricultural real estate loans based on collateral and risk rating criteria. The Company   may require guarantees on these loans. The Company’s multi-family, commercial and agricultural real estate loans are secured primarily by properties located in its primary market areas. The national unemployment rate is a key economic forecast used in estimate credit losses for the multi-family and commercial real estate segments. The national unemployment rate and national real GDP are key economic forecasts used in estimating expected credit losses for the agricultural real estate segment.

 

Commercial and agricultural operating loans are underwritten based on the Company’s examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. This underwriting includes the evaluation of cash flows of the borrower, underlying collateral, if applicable, and the borrower’s ability to manage its business activities. The cash flows of borrowers and the collateral securing these loans   may fluctuate in value after the initial evaluation. A first priority lien on the general assets of the business normally secures these types of loans. Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower. Crop and hail insurance is required for most agricultural borrowers. Loans are generally guaranteed by the principal(s). The Company’s commercial and agricultural operating lending is primarily in its primary market area. The national unemployment rate is a key economic forecast used in estimating expected credit losses for the commercial operating segment. The national unemployment rate and national real GDP are key economic forecasts used in estimating expected credit losses for the agricultural operating segment.

 

Consumer and other loans utilize credit reports to supplement the underwriting process. The underwriting standards include a determination of the applicant’s payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan. To monitor and manage loan risk, policies and procedures are developed and modified, as needed by management. This activity, coupled with smaller loan amounts that are spread across many individual borrowers, minimizes risk. Additionally, market conditions are reviewed by management on a regular basis. The national unemployment rate is a key economic forecast used in estimating expected credit losses for this segment.

 

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Activity in the allowance for credit losses, on a disaggregated basis, for the three months ended March 31, 2025 and 2024 is as follows (in thousands):

 

		Three Months Ended March 31, 2025
						1-4 Family
		Construction				Residential				Multi-family				Commercial				Agricultural												Consumer
		Real Estate				Real Estate				Real Estate				Real Estate				Real Estate				Commercial				Agricultural				and Other				Total
Balance, December 31, 2024		$	482			$	3,890			$	2,188			$	4,932			$	1,584			$	1,759			$	1,805			$	418			$	17,058
Credit loss expense (benefit) 1			65				(40	)			(36	)			8				5				1,131				(131	)			(8	)			994
Recoveries of loans charged-off			-				-				-				-				-				1				-				1				2
Loans charged-off			(44	)			-				-				-				-				(5	)			-				(1	)			(50	)
Balance, March 31, 2025		$	503			$	3,850			$	2,152			$	4,940			$	1,589			$	2,886			$	1,674			$	410			$	18,004

 

(1)	The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss benefit of $32 thousand related to off-balance sheet credit exposures.

 

		Three Months Ended March 31, 2024
						1-4 Family
		Construction				Residential				Multi-family				Commercial				Agricultural												Consumer
		Real Estate				Real Estate				Real Estate				Real Estate				Real Estate				Commercial				Agricultural				and Other				Total
Balance, December 31, 2023		$	408			$	3,333			$	2,542			$	5,236			$	1,238			$	1,955			$	1,607			$	457			$	16,776
Credit loss expense (benefit) 1			45				(25	)			(5	)			258				(17	)			(43	)			(19	)			(22	)			172
Recoveries of loans charged-off			-				1				-				-				-				1				-				2				4
Loans charged-off			-				-				-				-				-				-				-				-				-
Balance, March 31, 2024		$	453			$	3,309			$	2,537			$	5,494			$	1,221			$	1,913			$	1,588			$	437			$	16,952

 

(1)	The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss benefit of $3 thousand related to off-balance sheet credit exposures.

 

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Collateral Dependent Loans. The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans (in thousands):

 

		Primary Type of Collateral
March 31, 2025		Real Estate				Equipment				Other				Total				ACL Allocation
Real estate - construction		$	-			$	-			$	-			$	-			$	-
Real estate - 1 to 4 family residential			554				-				-				554				-
Real estate - multi-family			942				-				-				942				-
Real estate - commercial			11,406				-				-				11,406				-
Real estate - agricultural			415				-				-				415				-
Commercial			398				392				1,614				2,404				1,150
Agricultural			205				-				317				522				-
Consumer and other			-				-				2				2				-
		$	13,920			$	392			$	1,933			$	16,245			$	1,150

 

		Primary Type of Collateral
December 31, 2024		Real Estate				Equipment				Other				Total				ACL Allocation
Real estate - construction		$	62			$	-			$	-			$	62			$	-
Real estate - 1 to 4 family residential			696				-				-				696				40
Real estate - multi-family			947				-				-				947				-
Real estate - commercial			10,785				-				-				10,785				-
Real estate - agricultural			420				-				-				420				-
Commercial			460				398				405				1,263				50
Agricultural			213				-				357				570				-
Consumer and other			-				-				3				3				-
		$	13,583			$	398			$	765			$	14,746			$	90

 

Nonaccrual Loans. The accrual of interest income on loans is discontinued when, in the opinion of management, there is reasonable doubt as to the borrower's ability to meet payments of interest or principal when they become due, which is generally when a loan is 90 days or more past due unless the loan is well secured and in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed against interest income. Loans are returned to an accrual status when all of the principal and interest amounts contractually due are brought current and repayment of the remaining contractual principal and interest is expected. A loan may also return to accrual status if additional collateral is received from the borrower and, in the opinion of management, the financial position of the borrower indicates that there is no longer any reasonable doubt as to the collection of the amount contractually due. Payment received on nonaccrual loans are applied first to principal. Once principal is recovered, any remaining payments received are applied to interest income.

 

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The following table presents the amortized cost basis of loans on nonaccrual status and loans on nonaccrual status with no allowance for credit losses recorded by loan segment (in thousands):

 

		Total Nonaccrual								Nonaccrual with no ACL
		March 31, 2025				December 31, 2024				March 31, 2025				December 31, 2024
Real estate - construction		$	-			$	62			$	-			$	62
Real estate - 1 to 4 family residential			554				696				554				626
Real estate - multi-family			942				947				942				947
Real estate - commercial			11,389				10,768				11,389				10,768
Real estate - agricultural			415				420				415				420
Commercial			2,438				1,298				1,288				893
Agricultural			522				570				522				570
Consumer and other			9				11				2				3
		$	16,269			$	14,772			$	15,112			$	14,289

 

The interest income recognized on nonaccrual loans for the three months ended  March 31, 2025 and 2024 was approximately $1 thousand and $38 thousand, respectively.

 

The interest foregone on nonaccrual loans for the three months ended  March 31, 2025 and 2024 was approximately $327 thousand and $239 thousand, respectively.

 

Loan Modifications to Borrowers Experiencing Financial Difficulty. Loan modifications may include interest rate reductions or below market interest rates, extension of payments terms beyond the original maturity date, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

 

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a loss rate model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification.

 

The Company made no loan modifications to borrowers experiencing financial difficulty for the three months ended March 31, 2025 and 2024.

 

Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The Company had no net charge-offs for the three months ended  March 31, 2025 and 2024 related to loan modifications to borrowers experiencing financial difficulties.

 

There were no loan modifications that had a payment default and were modified in the twelve months before default as of March 31, 2025. A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms.

 

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Aging Analysis. An aging analysis of the recorded investments in loans, on a disaggregated basis, as of March 31, 2025 and  December 31, 2024, is as follows (in thousands):

 

2025						90 Days																90 Days
		30-89				or Greater				Total												or Greater
		Past Due				Past Due				Past Due				Current				Total				Accruing
Real estate - construction		$	374			$	-			$	374			$	61,364			$	61,738			$	-
Real estate - 1 to 4 family residential			4,015				118				4,133				306,696				310,829				-
Real estate - multi-family			444				-				444				199,165				199,609				-
Real estate - commercial			374				2,614				2,988				349,271				352,259				113
Real estate - agricultural			122				133				255				160,063				160,318				133
Commercial			1,291				-				1,291				92,083				93,374				-
Agricultural			2,333				-				2,333				127,028				129,361				-
Consumer and other			2				-				2				16,527				16,529				-
		$	8,955			$	2,865			$	11,820			$	1,312,197			$	1,324,017			$	246

 

2024						90 Days																90 Days
		30-89				or Greater				Total												or Greater
		Past Due				Past Due				Past Due				Current				Total				Accruing
Real estate - construction		$	-			$	63			$	63			$	59,218			$	59,281			$	-
Real estate - 1 to 4 family residential			1,744				204				1,948				307,756				309,704				23
Real estate - multi-family			-				-				-				200,209				200,209				-
Real estate - commercial			332				2,501				2,833				347,660				350,493				-
Real estate - agricultural			651				660				1,311				158,569				159,880				660
Commercial			288				356				644				89,379				90,023				-
Agricultural			68				53				121				134,036				134,157				53
Consumer and other			5				-				5				17,061				17,066				-
		$	3,088			$	3,837			$	6,925			$	1,313,888			$	1,320,813			$	736

 

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Credit Quality Indicators. As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk ratings of loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) non-performing loans and (v) the general economic conditions in our market areas.

 

The Company utilizes a risk rating matrix to assign risk ratings to each of its loans. Loans are rated on a scale of 1 to 7. A description of the general characteristics of the risk ratings is as follows:

 

Ratings 1, 2 and 3 - These ratings include “Pass” loans of average to excellent credit quality borrowers. These borrowers generally have significant capital strength, moderate leverage and stable earnings and growth commensurate to their relative risk rating. These ratings are reviewed at least annually. These ratings also include performing loans of less than $100,000.

 

Rating 4 - This rating includes loans on management’s “watch list” and is intended to be utilized for pass rated borrowers where credit quality has begun to show signs of financial weakness that now requires management’s heightened attention. This rating is reviewed at least quarterly.

 

Rating 5 - This rating is for “Special Mention” loans in accordance with regulatory guidelines. This rating is intended to be temporary and includes loans to borrowers whose credit quality has clearly deteriorated and are at risk of further decline unless active measures are taken to correct the situation. This rating is reviewed at least quarterly.

 

Rating 6 - This rating includes “Substandard” loans in accordance with regulatory guidelines, for which the accrual of interest has not been stopped. Under regulatory guideline definitions, a “Substandard” loan has defined weaknesses which make payment default or principal exposure likely, but not yet certain. Such loans are apt to be dependent upon collateral liquidation, a secondary source of repayment or an event outside of the normal course of business. This rating is reviewed at least quarterly.

 

Rating 7 - This rating includes “Substandard-Impaired” loans in accordance with regulatory guidelines, for which the accrual of interest has generally been stopped. This rating includes loans: (i) where interest is more than 90 days past due, (ii) not fully secured, (iii) where a specific valuation allowance may be necessary, or (iv) where the borrower is unable to make contractual principal and interest payments. This rating is reviewed at least quarterly.

 

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The following tables show the risk category of loans by loan segment and year of origination as of March 31, 2025 and  December 31, 2024 (in thousands):

 

March 31, 2025		Amortized Cost Basis of Term Loans by Year of Origination
		2025				2024				2023				2022				2021				Prior				Revolving				Total
Real estate - construction
Pass		$	10,634			$	31,968			$	14,606			$	1,413			$	223			$	171			$	2,119			$	61,134
Watch			-				604				-				-				-				-				-				604
Special Mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Substandard-Impaired			-				-				-				-				-				-				-				-
Total		$	10,634			$	32,572			$	14,606			$	1,413			$	223			$	171			$	2,119			$	61,738
Current-period gross charge-offs		$	-			$	44			$	-			$	-			$	-			$	-			$	-			$	44
Real estate - 1-4 family residential
Pass		$	13,220			$	44,400			$	42,801			$	65,748			$	51,040			$	56,123			$	20,881			$	294,213
Watch			285				1,046				1,109				89				9,549				1,157				81				13,316
Special Mention			286				-				-				640				-				-				-				926
Substandard			-				66				424				-				1,239				90				-				1,819
Substandard-Impaired			382				118				-				-				-				55				-				555
Total		$	14,173			$	45,630			$	44,334			$	66,477			$	61,828			$	57,425			$	20,962			$	310,829
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Real estate - multi-family
Pass		$	4,547			$	13,473			$	11,766			$	48,650			$	31,420			$	45,416			$	5,952			$	161,224
Watch			-				6,473				-				-				19,804				2,174				-				28,451
Special Mention			-				-				8,547				-				-				-				-				8,547
Substandard			-				-				-				-				-				444				-				444
Substandard-Impaired			943				-				-				-				-				-				-				943
Total		$	5,490			$	19,946			$	20,313			$	48,650			$	51,224			$	48,034			$	5,952			$	199,609
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Real estate - commercial
Pass		$	19,304			$	37,814			$	29,279			$	62,436			$	47,982			$	75,265			$	4,154			$	276,234
Watch			574				4,956				3,718				19,079				5,524				4,079				101				38,031
Special Mention			1,881				-				-				-				-				905				-				2,786
Substandard			6,910				-				-				-				15,834				1,000				75				23,819
Substandard-Impaired			504				821				7,562				2,502				-				-				-				11,389
Total		$	29,173			$	43,591			$	40,559			$	84,017			$	69,340			$	81,249			$	4,330			$	352,259
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Real estate - agricultural
Pass		$	8,502			$	18,002			$	16,645			$	26,397			$	27,643			$	41,668			$	2,647			$	141,504
Watch			4,816				2,184				1,036				1,038				1,499				5,131				-				15,704
Special Mention			-				-				-				-				-				-				-				-
Substandard			450				-				1,339				101				85				995				-				2,970
Substandard-Impaired			-				-				-				-				140				-				-				140
Total		$	13,768			$	20,186			$	19,020			$	27,536			$	29,367			$	47,794			$	2,647			$	160,318
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-

 

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March 31, 2025		Amortized Cost Basis of Term Loans by Year of Origination
		2025				2024				2023				2022				2021				Prior				Revolving				Total
Commercial
Pass		$	3,455			$	12,785			$	9,463			$	9,418			$	6,201			$	4,384			$	33,258			$	78,964
Watch			106				869				6,973				548				448				244				2,724				11,912
Special Mention			40				-				-				-				-				-				-				40
Substandard			-				-				-				21				-				-				-				21
Substandard-Impaired			391				1,485				34				-				-				63				464				2,437
Total		$	3,992			$	15,139			$	16,470			$	9,987			$	6,649			$	4,691			$	36,446			$	93,374
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	5			$	-			$	5
Agricultural
Pass		$	12,635			$	9,935			$	4,299			$	4,472			$	2,973			$	1,739			$	70,043			$	106,096
Watch			6,163				464				514				275				243				204				11,829				19,692
Special Mention			-				-				-				-				-				-				-				-
Substandard			314				1,395				136				78				43				360				990				3,316
Substandard-Impaired			-				-				50				-				207				-				-				257
Total		$	19,112			$	11,794			$	4,999			$	4,825			$	3,466			$	2,303			$	82,862			$	129,361
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Consumer and other
Pass		$	1,550			$	4,546			$	4,127			$	2,203			$	1,826			$	2,240			$	9			$	16,501
Watch			-				13				-				-				-				-				-				13
Special Mention			-				-				-				-				-				-				-				-
Substandard			-				-				4				-				-				-				-				4
Substandard-Impaired			-				1				1				2				-				7				-				11
Total		$	1,550			$	4,560			$	4,132			$	2,205			$	1,826			$	2,247			$	9			$	16,529
Current-period gross charge-offs		$	-			$	1			$	-			$	-			$	-			$	-			$	-			$	1
Total loans
Pass		$	73,847			$	172,923			$	132,986			$	220,737			$	169,308			$	227,006			$	139,063			$	1,135,870
Watch			11,944				16,609				13,350				21,029				37,067				12,989				14,735				127,723
Special Mention			2,207				-				8,547				640				-				905				-				12,299
Substandard			7,674				1,461				1,903				200				17,201				2,889				1,065				32,393
Substandard-Impaired			2,220				2,425				7,647				2,504				347				125				464				15,732
Total		$	97,892			$	193,418			$	164,433			$	245,110			$	223,923			$	243,914			$	155,327			$	1,324,017
Current-period gross charge-offs		$	-			$	45			$	-			$	-			$	-			$	5			$	-			$	50

 

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December 31, 2024		Amortized Cost Basis of Term Loans by Year of Origination
		2024				2023				2022				2021				2020				Prior				Revolving				Total
Real estate - construction
Pass		$	37,743			$	16,689			$	1,640			$	228			$	11			$	161			$	1,991			$	58,463
Watch			756				-				-				-				-				-				-				756
Special Mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Substandard-Impaired			62				-				-				-				-				-				-				62
Total		$	38,561			$	16,689			$	1,640			$	228			$	11			$	161			$	1,991			$	59,281
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Real estate - 1-4 family residential
Pass		$	46,850			$	44,736			$	66,864			$	52,746			$	41,574			$	18,767			$	21,325			$	292,862
Watch			1,233				1,212				91				9,535				1,003				303				95				13,472
Special Mention			-				-				639				-				289				-				-				928
Substandard			-				424				-				1,230				-				90				-				1,744
Substandard-Impaired			568				-				-				70				-				60				-				698
Total		$	48,651			$	46,372			$	67,594			$	63,581			$	42,866			$	19,220			$	21,420			$	309,704
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Real estate - multi-family
Pass		$	15,316			$	20,441			$	49,932			$	31,822			$	36,556			$	10,771			$	5,735			$	170,573
Watch			6,517				-				-				19,971				-				-				-				26,488
Special Mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				2,200				-				-				2,200
Substandard-Impaired			948				-				-				-				-				-				-				948
Total		$	22,781			$	20,441			$	49,932			$	51,793			$	38,756			$	10,771			$	5,735			$	200,209
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Real estate - commercial
Pass		$	37,014			$	30,228			$	71,779			$	51,164			$	53,722			$	26,685			$	3,995			$	274,587
Watch			4,749				5,429				14,982				5,484				6,005				548				241				37,438
Special Mention			-				-				-				-				2,893				-				-				2,893
Substandard			828				2,637				-				15,978				4,355				1,009				-				24,807
Substandard-Impaired			513				7,753				2,502				-				-				-				-				10,768
Total		$	43,104			$	46,047			$	89,263			$	72,626			$	66,975			$	28,242			$	4,236			$	350,493
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Real estate - agricultural
Pass		$	20,951			$	17,331			$	28,074			$	29,180			$	21,796			$	22,366			$	2,562			$	142,260
Watch			1,994				5,259				373				1,541				2,813				3,477				-				15,457
Special Mention			-				-				-				-				-				-				-				-
Substandard			-				1,275				-				746				-				-				-				2,021
Substandard-Impaired			-				-				-				142				-				-				-				142
Total		$	22,945			$	23,865			$	28,447			$	31,609			$	24,609			$	25,843			$	2,562			$	159,880
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-

 

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December 31, 2024		Amortized Cost Basis of Term Loans by Year of Origination
		2024				2023				2022				2021				2020				Prior				Revolving				Total
Commercial
Pass		$	14,729			$	10,589			$	10,677			$	7,405			$	1,475			$	3,298			$	28,192			$	76,365
Watch			726				6,926				215				-				244				136				2,138				10,385
Special Mention			-				-				-				-				-				-				-				-
Substandard			1,150				-				24				-				-				-				800				1,974
Substandard-Impaired			782				45				-				1				-				65				406				1,299
Total		$	17,387			$	17,560			$	10,916			$	7,406			$	1,719			$	3,499			$	31,536			$	90,023
Current-period gross charge-offs		$	465			$	-			$	-			$	-			$	-			$	9			$	-			$	474
Agricultural
Pass		$	14,463			$	5,547			$	5,057			$	3,499			$	1,429			$	503			$	85,222			$	115,720
Watch			1,822				563				356				261				8				186				12,249				15,445
Special Mention			-				-				-				-				-				-				-				-
Substandard			1,159				-				-				72				380				-				1,113				2,724
Substandard-Impaired			-				54				-				214				-				-				-				268
Total		$	17,444			$	6,164			$	5,413			$	4,046			$	1,817			$	689			$	98,584			$	134,157
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Consumer and other
Pass		$	5,845			$	4,451			$	2,435			$	1,931			$	1,608			$	758			$	11			$	17,039
Watch			15				-				-				-				-				-				-				15
Special Mention			-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-
Substandard-Impaired			1				-				3				-				8				-				-				12
Total		$	5,861			$	4,451			$	2,438			$	1,931			$	1,616			$	758			$	11			$	17,066
Current-period gross charge-offs		$	9			$	-			$	-			$	-			$	-			$	-			$	-			$	9
Total loans
Pass		$	192,911			$	150,012			$	236,458			$	177,975			$	158,171			$	83,309			$	149,033			$	1,147,869
Watch			17,812				19,389				16,017				36,792				10,073				4,650				14,723				119,456
Special Mention			-				-				639				-				3,182				-				-				3,821
Substandard			3,137				4,336				24				18,026				6,935				1,099				1,913				35,470
Substandard-Impaired			2,874				7,852				2,505				427				8				125				406				14,197
Total		$	216,734			$	181,589			$	255,643			$	233,220			$	178,369			$	89,183			$	166,075			$	1,320,813
Current-period gross charge-offs		$	474			$	-			$	-			$	-			$	-			$	9			$	-			$	483

 

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8.	Intangible assets

 

The following sets forth the carrying amounts and accumulated amortization of the intangible assets at March 31, 2025 and  December 31, 2024 (in thousands):

 

		2025								2024
		Gross				Accumulated				Gross				Accumulated
		Amount				Amortization				Amount				Amortization
Core deposit intangible asset		$	6,411			$	5,396			$	6,411			$	5,319

 

The weighted average remaining life of the intangible assets is approximately 2 years as of March 31, 2025 and  December 31, 2024.

 

The following sets forth the activity related to the intangible assets for the three months ended March 31, 2025 and 2024 (in thousands):

 

		Three Months Ended
		March 31,
		2025				2024
Beginning intangible assets, net		$	1,092			$	1,429
Amortization			(77	)			(87	)
Ending intangible assets, net		$	1,015			$	1,342

 

Estimated remaining amortization expense on intangible assets for the years ending December 31 is as follows (in thousands):

 

2025		$	223
2026			269
2027			240
2028			190
2029			93
Total		$	1,015

 

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9.	Pledged Collateral Related to Securities Sold Under Repurchase Agreements

 

The repurchase agreements mature daily and the following sets forth the pledged collateral at estimated fair value related to securities sold under repurchase agreements as of March 31, 2025 and  December 31, 2024 (in thousands):

 

		2025				2024
Securities sold under agreements to repurchase:
U.S. government treasuries		$	20,641			$	20,396
U.S. government agencies			44,139				43,852
U.S. government mortgage-backed securities			6,982				7,188
Total pledged collateral		$	71,762			$	71,436

 

In the event the repurchase agreements exceed the estimated fair value of the pledged securities available-for-sale, the Company has unpledged securities available-for-sale that may be pledged on the repurchase agreements.

 

10.	Borrowings

 

On April 25, 2024, the Company entered into a promissory note and line of credit agreement with an unaffiliated bank, providing for a two-year five million dollar line of credit facility.  The Company has secured its obligations under the Credit Agreement by pledging to the Lender all outstanding shares of common stock of its subsidiary bank, Reliance State Bank. The Company had $1 million of outstanding borrowings on the line of credit as of March 31, 2025 and December 31, 2024. The Company did not comply with one covenant requiring the modified Texas Ratio not exceed 20% at the end of each calendar quarter. The modified Texas Ratio is defined as substandard, substandard-impaired loans and other real estate owned, divided by the sum of Tier 1 capital plus the Allowance for Credit Losses – Loans. The modified Texas Ratio was 21.8% and 22.7% as of March 31, 2025 and December 31, 2024, respectively. The lender waived the noncompliance as of March 31, 2025 and December 31, 2024.

 

FHLB advances are collateralized by FHLB stock, certain 1-4 family residential real estate loans, multifamily real estate loans, commercial real estate loans and agricultural real estate loans. The Banks had available borrowing capacity with the FHLB of Des Moines, Iowa of $242.5 million and $245.3 million at  March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025, the Company had $32.5 million of FHLB advances with a weighted average interest rate of 4.31%. As of December 31, 2024, the Company had $43.5 million of FHLB advances with a weighted average interest rate of 4.42%.

 

On June 6, 2022, the Company borrowed $4.0 million on a credit agreement with a commercial bank. The borrowings were used for general corporate purposes. Interest under the note is payable quarterly over four years. Required quarterly principal payments of $150 thousand began in September 2022, with the remaining balance due June 2026. The interest rate is fixed at 3.35% and the outstanding balance was $2.35 million and $2.5 million as of  March 31, 2025 and December 31, 2024, respectively. The note is secured by property in West Des Moines, Iowa.

 

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11.	Derivative Financial Instruments

 

Fair Value Hedges

The Company uses interest rate swaps to convert certain long term fixed rate loans to floating rates to hedge interest rate risk exposure. The Company uses hedge accounting in accordance with ASC 815, with the unrealized gains and losses, representing the change in fair value of the derivative and the change in fair value of the risk being hedged on the related loan, being recorded in the consolidated statements of income. The ineffective portions of the unrealized gains or losses, if any, are recorded in interest income and interest expense in the consolidated statements of income.

 

During 2023, the Company executed an interest rate swap designated as a fair value hedge with an original notional amount of $25.0 million to convert certain long-term fixed rate 1-4 family loans to floating rates to hedge interest rate risk exposure using the portfolio layer method.

 

The portfolio layer method allows the Company to designate as the hedged item a stated amount of the assets that are not expected to be affected by prepayments, defaults and other factors that would affect the timing and amount of cash flow. The fair value portfolio level basis adjustment on the hedged loans has not been attributed to the individual loans on the consolidated balance sheet.

 

The table below identifies the notional amount, fair value and balance sheet category of the Company's interest rate swaps at March 31, 2025, and  December 31, 2024 (in thousands):

 

		Notional Amount				Fair Value			Balance Sheet Category
March 31, 2025
Interest rate swaps		$	8,427			$	741		Other assets
Interest rate swaps			25,000				(216	)	Other liabilities
December 31, 2024
Interest rate swaps		$	8,531			$	909		Other assets
Interest rate swaps			25,000				(161	)	Other liabilities

 

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The table below identifies the carrying amount of the hedged assets and cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets that are designated as a fair value hedge accounting relationship at March 31, 2025, and  December 31, 2024 (in thousands):

 

							Cumulative Amount of Fair Value
	Location in the consolidated		Carrying Amount of				Hedging Adjustment Included in
	balance sheet		the Hedged Assets				Carrying Amount of Hedged Assets
March 31, 2025
Interest rate swaps	Loans receivable, net		$	51,378			$	(524	)
December 31, 2024
Interest rate swaps	Loans receivable, net		$	52,567			$	(748	)

 

Back-to-Back Loan Swaps

The Company has interest rate swap loan relationships with customers to assist them in managing their interest rate risk. Upon entering into these loan swaps, the Company enters into offsetting positions with counterparties in order to minimize interest rate risk. These back-to-back loan swaps qualify as free standing financial derivatives with the fair values reported in other assets and other liabilities on the consolidated balance sheets. Any gains and losses on these back-to-back swaps are recorded in noninterest income on the consolidated statements of income, and for the three months ended March 31, 2025, and March 31, 2024, no gain or loss was recognized. The table below identifies the balance sheet category and fair values of the derivative instruments designated as loan swaps at March 31, 2025, and  December 31, 2024 (in thousands):

 

											Weighted Average				Weighted Average
		Notional Amount				Fair Value			Balance Sheet Category		Receive Rate				Pay Rate
March 31, 2025
Customer interest rate swaps		$	13,133			$	135		Other assets			6.32	%			5.85	%
Customer interest rate swaps			13,133				(135	)	Other liabilities			5.85	%			6.32	%
December 31, 2024
Customer interest rate swaps		$	12,258			$	87		Other assets			6.48	%			5.81	%
Customer interest rate swaps			12,258				(87	)	Other liabilities			5.81	%			6.48	%

 

The Company was required to pledge $1.2 million and $1.3 million of securities as collateral for these derivative financial instruments at March 31, 2025, and December 31, 2024, respectively. The Company's counterparties were not required to pledge collateral at March 31, 2025 and  December 31, 2024.

 

12.	Income Taxes

 

The tax effects of temporary differences related to income taxes are included in deferred income taxes. The change in deferred income taxes since  December 31, 2024 is due primarily to the decrease in unrealized losses on investment securities.

 

13.	Regulatory Matters

 

The Company and the Banks are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements (as shown in the following table) can result in certain mandatory and possibly additional discretionary actions by regulators, which, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Banks must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's and the Banks' capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believed the Company and the Banks met all capital adequacy requirements to which they were subject as of March 31, 2025.

 

 

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The Company and the Banks’ capital amounts and ratios as of March 31, 2025 and  December 31, 2024 are as follows (dollars in thousands):

 

																		To Be Well
																		Capitalized Under
										For Capital								Prompt Corrective
		Actual								Adequacy Purposes								Action Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
As of March 31, 2025
Total capital (to risk-weighted assets):
Consolidated		$	221,903				14.5	%		$	161,009				10.50	%			N/A				N/A
Boone Bank & Trust			16,449				13.0				13,239				10.50				12,609				10.0	%
First National Bank			113,232				14.7				80,994				10.50				77,137				10.0
Iowa State Savings Bank			27,517				15.9				18,179				10.50				17,313				10.0
Reliance State Bank			29,318				12.4				24,814				10.50				23,633				10.0
State Bank & Trust			22,594				15.8				14,991				10.50				14,277				10.0
United Bank & Trust			13,172				16.1				8,597				10.50				8,187				10.0
Tier 1 capital (to risk-weighted assets):
Consolidated		$	202,987				13.2	%		$	130,340				8.50	%			N/A				N/A
Boone Bank & Trust			15,399				12.2				10,717				8.50				10,087				8.0	%
First National Bank			103,584				13.4				65,567				8.50				61,710				8.0
Iowa State Savings Bank			25,353				14.6				14,716				8.50				13,850				8.0
Reliance State Bank			26,464				11.2				20,088				8.50				18,906				8.0
State Bank & Trust			20,911				14.6				12,135				8.50				11,421				8.0
United Bank & Trust			12,149				14.8				6,959				8.50				6,550				8.0
Tier 1 capital (to average-assets):
Consolidated		$	202,987				9.4	%		$	86,629				4.00	%			N/A				N/A
Boone Bank & Trust			15,399				9.2				6,717				4.00				8,396				5.0	%
First National Bank			103,584				9.4				44,270				4.00				55,338				5.0
Iowa State Savings Bank			25,353				9.1				11,146				4.00				13,933				5.0
Reliance State Bank			26,464				8.8				12,036				4.00				15,045				5.0
State Bank & Trust			20,911				10.1				8,290				4.00				10,362				5.0
United Bank & Trust			12,149				9.6				5,074				4.00				6,343				5.0
Common equity tier 1 capital (to risk-weighted assets):
Consolidated		$	202,987				13.2	%		$	107,339				7.00	%			N/A				N/A
Boone Bank & Trust			15,399				12.2				8,826				7.00				8,196				6.5	%
First National Bank			103,584				13.4				53,996				7.00				50,139				6.5
Iowa State Savings Bank			25,353				14.6				12,119				7.00				11,253				6.5
Reliance State Bank			26,464				11.2				16,543				7.00				15,361				6.5
State Bank & Trust			20,911				14.6				9,994				7.00				9,280				6.5
United Bank & Trust			12,149				14.8				5,731				7.00				5,322				6.5

 

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																		To Be Well
																		Capitalized Under
										For Capital								Prompt Corrective
		Actual								Adequacy Purposes								Action Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
As of December 31, 2024
Total capital (to risk-weighted assets):
Consolidated		$	219,750				14.3	%		$	161,155				10.50	%			N/A				N/A
Boone Bank & Trust			16,446				13.5				12,809				10.50				12,199				10.0	%
First National Bank			112,663				14.6				81,211				10.50				77,344				10.0
Iowa State Savings Bank			27,161				15.1				18,866				10.50				17,967				10.0
Reliance State Bank			29,222				12.2				25,232				10.50				24,030				10.0
State Bank & Trust			22,435				16.0				14,719				10.50				14,018				10.0
United Bank & Trust			13,205				16.4				8,479				10.50				8,075				10.0
Tier 1 capital (to risk-weighted assets):
Consolidated		$	201,749				13.1	%		$	130,459				8.50	%			N/A				N/A
Boone Bank & Trust			15,404				12.6				10,369				8.50				9,759				8.0	%
First National Bank			103,707				13.4				65,742				8.50				61,875				8.0
Iowa State Savings Bank			24,915				13.9				15,272				8.50				14,374				8.0
Reliance State Bank			26,237				10.9				20,426				8.50				19,224				8.0
State Bank & Trust			20,734				14.8				11,915				8.50				11,214				8.0
United Bank & Trust			12,198				15.1				6,864				8.50				6,460				8.0
Tier 1 capital (to average-assets):
Consolidated		$	201,749				9.2	%		$	87,421				4.00	%			N/A				N/A
Boone Bank & Trust			15,404				9.1				6,743				4.00				8,429				5.0	%
First National Bank			103,707				9.3				44,595				4.00				55,744				5.0
Iowa State Savings Bank			24,915				9.5				10,541				4.00				13,176				5.0
Reliance State Bank			26,237				8.6				12,160				4.00				15,200				5.0
State Bank & Trust			20,734				10.2				8,096				4.00				10,120				5.0
United Bank & Trust			12,198				9.6				5,084				4.00				6,356				5.0
Common equity tier 1 capital (to risk-weighted assets):
Consolidated		$	201,749				13.1	%		$	107,436				7.00	%			N/A				N/A
Boone Bank & Trust			15,404				12.6				8,540				7.00				7,930				6.5	%
First National Bank			103,707				13.4				54,141				7.00				50,274				6.5
Iowa State Savings Bank			24,915				13.9				12,577				7.00				11,679				6.5
Reliance State Bank			26,237				10.9				16,821				7.00				15,620				6.5
State Bank & Trust			20,734				14.8				9,812				7.00				9,112				6.5
United Bank & Trust			12,198				15.1				5,653				7.00				5,249				6.5

 

The Company and the Banks are subject to the rules of the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules included the implementation of a 2.5 percent capital conservation buffer that is added to the minimum requirements for capital adequacy purposes for all capital ratios except tier 1 capital to average assets. A banking organization with a capital conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers. At March 31, 2025, the capital ratios for the Company and the Banks were sufficient to meet the conservation buffer.

 

 

 

14.	Segment Information

 

The Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures on January 1, 2024. The Company has determined that its bank operating model is structured whereby all banking locations serve a similar base of customers utilizing a company-wide offering of similar products and services managed through similar processes and technology platforms that are collectively reviewed by the Company’s Chief Executive Officer, who has been designated as the chief operating decision maker (“CODM”). The CODM regularly assesses performance of the aggregated single banking segment in determining how to allocate resources.

 

The banking segment generates revenues through personal, business, agricultural and commercial lending, management of the investment securities portfolio, deposit account services and wealth management services.

 

Accounting policies for the banking segment are the same as those described in Note 1, Nature of Business and Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. The CODM assesses performance of the banking segment and decides how to allocate resources based on net income as reported in the Company’s consolidated statements of income. All categories of interest expense, credit loss expense, and noninterest expense as disclosed in the Company’s consolidated statements of income are considered significant to the banking segment. For the three months ended March 31, 2025 and 2024, respectively, there were no adjustments or reconciling items between the banking segment net income and consolidated net income as presented in the consolidated statements of income.

 

The measure of segment assets is based on total assets as reported on the consolidated balance sheets. For the three months ended March 31, 2025, and the year ended December 31, 2024, respectively, there were no adjustments or reconciling items between the banking segment total assets and total assets as presented on the consolidated balance sheets.

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

Ames National Corporation (the “Company”) is a bank holding company established in 1975 that owns and operates six bank subsidiaries in central, north-central and south-central Iowa (the “Banks”). The following discussion is provided for the consolidated operations of the Company and its Banks, First National Bank, Ames, Iowa (First National), State Bank & Trust Co. (State Bank), Boone Bank & Trust Co. (Boone Bank), Reliance State Bank (Reliance Bank), United Bank & Trust Co. (United Bank) and Iowa State Savings Bank (Iowa State Bank). The purpose of this discussion is to focus on significant factors affecting the Company's financial condition and results of operations.

 

The Company does not engage in any material business activities apart from its ownership of the Banks. Products and services offered by the Banks are for commercial and consumer purposes including loans, deposits and wealth management services. Wealth management services includes financial planning and managing trust, agencies, estates and investment brokerage accounts. The Company employs twenty-six individuals to assist the Banks with its financial reporting, human resources, audit, compliance, marketing, technology systems, training, real estate valuation services and the coordination of management activities, in addition to 232 full-time equivalent individuals employed by the Banks.

 

The Company’s primary competitive strategy is to utilize seasoned and competent Bank management and local decision making authority to provide customers with faster response times and more flexibility in the products and services offered. This strategy is viewed as providing an opportunity to increase revenues through creating a competitive advantage over other financial institutions. The Company also strives to remain operationally efficient to provide better profitability while enabling the Company to offer more competitive loan and deposit rates.

 

The principal sources of Company revenues and cash flow are: (i) interest and fees earned on loans made by the Company and Banks; (ii) interest on fixed income investments held by the Banks; (iii) fees on wealth management services provided by those Banks exercising trust powers; (iv) service fees on deposit accounts maintained at the Banks; (v) gain on sale of loans; and (vi) merchant and card fees. The Company’s principal expenses are: (i) interest expense on deposit accounts and other borrowings; (ii) credit loss expense; (iii) salaries and employee benefits; (iv) data processing costs associated with maintaining the Banks’ loan and deposit functions; (v) occupancy expenses for maintaining the Banks’ facilities; and (vi) professional fees. The largest component contributing to the Company’s net income is net interest income, which is the difference between interest earned on earning assets (primarily loans and investments) and interest paid on interest-bearing liabilities (primarily deposits and other borrowings). One of management’s principal functions is to manage the spread between interest earned on earning assets and interest paid on interest bearing liabilities in an effort to maximize net interest income while maintaining an appropriate level of interest rate risk.

 

The Company had net income of $3.4 million, or $0.39 per share, for the three months ended March 31, 2025, compared to net income of $2.3 million, or $0.26 per share, for the three months ended March 31, 2024. The increase in earnings is primarily due to an increase in net interest income and partially offset by an increase in credit loss expense. The increase in net interest income is primarily due to an increase in the volume and yield of loans and a decrease in interest expense on other borrowed funds as the Company has reduced borrowings. The increase in credit loss expense is primarily due to a specific reserve placed on a commercial loan relationship.

 

Net loan charge-offs for the three months ended March 31, 2025 totaled $48 thousand compared to net loan recoveries of $4 thousand for the three months ended March 31, 2024. A credit loss expense of $962 thousand was recognized for the three months ended March 31, 2025 as compared to $169 thousand for the three months ended March 31, 2024.

 

 

The following management discussion and analysis will provide a review of important items relating to:

 

●	Challenges, Risks and Uncertainties

●	Critical Accounting Policies

●	Non-GAAP Financial Measures

●	Income Statement Review

●	Balance Sheet Review

●	Asset Quality Review and Credit Risk Management

●	Liquidity and Capital Resources

●	Forward-Looking Statements and Business Risks

 

Challenges, Risks and Uncertainties

 

Management has identified certain events or circumstances that may negatively impact the Company’s financial condition and results of operations in the future and is attempting to position the Company to best respond to those challenges. These challenges are addressed in the Company’s most recent Annual Report on Form 10-K filed on March 12, 2025.

 

Critical Accounting Policies

 

The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements that have been prepared in accordance with GAAP. The preparation of the Company's financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes involve the most complex and subjective estimates and judgments and have the most effect on the Company's reported financial position and results of operations are described as critical accounting policies in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 12, 2025. There have been no significant changes in the critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2024.

 

 

Non-GAAP Financial Measures

 

This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the Company’s presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis. Management believes these non-GAAP financial measures are widely used in the financial institutions industry and provide useful information to both management and investors to analyze and evaluate the Company’s financial performance. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently. These non-GAAP disclosures should not be considered an alternative to the Company’s GAAP results. The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on an FTE basis to GAAP (dollars in thousands).

 

		Three Months Ended March 31,
		2025				2024
Reconciliation of net interest income and annualized net interest margin on an FTE basis to GAAP:
Net interest income (GAAP)		$	12,915			$	10,906
Tax-equivalent adjustment (1)			120				142
Net interest income on an FTE basis (non-GAAP)			13,035				11,048
Average interest-earning assets		$	2,060,173			$	2,072,069
Net interest margin on an FTE basis (non-GAAP)			2.53	%			2.13	%

 

(1) Computed on a tax-equivalent basis using an incremental federal income tax rate of 21 percent, adjusted to reflect the effect of the tax-exempt interest income associated with owning tax-exempt securities and loans.

 

 

Income Statement Review for the Three Months ended March 31, 2025 and 2024

 

The following highlights a comparative discussion of the major components of net income and their impact for the three months ended March 31, 2025 and 2024:

 

AVERAGE BALANCES AND INTEREST RATES

 

The following two tables are used to calculate the Company’s non-GAAP net interest margin on an FTE basis. The first table includes the Company’s average assets and the related income to determine the average yield on earning assets. The second table includes the average liabilities and related expense to determine the average rate paid on interest-bearing liabilities. The net interest margin is equal to interest income less interest expense divided by average earning assets. Refer to the net interest income discussion following the tables for additional detail.

 

AVERAGE BALANCE SHEETS AND INTEREST RATES
		Three Months Ended March 31,
		2025												2024
		Average				Revenue/				Yield/				Average				Revenue/				Yield/
		balance				expense				rate				balance				expense				rate
ASSETS
(dollars in thousands)
Interest-earning assets
Loans (1)
Commercial		$	89,952			$	1,370				6.09	%		$	88,061			$	1,337				6.07	%
Agricultural			123,643				2,130				6.89	%			115,362				2,125				7.37	%
Real estate			1,079,940				12,963				4.80	%			1,065,387				12,166				4.57	%
Consumer and other			16,643				211				5.07	%			16,126				194				4.81	%
Total loans (including fees)			1,310,178				16,674				5.09	%			1,284,936				15,822				4.93	%
Investment securities
Taxable			557,398				2,840				2.04	%			630,864				3,092				1.96	%
Tax-exempt (2)			83,730				573				2.74	%			101,069				677				2.68	%
Total investment securities			641,128				3,413				2.13	%			731,933				3,769				2.06	%
Interest-bearing deposits with banks and federal funds sold			108,867				1,151				4.23	%			55,200				662				4.80	%
Total interest-earning assets			2,060,173			$	21,238				4.12	%			2,072,069			$	20,253				3.91	%
Noninterest-earning assets			69,528												75,561
TOTAL ASSETS		$	2,129,701											$	2,147,630

 

(1) Average loan balances include nonaccrual loans, if any. Interest income collected on nonaccrual loans has been included.

(2) Tax-exempt income has been adjusted to a tax-equivalent basis using an incremental tax rate of 21%.

 

 

AVERAGE BALANCE SHEETS AND INTEREST RATES
		Three Months Ended March 31,
		2025												2024
		Average				Revenue/				Yield/				Average				Revenue/				Yield/
		balance				expense				rate				balance				expense				rate
LIABILITIES AND STOCKHOLDERS' EQUITY
(dollars in thousands)
Interest-bearing liabilities
Deposits
Interest-bearing checking, savings accounts and money markets		$	1,179,259			$	4,131				1.40	%		$	1,175,901			$	4,736				1.61	%
Time deposits			330,967				3,288				3.97	%			291,159				2,853				3.92	%
Total deposits			1,510,226				7,419				1.97	%			1,467,060				7,589				2.07	%
Other borrowed funds			87,594				784				3.58	%			156,312				1,616				4.14	%
Total interest-bearing liabilities			1,597,820				8,203				2.05	%			1,623,372				9,205				2.27	%
Noninterest-bearing liabilities
Noninterest-bearing checking			339,709												346,615
Other liabilities			13,834												13,204
Stockholders' equity			178,338												164,439
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	2,129,701											$	2,147,630
Net interest income (FTE)(3)						$	13,035											$	11,048
Net interest spread (FTE)											2.07	%											1.64	%
Net interest margin (FTE)(3)											2.53	%											2.13	%

 

(3) Net interest income (FTE) is a non-GAAP financial measure. For further information, refer to the Non-GAAP Financial Measures section of this report.

 

Net Interest Income

 

For the three months ended March 31, 2025 and 2024, the Company's net interest margin adjusted for tax exempt income was 2.53% and 2.13%, respectively. Net interest income, prior to the adjustment for tax-exempt income, for the three months ended March 31, 2025 totaled $12.9 million compared to $10.9 million for the three months ended March 31, 2024.

 

For the three months ended March 31, 2025, interest income increased $1.0 million, or 5.0%, when compared to the same period in 2024. The increase is primarily due to higher interest rates, growth in the loan portfolio and an increase in interest-bearing deposits and federal funds sold.

 

 

Interest expense decreased $1.0 million, or 10.9%, for the three months ended March 31, 2025 when compared to the same period in 2024. The lower interest expense for the period is primarily due to reduced borrowings and a decrease in market rates.

 

Credit Loss Expense

 

A credit loss expense of $962 thousand was recognized for the three months ended March 31, 2025 as compared to $169 thousand for the three months ended March 31, 2024. Net loan charge-offs for the three months ended March 31, 2025 totaled $48 thousand compared to net loan recoveries of $4 thousand for the three months ended March 31, 2024. The credit loss expense in 2025 was primarily due to an increase in specific reserves in the commercial loan portfolio. The credit loss expense in 2024 was primarily due to an increase in the risks associated with the softening of commercial real estate collateral values.

 

Noninterest Income and Expense

 

Noninterest income for the three months ended March 31, 2025 totaled $2.55 million compared to $2.18 million for the three months ended March 31, 2024, an increase of 17.0%. The increase is primarily due to a decrease in losses on the sale of securities and an increase in wealth management income due to growth in assets under management and new account relationships.

 

Noninterest expense for the three months ended March 31, 2025 totaled $10.26 million compared to $10.19 million recorded for the three months ended March 31, 2024, an increase of 0.7%. The efficiency ratio was 66.38% for the first quarter of 2025 as compared to 77.92% in the first quarter of 2024. The efficiency ratio continues to improve as net interest margin increases and noninterest expense is comparable to the prior year.

 

Income Taxes

 

Income tax expense for the three months ended March 31, 2025 totaled $794 thousand compared to $416 thousand recorded for the three months ended March 31, 2024. The effective tax rate was 19% and 15% for the three months ended March 31, 2025 and 2024. The lower than expected tax rate in 2025 and 2024 was due primarily to tax-exempt interest income and New Markets Tax Credits.

 

 

Balance Sheet Review

 

As of March 31, 2025, total assets were $2.2 billion, a $51.1 million increase compared to December 31, 2024. This increase in assets is primarily due to an increase in cash and cash equivalents, partially offset by a decrease in securities available-for-sale.

 

Investment Portfolio

 

The investment portfolio totaled $640.4 million as of March 31, 2025, a decrease of $8.1 million from the December 31, 2024 balance of $648.5 million. The decrease in securities available-for-sale is primarily due to maturities in excess of purchases, offset in part by a decrease in unrealized losses.

 

On a quarterly basis, the investment portfolio is reviewed for credit losses. As of March 31, 2025, gross unrealized losses of $42.7 million, are due to the interest rate environment and are not considered credit-related. Certain bonds in the investment portfolio may incur credit losses and could negatively affect the Company’s net income. As a result of the Company’s favorable liquidity position, the Company does not have the intent to sell securities with an unrealized loss at the present time. In addition, management believes it is more likely than not that the Company will hold these securities until recovery of their fair value to cost basis and expects full principal and interest to be collected. Therefore, the Company does not have an allowance for credit losses on these investments as of March 31, 2025.

 

At March 31, 2025, the Company’s investment securities portfolio included securities issued by 258 government municipalities and agencies located within 30 states with a fair value of $245.6  million. At December 31, 2024, the Company’s investment securities portfolio included securities issued by 258 government municipalities and agencies located within 30 states with a fair value of $245.6 million. No one municipality or agency represents a concentration within this segment of the investment portfolio. Omaha, Nebraska, sewer revenue bonds with a fair value of $5.4 million (approximately 2.2% of the fair value of the government municipalities and agencies) represent the largest exposure to any one municipality or agency for the Company as of March 31, 2025.

 

The Company’s procedures for evaluating investments in states, municipalities and political subdivisions include but are not limited to reviewing the offering statement and the most current available financial information, comparing yields to yields of bonds of similar credit quality, confirming capacity to repay, assessing operating and financial performance, evaluating the stability of tax revenues, considering debt profiles and local demographics, and for revenue bonds, assessing the source and strength of revenue structures for municipal authorities. These procedures, as applicable, are utilized for all municipal purchases and are utilized in whole or in part for monitoring the portfolio of municipal holdings. The Company does not utilize third party credit rating agencies as a primary component of determining if the municipal issuer has an adequate capacity to meet the financial commitments under the security for the projected life of the investment, and, therefore, does not compare internal assessments to those of the credit rating agencies. Credit rating downgrades are utilized as an additional indicator of credit weakness and as a reference point for historical default rates.

 

 

The following table summarizes the total general obligation and revenue bonds in the Company’s investment securities portfolios as of March 31, 2025 and December 31, 2024 identifying the state in which the issuing government municipality or agency operates (in thousands):

 

		2025								2024
						Estimated								Estimated
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
Obligations of states and political subdivisions:
General Obligation bonds:
Iowa		$	52,045			$	49,205			$	51,515			$	47,768
Texas			25,838				24,305				25,859				23,995
Nebraska			19,258				17,314				19,256				17,005
Oregon			9,152				8,752				8,698				8,089
Connecticut			8,698				8,209				7,885				7,184
Washington			7,875				7,276				9,167				8,651
Other (2025: 15 states; 2024: 15 states)			28,129				26,314				28,351				26,192
Total general obligation bonds		$	150,995			$	141,375			$	150,731			$	138,884
Revenue bonds:
Iowa		$	40,135			$	38,251			$	43,859			$	41,320
Texas			14,756				13,524				14,764				13,266
Nebraska			9,042				8,174				9,042				8,029
Other (2025: 23 states; 2024: 23 states)			47,369				44,237				47,722				44,063
Total revenue bonds		$	111,302			$	104,186			$	115,387			$	106,678
Total obligations of states and political subdivisions		$	262,297			$	245,561			$	266,118			$	245,562

 

As of March 31, 2025 and December 31, 2024, the revenue bonds in the Company’s investment securities portfolios were issued by government municipalities and agencies to fund public services such as community school facilities, college and university dormitory facilities, water utilities and electrical utilities. The revenue bonds are to be paid from 5 primary revenue sources. The revenue sources that represent 5% or more, individually, as a percent of the total revenue bonds are summarized in the following table (in thousands):

 

		2025								2024
						Estimated								Estimated
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
Revenue bonds by revenue source
Sales tax		$	27,190			$	25,659			$	27,404			$	25,327
Water			19,348				18,132				19,373				17,967
College and universities, primarily dormitory revenues			16,208				14,937				16,207				14,685
Sewer			12,198				11,280				12,205				11,024
Leases			7,950				7,470				7,936				7,364
Other			28,408				26,708				32,262				30,311
Total revenue bonds by revenue source		$	111,302			$	104,186			$	115,387			$	106,678

 

 

Loan Portfolio

 

The loan portfolio, net of the allowance for credit losses, totaled $1.306 billion and $1.304 billion as of March 31, 2025 and December 31, 2024, respectively.

 

Deposits

 

Deposits totaled $1.91 billion and $1.85 billion as of March 31, 2025 and December 31, 2024, respectively. The increase is primarily due to an increase in public funds and partially offset by a decrease in noninterest-bearing checking accounts. Securities sold under agreements to repurchase decreased to $45.8 million as of March 31, 2025 compared to $52.4 million as of December 31, 2024. Securities sold under agreements to repurchase and deposit balances fluctuate as customers’ liquidity needs vary and could be impacted by prevailing market interest rates, competition, and economic conditions. Approximately 16% of deposits are tied to external indexes as of March 31, 2025. Deposit interest expense related to these deposits can be more volatile than other deposit products in a changing interest rate environment.

 

Other Borrowings

 

Other borrowings decreased to $35.8 million as of March 31, 2025 compared to $47.0 million as of December 31, 2024. The Company has continued to reduce borrowings as debt has matured.

 

Off-Balance Sheet Arrangements

 

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. No material changes in the Company’s off-balance sheet arrangements have occurred since December 31, 2024.

 

Asset Quality Review and Credit Risk Management

 

The Company’s credit risk is historically centered in the loan portfolio, which totaled $1.306 billion and $1.304 billion as of March 31, 2025 and December 31, 2024, respectively. Net loans comprise 60% of total assets as of March 31, 2025. The objective in managing loan portfolio risk is to reduce the risk of loss resulting from a customer’s failure to perform according to the terms of an agreement and to quantify and manage credit risk on a portfolio basis. The Company’s level of problem loans (consisting of nonaccrual loans and loans past due 90 days or more) as a percentage of total loans was 1.25% at March 31, 2025, as compared to 1.17% at December 31, 2024. The Company’s level of problem loans as a percentage of total loans at March 31, 2025 of 1.25% is higher as compared to the Iowa State Average peer group of FDIC insured institutions as of December 31, 2024, of 0.47%, most recent available.

 

Substandard-Impaired loans totaled $15.7 million as of March 31, 2025 and have increased $1.5 million as compared to the substandard-impaired loans of $14.2 million as of December 31, 2024. The increase is primarily due to downgrades in the commercial real estate and commercial operating loan portfolios.

 

 

A loan is considered Substandard-Impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payment of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. The Company applies its normal loan review procedures to identify loans that should be evaluated for impairment.

 

Loans past due 90 days or more that are still accruing interest are reviewed no less frequently than quarterly to determine if there continues to be a strong reason that the credit should not be placed on nonaccrual. As of March 31, 2025, nonaccrual loans totaled $16.3 million and $246 thousand of loans past due 90 days and still accruing. This compares to nonaccrual loans of $14.8 million and $736 thousand of loans past due 90 days and still accruing as of December 31, 2024. There was no other real estate owned as of March 31, 2025 and December 31, 2024.  

 

Loans past due 30 days or more totaled $11.8 million as of March 31, 2025, compared to $6.9 million as of December 31, 2024. The increase is primarily related to the agriculture operating and 1-4 family real estate loan portfolios. A 1-4 family loan relationship of $2.5 million was past due 30 days as it was going through renewal.

 

The watch and special mention loans classified as agricultural real estate and operating totaled $35.4 million as of March 31, 2025 as compared to $30.9 million as of December 31, 2024. The substandard and substandard-impaired loans in these categories totaled $6.7 million and $5.2 million as of March 31, 2025 and December 31, 2024, respectively. The increase is primarily due to variable yields, weather impacts and commodity prices affecting agricultural loans.

 

The watch and special mention loans classified as commercial real estate totaled $40.8 million as of March 31, 2025 as compared to $40.3 million as of December 31, 2024. The substandard and substandard-impaired commercial real estate loans totaled $35.2 million and $35.6 million as of March 31, 2025 and December 31, 2024, respectively.

 

The allowance for credit losses as a percentage of outstanding loans as of March 31, 2025 was 1.36%, as compared to 1.29% at December 31, 2024. The allowance for credit losses totaled $18.0 million and $17.1 million as of March 31, 2025 and December 31, 2024, respectively. The increase in the allowance for credit losses is mainly due to a specific reserve placed on a commercial loan relationship.

 

Due to recent trends in the banking industry, commercial real estate and multi-family real estate loans are facing heightened risk due to factors such as increased susceptibility to economic pressures caused by elevated interest rates and challenging market conditions. The Company maintains a rigorous approach to risk management through regular loan reviews, stress testing and sensitivity analyses to evaluate the risk level in the loan portfolio. Loan reviews include monitoring past due rates, non-performing trends, concentrations, loan-to-value ratios, and other qualitative factors. The Company's loan policies are robust and are updated as needed to align with strategic objectives and risk management priorities.

 

Commercial real estate and multi-family real estate represent approximately 42% of the loan portfolio as of March 31, 2025.  The following is an additional breakdown of the Company's commercial real estate and multi-family real estate portfolios (in thousands):

 

		March 31, 2025								December 31, 2024
		Total				Percent of Total Loans				Total				Percent of Total Loans
Real estate - multi-family		$	199,609				15.1	%		$	200,209				15.2	%
Real estate - commercial
Owner-Occupied All Purposes			183,693				13.9	%			183,530				13.9	%
Non-Owner Occupied Retail or Other			54,727				4.1	%			57,971				4.4	%
Non-Owner Occupied Warehouse			42,244				3.2	%			39,567				3.0	%
Non-Owner Occupied Hotel			39,124				2.9	%			34,813				2.6	%
Non-Owner Occupied Office			32,471				2.5	%			34,612				2.6	%
Total real estate - commercial			352,259				26.6	%			350,493				26.5	%
Total real estate - commercial and multi-family		$	551,868				41.7	%		$	550,702				41.7	%

 

 

 

Liquidity and Capital Resources

 

Liquidity management is the process by which the Company, through its Banks’ Asset and Liability Committees (ALCO), ensures that adequate liquid funds are available to meet its financial commitments on a timely basis, at a reasonable cost and within acceptable risk tolerances. These commitments include funding credit obligations to borrowers, funding of mortgage originations pending delivery to the secondary market, withdrawals by depositors, maintaining adequate collateral for pledging for public funds, trust deposits and borrowings, paying dividends to shareholders, payment of operating expenses, funding capital expenditures and maintaining deposit reserve requirements.

 

Liquidity is derived primarily from core deposit growth and retention; principal and interest payments on loans; principal and interest payments, sale, maturity and prepayment of securities available-for-sale; net cash provided from operations; and access to other funding sources. Other funding sources include federal funds purchased lines, FHLB advances and other capital market sources.

 

As of March 31, 2025, the level of liquidity and capital resources of the Company remain at a satisfactory level. Management believes that the Company’s liquidity sources will be sufficient to support its existing operations for the foreseeable future.

 

The liquidity and capital resources discussion will cover the following topics:

 

●	Review of the Company’s Current Liquidity Sources

●	Review of Statements of Cash Flows

●	Company Only Cash Flows

●	Review of Commitments for Capital Expenditures, Cash Flow Uncertainties and Known Trends in Liquidity and Cash Flows Needs

●	Capital Resources

 

Review of the Company’s Current Liquidity Sources

 

Liquid assets of cash on hand, balances due from other banks and interest-bearing deposits in financial institutions as of March 31, 2025 and December 31, 2024 totaled $163.4 million and $101.2 million, respectively, and management believes these sources provide an adequate level of liquidity given current economic conditions.

 

Other sources of liquidity available to the Banks as of March 31, 2025 include outstanding lines of credit with the FHLB of Des Moines, Iowa of $242.5 million, with $32.5 million of outstanding FHLB advances. Federal funds borrowing capacity at correspondent banks was $97.1 million, with no outstanding federal fund purchase balances as of March 31, 2025. The Company had securities sold under agreements to repurchase totaling $45.8 million as of March 31, 2025.

 

Total investments as of March 31, 2025 were $640.4 million compared to $648.5 million as of December 31, 2024. These investments provide the Company with liquidity since all of the investments are classified as available-for-sale as of March 31, 2025. The Company has $348.5 million of unpledged securities available-for-sale and interest-bearing deposits as of March 31, 2025. The investment portfolio serves an important role in the overall context of balance sheet management in terms of balancing capital utilization and liquidity. The decision to purchase or sell securities is based upon the current assessment of economic and financial conditions, including the interest rate environment, liquidity and credit considerations. The portfolio’s scheduled maturities and payments represent a significant source of liquidity.

 

Review of the Consolidated Statements of Cash Flows

 

Net cash provided by operating activities for the three months ended March 31, 2025 totaled $7.1 million compared to $1.4 million for the three months ended March 31, 2024. The increase of $5.7 million in cash provided by operating activities was primarily due to payments of accrued interest on borrowings in 2024 and higher net income in 2025.

 

Net cash provided by investing activities for the three months ended March 31, 2025 was $15.5 million compared to $18.3 million for the three months ended March 31, 2024. The decrease of $2.8 million in cash provided by investing activities was primarily due to an increase in loans and purchases of securities available-for-sale, partially offset by maturities of securities available-for-sale.

 

Net cash provided by financing activities for the three months ended March 31, 2025 totaled $39.6 million compared to $36.6 million for the three months ended March 31, 2024. The increase of $3.0 million in cash provided by financing activities was primarily due to a decrease in net payments on other borrowings between periods. As of March 31, 2025, the Company did not have any external debt financing, off-balance sheet financing arrangements, or derivative instruments linked to its stock.

 

 

Review of Company Only Cash Flows

 

The Company’s liquidity on an unconsolidated basis is heavily dependent upon dividends paid to the Company by the Banks. The Banks provide adequate liquidity to pay the Company’s expenses and stockholder dividends. Dividends paid by the Banks to the Company amounted to $3.2 million and $2.6 million for the three months ended March 31, 2025 and 2024, respectively. Various federal and state statutory provisions limit the amounts of dividends banking subsidiaries are permitted to pay to their holding companies without regulatory approval. Federal Reserve policy further limits the circumstances under which bank holding companies may declare dividends. For example, a bank holding company should not continue its existing rate of cash dividends on its common stock unless its net income is sufficient to fully fund each dividend and its prospective rate of earnings retention appears consistent with its capital needs, asset quality and overall financial condition. In addition, the Federal Reserve and the FDIC have issued policy statements, which provide that insured banks and bank holding companies should generally pay dividends only out of current operating earnings. Federal and state banking regulators may also restrict the payment of dividends by order.

 

The Company, on an unconsolidated basis, has interest-bearing deposits totaling $1.3 million as of March 31, 2025.

 

Review of Commitments for Capital Expenditures, Cash Flow Uncertainties and Known Trends in Liquidity and Cash Flows Needs

 

No other material capital expenditures or material changes in the capital resource mix are anticipated at this time. The primary cash flow uncertainty would be a sudden decline in deposits causing the Banks to liquidate securities. Historically, the Banks have maintained an adequate level of short-term marketable investments to fund the temporary declines in deposit balances. There are no known trends in liquidity and cash flow needs as of March 31, 2025 that are of concern to management.

 

Capital Resources

 

The Company’s total stockholders’ equity as of March 31, 2025 totaled $183.1 million and was $8.4 million higher than the $174.7 million recorded as of December 31, 2024. The increase in stockholders’ equity was primarily the result of a decrease in unrealized losses on the investment portfolio and the retention of net income in excess of dividends. At March 31, 2025 and December 31, 2024, stockholders’ equity as a percentage of total assets was 8.4% and 8.2%, respectively. The capital levels of the Company currently exceed applicable regulatory guidelines to be considered “well capitalized” as of March 31, 2025. Unrealized losses on the investment portfolio are excluded from regulatory capital.

 

On February 12, 2025, the Company declared a cash dividend on its common stock, payable on June 13, 2025 to stockholders of record as of May 30, 2025, equal to $0.20 per share. The quarterly dividend will be paid a month later than usual. Previously, dividends were typically declared in one quarter and paid in the subsequent quarter. Going forward, the Company expects, subject to the discretion of the Board of Directors, to declare and pay dividends in the same quarter. To convert to this new timing, the Company does not intend to declare a dividend in the second quarter payable in the third quarter; rather, the dividend typically paid in the third quarter would be both declared and paid in the third quarter.

 

 

Forward-Looking Statements and Business Risks

 

The Private Securities Litigation Reform Act of 1995 provides the Company with the opportunity to make cautionary statements regarding forward-looking statements contained in this News Release, including forward-looking statements concerning the Company’s future performance and asset quality. Forward-looking statements contained in this News Release are not historical facts and are based on management’s current beliefs, assumptions, predictions and expectations of future events, including the Company’s future performance, taking into account all information currently available to management. These beliefs, assumptions, predictions and expectations are subject to numerous risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to management and many of which are beyond management’s control. If a change occurs, the Company’s business, financial condition, liquidity, results of operations, asset quality, plans and objectives may vary materially from those expressed in the forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on such forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “forecasts”, “continuing,” “ongoing,” “expects,” “views,” “intends” and similar words or phrases. The risks and uncertainties that may affect the Company’s future performance and asset quality include, but are not limited to, the following: national, regional and local economic conditions and the impact they may have on the Company and its customers; competitive products and pricing available in the marketplace; changes in credit and other risks posed by the Company’s loan and investment portfolios, including declines in commercial or residential real estate values or changes in the allowance for credit losses as dictated by new market conditions or regulatory requirements; changes in local, national and international economic conditions, including rising inflation rates; fiscal and monetary policies of the U.S. government; the imposition of tariffs and retaliatory tariffs; changes in governmental regulations affecting financial institutions (including regulatory fees and capital requirements); changes in prevailing interest rates; credit risk management and asset/liability management; the financial and securities markets; the availability of and cost associated with sources of liquidity; and other risks and uncertainties inherent in the Company’s business, including those discussed under the headings “Forward-Looking Statements and Business Risks” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2024. Any forward-looking statements are qualified in their entirety by the foregoing risks and uncertainties and speak only as of the date on which such statements are made. The Company undertakes no obligation to revise or update such forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable

 

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 management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended). Based on that evaluation, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Company’s 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 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 was no change in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

Not applicable

 

Item 1.A.

Risk Factors

 

Management does not believe there have been any material changes in the risk factors that were disclosed in the Company's Form 10-K filed with the SEC on March 12, 2025.

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

In November, 2024, the Company approved a Stock Repurchase Plan which provided for the repurchase of up to 100,000 shares of the Company’s common stock. As of March 31, 2025, there were 23,390 shares remaining to be purchased under the plan.

 

The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchases” (as defined in rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company’s common stock during the three months ended March 31, 2025.

 

Total

Number

Maximum

of Shares

Number of

Purchased as

Shares that

Total

Part of

May Yet Be

Number

Average

Publicly

Purchased

of Shares

Price Paid

Announced

Under

Period

Purchased

Per Share

Plans

The Plan

January 1, 2025 to January 31, 2025

33,553

$

16.41

33,553

23,390

February 1, 2025 to February 28, 2025

-

$

-

-

23,390

March 1, 2025 to March 31, 2025

-

$

-

-

23,390

Total

33,553

33,553

 

Item 3.

Defaults Upon Senior Securities

 

Not applicable

 

Item 4.

Mine Safety Disclosures

 

Not applicable

 

Item 5.

Other information

 

Not applicable

 

 

Item 6.

Exhibits

 

31.1	Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS	Inline XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (1)
101.SCH	Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
104	Cover page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101.1)

 

(1)         These interactive date files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.

 

 

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.

 

 

	AMES NATIONAL CORPORATION
DATE:         May 9, 2025	By:  /s/ John P. Nelson
	John P. Nelson, Chief Executive Officer and President
	(Principal Executive Officer)
	By:  /s/ Justin C. Clausen
	Justin C. Clausen, Chief Financial Officer
	(Principal Financial and Accounting Officer)