Net Income and Earnings - Net income for Q3 2024 was $2.2 million, or $0.25 per share, compared to $2.9 million, or $0.33 per share, in Q3 2023, primarily due to increased credit loss expense and consultant fees[118] - Net interest income (GAAP) for Q3 2024 was $11.077 million, up from $10.689 million in Q3 2023, with a tax-equivalent adjustment of $128 thousand[125] - Net interest margin on an FTE basis (non-GAAP) for Q3 2024 was 2.21%, up from 2.11% in Q3 2023[125] - Net interest income for Q3 2024 increased to $11.1 million, up from $10.7 million in Q3 2023, with a net interest margin of 2.21% compared to 2.11% in the same period last year[133] - Net interest income for the nine months ended September 30, 2024 was $32.9 million, with a net interest margin of 2.16%, compared to $33.7 million and 2.21% in the same period last year[149] Credit Loss and Loan Performance - Credit loss expense for Q3 2024 was $371 thousand, compared to a credit loss benefit of $274 thousand in Q3 2023, driven by loan growth and a specific reserve on a commercial loan[119] - Net loan charge-offs for Q3 2024 totaled $10 thousand, compared to net loan recoveries of $4 thousand in Q3 2023[119] - Credit loss expense for Q3 2024 was $371 thousand, compared to a credit loss benefit of $274 thousand in Q3 2023, mainly due to increased specific reserves in the commercial loan portfolio[137] - Credit loss expense for the nine months ended September 30, 2024 was $722 thousand, a significant increase from $34 thousand in the same period in 2023, primarily due to loan growth and increased specific reserves[153] - Problem loans as a percentage of total loans increased to 1.33% as of September 30, 2024, up from 1.08% at the end of 2023, primarily due to downgrades in commercial real estate and operating loan portfolios[168] - Substandard-impaired loans increased by $3.7 million to $16.9 million as of September 30, 2024, driven by downgrades in commercial real estate and commercial operating loan portfolios[169] - Nonaccrual loans totaled $17.5 million as of September 30, 2024, compared to $13.8 million as of December 31, 2023[172] - Loans past due 30 days or more totaled $9.8 million as of September 30, 2024, compared to $4.3 million as of December 31, 2023[173] - Watch and special mention loans classified as agricultural real estate and operating totaled $27.5 million as of September 30, 2024, compared to $19.9 million as of December 31, 2023[174] - Watch and special mention loans classified as commercial real estate totaled $41.0 million as of September 30, 2024, compared to $73.3 million as of December 31, 2023[175] - The allowance for credit losses as a percentage of outstanding loans was 1.34% as of September 30, 2024, compared to 1.30% at December 31, 2023[176] Interest Income and Expense - Interest income for Q3 2024 rose by $2.0 million (10.4%) compared to Q3 2023, driven by higher average rates and loan portfolio growth[134] - Interest expense for Q3 2024 increased by $1.6 million (19.3%) compared to Q3 2023, primarily due to customers shifting to higher-rate deposit products[136] - For the nine months ended September 30, 2024, interest income increased by $6.9 million (12.7%) compared to the same period in 2023, driven by higher average rates and loan portfolio growth[150] - Interest expense for the nine months ended September 30, 2024 increased by $7.7 million (37.1%) compared to the same period in 2023, due to higher market interest rates and customer shifts to higher-rate deposit products[152] Noninterest Income and Expense - Noninterest income for Q3 2024 increased by 2.2% to $2.41 million compared to $2.36 million in Q3 2023[138] - Noninterest expense for Q3 2024 rose by 7.2% to $10.5 million compared to $9.8 million in Q3 2023, driven by higher salaries and benefits and consultant fees[139] - Noninterest income increased by 4.0% to $7.2 million for the nine months ended September 30, 2024, driven by higher wealth management income, partially offset by securities sale losses[154] - Noninterest expense rose by 4.3% to $31.4 million for the nine months ended September 30, 2024, mainly due to increased employee numbers, salary and benefit costs, and $799 thousand in consultant fees[155] Tax and Equity - Income tax expense for Q3 2024 was $397 thousand, with an effective tax rate of 15%, down from 17% in Q3 2023, due to tax-exempt interest income and New Markets Tax Credits[140] - Income tax expense decreased to $1.2 million for the nine months ended September 30, 2024, with an effective tax rate of 15%, down from 17% in 2023, due to tax-exempt interest income and New Markets Tax Credits[156] - The Company's total stockholders' equity as of September 30, 2024 totaled $183.4 million, an increase of $17.6 million from December 31, 2023[192] Loan and Investment Portfolio - Total loans (including fees) for Q3 2024 averaged $1.303 billion, with an average yield of 5.14%, up from $1.251 billion and 4.67% in Q3 2023[129] - Real estate loans for Q3 2024 averaged $1.074 billion, with an average yield of 4.75%, up from $1.049 billion and 4.34% in Q3 2023[129] - Investment securities for Q3 2024 averaged $687.362 million, with an average yield of 2.09%, up from $756.366 million and 2.03% in Q3 2023[129] - Interest-bearing deposits with banks and federal funds sold for Q3 2024 averaged $39.456 million, with an average yield of 5.02%, up from $42.382 million and 4.49% in Q3 2023[129] - The loan portfolio increased to $1.296 billion as of September 30, 2024, up from $1.278 billion at the end of 2023, driven by growth in residential real estate, multi-family real estate, and agricultural operating loans[165] - Commercial real estate and multi-family real estate represent approximately 42% of the loan portfolio as of September 30, 2024[178] - Total investments as of September 30, 2024 were $688.6 million compared to $736.4 million as of December 31, 2023[185] Deposits and Cash Flow - Deposits decreased to $1.80 billion as of September 30, 2024, from $1.81 billion at the end of 2023, due to lower balances in noninterest-bearing accounts, partially offset by increases in time deposits and public funds[166] - Net cash provided by operating activities for the nine months ended September 30, 2024 totaled $8.4 million compared to $12.8 million for the nine months ended September 30, 2023[186] - Net cash provided by investing activities for the nine months ended September 30, 2024 was $51.6 million compared to $38.8 million for the nine months ended September 30, 2023[187] Stock Repurchase and Controls - No shares were repurchased in July, August, or September 2024, with 100,000 shares remaining under the Stock Repurchase Plan as of September 30, 2024[197][199] - The company's disclosure controls and procedures were deemed effective as of the end of the reporting period[195] - There were no material changes in the company's internal control over financial reporting during the last fiscal quarter[196] - The company's risk factors remained unchanged from those disclosed in the Form 10-K filed on March 8, 2024[196] Asset and Liability Management - Total assets decreased by $32.3 million to $2.1 billion as of September 30, 2024, primarily due to a reduction in securities available-for-sale, partially offset by loan growth[158] - The investment portfolio decreased by $47.8 million to $688.6 million as of September 30, 2024, mainly due to maturities exceeding purchases and a decrease in unrealized losses[158]

Net Income and Earnings - Net income for Q3 2024 was $2.2 million, a decrease from $2.9 million in Q3 2023, primarily due to increased credit loss expense and consultant fees[2] - Net income for the three months ended September 2024 was $2.22 million, down from $2.92 million in the same period in 2023[24] - Basic and diluted earnings per share for the three months ended September 2024 were $0.25, down from $0.33 in the same period in 2023[24] Net Interest Income - Net interest income for Q3 2024 increased by $0.4 million (3.6%) to $11.1 million compared to Q3 2023, driven by higher loan interest income[7] - Net interest income for the three months ended September 2024 was $11.08 million, compared to $10.69 million in the same period in 2023[24] - Total interest and dividend income for the three months ended September 2024 was $20.71 million, up from $18.76 million in the same period in 2023[24] Credit Loss Expense - Credit loss expense for Q3 2024 was $371 thousand, compared to a credit loss benefit of $274 thousand in Q3 2023, mainly due to increased specific reserves in the commercial loan portfolio[8] Noninterest Income and Expense - Noninterest income for Q3 2024 increased by 2.2% to $2.41 million compared to Q3 2023, driven by higher wealth management income[8] - Total noninterest income for the three months ended September 2024 was $2.41 million, compared to $2.36 million in the same period in 2023[24] - Total noninterest expense for the three months ended September 2024 was $10.51 million, up from $9.80 million in the same period in 2023[24] - The efficiency ratio for Q3 2024 was 77.87%, compared to 75.12% in Q3 2023, reflecting higher noninterest expenses[8] Total Assets and Loans - Total assets as of September 30, 2024, decreased by $30.9 million to $2.1 billion compared to September 30, 2023, primarily due to a decrease in interest-bearing deposits and securities available-for-sale[13] - Net loans increased by 5.2% to $1.30 billion as of September 30, 2024, compared to $1.23 billion in 2023, driven by growth in agriculture, residential, and commercial real estate loan portfolios[14] - Total assets decreased to $2,123.17 million in September 2024 from $2,154.05 million in September 2023[22] - Loans receivable, net increased to $1,295.77 million in September 2024 from $1,231.89 million in September 2023[22] Deposits - Deposits decreased by 1.5% to $1.80 billion as of September 30, 2024, compared to $1.83 billion in 2023, due to customers shifting to higher-rate deposit products[16] - Total deposits decreased to $1,801.72 million in September 2024 from $1,828.68 million in September 2023[22] Stockholders' Equity and Dividends - Stockholders' equity increased by $36.8 million to $183.4 million as of September 30, 2024, primarily due to a decrease in unrealized losses on the investment portfolio[17] - The company declared a quarterly cash dividend of $0.20 per share, payable on November 15, 2024[18] - Dividends declared per share for the three months ended September 2024 were $0.20, compared to $0.27 in the same period in 2023[24]

Net Income and Earnings Per Share - Net income for Q2 2024 was $2.2 million, or $0.24 per share, compared to $2.6 million, or $0.28 per share, in Q2 2023, primarily due to higher interest expenses on deposits[142] Interest Income and Expense - Interest income on loans increased due to higher rates and loan portfolio growth, while interest expense on deposits rose due to higher market rates[142] - Net interest income on an FTE basis (non-GAAP) was $11.007 million for Q2 2024, compared to $11.458 million in Q2 2023[149] - Net interest margin on an FTE basis (non-GAAP) was 2.14% for Q2 2024, down from 2.20% in Q2 2023[149] - Net interest income for Q2 2024 was $10.9 million, down from $11.3 million in Q2 2023, with a net interest margin of 2.14% compared to 2.20% in the same period last year[158] - Interest income increased by $2.0 million (11.1%) in Q2 2024 compared to Q2 2023, driven by higher average rates and loan portfolio growth[158] - Interest expense rose by $2.5 million (34.5%) in Q2 2024 compared to Q2 2023, primarily due to higher market interest rates and customer shifts to higher-rate deposit products[160] - Net interest income for the first six months of 2024 was $21.8 million, down from $23.0 million in the same period in 2023, with a net interest margin of 2.14% compared to 2.26%[172] - Interest income for the first six months of 2024 increased by $5.0 million (13.9%) compared to the same period in 2023, driven by higher average rates and loan portfolio growth[172] - Interest expense for the first six months of 2024 increased by $6.2 million (48.4%) compared to the same period in 2023, due to higher market rates and increased borrowings[174] Loan Portfolio and Credit Losses - No net loan charge-offs in Q2 2024, compared to $23 thousand in Q2 2023, with credit loss expense at $182 thousand in Q2 2024 versus $33 thousand in Q2 2023[142] - Credit loss expense for Q2 2024 was $182 thousand, up from $33 thousand in Q2 2023, mainly due to loan growth[160] - Credit loss expense for the first six months of 2024 was $351 thousand, up from $308 thousand in the same period in 2023, primarily due to loan growth and increased risks in commercial real estate collateral[175] - The loan portfolio increased slightly to $1.281 billion as of June 30, 2024, driven by growth in agriculture and multifamily loan portfolios[187] - Substandard-Impaired loans decreased by $1.2 million to $12.0 million as of June 30, 2024, primarily due to payments received during the year[192] - Nonaccrual loans totaled $12.6 million as of June 30, 2024, compared to $13.8 million as of December 31, 2023[195] - Loans past due 90 days and still accruing were $390 thousand as of June 30, 2024, compared to $109 thousand as of December 31, 2023[195] - Watch and special mention loans classified as agricultural real estate and operating totaled $31.1 million as of June 30, 2024, up from $19.9 million as of December 31, 2023[196] - Watch and special mention loans classified as commercial real estate totaled $51.4 million as of June 30, 2024, down from $73.3 million as of December 31, 2023[196] - The allowance for credit losses as a percentage of outstanding loans was 1.32% as of June 30, 2024, compared to 1.30% as of December 31, 2023[197] Noninterest Income and Expense - Noninterest income increased by 13.1% to $2.6 million in Q2 2024, driven by higher estate fees in wealth management income[160] - Noninterest expense rose by 1.7% to $10.7 million in Q2 2024, primarily due to increased employee numbers, salaries, and $300 thousand in consultant fees[161] - Noninterest income for the six months ended June 30, 2024 increased by 5.0% to $4.8 million compared to $4.6 million in the same period in 2023, driven by higher estate fees in wealth management income[176] - Noninterest expense for the six months ended June 30, 2024 increased by 2.9% to $20.9 million, primarily due to higher employee salaries, benefits, and $350 thousand in consultant fees[177] Assets and Investments - Total loans (including fees) averaged $1.292 billion in Q2 2024, with an average yield of 5.02%, compared to $1.242 billion and 4.51% in Q2 2023[154] - Total interest-earning assets averaged $2.055 billion in Q2 2024, with an average yield of 4.02%, compared to $2.079 billion and 3.59% in Q2 2023[154] - Commercial loans averaged $86.998 million in Q2 2024, with an average yield of 6.30%, compared to $86.477 million and 5.54% in Q2 2023[154] - Agricultural loans averaged $118.579 million in Q2 2024, with an average yield of 7.60%, compared to $92.094 million and 6.85% in Q2 2023[154] - Real estate loans averaged $1.069 billion in Q2 2024, with an average yield of 4.63%, compared to $1.046 billion and 4.22% in Q2 2023[154] - Total assets decreased by $29.2 million to $2.1 billion as of June 30, 2024, primarily due to proceeds from maturing investments used to reduce borrowings[179] - The investment portfolio decreased by $45.6 million to $690.8 million as of June 30, 2024, mainly due to maturities exceeding purchases[179] - Gross unrealized losses in the investment portfolio totaled $60.2 million as of June 30, 2024, attributed to the interest rate environment and not credit-related issues[180] - Total investments were $690.8 million as of June 30, 2024, compared to $736.4 million as of December 31, 2023[202] Deposits and Borrowings - Deposits increased to $1.82 billion as of June 30, 2024, with $603 million in estimated uninsured deposits, of which $166 million were collateralized[188] - Other borrowings decreased to $85.9 million as of June 30, 2024, with Bank Term Funding Program borrowings at $37.75 million and an average rate of 5.27%[189] Cash Flow and Equity - Net cash provided by operating activities for the six months ended June 30, 2024 totaled $5.3 million, down from $10.5 million for the same period in 2023[203] - Net cash provided by investing activities for the six months ended June 30, 2024 was $36.6 million, up from $28.8 million for the same period in 2023[203] - Total stockholders' equity as of June 30, 2024 totaled $167.1 million, up from $165.8 million as of December 31, 2023[208] Stock Repurchase Plan - The company approved a Stock Repurchase Plan in November 2023, allowing for the repurchase of up to 100,000 shares of common stock, with 100,000 shares remaining to be purchased as of June 30, 2024[213] - No shares were repurchased during the periods from April 1, 2024, to June 30, 2024, under the Stock Repurchase Plan[214] Internal Controls and Risk Factors - The company's disclosure controls and procedures were evaluated and deemed effective as of the end of the reporting period[211] - There were no material changes in the company's internal control over financial reporting during the last fiscal quarter[212] - The company's management concluded that there were no material changes in the risk factors disclosed in the Form 10-K filed on March 8, 2024[212] Tax Expense - Income tax expense for the six months ended June 30, 2024 decreased to $0.8 million from $1.1 million in 2023, with an effective tax rate of 15% compared to 16% in 2023[178] Liquid Assets - Liquid assets totaled $63.4 million as of June 30, 2024, compared to $55.1 million as of December 31, 2023[200]

Net Income and Earnings - Net income for Q2 2024 was $2.2 million, a decrease from $2.6 million in Q2 2023, primarily due to higher interest expenses on deposits and other borrowed funds[2] - Net income for the six months ended June 2024 was $4.5 million, compared to $5.8 million in the same period in 2023[26] - Basic and diluted earnings per share for the six months ended June 2024 were $0.50, down from $0.64 in the same period in 2023[26] - Management anticipates that the company will not meet its 2024 forecasted earnings due to higher-than-expected interest expenses on deposits and other borrowings[21] Interest Income and Net Interest Margin - Loan interest income increased by $2.2 million in Q2 2024 compared to Q2 2023, driven by higher average interest rates and loan portfolio growth[7] - Net interest margin for Q2 2024 was 2.14%, down from 2.20% in Q2 2023, due to market interest rate increases and faster deposit repricing[7] - Net interest income for the six months ended June 2024 was $21.8 million, down from $23.0 million in the same period in 2023[26] - Total interest and dividend income for the six months ended June 2024 was $40.6 million, up from $35.7 million in the same period in 2023[26] Noninterest Income and Expense - Noninterest income for Q2 2024 totaled $2.6 million, a 13.1% increase from Q2 2023, primarily due to higher estate fees in wealth management income[8] - Total noninterest income for the six months ended June 2024 was $4.8 million, up from $4.6 million in the same period in 2023[26] - Total noninterest expense for the six months ended June 2024 was $20.9 million, up from $20.3 million in the same period in 2023[26] Assets and Liabilities - Total assets as of June 30, 2024, were $2.1 billion, a decrease of $47.9 million from June 30, 2023, mainly due to lower interest-bearing deposits and securities available-for-sale[15] - Total assets decreased from $2,174.3 million in June 2023 to $2,126.3 million in June 2024[25] - Net loans increased by 3.9% to $1.28 billion as of June 30, 2024, driven by growth in agriculture, commercial real estate, and multifamily loan portfolios[16] - Loans receivable, net increased from $1,232.8 million in June 2023 to $1,281.2 million in June 2024[25] - Deposits decreased by 2.3% to $1.82 billion as of June 30, 2024, due to lower balances in noninterest-bearing accounts as customers sought higher interest rates[18] - Total deposits decreased from $1,863.3 million in June 2023 to $1,821.1 million in June 2024[25] Stockholders' Equity and Dividends - Stockholders' equity increased by $11.7 million to $167.1 million as of June 30, 2024, primarily due to a decrease in unrealized losses on the investment portfolio[19] - Total stockholders' equity increased from $155.4 million in June 2023 to $167.1 million in June 2024[25] - The company declared a quarterly cash dividend of $0.27 per share, payable on August 15, 2024[20]

Net Income and Earnings - Net income for Q1 2024 was $2.3 million, or $0.26 per share, compared to $3.2 million, or $0.36 per share, in Q1 2023, primarily due to higher interest expenses on deposits[129] Loan Performance and Credit Losses - Net loan recoveries totaled $4 thousand in Q1 2024, compared to net loan charge-offs of $158 thousand in Q1 2023[129] - Credit loss expense for Q1 2024 was $169 thousand, down from $275 thousand in Q1 2023[129] - Credit loss expense decreased to $169 thousand in Q1 2024 from $275 thousand in Q1 2023, with net loan recoveries of $4 thousand compared to net loan charge-offs of $158 thousand[147] - Problem loans as a percentage of total loans decreased to 1.03% as of March 31, 2024, from 1.08% as of December 31, 2023[163] - Substandard-impaired loans decreased to $12.6 million as of March 31, 2024, from $13.2 million as of December 31, 2023[164] - Nonaccrual loans totaled $13.2 million as of March 31, 2024, down from $13.8 million as of December 31, 2023[167] - The allowance for credit losses as a percentage of outstanding loans increased to 1.31% as of March 31, 2024, from 1.30% as of December 31, 2023[170] Net Interest Income and Margin - Net interest income (GAAP) for Q1 2024 was $10.9 million, compared to $11.7 million in Q1 2023[136] - Net interest margin on an FTE basis (non-GAAP) for Q1 2024 was 2.13%, down from 2.32% in Q1 2023[136] - Net interest margin adjusted for tax-exempt income was 2.13% in Q1 2024, down from 2.32% in Q1 2023[144] Loan Portfolio and Interest Income - Total loans (including fees) averaged $1.28 billion in Q1 2024, with an average yield of 4.93%, up from $1.22 billion and 4.28% in Q1 2023[140] - Interest income on loans increased to $15.8 million in Q1 2024, up from $13.1 million in Q1 2023, driven by higher rates and loan portfolio growth[129] - Interest income increased by $2.9 million (17%) in Q1 2024 compared to Q1 2023, driven by higher average rates and loan portfolio growth[144] - The loan portfolio decreased to $1.273 billion as of March 31, 2024, primarily due to reduced commercial real estate loan demand[160] Interest Expense and Deposits - Interest expense on deposits and other borrowings increased in Q1 2024 due to higher market rates and customer demand for higher interest rate options[129] - Interest expense increased by $3.7 million (67%) in Q1 2024 compared to Q1 2023, due to higher market interest rates and customer shifts to higher-rate deposit products[146] - Total deposits decreased to $1.467 billion in Q1 2024 from $1.491 billion in Q1 2023, with a total interest-bearing liabilities increase to $1.623 billion from $1.576 billion[143] - Deposits increased to $1.87 billion as of March 31, 2024, up from $1.81 billion as of December 31, 2023, driven by higher yielding accounts[161] - Estimated uninsured deposits were $637 million as of March 31, 2024, with $153 million collateralized by pledged assets[161] - Other borrowings decreased to $90.3 million as of March 31, 2024, from $110.6 million as of December 31, 2023, due to increased deposits[162] Noninterest Income and Expense - Noninterest income decreased by 3% to $2.2 million in Q1 2024, primarily due to losses on the sale of securities[148] - Noninterest expense increased by 4% to $10.2 million in Q1 2024, driven by higher FDIC assessments and salary/benefit increases[148] Asset and Liability Management - Total interest-earning assets averaged $2.07 billion in Q1 2024, with an average yield of 3.91%, up from $2.04 billion and 3.40% in Q1 2023[140] - Total assets increased by $36.4 million to $2.19 billion as of March 31, 2024, primarily due to growth in interest-bearing deposits and federal funds sold[151] - The investment portfolio decreased by $13.2 million to $723.2 million as of March 31, 2024, mainly due to maturities of investments[151] Cash Flow and Equity - Net cash provided by operating activities for Q1 2024 was $1.4 million, down from $6.5 million in Q1 2023[176] - Total stockholders' equity decreased to $165.5 million as of March 31, 2024, from $165.8 million as of December 31, 2023[181] Regulatory and Capital Compliance - The company's capital levels exceed regulatory guidelines to be considered "well capitalized" as of March 31, 2024[181] - No material changes in risk factors disclosed in the Company's Form 10-K filed with the SEC on March 8, 2024[187] - Maximum number of shares that may yet be purchased under the plan remains at 100,000 for January, February, and March 2024[189] - Company's disclosure controls and procedures are effective as of the end of the period covered by the report[185] - No change in the Company's internal control over financial reporting during the last fiscal quarter[186]

Financial Performance - Net income for Q1 2024 was $2.3 million, a decrease of 28.2% compared to $3.2 million in Q1 2023[1][2] - Net income declined from $3,197 thousand in 2023 to $2,304 thousand in 2024[23] - Basic and diluted earnings per share decreased from $0.36 in 2023 to $0.26 in 2024[23] Interest Income and Expense - Loan interest income increased by $2.8 million in Q1 2024 compared to Q1 2023, driven by higher average interest rates and loan portfolio growth[6] - Deposit interest expense increased by $2.9 million in Q1 2024 due to higher market interest rates and customer shifts to higher-rate deposit products[6] - Net interest margin decreased to 2.13% in Q1 2024 from 2.32% in Q1 2023, primarily due to higher deposit rates exceeding rate increases on interest-earning assets[6] - Net interest income decreased from $11,669 thousand in 2023 to $10,906 thousand in 2024[23] - Total interest and dividend income rose from $17,196 thousand in 2023 to $20,111 thousand in 2024[23] Asset and Liability Changes - Total assets increased to $2.19 billion as of March 31, 2024, up $2.2 million from March 31, 2023, driven by loan growth and interest-bearing deposits[10] - Net loans increased by 4% to $1.27 billion as of March 31, 2024, compared to $1.22 billion in the same period last year[11] - Deposits decreased by 1% to $1.87 billion as of March 31, 2024, due to declines in noninterest-bearing accounts as customers sought higher interest rates[12] - Other borrowings increased to $90.3 million as of March 31, 2024, up from $78.6 million in the same period last year, primarily due to loan growth and deposit declines[13] - Total assets increased slightly from $2,189,651 thousand in 2023 to $2,191,842 thousand in 2024[20] - Total deposits decreased from $1,896,793 thousand in 2023 to $1,872,123 thousand in 2024[20] - Loans receivable, net increased from $1,224,045 thousand in 2023 to $1,272,580 thousand in 2024[20] Noninterest Income and Expense - Total noninterest income decreased slightly from $2,254 thousand in 2023 to $2,177 thousand in 2024[23] - Total noninterest expense increased from $9,780 thousand in 2023 to $10,194 thousand in 2024[23] Stockholders' Equity and Dividends - Stockholders' equity increased to $165.5 million as of March 31, 2024, up from $159.1 million in the same period last year, driven by reduced unrealized losses on investments[14] - The company declared a quarterly cash dividend of $0.27 per share, payable on May 15, 2024[15] - Total stockholders' equity increased from $159,082 thousand in 2023 to $165,540 thousand in 2024[20]

Financial Performance and Key Metrics - Net income for 2023 was $10.8 million, a 44% decrease compared to $19.3 million in 2022, primarily due to higher interest expenses and increased credit loss expenses[165] - Earnings per share for 2023 were $1.20, down from $2.14 in 2022[165] - Return on average equity for 2023 was 7.05%, compared to 11.43% in 2022[165] - Return on average assets for 2023 was 0.51%, compared to 0.90% in 2022[165] - Net interest income for 2023 was $44.6 million, down from $53.2 million in 2022[160] - Total assets for 2023 were $2.16 billion, slightly up from $2.13 billion in 2022[160] - Net loans for 2023 were $1.28 billion, up from $1.23 billion in 2022[160] - Deposits for 2023 were $1.81 billion, down from $1.90 billion in 2022[160] - Equity to assets ratio for 2023 was 7.69%, up from 6.98% in 2022[160] - Net interest income (FTE) decreased to $45,234 million in 2023 from $53,934 million in 2022, with a net interest margin (FTE) of 2.20% compared to 2.62% in 2022[193] - Net interest income decreased by 15.9% to $44.6 million in 2023 compared to $53.2 million in 2022, primarily due to higher market interest rates on deposits[198] - Noninterest income decreased to $9.2 million in 2023 from $9.7 million in 2022, mainly due to fewer gains on residential loan sales and lower wealth management income[199] - Noninterest expense increased to $40.2 million in 2023 from $38.6 million in 2022, driven by a $523 thousand wire fraud loss, higher FDIC assessments, and salary increases[200] - Total assets grew by 1.0% to $2.16 billion in 2023, primarily due to interest-bearing deposit and loan growth[201] - Net loans increased by 4.2% to $1.28 billion in 2023, driven by growth in commercial, construction, and multi-family loan portfolios[202] - Gross loans totaled $1.29 billion in 2023, representing 71.4% of total deposits and 60.0% of total assets[203] - Total investments decreased by 6.4% to $736.4 million in 2023, primarily due to maturities exceeding purchases[215] - Loans held for sale decreased to $124 thousand in 2023 from $154 thousand in 2022, with no significant impact expected on total assets[214] - The investment portfolio comprised 34% of total assets in 2023, down from 37% in 2022[215] - Total deposits decreased by $86.1 million to $1.81 billion as of December 31, 2023, primarily due to decreases in savings and money market accounts[223] - Total borrowed funds increased to $164.6 million in 2023, up 106.2% from $79.8 million in 2022, with an average rate of 4.04%[233] - The loan portfolio grew by 4.2% to $1.28 billion in 2023, representing 59% of total assets[237] - Non-performing assets decreased by 5% to $13.9 million in 2023, with non-performing loans representing 1.08% of total loans[237] - The allowance for credit losses increased to $118 thousand in 2023, up 24.2% from $95 thousand in 2022[241] - Net charge-offs to average loans ratio increased to 0.02% in 2023 from 0.00% in 2022, with total net charge-offs of $213 thousand[246] - The ratio of allowance for credit losses to nonaccrual loans improved to 121.47% in 2023 from 106.62% in 2022[240] - Interest income on nonaccrual loans under original terms was $768 thousand in 2023, up 4.8% from $733 thousand in 2022[241] - The average balance of impaired loans decreased to $12.7 million in 2023 from $13.0 million in 2022[241] - Specific reserve on loans individually evaluated for credit losses increased by 24% to $118 million in 2023 compared to $95 million in 2022[249] - Loans individually evaluated for credit losses decreased by 4% to $13,794 million in 2023 from $14,386 million in 2022[249] - The allowance for credit losses allocated to 1-4 family residential loans increased to 22% ($3,333 million) in 2023 from 21% ($2,752 million) in 2021[250] - Liquid assets increased to $55.1 million in 2023 from $27.9 million in 2022, primarily due to increased deposits at the Federal Reserve Bank[252] - Total investments decreased to $736.4 million in 2023 from $786.4 million in 2022, with pretax net unrealized losses of $62.3 million in 2023[253] - Net cash provided by operating activities decreased to $19.5 million in 2023 from $21.2 million in 2022, primarily due to higher interest expense on deposits[254] - The company's total stockholders' equity increased to $165.8 million in 2023 from $149.1 million in 2022, representing 7.7% of total assets[259] - Commitments to extend credit totaled $262.7 million as of December 31, 2023, compared to $262.9 million at the end of 2022[258] - The company's investment portfolio has pretax net unrealized losses of $62.3 million as of December 31, 2023, compared to $83.6 million in 2022[253] - Dividends from the banks amounted to $10.0 million in 2023, slightly down from $10.2 million in 2022[256] - The company's allowance for credit losses on loans (ACL) was $16.78 million as of December 31, 2023[280] - Total assets increased to $2,155.481 million in 2023 from $2,134.926 million in 2022[287] - Net interest income decreased to $44.625 million in 2023 from $53.244 million in 2022[290] - Net income declined to $10.817 million in 2023 compared to $19.293 million in 2022[290] - Total deposits decreased to $1,811.831 million in 2023 from $1,897.957 million in 2022[287] - Interest expense on deposits rose significantly to $24.471 million in 2023 from $7.316 million in 2022[290] - Noninterest income slightly decreased to $9.215 million in 2023 from $9.687 million in 2022[290] - Total noninterest expense increased to $40.162 million in 2023 from $38.644 million in 2022[290] - Comprehensive income improved to $27.000 million in 2023 from a loss of $46.641 million in 2022[292] - Loans receivable, net increased to $1,277.812 million in 2023 from $1,226.011 million in 2022[287] - Securities available-for-sale decreased to $736.389 million in 2023 from $786.438 million in 2022[287] Interest Rates and Inflation Impact - Consumer inflation increased by 3.4% and 6.5% for the years ended December 31, 2023, and 2022, respectively, creating upward pressure on operating expenses and interest rates[98] - The FOMC raised the federal funds rate to a target range of 5.25% to 5.5% in 2022 and 2023 to curb inflation, which may decrease the company's net interest income[108] - Approximately 12% of deposits are tied to external indexes, with deposit interest expense increasing more quickly in a rising interest rate environment[223] - Net interest margin on an FTE basis (non-GAAP) decreased to 2.20% in 2023 from 2.62% in 2022[188] - The company's average interest-earning assets in 2023 were $2,059,506 thousand, slightly lower than $2,060,959 thousand in 2022[188] - Real estate loan interest income increased by $7.4 million in 2023, driven by a $2.4 million increase due to volume and a $5.0 million increase due to higher interest rates[194] - Total deposits decreased to $1,468,064 million in 2023 from $1,503,904 million in 2022, with a yield increase from 0.49% to 1.67%[193] - Other borrowed funds increased to $132,918 million in 2023 from $55,874 million in 2022, with a yield increase from 1.78% to 3.92%[193] - Total interest-bearing liabilities increased to $1,600,982 million in 2023 from $1,559,778 million in 2022, with a yield increase from 0.53% to 1.85%[193] - Net interest income-earning assets decreased by $8,700 million in 2023, with a $839 million decrease due to volume and a $7,861 million decrease due to yield/rate[195] - The company's non-GAAP net interest margin was 2.20% in 2023, down from 2.62% in 2022[197] - Credit loss expense was $789 thousand in 2023, compared to a credit loss benefit of ($874) thousand in 2022, driven by loan portfolio growth and agricultural loan charge-offs[198] - The company's securities portfolio had a fair value of $736.4 million as of December 31, 2023, with an unrealized loss of $62.3 million primarily due to increased interest rates[106] Loan Portfolio and Credit Risk - Commercial real estate loans constituted a significant portion of the company's total loan portfolio as of December 31, 2023, with risks tied to fluctuating collateral values[100] - The company's agricultural loan portfolio is exposed to risks from low commodity and livestock prices, poor weather conditions, and changes in government trade policies[105] - The company's allowance for credit losses reflects management's estimate of expected credit losses over the contractual life of the loan portfolio, subject to economic and regulatory conditions[102] - The company adopted the CECL methodology for credit loss estimation starting January 1, 2023, which requires estimating expected credit losses over the life of the loan portfolio[174] - The allowance for credit losses is adjusted by a credit loss expense recognized in earnings and reduced by charge-offs, net of recoveries[180] - The company uses a model to estimate credit loss assumptions for loan pools based on loan type and purpose, calculating an expected life-of-loan loss percentage for each category[177] - The allowance for credit losses considers factors such as economic conditions, lending policies, and collateral value to adjust historical loss rates[178] - The company employs a two-component methodology for establishing the allowance for credit losses: asset-specific and pooled components[175] - Total loans increased to $1,243,239 million in 2023, up from $1,169,157 million in 2022, with a yield of 4.57% compared to 3.93% in 2022[191] - Real estate loans contributed $44,792 million in revenue in 2023, up from $37,342 million in 2022, with a yield increase from 3.79% to 4.28%[191] - Total interest-earning assets generated $74,910 million in revenue in 2023, up from $62,243 million in 2022, with a yield increase from 3.02% to 3.64%[191] - Commercial real estate loans have the largest pooled reserve at 1.50% of outstanding balances as of December 31, 2023[246] - The company's ACL estimation process involves qualitative factor adjustments based on management's expectation of future conditions[280] - The company's ACL estimation process includes evaluating loans that do not share similar risk characteristics on an individual basis[280] - The company's ACL estimation process considers historical loss rates of similar peers for loans that share similar risk characteristics[280] - The company's ACL estimation process reduces adjustments on a straight-line basis over one year for loans extending beyond the forecast period[280] - The company's ACL estimation process involves significant judgment and subjectivity in identifying and measuring qualitative factor adjustments[281] Cybersecurity and Operational Risks - The company faces operational risks, including data processing system failures, data security breaches, and employee or customer fraud[112] - Cybersecurity risks have increased due to greater reliance on remote working and are expected to remain high due to evolving threats[117] - A breach of information security or compliance by third-party vendors could negatively affect the company's reputation and business[130] - The company's information security program is designed to continuously adapt to emerging threats, with regular testing through internal and external audits, penetration tests, and disaster recovery tests[143][144] - The company's cybersecurity strategy is integrated within its overall risk management strategy, with regular oversight by the Board of Directors and executive officers[147][148] - The company maintains insurance coverage for cybersecurity risks, but there is no assurance that liabilities or losses will be fully covered[144] - The company's cybersecurity program is designed to be consistent with the FFIEC Information Security IT Examination Handbook and other regulatory frameworks[145] Regulatory and Compliance Risks - The company relies on dividends and payments from its banks for substantially all of its revenue, which could be limited by federal and state regulations[110] - Compliance with the Dodd-Frank Act and other regulations has resulted in additional costs, with potential future regulatory changes impacting earnings[138] - The company's ability to pay dividends is subject to federal regulatory considerations, including capital adequacy guidelines, and may be reduced or eliminated in the future[140] - The company adopted Topic 326 effective January 1, 2023, changing its method of accounting for the allowance for credit losses[276] - The company's financial statements for 2023 were audited and found to be in conformity with accounting principles generally accepted in the United States[275] - The company's financial statements for 2022 were audited and found to be in conformity with accounting principles generally accepted in the United States[283] Market and Economic Risks - The company's earnings are highly dependent on the business environment, including economic growth, low inflation, and strong business earnings[96] - The company's operations are concentrated in central, north-central, and south-central Iowa, making it vulnerable to local economic conditions[125] - The company faces competition from larger financial institutions and non-bank financial services providers with greater resources[133] - Federal government spending and increases in monetary supply could strain the company's capital ratios and contribute to inflation[134] - Severe weather, natural disasters, pandemics, or acts of terrorism could significantly impact the company's business and financial condition[139] - Acquisitions involve risks such as integration difficulties, unexpected liabilities, and potential loss of key employees or customers[136] Dividends and Shareholder Information - The company declared aggregate annual cash dividends of approximately $9.7 million or $1.08 per share in 2023 and 2022, with a quarterly cash dividend of approximately $2.4 million or $0.27 per share declared in February 2024[153] - The company's common stock closed at $18.46 on February 28, 2024, with approximately 249 shareholders of record and 3,298 beneficial owners[153] - The company approved a Stock Repurchase Plan in November 2023, authorizing the purchase of up to 100,000 shares, with no shares purchased under this plan during November or December 2023[155][156] - The company's stock trading volume on the NASDAQ Capital Market is relatively limited, making it more susceptible to price volatility compared to more actively traded companies[141] Investment Portfolio and Securities - The company's securities portfolio had a fair value of $736.4 million as of December 31, 2023, with an unrealized loss of $62.3 million primarily due to increased interest rates[106] - The company's securities available-for-sale portfolio is carried at fair value, with declines below cost evaluated for credit losses and reflected in earnings[183][184] - The company's total investment portfolio amounted to $736.4 million, with U.S. government treasuries making up $200.1 million, U.S. government agencies $92.6 million, and U.S. government mortgage-backed securities $101.9 million[217] - The weighted average yield for the total investment portfolio was 1.87%, with U.S. government treasuries yielding 1.15%, U.S. government agencies 1.95%, and U.S. government mortgage-backed securities 1.23%[217] - The company's investment portfolio had an expected duration of 3.55 years as of December 31, 2023, compared to 4.06 years in 2022[218] - The company's investment securities portfolio included securities issued by 272 government municipalities and agencies with a fair value of $269.9 million as of December 31, 2023[218] Liquidity and Funding - The company's liquidity is primarily maintained through customer deposits and short-term funding sources, with potential risks from changes in governmental programs or economic conditions[109] - The company had $6.9 million of brokered deposits and approximately $590 million of estimated uninsured deposits as of December 31, 2023[224] - The average balance for non-interest bearing checking deposits was $373.7 million with a 0.00% interest rate, while interest-bearing checking deposits averaged $610.0 million with a 1.61% interest rate in 2023[226] - Time certificates of deposit with balances exceeding the FDIC insurance limit of $250,000 totaled $68.2 million as of December 31, 2023, up from $42.9 million in 2022[228] - Uninsured time certificates of deposit totaled $59.2 million as of December 31, 2023, an increase of 93.4% from $30.6 million in 2022[230] Accounting Policies and Good

Financial Performance - Net income for the nine months ended September 30, 2023, was $8.7 million, a decrease from $14.9 million in the same period in 2022[6] - Net income for the nine months ended September 30, 2023, was $8,678 thousand, compared to $14,881 thousand for the same period in 2022[8] - Net income for the three months ended September 30, 2023, was $2,924 thousand, compared to $5,543 thousand for the same period in 2022[14] - Net income for 2023 was $8,678 thousand, a decrease from $14,881 thousand in 2022[18] - Net income for Q3 2023 was $2.9 million, or $0.33 per share, compared to $5.5 million, or $0.62 per share, in Q3 2022, primarily due to higher interest expenses on deposits and other borrowings[160] Assets and Liabilities - Total assets increased to $2,154.1 million as of September 30, 2023, compared to $2,134.9 million as of December 31, 2022[4] - Total deposits decreased to $1,828.7 million as of September 30, 2023, from $1,898.0 million as of December 31, 2022[4] - Loans receivable, net, increased to $1,231.9 million as of September 30, 2023, from $1,226.0 million as of December 31, 2022[4] - Total stockholders' equity decreased to $146.6 million as of September 30, 2023, from $149.1 million as of December 31, 2022[4] - Stockholders' equity as of September 30, 2023, was $146,640 thousand, compared to $137,271 thousand as of September 30, 2022[14] - Cash and cash equivalents increased significantly from $27.884 million in 2022 to $90.063 million in 2023, reflecting strong liquidity growth[75] - Loans receivable, net, remained stable at $1.231 billion in 2023 compared to $1.226 billion in 2022, with a slight decrease in fair value from $1.170 billion to $1.173 billion[75] - Deposits decreased from $1.897 billion in 2022 to $1.828 billion in 2023, with a minor change in fair value from $1.895 billion to $1.828 billion[75] Interest Income and Expense - Net interest income for the nine months ended September 30, 2023, was $33.7 million, down from $40.5 million in the same period in 2022[6] - Interest expense on deposits for the nine months ended September 30, 2023, was $17.2 million, a significant increase from $3.9 million in the same period in 2022[6] - Net interest income on an FTE basis (non-GAAP) for the three months ended September 30, 2023, was $10,835 thousand, compared to $13,833 thousand for the same period in 2022[192] - The average yield on total loans (including fees) for the three months ended September 30, 2023, was 4.67%, compared to 3.99% for the same period in 2022[197] - The average yield on total investment securities for the three months ended September 30, 2023, was 2.03%, compared to 1.94% for the same period in 2022[197] - The average rate paid on total interest-bearing liabilities for the three months ended September 30, 2023, was 2.02%, compared to 0.55% for the same period in 2022[200] - The net interest margin (FTE) for the three months ended September 30, 2023, was 2.11%, compared to 2.71% for the same period in 2022[200] - Net interest margin adjusted for tax-exempt income was 2.11% for Q3 2023, compared to 2.71% for Q3 2022[201] - Net interest income before tax-exempt adjustment was $10.7 million for Q3 2023, down from $13.7 million in Q3 2022[201] Credit Losses and Allowances - The company recorded a net decrease to retained earnings of $603 thousand due to the adoption of ASC 326[27] - Allowance for credit losses on loans increased by $518 thousand under ASC 326[28] - Allowance for credit losses on off-balance sheet credit exposures increased by $273 thousand under ASC 326[28] - The allowance for credit losses as of September 30, 2023, was $16.1 million, compared to $15.7 million as of December 31, 2022[90] - The credit loss expense for the three months ended September 30, 2023, was a benefit of $205 thousand, primarily driven by recoveries and adjustments across various loan categories[94] - The impact of adopting ASC 326 resulted in a credit loss expense benefit of $518 thousand for the nine months ended September 30, 2023[95] - Loans individually assessed for credit losses as of September 30, 2023, were collateral dependent and in the process of foreclosure, differing from the collectively evaluated loans[99] - The allowance for credit losses is determined through a two-component process: asset-specific allowances and pooled allowances based on loan risk characteristics[176] - Factors influencing credit loss estimates include economic conditions, loan portfolio characteristics, collateral values, and regulatory requirements[181] - The allowance for credit losses is established through a credit loss expense, which is charged against earnings, and is reviewed quarterly incorporating both quantitative and qualitative factors[185] Comprehensive Income and Loss - Unrealized holding losses arising during the period were $(4,230) thousand for the nine months ended September 30, 2023, compared to $(100,257) thousand for the same period in 2022[8] - Other comprehensive loss, net of tax, was $(3,251) thousand for the nine months ended September 30, 2023, compared to $(75,777) thousand for the same period in 2022[8] - Comprehensive income (loss) for the nine months ended September 30, 2023, was $5,427 thousand, compared to $(60,896) thousand for the same period in 2022[8] - Other comprehensive loss, net of tax, was $(9,285) thousand for the three months ended September 30, 2023, compared to $(23,195) thousand for the same period in 2022[14] - Comprehensive income (loss) for the three months ended September 30, 2023, was $(6,361) thousand, compared to $(17,652) thousand for the same period in 2022[14] Cash Flow - Net cash provided by operating activities in 2023 was $12,814 thousand, down from $15,000 thousand in 2022[18] - Net cash provided by investing activities in 2023 was $38,838 thousand, compared to a net cash used of $85,987 thousand in 2022[18] - Net cash provided by financing activities in 2023 was $10,527 thousand, slightly down from $11,113 thousand in 2022[18] - Net increase in cash and cash equivalents for 2023 was $62,179 thousand, compared to a net decrease of $59,874 thousand in 2022[18] - Cash payments for interest in 2023 were $17,890 thousand, significantly higher than $4,553 thousand in 2022[20] Loans and Credit Risk - Total loans receivable as of September 30, 2023, amounted to $1,248.1 million, with real estate - commercial loans being the largest category at $345.6 million[90] - Real estate - construction loans increased to $64.7 million as of September 30, 2023, from $51.3 million as of December 31, 2022[90] - Agricultural loans decreased to $98.8 million as of September 30, 2023, from $113.4 million as of December 31, 2022[90] - Total loans as of September 30, 2023, amounted to $1,248,108 thousand, with $1,094,187 thousand classified as "Pass" and $99,892 thousand as "Watch"[125] - Current-period gross writeoffs for total loans were $201 thousand, with $164 thousand from agricultural loans and $37 thousand from commercial loans[125] - The credit risk profile as of December 31, 2022, showed total loans of $940,390 thousand, with $794,529 thousand classified as "Pass" and $109,282 thousand as "Watch"[127] - Performing loans as of December 31, 2022, were $300,492 thousand, with $284,302 thousand in 1-4 Family Residential Real Estate and $16,190 thousand in Consumer and Other[128] Fair Value Measurements - The fair value of U.S. government treasuries as of September 30, 2023, was $202,522, classified under Level 1[67] - The fair value of U.S. government agencies as of September 30, 2023, was $98,049, classified under Level 2[67] - The fair value of U.S. government mortgage-backed securities as of September 30, 2023, was $101,552, classified under Level 2[67] - The fair value of state and political subdivisions as of September 30, 2023, was $265,299, classified under Level 2[67] - The fair value of corporate bonds as of September 30, 2023, was $69,522, classified under Level 2[67] - The fair value of loans receivable as of September 30, 2023, was $8,045, classified under Level 2[67] - The fair value of derivative financial instruments as of September 30, 2023, was $1,565 for assets and $199 for liabilities, classified under Level 2[67] - The fair value of loans receivable measured at fair value on a nonrecurring basis as of September 30, 2023, was $304, classified under Level 3[68] - The fair value of the company's available-for-sale securities portfolio is measured based on the price that would be received in an orderly transaction between market participants[187] - Declines in the fair value of available-for-sale securities below their cost are evaluated for credit losses and reflected in earnings as a credit loss expense[188] Capital and Risk Management - Consolidated total capital to risk-weighted assets as of September 30, 2023, was $217.47 billion, representing a ratio of 14.1%[152] - Boone Bank & Trust's Tier 1 capital to risk-weighted assets was $15.34 billion, with a ratio of 13.0% as of September 30, 2023[152] - First National Bank's common equity Tier 1 capital to risk-weighted assets was $102.72 billion, with a ratio of 12.9% as of September 30, 2023[152] - Iowa State Savings Bank's total capital to risk-weighted assets was $26.45 billion, with a ratio of 16.2% as of September 30, 2023[152] - Reliance State Bank's Tier 1 capital to average assets was $25.97 billion, with a ratio of 8.4% as of September 30, 2023[152] - State Bank & Trust's common equity Tier 1 capital to risk-weighted assets was $20.70 billion, with a ratio of 15.0% as of September 30, 2023[152] - United Bank & Trust's Tier 1 capital to risk-weighted assets was $12.00 billion, with a ratio of 14.8% as of September 30, 2023[152] - Consolidated total capital to risk-weighted assets as of December 31, 2022, was $215.80 billion, representing a ratio of 14.1%[153] - Boone Bank & Trust's Tier 1 capital to risk-weighted assets was $14.99 billion, with a ratio of 12.1% as of December 31, 2022[153] - First National Bank's common equity Tier 1 capital to risk-weighted assets was $101.98 billion, with a ratio of 13.0% as of December 31, 2022[153] - Capital ratio stood at 7.23% as of September 30, 2023, lower than the industry average of 10.68% as of June 30, 2023, though all six affiliate banks remain well-capitalized[173] Dividends and Share Repurchases - Cash dividends declared were $2,428 thousand for both the three months ended September 30, 2023, and September 30, 2022[14] - The company declared a cash dividend of $0.27 per share, payable on November 15, 2023, to stockholders of record as of November 1, 2023[58] - Repurchase and retirement of stock for the nine months ended September 30, 2022, was $(2,300) thousand[15] Intangible Assets - Intangible assets as of September 30, 2023, had a gross amount of $6,946 thousand, with accumulated amortization of $5,403 thousand[130] - The weighted average remaining life of intangible assets is approximately 3 years as of September 30, 2023[130] - Amortization expense for intangible assets for the nine months ended September 30, 2023, was $388 thousand[133] - Ending net intangible assets as of September 30, 2023, were $1,543 thousand, down from $1,931 thousand at the beginning of the period[133] Borrowings and Collateral - Total pledged collateral related to securities sold under repurchase agreements was $73.3 million as of September 30, 2023, compared to $60.9 million as of December 31, 2022[136] - The company borrowed $400 thousand on August 15, 2023, with a fixed interest rate of 6.5% for five years, and the outstanding balance was $392 thousand as of September 30, 2023[138] - The company had $19.0 million of short-term FHLB advances as of September 30, 2023, down from $35.4 million as of December 31, 2022[139] - The company borrowed $83.3 million under the Bank Term Funding Program (BTFP) as of September 30, 2023[139] - The company executed an interest rate swap with a notional amount of $25.0 million in Q3 2023 to hedge interest rate risk on long-term fixed-rate loans[140] - The notional amount of interest rate swaps increased to $34.0 million as of September 30, 2023, from $9.3 million as of December 31, 2022[143] - The carrying amount of hedged assets was $58.9 million as of September 30, 2023, with a cumulative fair value hedging adjustment of $(1.4) million[144] - The company posted $415 thousand in collateral for back-to-back loan swaps as of September 30, 2023[144] Investments and Securities - U.S. government treasuries saw a decrease in amortized cost from $227.065 million in 2022 to $221.032 million in 2023, with fair value dropping from $207.597 million to $202.522 million[80] - Corporate bonds' amortized cost decreased from $82.177 million in 2022 to $77.177 million in 2023, with fair value declining from $75.164 million to $69.522 million[80] - Securities available-for-sale had an amortized cost of $824.767 million in 2023, down from $869.996 million in 2022, with fair value decreasing from $786.438 million to $736.944 million[80] - The company's investment portfolio had an expected duration of 3.64 years as of September 30, 2023[81] - Securities pledged increased from $256.7 million in 2022 to $367.6 million in 2023, indicating higher collateral usage[82] - Gross realized gains on securities available-for-sale were $62,000 for the three months ended September 30, 2023, compared to $25,000 in the same period in 2022[86] - Unrealized losses on U.S. government treasuries increased from $19.468 million in 2022 to $18.510 million in 2023, reflecting market volatility[87] - Gross unrealized losses on debt securities totaled $87.8 million as of September 30, 2023, primarily due to changes in interest rates or general market conditions[88] - The company does not rely on third-party credit rating agencies as a primary component for determining the capacity of municipal issuers to meet financial commitments[88] - The company's procedures for evaluating municipal investments include reviewing financial information, assessing tax revenue stability, and evaluating debt profiles[88] Loan Portfolio Composition - Total real estate - construction loans increased to $28,735 million in 2023 from $28,615 million in 2022[123] - Total 1-4 family residential loans decreased to $43,903 million in 2023 from $66,973 million in 2022[123] - Total multifamily loans decreased to $22,138 million in 2023 from $53,757 million in 2022[123] - Total commercial real estate loans decreased to $40,587 million in 2023 from $87,736 million in 2022[123] - Total agricultural real estate loans increased to $21,716 million in 2023 from $33,058 million in 2022[123] - Watch list loans for 1-4 family residential increased to $1,919 million in 2023 from $303 million in 2022[123] - Watch list loans for multifamily increased to $4,602 million in 2023 from $1,434 million in 2022[123] - Watch list loans for commercial real estate increased to $1,543 million in 2023 from $3,045 million in 2022[123] - Watch list loans for agricultural real estate increased to $1,168 million in 2023 from $381 million in 2022

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Ames National Corporation's unaudited consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flows, along with notes and details on CECL adoption [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20at%20June%2030%2C%202023%20and%20December%2031%2C%202022) Total assets increased to $2.17 billion, liabilities grew due to borrowings, and stockholders' equity improved to $155.4 million by June 30, 2023 | Balance Sheet Highlights (in thousands) | June 30, 2023 (unaudited) | December 31, 2022 (audited) | | :--- | :--- | :--- | | **Total Assets** | **$2,174,261** | **$2,134,926** | | Total Loans Receivable, net | $1,232,772 | $1,226,011 | | Securities Available-for-sale | $758,520 | $786,438 | | Total Deposits | $1,863,277 | $1,897,957 | | **Total Liabilities** | **$2,018,832** | **$1,985,828** | | **Total Stockholders' Equity** | **$155,429** | **$149,098** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202023%20and%202022) Net income for Q2 2023 decreased to $2.6 million due to lower net interest income, with six-month net income at $5.8 million | Income Statement Highlights (in thousands, except per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $11,302 | $13,636 | $22,971 | $26,788 | | Credit Loss Expense (Benefit) | $33 | $(59) | $308 | $(186) | | **Net Income** | **$2,557** | **$4,193** | **$5,754** | **$9,338** | | **Basic and Diluted EPS** | **$0.28** | **$0.46** | **$0.64** | **$1.03** | | Dividends Declared per Share | $0.27 | $0.27 | $0.54 | $0.54 | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202023%20and%202022) Q2 2023 comprehensive loss improved to $1.2 million, while six-month comprehensive income was $11.8 million, driven by changes in unrealized securities losses | Comprehensive Income (Loss) (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $2,557 | $4,193 | $5,754 | $9,338 | | Other Comprehensive Income (Loss), net of tax | $(3,784) | $(18,779) | $6,034 | $(52,582) | | **Comprehensive Income (Loss)** | **$(1,227)** | **$(14,586)** | **$11,788** | **$(43,244)** | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202023%20and%202022) Stockholders' equity increased to $155.4 million by June 30, 2023, driven by net income and other comprehensive income, partially offset by dividends - For the six months ended June 30, 2023, stockholders' equity increased by **$6.3 million**. Key drivers were net income of **$5.8 million** and other comprehensive income of **$6.0 million**, offset by cash dividends of **$4.9 million** and a **$0.6 million** adjustment for a change in accounting principle (CECL adoption)[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202023%20and%202022) Cash and cash equivalents increased by $65.4 million for the first six months of 2023, driven by reduced investing activities and new borrowings | Cash Flow Summary (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $10,473 | $11,260 | | Net cash provided by (used in) investing activities | $28,793 | $(63,528) | | Net cash provided by financing activities | $26,149 | $37,817 | | **Net increase (decrease) in cash and cash equivalents** | **$65,415** | **$(14,451)** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, CECL adoption impact on retained earnings, debt and loan portfolios, fair value, borrowings including a new $75 million BTFP loan, and regulatory capital compliance - The company adopted ASC 326 (CECL) on January 1, 2023, using the modified retrospective method, resulting in a **$518 thousand** increase to the Allowance for Credit Losses on loans and a **$273 thousand** increase to the Allowance for Credit Losses on off-balance sheet exposures, leading to a net decrease in retained earnings of **$603 thousand**[26](index=26&type=chunk)[27](index=27&type=chunk) - As of June 30, 2023, the debt securities portfolio had gross unrealized losses of **$75.7 million**, attributed to interest rate changes, with management expecting to recover amortized cost[83](index=83&type=chunk)[84](index=84&type=chunk) - The company borrowed **$75 million** under the Federal Reserve's Bank Term Funding Program (BTFP) as of June 30, 2023, enhancing its liquidity position[130](index=130&type=chunk) - As of June 30, 2023, the company and its subsidiary banks met all 'well capitalized' regulatory capital requirements, with a consolidated Total Capital to risk-weighted assets ratio of **14.3%**[140](index=140&type=chunk)[143](index=143&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2023 net income decline due to higher interest expense, asset growth funded by borrowings, deposit shifts, improved asset quality, and satisfactory liquidity and capital [Overview](index=43&type=section&id=Overview) Q2 2023 net income decreased to $2.6 million ($0.28/share) primarily due to higher interest expense on deposits and borrowed funds - The primary cause for the decrease in earnings was higher interest expense on deposits and other borrowed funds, partially offset by increased interest income on loans[151](index=151&type=chunk) - The company's main revenue sources are interest and fees on loans and investments, while principal expenses include interest on deposits, credit loss provisions, and operating costs[150](index=150&type=chunk) [Key Performance Indicators and Industry Results](index=44&type=section&id=Key%20Performance%20Indicators%20and%20Industry%20Results) Key performance indicators for Q2 2023 show declines in ROA, ROE, and net interest margin, with an increased efficiency ratio | Key Performance Indicator | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Return on Assets (annualized) | 0.47% | 0.77% | | Return on Equity (annualized) | 6.45% | 9.78% | | Net Interest Margin | 2.20% | 2.63% | | Efficiency Ratio | 77.57% | 61.51% | [Income Statement Review](index=50&type=section&id=Income%20Statement%20Review) Q2 2023 net interest income decreased due to rising interest expense, noninterest expense increased due to a wire fraud loss, and the effective tax rate was 15% - Net interest income fell as interest expense increased by **$5.9 million (479%)** year-over-year for Q2 2023, outpacing the **$3.6 million (24%)** increase in interest income[192](index=192&type=chunk) - Noninterest expense for Q2 2023 increased by **7%** year-over-year, primarily due to a wire fraud loss of **$523 thousand**[194](index=194&type=chunk) - The effective tax rate for Q2 2023 was **15%**, compared to **33%** in Q2 2022, with the higher 2022 rate due to a **$780 thousand** deferred tax adjustment[195](index=195&type=chunk) [Balance Sheet Review](index=56&type=section&id=Balance%20Sheet%20Review) Total assets grew to $2.17 billion, funded by borrowings, while the investment portfolio decreased with unrealized losses, and deposits shifted to higher-yielding accounts - Total assets increased by **$39.3 million** since December 31, 2022, primarily due to an increase in interest-bearing deposits in financial institutions, funded by an increase in other borrowings[210](index=210&type=chunk) - Deposits decreased to **$1.86 billion** from **$1.90 billion** at year-end 2022, with a shift from savings/money market accounts to time deposits; uninsured deposits were approximately **16%** of total deposits[221](index=221&type=chunk) [Asset Quality Review and Credit Risk Management](index=58&type=section&id=Asset%20Quality%20Review%20and%20Credit%20Risk%20Management) Asset quality improved with problem loans decreasing to **0.93%** of total loans, while the allowance for credit losses increased to **1.31%** due to CECL adoption - Problem loans (nonaccrual and loans past due 90+ days) as a percentage of total loans decreased to **0.93%** at June 30, 2023, from **1.19%** at December 31, 2022[223](index=223&type=chunk) - Nonaccrual loans decreased to **$11.3 million** at June 30, 2023, from **$14.7 million** at December 31, 2022, primarily due to payments received[225](index=225&type=chunk) - The allowance for credit losses as a percentage of outstanding loans was **1.31%** as of June 30, 2023, up from **1.26%** at year-end 2022, mainly due to ASC 326 (CECL) implementation[228](index=228&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains satisfactory liquidity with diverse sources, including a new $75 million BTFP loan, and remains 'well capitalized' with increased stockholders' equity - The company enhanced its liquidity by borrowing **$75 million** under the Federal Reserve's Bank Term Funding Program (BTFP) as of June 30, 2023, citing favorable lending terms[232](index=232&type=chunk) - Total stockholders' equity increased by **$6.3 million** to **$155.4 million** from year-end 2022, primarily due to a decrease in unrealized losses on the investment portfolio and retained earnings[239](index=239&type=chunk) - The company's capital levels exceed regulatory guidelines to be considered 'well capitalized' as of June 30, 2023[239](index=239&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable for the current reporting period - Not applicable[242](index=242&type=chunk) [Controls and Procedures](index=63&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that the Company's disclosure controls and procedures are effective[242](index=242&type=chunk) - No material changes occurred in the Company's internal control over financial reporting during the last fiscal quarter[243](index=243&type=chunk) [PART II. OTHER INFORMATION](index=63&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=63&type=section&id=Item%201.%20Legal%20Proceedings) This section is not applicable as no material legal proceedings were reported - Not applicable[244](index=244&type=chunk) [Risk Factors](index=63&type=section&id=Item%201.A.%20Risk%20Factors) No material changes in risk factors were reported from those disclosed in the company's Form 10-K filed on March 10, 2023 - There have been no material changes in the risk factors from those disclosed in the Company's Form 10-K filed on March 10, 2023[244](index=244&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) A stock repurchase plan for up to 100,000 shares was approved in November 2022, with no shares repurchased during Q2 2023 - A stock repurchase plan for up to **100,000 shares** was approved in November 2022[245](index=245&type=chunk) - No shares were purchased during the three months ended June 30, 2023, with **100,000 shares** remaining available for repurchase under the plan[245](index=245&type=chunk)[246](index=246&type=chunk) [Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL data files - The report includes CEO and CFO certifications pursuant to Section 302 of the Sarbanes-Oxley Act and Section 1350 of U.S.C. Title 18[249](index=249&type=chunk) - Interactive Data Files (Inline XBRL) are included as exhibits[250](index=250&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents unaudited consolidated financial statements for Q1 2023 and 2022, including balance sheets, income, equity, cash flows, and notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) - Total assets increased by **$54.7 million** from December 31, 2022, to March 31, 2023, primarily driven by an increase in interest-bearing deposits and federal funds sold, funded by an increase in other borrowings[5](index=5&type=chunk)[207](index=207&type=chunk) - Total cash and cash equivalents significantly increased from **$27.88 million** at December 31, 2022, to **$87.19 million** at March 31, 2023[5](index=5&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Item | March 31, 2023 (Unaudited) | December 31, 2022 (Audited) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | **ASSETS** | | | | Total cash and cash equivalents | $87,186 | $27,884 | | Securities available-for-sale | $788,910 | $786,438 | | Loans receivable, net | $1,224,045 | $1,226,011 | | Total assets | $2,189,651 | $2,134,926 | | **LIABILITIES** | | | | Total deposits | $1,896,793 | $1,897,957 | | Securities sold under agreements to repurchase | $46,202 | $40,676 | | Other borrowings | $78,550 | $39,120 | | Total liabilities | $2,030,569 | $1,985,828 | | **STOCKHOLDERS' EQUITY** | | | | Total stockholders' equity | $159,082 | $149,098 | | Total liabilities and stockholders' equity | $2,189,651 | $2,134,926 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) - Net income decreased by **37.8%** from **$5.145 million** in Q1 2022 to **$3.197 million** in Q1 2023, primarily due to a significant increase in interest expense[8](index=8&type=chunk)[156](index=156&type=chunk) - Total interest expense surged by **500%** from **$920 thousand** in Q1 2022 to **$5.527 million** in Q1 2023, driven by higher market rates on deposits[8](index=8&type=chunk)[202](index=202&type=chunk) Consolidated Statements of Income Highlights (in thousands, except per share data) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $17,196 | $14,072 | | Total interest expense | $5,527 | $920 | | Net interest income | $11,669 | $13,152 | | Credit loss expense (benefit) | $275 | ($127) | | Net interest income after credit loss expense (benefit) | $11,394 | $13,279 | | Total noninterest income | $2,254 | $2,553 | | Total noninterest expense | $9,780 | $9,379 | | Income before income taxes | $3,868 | $6,453 | | Provision for income taxes | $671 | $1,308 | | Net income | $3,197 | $5,145 | | Basic and diluted earnings per share | $0.36 | $0.57 | | Dividends declared per share | $0.27 | $0.27 | [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) - The Company reported comprehensive income of **$13.015 million** in Q1 2023, a significant improvement from a comprehensive loss of **$28.658 million** in Q1 2022, primarily due to unrealized gains on securities before tax[10](index=10&type=chunk) Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $3,197 | $5,145 | | Other comprehensive income (loss), net of tax | $9,818 | ($33,803) | | Comprehensive income (loss) | $13,015 | ($28,658) | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) - Total stockholders' equity increased by **$9.984 million** from **$149.098 million** at December 31, 2022, to **$159.082 million** at March 31, 2023, driven by net income and a decrease in accumulated other comprehensive loss[14](index=14&type=chunk)[236](index=236&type=chunk) Consolidated Statements of Stockholders' Equity (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Common stock | $17,984 | $17,984 | | Additional paid-in capital | $14,253 | $14,253 | | Retained earnings | $180,097 | $179,931 | | Accumulated other comprehensive (loss) | ($53,252) | ($63,070) | | Total stockholders' equity | $159,082 | $149,098 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) - Net cash provided by investing activities significantly improved from a net outflow of **$24.342 million** in Q1 2022 to a net inflow of **$11.443 million** in Q1 2023, primarily due to fewer purchases of investments[16](index=16&type=chunk)[231](index=231&type=chunk) - Net cash provided by financing activities decreased by **$35.2 million**, from **$76.561 million** in Q1 2022 to **$41.364 million** in Q1 2023, mainly due to a decrease in the change in deposits[16](index=16&type=chunk)[232](index=232&type=chunk) Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $6,495 | $6,984 | | Net cash provided by (used in) investing activities | $11,443 | ($24,342) | | Net cash provided by financing activities | $41,364 | $76,561 | | Net increase in cash and cash equivalents | $59,302 | $59,203 | | Cash and cash equivalents, Ending | $87,186 | $148,332 | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Note 1. Significant Accounting Policies](index=10&type=section&id=Note%201.%20Significant%20Accounting%20Policies) - The Company adopted ASU 2016-13 (CECL) on January 1, 2023, resulting in a net decrease to retained earnings of **$603 thousand**, including a **$518 thousand** increase to the Allowance for Credit Losses on loans and a **$273 thousand** increase for off-balance sheet credit exposures[24](index=24&type=chunk)[25](index=25&type=chunk) - Goodwill was assessed for impairment as of October 1, 2022, and again at March 31, 2023, with no impairment identified[22](index=22&type=chunk) - The Company utilizes a one-year initial forecast period for credit loss estimation, followed by a historical loss forecast covering the remaining contractual life, with a one-year reversion period[36](index=36&type=chunk)[37](index=37&type=chunk) Impact of ASC 326 (CECL) Adoption (in thousands) | Item | As Reported Under ASC 326 | Pre-ASC 326 Adoption | Impact of ASC 326 Adoption | | :--------------------------------------- | :-------------------------- | :------------------- | :------------------------- | | Allowance for credit losses on loans | $16,215 | $15,697 | $518 | | Allowance for credit losses on off-balance sheet credit exposures | $1,071 | $798 | $273 | [Note 2. Dividends](index=17&type=section&id=Note%202.%20Dividends) - A cash dividend of **$0.27 per share** was declared on February 8, 2023, payable on May 15, 2023[55](index=55&type=chunk) [Note 3. Earnings Per Share](index=17&type=section&id=Note%203.%20Earnings%20Per%20Share) - The Company had no potentially dilutive securities outstanding during the periods presented[56](index=56&type=chunk) Earnings Per Share Data | Period | Weighted Average Shares Outstanding | | :--------------------------------------- | :-------------------------------- | | Three months ended March 31, 2023 | 8,992,167 | | Three months ended March 31, 2022 | 9,092,167 | [Note 4. Off-Balance Sheet Arrangements](index=17&type=section&id=Note%204.%20Off-Balance%20Sheet%20Arrangements) - The Company is party to financial instruments with off-balance sheet risk, including commitments to extend credit and standby letters of credit, with no material changes since December 31, 2022[57](index=57&type=chunk) [Note 5. Fair Value Measurements](index=18&type=section&id=Note%205.%20Fair%20Value%20Measurements) - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[58](index=58&type=chunk)[59](index=59&type=chunk) - Securities available-for-sale are primarily valued using Level 1 (U.S. Treasury securities) and Level 2 inputs (U.S. government agencies, mortgage-backed securities, state and political subdivisions, corporate bonds)[60](index=60&type=chunk) Assets Measured at Fair Value on a Recurring Basis (in thousands) | Description | March 31, 2023 Total | Level 1 | Level 2 | Level 3 | | :--------------------------------------- | :------------------- | :------ | :------ | :------ | | U.S. government treasuries | $205,513 | $205,513 | $- | $- | | U.S. government agencies | $102,649 | $- | $102,649 | $- | | U.S. government mortgage-backed securities | $114,126 | $- | $114,126 | $- | | State and political subdivisions | $291,860 | $- | $291,860 | $- | | Corporate bonds | $74,762 | $- | $74,762 | $- | | Loans receivable | $8,596 | $- | $8,596 | $- | | Derivative financial instruments | $901 | $- | $901 | $- | | Description | December 31, 2022 Total | Level 1 | Level 2 | Level 3 | | :--------------------------------------- | :------------------- | :------ | :------ | :------ | | U.S. government treasuries | $207,597 | $207,597 | $- | $- | | U.S. government agencies | $100,933 | $- | $100,933 | $- | | U.S. government mortgage-backed securities | $116,741 | $- | $116,741 | $- | | State and political subdivisions | $286,003 | $- | $286,003 | $- | | Corporate bonds | $75,164 | $- | $75,164 | $- | | Loans receivable | $8,494 | $- | $8,494 | $- | | Derivative financial instruments | $1,096 | $- | $1,096 | $- | Assets Measured at Fair Value on a Nonrecurring Basis (in thousands) | Description | March 31, 2023 Total | Level 1 | Level 2 | Level 3 | | :--------------------------------------- | :------------------- | :------ | :------ | :------ | | Loans receivable | $323 | $- | $- | $323 | | Description | December 31, 2022 Total | Level 1 | Level 2 | Level 3 | | :--------------------------------------- | :------------------- | :------ | :------ | :------ | | Loans receivable | $304 | $- | $- | $304 | [Note 6. Debt Securities](index=22&type=section&id=Note%206.%20Debt%20Securities) - Gross unrealized losses on debt securities totaled **$70.8 million** as of March 31, 2023, primarily due to changes in interest rates, but management concluded these losses were temporary[83](index=83&type=chunk) Amortized Cost and Fair Value of Securities Available-for-Sale (in thousands) | Category | March 31, 2023 Amortized Cost | March 31, 2023 Estimated Fair Value | December 31, 2022 Amortized Cost | December 31, 2022 Estimated Fair Value | | :--------------------------------------- | :-------------------------- | :-------------------------------- | :-------------------------- | :-------------------------------- | | U.S. government treasuries | $222,059 | $205,513 | $227,065 | $207,597 | | U.S. government agencies | $110,426 | $102,649 | $110,370 | $100,933 | | U.S. government mortgage-backed securities | $128,941 | $114,126 | $133,205 | $116,741 | | State and political subdivisions | $317,306 | $291,860 | $317,179 | $286,003 | | Corporate bonds | $80,851 | $74,762 | $82,177 | $75,164 | | Total | $859,583 | $788,910 | $869,996 | $786,438 | Gross Unrealized Losses on Debt Securities (in thousands) | Category | March 31, 2023 Unrealized Losses | December 31, 2022 Unrealized Losses | | :--------------------------------------- | :-------------------------- | :-------------------------- | | U.S. government treasuries | ($16,546) | ($19,468) | | U.S. government agencies | ($7,780) | ($9,441) | | U.S. government mortgage-backed securities | ($14,817) | ($16,468) | | State and political subdivisions | ($25,587) | ($31,203) | | Corporate bonds | ($6,092) | ($7,020) | | Total | ($70,822) | ($83,600) | [Note 7. Loans Receivable and Credit Disclosures](index=24&type=section&id=Note%207.%20Loans%20Receivable%20and%20Credit%20Disclosures) - The allowance for credit losses increased to **$16.269 million** at March 31, 2023, from **$15.697 million** at December 31, 2022, primarily due to the adoption of ASC 326[88](index=88&type=chunk)[224](index=224&type=chunk) - Nonaccrual loans decreased from **$14.7 million** at December 31, 2022, to **$11.4 million** at March 31, 2023, primarily due to payments received[99](index=99&type=chunk)[221](index=221&type=chunk) - The Company made three loan modifications to borrowers experiencing financial difficulty in Q1 2023, specifically for agricultural loans, extending their terms by a weighted-average of **7.7 years**[99](index=99&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk) Composition of Loans Receivable (in thousands) | Loan Type | March 31, 2023 | December 31, 2022 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Real estate - construction | $59,756 | $51,253 | | Real estate - 1 to 4 family residential | $286,418 | $285,107 | | Real estate - multi-family | $193,566 | $185,784 | | Real estate - commercial | $350,999 | $353,285 | | Real estate - agricultural | $158,337 | $159,448 | | Commercial | $82,345 | $77,265 | | Agricultural | $92,402 | $113,355 | | Consumer and other | $16,491 | $16,211 | | Less allowance for credit losses | ($16,269) | ($15,697) | | Loans receivable, net | $1,224,045 | $1,226,011 | Allowance for Credit Losses Activity (in thousands) | Item | Three Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | | Balance, December 31, 2022 | $15,697 | | Impact of adopting ASC 326 | $518 | | Credit loss expense (benefit) | $212 | | Recoveries of loans charged-off | $10 | | Loans charged-off | ($168) | | Balance, March 31, 2023 | $16,269 | [Note 8. Intangible assets](index=36&type=section&id=Note%208.%20Intangible%20assets) - Net intangible assets decreased from **$1.931 million** at December 31, 2022, to **$1.801 million** at March 31, 2023, due to amortization expense of **$130 thousand**[132](index=132&type=chunk) - The weighted average remaining life of intangible assets is approximately **3 years**[130](index=130&type=chunk) Intangible Assets (in thousands) | Item | March 31, 2023 Gross Amount | March 31, 2023 Accumulated Amortization | December 31, 2022 Gross Amount | December 31, 2022 Accumulated Amortization | | :--------------------------------------- | :-------------------------- | :-------------------------------------- | :-------------------------- | :-------------------------------------- | | Core deposit intangible asset | $6,411 | $4,654 | $6,411 | $4,539 | | Customer list | $535 | $491 | $535 | $476 | | Total | $6,946 | $5,145 | $6,946 | $5,015 | [Note 9. Pledged Collateral Related to Securities Sold Under Repurchase Agreements](index=37&type=section&id=Note%209.%20Pledged%20Collateral%20Related%20to%20Securities%20Sold%20Under%20Repurchase%20Agreements) - Total pledged collateral increased to **$62.536 million** at March 31, 2023, from **$60.914 million** at December 31, 2022[135](index=135&type=chunk) Pledged Collateral for Repurchase Agreements (in thousands) | Security Type | March 31, 2023 | December 31, 2022 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | U.S. government treasuries | $14,506 | $12,555 | | U.S. government agencies | $39,229 | $39,226 | | U.S. government mortgage-backed securities | $8,801 | $9,133 | | Total pledged collateral | $62,536 | $60,914 | [Note 10. Borrowings](index=37&type=section&id=Note%2010.%20Borrowings) - The Company had no short-term FHLB advances as of March 31, 2023, compared to **$35.4 million** at December 31, 2022[136](index=136&type=chunk) - The Company borrowed **$75 million** under the new Bank Term Funding Program (BTFP) as of March 31, 2023, utilizing it due to favorable lending terms[137](index=137&type=chunk)[229](index=229&type=chunk) [Note 11. Derivative Financial Instruments](index=38&type=section&id=Note%2011.%20Derivative%20Financial%20Instruments) - The Company uses interest rate swaps as fair value hedges to convert long-term fixed-rate loans to floating rates, mitigating interest rate risk[139](index=139&type=chunk) Interest Rate Swaps (in thousands) | Item | Notional Amount | Fair Value | Balance Sheet Category | | :--------------------------------------- | :---------------- | :--------- | :--------------------- | | March 31, 2023 Interest rate swaps | $9,218 | $901 | Other assets | | December 31, 2022 Interest rate swaps | $9,314 | $1,096 | Other assets | [Note 12. Income Taxes](index=38&type=section&id=Note%2012.%20Income%20Taxes) - The change in deferred income taxes since December 31, 2022, is primarily due to a decrease in unrealized losses on investment securities[142](index=142&type=chunk) [Note 13. Commitments, Contingencies and Concentrations of Credit Risk](index=38&type=section&id=Note%2013.%20Commitments,%20Contingencies%20and%20Concentrations%20of%20Credit%20Risk) - The Company has **$1.7 million** remaining on a **$4.0 million** commitment for a branch remodel in Ames, Iowa, as of March 31, 2023[143](index=143&type=chunk) [Note 14. Regulatory Matters](index=38&type=section&id=Note%2014.%20Regulatory%20Matters) - The Company and its Banks met all capital adequacy requirements and were considered 'well capitalized' as of March 31, 2023[144](index=144&type=chunk)[169](index=169&type=chunk)[236](index=236&type=chunk) - The Company's capital ratios were sufficient to meet the Basel III capital conservation buffer requirements as of March 31, 2023[149](index=149&type=chunk) Consolidated Capital Ratios (as of March 31, 2023, in thousands) | Capital Ratio | Actual Amount | Actual Ratio | For Capital Adequacy Purposes Amount | For Capital Adequacy Purposes Ratio | | :--------------------------------------- | :-------------------------- | :----------- | :----------------------------------- | :---------------------------------- | | Total capital (to risk-weighted assets) | $216,793 | 14.2% | $159,936 | 10.50% | | Tier 1 capital (to risk-weighted assets) | $199,391 | 13.1% | $129,472 | 8.50% | | Tier 1 capital (to average assets) | $199,391 | 9.1% | $87,463 | 4.00% | | Common equity tier 1 capital (to risk-weighted assets) | $199,391 | 13.1% | $106,624 | 7.00% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial condition and operational results, covering KPIs, accounting policies, and key financial statements [Overview](index=42&type=section&id=Overview) - Ames National Corporation is a bank holding company operating six bank subsidiaries in Iowa, offering commercial and consumer loans, deposits, and wealth management services[152](index=152&type=chunk)[153](index=153&type=chunk) - The Company's primary strategy focuses on local decision-making and operational efficiency to gain a competitive advantage and maximize profitability[154](index=154&type=chunk) - Net income for Q1 2023 was **$3.2 million** (**$0.36 per share**), down from **$5.1 million** (**$0.57 per share**) in Q1 2022, primarily due to higher interest expense on deposits and other borrowed funds[156](index=156&type=chunk) [Challenges](index=43&type=section&id=Challenges) - Management has identified potential future negative impacts from events or circumstances, which are detailed in the Company's most recent Annual Report on Form 10-K[159](index=159&type=chunk) [Key Performance Indicators and Industry Results](index=43&type=section&id=Key%20Performance%20Indicators%20and%20Industry%20Results) - Return on assets decreased to **0.60%** in Q1 2023 from **0.96%** in Q1 2022, and return on equity decreased to **8.36%** from **10.28%**, both primarily due to lower net income[164](index=164&type=chunk)[165](index=165&type=chunk) - The net interest margin declined to **2.23%** in Q1 2023 from **2.55%** in Q1 2022, and the efficiency ratio increased to **70.70%** from **59.72%**, indicating reduced profitability and operational efficiency[166](index=166&type=chunk)[167](index=167&type=chunk) Selected Key Performance Indicators (Company vs. Industry) | Indicator | 3 Months Ended March 31, 2023 (Company) | 3 Months Ended March 31, 2022 (Company) | Years Ended December 31, 2022 (Industry*) | | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | :---------------------------------------- | | Return on assets | 0.60% | 0.90% | 1.15% | | Return on equity | 8.36% | 11.43% | 12.01% | | Net interest margin | 2.23% | 2.55% | 3.45% | | Efficiency ratio | 70.70% | 61.41% | 61.36% | | Capital ratio | 7.21% | 7.90% | 10.51% | *Latest available data [Critical Accounting Policies](index=45&type=section&id=Critical%20Accounting%20Policies) - The Company's critical accounting policies include the allowance for credit losses (now under CECL methodology), fair value assessment for investment securities, and goodwill impairment[171](index=171&type=chunk) - Under CECL, the allowance for credit losses is an estimate of all expected credit losses over the contractual life of the loan portfolio, determined through asset-specific and pooled components[172](index=172&type=chunk)[176](index=176&type=chunk) - Fair value declines in available-for-sale securities are evaluated for credit losses, with management assessing intent and likelihood of selling before recovery[184](index=184&type=chunk) - Goodwill impairment is tested annually, with no impairment found as of March 31, 2023, but future economic conditions could impact this assessment[186](index=186&type=chunk) [Non-GAAP Financial Measures](index=49&type=section&id=Non-GAAP%20Financial%20Measures) - The report includes non-GAAP financial measures, such as net interest income and net interest margin on a fully taxable equivalent (FTE) basis, to provide additional insights into financial performance[188](index=188&type=chunk) Reconciliation of Net Interest Income and Annualized Net Interest Margin on an FTE Basis (in thousands) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net interest income (GAAP) | $11,669 | $13,152 | | Tax-equivalent adjustment | $163 | $180 | | Net interest income on an FTE basis (non-GAAP) | $11,832 | $13,332 | | Average interest-earning assets | $2,120,520 | $2,090,628 | | Net interest margin (FTE) | 2.23% | 2.55% | [Income Statement Review](index=50&type=section&id=Income%20Statement%20Review) - Net interest income (FTE) decreased to **$11.832 million** in Q1 2023 from **$13.332 million** in Q1 2022, with the net interest margin declining from **2.55%** to **2.23%**[199](index=199&type=chunk)[200](index=200&type=chunk) - Interest income increased by **22%** (**$3.1 million**) in Q1 2023 compared to Q1 2022, driven by higher average rates and growth in loan and investment portfolios[202](index=202&type=chunk) - Interest expense surged by **500%** (**$4.6 million**) in Q1 2023 compared to Q1 2022, primarily due to increased market rates on deposits following Federal Open Market Committee rate hikes[202](index=202&type=chunk) - A credit loss expense of **$212 thousand** was recognized in Q1 2023 (vs. a **$127 thousand** benefit in Q1 2022), mainly due to a charge-off in the agriculture loan portfolio[203](index=203&type=chunk) - Noninterest income decreased by **12%** to **$2.3 million** in Q1 2023, while noninterest expense increased by **5%** to **$9.8 million**, leading to an increased efficiency ratio of **70.7%**[204](index=204&type=chunk) [Balance Sheet Review](index=53&type=section&id=Balance%20Sheet%20Review) - Total assets increased by **$54.7 million** to **$2.19 billion** as of March 31, 2023, primarily due to an increase in interest-bearing deposits in financial institutions and federal funds sold, funded by an increase in other borrowings[207](index=207&type=chunk) - The investment portfolio increased by **$2.5 million** to **$788.9 million**, mainly due to a decline in unrealized losses, partially offset by maturities[207](index=207&type=chunk) - The loan portfolio, net of allowance for credit losses, slightly decreased to **$1.22 billion** at March 31, 2023, from **$1.23 billion** at December 31, 2022, driven by a decrease in agricultural operating loans[216](index=216&type=chunk) - Total deposits remained stable at **$1.90 billion**, with a shift from noninterest-bearing and savings accounts to higher-yielding interest-bearing checking and time deposits[217](index=217&type=chunk) - Uninsured deposits represented approximately **18%** of total deposits as of March 31, 2023[217](index=217&type=chunk) [Asset Quality Review and Credit Risk Management](index=55&type=section&id=Asset%20Quality%20Review%20and%20Credit%20Risk%20Management) - The Company's problem loans (nonaccrual and 90+ days past due) as a percentage of total loans decreased to **0.95%** at March 31, 2023, from **1.19%** at December 31, 2022[219](index=219&type=chunk) - Substandard-Impaired loans decreased by **$3.6 million** to **$10.8 million** at March 31, 2023, primarily due to payments received[220](index=220&type=chunk) - Nonaccrual loans decreased to **$11.4 million** at March 31, 2023, from **$14.7 million** at December 31, 2022, also due to payments received[221](index=221&type=chunk) - The allowance for credit losses as a percentage of outstanding loans increased to **1.31%** at March 31, 2023, from **1.26%** at December 31, 2022, mainly due to ASC 326 implementation[224](index=224&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company maintains a satisfactory level of liquidity, with liquid assets totaling **$87.2 million** at March 31, 2023, up from **$27.9 million** at December 31, 2022[228](index=228&type=chunk) - Available liquidity sources include **$314.4 million** in FHLB lines of credit (no outstanding advances), **$102.2 million** in federal funds borrowing capacity, and **$439.1 million** in unpledged available-for-sale securities and interest-bearing deposits[228](index=228&type=chunk)[230](index=230&type=chunk) - The Company utilized **$75 million** from the Bank Term Funding Program (BTFP) as of March 31, 2023, due to favorable lending terms[229](index=229&type=chunk) - Total stockholders' equity increased to **$159.1 million** at March 31, 2023, from **$149.1 million** at December 31, 2022, primarily due to decreased unrealized losses on the investment portfolio and retained net income[236](index=236&type=chunk) [Forward-Looking Statements and Business Risks](index=59&type=section&id=Forward-Looking%20Statements%20and%20Business%20Risks) - The report contains forward-looking statements subject to numerous risks and uncertainties, including the impact of inflation, rising interest rates, competitive pressures, changes in credit risks, governmental regulations, and market conditions[237](index=237&type=chunk) - Investors are cautioned not to place undue reliance on forward-looking statements, which are qualified by inherent business risks and speak only as of their making date[237](index=237&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that quantitative and qualitative disclosures about market risk are not applicable for this quarterly report - The Company states that quantitative and qualitative disclosures about market risk are not applicable for this reporting period[239](index=239&type=chunk) [Item 4. Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting - The Company's management concluded that disclosure controls and procedures were effective as of March 31, 2023[239](index=239&type=chunk) - No material changes in internal control over financial reporting occurred during the last fiscal quarter[240](index=240&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) This section indicates that there are no legal proceedings applicable to the Company for the reporting period - Legal proceedings are not applicable for this reporting period[241](index=241&type=chunk) [Item 1.A. Risk Factors](index=60&type=section&id=Item%201.A.%20Risk%20Factors) Management believes there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - No material changes in risk factors have occurred since the Company's Form 10-K filing on March 10, 2023[241](index=241&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's stock repurchase plan, indicating no shares were repurchased during Q1 2023, with 100,000 shares remaining - The Company approved a Stock Repurchase Plan in November 2022 for up to **100,000 shares**[242](index=242&type=chunk) - No shares were purchased under the plan during the three months ended March 31, 2023[243](index=243&type=chunk) - As of March 31, 2023, **100,000 shares** remained available for purchase under the plan[242](index=242&type=chunk)[243](index=243&type=chunk) [Item 3. Defaults Upon Senior Securities](index=61&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there are no defaults upon senior securities applicable to the Company for the reporting period - Defaults upon senior securities are not applicable for this reporting period[242](index=242&type=chunk) [Item 4. Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable for this reporting period[242](index=242&type=chunk) [Item 5. Other Information](index=61&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information applicable to the Company for the reporting period - No other information is applicable for this reporting period[242](index=242&type=chunk) [Item 6. Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications of executive officers and Inline XBRL documents - Exhibits include certifications of Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2)[244](index=244&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are also filed as exhibits[245](index=245&type=chunk) [Signatures](index=63&type=section&id=Signatures) The report is duly signed on behalf of Ames National Corporation by its Chief Executive Officer and President, John P. Nelson, and Chief Financial Officer, John L. Pierschbacher - The report is signed by John P. Nelson, Chief Executive Officer and President, and John L. Pierschbacher, Chief Financial Officer[248](index=248&type=chunk)