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)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [Mark One] ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number 0-32637 AMES NATIONAL CORPORATION (Exact Name of Registrant as Specified in Its Charter) Io ...

Stock Repurchase - The Company approved a Stock Repurchase Plan on November 14, 2022, allowing for the repurchase of up to 100,000 shares of common stock[153] - The Company purchased 100,000 shares in 2022 and 30,580 shares in 2021 under the Stock Repurchase Plans[153] Financial Performance - Net income for 2022 was $19,293,000, a decrease of 19.5% from $23,913,000 in 2021[292] - Basic and diluted earnings per share decreased to $2.14 in 2022 from $2.62 in 2021, a decline of 18.3%[290] - Other comprehensive loss before tax was $87,376,000 in 2022, significantly higher than $17,545,000 in 2021[292] - The Company reported a net cash provided by operating activities of $21,231,000 in 2022, down from $30,470,000 in 2021[297] - The Company reported cash payments for interest income taxes of $8,560,000 in 2022, compared to $4,969,000 in 2021, indicating a significant increase of 72%[299] - Total interest and dividend income increased to $61,553,000 in 2022, up 1.8% from $60,482,000 in 2021[290] - Net interest income after provision for loan losses was $54,118,000, down from $56,754,000 in 2021, reflecting a decrease of 4.6%[290] - Noninterest income decreased to $9,687,000 in 2022, down 8.1% from $10,537,000 in 2021[290] - Total noninterest expense rose to $38,644,000, an increase of 5.5% from $36,618,000 in 2021[290] - The provision for income taxes was $5,868,000 in 2022, compared to $6,760,000 in 2021, indicating a decrease of 13.2%[290] Assets and Liabilities - Total assets decreased slightly to $2,134,926 thousand in 2022 from $2,137,041 thousand in 2021[287] - Total liabilities decreased to $1,985,828 thousand in 2022 from $1,929,263 thousand in 2021[287] - Total deposits increased to $1,897,957 thousand in 2022 from $1,878,019 thousand in 2021[287] - Retained earnings increased to $179,931 thousand in 2022 from $170,377 thousand in 2021[287] - The Company reported a decline in securities available-for-sale to $786,438 thousand in 2022 from $831,003 thousand in 2021[287] Loan Losses and Provisions - The allowance for loan losses was $15.7 million as of December 31, 2022, consisting of $0.1 million in specific reserves and $15.6 million in general reserves[283] - The allowance for loan losses decreased to $15,697 thousand in 2022 from $16,621 thousand in 2021, indicating a reduction of about 5.5%[346] - The provision for loan losses was a credit of $874 thousand in 2022 compared to a credit of $757 thousand in 2021, showing an increase in recoveries[346] - The provision for loan losses in 2022 was $874,000,000, compared to $757,000,000 in 2021, indicating a rise of approximately 15.5%[347] Loans and Credit Quality - Total loans receivable increased to $1,226,011 thousand in 2022 from $1,144,108 thousand in 2021, representing a growth of approximately 7.2%[341] - The commercial real estate loan portfolio includes $539,053 thousand in 2022, up from $515,367 thousand in 2021, reflecting an increase of approximately 4.6%[341] - The company's real estate loans for 1 to 4 family residential properties rose to $285,045 thousand in 2022 from $246,745 thousand in 2021, a growth of about 15.5%[341] - The company's agricultural real estate loans increased to $159,419 thousand in 2022 from $153,457 thousand in 2021, marking a growth of approximately 3.9%[341] - The commercial loan portfolio includes $77,140 thousand in 2022, slightly up from $75,482 thousand in 2021, reflecting a modest increase of about 2.2%[341] - The total performing loans for 2022 amounted to $301,215 thousand, up from $261,842 thousand in 2021, representing an increase of around 15%[357] - Non-performing loans decreased to $826 thousand in 2022 from $1,177 thousand in 2021, indicating a reduction of approximately 29.8%[357] - The company tracks credit quality indicators, including trends in risk ratings, classified loans, net charge-offs, and nonperforming loans[351] Capital and Reserves - The Company has total deferred tax assets of $25.129 million as of December 31, 2022, compared to $5.677 million in 2021[401] - The Company has established liabilities of approximately $798 thousand for estimated credit losses related to off-balance-sheet commitments as of December 31, 2022[406] - The consolidated total capital to risk-weighted assets was $215,799 million, with a ratio of 14.1%[411] - The Tier 1 capital to risk-weighted assets for the consolidated entity was $199,069 million, representing a ratio of 13.0%[411] - The common equity tier 1 capital to risk-weighted assets was $199,069 million, with a ratio of 13.0%[411] Securities and Investments - The amortized cost of debt securities available-for-sale as of December 31, 2022, was $869.996 million, with an estimated fair value of $786.438 million, reflecting unrealized losses of $83.600 million[334] - Proceeds from sales of securities available-for-sale in 2022 amounted to $10.548 million, a significant increase from $622 thousand in 2021[337] - The total gross unrealized losses on securities available for sale amounted to $83,600 million in 2022, compared to $52,117 million in 2021, indicating a significant increase in unrealized losses[339] - The fair value of U.S. government mortgage-backed securities was $116,741,000 in 2022, down from $149,601,000 in 2021[421] Miscellaneous - The Company has no equity compensation plans for directors, executives, or employees[152] - The Company disclaims any responsibility to update forward-looking statements provided in the document[276] - The Company has determined that its business comprises one operating segment: banking, which generates revenues through various lending and wealth management services[301] - The Company completed a quantitative assessment of goodwill as of October 1, 2022, indicating no impairment, with further evaluations necessary if circumstances change[317] - The Company does not use derivatives for trading or speculative purposes, focusing instead on hedging relationships[324]