PART I. FINANCIAL INFORMATION [Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents Ames National Corporation's unaudited consolidated financial statements for the three and six-month periods ended June 30, 2022, with comparative prior period data [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2022, total assets slightly decreased to $2.131 billion from $2.137 billion at December 31, 2021, primarily due to a significant reduction in accumulated other comprehensive income, while total deposits increased Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 (unaudited) | December 31, 2021 (audited) | | :--- | :--- | :--- | | **Total Assets** | **$2,130,973** | **$2,137,041** | | Total cash and cash equivalents | $74,678 | $89,129 | | Securities available-for-sale | $828,389 | $831,003 | | Loans receivable, net | $1,140,609 | $1,144,108 | | **Total Liabilities** | **$1,973,622** | **$1,929,263** | | Total deposits | $1,926,140 | $1,878,019 | | **Total Stockholders' Equity** | **$157,351** | **$207,778** | | Accumulated other comprehensive income (loss) | $(49,718) | $2,864 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income for Q2 2022 decreased to $4.2 million ($0.46 per share) from $5.9 million ($0.64 per share) in Q2 2021, primarily due to lower interest income from reduced PPP loan fees and higher income tax expense Income Statement Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $13,636 | $14,172 | $26,788 | $27,836 | | Provision (credit) for loan losses | $(59) | $(20) | $(186) | $(446) | | Noninterest Income | $2,379 | $2,636 | $4,932 | $5,142 | | Noninterest Expense | $9,851 | $9,414 | $19,230 | $18,420 | | **Net Income** | **$4,193** | **$5,879** | **$9,338** | **$11,902** | | **Basic and diluted EPS** | **$0.46** | **$0.64** | **$1.03** | **$1.30** | | Dividends declared per share | $0.27 | $0.26 | $0.54 | $0.51 | [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The company reported a comprehensive loss of $14.6 million for Q2 2022 and $43.2 million for the first six months of 2022, driven by significant unrealized losses on available-for-sale securities due to rising interest rates Comprehensive Income (Loss) (in thousands) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $4,193 | $5,879 | $9,338 | $11,902 | | Other comprehensive income (loss), net of tax | $(18,779) | $2,262 | $(52,582) | $(6,614) | | **Comprehensive income (loss)** | **$(14,586)** | **$8,141** | **$(43,244)** | **$5,288** | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased from $207.8 million at year-end 2021 to $157.4 million at June 30, 2022, primarily due to a $52.6 million other comprehensive loss from unrealized securities losses - Key changes in stockholders' equity for the six months ended June 30, 2022 include: net income of **$9.3 million**, other comprehensive loss of **$52.6 million**, cash dividends of **$4.9 million**, and stock repurchases of **$2.3 million**[19](index=19&type=chunk) - The company repurchased and retired **100,000 shares** of common stock for **$2.3 million** during the second quarter of 2022[18](index=18&type=chunk)[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2022, net cash provided by operating activities was $11.3 million, net cash used in investing activities was $63.5 million, and net cash provided by financing activities was $37.8 million, resulting in a net decrease in cash of $14.5 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,260 | $17,397 | | Net cash (used in) investing activities | $(63,528) | $(146,855) | | Net cash provided by financing activities | $37,817 | $106,360 | | **Net decrease in cash and cash equivalents** | **$(14,451)** | **$(23,098)** | | Cash and cash equivalents, beginning | $89,129 | $173,097 | | Cash and cash equivalents, ending | $74,678 | $149,999 | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures supporting the consolidated financial statements, covering accounting policies, debt securities, loan portfolios, credit quality, regulatory capital, and commitments [Note 1: Significant Accounting Policies](index=10&type=section&id=Note%201%3A%20Significant%20Accounting%20Policies) The financial statements adhere to SEC rules and GAAP, with goodwill tested annually for impairment, and the company is preparing for the adoption of ASU No. 2016-13 (CECL) in December 2022 - The company will adopt ASU No. 2016-13 (CECL) for interim and annual periods beginning after December 15, 2022, with the impact on financial statements currently unknown[30](index=30&type=chunk) - A quantitative assessment of goodwill as of October 1, 2021, indicated no impairment, and no adverse changes were noted as of June 30, 2022[29](index=29&type=chunk) [Note 6: Debt Securities](index=16&type=section&id=Note%206%3A%20Debt%20Securities) As of June 30, 2022, the company held $828.4 million in available-for-sale debt securities with gross unrealized losses of $66.2 million, which management considers temporary due to rising interest rates Debt Securities Available-for-Sale (in thousands) | Category | Amortized Cost (June 30, 2022) | Estimated Fair Value (June 30, 2022) | Gross Unrealized Losses (June 30, 2022) | | :--- | :--- | :--- | :--- | | U.S. government treasuries | $224,177 | $208,130 | $(16,048) | | U.S. government agencies | $116,945 | $110,149 | $(6,809) | | U.S. government mortgage-backed | $144,619 | $130,907 | $(13,728) | | State and political subdivisions | $322,916 | $298,733 | $(24,303) | | Corporate bonds | $85,768 | $80,470 | $(5,322) | | **Total** | **$894,425** | **$828,389** | **$(66,210)** | - Securities with a carrying value of **$216.3 million** were pledged on public deposits and for other purposes as of June 30, 2022[55](index=55&type=chunk) [Note 7: Loans Receivable and Credit Disclosures](index=18&type=section&id=Note%207%3A%20Loans%20Receivable%20and%20Credit%20Disclosures) The net loan portfolio remained stable at $1.14 billion, with a slight decrease in the allowance for loan losses and an improvement in impaired and nonaccrual loans, indicating stable credit quality Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Real estate - commercial | $515,250 | $515,367 | | Real estate - 1 to 4 family | $261,690 | $246,745 | | Real estate - agricultural | $158,897 | $153,457 | | Agricultural | $91,929 | $111,881 | | Commercial | $72,065 | $75,482 | | **Total Loans** | **$1,156,678** | **$1,160,667** | - The allowance for loan losses was **$16.42 million** as of June 30, 2022, compared to **$16.62 million** as of December 31, 2021[61](index=61&type=chunk)[66](index=66&type=chunk) - Total impaired loans decreased from **$12.3 million** at year-end 2021 to **$11.2 million** at June 30, 2022, while nonaccrual loans also decreased from **$12.3 million** to **$11.5 million**[74](index=74&type=chunk)[78](index=78&type=chunk) [Note 12: Income Taxes](index=31&type=section&id=Note%2012%3A%20Income%20Taxes) A change in Iowa state law reducing the bank franchise tax rate resulted in a one-time, non-recurring increase in income tax expense of $780,000 for the three and six months ended June 30, 2022 - A newly enacted reduction in the Iowa bank franchise tax rate caused a non-recurring increase in income tax expense of **$780,000** in Q2 2022 due to the revaluation of deferred tax assets[102](index=102&type=chunk) [Note 14: Regulatory Matters](index=31&type=section&id=Note%2014%3A%20Regulatory%20Matters) As of June 30, 2022, the Company and its subsidiary banks met all regulatory capital requirements and were classified as well-capitalized, with consolidated Tier 1 capital to risk-weighted assets ratio at 13.5% Consolidated Capital Ratios (as of June 30, 2022) | Capital Ratio | Actual Ratio | Minimum for Adequacy | | :--- | :--- | :--- | | Total capital (to risk-weighted assets) | 14.7% | 10.50% | | Tier 1 capital (to risk-weighted assets) | 13.5% | 8.50% | | Common equity tier 1 capital | 13.5% | 7.00% | | Tier 1 capital (to average assets) | 8.7% | 4.00% | - The Company and its subsidiary banks were considered **well-capitalized** under the regulatory framework for prompt corrective action as of June 30, 2022[104](index=104&type=chunk)[107](index=107&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting a decrease in Q2 2022 net income due to lower PPP loan fees and a one-time tax expense, a reduction in stockholders' equity from unrealized securities losses, and stable asset quality [Income Statement Review](index=41&type=section&id=Income%20Statement%20Review) For the six months ended June 30, 2022, net interest income decreased due to reduced PPP loan fees, noninterest income slightly fell, noninterest expense increased from technology investments, and income tax expense rose due to a one-time adjustment - Net interest margin (FTE) decreased to **2.57%** in Q2 2022 from **2.84%** in Q2 2021[149](index=149&type=chunk) - Interest income for Q2 2022 declined, primarily because PPP loan fees recognized were only **$15 thousand**, compared to **$1.4 million** in Q2 2021[117](index=117&type=chunk)[151](index=151&type=chunk) - The effective tax rate for Q2 2022 was **33%**, up from **21%** in Q2 2021, due to a **$780,000** adjustment for a reduction in future Iowa bank franchise tax rates[154](index=154&type=chunk) [Balance Sheet Review](index=47&type=section&id=Balance%20Sheet%20Review) Total assets decreased by $6.1 million to $2.13 billion at June 30, 2022, with the investment portfolio holding $66.2 million in temporary unrealized losses, while the loan portfolio remained stable and total deposits grew - The investment portfolio had gross unrealized losses of **$66.2 million** as of June 30, 2022, which are considered temporary and caused by the rising interest rate environment[171](index=171&type=chunk) - The largest exposure to any single municipality is **$6.0 million** in Storm Lake, Iowa general obligation bonds[172](index=172&type=chunk) - Total deposits increased by **$48.1 million** since December 31, 2021, reaching **$1.93 billion**[179](index=179&type=chunk) [Asset Quality Review and Credit Risk Management](index=49&type=section&id=Asset%20Quality%20Review%20and%20Credit%20Risk%20Management) Asset quality remained stable, with problem loans as a percentage of total loans improving to 1.00% at June 30, 2022, impaired loans decreasing, and the allowance for loan losses at 1.42% of outstanding loans - The level of problem loans as a percentage of total loans was **1.00%** at June 30, 2022, down from **1.11%** at December 31, 2021[180](index=180&type=chunk) - Impaired loans decreased to **$11.2 million** from **$12.3 million** at year-end 2021, primarily due to payments on nonaccrual loans[181](index=181&type=chunk) - The allowance for loan losses as a percentage of outstanding loans was **1.42%** as of June 30, 2022[186](index=186&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity and capital are satisfactory, supported by core deposits and available FHLB advances and federal funds lines, despite a $50.4 million decrease in stockholders' equity due to unrealized investment losses, which do not impact regulatory capital - As of June 30, 2022, available liquidity sources included **$302.1 million** in FHLB borrowing capacity and **$98.5 million** in federal funds lines, with no outstanding balances on either[191](index=191&type=chunk) - Total stockholders' equity decreased by **$50.4 million** since Dec 31, 2021, to **$157.4 million**, primarily due to an increase in unrealized losses on the investment portfolio[199](index=199&type=chunk) - The parent company's liquidity is dependent on dividends from its subsidiary banks, which amounted to **$5.1 million** for the first six months of 2022[196](index=196&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with management's mitigation strategies remaining consistent from 2021, though high inflation or governmental actions could cause market interest rates to deviate from historical norms - The Company's main market risk is interest rate risk, and management's approach to managing this risk has not significantly changed from 2021[202](index=202&type=chunk) [Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the last fiscal quarter - Management concluded that the Company's disclosure controls and procedures are **effective** as of June 30, 2022[203](index=203&type=chunk) - No changes in internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls[204](index=204&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) Not applicable - There are no legal proceedings to report[204](index=204&type=chunk) [Risk Factors](index=54&type=section&id=Item%201.A.%20Risk%20Factors) Management does not believe there have been any material changes in the risk factors previously disclosed in the Company's Form 10-K filed on March 11, 2022 - No material changes in risk factors from the Annual Report on Form 10-K filed on March 11, 2022[204](index=204&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company completed its November 2021 stock repurchase plan during Q2 2022, repurchasing all 100,000 authorized shares by June 30, 2022 Common Stock Repurchases (Q2 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1-30, 2022 | - | $- | | May 1-31, 2022 | 43,247 | $23.16 | | June 1-30, 2022 | 56,753 | $22.88 | | **Total** | **100,000** | | - The stock repurchase plan approved in November 2021 for up to **100,000 shares** was completed as of June 30, 2022[206](index=206&type=chunk) [Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including CEO and CFO certifications and Inline XBRL data files - Exhibits filed include CEO and CFO certifications (**31.1, 31.2, 32.1, 32.2**) and Inline XBRL documents (**101, 104**)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited statements show total assets grew to $2.10 billion, driven by deposit growth and higher net income [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$2,096,396** | **$1,975,648** | | Cash and equivalents | $148,393 | $191,523 | | Securities available-for-sale | $765,423 | $596,999 | | Loans receivable, net | $1,126,059 | $1,129,505 | | Goodwill | $12,424 | $12,424 | | **Total Liabilities** | **$1,886,016** | **$1,766,161** | | Total deposits | $1,836,708 | $1,716,446 | | **Total Stockholders' Equity** | **$210,380** | **$209,487** | - Total assets grew by **$120.7 million**, or 6.1%, from December 31, 2020 to September 30, 2021, primarily driven by a **$120.3 million increase in total deposits**[5](index=5&type=chunk) [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $14,652 | $14,160 | $42,488 | $40,886 | | Provision (credit) for loan losses | ($94) | $541 | ($540) | $4,424 | | **Net income** | **$6,714** | **$5,672** | **$18,616** | **$13,654** | | **Basic and diluted EPS** | **$0.74** | **$0.62** | **$2.04** | **$1.49** | | Dividends declared per share | $0.52 | $0.25 | $1.03 | $0.50 | - The significant increase in net income was heavily influenced by a **reversal of loan loss provisions in 2021** compared to substantial provisions in 2020[9](index=9&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive Income (in thousands) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income | $6,714 | $5,672 | $18,616 | $13,654 | | Other comprehensive income (loss), net of tax | ($1,148) | $1,496 | ($7,762) | $11,374 | | **Comprehensive income** | **$5,566** | **$7,168** | **$10,854** | **$25,028** | - Comprehensive income for the first nine months of 2021 was significantly lower than net income due to a **$7.76 million after-tax unrealized loss on securities**[13](index=13&type=chunk) [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) - For the nine months ended September 30, 2021, stockholders' equity increased slightly to **$210.4 million**, as net income was largely offset by dividends and unrealized losses[18](index=18&type=chunk) - The company repurchased and retired **24,603 shares** of its common stock for **$571 thousand** during the first nine months of 2021[17](index=17&type=chunk)[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Cash Flows Highlights (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,738 | $21,322 | | Net cash (used in) investing activities | ($134,692) | ($178,202) | | Net cash provided by financing activities | $111,742 | $145,013 | | **Net increase (decrease) in cash** | **$788** | **($11,867)** | - Cash from financing activities decreased primarily due to a **smaller increase in deposits in 2021 ($120.4M)** compared to 2020 ($167.3M)[21](index=21&type=chunk) - Cash used in investing activities decreased, mainly because the **net increase in loans was significantly lower in 2021** compared to 2020[21](index=21&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - The company has delayed the adoption of the new credit loss standard (CECL) until **interim and annual periods beginning after December 15, 2022**[29](index=29&type=chunk) - Management concluded there was **no goodwill impairment** as of September 30, 2021[28](index=28&type=chunk) - As of September 30, 2021, **substantially all COVID-19 related loan modifications have returned to normal payment status**[88](index=88&type=chunk) Regulatory Capital Ratios (Consolidated) as of September 30, 2021 | Ratio | Actual | For Capital Adequacy | To Be Well Capitalized | | :--- | :--- | :--- | :--- | | Total capital (to risk- weighted assets) | 15.3% | 10.50% | N/A | | Tier 1 capital (to risk- weighted assets) | 14.0% | 8.50% | N/A | | Tier 1 capital (to average- assets) | 9.2% | 4.00% | N/A | | Common equity tier 1 capital | 14.0% | 7.00% | N/A | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Strong Q3 2021 performance was driven by lower interest expense and a credit for loan losses, though the net interest margin compressed [Overview and Performance](index=32&type=section&id=Overview%20and%20Performance) - Net income for Q3 2021 was **$6.7 million ($0.74 per share)**, up from $5.7 million ($0.62 per share) in Q3 2020[118](index=118&type=chunk) - The earnings increase was primarily driven by **lower interest expense and a reversal of the provision for loan losses**[118](index=118&type=chunk) [Challenges and COVID-19 Status, Risks and Uncertainties](index=33&type=section&id=Challenges%20and%20COVID-19%20Status%2C%20Risks%20and%20Uncertainties) - Management identifies ongoing risks from the COVID-19 pandemic and **prolonged low market interest rates**[122](index=122&type=chunk) - As of September 30, 2021, the company held 227 Paycheck Protection Program (PPP) loans with an outstanding balance of **$14.8 million**[122](index=122&type=chunk) - Substantially all **COVID-19 related loan modifications have returned to normal payment status** as of September 30, 2021[123](index=123&type=chunk) [Key Performance Indicators](index=34&type=section&id=Key%20Performance%20Indicators) Selected Performance Indicators (Q3 2021 vs Q3 2020) | Indicator | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Return on assets (annualized) | 1.29% | 1.21% | | Return on equity (annualized) | 12.60% | 11.18% | | Net interest margin | 2.97% | 3.21% | | Efficiency ratio | 51.35% | 54.80% | [Income Statement Review](index=41&type=section&id=Income%20Statement%20Review) - For Q3 2021, net interest income increased to **$14.7 million** as a **42% decline in interest expense** more than offset lower interest income[161](index=161&type=chunk)[163](index=163&type=chunk) - A **credit for loan losses of ($94) thousand** was recorded in Q3 2021, compared to a provision of $541 thousand in Q3 2020[164](index=164&type=chunk) - Q3 2021 noninterest income decreased 4% to **$2.7 million**, primarily due to a slowdown in gains on sale of residential loans[164](index=164&type=chunk) - Q3 2021 noninterest expense decreased 4% to **$8.9 million**, mainly from lower salaries and benefits[165](index=165&type=chunk) [Balance Sheet Review](index=47&type=section&id=Balance%20Sheet%20Review) - Total assets increased by **$120.7 million** since year-end 2020 to **$2.1 billion**, funded by deposit growth from government stimulus[181](index=181&type=chunk) - The investment portfolio grew by **$168.4 million to $765.4 million** since year-end, as deposit growth outpaced loan growth[181](index=181&type=chunk) - The loan portfolio decreased slightly to **$1.126 billion**, primarily due to a reduction in PPP loans to **$14.8 million**[190](index=190&type=chunk) - Deposits increased to **$1.84 billion** from $1.72 billion at year-end 2020, with growth across all categories except CDs[191](index=191&type=chunk) [Asset Quality Review and Credit Risk Management](index=50&type=section&id=Asset%20Quality%20Review%20and%20Credit%20Risk%20Management) - The ratio of problem loans to total loans improved, decreasing to **1.11%** at September 30, 2021, from 1.33% at year-end 2020[195](index=195&type=chunk) - Impaired loans decreased by **$2.8 million to $12.5 million** as of September 30, 2021, due to payoffs of nonaccrual loans[196](index=196&type=chunk) - The allowance for loan losses as a percentage of outstanding loans was **1.47%** as of September 30, 2021[203](index=203&type=chunk) - Troubled Debt Restructurings (TDRs) totaled **$10.6 million** as of September 30, 2021, down from $11.3 million at year-end 2020[196](index=196&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) - Management believes the company's **liquidity and capital resources remain at a satisfactory level** to support operations[207](index=207&type=chunk) - Primary liquidity sources include core deposit growth, loan payments, and access to **$306.6 million in FHLB advances**[207](index=207&type=chunk)[208](index=208&type=chunk) - Stockholders' equity increased by **$893 thousand** since year-end 2020 to **$210.4 million**[215](index=215&type=chunk) - The company's capital levels **exceed all applicable regulatory guidelines** as of September 30, 2021[215](index=215&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with no significant change in exposure from 2020 to 2021 - The Company's main market risk is **interest rate risk** from its lending and deposit-taking activities[217](index=217&type=chunk) - Management does not believe the primary market risk exposure or its management has **changed significantly in 2021** compared to 2020[217](index=217&type=chunk) [Item 4. Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures are effective with no material changes in the last quarter - Management, including the CEO and CFO, concluded that the Company's **disclosure controls and procedures were effective**[218](index=218&type=chunk) - **No material changes** in internal control over financial reporting occurred during the last fiscal quarter[219](index=219&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that there are no applicable legal proceedings to disclose for the period - Not applicable[219](index=219&type=chunk) [Item 1.A. Risk Factors](index=55&type=section&id=Item%201.A.%20Risk%20Factors) There have been no material changes in risk factors from those disclosed in the company's Annual Report on Form 10-K - Management does not believe there have been any **material changes in the risk factors** disclosed in the Company's Form 10-K[219](index=219&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 24,603 shares in Q3 2021 under its 100,000-share repurchase plan approved in April 2021 - In April 2021, the Company approved a Stock Repurchase Plan for up to **100,000 shares** of its common stock[221](index=221&type=chunk) Share Repurchases in Q3 2021 | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Remaining Under Plan | | :--- | :--- | :--- | :--- | | July 2021 | 0 | $ - | 100,000 | | August 2021 | 0 | $ - | 100,000 | | September 2021 | 24,603 | $23.19 | 75,397 | | **Total** | **24,603** | | **75,397** | [Item 3. Defaults Upon Senior Securities](index=56&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports that there are no applicable defaults upon senior securities to disclose for the period - Not applicable[222](index=222&type=chunk) [Item 4. Mine Safety Disclosures](index=56&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports that there are no applicable mine safety disclosures - Not applicable[223](index=223&type=chunk) [Item 5. Other Information](index=56&type=section&id=Item%205.%20Other%20Information) The company reports that there is no other information to disclose for the period - Not applicable[223](index=223&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including Sarbanes-Oxley certifications and Inline XBRL data files - Exhibits filed include **CEO and CFO certifications** pursuant to Section 302 of the Sarbanes-Oxley Act and U.S.C. Section 1350[225](index=225&type=chunk) - The filing includes **Inline XBRL** Instance, Schema, Calculation, Definition, Label, and Presentation documents[225](index=225&type=chunk)

PART I. FINANCIAL INFORMATION [Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) Ames National Corporation's unaudited consolidated financial statements show asset growth to $2.09 billion and increased net income for Q2 2021, driven by deposit increases and a credit for loan losses [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to **$2.09 billion** by June 30, 2021, primarily due to increased securities available-for-sale and deposits, while loans slightly decreased Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 (unaudited) | December 31, 2020 (audited) | | :--- | :--- | :--- | | **Total Assets** | **$2,085,460** | **$1,975,648** | | Cash and equivalents | $166,172 | $191,523 | | Securities available-for-sale | $740,102 | $596,999 | | Loans receivable, net | $1,124,435 | $1,129,505 | | **Total Liabilities** | **$1,875,338** | **$1,766,161** | | Total deposits | $1,831,399 | $1,716,446 | | **Total Stockholders' Equity** | **$210,122** | **$209,487** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income significantly increased to **$5.9 million** for Q2 2021 and **$11.9 million** for the six-month period, driven by a credit for loan losses and reduced interest expense Key Performance Metrics (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $14,172 | $13,680 | $27,836 | $26,726 | | Provision (credit) for loan losses | $(20) | $1,567 | $(446) | $3,883 | | **Net Income** | **$5,879** | **$4,427** | **$11,902** | **$7,982** | | **Basic and diluted EPS** | **$0.64** | **$0.49** | **$1.30** | **$0.87** | | Dividends declared per share | $0.26 | - | $0.51 | $0.25 | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income decreased to **$8.1 million** for Q2 2021 and **$5.3 million** for the six-month period, primarily due to changes in unrealized gains/losses on securities Comprehensive Income (in thousands) | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $5,879 | $4,427 | $11,902 | $7,982 | | Other comprehensive income (loss), net of tax | $2,262 | $9,515 | $(6,614) | $9,878 | | **Comprehensive Income** | **$8,141** | **$13,942** | **$5,288** | **$17,860** | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity increased to **$210.1 million** by June 30, 2021, driven by net income but partially offset by dividends and unrealized losses on securities Reconciliation of Stockholders' Equity - Six Months Ended June 30, 2021 (in thousands) | Description | Amount | | :--- | :--- | | Balance, December 31, 2020 | $209,487 | | Net income | $11,902 | | Other comprehensive (loss) | $(6,614) | | Cash dividends declared ($0.51 per share) | $(4,653) | | **Balance, June 30, 2021** | **$210,122** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities was **$17.4 million** for the first half of 2021, with investing activities using **$123.7 million** and financing providing **$106.4 million** Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,432 | $17,925 | | Net cash (used in) investing activities | $(123,721) | $(156,984) | | Net cash provided by financing activities | $106,360 | $136,970 | | **Net increase (decrease) in cash** | **$71** | **$(2,089)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, fair value, loan and securities composition, credit quality, and regulatory capital, including CECL adoption and CBLR compliance - The Company is preparing for the adoption of **ASU No. 2016-13 (CECL)**, which will become effective for interim and annual periods beginning after **December 15, 2022**[29](index=29&type=chunk) - As of June 30, 2021, the Company had four COVID-19 related loan modifications still in the modification period with a total outstanding principal balance of **$15.3 million**, down significantly from **$45.9 million** at year-end 2020[84](index=84&type=chunk) - Two subsidiary banks, State Bank & Trust and First National Bank, had **Community Bank Leverage Ratios (CBLR)** below the **8.5%** requirement as of June 30, 2021, and are in a grace period to return to compliance[101](index=101&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 and H1 2021 financial results, highlighting increased net income, asset growth to **$2.1 billion**, improved asset quality, and the impact of COVID-19 [Overview](index=32&type=section&id=Overview) Net income for Q2 2021 increased to **$5.9 million**, primarily due to a lower provision for loan losses and reduced interest expense Q2 2021 vs Q2 2020 Performance | Metric | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Net Income | $5.9 million | $4.4 million | | EPS | $0.64 | $0.49 | - The primary drivers for the earnings increase were a **lower provision for loan losses** and a **reduction in interest expense**[114](index=114&type=chunk) [Challenges and COVID-19 Status, Risks and Uncertainties](index=33&type=section&id=Challenges%20and%20COVID-19%20Status,%20Risks%20and%20Uncertainties) The company faces COVID-19 related risks including potential loan payment defaults and impacts from low interest rates, with **$15.3 million** in loans still in deferral - Management is concerned that some customers may continue to experience decreased revenues, potentially leading to **higher loan losses and charge-offs**[118](index=118&type=chunk) - As of June 30, 2021, the company held **897 PPP loans** with an outstanding balance of **$37.6 million**[118](index=118&type=chunk) - Approximately **$15.3 million**, or **1.34% of loans**, were in payment deferral status under COVID-19 related modifications as of June 30, 2021[118](index=118&type=chunk) [Income Statement Review](index=41&type=section&id=Income%20Statement%20Review) Net interest income increased to **$27.8 million** for H1 2021, driven by a **48% decline in interest expense** and a **$446 thousand credit for loan losses** Net Interest Margin (FTE, non-GAAP) | Period | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Margin | 2.84% | 3.10% | 2.85% | 3.14% | - Interest expense for the first six months of 2021 declined by **$2.3 million (48%)** compared to 2020, primarily due to lower market interest rates[173](index=173&type=chunk) - A **($446 thousand) credit for loan losses** was recognized for the first half of 2021, compared to a **$3.9 million provision** in H1 2020, attributed to loan recoveries, a reduction in a specific reserve, and improving economic conditions[174](index=174&type=chunk) [Balance Sheet Review](index=47&type=section&id=Balance%20Sheet%20Review) Total assets grew by **$109.8 million** to **$2.1 billion**, driven by deposit growth and a **$143.1 million** increase in the investment portfolio, while the loan portfolio slightly decreased - The investment portfolio grew by **$143.1 million** to **$740.1 million**, with purchases of treasuries, mortgage-backed securities, and municipals[178](index=178&type=chunk) - The loan portfolio decreased slightly, with PPP loans declining to **$37.6 million** from **$50.9 million** at year-end; the company has **$2.3 million** in unrecognized net PPP loan fees expected to be recognized as loans are forgiven[187](index=187&type=chunk) - Deposits increased by **$115 million** to **$1.83 billion**, driven by government stimulus programs and normal customer activity[188](index=188&type=chunk) [Asset Quality Review and Credit Risk Management](index=50&type=section&id=Asset%20Quality%20Review%20and%20Credit%20Risk%20Management) Asset quality improved in H1 2021, with problem loans decreasing to **1.11%** and impaired loans falling to **$12.7 million** due to payoffs Asset Quality Indicators | Metric | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Problem Loans (% of total loans) | 1.11% | 1.33% | | Impaired Loans | $12.7 million | $15.3 million | | Troubled Debt Restructurings (TDRs) | $10.8 million | $11.3 million | | Allowance for Loan Losses (% of loans) | 1.48% | 1.50% | - The decrease in problem loans is primarily attributed to **payoffs of nonaccrual loans**[191](index=191&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$166.2 million** in liquid assets and **$244.0 million** in FHLB lines, and capital levels exceed regulatory guidelines - Liquid assets (cash and equivalents) totaled **$166.2 million** as of June 30, 2021[203](index=203&type=chunk) - The company has access to **$244.0 million** in FHLB lines of credit and a **$4 million** line with an unaffiliated bank[204](index=204&type=chunk) - Stockholders' equity as a percentage of total assets was **10.1%** at June 30, 2021, and capital levels exceed regulatory guidelines[212](index=212&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, which management believes has not significantly changed from 2020, despite COVID-19 related uncertainties - The company's main market risk is **interest rate risk** from lending and deposit-taking activities[214](index=214&type=chunk) - Management does not believe the primary market risk exposure has **not changed significantly** in 2021 compared to 2020[214](index=214&type=chunk) [Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures are effective, with no material changes to internal control over financial reporting during the last quarter - Management concluded that the Company's disclosure controls and procedures are **effective**[215](index=215&type=chunk) - **No material changes** occurred in the Company's internal control over financial reporting during the last fiscal quarter[216](index=216&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) No applicable legal proceedings were disclosed for the reporting period - **Not applicable**[216](index=216&type=chunk) [Risk Factors](index=55&type=section&id=Item%201.A.%20Risk%20Factors) Management reported no material changes to risk factors previously disclosed in the Company's Form 10-K - **No material changes** in risk factors were reported since the last Form 10-K filing[216](index=216&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=56&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 April 2021, with no shares repurchased as of June 30, 2021 - A stock repurchase plan for up to **100,000 shares** was approved in April 2021[218](index=218&type=chunk) - **No shares were purchased** under the plan during the three months ended June 30, 2021[219](index=219&type=chunk) [Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including CEO and CFO certifications and Inline XBRL data files - Exhibits include **CEO and CFO certifications** (31.1, 31.2, 32.1, 32.2) and **XBRL data files** (101, 104)[221](index=221&type=chunk)[222](index=222&type=chunk)

Financial Performance - The Company reported net income of $5,671,000, or $0.62 per share, for the three months ended September 30, 2020, an increase from $4,041,000, or $0.44 per share, for the same period in 2019[96]. - For the nine months ended September 30, 2020, net income was $13,654,000, or $1.49 per share, compared to $12,896,000, or $1.40 per share, for the same period in 2019[98]. - The Company's return on assets was 1.21% for the three months ended September 30, 2020, compared to 1.10% for the same period in 2019[112]. - The return on equity was 11.18% for the three months ended September 30, 2020, up from 8.74% for the same period in 2019[113]. - The efficiency ratio improved to 54.80% for the three months ended September 30, 2020, from 57.80% for the same period in 2019[115]. - Income tax expense for the three months ended September 30, 2020, was $1,451,000, with an effective tax rate of 20%[146]. Loan and Credit Quality - Net loan charge-offs increased to $615,000 for the three months ended September 30, 2020, compared to $314,000 for the same period in 2019[97]. - As of September 30, 2020, approximately $94.8 million, or 8.1%, of loans were in payment deferral status due to COVID-19 related modifications[108]. - Provisions for credit losses surged by $49.1 billion (382.2%) to $61.9 billion, with 61.2% of banks reporting yearly increases in provisions[121]. - The average net charge-off rate increased by 7 basis points to 0.57%, with net charge-offs rising by $2.8 billion (22.2%) year-over-year[122]. - Noncurrent loan rate increased by 15 basis points to 1.08%, with noncurrent loan balances totaling $118.3 billion, up $15.9 billion (15.5%) from the previous quarter[123]. - The allowance for loan losses as a percentage of outstanding loans rose to 1.35% in 2020 from 1.19% in 2019[179]. - Problem loans as a percentage of total loans increased to 1.44% in 2020 from 0.48% in 2019, indicating rising credit risk[168]. - Impaired loans surged to $16,388,000 in 2020, up from $4,788,000 in 2019, a significant increase of 242%[169]. - The agricultural real estate and operating loan portfolio classifications showed elevated watch and special mention loans totaling $58,653,000 in 2020, up from $48,028,000 in 2019[177]. - As of September 30, 2020, the allowance for loan losses increased due to heightened risks from the COVID-19 pandemic, with expectations for further increases if economic conditions worsen[180]. Income and Expenses - Net interest income decreased by $7.6 billion (5.4%) year-over-year to $131.5 billion, marking the third consecutive quarterly decline[118]. - Noninterest income increased by $4.6 billion (6.9%) to $70.8 billion, driven by higher trading revenue, which rose by $6.7 billion (80.2%) and net gains on loan sales, which increased by $4.1 billion (110.8%)[119]. - Noninterest expense rose to $122.3 billion, up $7.2 billion (6.2%) from a year ago, with salary and employee benefits increasing by $2.7 billion (4.8%) and goodwill impairment charges rising by $2.5 billion[120]. - Noninterest income increased by 32% to $2,795,000 for the three months ended September 30, 2020, driven by gains on loan sales and refinancing volume[144]. - Noninterest expense totaled $9,291,000 for the three months ended September 30, 2020, an increase of 24% primarily related to the Acquisition[145]. - Noninterest income totaled $7,854,000 for the nine months ended September 30, 2020, a 26% increase from $6,258,000 in 2019, mainly due to gains on loan sales and the acquisition[152]. - Noninterest expense increased to $27,440,000 for the nine months ended September 30, 2020, up 24% from $22,150,000 in 2019, largely due to the acquisition[153]. Assets and Capital - Total assets expanded by $884.6 billion (4.4%) to $21.1 trillion, with cash and balances due from depository institutions increasing by $478 billion (19.9%)[124]. - Total loan and lease balances increased by $33.9 billion (0.3%), led by a $146.5 billion (5.8%) rise in the commercial and industrial loan portfolio[125]. - Total deposit balances increased by $1.2 trillion (7.5%) from the previous quarter, with noninterest-bearing account balances rising by $637 billion (17.7%)[126]. - Equity capital rose by $31.9 billion (1.5%) to $2.1 trillion, with retained earnings contributing $4.8 billion to equity formation[127]. - Total assets as of September 30, 2020, were $1,910,395,000, an increase of $173,212,000 compared to December 31, 2019, primarily funded by deposits[154]. - The investment portfolio increased to $548,818,000 as of September 30, 2020, up $68,975,000 from $479,843,000 at the end of 2019[155]. - The Company's total stockholders' equity as of September 30, 2020, was $206,037,000, an increase of $18,458,000 from $187,579,000 as of December 31, 2019[191]. Cash Flow - Net cash provided by operating activities for the nine months ended September 30, 2020, was $21,323,000, an increase of $6,984,000 from $14,339,000 in the same period of 2019[186]. - Net cash used in investing activities surged to $178,202,000 for the nine months ended September 30, 2020, compared to $32,866,000 in 2019, primarily due to increased loans and investments[187]. - Net cash provided by financing activities increased to $145,012,000 for the nine months ended September 30, 2020, up from $21,628,000 in 2019, driven by higher deposits[188]. Future Outlook - The COVID-19 pandemic is expected to continue adversely impacting the Company's business and financial results, with potential increases in credit losses and loan loss allowances[196]. - The company expects most Paycheck Protection Program (PPP) loans, totaling $79.6 million, to be forgiven, impacting future interest income positively[163]. - The Company had outstanding lines of credit with the FHLB of Des Moines totaling $214,567,000 as of September 30, 2020[184]. - The Company completed its stock repurchase program in April 2020, repurchasing 100,000 shares at an average price of $19.92[199].

[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%28Unaudited%29) This section presents Ames National Corporation's unaudited consolidated financial statements, highlighting asset growth and decreased net income from higher loan loss provisions [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20at%20June%2030%2C%202020%20and%20December%2031%2C%202019) Total assets increased to **$1.90 billion** by June 30, 2020, driven by loan and deposit growth, with stockholders' equity also rising Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | Dec 31, 2019 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$1,896,972** | **$1,737,183** | **+$159,789** | | Loans receivable, net | $1,146,046 | $1,048,147 | +$97,899 | | Securities available-for-sale | $513,616 | $479,843 | +$33,773 | | **Total Liabilities** | **$1,695,823** | **$1,549,603** | **+$146,220** | | Total deposits | $1,643,543 | $1,493,175 | +$150,368 | | **Total Stockholders' Equity** | **$201,150** | **$187,579** | **+$13,571** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202020%20and%202019) Net income decreased for Q2 and six months 2020 due to a substantial increase in the provision for loan losses Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2020 | Q2 2019 | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $13,680 | $10,930 | $26,726 | $21,901 | | Provision for Loan Losses | $1,566 | $68 | $3,883 | $166 | | Noninterest Income | $2,428 | $2,213 | $5,059 | $4,139 | | Noninterest Expense | $9,100 | $7,218 | $18,150 | $14,675 | | **Net Income** | **$4,428** | **$4,618** | **$7,982** | **$8,855** | | **EPS (Basic and Diluted)** | **$0.49** | **$0.50** | **$0.87** | **$0.96** | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202020%20and%202019) Comprehensive income significantly increased for Q2 and six months 2020, driven by higher unrealized gains on securities Comprehensive Income (in thousands) | Metric | Q2 2020 | Q2 2019 | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $4,428 | $4,618 | $7,982 | $8,855 | | Other Comprehensive Income, net of tax | $9,514 | $3,351 | $9,878 | $7,530 | | **Comprehensive Income** | **$13,942** | **$7,969** | **$17,860** | **$16,385** | [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%202020%20and%202019) Stockholders' equity increased due to net income and other comprehensive income, partially offset by dividends and stock repurchases - For the six months ended June 30, 2020, stockholders' equity increased by **$13.6 million**, driven by net income of **$8.0 million** and other comprehensive income of **$9.9 million**, while being reduced by dividends of **$2.3 million** and stock retirement of **$2.0 million**[10](index=10&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%202020%20and%202019) Operating activities provided cash, investing activities used cash for loans and securities, and financing activities provided cash from deposits Six-Month Cash Flow Summary (in thousands) | Activity | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,925 | $10,901 | | Net cash (used in) investing activities | ($156,984) | ($14,570) | | Net cash provided by (used in) financing activities | $136,970 | ($4,099) | | **Net (decrease) in cash and due from banks** | **($2,089)** | **($7,769)** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, the ISSB acquisition, loan portfolio, and COVID-19 related loan modifications - The company has delayed the effective date for adopting the new credit loss standard (ASU No. 2016-13, CECL) until interim and annual periods beginning after December 15, 2022[19](index=19&type=chunk) - On October 25, 2019, the Company acquired Iowa State Savings Bank (ISSB) for **$22.6 million** in cash, recording goodwill of approximately **$2.7 million** and a core deposit intangible of **$1.9 million**[23](index=23&type=chunk)[24](index=24&type=chunk) - In response to COVID-19, the company modified loans totaling **$122.8 million** as of June 30, 2020; these are not considered Troubled Debt Restructurings (TDRs) per regulatory guidance[64](index=64&type=chunk) Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Real estate - commercial | $463,077 | $435,850 | | Real estate - 1 to 4 family | $205,254 | $201,510 | | Real estate - agricultural | $160,286 | $160,771 | | Commercial | $158,217 | $84,084 | | Agricultural | $109,066 | $111,945 | | **Total Loans** | **$1,164,649** | **$1,060,846** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses decreased earnings due to higher loan loss provisions from COVID-19, noting asset quality deterioration and PPP loan impact - Net income for Q2 2020 was **$4.4 million**, down from **$4.6 million** in Q2 2019, primarily due to an increased provision for loan losses attributed to the economic impact of COVID-19[87](index=87&type=chunk)[88](index=88&type=chunk) - The COVID-19 pandemic has heightened risks, with approximately **8.3%** of the loan portfolio associated with the hard-hit hospitality and entertainment industries; loan modifications totaled approximately **$122.8 million** as of June 30, 2020[88](index=88&type=chunk)[93](index=93&type=chunk) - The loan portfolio grew to **$1.15 billion**, largely due to **$78.3 million** in Paycheck Protection Program (PPP) loans originated during the period[154](index=154&type=chunk) - Asset quality deteriorated, with problem loans increasing to **1.63%** of total loans at June 30, 2020, up from **0.48%** at year-end 2019, mainly due to one large hospitality loan relationship[159](index=159&type=chunk)[160](index=160&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with COVID-19 introducing uncertainty to future rate movements - The company's main market risk is interest rate risk; while management's approach has not significantly changed, the COVID-19 pandemic introduces uncertainty to future interest rate movements[187](index=187&type=chunk) [Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures are effective as of June 30, 2020[188](index=188&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the second quarter of 2020[189](index=189&type=chunk) [PART II. Other Information](index=48&type=section&id=PART%20II.%20Other%20Information) [Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings - Not applicable[189](index=189&type=chunk) [Risk Factors](index=48&type=section&id=Item%201.A.%20Risk%20Factors) The COVID-19 pandemic is a primary risk factor, expected to adversely impact the economy, financial markets, and company operations - The COVID-19 pandemic is identified as a major risk factor, expected to continue adversely impacting business and financial results through its effects on the economy, customers, and financial markets[189](index=189&type=chunk) - Potential impacts include elevated credit losses, impairment of investment securities, and goodwill impairment, particularly from recent acquisitions, if the economic slowdown persists[190](index=190&type=chunk) - Business operations may be disrupted, and the company could take actions to preserve capital, such as lowering or suspending dividends, in response to the pandemic's effects[191](index=191&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company completed its stock repurchase plan in April 2020, repurchasing 65,847 shares in Q2 - The company completed its November 2019 stock repurchase plan in April 2020; no shares remain to be purchased under the plan[193](index=193&type=chunk) Share Repurchases in Q2 2020 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1-30, 2020 | 65,847 | $19.52 | | May 1-31, 2020 | - | - | | June 1-30, 2020 | - | - | | **Total** | **65,847** | **$19.52** | [Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - Not applicable[196](index=196&type=chunk) [Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports no mine safety disclosures - Not applicable[196](index=196&type=chunk) [Other Information](index=49&type=section&id=Item%205.%20Other%20Information) The company reports no other information - Not applicable[196](index=196&type=chunk) [Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906 (18 U.S.C. Section 1350), and Inline XBRL data files[196](index=196&type=chunk) [Signatures](index=50&type=section&id=Signatures) - The report was duly signed on August 6, 2020, by John P. Nelson, Chief Executive Officer and President, and John L. Pierschbacher, Chief Financial Officer[197](index=197&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, 2020 ☐ 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 ...