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 June 30, 2026
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-32637
AMES NATIONAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
(I. R. S. Employer
Identification Number)
323 Sixth Street
Ames, Iowa 50010
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (515) 232-6251
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock
ATLO
The NASDAQ Capital Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 31, 2026, there were 8,857,220 shares of common stock, par value $2, outstanding.
INDEX
Consolidated Balance Sheets at June 30, 2026 and December 31, 2025
Consolidated Statements of Income for the three and six months ended June 30, 2026 and 2025
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2026 and 2025
Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2026 and 2025
Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025
Management's Discussion and Analysis of Financial Condition and Results of Operations
AMES NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 30,
December 31,
2026
2025
(unaudited)
(audited)
ASSETS
Cash and due from banks
Interest-bearing deposits in financial institutions and federal funds sold
Total cash and cash equivalents
Interest-bearing time deposits
Securities available-for-sale
Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock, at cost
Loans receivable, net
Loans held for sale
Bank premises and equipment, net
Accrued income receivable
Other real estate owned
Bank-owned life insurance
Deferred income taxes, net
Intangible assets, net
Goodwill
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Noninterest-bearing checking
Interest-bearing checking
Savings and money market
Time, $250 and over
Other time
Total deposits
Securities sold under agreements to repurchase
Other borrowings
Accrued interest payable
Accrued expenses and other liabilities
Total liabilities
STOCKHOLDERS' EQUITY
Common stock, $2 par value, authorized 18,000,000 shares; issued and outstanding 8,857,220 shares as of June 30, 2026 and December 31, 2025
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss)
Total stockholders' equity
Total liabilities and stockholders' equity
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(in thousands, except per share data)
Three Months Ended
Six Months Ended
Interest and dividend income:
Loans, including fees
Securities:
Taxable
Tax-exempt
Other interest and dividend income
Total interest and dividend income
Interest expense:
Other borrowed funds
Total interest expense
Net interest income
Credit loss expense (benefit)
Net interest income after credit loss expense (benefit)
Noninterest income:
Wealth management income
Service fees
Securities gains (losses), net
Gain on sale of loans held for sale
Merchant and card fees
Other noninterest income
Total noninterest income
Noninterest expense:
Salaries and employee benefits
Data processing
Occupancy expenses, net
FDIC insurance assessments
Professional fees
Business development
Intangible asset amortization
New market tax credit projects amortization
Other operating expenses, net
Total noninterest expense
Income before income taxes
Provision for income taxes
Net income
Basic and diluted earnings per share
Dividends declared per share
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
(in thousands)
Unrealized gains (losses) on securities before tax:
Unrealized holding gains (losses) arising during the period
Plus: reclassification adjustment for losses realized in net income
Other comprehensive income (loss), before tax
Tax (expense) benefit related to other comprehensive income
Other income tax effects from tax reform
Other comprehensive income (loss), net of tax
Comprehensive income
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
Accumulated
Other
Three Months Ended June 30, 2026 and 2025
Comprehensive
Total
Common Stock
Additional Paid-in
Retained
Income (Loss),
Stockholders'
Shares
Amount
Capital
Earnings
Net of Taxes
Equity
Balance, March 31, 2025
Other comprehensive income
Repurchase and retirement of stock
Cash dividends declared on retired stock
Balance, June 30, 2025
Balance, March 31, 2026
Cash dividends declared, $0.24 per share
Balance, June 30, 2026
Six Months Ended June 30, 2026 and 2025
Balance, December 31, 2024
Cash dividends declared, $0.20 per share
Balance, December 31, 2025
Other comprehensive (loss)
Cash dividends declared, $0.48 per share
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense (benefit) for loans
(167
Credit loss expense for off-balance sheet credit exposures
Amortization (accretion) of securities available-for-sale and loans, net
Amortization of intangible assets
Depreciation
Provision for deferred income taxes
Securities losses, net
Increase in cash value of bank-owned life insurance
Gain on sales of loans held for sale
Proceeds from loans held for sale
Originations of loans held for sale
Amortization of investment in New Markets Tax Credit projects
Gain on other real estate owned, net
Change in assets and liabilities:
Decrease in accrued income receivable
Decrease (increase) in other assets
(Decrease) in accrued interest payable
(Decrease) in accrued expenses and other liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Change in interest-bearing time deposits
Purchase of securities available-for-sale
Proceeds from sale of securities available-for-sale
Proceeds from maturities and calls of securities available-for-sale
Purchase of FHLB stock
Proceeds from the redemption of FHLB and FRB stock
Net decrease in loans
Net proceeds from the sale of other real estate owned
Purchase of premises and equipment
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) in deposits
(Decrease) in securities sold under agreements to repurchase
Payments on other borrowings
Proceeds from other borrowings
Net (payments on) FHLB short-term borrowings
Dividends paid
Stock repurchases
Net cash used in financing activities
Net (decrease) in cash and cash equivalents
CASH AND CASH EQUIVALENTS
Beginning
Ending
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for:
Interest
Income taxes
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Transfer of loans receivable to other real estate owned
Notes to Consolidated Financial Statements (unaudited)
1.
Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been prepared by Ames National Corporation (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these interim financial statements be read in conjunction with the year-end audited financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”). The consolidated balance sheet of the Company as of December 31, 2025 has been derived from the audited consolidated balance sheet of the Company as of that date. In the opinion of management, the accompanying consolidated financial statements of the Company contain all adjustments necessary to fairly present the financial results for the interim periods reported. Those adjustments consist only of normal recurring adjustments. The results of operations for the interim periods are not necessarily indicative of results which may be expected for an entire year. The consolidated financial statements include the accounts of the Company and its wholly-owned banking subsidiaries (the “Banks”). All significant intercompany balances and transactions have been eliminated in consolidation.
Subsequent Events: The Company has evaluated subsequent events through the filing date of this Quarterly Report on Form 10-Q with the SEC.
Goodwill: Goodwill represents the excess of cost over the fair value of net assets acquired. Goodwill resulting from acquisitions is not amortized but is tested for impairment annually or whenever events change, and circumstances indicate that it is more likely than not that an impairment loss has occurred. Goodwill is tested for impairment with an estimation of the fair value of a reporting unit.
The fair value of a reporting unit is the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. As none of the Company’s reporting units are publicly traded, individual reporting unit fair value determinations cannot be directly correlated to the Company’s stock price. Significant judgment is applied when goodwill is assessed for impairment. This judgment includes developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables, incorporating general economic and market conditions and selecting an appropriate control premium. The Company completed a quantitative assessment of goodwill as of October 1, 2025 which indicated that goodwill was not impaired. Subsequently, the Company determined there were no adverse changes in criteria and key considerations to the previous assessment. Accordingly, the Company concluded there is no impairment of goodwill as of June 30, 2026.
New and Pending Accounting Pronouncements:
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this ASU require public companies to disclose, in the notes to the financial statements, specified information about certain costs and expenses at each interim and annual reporting period. Additionally, in January 2025, the FASB issued ASU No. 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This ASU amends the effective date of ASU No. 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU No. 2024-03 is permitted. The Company is currently evaluating the impact of the ASU on the Company's consolidated financial statements.
In November 2025, the FASB issued ASU No. 2025-08, Financial Instruments - Credit Losses (Topic 326): Purchased Loans. The ASU expands the population of acquired financial assets accounted for using the "gross-up approach" when recording the initial allowance for credit losses through an adjustment to the initial amortized cost basis. Acquired loans are deemed purchased seasoned loans and accounted for using the gross-up approach upon acquisition if criteria established by the new guidance are met. This change aims to enhance comparability, consistency and better reflect the economics of acquiring financial assets. This ASU is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of the ASU on the Company's consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. The ASU enables entities to apply hedge accounting to a greater number of highly effective economic hedges in multiple areas. The ASU expands the hedged risks permitted to be aggregated in a group of individual forecasted transactions, enabling entities to apply hedge accounting to potentially broader portfolios of forecasted transactions. The ASU is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies the applicability of the interim reporting guidance, the types of interim reporting, and the form and content of interim financial statements in accordance with generally accepted accounting principles. The amendments in this ASU are effective for public business entities for interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted. The amendments can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.
2.
Earnings Per Share
Earnings per share amounts were calculated using the weighted average shares outstanding during the periods presented. The weighted average outstanding shares for the three months ended June 30, 2026 and 2025 was 8,857,220 and 8,900,515, respectively. The weighted average outstanding shares for the six months ended June 30, 2026 and 2025 was 8,857,220 and 8,908,904, respectively. The Company had no potentially dilutive securities outstanding during the periods presented.
3.
Off-Balance Sheet Arrangements
The Company is party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheet. No material changes in the Company’s off-balance sheet arrangements have occurred since December 31, 2025.
4.
Fair Value Measurements
Assets and liabilities carried at fair value are required to be classified and disclosed according to the process for determining fair value. There are three levels of determining fair value.
Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets.
Level 2: Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatility, prepayment speeds, credit risk); or inputs derived principally from or can be corroborated by observable market data by correlation or other means.
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis.
Securities available-for-sale: Level 1 securities include U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets. U.S. government agencies, mortgage-backed securities, state and political subdivisions, and most corporate bonds are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.
Derivative financial instruments and loans receivable: The Company’s derivative financial instruments and loans receivable consist of interest rate swaps on loans accounted for as fair value hedges. The Company’s derivative financial instruments also include back-to-back loan swaps to assist customers in managing their interest rate risk while executing offsetting interest rate swaps with dealer counterparties. The Company's derivative positions and related loans are classified within Level 2 of the fair value hierarchy and are valued using models generally accepted in the financial services industry and that use actively quoted or observable market input values from external market data providers and/or non-binding broker-dealer quotations. The fair value of the derivatives and loans are determined using discounted cash flow models. These models’ key assumptions include the contractual terms of the respective contract along with significant observable inputs, including interest rates, yield curves, nonperformance risk and volatility.
The following table presents the balances of assets measured at fair value on a recurring basis by level as of June 30, 2026 and December 31, 2025 (in thousands):
Description
Level 1
Level 2
Level 3
Assets
U.S. government treasuries
U.S. government agencies
U.S. government mortgage-backed securities
State and political subdivisions
Corporate bonds
Loans receivable
Derivative financial instruments
Liabilities
Certain assets are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment or a change in previously recognized impairment). The following table presents the assets carried on the balance sheet (after specific reserves) by caption and by level within the valuation hierarchy as of June 30, 2026 and December 31, 2025 (in thousands):
Collateral dependent loans
As of June 30, 2026, individually analyzed loans with a carrying value of $4.6 million were reduced by a specific reserve of $1.3 million, resulting in a reported fair value of $3.3 million. As of December 31, 2025, individually analyzed loans with a carrying value of $3.2 million were reduced by a specific reserve of $1.1 million resulting in a reported fair value of $2.1 million.
The significant inputs used in the fair value measurements for Level 3 assets measured at fair value on a nonrecurring basis as of June 30, 2026 and December 31, 2025 are as follows (in thousands):
Estimated
Valuation
Unobservable
Fair Value
Techniques
Inputs
Range
Fair value of collateral
Valuation adjustments
Evaluations of the underlying assets are completed for each collateral dependent loan with a specific reserve. The types of collateral vary widely and could include accounts receivables, inventory, a variety of equipment and real estate. Collateral evaluations are reviewed and discounted as appropriate based on knowledge of the specific type of collateral and could include cost approach, sales comparison approach, or income approach. In the case of real estate, an independent appraisal may be obtained. Types of discounts considered included aging of receivables, condition of the collateral, potential market for the collateral and estimated disposal costs. These discounts will vary from loan to loan.
Other real estate owned is measured at fair value less costs to sell. These estimates are based on the most recently available appraisals with certain adjustments made based on the type of property, age of appraisal, current status of the property, and other related factors to estimate the current value.
GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or nonrecurring basis. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following table includes the carrying amounts and estimated fair values of the Company’s financial assets and liabilities as of June 30, 2026 and December 31, 2025 (in thousands):
Hierarchy
Carrying
Fair
Level
Value
Financial assets:
Cash and cash equivalents
See previous table
FHLB and FRB stock
Financial liabilities:
The methodologies used to determine fair value as of June 30, 2026 did not change from the methodologies described in the December 31, 2025 Annual Financial Statements.
Commitments to extend credit and standby letters of credit: The fair values of commitments to extend credit and standby letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and credit worthiness of the counterparties. The carrying value and fair value of the commitments to extend credit and standby letters of credit are not considered significant.
Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
5.
Debt Securities
The amortized cost of securities available-for-sale and their approximate fair values as of June 30, 2026 and December 31, 2025 are summarized below (in thousands):
2026:
Gross
Amortized
Unrealized
Cost
Gains
Losses
2025:
The amortized cost and fair value of debt securities available-for-sale as of June 30, 2026, are shown below by expected maturity. Expected maturity will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).
Due in one year or less
Due after one year through five years
Due after five years through ten years
The Company's investment portfolio had an expected duration of 3.2 years as of June 30, 2026.
Securities with a carrying value of $302.5 million and $295.4 million at June 30, 2026 and December 31, 2025, respectively, were pledged on public deposits, securities sold under agreements to repurchase, other borrowings and for other purposes as required or permitted by law.
The proceeds and losses on securities available-for-sale for the three and six months ended June 30, 2026 and 2025 are summarized below (in thousands):
Proceeds from sales of securities available-for-sale
Gross realized gains on securities available-for-sale
Gross realized losses on securities available-for-sale
Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2026 and December 31, 2025 are summarized as follows (in thousands):
Less than 12 Months
12 Months or More
No. of
Securities
Securities available-for-sale:
Gross unrealized losses on debt securities totaled $27.9 million as of June 30, 2026. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, state or political subdivision, or corporations. Management then determines whether downgrades by bond rating agencies have occurred, and reviews industry analysts’ reports. The Company’s procedures for evaluating investments in states, municipalities and political subdivisions include but are not limited to reviewing the offering statement and the most current available financial information, comparing yields to yields of bonds of similar credit quality, confirming capacity to repay, assessing operating and financial performance, evaluating the stability of tax revenues, considering debt profiles and local demographics, and for revenue bonds, assessing the source and strength of revenue structures for municipal authorities. These procedures, as applicable, are utilized for all municipal purchases and are utilized in whole or in part for monitoring the portfolio of municipal holdings. The Company does not utilize third party credit rating agencies as a primary component of determining if the municipal issuer has an adequate capacity to meet the financial commitments under the security for the projected life of the investment, and, therefore, does not compare internal assessments to those of the credit rating agencies. Credit rating downgrades are utilized as an additional indicator of credit weakness and as a reference point for historical default rates. As of June 30, 2026 and December 31, 2025, the Company determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses. The Company concluded that the unrealized losses were primarily attributable to increases in market interest rates since these securities were purchased and other market conditions. Furthermore, the Company does not have the intent to sell any of these AFS debt securities and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost. Accrued interest receivable on AFS debt securities totaled $3.9 million and $3.2 million as of June 30, 2026 and December 31, 2025, respectively, and is excluded from the estimate of credit losses.
6.
Loans Receivable and Credit Disclosures
The composition of loans receivable as of June 30, 2026 and December 31, 2025 is as follows (in thousands):
Real estate - construction
Real estate - 1 to 4 family residential
Real estate - multi-family
Real estate - commercial
Real estate - agricultural
Commercial
Agricultural
Consumer and other
Unallocated portfolio layer basis adjustments1
Less allowance for credit losses
1 This amount represents portfolio layer method basis adjustments related to loans hedged in a closed portfolio. Under the portfolio layer method basis adjustments are not allocated to individual loans, however, the amounts impact the net loan balance. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See Note 10 (“Derivative Financial Instruments”) for additional information.
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost net of the allowance for credit losses (ACL) and other basis adjustments. Amortized cost is the principal balance outstanding, net of deferred loan fees and costs. Interest income is accrued on the unpaid principal balance. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. Accrued interest receivable on loans held for investment totaled $9.1 million and $10.8 million as of June 30, 2026 and December 31, 2025, respectively, and is excluded from the estimate of credit losses. Nonrefundable loan fees and origination costs are deferred and recognized as a yield adjustment over the life of the related loan.
The policy for charging off loans is consistent throughout all loan categories. A loan is charged off based on criteria that includes but is not limited to: delinquency status, financial condition of the entire customer credit line and underlying collateral coverage, economic or external conditions that might impact full repayment of the loan, legal issues, overdrafts, and the customer’s willingness to work with the Company.
Allowance for Credit Losses for Loans. The allowance for credit losses is an estimate of expected losses inherent within the Company's existing loans held for investment portfolio. Expected credit loss inherent in non-cancelable off-balance-sheet (“OBS”) credit exposures is accounted for as a separate liability on the consolidated balance sheet. The Company's allowance for credit losses for OBS credit exposures was $1.0 million and $984 thousand as of June 30, 2026 and December 31, 2025, respectively. The allowance for credit losses for loans held for investment, as reported in our consolidated balance sheet, is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.
The credit loss estimation process involves procedures to appropriately consider the unique characteristics of loan portfolio segments which consist of construction real estate, 1 to 4 family residential real estate, multi-family real estate, commercial real estate, agricultural real estate, commercial, agricultural and consumer and other lending. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. The key components in this estimation process include the following:
●
An initial forecast period of one year for all portfolio segments and OBS credit exposures. This period reflects management's expectation of losses based on forward-looking economic scenarios over that time.
A historical loss forecast period covering the remaining contractual life, adjusted for prepayments, by portfolio segment based on the change in key historical economic variables.
A reversion period of 1 year connecting the initial loss forecast to the historical loss forecast based on economic conditions at the measurement date.
The Company primarily utilizes loss rate based undiscounted cash flow (UDCF) methods to estimate credit losses by portfolio segment. The UDCF methods obtain estimated life-time credit losses using the conceptual components described above.
Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.
Credit quality is assessed and monitored by evaluating various attributes and the results of those evaluations are utilized in underwriting new loans and in our process for estimation of expected credit losses. The following provides the credit quality indicators and risk elements that are most relevant and most carefully considered and monitored for each loan portfolio segment.
Construction loans are underwritten utilizing independent appraisals, sensitivity analysis of absorption, vacancy and lease rates and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. These estimates may prove to be inaccurate primarily due to unforeseen circumstances beyond the control of the borrower or lender. Construction loans often involve the disbursement of funds with repayment substantially dependent on the success of the ultimate project. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. The Company may require guarantees on these loans. The Company’s construction loans are secured primarily by properties located in its primary market area. National unemployment rate and national real gross domestic product (GDP) are key economic forecasts used in estimating expected credit losses for this segment.
The Company originates 1-4 family real estate loans utilizing credit reports to supplement the underwriting process. The Company’s underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines. Properties securing 1-4 family real estate loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function and have been approved by the Board of Directors. The loan-to-value ratios normally do not exceed 90% without credit enhancements such as mortgage insurance. The Company will lend up to 100% of the lesser of the appraised value or purchase price for conventional 1-4 family real estate loans, provided private mortgage insurance is obtained. The Company’s 1-4 family real estate loans are secured primarily by properties located in its primary market area. The national unemployment rate is a key economic forecast used in estimating expected credit losses for this segment.
Multi-family, commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans, in addition to those unique to real estate loans. These loans are viewed primarily as cash flow loans and, secondarily, as loans secured by real estate. Multi-family, commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Loan-to-value generally does not exceed 80% of the cost or value of the assets. Loans are typically subject to interest rate adjustments between five and seven years from origination. Fully amortized monthly repayment terms normally do not exceed twenty-five years. Projections and cash flows that show ability to service debt within the amortization period are required. Property and casualty insurance is required to protect the Banks’ collateral interests. Appraisals on properties securing these loans are generally performed by fee appraisers approved by the Board of Directors. Because payments on multi-family, commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. Management monitors and evaluates commercial and agricultural real estate loans based on collateral and risk rating criteria. The Company may require guarantees on these loans. The Company’s multi-family, commercial and agricultural real estate loans are secured primarily by properties located in its primary market areas. The national unemployment rate is a key economic forecast used in estimate credit losses for the multi-family and commercial real estate segments. The national unemployment rate and national real GDP are key economic forecasts used in estimating expected credit losses for the agricultural real estate segment.
Commercial and agricultural operating loans are underwritten based on the Company’s examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. This underwriting includes the evaluation of cash flows of the borrower, underlying collateral, if applicable, and the borrower’s ability to manage its business activities. The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation. A first priority lien on the general assets of the business normally secures these types of loans. Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower. Crop and hail insurance is required for most agricultural borrowers. Loans are generally guaranteed by the principal(s). The Company’s commercial and agricultural operating lending is primarily in its primary market area. The national unemployment rate is a key economic forecast used in estimating expected credit losses for the commercial operating segment. The national unemployment rate and national real GDP are key economic forecasts used in estimating expected credit losses for the agricultural operating segment.
Consumer and other loans utilize credit reports to supplement the underwriting process. The underwriting standards include a determination of the applicant’s payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan. To monitor and manage loan risk, policies and procedures are developed and modified, as needed by management. This activity, coupled with smaller loan amounts that are spread across many individual borrowers, minimizes risk. Additionally, market conditions are reviewed by management on a regular basis. The national unemployment rate is a key economic forecast used in estimating expected credit losses for this segment.
Activity in the allowance for credit losses, on a disaggregated basis, for the three and six months ended June 30, 2026 and 2025 is as follows (in thousands):
Three Months Ended June 30, 2026
1-4 Family
Construction
Residential
Multi-family
Consumer
Real Estate
and Other
Credit loss expense (benefit) 1
Recoveries of loans charged-off
Loans charged-off
The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss expense of $65 thousand related to off-balance sheet credit exposures.
Six Months Ended June 30, 2026
The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss expense of $28 thousand related to off-balance sheet credit exposures.
Three Months Ended June 30, 2025
The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss expense of $33 thousand related to off-balance sheet credit exposures.
Six Months Ended June 30, 2025
The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss expense of $1 thousand related to off-balance sheet credit exposures.
Collateral Dependent Loans. The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans (in thousands):
Primary Type of Collateral
June 30, 2026
Equipment
ACL Allocation
December 31, 2025
Nonaccrual Loans. The accrual of interest income on loans is discontinued when, in the opinion of management, there is reasonable doubt as to the borrower's ability to meet payments of interest or principal when they become due, which is generally when a loan is 90 days or more past due unless the loan is well secured and in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed against interest income. Loans are returned to an accrual status when all of the principal and interest amounts contractually due are brought current and repayment of the remaining contractual principal and interest is expected. A loan may also return to accrual status if additional collateral is received from the borrower and, in the opinion of management, the financial position of the borrower indicates that there is no longer any reasonable doubt as to the collection of the amount contractually due. Payment received on nonaccrual loans are applied first to principal. Once principal is recovered, any remaining payments received are applied to interest income.
The following table presents the amortized cost basis of loans on nonaccrual status and loans on nonaccrual status with no allowance for credit losses recorded by loan segment (in thousands):
Total Nonaccrual
Nonaccrual with no ACL
The interest income recognized on nonaccrual loans for the three months ended June 30, 2026 and 2025 was approximately $25 thousand and $1 thousand, respectively. The interest income recognized on nonaccrual loans for the six months ended June 30, 2026 and 2025 was approximately $32 thousand and $2 thousand, respectively.
The interest foregone on nonaccrual loans for the three months ended June 30, 2026 and 2025 was approximately $493 thousand and $636 thousand, respectively. The interest foregone on nonaccrual loans for the six months ended June 30, 2026 and 2025 was approximately $877 thousand and $963 thousand, respectively.
Loan Modifications to Borrowers Experiencing Financial Difficulty. Loan modifications may include interest rate reductions or below market interest rates, extension of payments terms beyond the original maturity date, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a loss rate model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification.
The Company made two loan modification to borrowers experiencing financial difficulty for the six months ended June 30, 2026. The Company made no loan modifications to borrowers experiencing financial difficulty for the six months ended June 30, 2025.
The following table shows the amortized cost basis at the end of the reporting period of the loans modified to borrowers experiencing financial difficulty, disaggregated by portfolio segment and type of modification during the six months ended June 30, 2026 (in thousands):
Payment Structure
Term Extension
Interest Rate Reduction
% of Total Loans
Loan Type
Real estate - 1-4 family residential
The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2026:
Payment structure
Financial Effect
Payment structure modified by suspending principal and interest payments through the revised maturity date, providing the borrower temporary payment relief to facilitate resolution
Payment structure modified to provide temporary payment relief, allowing the borrower to defer the current year payment through a restructuring of the final five scheduled payments
Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The Company had no net charge-offs for the three and six months ended June 30, 2026 and 2025 related to loan modifications to borrowers experiencing financial difficulties.
There were no loan modifications that had a payment default and were modified in the twelve months before default as of June 30, 2026. A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms.
Aging Analysis. An aging analysis of the recorded investments in loans, on a disaggregated basis, as of June 30, 2026 and December 31, 2025, is as follows (in thousands):
90 Days
30-89
or Greater
Past Due
Current
Accruing
Credit Quality Indicators. As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk ratings of loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) non-performing loans and (v) the general economic conditions in our market areas.
The Company utilizes a risk rating matrix to assign risk ratings to each of its loans. Loans are rated on a scale of 1 to 7. A description of the general characteristics of the risk ratings is as follows:
Ratings 1, 2 and 3 - These ratings include “Pass” loans of average to excellent credit quality borrowers. These borrowers generally have significant capital strength, moderate leverage and stable earnings and growth commensurate to their relative risk rating. These ratings are reviewed at least annually. These ratings also include performing loans of less than $100,000.
Rating 4 - This rating includes loans on management’s “watch list” and is intended to be utilized for pass rated borrowers where credit quality has begun to show signs of financial weakness that now requires management’s heightened attention. This rating is reviewed at least quarterly.
Rating 5 - This rating is for “Special Mention” loans in accordance with regulatory guidelines. This rating is intended to be temporary and includes loans to borrowers whose credit quality has clearly deteriorated and are at risk of further decline unless active measures are taken to correct the situation. This rating is reviewed at least quarterly.
Rating 6 - This rating includes “Substandard” loans in accordance with regulatory guidelines, for which the accrual of interest has not been stopped. Under regulatory guideline definitions, a “Substandard” loan has defined weaknesses which make payment default or principal exposure likely, but not yet certain. Such loans are apt to be dependent upon collateral liquidation, a secondary source of repayment or an event outside of the normal course of business. This rating is reviewed at least quarterly.
Rating 7 - This rating includes “Substandard-Impaired” loans in accordance with regulatory guidelines, for which the accrual of interest has generally been stopped. This rating includes loans: (i) where interest is more than 90 days past due, (ii) not fully secured, (iii) where a specific valuation allowance may be necessary, or (iv) where the borrower is unable to make contractual principal and interest payments. This rating is reviewed at least quarterly.
The following tables show the risk category of loans by loan segment and year of origination as of June 30, 2026 and December 31, 2025 (in thousands):
Amortized Cost Basis of Term Loans by Year of Origination
2024
2023
2022
Prior
Revolving
Pass
Watch
Special Mention
Substandard
Substandard-Impaired
Current-period gross charge-offs
Total loans
2021
7.
Intangible assets
The following sets forth the carrying amounts and accumulated amortization of the intangible assets at June 30, 2026 and December 31, 2025 (in thousands):
Amortization
Core deposit intangible asset
The weighted average remaining life of the intangible assets is approximately 1.6 years as of June 30, 2026 and December 31, 2025.
The following sets forth the activity related to the intangible assets for the three and six months ended June 30, 2026 and 2025 (in thousands):
Beginning intangible assets, net
Ending intangible assets, net
Estimated remaining amortization expense on intangible assets for the years ending December 31 is as follows (in thousands):
2027
2028
2029
2030
8.
Pledged Collateral Related to Securities Sold Under Repurchase Agreements
The repurchase agreements mature daily and the following sets forth the pledged collateral at estimated fair value related to securities sold under repurchase agreements as of June 30, 2026 and December 31, 2025 (in thousands):
Securities sold under agreements to repurchase:
Total pledged collateral
In the event the repurchase agreements exceed the estimated fair value of the pledged securities available-for-sale, the Company has unpledged securities available-for-sale that may be pledged on the repurchase agreements.
9.
Borrowings
On April 25, 2024, the Company entered into a promissory note and line of credit agreement with an unaffiliated bank, providing for a two-year five million dollar line of credit facility. On May 15, 2026, the Company extended the maturity date for an additional two-years. The Company has secured its obligations under the Credit Agreement by pledging to the Lender all outstanding shares of common stock of its subsidiary bank, Reliance State Bank. The Company had no outstanding borrowings on the line of credit as of June 30, 2026 and December 31, 2025. The Company did not comply with one covenant as of June 30, 2026 and December 31, 2025. The agreement includes a covenant requiring that the modified Texas Ratio not exceed a specific threshold at the end of each calendar quarter. Effective beginning with the quarter ended June 30, 2026, the covenant threshold was amended from 20% to 25%. Accordingly, the modified Texas Ratio was required not to exceed 25% as of June 30, 2026 and subsequent quarter ends, compared with 20% as of December 31, 2025. The modified Texas Ratio is defined as substandard, substandard-impaired loans and other real estate owned, divided by the sum of Tier 1 capital plus the Allowance for Credit Losses – Loans. The modified Texas Ratio was 29.2% as of June 30, 2026 and 24.6% as of December 31, 2025. The lender waived the noncompliance.
FHLB advances are collateralized by FHLB stock, certain 1-4 family residential real estate loans, multifamily real estate loans, commercial real estate loans and agricultural real estate loans. The Banks had available borrowing capacity with the FHLB of Des Moines, Iowa of $304.1 million and $291.9 million at June 30, 2026 and December 31, 2025, respectively. As of June 30, 2026, the Company had $16.5 million of FHLB advances with a weighted average interest rate of 3.93%. As of December 31, 2025, the Company had $19.5 million of FHLB advances with a weighted average interest rate of 3.95%.
On June 6, 2022, the Company borrowed $4.0 million on a credit agreement with a commercial bank. The borrowings were used for general corporate purposes. Interest under the note is payable quarterly over four years. Required quarterly principal payments of $150 thousand began in September 2022, with the remaining balance due June 2026. The interest rate is fixed at 3.35%. This note was paid in full in June 2026 and there is no outstanding balance remaining as of June 30, 2026. The outstanding balance was $1.9 million as of December 31, 2025.
10.
Derivative Financial Instruments
Fair Value Hedges
The Company uses interest rate swaps to convert certain long term fixed rate loans to floating rates to hedge interest rate risk exposure. The Company uses hedge accounting in accordance with ASC 815, with the unrealized gains and losses, representing the change in fair value of the derivative and the change in fair value of the risk being hedged on the related loan, being recorded in the consolidated statements of income. The ineffective portions of the unrealized gains or losses, if any, are recorded in interest income and interest expense in the consolidated statements of income.
During 2023, the Company executed an interest rate swap designated as a fair value hedge with an original notional amount of $25.0 million to convert certain long-term fixed rate 1-4 family loans to floating rates to hedge interest rate risk exposure using the portfolio layer method.
The portfolio layer method allows the Company to designate as the hedged item a stated amount of the assets that are not expected to be affected by prepayments, defaults and other factors that would affect the timing and amount of cash flow. The fair value portfolio level basis adjustment on the hedged loans has not been attributed to the individual loans on the consolidated balance sheet.
The table below identifies the notional amount, fair value and balance sheet category of the Company's interest rate swaps at June 30, 2026, and December 31, 2025 (in thousands):
Notional Amount
Balance Sheet Category
Interest rate swaps
Other liabilities
The table below identifies the carrying amount of the hedged assets and cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets that are designated as a fair value hedge accounting relationship at June 30, 2026, and December 31, 2025 (in thousands):
Cumulative Amount of Fair Value
Location in the consolidated
Carrying Amount of
Hedging Adjustment Included in
balance sheet
the Hedged Assets
Carrying Amount of Hedged Assets
Back-to-Back Loan Swaps
The Company has interest rate swap loan relationships with customers to assist them in managing their interest rate risk. Upon entering into these loan swaps, the Company enters into offsetting positions with counterparties in order to minimize interest rate risk. These back-to-back loan swaps qualify as free standing financial derivatives with the fair values reported in other assets and other liabilities on the consolidated balance sheets. Any gains and losses on these back-to-back swaps are recorded in noninterest income on the consolidated statements of income, and for the three and six months ended June 30, 2026, and June 30, 2025, no gain or loss was recognized. The table below identifies the balance sheet category and fair values of the derivative instruments designated as loan swaps at June 30, 2026, and December 31, 2025 (in thousands):
Weighted Average
Receive Rate
Pay Rate
Customer interest rate swaps
The Company was required to pledge $767 thousand and $1.1 million of securities as collateral for these derivative financial instruments at June 30, 2026, and December 31, 2025, respectively. The Company's counterparties were not required to pledge collateral at June 30, 2026 and December 31, 2025.
11.
Income Taxes
The tax effects of temporary differences related to income taxes are included in deferred income taxes. The change in deferred income taxes since December 31, 2025 is due primarily to the increase in unrealized losses on investment securities.
12.
Commitments, Contingencies and Concentrations of Credit Risk
On April 7, 2026, the Company entered into a $2.0 million commitment with a contractor to remodel the Company headquarters in Ames, Iowa. The Company has $1.8 million of the commitment remaining at June 30, 2026.
On May 14, 2026, the Company entered into a $1.8 million commitment with a contractor to remodel two branches in Creston, Iowa. The Company has $1.7 million of the commitment remaining at June 30, 2026.
13.
Regulatory Matters
The Company and the Banks are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements (as shown in the following table) can result in certain mandatory and possibly additional discretionary actions by regulators, which, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Banks must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's and the Banks' capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believed the Company and the Banks met all capital adequacy requirements to which they were subject as of June 30, 2026.
The Company and the Banks’ capital amounts and ratios as of June 30, 2026 and December 31, 2025 are as follows (dollars in thousands):
To Be Well
Capitalized Under
For Capital
Prompt Corrective
Actual
Adequacy Purposes
Action Provisions
Ratio
As of June 30, 2026
Total capital (to risk-weighted assets):
Consolidated
Boone Bank & Trust
First National Bank
Iowa State Savings Bank
Reliance State Bank
State Bank & Trust
United Bank & Trust
Tier 1 capital (to risk-weighted assets):
Tier 1 capital (to average-assets):
Common equity tier 1 capital (to risk-weighted assets):
As of December 31, 2025
The Company and the Banks are subject to the rules of the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules included the implementation of a 2.5 percent capital conservation buffer that is added to the minimum requirements for capital adequacy purposes for all capital ratios except tier 1 capital to average assets. A banking organization with a capital conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers. At June 30, 2026, the capital ratios for the Company and the Banks were sufficient to meet the conservation buffer.
The Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures on January 1, 2024. The Company has determined that its bank operating model is structured whereby all banking locations serve a similar base of customers utilizing a company-wide offering of similar products and services managed through similar processes and technology platforms that are collectively reviewed by the Company’s Chief Executive Officer, who has been designated as the chief operating decision maker (“CODM”). The CODM regularly assesses performance of the aggregated single banking segment in determining how to allocate resources.
The banking segment generates revenues through personal, business, agricultural and commercial lending, management of the investment securities portfolio, deposit account services and wealth management services.
Accounting policies for the banking segment are the same as those described in Note 1, Nature of Business and Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The CODM assesses performance of the banking segment and decides how to allocate resources based on net income as reported in the Company’s consolidated statements of income. All categories of interest expense, credit loss expense, and noninterest expense as disclosed in the Company’s consolidated statements of income are considered significant to the banking segment. For the six months ended June 30, 2026 and 2025, respectively, there were no adjustments or reconciling items between the banking segment net income and consolidated net income as presented in the consolidated statements of income.
The measure of segment assets is based on total assets as reported on the consolidated balance sheets. For the six months ended June 30, 2026, and the year ended December 31, 2025, respectively, there were no adjustments or reconciling items between the banking segment total assets and total assets as presented on the consolidated balance sheets.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Ames National Corporation (the “Company”) is a bank holding company established in 1975 that owns and operates six bank subsidiaries in central, north-central and south-central Iowa (the “Banks”). The following discussion is provided for the consolidated operations of the Company and its Banks, First National Bank, Ames, Iowa (First National), State Bank & Trust Co. (State Bank), Boone Bank & Trust Co. (Boone Bank), Reliance State Bank (Reliance Bank), United Bank & Trust Co. (United Bank) and Iowa State Savings Bank (Iowa State Bank). The purpose of this discussion is to focus on significant factors affecting the Company's financial condition and results of operations.
The Company does not engage in any material business activities apart from its ownership of the Banks. Products and services offered by the Banks are for commercial and consumer purposes including loans, deposits and wealth management services. Wealth management services includes financial planning and managing trust, agencies, estates and investment brokerage accounts. The Company employs twenty-nine individuals to assist the Banks with its financial reporting, human resources, audit, compliance, marketing, technology systems, training, real estate valuation services and the coordination of management activities, in addition to 232 full-time equivalent individuals employed by the Banks.
The Company’s primary competitive strategy is to utilize seasoned and competent Bank management and local decision making authority to provide customers with faster response times and more flexibility in the products and services offered. This strategy is viewed as providing an opportunity to increase revenues through creating a competitive advantage over other financial institutions. The Company also strives to remain operationally efficient to provide better profitability while enabling the Company to offer more competitive loan and deposit rates.
The principal sources of Company revenues and cash flow are: (i) interest and fees earned on loans made by the Company and Banks; (ii) interest on fixed income investments held by the Banks; (iii) fees on wealth management services provided by those Banks exercising trust powers; (iv) service fees on deposit accounts maintained at the Banks; (v) gain on sale of loans; and (vi) merchant and card fees. The Company’s principal expenses are: (i) interest expense on deposit accounts and other borrowings; (ii) credit loss expense; (iii) salaries and employee benefits; (iv) data processing costs associated with maintaining the Banks’ loan and deposit functions; (v) occupancy expenses for maintaining the Banks’ facilities; and (vi) professional fees. The largest component contributing to the Company’s net income is net interest income, which is the difference between interest earned on earning assets (primarily loans and investments) and interest paid on interest-bearing liabilities (primarily deposits and other borrowings). One of management’s principal functions is to manage the spread between interest earned on earning assets and interest paid on interest bearing liabilities in an effort to maximize net interest income while maintaining an appropriate level of interest rate risk.
The Company had net income of $5.9 million, or $0.67 per share, for the three months ended June 30, 2026, compared to net income of $4.5 million, or $0.51 per share, for the three months ended June 30, 2025. The Company had net income of $11.9 million, or $1.34 per share, for the six months ended June 30, 2026, compared to net income of $8.0 million, or $0.89 per share, for the six months ended June 30, 2025. The increase in earnings is primarily due to an increase in net interest income. Net interest income increased due to higher yields and average balances on investments, combined with a lower cost of funds driven by declining market rates and reduced borrowings.
The following management discussion and analysis will provide a review of important items relating to:
Challenges, Risks and Uncertainties
Critical Accounting Policies
Non-GAAP Financial Measures
Income Statement Review
Balance Sheet Review
Asset Quality Review and Credit Risk Management
Liquidity and Capital Resources
Forward-Looking Statements and Business Risks
Management has identified certain events or circumstances that may negatively impact the Company’s financial condition and results of operations in the future and is attempting to position the Company to best respond to those challenges. These challenges are addressed in the Company’s most recent Annual Report on Form 10-K filed on March 12, 2026.
The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements that have been prepared in accordance with GAAP. The preparation of the Company's financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes involve the most complex and subjective estimates and judgments and have the most effect on the Company's reported financial position and results of operations are described as critical accounting policies in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 12, 2026. There have been no significant changes in the critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2025.
This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include the Company’s presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis. Management believes these non-GAAP financial measures are widely used in the financial institutions industry and provide useful information to both management and investors to analyze and evaluate the Company’s financial performance. Limitations associated with non-GAAP financial measures include the risks that persons might disagree as to the appropriateness of items included in these measures and that different companies might calculate these measures differently. These non-GAAP disclosures should not be considered an alternative to the Company’s GAAP results. The following table reconciles the non-GAAP financial measures of net interest income and net interest margin on an FTE basis to GAAP (dollars in thousands).
Three Months Ended June 30,
Six Months Ended June 30,
Reconciliation of net interest income and annualized net interest margin on an FTE basis to GAAP:
Net interest income (GAAP)
Tax-equivalent adjustment (1)
Net interest income on an FTE basis (non-GAAP)
Average interest-earning assets
Net interest margin on an FTE basis (non-GAAP)
(1) Computed on a tax-equivalent basis using an incremental federal income tax rate of 21 percent, adjusted to reflect the effect of the tax-exempt interest income associated with owning tax-exempt securities and loans.
Income Statement Review for the Three Months ended June 30, 2026 and 2025
The following highlights a comparative discussion of the major components of net income and their impact for the three months ended June 30, 2026 and 2025:
AVERAGE BALANCES AND INTEREST RATES
The following two tables are used to calculate the Company’s non-GAAP net interest margin on an FTE basis. The first table includes the Company’s average assets and the related income to determine the average yield on earning assets. The second table includes the average liabilities and related expense to determine the average rate paid on interest-bearing liabilities. The net interest margin is equal to interest income less interest expense divided by average earning assets. Refer to the net interest income discussion following the tables for additional detail.
AVERAGE BALANCE SHEETS AND INTEREST RATES
Average
Revenue/
Yield/
balance
expense
rate
(dollars in thousands)
Interest-earning assets
Loans (1)
Real estate
Total loans (including fees)
Investment securities
Tax-exempt (2)
Total investment securities
Interest-bearing deposits with banks and federal funds sold
Total interest-earning assets
Noninterest-earning assets
TOTAL ASSETS
(1) Average loan balances include nonaccrual loans, if any. Interest income collected on nonaccrual loans has been included.
(2) Tax-exempt income has been adjusted to a tax-equivalent basis using an incremental tax rate of 21%.
Interest-bearing liabilities
Interest-bearing checking, savings accounts and money markets
Time deposits
Total interest-bearing liabilities
Noninterest-bearing liabilities
Stockholders' equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
Net interest income (FTE)(3)
Net interest spread (FTE)
Net interest margin (FTE)(3)
(3) Net interest income (FTE) is a non-GAAP financial measure. For further information, refer to the Non-GAAP Financial Measures section of this report.
Net Interest Income
For the three months ended June 30, 2026 and 2025, the Company's net interest margin adjusted for tax exempt income was 3.18% and 2.65%, respectively. Net interest income, prior to the adjustment for tax-exempt income, for the three months ended June 30, 2026 totaled $16.4 million compared to $13.5 million for the three months ended June 30, 2025.
For the three months ended June 30, 2026, interest income increased $1.8 million, or 8.4%, when compared to the same period in 2025. The increase is primarily due to higher yield and average balances on the investment portfolio.
Interest expense decreased $1.1 million, or 14.0%, for the three months ended June 30, 2026 when compared to the same period in 2025. The lower interest expense for the period is primarily due to a decrease in market rates and reduced borrowings.
Credit Loss Expense
A credit loss expense of $208 thousand was recognized for the three months ended June 30, 2026 as compared to a credit loss expense of $108 thousand for the three months ended June 30, 2025. Net loan charge-offs for the three months ended June 30, 2026 totaled $255 thousand compared to net loan charge-offs of $1.1 million for the three months ended June 30, 2025. The credit loss expense in 2026 and 2025 was primarily due charge-offs in the commercial loan portfolio.
Noninterest Income and Expense
Noninterest income for the three months ended June 30, 2026 totaled $2.7 million compared to $2.6 million for the three months ended June 30, 2025, an increase of 2.3%.
Noninterest expense for the three months ended June 30, 2026 totaled $11.2 million compared to $10.4 million recorded for the three months ended June 30, 2025, an increase of 7.8%. The increase reflects higher professional fees, salaries and benefits. The increase in professional fees was primarily due to $300 thousand of consultant fees for certain contract negotiations during the three months ended June 30, 2026. The consultant fees are expected to continue throughout 2026 as negotiations are in process. The increase in salaries and benefits was driven by anticipated bonus payouts as Company performance thresholds are met, in addition to normal increases in salaries and benefits. The efficiency ratio was 58.52% for the second quarter of 2026 as compared to 64.34% in the second quarter of 2025. The efficiency ratio continues to improve as net interest margin increases.
Income tax expense for the three months ended June 30, 2026 totaled $1.8 million compared to $1.1 million recorded for the three months ended June 30, 2025. The effective tax rate was 23% and 20% for the three months ended June 30, 2026 and 2025, respectively. The increase in income tax expense and effective tax rate was primarily due to higher net income and lower New Markets Tax Credits. The final year of tax credits was 2025 for a majority of the New Markets Tax Credit projects.
Income Statement Review for the Six Months ended June 30, 2026 and 2025
The following highlights a comparative discussion of the major components of net income and their impact for the six months ended June 30, 2026 and 2025:
For the six months ended June 30, 2026 and 2025, the Company's net interest margin adjusted for tax exempt income was 3.10% and 2.59%, respectively. Net interest income, prior to the adjustment for tax-exempt income, for the six months ended June 30, 2026 totaled $31.8 million compared to $26.4 million for the six months ended June 30, 2025.
For the six months ended June 30, 2026, interest income increased $2.9 million, or 6.8%, when compared to the same period in 2025. The increase is primarily due to higher yield and average balances on the investment portfolio.
Interest expense decreased $2.5 million, or 15.7%, for the six months ended June 30, 2026 when compared to the same period in 2025. The lower interest expense for the period is primarily due to a decrease in market rates and reduced borrowings.
A credit loss benefit of ($139) thousand was recognized for the six months ended June 30, 2026 as compared to a credit loss expense of $1.1 million for the six months ended June 30, 2025. Net loan charge-offs for the six months ended June 30, 2026 totaled $223 thousand compared to net loan charge-offs of $1.2 million for the six months ended June 30, 2025. The credit loss benefit in 2026 was primarily due to a decline in loan balances. The credit loss expense in 2025 was primarily due to charge-offs in the commercial loan portfolio.
Noninterest income for the six months ended June 30, 2026 totaled $5.5 million compared to $5.2 million for the six months ended June 30, 2025, an increase of 5.8%. The increase is primarily due to an increase in wealth management income due to growth in assets under management and an increase in estate and trust fees.
Noninterest expense for the six months ended June 30, 2026 totaled $22.0 million compared to $20.6 million recorded for the six months ended June 30, 2025, an increase of 6.9%. The increase reflects higher professional fees, salaries and benefits. The increase in professional fees was primarily due to $600 thousand of consultant fees for certain contract negotiations during the six months ended June 30, 2026. The consultant fees are expected to continue throughout 2026 as negotiations are in process. The increase in salaries and benefits was driven by anticipated bonus payouts as Company performance thresholds are met, in addition to normal increases in salaries and benefits. The efficiency ratio was 59.09% for the six months ended June 30, 2026 as compared to 65.34% in the six months ended June 30, 2025. The efficiency ratio continues to improve as net interest margin increases.
Income tax expense for the six months ended June 30, 2026 totaled $3.5 million compared to $1.9 million recorded for the six months ended June 30, 2025. The effective tax rate was 23% and 19% for the six months ended June 30, 2026 and 2025, respectively. The increase in income tax expense and effective tax rate was primarily due to higher net income and lower New Markets Tax Credits. The final year of tax credits was 2025 for a majority of the New Markets Tax Credit projects.
As of June 30, 2026, total assets were $2.12 billion, a $10.6 million decrease compared to December 31, 2025. This decrease in assets is primarily due to a decrease in the loan portfolio and interest-bearing deposits in financial institutions, partially offset by an increase in securities available-for-sale.
Investment Portfolio
The investment portfolio totaled $695 million as of June 30, 2026, an increase of $39 million from the December 31, 2025 balance of $656 million. The increase in securities available-for-sale is primarily due to purchases in excess of maturities.
On a quarterly basis, the investment portfolio is reviewed for credit losses. As of June 30, 2026, gross unrealized losses of $27.9 million, are due to the interest rate environment and are not considered credit-related. Certain bonds in the investment portfolio may incur credit losses and could negatively affect the Company’s net income. As a result of the Company’s favorable liquidity position, the Company does not have the intent to sell securities with an unrealized loss at the present time. In addition, management believes it is more likely than not that the Company will hold these securities until recovery of their fair value to cost basis and expects full principal and interest to be collected. Therefore, the Company does not have an allowance for credit losses on these investments as of June 30, 2026.
Loan Portfolio
The loan portfolio, net of the allowance for credit losses, totaled $1.25 billion and $1.28 billion as of June 30, 2026 and December 31, 2025, respectively. The decrease is primarily due to payoffs in the commercial real estate and agricultural loan portfolios.
Deposits totaled $1.853 billion and $1.855 billion as of June 30, 2026 and December 31, 2025, respectively. The decrease in deposits is primarily due to a decrease in retail and commercial interest-bearing deposits, partially offset by an increase in public funds. Securities sold under agreements to repurchase decreased to $30.9 million as of June 30, 2026 compared to $38.8 million as of December 31, 2025. Securities sold under agreements to repurchase and deposit balances fluctuate as customers’ liquidity needs vary and could be impacted by prevailing market interest rates, competition, and economic conditions. Approximately 14% of deposits are tied to external indexes as of June 30, 2026. Deposit interest expense related to these deposits can be more volatile than other deposit products in a changing interest rate environment.
The Company is party to financial instruments with off-balance-sheet risk in the normal course of business. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. No material changes in the Company’s off-balance sheet arrangements have occurred since December 31, 2025.
The Company’s credit risk is historically centered in the loan portfolio, which totaled $1.25 billion and $1.28 billion as of June 30, 2026 and December 31, 2025, respectively. Net loans comprise 59% of total assets as of June 30, 2026. The objective in managing loan portfolio risk is to reduce the risk of loss resulting from a customer’s failure to perform according to the terms of an agreement and to quantify and manage credit risk on a portfolio basis. The Company’s level of problem loans (consisting of nonaccrual loans and loans past due 90 days or more) as a percentage of total loans was 1.55% at June 30, 2026, as compared to 1.19% at December 31, 2025. The Company’s level of problem loans as a percentage of total loans at June 30, 2026 of 1.55% is higher as compared to the Iowa State Average peer group of FDIC insured institutions as of March 31, 2026, of 0.60%, most recent available.
Substandard-Impaired loans totaled $19.1 million as of June 30, 2026 and have increased $4.5 million as compared to the substandard-impaired loans of $14.6 million as of December 31, 2025. The increase is primarily due to one relationship in the agricultural loan portfolio.
A loan is considered Substandard-Impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payment of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. The Company applies its normal loan review procedures to identify loans that should be evaluated for impairment.
Loans past due 90 days or more that are still accruing interest are reviewed no less frequently than quarterly to determine if there continues to be a strong reason that the credit should not be placed on nonaccrual. As of June 30, 2026, nonaccrual loans totaled $19.6 million and $35 thousand of loans past due 90 days and still accruing. This compares to nonaccrual loans of $15.1 million and $328 thousand of loans past due 90 days and still accruing as of December 31, 2025. There was no other real estate owned as of June 30, 2026 and $204 thousand of other real estate owned as of December 31, 2025.
Loans past due 30 days or more totaled $22.5 million as of June 30, 2026, compared to $7.3 million as of December 31, 2025. The increase is primarily related to one agricultural operating loan relationships classified as substandard-impaired and one commercial real estate loan relationship that matured and is being restructured.
Substandard loans totaled $50.7 million as of June 30, 2026 and have increased $8.5 million as compared to the substandard loans of $42.2 million as of December 31, 2025. The increase is primarily due to one large relationship secured by 1-4 family residential properties and weakening in the multi-family portfolio, partially offset by payoffs in the commercial real estate portfolio.
The watch and special mention loans classified as agricultural real estate and operating totaled $38.2 million as of June 30, 2026 as compared to $30.7 million as of December 31, 2025. The substandard and substandard-impaired loans in these categories totaled $9.4 million and $9.8 million as of June 30, 2026 and December 31, 2025, respectively. The change is primarily due to variable yields, weather impacts and commodity prices affecting agricultural loans.
The watch and special mention loans classified as commercial real estate totaled $34.3 million as of June 30, 2026 as compared to $39.0 million as of December 31, 2025. The substandard and substandard-impaired commercial real estate loans totaled $21.7 million and $26.8 million as of June 30, 2026 and December 31, 2025, respectively. The decrease is primarily due to payoffs of substandard loans.
The allowance for credit losses as a percentage of outstanding loans was 1.36% as of June 30, 2026 and December 31, 2025.The allowance for credit losses totaled $17.3 million and $17.7 million as of June 30, 2026 and December 31, 2025, respectively. The decrease in the allowance for credit losses is primarily due to a decrease in loan balances.
Due to recent trends in the banking industry, commercial real estate and multi-family real estate loans are facing heightened risk due to factors such as increased susceptibility to economic pressures caused by elevated interest rates and challenging market conditions. The Company maintains a rigorous approach to risk management through regular loan reviews, stress testing and sensitivity analyses to evaluate the risk level in the loan portfolio. Loan reviews include monitoring past due rates, non-performing trends, concentrations, loan-to-value ratios, and other qualitative factors. The Company's loan policies are robust and are updated as needed to align with strategic objectives and risk management priorities.
Commercial real estate and multi-family real estate represent approximately 39% of the loan portfolio as of June 30, 2026. The following is an additional breakdown of the Company's commercial real estate and multi-family real estate portfolios (in thousands):
Percent of Total Loans
Owner-Occupied All Purposes
Non-Owner Occupied Retail or Other
Non-Owner Occupied Hotel
Non-Owner Occupied Warehouse
Non-Owner Occupied Office
Total real estate - commercial
Total real estate - commercial and multi-family
Liquidity management is the process by which the Company, through its Banks’ Asset and Liability Committees (ALCO), ensures that adequate liquid funds are available to meet its financial commitments on a timely basis, at a reasonable cost and within acceptable risk tolerances. These commitments include funding credit obligations to borrowers, funding of mortgage originations pending delivery to the secondary market, withdrawals by depositors, maintaining adequate collateral for pledging for public funds, trust deposits and borrowings, paying dividends to shareholders, payment of operating expenses, funding capital expenditures and maintaining deposit reserve requirements.
Liquidity is derived primarily from core deposit growth and retention; principal and interest payments on loans; principal and interest payments, sale, maturity and prepayment of securities available-for-sale; net cash provided from operations; and access to other funding sources. Other funding sources include federal funds purchased lines, FHLB advances and other capital market sources.
As of June 30, 2026, the level of liquidity and capital resources of the Company remain at a satisfactory level. Management believes that the Company’s liquidity sources will be sufficient to support its existing operations for the foreseeable future.
The liquidity and capital resources discussion will cover the following topics:
Review of the Company’s Current Liquidity Sources
Review of Statements of Cash Flows
Company Only Cash Flows
Review of Commitments for Capital Expenditures, Cash Flow Uncertainties and Known Trends in Liquidity and Cash Flows Needs
Capital Resources
Liquid assets of cash on hand, balances due from other banks and interest-bearing deposits in financial institutions as of June 30, 2026 and December 31, 2025 totaled $107.2 million and $126.8 million, respectively, and management believes these sources provide an adequate level of liquidity given current economic conditions.
Other sources of liquidity available to the Banks as of June 30, 2026 include outstanding lines of credit with the FHLB of Des Moines, Iowa of $304.1 million, with $16.5 million of outstanding FHLB advances. Federal funds borrowing capacity at correspondent banks was $106.9 million, with no outstanding federal fund purchase balances as of June 30, 2026. The Company had securities sold under agreements to repurchase totaling $30.9 million as of June 30, 2026.
Total investments as of June 30, 2026 were $695 million compared to $656 million as of December 31, 2025. These investments provide the Company with liquidity since all of the investments are classified as available-for-sale as of June 30, 2026. The Company has $401.6 million of unpledged securities available-for-sale and interest-bearing deposits as of June 30, 2026. The investment portfolio serves an important role in the overall context of balance sheet management in terms of balancing capital utilization and liquidity. The decision to purchase or sell securities is based upon the current assessment of economic and financial conditions, including the interest rate environment, liquidity and credit considerations. The portfolio’s scheduled maturities and payments represent a significant source of liquidity.
Review of the Consolidated Statements of Cash Flows
Net cash provided by operating activities for the six months ended June 30, 2026 totaled $11.8 million compared to $11.1 million for the six months ended June 30, 2025. The increase of $666 thousand in cash provided by operating activities was primarily due to higher net interest income.
Net cash provided by (used in) investing activities for the six months ended June 30, 2026 was ($12.2) million compared to $43.4 million for the six months ended June 30, 2025. The decrease of $55.5 million in cash provided by investing activities was primarily due to purchases of securities available-for-sale, partially offset by a decrease in loans.
Net cash (used in) financing activities for the six months ended June 30, 2026 totaled ($19.2) million compared to ($60.5) million for the six months ended June 30, 2025. The decrease of $41.4 million in cash used in financing activities was primarily due to a smaller decline in deposits and lower repayments of other borrowings as the Company has continued to reduce borrowings. As of June 30, 2026, the Company did not have any external debt financing, off-balance sheet financing arrangements, or derivative instruments linked to its stock.
Review of Company Only Cash Flows
The Company’s liquidity on an unconsolidated basis is heavily dependent upon dividends paid to the Company by the Banks. The Banks provide adequate liquidity to pay the Company’s expenses and stockholder dividends. Dividends paid by the Banks to the Company amounted to $9.3 million and $6.35 million for the six months ended June 30, 2026 and 2025, respectively. Various federal and state statutory provisions limit the amounts of dividends banking subsidiaries are permitted to pay to their holding companies without regulatory approval. Federal Reserve policy further limits the circumstances under which bank holding companies may declare dividends. For example, a bank holding company should not continue its existing rate of cash dividends on its common stock unless its net income is sufficient to fully fund each dividend and its prospective rate of earnings retention appears consistent with its capital needs, asset quality and overall financial condition. In addition, the Federal Reserve and the FDIC have issued policy statements, which provide that insured banks and bank holding companies should generally pay dividends only out of current operating earnings. Federal and state banking regulators may also restrict the payment of dividends by order.
The Company, on an unconsolidated basis, has interest-bearing deposits totaling $4.8 million as of June 30, 2026.
No other material capital expenditures or material changes in the capital resource mix are anticipated at this time. The primary cash flow uncertainty would be a sudden decline in deposits causing the Banks to liquidate securities. Historically, the Banks have maintained an adequate level of short-term marketable investments to fund the temporary declines in deposit balances. There are no known trends in liquidity and cash flow needs as of June 30, 2026 that are of concern to management.
The Company’s total stockholders’ equity as of June 30, 2026 totaled $213.1 million and was $5.2 million higher than the $207.9 million recorded as of December 31, 2025. The increase in stockholders’ equity was primarily the result of retention of net income in excess of dividends. At June 30, 2026 and December 31, 2025, stockholders’ equity as a percentage of total assets was 10.0% and 9.7%, respectively. The capital levels of the Company currently exceed applicable regulatory guidelines to be considered “well capitalized” as of June 30, 2026. Unrealized losses on the investment portfolio are excluded from regulatory capital.
The Private Securities Litigation Reform Act of 1995 provides the Company with the opportunity to make cautionary statements regarding forward-looking statements contained in this Quarterly Report, including forward-looking statements concerning the Company’s future performance and asset quality. Forward-looking statements contained in this Quarterly Report are not historical facts and are based on management’s current beliefs, assumptions, predictions and expectations of future events, including the Company’s future performance, taking into account all information currently available to management. These beliefs, assumptions, predictions and expectations are subject to numerous risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to management and many of which are beyond management’s control. If a change occurs, the Company’s business, financial condition, liquidity, results of operations, asset quality, plans and objectives may vary materially from those expressed in the forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on such forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “forecasts”, “continuing,” “ongoing,” “expects,” “views,” “intends” and similar words or phrases. The risks and uncertainties that may affect the Company’s future performance and asset quality include, but are not limited to, the following: national, regional and local economic conditions and the impact they may have on the Company and its customers; competitive products and pricing available in the marketplace; changes in credit and other risks posed by the Company’s loan and investment portfolios, including declines in commercial or residential real estate values or changes in the allowance for credit losses as dictated by new market conditions or regulatory requirements; changes in local, national and international economic conditions, including rising inflation rates; fiscal and monetary policies of the U.S. government; the imposition of tariffs and retaliatory tariffs; changes in governmental regulations affecting financial institutions (including regulatory fees and capital requirements); changes in prevailing interest rates; credit risk management and asset/liability management; the financial and securities markets; the availability of and cost associated with sources of liquidity; and other risks and uncertainties inherent in the Company’s business, including those discussed under the headings “Forward-Looking Statements and Business Risks” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2025. Any forward-looking statements are qualified in their entirety by the foregoing risks and uncertainties and speak only as of the date on which such statements are made. The Company undertakes no obligation to revise or update such forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Not applicable
Item 4.
Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended). Based on that evaluation, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.
There was no change in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II.
OTHER INFORMATION
Item 1.
Legal Proceedings
Item 1.A.
Risk Factors
Management does not believe there have been any material changes in the risk factors that were disclosed in the Company's Form 10-K filed with the SEC on March 12, 2026.
Unregistered Sales of Equity Securities and Use of Proceeds
In August 2025, the Company approved a Stock Repurchase Plan which provided for the repurchase of up to 200,000 shares of the Company's common stock. As of June 30, 2026, there were 165,053 shares remaining to be purchased under the plan.
The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchases” (as defined in rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company’s common stock during the three months ended June 30, 2026.
Number
Maximum
of Shares
Number of
Purchased as
Shares that
Part of
May Yet Be
Publicly
Purchased
Price Paid
Announced
Under
Period
Per Share
Plans
The Plan
April 1, 2026 to April 30, 2026
May 1, 2026 to May 31, 2026
June 1, 2026 to June 30, 2026
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other information
Item 6.
Exhibits
31.1
Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2
Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS
Inline XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (1)
101.SCH
Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
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Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
104
Cover page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101.1)
(1) These interactive data files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE: August 7, 2026
By: /s/ John P. Nelson
John P. Nelson, Chief Executive Officer and President
(Principal Executive Officer)
By: /s/ Justin C. Clausen
Justin C. Clausen, Chief Financial Officer
(Principal Financial and Accounting Officer)