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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, 2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ____________ to ____________

Commission File Number 0-32637

AMES NATIONAL CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Iowa

42-1039071

(State of Incorporation)

(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, 2025, there were 8,898,689 shares of common stock, par value $2, outstanding.

Table of Contents

AMES NATIONAL CORPORATION

INDEX

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)	3

	Consolidated Balance Sheets at June 30, 2025 and December 31, 2024	3

	Consolidated Statements of Income for the three and six months ended June 30, 2025 and 2024	4

	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2025 and 2024	5

	Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2025 and 2024	6

	Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024	7

	Notes to Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51

Item 4.	Controls and Procedures	51

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	51

Item 1.A.	Risk Factors	51

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 3.	Defaults Upon Senior Securities	52

Item 4.	Mine Safety Disclosures	52

Item 5.	Other Information	52

Item 6.	Exhibits	53

	Signatures	54

Table of Contents

AMES NATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	*June 30,*			*December 31,*
	*2025*			*2024*
	(unaudited)			(audited)
ASSETS
Cash and due from banks	$	24,148		$	19,525
Interest-bearing deposits in financial institutions and federal funds sold		71,063			81,702
Total cash and cash equivalents		95,211			101,227
Interest-bearing time deposits		6,918			6,166
Securities available-for-sale		644,702			648,513
Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock, at cost		3,166			3,883
Loans receivable, net		1,279,644			1,303,917
Loans held for sale		341			342
Bank premises and equipment, net		21,239			21,567
Accrued income receivable		12,166			13,864
Bank-owned life insurance		3,256			3,214
Deferred income taxes, net		9,949			14,056
Intangible assets, net		938			1,092
Goodwill		12,424			12,424
Other assets		2,890			2,915

Total assets	$	2,092,844		$	2,133,180

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits
Noninterest-bearing checking	$	309,379		$	358,386
Interest-bearing checking		629,728			619,951
Savings and money market		547,277			540,491
Time, $250 and over		88,692			84,996
Other time		244,129			242,858
Total deposits		1,819,205			1,846,682

Securities sold under agreements to repurchase		40,061			52,412
Other borrowings		30,652			46,952
Dividends payable		-			1,790
Accrued interest payable		2,472			3,208
Accrued expenses and other liabilities		7,425			7,430
Total liabilities		1,899,815			1,958,474

STOCKHOLDERS' EQUITY
Common stock, $2 par value, authorized 18,000,000 shares; issued and outstanding 8,898,689 and 8,949,110 shares as of June 30, 2025 and December 31, 2024, respectively		17,797			17,898
Additional paid-in capital		12,907			13,635
Retained earnings		188,442			182,236
Accumulated other comprehensive (loss)		(26,117	)		(39,063	)
Total stockholders' equity		193,029			174,706

Total liabilities and stockholders' equity	$	2,092,844		$	2,133,180

See Notes to Consolidated Financial Statements.

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AMES NATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(in thousands, except per share data)

	*Three Months Ended*				*Six Months Ended*
	*June 30,*				*June 30,*
	*2025*		*2024*		*2025*		*2024*

Interest and dividend income:
Loans, including fees	$	16,667	$	16,220	$	33,341	$	32,042
Securities:
Taxable		3,116		3,027		5,956		6,119
Tax-exempt		450		508		903		1,043
Other interest and dividend income		1,252		780		2,403		1,442
Total interest and dividend income		21,485		20,535		42,603		40,646

Interest expense:
Deposits		7,387		8,170		14,806		15,759
Other borrowed funds		632		1,493		1,416		3,109
Total interest expense		8,019		9,663		16,222		18,868

Net interest income		13,466		10,872		26,381		21,778

Credit loss expense		108		182		1,070		351

Net interest income after credit loss expense		13,358		10,690		25,311		21,427

Noninterest income:
Wealth management income		1,518		1,476		2,962		2,671
Service fees		378		341		748		663
Securities (losses), net		-		-		-		(165	)
Gain on sale of loans held for sale		150		166		225		249
Merchant and card fees		392		423		740		785
Other noninterest income		203		213		513		593
Total noninterest income		2,641		2,619		5,188		4,796

Noninterest expense:
Salaries and employee benefits		6,479		6,437		12,852		12,674
Data processing		1,456		1,568		2,808		3,003
Occupancy expenses, net		728		716		1,500		1,493
FDIC insurance assessments		275		296		535		597
Professional fees		540		863		1,025		1,323
Business development		311		285		683		665
Intangible asset amortization		77		86		154		173
New market tax credit projects amortization		191		175		383		349
Other operating expenses, net		306		314		686		657
Total noninterest expense		10,363		10,740		20,626		20,934

Income before income taxes		5,636		2,569		9,873		5,289

Provision for income taxes		1,125		385		1,919		801

Net income	$	4,511	$	2,184	$	7,954	$	4,488

Basic and diluted earnings per share	$	0.51	$	0.24	$	0.89	$	0.50

Dividends declared per share	$	-	$	0.27	$	0.20	$	0.54

See Notes to Consolidated Financial Statements.

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AMES NATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in thousands)

	*Three Months Ended*						*Six Months Ended*
	*June 30,*						*June 30,*
	*2025*			*2024*			*2025*			*2024*


Net income	$	4,511		$	2,184		$	7,954		$	4,488
Unrealized gains on securities before tax:
Unrealized holding gains arising during the period		7,530			2,304			17,021			1,977
Plus: reclassification adjustment for losses realized in net income		-			-			-			165
Other comprehensive income, before tax		7,530			2,304			17,021			2,142
Tax expense related to other comprehensive income		(1,792	)		(547	)		(4,051	)		(509	)
Other income tax effects from tax reform		(14	)		(10	)		(24	)		(12	)
Other comprehensive income, net of tax		5,724			1,747			12,946			1,621
Comprehensive income	$	10,235		$	3,931		$	20,900		$	6,109

See Notes to Consolidated Financial Statements.

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AMES NATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

(in thousands, except share and per share data)

													Accumulated
													Other
Three Months Ended June 30, 2025 and 2024													Comprehensive			Total
	Common Stock						Additional Paid-in			Retained			Income (Loss),			Stockholders'
	Shares			Amount			Capital			Earnings			Net of Taxes			Equity

Balance, March 31, 2024		8,992,167		$	17,984		$	14,253		$	180,316		$	(47,013	)	$	165,540
Net income		-			-			-			2,184			-			2,184
Other income tax effects from tax reform		-			-			-			10			-			10
Other comprehensive income		-			-			-			-			1,747			1,747
Cash dividends declared, $0.27 per share		-			-			-			(2,428	)		-			(2,428	)
Balance, June 30, 2024		8,992,167		$	17,984		$	14,253		$	180,082		$	(45,266	)	$	167,053


Balance, March 31, 2025		8,915,557		$	17,831		$	13,152		$	183,914		$	(31,841	)	$	183,056
Net income		-			-			-			4,511			-			4,511
Other income tax effects from tax reform		-			-			-			14			-			14
Other comprehensive income		-			-			-			-			5,724			5,724
Repurchase and retirement of stock		(16,868	)		(34	)		(245	)		-			-			(279	)
Cash dividends declared on retired stock		-			-			-			3			-			3
Balance, June 30, 2025		8,898,689		$	17,797		$	12,907		$	188,442		$	(26,117	)	$	193,029

													Accumulated
													Other
Six Months Ended June 30, 2025 and 2024													Comprehensive			Total
	Common Stock						Additional Paid-in			Retained			Income (Loss),			Stockholders'
	Shares			Amount			Capital			Earnings			Net of Taxes			Equity

Balance, December 31, 2023		8,992,167		$	17,984		$	14,253		$	180,438		$	(46,887	)	$	165,788
Net income		-			-			-			4,488			-			4,488
Other income tax effects from tax reform		-			-			-			12			-			12
Other comprehensive income		-			-			-			-			1,621			1,621
Cash dividends declared, $0.54 per share		-			-			-			(4,856	)		-			(4,856	)
Balance, June 30, 2024		8,992,167		$	17,984		$	14,253		$	180,082		$	(45,266	)	$	167,053


Balance, December 31, 2024		8,949,110		$	17,898		$	13,635		$	182,236		$	(39,063	)	$	174,706
Net income		-			-			-			7,954			-			7,954
Other income tax effects from tax reform		-			-			-			24			-			24
Other comprehensive income		-			-			-			-			12,946			12,946
Repurchase and retirement of stock		(50,421	)		(101	)		(728	)		-			-			(829	)
Cash dividends declared, $0.20 per share		-			-			-			(1,772	)		-			(1,772	)
Balance, June 30, 2025		8,898,689		$	17,797		$	12,907		$	188,442		$	(26,117	)	$	193,029

See Notes to Consolidated Financial Statements.

Table of Contents

AMES NATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

Six Months Ended June 30, 2025 and 2024

	*2025*			*2024*

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	7,954		$	4,488
Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense for loans		1,069			423
Credit loss expense (benefit) for off-balance sheet credit exposures		1			(72	)
Amortization of securities available-for-sale and loans, net		194			529
Amortization of intangible assets		154			173
Depreciation		638			654
Provision for deferred income taxes		56			(35	)
Securities losses, net		-			165
Increase in cash value of bank-owned life insurance		(42	)		(40	)
Gain on sales of loans held for sale		(225	)		(249	)
Proceeds from loans held for sale		11,382			11,992
Originations of loans held for sale		(11,156	)		(12,129	)
Amortization of investment in New Markets Tax Credit projects		383			349
Gain on other real estate owned, net		-			(11	)
Change in assets and liabilities:
Decrease in accrued income receivable		1,698			469
Decrease (increase) in other assets		(233	)		207
(Decrease) in accrued interest payable		(736	)		(1,519	)
(Decrease) in accrued expenses and other liabilities		(6	)		(134	)
Net cash provided by operating activities		11,131			5,260

CASH FLOWS FROM INVESTING ACTIVITIES
Change in interest-bearing time deposits		(752	)		2,489
Purchase of securities available-for-sale		(57,915	)		(11,614	)
Proceeds from sale of securities available-for-sale		-			2,049
Proceeds from maturities and calls of securities available-for-sale		78,489			48,478
Purchase of FHLB stock		(1,703	)		(6,344	)
Proceeds from the redemption of FHLB and FRB stock		2,420			5,482
Net (increase) decrease in loans		23,054			(3,815	)
Net proceeds from the sale of other real estate owned		89			82
Purchase of premises and equipment		(310	)		(164	)
Net cash provided by investing activities		43,372			36,643

CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in deposits		(27,477	)		9,282
(Decrease) in securities sold under agreements to repurchase		(12,351	)		(13,330	)
Payments on other borrowings		(19,100	)		(110,658	)
Proceeds from other borrowings		2,800			107,000
Net (payments on) FHLB short-term borrowings		-			(21,000	)
Dividends paid		(3,562	)		(4,856	)
Stock repurchases		(829	)		-
Net cash used in financing activities		(60,519	)		(33,562	)

Net increase (decrease) in cash and cash equivalents		(6,016	)		8,341

CASH AND CASH EQUIVALENTS
Beginning		101,227			55,101
Ending	$	95,211		$	63,442

Table of Contents

AMES NATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (unaudited)

(in thousands)

Six Months Ended June 30, 2025 and 2024

	*2025*		*2024*

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for:
Interest	$	16,958	$	20,387
Income taxes		2,161		53

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Transfer of loans receivable to other real estate owned	$	214	$	71

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
Dividends declared, not paid	$	-	$	2,428

See Notes to Consolidated Financial Statements.

Table of Contents

AMES NATIONAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

1.	Significant Accounting Policies

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

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

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

The fair value of a reporting unit is the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. As none of the Company’s reporting units are publicly traded, individual reporting unit fair value determinations cannot be directly correlated to the Company’s stock price. Significant judgment is applied when goodwill is assessed for impairment. This judgment includes developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables, incorporating general economic and market conditions and selecting an appropriate control premium. The Company completed a quantitative assessment of goodwill as of October 1, 2024 which indicated that goodwill was not impaired. Subsequently, the Company determined there were no adverse changes in criteria and key considerations to the previous assessment. Accordingly, the Company concluded there is no impairment of goodwill as of June 30, 2025.

New and Pending Accounting Pronouncements:

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU expands segment disclosure requirements for public entities to include disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The updated guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024, and did not have a material impact on the consolidated financial statements. See Note 13 for the new interim segment disclosures.

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

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

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2.	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, 2025 and 2024 was 8,900,515 and 8,992,167, respectively. The weighted average outstanding shares for the six months ended June 30, 2025 and 2024 was 8,908,904 and 8,992,167, 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, 2024.

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.

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The following table presents the balances of assets measured at fair value on a recurring basis by level as of June 30, 2025 and December 31, 2024 (in thousands):

Description	Total		Level 1		Level 2		Level 3

2025
Assets
Securities available-for-sale
U.S. government treasuries	$	158,667	$	158,667	$	-	$	-
U.S. government agencies		85,510		-		85,510		-
U.S. government mortgage-backed securities		103,660		-		103,660		-
State and political subdivisions		235,638		-		235,638		-
Corporate bonds		61,227		-		61,227		-
Loans receivable		8,001		-		8,001		-
Derivative financial instruments		844		-		844		-

Liabilities
Derivative financial instruments	$	406	$	-	$	406	$	-

2024
Assets
Securities available-for-sale
U.S. government treasuries	$	167,715	$	167,715	$	-	$	-
U.S. government agencies		83,433		-		83,433		-
U.S. government mortgage-backed securities		91,050		-		91,050		-
State and political subdivisions		245,562		-		245,562		-
Corporate bonds		60,753		-		60,753		-
Loans receivable		7,923		-		7,923		-
Derivative financial instruments		996		-		996		-

Liabilities
Derivative financial instruments	$	248	$	-	$	248	$	-

Certain assets are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment or a change in previously recognized impairment). The following table presents the assets carried on the balance sheet (after specific reserves) by caption and by level within the valuation hierarchy as of June 30, 2025 and December 31, 2024 (in thousands):

Description	Total		Level 1		Level 2		Level 3

2025

Collateral dependent loans	$	3,766	$	-	$	-	$	3,766

2024

Collateral dependent loans	$	385	$	-	$	-	$	385

As of June 30, 2025, individually analyzed collateral dependent loans with a carrying value of $4.2 million were reduced by a specific reserve of $472 thousand, resulting in a reporting fair value of $3.8 million. As of December 31, 2024, individually analyzed collateral dependent loans with a carrying value of $483 thousand were reduced by a specific reserve of $98 thousand resulting in a reporting fair value of $385 thousand.

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The significant inputs used in the fair value measurements for Level 3 assets measured at fair value on a nonrecurring basis as of June 30, 2025 and December 31, 2024 are as follows (in thousands):

	*2025*
	Estimated		Valuation	Unobservable
	Fair Value		Techniques	Inputs	Range

Collateral dependent loans	$	3,766	Fair value of collateral	Valuation adjustments		0% - 25%

	*2024*
	Estimated		Valuation	Unobservable
	Fair Value		Techniques	Inputs	Range

Collateral dependent loans	$	385	Fair value of collateral	Valuation adjustments		0% - 25%

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

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GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or nonrecurring basis. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following table includes the carrying amounts and estimated fair values of the Company’s financial assets and liabilities as of June 30, 2025 and December 31, 2024 (in thousands):

		*2025*				*2024*
	Fair Value			Estimated				Estimated
	Hierarchy	Carrying		Fair		Carrying		Fair
	Level	Amount		Value		Amount		Value

Financial assets:
Cash and cash equivalents	Level 1	$	95,211	$	95,211	$	101,227	$	101,227
Interest-bearing time deposits	Level 1		6,918		6,826		6,166		5,938
Securities available-for-sale	See previous table		644,702		644,702		648,513		648,513
FHLB and FRB stock	Level 2		3,166		3,166		3,883		3,883
Loans receivable, net	Level 3		1,279,644		1,244,423		1,303,917		1,261,703
Loans held for sale	Level 2		341		341		342		342
Accrued income receivable	Level 1		12,166		12,166		13,864		13,864
Derivative financial instruments	Level 2		844		844		996		996
Financial liabilities:
Deposits	Level 2	$	1,819,205	$	1,819,218	$	1,846,682	$	1,848,472
Securities sold under agreements to repurchase	Level 1		40,061		40,061		52,412		52,412
Other borrowings	Level 2		30,652		30,513		46,952		46,543
Accrued interest payable	Level 1		2,472		2,472		3,208		3,208
Derivative financial instruments	Level 2		406		406		248		248

The methodologies used to determine fair value as of June 30, 2025 did not change from the methodologies described in the December 31, 2024 Annual Financial Statements.

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

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

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5.	Debt Securities

The amortized cost of securities available-for-sale and their approximate fair values as of June 30, 2025 and December 31, 2024 are summarized below (in thousands):

2025:			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value

U.S. government treasuries	$	163,946	$	253	$	(5,532	)	$	158,667
U.S. government agencies		88,726		87		(3,303	)		85,510
U.S. government mortgage-backed securities		113,399		51		(9,790	)		103,660
State and political subdivisions		249,344		138		(13,844	)		235,638
Corporate bonds		64,281		60		(3,114	)		61,227
	$	679,696	$	589	$	(35,583	)	$	644,702

2024:			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value

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

The amortized cost and fair value of debt securities available-for-sale as of June 30, 2025, are shown below by expected maturity. Expected maturity will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).

	Amortized		Estimated
	Cost		Fair Value

Due in one year or less	$	94,816	$	93,398
Due after one year through five years		381,451		364,726
Due after five years through ten years		87,927		80,857
Due after ten years		2,103		2,061
	$	566,297	$	541,042
U.S. government mortgage-backed securities		113,399		103,660
Total	$	679,696	$	644,702

The Company's investment portfolio had an expected duration of 3.1 years as of June 30, 2025.

Securities with a carrying value of $298.3 million and $292.8 million at June 30, 2025 and December 31, 2024, respectively, were pledged on public deposits, securities sold under agreements to repurchase, other borrowings and for other purposes as required or permitted by law.

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The proceeds and losses on securities available-for-sale for the three and six months ended June 30, 2025 and 2024 are summarized below (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	*2025*		*2024*		*2025*		*2024*
Proceeds from sales of securities available-for-sale	$	-	$	-	$	-	$	2,049
Gross realized gains on securities available-for-sale		-		-		-		-
Gross realized losses on securities available-for-sale		-		-		-		(165	)

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2025 and December 31, 2024 are summarized as follows (in thousands):

	Less than 12 Months							12 Months or More							Total
	Estimated		Unrealized			No. of		Estimated		Unrealized			No. of		Estimated		Unrealized
2025:	Fair Value		Losses			Securities		Fair Value		Losses			Securities		Fair Value		Losses

Securities available-for-sale:
U.S. government treasuries	$	3,020	$	(7	)		1	$	126,092	$	(5,525	)		73	$	129,112	$	(5,532	)
U.S. government agencies		3,066		(22	)		1		71,156		(3,281	)		64		74,222		(3,303	)
U.S. government mortgage-backed securities		7,751		(57	)		5		82,612		(9,733	)		150		90,363		(9,790	)
State and political subdivisions		9,487		(167	)		16		212,559		(13,677	)		412		222,046		(13,844	)
Corporate bonds		990		(3	)		1		53,977		(3,111	)		67		54,967		(3,114	)
	$	24,314	$	(256	)		24	$	546,396	$	(35,327	)		766	$	570,710	$	(35,583	)

	Less than 12 Months							12 Months or More							Total
	Estimated		Unrealized			No. of		Estimated		Unrealized			No. of		Estimated		Unrealized
2024:	Fair Value		Losses			Securities		Fair Value		Losses			Securities		Fair Value		Losses

Securities available-for-sale:
U.S. government treasuries	$	5,466	$	(43	)		2	$	159,321	$	(8,733	)		94	$	164,787	$	(8,776	)
U.S. government agencies		3,953		(34	)		2		77,166		(5,160	)		70		81,119		(5,194	)
U.S. government mortgage-backed securities		3,740		(64	)		5		86,870		(12,856	)		154		90,610		(12,920	)
State and political subdivisions		13,944		(253	)		25		226,201		(20,338	)		440		240,145		(20,591	)
Corporate bonds		3,153		(27	)		4		56,604		(4,565	)		74		59,757		(4,592	)
	$	30,256	$	(421	)		38	$	606,162	$	(51,652	)		832	$	636,418	$	(52,073	)

Gross unrealized losses on debt securities totaled $35.6 million as of June 30, 2025. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, state or political subdivision, or corporations. Management then determines whether downgrades by bond rating agencies have occurred, and reviews industry analysts’ reports. The Company’s procedures for evaluating investments in states, municipalities and political subdivisions include but are not limited to reviewing the offering statement and the most current available financial information, comparing yields to yields of bonds of similar credit quality, confirming capacity to repay, assessing operating and financial performance, evaluating the stability of tax revenues, considering debt profiles and local demographics, and for revenue bonds, assessing the source and strength of revenue structures for municipal authorities. These procedures, as applicable, are utilized for all municipal purchases and are utilized in whole or in part for monitoring the portfolio of municipal holdings. The Company does not utilize third party credit rating agencies as a primary component of determining if the municipal issuer has an adequate capacity to meet the financial commitments under the security for the projected life of the investment, and, therefore, does not compare internal assessments to those of the credit rating agencies. Credit rating downgrades are utilized as an additional indicator of credit weakness and as a reference point for historical default rates. As of June 30, 2025 and December 31, 2024, the Company determined that no individual securities in an unrealized loss position represented credit losses that would require an allowance for credit losses. The Company concluded that the unrealized losses were primarily attributable to increases in market interest rates since these securities were purchased and other market conditions. Furthermore, the Company does not have the intent to sell any of these AFS debt securities and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost. Accrued interest receivable on AFS debt securities totaled $3.0 million and $2.9 million as of June 30, 2025 and December 31, 2024, respectively, and is excluded from the estimate of credit losses.

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6.	Loans Receivable and Credit Disclosures

The composition of loans receivable as of June 30, 2025 and December 31, 2024 is as follows (in thousands):

	*2025*			*2024*

Real estate - construction	$	57,304		$	59,281
Real estate - 1 to 4 family residential		312,570			309,704
Real estate - multi-family		204,409			200,209
Real estate - commercial		321,009			350,493
Real estate - agricultural		159,845			159,880
Commercial		97,129			90,023
Agricultural		126,425			134,157
Consumer and other		17,730			17,066
		1,296,421			1,320,813
Unallocated portfolio layer basis adjustments¹		194			162
Less allowance for credit losses		(16,971	)		(17,058	)
Loans receivable, net	$	1,279,644		$	1,303,917

¹ This amount represents portfolio layer method basis adjustments related to loans hedged in a closed portfolio. Under the portfolio layer method basis adjustments are not allocated to individual loans, however, the amounts impact the net loan balance. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See Note 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 $10.9 million as of June 30, 2025 and December 31, 2024, respectively, and is excluded from the estimate of credit losses. Nonrefundable loan fees and origination costs are deferred and recognized as a yield adjustment over the life of the related loan.

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

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Allowance for Credit Losses for Loans. The allowance for credit losses is an estimate of expected losses inherent within the Company's existing loans held for investment portfolio. Expected credit loss inherent in non-cancelable off-balance-sheet (“OBS”) credit exposures is accounted for as a separate liability on the consolidated balance sheet. The Company's allowance for credit losses for OBS credit exposures was $944 thousand and $943 thousand as of June 30, 2025 and December 31, 2024, respectively. The allowance for credit losses for loans held for investment, as reported in our consolidated balance sheet, is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.

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

●

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

●

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

●

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

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

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

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

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

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

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

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

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

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Activity in the allowance for credit losses, on a disaggregated basis, for the three and six months ended June 30, 2025 and 2024 is as follows (in thousands):

	*Three Months Ended June 30, 2025*
				1-4 Family
	Construction			Residential			Multi-family		Commercial			Agricultural								Consumer
	Real Estate			Real Estate			Real Estate		Real Estate			Real Estate			Commercial			Agricultural		and Other		Total
Balance, March 31, 2025	$	503		$	3,850		$	2,152	$	4,940		$	1,589		$	2,886		$	1,674	$	410	$	18,004
Credit loss expense (benefit) ¹		(23	)		32			69		(432	)		(16	)		109			317		19		75
Recoveries of loans charged-off		1			-			-		-			-			2			-		-		3
Loans charged-off		-			(2	)		-		-			-			(1,109	)		-		-		(1,111	)
Balance, June 30, 2025	$	481		$	3,880		$	2,221	$	4,508		$	1,573		$	1,888		$	1,991	$	429	$	16,971

(1)	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*
				1-4 Family
	Construction			Residential			Multi-family		Commercial			Agricultural								Consumer
	Real Estate			Real Estate			Real Estate		Real Estate			Real Estate			Commercial			Agricultural		and Other			Total
Balance, December 31, 2024	$	482		$	3,890		$	2,188	$	4,932		$	1,584		$	1,759		$	1,805	$	418		$	17,058
Credit loss expense (benefit) 1		42			(8	)		33		(424	)		(11	)		1,240			186		11			1,069
Recoveries of loans charged-off		1			-			-		-			-			3			-		1			5
Loans charged-off		(44	)		(2	)		-		-			-			(1,114	)		-		(1	)		(1,161	)
Balance, June 30, 2025	$	481		$	3,880		$	2,221	$	4,508		$	1,573		$	1,888		$	1,991	$	429		$	16,971

(1)	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.

	*Three Months Ended June 30, 2024*
				1-4 Family
	Construction			Residential		Multi-family		Commercial		Agricultural							Consumer
	Real Estate			Real Estate		Real Estate		Real Estate		Real Estate		Commercial			Agricultural		and Other		Total
Balance, March 31, 2024	$	453		$	3,309	$	2,537	$	5,494	$	1,221	$	1,913		$	1,588	$	437	$	16,952
Credit loss expense (benefit) 1		(40	)		39		47		36		5		1			122		41		251
Recoveries of loans charged-off		-			1		-		-		-		1			-		1		3
Loans charged-off		-			-		-		-		-		(3	)		-		-		(3	)
Balance, June 30, 2024	$	413		$	3,349	$	2,584	$	5,530	$	1,226	$	1,912		$	1,710	$	479	$	17,203

(1)	The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss benefit of $69 thousand related to off-balance sheet credit exposures.

	*Six Months Ended June 30, 2024*
			1-4 Family
	Construction		Residential		Multi-family		Commercial		Agricultural								Consumer
	Real Estate		Real Estate		Real Estate		Real Estate		Real Estate			Commercial			Agricultural		and Other		Total
Balance, December 31, 2023	$	408	$	3,333	$	2,542	$	5,236	$	1,238		$	1,955		$	1,607	$	457	$	16,776
Credit loss expense (benefit) 1		5		14		42		294		(12	)		(42	)		103		19		423
Recoveries of loans charged-off		-		2		-		-		-			2			-		3		7
Loans charged-off		-		-		-		-		-			(3	)		-		-		(3	)
Balance, June 30, 2024	$	413	$	3,349	$	2,584	$	5,530	$	1,226		$	1,912		$	1,710	$	479	$	17,203

(1)	The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss benefit of $72 thousand related to off-balance sheet credit exposures.

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

	Primary Type of Collateral
June 30, 2025	Real Estate		Equipment		Other		Total		ACL Allocation

Real estate - construction	$	-	$	-	$	-	$	-	$	-
Real estate - 1 to 4 family residential		586		-		-		586		-
Real estate - multi-family		926		-		-		926		-
Real estate - commercial		11,241		-		-		11,241		-
Real estate - agricultural		1,480		-		-		1,480		-
Commercial		450		379		927		1,756		115
Agricultural		2,581		-		296		2,877		351
Consumer and other		-		-		2		2		-

	$	17,264	$	379	$	1,225	$	18,868	$	466

	Primary Type of Collateral
December 31, 2024	Real Estate		Equipment		Other		Total		ACL Allocation

Real estate - construction	$	62	$	-	$	-	$	62	$	-
Real estate - 1 to 4 family residential		696		-		-		696		40
Real estate - multi-family		947		-		-		947		-
Real estate - commercial		10,785		-		-		10,785		-
Real estate - agricultural		420		-		-		420		-
Commercial		460		398		405		1,263		50
Agricultural		213		-		357		570		-
Consumer and other		-		-		3		3		-

	$	13,583	$	398	$	765	$	14,746	$	90

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

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

	Total Nonaccrual				Nonaccrual with no ACL
	*June 30, 2025*		*December 31, 2024*		*June 30, 2025*		*December 31, 2024*

Real estate - construction	$	-	$	62	$	-	$	62
Real estate - 1 to 4 family residential		586		696		586		626
Real estate - multi-family		926		947		926		947
Real estate - commercial		11,224		10,768		11,224		10,768
Real estate - agricultural		1,480		420		406		420
Commercial		1,784		1,298		1,007		893
Agricultural		2,877		570		494		570
Consumer and other		8		11		2		3

	$	18,885	$	14,772	$	14,645	$	14,289

The interest income recognized on nonaccrual loans for the three months ended June 30, 2025 was approximately $1 thousand, while there was no interest income recognized on nonaccrual loans for the three months ended June 30, 2024. The interest income recognized on nonaccrual loans for the six months ended June 30, 2025 and 2024 was approximately $2 thousand and $38 thousand, respectively.

The interest foregone on nonaccrual loans for the three months ended June 30, 2025 and 2024 was approximately $636 thousand and $217 thousand, respectively. The interest foregone on nonaccrual loans for the six months ended June 30, 2025 and 2024 was approximately $963 thousand and $456 thousand, respectively.

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

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

The Company made no loan modifications to borrowers experiencing financial difficulty for the six months ended June 30, 2025 and 2024.

Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The Company had no net charge-offs for the three and six months ended June 30, 2025 and 2024 related to loan modifications to borrowers experiencing financial difficulties.

There were no loan modifications that had a payment default and were modified in the twelve months before default as of June 30, 2025. A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms.

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Aging Analysis. An aging analysis of the recorded investments in loans, on a disaggregated basis, as of June 30, 2025 and December 31, 2024, is as follows (in thousands):

2025			90 Days								90 Days
	30-89		or Greater		Total						or Greater
	Past Due		Past Due		Past Due		Current		Total		Accruing

Real estate - construction	$	30	$	-	$	30	$	57,274	$	57,304	$	-
Real estate - 1 to 4 family residential		3,719		152		3,871		308,699		312,570		-
Real estate - multi-family		-		-		-		204,409		204,409		-
Real estate - commercial		290		2,563		2,853		318,156		321,009		-
Real estate - agricultural		1,413		133		1,546		158,299		159,845		133
Commercial		1,080		-		1,080		96,049		97,129		-
Agricultural		139		2,308		2,447		123,978		126,425		-
Consumer and other		2		2		4		17,726		17,730		-

	$	6,673	$	5,158	$	11,831	$	1,284,590	$	1,296,421	$	133

2024			90 Days								90 Days
	30-89		or Greater		Total						or Greater
	Past Due		Past Due		Past Due		Current		Total		Accruing

Real estate - construction	$	-	$	63	$	63	$	59,218	$	59,281	$	-
Real estate - 1 to 4 family residential		1,744		204		1,948		307,756		309,704		23
Real estate - multi-family		-		-		-		200,209		200,209		-
Real estate - commercial		332		2,501		2,833		347,660		350,493		-
Real estate - agricultural		651		660		1,311		158,569		159,880		660
Commercial		288		356		644		89,379		90,023		-
Agricultural		68		53		121		134,036		134,157		53
Consumer and other		5		-		5		17,061		17,066		-

	$	3,088	$	3,837	$	6,925	$	1,313,888	$	1,320,813	$	736

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

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

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

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

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

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

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

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The following tables show the risk category of loans by loan segment and year of origination as of June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025	Amortized Cost Basis of Term Loans by Year of Origination
	2025		2024		2023		2022		2021		Prior		Revolving		Total
Real estate - construction
Pass	$	24,995	$	14,747	$	14,939	$	-	$	208	$	171	$	1,766	$	56,826
Watch		478		-		-		-		-		-		-		478
Special Mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Substandard-Impaired		-		-		-		-		-		-		-		-
Total	$	25,473	$	14,747	$	14,939	$	-	$	208	$	171	$	1,766	$	57,304

Current-period gross charge-offs	$	-	$	44	$	-	$	-	$	-	$	-	$	-	$	44

Real estate - 1-4 family residential
Pass	$	28,074	$	42,173	$	40,990	$	64,369	$	47,855	$	50,102	$	21,582	$	295,145
Watch		358		804		1,703		89		9,320		1,137		157		13,568
Special Mention		-		-		95		637		737		-		200		1,669
Substandard		-		65		422		-		1,025		89		-		1,601
Substandard-Impaired		375		84		76		-		-		52		-		587
Total	$	28,807	$	43,126	$	43,286	$	65,095	$	58,937	$	51,380	$	21,939	$	312,570

Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	2	$	-	$	2

Real estate - multi-family
Pass	$	17,887	$	12,736	$	9,566	$	47,916	$	26,064	$	44,200	$	6,061	$	164,430
Watch		855		7,012		1,069		-		19,462		2,149		-		30,547
Special Mention		-		-		8,505		-		-		-		-		8,505
Substandard		-		-		-		-		-		-		-		-
Substandard-Impaired		927		-		-		-		-		-		-		927
Total	$	19,669	$	19,748	$	19,140	$	47,916	$	45,526	$	46,349	$	6,061	$	204,409

Current-period gross charge-offs

AMES NATIONAL CORP 10-Q