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 September 30, 2017March 31, 2022
| 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)
| 42-1039071 |
(State | (I. R. S. Employer |
| Identification Number) |
405 FIFTH STREETFifth Street
AMES, IOWAAmes, Iowa 50010
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (515) 232-6251
Not ApplicableSecurities registered pursuant to Section 12(b) of the Act:
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common stock | ATLO | NASDAQ |
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 X ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes X ☒ 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 “accelerated“large accelerated filer”, “large accelerated“accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ Accelerated filer X (Do not check if a smaller reporting company)☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected notnot to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(1)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 X ☒
Indicate the numberAs of April 29, 2022, there were 9,092,167 shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.par value $2, outstanding.
| |
|
Page | ||
| ||
Item 1. | 3 | |
| Consolidated Balance Sheets at | 3 |
| 4 | |
5 | ||
6 | ||
| 7 | |
9 | ||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 29 |
Item 3. | 43 | |
Item 4. | Controls and Procedures | |
| ||
Item 1. | 44 | |
Item 1.A. | 44 | |
Item 2. | 45 | |
Item 3. | 45 | |
Item 4. | 45 | |
Item 5. | 45 | |
Item 6. | 46 | |
47 |
CONSOLIDATED BALANCE SHEETS |
(in thousands, except share and per share data) |
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, | December 31, | |||||||||||||||
| 2022 | 2021 | ||||||||||||||
September 30, | December 31, | (unaudited) | (audited) | |||||||||||||
ASSETS | 2017 | 2016 | ||||||||||||||
Cash and due from banks | $ | 23,087,890 | $ | 29,478,068 | $ | 28,681 | $ | 19,590 | ||||||||
Interest bearing deposits in financial institutions | 35,486,284 | 31,737,259 | ||||||||||||||
Interest-bearing deposits in financial institutions and federal funds sold | 119,651 | 69,539 | ||||||||||||||
Total cash and cash equivalents | 148,332 | 89,129 | ||||||||||||||
Interest-bearing time deposits | 16,419 | 16,922 | ||||||||||||||
Securities available-for-sale | 506,610,435 | 516,079,506 | 823,897 | 831,003 | ||||||||||||
Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock, at cost | 3,473 | 3,422 | ||||||||||||||
Loans receivable, net | 764,228,850 | 752,181,730 | 1,130,077 | 1,144,108 | ||||||||||||
Loans held for sale | 279,800 | 242,618 | ||||||||||||||
Bank premises and equipment, net | 15,595,418 | 16,049,379 | 17,733 | 17,512 | ||||||||||||
Accrued income receivable | 8,423,038 | 7,768,689 | 9,330 | 10,124 | ||||||||||||
Other real estate owned | 385,509 | 545,757 | ||||||||||||||
Deferred income taxes | 1,817,543 | 3,485,689 | ||||||||||||||
Bank-owned life insurance | 3,002 | 2,985 | ||||||||||||||
Deferred income taxes, net | 13,112 | 1,922 | ||||||||||||||
Intangible assets, net | 1,133,736 | 1,352,812 | 2,359 | 2,505 | ||||||||||||
Goodwill | 6,732,216 | 6,732,216 | 12,424 | 12,424 | ||||||||||||
Other assets | 1,159,533 | 799,306 | 4,560 | 4,985 | ||||||||||||
Total assets | $ | 1,364,940,252 | $ | 1,366,453,029 | $ | 2,184,718 | $ | 2,137,041 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
LIABILITIES | ||||||||||||||||
Deposits | ||||||||||||||||
Demand, noninterest bearing | $ | 202,368,921 | $ | 212,074,792 | ||||||||||||
NOW accounts | 337,062,117 | 310,427,812 | ||||||||||||||
Noninterest-bearing checking | $ | 413,114 | $ | 411,585 | ||||||||||||
Interest-bearing checking | 630,016 | 575,997 | ||||||||||||||
Savings and money market | 380,454,650 | 381,852,433 | 705,560 | 674,975 | ||||||||||||
Time, $250,000 and over | 36,776,010 | 39,031,663 | ||||||||||||||
Time, $250 and over | 41,460 | 40,793 | ||||||||||||||
Other time | 157,876,361 | 166,022,165 | 169,743 | 174,669 | ||||||||||||
Total deposits | 1,114,538,059 | 1,109,408,865 | 1,959,893 | 1,878,019 | ||||||||||||
Securities sold under agreements to repurchase | 39,001,050 | 58,337,367 | 39,902 | 39,851 | ||||||||||||
Federal Home Loan Bank (FHLB) advances | 19,000,000 | 14,500,000 | ||||||||||||||
Other borrowings | 13,000,000 | 13,000,000 | ||||||||||||||
FHLB advances | 0 | 3,000 | ||||||||||||||
Dividends payable | 2,048,401 | 1,955,292 | 2,455 | 2,364 | ||||||||||||
Accrued expenses and other liabilities | 4,023,858 | 4,146,262 | 5,803 | 6,029 | ||||||||||||
Total liabilities | 1,191,611,368 | 1,201,347,786 | 2,008,053 | 1,929,263 | ||||||||||||
STOCKHOLDERS' EQUITY | ||||||||||||||||
Common stock, $2 par value, authorized 18,000,000 shares; issued and outstanding 9,310,913 shares as of September 30, 2017 and December 31, 2016 | 18,621,826 | 18,621,826 | ||||||||||||||
Common stock, $2 par value, authorized 18,000,000 shares; issued and outstanding 9,092,167 shares as of March 31, 2022 and December 31, 2021 | 18,184 | 18,184 | ||||||||||||||
Additional paid-in capital | 20,878,728 | 20,878,728 | 16,353 | 16,353 | ||||||||||||
Retained earnings | 131,047,038 | 126,181,376 | 173,067 | 170,377 | ||||||||||||
Accumulated other comprehensive income (loss) - net unrealized gain (loss) on securities available-for-sale | 2,781,292 | (576,687 | ) | |||||||||||||
Accumulated other comprehensive income (loss) | (30,939 | ) | 2,864 | |||||||||||||
Total stockholders' equity | 173,328,884 | 165,105,243 | 176,665 | 207,778 | ||||||||||||
Total liabilities and stockholders' equity | $ | 1,364,940,252 | $ | 1,366,453,029 | $ | 2,184,718 | $ | 2,137,041 |
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME (unaudited) |
(in thousands, except per share data) |
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended | Nine Months Ended | Three Months Ended | ||||||||||||||||||||||
September 30, | September 30, | March 31, | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2022 | 2021 | |||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Interest and dividend income: | ||||||||||||||||||||||||
Loans, including fees | $ | 8,729,702 | $ | 8,236,401 | $ | 25,345,116 | $ | 24,124,973 | $ | 10,644 | $ | 11,984 | ||||||||||||
Securities: | ||||||||||||||||||||||||
Taxable | 1,557,872 | 1,425,366 | 4,637,498 | 4,392,602 | 2,588 | 1,989 | ||||||||||||||||||
Tax-exempt | 1,210,510 | 1,329,071 | 3,819,380 | 4,117,893 | 674 | 844 | ||||||||||||||||||
Interest bearing deposits and federal funds sold | 114,820 | 86,869 | 365,346 | 296,925 | ||||||||||||||||||||
Other interest and dividend income | 166 | 178 | ||||||||||||||||||||||
Total interest income | 11,612,904 | 11,077,707 | 34,167,340 | 32,932,393 | 14,072 | 14,995 | ||||||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Deposits | 1,169,296 | 753,642 | 3,204,115 | 2,259,140 | 888 | 1,294 | ||||||||||||||||||
Other borrowed funds | 292,054 | 274,297 | 862,798 | 796,006 | 32 | 37 | ||||||||||||||||||
Total interest expense | 1,461,350 | 1,027,939 | 4,066,913 | 3,055,146 | 920 | 1,331 | ||||||||||||||||||
Net interest income | 10,151,554 | 10,049,768 | 30,100,427 | 29,877,247 | 13,152 | 13,664 | ||||||||||||||||||
Provision for loan losses | 57,277 | 234,703 | 1,221,620 | 440,787 | ||||||||||||||||||||
Provision (credit) for loan losses | (127 | ) | (426 | ) | ||||||||||||||||||||
Net interest income after provision for loan losses | 10,094,277 | 9,815,065 | 28,878,807 | 29,436,460 | ||||||||||||||||||||
Net interest income after provision (credit) for loan losses | 13,279 | 14,090 | ||||||||||||||||||||||
Noninterest income: | ||||||||||||||||||||||||
Wealth management income | 747,634 | 684,908 | 2,180,941 | 2,210,229 | 1,280 | 932 | ||||||||||||||||||
Service fees | 401,237 | 426,711 | 1,126,122 | 1,228,416 | 338 | 333 | ||||||||||||||||||
Securities gains, net | 37,881 | 64,917 | 498,560 | 296,110 | 35 | 0 | ||||||||||||||||||
Gain on sale of loans held for sale | 179,553 | 339,501 | 544,095 | 773,512 | 180 | 504 | ||||||||||||||||||
Merchant and card fees | 348,847 | 350,488 | 1,017,362 | 1,051,378 | 442 | 464 | ||||||||||||||||||
Other noninterest income | 144,953 | 137,153 | 598,791 | 469,138 | 278 | 273 | ||||||||||||||||||
Total noninterest income | 1,860,105 | 2,003,678 | 5,965,871 | 6,028,783 | 2,553 | 2,506 | ||||||||||||||||||
Noninterest expense: | ||||||||||||||||||||||||
Salaries and employee benefits | 4,026,932 | 3,977,495 | 12,058,903 | 11,883,696 | 5,611 | 5,507 | ||||||||||||||||||
Data processing | 807,419 | 824,429 | 2,481,331 | 2,366,293 | 1,432 | 1,372 | ||||||||||||||||||
Occupancy expenses, net | 527,071 | 449,775 | 1,546,657 | 1,461,201 | 717 | 728 | ||||||||||||||||||
FDIC insurance assessments | 111,987 | 109,289 | 326,958 | 434,808 | 147 | 139 | ||||||||||||||||||
Professional fees | 307,484 | 296,720 | 919,157 | 889,721 | 474 | 396 | ||||||||||||||||||
Business development | 262,408 | 239,917 | 722,869 | 696,033 | 336 | 237 | ||||||||||||||||||
Other real estate owned (income), net | (3,200 | ) | (91,173 | ) | (2,396 | ) | (87,564 | ) | ||||||||||||||||
Intangible asset amortization | 89,861 | 86,492 | 280,837 | 273,206 | 146 | 160 | ||||||||||||||||||
New market tax credit projects amortization | 189 | 160 | ||||||||||||||||||||||
Other operating expenses, net | 166,026 | 219,283 | 837,810 | 750,244 | 327 | 307 | ||||||||||||||||||
Total noninterest expense | 6,295,988 | 6,112,227 | 19,172,126 | 18,667,638 | 9,379 | 9,006 | ||||||||||||||||||
Income before income taxes | 5,658,394 | 5,706,516 | 15,672,552 | 16,797,605 | 6,453 | 7,590 | ||||||||||||||||||
Provision for income taxes | 1,729,987 | 1,902,636 | 4,661,687 | 5,087,253 | 1,308 | 1,567 | ||||||||||||||||||
Net income | $ | 3,928,407 | $ | 3,803,880 | $ | 11,010,865 | $ | 11,710,352 | $ | 5,145 | $ | 6,023 | ||||||||||||
Basic and diluted earnings per share | $ | 0.42 | $ | 0.41 | $ | 1.18 | $ | 1.26 | $ | 0.57 | $ | 0.66 | ||||||||||||
Dividends declared per share | $ | 0.22 | $ | 0.21 | $ | 0.66 | $ | 0.63 | $ | 0.27 | $ | 0.25 |
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) (unaudited) |
(in thousands) |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income | $ | 3,928,407 | $ | 3,803,880 | $ | 11,010,865 | $ | 11,710,352 | ||||||||
Other comprehensive income (loss), before tax: | ||||||||||||||||
Unrealized gains (losses) on securities before tax: | ||||||||||||||||
Unrealized holding gains (losses) arising during the period | (270,853 | ) | (1,838,831 | ) | 5,828,684 | 6,077,365 | ||||||||||
Less: reclassification adjustment for gains realized in net income | 37,881 | 64,917 | 498,560 | 296,110 | ||||||||||||
Other comprehensive income (loss), before tax | (308,734 | ) | (1,903,748 | ) | 5,330,124 | 5,781,255 | ||||||||||
Tax effect related to other comprehensive income (loss) | 114,233 | 704,387 | (1,972,145 | ) | (2,139,064 | ) | ||||||||||
Other comprehensive income (loss), net of tax | (194,501 | ) | (1,199,361 | ) | 3,357,979 | 3,642,191 | ||||||||||
Comprehensive income | $ | 3,733,906 | $ | 2,604,519 | $ | 14,368,844 | $ | 15,352,543 |
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
Net income | $ | 5,145 | $ | 6,023 | ||||
Unrealized (losses) on securities before tax: | ||||||||
Unrealized holding (losses) arising during the period | (45,034 | ) | (11,833 | ) | ||||
Less: reclassification adjustment for gains realized in net income | 35 | 0 | ||||||
Other comprehensive (loss), before tax | (45,069 | ) | (11,833 | ) | ||||
Tax effect related to other comprehensive (loss) | 11,266 | 2,957 | ||||||
Other comprehensive (loss), net of tax | (33,803 | ) | (8,876 | ) | ||||
Comprehensive (loss) | $ | (28,658 | ) | $ | (2,853 | ) |
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) |
(in thousands, except share and per share data) |
Three Months Ended March 31, 2022 and 2021 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
Nine Months Ended September 30, 2017 and 2016
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss), Net of Taxes | Total Stockholders' Equity | ||||||||||||||||
Balance, December 31, 2015 | $ | 18,621,826 | $ | 20,878,728 | $ | 118,267,767 | $ | 3,481,736 | $ | 161,250,057 | ||||||||||
Net income | - | - | 11,710,352 | - | 11,710,352 | |||||||||||||||
Other comprehensive income | - | - | - | 3,642,191 | 3,642,191 | |||||||||||||||
Cash dividends declared, $0.63 per share | - | - | (5,865,875 | ) | - | (5,865,875 | ) | |||||||||||||
Balance, September 30, 2016 | $ | 18,621,826 | $ | 20,878,728 | $ | 124,112,244 | $ | 7,123,927 | $ | 170,736,725 | ||||||||||
Balance, December 31, 2016 | $ | 18,621,826 | $ | 20,878,728 | $ | 126,181,376 | $ | (576,687 | ) | $ | 165,105,243 | |||||||||
Net income | - | - | 11,010,865 | - | 11,010,865 | |||||||||||||||
Other comprehensive income | - | - | - | 3,357,979 | 3,357,979 | |||||||||||||||
Cash dividends declared, $0.66 per share | - | - | (6,145,203 | ) | - | (6,145,203 | ) | |||||||||||||
Balance, September 30, 2017 | $ | 18,621,826 | $ | 20,878,728 | $ | 131,047,038 | $ | 2,781,292 | $ | 173,328,884 |
Common Stock | Additional Paid- | Retained | Accumulated Other Comprehensive Income (Loss), | Total Stockholders' | ||||||||||||||||||||
Shares | Amount | in Capital | Earnings | Net of Taxes | Equity | |||||||||||||||||||
Balance, December 31, 2020 | 9,122,747 | $ | 18,245 | $ | 17,002 | $ | 158,217 | $ | 16,023 | $ | 209,487 | |||||||||||||
Net income | - | 0 | 0 | 6,023 | 0 | 6,023 | ||||||||||||||||||
Other comprehensive (loss) | - | 0 | 0 | 0 | (8,876 | ) | (8,876 | ) | ||||||||||||||||
Cash dividends declared, $0.25 per share | - | 0 | 0 | (2,281 | ) | 0 | (2,281 | ) | ||||||||||||||||
Balance, March 31, 2021 | 9,122,747 | $ | 18,245 | $ | 17,002 | $ | 161,959 | $ | 7,147 | $ | 204,353 | |||||||||||||
Balance, December 31, 2021 | 9,092,167 | $ | 18,184 | $ | 16,353 | $ | 170,377 | $ | 2,864 | $ | 207,778 | |||||||||||||
Net income | - | 0 | 0 | 5,145 | 0 | 5,145 | ||||||||||||||||||
Other comprehensive (loss) | - | 0 | 0 | 0 | (33,803 | ) | (33,803 | ) | ||||||||||||||||
Cash dividends declared, $0.27 per share | - | 0 | 0 | (2,455 | ) | 0 | (2,455 | ) | ||||||||||||||||
Balance, March 31, 2022 | 9,092,167 | $ | 18,184 | $ | 16,353 | $ | 173,067 | $ | (30,939 | ) | $ | 176,665 |
See Notes to Consolidated Financial Statements.
AMES NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended September 30, 2017 and 2016
2017 | 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 11,010,865 | $ | 11,710,352 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for loan losses | 1,221,620 | 440,787 | ||||||
Provision for off-balance sheet commitments | 4,000 | 12,000 | ||||||
Amortization, net | 2,129,648 | 2,327,654 | ||||||
Amortization of intangible asset | 280,837 | 273,206 | ||||||
Depreciation | 861,700 | 885,202 | ||||||
Deferred income taxes | (303,999 | ) | 176,658 | |||||
Securities gains, net | (498,560 | ) | (296,110 | ) | ||||
(Gain) on sales of loans held for sale | (544,095 | ) | (773,511 | ) | ||||
Proceeds from loans held for sale | 22,668,307 | 34,782,288 | ||||||
Originations of loans held for sale | (22,161,394 | ) | (34,657,822 | ) | ||||
Loss on sale of premises and equipment, net | 56,168 | 2,769 | ||||||
Impairment of other real estate owned | - | 28,039 | ||||||
(Gain) on sale of other real estate owned, net | (14,648 | ) | (131,127 | ) | ||||
Change in assets and liabilities: | ||||||||
(Increase) in accrued income receivable | (654,349 | ) | (805,127 | ) | ||||
(Increase) decrease in other assets | (377,095 | ) | 286,238 | |||||
Increase (decrease) in accrued expenses and other liabilities | (126,404 | ) | 323,605 | |||||
Net cash provided by operating activities | 13,552,601 | 14,585,101 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of securities available-for-sale | (51,271,943 | ) | (49,668,267 | ) | ||||
Proceeds from sale of securities available-for-sale | 11,756,963 | 18,738,154 | ||||||
Proceeds from maturities and calls of securities available-for-sale | 52,588,102 | 54,611,331 | ||||||
Net (increase) decrease in interest bearing deposits in financial institutions | (3,749,025 | ) | 994,573 | |||||
Net (increase) in loans | (13,190,423 | ) | (39,394,414 | ) | ||||
Net proceeds from the sale of other real estate owned | 191,564 | 755,906 | ||||||
Purchase of bank premises and equipment, net | (447,039 | ) | (218,081 | ) | ||||
Other | (61,761 | ) | - | |||||
Net cash (used in) investing activities | (4,183,562 | ) | (14,180,798 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Increase (decrease) in deposits | 5,129,194 | (12,358,477 | ) | |||||
(Decrease) in securities sold under agreements to repurchase | (19,336,317 | ) | (4,431,520 | ) | ||||
Payments on FHLB borrowings and other borrowings | (1,000,000 | ) | (1,542,203 | ) | ||||
Proceeds from short-term FHLB borrowings, net | 5,500,000 | 21,000,000 | ||||||
Dividends paid | (6,052,094 | ) | (5,772,766 | ) | ||||
Net cash (used in) financing activities | (15,759,217 | ) | (3,104,966 | ) | ||||
Net (decrease) in cash and due from banks | (6,390,178 | ) | (2,700,663 | ) | ||||
CASH AND DUE FROM BANKS | ||||||||
Beginning | 29,478,068 | 24,005,801 | ||||||
Ending | $ | 23,087,890 | $ | 21,305,138 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
(in thousands) |
Three Months Ended March 31, 2022 and 2021 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(unaudited)
Nine Months Ended September 30, 2017 and 2016
2022 | 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 5,145 | $ | 6,023 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision (credit) for loan losses | (127 | ) | (426 | ) | ||||
Provision for off-balance sheet commitments | 13 | 0 | ||||||
Amortization of securities available-for-sale, loans and deposits, net | 702 | 489 | ||||||
Amortization of intangible assets | 146 | 160 | ||||||
Depreciation | 313 | 356 | ||||||
Deferred income taxes | 77 | 93 | ||||||
Securities (gains), net | (35 | ) | 0 | |||||
Increase in cash value of bank-owned life insurance | (17 | ) | (17 | ) | ||||
(Gain) on sales of loans held for sale | (180 | ) | (504 | ) | ||||
Proceeds from loans held for sale | 9,191 | 22,428 | ||||||
Originations of loans held for sale | (9,011 | ) | (20,901 | ) | ||||
Amortization of investment in New Markets Tax Credit projects | 189 | 160 | ||||||
Change in assets and liabilities: | ||||||||
Decrease in accrued income receivable | 794 | 1,129 | ||||||
(Increase) decrease in other assets | 23 | (224 | ) | |||||
Increase (decrease) in accrued expenses and other liabilities | (239 | ) | 616 | |||||
Net cash provided by operating activities | 6,984 | 9,382 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Net decrease in interest-bearing time deposits | 503 | 531 | ||||||
Purchase of securities available-for-sale | (61,423 | ) | (113,635 | ) | ||||
Proceeds from sale of securities available-for-sale | 535 | 0 | ||||||
Proceeds from maturities and calls of securities available-for-sale | 22,175 | 25,680 | ||||||
Purchase of FHLB stock | (176 | ) | (286 | ) | ||||
Proceeds from the redemption of FHLB stock | 125 | 7 | ||||||
Net decrease in loans | 14,451 | 9,923 | ||||||
Purchase of bank premises and equipment | (532 | ) | (83 | ) | ||||
Net cash (used in) investing activities | (24,342 | ) | (77,863 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Increase in deposits | 81,874 | 126,358 | ||||||
Increase in securities sold under agreements to repurchase | 51 | 4,128 | ||||||
Payments on FHLB borrowings | (3,000 | ) | 0 | |||||
Dividends paid | (2,364 | ) | (2,281 | ) | ||||
Net cash provided by financing activities | 76,561 | 128,205 | ||||||
Net increase in cash and cash equivalents | 59,203 | 59,724 | ||||||
CASH AND CASH EQUIVALENTS | ||||||||
Beginning | 89,129 | 173,097 | ||||||
Ending | $ | 148,332 | $ | 232,821 |
2017 | 2016 | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
Cash payments for: | ||||||||
Interest | $ | 4,027,782 | $ | 3,145,519 | ||||
Income taxes | 5,050,220 | 4,223,653 | ||||||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES | ||||||||
Transfer of loans receivable to other real estate owned | $ | 16,668 | $ | 56,587 |
AMES NATIONAL CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (unaudited) |
(in thousands) |
Three Months Ended March 31, 2022 and 2021 |
2022 | 2021 | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
Cash payments for: | ||||||||
Interest | $ | 981 | $ | 1,576 | ||||
Income taxes | 95 | 70 | ||||||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES | ||||||||
Transfer of loans receivable to other real estate owned | $ | 0 | $ | 10 |
See Notes to Consolidated Financial Statements.
AMES NATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements ((unaudited)unaudited)
1. Significant Accounting Policies
1. | Significant Accounting Policies |
The accompanying unaudited consolidated financial statements for the nine months ended September 30, 2017 and 2016 are unaudited. In the opinion of the management ofhave been prepared by Ames National Corporation (the "Company"“Company”), these financial statements reflect all adjustments, consisting only pursuant to the rules and regulations of normal recurring accruals, necessary to present fairly these consolidated financial statements. The results of operations for the interim periods are not necessarily indicative of results which may be expected for an entire year.Securities and Exchange Commission (the “SEC”). Certain information and footnotenote disclosures normally included in completeannual financial statements prepared in accordance with generally accepted accounting principles generally accepted in the United States of America have been condensed or omitted in accordance withpursuant to those rules and regulations, although the requirements for interim financial statements. Thecompany believes that the disclosures made are adequate to make the information not misleading. It is suggested that these interim financial statements and notes thereto should be read in conjunction with the year-end audited financial statements contained in the Company's Annual Report on Form 10-K10-K for the year ended December 31, 2016 (the2021 (the “Annual Report”). 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. 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.
Reclassifications: Certain reclassifications have been made to the prior period’s consolidated financial statements to present them on a basis comparable with the current period’s consolidated financial statements. Interest-bearing deposits in financial institutions and federal funds sold were reclassified as cash and cash equivalents in 2021 resulting in net cash used in investing activities decreasing by approximately $61 million. No other reclassifications were significant. The reclassifications had no effect on stockholders’ equity and net income of the prior periods.
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 using a two-step process that begins with an estimation of the fair value of a reporting unit. The second step, if necessary, measures the amount of impairment, if any.
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. At September 30, 2017,The Company management has performedcompleted a quantitative assessment of goodwill impairment assessment and determinedas of October 1, 2021 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 0 impairment of goodwill as of March 31, 2022.
New and Pending Accounting Pronouncements: In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information by updating certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Among other changes, the update includes requiring changes in fair value of equity securities with readily determinable fair value to be recognized in net income and clarifies that entities should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entities' other deferred tax assets. Among other items the ASC requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2017, and is to be applied on a modified retrospective basis. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements, but does not expect the guidance to have a material impact on the Company's consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU requires a lessee to recognize on the balance sheet assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. Unlike current GAAP, which requires that only capital leases be recognized on the balance sheet, the ASC requires that both types of leases by recognized on the balance sheet. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2018. Early application is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
New and Pending Accounting Pronouncements:In June 2016, the FASB issued ASU No. 2016-13,2016-13, Financial Instruments-Credit Losses (Topic 326)326): Measurement of Credit Losses on Financial Instruments.Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For publicIn October 2019, the FASB voted to approve amendments to the effective date of ASU No.2016-13 for smaller reporting companies, this update will beas defined by the SEC, and other non-SEC reporting entities. The amendment delays the effective date for our Company until interim and annual periods beginning after December 15, 2019.2022. The Company continues collecting and retaining loan and credit data and evaluating various loss estimation models, along with refining the implementation of the software and its approach for determining the expected credit losses under the new guidance. The impact of ASU No.2016-13 on the Company’s financial statements is unknown at this time. The Company will continue to evaluate the extent of the potential impact.
In March 2022, the FASB issued ASU No.2022-02, Financial Instruments - Credit Losses (ASC 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments in this ASU improve the usefulness of information provided to investors about certain loan refinancing, restructurings, and write-offs. The amendments eliminate the accounting guidance for troubled debt restructurings (TDRs) by creditors that have adopted ASU No.2016-13. It also enhances disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Lastly, the amendments require that a public business entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. The Company is currently planning for the implementation of this accounting standard. It is too early to assessevaluating the impact that the guidance will have on the Company’s consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606): Summary and Amendments that Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40) . The guidance in this update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the Codification. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2017. The guidance does not apply to revenues associated with financial instruments, including loans and securities that are accounted for under U.S. GAAP. Based upon management’s revenue recognition analysis, the Company does not expect the guidance to have a material impactASU on the Company's consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The guidance in this update eliminates the Step 2 from the goodwill impairment test. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual goodwill impairment test with a measurement date after January 1, 2017. The Company does not expect the guidance to have a material impact on the Company's consolidated financial statements.
2. Dividends
2. | Dividends |
On AugustFebruary 9, 2017, 2022, the Company declared a cash dividend on its common stock, payable on November 15, 2017 May 13, 2022to stockholders of record as of November 1, 2017, April 29, 2022, equal to $0.22$0.27 per share.
3. Earnings Per Share
3. | 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 and nine months ended September 30, 2017 March 31, 2022 and 2016 were 9,310,913.2021 was 9,092,167 and 9,122,747, respectively. The Company had no0 potentially dilutive securities outstanding during the periods presented.
4. Off-Balance Sheet Arrangements
4. | 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 balance sheet. No material changes in the Company’s off-balance sheet arrangements have occurred since December 31, 2016.2021.
5. | Fair Value Measurements |
5. Fair Value Measurements
AssetsAssets 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. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
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 table presents the balances of assets measured at fair value on a recurring basis by level as of September 30, 2017 March 31, 2022 and December 31, 2016. 2021 (in thousands):
Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
2017 | ||||||||||||||||
U.S. government treasuries | $ | 4,449 | $ | 4,449 | $ | - | $ | - | ||||||||
U.S. government agencies | 112,657 | - | 112,657 | - | ||||||||||||
U.S. government mortgage-backed securities | 81,956 | - | 81,956 | - | ||||||||||||
State and political subdivisions | 243,438 | - | 243,438 | - | ||||||||||||
Corporate bonds | 60,834 | - | 60,834 | - | ||||||||||||
Equity securities, other | 3,276 | 34 | 3,242 | - | ||||||||||||
$ | 506,610 | $ | 4,483 | $ | 502,127 | $ | - | |||||||||
2016 | ||||||||||||||||
U.S. government treasuries | $ | 4,368 | $ | 4,368 | $ | - | $ | - | ||||||||
U.S. government agencies | 110,209 | - | 110,209 | - | ||||||||||||
U.S. government mortgage-backed securities | 82,858 | - | 82,858 | - | ||||||||||||
State and political subdivisions | 264,448 | - | 264,448 | - | ||||||||||||
Corporate bonds | 51,184 | - | 51,184 | - | ||||||||||||
Equity securities, other | 3,013 | - | 3,013 | - | ||||||||||||
$ | 516,080 | $ | 4,368 | $ | 511,712 | $ | - |
Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
2022 | ||||||||||||||||
U.S. government treasuries | $ | 200,887 | $ | 200,887 | $ | 0 | $ | 0 | ||||||||
U.S. government agencies | 112,168 | 0 | 112,168 | 0 | ||||||||||||
U.S. government mortgage-backed securities | 142,507 | 0 | 142,507 | 0 | ||||||||||||
State and political subdivisions | 289,213 | 0 | 289,213 | 0 | ||||||||||||
Corporate bonds | 79,122 | 0 | 79,122 | 0 | ||||||||||||
$ | 823,897 | $ | 200,887 | $ | 623,010 | $ | 0 | |||||||||
2021 | ||||||||||||||||
U.S. government treasuries | $ | 190,479 | $ | 190,479 | $ | 0 | $ | 0 | ||||||||
U.S. government agencies | 116,014 | 0 | 116,014 | 0 | ||||||||||||
U.S. government mortgage-backed securities | 149,601 | 0 | 149,601 | 0 | ||||||||||||
State and political subdivisions | 292,859 | 0 | 292,859 | 0 | ||||||||||||
Corporate bonds | 82,050 | 0 | 82,050 | 0 | ||||||||||||
$ | 831,003 | $ | 190,479 | $ | 640,524 | $ | 0 |
Level 1 securities include U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets. U.SU.S. government agencies, mortgage-backed securities, state and political subdivisions, and most corporate bonds and other equity securities 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.
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 Description Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 2017 2022 Loans receivable 2021 Loans receivable Other real estate owned Total 2016 Loans receivable Other real estate owned Total 2017 Estimated Fair Value Valuation Techniques Range (Average) Impaired Loans Evaluation of collateral Estimation of value Other real estate owned Appraisal Appraisal adjustment 2022 Estimated Valuation Range Fair Value Techniques (Average) Loans receivable Evaluation of collateral Estimation of value 2016 2021 Estimated Fair Value Valuation Techniques Range (Average) Estimated Valuation Range Fair Value Techniques (Average) Impaired Loans Evaluation of collateral Estimation of value Loans receivable Evaluation of collateral Estimation of value Other real estate owned Appraisal Appraisal adjustment Appraisal Appraisal adjustment * 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. The following table includes the carrying amounts and estimated fair values of the Company’s financial assets and liabilities as of March 31, 2022 and December 31, 2021 (in thousands): 2022 2021 Fair Value Estimated Estimated Hierarchy Carrying Fair Carrying Fair Level Amount Value Amount Value Financial assets: Cash and cash equivalents Level 1 Interest-bearing time deposits Level 1 Securities available-for-sale See previous table FHLB and FRB stock Level 2 Loans receivable, net Level 2 Accrued income receivable Level 1 Financial liabilities: Deposits Level 2 Securities sold under agreements to repurchase Level 1 FHLB advances Level 2 Accrued interest payable Level 1 Commitments to extend credit and standby letters of 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. 2017 2016 Fair Value Estimated Estimated Hierarchy Carrying Fair Carrying Fair Level Amount Value Amount Value Financial assets: Cash and due from banks Level 1 Interest bearing deposits Level 1 Securities available-for-sale See previous table Loans receivable, net Level 2 Loans held for sale Level 2 Accrued income receivable Level 1 Financial liabilities: Deposits Level 2 Securities sold under agreements to repurchase Level 1 FHLB advances Level 2 Other borrowings Level 2 Accrued interest payable Level 1 6. Debt Securities The amortized cost of securities 2017: Gross Gross 2022: Gross Gross Amortized Unrealized Unrealized Estimated Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value Cost Gains Losses Fair Value U.S. government treasuries U.S. government agencies U.S. government mortgage-backed securities State and political subdivisions Corporate bonds Equity securities, other 2016: Gross Gross 2021: Gross Gross Amortized Unrealized Unrealized Estimated Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value Cost Gains Losses Fair Value U.S. government treasuries U.S. government agencies U.S. government mortgage-backed securities State and political subdivisions Corporate bonds Equity securities, other The Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Proceeds from sales of securities available-for-sale Gross realized gains on securities available-for-sale Gross realized losses on securities available-for-sale Tax provision applicable to net realized gains on securities available-for-sale Amortized Estimated Cost Fair Value Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Total Securities with a carrying value of $217.3 million and $219.7 million at March 31, 2022 and December 31, 2021, respectively, were pledged on public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law. The proceeds and gains on securities available-for-sale for the three months ended March 31, 2022 and 2021 are summarized below (in thousands): Three Months Ended March 31, 2022 2021 Proceeds from sales of securities available-for-sale Gross realized gains on securities available-for-sale Gross realized losses on securities available-for-sale Less than 12 Months 12 Months or More Total 2017: Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Securities available-for-sale: U.S. government agencies U.S. government mortgage-backed securities State and political subdivisions Corporate bonds Less than 12 Months 12 Months or More Total Less than 12 Months 12 Months or More Total 2016: Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses 2022: Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Securities available-for-sale: U.S. government treasuries U.S. government agencies U.S. government mortgage-backed securities State and political subdivisions Corporate bonds Less than 12 Months 12 Months or More Total 2021: Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Securities available-for-sale: U.S. government treasuries U.S. government agencies U.S. government mortgage-backed securities State and political subdivisions Corporate bonds Gross unrealized losses on debt securities totaled 7. Loans Receivable and Credit Disclosures 2022 2021 Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial 1 Agricultural Consumer and other Less: Allowance for loan losses Deferred loan (fees) and costs, net Loans receivable, net 1 Commercial loan portfolio includes $0.3 million and $6.0 million of Paycheck Protection Program ("PPP") loans as of March 31, 2022 and December 31, 2021, respectively. The Paycheck Protection Program (PPP) was established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in response to the Coronavirus Disease 2019 (COVID-19) pandemic. Funding was extended into 2021. The PPP is administered by the Small Business Administration (SBA). PPP loans are forgivable by the SBA in qualifying circumstances and are 100 percent guaranteed by the SBA. Activity in the allowance for loan losses, on a disaggregated basis, for the three Three Months Ended September 30, 2017 1-4 Family Construction Residential Commercial Agricultural Consumer Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Balance, June 30, 2017 Provision (credit) for loan losses Recoveries of loans charged-off Loans charged-off Balance, September 30, 2017 Nine Months Ended September 30, 2017 Three Months Ended March 31, 2022 1-4 Family 1-4 Family Construction Residential Commercial Agricultural Consumer Construction Residential Commercial Agricultural Consumer Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Balance, December 31, 2016 Balance, December 31, 2021 Provision (credit) for loan losses Recoveries of loans charged-off Loans charged-off Balance, September 30, 2017 Balance, March 31, 2022 Three Months Ended September 30, 2016 1-4 Family Construction Residential Commercial Agricultural Consumer Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Balance, June 30, 2016 Provision (credit) for loan losses Recoveries of loans charged-off Loans charged-off Balance, September 30, 2016 Nine Months Ended September 30, 2016 1-4 Family Construction Residential Commercial Agricultural Consumer Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Balance, December 31, 2015 Provision (credit) for loan losses Recoveries of loans charged-off Loans charged-off Balance, September 30, 2016 Three Months Ended March 31, 2021 1-4 Family Construction Residential Commercial Agricultural Consumer Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Balance, December 31, 2020 Provision (credit) for loan losses Recoveries of loans charged-off Loans charged-off Balance, March 31, 2021 Allowance for loan losses disaggregated on the basis of impairment analysis method as of 2017 1-4 Family 2022 1-4 Family Construction Residential Commercial Agricultural Consumer Construction Residential Commercial Agricultural Consumer Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Individually evaluated for impairment Collectively evaluated for impairment Balance September 30, 2017 Balance March 31, 2022 2016 1-4 Family 2021 1-4 Family Construction Residential Commercial Agricultural Consumer Construction Residential Commercial Agricultural Consumer Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Individually evaluated for impairment Collectively evaluated for impairment Balance December 31, 2016 Balance December 31, 2021 Loans receivable disaggregated on the basis of impairment analysis method as of 2017 1-4 Family 2022 1-4 Family Construction Residential Commercial Agricultural Consumer Construction Residential Commercial Agricultural Consumer Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Individually evaluated for impairment Collectively evaluated for impairment Balance September 30, 2017 Balance March 31, 2022 2016 1-4 Family 2021 1-4 Family Construction Residential Commercial Agricultural Consumer Construction Residential Commercial Agricultural Consumer Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Real Estate Real Estate Real Estate Real Estate Commercial Agricultural and Other Total Individually evaluated for impairment Collectively evaluated for impairment Balance December 31, 2016 Balance December 31, 2021 A loan is considered 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 2017 2016 2022 2021 Unpaid Unpaid Unpaid Unpaid Recorded Principal Related Recorded Principal Related Recorded Principal Related Recorded Principal Related Investment Balance Allowance Investment Balance Allowance Investment Balance Allowance Investment Balance Allowance With no specific reserve recorded: Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other Total loans with no specific reserve: With an allowance recorded: Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other Total loans with specific reserve: Total Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other Three Months Ended September 30, 2017 2016 Average Interest Average Interest Recorded Income Recorded Income Investment Recognized Investment Recognized With no specific reserve recorded: Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other Total loans with no specific reserve: With an allowance recorded: Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other Total loans with specific reserve: Total Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other Nine Months Ended September 30, Three Months Ended March 31, 2017 2016 2022 2021 Average Interest Average Interest Average Interest Average Interest Recorded Income Recorded Income Recorded Income Recorded Income Investment Recognized Investment Recognized Investment Recognized Investment Recognized With no specific reserve recorded: Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other Total loans with no specific reserve: With an allowance recorded: Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other Total loans with specific reserve: Total Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other The Company had loans meeting the definition of a troubled debt restructuring (TDR) of Three Months Ended September 30, 2017 2016 Pre-Modification Post-Modification Pre-Modification Post-Modification Outstanding Outstanding Outstanding Outstanding Number of Recorded Recorded Number of Recorded Recorded Contracts Investment Investment Contracts Investment Investment Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other Nine Months Ended September 30, Three Months Ended March 31, 2017 2016 2022 2021 Pre-Modification Post-Modification Pre-Modification Post-Modification Pre-Modification Post-Modification Pre-Modification Post-Modification Outstanding Outstanding Outstanding Outstanding Outstanding Outstanding Outstanding Outstanding Number of Recorded Recorded Number of Recorded Recorded Number of Recorded Recorded Number of Recorded Recorded Contracts Investment Investment Contracts Investment Investment Contracts Investment Investment Contracts Investment Investment Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other During the three 2017 90 Days 90 Days 2022 90 Days 90 Days or Greater Total or Greater or Greater Total or Greater Past Due Past Due Past Due Current Total Accruing Past Due Past Due Past Due Current Total Accruing Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other 2016 90 Days 90 Days 2021 90 Days 90 Days or Greater Total or Greater 30-89 or Greater Total or Greater Past Due Past Due Past Due Current Total Accruing Past Due Past Due Past Due Current Total Accruing Real estate - construction Real estate - 1 to 4 family residential Real estate - commercial Real estate - agricultural Commercial Agricultural Consumer and other The credit risk profile by internally assigned grade, on a disaggregated basis, 2017 Construction Commercial Agricultural 2022 Construction Commercial Agricultural Real Estate Real Estate Real Estate Commercial Agricultural Total Real Estate Real Estate Real Estate Commercial Agricultural Total Pass Watch Special Mention Substandard Substandard-Impaired 2016 Construction Commercial Agricultural 2021 Construction Commercial Agricultural Real Estate Real Estate Real Estate Commercial Agricultural Total Real Estate Real Estate Real Estate Commercial Agricultural Total Pass Watch Special Mention Substandard Substandard-Impaired The credit risk profile based on payment activity, on a disaggregated basis, 2017 1-4 Family 2022 1-4 Family Residential Consumer Residential Consumer Real Estate and Other Total Real Estate and Other Total Performing Non-performing 2016 1-4 Family 2021 1-4 Family Residential Consumer Residential Consumer Real Estate and Other Total Real Estate and Other Total Performing Non-performing 8. Intangible assets The following sets forth the carrying amounts and accumulated amortization of the intangible assets at 2017 2016 2022 2021 Gross Accumulated Gross Accumulated Gross Accumulated Gross Accumulated Amount Amortization Amount Amortization Amount Amortization Amount Amortization Core deposit intangible asset Customer list Total The weighted average remaining life of the intangible assets is approximately 3 years and 4 years as of The following sets forth the activity related to the intangible assets for the three Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Beginning intangible asset, net Adjustment to intangible asset Amortization Ending intangible asset, net Three Months Ended March 31, 2022 2021 Beginning intangible assets, net Amortization Ending intangible assets, net 2017 2018 2019 2020 2021 2022 2023 2022 2023 2024 2025 2026 2027 After Total 9. The repurchase agreements mature daily and the following sets forth the pledged collateral at estimated fair value related to securities sold under repurchase agreements 2017 2016 Remaining Contractual Maturity of the Agreements Overnight Greater than Total Overnight Greater than Total 90 days 90 days 2022 2021 Securities sold under agreements to repurchase: U.S. government treasuries U.S. government agencies U.S. government mortgage-backed securities Total Term repurchase agreements (Other borrowings): U.S. government agencies U.S. government mortgage-backed securities Total 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. 10. Borrowings The Company had $3.0 million of FHLB advances as of December 31, 2021 and NaN as of March 31, 2022. 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, 2021 is due primarily to the increase in the unrealized losses on investment securities. 12. Commitments, Contingencies and Concentrations of Credit Risk On April 16, 2021, the Company entered into a $1.7 million commitment with a contractor to build a new branch in West Des Moines, Iowa. The Company has $406 thousand of the commitment remaining at March 31, 2022. 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 March 31, 2022. The Company and the Banks’ capital amounts and ratios as of March 31, 2022 and December 31, 2021 are as To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes * Action Provisions Amount Ratio Amount Ratio Amount Ratio As of September 30, 2017: Total capital (to risk- weighted assets): Consolidated Boone Bank & Trust First National Bank Reliance State Bank State Bank & Trust United Bank & Trust Tier 1 capital (to risk- weighted assets): Consolidated Boone Bank & Trust First National Bank Reliance State Bank State Bank & Trust United Bank & Trust Tier 1 capital (to average- weighted assets): Consolidated Boone Bank & Trust First National Bank Reliance State Bank State Bank & Trust United Bank & Trust Common equity tier 1 capital (to risk-weighted assets): Consolidated Boone Bank & Trust First National Bank Reliance State Bank State Bank & Trust United Bank & Trust To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio As of March 31, 2022: 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): Consolidated Boone Bank & Trust First National Bank Iowa State Savings Bank Reliance State Bank State Bank & Trust United Bank & Trust Tier 1 capital (to average-assets): Consolidated Boone Bank & Trust First National Bank Iowa State Savings Bank Reliance State Bank State Bank & Trust United Bank & Trust Common equity tier 1 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 To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 2021: 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): Consolidated Boone Bank & Trust First National Bank Iowa State Savings Bank Reliance State Bank State Bank & Trust United Bank & Trust Tier 1 capital (to average-assets): Consolidated Boone Bank & Trust First National Bank Iowa State Savings Bank Reliance State Bank State Bank & Trust United Bank & Trust Common equity tier 1 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 To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 2016: Total capital (to risk- weighted assets): Consolidated Boone Bank & Trust First National Bank Reliance State Bank State Bank & Trust United Bank & Trust Tier 1 capital (to risk- weighted assets): Consolidated Boone Bank & Trust First National Bank Reliance State Bank State Bank & Trust United Bank & Trust Tier 1 capital (to average- weighted assets): Consolidated Boone Bank & Trust First National Bank Reliance State Bank State Bank & Trust United Bank & Trust Common equity tier 1 capital (to risk-weighted assets): Consolidated Boone Bank & Trust First National Bank Reliance State Bank State Bank & Trust United Bank & Trust 14. Subsequent Events Management evaluated subsequent events through the date the financial statements were issued. There were no significant events or transactions occurring after Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Ames National Corporation 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. The 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 The Company had net income of Net loan charge-offs The following management discussion and analysis will provide a review of important items relating to: ● Challenges ● ● ● ● Income Statement Review ● ● Asset Quality Review and Credit Risk Management ● Liquidity and Capital Resources ● Forward-Looking Statements and Business Risks Challenges Management has identified certain events or circumstances that may negatively impact the Certain key performance indicators for the Company and the industry are presented in the following chart. The industry figures are compiled by the Federal Deposit Insurance Corporation (the “FDIC”) and are derived from Selected Indicators for the Company and the Industry 3 Months 3 Months 9 Months Ended Years Ended December 31, Ended Ended 3 Months Ended Years Ended December 31, March, 31, September 30, 2017 June 30, 2017 2016 2015 2022 2021 2020 Company Company Industry* Company Industry Company Industry Company Company Industry* Company Industry* Return on assets Return on equity Net interest margin Efficiency ratio Capital ratio *Latest available data Key performances indicators include: ● Return on Assets This ratio is calculated by dividing net income by average assets. It is used to measure how effectively the assets of the Company are being utilized in generating income. The Company's annualized return on ● Return on Equity This ratio is calculated by dividing net income by average equity. It is used to measure the net income or return the Company generated for the shareholders’ equity investment in the Company. The Company's return on average equity was at ● Net Interest Margin The net interest margin for the three months ended ● Efficiency Ratio This ratio is calculated by dividing noninterest expense by the sum of net interest income and noninterest income. The ratio is a measure of the Company’s ability to manage noninterest expenses. The Company’s efficiency ratio was ● Capital Ratio The average capital ratio is calculated by dividing average total equity capital by average total assets. It measures the level of average assets that are funded by shareholders’ equity. Given an equal level of risk in the financial condition of two companies, the higher the capital ratio, generally the more financially sound the company. The Company’s capital ratio of Critical Accounting Policies The discussion contained in this Item 2 and other disclosures included within this report are based, The Allowance for Loan Losses The allowance for loan losses is established through a provision for loan losses that is treated as an expense and charged against earnings. Loans are charged against the allowance for loan losses when management believes that collectability of the principal is unlikely. The Company has policies and procedures for evaluating the overall credit quality of its loan portfolio, including timely identification of potential problem loans. On a quarterly basis, management reviews the appropriate level for the allowance for loan losses, incorporating a variety of risk considerations, both quantitative and qualitative. Quantitative factors include the For further discussion concerning the allowance for loan losses and the process of establishing specific reserves, see the section of Fair Value and Other-Than-Temporary Impairment of Investment Securities The Declines in the fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer. Due to potential changes in conditions, including the economic disruption and uncertainties resulting from the continuation of the COVID-19 pandemic, it is at least reasonably possible that changes in Goodwill Goodwill arose in connection with Non-GAAP Financial Measures 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 March 31, 2022 2021 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 The following highlights a comparative discussion of the major components of net income and their impact for the three AVERAGE BALANCES AND INTEREST RATES The following two tables are used to calculate the AVERAGE BALANCE SHEETS AND INTEREST RATES AVERAGE BALANCE SHEETS AND INTEREST RATES AVERAGE BALANCE SHEETS AND INTEREST RATES Three Months Ended September 30, Three Months Ended March 31, 2017 2016 2022 2021 Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ balance expense rate balance expense rate balance expense rate balance expense rate ASSETS (dollars in thousands) Interest-earning assets Loans 1 Loans (1) Commercial Agricultural Real estate Consumer and other Total loans (including fees) Investment securities Taxable Tax-exempt 2 Tax-exempt (2) Total investment securities Interest bearing deposits with banks and federal funds sold 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%. AVERAGE BALANCE SHEETS AND INTEREST RATES AVERAGE BALANCE SHEETS AND INTEREST RATES AVERAGE BALANCE SHEETS AND INTEREST RATES Three Months Ended September 30, Three Months Ended March 31, 2017 2016 2022 2021 Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/ balance expense rate balance expense rate balance expense rate balance expense rate LIABILITIES AND STOCKHOLDERS' EQUITY (dollars in thousands) Interest-bearing liabilities Deposits NOW, savings accounts and money markets Time deposits > $100,000 Time deposits < $100,000 Interest-bearing checking, savings accounts and money markets Time deposits Total deposits Other borrowed funds Total Interest-bearing liabilities Total interest-bearing liabilities Noninterest-bearing liabilities Demand deposits Noninterest-bearing checking Other liabilities Stockholders' equity TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY Net interest income Net interest income (FTE)(3) Spread Analysis Spread Analysis (FTE) Interest income/average assets Interest expense/average assets Net interest income/average assets (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 For the three months ended Interest expense Provision (Credit) for Loan Losses AVERAGE BALANCE SHEETS AND INTEREST RATES Nine Months Ended September 30, 2017 2016 Average Revenue/ Yield/ Average Revenue/ Yield/ balance expense rate balance expense rate ASSETS (dollars in thousands) Interest-earning assets Loans 1 Commercial Agricultural Real estate Consumer and other Total loans (including fees) Investment securities Taxable Tax-exempt 2 Total investment securities Interest bearing deposits with banks and federal funds sold Total interest-earning assets Noninterest-earning assets TOTAL ASSETS AVERAGE BALANCE SHEETS AND INTEREST RATES Nine Months Ended September 30, 2017 2016 Average Revenue/ Yield/ Average Revenue/ Yield/ balance expense rate balance expense rate LIABILITIES AND STOCKHOLDERS' EQUITY (dollars in thousands) Interest-bearing liabilities Deposits NOW, savings accounts and money markets Time deposits > $100,000 Time deposits < $100,000 Total deposits Other borrowed funds Total Interest-bearing liabilities Noninterest-bearing liabilities Demand deposits Other liabilities Stockholders' equity TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY Net interest income Spread Analysis Interest income/average assets Interest expense/average assets Net interest income/average assets Noninterest Income and Expense Noninterest income Noninterest expense for the three months ended March 31, 2022 totaled $9.4 million compared to $9.0 million recorded for the three months ended March 31, 2021, an increase of 4%. The increase is primarily due to Income Taxes Balance Sheet Review As of Investment Portfolio The On a quarterly basis, the investment portfolio is reviewed for other-than-temporary impairment. As of At The The following table summarizes the total general obligation and revenue bonds in the 2017 2016 2022 2021 Estimated Estimated Estimated Estimated Amortized Fair Amortized Fair Amortized Fair Amortized Fair Cost Value Cost Value Cost Value Cost Value Obligations of states and political subdivisions: General Obligation bonds: Iowa Texas Pennsylvania Nebraska Washington Other (2017: 16 states; 2016: 17 states) Other (2022: 16 states; 2021: 16 states) Total general obligation bonds Revenue bonds: Iowa Other (2017: 9 states; 2016: 10 states) Texas Nebraska Other (2022: 21 states; 2021: 21 states) Total revenue bonds Total obligations of states and political subdivisions As of 2017 2016 2022 2021 Estimated Estimated Estimated Estimated Amortized Fair Amortized Fair Amortized Fair Amortized Fair Cost Value Cost Value Cost Value Cost Value Revenue bonds by revenue source Sales tax Water College and universities, primarily dormitory revenues Sewer Leases Electric Electric power & light revenues Other Total revenue bonds by revenue source Loan Portfolio The Deposits Deposits totaled 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 balance sheet. No material changes in the Company’s off-balance sheet arrangements have occurred since December 31, Asset Quality Review and Credit Risk Management The A loan is considered 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. The Company had TDRs of TDRs are monitored and reported on a quarterly basis. Certain TDRs are on nonaccrual status at the time of restructuring. These borrowings are typically returned to accrual status after the following: sustained repayment performance in accordance with the restructuring agreement for a reasonable period of at least For TDRs that were on nonaccrual status before the modification, a specific reserve may already be recorded. In periods subsequent to modification, the Company will continue to evaluate all TDRs for possible impairment and, as necessary, recognize impairment through the allowance. Loans past due 90 days or more that are still accruing interest are reviewed no less frequently than quarterly to determine if there The agricultural real estate and agricultural operating loan portfolio classifications remain The watch and special mention loans classified as commercial real estate totaled $79.4 million as of March 31, 2022 as compared to The allowance for loan losses as a percentage of outstanding loans as of The allowance for loan losses is Liquidity and Capital Resources Liquidity management is the process by which the Company, through its 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 The liquidity and capital resources ● Review of ● 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 Review of the Company’s Current Liquidity Sources Liquid assets of cash on hand, balances due from other banks and interest-bearing deposits in financial institutions as of March 31, 2022 and December 31, 2021 totaled $148.3 million and $89.1 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 March 31, 2022 include outstanding lines of credit with the FHLB of Des Moines, Iowa of $301.0 million, with no outstanding FHLB advances. The Company also has a $4 million line of credit with an unaffiliated bank, with no outstanding borrowings as of March 31, 2022. Federal funds borrowing capacity at correspondent banks was $102.2 million, with no outstanding federal fund purchase balances as of March 31, 2022. The Company had securities sold under agreements to repurchase totaling $39.9 million as of March 31, 2022. Total investments as of March 31, 2022 were $823.9 million compared to $831.0 million as of December 31, 2021. These investments provide the Company with a significant amount of liquidity since all of the investments are classified as available-for-sale as of March 31, 2022. 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 three months ended March 31, 2022 totaled $7.0 million compared to $9.4 million for the three months ended March 31, 2021. The decrease of $2.4 million in cash provided by operating activities was primarily due to lower net income and fewer net proceeds from loans held for sale. Net cash used in investing activities for the three months ended March 31, 2022 was $24.3 million compared to $77.9 million for the three months ended March 31, 2021. The decrease of $53.6 million in cash used in investing activities was primarily due to fewer purchases of investments. Net cash provided by financing activities for the three months ended March 31, 2022 totaled $76.6 million compared to $128.2 million for the three months ended March 31, 2021. The decrease in cash provided by financing activities of $51.6 million was primarily due to a lower increase in deposits between periods. As of March 31, 2022, 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 $2.5 million and $2.4 million for the three months ended March 31, 2022 and 2021, 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 $1.3 million as of March 31, 2022. Review of Commitments for Capital Expenditures, Cash Flow Uncertainties and Known Trends in Liquidity and Cash Flows Needs On April 16, 2021, the Company entered into a commitment with a contractor to build a new branch in West Des Moines, Iowa for $1.7 million. The Company has $406 thousand of the commitment remaining at March 31, 2022. 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 March 31, 2022 that are of concern to management. Capital Resources The Company’s total stockholders’ equity as of March 31, 2022 totaled $176.7 million and was $31.1 million less than the $207.8 million recorded as of December 31, 2021. The decrease in stockholders’ equity was primarily the result of an increase in unrealized losses on the investment portfolio, offset in part by the retention of net income in excess of dividends. At March 31, 2022 and December 31, 2021, stockholders’ equity as a percentage of total assets was 8.1% and 9.7%, respectively. The capital levels of the Company exceed applicable regulatory guidelines as of March 31, 2022. Forward-Looking Statements and Business Risks 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 financial performance and asset quality. Any forward-looking statement contained in this Quarterly Report is based on management’s current beliefs, assumptions and expectations of the Company’s future performance, taking into account all information currently available to management. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to management. 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. The risks and uncertainties that may affect the actual results of the Company include, but are not limited to, the following: the substantial negative impact of the COVID-19 pandemic on national, regional and local economies in general and on our customers in particular; 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 loan losses resulting from the COVID-19 pandemic or as dictated by new market conditions or regulatory requirements; fiscal and monetary policies of the U.S. government; 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 heading “Risk Factors” in the Company’s annual report on Form 10-K. Management intends to identify forward-looking statements when using words such as “believe”, “expect”, “intend”, “anticipate”, “estimate”, “should”, “forecasting” or similar expressions. Undue reliance should not be placed on these forward-looking statements. The Company undertakes no obligation to revise or update such forward-looking statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Quantitative and Qualitative Disclosures About Market Risk The Company's market risk is comprised primarily of interest rate risk arising from its core banking activities of lending and deposit taking. Interest rate risk results from the changes in market interest rates which may adversely affect the Company's net interest income. Management continually develops and applies strategies to mitigate this risk. Management does not believe that the Company's primary market risk exposure and how it has been managed year-to-date in 2022 changed significantly when compared to 2021. Uncertainty due to the federal governmental actions stemming from reactions to the COVID-19 pandemic, may cause market interest rates to deviate from historical norms. 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. OTHER INFORMATION Legal Proceedings Not applicable 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 11, 2022. Unregistered Sales of Equity Securities and Use of Proceeds In November, 2021, the Company approved a Stock Repurchase Plan which provided for the repurchase of up to 100,000 shares of the Company’s common stock. As of March 31, 2022, there were 100,000 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 March 31, 2022. Total Number Maximum of Shares Number of Purchased as Shares that Total Part of May Yet Be Number Average Publicly Purchased of Shares Price Paid Announced Under Period Purchased Per Share Plans The January 1, 2022 to February 1, 2022 to February 28, 2022 March 1, 2022 to March 31, 2022 Total Defaults Upon Senior Securities Not applicable Mine Safety Disclosures Not applicable Other information Not applicable 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.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document (1) 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document (1) 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document (1) 104 Cover page Interactive Data File (formatted as Inline XBRL and combined in Exhibit 101.1) (1) These interactive date 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. 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: May 6, 2022 By: /s/ John P. Nelson John P. Nelson, Chief Executive Officer and President By: /s/ John L. Pierschbacher John L. Pierschbacher, Chief Financial Officer The Company's policy is to recognize transfers between levels at the endSeptember 30, 2017 March 31, 2022 and December 31, 2016. 2021 (in thousands): $ 8,991 $ 0 $ 0 $ 8,991 $ 2,439 $ - $ - $ 2,439 $ 9,012 $ 0 $ 0 $ 9,012 386 - - 386 218 0 0 218 $ 2,825 $ - $ - $ 2,825 $ 9,230 $ 0 $ 0 $ 9,230 $ 683 $ - $ - $ 683 546 - - 546 $ 1,229 $ - $ - $ 1,229 Loans Receivable: Loans in the tables above consist of impaired credits held for investment. In accordance with the loan impairment guidance, impairment was measured based on the fair value of collateral less estimated selling costs for collateral dependent loans. Fair value for impaired loans is based upon appraised values of collateral adjusted for trends observed in the market. A valuation allowance was recorded for the excess of the loan’s recorded investment over the amounts determined by the collateral value method. This valuation allowance is a component of the allowance for loan losses. The Company considers these fair value measurements as level 3.Other Real Estate Owned: Other real estate owned in the table above consists of real estate obtained through foreclosure. Other real estate owned is recorded at fair value less estimated selling costs, at the date of transfer, with any impairment amount charged to the allowance for loan losses. Subsequent to the transfer, other real estate owned is carried at the lower of cost or fair value, less estimated selling costs, with any impairment amount recorded as a noninterest expense. The carrying value of other real estate owned is not re-measured to fair value on a recurring basis but is subject to fair value adjustments when the carrying value exceeds the fair value less estimated selling costs. Management uses appraised values and adjusts for trends observed in the market and for disposition costs in determining the value of other real estate owned. A valuation allowance was recorded for the excess of the asset’s recorded investment over the amount determined by the fair value, less estimated selling costs. This valuation allowance is a component of the allowance for other real estate owned. The valuation allowance was $287,000 as of September 30, 2017 and $331,000 as of December 31, 2016. The Company considers these fair value measurements as level 3.The significant inputs used in the fair value measurements for Level 3 assets measured at fair value on a nonrecurring basis as of September 30, 2017 March 31, 2022 and December 31, 2016 2021 are as follows:follows (in thousands): Unobservable Inputs $ 2,439 NM* $ 386 6% - 8% (7%) Unobservable Inputs $ 8,991 NM* Unobservable Inputs Unobservable Inputs $ 683 NM* $ 9,012 NM* $ 546 6% - 10% (8%) $ 218 6% - 8% (7%) Not Meaningful. Evaluations of the underlying assets are completed for each collateral dependent impaired 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. 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, thus providing a range would not be meaningful. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or nonrecurring basis are discussed above. The methodologies for other financial assets and financial liabilities are discussed below.Fair value of financial instruments:Disclosure of fair value information about financial instruments, for which it is practicable to estimate that value, is required whether or not recognized in the consolidated balance sheets. In cases in which quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases could not be realized in immediate settlement of the instruments. Certain financial instruments with a fair value that is not practicable to estimate and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not necessarily represent the underlying value of the Company.The following disclosures represent financial instruments in which the ending balances at September 30, 2017 and December 31, 2016 are not carried at fair value in their entirety on the consolidated balance sheets.Cash and due from banks and interest bearing deposits in financial institutions: The recorded amount of these assets approximates fair value.1312 $ 148,332 $ 148,332 $ 89,129 $ 89,129 16,419 16,419 16,922 16,922 823,897 823,897 831,003 831,003 3,473 3,473 3,422 3,422 1,130,077 1,075,680 1,144,108 1,112,684 9,330 9,330 10,124 10,124 $ 1,959,893 $ 1,961,384 $ 1,878,019 $ 1,880,137 39,902 39,902 39,851 39,851 0 0 3,000 3,071 292 292 353 353 Securities available-for-sale: Fair value measurement for Level 1 securities is based upon quoted prices. Fair value measurement for Level 2 securities are based upon quoted prices, if available. If quoted prices are not available, the Company obtainsThe methodologies used to determine fair value measurementsas of March 31, 2022 did not change 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 andmethodologies described in the security’s terms and conditions, among other things. Level 1 securities include U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets. U.S government mortgage-backed securities, state and political subdivisions, some corporate bonds and other equity securities are reported at fair value utilizing Level 2 inputs.December 31, 2021 Annual Financial Statements.Loans receivable: The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates, which reflect the credit and interest rate risk inherent in the loan. The estimate of maturity is based on the historical experience, with repayments for each loan classification modified, as required, by an estimate of the effect of current economic and lending conditions. The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate.Loans held for sale: The fair value of loans held for sale is based on prevailing market prices.Deposits: Fair values of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings and NOW accounts, and money market accounts, are equal to the amount payable on demand as of the respective balance sheet date. Fair values of certificates of deposit are based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.Securities sold under agreements to repurchase: The carrying amounts of securities sold under agreements to repurchase approximate fair value because of the generally short-term nature of the instruments.FHLB advances and other borrowings: Fair values of FHLB advances and other borrowings are estimated using discounted cash flow analysis based on interest rates currently being offered with similar terms.Accrued income receivable and accrued interest payable: The carrying amounts of accrued income receivable and accrued interest payable approximate fair value.credit: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.1413The estimated fair values of the Company’s financial instruments as described above as of September 30, 2017 and December 31, 2016 are as follows: (in thousands) $ 23,088 $ 23,088 $ 29,478 $ 29,478 35,486 35,486 31,737 31,737 506,610 506,610 516,080 516,080 764,229 753,977 752,182 746,580 280 280 243 243 8,423 8,423 7,769 7,769 $ 1,114,538 $ 1,115,076 $ 1,109,409 $ 1,110,211 39,001 39,001 58,337 58,337 19,000 19,046 14,500 14,681 13,000 13,159 13,000 13,386 447 447 408 408 The methodologies used to determine fair value as of September 30, 2017 did not change from the methodologies described in the December 31, 2016 Annual Financial Statements.156. Debt and Equity Securitiesavailable-for-saleavailable-for-sale and their approximate fair values as of September 30, 2017 March 31, 2022 and December 31, 2016 2021 are summarized below:below (in thousands): $ 4,412 $ 37 $ - $ 4,449 $ 212,757 $ 16 $ (11,886 ) $ 200,887 112,011 807 (161 ) 112,657 116,513 99 (4,444 ) 112,168 80,948 1,091 (83 ) 81,956 151,333 90 (8,916 ) 142,507 241,150 2,684 (396 ) 243,438 302,881 296 (13,964 ) 289,213 60,417 560 (143 ) 60,834 81,664 235 (2,777 ) 79,122 3,257 19 - 3,276 $ 502,195 $ 5,198 $ (783 ) $ 506,610 $ 865,148 $ 736 $ (41,987 ) $ 823,897 $ 4,396 $ 18 $ (46 ) $ 4,368 $ 192,323 $ 239 $ (2,083 ) $ 190,479 110,372 540 (703 ) 110,209 114,531 2,235 (752 ) 116,014 82,279 1,018 (439 ) 82,858 149,896 1,375 (1,670 ) 149,601 265,204 1,660 (2,416 ) 264,448 290,548 4,035 (1,724 ) 292,859 51,731 147 (694 ) 51,184 79,887 2,437 (274 ) 82,050 3,013 - - 3,013 $ 516,995 $ 3,383 $ (4,298 ) $ 516,080 $ 827,185 $ 10,321 $ (6,503 ) $ 831,003 proceeds, gainsamortized cost and losses fromfair value of debt securities available-for-sale as of March 31, 2022, are summarized as follows: 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)thousands). $ 933 $ 5,852 $ 11,757 $ 18,738 38 66 501 303 - (1 ) (2 ) (7 ) 14 29 175 110 $ 43,084 $ 43,195 459,166 439,613 340,100 319,708 22,798 21,381 $ 865,148 $ 823,897 1614 $ 535 $ 0 35 0 0 0 UnrealizedGross 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 March 31, 2022 and December 31, 2021 are summarized as of September 30, 2017 and December 31, 2016 are as follows:follows (in thousands): $ 28,424 $ (125 ) $ 3,773 $ (36 ) $ 32,197 $ (161 ) 10,639 (71 ) 1,997 (12 ) 12,636 (83 ) 22,029 (81 ) 21,739 (315 ) 43,768 (396 ) 5,619 (11 ) 7,310 (132 ) 12,929 (143 ) $ 66,711 $ (288 ) $ 34,819 $ (495 ) $ 101,530 $ (783 ) $ 2,893 $ (46 ) $ - $ - $ 2,893 $ (46 ) $ 181,570 $ (10,962 ) $ 11,487 $ (924 ) $ 193,057 $ (11,886 ) 48,225 (703 ) - - 48,225 (703 ) 77,732 (3,006 ) 15,671 (1,438 ) 93,403 (4,444 ) 33,753 (439 ) - - 33,753 (439 ) 82,105 (4,063 ) 51,997 (4,853 ) 134,102 (8,916 ) 125,558 (2,226 ) 6,512 (190 ) 132,070 (2,416 ) 218,589 (11,894 ) 19,703 (2,070 ) 238,292 (13,964 ) 35,703 (694 ) - - 35,703 (694 ) 43,356 (2,603 ) 1,460 (174 ) 44,816 (2,777 ) $ 246,132 $ (4,108 ) $ 6,512 $ (190 ) $ 252,644 $ (4,298 ) $ 603,352 $ (32,528 ) $ 100,318 $ (9,459 ) $ 703,670 $ (41,987 ) $ 163,206 $ (2,083 ) $ 0 $ 0 $ 163,206 $ (2,083 ) 30,647 (570 ) 5,836 (182 ) 36,483 (752 ) 92,192 (1,580 ) 2,524 (90 ) 94,716 (1,670 ) 115,204 (1,667 ) 1,725 (57 ) 116,929 (1,724 ) 16,484 (274 ) 0 0 16,484 (274 ) $ 417,733 $ (6,174 ) $ 10,085 $ (329 ) $ 427,818 $ (6,503 ) $783,000$42.0 million as of September 30, 2017. March 31, 2022. These unrealized losses are generally due to changes in interest rates or general market conditions. 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. Management concluded that the gross unrealized losses on debt securities were temporary. Due to potential changes in conditions, it is at least reasonably possible that changes in fair values and management’s assessments will occur in the near term and that such changes could materially affect the amounts reported in the Company’s financial statements.177. Loans Receivable The composition of loans receivable as of March 31, 2022 and Credit DisclosuresDecember 31, 2021 is as follows (in thousands): $ 46,140 $ 42,638 256,362 246,745 507,598 515,367 152,136 153,457 71,150 75,482 96,197 111,881 16,647 15,097 1,146,230 1,160,667 (16,484 ) (16,621 ) 331 62 $ 1,130,077 $ 1,144,108 and nine months ended September 30, 2017 March 31, 2022 and 20162021 is as follows:follows (in thousands): $ 780 $ 1,713 $ 4,437 $ 907 $ 2,071 $ 1,154 $ 126 $ 11,188 (74 ) 15 155 36 (80 ) (34 ) 39 57 - 4 - - 2 - 4 10 - - - - (109 ) - (6 ) (115 ) $ 706 $ 1,732 $ 4,592 $ 943 $ 1,884 $ 1,120 $ 163 $ 11,140 $ 908 $ 1,711 $ 3,960 $ 861 $ 1,728 $ 1,216 $ 123 $ 10,507 $ 675 $ 2,752 $ 8,406 $ 1,584 $ 1,170 $ 1,836 $ 198 $ 16,621 (202 ) 12 632 82 735 (96 ) 59 1,222 (30 ) 150 (92 ) 46 (19 ) (230 ) 48 (127 ) - 9 - - 30 - 8 47 0 1 0 0 1 0 1 3 - - - - (609 ) - (27 ) (636 ) 0 (4 ) 0 0 0 0 (9 ) (13 ) $ 706 $ 1,732 $ 4,592 $ 943 $ 1,884 $ 1,120 $ 163 $ 11,140 $ 645 $ 2,899 $ 8,314 $ 1,630 $ 1,152 $ 1,606 $ 238 $ 16,484 $ 758 $ 1,742 $ 3,890 $ 834 $ 1,439 $ 1,219 $ 253 $ 10,135 121 32 (89 ) - 169 12 (10 ) 235 15 1 - - 75 - 2 93 - - - - (1 ) - (11 ) (12 ) $ 894 $ 1,775 $ 3,801 $ 834 $ 1,682 $ 1,231 $ 234 $ 10,451 $ 999 $ 1,806 $ 3,557 $ 760 $ 1,371 $ 1,256 $ 239 $ 9,988 (135 ) (34 ) 244 74 308 (25 ) 9 441 30 3 - - 81 - 7 121 - - - - (78 ) - (21 ) (99 ) $ 894 $ 1,775 $ 3,801 $ 834 $ 1,682 $ 1,231 $ 234 $ 10,451 $ 725 $ 2,581 $ 8,930 $ 1,595 $ 1,453 $ 1,696 $ 235 $ 17,215 143 (431 ) 118 (97 ) (79 ) (82 ) 2 (426 ) 0 263 1 0 1 0 4 269 0 (30 ) 0 0 (113 ) 0 (8 ) (151 ) $ 868 $ 2,383 $ 9,049 $ 1,498 $ 1,262 $ 1,614 $ 233 $ 16,907 September 30, 2017 March 31, 2022 and December 31, 2016 2021 is as follows:follows (in thousandsthousands)): $ - $ 28 $ - $ - $ 747 $ - $ 48 $ 823 $ 0 $ 53 $ 1,139 $ 0 $ 42 $ 119 $ 20 $ 1,373 706 1,704 4,592 943 1,137 1,120 115 10,317 645 2,846 7,175 1,630 1,110 1,487 218 15,111 $ 706 $ 1,732 $ 4,592 $ 943 $ 1,884 $ 1,120 $ 163 $ 11,140 $ 645 $ 2,899 $ 8,314 $ 1,630 $ 1,152 $ 1,606 $ 238 $ 16,484 $ - $ 76 $ - $ - $ 644 $ - $ - $ 720 $ 0 $ 40 $ 1,139 $ 0 $ 60 $ 132 $ 21 $ 1,392 908 1,635 3,960 861 1,084 1,216 123 9,787 675 2,712 7,267 1,584 1,110 1,704 177 15,229 $ 908 $ 1,711 $ 3,960 $ 861 $ 1,728 $ 1,216 $ 123 $ 10,507 $ 675 $ 2,752 $ 8,406 $ 1,584 $ 1,170 $ 1,836 $ 198 $ 16,621 September 30, 2017 March 31, 2022 and December 31, 2016 2021 is as follows (in thousands): $ - $ 692 $ 703 $ - $ 3,250 $ - $ 85 $ 4,730 $ 0 $ 976 $ 9,789 $ 542 $ 262 $ 564 $ 24 $ 12,157 44,041 148,148 350,508 79,181 70,916 67,711 10,201 770,706 46,140 255,386 497,809 151,594 70,888 95,633 16,623 1,134,073 $ 44,041 $ 148,840 $ 351,211 $ 79,181 $ 74,166 $ 67,711 $ 10,286 $ 775,436 $ 46,140 $ 256,362 $ 507,598 $ 152,136 $ 71,150 $ 96,197 $ 16,647 $ 1,146,230 $ - $ 660 $ 399 $ - $ 3,942 $ - $ 76 $ 5,077 $ 0 $ 980 $ 9,792 $ 546 $ 330 $ 637 $ 27 $ 12,312 61,042 148,847 315,303 73,032 70,436 76,994 12,054 757,708 42,638 245,765 505,575 152,911 75,152 111,244 15,070 1,148,355 $ 61,042 $ 149,507 $ 315,702 $ 73,032 $ 74,378 $ 76,994 $ 12,130 $ 762,785 $ 42,638 $ 246,745 $ 515,367 $ 153,457 $ 75,482 $ 111,881 $ 15,097 $ 1,160,667 will applyapplies its normal loan review procedures to identify loans that should be evaluated for impairment.1918The following is a recap of impairedImpaired loans,, on a disaggregated basis, as of September 30, 2017 March 31, 2022 and December 31, 2016: 2021 (in thousands): $ - $ - $ - $ - $ - $ - $ 0 $ 0 $ - $ 0 $ 0 $ - 610 750 - 452 473 - 651 719 - 677 739 - 703 1,369 - 399 1,025 - 121 140 - 124 142 - - - - - - - 542 617 - 546 1,001 - 127 150 - 2,747 2,672 - 220 258 - 233 269 - - - - - - - 255 486 - 322 521 - 28 30 - 76 81 - 4 6 - 6 8 - 1,468 2,299 - 3,674 4,251 - 1,793 2,226 - 1,908 2,680 - - - - - - - 0 0 0 0 0 0 82 104 28 208 360 76 325 341 53 303 314 40 - - - - - - 9,668 10,001 1,139 9,668 10,001 1,139 - - - - - - 0 0 0 0 0 0 3,123 3,392 747 1,195 1,286 644 42 42 42 97 98 60 - - - - - - 309 315 119 315 315 132 57 60 48 - - - 20 22 20 21 23 21 3,262 3,556 823 1,403 1,646 720 10,364 �� 10,721 1,373 10,404 10,751 1,392 - - - - - - 0 0 0 0 0 0 692 854 28 660 833 76 976 1,060 53 980 1,053 40 703 1,369 - 399 1,025 - 9,789 10,141 1,139 9,792 10,143 1,139 - - - - - - 542 617 0 546 1,001 0 3,250 3,542 747 3,942 3,958 644 262 300 42 330 367 60 - - - - - - 564 801 119 637 836 132 85 90 48 76 81 - 24 28 20 27 31 21 $ 4,730 $ 5,855 $ 823 $ 5,077 $ 5,897 $ 720 $ 12,157 $ 12,947 $ 1,373 $ 12,312 $ 13,431 $ 1,392 2019The following is a recap of the averageAverage recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2017 March 31, 2022 and 2016:2021 (in thousands): $ - $ - $ - $ - 631 18 481 - 716 - 450 - - - - - 139 2 67 - - - 11 - 46 - 88 6 1,532 20 1,097 6 - - - - 128 - 626 - - - - - - - - - 3,263 - 1,003 2 - - - - 29 - 1 - 3,420 - 1,630 2 - - - - 759 18 1,107 - 716 - 450 - - - - - 3,402 2 1,070 2 - - 11 - 75 - 89 6 $ 4,952 $ 20 $ 2,727 $ 8 $ - $ - $ - $ 31 $ 0 $ 0 $ 167 $ 0 535 27 438 1 664 3 361 0 648 - 465 22 123 0 192 297 - - - - 544 0 1,378 25 1,457 3 39 - 227 4 546 0 - - 11 - 289 0 360 13 60 - 66 6 5 0 6 0 2,700 30 1,019 60 1,852 7 3,010 335 16 2 - - 0 0 0 0 162 - 663 5 314 0 509 0 - - 26 - 9,668 0 10,016 0 - - - - 0 0 0 0 2,193 - 732 2 70 0 333 0 - - - - 312 0 443 0 15 1 1 - 21 0 40 0 2,386 3 1,422 7 10,385 0 11,341 0 16 2 - 31 0 0 167 0 697 27 1,101 6 978 3 870 0 648 - 491 22 9,791 0 10,208 297 - - - - 544 0 1,378 25 3,650 3 771 2 297 4 879 0 - - 11 - 601 0 803 13 75 1 67 6 26 0 46 0 $ 5,086 $ 33 $ 2,441 $ 67 $ 12,237 $ 7 $ 14,351 $ 335 The interest foregone on nonaccrual loans for the three months ended September 30, 2017 and 2016 was approximately $88,000 and $46,000, respectively. The interest foregone on nonaccrual loans for the ninethree months ended September 30, 2017 March 31, 2022 and 20162021 was approximately $289,000$143 thousand and $124,000,$199 thousand, respectively.TheNonaccrual loans at March 31, 2022 and December 31, 2021 were $12.2 million and $12.3 million, respectively.$3,098,000$11.27 million as of September 30, 2017, March 31, 2022, all of which were included in impaired and nonaccrual loans. The Company had TDRs of $3,672,000$11.30 million as of December 31, 2016, 2021, all of which were included in impaired and nonaccrual loans.2220The following table sets forth information on theThe Company’s TDRs, on a disaggregated basis, occurring in the three and nine months ended September 30, 2017 March 31, 2022 and 2016: 2021, were as follows (dollarsin thousands)thousands): - $ - $ - - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ - $ - - $ - $ - - $ - $ - - $ - $ - 0 $ 0 $ 0 0 $ 0 $ 0 - - - - - - 0 0 0 2 153 153 - - - - - - 0 0 0 0 0 0 - - - - - - 0 0 0 0 0 0 2 93 99 3 702 705 0 0 0 1 58 58 - - - - - - 0 0 0 0 0 0 - - - 3 70 70 0 0 0 0 0 0 2 $ 93 $ 99 6 $ 772 $ 775 0 $ 0 $ 0 3 $ 211 $ 211 and nine months ended September 30, 2017, March 31, 2022, the Company did not grant any concessions to borrowers facing financial difficulties. During the three months ended March 31, 2021, the Company granted concessions to two borrowers, that were experiencingwith 3 contracts, facing financial difficulties. The loans were restructured for an extended beyond their normal terms and on one loan the interest was capitalized.maturity without principal reductions or an amortization period longer than a typical loan.DuringThere were 0 TDR loans that were modified during the threetwelve months ended September 30, 2016, the Company did not grant any concessions to any borrowers facing financial difficulties. During the nine months ended September 30, 2016, the Company granted concessions to two borrowers experiencing financial difficulties with six loans.March 31, 2022 that had payment defaults. The three consumer loans were extended beyond normal terms at an interest rate below a market interest rate. The three commercial operating loans were extended beyond normal terms.The Company considers TDR loans to have payment default when it is past due 60 days or more.No TDR modified during the twelve months ended September 30, 2017 and 2016 had payment defaults.A $530,000 specific reserve was established in the nine months ended September 30, 2017 on two TDR loans. There were $257,000no net charge-offs and $262 thousand of net charge-offsrecoveries related to TDRs for the ninethree months ended September 30, 2017. There were no charge-offs related to TDRsMarch 31, 2022 and 2021, respectively. No additional specific reserve was provided for the three and nine months ended September 30, 2016.March 31, 2022 and 2021.2321AnAn aging analysis of the recorded investments in loans, on a disaggregated basis, as of September 30, 2017 March 31, 2022 and December 31, 2016, 2021, is as follows:follows (in thousands): 30-89 30-89 $ 205 $ - $ 205 $ 43,836 $ 44,041 $ - $ 0 $ 0 $ 0 $ 46,140 $ 46,140 $ 0 1,065 476 1,541 147,299 148,840 81 989 216 1,205 255,157 256,362 0 312 398 710 350,501 351,211 - 24 0 24 507,574 507,598 0 377 - 377 78,804 79,181 - 408 0 408 151,728 152,136 0 129 429 558 73,608 74,166 - 549 49 598 70,552 71,150 0 207 - 207 67,504 67,711 - 894 0 894 95,303 96,197 0 43 32 75 10,211 10,286 - 15 0 15 16,632 16,647 0 $ 2,338 $ 1,335 $ 3,673 $ 771,763 $ 775,436 $ 81 $ 2,879 $ 265 $ 3,144 $ 1,143,086 $ 1,146,230 $ 0 30-89 $ - $ - $ - $ 61,042 $ 61,042 $ - $ 0 $ 0 $ 0 $ 42,638 $ 42,638 $ 0 1,577 35 1,612 147,895 149,507 19 1,198 482 1,680 245,065 246,745 169 1,420 - 1,420 314,282 315,702 - 24 0 24 515,343 515,367 0 - - - 73,032 73,032 - 30 0 30 153,427 153,457 0 84 747 831 73,547 74,378 - 251 15 266 75,216 75,482 0 - - - 76,994 76,994 - 172 0 172 111,709 111,881 0 36 3 39 12,091 12,130 3 49 0 49 15,048 15,097 0 $ 3,117 $ 785 $ 3,902 $ 758,883 $ 762,785 $ 22 $ 1,724 $ 497 $ 2,221 $ 1,158,446 $ 1,160,667 $ 169 2422asas of September 30, 2017 March 31, 2022 and December 31, 2016 2021 is as follows:follows (in thousands): $ 41,032 $ 329,263 $ 57,569 $ 59,420 $ 42,695 $ 529,979 $ 45,904 $ 388,722 $ 125,766 $ 61,302 $ 80,758 $ 702,452 3,009 17,927 18,984 10,020 23,828 73,768 236 78,615 20,791 7,372 14,293 121,307 - 189 1,234 - - 1,423 0 830 0 633 0 1,463 - 3,129 1,394 1,478 1,188 7,189 0 29,642 5,037 1,581 582 36,842 - 703 - 3,248 - 3,951 0 9,789 542 262 564 11,157 $ 44,041 $ 351,211 $ 79,181 $ 74,166 $ 67,711 $ 616,310 $ 46,140 $ 507,598 $ 152,136 $ 71,150 $ 96,197 $ 873,221 $ 57,420 $ 288,107 $ 51,720 $ 59,506 $ 57,415 $ 514,168 $ 38,753 $ 381,346 $ 126,157 $ 63,141 $ 95,289 $ 704,686 3,245 22,833 15,251 9,512 18,938 69,779 239 99,127 17,853 8,132 7,421 132,772 - 204 4,228 96 75 4,603 0 3,085 3,519 762 7,664 15,030 377 4,159 1,833 1,322 566 8,257 3,646 22,017 5,382 3,117 870 35,032 - 399 - 3,942 - 4,341 0 9,792 546 330 637 11,305 $ 61,042 $ 315,702 $ 73,032 $ 74,378 $ 76,994 $ 601,148 $ 42,638 $ 515,367 $ 153,457 $ 75,482 $ 111,881 $ 898,825 asas of September 30, 2017 March 31, 2022 and December 31, 2016 2021 is as follows:follows (in thousands): $ 148,069 $ 10,202 $ 158,271 $ 255,386 $ 16,623 $ 272,009 771 84 855 976 24 1,000 $ 148,840 $ 10,286 $ 159,126 $ 256,362 $ 16,647 $ 273,009 $ 148,828 $ 12,051 $ 160,879 $ 245,598 $ 15,067 $ 260,665 679 79 758 1,147 30 1,177 $ 149,507 $ 12,130 $ 161,637 $ 246,745 $ 15,097 $ 261,842 8. GoodwillGoodwill is not amortized but is evaluated for impairment at least annually. For income tax purposes, goodwill is amortized over fifteen years.25239. Intangible assetsSeptember 30, 2017 March 31, 2022 and December 31, 2016: 2021 (in thousands): $ 2,518 $ 1,793 $ 2,518 $ 1,563 $ 6,411 $ 4,169 $ 6,411 $ 4,043 474 65 412 14 535 418 535 398 $ 2,992 $ 1,858 $ 2,930 $ 1,577 $ 6,946 $ 4,587 $ 6,946 $ 4,441 September 30, 2017 March 31, 2022 and December 31, 2016.2021. and nine months ended September 30, 2017 March 31, 2022 and 2016:2021 (in thousands): $ 1,212 $ 1,122 $ 1,353 $ 1,309 12 - 62 - (90 ) (86 ) (281 ) (273 ) $ 1,134 $ 1,036 $ 1,134 $ 1,036 $ 2,505 $ 3,133 (146 ) (160 ) $ 2,359 $ 2,973 EstimatedEstimated remaining amortization expense on core deposit intangible assets for the years ending December 31stis as follows:follows (in thousands): $ 85 319 196 139 139 133 123 $ 1,134 428 502 337 300 268 240 284 $ 2,359 262410. Pledged Collateral Related to Securities Sold Under Repurchase Agreementsand term repurchase agreements as of September 30, 2017 March 31, 2022 and December 31, 2016: 2021 (in thousands): $ 1,485 $ - $ 1,485 $ 1,476 $ - $ 1,476 $ 4,796 $ 4,971 48,363 - 48,363 46,557 - 46,557 39,461 38,045 24,514 - 24,514 30,376 - 30,376 9,311 11,127 $ 74,362 $ - $ 74,362 $ 78,409 $ - $ 78,409 $ - $ 15,174 $ 15,174 $ - $ 15,068 $ 15,068 - - - - 354 354 $ - $ 15,174 $ 15,174 $ - $ 15,422 $ 15,422 $ 74,362 $ 15,174 $ 89,536 $ 78,409 $ 15,422 $ 93,831 $ 53,568 $ 54,143 11. On June 11, 2021, the Company entered into a promissory note and line of credit agreement with an unaffiliated bank, providing for a five-year four million dollar line of credit facility. The Company had 0 outstanding borrowings on the line of credit as of March 31, 2022 and December 31, 2021.follows:follows (dollars in thousands): $ 175,203 17.7 % $ 91,324 9.25 % N/A N/A 15,325 16.7 8,486 9.25 $ 9,174 10.0 % 81,177 15.4 48,867 9.25 52,829 10.0 26,957 15.9 15,661 9.25 16,931 10.0 20,217 16.5 11,337 9.25 12,256 10.0 14,903 20.4 6,741 9.25 7,288 10.0 $ 163,536 16.6 % $ 71,578 7.25 % N/A N/A 14,419 15.7 6,651 7.25 $ 7,339 8.0 % 75,221 14.2 38,301 7.25 42,263 8.0 24,947 14.7 12,275 7.25 13,545 8.0 18,680 15.2 8,886 7.25 9,805 8.0 14,084 19.3 5,284 7.25 5,830 8.0 $ 163,536 12.1 % $ 53,995 4.00 % N/A N/A 14,419 10.5 5,484 4.00 $ 6,855 5.0 % 75,221 10.0 29,942 4.00 37,428 5.0 24,947 12.2 8,147 4.00 10,184 5.0 18,680 11.9 6,297 4.00 7,871 5.0 14,084 12.9 4,372 4.00 5,465 5.0 $ 163,536 16.6 % $ 56,769 5.75 % N/A N/A 14,419 15.7 5,275 5.75 $ 5,963 6.5 % 75,221 14.2 30,377 5.75 34,339 6.5 24,947 14.7 9,735 5.75 11,005 6.5 18,680 15.2 7,047 5.75 7,967 6.5 14,084 19.3 4,190 5.75 4,737 6.5 * These ratios for September 30, 2017 include a capital conservation buffer of 1.25%, except for the Tier 1 capital to average weighted assets ratios. $ 211,219 14.9 % $ 148,534 10.50 % N/A N/A 15,704 13.5 12,251 10.50 11,668 10.0 % 106,493 14.5 77,007 10.50 73,340 10.0 24,309 15.9 16,043 10.50 15,280 10.0 27,424 15.0 19,235 10.50 18,319 10.0 21,243 14.8 15,114 10.50 14,395 10.0 12,137 15.3 8,328 10.50 7,931 10.0 $ 194,024 13.7 % $ 120,242 8.50 % N/A N/A 14,778 12.7 9,917 8.50 9,334 8.0 % 97,319 13.3 62,339 8.50 58,672 8.0 23,048 15.1 12,988 8.50 12,224 8.0 25,131 13.7 15,571 8.50 14,655 8.0 19,590 13.6 12,235 8.50 11,516 8.0 11,144 14.1 6,742 8.50 6,345 8.0 $ 194,024 9.1 % $ 85,639 4.00 % N/A N/A 14,778 9.0 6,538 4.00 8,172 5.0 % 97,319 8.9 43,893 4.00 54,866 5.0 23,048 9.0 10,219 4.00 12,774 5.0 25,131 8.6 11,642 4.00 14,553 5.0 19,590 8.9 8,812 4.00 11,016 5.0 11,144 8.7 5,137 4.00 6,421 5.0 $ 194,024 13.7 % $ 99,022 7.00 % N/A N/A 14,778 12.7 8,167 7.00 7,584 6.5 % 97,319 13.3 51,338 7.00 47,671 6.5 23,048 15.1 10,696 7.00 9,932 6.5 25,131 13.7 12,823 7.00 11,907 6.5 19,590 13.6 10,076 7.00 9,356 6.5 11,144 15.1 5,552 7.00 5,155 6.5 28
$ 208,480 14.8 % $ 146,881 10.50 % N/A N/A 15,603 14.2 11,562 10.50 11,012 10.0 % 104,608 14.5 75,832 10.50 72,221 10.0 24,008 15.9 15,895 10.50 15,138 10.0 27,292 13.6 21,136 10.50 20,129 10.0 20,885 15.2 14,416 10.50 13,730 10.0 12,001 15.7 8,039 10.50 7,657 10.0 $ 191,161 13.7 % $ 118,904 8.50 % N/A N/A 14,652 13.3 9,360 8.50 8,809 8.0 % 95,573 13.2 61,388 8.50 57,777 8.0 22,747 15.0 12,868 8.50 12,111 8.0 24,774 12.3 17,110 8.50 16,103 8.0 19,231 14.0 11,670 8.50 10,984 8.0 11,042 14.4 6,508 8.50 6,125 8.0 $ 191,161 9.0 % $ 84,585 4.00 % N/A N/A 14,652 9.0 6,525 4.00 8,157 5.0 % 95,573 8.7 44,333 4.00 55,416 5.0 22,747 9.1 10,102 4.00 12,628 5.0 24,774 8.8 11,396 4.00 14,245 5.0 19,231 9.1 8,469 4.00 10,586 5.0 11,042 8.9 4,955 4.00 6,193 5.0 $ 191,161 13.7 % $ 97,921 7.00 % N/A N/A 14,652 13.3 7,708 7.00 7,158 6.5 % 95,573 13.2 50,555 7.00 46,944 6.5 22,747 15.0 10,597 7.00 9,840 6.5 24,774 12.3 14,091 7.00 13,084 6.5 19,231 14.0 9,611 7.00 8,924 6.5 11,042 14.4 5,360 7.00 4,977 6.5 $ 170,358 17.2 % $ 85,241 8.625 % N/A N/A 15,044 17.2 7,534 8.625 $ 8,735 10.0 % 78,322 15.3 44,279 8.625 51,338 10.0 26,095 14.1 15,927 8.625 18,466 10.0 20,170 16.4 10,590 8.625 12,278 10.0 14,897 19.2 6,684 8.625 7,749 10.0 $ 159,325 16.1 % $ 65,475 6.625 % N/A N/A 14,132 16.2 5,787 6.625 $ 6,988 8.0 % 72,750 14.2 34,011 6.625 41,070 8.0 24,139 13.1 12,234 6.625 14,773 8.0 18,633 15.2 8,134 6.625 9,822 8.0 14,078 18.2 5,134 6.625 6,199 8.0 $ 159,325 12.0 % $ 53,316 4.000 % N/A N/A 14,132 10.2 5,529 4.000 $ 6,911 5.0 % 72,750 10.0 29,077 4.000 36,347 5.0 24,139 11.5 8,374 4.000 10,467 5.0 18,633 11.6 6,449 4.000 8,061 5.0 14,078 12.5 4,523 4.000 5,654 5.0 $ 159,325 16.1 % $ 50,650 5.125 % N/A N/A 14,132 16.2 4,477 5.125 $ 5,678 6.5 % 72,750 14.2 26,311 5.125 33,370 6.5 24,139 13.1 9,464 5.125 12,003 6.5 18,633 15.2 6,292 5.125 7,981 6.5 14,078 18.2 3,972 5.125 5,037 6.5 * These ratios for December 31, 2016 include a capital conservation bufferThe Federal Reserve BoardThe Company and the FDIC issued finalBanks are subject to the rules implementingof the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes in July 2013.Act. The rules revise minimum capital requirements and adjust prompt corrective action thresholds. The final rules reviseinclude the regulatory capital elements, addimplementation of a new common equity Tier I capital ratio, increase the minimum Tier 1 capital ratio requirements and implement a new capital conservation buffer. The rules also permit certain banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income. The Company and the Banks have made the election to retain the existing treatment for accumulated other comprehensive income. The final rules took effect for the Company and the Banks on January 1, 2015, subject to a transition period for certain parts of the rules.Beginning in 2016, an additional2.5 percent capital conservation buffer wasthat is added to the minimum requirements for capital adequacy purposes subjectfor all capital ratios except tier 1 capital to a three year phase-in period. The capital conservation buffer will be fully phased-in on January 1, 2019 at 2.5 percent.average assets. A banking organization with a capital conservation buffer of less than 2.5 percent (or the required phase-in amount in years prior to 2019) will be subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers. At March 31, 2022, the present time, thecapital ratios for the Company and the Banks arewere sufficient to meet the fully phased-in conservation buffer.12. Subsequent EventsSeptember 30, 2017, March 31, 2022, but prior to November 8, 2017, May 6, 2022, that provided additional evidence about conditions that existed at September 30, 2017. March 31, 2022. There were no other significant events or transactions that provided evidence about conditions that did not exist at September 30, 2017.March 31, 2022.(the(the “Company”) is a bank holding company established in 1975 that owns and operates fivesix bank subsidiaries in 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), and United Bank & Trust NA (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 Banks also offerWealth management services includes financial planning and managing trust, agencies, estates and investment services through a third-party broker-dealer.brokerage accounts. The Company employs fourteensixteen individuals to assist with financial reporting, human resources, audit, compliance, marketing, technology systems, training, real estate valuation services and the coordination of management activities, in addition to 205250 full-time equivalent individuals employed by the Banks.Company’sCompany’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.BanksBanks; (v) gain on sale of loans; and (v) Merchant(vi) merchant and card fees. The Company’s principal expenses are: (i) interest expense on deposit accounts and other borrowings; (ii) provision for loan losses; (iii) salaries and employee benefits; (iv) data processing costs associated with maintaining the Banks’ loan and deposit functions; (v) occupancy expenses for maintaining the Bank’s 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 bearinginterest-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 $3,928,000, or $0.42 per share, for the three months ended September 30, 2017, compared to net income of $3,804,000, or $0.41 per share, for the three months ended September 30, 2016.The increase in quarterly earnings can be primarily attributed to an increase in loan interest income and a lower provision for loan losses, offset in part by increases in interest expense.Net loan charge-offs (recoveries) totaled $105,000 and $(81,000) for the three months ended September 30, 2017 and 2016, respectively. The provision for loan losses totaled $57,000 and $235,000 for the three months ended September 30, 2017 and 2016, respectively.$11,011,000,$5.1 million, or $1.18$0.57 per share, for the ninethree months ended September 30, 2017,March 31, 2022, compared to net income of $11,710,000,$6.0 million, or $1.26$0.66 per share, for the ninethree months ended September 30, 2016.March 31, 2021. The decrease in nine month earnings can beis primarily attributed to a higher provision for loan losses and increases inthe result of lower interest expense,income on loans, offset in part by an increase in loan interest income.income on taxable securities and a decrease in interest expense on time deposits.(recoveries) totaled $589,000 and $(22,000)$10 thousand for the ninethree months ended September 30, 2017 and 2016, respectively. The provisionMarch 31, 2022 compared to net loan recoveries of $118 thousand for the three months ended March 31, 2021. A credit for loan losses totaled $1,222,000 and $441,000of $127 thousand was recognized for the ninethree months ended September 30, 2017 and 2016, respectively.March 31, 2022 as compared to a $426 thousand credit for loan losses for the three months ended March 31, 2021.ChallengesKey Performance Indicators and Industry ResultsKey Performance Indicators and Industry ResultsCritical Accounting PoliciesCritical Accounting PoliciesNon-GAAP Financial MeasuresIncome StatementBalance Sheet Review●Balance Sheet Review●Liquidity and Capital ResourcesCompany’sCompany’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 13, 2017.11, 2022.KeyKey Performance Indicators and Industry Results5,787 commercial4,391 community banks and savings institutions insured by the FDIC. Management reviews these indicators on a quarterly basis for purposes of comparing the Company’s performance from quarter-to-quarter against the industry as a whole. 1.15 % 1.07 % 1.01 % 1.14 % 1.18 % 1.04 % 1.13 % 1.04 % 0.96 % 1.15 % 1.25 % 1.01 % 1.09 % 9.08 % 8.64 % 8.17 % 10.11 % 9.38 % 9.32 % 9.44 % 9.31 % 10.28 % 11.43 % 11.61 % 9.48 % 9.72 % 3.29 % 3.25 % 3.25 % 3.22 % 3.36 % 3.13 % 3.33 % 3.07 % 2.55 % 2.83 % 3.27 % 3.13 % 3.39 % 52.42 % 53.16 % 52.93 % 56.32 % 51.95 % 58.28 % 53.59 % 59.91 % 59.72 % 55.04 % 61.42 % 55.83 % 62.34 % 12.70 % 12.41 % 12.37 % 9.69 % 12.60 % 9.48 % 12.00 % 9.59 % 9.33 % 10.04 % 10.16 % 10.66 % 10.32 % averageaverage assets was 1.15%0.96% and 1.19% for the three months ended September 30, 2017March 31, 2022 and 2016.2021, respectively. This ratio decrease was primarily the result of lower net income.9.08%10.28% and 8.91%11.52% for the three months ended September 30, 2017March 31, 2022 and 2016,2021, respectively. The increaseThis ratio decrease was primarily the result of a lower net income and offset in this ratiopart by a decrease in 2017 from the previous period is primarily due to an increase in net income.stockholders’ equity.September 30, 2017March 31, 2022 and 20162021 was 3.29%2.55% and 3.38%2.86%, respectively. The ratio is calculated by dividing tax equivalent net interest income by average earning assets. Earning assets are primarily made up of loans and investments that earn interest. This ratio is used to measure how well the Company is able to maintain interest rates on earning assets above those of interest-bearing liabilities, which is the interest expense paid on deposits and other borrowings. The decrease in this ratio in 2017 is primarily the result of an increase in the interest rates on deposits.52.42%59.72% and 50.71%55.70% for the three months ended September 30, 2017March 31, 2022 and 2016,2021, respectively. The efficiency ratio remained consistent with prior periods.has increased compared to the same quarter last year primarily due to a reduction in net interest income and an increase in noninterest expense.12.70%9.33% as of September 30, 2017March 31, 2022 is significantly higherlower than the industry average of 9.69%10.16% as of June 30, 2017.December 31, 2021 primarily due an increase in unrealized losses on investment securities.Industry ResultsThe FDIC Quarterly Banking Profile reported the following results for the second quarter of 2017:Higher Net Interest Income Lifts Industry EarningsHigher net interest income and restrained growth in operating expenses helped lift banking industry profits in second quarter 2017. The 5,787 commercial banks and savings institutions insured by the FDIC reported net income of $48.3 billion for the quarter, an increase of $4.7 billion (10.7%) compared with the second quarter of 2016. Almost two out of every three banks, 63.4% reported year-over-year earnings improvement, while only 4.1% were unprofitable, down from 4.6% a year earlier. The average return on assets (ROA) rose to 1.14% from 1.06% the year before. This is the highest quarterly ROA for the industry since second quarter 2007.Net Interest Margins ImproveNet operating revenue—the sum of net interest income and total noninterest income—rose to $190.5 billion in the second quarter, an $11 billion (6.1%) increase from second quarter 2016. Most of the improvement consisted of higher net interest income, which was $10.3 billion (9.1%) higher than a year earlier. The increase in net interest income helped lift the industry’s net interest margin (NIM) to 3.22%, from 3.08% in second quarter 2016. This is the highest quarterly NIM since fourth quarter 2013. While 57.7% of all banks reported higher NIMs, the improvement was greatest at larger institutions. More of their assets reprice or mature in the short term, and they are better-positioned to benefit from rising short-term interest rates. Noninterest income totaled $66.8 billion, up $654 million (1%) from a year earlier. Income from asset servicing was $1 billion (93.9%) higher, while gains on asset sales were $1.6 billion (31.7%) lower. Trading income fell $313 million (4.5%).Noninterest Expense Growth Is ModerateBanks set aside $12 billion in loan-loss provisions during the second quarter, up $273 million (2.3%) from the previous year. Slightly more than one-third of all banks—36.5%—increased their loss provisions versus second quarter 2016, while 32.2% reported lower provisions. Noninterest expenses totaled $108.6 billion, an increase of $3.5 billion (3.3%). Expenses for salaries and employee benefits were $2.1 billion (4.3%) higher than a year earlier, as the total number of employees rose by 48,019 (2.3%).Noncurrent Loan Balances Decline FurtherThe amount of loans and leases that were noncurrent—90 days or more past due or in nonaccrual status—fell for the 28th time in the last 29 quarters, declining by $8.4 billion (6.7%) in the three months ended June 30. Noncurrent balances declined in all major loan categories during the quarter. Noncurrent residential mortgage loans fell by $4.8 billion (7.9%), while noncurrent C&I loans declined by $2.2 billion (9.5%). The average noncurrent loan rate fell from 1.34% to 1.23% during the quarter, the lowest since third quarter 2007.Banks Shift Their Reserve AllocationsTotal loan-loss reserves posted a modest ($197 million, 0.2%) decline during the second quarter. The industry’s coverage ratio of reserves to noncurrent loans and leases rose from 97.5% to 104.3%, the highest level since third quarter 2007. Banks with assets greater than $1 billion, which account for 90% of the industry’s loss reserves, increased their reserves for credit card losses by $1.4 billion (4.3%), while reducing their reserves for commercial loan losses by $1.1 billion (3.3%) and their reserves for residential real estate loan losses by $922 million (5.5%).Retained Earnings Drive Capital GrowthEquity capital increased by $38.7 billion (2%) during the quarter. Retained earnings contributed $20 billion to the growth in capital, $322 million (1.6%) less than in second quarter 2016. Banks declared $28.3 billion in dividends in the quarter, up $5 billion (21.4%) from the year-earlier quarter. Lower long-term interest rates contributed to an $8 billion improvement in accumulated other comprehensive income, which was reflected in the equity capital increase. At the end of the quarter, 99.4% of all FDIC-insured institutions, representing 99.96% of total industry assets, met or exceeded the requirements for well-capitalized banks, as defined for Prompt Corrective Action purposes.Banks Reduce Their Federal Reserve Bank BalancesIndustry assets surpassed $17 trillion for the first time at the end of the second quarter, rising by $100.8 billion (0.6%) during the three months ended June 30. Banks reduced their balances at Federal Reserve banks by $102.4 billion (8%). They also reduced their investment securities by $15 billion (0.4%), as U.S. Treasury securities fell by $49.9 billion (9.7%), and mortgage-backed securities rose by $38 billion (1.9%). Securities held in available-for-sale accounts declined by $59 billion (9.7%), while securities in held-to-maturity accounts increased by $44 billion (4.7%). Assets in trading accounts increased by $18.7 billion (3.2%) during the quarter. The percentage of industry assets maturing or repricing in more than three years remained unchanged from the first quarter, at 35.4%. The all-time high level for this percentage—35.5%—occurred at the end of fourth quarter 2016.The Annual Loan Growth Rate Slows for a Third Consecutive QuarterTotal loans and leases increased by $161.2 billion (1.7%) during the second quarter. All major loan categories posted increases, led by residential mortgage loans (up $35.1 billion, 1.8%), credit card balances (up $23.6 billion, 3.1%), and C&I loans (up $22.1 billion, 1.1%). Unused loan commitments increased by $25.9 billion (0.4%). For the 12 months ended June 30, total loans and leases increased by $337.6 billion (3.7%), while unused loan commitments rose by $274.8 billion (3.9%). The 12-month growth rate for total loans and leases has slowed in each of the last three quarters. A year ago, the 12-month loan growth rate was 6.7%. The 12-month growth rate in unused loan commitments has slowed for six consecutive quarters. In 2015, unused commitments increased 6.6%.The Number of Banking Employees Rises 2.3% Over the Past YearThe number of FDIC-insured commercial banks and savings institutions reporting financial results fell to 5,787 in the second quarter, from 5,856 in the first quarter. During the second quarter, three insured institutions failed, while 62 institutions were absorbed by mergers. No new reporters were added during the quarter. The number of institutions on the FDIC’s Problem Bank List declined for a 25th consecutive quarter, from 112 to 105. This is the smallest number of problem banks since March 31, 2008, and is almost 90% below the peak of 888 at the end of March 2011. The number of full-time equivalent employees rose by 11,663 (0.6%) to 2,093,278 during the quarter, which was 48,019 higher than second quarter 2016 (2.3%). This is still 5.9% below the peak of 2,223,383 employees in first quarter 2007., in part, on the Company’s audited December 31, 20162021 consolidated financial statements. These statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The financial information contained in these statements is, for the most part, based on the financial effects of transactions and events that have already occurred. However, the preparation of these statements requires management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.Company’sCompany’s significant accounting policies are described in the “Notes to Consolidated Financial Statements” accompanying the Company’s audited financial statements. Based on its consideration of accounting policies that involve the most complex and subjective estimates and judgments, management has identified the allowance for loan losses, the assessment of other-than-temporary impairment for investment securities and the assessment of goodwill impairment to be the Company’s most critical accounting policies.Company’sCompany’s historical loss experience, delinquency and charge-off trends, collateral values, known information about individual loans and other factors. Qualitative factors include various considerations regarding the general economic environment in the Company’s market area. To the extent actual results differ from forecasts and management’s judgment, the allowance for loan losses may be greater or lesser than future charge-offs. Due to potential changes in conditions, including the economic disruption and uncertainties resulting from the continuation of the COVID-19 pandemic, it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could be material to the amounts reported in the Company’s financial statements.thethe Annual Report on Form 10-K entitled “Asset Quality Review and Credit Risk Management” and “Analysis of the Allowance for Loan Losses”.Company’sCompany’s securities available-for-sale portfolio is carried at fair value with “fair value” being defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.management’smanagement’s assessment of other-than-temporary impairment will occur in the near term and that such changes could be material to the amounts reported in the Company’s financial statements.twofour acquisitions consummated in previous periods. Goodwill is tested annually for impairment or more often if conditions indicate a possible impairment. For the purposes of goodwill impairment testing, determination of the fair value of a reporting unit involves the use of significant estimates and assumptions. Impairment would arise if the fair value of a reporting unit is less than its carrying value. At September 30, 2017,March 31, 2022, Company’s management has completed the goodwill impairment assessment and determined goodwill was not impaired. Actual future test results may differ from the present evaluation of impairment due to changes in the conditions used in the current evaluation. The effects of the continuation of the COVID-19 pandemic may negatively impact our net income, fair value and correspondingly goodwill. An impairment of goodwill would decrease the Company’s earnings during the period in which the impairment is recorded. $ 13,152 $ 13,664 180 225 13,332 13,889 $ 2,090,628 $ 1,941,859 2.55 % 2.86 % September 30, 2017March 31, 2022 and 20162021monthsmonths ended September 30, 2017March 31, 2022 and 2016:2021:Company’sCompany’s non-GAAP net interest margin.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 bearinginterest-bearing liabilities. The net interest margin is equal to the interest income less the interest expense divided by average earning assets. Refer to the net interest income discussion following the tables for additional detail. $ 77,788 $ 920 4.73 % $ 88,265 $ 1,014 4.59 % $ 70,847 $ 876 4.95 % $ 122,006 $ 1,712 5.61 % 67,951 922 5.43 % 73,879 900 4.87 % 95,526 925 3.87 % 92,362 989 4.28 % 623,214 6,756 4.34 % 555,002 6,131 4.42 % 957,869 8,683 3.63 % 908,212 9,112 4.01 % 10,514 132 5.03 % 21,513 191 3.56 % 16,136 160 3.97 % 14,172 171 4.83 % 779,467 8,730 4.48 % 738,659 8,236 4.46 % 1,140,378 10,644 3.73 % 1,136,752 11,984 4.22 % 275,498 1,558 2.26 % 259,212 1,425 2.20 % 699,709 2,588 1.48 % 453,939 1,989 1.75 % 230,249 1,862 3.23 % 249,400 2,045 3.28 % 140,569 854 2.43 % 162,496 1,069 2.63 % 505,747 3,420 2.70 % 508,612 3,470 2.73 % 840,278 3,442 1.64 % 616,435 3,058 1.98 % 27,183 115 1.69 % 25,533 87 1.36 % 109,972 166 0.60 % 188,672 178 0.38 % 1,312,397 $ 12,265 3.74 % 1,272,804 $ 11,793 3.71 % 2,090,628 $ 14,252 2.73 % 1,941,859 $ 15,220 3.14 % 49,366 55,732 54,353 81,154 $ 1,361,763 $ 1,328,536 $ 2,144,981 $ 2,023,013 1 Average loan balance includes 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 35% $ 712,550 $ 685 0.38 % $ 658,522 $ 325 0.20 % 83,793 240 1.15 % 84,034 196 0.93 % 113,112 244 0.86 % 123,648 233 0.75 % $ 1,286,431 $ 490 0.15 % $ 1,156,088 $ 479 0.17 % 213,427 398 0.75 % 252,035 815 1.29 % 909,455 1,169 0.51 % 866,204 754 0.35 % 1,499,858 888 0.24 % 1,408,123 1,294 0.37 % 71,266 292 1.64 % 94,504 274 1.16 % 39,495 32 0.32 % 40,692 37 0.36 % 980,721 1,461 0.60 % 960,708 1,028 0.43 % 1,539,353 920 0.24 % 1,448,815 1,331 0.37 % 200,934 188,419 396,894 354,595 7,132 8,710 8,563 10,571 172,976 170,699 200,171 209,032 $ 1,361,763 $ 1,328,536 $ 2,144,981 $ 2,023,013 $ 10,804 3.29 % $ 10,765 3.38 % $ 13,332 2.55 % $ 13,889 2.86 % $ 12,265 3.60 % $ 11,793 3.55 % $ 14,252 2.66 % $ 15,220 3.01 % $ 1,461 0.43 % $ 1,028 0.31 % $ 920 0.17 % $ 1,331 0.26 % $ 10,804 3.17 % $ 10,765 3.24 % $ 13,332 2.49 % $ 13,889 2.75 % September 30, 2017March 31, 2022 and 2016,2021, the Company's net interest margin adjusted for tax exempt income was 3.29%2.55% and 3.38%2.86%, respectively. Net interest income, prior to the adjustment for tax-exempt income, for the three months ended September 30, 2017March 31, 2022 totaled $10,152,000$13.2 million compared to $10,050,000$13.7 million for the three months ended September 30, 2016.March 31, 2021.September 30, 2017,March 31, 2022, interest income increased $535,000,declined $923 thousand, or 5%6%, when compared to the same period in 2016.2021. The decrease is primarily due to a reduction in interest rates, less income recognized from PPP fees and the recognition of nonaccrual interest income offset in part by an increase in taxable security interest income. Fees recognized from 2016PPP loans during the first quarter of 2022 were $200 thousand as compared to $840 thousand of fees during the first quarter of 2021. Nonaccrual interest income recognized in the first quarter of 2022 was primarily attributable$7 thousand compared to $335 thousand recognized during the first quarter of 2021. Taxable securities interest income was $599 thousand higher average balancethan the first quarter of loans. The higher average balances of loans were2021 due primarily to favorable economic conditions in our market areas.increased balances.increased $433,000,declined $411 thousand, or 42%31%, for the three months ended September 30, 2017March 31, 2022 when compared to the same period in 2016.2021. The higherlower interest expense for the period is primarily attributable to higher rates on core deposits due to competitive pressures.interest rate declines and a decrease in time deposit balances.The Company’s provisionA credit for loan losses of ($127) thousand was $57,000 and $235,000recognized for the three months ended September 30, 2017 and 2016, respectively. The decrease in the provisionMarch 31, 2022 as compared to a credit for loan losses was due primarily to an increase in specific reserves for one loan in 2016. Net loan charge-offs (recoveries) were $105,000 and $(81,000)of ($426) thousand for the three months ended September 30, 2017 and 2016, respectively. The increase netMarch 31, 2021. Net loan charge-offs related primarily to one commercial operating customer relationship. While the current provision for loan losses are not related to agricultural loans, Company management is seeing weakness in the Iowa agricultural economy as a result of the current low grain prices; however, initial crop yield reports have been favorable in the Company’s market area as of the end of the quarter.Noninterest Income and ExpenseNoninterest income decreased $144,000totaled $10 thousand for the three months ended September 30, 2017March 31, 2022 compared to the same period in 2016. The decrease in noninterest income is primarily due to a slowdown in the refinancenet loan recoveries of home loans held for sale resulting in lower gains on the sale of loans, offset in part by a 9% increase in wealth management income. The increase in wealth management income is primarily due to an revenue increases associated with an acquisition and higher revenues related to increases in assets under management, offset in part by lower one time estate fees. Exclusive of realized securities gains, noninterest income was 6% lower in the third quarter of 2017 compared to the same period in 2016.Noninterest expense increased $184,000 or 3%$118 thousand for the three months ended September 30, 2017 compared toMarch 31, 2021. The credit for loan losses in the same period in 2016 primarily as a result of lower other real estate owned income and higher occupancy costs. The decrease in other real estate income was due to the continuing lower levels of other real estate owned. The higher occupancy costs were primarily related to an increase in property tax expense. The efficiency ratio was 52.42% for the thirdfirst quarter of 2017 as compared to 50.71% in 2016.Income TaxesThe provision for income taxes expense for the three months ended September 30, 2017 and 20162022 was $1,730,000 and $1,903,000, respectively, representing an effective tax rate of 31% and 33%, respectively. The lower effective tax rate than the expected tax rate of 35% for both periods is primarily due to tax-exempt interest income.a decline in loans outstanding from December 31, 2021. The initial recording of a valuation allowance on a deferred tax asset resulted in a higher effective tax rate in 2016.Income Statement Review for the Nine Months ended September 30, 2017 and 2016The following highlights a comparative discussion of the major components of net income and their impact for the nine months ended September 30, 2017 and 2016:AVERAGE BALANCES AND INTEREST RATESThe following two tables are used to calculate the Company’s net interest margin. 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 the interest income less the interest expense divided by average earning assets. $ 77,471 $ 2,613 4.50 % $ 94,121 $ 3,192 4.52 % 69,093 2,703 5.22 % 75,211 2,754 4.88 % 612,845 19,620 4.27 % 528,179 17,595 4.44 % 11,121 411 4.92 % 21,897 584 3.56 % 770,530 25,347 4.39 % 719,408 24,125 4.47 % 271,913 4,637 2.27 % 262,604 4,393 2.23 % 241,160 5,875 3.25 % 253,688 6,335 3.33 % 513,073 10,512 2.73 % 516,292 10,728 2.77 % 36,633 365 1.33 % 34,930 297 1.13 % 1,320,236 $ 36,224 3.66 % 1,270,630 $ 35,150 3.69 % 49,268 54,989 $ 1,369,504 $ 1,325,619 1 Average loan balance includes 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 35%. $ 717,946 $ 1,819 0.34 % $ 663,891 $ 965 0.19 % 82,956 671 1.08 % 86,632 590 0.91 % 115,646 714 0.82 % 125,745 704 0.75 % 916,548 3,204 0.47 % 876,268 2,259 0.34 % 75,662 863 1.52 % 84,261 796 1.26 % 992,210 4,067 0.55 % 960,529 3,055 0.42 % 200,020 190,176 7,319 7,606 169,955 167,308 $ 1,369,504 $ 1,325,619 $ 32,157 3.25 % $ 32,095 3.37 % $ 36,224 3.53 % $ 35,150 3.54 % $ 4,067 0.40 % $ 3,055 0.31 % $ 32,157 3.13 % $ 32,095 3.23 % Net Interest IncomeFor the nine months ended September 30, 2017 and 2016, the Company's net interest margin adjusted for tax exempt income was 3.25% and 3.37%, respectively. Net interest income, prior to the adjustment for tax-exempt income, for the nine months ended September 30, 2017 totaled $30,100,000 compared to $29,877,000 for the nine months ended September 30, 2016.For the nine months ended September 30, 2017, interest income increased $1,235,000, or 4%, when compared to the same period in 2016. The increase from 2016 was primarily attributable to higher average balance of loans, offset in part by lower yields on loans. The higher average balances of loans were due primarily to favorable economic conditions in our market areas. The lower yields on loans were due primarily to competitive pressures.Interest expense increased $1,012,000, or 33%, for the nine months ended September 30, 2017 when compared to the same period in 2016. The higher interest expense for the period is primarily attributable to higher rates on core deposits due to competitive pressures.Provision for Loan LossesThe Company’s provisioncredit for loan losses was $1,222,000 and $441,000 for the nine months ended September 30, 2017 and 2016, respectively. The increase in the provision forfirst quarter of 2021 was primarily due to loan losses was due primarily to the increaserecoveries, a reduction in thea specific reserve for one commercial credit and growth in thelower loan portfolio. Net loan charge-offs (recoveries) were $589,000 and $(22,000) for the nine months ended September 30, 2017 and 2016, respectively. The increase in the net loan charge-offs were related primarily to commercial operating loans with construction contractors. While the current provision for loan losses are not related to agricultural loans, Company management is seeing weakness in the Iowa agricultural economy as a result of the current low grain prices; however, initial crop yield reports have been favorable in the Company’s market area as of the end of the quarter.balances from December 31, 2020.decreased $63,000 for the ninethree months ended September 30, 2017March 31, 2022 totaled $2.6 million as compared to $2.5 million for the same period in 2016.three months ended March 31, 2021, an increase of 2%. The decreaseincrease in noninterest income was primarily due to an increase in wealth management income, offset in part by lower gains on sale of residential loans held for sale as refinancing volume has slowed. The increase in wealth management income was primarily related to growth in the assets under management and new account relationships.decreases in gain on sale of loans and service fees, offset in part by an increase in security gainssalaries and other noninterest income. The decrease in the gain on the sale of loans is primarily due to a slowdown in the refinance of home loans held for sale resulting in lower revenue. The increase in other noninterest income is primarily due to the collection of $73,000 on a court judgement previously deemed uncollectible by First Bank prior to the Company’s acquisition in 2014. Exclusive of realized securities gains, noninterest income was 5% lower for the nine months ended September 30, 2017 compared to the same period in 2016.Noninterest expense increased $504,000 or 3% for the nine months ended September 30, 2017 compared to the same period in 2016 primarily as a result of normal salaryemployee benefits, professional fees and benefit increases and higher data processing costs. Data processing increases were due to increasing technologybusiness development costs. The efficiency ratio was 53.16%59.7% for the nine months ended September 30, 2017first quarter of 2022 as compared to 51.99%55.7% in same period in 2016.the first quarter of 2021.The provision for income taxesIncome tax expense for the ninethree months ended September 30, 2017 and 2016 was $4,662,000 and $5,087,000, respectively, representing anMarch 31, 2022 totaled $1.3 million compared to $1.6 million recorded for the three months ended March 31, 2021. The effective tax rate of 30%was 20.3% and 30%,20.6% for the three months ended March 31, 2022 and 2021, respectively. The lower effectivethan expected tax rate than the expected income tax rate of 35% for both periods isin 2022 and 2021 was due primarily due to tax-exempt interest income.income and New Markets Tax Credits.September 30, 2017,March 31, 2022, total assets were $1,364,940,000,$2.18 billion, a $1,513,000 decrease$47.7 million increase compared to December 31, 2016. The decrease2021. This increase in assets is primarily reflected in interest-bearing deposits and federal funds sold and was due primarily to a decreasefunded by growth in cash and due from banks and securities available for sale, offset by an increase in loans.our deposits.investmentinvestment portfolio totaled $506,610,000$823.9 million as of September 30, 2017,March 31, 2022, a decrease of $9,469,000$7.1 million from the December 31, 20162021 balance of $516,080,000.$831.0 million. The decrease in the investment portfolio wassecurities available-for-sale is primarily due to sales, calls and maturitiesa decline in fair value as interest rates rose during the first quarter of state and political subdivision bonds.September 30, 2017,March 31, 2022, gross unrealized losses of $783,000,$42.0 million, are considered to be temporary in nature due to the interest rate environment of 2017 and other general economic factors. Certain bonds in the investment portfolio may become other-than-temporarily impaired 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 avoid considering present unrealized loss positionsexpects full principal and interest to be other-than-temporary.collected. Therefore, the Company does not consider these investments to have other-than-temporary impairment as of March 31, 2022.September 30, 2017,March 31, 2022, the Company’s investment securities portfolio included securities issued by 266280 government municipalities and agencies located within 2428 states with a fair value of $243.4$289.2 million. At December 31, 2016,2021, the Company’s investment securities portfolio included securities issued by 286298 government municipalities and agencies located within 2528 states with a fair value of $264.4$292.9 million. No one municipality or agency represents a concentration within this segment of the investment portfolio. TheStorm Lake, Iowa, general obligation bonds with a fair value of $7.0 million (approximately 2.4% of the fair value of the government municipalities and agencies) represent the largest exposure to any one municipality or agency for the Company as of September 30, 2017 was $4.4 million (approximately 2.0%March 31, 2022; the bonds are repayable from the levy of continuing annual tax on all the taxable property within the territory of the fair valuecity of the governmental municipalities and agencies) represented by the Dubuque, Iowa Community School District to be repaid by sales tax revenues and property taxes.Storm Lake.Company’sCompany’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.Company’sCompany’s investment securities portfolios as of September 30, 2017March 31, 2022 and December 31, 20162021 identifying the state in which the issuing government municipality or agency operates.operates (Dollars in thousands): $ 60,493 $ 60,732 $ 75,142 $ 74,408 $ 71,716 $ 69,206 $ 72,128 $ 72,830 12,188 12,359 11,091 11,065 28,923 27,323 24,742 24,953 8,720 8,795 8,728 8,654 19,543 18,076 19,546 19,486 6,640 6,609 7,221 6,957 10,988 10,566 11,013 11,241 24,150 24,601 28,064 28,258 41,008 38,918 41,371 41,617 $ 112,191 $ 113,096 $ 130,246 $ 129,342 $ 172,178 $ 164,089 $ 168,800 $ 170,127 $ 118,886 $ 120,175 $ 126,750 $ 126,964 $ 66,468 $ 64,638 $ 61,718 $ 62,181 10,073 10,167 8,208 8,142 13,108 12,363 11,898 12,090 10,067 9,321 9,727 9,636 41,060 38,802 38,405 38,825 $ 128,959 $ 130,342 $ 134,958 $ 135,106 $ 130,703 $ 125,124 $ 121,748 $ 122,732 $ 241,150 $ 243,438 $ 265,204 $ 264,448 $ 302,881 $ 289,213 $ 290,548 $ 292,859 September 30, 2017March 31, 2022 and December 31, 2016,2021, the revenue bonds in the Company’s investment securities portfolios were issued by government municipalities and agencies to fund public services such as community school facilities, college and university dormitory facilities, water utilities and electrical utilities. The revenue bonds are to be paid from primarily 56 primary revenue sources. The revenue sources that represent 5% or more, individually, as a percent of the total revenue bonds are summarized in the following table.table (in ththousands)ousands): $ 72,894 $ 73,917 $ 77,586 $ 78,085 $ 32,652 $ 31,476 $ 31,632 $ 31,896 14,139 14,218 11,283 11,296 22,579 21,543 22,611 22,924 10,457 10,538 14,105 13,907 17,128 16,268 17,169 17,353 14,239 13,431 14,248 14,327 9,062 9,098 9,106 8,960 10,265 9,972 8,788 8,894 8,428 8,545 8,446 8,459 7,498 7,191 7,508 7,646 13,979 14,026 14,432 14,399 26,342 25,243 19,792 19,692 $ 128,959 $ 130,342 $ 134,958 $ 135,106 $ 130,703 $ 125,124 $ 121,748 $ 122,732 loanloan portfolio, net of the allowance for loan losses, totaled $764,229,000, $768,208,000$1.13 billion and $752,182,000$1.14 billion as of September 30, 2017, June 30, 2017March 31, 2022 and December 31, 2016,2021, respectively. The decrease was primarily due to a reduction in agriculture and commercial real estate loans, offset in part by an increase in the 1-4 family residential loan portfolio since December 31, 2016 is primarily due to steady loan demand, in the Ames and Des Moines markets. Loan demand has softened in the third quarter of 2017.portfolio.$1,114,538,000, $1,126,771,000$1.96 billion and $1,109,409,000$1.88 billion as of September 30, 2017, June 30, 2017March 31, 2022 and December 31, 2016,2021, respectively. The increasechange in deposits since December 31, 20162021 was primarily due to increases in public funds NOW account balances. The decrease inacross all types except time deposits since June 30, 2017 was primarilywhich continue to decline due to decreasesthe current rate environment. Balances fluctuate as customers’ liquidity needs vary at any given time. Deposit levels may be impacted in retail NOW and public funds money market account balances.Securities Sold Under Agreements to RepurchaseSecurities sold under agreements to repurchase totaled $39,001,000 as of September 30, 2017, a decrease of $19,336,000, or 33%, from the December 31, 2016 balance of $58,337,000. The decrease in primarily due to withdrawals from three commercial accounts.future periods by changing economic conditions.2016.2021.Company’sCompany’s credit risk is historically centered in the loan portfolio, which on September 30, 2017March 31, 2022 totaled $764,229,000$1.13 billion compared to $752,182,000$1.14 billion as of December 31, 2016.2021. Net loans comprise 56%52% of total assets as of September 30, 2017.March 31, 2022. The objectobjective 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 a transactionan 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 0.62%1.09% at September 30, 2017,March 31, 2022, as compared to 0.67%1.11% at December 31, 2016 and 0.40% at September 30, 2016.2021. The Company’s level of problem loans as a percentage of total loans at September 30, 2017March 31, 2022 of 0.62%1.09% is lower thanhigher as compared to the Company’sIowa State Average peer group (339 bank holding companies with assets of $1 billion to $3 billion) of 0.72%FDIC insured institutions as of June 30, 2017.December 31, 2021, of 0.45%, most recent available.ImpairedImpaired loans net of specific reserves, totaled $3,907,000$12.2 million as of September 30, 2017March 31, 2022 and have decreased $450,000$682 thousand as compared to the impaired loans of $4,357,000$12.8 million as of December 31, 2016.2021. The decrease is primarily due to payments on nonaccrual loans.$3,098,000$11.27 million as of September 30, 2017,March 31, 2022 and $11.30 million as of December 31, 2021, all of which were included in impaired and nonaccrual loans. The Company had TDRs of $3,672,000 as of December 31, 2016, all of which were included in impaired and nonaccrual loans.TDRssixnine months; and, management is reasonably assured of future performance. If the TDR meets these performance criteria and the interest rate granted at the modification is equal to or greater than the rate that the Company was willing to accept at the time of the restructuring for a new loan with comparable risk, then the loan will return to performing status.A $530,000No additional specific reserve was established inprovided for the ninethree months ended September 30, 2017 on a TDR loan.March 31, 2022 and 2021. The Company had $257,000no charge-offs and $262 thousand of net charge-offs related torecoveries for TDRs for the ninethree months ended September 30, 2017March 31, 2022 and none for the same period2021, respectively. The Company does not have material commitments to lend additional funds to borrowers with loans whose terms have been modified in 2016.troubled debt restructurings or whose loans are on nonaccrual.iscontinues to be a strong reason that the credit should not be placed on non-accrual.nonaccrual. As of September 30, 2017, non-accrualMarch 31, 2022, nonaccrual loans totaled $4,726,000$12.5 million and there was one loan in the amount of $81,000were no loans past due 90 days and still accruing. This compares to non-accrualnonaccrual loans of $5,077,000$12.7 million and loans past due 90 days and still accruing totaled $22,000$169 thousand as of December 31, 2016. Other2021. The decrease in nonaccrual loans is due primarily to payments received during the quarter. There was no real estate owned totaled $385,000and $218 thousand as of September 30, 2017March 31, 2022 and $546,000 as of December 31, 2016.2021, respectively.in a weakened position.elevated. The watch and special mention loans in these categories totaled $44,046,000$35.1 million as of September 30, 2017March 31, 2022 as compared to $38,492,000$36.5 million as of December 31, 2016.2021. The substandard and impaired loans in these categories totaled $2,582,000$6.7 million and $7.4 million as of September 30, 2017March 31, 2022 and December 31, 2021, respectively.$2,399,000$102.2 million as of December 31, 2016.2021. The increase in these categories is primarily due to the impact on agriculturalsubstandard and impaired commercial real estate loans totaled $39.4 million and $31.8 million as of low grain prices, mitigated by indications of favorable yields in 2017.March 31, 2022 and December 31, 2021, respectively.September 30, 2017March 31, 2022 was 1.44%, as compared to 1.38%1.43% at December 31, 2016.2021. The allowance for loan losses totaled $11,140,000$16.5 million and $10,507,000$16.6 million as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively. Net charge-offs (recoveries) ofPPP loans totaled $589,000are government guaranteed and $(22,000)the impact on the allowance for the nine months ended September 30, 2017 and 2016, respectively.loan loss was not significant.management’smanagement’s best estimate of probable losses inherent in the loan portfolio as of the balance sheet date. Factors considered in establishing an appropriate allowance include: an assessment of the financial condition of the borrower, a realistic determination of value and adequacy of underlying collateral, the condition of the local economy and the condition of the specific industry of the borrower, an analysis of the levels and trends of loan categories and a review of delinquent and classified loans. The decrease in the allowance for loan losses is mainly due to a decline in loans outstanding from December 31, 2021. Additional increases in the allowance for loan losses are possible if the effects of the COVID-19 pandemic or high inflation levels negatively impact our loan portfolio. These increases may be due to increased charge-offs or an increase in the qualitative factors. The qualitative factors are considered as a part of our allowance for loan loss calculation and may deteriorate if economic conditions worsen.Banks’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.September 30, 2017,March 31, 2022, 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.discussiondiscussion will cover the following topics:●Review of the Company’s Current Liquidity SourcesStatements of Cash Flowsthe Company’s Current Liquidity SourcesCompany Only Cash Flows●Review of Commitments for Capital Expenditures, Cash Flow Uncertainties and Known Trends in Liquidity and Cash Flows Needs●Capital ResourcesReview of the Company’s Current Liquidity SourcesLiquid assets of cash and due from banks and interest-bearing deposits in financial institutions as of September 30, 2017 and December 31, 2016 totaled $58,574,000 and $61,215,000, respectively, and provide an adequate level of liquidity given current economic conditions.Other sources of liquidity available to the Banks as of September 30, 2017 include outstanding lines of credit with the FHLB of Des Moines, Iowa of $183,824,000, with $19,000,000 of outstanding FHLB advances. Federal funds borrowing capacity at correspondent banks was $108,571,000, with no outstanding federal fund purchase balances as of September 30, 2017. The Company had securities sold under agreements to repurchase totaling $39,001,000 and term repurchase agreements of $13,000,000 as of September 30, 2017.Total investments as of September 30, 2017 were $506,610,000 compared to $516,080,000 as of December 31, 2016. These investments provide the Company with a significant amount of liquidity since all of the investments are classified as available-for-sale as of September 30, 2017.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.Net cash provided by operating activities for the nine months ended September 30, 2017 totaled $13,553,000 compared to $14,585,000 for the nine months ended September 30, 2016. The decrease in cash provided by operating activities was primarily due to lower net income.Net cash used in investing activities for the nine months ended September 30, 2017 was $4,184,000 compared to $14,181,000 for the nine months ended September 30, 2016. The decrease of $9,997,000 in cash used in investing activities was primarily due to a net decrease in the change in the loan portfolio of $26,204,000, offset in part by lower levels of proceeds from the sale of securities of $6,981,000 and a net increase in the change in the interest bearing deposits.Net cash used in financing activities for the nine months ended September 30, 2017 totaled $15,759,000 compared to $3,105,000 for the nine months ended September 30, 2016. The change of $12,654,000 in net cash used in financing activities was primarily due to a decrease in securities sold under agreements to repurchase in 2017 of $19,336,000 as compared to a decrease of $4,432,000 in 2016 and a decrease in proceeds from short-term FHLB borrowings of $15,500,000, offset in part by an increase in deposits in 2017 of $5,129,000 as compared to a decrease of $12,358,000 in 2016. As of September 30, 2017, the Company did not have any external debt financing, off-balance sheet financing arrangements, or derivative instruments linked to its stock.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 $7,655,000 and $6,825,000 for the nine months ended September 30, 2017 and 2016, 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 quarterly dividend declared by the Company increased to $0.22 per share in 2017 from $0.21 per share in 2016. The Company, on an unconsolidated basis, has interest bearing deposits totaling $13,287,000 as of September 30, 2017 that are presently available to provide additional liquidity to the Banks.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 September 30, 2017 that are of concern to management.The Company’s total stockholders’ equity as of September 30, 2017 totaled $173,329,000 and was $8,224,000 higher than the $165,105,000 recorded as of December 31, 2016. The increase in stockholders’ equity was primarily due to net income and an increase in accumulated other comprehensive income, reduced by dividends declared. The increase in other comprehensive income is created by lower market interest rates on the longer end of the interest yield curve compared to December 31, 2016, which resulted in higher fair values in the securities available-for-sale portfolio. At September 30, 2017 and December 31, 2016, stockholders’ equity as a percentage of total assets was 12.70% and 12.08%, respectively. The capital levels of the Company exceed applicable regulatory guidelines as of September 30, 2017.Forward-Looking Statements and Business RisksThe 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 financial performance and asset quality. Any forward-looking statement contained in this Quarterly Report is based on management’s current beliefs, assumptions and expectations of the Company’s future performance, taking into account all information currently available to management. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to management. 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. The risks and uncertainties that may affect the actual results of the Company include, but are not limited to, the following: economic conditions, particularly in the concentrated geographic area in which the Company and its affiliate banks operate; 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 loan losses dictated by new market conditions or regulatory requirements; fiscal and monetary policies of the U.S. government; 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 “Risk Factors” and “Forward-Looking Statements and Business Risks” in the Company’s Annual Report. Management intends to identify forward-looking statements when using words such as “believe”, “expect”, “intend”, “anticipate”, “estimate”, “should” or similar expressions. Undue reliance should not be placed on these forward-looking statements. The Company undertakes no obligation to revise or update such forward-looking statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.The Company's market risk is comprised primarily of interest rate risk arising from its core banking activities of lending and deposit taking. Interest rate risk results from the changes in market interest rates which may adversely affect the Company's net interest income. Management continually develops and applies strategies to mitigate this risk. Management does not believe that the Company's primary market risk exposure and how it has been managed year-to-date in 2017 changed significantly when compared to 2016.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.Not applicableNone.In November, 2016, the Company approved a Stock Repurchase Plan which provided for the repurchase of up to 100,000 shares of the Company’s common stock. As of September 30, 2017, there were 100,000 shares remaining to be purchased under the plan.following table provides information with respectPlanpurchase 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 September 30, 2017.January 31, 2022- $ - - 100,000 TotalNumberMaximumof SharesNumber ofPurchased asShares thatTotalPart ofMay Yet BeNumberAveragePubliclyPurchasedof SharesPrice PaidAnnouncedUnderPeriodPurchasedPer SharePlansThe PlanJuly 1, 2017 to July 31, 2017-$--100,000August 1, 2017 to August 31, 2017-$--100,000September 1, 2017 to September 30, 2017- $ - - 100,000 - $ - - 100,000 - - Not applicable31.1Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.31.2Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.32.1Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.32.2Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.101.INSXBRL Instance Document (1)101.SCHXBRL Taxonomy Extension Schema Document (1)101.CALXBRL Taxonomy Extension Calculation Linkbase Document (1)101.LABXBRL Taxonomy Extension Label Linkbase Document (1)101.PREXBRL Taxonomy Extension Presentation Linkbase Document (1)101.DEFXBRL Taxonomy Extension Definition Linkbase Document (1)(1) AMES NATIONAL CORPORATION DATE: November 8, 2017By:/s/ Thomas H. PohlmanThomas H. Pohlman, Chief Executive Officer and PresidentBy:/s/ John P. NelsonJohn P. Nelson, Chief Financial Officer and Executive Vice PresidentEXHIBIT INDEXThe following exhibits are filed herewith:Exhibit No.Description------------------------------------------------------------------------------------------------------31.131.232.1Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 135032.2Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350101.INSXBRL Instance Document (1)101.SCHXBRL Taxonomy Extension Schema Document (1)101.CALXBRL Taxonomy Extension Calculation Linkbase Document (1)101.LABXBRL Taxonomy Extension Label Linkbase Document (1)101.PREXBRL Taxonomy Extension Presentation Linkbase Document (1)101.DEFXBRL Taxonomy Extension Definition Linkbase Document (1)(1) These interactive date 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.53