AMES NATIONAL CORP

Previous wording

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. Some Banks also offer investment services through a third-party broker-dealer. The Company employs 26 individuals to assist the Banks with financial reporting, human resources, marketing, audit, compliance, technology systems, property appraisals, training and the coordination of management activities, in addition to 240 full-time equivalent individuals employed by the Banks.

Current wording

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. Some Banks also offer investment services through a third-party broker-dealer. The Company employs 27 individuals to assist the Banks with financial reporting, human resources, marketing, audit, compliance, technology systems, property appraisals, training and the coordination of management activities, in addition to 233 full-time equivalent individuals employed by the Banks.

Previous wording

The Company reported net income of $10.2 million for the year ended December 31, 2024 compared to $10.8 million for the year ended December 31, 2023. This represents a decrease in net income of 5.5% when comparing 2024 with 2023. The decrease in earnings in 2024 from 2023 is primarily the result of normal increases in salaries and benefits and one-time consultant fees related to negotiating long-term vendor contracts, offset in part by an increase in wealth management income. Earnings per share for 2024 were $1.14 compared to $1.20 in 2023. All six Banks demonstrated profitable operations during 2024 and 2023.

Current wording

The Company reported net income of $19.0 million for the year ended December 31, 2025 compared to $10.2 million for the year ended December 31, 2024. This represents an increase in net income of 86.2% when comparing 2025 with 2024. The increase in earnings in 2025 from 2024 is primarily due to an increase in net interest income. Net interest income increased due to higher yields on loans and investments, combined with a lower cost of funds driven by declining market rates and reduced borrowings. Earnings per share for 2025 were $2.14 compared to $1.14 in 2024. All six Banks demonstrated profitable operations during 2025 and 2024.

Previous wording

The Company’s return on average equity for 2024 was 6.02% compared to 7.05% in 2023. The return on average assets for 2024 was 0.48% compared to 0.51% in 2023. The decrease in return on average equity and return on average assets when comparing 2024 to 2023 was primarily a result of a reduction in earnings.

Current wording

The Company’s return on average equity for 2025 was 9.95% compared to 6.02% in 2024. The return on average assets for 2025 was 0.90% compared to 0.48% in 2024. The increase in return on average equity and return on average assets when comparing 2025 to 2024 was primarily a result of an increase in earnings.

Previous wording

The current economic environment, characterized by elevated short-term interest rates in response to inflationary pressures in the economy and the potential for a period of slower or negative economic growth resulting from efforts to dampen economic activity, has heightened the level of challenges, risks and uncertainties facing our business, including the following:

Current wording

The current economic environment, characterized by elevated short-term interest rates in response to inflationary pressures in the economy and the potential for a period of slower or negative economic growth resulting from efforts to dampen economic activity, combined with uncertainties related to changes in U.S. trade policies, has heightened the level of challenges, risks and uncertainties facing our business, including the following:

Previous wording

The rate and volume analysis is used to determine how much of the change in interest income or expense is the result of a change in volume or a change in interest rate. For example, real estate loan interest income increased $5.6 million in 2024 compared to 2023. Increased volume of real estate loans increased interest income in 2024 by $1.1 million and higher interest rates increased interest income in 2024 by $4.5 million.

Current wording

The rate and volume analysis is used to determine how much of the change in interest income or expense is the result of a change in volume or a change in interest rate. For example, real estate loan interest income increased $2.7 million in 2025 compared to 2024. Decreased volume of real estate loans decreased interest income in 2025 by $507 thousand and higher interest rates increased interest income in 2025 by $3.2 million.

Previous wording

The Company’s largest contributing component to net income is net interest income, which is the difference between interest earned on earning assets and interest paid on interest-bearing liabilities. The volume of and yields earned on earning assets and the volume of and the rates paid on interest-bearing liabilities determine net interest income. Refer to the tables preceding this paragraph for additional detail. Interest earned and interest paid is also affected by general economic conditions, particularly changes in market interest rates, by government policies and the action of regulatory authorities. Net interest income divided by average earning assets is referred to as net interest margin. For the years December 31, 2024 and 2023, the Company's non-GAAP net interest margin was 2.22% and 2.20%, respectively, computed on an FTE basis. For further information, refer to the Non-GAAP Financial Measures section of this report.

Current wording

The Company’s largest contributing component to net income is net interest income, which is the difference between interest earned on earning assets and interest paid on interest-bearing liabilities. The volume of and yields earned on earning assets and the volume of and the rates paid on interest-bearing liabilities determine net interest income. Refer to the tables preceding this paragraph for additional detail. Interest earned and interest paid is also affected by general economic conditions, particularly changes in market interest rates, by government policies and the action of regulatory authorities. Net interest income divided by average earning assets is referred to as net interest margin. For the years December 31, 2025 and 2024, the Company's non-GAAP net interest margin was 2.75% and 2.22%, respectively, computed on an FTE basis. For further information, refer to the Non-GAAP Financial Measures section of this report.

Previous wording

Net interest income during 2024 and 2023 totaled $45.0 million and $44.6 million, respectively, representing a 0.8% increase in 2024 compared to 2023.

Current wording

Net interest income during 2025 and 2024 totaled $55.7 million and $45.0 million, respectively, representing a 23.8% increase in 2025 compared to 2024.

Previous wording

The high level of competition in the local markets may continue to put downward pressure on the net interest margin of the Company. Currently, the Company’s primary market in Ames, Iowa, has fifteen banks, five credit unions and several other financial investment companies. Multiple banks are also located in the Company’s other market areas in central, north-central and south-central Iowa creating similarly competitive environments.

Current wording

The high level of competition in the local markets may put downward pressure on the net interest margin of the Company. Currently, the Company’s primary market in Ames, Iowa, has fifteen banks, five credit unions and several other financial investment companies. Multiple banks are also located in the Company’s other market areas in central, north-central and south-central Iowa creating similarly competitive environments.

Previous wording

The credit loss expense reflects management's judgment of the expense to be recognized in order to maintain an adequate allowance for credit losses. The Company’s credit loss expense for the year ended December 31, 2024 was $592 thousand compared to a credit loss expense of $789 thousand for the previous year. Net loan charge-offs totaled $453 thousand for the year ended December 31, 2024 compared to net loan charge-offs of $213 thousand for the previous year. The credit loss expense in 2024 was primarily due to growth in the loan portfolio and charge-offs in the commercial loan portfolio. The credit loss benefit in 2023 was primarily due to growth in the loan portfolio and charge-offs in the agriculture loan portfolio. Loans classified as substandard and substandard-impaired increased $18.0 million to $49.7 million in 2024 primarily due to downgrades in the commercial real estate and commercial operating loan portfolios. Some commercial real estate loans are experiencing a decline in occupancy rate and collateral valuation. Refer to the “Asset Quality Review and Credit Risk Management” discussion for additional details with regard to credit loss expense.

Current wording

The credit loss expense reflects management's judgment of the expense to be recognized in order to maintain an adequate allowance for credit losses. The Company’s credit loss expense for the year ended December 31, 2025 was $1.0 million compared to a credit loss expense of $592 thousand for the previous year. Net loan charge-offs totaled $357 thousand for the year ended December 31, 2025 compared to net loan charge-offs of $453 thousand for the previous year. The credit loss expense in 2025 was primarily due to an increase in specific reserves in the commercial real estate and operating loan portfolios. The credit loss expense in 2024 was primarily due to growth in the loan portfolio and charge-offs in the commercial loan portfolio. Loans classified as substandard and substandard-impaired increased $7.2 million to $56.8 million in 2025 primarily due to weakening in the multi-family and agricultural loan portfolios. Some multi-family real estate loans are experiencing a decline in occupancy rate, while the weakening in the agricultural loan portfolio is primarily due to one agricultural loan relationship. Refer to the “Asset Quality Review and Credit Risk Management” discussion for additional details with regard to credit loss expense.

Previous wording

Noninterest income during the years ended 2024 and 2023 totaled $9.8 million and $9.2 million, respectively. The increase in noninterest income in 2024 compared to 2023 is primarily due to an increase in wealth management income due to growth in assets under management and new account relationships.

Current wording

Noninterest income during the years ended 2025 and 2024 totaled $11.2 million and $9.8 million, respectively. The increase in noninterest income in 2025 compared to 2024 is primarily due to an increase in wealth management income due to growth in assets under management and an increase in estate and trust fees.

Previous wording

Noninterest expense for the Company consists of all operating expenses other than interest expense on deposits and other borrowed funds. Salaries and employee benefits are the largest component of the Company’s operating expenses and comprise 60% and 59% of noninterest expense in 2024 and 2023, respectively.

Current wording

Noninterest expense for the Company consists of all operating expenses other than interest expense on deposits and other borrowed funds. Salaries and employee benefits are the largest component of the Company’s operating expenses and comprise 62% and 60% of noninterest expense in 2025 and 2024, respectively.

Previous wording

Noninterest expense during the years ended 2024 and 2023 totaled $42.0 million and $40.2 million, respectively. The increase in noninterest expense is primarily due to normal increases in salaries and benefits and $799 thousand of consultant fees for certain contract negotiations included in professional fees in 2024. The percentage of noninterest expense to average assets was 1.97% in 2024, compared to 1.88% during 2023.

Current wording

Noninterest expense during the years ended 2025 and 2024 totaled $41.9 million and $42.0 million, respectively. The decrease in noninterest expense is primarily due to $799 thousand of consultant fees for certain contract negotiations completed in 2024 and cost savings reflected in 2025. The cost savings were offset by an increase in salaries and benefits primarily due to normal raises and anticipated bonus payouts as Company performance thresholds are met. The percentage of noninterest expense to average assets was 1.99% in 2025, compared to 1.97% during 2024.

Previous wording

The provision for income taxes for 2024 and 2023 was $2.0 million and $2.1 million, respectively. This amount represents an effective tax rate of 17% and 16%, respectively. The Company's federal income tax rate was 21% for the years ended December 31, 2024 and 2023. The decrease in income tax expense and lower than expected tax rate in 2024 and 2023 was primarily due to a higher proportion of tax-exempt interest income and New Markets Tax Credits to pretax income.

Current wording

The provision for income taxes for 2025 and 2024 was $4.8 million and $2.0 million, respectively. This amount represents an effective tax rate of 20% and 17%, respectively. The Company's federal income tax rate was 21% for the years ended December 31, 2025 and 2024. The increase in income tax expense was due to higher taxable income. The lower than expected tax rate in 2025 and 2024 was primarily due to tax-exempt interest income and New Markets Tax Credits.

Previous wording

Total assets decreased to $2.13 billion in 2024 compared to $2.16 billion in 2023, or 1.0%. The decrease was primarily due to a decrease in securities available-for-sale and partially offset by an increase in loans and interest-bearing deposits in financial institutions.

Current wording

Total assets increased to $2.134 billion in 2025 compared to $2.133 billion in 2024, or 0.02%. The increase was primarily due to an increase in interest-bearing deposits in financial institutions, decrease in unrealized losses on securities available-for-sale and partially offset by a decrease in loans receivable.

Previous wording

Net loans as of December 31, 2024 totaled $1.30 billion, an increase of 2.0% from the $1.28 billion as of December 31, 2023. Loans increased primarily due to increases in the 1 to 4 family residential real estate and agricultural operating loan portfolios. Loans are the primary contributor to the Company’s revenues and cash flows. The average yield on loans was 299 and 254 basis points higher in 2024 and 2023, respectively, in comparison to the average tax-equivalent investment portfolio yields.

Current wording

Net loans as of December 31, 2025 totaled $1.28 billion, a decrease of 1.8% from the $1.30 billion as of December 31, 2024. Loans decreased primarily due to a decline in the commercial real estate loan portfolio and partially offset by an increase in the 1-4 family residential and multi-family real estate portfolios. Loans are the primary contributor to the Company’s revenues and cash flows. The average yield on loans was 293 and 299 basis points higher in 2025 and 2024, respectively, in comparison to the average tax-equivalent investment portfolio yields.

Previous wording

The Company's loan portfolio consists of real estate, commercial, agricultural and consumer loans. As of December 31, 2024, gross loans totaled approximately $1.32 billion, which equals approximately 71.5% of total deposits and 61.9% of total assets. The Iowa State Average Report (consisting of 232 banks in the State of Iowa) loan to deposit ratio as of December 31, 2024 was 78%. As of December 31, 2024, the majority of the loans were originated directly by the Banks to borrowers within the Banks’ principal market areas. There are no foreign loans outstanding during the years presented.

Current wording

The Company's loan portfolio consists of real estate, commercial, agricultural and consumer loans. As of December 31, 2025, gross loans totaled approximately $1.30 billion, which equals approximately 70.0% of total deposits and 60.8% of total assets. The Iowa State Average Report (consisting of 227 banks in the State of Iowa) loan to deposit ratio as of December 31, 2025 was 80%. As of December 31, 2025, the majority of the loans were originated directly by the Banks to borrowers within the Banks’ principal market areas. There are no foreign loans outstanding during the years presented.

Previous wording

There was $342 thousand of mortgage origination funding awaiting delivery to the secondary market as of December 31, 2024 and $124 thousand as of December 31, 2023. Residential mortgage loans are originated by the Banks and sold to several secondary mortgage market outlets based upon customer product preferences and pricing considerations. The mortgages are sold in the secondary market to eliminate interest rate risk and to generate secondary market fee income. It is not anticipated at the present time that loans held for sale will become a significant portion of total assets.

Current wording

There was $472 thousand of mortgage origination funding awaiting delivery to the secondary market as of December 31, 2025 and $342 thousand as of December 31, 2024. Residential mortgage loans are originated by the Banks and sold to several secondary mortgage market outlets based upon customer product preferences and pricing considerations. The mortgages are sold in the secondary market to eliminate interest rate risk and to generate secondary market fee income. It is not anticipated at the present time that loans held for sale will become a significant portion of total assets.

Previous wording

Total investments as of December 31, 2024 were $648.5 million, a decrease of $87.9 million or 11.9% from the prior year end. As of December 31, 2024 and 2023, the investment portfolio comprised 30% and 34% of total assets, respectively. The decrease in investments during 2024 is primarily due to maturities in excess of purchases. The decrease is offset in part by lower unrealized losses in the investment portfolio.

Current wording

Total investments as of December 31, 2025 were $656.0 million, an increase of $7.4 million or 1.1% from the prior year end. As of December 31, 2025 and 2024, the investment portfolio comprised 31% and 30% of total assets, respectively. The increase in investments during 2025 is primarily due to lower unrealized losses in the investment portfolio.

Previous wording

The Company's investment portfolio had an expected duration of 3.1 years and 3.6 years as of December 31, 2024 and 2023, respectively.

Current wording

The Company's investment portfolio had an expected duration of 3.0 years and 3.1 years as of December 31, 2025 and 2024, respectively.

Previous wording

At December 31, 2024 and 2023, the Company’s investment securities portfolio included securities issued by 258 and 272 government municipalities and agencies located within 30 states with a fair value of $245.6 million and $269.9 million, respectively. No one municipality or agency represents a concentration within this segment of the investment portfolio. Omaha, Nebraska, sewer revenue bonds with a fair value of $5.3 million (approximately 2.1% of the fair value of the government municipalities and subdivisions) represent the largest exposure to any one municipality or subdivision for the Company as of December 31, 2024.

Current wording

At December 31, 2025 and 2024, the Company’s investment securities portfolio included securities issued by 243 and 258 government municipalities and agencies located within 30 states with a fair value of $236.9 million and $245.6 million, respectively. No one municipality or agency represents a concentration within this segment of the investment portfolio. Omaha, Nebraska, sewer revenue bonds with a fair value of $5.6 million (approximately 2.4% of the fair value of the government municipalities and subdivisions) represent the largest exposure to any one municipality or subdivision for the Company as of December 31, 2025.

Previous wording

As of December 31, 2024 and 2023, 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 and water utilities. The revenue bonds are to be paid from 15 and 16 revenue sources in 2024 and 2023, respectively. The revenue sources that represent 5% or more, individually, as a percent of the total revenue bonds are summarized in the following table*(in thousands)*:

Current wording

As of December 31, 2025 and 2024, 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 and water utilities. The revenue bonds are to be paid from 15 revenue sources in 2025 and 2024. The revenue sources that represent 5% or more, individually, as a percent of the total revenue bonds are summarized in the following table*(in thousands)*:

Previous wording

Total deposits were $1.85 billion and $1.81 billion as of December 31, 2024 and 2023, respectively. The increase of $34.9 million between the periods can be primarily attributed to increases in time deposits and public funds. A portion of the increase in time deposits and public funds was offset by a decline in noninterest-bearing checking, savings and money market accounts. Balances fluctuate as customer liquidity needs vary and could be impacted by prevailing market interest rates, competition, and economic conditions. Approximately 14% of deposits are tied to external indexes as of December 31, 2024. Deposit interest expense related to these deposits can be more volatile than our other deposit products in a changing interest rate environment.

Current wording

Total deposits were $1.855 billion and $1.847 billion as of December 31, 2025 and 2024, respectively. The increase of $8.0 million between the periods can be primarily attributed to increases in commercial demand and interest-bearing checking accounts. Balances fluctuate as customer liquidity needs vary and could be impacted by prevailing market interest rates, competition, and economic conditions. Approximately 14% of deposits are tied to external indexes as of December 31, 2025. Deposit interest expense related to these deposits can be more volatile than our other deposit products in a changing interest rate environment.

Previous wording

The Company’s primary source of funds is customer deposits. The Banks attempt to attract noninterest-bearing deposits, which are a low-cost funding source. In addition, the Banks offer a variety of interest-bearing accounts designed to attract both short-term and longer-term deposits from customers. Interest-bearing accounts earn interest at rates established by Bank management based on competitive market factors and the Company’s need for funds. While 91.9% of the Banks’ certificates of deposit mature in the next year, it is anticipated that many of these certificates will be renewed. Rate sensitive certificates of deposits in excess of $250,000 are subject to somewhat higher volatility with regard to renewal volume as the Banks adjust rates based upon funding needs. In the event a substantial volume of certificates is not renewed, the Company believes it has sufficient liquid assets and borrowing lines to fund significant runoff. A sustained reduction in deposit volume would have a significant negative impact on the Company’s operations and liquidity. The Company had $14.2 million and $6.9 million of brokered deposits as of December 31, 2024 and 2023, respectively. The Company has approximately $643 million of estimated uninsured deposits as of December 31, 2024. Approximately $168 million of estimated uninsured deposits were collateralized by pledged assets.

Current wording

The Company’s primary source of funds is customer deposits. The Banks attempt to attract noninterest-bearing deposits, which are a low-cost funding source. In addition, the Banks offer a variety of interest-bearing accounts designed to attract both short-term and longer-term deposits from customers. Interest-bearing accounts earn interest at rates established by Bank management based on competitive market factors and the Company’s need for funds. While 88.6% of the Banks’ certificates of deposit mature in the next year, it is anticipated that many of these certificates will be renewed. Rate sensitive certificates of deposits in excess of $250,000 are subject to somewhat higher volatility with regard to renewal volume as the Banks adjust rates based upon funding needs. In the event a substantial volume of certificates is not renewed, the Company believes it has sufficient liquid assets and borrowing lines to fund significant runoff. A sustained reduction in deposit volume would have a significant negative impact on the Company’s operations and liquidity. The Company had $9.9 million and $14.2 million of brokered deposits as of December 31, 2025 and 2024, respectively. The Company has approximately $646 million of estimated uninsured deposits as of December 31, 2025. Approximately $182 million of estimated uninsured deposits were collateralized by pledged assets.

Previous wording

The following table shows the amounts and remaining maturities of the portion of estimated time deposits in excess of FIDC Insurance Limits as of December 31, 2024 and 2023 (in thousands).

Current wording

The following table shows the amounts and remaining maturities of the portion of estimated time deposits in excess of FDIC Insurance Limits as of December 31, 2025 and 2024 (in thousands).

Previous wording

Borrowed funds that may be utilized by the Company are comprised of the Federal Reserve Bank Term Funding Program (BTFP), FHLB advances, federal funds purchased and securities sold under agreements to repurchase (repurchase agreements). Borrowed funds are an alternative funding source to deposits and can be used to fund the Company’s assets and unforeseen liquidity needs. The BTFP offers loans of up to one year in length to banks pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. The BTFP allows for borrowing from the Federal Reserve Bank up to the par value of the pledged collateral. FHLB advances are loans that can mature daily or have longer maturities for fixed or floating rates of interest. Federal funds purchased are borrowings from other banks that mature daily. Repurchase agreements are similar to deposits as they are funds lent by various Bank customers; however, investment securities are pledged to secure such borrowings. The Company’s repurchase agreements reprice daily.

Current wording

Borrowed funds that may be utilized by the Company are comprised of FHLB advances, federal funds purchased and securities sold under agreements to repurchase (repurchase agreements). Borrowed funds are an alternative funding source to deposits and can be used to fund the Company’s assets and unforeseen liquidity needs. FHLB advances are loans that can mature daily or have longer maturities for fixed or floating rates of interest. Federal funds purchased are borrowings from other banks that mature daily. Repurchase agreements are similar to deposits as they are funds lent by various Bank customers; however, investment securities are pledged to secure such borrowings. The Company’s repurchase agreements reprice daily.

Previous wording

The Company’s credit risk is centered in the loan portfolio, which on December 31, 2024, totaled $1.30 billion as compared to $1.28 billion as of December 31, 2023, an increase of 2.0%. Net loans comprise approximately 61% of total assets as of the end of 2024. The objective in managing loan portfolio risk is to reduce the risk of loss resulting from a customer’s failure to perform according to the terms of a transaction and to quantify and manage credit risk on a portfolio basis. As the following chart indicates, the Company’s non-performing assets have increased by 11.4% from December 31, 2023 and total $15.5 million as of December 31, 2024. The Company’s level of non-performing loans as a percentage of loans of 1.17% as of December 31, 2024, is higher than the Iowa State Average peer group of FDIC insured institutions as of December 31, 2024, of 0.47%. Management believes that the allowance for credit losses as of December 31, 2024 remains adequate based on its analysis of the non-performing assets and the portfolio as a whole.

Current wording

The Company’s credit risk is centered in the loan portfolio, which on December 31, 2025, totaled $1.28 billion as compared to $1.30 billion as of December 31, 2024, a decrease of 1.8%. Net loans comprise approximately 60% of total assets as of the end of 2025. The objective in managing loan portfolio risk is to reduce the risk of loss resulting from a customer’s failure to perform according to the terms of a transaction and to quantify and manage credit risk on a portfolio basis. As the following chart indicates, the Company’s non-performing assets have increased by 1.0% from December 31, 2024 and total $15.7 million as of December 31, 2025. The Company’s level of non-performing loans as a percentage of loans of 1.19% as of December 31, 2025, is higher than the Iowa State Average peer group of FDIC insured institutions as of December 31, 2025, of 0.53%. Management believes that the allowance for credit losses as of December 31, 2025 remains adequate based on its analysis of the non-performing assets and the portfolio as a whole.

Previous wording

Non-performing loans totaled $15.5 million as of December 31, 2024 and were $1.6 million higher than the non-performing loans as of December 31, 2023. The increase in non-performing loans was due primarily to one loan relationship in the commercial real estate and commercial operating portfolios. The Company considers non-performing loans to generally include nonaccrual loans, loans past due 90 days or more and still accruing and other loans that may or may not meet the former non-performing criteria.

Current wording

Non-performing loans totaled $15.46 million as of December 31, 2025 and were $47 thousand lower than the non-performing loans as of December 31, 2024. The decrease in non-performing loans was due primarily to portfolio resolution activities, such as charge-offs, loan restructurings, and return to accrual status following sustained improvement in performance. The Company considers non-performing loans to generally include nonaccrual loans, loans past due 90 days or more and still accruing and other loans that may or may not meet the former non-performing criteria.

Previous wording

The allowance for credit losses related to these non-performing loans was approximately $98 thousand and $118 thousand at December 31, 2024 and 2023, respectively. The average balances of non-performing loans for the years ended December 31, 2024 and 2023 were $14.4 million and $13.2 million, respectively. For the years ended December 31, 2024 and 2023, interest income, which would have been recorded under the original terms of nonaccrual loans, was approximately $963 thousand and $768 thousand, respectively. There were $736 thousand and $109 thousand of loans greater than 90 days past due and still accruing interest as of December 31, 2024 and 2023, respectively.

Current wording

The allowance for credit losses related to these non-performing loans was approximately $1.1 million and $98 thousand at December 31, 2025 and 2024, respectively. The average balances of non-performing loans for the years ended December 31, 2025 and 2024 were $16.9 million and $14.4 million, respectively. For the years ended December 31, 2025 and 2024, interest income, which would have been recorded under the original terms of nonaccrual loans, was approximately $1.9 million and $963 thousand, respectively. There were $328 thousand and $736 thousand of loans greater than 90 days past due and still accruing interest as of December 31, 2025 and 2024, respectively.

Previous wording

Pooled reserves for loan categories range from 0.81% to 2.41% of the outstanding loan balances as of December 31, 2024. In general, as loan volume increases, the pooled reserve levels increase with that growth and as loan volume decreases, the pooled reserve levels decrease with that decline. The allowance relating to commercial real estate is the largest reserve component. As of December 31, 2024, commercial real estate loans have a pooled reserve of 1.45%.

Current wording

Pooled reserves for loan categories range from 0.84% to 2.36% of the outstanding loan balances as of December 31, 2025. In general, as loan volume increases, the pooled reserve levels increase with that growth and as loan volume decreases, the pooled reserve levels decrease with that decline. The allowance relating to commercial real estate is the largest reserve component. As of December 31, 2025, commercial real estate loans have a pooled reserve of 1.45%.

Previous wording

Commercial real estate and multi-family real estate represent approximately 42% of the loan portfolio as of December 31, 2024. The following is an additional breakdown of the Company's commercial real estate and multi-family real estate portfolios*(in thousands)*:

Current wording

Commercial real estate and multi-family real estate represent approximately 40% of the loan portfolio as of December 31, 2025. The following is an additional breakdown of the Company's commercial real estate and multi-family real estate portfolios*(in thousands)*:

Previous wording

Liquid assets of cash on hand, balances due from other banks, interest-bearing deposits in financial institutions and federal funds sold for December 31, 2024 and 2023 totaled $101.2 million and $55.1 million, respectively. The higher balance of liquid assets as of December 31, 2024 primarily relates to increased deposits at the Federal Reserve Bank.

Current wording

Liquid assets of cash on hand, balances due from other banks, interest-bearing deposits in financial institutions and federal funds sold for December 31, 2025 and 2024 totaled $126.8 million and $101.2 million, respectively. The higher balance of liquid assets as of December 31, 2025 primarily relates to increased deposits at the Federal Reserve Bank.

Previous wording

Other sources of liquidity available to the Banks as of December 31, 2024 include available borrowing capacity with the FHLB of $245.3 million and federal funds borrowing capacity at correspondent banks of $97.0 million. As of December 31, 2024, the Company had outstanding FHLB advances and other borrowings of $47.0 million, no federal funds purchased, and securities sold under agreements to repurchase of $52.4 million.

Current wording

Other sources of liquidity available to the Banks as of December 31, 2025 include available borrowing capacity with the FHLB of $291.9 million and federal funds borrowing capacity at correspondent banks of $106.3 million. As of December 31, 2025, the Company had outstanding FHLB advances and other borrowings of $21.4 million, no federal funds purchased, and securities sold under agreements to repurchase of $38.8 million.

Previous wording

Total investments as of December 31, 2024, were $648.5 million compared to $736.4 million as of year-end 2023. The investment portfolio provides the Company with a significant amount of liquidity since all investments are classified as available-for-sale as of December 31, 2024 and 2023. The investments have pretax net unrealized losses of $52.0 million and $62.3 million as of December 31, 2024 and 2023, respectively.

Current wording

Total investments as of December 31, 2025, were $656.0 million compared to $648.5 million as of year-end 2024. The investment portfolio provides the Company with a significant amount of liquidity since all investments are classified as available-for-sale as of December 31, 2025 and 2024. The investments have pretax net unrealized losses of $24.2 million and $52.0 million as of December 31, 2025 and 2024, respectively.

Previous wording

Net cash provided by operating activities for the years ended December 31, 2024 and 2023 totaled $14.3 million and $19.2 million, respectively. The change in net cash provided by operating activities in 2024 was primarily due to payments of accrued interest on borrowings.

Current wording

Net cash provided by operating activities for the years ended December 31, 2025 and 2024 totaled $21.3 million and $14.3 million, respectively. The change in net cash provided by operating activities in 2025 was primarily due to higher net interest income.

Previous wording

Net cash provided by investing activities for the years ended December 31, 2024 and 2023 was $72.0 million and $19.1 million, respectively. The change in net cash provided by investing activities in 2024 was primarily due to maturities of securities available-for-sale and partially offset by growth in the loan portfolio.

Current wording

Net cash provided by investing activities for the years ended December 31, 2025 and 2024 was $44.2 million and $72.0 million, respectively. The change in net cash provided by investing activities in 2025 was primarily due to purchases of securities available-for-sale, partially offset by a decrease in loans and maturities of securities available-for-sale.

Previous wording

Net cash (used in) financing activities for the years ended December 31, 2024 and 2023 totaled ($40.2) million and ($11.1) million, respectively. The change in net cash (used in) financing activities in 2024 was due primarily to fewer proceeds from other borrowings between periods and partially offset by an increase in deposits.

Current wording

Net cash (used in) financing activities for the years ended December 31, 2025 and 2024 totaled ($40.0) million and ($40.2) million, respectively. The change in net cash (used in) financing activities in 2025 was due primarily due to a decrease in net payments on other borrowings between periods, a smaller increase in deposits between periods, and a larger decrease in securities sold under agreements to repurchase.

Previous wording

The Company’s liquidity on an unconsolidated basis is heavily dependent upon dividends paid to the Company by the Banks. The Company requires adequate liquidity to pay its expenses and pay stockholder dividends. In 2024, dividends from the Banks amounted to $10.2 million compared to $10.0 million in 2023. Various federal and state statutory provisions limit the amount 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.

Current wording

The Company’s liquidity on an unconsolidated basis is heavily dependent upon dividends paid to the Company by the Banks. The Company requires adequate liquidity to pay its expenses and pay stockholder dividends. In 2025, dividends from the Banks amounted to $13.5 million compared to $10.2 million in 2024. Various federal and state statutory provisions limit the amount 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.

Previous wording

The Company has unconsolidated cash and interest-bearing deposits totaling $992 thousand that is available as of December 31, 2024 to provide additional liquidity to the Banks.

Current wording

The Company has unconsolidated cash and interest-bearing deposits totaling $3.0 million that is available as of December 31, 2025 to provide additional liquidity to the Banks.

Previous wording

Commitments to extend credit totaled $232.0 million as of December 31, 2024 compared to a total of $262.7 million at the end of 2023. The timing of these credit commitments varies with the underlying borrowers; however, the Company believes it has satisfactory liquidity to fund these obligations as of December 31, 2024. 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 other known trends in liquidity and cash flow needs as of December 31, 2024, that are of concern to management.

Current wording

Commitments to extend credit totaled $239.7 million as of December 31, 2025 compared to a total of $232.0 million at the end of 2024. The timing of these credit commitments varies with the underlying borrowers; however, the Company believes it has satisfactory liquidity to fund these obligations as of December 31, 2025. 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 other known trends in liquidity and cash flow needs as of December 31, 2025, that are of concern to management.

Previous wording

The Company’s total stockholders’ equity increased to $174.7 million at December 31, 2024, from $165.8 million at December 31, 2023. As of December 31, 2024 and 2023, stockholders’ equity as a percentage of total assets was 8.2% and 7.7%, respectively. The increase in stockholders’ equity was primarily the result of a decrease in unrealized losses on the investment portfolio and the retention of net income in excess of dividends. The capital levels of the Company currently exceed applicable regulatory guidelines to be considered “well capitalized” as of December 31, 2024. Net unrealized losses on the investment portfolio are excluded from regulatory capital.

Current wording

The Company’s total stockholders’ equity increased to $207.9 million at December 31, 2025, from $174.7 million at December 31, 2024. As of December 31, 2025 and 2024, stockholders’ equity as a percentage of total assets was 9.7% and 8.2%, respectively. The increase in stockholders’ equity was primarily the result of a decrease in unrealized losses on the investment portfolio and the retention of net income in excess of dividends. The capital levels of the Company currently exceed applicable regulatory guidelines to be considered “well capitalized” as of December 31, 2025. Net unrealized losses on the investment portfolio are excluded from regulatory capital for the purposes of calculating required capital ratios per regulatory standards.