Business Context and Reporting Period
Company: Ames National Corporation (ATLO)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2026
Business Overview: Ames National Corporation is a bank holding company operating six bank subsidiaries in central, north-central, and south-central Iowa. The company provides commercial and consumer banking services, including lending, deposits, and wealth management.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 | As of June 30, 2026 |
|---|---|---|---|
| Net Income | $5.93 million | $11.89 million | - |
| Earnings Per Share (Diluted) | $0.67 | $1.34 | - |
| Net Interest Income | $16.38 million | $31.81 million | - |
| Net Interest Margin (FTE) | 3.18% | 3.10% | - |
| Total Assets | - | - | $2.12 billion |
| Total Loans (Net) | - | - | $1.25 billion |
| Total Deposits | - | - | $1.85 billion |
| Stockholders' Equity | - | - | $213.09 million |
| Cash and Cash Equivalents | - | - | $107.24 million |
| Allowance for Credit Losses | - | - | $17.31 million |
Material Changes vs. Prior Period
- Profitability: Net income increased 31.5% year-over-year for the three months ended June 30, 2026 ($5.93M vs. $4.51M) and 49.5% for the six-month period ($11.89M vs. $7.95M). This growth was driven primarily by higher net interest income.
- Net Interest Income: Increased due to higher yields and average balances on the investment portfolio, combined with a lower cost of funds driven by declining market rates and reduced borrowings. Net interest margin (FTE) improved to 3.18% (Q2 2026) from 2.65% (Q2 2025).
- Interest Expense: Decreased 14.0% for the quarter and 15.7% for the six-month period compared to the prior year, attributed to lower market rates and reduced borrowing levels.
- Asset Quality: Nonaccrual loans increased to $19.6 million (1.55% of total loans) from $15.1 million at year-end 2025. Substandard-impaired loans rose to $19.1 million, primarily due to one relationship in the agricultural portfolio. However, net charge-offs decreased significantly to $255k for the quarter and $223k for the six months, compared to $1.1M and $1.2M in the prior year periods.
- Expense Management: Noninterest expense increased 7.8% for the quarter, largely due to $300k in consultant fees for contract negotiations and higher salary/benefit costs related to performance bonuses. The efficiency ratio improved to 58.52% from 64.34% in the prior year quarter.
Guidance, Outlook, and Risks
- Outlook: Management believes liquidity sources are sufficient to support operations. The company continues to reduce borrowings and has no external debt financing as of June 30, 2026.
- Capital: The company remains "well capitalized" under regulatory guidelines. Total capital ratio was 16.7% and Tier 1 capital ratio was 15.4% as of June 30, 2026.
- Risks and Contingencies:
- Covenant Compliance: The company did not comply with a modified Texas Ratio covenant (29.2% vs. 25% threshold) on a $5 million line of credit; however, the lender waived the noncompliance.
- Asset Quality: Commercial real estate and multi-family loans (39% of portfolio) face heightened risk due to interest rates and market conditions. Agricultural loans are sensitive to commodity prices and weather.
- Investment Portfolio: Gross unrealized losses on securities totaled $27.9 million, attributed to interest rate environments rather than credit issues. Management has no intent to sell these securities.
- Capital Expenditures: The company has $3.5 million in remaining commitments for headquarters and branch remodels.
Investor Verification Checklist
- Covenant Waiver: Verify the status of the modified Texas Ratio covenant waiver and any potential future restrictions on the $5 million credit line.
- Asset Quality Trends: Monitor the concentration of substandard-impaired loans in the agricultural portfolio and the restructuring of the commercial real estate relationship mentioned in the MD&A.
- Unrealized Losses: Review the composition of the $27.9 million in unrealized losses on the investment portfolio to ensure they remain non-credit related.
- Expense Run Rate: Assess the sustainability of the $600k in consultant fees for contract negotiations and their impact on future efficiency ratios.
- Dividend Policy: Confirm the sustainability of the $0.48 per share dividend declared for the six-month period given the retention of earnings.