AMES NATIONAL CORP

Ames National Corporation is an Iowa corporation and bank holding company registered under the Bank Holding Company Act of 1956, as amended, that owns 100% of the stock of six bank subsidiaries consisting of one national bank and five state-chartered banks. All of the Company's operations are conducted in the State of Iowa and primarily within the central, north-central and south-central Iowa counties of Boone, Clarke, Hancock, Marshall, Polk, Story, Taylor and Union where the Company's banking subsidiaries are located. The Company does not engage in any material business activities apart from its ownership of its banking subsidiaries and the management of its own loan portfolios. The geographic market area served by the Banks is highly competitive with respect to both loans and deposits, and the Banks compete principally with other commercial banks, savings and loan associations, credit unions, mortgage companies, finance divisions of auto and farm equipment companies, agricultural suppliers and other financial service providers. As of December 31, 2025, there were 48 FDIC insured institutions having approximately 123 locations within Boone, Clarke, Hancock, Marshall, Polk, Story, Taylor and Union County, Iowa where the Banks' offices are located. The major commercial bank competitors include First Interstate Bank, U.S. Bank National Association and Wells Fargo Bank, each of which maintains an office or offices within the Banks' primary central Iowa trade areas. The Company anticipates bank competition will continue to change materially over the next several years as more financial institutions, including the major regional and national banks, continue to consolidate, and credit unions, which are not subject to income taxes, have a significant competitive advantage and provide additional competition in the Company's local markets, while financial technology, or fintech, companies and other non-bank competitors emerging provide competition in key areas of banking.

The Company emphasizes strong personal relationships to provide products and services that meet the needs of the Banks' customers, seeking to achieve growth and maintain a strong return on equity. To accomplish these goals, the Banks focus on small-to-medium size businesses that traditionally wish to develop an exclusive relationship with a single bank. The Banks, individually and collectively, have the size to give the personal attention required by business owners, in addition to the credit expertise to help businesses meet their goals. The Company's primary competitive strategy is to utilize seasoned and competent Bank management and local decision-making authority to provide customers with prompt response times and flexibility in the products and services offered. First National, State Bank and Reliance Bank together have the largest percentage of deposits in Story County, and Reliance Bank has the largest percentage of deposits in Hancock County.

The principal sources of Company revenue are: interest and fees earned on loans made or held by the Company and Banks; interest on investments, primarily on bonds, held by the Banks; fees on wealth management services; service charges on deposit accounts maintained at the Banks; merchant and card fees; gain on the sale of loans; and securities gains. The largest component contributing to the Company's net income is net interest income, which is the difference between interest earned on earning assets (primarily loans and investments) and interest paid on interest-bearing liabilities (primarily deposit accounts and other borrowings). The Company's principal expenses are: interest expense on deposit accounts and other borrowings; salaries and employee benefits; data processing costs primarily associated with maintaining the Banks' loan and deposit functions; occupancy expenses for maintaining the Banks' facilities; professional fees; and business development.

The Banks' lending activities consist primarily of short-term and medium-term commercial, multi-family and agricultural real estate loans, residential real estate loans, agricultural and business operating loans and lines of credit, equipment loans, vehicle loans, personal loans and lines of credit, home improvement loans and origination of mortgage loans for sale into the secondary market. Approximately 51% of the loan portfolio consists of loans made for commercial purposes, approximately 23% consists of loans made for agricultural purposes, approximately 25% consists of loans made for 1-4 family residential purposes, and approximately 1% consists of loans made for consumer purposes. Commercial real estate, multi-family and agricultural real estate loans represent approximately 52% of the loan portfolio. Commercial and agricultural operating and term loans represent approximately 17% of the loan portfolio. Residential first mortgage loans, home equity term loans and home equity lines of credit represent approximately 25% of the loan portfolio. Consumer and other loans represent approximately 1% of the loan portfolio. The Banks also offer a variety of checking, savings and time deposits, cash management services, merchant credit card processing, safe deposit boxes, wire transfers, direct deposit and automated/video teller machine access. Five of the six Banks also offer trust services, which includes wealth management services. Assets under management amount to $510.4 million ¹ and $456.3 million ² as of December 31, 2025 and 2024, respectively. The Banks earn income from the origination and referral of residential mortgages that are sold in the secondary real estate market without retaining the mortgage servicing rights.

First National Bank, Ames, Iowa is a nationally-chartered, commercial bank insured by the FDIC that as of December 31, 2025 had capital of $104.5 million ³ and 114 full-time equivalent employees ⁴, with net income for the years ended December 31, 2025 and 2024 of approximately $10.0 million ⁵ and $5.2 million ⁶, respectively, and total assets as of December 31, 2025 and 2024 of approximately $1.109 billion ⁷ and $1.107 billion ⁸, respectively. State Bank & Trust Co., Nevada, Iowa as of December 31, 2025 had capital of $19.4 million ⁹ and 20 full-time equivalent employees ¹⁰, with net income for the years ended December 31, 2025 and 2024 of approximately $2.4 million ¹¹ and $933 thousand ¹², respectively, and total assets as of December 31, 2025 and 2024 of approximately $196.4 million ¹³ and $198.6 million ¹⁴, respectively. Boone Bank & Trust Co., Boone, Iowa as of December 31, 2025 had capital of $13.1 million ¹⁵ and 18 full-time equivalent employees ¹⁶, with net income for the years ended December 31, 2025 and 2024 of approximately $1.1 million ¹⁷ and $616 thousand ¹⁸, respectively, and total assets as of December 31, 2025 and 2024 of approximately $160.4 million ¹⁹ and $156.7 million ²⁰, respectively. Reliance State Bank, Story City, Iowa as of December 31, 2025 had capital of $28.1 million ²¹ and 31 full-time equivalent employees ²², with net income for the years ended December 31, 2025 and 2024 of approximately $2.5 million ²³ and $1.9 million ²⁴, respectively, and total assets as of December 31, 2025 and 2024 of approximately $284.9 million ²⁵ and $307.5 million ²⁶, respectively. United Bank & Trust Co., Marshalltown, Iowa as of December 31, 2025 had capital of $11.9 million ²⁷ and 16 full-time equivalent employees ²⁸, with net income for the years ended December 31, 2025 and 2024 of approximately $1.5 million ²⁹ and $1.1 million ³⁰, respectively, and total assets as of December 31, 2025 and 2024 of approximately $122.9 million ³¹ and $130.3 million ³², respectively. Iowa State Savings Bank, Creston, Iowa as of December 31, 2025 had capital of $27.2 million ³³ and 34 full-time equivalent employees ³⁴, with net income for the years ended December 31, 2025 and 2024 of approximately $2.9 million ³⁵ and $2.0 million ³⁶, respectively, and total assets as of December 31, 2025 and 2024 of approximately $282.7 million ³⁷ and $270.3 million ³⁸, respectively.

On August 13, 2025, the Board of Directors approved a Stock Repurchase Plan which provided for the repurchase of up to 200,000 shares ³⁹ of the Company's common stock, replacing the previous Stock Repurchase Plan (approved in November 2024) that was completed in July 2025. The Company purchased 91,890 shares ⁴⁰ in 2025 and 43,057 shares ⁴¹ in 2024 under the Stock Repurchase Plans that were in effect during 2025 and 2024. The Company declared aggregate annual cash dividends in 2025 and 2024 of approximately $5.3 million ⁴² and $8.4 million ⁴³, respectively, or $0.60 ⁴⁴ per share in 2025 and $0.94 ⁴⁵ per share in 2024. In February 2026, the Company declared a quarterly cash dividend of approximately $2.1 million ⁴⁶, or $0.24 ⁴⁷ per share, payable on March 13, 2026, to shareholders of record at the close of business on February 27, 2026. The Company contributed over $312 thousand ⁴⁸ to various charitable and community organizations in 2025, and Company employees volunteered approximately 11,000 hours ⁴⁹ serving various charitable organizations in the Banks' communities.

The Company reported net income of $19.0 million ⁵⁰ for the year ended December 31, 2025 compared to $10.2 million ⁵¹ for the year ended December 31, 2024, representing an increase in net income of 86.2% ⁵² when comparing 2025 with 2024. Earnings per share for 2025 were $2.14 ⁵³ compared to $1.14 ⁵⁴ in 2024. The Company's return on average equity for 2025 was 9.95% ⁵⁵ compared to 6.02% ⁵⁶ in 2024, and the return on average assets for 2025 was 0.90% ⁵⁷ compared to 0.48% ⁵⁸ in 2024. Net interest income during 2025 and 2024 totaled $55.7 million ⁵⁹ and $45.0 million ⁶⁰, respectively, representing a 23.8% ⁶¹ increase in 2025 compared to 2024. The Company's non-GAAP net interest margin was 2.75% ⁶² and 2.22% ⁶³, respectively, computed on an FTE basis. Total assets increased to $2.134 billion ⁶⁴ in 2025 compared to $2.133 billion ⁶⁵ in 2024, or 0.02% ⁶⁶. Total stockholders' equity increased to $207.9 million ⁶⁷ at December 31, 2025, from $174.7 million ⁶⁸ at December 31, 2024, and stockholders' equity as a percentage of total assets was 9.7% ⁶⁹ and 8.2% ⁷⁰, respectively.

The Company's growth strategy centers on its multi-bank holding company structure for six community banks, emphasizing strong personal relationships to provide products and services that meet the needs of the Banks' customers, with a focus on small-to-medium size businesses that traditionally wish to develop an exclusive relationship with a single bank. The Banks offer a full range of deposit services and provide innovative, quality financial services such as Online Banking, Mobile Banking, Private Banking and Wealth Management that meet the evolving banking needs of their customers and communities. The Company seeks to achieve growth and maintain a strong return on equity, and the Banks focus on small-to-medium size businesses. The Company also strives to remain operationally efficient to improve profitability while enabling the Banks to offer more competitive loan and deposit rates. The Company's primary competitive strategy is to utilize seasoned and competent Bank management and local decision-making authority to provide customers with prompt response times and flexibility in the products and services offered, which is viewed as providing an opportunity to increase revenues through the creation of a competitive advantage over other financial institutions.

The Company's growth is also supported by its wealth management services, with assets under management amounting to $510.4 million ⁷¹ as of December 31, 2025, compared to $456.3 million ⁷² as of December 31, 2024. The Banks also provide farm management, investment and custodial services for individuals, businesses and non-profit organizations. The Banks earn income from the origination and referral of residential mortgages that are sold in the secondary real estate market without retaining the mortgage servicing rights. The Company has in the past, and may in the future, acquire other financial institutions or bank offices when it believes such acquisitions support its business strategy, though acquisitions involve many risks including incurring time and expense, the risk that the acquired business will not perform to expectations, and difficulties integrating operations.

The Company's efficiency ratio (noninterest expense divided by noninterest income plus net interest income) was 62.74% ⁷³ for 2025 compared to 76.59% ⁷⁴ for 2024. Noninterest expense during the years ended 2025 and 2024 totaled $41.9 million ⁷⁵ and $42.0 million ⁷⁶, respectively, with the decrease in noninterest expense primarily due to $799 thousand ⁷⁷ of consultant fees for certain contract negotiations completed in 2024 and cost savings reflected in 2025, 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% ⁷⁸ in 2025, compared to 1.97% ⁷⁹ during 2024. Salaries and employee benefits comprise 62% ⁸⁰ and 60% ⁸¹ of noninterest expense in 2025 and 2024, respectively.

The Company employs approximately 260 employees ⁸², of which 95% ⁸³ are full-time employees and the remaining 5% ⁸⁴ are part-time employees. Of the 260 employees ⁸⁵, 122 employees ⁸⁶ were considered officers of the Company. As of December 31, 2025, approximately 62% ⁸⁷ of the current workforce was female and 38% ⁸⁸ was male, and approximately 5% ⁸⁹ of the workforce consisted of ethnically diverse employees. The average tenure of employees is approximately eleven years ⁹⁰. The Company employs 27 individuals ⁹¹ 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 ⁹² employed by the Banks.

The Company's total stockholders' equity increased to $207.9 million ⁹³ at December 31, 2025, from $174.7 million ⁹⁴ at December 31, 2024. 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. A total of 91,890 shares ⁹⁵ of common stock were repurchased under stock repurchase plans in 2025 and 43,057 shares ⁹⁶ of common stock were repurchased in 2024. The Company declared aggregate annual cash dividends in 2025 and 2024 of approximately $5.3 million ⁹⁷ and $8.4 million ⁹⁸, respectively, or $0.60 ⁹⁹ per share in 2025 and $0.94 ¹⁰⁰ per share in 2024. The Company does not maintain or sponsor any equity compensation plans covering the directors, its executives or employees of the Company or the Banks.

Management has identified that if short-term interest rates remain elevated or increase over a relatively short period of time due to inflationary pressures or other factors, the interest rate environment may present a challenge to the Company, as increases in interest rates may negatively impact the Company's net interest margin if interest expense increases more quickly than interest income. The Company's earning assets have longer maturities than its interest-bearing liabilities, so in a rising interest rate environment, interest expense will tend to increase more quickly than interest income. Additionally, if market interest rates in the three to five year term remain at low levels as compared to the short-term interest rates, the interest rate environment may present a challenge as earning assets will reprice at lower interest rates while deposits generally reprice at short term interest rates, potentially decreasing net interest income. The agricultural industry is subject to commodity price fluctuations and other risks, and extended periods of low commodity prices, higher input costs or poor weather conditions could result in reduced profit margins, reducing demand for goods and services provided by agriculture-related businesses. The portfolio of multi-family and commercial real estate loans are facing challenging conditions resulting from a combination of reduced occupancy and higher operating costs due to the continuing inflationary pressures in the economy and is primarily responsible for the increase in substandard loans during 2025. The current economic environment, characterized by elevated short-term interest rates in response to inflationary pressures and the potential for a period of slower or negative economic growth, combined with uncertainties related to changes in U.S. trade policies, has heightened the level of challenges, risks and uncertainties facing the business.

The Company's operations are concentrated primarily in central, north-central and south-central Iowa, and as a result of this geographic concentration, results of operations may correlate to the economic conditions in this area. Any deterioration in economic conditions in central, north-central or south-central Iowa, particularly in the industries on which the area depends (including agriculture which, in turn, is dependent upon commodity prices, input costs, weather conditions, trade policies and government support programs), may adversely affect the quality of the loan portfolio and the demand for products and services. The national economy continues to face challenges due to inflationary pressures that began building during late 2021 and, although improved, have persisted through 2025, resulting in continuing upward pressure on consumer and wholesale prices. The FOMC initiated a series of increases in the short-term federal funds interest rate beginning in 2022 and continuing through 2023, and although the FOMC began reducing the federal funds rate in late 2024 and during 2025, interest rates continue to remain at relatively high levels on a historic basis. The continuation of elevated interest rates has the potential to overly reduce economic activity and potentially tip the domestic economy into a recessionary period of slower or negative growth. Developments with respect to global trade policies, including changing tariffs and the imposition of new or increased tariffs and related uncertainty thereof, could have a material adverse effect on the Company's customers and thereby negatively impact its business, results of operations or financial condition.

The Company's loan portfolio is concentrated in commercial real estate and multi-family real estate, which represent approximately 40% ¹⁰¹ of the loan portfolio as of December 31, 2025, and these loans face heightened risk due to factors such as increased susceptibility to economic pressures caused by elevated interest rates and challenging market conditions, with commercial real estate and multi-family real estate loans facing challenging conditions resulting from reduced occupancy and higher operating costs due to inflationary pressures. A significant portion of the loan portfolio consists of loans to agricultural-related borrowers, with approximately 23% ¹⁰² of the loan portfolio made for agricultural purposes, and these borrowers are subject to factors beyond the Company's control including fluctuations in commodity and livestock prices, government trade policies, tariffs, and poor weather conditions, which could result in reduced cash flows and profit margins. The Company's operations are concentrated in Iowa, and any deterioration in economic conditions in central, north-central or south-central Iowa, particularly in the industries on which the area depends including agriculture, may adversely affect the quality of the loan portfolio. The fair value of the securities portfolio had a net unrealized loss of $24.2 million ¹⁰³ as of December 31, 2025, resulting primarily from the negative impact of increased interest rates on the fair value of the portfolio, and factors beyond the Company's control can significantly influence the fair value of securities in the portfolio. The Company relies on dividends and other payments from its Banks for substantially all of its revenue, and various federal and state laws and regulations limit the amounts of dividends that the Banks may pay to the Company, with the Company receiving $13.5 million ¹⁰⁴ in dividends from the Banks in 2025 compared to $10.2 million ¹⁰⁵ in 2024.

Management's message emphasizes that the Company reported net income of $19.0 million ¹⁰⁶ for the year ended December 31, 2025 compared to $10.2 million ¹⁰⁷ for the year ended December 31, 2024, representing an increase in net income of 86.2% ¹⁰⁸, with the increase in earnings primarily due to an increase in net interest income driven by higher yields on loans and investments combined with a lower cost of funds driven by declining market rates and reduced borrowings. All six Banks demonstrated profitable operations during 2025 and 2024. The Company's return on average equity for 2025 was 9.95% ¹⁰⁹ compared to 6.02% ¹¹⁰ in 2024, and the return on average assets for 2025 was 0.90% ¹¹¹ compared to 0.48% ¹¹² in 2024. Management's strategic priorities include utilizing seasoned and competent Bank management and local decision-making authority to provide customers with prompt response times and flexibility in the products and services offered, striving to remain operationally efficient to improve profitability while enabling the Banks to offer more competitive loan and deposit rates, and managing the spread between interest earned on earning assets and interest paid on interest-bearing liabilities to maximize net interest income while maintaining an appropriate level of interest rate risk. Management also emphasizes the importance of maintaining disciplined and prudent underwriting standards and monitoring the multi-family and commercial real estate loan portfolios through regular loan reviews, stress testing and sensitivity analysis.