News and Events

News & Events


Date: 7/19/2019

Title: Ames National Corporation Announces 2019 Q2 Earnings (7/19/19)

AMES NATIONAL CORPORATION ANNOUNCES RECORD EARNINGS FOR THE SECOND QUARTER OF 2019



Second Quarter 2019 results:



For the quarter ended June 30, 2019, net income for Ames National Corporation (the Company) totaled $4,618,000 or $0.50 per share, compared to $4,317,000 or $0.46 per share earned in 2018. The increase in earnings is primarily the result of improved loan interest income, offset in part by higher deposit interest and salary and benefits expenses.

As previously announced, the Company’s largest subsidiary bank, First National Bank (FNB) acquired Clarke County State Bank in Osceola, Iowa on September 14, 2018 (the “Acquisition”). The acquired assets totaled approximately $103 million. Retention of loan and deposit customers from the Acquisition has been favorable. The impact of the Acquisition on the Company’s quarterly net income was accretive.

Second quarter 2019 loan interest income was $1,812,000 higher than second quarter 2018; deposit interest expense also increased $973,000. Second quarter 2019 net interest income totaled $10,930,000, an increase of $719,000, or 7%, compared to the same quarter a year ago. The increase in the net interest income was primarily due to the Acquisition. The higher loan volume, resulting primarily from the Acquisition, and improved loan yields more than offset higher interest expense due to market interest rate increases. The Federal Reserve Bank increased short-term interest rates four times during 2018 that led to a significant increase in interest expense for the quarter ended June 30, 2019. The Company’s net interest margin was 3.20% for the quarter ended June 30, 2019 as compared to 3.16% for the quarter ended June 30, 2018.

A provision for loan losses of $68,000 was recognized in the second quarter of 2019 as compared to $64,000 in the second quarter of 2018. Net loan charge offs totaled $11,000 for the quarter ended June 30, 2019 compared to net loan charge offs of $4,000 for the quarter ended June 30, 2018. While the current provision for loan losses are not related to agricultural loans, the Iowa agricultural economy remains challenged as the result of the low grain prices throughout much of 2018 and 2019 and tariff concerns on Iowa exports. Corn prices rebounded in the second quarter of 2019 as a result of delayed planting caused by excessive rain in much of the Midwest. An early frost could be problematic for our ag loan customers that were impacted by the delayed planting season.

Noninterest income for the second quarter of 2019 totaled $2,213,000 as compared to $1,991,000 in the second quarter of 2018, an increase of 11%. The increase in noninterest income is primarily due to the Acquisition and higher wealth management income. The increase in wealth management income was primarily related to growth in the assets under management, fueled by a favorable equity market and new account relationships.

Noninterest expense for the second quarter of 2019 totaled $7,218,000 compared to $6,713,000 recorded in the second quarter of 2018, an increase of 8%, which was primarily due to the Acquisition. Salaries and benefits was the largest component of the increase in noninterest expense which also includes normal salary and employee benefit increases. The efficiency ratio was 54.9% for the second quarter of 2019 as compared to 55.0% in the second quarter of 2018.

Income tax expense for the second quarter of 2019 totaled $1,239,000 compared to $1,107,000 recorded in 2018. The effective tax rate was 21% and 20% for the quarters ended June 30, 2019 and 2018, respectively. The lower than expected tax rate was due primarily to tax-exempt interest income.

Six Months 2019 results:



For the six months ended June 30, 2019, net income for the Company totaled $8,855,000 or $0.96 per share, compared to $8,354,000 or $0.90 per share earned in 2018. The increase in earnings is primarily the result of improved loan interest income, offset in part by elevated deposit interest expense and higher salary and employee benefits.

For the six months ended June 30, 2019 loan interest income was $3,624,000 higher than the first six months of 2018; deposit interest expense also increased $1,969,000. The net interest income for the six months ended June 30, 2019 totaled $21,901,000, an increase of $1,503,000, or 7%, compared to the same period a year ago. The increase in the net interest income was primarily due to the Acquisition. The higher loan volume, resulting primarily from the Acquisition, and improved loan yields more than offset higher interest expense due to market interest rate increases. The Company’s net interest margin was 3.22% for the six months ended June 30, 2019 as compared to 3.17% for the six months ended June 30, 2018.

A provision for loan losses of $166,000 was recognized in the six months ended June 30, 2019 as compared to $93,000 for the six months ended June 30, 2018. Net loan recoveries totaled $19,000 for the six months ended June 30, 2019 compared to net loan charge offs of $31,000 for the six months ended June 30, 2018. While the current provision for loan losses are not related to agricultural loans, the Iowa agricultural economy remains challenged as the result of the low grain prices, the delayed planting season and tariff concerns on Iowa exports.

Noninterest income for the six months ended June 30, 2019 totaled $4,139,000 as compared to $3,755,000 for the six months ended June 30, 2018, an increase of 10%. The increase in noninterest income is primarily due to the Acquisition and higher wealth management income. The increase in wealth management income was primarily related to growth in the assets under management, fueled by a favorable equity market and new account relationships.

Noninterest expense for the six months ended June 30, 2019 totaled $14,675,000 compared to $13,578,000 for the six months ended June 30, 2018, an increase of 8%, which was primarily due to the Acquisition. Salaries and benefits was the largest component of the increase in noninterest expense which also includes normal salary and employee benefit increases, offset in part by a one-time $1,000 bonus paid to full-time employees in 2018. The efficiency ratio was 56.4% for the six months ended June 30, 2019 and 2018.

Income tax expense for the six months ended June 30, 2019 and 2018 totaled $2,343,000 and $2,127,000, respectively. The effective tax rate was 21% and 20% for the six months ended June 30, 2019 and 2018, respectively. The lower than expected tax rate was due primarily to tax-exempt interest income.

Balance Sheet Review:



As of June 30, 2019, total assets were $1,468,595,000, a $106.5 million increase in assets, compared to June 30, 2018. The increase is primarily due to loan growth resulting from the Acquisition, offset in part by a smaller portfolio of investments.

Securities available-for-sale as of June 30 2019 declined to $458,763,000 from $478,733,000 as of June 30, 2018. The decrease in securities available-for-sale is primarily due to maturities of municipal bonds and payments received on mortgage backed securities, offset in part by increases in the unrealized gain on the investment portfolio as market interest rates caused an increase in the fair value of the investment portfolio.

Net loans as of June 30, 2019 increased 12%, to $873,639,000, as compared to $780,260,000 as of June 30, 2018. Impaired loans were $3,233,000 and $3,803,000 as of June 30, 2019 and 2018, respectively. The allowance for loan losses on June 30, 2019 totaled $11,869,000, or 1.34% of gross loans, compared to $11,383,000 or 1.44% of gross loans as of June 30, 2018. The decrease in the ratio of the allowance for loan losses to loans is due primarily to the Acquisition. The purchased loan portfolio is initially recorded without an allowance for loan loss, as the credit risk is reflected in the fair value of loans on the acquisition date. Loan demand appears to have softened during 2019 declining approximately $17 million since December 31, 2018.

Deposits totaled $1,244,457,000 on June 30, 2019, compared to $1,151,815,000 recorded at June 30, 2018. The increase in deposits is primarily due to the Acquisition.

The largest source of funding for the Company besides deposits is securities sold under agreements to repurchase which totaled $31,693,000 as of June 30, 2019 as compared to $34,108,000 recorded as of June 30, 2018.

The Company’s stockholders’ equity represented 12.5% of total assets as of June 30, 2019 with all of the Company’s five affiliate banks considered well-capitalized as defined by federal capital regulations. Total stockholders’ equity was $183,252,000 as of June 30, 2019, compared to $167,941,000 as of June 30, 2018. The increase in stockholders’ equity was primarily the result of the retention of net income in excess of dividends and an increase in the market value of the Company’s investment portfolio.

Shareholder Information:


Return on average assets was 1.27% and 1.26% for the quarters ended June 30, 2019 and 2018, respectively. Return on average equity was 10.3% and 10.4% for the quarters ended June 30, 2019 and 2018, respectively.

Return on average assets was 1.22% for the six months ended June 30, 2019 and 2018. Return on average equity was 10.0% for the six months ended June 30, 2019 and 2018.

The Company’s stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $27.10 on June 30, 2019. During the second quarter of 2019, the price ranged from $25.40 to $28.86.

On May 8, 2019, the Company declared a quarterly cash dividend on common stock, payable on August 15, 2019 to stockholders of record as of August 1, 2019, equal to $0.24 per share.

 

Click here to view the Consolidated Balance Sheets & Statements of Income (unaudited)

 

Click here to view a PDF of the Q2 Report.

 

About Ames National Corporation

Ames National Corporation is listed on the NASDAQ Capital Market under the ticker symbol, ATLO. The Corporation affiliate banks, all located in central Iowa, include: First National Bank, Ames, Boone Bank & Trust Co., Boone, State Bank & Trust Co., Nevada, Reliance State Bank, Story City, and United Bank & Trust, Marshalltown. Information regarding the process for purchasing stock can be obtained through Richard Nelson at First Point Wealth Management, (515) 663-3074.

For further information contact:
John P. Nelson, President and CEO
(515) 232-6251 or [email protected]