News and Events

News & Events


Date: 1/25/2020

Title: Ames National Corporation Announces 2019 Q4 Earnings (1/24/20)

AMES NATIONAL CORPORATION ANNOUNCES 2019 FOURTH QUARTER EARNINGS 


Fourth Quarter 2019 results:


Ames National Corporation is pleased to announce the completion of the acquisition of Iowa State Savings Bank with its five branches located in Creston, Corning, Lenox and Diagonal on October 25, 2019 (the “Creston Acquisition”). The Company welcomes our new employees and customers, and look forward to a mutually beneficial long-term relationship. The staff of Iowa State Savings Bank has made outstanding progress during the fourth quarter with the integration of the bank and are to be commended on their significant efforts to ensure a smooth transition. Iowa State Savings Bank has assets, loans and deposits as of December 31, 2019 of approximately $215 million, $137 million and $186 million, respectively. Retention of loan and deposit customers from the Acquisition has been favorable. Non-routine costs associated with the Acquisition totaled approximately $195,000 for the quarter ended December 31, 2019.

For the quarter ended December 31, 2019, net income for the Company totaled $4,298,000, or $0.47 per share, compared to $4,201,000, or $0.45 per share, earned in the fourth quarter of 2018. The increase in earnings is primarily the result of the Creston Acquisition and the net effect of the investment in new market tax credit projects, offset by higher deposit interest expense.

Fourth quarter 2019 loan interest income was $1,689,000 higher than fourth quarter 2018; deposit interest expense also increased $582,000. Fourth quarter 2019 net interest income totaled $12,534,000, an increase of $1,393,000, or 12.5%, compared to the same quarter a year ago. The increase in net interest income was primarily due to the Creston Acquisition, offset in part by an increase in deposit interest expense and a decrease in tax-exempt interest income. Tax-exempt interest income decreased primarily due to the maturity of municipal bonds. Deposit interest rates were higher than a year ago due to general market interest rates in 2019 and heightened competition for deposits among financial institutions. The Company’s net interest margin was 3.25% for the quarter ended December 31, 2019 as compared to 3.29% for the quarter ended December 31, 2018.

A provision for loan losses of $769,000 was recognized in the fourth quarter of 2019 as compared to $446,000 in the fourth quarter of 2018. Net loan charge offs totaled $84,000 for the quarter ended December 31, 2019 compared to $51,000 for the quarter ended December 31, 2018. The increase in the provision for loan losses was primarily due to loan growth. 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. Initial loan renewal activity for 2020 agricultural operating lines of credit reflect positive cash flow statements for the 2019 growing season.

Noninterest income for the fourth quarter of 2019 totaled $2,372,000 as compared to $1,984,000 in the fourth quarter of 2018, an increase of 19.5%. The increase in noninterest income was primarily due to the noninterest income related to the Creston Acquisition and gain on the sale of loans. The increase in the gain on sale of loans was due to higher loan volume driven by a healthy residential mortgage market in central Iowa.

Noninterest expense for the fourth quarter of 2019 totaled $9,372,000 compared to $7,399,000 recorded in the fourth quarter of 2018, an increase of 26.7%. Most of the increase was related to the Creston Acquisition and the amortization of Federal new market tax credit investments. Salaries and employee benefits, excluding the Creston Acquisition, increased 4.9% primarily due to normal salary and benefit increases. Data processing costs, excluding the Creston Acquisition, increased 10.2% primarily due to normal cost increases and expanded services. The decrease in FDIC insurance assessments was due to the receipt of a small bank credit as the deposit insurance reserve ratio exceeded 1.35%. The efficiency ratio was 62.9% for the fourth quarter of 2019 as compared to 56.4% in the fourth quarter of 2018. The increase in the efficiency ratio was due in part to the amortization of the Federal new market tax credit investments and one-time costs associated with the Creston Acquisition in 2019.

Income tax expense for the fourth quarter of 2019 totaled $467,000 compared to $1,078,000 recorded in the fourth quarter of 2018. The effective tax rate was 9.8% and 20.4% for the quarters ended December 31, 2019 and 2018, respectively. The lower than expected tax rate was due primarily to tax-exempt interest income and $693,000 of new market tax credits recognized in the fourth quarter of 2019.

Year 2019 results:


In addition to the Creston Acquisition referred to above, the Company’s largest subsidiary bank, First National Bank (FNB) acquired Clarke County State Bank in Osceola, Iowa on September 14, 2018 (the “Osceola Acquisition”).

For the year ended December 31, 2019, net income for the Company totaled $17,194,000, or $1.86 per share, compared to $17,014,000, or $1.83 per share, earned in 2018. The increase in earnings is primarily the result of the Osceola Acquisition and improved loan interest income, offset in part by elevated deposit interest expense.

For the year ended December 31, 2019 loan interest income was $6,269,000 higher than the year ended 2018; while deposit interest expense increased $3,359,000. Net interest income for the year ended December 31, 2019 totaled $45,248,000, an increase of $3,124,000, or 7.4%, compared to the same period a year ago. The increase in net interest income was primarily due to the Creston and Osceola Acquisitions (the “Acquisitions”). The higher loan volume, resulting primarily from the Acquisitions, and improved loan yields more than offset higher interest expense due to market interest rate increases. The Company’s net interest margin was 3.21% for the year ended December 31, 2019 as compared to 3.23% for the year ended December 31, 2018.

A provision for loan losses of $1,314,000 was recognized for the year ended December 31, 2019 as compared to $639,000 for the year ended December 31, 2018. Net loan charge offs totaled $379,000 for the year ended December 31, 2019 compared to $276,000 for the year ended December 31, 2018. The increase in the provision for loan losses was necessary to maintain an adequate allowance for loan losses on the increasing outstanding loan portfolio, as well as funding net charge offs. 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.

Noninterest income for the year ended December 31, 2019 totaled $8,629,000 as compared to $7,901,000 for the year ended December 31, 2018, an increase of 9.2%. The increase in noninterest income is primarily due to the Acquisitions and higher wealth management income and gain on the sale of loans, offset in part by a gain on foreclosure of other real estate owned in 2018. 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 year ended December 31, 2019 totaled $31,522,000 compared to $27,965,000 for the year ended December 31, 2018, an increase of 12.7%, which was primarily due to the Acquisitions. Salaries and benefits was the largest component of the increase in noninterest expense, which in addition to Acquisition related increases 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. Another component of the non-Acquisition related increase in noninterest expense was the increase in data processing costs, which includes costs associated with expanded services and normal cost increases. The efficiency ratio was 58.5% and 55.9% for the year ended December 31, 2019 and 2018, respectively.

Income tax expense for the year ended December 31, 2019 and 2018 totaled $3,848,000 and $4,406,000, respectively. The effective tax rate was 18.3% and 20.6% for the years ended December 31, 2019 and 2018, respectively. The lower than expected tax rate was due primarily to tax-exempt interest income and $693,000 of new market tax credits recognized in the fourth quarter of 2019.


Balance Sheet Review:


As of December 31, 2019, total assets were $1,737,183,000, a $281.5 million increase in assets, as compared to December 31, 2018. The increase is primarily due to the Creston Acquisition, growth in interest bearing deposits in financial institutions and to a lesser extent organic loan growth.

Securities available-for-sale as of December 31, 2019 increased to $479,843,000 from $458,971,000 as of December 31, 2018. The increase in securities available-for-sale is primarily due to the Creston Acquisition and the increase in the unrealized gain on the investment portfolio, offset in part by maturities of municipal bonds and payments received on mortgage backed securities.

Net loans as of December 31, 2019 increased 18%, to $1,048,147,000, as compared to $890,461,000 as of December 31, 2018. Impaired loans were $4,788,000 and $3,234,000 as of December 31, 2019 and 2018, respectively. The allowance for loan losses on December 31, 2019 totaled $12,619,000, or 1.19% of gross loans, compared to $11,684,000, or 1.29% of gross loans, as of December 31, 2018. The decrease in the allowance for loan losses as a percent of loans is mainly due to initially recording the purchased loan portfolios from Acquisitions without an allowance for loan losses, as the credit risk is reflected in the fair value of loans on the acquisition dates.

Other assets totaled $6,041,000 as of December 31, 2019, compared to $1,117,000 as of December 31, 2018. This increase is primarily due to the investment in new market tax credits.

Deposits totaled $1,493,175,000 on December 31, 2019, compared to $1,221,084,000 recorded at December 31, 2018. The growth in deposits is primarily due to the Creston Acquisition and increases in core deposits at the Company’s largest affiliate bank, including retail, commercial and public funds.

The Company’s stockholders’ equity represented 10.8% of total assets as of December 31, 2019 with all of the Company’s six affiliate banks considered well-capitalized as defined by federal capital regulations. Total stockholders’ equity was $187,579,000 as of December 31, 2019, compared to $172,865,000 as of December 31, 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:


Annualized return on average assets was 1.0% and 1.2% for the quarters ended December 31, 2019 and 2018, respectively. Annualized return on average equity was 9.2% and 9.9% for the quarters ended December 31, 2019 and 2018, respectively.

Return on average assets was 1.1% and 1.2% for the years ended December 31, 2019 and 2018, respectively. Return on average equity was 9.5% and 10.1% for the years ended December 31, 2019 and 2018, respectively.

The Company’s stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $28.06 on December 31, 2019. During the fourth quarter of 2019, the price ranged from $26.97 to $29.30.

On November 13, 2019, the Company declared a quarterly cash dividend on common stock, payable on February 14, 2020 to stockholders of record as of January 31, 2020, equal to $0.24 per share.

The Company is forecasting earnings for the year ending December 31, 2020 in the range of $1.93 to $1.98 per share compared to $1.86 per share earned for the year ended December 31, 2019.

 

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

 

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; Iowa State Savings Bank, Creston; 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]