Ames National Corporation Announces 2021 Q1 Earnings (4/16/21)
Ames National Corporation Announces 2021 Q1 Earnings
First Quarter 2021 results:
For the quarter ended March 31, 2021, net income for the Company totaled $6.0 million, or $0.66 per share, compared to $3.6 million, or $0.39 per share, earned in the first quarter of 2020. The increase in earnings is primarily the result of a decrease in provision for loan losses due to the onset of the COVID-19 pandemic in 2020 and a reduction in interest expense due to declines in market interest rates.
First quarter 2021 interest income was $840 thousand lower than first quarter 2020. The decrease is primarily due to a reduction in interest rates, offset in part by $840 thousand of fees recognized from Paycheck Protection Program (PPP) loans and $335 thousand of recognized nonaccrual interest income. Deposit interest expense declined $1.4 million during this same time period, primarily due to market rate declines offset in part by increases in deposit balances. First quarter 2021 net interest income totaled $13.7 million, an increase of $618 thousand, or 5%, compared to the same quarter a year ago. The increase in net interest income was primarily due to a reduction in interest expense due to declines in market rates. The Company’s net interest margin was 2.86% for the quarter ended March 31, 2021 as compared to 3.18% for the quarter ended March 31, 2020.
A negative provision for loan losses of ($426) thousand was recognized in the first quarter of 2021 as compared to $2.3 million in the first quarter of 2020. Net loan recoveries totaled $118 thousand for the quarter ended March 31, 2021 compared to net loan charge offs of $26 thousand for the quarter ended March 31, 2020. The negative provision for loan losses was primarily due to loan recoveries, a reduction in a specific reserve and lower loan balances from year-end. The provision for loan losses in 2020 was primarily due to the onset of the COVID-19 pandemic.
As the economic slowdown and recovery due to the COVID-19 pandemic continues to evolve, our customers may experience decreased revenues, which may correlate to an inability to make timely loan payments or maintain payroll. This, in turn, could adversely impact the revenues and earnings of the Company by, among other things, requiring increases in our allowance for loan losses and increases in the level of charge-offs in our loan portfolio. The COVID-19 pandemic has more significantly impacted the Company’s hospitality and fitness center loans. As of March 31, 2021, approximately 6.8% of our loan portfolio is associated with these industries. There have been requests for loan payment modifications due to the COVID-19 pandemic and these modifications were primarily related to payment deferrals or interest only payments. The total loans still in the modification period were approximately $15.4 million as of March 31, 2021. In addition to these modifications, certain types of government guaranteed loans originated under the PPP of approximately $59.2 million are outstanding as of March 31, 2021. Fee income from PPP loans of $840 thousand was recognized into interest income for the three months ended March 31, 2021. As of March 31, 2021, the Company has $3.1 million of unrecognized PPP loan fees that are amortizing to interest income over the life of the loans. The federal government is providing numerous other programs to lessen the effects of COVID-19 on the economy and, in turn, our loan portfolio.
Noninterest income for the first quarter of 2021 totaled $2.5 million as compared to $2.6 million in the first quarter of 2020, a decrease of 5%. The decrease in noninterest income was primarily due to securities gains recognized in the first quarter of 2020 and partially offset by an increase in gains on sale of residential loans held for sale.
Noninterest expense for the first quarter of 2021 totaled $9.0 million compared to $9.1 million recorded in the first quarter of 2020, a decrease of 1%. The decrease is primarily due to salaries and employee benefits and partially offset by an increase in data processing costs. The decrease in salaries and employee benefits is due to a reduction in the number of personnel and increased deferred loan costs due to PPP loan volume, offset in part by normal salary and benefit increases. The efficiency ratio was 55.7% for the first quarter of 2021 as compared to 57.7% in the first quarter of 2020.
Income tax expense for the first quarter of 2021 totaled $1.6 million compared to $756 thousand recorded in the first quarter of 2020. The effective tax rate was 21% and 18% for the quarters ended March 31, 2021 and 2020, respectively. The lower than expected tax rate in 2021 and 2020 was due primarily to tax-exempt interest income and New Markets Tax Credits.
Balance Sheet Review:
As of March 31, 2021, total assets were $2.1 billion, an increase of $302.1 million, as compared to March 31, 2020. The increase is primarily due to investment securities, PPP and commercial real estate loans, and growth in interest-bearing deposits in financial institutions. This increase in assets was funded by growth in our deposits due in part to federal government stimulus programs and a lack of other desirable fixed income alternatives for our customers.
Securities available-for-sale as of March 31, 2021 increased to $672.3 million from $489.3 million as of March 31, 2020. The increase in securities available-for-sale is primarily due to purchases of treasuries, mortgage-backed securities, and municipals as deposit growth was deployed.
Net loans as of March 31, 2021 increased 4%, to $1.12 billion, as compared to $1.08 billion as of March 31, 2020. The increase in loans was primarily due to organic growth in the commercial real estate loan portfolio and government guaranteed loans under the PPP, offset in part by decreases in the agricultural loan portfolios. PPP loans totaled $59.2 million as of March 31, 2021. Impaired loans were $13.4 million and $17.7 million as of March 31, 2021 and 2020, respectively. Loans classified as substandard were $48.9 million and $23.0 million as of March 31, 2021 and 2020, respectively. Loans classified as watch totaled $176.0 million and $169.6 million as of March 31, 2021 and 2020, respectively. The increase in substandard and watch loans relate mainly to the weakened economy due to the COVID-19 pandemic. The allowance for loan losses on March 31, 2021 totaled $16.9 million, or 1.48% of gross loans, compared to $14.9 million, or 1.36% of gross loans, as of March 31, 2020. The increase in the allowance for loan losses is mainly due to increased risk associated with the loan portfolio due to the economic slowdown associated with the COVID-19 pandemic. Also, the PPP loans are government guaranteed and the impact on the allowance for loan loss was not significant. Additional increases in the allowance for loan losses and charge-offs are possible if the effects of the COVID-19 pandemic negatively impact our loan portfolio.
Deposits totaled $1.84 billion as of March 31, 2021, compared to $1.55 billion recorded as of March 31, 2020. The growth in deposits is primarily due to increases in core deposits, including retail and commercial funds. Balances fluctuate as customer’s liquidity needs vary and could be impacted by additional government stimulus or distressed economic conditions.
There were no dividends payable as of March 31, 2021. In the past, dividends were declared in one quarter and then paid in the subsequent quarter. For the quarter ended March 31, 2021 the dividend was not declared until April 14, 2021 and will be paid in the second quarter of 2021.
The Company’s stockholders’ equity represented 9.7% of total assets as of March 31, 2021. Total stockholders’ equity was $204.4 million as of March 31, 2021, compared to $188.5 million as of March 31, 2020. 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.
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The Company’s stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $25.58 on March 31, 2021. During the first quarter of 2021, the price ranged from $22.05 to $27.90.
On April 14, 2021, the Company declared a quarterly cash dividend on common stock, payable on May 14, 2021 to stockholders of record as of April 30, 2021, equal to $0.26 per share, an increase of $0.01 per share or 4% from the prior quarter. Dividends in the future may be reduced or eliminated if the COVID-19 pandemic has an adverse effect on net income or the Company’s capital ratios are negatively affected from balance sheet growth related to additional government stimulus programs.
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]