Date: 4/15/2019

Title: Ames National Corporation Announces 2019 Q1 Earnings (4/15/19)

AMES NATIONAL CORPORATION ANNOUNCES 2019 FIRST QUARTER EARNINGS RESULTS

For the quarter ended March 31, 2019, net income for Ames National Corporation (the Company) totaled $4,237,000 or $0.46 per share, compared to $4,037,000 or $0.43 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, higher salary and employee benefits, data processing and occupancy 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.

First quarter 2019 loan interest income was $1,813,000 higher than first quarter 2018; deposit interest expense also increased $996,000. First quarter 2019 net interest income totaled $10,970,000, an increase of $784,000, or 8%, compared to the same quarter a year ago. The increase in the net interest income was primarily due to the Acquisition. The higher volume of loans and improved 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, with no changes in rates for 2019. The Company’s net interest margin was 3.23% for the quarter ended March 31, 2019 as compared to 3.19% for the quarter ended March 31, 2018.

A provision for loan losses of $98,000 was recognized in the first quarter of 2019 as compared to $29,000 in the first quarter of 2018. Net loan recoveries totaled $30,000 for the quarter ended March 31, 2019 compared to net loan charge offs of $27,000 for the quarter ended March 31, 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 current low grain prices and tariff concerns on Iowa exports.

Noninterest income for the first quarter of 2019 totaled $1,926,000 as compared to $1,764,000 in the first quarter of 2018, an increase of 9%. 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 first quarter of 2019 totaled $7,457,000 compared to $6,865,000 recorded in the first quarter of 2018, an increase of 9%, 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 57.8% for the first quarter of 2019 as compared to 57.4% in the first quarter of 2018.

Income tax expense for the first quarter of 2019 totaled $1,104,000 compared to $1,020,000 recorded in 2018. The effective tax rate was 21% and 20% for the quarter ended March 31, 2019 and 2018, respectively. The lower than expected tax rate was due primarily to tax-exempt interest income.

Balance Sheet Review:

As of March 31, 2019, total assets were $1,472,317,000, an $80.5 million increase in assets, compared to March 31, 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 March 31, 2019 declined to $455,554,000 from $489,091,000 as of March 31, 2018. The decrease in securities available-for-sale is primarily due to maturities of municipal bonds and payments received on mortgage backed securities.

Net loans as of March 31, 2019 increased 15%, to $886,557,000, as compared to $772,495,000 as of March 31, 2018. Impaired loans were $3,340,000 and $4,279,000 as of March 31, 2019 and 2018, respectively. The allowance for loan losses on March 31, 2019 totaled $11,812,000, or 1.31% of gross loans, compared to $11,323,000 or 1.44% of gross loans as of March 31, 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 the first quarter of 2019.

Deposits totaled $1,252,514,000 on March 31, 2019, compared to $1,170,424,000 recorded at March 31, 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 $32,397,000 as of March 31, 2019 as compared to $36,534,000 recorded as of March 31, 2018.

The Company’s stockholders’ equity represented 12.1% of total assets as of March 31, 2019 with all of the Company’s five affiliate banks considered well-capitalized as defined by federal capital regulations. Total stockholders’ equity was $177,777,000 as of March 31, 2019, compared to $166,546,000 as of March 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:

Return on average assets was 1.17% and 1.19% for the quarters ended March 31, 2019 and 2018, respectively. Return on average equity was 9.73% for the quarter ended March 31, 2019, compared to 9.55% for the quarter ended March 31, 2018. The Company’s stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $27.41 on March 31, 2019. During the first quarter of 2019, the price ranged from $24.47 to $29.46. On February 13, 2019, the Company declared a quarterly cash dividend on common stock, payable on May 15, 2019 to stockholders of record as of May 1, 2019, equal to $0.24 per share, a 4.3% increase in the regular dividend from the previous quarter.

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]