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Corporate Information

Press Releases

Date: 1/23/2021

Title: Ames National Corporation announces 2020 Q4 Earnings (1/22/21)

AMES NATIONAL CORPORATION ANNOUNCES EARNINGS FOR THE FOURTH QUARTER OF 2020

Fourth Quarter 2020 results:

For the quarter ended December 31, 2020, net income for the Company totaled $5,196,000, or $0.57 per share, compared to $4,298,000, or $0.47 per share, earned in the fourth quarter of 2019. The increase in earnings is primarily the result of a reduction in interest expense due to declines in market rates, offset in part by an increase in the provision for loan losses.

As previously announced, the Company acquired Iowa State Savings Bank on October 25, 2019 (the “Acquisition”). The acquired assets totaled approximately $215 million. Retention of loan and deposit customers from the Acquisition has been favorable. The net income of Iowa State Savings Bank was $506,000 and $1,679,000 for the three months and year ended December 31, 2020, respectively. The net income of Iowa State Savings Bank was $303,000 from the acquisition date of October 25, 2019 through the year ended December 31, 2019.

Fourth quarter 2020 interest income was $153,000 higher than fourth quarter 2019. The increase is primarily due to organic loan growth, Paycheck Protection Program (PPP) loans and growth in investment securities, offset in part by a reduction in interest rates. Deposit interest expense decreased $1,134,000 during this same time period, primarily due to market rate declines offset in part by increases in deposit balances. Fourth quarter 2020 net interest income totaled $13,957,000, an increase of $1,423,000, or 11%, 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 3.03% for the quarter ended December 31, 2020 as compared to 3.25% for the quarter ended December 31, 2019.

A provision for loan losses of $1,256,000 was recognized in the fourth quarter of 2020 as compared to $769,000 in the fourth quarter of 2019. Net loan recoveries totaled $26,000 for the quarter ended December 31, 2020 compared to net loan charge offs of $84,000 for the quarter ended December 31, 2019. The increase in the provision for loan losses was primarily due to a specific reserve placed on one hospitality loan in the commercial real estate portfolio. The economic slowdown associated with the COVID-19 pandemic may adversely affect our loan portfolios but could more quickly affect the loans associated with hospitality and entertainment industries. As of December 31, 2020, approximately 8.7% of our loan portfolio is associated with these industries.

The Company conducts business in the State of Iowa and Iowa began to place significant restrictions on companies and individuals on March 9, 2020 as a result of the COVID-19 pandemic. The State of Iowa has eased many of the restrictions related to the COVID-19 pandemic. As an organization that focuses on community banking, we are concerned about the health of our customers, employees and local communities and keep that thought at the forefront of our decisions. The Company’s bank lobbies have been open to the public, and business is also being transacted through our drive-up facilities, online, telephone or by appointment. As the economic slowdown 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 further increases in our allowance for loan losses and increases in the level of charge-offs in our loan portfolio. 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 $45.9 million as of December 31, 2020. The total modified loans more than 30 days past due after the modification period was completed were $572,000 as of December 31, 2020. In addition to these modifications, certain types of government guaranteed loans originated under the Paycheck Protection Program of approximately $45.5 million are outstanding as of December 31, 2020. Fee income from PPP loans of $1.1 million and $2.3 million was recognized into interest income for the three months and year ended December 31, 2020, respectively. The federal government is providing numerous other programs to lessen the effects of COVID-19 on the economy and in turn our loan portfolio. The severity of the effect of the COVID-19 pandemic on our operations is difficult to determine at this time.

Noninterest income for the fourth quarter of 2020 totaled $2,766,000 as compared to $2,372,000 in the fourth quarter of 2019, an increase of 17%. The increase in noninterest income was primarily due to gains on sale of residential loans held for sale from increased refinancing volume in a low interest rate environment.

Noninterest expense for the fourth quarter of 2020 totaled $9,111,000 compared to $9,372,000 recorded in the fourth quarter of 2019, a decrease of 3%. The decrease is primarily due to less amortization of New Markets Tax Credit projects in 2020 and one-time costs associated with the Acquisition in 2019. The efficiency ratio was 54.5% for the fourth quarter of 2020 as compared to 62.9% in the fourth quarter of 2019.

Income tax expense for the fourth quarter of 2020 totaled $1,159,000 compared to $467,000 recorded in the fourth quarter of 2019. The effective tax rate was 18% and 10% for the quarters ended December 31, 2020 and 2019, respectively. The lower than expected tax rate in 2020 and 2019 was due primarily to tax-exempt interest income and New Markets Tax Credits. New Markets Tax Credits of $674,000 were recognized in the fourth quarter of 2019. The New Markets Tax Credits were recognized throughout the year in 2020.


Year 2020 results:

For the year ended December 31, 2020, net income for the Company totaled $18,850,000 or $2.06 per share, compared to $17,194,000 or $1.86 per share earned in 2019. The increase in earnings is primarily the result of the Acquisition, reduction in interest expense due to declines in market rates, and was partially offset by an increase in the provision for loan losses.

For the year ended December 31, 2020 loan interest income was $6,188,000 higher than the year ended 2019, primarily due to the Acquisition, PPP loans and related fees, and organic loan growth, offset in part by a reduction in interest rates. Deposit interest expense decreased $2,380,000, mostly due to market interest rate declines and offset in part by an increase in average balances. The net interest income for the year ended December 31, 2020 totaled $54,843,000, an increase of $9,595,000, or 21%, compared to the same period a year ago. The Company’s net interest margin was 3.13% for the year ended December 31, 2020 as compared to 3.21% for the year ended December 31, 2019.

A provision for loan losses of $5,681,000 was recognized in the year ended December 31, 2020 as compared to $1,314,000 for the year ended December 31, 2019. Net loan charge offs totaled $1,085,000 for the year ended December 31, 2020 compared to $379,000 for the year ended December 31, 2019. The increase in the provision for loan losses was primarily due to the effects of the economic slowdown associated with the COVID-19 pandemic on our loan portfolio and to a lesser extent loan growth.

Noninterest income for the year ended December 31, 2020 totaled $10,620,000 as compared to $8,629,000 for the year ended December 31, 2019, an increase of 23%. The increase in noninterest income was primarily due to an increase in gains on sale of residential loans held for sale due to increased refinancing in a low interest rate environment, the Acquisition, and security gains.

Noninterest expense for the year ended December 31, 2020 totaled $36,551,000 compared to $31,522,000 for the year ended December 31, 2019, an increase of 16%. Most of the increase was related to the Acquisition. Excluding the Acquisition, the increase was primarily related to salaries and employee benefits due to normal increases including health insurance costs. The efficiency ratio was 55.8% and 58.5% for the year ended December 31, 2020 and 2019, respectively.

Income tax expense for the year ended December 31, 2020 and 2019 totaled $4,381,000 and $3,848,000, respectively. The effective tax rate was 19% and 18% for the year ended December 31, 2020 and 2019, respectively. The lower than expected tax rate in 2020 and 2019 was due primarily to tax-exempt interest income and New Markets Tax Credits.


Balance Sheet Review:

As of December 31, 2020, total assets were $1,975,648,000, an increase of $238.5 million, as compared to December 31, 2019. The increase is primarily due to investment securities, Payroll Protection Program loans, organic loan growth and to a lesser extent 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 fixed income alternatives.

Securities available-for-sale as of December 31, 2020 increased to $596,999,000 from $479,843,000 as of December 31, 2019. The increase in securities available-for-sale is primarily due to purchases in excess of maturities of mortgage-backed securities and municipal bonds as deposit growth was deployed.

Net loans as of December 31, 2020 increased 8%, to $1,129,505,000, as compared to $1,048,147,000 as of December 31, 2019. The increase in loans was primarily due to organic growth in the commercial real estate loan portfolio and government guaranteed loans under the Paycheck Protection Program. Paycheck Protection Program loans totaled $45.5 million as of December 31, 2020. Impaired loans were $15.3 million and $4.8 million as of December 31, 2020 and 2019, respectively. The increase in impaired loans was due primarily to the deterioration of one hospitality loan relationship in the commercial real estate portfolio. Loans classified as substandard were $38.4 million and $32.4 million as of December 31, 2020 and 2019, respectively. Loans classified as watch totaled $187.3 million and $104.8 million as of December 31, 2020 and 2019, 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 December 31, 2020 totaled $17,215,000, or 1.50% of gross loans, compared to $12,619,000, or 1.19% of gross loans, as of December 31, 2019. 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 and to a lesser extent organic growth in the loan portfolio. The initial recording of the purchased loan portfolios from prior acquisitions did not initially have an allowance for loan losses, as the credit risk was reflected in the fair value of loans on the acquisition date. Also, the Paycheck Protection Program 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 anticipated if the effects of the COVID-19 pandemic negatively impact our loan portfolio.

Deposits totaled $1,716,446,000 as of December 31, 2020, compared to $1,493,175,000 recorded as of December 31, 2019. 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 distressed economic conditions or additional government stimulus.

There were no dividends payable as of December 31, 2020. In the past, dividends were declared in one quarter and then paid in the subsequent quarter. For the quarter ended December 31, 2020 the dividend was not declared until January 13, 2021 and will be paid in the first quarter of 2021.

The Company’s stockholders’ equity represented 10.6% of total assets as of December 31, 2020 with all of the Company’s six affiliate banks considered well-capitalized as defined by federal capital regulations. Total stockholders’ equity was $209,486,000 as of December 31, 2020, compared to $187,579,000 as of December 31, 2019. 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, offset in part by stock repurchases.


Shareholder Information:

The Company’s stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $24.02 on December 31, 2020. During the fourth quarter of 2020, the price ranged from $16.62 to $26.87.

On January 13, 2021, the Company declared a quarterly cash dividend on common stock, payable on February 15, 2021 to stockholders of record as of February 1, 2021, equal to $0.25 per share. Dividends in the future may be reduced or eliminated if the COVID-19 pandemic has an adverse effect on net income.

 

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]