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Date: 10/18/2013

Title: ANC Announces 2013 Q3 Earnings

Ames National Corporation Announces 2013 Third Quarter Earnings Results


Third Quarter 2013 Results:

For the quarter ended September 30, 2013, net income for Ames National Corporation (the Company) totaled $3,712,000, or $0.40 per share, compared to $3,861,000 or $0.41 per share in 2012.  Net income decreased primarily due to lower gains on the sale of loans held for sale and higher salaries and employee benefits, offset in part by an increase in net interest income. 

Third quarter net interest income totaled $8,511,000, an increase of $265,000, or 3.2%, compared to the same quarter a year ago, due to the recognition of $320,000 of interest income on several nonaccrual loans that were collected or returned to accrual during the quarter.  Indicative of an industry wide trend, the Company’s net interest margin decreased to 3.28% for the quarter ended September 30, 2013 from 3.34% for the quarter ended September 30, 2012.  Excluding the interest income recognized on several nonaccrual loans, the net interest margin for the quarter ended September 30, 2013 would have been 3.17%.  The decrease can be attributed to lower market yields on interest earning assets which have matured and repriced in 2013 as compared to 2012.   

A provision for loan losses of $92,000 was recognized in the third quarter of 2013 as compared to $36,000 in the third quarter of 2012.  Net loan charge-offs were $9,000 and $47,000 for the quarters ended September 30, 2013 and 2012, respectively.

Noninterest income for the third quarter of 2013 totaled $1,820,000 as compared to $2,059,000 for the same period in 2012.  The decrease in noninterest income is primarily due to lower gains on the sale of loans held for sale due to decreased secondary market volume as refinancing activity has slowed.

Noninterest expense for the third quarter of 2013 totaled $5,231,000 compared to $5,043,000 recorded in 2012.  The increase of 3.7% in noninterest expense was primarily the result of increased salaries and benefits due to normal salary increases and increased staffing.  The efficiency ratio for the third quarter of 2013 was 50.63%, compared to 48.93% in 2012.

Nine Months 2013 Results:

For the nine months ended September 30, 2013, net income for the Company totaled $10,577,000, or $1.14 per share, compared to $10,714,000 or $1.15 per share in 2012.  Net income decreased primarily due to higher noninterest expenses, offset in part by an increase in net interest income.  

The Company’s management continues to be pleased with the results of the acquisition of the Garner and Klemme, Iowa offices by Reliance State Bank (the “Acquisition”) on April 27, 2012.  Reliance State Bank’s (RSB’s) net income for the nine months ended September 30, 2013 was $1,629,000, as compared to $1,248,000 for the nine months ended September 30, 2012.  The Acquisition contributed to increases in net interest income, noninterest income excluding securities gains, and noninterest expense.

Net interest income for the nine months ended September 30, 2013 totaled $24,703,000, an increase of $546,000, or 2.3%, compared to the same period a year ago, primarily due to the recognition of interest income on several nonaccrual loans, the Acquisition and lower interest rates on deposits.  Indicative of an industry wide trend, the Company’s net interest margin declined to 3.16% for the nine months ended September 30, 2013 from 3.37% for the nine months ended September 30, 2012.  The decrease can be attributed to lower market yields on interest earning assets which have matured and repriced, offset in part by lower rates on interest bearing liabilities in 2013 as compared to 2012.   

A provision for loan losses of $166,000 was recognized for the nine months ended September 30, 2013 as compared to $151,000 for the nine months ended September 30, 2012.  Net loan charge-offs were $36,000 and $47,000 for the nine months ended September 30, 2013 and 2012, respectively.

Noninterest income for the nine months ended September 30, 2013 totaled $5,752,000 as compared to $5,690,000 for the same period in 2012. 

Noninterest expense for the nine months ended September 30, 2013 totaled $16,188,000 compared to $15,376,000 recorded for the same period in 2012.  The increase of 5.3% in noninterest expense was primarily the result of higher salaries and employee benefits and higher other real estate owned costs.  The higher salaries and benefits costs were due primarily to normal salary increases, the Acquisition and increased staffing.  Other real estate owned costs increased due to the impairment write down of $670,000 in the second quarter of 2013.  The efficiency ratio for the nine months ended September 30, 2013 was 53.15%, compared to 51.52% in 2012.

Balance Sheet Review:

As of September 30, 2013, total assets were $1,213,233,000, a $45,354,000 increase compared to September 30, 2012.  The increase in assets was mainly due to a higher level of loans and investments funded by the growth in deposits and FHLB advances. 

Securities available-for-sale as of September 30, 2013 increased to $583,477,000, compared to $573,557,000 as of September 30, 2012.  The increase in securities available-for-sale is primarily due to increases in U.S. government agencies, state and political subdivisions and corporate bonds, offset by a decrease in U.S. government mortgage-backed securities.

Net loans as of September 30, 2013 increased 8.2% over 2012 ending at $528,706,000 compared to $488,426,000 as of September 30, 2012.  The growth was due primarily to increases in the real estate loan portfolio.  The allowance for loan losses on September 30, 2013 totaled $7,903,000, or 1.47% of gross loans, compared to $8,009,000 or 1.61% of gross loans as of September 30, 2012.  The decline in the percentage of the allowance for loan losses to gross loans can be primarily attributed to the improved credit quality of impaired loans as reflected in a decrease in the specific reserves included in the allowance for loan losses and an increase in loans receivables.  Impaired loans as of September 30, 2013, were $2,420,000, or 0.45% of gross loans, compared to $4,918,000, or 0.99% of gross loans as of September 30, 2012.  

Other real estate owned was $8,994,000 as of September 30, 2013, which was $946,000 lower than September 30, 2012, primarily due to sales and impairment write downs, recorded in the second quarter of 2013, of other real estate offset in part by transfers from loan receivables.  Due to potential changes in the real estate markets, it is at least reasonably possible that management’s assessments of fair value will change in the near term and that such changes could materially affect the amounts reported in the Company’s financial statements.

Other assets decreased $7,472,000 to $551,000 as of September 30, 2013 as compared to $8,023,000 as of September 30, 2012.  The decrease in other assets is due primarily to the repayment from the FDIC of the Bank’s unused prepaid insurance assessment and a decrease in a receivable due to investment securities sales transactions recorded at trade date, September 30, 2012, for which final settlement was received in October, 2012..

Deposits totaled $977,006,000 on September 30, 2013, a 3.7% increase from the $942,222,000 recorded at September 30, 2012.  This increase is mainly the result of the continued growth in commercial and retail demand, NOW, money market and savings account balances, offset in part by decreases in retail certificates of deposits and decreases in public funds. 

FHLB advances and other long-term borrowings totaled $57,558,000 on September 30, 2013, a 66.2% increase from $34,628,000 on September 30, 2012.  This increase is the result of overnight borrowings at the FHLB as an alternative to federal funds purchased. 

The Company’s stockholders’ equity represented 11.7% of total assets as of September 30, 2013 with all of the Company’s five affiliate banks considered well-capitalized as defined by federal capital regulations.  Total stockholders’ equity was $141,354,000 as of September 30, 2013, and $144,054,000 as of September 30, 2012.  The decrease in stockholders’ equity was primarily the result of lower fair value on the securities available-for-sale as reflected in the decrease in accumulated other comprehensive income, offset in part by net income, reflected in retained earnings.

Shareholder Information:

Return on average assets was 1.24% for the quarter ended September 30, 2013, compared to 1.32% for the same period in 2012.  Return on average assets was 1.15% for the nine months ended September 30, 2013, compared to 1.27% for the same period in 2012.  Return on average equity was 10.77% for the quarter ended September 30, 2013, compared to the 10.86% in 2012.  Return on average equity was 9.86% for the nine months ended September 30, 2013, compared to the 10.26% in 2012.  

The Company’s stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $22.41 on September 30, 2013.   During the third quarter of 2013, the price ranged from $19.87 to $23.94.

On August 14, 2013, the Company declared a quarterly cash dividend on its common stock, payable on November 15, 2013 to stockholders of record as of November 1, 2013, equal to $0.16 per share.

Ames National Corporation affiliate Iowa banks are First National Bank, Ames; Boone Bank & Trust Co., Boone; State Bank & Trust Co., Nevada; Reliance State Bank, Story City; and United Bank & Trust, Marshalltown.

For further information contact:
Thomas H. Pohlman, President and CEO
(515) 232-6251 or Tom.Pohlman@amesnational.com