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Date: 10/14/2016

Title: Ames National Corporation Announces 2016 Q3 Earnings (10/14/16)

2016 THIRD QUARTER EARNINGS RESULTS

 

Third Quarter 2016 results:

 

For the quarter ended September 30, 2016, net income for Ames National Corporation (the Company) totaled $3,804,000 or $0.41 per share, compared to $4,100,000 or $0.44 per share earned in 2015. The lower earnings are primarily the result of increased income tax expense, a higher provision for loan loss, and higher data processing costs, offset in part by higher loan interest income and gain on sale of loans. The increase in loan interest income was attributable to higher loan volume. Average net loans for the three months were $50 million higher for the quarter ended September 30, 2016 compared to a year earlier. Company’s management was pleased with the growth in the Company’s loan portfolio.

Third quarter net interest income totaled $10,050,000, an increase of $210,000, or 2%, compared to the same quarter a year ago, due primarily to growth in the real estate loan portfolio. The Company’s continued expansion into the Des Moines metro market was a factor in obtaining this growth. The Company’s net interest margin was 3.38% for the quarter ended September 30, 2016 as compared to 3.36% for the quarter ended September 30, 2015.

A provision for loan losses of $235,000 was recognized in the third quarter of 2016 as compared to $38,000 in the third quarter of 2015. The growth in the loan portfolio and a specific reserve on a newly impaired loan were the primary factors for the provision for loan losses in 2016. Net loan recoveries were $81,000 for the quarter ended September 30, 2016 compared to net loan recoveries of $17,000 for the quarter ended September 30, 2015. The loan portfolio credit quality gauged by 90 day past due loans and total impaired loans remains favorable in comparison to our peers. However, the agricultural economy has weakened as declining grain prices have caused lower profitability for our agricultural borrowers.

Noninterest income for the third quarter of 2016 totaled $2,004,000 as compared to $1,950,000 for the same period in 2015. The increase in noninterest income is primarily due to an increase in the gain on sale of loans held for sale. 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 third quarter of 2016 totaled $6,112,000 compared to $5,982,000 recorded in 2015, an increase of 2%, which was primarily due to higher salaries and employee benefits and data processing expenses. The efficiency ratio was 50.71% for the third quarter of 2016 as compared to 50.74% in 2015. The Company strives to maintain a low efficiency ratio to enable better loan and deposit pricing for our customers, while maintaining a favorable shareholder return.

Income tax expense for the third quarter of 2016 totaled $1,903,000 compared to $1,670,000 recorded in 2015, an increase of 14%. This increase in income tax expense is due primarily to recording a $226,000 valuation allowance to fully reserve the deferred income tax asset associated with a state alternative minimum tax credit carryforward.

Nine Months 2016 results:


For the nine months ended September 30, 2016, net income for the Company totaled $11,710,000 or $1.26 per share, compared to $11,100,000 or $1.19 per share earned in 2015. The higher earnings are primarily the result of increased loan interest income, a lower provision for loan loss, and lower other real estate owned expenses, offset in part by lower net securities gains and an increase in salaries and benefits. The increased loan interest income was attributable to higher loan volume. Average net loans for the nine months were $43 million higher for the nine months ended September 30, 2016 compared to a year earlier.

Net interest income for the nine months ended September 30, 2016 totaled $29,877,000, an increase of $804,000, or 3%, compared to the same period a year ago, due primarily to growth in the real estate loan portfolio. The Company’s continued expansion into the Des Moines metro market was a significant factor in obtaining this growth. The Company’s net interest margin was 3.37% for the nine months ended September 30, 2016 as compared to 3.32% for the same period in 2015.

A provision for loan losses of $441,000 was recognized for the nine months ended September 30, 2016 as compared to $1,037,000 for the same period in 2015. The growth in the loan portfolio and a specific reserve on a newly impaired loan were the primary factors for the provision for loan losses in 2016. The growth in the loan portfolio was a primary factor for the provision for loan losses in 2015. Net loan recoveries were $22,000 for the nine months ended September 30, 2016 compared to net loan recoveries of $51,000 for the nine months ended September 30, 2015.

Noninterest income for the nine months ended September 30, 2016 totaled $6,029,000 as compared to $6,123,000 for the same period in 2015. The decrease in noninterest income is primarily due to a decrease in realized securities gains of $313,000, offset in part by higher wealth management income of $170,000 compared to the prior year. Wealth management income continues to be a focus of management and provides an opportunity for increasing revenue.

Noninterest expense for the nine months ended September 30, 2016 totaled $18,668,000 compared to $18,813,000 recorded in 2015, a decrease of 1%, which was primarily due to the lower other real estate owned expenses of $694,000. The decrease in other real estate owned expenses was primarily due to an impairment write down in 2015. Offsetting this decrease in expenses is a 4% increase in salaries and employee benefits. The increase in salaries and employee benefits is mainly due to normal salary increases along with additional lending and support staff. The efficiency ratio was 51.99% for the nine months ended September 30, 2016 as compared to 53.45% in 2015.

Balance Sheet Review:

As of September 30, 2016, total assets were $1,340,344,000, a $3.0 million decrease in assets compared to September 30, 2015. The decrease in assets was due primarily to a decrease in securities and interest bearing deposits, which funded loan growth.

Securities available-for-sale as of September 30, 2016 declined to $517,579,000 from $546,017,000 as of September 30, 2015. The decrease in securities available-for-sale is primarily due to the sale, maturity or pay downs of U.S. government mortgage-backed and municipal securities.

Net loans as of September 30, 2016 increased 7%, to $740,322,000, as compared to $690,315,000 as of September 30, 2015. Loan demand has remained steady for most of our affiliate banks. Impaired loans, net of specific reserves, totaled $2,264,000, or 0.30% of gross loans as of September 30, 2016, compared to $1,464,000, or 0.21%, of gross loans as of September 30, 2015. The allowance for loan losses on September 30, 2016 totaled $10,451,000, or 1.39% of gross loans, compared to $9,927,000 or 1.42% of gross loans as of September 30, 2015. The increase in the allowance for loan losses was provided to accommodate growth in the Company’s loan portfolios and, to a lesser extent to provide for a specific reserve on a newly impaired loan.

Other real estate owned was $654,000 and $3,418,000 as of September 30, 2016 and 2015, respectively. The decrease in the other real estate owned was due primarily to the sale of properties.

Deposits totaled $1,061,809,000 on September 30, 2016, compared to $1,061,378,000 recorded at September 30, 2015. The decline in the other time deposits, was offset by an increase in money market accounts primarily as a result of the low interest rate environment.

Securities sold under agreements to repurchase totaled $49,858,000 on September 30, 2016, a 4% decrease from the $52,066,000 recorded at September 30, 2015.

The Company’s stockholders’ equity represented 12.7% of total assets as of September 30, 2016 with all of the Company’s five affiliate banks considered well-capitalized as defined by federal capital regulations. Total stockholders’ equity was $170,737,000 as of September 30, 2016, and $160,405,000 as of September 30, 2015. The increase in stockholders’ equity was primarily the result of the retention of net income in excess of dividends and an increase in the net unrealized gain on securities.

Shareholder Information:


Return on average assets was 1.15% for the quarter ended September 30, 2016, compared to 1.24% for the same period in 2015. Return on average equity was 8.91% for the quarter ended September 30, 2016, compared to the 10.35% in 2015.

Return on average assets was 1.18% for the nine months ended September 30, 2016, compared to 1.12% for the same period in 2015. Return on average equity was 9.33% for the nine months ended September 30, 2016, compared to the 9.36% in 2015.

The Company’s stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $27.66 on September 30, 2016. During the third quarter of 2016, the price ranged from $25.78 to $28.86.

On August 10, 2016, the Company declared a quarterly cash dividend on common stock, payable on November 15, 2016 to stockholders of record as of November 1, 2016, equal to $0.21 per share.

 

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