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Date: 7/13/2018

Title: Ames National Corporation Announces Q2 Earning Results (7/13/18)

AMES NATIONAL CORPORATION ANNOUNCES 2018 SECOND QUARTER EARNINGS RESULTS

Second Quarter 2018 results:

For the quarter ended June 30, 2018, net income for Ames National Corporation (the Company) totaled $4,317,000 or $0.46 per share, compared to $3,472,000 or $0.37 per share earned in 2017. The improvement in earnings is primarily the result of an increase in loan interest income, a reduction in the provision for loan losses and lower federal income tax expense, offset in part by higher deposit interest expense and an increase in salaries and benefits.

Second quarter net interest income totaled $10,211,000, an increase of $145,000, or 1%, compared to the same quarter a year ago. The improvement in net interest income was mainly due to increased loan rates, offset by an increase in deposit interest expense. Loan and deposit interest rates increased in conjunction with general market interest rates, as the Federal Reserve Bank increased short term interest rate targets by 0.75% since June 30, 2017. The Company’s net interest margin was 3.16% for the quarter ended June 30, 2018 as compared to 3.25% for the quarter ended June 30, 2017. The decrease in the net interest margin was primarily due to the tax equivalent yield on tax-exempt securities interest income computed in 2018 based upon a 21% federal income tax rate as compared to a 35% income tax rate used in 2017.

A provision for loan losses of $64,000 was recognized in the second quarter of 2018 as compared to $767,000 in the second quarter of 2017. Net loan charge offs remained at a favorable level and totaled $4,000 for the quarter ended June 30, 2018 compared to net loan charge offs of $479,000 for the quarter ended June 30, 2017. The Iowa agricultural economy remains challenged as the result of the current low grain prices, potential tariff concerns on Iowa exports and excessive rainfall in a portion of our markets.

Noninterest income for the second quarter of 2018 totaled $1,991,000 as compared to $2,025,000, a decrease of 2%, for the same period in 2017. The decrease in noninterest income is primarily due to lower security gains and other noninterest income, offset in part by higher wealth management income. The higher wealth management income was primarily due to an increase in one time estate fees.

Noninterest expense for the second quarter of 2018 totaled $6,713,000 compared to $6,399,000 recorded in 2017, an increase of 5%, which was primarily due to increases in salaries and employee benefits. This increase in salaries and benefits was primarily due to increases in employee benefit costs, additional personnel, changes in the Company’s paid time off benefits and normal salary increases. The efficiency ratio was 55.0% for the second quarter of 2018 as compared to 52.9% in 2017.

The provision for income taxes expense for the quarter ended June 30, 2018 and 2017 was $1,107,000 and $1,453,000, respectively, representing an effective tax rate of 20% and 29%, respectively. The reduction in the effective income tax rate from one year ago was primarily related to the enactment of the Tax Cut and Jobs Act legislation signed on December 22, 2017. This legislation lowered the marginal statutory federal corporation income tax rate for the Company from 35% to 21% beginning January 1, 2018. The effective tax rates are lower than the statutory rates for both periods primarily due to tax-exempt income.

Six Months 2018 Results:


For the six months ended June 30, 2018, net income for Ames National Corporation (the Company) totaled $8,354,000 or $0.90 per share, compared to $7,082,000 or $0.76 per share earned in 2017. The improvement in earnings is primarily the result of an increase in loan interest income, a reduction in the provision for loan losses and lower federal income tax expense, offset in part by higher deposit interest expense, an increase in salaries and benefits and a decrease in securities gains.

For the six months ended June 30, 2018, net interest income totaled $20,397,000, an increase of $448,000, or 2%, compared to the same period a year ago. The improvement in net interest income was mainly due to increased loan rates and recognition of nonaccrual loan interest income on loans, offset by an increase in deposit interest expense and a decrease in interest income on tax-exempt investments. Nonaccrual interest income recognized in the six months ended June 30, 2018 was $309,000 as compared to $13,000 for the same period in 2017. The decrease in tax-exempt interest income on investments is mainly due to higher yielding municipal bonds maturing and being called. Deposit interest rates increased in conjunction with general market interest rates, as the Federal Reserve Bank increased short term interest rate targets by 0.75% since June 30, 2017. The Company’s net interest margin was 3.17% for the six months ended June 30, 2018 as compared to 3.22% for the six months ended June 30, 2017. The decrease in the net interest margin was primarily due to the tax equivalent yield on tax-exempt securities interest income computed in 2018 based upon a 21% federal income tax rate as compared to a 35% income tax rate used in 2017

A provision for loan losses of $93,000 was recognized in the six months ended June 30, 2018 as compared to $1,164,000 in the six months ended June 30, 2017. Net loan charge offs remained at a favorable level and totaled $31,000 for the six months ended June 30, 2018 compared to net loan charge offs of $482,000 for the six months ended June 30, 2017.

Noninterest income for the six months ended June 30, 2018 totaled $3,755,000 as compared to $4,106,000, a decrease of 9%, for the same period in 2017. The decrease in noninterest income is primarily due to lower security gains, offset in part by higher wealth management income. The higher wealth management income was primarily due to an increase in one time estate fees.

Noninterest expense for the six months ended June 30, 2018 totaled $13,578,000 compared to $12,876,000 recorded in 2017, an increase of 5%, which was primarily due to increases in salaries and employee benefits. This increase in salaries and benefits was primarily due to a one-time $1,000 bonus paid to full-time employees, increases in employee benefit costs, additional personnel, changes in the Company’s paid time off benefits and normal salary increases. The efficiency ratio was 56.2% for the six months ended June 30, 2018 as compared to 53.5% in 2017.

The provision for income taxes expense for the six months ended June 30, 2018 and 2017 was $2,127,000 and $2,932,000, respectively, representing an effective tax rate of 20% and 29%, respectively. The reduction in the effective income tax rate from one year ago was primarily related to the enactment of the Tax Cut and Jobs Act legislation signed on December 22, 2017. This legislation lowered the marginal statutory federal corporation income tax rate for the Company from 35% to 21% beginning January 1, 2018. The effective tax rates are lower than the statutory rates for both periods primarily due to tax-exempt income.

Balance Sheet Review:


As of June 30, 2018, total assets were $1,362,055,000, a $7.6 million decrease compared to June 30, 2017. The reduction in assets was due primarily to a decrease in the securities portfolio, offset in part by increases in interest bearing deposits in financial institutions and loans. Deposit funding increased $25.0 million from one year ago, however this was more than offset by reductions in securities sold under agreements to repurchase and repayments of FHLB and other borrowings of $29.1 million.

Securities available-for-sale as of June 30, 2018 declined to $478,733,000 from $515,886,000 as of June 30, 2017. The decrease in securities available-for-sale is primarily due to sales and maturities of municipals and higher unrealized loss in the investment portfolio as higher market interest rates caused a decline in the fair value of the investment portfolio, offset in part by purchases of U.S. agency securities.

Net loans as of June 30, 2018 increased 2%, to $780,260,000, as compared to $768,208,000 as of June 30, 2017. Loan demand has moderated over the past twelve months. The loan portfolio credit quality, gauged by impaired loans was more favorable than a year ago as non-performing loans totaled $3.8 million as of June 30, 2018 compared to $5.2 million as of June 30, 2017. The decrease in impaired loans was due primarily to payments and pay offs received on impaired loans. The allowance for loan losses on June 30, 2018 totaled $11,383,000, or 1.44% of gross loans, compared to $11,189,000 or 1.44% of gross loans as of June 30, 2017.

Deposits totaled $1,151,815,000 on June 30, 2018, compared to $1,126,771,000 recorded at June 30, 2017, a 2.2% increase from a year ago. The higher level of deposits is primarily due to increases in retail and commercial demand deposit and retail savings account balances.

Securities sold under agreements to repurchase totaled $34,108,000 as of June 30, 2018 as compared to $38,683,000 recorded as of June 30, 2017.

The Company’s stockholders’ equity represented 12.3% of total assets as of June 30, 2018 with all of the Company’s five affiliate banks considered well-capitalized as defined by federal capital regulations. Total stockholders’ equity was $167,941,000 as of June 30, 2018, compared to $171,643,000 as of June 30, 2017. The decrease in stockholders’ equity was the result of the after tax impact of depreciation in the fair value of securities available for sale, offset in part by the retention of net income in excess of dividends.

Shareholder Information:


Return on average assets was 1.26% for the quarter ended June 30, 2018, compared to 1.01% for the same period in 2017. Return on average equity was 10.35% for the quarter ended June 30, 2018, compared to the 8.17% in 2017. Return on average assets was 1.22% for the six months ended June 30, 2018, compared to 1.03% for the same period in 2017. Return on average equity was 9.95% for the six months ended June 30, 2018, compared to the 8.41% in 2017.

The Company’s stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $30.85 on June 30, 2018. During the second quarter of 2018, the price ranged from $26.80 to $31.55.

On May 9, 2018, the Company declared a quarterly cash dividend of $0.23 per common share. The dividend is payable August 15, 2018, to shareholders of record at the close of business on August 1, 2018.

 

Click here to view the Consolidated Balance Sheets & Statements of Income (unaudited)

 

Click here to view a PDF of the Second Quarter Report.

 

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 John.Nelson@amesnational.com