EX-99.1 2 ex_125696.htm EXHIBIT 99.1 ex_125696.htm

EXHIBIT 99.1

 

NEWS RELEASE Contact: JOHN P. NELSON
FOR IMMEDIATE RELEASE   PRESIDENT
    (515) 232-6251
OCTOBER 19, 2018    

                              

 

AMES NATIONAL CORPORATION

ANNOUNCES 2018 THIRD QUARTER EARNINGS RESULTS

 

 

Third Quarter 2018 results:

 

Ames National Corporation (the “Company”) is pleased to announce the completion of the acquisition of Clarke County State Bank with its three branches located in Osceola and Murray, Iowa by First National Bank (FNB), the Company’s largest affiliate bank, on September 14, 2018 (the “Acquisition”). The Company and FNB welcome our new employees and customers, and look forward to a mutually beneficial long term relationship. The newly combined staffs of FNB have made outstanding progress during the third quarter with the integration of the new branches and are to be commended on their significant efforts to ensure a smooth transition. Non-routine costs associated with the Acquisition totaled approximately $340,000 for the quarter ended September 30, 2018.

 

For the quarter ended September 30, 2018, net income for Ames National Corporation totaled $4,459,000 or $0.48 per share, compared to $3,928,000 or $0.42 per share earned in 2017. The improvement in earnings is primarily the result of an increase in loan interest income and lower federal income tax expense, offset in part by higher deposit interest expense, an increase in salaries and benefits and non-routine costs associated with the Acquisition.

 

Third quarter net interest income totaled $10,586,000, an increase of $434,000, or 4%, compared to the same quarter a year ago. The improvement in net interest income was mainly due to increased loan volume and rates and recognition of nonaccrual interest income. Nonaccrual interest income recognized in the three months ended September 30, 2018 was $143,000 as compared to $20,000 for the same period in 2017. 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 1.00% since September 30, 2017. The Company’s net interest margin was 3.28% for the quarter ended September 30, 2018 as compared to 3.29% for the quarter ended September 30, 2017. The net interest margin was negatively impacted in 2018 by the lower 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% federal income tax rate used in 2017.

 

A provision for loan losses of $100,000 was recognized in the third quarter of 2018 as compared to $57,000 in the third quarter of 2017. Net loan charge offs totaled $195,000 for the quarter ended September 30, 2018 compared to net loan charge offs of $105,000 for the quarter ended September 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 most of our markets.

 

 

 

 

Noninterest income for the third quarter of 2018 totaled $2,162,000 as compared to $1,860,000 for the same period in 2017, an increase of 16%. The increase in noninterest income is primarily due to higher wealth management income and a one-time gain on the foreclosure of other real estate owned. The higher wealth management income was primarily due to an increase in estate fees.

 

Noninterest expense for the third quarter of 2018 totaled $6,988,000 compared to $6,296,000 recorded for the same period in 2017, an increase of 11%, which was primarily due to the Acquisition and increases in salaries and employee benefits. This increase in salaries and benefits was primarily due to normal salary increases, additional personnel and changes in the Company’s paid time off benefits. The efficiency ratio was 54.8% for the third quarter of 2018 as compared to 52.4% in 2017.

 

The provision for income taxes expense for the quarter ended September 30, 2018 and 2017 was $1,201,000 and $1,730,000, respectively, representing an effective tax rate of 21% and 31%, 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.

 

Nine Months 2018 results:

 

For the nine months ended September 30, 2018, net income for the Company totaled $12,813,000 or $1.38 per share, compared to $11,011,000 or $1.18 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.

 

For the nine months ended September 30, 2018, net interest income totaled $30,983,000, an increase of $883,000, or 3%, compared to the same period a year ago. The improvement in net interest income was mainly due to increased loan interest rates and recognition of nonaccrual interest income on loans, offset by an increase in deposit interest expense and a decrease in interest income on tax-exempt securities. Nonaccrual interest income recognized in the nine months ended September 30, 2018 was $452,000 as compared to $33,000 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. 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 1.00% since September 30, 2017. The Company’s net interest margin was 3.21% for the nine months ended September 30, 2018 as compared to 3.25% for the nine months ended September 30, 2017. The decrease in the net interest margin was primarily due to the lower 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% federal income tax rate used in 2017.

 

A provision for loan losses of $193,000 was recognized in the nine months ended September 30, 2018 as compared to $1,222,000 in the nine months ended September 30, 2017. Net loan charge offs totaled $226,000 for the nine months ended September 30, 2018 compared to net loan charge offs of $589,000 for the nine months ended September 30, 2017.

 

 

 

 

Noninterest income for the nine months ended September 30, 2018 totaled $5,917,000 as compared to $5,966,000, a decrease of 1%, 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 and a gain on the foreclosure of other real estate owned. The higher wealth management income was primarily due to an increase in estate fees.   

 

Noninterest expense for the nine months ended September 30, 2018 totaled $20,566,000 compared to $19,172,000 recorded in 2017, an increase of 7%, which was primarily due to non-routine costs associated with the Acquisition of $340,000 and increases in salaries and employee benefits. This increase in salaries and benefits was primarily due to a normal salary increases, additional personnel and one-time $1,000 bonus paid to full-time employees. The efficiency ratio was 55.7% for the nine months ended September 30, 2018 as compared to 53.2% in 2017.

 

The provision for income taxes expense for the nine months ended September 30, 2018 and 2017 was $3,328,000 and $4,662,000, respectively, representing an effective tax rate of 21% and 30%, 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 September 30, 2018, total assets were $1,448,252,000, an $83.3 million increase, compared to September 30, 2017. The increase in assets, primarily loans, was mainly due to the acquisition of the Clarke County State Bank.

 

Securities available-for-sale as of September 30, 2018 declined to $474,442,000 from $503,368,000 as of September 30, 2017. The decrease in securities available-for-sale is primarily due to payments and maturities of mortgage backed securities and 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. This decline was offset in part by the Acquisition and purchases of U.S. agency securities.

 

Net loans as of September 30, 2018 increased 13%, to $859,830,000, as compared to $764,229,000 as of September 30, 2017. The growth in the loan portfolio is primarily due to the Acquisition. Loan demand has moderated over the past twelve months. The allowance for loan losses on September 30, 2018 totaled $11,288,000, or 1.30% of gross loans, compared to $11,140,000 or 1.44% of gross loans as of September 30, 2017. The decrease in the percentage of allowance for loan losses to gross loans can be primarily attributed 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.

 

Deposits totaled $1,215,761,000 on September 30, 2018, compared to $1,114,538,000 recorded at September 30, 2017, a 9% increase from a year ago. The growth in the deposits was due primarily to the Acquisition.

 

 

 

 

Securities sold under agreements to repurchase totaled $48,859,000 as of September 30, 2018 as compared to $39,001,000 recorded as of September 30, 2017.

 

The Company’s stockholders’ equity represented 11.6% of total assets as of September 30, 2018 with all of the Company’s five affiliate banks considered well-capitalized as defined by federal capital regulations. Total stockholders’ equity was $168,630,000 as of September 30, 2018, compared to $173,329,000 as of September 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 1.31% for the quarter ended September 30, 2018, compared to 1.15% for the same period in 2017. Return on average equity was 10.54% for the quarter ended September 30, 2018, compared to the 9.08% in 2017. Return on average assets was 1.25% for the nine months ended September 30, 2018, compared to 1.07% for the same period in 2017. Return on average equity was 10.15% for the nine months ended September 30, 2018, compared to the 8.64% in 2017.

 

The Company’s stock, which is listed on the NASDAQ Capital Market under the symbol ATLO, closed at $27.25 on September 30, 2018. During the third quarter of 2018, the price ranged from $26.20 to $32.15.

 

On August 8, 2018, the Company declared a quarterly cash dividend of $0.23 per common share. The dividend is payable November 15, 2018, to shareholders of record at the close of business on November 1, 2018.

 

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.

 

The Private Securities Litigation Reform Act of 1995 provides the Company with the opportunity to make cautionary statements regarding forward-looking statements contained in this News Release, including forward-looking statements concerning the Company’s future financial performance and asset quality.  Any forward-looking statement contained in this News Release is based on management’s current beliefs, assumptions and expectations of the Company’s future performance, taking into account all information currently available to management.  These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to management.  If a change occurs, the Company’s business, financial condition, liquidity, results of operations, asset quality, plans and objectives may vary materially from those expressed in the forward-looking statements.  The risks and uncertainties that may affect the actual results of the Company include, but are not limited to, the following:  economic conditions, particularly in the concentrated geographic area in which the Company and its affiliate banks operate; competitive products and pricing available in the marketplace; changes in credit and other risks posed by the Company’s loan and investment portfolios, including declines in commercial or residential real estate values or changes in the allowance for loan losses dictated by new market conditions or regulatory requirements; fiscal and monetary policies of the U.S. government; changes in governmental regulations affecting financial institutions (including regulatory fees and capital requirements); changes in prevailing interest rates; credit risk management and asset/liability management; the financial and securities markets; the availability of and cost associated with sources of liquidity; and other risks and uncertainties inherent in the Company’s business, including those discussed under the heading “Risk Factors” in the Company’s annual report on Form 10-K.  Management intends to identify forward-looking statements when using words such as “believe”, “expect”, “intend”, “anticipate”, “estimate”, “should”, “forecasting” or similar expressions.  Undue reliance should not be placed on these forward-looking statements.  The Company undertakes no obligation to revise or update such forward-looking statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

 

 

 

AMES NATIONAL CORPORATION AND SUBSIDIARIES

 

Consolidated Balance Sheets

September 30, 2018 and 2017

(unaudited)

 

ASSETS

 

2018

   

2017

 
                 

Cash and due from banks

  $ 25,318,944     $ 23,087,890  

Interest bearing deposits in financial institutions

    38,048,525       35,486,284  

Securities available-for-sale

    474,442,299       503,368,435  

Federal Home Loan Bank and Federal Reserve Bank stock, at cost

    2,946,100       3,242,000  

Loans receivable, net

    859,830,015       764,228,850  

Loans held for sale

    279,940       279,800  

Bank premises and equipment, net

    16,071,119       15,595,418  

Accrued interest income receivable

    9,485,035       8,423,038  

Other real estate owned

    729,795       385,509  

Bank-owned life insurance

    2,757,310       -  

Deferred income taxes, net

    4,803,300       1,817,543  

Other intangible assets, net

    2,842,085       1,133,736  

Goodwill

    9,618,621       6,732,216  

Other assets

    1,079,179       1,159,533  
                 

Total assets

  $ 1,448,252,267     $ 1,364,940,252  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               
                 

LIABILITIES

               

Deposits

               

Demand, noninterest bearing

  $ 220,806,001     $ 202,368,921  

NOW accounts

    369,779,264       337,062,117  

Savings and money market

    414,057,574       380,454,650  

Time, $250,000 and over

    42,849,563       36,776,010  

Other time

    168,268,111       157,876,361  

Total deposits

    1,215,760,513       1,114,538,059  
                 

Securities sold under agreements to repurchase

    48,858,900       39,001,050  

Federal Home Loan Bank (FHLB) advances and other borrowings

    8,400,000       32,000,000  

Dividends payable

    2,141,510       2,048,401  

Accrued expenses and other liabilities

    4,461,535       4,023,858  

Total liabilities

    1,279,622,458       1,191,611,368  
                 

STOCKHOLDERS' EQUITY

               

Common stock, $2 par value, authorized 18,000,000 shares; issued and outstanding 9,310,913 shares as of September 30, 2018 and 2017

    18,621,826       18,621,826  

Additional paid-in capital

    20,878,728       20,878,728  

Retained earnings

    135,828,253       131,047,038  

Accumulated other comprehensive income (loss)

    (6,698,998 )     2,781,292  

Total stockholders' equity

    168,629,809       173,328,884  
                 

Total liabilities and stockholders' equity

  $ 1,448,252,267     $ 1,364,940,252  

 

 

 

 

AMES NATIONAL CORPORATION AND SUBSIDIARIES

 

Consolidated Statements of Income

(unaudited)

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2018

   

2017

   

2018

   

2017

 

Interest income:

                               

Loans

  $ 9,557,527     $ 8,729,702     $ 27,442,604     $ 25,345,116  

Securities

                               

Taxable

    1,574,020       1,557,872       4,720,996       4,637,498  

Tax-exempt

    1,085,131       1,210,510       3,451,084       3,819,380  

Interest bearing deposits and federal funds sold

    243,879       114,820       638,924       365,346  
                                 

Total interest income

    12,460,557       11,612,904       36,253,608       34,167,340  
                                 

Interest expense:

                               

Deposits

    1,740,579       1,169,296       4,736,455       3,204,115  

Other borrowed funds

    134,017       292,054       533,870       862,798  
                                 

Total interest expense

    1,874,596       1,461,350       5,270,325       4,066,913  
                                 

Net interest income

    10,585,961       10,151,554       30,983,283       30,100,427  
                                 

Provision for loan losses

    100,000       57,277       192,978       1,221,620  
                                 

Net interest income after provision for loan losses

    10,485,961       10,094,277       30,790,305       28,878,807  
                                 

Noninterest income:

                               

Wealth Management Income

    877,146       747,634       2,534,510       2,180,941  

Service fees

    363,993       401,237       1,036,841       1,126,122  

Securities gains, net

    -       37,881       -       498,560  

Gain on sale of loans held for sale

    207,856       179,553       576,441       544,095  

Merchant and card fees

    358,816       348,847       1,035,338       1,017,362  

Gain on foreclosure of other real estate owned

    162,862       -       162,862       -  

Other noninterest income

    191,130       144,953       570,685       598,791  
                                 

Total noninterest income

    2,161,803       1,860,105       5,916,677       5,965,871  
                                 

Noninterest expense:

                               

Salaries and employee benefits

    4,331,976       4,026,932       13,216,844       12,058,903  

Data processing

    838,414       807,419       2,506,804       2,481,331  

Occupancy expenses, net

    536,004       527,071       1,490,395       1,546,657  

FDIC insurance assessments

    99,934       111,987       308,002       326,958  

Professional fees

    423,172       307,484       1,123,577       919,157  

Business development

    327,985       262,408       821,344       722,869  

Intangible asset amortization

    94,883       89,861       266,337       280,837  

Other operating expenses, net

    335,464       162,826       832,729       835,414  
                                 

Total noninterest expense

    6,987,832       6,295,988       20,566,032       19,172,126  
                                 

Income before income taxes

    5,659,932       5,658,394       16,140,950       15,672,552  
                                 

Income tax expense

    1,201,100       1,729,987       3,328,100       4,661,687  
                                 

Net income

  $ 4,458,832     $ 3,928,407     $ 12,812,850     $ 11,010,865  
                                 

Basic and diluted earnings per share

  $ 0.48     $ 0.42     $ 1.38     $ 1.18  
                                 

Declared dividends per share

  $ 0.23     $ 0.22     $ 0.94     $ 0.66