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Ames National Corporation Announces Earnings for the Fourth Quarter of 2022
Source: Nasdaq GlobeNewswire / 20 Jan 2023 16:30:47 America/New_York
AMES, Iowa, Jan. 20, 2023 (GLOBE NEWSWIRE) -- Ames National Corporation (Nasdaq: ATLO; the “Company”) today reported net income for the fourth quarter of 2022 of $4.4 million, or $0.49 per share, compared to $5.3 million, or $0.58 per share, earned in the fourth quarter of 2021. For the year ended December 31, 2022, net income for the Company totaled $19.3 million or $2.14 per share, compared to $23.9 million or $2.62 per share earned in 2021. The decrease in earnings for the three months and year ended is primarily the result of higher interest expense on deposits and fewer Paycheck Protection Program (“PPP”) fees recognized into income, offset in part by an increase in interest income on loans and taxable securities. The higher interest expense on deposits is due to an increase in market rates. In 2022, the Federal Open Market Committee has increased its target for the federal funds interest rate by 4.25%. The increase in interest income on loans and taxable securities was primarily due to growth in the loan and investment portfolios.
INCOME STATEMENT HIGHLIGHTS (unaudited) Three Months Ended Year Ended December 31, December 31, 2022 2021 2022 2021 Net income (in thousands) $ 4,412 $ 5,297 $ 19,293 $ 23,913 Earnings per share - basic and diluted $ 0.49 $ 0.58 $ 2.14 $ 2.62 Return on average assets 0.84 % 0.99 % 0.90 % 1.15 % Return on average equity 12.47 % 10.19 % 11.43 % 11.43 % Efficiency ratio 65.04 % 57.30 % 61.41 % 55.04 % Net interest margin 2.45 % 2.65 % 2.55 % 2.83 % COMPANY STOCK HIGHLIGHTS (unaudited) As of or for the
three months endedDecember 31, Company Stock (ATLO) 2022 Closing price $ 23.61 Price range $ 22.00 - 23.76 Book value per common share $ 16.58 Cash dividend declared $ 0.27 Dividend yield 4.57 % BALANCE SHEET HIGHLIGHTS (unaudited) December 31, (Dollars in thousands) 2022 2021 Assets $ 2,134,926 $ 2,137,041 Loans receivable, net $ 1,226,011 $ 1,144,108 Deposits $ 1,897,957 $ 1,878,019 Stockholders' equity $ 149,098 $ 207,778 Equity capital ratio 6.98 % 9.72 % Fourth Quarter 2022 Results:
Fourth quarter 2022 loan interest income was $1.5 million higher than fourth quarter 2021. The increase is primarily due to growth in the loan portfolio and higher average rates, offset in part by fewer PPP fees recognized into income. Fees recognized from PPP loans during the fourth quarter of 2022 were $1 thousand as compared to $458 thousand during the fourth quarter of 2021. Taxable securities interest income was $836 thousand higher than the fourth quarter of 2021 due primarily to increased balances and rates. Deposit interest expense increased $2.5 million during this same period due to an increase in market interest rates on core deposits. Fourth quarter 2022 net interest income totaled $12.8 million, a decrease of $716 thousand, or 5%, compared to the same quarter a year ago. The Company’s net interest margin was 2.45% for the quarter ended December 31, 2022 as compared to 2.65% for the quarter ended December 31, 2021. The decrease in net interest margin was primarily due to an increase in market interest rates on core deposits in excess of rate increases on interest-earning assets and a decline in PPP fees.
A credit for loan losses of ($168) thousand was recognized in the fourth quarter of 2022 as compared to a credit for loan losses of ($217) thousand in the fourth quarter of 2021. Net loan charge-offs totaled $32 thousand for the quarter ended December 31, 2022 compared to net loan recoveries of $8 thousand for the quarter ended December 31, 2021. The credit for loan losses in 2022 was primarily due to a reduction in specific reserves and offset in part by growth in the loan portfolio. The credit for loan losses in the fourth quarter of 2021 was primarily due to improving economic conditions.
Noninterest income for the fourth quarter of 2022 totaled $2.5 million as compared to $2.7 million in the fourth quarter of 2021, a decrease of 9%. The decrease in noninterest income was primarily due to fewer gains on sale of residential loans held for sale as refinancing volume has slowed.
Noninterest expense for the fourth quarter of 2022 totaled $9.9 million compared to $9.3 million recorded in the fourth quarter of 2021, an increase of 7%. The increase is primarily due to normal increases in salaries and higher occupancy expenses as a result of a branch remodel. The efficiency ratio was 65.0% for the fourth quarter of 2022 as compared to 57.3% in the fourth quarter of 2021.
Income tax expense for the fourth quarter of 2022 totaled $1.1 million compared to $1.9 million recorded in the fourth quarter of 2021. The effective tax rate was 20% and 26% for the quarters ended December 31, 2022 and 2021, respectively. The decrease in the effective tax rate was primarily due to a deferred tax valuation allowance established in the fourth quarter of 2021 on a state tax net operating loss at the holding company.
Year 2022 Results:
For the year ended December 31, 2022 loan interest income was $1.9 million lower than the year ended 2021. The decrease is primarily due to fewer PPP fees recognized into income and partially offset by growth in the loan portfolio. Fees recognized from PPP loans during the year ended December 31, 2022 were $218 thousand as compared to $4.3 million during the year ended December 31, 2021. Taxable securities interest income was $3.2 million higher than 2021 due primarily to increased balances. Deposit interest expense increased $3.0 million during this same period primarily related to an increase in market interest rates on core deposits. The net interest income for the year ended December 31, 2022 totaled $53.2 million, a decrease of $2.8 million, or 5%, compared to the same period a year ago. The Company’s net interest margin was 2.55% for the year ended December 31, 2022 as compared to 2.83% for the year ended December 31, 2021. The decrease in net interest margin was primarily due to a decline in PPP fees and an increase in market interest rates on core deposits.
A credit for loan losses of ($874) thousand was recognized for the year ended December 31, 2022 as compared to a credit for loan losses of ($757) thousand for the year ended December 31, 2021. Net loan charge-offs totaled $50 thousand for the year ended December 31, 2022 compared to net loan recoveries of $163 thousand for the year ended December 31, 2021. The credit for loan losses in 2022 was primarily due to a reduction in specific reserves and offset in part by growth in the loan portfolio. The credit for loan losses in 2021 was primarily due to loan recoveries, a reduction in specific reserves, and improving economic conditions.
Noninterest income for the year ended December 31, 2022 totaled $9.7 million compared to $10.5 million for the year ended December 31, 2021, a decrease of 8%. The decrease in noninterest income was primarily due to fewer gains on sale of residential loans held for sale as refinancing volume has slowed and offset in part by an increase in wealth management income due to growth in assets under management and new account relationships.
Noninterest expense for the year ended December 31, 2022 totaled $38.6 million compared to $36.6 million for the year ended December 31, 2021, an increase of 6%. The increase is primarily due to data processing costs as a result of additional investments in technology and normal increases in salaries and benefits. The efficiency ratio was 61.4% and 55.0% for the year ended December 31, 2022 and 2021, respectively.
Income tax expense for the year ended December 31, 2022 and 2021 totaled $5.9 million and $6.8 million, respectively. The effective tax rate was 23% and 22% for the year ended December 31, 2022 and 2021, respectively. The increase in the effective tax rate in 2022 was due to a $780 thousand adjustment to deferred taxes for the reduction in future Iowa bank franchise tax rates enacted in the second quarter of 2022. The lower than expected tax rate in 2022 and 2021 was due primarily to tax-exempt interest income and New Markets Tax Credits.
Balance Sheet Review:
As of December 31, 2022, total assets were $2.13 billion, a decrease of $2.1 million, as compared to December 31, 2021. The largest fluctuations in assets during 2022 was primarily due to higher unrealized losses on the investment portfolio as market interest rates have risen. In the same time period, increases in loan volume and purchases of investments were funded by federal funds sold and an increase in deposits and advances.
Securities available-for-sale as of December 31, 2022 decreased to $786.4 million from $831.0 million as of December 31, 2021. The decrease in securities available-for-sale is primarily due to a decline in fair value of the portfolio due to interest rate increases during 2022. The decrease is offset in part by purchases of U.S. treasuries and municipal securities.
Net loans as of December 31, 2022 increased to $1.23 billion, as compared to $1.14 billion as of December 31, 2021. The increase was primarily due to an increase in the 1-4 family and commercial real estate portfolios. Impaired loans were $14.4 million and $12.3 million as of December 31, 2022 and 2021, respectively. Loans classified as substandard were $24.2 million and $36.9 million as of December 31, 2022 and 2021, respectively. Loans classified as watch and special mention totaled $124.1 million and $165.3 million as of December 31, 2022 and 2021, respectively. The allowance for loan losses on December 31, 2022 totaled $15.7 million, or 1.26% of gross loans, compared to $16.6 million, or 1.43% of gross loans, as of December 31, 2021. The decrease in the allowance for loan losses is mainly due to lower specific reserves and improved quality of the loan portfolio, offset in part by loan growth.
Deposits totaled $1.90 billion as of December 31, 2022, an increase of 1%, compared to $1.88 billion recorded as of December 31, 2021. The growth in deposits is primarily due to increases in interest-bearing core deposits, including commercial and public funds, offset in part by a decrease in time deposits. Deposit balances fluctuate as customers’ liquidity needs vary and could be impacted by prevailing market interest rates, competition, and economic conditions.
The Company’s stockholders’ equity represented 7.0% of total assets as of December 31, 2022 with all of the Company’s six affiliate banks considered well-capitalized as defined by federal capital regulations. Total stockholders’ equity was $149.1 million as of December 31, 2022, compared to $207.8 million as of December 31, 2021. The decrease in stockholders’ equity was primarily the result of an increase in unrealized losses on the investment portfolio, offset in part by the retention of net income in excess of dividends.
Dividends
On November 9, 2022, the Company declared a quarterly cash dividend on common stock, payable on February 15, 2023 to stockholders of record as of February 1, 2023, equal to $0.27 per share.
Four dividends were declared during 2022 compared to five dividends declared during 2021. Dividends are typically declared in one quarter and then paid in the subsequent quarter. Beginning in July 2020 the dividends were declared and paid in the same quarter before returning to the previous practice in August 2021.
Forecasted Earnings
The Company is forecasting earnings for the year ending December 31, 2023 in the range of $1.75 to $1.85 per share compared to $2.14 per share earned for the year ended December 31, 2022. The decrease in forecasted earnings from the 2022 actual results was primarily attributable to a projected increase in salaries and interest expense due to continuing inflationary pressures and higher expected market interest rates.
About Ames National Corporation
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; United Bank & Trust, Marshalltown; and Iowa State Savings Bank, Creston, Iowa.
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 performance and asset quality. Forward-looking statements contained in this News Release are not historical facts and are based on management’s current beliefs, assumptions, predictions and expectations of future events, including the Company’s future performance, taking into account all information currently available to management. These beliefs, assumptions, predictions and expectations are subject to numerous risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to management and many of which are beyond management’s control. 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. Accordingly, investors are cautioned not to place undue reliance on such forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “forecasts”, “continuing,” “ongoing,” “expects,” “views,” “intends” and similar words or phrases. The risks and uncertainties that may affect the Company’s future performance and asset quality include, but are not limited to, the following: the substantial negative impact of the continuing COVID-19 pandemic on national, regional and local economies in general and on the Company’s customers in particular; 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 resulting from the COVID-19 pandemic or as dictated by new market conditions or regulatory requirements; changes in local, national and international economic conditions, including rising inflation rates; 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 headings “Forward-Looking Statements and Business Risks” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2021. Any forward-looking statements are qualified in their entirety by the foregoing risks and uncertainties and speak only as of the date on which such statements are made. The Company undertakes no obligation to revise or update such forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
AMES NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (in thousands, except share and per share data) (unaudited) (audited) December 31, December 31, ASSETS 2022 2021 Cash and due from banks $ 20,819 $ 19,590 Interest-bearing deposits in financial institutions and federal funds sold 7,065 69,539 Total cash and cash equivalents 27,884 89,129 Interest-bearing time deposits 14,669 16,922 Securities available-for-sale 786,438 831,003 Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock, at cost 4,613 3,422 Loans receivable, net 1,226,011 1,144,108 Loans held for sale 154 - Bank premises and equipment, net 18,895 17,512 Accrued income receivable 11,275 10,124 Bank-owned life insurance 3,054 2,985 Deferred income taxes, net 22,130 1,922 Other intangible assets, net 1,931 2,505 Goodwill 12,424 12,424 Other assets 5,448 4,985 Total assets $ 2,134,926 $ 2,137,041 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits Noninterest-bearing checking $ 391,576 $ 411,585 Interest-bearing checking 617,379 575,997 Savings and money market 675,031 674,975 Time, $250 and over 42,886 40,793 Other time 171,085 174,669 Total deposits 1,897,957 1,878,019 Securities sold under agreements to repurchase 40,676 39,851 FHLB advances and other borrowings 39,120 3,000 Dividends payable 2,428 2,364 Accrued expenses and other liabilities 5,647 6,029 Total liabilities 1,985,828 1,929,263 STOCKHOLDERS' EQUITY Common stock, $2 par value, authorized 18,000,000 shares; issued and outstanding 8,992,167 (unaudited) and 9,092,167 shares as of December 31, 2022 and 2021, respectively. 17,984 18,184 Additional paid-in capital 14,253 16,353 Retained earnings 179,931 170,377 Accumulated other comprehensive income (loss) (63,070 ) 2,864 Total stockholders' equity 149,098 207,778 Total liabilities and stockholders' equity $ 2,134,926 $ 2,137,041 AMES NATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Income (in thousands, except per share data) (unaudited) (unaudited) (unaudited) (audited) Three Months Ended Year Ended December 31, December 31, 2022 2021 2022 2021 Interest and dividend income: Loans, including fees $ 12,727 $ 11,188 $ 45,956 $ 47,829 Securities Taxable 3,240 2,404 12,101 8,861 Tax-exempt 605 703 2,595 3,095 Other interest and dividend income 226 182 901 697 Total interest and dividend income 16,798 14,477 61,553 60,482 Interest expense: Deposits 3,395 931 7,316 4,342 Other borrowed funds 610 37 993 143 Total interest expense 4,005 968 8,309 4,485 Net interest income 12,793 13,509 53,244 55,997 Provision (credit) for loan losses (168 ) (217 ) (874 ) (757 ) Net interest income after provision (credit) for loan losses 12,961 13,726 54,118 56,754 Noninterest income: Wealth management income 1,349 1,224 4,938 4,448 Service fees 338 409 1,351 1,474 Securities gains, net - - 37 24 Gain on sale of loans held for sale 105 360 606 1,673 Merchant and card fees 455 511 1,817 2,019 Other noninterest income 222 218 938 899 Total noninterest income 2,469 2,722 9,687 10,537 Noninterest expense: Salaries and employee benefits 5,817 5,515 22,909 22,281 Data processing 1,559 1,560 6,153 5,549 Occupancy expenses, net 848 665 2,945 2,664 FDIC insurance assessments 158 137 608 578 Professional fees 481 356 1,888 1,663 Business development 446 630 1,427 1,465 Intangible asset amortization 136 149 574 628 New markets tax credit projects amortization 188 160 755 639 Other operating expenses, net 294 129 1,385 1,151 Total noninterest expense 9,927 9,301 38,644 36,618 Income before income taxes 5,503 7,147 25,161 30,673 Income tax expense 1,091 1,850 5,868 6,760 Net income $ 4,412 $ 5,297 $ 19,293 $ 23,913 Basic and diluted earnings per share $ 0.49 $ 0.58 $ 2.14 $ 2.62 Declared dividends per share $ 0.27 $ 0.26 $ 1.08 $ 1.29 CONTACT: JOHN P. NELSON CEO AND PRESIDENT (515) 232-6251
