NEWS RELEASE
| FOR IMMEDIATE RELEASE | CONTACT: | THOMAS H. POHLMAN |
| | | PRESIDENT |
| | | OR |
| | | JOHN P. NELSON |
| | | CFO |
| | | |
| | | (515) 232-6251 |
OCTOBER 17, 2008
AMES NATIONAL CORPORATION
ANNOUNCES THIRD QUARTER 2008 FINANCIAL RESULTS
The Company had net income of $4,775,000, or $0.51 per share, for the nine months ended September 30, 2008, compared to net income of $8,287,000, or $0.88 per share, for the nine months ended September 30, 2007. Total equity capital as of September 30, 2008 totaled $104 million or 12.3% of total assets at the end of the quarter.
The Company’s earnings for the third quarter were $7,000, down significantly from the $2,939,000, or $0.31 per share earned a year ago. The lower earnings were due to additional impairment charges related to the Company’s investment in Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA) preferred stock and the initial impairment charge for the corporate bond issues of Lehman Brothers Holdings and American General Finance. The carrying values of the preferred stock, the Lehman Brothers Holdings bonds, and American General Finance bonds have been written down to their estimated September 30, 2008 fair market values of $593,000, $497,000 and $260,000, respectively. These impairment charges contributed to a net securities loss of $5,487,000, or $0.58 per share, for the quarter, equating to an after-tax loss of $3,457,000, or $0.37 per share. Excluding these net securities losses, pre-tax earnings for the quarter totaled $4,300,000 for the three-months ended September 30, 2008, a 9.5% increase over the $3,928,000 earned for the same period in 2007. Management believes that additional impairment charges may be necessary on investment securities in future quarters if financial and economic conditions do not improve as perceived by bond and equity investors.
Positive income items for the quarter included net interest income that was higher than the third quarter of 2007 by $1,015,000, or 23%. The net interest margin for the quarter ended September 30, 2008 was 3.99%, compared to 3.39% for the third quarter of 2007. Also, net loan charge-offs for the quarter totaled $20,000, compared to net losses of $245,000 in the third quarter of 2007.
For the nine month period ending September 30, 2008, net securities losses on the FHLMC and FNMA preferred stock and corporate bonds totaled $6,901,000 compared to net securities gains of $1,444,000 for the nine months ended September 30, 2008. In addition, a higher provision for loan losses of $1,002,000 for the first nine months of 2008 compared to a credit for loan losses of $110,000 for the same period in 2007. Partially offsetting these expense items was an increase in net interest income for the nine month period of $4,089,000 compared to the same nine month period in 2007. The improvement in the net interest income is attributable to lower funding costs as market interest rates paid on deposits have been more favorable for the Company in 2008.
Impaired loans as of September 30, 2008 totaled $6,324,000, or 1.4% of gross loans, compared to impaired loans of $14,010,000 as of June 30, 2008 and $2,982,000 as of September 30, 2007. The decrease in impaired loans on a quarter-to-quarter basis is due to the foreclosure of improved commercial development land which collateralized a $9 million line of credit. The land is recorded in other real estate owned. An independent appraisal confirms that the fair market value supports the carrying value of the other real estate.
The Company’s return on average assets was 0.003% and 1.39% for the three-month periods ending September 30, 2008 and 2007, respectively. The Company’s return on average equity was 0.03% for the three months ended September 30, 2008, compared to 10.69% for the same period a year ago.
Third quarter non-interest income decreased $6,102,000 primarily as the result of net security losses and lower trust department income compared to same period one year ago.
Non-interest expense rose 1% in the third quarter of 2008 primarily as the result of higher salary and benefit costs. Increased occupancy costs are primarily associated with higher property taxes and depreciation relating to First National Bank’s Ankeny office. The efficiency ratio (non-interest expense divided by net interest income plus non-interest income) for the three months ended September 30, 2008 rose to 135% from 54% at September 30, 2007, skewed by net security losses discussed earlier.
Assets totaled $846 million at September 30, 2008, compared to $851 million for same quarter last year, a decrease of 1%. Investment and loans balances were down from a year ago while other real estate owned and deferred tax assets increased as the result of recording the previously described investment impairment charges and taking possession of real estate collateral.
Loans totaled $446 million at the end of the third quarter, 3% lower than the $458 million recorded on September 30, 2007. The allowance for loan losses as of September 30, 2008 and 2007 totaled $6,662,000 and $6,181,000, respectively. The allowance represents 1.47% and 1.33% of loans at September 30, 2008 and 2007, respectively.
Deposits totaled $647 million as of September 30, 2008, compared to the $651 million recorded as of September 30, 2007. Demand checking, interest checking (NOW), and money market balances showed positive growth of $34 million while certificate of deposit balances were down $38 million compared to one year ago.
Capital levels declined 7% to $104 million compared to $112 million reported one year ago primarily as a result of unrealized loss on securities held as available for sale and lower earnings.
Ames National Corporation stock, under the symbol ATLO, traded in the $15.60 to $42.11 range in the third quarter of 2008 and closed at $25.95 on September 30, 2008.
Ames National Corporation affiliate Iowa banks are First National Bank, Ames, Boone Bank & Trust Co., Boone, State Bank & Trust Co., Nevada, Randall-Story 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” 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
(unaudited)
| | | September 30, | | | September 30, | |
| ASSETS | | 2008 | | | 2007 | |
| | | | | | | |
| Cash and due from banks | | $ | 27,216,295 | | | $ | 25,654,272 | |
| Interest bearing deposits in financial institutions | | | 7,550,340 | | | | 661,885 | |
| Securities available-for-sale | | | 323,416,226 | | | | 341,089,875 | |
| Loans receivable, net | | | 446,224,818 | | | | 457,864,361 | |
| Loans held for sale | | | 1,169,084 | | | | 754,433 | |
| Bank premises and equipment, net | | | 12,785,372 | | | | 13,719,670 | |
| Other real estate owned | | | 12,648,962 | | | | 2,871,051 | |
| Accrued income receivable | | | 7,723,433 | | | | 8,408,901 | |
| Deferred income taxes | | | 7,263,335 | | | | - | |
| Other assets | | | 473,967 | | | | 268,427 | |
| Total assets | | $ | 846,471,832 | | | $ | 851,292,875 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| LIABILITIES | | | | | | | | |
| Deposits | | | | | | | | |
| Demand, noninterest bearing | | $ | 79,518,096 | | | $ | 71,653,364 | |
| NOW accounts | | | 155,448,377 | | | | 145,788,086 | |
| Savings and money market | | | 161,470,338 | | | | 144,800,475 | |
| Time, $100,000 and over | | | 85,408,343 | | | | 108,556,497 | |
| Other time | | | 165,418,906 | | | | 180,181,480 | |
| Total deposits | | | 647,264,060 | | | | 650,979,902 | |
| | | | | | | | | |
| Federal funds purchased and securities sold under agreements to repurchase | | | 47,258,710 | | | | 55,232,215 | |
| Other short-term borrowings | | | 1,089,061 | | | | 3,361,535 | |
| Long-term borrowings | | | 39,500,000 | | | | 23,000,000 | |
| Dividend payable | | | 2,641,216 | | | | 2,545,987 | |
| Accrued expenses and other liabilities | | | 4,967,463 | | | | 4,555,396 | |
| Total liabilities | | | 742,720,510 | | | | 739,675,035 | |
| | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | |
| Common stock, $2 par value, authorized 18,000,000 shares;9,432,915 and 9,429,580 shares issued and outstanding at September 30, 2008and September 30, 2007, respectively | | | 18,865,830 | | | | 18,859,160 | |
| Additional paid-in capital | | | 22,651,222 | | | | 22,588,691 | |
| Retained earnings | | | 63,535,036 | | | | 66,506,883 | |
| Accumulated other comprehensive income (loss)-net unrealized gain (loss) on securities available-for-sale | | | (1,300,766 | ) | | | 3,663,106 | |
| Total stockholders' equity | | | 103,751,322 | | | | 111,617,840 | |
| Total liabilities and stockholders' equity | | $ | 846,471,832 | | | $ | 851,292,875 | |
AMES NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Interest and dividend income: | | | | | | | | | | | | |
| Loans | | $ | 7,237,129 | | | $ | 8,062,624 | | | $ | 22,386,655 | | | $ | 23,500,424 | |
| Securities | | | | | | | | | | | | | | | | |
| Taxable | | | 2,497,103 | | | | 2,322,438 | | | | 7,487,230 | | | | 6,981,845 | |
| Tax-exempt | | | 1,201,777 | | | | 1,218,921 | | | | 3,809,905 | | | | 3,603,235 | |
| Federal funds sold | | | 15,835 | | | | 2,132 | | | | 150,284 | | | | 181,523 | |
| Dividends | | | 229,216 | | | | 397,137 | | | | 898,953 | | | | 1,171,687 | |
| | | | | | | | | | | | | | | | | |
| Total interest income | | | 11,181,060 | | | | 12,003,252 | | | | 34,733,027 | | | | 35,438,714 | |
| | | | | | | | | | | | | | | | | |
| Interest expense: | | | | | | | | | | | | | | | | |
| Deposits | | | 3,289,349 | | | | 5,232,913 | | | | 11,363,993 | | | | 16,041,795 | |
| Other borrowed funds | | | 557,783 | | | | 789,136 | | | | 1,687,382 | | | | 1,804,055 | |
| | | | | | | | | | | | | | | | | |
| Total interest expense | | | 3,847,132 | | | | 6,022,049 | | | | 13,051,375 | | | | 17,845,850 | |
| | | | | | | | | | | | | | | | | |
| Net interest income | | | 7,333,928 | | | | 5,981,203 | | | | 21,681,652 | | | | 17,592,864 | |
| | | | | | | | | | | | | | | | | |
| Provision (credit) for loan losses | | | 73,514 | | | | (264,131 | ) | | | 1,002,208 | | | | (110,527 | ) |
| | | | | | | | | | | | | | | | | |
| Net interest income after provision (credit) for loan losses | | | 7,260,414 | | | | 6,245,334 | | | | 20,679,444 | | | | 17,703,391 | |
| | | | | | | | | | | | | | | | | |
| Non-interest income: | | | | | | | | | | | | | | | | |
| Trust department income | | | 391,115 | | | | 438,383 | | | | 1,222,268 | | | | 1,543,048 | |
| Service fees | | | 451,162 | | | | 479,930 | | | | 1,332,094 | | | | 1,383,137 | |
| Securities gains, net | | | (5,487,250 | ) | | | 537,969 | | | | (6,900,899 | ) | | | 1,444,047 | |
| Gain on sale of loans held for sale | | | 217,928 | | | | 241,548 | | | | 604,467 | | | | 539,652 | |
| Merchant and ATM fees | | | 169,512 | | | | 143,859 | | | | 483,515 | | | | 426,144 | |
| Other | | | 143,802 | | | | 146,284 | | | | 520,704 | | | | 430,943 | |
| | | | | | | | | | | | | | | | | |
| Total non-interest income | | | (4,113,731 | ) | | | 1,987,973 | | | | (2,737,851 | ) | | | 5,766,971 | |
| | | | | | | | | | | | | | | | | |
| Non-interest expense: | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 2,647,502 | | | | 2,480,547 | | | | 7,728,417 | | | | 7,543,814 | |
| Data processing | | | 511,166 | | | | 535,527 | | | | 1,681,526 | | | | 1,643,884 | |
| Occupancy expenses | | | 397,897 | | | | 344,227 | | | | 1,203,963 | | | | 965,715 | |
| Provision for off-balance sheet commitments | | | 4,000 | | | | 233,000 | | | | 15,000 | | | | 233,000 | |
| Other operating expenses | | | 773,195 | | | | 711,887 | | | | 2,230,776 | | | | 2,146,260 | |
| | | | | | | | | | | | | | | | | |
| Total non-interest expense | | | 4,333,760 | | | | 4,305,188 | | | | 12,859,682 | | | | 12,532,673 | |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | (1,187,077 | ) | | | 3,928,119 | | | | 5,081,911 | | | | 10,937,689 | |
| | | | | | | | | | | | | | | | | |
| Income tax expense | | | (1,193,983 | ) | | | 989,580 | | | | 307,176 | | | | 2,650,706 | |
| | | | | | | | | | | | | | | | | |
| Net income | | $ | 6,906 | | | $ | 2,938,539 | | | $ | 4,774,735 | | | $ | 8,286,983 | |
| | | | | | | | | | | | | | | | | |
| Basic and diluted earnings per share | | $ | 0.00 | | | $ | 0.31 | | | $ | 0.51 | | | $ | 0.88 | |
| | | | | | | | | | | | | | | | | |
| Declared dividends per share | | $ | 0.28 | | | $ | 0.27 | | | $ | 0.84 | | | $ | 0.81 | |
