ATLO Ames National Corporation

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 ended
	December 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