Key Highlights

  • EPS of USD 0.80 topped the USD 0.66 estimate, up from USD 0.51.
  • Net interest income rose 20.7% to USD 17.0 million.
  • Net interest margin widened to 3.38% from 2.83% a year earlier.
  • Substandard loans rose to USD 52.0 million from USD 29.7 million.

Ames National (NASDAQ:ATLO) reported third-quarter results on Friday, Oct. 16, with earnings of USD 0.80 per share, above the USD 0.66 estimate and up from USD 0.51 a year earlier. Net income was USD 7.0 million, compared with USD 4.6 million. No revenue estimate was available, so no revenue comparison is made.

Ames National is an Ames, Iowa, holding company for six community banks across the state. Shares were up 1.30% at USD 32.71 in Wednesday trading.

Net Interest Income Drives the Gain

Net interest income rose USD 2.9 million, or 20.7%, to USD 17.0 million. Interest income from investment securities increased USD 1.4 million on higher balances and maturities reinvested at higher rates, and loan interest income rose USD 490 thousand on better yields. Deposit interest expense fell USD 801 thousand and interest on other borrowed funds fell USD 327 thousand.

On a tax-equivalent basis, the net interest margin was 3.38%, compared with 2.83% a year earlier and 3.18% in the second quarter. The efficiency ratio improved to 54.97% from 61.76%. Return on average assets was 1.35% and return on average equity 13.18%, up from 0.88% and 9.31%.

Fees, Expenses and Taxes

Noninterest income rose 36.7% to USD 3.5 million, driven by estate and trust fees from several estates that concluded during the quarter, growth in assets under management and USD 235 thousand of insurance proceeds for storm damage. Noninterest expense rose 9.6% to USD 11.2 million, including USD 600 thousand of consultant fees tied to contract negotiations. The company said those fees continue through 2026 as negotiations proceed.

Income tax expense was USD 2.1 million, up from USD 1.2 million, and the effective rate rose to 23% from 20% as New Markets Tax Credits wound down. Nine-month net income was USD 18.9 million, or USD 2.14 per share, versus USD 12.5 million and USD 1.41.

Credit and Balance Sheet

Credit loss expense was USD 66 thousand, versus USD 627 thousand a year earlier. Net loan charge-offs were USD 745 thousand, compared with net recoveries of USD 344 thousand, on commercial real estate and operating loans that already carried specific reserves.

Substandard loans increased to USD 52.0 million from USD 29.7 million, mainly because of one large relationship secured by residential properties and falling occupancy in some multi-family loans. After quarter-end, a USD 3 million agricultural relationship that had been impaired and on nonaccrual was paid in full. The allowance was USD 16.7 million, or 1.31% of loans, versus 1.39%.

Total assets were USD 2.1 billion, down USD 25.8 million from a year earlier. Net loans slipped 1.2% to USD 1.26 billion, securities available for sale grew to USD 671 million, and deposits were USD 1.831 billion. Other borrowings fell to USD 1.5 million from USD 23.5 million. Equity was USD 205.8 million, or 9.88% of assets.

The company repurchased no shares in the quarter, leaving 165,053 shares under its authorization, and paid a quarterly dividend of USD 0.24 per share on Sept. 15.

Credit and Margin Items to Watch

The next reports show whether the net interest margin holds above 3.38%, how the multi-family and residential relationships behind the rise in substandard loans develop, and how long the consultant fees run. Noninterest income without the estate fees and storm proceeds, the roughly USD 100 million of investments maturing within one year and the USD 376 million of loans maturing within one year are the other items to follow.