Ames National (US:ATLO)2025-03-12 19:01Financial Performance - As of December 31, 2024, First National Bank had total assets of approximately $1.11 billion, down from $1.14 billion in 2023, with net income of approximately $5.2 million compared to $5.5 million in 2023[20]. - State Bank reported total assets of approximately $198.6 million as of December 31, 2024, a decrease from $201.7 million in 2023, with net income of approximately $933 thousand, down from $1.4 million in 2023[22]. - Boone Bank's total assets increased to approximately $156.7 million as of December 31, 2024, up from $149.4 million in 2023, with net income of approximately $616 thousand compared to $740 thousand in 2023[24]. - Reliance Bank had total assets of approximately $307.5 million as of December 31, 2024, down from $313.3 million in 2023, with net income of approximately $1.9 million, up from $1.7 million in 2023[26]. - United Bank's total assets increased to approximately $130.3 million as of December 31, 2024, compared to $118.5 million in 2023, with net income of approximately $1.1 million, up from $1.0 million in 2023[28]. - Iowa State Bank reported total assets of approximately $270.3 million as of December 31, 2024, an increase from $254.7 million in 2023, with net income of approximately $2.0 million for both years[30]. - The Company reported net income of $10.2 million for the year ended December 31, 2024, a decrease of 5.5% compared to $10.8 million in 2023[180]. - Earnings per share for 2024 were $1.14, down from $1.20 in 2023[180]. - Interest income increased to $82.6 million in 2024 from $74.3 million in 2023, while interest expense rose to $37.6 million from $29.7 million[175]. - The Company's return on average equity for 2024 was 6.02%, down from 7.05% in 2023, and return on average assets was 0.48%, compared to 0.51% in 2023[181]. - The efficiency ratio for 2024 was 76.59%, compared to 74.60% in 2023, indicating a decline in operational efficiency[175]. - Net interest income for 2024 totaled $45.0 million, a 0.8% increase from $44.6 million in 2023[210]. Loan Portfolio - The Banks' loan portfolio consists of approximately 53% commercial loans, 22% agricultural loans, and 23% residential loans[34][35][36]. - Commercial real estate loans account for approximately 54% of the loan portfolio, with loan-to-appraisal value ratios not exceeding 80%[40]. - Commercial and agricultural operating and term loans represent about 17% of the loan portfolio, with loan-to-value ratios generally not exceeding 75%[42]. - Residential first mortgage loans, home equity term loans, and home equity lines of credit together make up approximately 23% of the loan portfolio, with loan-to-value ratios typically not exceeding 90%[47]. - Consumer loans represent around 1% of the loan portfolio, with automobile loans not exceeding 90% of the value for new cars and 75% for used cars[48]. - The allowance for credit losses for loans is established through a disciplined process, incorporating both asset-specific and pooled components to estimate expected credit losses[189]. - The company's credit loss expense is necessary to maintain the allowance for credit losses at the expected levels inherent within the loan portfolio[194]. - Net loan charge-offs increased to $453 thousand in 2024 compared to $213 thousand in 2023, primarily due to growth in the loan portfolio[212]. - Loans classified as substandard and substandard-impaired rose by $18.0 million to $49.7 million in 2024, mainly due to downgrades in commercial real estate and operating loan portfolios[212]. Regulatory Environment - The Company is subject to extensive federal and state regulation, which may materially affect its business and operations in the future[71]. - As of December 31, 2024, the Banks exceeded all regulatory capital requirements and were designated as "well capitalized" under federal guidelines[94]. - The deposit insurance coverage limit is $250,000 per depositor, per insured depository institution for each account ownership category[87]. - The Federal Reserve requires bank holding companies to obtain approval before acquiring more than 5% of the voting stock of any bank[75]. - The Dodd-Frank Act subjects the Banks to regulations from the Consumer Financial Protection Bureau, which has substantial power over consumer financial products and services[85]. - Iowa law currently has a deposit concentration limit of 15% on the amount of deposits that any one banking organization can control[80]. - The Basel III Capital Rules require a Common Equity Tier 1 (CET1) ratio of 6.5% for well-capitalized status[91]. - The Federal Reserve and the FDIC have issued policy statements that generally restrict insured banks and bank holding companies from paying dividends unless out of current operating earnings[96]. - The Company’s ability to pay dividends is subject to federal regulatory considerations and may be impacted by its financial condition and capital requirements[167]. Market Competition - The geographic market area served by the Banks is highly competitive, with 49 FDIC insured institutions having around 125 locations in the primary trade areas[67]. - The Company anticipates continued changes in bank competition, particularly from fintech companies and credit unions, which have significant competitive advantages[69]. - The Company faces significant competition from larger financial institutions, which may adversely affect its ability to compete effectively in the market[140]. - The competitive landscape in Ames, Iowa, includes fifteen banks and five credit unions, which may exert downward pressure on the net interest margin[211]. Operational Risks - The Company employs approximately 268 individuals, with 93% being full-time employees and an average tenure of about eleven years[52]. - The Company faces risks related to credit losses, particularly if actual credit losses exceed the allowance for credit losses, which could decrease net income[116]. - The Company must maintain disciplined underwriting standards to manage credit risk effectively, as weakening these standards could lead to increased loan defaults[113]. - The Company is exposed to operational risks from data processing failures and employee misconduct, which could result in financial losses and regulatory sanctions[125]. - Operational risks include the potential inability to attract and retain key personnel, which could hinder business growth and operations[124]. - The Company faces cybersecurity risks, with increased threats due to remote working, which could lead to significant financial losses[129]. - Damage to the company's reputation from various sources, including cybersecurity breaches, could lead to lost revenue and increased costs[136]. Investment and Asset Management - Assets under management for wealth management services increased to $456.3 million as of December 31, 2024, up from $416.0 million in 2023[38]. - The investment policy focuses on U.S. Government securities and corporate debt securities, balancing liquidity needs with risk minimization and yield maximization[49]. - The fair value of the Company's securities portfolio was approximately $648.5 million as of December 31, 2024, with a net unrealized loss of $52.0 million primarily due to increased interest rates[119]. - The company's investment securities portfolio generated a total revenue of $14,539 in 2024, with a yield of 2.08%, compared to $15,575 and a yield of 2.03% in 2023[204]. Economic Environment - Consumer inflation, as measured by the Consumer Price Index, increased by 3.4% for the year ended December 31, 2023, and 2.9% for the year ended December 31, 2024[111]. - The economic environment, including inflation and interest rates, significantly impacts the Company's financial performance and the ability of customers to repay loans[109]. - The Company is subject to risks from evolving trade policies that could disrupt major trade relationships, affecting customer repayment capabilities[112]. - The Federal Open Market Committee has initiated a series of increases in the short-term federal funds interest rate to combat inflation, which could adversely affect economic activity[110]. - The Company is facing challenges from elevated interest rates, which may negatively impact net interest income and margins going forward[184]. Shareholder Returns - The Company declared aggregate annual cash dividends of approximately $8.4 million in 2024 and $9.7 million in 2023, translating to $0.94 per share in 2024 and $1.08 per share in 2023[166]. - A successor Stock Repurchase Plan was approved on November 14, 2024, allowing for the purchase of up to 100,000 shares, set to expire on November 12, 2025[172]. - The Company purchased 43,057 shares under its Stock Repurchase Plan in 2024, with no purchases made in 2023[169]. - The Company relies on dividends from its banks for nearly all revenue, and any inability to receive these dividends could adversely affect financial obligations[123].