Ames National (ATLO) - 2025 Q3 - Quarterly Results

Third Quarter 2025 Earnings Announcement Overall Performance Summary Ames National Corporation reported significant net income growth in Q3 2025 and the first nine months, primarily due to increased net interest income and lower funding costs Net Income and EPS Overview | Metric | Q3 2025 | Q3 2024 | Change | Nine Months 2025 | Nine Months 2024 | Change | | :----------------- | :------------- | :------------- | :--- | :------------- | :------------- | :--- | | Net Income (million USD) | $4.6 | $2.2 | +109.1% | $12.5 | $6.7 | +86.6% | | EPS (USD) | $0.51 | $0.25 | +104.0% | $1.41 | $0.75 | +88.0% | - Net income growth was primarily driven by increased net interest income from higher loan and investment yields, and reduced funding costs due to declining market rates and decreased borrowings[2] Financial Highlights Income Statement Highlights The company achieved significant growth in key profitability metrics and improved its efficiency ratio for Q3 2025 and the first nine months Income Statement Key Metrics | Metric | Q3 2025 | Q3 2024 | Nine Months 2025 | Nine Months 2024 | | :----------------------- | :------------- | :------------- | :------------- | :------------- | | Net Income (thousand USD) | $4,559 | $2,217 | $12,513 | $6,705 | | EPS - Basic and Diluted (USD) | $0.51 | $0.25 | $1.41 | $0.75 | | Return on Average Assets | 0.88% | 0.42% | 0.79% | 0.42% | | Return on Average Equity | 9.31% | 5.12% | 8.92% | 5.37% | | Efficiency Ratio | 61.76% | 77.87% | 64.10% | 78.47% | | Net Interest Margin | 2.83% | 2.21% | 2.67% | 2.16% | Company Stock Highlights As of September 30, 2025, the company's stock closed at $20.22 with a book value of $22.56 per share, and a $0.20 cash dividend was declared Stock Performance and Dividends | Metric | September 30, 2025 | | :------------------- | :------------- | | Closing Price (USD) | $20.22 | | Price Range (USD) | $17.75 - 20.89 | | Book Value Per Common Share (USD) | $22.56 | | Declared Cash Dividend (USD) | $0.20 | | Dividend Yield | 3.96% | Balance Sheet Highlights As of September 30, 2025, total assets slightly decreased, while deposits and stockholders' equity increased, leading to improved capital ratios Balance Sheet Key Metrics | Metric (thousand USD) | September 30, 2025 | September 30, 2024 | | :----------------- | :------------- | :------------- | | Assets | $2,107,999 | $2,123,173 | | Net Loans Receivable | $1,275,794 | $1,295,773 | | Deposits | $1,832,819 | $1,801,721 | | Stockholders' Equity | $200,592 | $183,394 | | Capital Ratio | 9.52% | 8.64% | Detailed Financial Results Third Quarter 2025 Results Q3 2025 saw significant growth in net interest income and net interest margin, alongside improved non-interest income and reduced non-interest expenses, despite higher credit loss expenses - Loan interest income increased by $658 thousand, primarily due to higher yields on the loan portfolio[7] - Interest income from investment securities increased by $289 thousand, driven by reinvestment at higher rates upon maturity[7] - Deposit interest expense decreased by $1.1 million, mainly due to declining market interest rates[7] - Other borrowings interest expense decreased by $726 thousand, primarily due to reduced borrowings[7] Q3 2025 Performance Overview | Metric | Q3 2025 | Q3 2024 | Change | | :----------------- | :------------- | :------------- | :--- | | Net Interest Income (million USD) | $14.0 | $11.0 | +26.8% | | Net Interest Margin | 2.83% | 2.21% | +0.62pp | | Credit Loss Expense (thousand USD) | $627 | $371 | +69.0% | | Non-Interest Income (million USD) | $2.5 | $2.4 | +5.0% | | Non-Interest Expense (million USD) | $10.2 | $10.5 | -2.5% | | Efficiency Ratio | 61.76% | 77.87% | -16.11pp | | Effective Tax Rate | 20% | 15% | +5pp | - The increase in credit loss expense was primarily due to higher specific reserves in the commercial real estate and operating loan portfolios[8] - Non-interest income increased mainly due to growth in wealth management income, driven by increased assets under management and new client relationships[9] - Non-interest expense decreased primarily due to a $449 thousand reduction in consulting fees from contract negotiations completed in 2024[10] Nine Months 2025 Results For the first nine months of 2025, net interest income and net interest margin grew substantially, with improved non-interest income and expenses, despite increased credit loss expenses and net charge-offs - Loan interest income increased by $2.0 million, primarily due to higher yields on the loan portfolio[12] - Interest income from interest-bearing deposits with banks and federal funds sold increased by $1.2 million, mainly due to higher average balances[12] - Deposit interest expense decreased by $2.1 million, primarily due to declining market interest rates[12] - Other borrowings interest expense decreased by $2.4 million, mainly due to reduced borrowings[12] Nine Months 2025 Performance Overview | Metric | Nine Months 2025 | Nine Months 2024 | Change | | :----------------- | :------------- | :------------- | :--- | | Net Interest Income (million USD) | $40.4 | $32.8 | +23.1% | | Net Interest Margin | 2.67% | 2.16% | +0.51pp | | Credit Loss Expense (million USD) | $1.7 | $0.722 | +135.5% | | Net Loan Charge-offs (thousand USD) | $812 | $6 | +13433.3% | | Non-Interest Income (million USD) | $7.7 | $7.2 | +7.1% | | Non-Interest Expense (million USD) | $30.9 | $31.4 | -1.8% | | Efficiency Ratio | 64.10% | 78.47% | -14.37pp | | Effective Tax Rate | 20% | 15% | +5pp | - The increase in credit loss expense was primarily due to higher specific reserves in the commercial real estate and operating loan portfolios, with charge-offs mainly related to a single commercial loan relationship[13] - Non-interest income increased mainly due to growth in wealth management income, driven by increased assets under management and new client relationships[14] - Non-interest expense decreased primarily due to a $799 thousand reduction in consulting fees from contract negotiations completed in 2024[15] Balance Sheet Review Assets Total assets slightly decreased due to reduced securities and loans, while non-performing and substandard loans increased, primarily in commercial real estate and agriculture Asset Overview | Metric (million USD) | September 30, 2025 | September 30, 2024 | Change | | :----------------------- | :------------- | :------------- | :--- | | Total Assets | $2,100 | $2,115.2 | -$15.2 | | Available-for-Sale Securities | $650.7 | $688.6 | -$37.9 | | Net Loans | $1,280 | $1,300 | -$20 | | Substandard Loans | $29.7 | $28.3 | +$1.4 | | Non-Performing Loans | $18.8 | $16.9 | +$1.9 | | Allowance for Credit Losses | $18.0 | $17.6 | +$0.4 | | Allowance for Credit Losses to Loans | 1.39% | 1.34% | +0.05pp | - Total assets decreased primarily due to reductions in available-for-sale securities and loans receivable, partially offset by increased interest-bearing deposits with financial institutions[17] - Available-for-sale securities decreased mainly because maturities exceeded purchases, partially offset by a reduction in unrealized losses within the portfolio, which has an expected duration of 3.0 years[18] - Substandard loans increased primarily due to higher vacancy rates on a multi-family real estate loan, while non-performing loans increased due to weakness in commercial real estate and agricultural loan portfolios[19] - The allowance for credit losses increased primarily due to higher specific reserves[20] Liabilities Total deposits increased, driven by time deposits and public funds, while other borrowings significantly decreased Liabilities Overview | Metric (million USD) | September 30, 2025 | September 30, 2024 | Change | | :----------------- | :------------- | :------------- | :--- | | Deposits | $1,830 | $1,800 | +1.7% | | Other Borrowings | $23.5 | $83.1 | -$59.6 | | Stockholders' Equity | $200.6 | $183.4 | +$17.2 | - Deposits increased primarily due to growth in time deposits and public funds, partially offset by decreases in retail and commercial checking and money market account balances as customers sought higher interest rates[21] - Approximately 16% of deposits are indexed to external rates, which may lead to more volatile interest expense in a changing rate environment[21] - Other borrowings decreased as the company continued to reduce borrowings as investments matured[22] Stockholders' Equity Stockholders' equity increased to 9.5% of total assets, with all subsidiary banks well-capitalized, driven by reduced unrealized losses and retained net income Stockholders' Equity Overview | Metric (million USD) | September 30, 2025 | September 30, 2024 | Change | | :----------------- | :------------- | :------------- | :--- | | Stockholders' Equity | $200.6 | $183.4 | +$17.2 | | Stockholders' Equity as % of Total Assets | 9.5% | 8.64% | +0.86pp | - Stockholders' equity increased primarily due to a reduction in unrealized losses in the investment portfolio and net income retained in excess of dividends[23] Capital Management and Dividends Share Repurchase Program The company completed its prior share repurchase program in Q3 2025 and initiated a new program authorizing the repurchase of 200,000 common shares - From July 1 to September 30, 2025, the company repurchased 6,522 shares of common stock under the November 2024 program at an average price of $18.73 per share, totaling $122 thousand, completing the program as of September 30, 2025[24] - A new share repurchase program was announced in August 2025, authorizing the repurchase of 200,000 shares of common stock, with 200,000 shares remaining available for repurchase as of September 30, 2025[25] Weighted Average Shares Outstanding | Metric | Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | | :------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Weighted Average Shares Outstanding | 8,894,152 | 8,992,167 | 8,903,933 | 8,992,167 | Cash Dividend Announcement A quarterly cash dividend of $0.20 per share was declared on August 13, 2025, and paid on September 15, 2025 - On August 13, 2025, the company declared a quarterly cash dividend of $0.20 per share on common stock, payable on September 15, 2025, to shareholders of record as of September 1, 2025[27] Company Information and Forward-Looking Statements About the Company Ames National Corporation is a holding company with several subsidiary banks operating across Iowa - Ames National Corporation's subsidiary Iowa banks include First National Bank of Ames, Boone Bank & Trust Co., State Bank & Trust Co. of Nevada, Reliance State Bank of Story City, United Bank & Trust Co. of Marshalltown, and Iowa Savings Bank of Creston, Iowa[28] Forward-Looking Statements This press release contains forward-looking statements about future performance and asset quality, subject to various risks and uncertainties - This press release contains forward-looking statements regarding the company's future performance and asset quality, based on management's current beliefs, assumptions, projections, and expectations of future events[29] - These beliefs, assumptions, projections, and expectations are subject to numerous risks and uncertainties that may change due to various events or factors, many of which are unknown to and beyond management's control[29] - Risks and uncertainties include, but are not limited to, national, regional, and local economic conditions, market competition, changes in credit and other risks to the loan and investment portfolios, changes in government regulations, changes in interest rates, credit risk management, financial and securities markets, and the availability and cost of liquidity sources[29] Consolidated Financial Statements Consolidated Balance Sheets As of September 30, 2025, total assets were $2.108 billion, with increased deposits and stockholders' equity year-over-year Consolidated Balance Sheet Summary | (thousand USD) | September 30, 2025 | September 30, 2024 | | :------------------------------------------------- | :------------- | :------------- | | Assets | | | | Cash and Due from Banks | $22,706 | $22,660 | | Interest-Bearing Deposits with Financial Institutions and Federal Funds Sold | $85,455 | $36,309 | | Available-for-Sale Securities | $650,660 | $688,595 | | Net Loans Receivable | $1,275,794 | $1,295,773 | | Total Assets | $2,107,999 | $2,123,173 | | Liabilities | | | | Deposits | $1,832,819 | $1,801,721 | | Other Borrowings | $23,502 | $83,101 | | Total Liabilities | $1,907,407 | $1,939,779 | | Stockholders' Equity | | | | Common Stock | $17,784 | $17,984 | | Retained Earnings | $191,235 | $180,505 | | Accumulated Other Comprehensive (Loss) | ($21,225) | ($29,348) | | Total Stockholders' Equity | $200,592 | $183,394 | | Total Liabilities and Stockholders' Equity | $2,107,999 | $2,123,173 | Consolidated Statements of Income Net interest income and net income significantly increased for Q3 2025 and the first nine months, driven by higher revenues and lower non-interest expenses Consolidated Income Statement Summary | (thousand USD) | Q3 2025 | Q3 2024 | Nine Months 2025 | Nine Months 2024 | | :----------------------- | :------------- | :------------- | :------------- | :------------- | | Interest and Dividend Income | | | | | | Loans | $17,409 | $16,751 | $50,750 | $48,793 | | Securities | $3,755 | $3,466 | $10,614 | $10,628 | | Other Interest and Dividend Income | $689 | $495 | $3,092 | $1,937 | | Total Interest and Dividend Income | $21,853 | $20,712 | $64,456 | $61,358 | | Interest Expense | | | | | | Deposits | $7,173 | $8,278 | $21,979 | $24,037 | | Other Borrowings | $631 | $1,357 | $2,047 | $4,466 | | Total Interest Expense | $7,804 | $9,635 | $24,026 | $28,503 | | Net Interest Income | $14,049 | $11,077 | $40,430 | $32,855 | | Credit Loss Expense | $627 | $371 | $1,697 | $722 | | Non-Interest Income | | | | | | Wealth Management Income | $1,374 | $1,242 | $4,336 | $3,913 | | Total Non-Interest Income | $2,534 | $2,413 | $7,722 | $7,209 | | Non-Interest Expense | | | | | | Salaries and Employee Benefits | $6,374 | $6,291 | $19,226 | $18,965 | | Professional Fees | $412 | $867 | $1,437 | $2,190 | | Total Non-Interest Expense | $10,241 | $10,505 | $30,867 | $31,439 | | Net Income | $4,559 | $2,217 | $12,513 | $6,705 | | Basic and Diluted EPS (USD) | $0.51 | $0.25 | $1.41 | $0.75 | | Declared Dividends Per Share (USD) | $0.20 | $0.20 | $0.40 | $0.74 | Average Balances and Interest Rates Average Balance Sheets and Interest Rates (Q3 2025 vs Q3 2024) Q3 2025 saw improved net interest spread and net interest margin, driven by higher interest-earning asset yields and lower interest-bearing liability rates Average Balance Sheets and Interest Rates | (thousand USD) | Q3 2025 Average Balance | Q3 2025 Yield/Rate | Q3 2024 Average Balance | Q3 2024 Yield/Rate | | :--------------------------------------- | :--------------------- | :---------------------- | :--------------------- | :---------------------- | | Interest-Earning Assets | | | | | | Total Loans | $1,291,678 | 5.39% | $1,303,284 | 5.14% | | Total Investment Securities | $644,011 | 2.40% | $687,362 | 2.09% | | Interest-Bearing Deposits with Banks and Federal Funds Sold | $65,313 | 4.22% | $39,456 | 5.02% | | Total Interest-Earning Assets | $2,001,002 | 4.39% | $2,030,102 | 4.11% | | Interest-Bearing Liabilities | | | | | | Total Deposits | $1,477,009 | 1.94% | $1,458,495 | 2.27% | | Other Borrowings | $71,223 | 3.54% | $120,234 | 4.51% | | Total Interest-Bearing Liabilities | $1,548,232 | 2.02% | $1,578,729 | 2.44% | | Net Interest Spread (FTE) | | 2.37% | | 1.67% | | Net Interest Margin (FTE) | | 2.83% | | 2.21% | - Commercial loan yields increased from 6.36% to 6.45%, real estate loan yields from 4.75% to 5.10%, and consumer and other loan yields from 5.16% to 5.44%[35] - Agricultural loan yields decreased from 7.68% to 7.05%[35] - Interest-bearing checking, savings, and money market deposit rates decreased from 1.74% to 1.41%[38] - Time deposit rates decreased from 4.23% to 3.73%[38] Non-GAAP Financial Measures The company provides non-GAAP financial measures, such as FTE net interest income and net interest margin, for comprehensive financial performance analysis - This report includes non-GAAP financial measures, such as FTE net interest income and net interest margin, which management believes are widely used in the financial institution industry and provide useful information for analyzing and evaluating the company's financial performance for both management and investors[39] Non-GAAP Net Interest Income and Margin (FTE) | (thousand USD) | Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | | :----------------------------------------------------------------- | :--------------------- | :--------------------- | | Net Interest Income (GAAP) | $14,049 | $11,077 | | Tax-Equivalent Adjustment | $109 | $128 | | Net Interest Income (FTE, Non-GAAP) | $14,158 | $11,205 | | Average Interest-Earning Assets | $2,001,002 | $2,030,102 | | Net Interest Margin (FTE, Non-GAAP) | 2.83% | 2.21% | - The tax-equivalent adjustment is calculated using an incremental federal income tax rate of 21% and adjusted for the impact of tax-exempt interest income related to tax-exempt securities and loans[40]