Ames National (ATLO) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (Unaudited) Unaudited statements show total assets grew to $2.10 billion, driven by deposit growth and higher net income Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $2,096,396 | $1,975,648 | | Cash and equivalents | $148,393 | $191,523 | | Securities available-for-sale | $765,423 | $596,999 | | Loans receivable, net | $1,126,059 | $1,129,505 | | Goodwill | $12,424 | $12,424 | | Total Liabilities | $1,886,016 | $1,766,161 | | Total deposits | $1,836,708 | $1,716,446 | | Total Stockholders' Equity | $210,380 | $209,487 | - Total assets grew by $120.7 million, or 6.1%, from December 31, 2020 to September 30, 2021, primarily driven by a $120.3 million increase in total deposits[5] Consolidated Statements of Income Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $14,652 | $14,160 | $42,488 | $40,886 | | Provision (credit) for loan losses | ($94) | $541 | ($540) | $4,424 | | Net income | $6,714 | $5,672 | $18,616 | $13,654 | | Basic and diluted EPS | $0.74 | $0.62 | $2.04 | $1.49 | | Dividends declared per share | $0.52 | $0.25 | $1.03 | $0.50 | - The significant increase in net income was heavily influenced by a reversal of loan loss provisions in 2021 compared to substantial provisions in 2020[9] Consolidated Statements of Comprehensive Income Comprehensive Income (in thousands) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income | $6,714 | $5,672 | $18,616 | $13,654 | | Other comprehensive income (loss), net of tax | ($1,148) | $1,496 | ($7,762) | $11,374 | | Comprehensive income | $5,566 | $7,168 | $10,854 | $25,028 | - Comprehensive income for the first nine months of 2021 was significantly lower than net income due to a $7.76 million after-tax unrealized loss on securities[13] Consolidated Statements of Stockholders' Equity - For the nine months ended September 30, 2021, stockholders' equity increased slightly to $210.4 million, as net income was largely offset by dividends and unrealized losses[18] - The company repurchased and retired 24,603 shares of its common stock for $571 thousand during the first nine months of 2021[17][18] Consolidated Statements of Cash Flows Consolidated Cash Flows Highlights (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,738 | $21,322 | | Net cash (used in) investing activities | ($134,692) | ($178,202) | | Net cash provided by financing activities | $111,742 | $145,013 | | Net increase (decrease) in cash | $788 | ($11,867) | - Cash from financing activities decreased primarily due to a smaller increase in deposits in 2021 ($120.4M) compared to 2020 ($167.3M)[21] - Cash used in investing activities decreased, mainly because the net increase in loans was significantly lower in 2021 compared to 2020[21] Notes to Consolidated Financial Statements - The company has delayed the adoption of the new credit loss standard (CECL) until interim and annual periods beginning after December 15, 2022[29] - Management concluded there was no goodwill impairment as of September 30, 2021[28] - As of September 30, 2021, substantially all COVID-19 related loan modifications have returned to normal payment status[88] Regulatory Capital Ratios (Consolidated) as of September 30, 2021 | Ratio | Actual | For Capital Adequacy | To Be Well Capitalized | | :--- | :--- | :--- | :--- | | Total capital (to risk- weighted assets) | 15.3% | 10.50% | N/A | | Tier 1 capital (to risk- weighted assets) | 14.0% | 8.50% | N/A | | Tier 1 capital (to average- assets) | 9.2% | 4.00% | N/A | | Common equity tier 1 capital | 14.0% | 7.00% | N/A | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Strong Q3 2021 performance was driven by lower interest expense and a credit for loan losses, though the net interest margin compressed Overview and Performance - Net income for Q3 2021 was $6.7 million ($0.74 per share), up from $5.7 million ($0.62 per share) in Q3 2020[118] - The earnings increase was primarily driven by lower interest expense and a reversal of the provision for loan losses[118] Challenges and COVID-19 Status, Risks and Uncertainties - Management identifies ongoing risks from the COVID-19 pandemic and prolonged low market interest rates[122] - As of September 30, 2021, the company held 227 Paycheck Protection Program (PPP) loans with an outstanding balance of $14.8 million[122] - Substantially all COVID-19 related loan modifications have returned to normal payment status as of September 30, 2021[123] Key Performance Indicators Selected Performance Indicators (Q3 2021 vs Q3 2020) | Indicator | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Return on assets (annualized) | 1.29% | 1.21% | | Return on equity (annualized) | 12.60% | 11.18% | | Net interest margin | 2.97% | 3.21% | | Efficiency ratio | 51.35% | 54.80% | Income Statement Review - For Q3 2021, net interest income increased to $14.7 million as a 42% decline in interest expense more than offset lower interest income[161][163] - A credit for loan losses of ($94) thousand was recorded in Q3 2021, compared to a provision of $541 thousand in Q3 2020[164] - Q3 2021 noninterest income decreased 4% to $2.7 million, primarily due to a slowdown in gains on sale of residential loans[164] - Q3 2021 noninterest expense decreased 4% to $8.9 million, mainly from lower salaries and benefits[165] Balance Sheet Review - Total assets increased by $120.7 million since year-end 2020 to $2.1 billion, funded by deposit growth from government stimulus[181] - The investment portfolio grew by $168.4 million to $765.4 million since year-end, as deposit growth outpaced loan growth[181] - The loan portfolio decreased slightly to $1.126 billion, primarily due to a reduction in PPP loans to $14.8 million[190] - Deposits increased to $1.84 billion from $1.72 billion at year-end 2020, with growth across all categories except CDs[191] Asset Quality Review and Credit Risk Management - The ratio of problem loans to total loans improved, decreasing to 1.11% at September 30, 2021, from 1.33% at year-end 2020[195] - Impaired loans decreased by $2.8 million to $12.5 million as of September 30, 2021, due to payoffs of nonaccrual loans[196] - The allowance for loan losses as a percentage of outstanding loans was 1.47% as of September 30, 2021[203] - Troubled Debt Restructurings (TDRs) totaled $10.6 million as of September 30, 2021, down from $11.3 million at year-end 2020[196] Liquidity and Capital Resources - Management believes the company's liquidity and capital resources remain at a satisfactory level to support operations[207] - Primary liquidity sources include core deposit growth, loan payments, and access to $306.6 million in FHLB advances[207][208] - Stockholders' equity increased by $893 thousand since year-end 2020 to $210.4 million[215] - The company's capital levels exceed all applicable regulatory guidelines as of September 30, 2021[215] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with no significant change in exposure from 2020 to 2021 - The Company's main market risk is interest rate risk from its lending and deposit-taking activities[217] - Management does not believe the primary market risk exposure or its management has changed significantly in 2021 compared to 2020[217] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures are effective with no material changes in the last quarter - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective[218] - No material changes in internal control over financial reporting occurred during the last fiscal quarter[219] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports that there are no applicable legal proceedings to disclose for the period - Not applicable[219] Item 1.A. Risk Factors There have been no material changes in risk factors from those disclosed in the company's Annual Report on Form 10-K - Management does not believe there have been any material changes in the risk factors disclosed in the Company's Form 10-K[219] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 24,603 shares in Q3 2021 under its 100,000-share repurchase plan approved in April 2021 - In April 2021, the Company approved a Stock Repurchase Plan for up to 100,000 shares of its common stock[221] Share Repurchases in Q3 2021 | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Remaining Under Plan | | :--- | :--- | :--- | :--- | | July 2021 | 0 | $ - | 100,000 | | August 2021 | 0 | $ - | 100,000 | | September 2021 | 24,603 | $23.19 | 75,397 | | Total | 24,603 | | 75,397 | Item 3. Defaults Upon Senior Securities The company reports that there are no applicable defaults upon senior securities to disclose for the period - Not applicable[222] Item 4. Mine Safety Disclosures The company reports that there are no applicable mine safety disclosures - Not applicable[223] Item 5. Other Information The company reports that there is no other information to disclose for the period - Not applicable[223] Item 6. Exhibits This section lists the exhibits filed with the report, including Sarbanes-Oxley certifications and Inline XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Section 302 of the Sarbanes-Oxley Act and U.S.C. Section 1350[225] - The filing includes Inline XBRL Instance, Schema, Calculation, Definition, Label, and Presentation documents[225]