Ames National Corporation (NASDAQ:ATLO) is a bank holding company that operates six community banks across central, north-central, and south-central Iowa. With a focus on providing personalized banking services, the company has established itself as a trusted financial institution in its local markets.
Business Overview
Ames National Corporation's six bank subsidiaries - First National Bank, State Bank & Trust Co., Boone Bank & Trust Co., Reliance State Bank, United Bank & Trust Co., and Iowa State Savings Bank - offer a comprehensive suite of commercial and consumer banking products and services. This includes commercial and agricultural lending, residential and commercial real estate lending, wealth management, and traditional deposit services. The company's diversified revenue streams and geographic footprint have enabled it to navigate various economic conditions and deliver consistent financial performance.Financials
For the full year 2023, Ames National Corporation reported net income of $10.8 million, a 3.2% increase from the previous year. Annual revenue reached $83.5 million, up 4.1% year-over-year. The company's strong operating cash flow of $18.8 million and free cash flow of $13.9 million underscored its ability to generate ample liquidity to support its operations and strategic initiatives.In the first quarter of 2024, the company continued its solid performance, reporting net income of $2.3 million, or $0.26 per share, compared to $3.2 million, or $0.36 per share, in the same period of 2023. The decrease in earnings was primarily due to higher interest expense on deposits and other borrowed funds, partially offset by an increase in interest income on loans. Net loan recoveries totaled $4 thousand in the first quarter of 2024, compared to net loan charge-offs of $158 thousand in the same period of 2023. The company recognized a credit loss expense of $169 thousand in the first quarter of 2024, down from $275 thousand in the first quarter of 2023.
Geographic and Revenue Diversification
Ames National Corporation's six bank subsidiaries are strategically located across central, north-central, and south-central Iowa, providing the company with a diverse geographic footprint and customer base. This geographic diversification helps mitigate the company's exposure to regional economic fluctuations and allows it to capitalize on growth opportunities in different markets.In terms of revenue diversification, the company generates income from various sources, including net interest income, wealth management fees, service fees, and merchant and card fees. This diversification helps to stabilize the company's overall financial performance and reduce its reliance on any single revenue stream.
Loan Portfolio and Asset Quality
As of March 31, 2024, Ames National Corporation's loan portfolio, net of the allowance for credit losses, totaled $1.27 billion, a slight decrease from $1.28 billion as of December 31, 2023. The decrease was primarily due to a decline in commercial real estate loan demand. The company's level of problem loans (consisting of nonaccrual loans and loans past due 90 days or more) as a percentage of total loans was 1.03% at March 31, 2024, compared to 1.08% at December 31, 2023. This level is higher than the Iowa State Average peer group of FDIC insured institutions as of December 31, 2023, which stood at 0.39%.The company's allowance for credit losses as a percentage of outstanding loans was 1.31% as of March 31, 2024, compared to 1.30% at December 31, 2023. The increase in the allowance for credit losses was mainly due to an increased collateral value risk factor associated with the commercial real estate portfolio.
Liquidity
Ames National Corporation maintains a strong liquidity position, with liquid assets of cash on hand, balances due from other banks, and interest-bearing deposits in financial institutions totaling $111.4 million as of March 31, 2024, compared to $55.1 million as of December 31, 2023. The company also has access to additional liquidity sources, including outstanding lines of credit with the Federal Home Loan Bank of Des Moines, Iowa, and federal funds borrowing capacity at correspondent banks.The company's capital levels exceed applicable regulatory guidelines, with a total risk-based capital ratio of 14.1% and a Tier 1 capital ratio of 12.9% as of March 31, 2024. These ratios demonstrate the company's financial strength and its ability to support its operations and growth initiatives.