Ames National Corp. (ATLO, Financial) filed Quarterly Report for the period ended 2009-06-30.
Ames National Corporation is a multi-bank holding company. Headquartered in Ames Iowa Ames National Corporation and its five individually chartered banks provide central Iowa with commercial banking services. Ames National Corp. has a market cap of $233.8 million; its shares were traded at around $24.79 with a P/E ratio of 22.4 and P/S ratio of 5.5. The dividend yield of Ames National Corp. stocks is 1.7%.
The Company s earnings for the six months ended June 30, 2009 increased $82,000 from the $4,768,000 earned a year ago. While the level of net income remained relatively stable, certain non-interest income and non-interest expense items incurred significant changes. The six month period ending June 30, 2009 had much lower expense associated with the write down of other-than-temporary impairment of investment securities and lower provision expense for loan losses. Impairment of securities for the six months ended June 30, 2009 of $30,000 related to a corporate bond issue of MGIC Investment Corporation. For the six months ended June 30, 2008, the Company had other-than-temporary impairments of investment securities of $2,555,000 related to FNMA and FHLMC preferred stock and a corporate bond issue of MGIC Investment Corporation. The improvement in these areas was partially offset by higher write downs of other real estate owned, a decrease in securities gains and higher FDIC insurance assessments. The increase in other real estate costs of $1,094,000 is due primarily to write downs on certain other real estate owned and other costs associated with the increased volume of other real estate owned. The increase in the FDIC assessments of $948,000 is due primarily to higher quarterly deposit assessment rates and a special assessment for 2009.
Insured institutions set aside $60.9 billion in loan loss provisions in the first quarter, an increase of $23.7 billion (63.6%) from the first quarter of 2008. Almost two out of every three insured institutions (65.4%) increased their loss provisions. Goodwill impairment charges and other intangible asset expenses rose to $7.2 billion from $2.8 billion a year earlier. Against these negative factors, total noninterest income contributed $68.3 billion to pretax earnings, a $7.8-billion (12.8%) improvement over the first quarter of 2008. Net interest income was $4.4 billion (4.7%) higher, and realized gains on securities and other assets were up by $1.9 billion (152.6%). The rebound in noninterest income stemmed primarily from higher trading revenue at a few large banks, but gains on loan sales and increased servicing fees also provided a boost to noninterest revenues. Trading revenues were $7.6 billion higher than a year earlier, servicing fees were up by $2.4 billion, and realÂized gains on securities and other assets were $1.9 billion higher. Nevertheless, these positive developÂments were outweighed by the higher expenses for bad loans and goodwill impairment. The average return on assets (ROA) was 0.22%, less than half the 0.58% registered in the first quarter of 2008 and less than one-fifth the 1.20% ROA the industry enjoyed in the first quarter of 2007.
First-quarter net charge-offs of $37.8 billion were slightly lower than the $38.5 billion the industry charged-off in the fourth quarter of 2008, but they were almost twice as high as the $19.6 billion total in the first quarter of 2008. The year-over-year rise in charge-offs was led by loans to commercial and industrial (C&I) borrowers, where charge-offs increased by $4.2 billion (170%); by credit cards (up $3.4 billion, or 68.9%); by real estate construction loans (up $2.9 billion, or 161.7%); and by closed-end 1–4 family residential real estate loans (up $2.7 billion, or 64.9%). Net charge-offs in all major categories were higher than a year ago. The annualized net charge-off rate on total loans and leases was 1.94%, slightly below the 1.95% rate in the fourth quarter of 2008 that is the highest quarterly net charge-off rate in the 25 years that insured institutions have reported these data. Well over half of all insured institutions (58.3%) reported year-over-year increases in quarterly charge-offs.
Total assets declined by $301.7 billion (2.2%) during the quarter, as a few large banks reduced their loan portfolios and trading accounts. This is the largest percentage decline in industry assets in a single quarter in the 25 years for which quarterly data are available. Eight large institutions accounted for the entire decline in industry assets; most insured institutions (67.3%) reported increased assets during the quarter, although only 47% had increases in their loan balances. The decline in industry assets consisted primarily of a $159.6-billion (2.1%) reduction in loans and leases, a $144.5-billion (14.9%) decline in assets in trading accounts, and a $91.7-billion (12.7%) drop in Fed funds sold and securities purchased under resale agreements. Balances with Federal Reserve banks, which had increased by $488.2 billion in the previous two quarters, declined by $32.5 billion (6.3%) during the first quarter. Unused loan commitments fell for a fifth consecutive quarter, declining by $532.0 billion (7.4%). Most of the reduction occurred in credit card lines, which fell by $406.6 billion (9.9%), but unused commitments declined for all major loan categories during the quarÂter. The amount of assets securitized and sold declined by $26.6 billion (1.4%) during the quarter.
The decline in industry assets and the increase in equity capital meant a reduced need for funding during the quarter. Total deposits declined by $81.3 billion (0.9%), while nondeposit liabilities fell by $320.2 billion (9.1%). Deposits in domestic offices increased modestly ($41.9 billion, or 0.6%), with time deposits falling by $72.5 billion (2.6%). Deposits in foreign offices declined by $123.2 billion (8.0%). Liabilities in trading accounts fell by $116.8 billion (24.6%), while Federal Home Loan Bank advances declined for a second consecutive quarter, falling by $91.0 billion (11.6%). Deposits funded 66.1% of total industry assets at the end of the quarter, up from 65.3% at the end of 2008. This is the highest deposit funding share since March 2002.
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Ames National Corporation is a multi-bank holding company. Headquartered in Ames Iowa Ames National Corporation and its five individually chartered banks provide central Iowa with commercial banking services. Ames National Corp. has a market cap of $233.8 million; its shares were traded at around $24.79 with a P/E ratio of 22.4 and P/S ratio of 5.5. The dividend yield of Ames National Corp. stocks is 1.7%.
Highlight of Business Operations:
The Company s earnings for the second quarter increased $542,000 from the $1,867,000 earned a year ago. The higher quarterly earnings can be primarily attributed to decreased write downs associated with the other-than-temporary impairment of investment securities and lower provision expense for loan losses. Impairment of securities for the quarter ended June 30, 2009 of $7,000 related to a corporate bond issue of MGIC Investment Corporation. During the same period in 2008, the Company had other-than-temporary impairments of investment securities of $2,328,000 related to FNMA and FHLMC preferred stock and a corporate bond issue of MGIC Investment Corporation. As of June 30, 2009, the carrying value and fair value of the other-than-temporary impaired securities totaled $752,000. Management believes that additional impairment charges may be necessary on investment securities in future quarters if financial and economic conditions do not improve as perceived by bond investors. Partially offsetting these improvements was an increase in other real estate owned costs, a decrease in securities gains and an increase in FDIC insurance assessments. The increase in other real estate costs of $697,000 is due primarily to write downs on certain other real estate owned and other costs associated with the increased volume of other real estate owned. The increase in the FDIC insurance assessments of $509,000 is due to higher quarterly deposit assessment rates and a special assessment for 2009, which are also expected to negatively impact future quarters if bank failures continue to erode the FDIC insurance fund. In 2009, 53 banks have failed compared to 25 bank failures in 2008.The Company s earnings for the six months ended June 30, 2009 increased $82,000 from the $4,768,000 earned a year ago. While the level of net income remained relatively stable, certain non-interest income and non-interest expense items incurred significant changes. The six month period ending June 30, 2009 had much lower expense associated with the write down of other-than-temporary impairment of investment securities and lower provision expense for loan losses. Impairment of securities for the six months ended June 30, 2009 of $30,000 related to a corporate bond issue of MGIC Investment Corporation. For the six months ended June 30, 2008, the Company had other-than-temporary impairments of investment securities of $2,555,000 related to FNMA and FHLMC preferred stock and a corporate bond issue of MGIC Investment Corporation. The improvement in these areas was partially offset by higher write downs of other real estate owned, a decrease in securities gains and higher FDIC insurance assessments. The increase in other real estate costs of $1,094,000 is due primarily to write downs on certain other real estate owned and other costs associated with the increased volume of other real estate owned. The increase in the FDIC assessments of $948,000 is due primarily to higher quarterly deposit assessment rates and a special assessment for 2009.
Insured institutions set aside $60.9 billion in loan loss provisions in the first quarter, an increase of $23.7 billion (63.6%) from the first quarter of 2008. Almost two out of every three insured institutions (65.4%) increased their loss provisions. Goodwill impairment charges and other intangible asset expenses rose to $7.2 billion from $2.8 billion a year earlier. Against these negative factors, total noninterest income contributed $68.3 billion to pretax earnings, a $7.8-billion (12.8%) improvement over the first quarter of 2008. Net interest income was $4.4 billion (4.7%) higher, and realized gains on securities and other assets were up by $1.9 billion (152.6%). The rebound in noninterest income stemmed primarily from higher trading revenue at a few large banks, but gains on loan sales and increased servicing fees also provided a boost to noninterest revenues. Trading revenues were $7.6 billion higher than a year earlier, servicing fees were up by $2.4 billion, and realÂized gains on securities and other assets were $1.9 billion higher. Nevertheless, these positive developÂments were outweighed by the higher expenses for bad loans and goodwill impairment. The average return on assets (ROA) was 0.22%, less than half the 0.58% registered in the first quarter of 2008 and less than one-fifth the 1.20% ROA the industry enjoyed in the first quarter of 2007.
First-quarter net charge-offs of $37.8 billion were slightly lower than the $38.5 billion the industry charged-off in the fourth quarter of 2008, but they were almost twice as high as the $19.6 billion total in the first quarter of 2008. The year-over-year rise in charge-offs was led by loans to commercial and industrial (C&I) borrowers, where charge-offs increased by $4.2 billion (170%); by credit cards (up $3.4 billion, or 68.9%); by real estate construction loans (up $2.9 billion, or 161.7%); and by closed-end 1–4 family residential real estate loans (up $2.7 billion, or 64.9%). Net charge-offs in all major categories were higher than a year ago. The annualized net charge-off rate on total loans and leases was 1.94%, slightly below the 1.95% rate in the fourth quarter of 2008 that is the highest quarterly net charge-off rate in the 25 years that insured institutions have reported these data. Well over half of all insured institutions (58.3%) reported year-over-year increases in quarterly charge-offs.
Total assets declined by $301.7 billion (2.2%) during the quarter, as a few large banks reduced their loan portfolios and trading accounts. This is the largest percentage decline in industry assets in a single quarter in the 25 years for which quarterly data are available. Eight large institutions accounted for the entire decline in industry assets; most insured institutions (67.3%) reported increased assets during the quarter, although only 47% had increases in their loan balances. The decline in industry assets consisted primarily of a $159.6-billion (2.1%) reduction in loans and leases, a $144.5-billion (14.9%) decline in assets in trading accounts, and a $91.7-billion (12.7%) drop in Fed funds sold and securities purchased under resale agreements. Balances with Federal Reserve banks, which had increased by $488.2 billion in the previous two quarters, declined by $32.5 billion (6.3%) during the first quarter. Unused loan commitments fell for a fifth consecutive quarter, declining by $532.0 billion (7.4%). Most of the reduction occurred in credit card lines, which fell by $406.6 billion (9.9%), but unused commitments declined for all major loan categories during the quarÂter. The amount of assets securitized and sold declined by $26.6 billion (1.4%) during the quarter.
The decline in industry assets and the increase in equity capital meant a reduced need for funding during the quarter. Total deposits declined by $81.3 billion (0.9%), while nondeposit liabilities fell by $320.2 billion (9.1%). Deposits in domestic offices increased modestly ($41.9 billion, or 0.6%), with time deposits falling by $72.5 billion (2.6%). Deposits in foreign offices declined by $123.2 billion (8.0%). Liabilities in trading accounts fell by $116.8 billion (24.6%), while Federal Home Loan Bank advances declined for a second consecutive quarter, falling by $91.0 billion (11.6%). Deposits funded 66.1% of total industry assets at the end of the quarter, up from 65.3% at the end of 2008. This is the highest deposit funding share since March 2002.
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