Ames National Corporation
Annual Report 2019

Plain-text annual report

2019 SUMMARY ANNUAL REPORT BACKGROUND Ames National Corporation (ANC) is an Iowa-based AFFILIATE BANK STRUCTURE Each Affiliate Bank operates independently with a bank holding company. ANC was organized and board of directors and a bank president. Decisions are incorporated on January 21, 1975, under the laws of made locally, which means customers receive quick the State of Iowa to serve as a holding company for responses to questions, and services are customized its principal banking subsidiary, First National Bank, to meet customer needs in each community. Ames, Iowa. In 1983, ANC acquired the stock of State Bank & Trust Co. located in Nevada, Iowa; in 1991, ANC The Affiliate Banks’ lending activities consist primarily acquired Boone Bank & Trust Co., located in Boone, Iowa; in 1995, ANC acquired the stock of Reliance State Bank located in Story City, Iowa; and in 2002, of short-term and medium-term commercial, agricultural and residential real estate loans, agricultural and business operating loans, lines of ANC chartered and commenced operations of United credit, home improvement loans and the origination Bank & Trust NA, located in Marshalltown, Iowa. In 2012, Reliance State Bank acquired an office located in Garner, Iowa. In 2014, First National Bank acquired three offices located in West Des Moines and Johnston, Iowa, and three locations in the Osceola, Iowa area in 2018. Most recently, ANC acquired Iowa State Savings Bank in the Creston, Iowa area. of mortgage loans for sale into the secondary market. Affiliate Banks also offer a variety of checking, savings and time deposits accounts, cash management services, wealth management and trust services, merchant credit card processing and safe deposit box services. Convenient access to funds and account information is also available through: Online Banking, Video Banking, Mobile Banking, Online Bill Pay, Mobile Wallet, online statements and debit cards. ANC SERVICES ANC provides various services to the Affiliate Banks, which include: management assistance, payroll, internal auditing services, human resources services, compliance management, marketing assistance, loan review, technology support, training and employee development. ANC employees seek to incorporate efficiencies across the Affiliate Banks’ operational functions so the management teams can focus on what they do best: banking and taking care of customers’ financial needs. 2 2019 Annual Report | Ames National Corporation AMES NATIONAL CORPORATION AT A GLANCE MISSION STATEMENT Ames National Corporation is a results-oriented financial services holding company providing leadership, counsel and support to its community affiliate banks and superior performance for its shareholders. CORE VALUES Ames National Corporation’s foundation is built on these values which guide our actions. EXCELLENCE • INTEGRITY • LEADERSHIP STABILITY • TRUST • COMMUNITY BOARD OF DIRECTORS BACK, LEFT TO RIGHT: Thomas H. Pohlman, Chairman John P. Nelson, President & CEO Steven D. Forth, Farmer John L. Pierschbacher, Chief Financial Officer MIDDLE, LEFT TO RIGHT: Michelle R. Cassabaum, Chief Operating & Financial Officer, 21st Century Rehab Betty A. Baudler Horras, President, Baudler Enterprises, Inc. Lisa M. Eslinger, Chief Financial and Administrative Officer, Iowa State University Foundation FRONT, LEFT TO RIGHT: Patrick G. Hagan, Retired Senior Vice President of Fareway Stores, Inc. David W. Benson, Partner, Nyemaster Goode Attorneys at Law Kevin L. Swartz, Chief Executive Officer, Wolfe Clinic PC James R. Larson, II, President, Larson Development Corporation Ames National Corporation | 2019 Annual Report 3 LETTER TO SHAREHOLDERS As we reflect on 2019, we have much to celebrate at Ames National Corporation. Your company reached new growth milestones in addition to welcoming Iowa State Savings Bank, our sixth affiliate bank, to the organization. Net income, assets, loans and deposits climbed to record highs as we continued to deliver on our core values. The following report provides highlights of Ames National Corporation’s financial results as well as an overview of our continued focus on enhancing your shareholder value through profitable growth. FINANCIAL RESULTS Net income for 2019 totaled $17.2 million or $1.86 per share, compared to $17.0 million or $1.83 per share earned in 2018. The primary drivers of the growth in earnings were improvements in loan interest income, increases in home mortgage originations and wealth management income and the income resulting from the Osceola acquisition. Higher interest expense and a competitive interest rate landscape for loan and deposit customers were among the biggest challenges in 2019, so we were pleased with the continued growth of the balance sheet and the stable net interest margin despite these obstacles. With the organic growth at our affiliate banks combined with the recent acquisition, assets reached a record high of $1.7 billion, up $281.5 million compared to year-end last year. Loans increased 18% to just over $1 billion, and deposits grew to a record $1.5 billion. 2019 was also a good year for non-interest income in the areas of home mortgage originations and Wealth Management Services. Mortgage origination income increased $264,000 or 34% over 2018 while Wealth Management Services income grew by $252,000 or 8% over 2019. Both of these teams have built a loyal customer base by providing tailored, exceptional service in the markets we serve. Customers value the continuum of services provided by our team of experts for all of life’s financial stages, and our Banks benefit from long-term customer relationships. 4 2019 Annual Report | Ames National Corporation Credit quality remains favorable as measured by our problem loans to total equity capital ratio of 20%. Provisions for loan losses of $1,314,000 were recognized in 2019 as compared to $639,000 for the previous year. The increase in the provision for loan losses was necessary to maintain an adequate allowance for loan losses on the increasing outstanding loan portfolio. GROWTH We are pleased to report that the 2018 and 2019 acquisitions of Clarke County State Bank in Osceola, Iowa, and Iowa State Savings Bank, in Creston, Iowa, have an important role in growing profitably. Since 2012, Ames National Corporation has completed four acquisitions, resulting in additional assets of over $500 million. Ames National Corporation is proactively seeking strategically aligned acquisition opportunities that will enhance shareholder value through profitable growth. With our large capital base and strong earnings, we are well-positioned and excited to continue to expand our footprint throughout Iowa. STRATEGIC DIRECTION During 2019, our Management Team and Board of Directors developed a five-year strategic plan focused on initiatives that will help us “move the needle” and reach our goals. We incorporated employee and customer feedback as well as industry research to help guide us to three major strategic initiatives: • • • Employee Engagement - Enhance systems and activities to acquire, develop and retain employees. Customer Engagement - Develop a customer experience that supports relationship growth and customer acquisition. Continuous Improvement - Continually improve key processes to increase customer engagement, employee engagement and shareholder value. To remain financial leaders in the communities we serve, we must strategically focus on growth and continue to identify ways to stand out above the competition. It is also important to have an optimal balance of serving our customers, shareholders and employees. Through Strategic Planning, we developed a Vision Statement to cultivate a culture that engages our employees so they are empowered, equipped and encouraged to build relationships, deliver financial solutions and grow professionally. As we wrap up another decade of dedicated service to our customers, community and shareholders, we believe that there are great opportunities ahead as we continue to expand our proven model of local, community banking. We continue to set high standards for profitable growth and are focused on serving our communities. On behalf of the employees and board of directors, thank for your ongoing support of Ames National Corporation, and we appreciate the opportunity to serve you. Thomas H. Pohlman Chairman John P. Nelson President & CEO Ames National Corporation | 2019 Annual Report 5 FINANCIAL HIGHLIGHTS As of December 31, 2019 Assets $1.7 Billion ROE 9.48% Declared Dividends Per Share $0.96 Net Income $17.2 Million ROA 1.14% ATLO Closing Price $28.06 Per Common Share Loan Quality Market Price Per Share 2019 2018 2019 2018 Cash Dividends $0.96 Allowance 1.19% 1.30% Closing $28.06 $25.42 Dividend Payout 51.61% Net Charge-Offs 0.04% 0.03% High $29.46 $32.15 Dividend Yield 3.42% Non Performing 0.48% 0.38% Low $24.47 $24.51 6 2019 Annual Report | Ames National Corporation PERFORMANCERECORD THREE-YEAR FINANCIAL HIGHLIGHTS $17.5 $17.0 $16.5 $16 $15.5 $15 $14.5 $14 $13.5 $13 $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 . 2 7 1 $ 9 1 0 2 . 0 7 1 $ 8 1 0 2 Earnings Millions of Dollars 4 0 5 , 1 $ 9 1 0 2 5 8 3 , 1 $ 8 1 0 2 . 7 3 1 $ 7 1 0 2 9 6 3 , 1 $ 7 1 0 2 $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $400 6 8 . 1 $ 9 1 0 2 3 8 . 1 $ 8 1 0 2 Earnings Per Share Dollars 8 6 2 , 1 $ 9 1 0 2 8 5 1 , 1 $ 8 1 0 2 7 4 . 1 $ 7 1 0 2 8 1 1 , 1 $ 7 1 0 2 $200 $190 $180 $170 $160 $150 $140 $130 $120 $110 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 8 8 1 $ 9 1 0 2 3 7 1 $ 8 1 0 2 Capital Millions of Dollars 1 2 9 $ 9 1 0 2 4 1 8 $ 8 1 0 2 1 7 1 $ 7 1 0 2 2 7 7 $ 7 1 0 2 Average Total Assets Millions of Dollars Average Deposits Millions of Dollars Average Loans Millions of Dollars Ames National Corporation | 2019 Annual Report 7 AFFILIATE BANKS Contact: (515) 432-6200 www.boonebankiowa.com Charter: State Organized: 1883 Offices: Two locations in Boone, Iowa Employees: 22 Capital: $13.7 Million Assets: $135 Million 2019 Net Income: $1.5 Million Contact: (515) 382-2191 www.bankSBT.com Charter: State Organized: 1939 Offices: One location in Nevada, Iowa Employees: 20 Capital: $15.6 Million Assets: $159 Million 2019 Net Income: $2.1 Million Contact: (641) 753-5900 www.ISSBbank.com Charter: State Organized: 1883 Offices: Five locations in Creston, Corning, Diagonal, and Lenox, Iowa Employees: 38 Capital: $24.3 Million Assets: $215 Million 2019 Net Income: $303,000 (since acquisition) 8 2019 Annual Report | Ames National Corporation Contact: (515) 733-4396 www.RSBiowa.com Charter: State Organized: 1928 Offices: Two locations in Story City and Garner, Iowa Employees: 32 Capital: $27.5 Million Assets: $230 Million 2019 Net Income: $2.8 Million Contact: (641) 753-5900 www.ubtna.com Charter: National Organized: 2002 Offices: Two locations in Marshalltown, Iowa Employees: 21 Capital: $10.3 Million Assets: $100 Million 2019 Net Income: $930,000 Contact: (515) 232-5561 www.FNB247.com Charter: National Organized: 1903 Offices: 10 locations in Ames, Ankeny, Johnston, Murray, Osceola, and West Des Moines, Iowa Employees: 133 Capital: $89 Million Assets: $913 Million 2019 Net Income: $10.3 Million Contact: (515) 432-6200 www.boonebankiowa.com Charter: State Organized: 1883 Offices: Two locations in Boone, Iowa Employees: 22 Capital: $13.7 Million Assets: $135 Million 2019 Net Income: $1.5 Million Contact: (515) 382-2191 www.bankSBT.com Charter: State Organized: 1939 Offices: One location in Nevada, Iowa Employees: 20 Capital: $15.6 Million Assets: $159 Million 2019 Net Income: $2.1 Million Contact: (641) 753-5900 www.ISSBbank.com Charter: State Organized: 1883 Offices: Five locations in Creston, Corning, Diagonal, and Lenox, Iowa Employees: 38 Capital: $24.3 Million Assets: $215 Million 2019 Net Income: $303,000 (since acquisition) Contact: (515) 733-4396 www.RSBiowa.com Charter: State Organized: 1928 Offices: Two locations in Story City and Garner, Iowa Employees: 32 Capital: $27.5 Million Assets: $230 Million 2019 Net Income: $2.8 Million Contact: (641) 753-5900 www.ubtna.com Charter: National Organized: 2002 Offices: Two locations in Marshalltown, Iowa Employees: 21 Capital: $10.3 Million Assets: $100 Million 2019 Net Income: $930,000 Contact: (515) 232-5561 www.FNB247.com Charter: National Organized: 1903 Offices: 10 locations in Ames, Ankeny, Johnston, Murray, Osceola, and West Des Moines, Iowa Employees: 133 Capital: $89 Million Assets: $913 Million 2019 Net Income: $10.3 Million Ames National Corporation | 2019 Annual Report 9 CONSOLIDATED BALANCE SHEETS Unaudited ASSETS Cash and due from banks Interest bearing deposits in financial institutions Securities available-for-sale Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock, at cost Loans receivable, net Loans held for sale Bank premises and equipment, net Accrued income receivable Other real estate owned Bank-owned life insurance Deferred income taxes Other intangible assets, net Goodwill Other assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Deposits Non-interest bearing checking Interest bearing checking Savings and money market Time, $250,000 and over Other time Total deposits Securities sold under agreements to repurchase FHLB advances Dividends payable Accrued expenses and other liabilities Total liabilities STOCKHOLDERS’ EQUITY Common stock, $2 par value, authorized 18,000,000 shares; issued and outstanding 9,222,747 and 9,293,305 shares as of December 31, 2019 and 2018, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total stockholders’ equity Total liabilities and stockholders’ equity 10 2019 Annual Report | Ames National Corporation December 31, 2019 December 31, 2018 $ 34,616,880 $ 30,384,066 108,947,624 479,843,448 3,138,900 1,048,147,496 2,776,785 17,810,605 11,788,409 4,003,684 2,842,713 1,151,016 3,959,260 12,114,559 6,041,126 26,057,513 458,971,162 3,191,200 890,461,479 401,287 15,813,196 9,415,570 829,603 2,773,729 3,848,713 2,677,884 9,744,472 1,117,477 $ 1,737,182,505 $ 1,455,687,351 $ 267,441,988 $ 230,113,170 461,857,728 481,642,221 74,206,421 207,026,740 366,178,715 418,384,284 40,014,550 166,393,120 1,493,175,098 1,221,083,839 42,033,570 5,000,000 2,213,459 7,180,906 40,674,486 14,600,000 2,137,460 4,326,502 1,549,603,033 1,282,822,287 18,445,494 18,586,610 18,794,141 146,225,085 4,114,752 20,461,724 137,891,821 (4,075,091) 187,579,472 172,865,064 $ 1,737,182,505 $ 1,455,687,351 CONSOLIDATED STATEMENTS OF INCOME Unaudited December 31, 2019 December 31, 2018 $ 44,282,197 $ 38,013,249 INTEREST AND DIVIDEND INCOME: Loans, including fees Securities Taxable Tax-exempt Other interest and dividend income Total interest and dividend income INTEREST EXPENSE: Deposits Other borrowed funds Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses NON-INTEREST INCOME: Wealth management income Service fees Securities gains, net Gain on sale of loans held for sale Merchant and card fees Gain on foreclosure of other real estate owned Other non-interest income Total non-interest income NON-INTEREST EXPENSE: Salaries and employee benefits Data processing Occupancy expenses, net FDIC insurance assessments Professional fees Business development Intangible asset amortization Data conversion costs New market tax credit projects amortization Other operating expenses, net Total non-interest expense Income before income taxes INCOME TAX EXPENSE NET INCOME Basic and diluted earnings per share Declared dividends per share 6,483,893 4,047,054 1,364,349 56,177,493 10,200,626 728,723 10,929,349 45,248,144 1,314,104 43,934,040 3,596,770 1,619,269 17,031 1,044,798 1,525,309 - 826,221 8,629,398 19,675,952 4,130,506 2,275,882 193,593 1,753,531 1,242,271 609,624 - 581,563 1,058,747 31,521,669 21,041,769 3,847,600 17,194,169 1.86 0.96 $ $ $ $ $ $ 6,188,403 4,582,970 942,341 49,726,963 6,841,807 761,389 7,603,196 42,123,767 639,316 41,484,451 3,344,579 1,425,361 - 780,947 1,427,334 162,862 759,854 7,900,937 17,821,753 3,478,640 2,008,331 404,514 1,482,911 1,166,688 430,537 228,854 - 943,182 27,965,410 21,419,978 4,406,100 17,013,878 1.83 1.17 11 Ames National Corporation | 2019 Annual Report COMMUNITY INVOLVEMENT We believe that the success our company is measured by the success of our stakeholders – our clients, community, business partners, employees and shareholders. We recognize our civic responsibility and appreciate all of our employees’ efforts to support the communities that help us grow. Each year, our employees give of their time to support our key areas of focus. Each affiliate community is unique and our employees play integral roles in helping our community members live more productive, educated and enriched lives. FINANCIAL LITERACY Financial Literacy has long been an important part of our community involvement. Whether through our school bank partnerships, classroom visits by our bankers, bank tours or online financial resources, we are dedicated to providing the tools to help youth in our communities reach their greatest potential and feel confident in their financial decisions. In 2019, we expanded our financial education efforts to include adult financial learning opportunities. First National Bank launched FNB U, an online, personalized education tool that helps users build financial health and confidence by completing short learning modules. Optimized for mobile use, this program is designed to equip busy adults with the critical knowledge and skills to make informed financial decisions. 12 2019 Annual Report | Ames National Corporation AREAS OF SUPPORT 17 Locations serving 10 Communities FINANCIAL LITERACY AND EDUCATION COMMUNITY AND ECONOMIC DEVELOPMENT COMMUNITY ARTS AFFORDABLE HOUSING AND ECONOMIC REVITALIZATION HEALTH AND HUMAN SERVICES YOUTH PROGRAMS  Ames National Corporation | 2019 Annual Report 13 ACQUISITION UPDATE Iowa State Savings Bank Board of Directors Front Row, L-R: John Linch, Adam Snodgrass, Tia Samo | Back Row, L-R: Dave Driskell, Kevin Stewart, John Nelson, Scot Trost, Mike Tamerius Ames National Corporation Welcomes Iowa State Savings Bank as its Sixth Affiliate Bank On July 29, 2019, Ames National Corporation entered into a Stock Purchase Agreement to acquire Iowa State Savings Bank in Creston, Iowa.  The Agreement provided for the purchase of 100% of the outstanding stock of Iowa State Savings Bank. With this acquisition, the Company determined that Iowa State Savings Bank would remain an independently chartered bank with local decisions, no name change and no account changes. In addition, the same management team continues to lead the Bank along with a local board of directors. Community banking with local decisions is the basis of our banking philosophy. It was clear that Iowa State Savings Bank shared this same philosophy of delivering local, responsive service and serving the community. The synergies between Iowa State Savings Bank and Ames National Corporation’s approach to customer service and community involvement are key components in this strategic acquisition. This approach has served our banks and customers well over the past 44 years. On October 25th, 116 days after the announcement, the acquisition was complete. Iowa State Savings Bank added approximately $212 million in assets, $138 million in loans and $189 million in deposits to the Company. The addition of Iowa State Savings Bank brings a stable loan and deposit customer base, a talented team of bankers and an expanded geographic footprint for the Company. We believe this acquisition will be an excellent fit for our community banking model and we will continue to actively seek growth opportunities to enhance shareholder value. 14 2019 Annual Report | Ames National Corporation SHAREHOLDER INFORMATION ANNUAL MEETING The Board of Directors of Ames National Corporation has established Wednesday, April 29, 2020, at 4:30 p.m. as the date of the Annual Meeting of Shareholders. Registration will begin at 4:00 p.m. We invite all shareholders to attend the meeting, which will be held at Reiman Gardens, 1407 University Boulevard, Ames, Iowa. MARKET MAKERS Ames National Corporation’s common stock is listed on the NASDAQ Capital Market under the symbol “ATLO.” Market makers and brokers in the stock include: STOCK TRANSFER AGENT Continental Stock Transfer & Trust 17 Battery Place New York, NY 10004 (212) 509-4000 www.continentalstock.com FORM 10-K AND OTHER INFORMATION A copy of the Company’s Annual Report to the Securities and Exchange Commission on Form 10-K will be available on the Securities and Exchange Commission’s website at http://www.sec.gov and through a link on the Company’s website, www. amesnational.com, at Financial Information, SEC Filings on or about, March 17, 2020. First Point Wealth Management , First National Bank, Ames | (515) 663-3074 Fig Partners, LLC | (404) 601-7200 Raymond James | (800) 800-4693 Additional information is also available by contacting John L. Pierschbacher, CFO at 515-232-6251 or info@amesnational.com. PROFESSIONAL EXPERTS Accounts: CliftonLarsonAllen LLP West Des Moines, Iowa Counsel: Nyemaster Goode, P.C. Des Moines, Iowa Ames National Corporation | 2019 Annual Report 15 Ames National Corporation P.O. Box 846 405 5th Street Ames, IA 50010 (515) 232-6251 | Fax (515) 663-3033 info@amesnational.com | www.amesnational.com 

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