Ames National Corporation
Annual Report 2020

Plain-text annual report

2020 SUMMARY ANNUAL REPORT AMES NATIONAL CORPORATION AT A GLANCE 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. In 2019, 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. AMES NATIONAL CORPORATION SERVICES ANC provides various services to the affiliate banks, which include: management assistance, payroll, internal auditing, human resources, 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 affiliate bank management teams can focus on what they do best: banking and taking care of customers’ financial needs. 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 STRATEGIC DIRECTION The Ames National Corporation five-year strategic plan is focused on three driving initiatives: EMPLOYEE ENGAGEMENT Enhance systems and activities to acquire, develop CONTINUOUS IMPROVEMENT Continually improve key processes to increase and retain employees. customer engagement, employee engagement and shareholder value. CUSTOMER ENGAGEMENT Develop a customer experience that supports relationship growth and customer acquistion. 2 2020 Annual Report | Ames National Corporation Ames National Corporation | 2020 Annual Report 3 LETTER TO SHAREHOLDERS The journey of 2020 was unprecedented and unanticipated. Early in the first quarter, we realized that 2020 would be a year like no other. Though our plans and expectations quickly changed due to the pandemic, we could not be more proud of our affiliate bank teams and their resilience in adjusting and adapting throughout this year. Driven by these core value promises, Ames National Corporation was able to reach record levels in net income, assets, loans and deposits. We are pleased to provide our 2020 financial overview and highlight drivers of the record growth. We have always emphasized that it is imperative for our organization that decisions are made by leaders who work directly with customers to best understand their needs and community needs. This philosophy proved to be valuable when faced with the rapidly changing COVID-19 environment and its varying effects on the communities we serve. Our affiliate leadership teams were responsive, caring and diligent in finding solutions to continue to serve our employees, customers and communities while keeping health and safety as a top priority. Digital Banking usage reached new highs as customers took even greater advantage of our online and mobile delivery. In addition, affiliate bank offices remained open to continue to provide personal service. Through flexibility, innovation, discernment and empathy, our leaders responded and forged a unique path in 2020. Customers value the continuum of services provided by our team of experts at each life stage. We are in the long-term relationship building business. Whether opening up a child’s first savings account, purchasing a first home, assisting with finances during retirement or managing business cash flow, we know just how important relationships are as we walk alongside our customers every day, but especially through events like a pandemic. Although it seemed that each day brought a new set of challenges, whether pandemic or derecho-related, we remained focused on delivering on our core values of: EXCELLENCE • INTEGRITY • LEADERSHIP • STABILITY • TRUST • COMMUNITY 4 2020 Annual Report | Ames National Corporation FINANCIAL RESULTS Net income for 2020 totaled a record $18.9 million or $2.06 per share, compared to $17.2 million or $1.86 per share earned in 2019. The increase in earnings was primarily the result of the Iowa State Savings Bank acquisition, growth in mortgage lending and a reduction in interest expense due to declines in market rates. We are pleased to report that, as a result of the 2019 acquisition, Iowa State Savings Bank contributed $1.7 million in earnings to the bottom line in 2020 compared to just over $300,000 for a partial year in 2019. Earnings were partially offset by a $4.4 million increase in the provision for loan losses in 2020 compared to 2019. The increase in the loan loss reserve was a result of the economic slowdown associated with the COVID-19 pandemic on our loan portfolio and, to a lesser extent, loan growth. Loan interest income was $6.2 million higher in 2020 in 2019. This increase was primarily due to the Iowa State Savings Bank acquisition, Paycheck Protection Program (PPP) loans and organic loan growth, offset in part by a reduction in interest rates. Deposit interest expense decreased $2.4 million, mostly due to market interest rate declines. Net interest income for 2020 totaled $54.8 million, a $9.6 million increase, or 21%, compared to 2019. Non-interest income for 2020 totaled $10.6 million, as compared to $8.6 million in 2019, an increase of 23%. The three factors that drove growth in noninterest income were an uptick in refinancing of home loans in a low interest rate environment, security gains on investment sales and customers seeking wealth management and trust services advice. Income from the sale of residential loans was up nearly $1.1 million over 2019, security gains were $413,000 higher in 2020 than in 2019, while Wealth Management income increased just over $250,000. The balance sheet for 2020 also showed record growth. Assets reached $2.0 billion, an increase of $238.5 million compared to 2019. Investment securities, PPP loans and organic loan growth were the drivers of this 14% rise in assets. These assets were funded mainly due to a surge in deposits as a result of the federal government stimulus programs. Deposits reached record levels, and totaled $1.7 billion at year-end, 15% higher than year-end 2019, and this growth was mainly in commercial and retail core deposits. The amount of government stimulus dollars that have been injected into the economy is unprecedented. Deposits held by all FDIC insured institutions in the United States totaled $17.1 trillion as of September 30, 2020 which compares to $14.3 trillion as of September 30, 2019. This excess liquidity in the banking system has contributed to a challenging environment, as we work to deploy investable funds. Loan prospects and bond issuers have a significant number of options which constrains funding opportunities and puts downward pressure on yields. Despite these constraints, 2020 net loans increased 8%, to $1.1 billion, as compared to $1.0 billion in 2019. Ames National Corporation affiliate banks extended credit for local projects and funded nearly $80 million in PPP loans to assist business owners through the economic slowdown due to the pandemic. During the fourth quarter, the Affiliate Banks began the process of assisting PPP loan customers with the loan forgiveness application process and $34.1 million in loans had been granted forgiveness by the end of the year. OUR AFFILIATE BANKS continue to support the local economy, small businesses and our customers and have begun processing applications for the second Phase of the PPP in response to additional government stimulus programs. ECONOMIC OUTLOOK As mentioned earlier, the Company’s provision for loan losses increased by $4.4 million in 2020 as a precaution to safeguard from uncertainties in the market derived from the pandemic. We are optimistic that consumer confidence will rebound with the vaccine rollout which we expect to result in a more normalized economic environment. Nevertheless, boosting the loan loss reserve will help us weather uncertainties in the market and fortify the balance sheet. We are also appreciative of the diversification of our loan portfolio. With a quality mix of commercial, agricultural and residential loans, we believe we are well-positioned for potential uncertain economic conditions. IN SUMMARY As we begin 2021, we are hopeful and excited for the opportunities ahead. Our management teams will focus on the factors that we can control. We have a talented team of bankers that will continue to build on our past success and find opportunities to strengthen our Company. 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 you for your ongoing support of Ames National Corporation, and we appreciate the opportunity to serve you. ANNUAL MEETING We look forward to providing you additional financial highlights at our Annual Meeting of Shareholders which will be held on April 28, 2021 at 4:30 p.m. More details are available on page 15 of this report. We encourage you to attend the annual meeting virtually. Thomas H. Pohlman Chairman John P. Nelson President & CEO Ames National Corporation | 2020 Annual Report 5 FINANCIAL HIGHLIGHTS As of December 31, 2020 PERFORMANCERECORD THREE-YEAR FINANCIAL HIGHLIGHTS Net Income $18.9 Million Assets $2.0 Billion Dividends Paid Per Share $0.99 ROA 1.01% ROE 9.48% ATLO Closing Price $24.02 Per Common Share 2020 Cash Dividends Declared $0.75 Cash Dividends Paid $0.99 Loan Quality Market Price Per Share 2020 2019 2020 2019 Allowance 1.50% 1.19% Closing $24.02 $28.06 Dividend Payout 36.41% Net Charge-Offs 0.10% 0.04% High $26.87 $29.46 Dividend Yield 3.12% Non Performing 1.33% 0.48% Low $16.62 $24.47 $19.0 $18.5 $18.0 $17.5 $17.0 $16.5 $16 $15.5 $15 $14.5 $14 $13.5 $13 $2,000 $1,900 $1,800 $1,700 $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 . 9 8 1 $ 0 2 0 2 . 2 7 1 $ 9 1 0 2 Earnings Millions of Dollars 6 6 8 , 1 $ 0 2 0 2 4 0 5 , 1 $ 9 1 0 2 . 0 7 1 $ 8 1 0 2 5 8 3 , 1 $ 8 1 0 2 $2.30 $2.20 $2.10 $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1,700 $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $400 6 0 2 $ . 0 2 0 2 6 8 . 1 $ 9 1 0 2 Earnings Per Share Dollars 1 1 6 , 1 $ 0 2 0 2 8 6 2 , 1 $ 9 1 0 2 $230 $220 $210 $200 $190 $180 $170 $160 $150 $140 $130 $120 $110 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 3 8 . 1 $ 8 1 0 2 8 5 1 , 1 $ 8 1 0 2 9 0 2 $ 0 2 0 2 8 8 1 $ 9 1 0 2 Capital Millions of Dollars 8 3 1 , 1 $ 0 2 0 2 1 2 9 $ 9 1 0 2 3 7 1 $ 8 1 0 2 4 1 8 $ 8 1 0 2 6 2020 Annual Report | Ames National Corporation Average Total Assets Millions of Dollars Average Deposits Millions of Dollars Average Loans Millions of Dollars Ames National Corporation | 2020 Annual Report 7 AFFILIATE BANKS Contact: (515) 432-6200 www.boonebankiowa.com Charter: State Organized: 1883 Offices: Two locations in Boone, Iowa Employees: 20 Capital: $15.9 Million Assets: $150 Million 2020 Net Income: $1.6 Million Contact: (515) 232-5561 www.FNB247.com Charter: National Organized: 1903 Offices: Nine locations in Ames, Ankeny, Johnston, Osceola, and West Des Moines, Iowa Employees: 132 Capital: $101 Million Assets: $1.0 Billion 2020 Net Income: $9.8 Million Contact: (641) 753-5900 www.ISSBbank.com Charter: State Organized: 1883 Offices: Three locations in Creston and Lenox, Iowa Employees: 38 Capital: $26.8 Million Assets: $237 Million 2020 Net Income: $1.7 Million Contact: (515) 733-4396 www.RSBiowa.com Charter: State Organized: 1928 Offices: Two locations in Story City and Garner, Iowa Employees: 33 Capital: $30 Million Assets: $259 Million 2020 Net Income: $2.6 Million Contact: (641) 753-5900 www.ubtna.com Charter: National Organized: 2002 Offices: Two locations in Marshalltown, Iowa Employees: 21 Capital: $11.4 Million Assets: $118 Million 2020 Net Income: $1.2 Million Contact: (515) 382-2191 www.bankSBT.com Charter: State Organized: 1939 Offices: One location in Nevada, Iowa Employees: 22 Capital: $17.6 Million Assets: $197 Million 2020 Net Income: $2.6 Million 8 2020 Annual Report | Ames National Corporation Ames National Corporation | 2020 Annual Report 9 CONSOLIDATED BALANCE SHEETS Unaudited CONSOLIDATED STATEMENTS OF INCOME Unaudited ASSETS Cash and due from banks Interest bearing deposits in financial institutions and federal funds sold 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 Deferred Income Taxes Accrued expenses and other liabilities Total liabilities STOCKHOLDERS’ EQUITY Common stock, $2 par value, authorized 18,000,000 shares; issued and outstanding 9,122,747 and 9,222,747 shares as of December 31, 2020 and 2019, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income Total stockholders’ equity Total liabilities and stockholders’ equity December 31, 2020 December 31, 2019 $ 24,818,619 $ 34,616,880 166,704,001 596,999,072 3,147,500 108,947,624 479,843,448 3,138,900 1,129,505,157 1,048,147,496 1,620,801 17,340,250 11,142,897 217,856 2,915,715 - 3,133,240 12,424,434 5,678,201 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 $ 1,975,647,743 $ 1,737,182,505 $ 349,500,268 $ 267,441,988 528,795,635 581,223,880 60,019,296 196,907,101 461,857,728 481,642,221 74,206,421 208,026,740 1,716,446,180 1,493,175,098 37,293,019 3,000,000 - 1,731,211 7,690,907 42,033,570 5,000,000 2,213,459 - 7,180,906 1,766,161,317 1,549,603,033 18,245,494 18,445,494 17,001,736 158,216,626 16,022,570 18,794,141 146,225,085 4,114,752 209,486,426 187,579,472 $ 1,975,647,743 $ 1,737,182,505 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 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 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 December 31, 2020 December 31, 2019 $ 50,469,873 $ 44,282,197 7,763,684 3,628,123 1,078,967 62,940,647 7,820,828 276,982 8,097,810 54,842,837 5,680,656 49,162,181 3,848,497 1,523,189 429,925 2,111,893 1,772,469 934,164 10,620,137 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 22,868,601 19,675,952 5,181,705 2,667,788 313,069 1,537,254 1,081,537 826,020 638,851 1,436,430 36,551,255 23,231,063 4,381,000 18,850,063 2.06 0.75 $ $ $ $ $ $ 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 10 2020 Annual Report | Ames National Corporation Ames National Corporation | 2020 Annual Report 11 COMMUNITY INVOLVEMENT Community Involvement is a guiding core value for Ames National Corporation. Even with all of the challenges of 2020, there were so many examples of friends and neighbors working to help in whatever way they were able. As we take a moment to reflect on the over 7,200 volunteer hours through nearly 200 organizations, it is inspiring to consider the great things we can do as a community when we unite our efforts. Throughout 2020, we joined together as a team to give our time and talents to support our key areas of focus. Each affiliate community is unique, and we encourage our employees to find ways to help our customers and community members live productive and enriched lives. Volunteering and giving had to be approached differently in 2020, but our team was flexible and adjusted to new ways of getting involved. Whether making and distributing masks to encourage health and safety during the pandemic or assisting with clean-up efforts after the historic and devastating “derecho” that made its way through Iowa, our employees didn’t miss a beat in stepping up and getting involved. Thank you to all employees, board members, customers and local business partners for your support in our efforts to make a difference in the communities we serve. It is a privilege to see the impact of our core values in action. Visit www.amesnational.com for more details on our commitment to Community. AREAS OF SUPPORT 19 Locations serving 12 Communities FINANCIAL LITERACY AND EDUCATION COMMUNITY AND ECONOMIC DEVELOPMENT HEALTH AND HUMAN SERVICES 12 2020 Annual Report | Ames National Corporation Ames National Corporation | 2020 Annual Report 13 BOARD OF DIRECTORS SHAREHOLDER INFORMATION BACK, LEFT TO RIGHT: 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 Retired Chief Executive Officer, Wolfe Clinic PC James R. Larson II President, Larson Development Corporation 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 MANAGEMENT TEAM John P. Nelson President & CEO John L. Pierschbacher CFO Timothy J. Lupardus Senior Vice President & Chief Information Officer Nicole J. Rasmussen Vice President & Strategic Engagement Officer Jennifer J. Hanson Vice President & Human Resources Director Tracy W. Laws Vice President & Internal Auditor Matthew R. Hackbart Vice President of Information Technology Joel P. Jacobsen Vice President & Risk Management Officer David A. Troe Vice President & Valuation Officer Wendy S. Current Vice President & Training and Development Director Justin C. Clausen Controller Marie I. Roberts Accounting Specialist Lori J. Hill Valuation Services Coordinator & Administrative Officer Douglas S.H. Kinsey Information Technology Systems Admin II Paul M. Crowe Information Technology Systems Admin I Tyler D. Nablo Information Technology Support Analyst II ANNUAL MEETING The Board of Directors of Ames National Corporation has established Wednesday, April 28, 2021, at 4:30 p.m. as the date of the Annual Meeting of Shareholders. The meeting will be held at First National Bank, 405 5th Street Ames, Iowa. Due to the continued public health impact of the coronavirus pandemic (COVID-19), recommendations and orders from federal and Iowa authorities, and to support the health and well-being of our shareholders, the Annual Meeting will also be available through a virtual format. Shareholders are strongly encouraged to participate virtually. To participate virtually, visit the Ames National Corporation website, www. amesnational.com, shortly before the meeting on April 28, 2021. Shareholders are encouraged to participate virtually and to vote their shares in advance by proxy, as online voting will not be available through the virtual format. Shareholders may attend the meeting in person, but are requested to notify the Company of their attendance in advance to enable the Company to plan for and ensure compliance with state and local ordinances relating to the pandemic. Notification should be made by email, info@ amesnational.com or by calling 515-232-6251 PROFESSIONAL EXPERTS External Auditor: CliftonLarsonAllen LLP West Des Moines, Iowa Counsel: Nyemaster Goode, P.C. Des Moines, 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: First Point Wealth Management, First National Bank, Ames (515) 663-3074 D.A. Davidson | (800) 755-7589 Raymond James | (800) 800-4693 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 12, 2021. Additional information is also available by contacting John L. Pierschbacher, CFO at 515-232-6251 or info@ amesnational.com. 14 2020 Annual Report | Ames National Corporation Ames National Corporation | 2020 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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