Ames National Corporation
Annual Report 2021

Plain-text annual report

2021 SUMMARY ANNUAL REPORT AMES NATIONAL CORPORATION AT A GLANCE MISSION STATEMENT Background Affiliate Bank Structure Ames National Corporation (ANC) is an Iowa-based bank holding company. ANC was organized and incorporated on January 21, 1975, under the laws of the State of Iowa to serve as a holding company for its principal banking subsidiary, First National Bank, Ames, Iowa. In 1983, ANC acquired the stock of State Bank & Trust Co. located in Nevada, Iowa; in 1991, ANC 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, ANC chartered and commenced operations of United 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 two locations in the Osceola, Iowa area in 2018. In 2019, ANC acquired Iowa State Savings Bank headquartered in Creston, Iowa. Each affiliate bank operates independently with a board of directors and a bank president. Decisions are made locally, which means customers receive quick responses to questions, and services are customized to meet customer needs in each community. The affiliate banks’ lending activities consist primarily of short-term and medium-term commercial, agricultural and residential real estate loans, agricultural and business operating loans, lines of credit, home improvement loans and the origination of mortgage loans for sale into the secondary market. Affiliate banks also offer a variety of checking, savings, money market 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. 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. E X C E L L E N C E • I N T E G R I T Y • L E A D E R S H I P S T A B I L I T Y • T R U S T • C O M M U N I T Y 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 and retain employees. Customer engagement Develop a customer experience that supports relationship growth and customer acquistion. Continuous improvement Continually improve key processes to increase customer engagement, employee engagement and shareholder value. LETTER TO SHAREHOLDERS As the pandemic persisted into the 2021 financial year, Ames National Corporation (the “Company”) and our affiliate banks delivered on our mission to our customers, employees and shareholders with a strong financial performance. Our purpose has been magnified and elevated as our banks continue to support personal and business customers impacted by COVID-19. Building on the momentum we created leading up to the pandemic has provided us with a strong sense of direction throughout the past year. The strength and stability of a well-capitalized holding company allowed us to weather record-low interest rates and lingering pandemic related trials and still prosper and grow as an organization. Net loans as of December 31, 2021 increased slightly to $1.14 billion, as compared to $1.13 billion as of December 31, 2020. Excluding the $44.9 million decrease in PPP loans, net loans increased $59.5 million or 5% in 2021. Loan quality metrics improved during 2021 compared to 2020 as substandard and impaired loan volumes were reduced by $6.3 million. An additional positive development was the recording of net loan loss recoveries of $163 thousand for 2021 compared to net loan charge offs of $1.1 million for 2020. Deposits totaled $1.88 billion as of December 31, 2021, an increase of 9%, compared to $1.72 billion as of December 31, 2020. The growth in deposits is primarily due to federal government stimulus programs and increases in core deposits, including retail and, to a lesser extent, commercial funds. Financial Results Ames National Corporation was able to reach record levels of net income, assets, loans, deposits, and capital during 2021. We are pleased to provide our 2021 financial overview and highlight drivers of this record setting year. Annual net income for the Company totaled $23.9 million, or $2.62 per share, in 2021 compared to $18.9 million, or $2.06 per share, in 2020. The increase in earnings is primarily the result of a decrease in the provision for loan losses in 2021 compared to 2020, as uncertainties associated with the economic slow-down created by the pandemic began to lessen. Further contributing to the improved net income was a reduction in interest expense due to declines in market interest rates. Net interest income for 2021, was $1.2 million higher than the prior year. The improved net interest income is primarily attributable to lower deposit interest expense and to the Paycheck Protection Program (PPP) annual fees of $4.3 million recognized in 2021 compared to $2.3 million in 2020. Annual noninterest income for 2021 totaled $10.5 million compared to $10.6 million for 2020; while noninterest expense totaled $36.6 million for 2021 and 2020. 4 2021 Annual Report | Ames National Corporation Highlights & Innovations Changing consumer behaviors, expectations and preferences caused us to rethink much of what we do. The need to integrate advancing technology, build relationships and empower our team to continue to meet the wants and needs of customers pushed us to be more agile and innovative. Across our affiliate banks, we have shown we are both flexible and resilient. A few notable highlights include: ƒ First National Bank is replacing our existing Valley Junction building with a new 5,000 square foot building. ƒ Partnered with small businesses to originate and service 2,152 PPP loans which represented over $123.3 million to support local business during the pandemic. ƒ We invest in each of the communities we serve through financial education, monetary contributions and volunteering our time and talents. ƒ We continue to invest in and expand our digital offerings to enhance the customer experience. ƒ ANC surpassed $2 billion in assets and thanked our employees for achieving this milestone. Board of Directors In Summary During 2021, two new directors were appointed to our affiliate banks’ Boards of Directors. Jeff Baker joined the First National Bank (FNB) Board of Directors. Mr. Baker retired from the accounting and consulting firm RSM US LLP where he specialized in banking, other financial services entities and public companies. In addition to his role as an audit partner, he was the Firm’s national director of banking services. Jeff Rasmussen, CPA and proprietor of Bergman Tax and Accounting in Marshalltown, IA joined the United Bank & Trust (UBT) Board of Directors. Mr. Rasmussen has over 18 years of experience in accounting and tax matters and worked as the CFO of Marshalltown Company prior to joining the Bergman firm. Amy Rieck, PHR and Chief Human Resources Officer of Greater Regional Health in Creston joined the Iowa State Savings Bank Board of Directors. Amy and her husband own KSIB Radio station in Creston, raise and show livestock, and operate two additional local businesses. We also want to thank the members of the affiliate banks’ Board of Directors who will be retiring this upcoming May for their dedicated work and assistance to our success. Dave Benson will be leaving the FNB Board of Directors but will remain on the ANC Board. John Wise will be leaving the UBT Board of Directors. We are grateful to our Board members for lending their expertise to further our mission and for providing us with valuable insight into the communities we serve. Economic Outlook We are expecting increased volatility in the bond and equity markets as investors try to read the tea leaves on inflation, interest rates, and supply chain impediments on business profitability. Presently, economists prognostications for interest rates in 2022 is a 1% increase short term rates. With the Consumer Price Index All Urban Consumer (CPI) for December 2021 increasing 7% over the last 12 months; the question for many, is will a 1% hike in interest rates be enough to dampen the increasing momentum of higher prices which started in 2021. This relationship between interest rates and inflation will likely have a significant impact on our deposit interest expense in 2022. As we turn our attention to 2022, our team at ANC and the affiliate banks are aligned and motivated to build on the progress and lessons learned over the past year. Our strategic priorities build on our strong foundation and positions us for the future. We are stepping forward, focused on our integrated strategy and our immediate priorities to grow through the challenges we are facing. Over the past year, ANC has set a more ambitious agenda to build tomorrows’ bank today. Introducing and offering the best digital tools that help customers achieve their financial goals and maintaining our excellent customer service standards are core to this ambition. In aspiring to these ambitions, we recognize the importance of achieving a balance for all stakeholders and thank our employees, customers, and shareholders for your support. Annual Meeting We look forward to providing you additional financial highlights at our Annual Meeting of Shareholders which will be held on April 27, 2022 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 FINANCIAL HIGHLIGHTS As of and for the year ended December 31, 2021 PERFORMANCE RECORD Net Income $23.9 Million Assets $2.14 Billion Dividends Paid Per Share $1.03 ROA 1.15% ROE 11.43% ATLO Closing Price $24.49 Per Common Share 2021 Cash Dividends Declared $1.29 Cash Dividends Paid $1.03 Loan Quality Market Price Per Share 2021 2020 2021 2020 Allowance 1.43% 1.50% Closing $24.49 $24.02 Dividend Payout* 39.26% Net Charge-Offs -0.01% 0.10% High $27.90 $28.05 Dividend Yield** 4.25% Non Performing 1.11% 1.33% Low $22.04 $16.53 * Cash dividends paid divided by net income ** Based upon latest quarterly dividend of $0.26 and year-end ALTO closing price 6 2021 Annual Report | Ames National Corporation THREE-YEAR FINANCIAL HIGHLIGHTS $25 $24 $23 $22 $21 $20 $19 $18 $17 $16 $15 $14 $13 $2,100 $2,000 $1,900 $1,800 $1,700 $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 . 9 3 2 $ 1 2 0 2 . 9 8 1 $ 0 2 0 2 Earnings Millions of Dollars 3 8 0 2 $ , 6 6 8 1 $ , 1 2 0 2 0 2 0 2 Average Total Assets Millions of Dollars . 2 7 1 $ 9 1 0 2 4 0 5 1 $ , 9 1 0 2 $2.70 $2.60 $2.50 $2.40 $2.30 $2.20 $2.10 $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 $1,900 $1,800 $1,700 $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 2 6 2 $ . 1 2 0 2 6 0 2 $ . 0 2 0 2 Earnings Per Share Dollars 3 2 8 1 $ , 1 1 6 1 $ , 1 2 0 2 0 2 0 2 Average Deposits Millions of Dollars 6 8 1 $ . 9 1 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 8 0 2 $ 9 0 2 $ 1 2 0 2 0 2 0 2 Capital Millions of Dollars 2 4 1 1 $ , 8 3 1 1 $ , 8 8 1 $ 9 1 0 2 1 2 9 $ 1 2 0 2 0 2 0 2 9 1 0 2 Average Loans Millions of Dollars AFFILIATE BANKS Contact: (515) 432-6200 www.boonebankiowa.com Charter: State Organized: 1883 Offices: Two locations in Boone, Iowa Employees: 21 Capital: $15.1 Million Assets: $159 Million 2021 Net Income: $1.9 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: 125 Capital: $103 Million Assets: $1.11 Billion 2021 Net Income: $13.1 Million Contact: (641) 753-5900 www.ISSBbank.com Charter: State Organized: 1883 Offices: Three locations in Creston and Lenox, Iowa Employees: 34 Capital: $26.5 Million Assets: $252 Million 2021 Net Income: $2.1 Million 8 2021 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: 33 Capital: $29.7 Million Assets: $286 Million 2021 Net Income: $3.2 Million Contact: (641) 753-5900 www.ubtna.com Charter: National Organized: 2002 Offices: Two locations in Marshalltown, Iowa Employees: 20 Capital: $11.3 Million Assets: $126 Million 2021 Net Income: $1.2 Million Contact: (515) 382-2191 www.bankSBT.com Charter: State Organized: 1939 Offices: One location in Nevada, Iowa Employees: 20 Capital: $19.1 Million Assets: $209 Million 2021 Net Income: $3.3 Million CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) Unaudited ASSETS Cash and due from banks Interest-bearing deposits in financial institutions and federal funds sold Total cash and cash equivalents Interest-bearing time deposits 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 Bank-owned life insurance Deferred income taxes, net 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, net Accrued expenses and other liabilities Total liabilities STOCKHOLDERS’ EQUITY December 31, 2021 December 31, 2020 $ $ 19,590 69,539 89,129 16,922 831,003 3,422 1,144,108 - 17,512 10,124 2,985 1,922 2,505 12,424 4,985 24,819 148,278 173,097 18,426 596,999 3,148 1,129,505 1,621 17,340 11,143 2,916 - 3,133 12,424 5,896 $ 2,137,041 $ 1,975,648 $ 411,585 $ 575,997 674,975 40,793 174,669 1,878,019 39,851 3,000 2,364 - 6,029 349,500 528,796 581,224 60,019 196,907 1,716,446 37,293 3,000 - 1,731 7,691 1,929,263 1,766,161 Common stock, $2 par value, authorized 18,000,000 shares; issued and outstanding 18,184 18,245 9,092,167 (unaudited) and 9,122,747 shares as of December 31, 2021 and 2020, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income Total stockholders’ equity Total liabilities and stockholders’ equity 16,353 170,377 2,864 207,778 17,002 158,217 16,023 209,487 $ 2,137,041 $ 1,975,648 10 2021 Annual Report | Ames National Corporation CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share data) Unaudited 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 (credit) for loan losses Net interest income after provision (credit) 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 Years Ended December 31 2021 2020 $ 47,829 $ 50,470 8,861 3,095 697 60,482 4,342 143 4,485 55,997 (757) 56,754 4,448 1,474 24 1,673 2,019 899 10,537 7,764 3,628 1,079 62,941 7,821 277 8,098 54,843 5,681 49,162 3,848 1,523 430 2,112 1,772 935 10,620 22,281 22,869 5,549 2,664 578 1,663 1,465 628 639 1,151 36,618 30,673 6,760 23,913 2.62 1.29 $ $ $ 5,182 2,668 313 1,537 1,082 826 639 1,435 36,551 23,231 4,381 18,850 2.06 0.75 $ $ $ STATE BANK & TRUST Historically, banks have been the core of a strong community. More than 80 years of banking in Nevada confirm that State Bank & Trust Co. (SBT) is a community pillar with a talented team of local experts offering decisions made close to the customer. State Bank & Trust is a full-service bank, serving Nevada and Eastern Story County communities from one convenient location, whose goal is to simplify your banking and life by providing you with a level of personal service you don’t often find today. As a local, community bank, we work to give our clients the most dependable and secure banking experience possible. When you begin to explore what a local, community bank means, you begin to understand how our commitment to the Nevada community prepared us to meet the challenges of 2021. The strength and resiliency of an organization is best defined by its ability to respond to the unexpected. That’s where experience comes into play. In 2021, we drew on the collective knowledge of our entire team and generations of bankers before us. We knew we were in for a test as we navigated a persistent global pandemic and a two-year Nevada Main Street project to repave the streets and repair infrastructure, which restricted customer access to our building and drive up. We planned, got creative, and worked together. While clients were sometimes unable to visit the bank, that didn’t stop their need for banking services. Many were introduced to online and mobile banking systems for the first time. During the height of the pandemic, our team shifted into split-teams, allowing remote work to become a reality. We relied on ANC and their technology to provide a safe working environment for all. Committed to our clients, our team proved day after day that high-touch service can be delivered in a challenging environment. 12 2021 Annual Report | Ames National Corporation Nevada created a new Community Garden in 2021. SBT donated funds to build raised beds in the garden. The bank became a lifeline for financial information for our commercial and ag clients. Navigating the rules of the Paycheck Protection Program was overwhelming for many. Our business banking team was on the front line, working to ensure that every customer got the necessary attention and guidance. Their work directly supported the preservation of many local jobs and businesses. We know we strengthened existing relationships and built new relationships that will endure for years to come. We believe that supporting our communities adds to the common good and enriches the lives of all. The communities served by State Bank & Trust Co. are thriving examples of our vision and we are proud to contribute in a variety of ways including volunteer work, serving on committees and boards, and philanthropic giving. 2021 saw State Bank & Trust reaching new levels of performance with income of $3.3 million, due in part to PPP loans and negative provision for loan losses, and we peaked at $225 million in total assets. Bank President, Steve McGill, credits the success to his excellent team of 22 employees who offer more than 200 years of SBT experience and banking expertise to serve clients’ changing needs. $2 BILLION Celebrated becoming a $2 Billion Holding Company with a Special Gift as a thank you to all employees 3 Areas of Support: Financial Literacy Community & Economic Development Health & Human Services Employees serve on nearly 200 organizations Locations 19 12Communities 7100 volunteer hours STEVE MCGILL RETIREMENT Steve McGill plans to retire from his position as President of State Bank & Trust at the end of 2022, after 19 years as the leader of this successful team of bankers. His unique ability to build employee and client relationships earned him respect across our markets and helped increase SBT assets from $76 million to more than $225 million; and loans increased from $42 million to $110 million during his tenure. McGill was quick to credit his long-time team members and said he surrounds himself with a great team he trusts. Steve hails from Independence Iowa, and he studied ag business at Iowa State University. He joined SBT in 1999 as a commercial lender and has an impressive lending and banking career with a niche for problem solving loans. He and his wife, Nancy, a retired teacher, have two children and five grandchildren. McGill will remain in Nevada after retirement. He plans to travel and hopes to enjoy more of his hobbies, including fishing, hunting, and Lego-building including large creations, such as the USS Arizona. When asked about his career milestones, Steve said he enjoyed and was honored to serve on local boards through volunteer work with ASSET and United Way; however, the career achievement he is most proud of is being the President at State Bank & Trust and said, “I like a small-town community bank, and this is a really good place to work!” Dan Johnson, Executive Vice President & Assistant Trust Officer with SBT for 14 years, will be named President in 2023. Prior to his departure, Steve continues to work with Dan to provide for a smooth transition. We wish Steve good health and happiness as he nears his retirement and want to encourage Dan in his transition as Steve’s successor. Steve McGill Dan Johnson Executive Vice President & Assistant Trust Officer BOARD OF DIRECTORS SHAREHOLDER INFORMATION AMES NATIONAL TEAM John P. Nelson President & CEO John L. Pierschbacher Chief Financial Officer Timothy J. Lupardus Chief Information Officer Buffy S. Clatt Vice President & Marketing Director Jennifer J. Hanson Vice President & Human Resources Director Tracy W. Laws Vice President & Internal Auditor Matthew R. Hackbart Vice President of Technology Joel P. Jacobsen Vice President & Risk Management Officer David A. Troe Vice President & Valuation Officer Justin C. Clausen Controller Marie I. Roberts Accounting Specialist Lori J. Hill Valuation Services Coordinator & Administrative Officer Doug 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 27, 2022, at 4:30 p.m. as the date of the Annual Meeting of Shareholders. 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 11, 2022. Additional information is also available by contacting John L. Pierschbacher, CFO at 515-232-6251 or info@amesnational.com. The meeting will be held at First National Bank, 405 5th Street Ames, Iowa. The Annual Meeting will also be available through a virtual format due to the continued public health impact of the coronavirus pandemic (COVID-19). Shareholders are encouraged to participate virtually. To participate virtually, visit the Ames National Corporation website, www. amesnational.com, shortly before the meeting on April 27, 2022. Shareholders are encouraged 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. 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.” Front, Left to Right: Patrick G. Hagan Retired Senior Vice President of Fareway Stores, Inc. David W. Benson Attorney at Law Nyemaster Goode Kevin L. Swartz Retired Chief Executive Officer, Wolfe Clinic PC James R. Larson II President, Larson Development Corporation 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 14 2021 Annual Report | Ames National Corporation 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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