Ixonia Bank Annual Report 2017

Ixonia Bancshares, Inc.
2017 Annual Report

Message from the CEOs
April, 2018
Shareholders,
In 2017, Ixonia Bank continued to make investments in the talent and resources it will need to profitably grow in 2018
and beyond. Ixonia Bancshares’ consolidated net income in 2017 before taxes was $1,180,000. That number, though,
was after $503,000 of “growth expenses” over the year that will benefit earnings in future years. A major part of these
growth expenses in 2017 was adding talent in lending and credit support. Because of the lead time necessary for new
senior commercial lenders to source, produce, document and book new lending business, as expected, the new lenders
did not have a major impact on the Bank’s revenue in 2017, but all have begun producing profitable loan volume for the
bank as of the date of this letter. We will further discuss our investment in people later in this letter.
Another major part of the growth expenses in 2017 was to provide the infrastructure for growth in terms of equipment,
technology, and facilities that a larger Ixonia Bank will need. This includes the expenditures necessary to reopen the
Bank’s Lakes Plaza Branch. This branch, which was closed in January of 2012 and reopened in January of 2018, is
located in an area of Oconomowoc that enjoys high growth and income demographics and will provide the Bank an
opportunity to further serve its marketplace.
Of note, while the tax reform act that was signed into law in the last days of 2017 is considered positive for the business
community, including Ixonia Bancshares, accounting rules required the write down of the Bank's deferred tax asset in
2017. This non-cash write down of $3.7 million of net operating loss carry forwards does not reflect an inability of Ixonia
Bancshares to utilize these past losses to shield future income from taxation, but simply reflects that the lower tax rates
going forward will require a longer recovery period and thus a lower present value of these loss carry forwards. The
amount of the write down is reflected in the enclosed financial statement for 2017 as part of the Bank’s $4.0 million tax
expense, although these are not, in actuality taxes paid.
Finally, it should be noted, that the Bank’s net income reflects a noncash write down to a parcel of real estate that the
Bank has been holding for several years. The Bank acquired this property in settlement of a loan relationship and it has
been offered for sale since its acquisition. It appears that the property will be sold early in 2018 at a price lower than its
appraised value, and, as such, management determined to take a write down of $375,000 in 2017, reflecting the agreed
upon anticipated sales price.
Adjusting the company’s 2017 pretax income of $1,180,000 for the aforementioned growth expenses and the
write down of the property value would produce an adjusted pretax income of $2,058,000 for 2017.
The enclosed financial results for the first quarter of 2018 reflect that the Bank is fully on pace to meet its projected net
income of $3 million for the full year. While the first quarter income before taxes of $475,000 reflects the Bank’s typical
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seasonal low quarter, net income in each subsequent quarter will increase as its loans grow. Furthermore, the company
earned $81,000 more in the first quarter of 2018 than in the same quarter of 2017, which did not include any of the
previously discussed growth expenses.
2018 is the 100-Year Anniversary of Ixonia Bank, which was founded in 1918. We are certain the Founders would be
pleased if they were here to see where we are today. We intend to celebrate our 100 th birthday all of this year and we
will keep you informed of our anniversary events.
"
Most importantly, if the founders were here and knew our long-term plan and strategy it would leave them in awe. Simply
stated, our targets include growth to $1 billion of assets. We will reach this
size with a combination of organic growth and, if possible, acquisitions. Our
All great
businesses are
based on the
character and
experience of
their people."
financial targets are to reach a 15% pretax return on capital and an efficiency
ratio of 50%. This ratio is a measure of cost to total income. We believe we
need $1billion of assets to reach these target levels of earnings.
As you know, Ixonia Bank’s headquarters is located halfway between Madison
and Milwaukee in the Milwaukee-Madison corridor. We intend to establish
a branch in each of these two cities. We have already established a loan
production office in Madison. These are the two largest cities in Wisconsin
and together they represent about half of Wisconsin’s total population.
All great businesses are based on the character and experience of their
people. Both of us can attest to you that we came to Ixonia Bank because we
recognized the high-quality and hardworking nature of the people that were
here. We have continued to complement this group with additional senior leadership. In early 2018, we were fortunate
to have Beth Wnuk join the Bank in an executive leadership position. Beth previously served as the Wisconsin Regional
President of PNC, one of the nation’s largest banks. She brings exceptional talent and experience to Ixonia Bank and will
primarily focus on consumer banking, marketing, and wealth management. Beth will be instrumental in positioning the
Bank as it continues on its growth trajectory.
As we go forward, a key driver of our earnings will be the continued growth of the Bank’s loan portfolio. Ixonia Bank was
able to add three very experienced senior commercial bankers in 2017. Doug Ortyn joined Ixonia Bank from a large
regional bank, where he served as the leader of its commercial banking efforts in Wisconsin and Michigan. Doug will
spearhead our commercial presence in Milwaukee. Dennis Sampson came to Ixonia Bank from a prominent local bank
where he served in a leadership role in that company’s commercial banking division. Mike Jones also joined us in 2017,
following a successful career of over 20 years in commercial banking in the Madison market. The addition of these three
senior leaders will not only fortify our already strong commercial banking group, but also will provide valuable insights
regarding the Bank’s strategy and development.
Sincerely yours,
Sheldon B. Lubar
President and CEO |Ixonia Bancshares, Inc.
Daniel L. Westrope
Chairman and CEO | Ixonia Bank
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Ixonia Bancshares, Inc. – Consolidated Statement of Condition
(amounts in thousands)
March 31, December 31,
ASSETS 2018 2017 2017 2016
Cash and cash equivalents $ 12,216 $ 10,729 $ 6,261 $ 27,995
Securities available for sale 78,696 92,106 86,386 91,945
Loans held for sale 322 309 1,312 19
Gross Loans 198,203 166,753 196,417 158,828
Allowance for loan and lease loss (2,895) (2,784) (2,875) (2,764)
Loans, net 195,308 163,969 193,542 156,064
Premises and equipment, net 11,468 11,097 11,505 11,210
Foreclosed assets, net 4,885 6,159 4,885 6,276
Deferred Tax Asset 8,931 13,027 8,894 13,303
Other assets 9,114 8,968 9,108 8,845
Total Assets $ 320,940 $ 306,364 $ 321,893 $ 315,657
LIABILITIES & STOCKHOLDERS’ EQUITY
Liabilities
Non-interest bearing deposits $ 45,802 $ 41,678 $ 49,279 $ 45,758
Interest-bearing deposits 226,320 210,361 220,162 215,030
Total Deposits 272,122 252,039 269,441 260,788
Securities sold under repurchase agreements 2,917 2,488 6,067 6,058
Borrowed funds 2,422 4,916 2,446 1,939
Other liabilities 955 1,006 1,339 1,372
Total Liabilities 278,416 260,449 279,293 270,157
Stockholders’ Equity
Common stock 2,890 2,884 2,890 2,884
Additional paid-in capital 29,596 29,566 29,593 29,566
Retained earnings 12,008 14,858 11,668 14,616
Accumulated other comprehensive income (loss) (1,334) (760) (915) (933)
Treasury stock (636) (633) (636) (633)
Total Stockholders’ Equity 42,524 45,915 42,600 45,500
Total Liabilities & Stockholders’ Equity $ 320,940 $ 306,364 $ 321,893 $ 315,657
Ixonia Bank Regulatory Capital Ratios
Tier 1 Leverage Capital 11.27% 11.74% 11.24% 11.47%
Total Risk-Based Capital 14.92% 17.39% 15.20% 17.51%
Ixonia Bancshares, Inc.
Tangible Book Value per Share
$11.69 $11.45 $11.73 $11.21
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Ixonia Bancshares, Inc. – Consolidated Statement of Operations
(amounts in thousands)
INCOME Mar. 31,
2018
Three Months Ending,
Mar. 31,
2017
Twelve Months Ending,
Dec. 31,
2017
Dec. 31,
2016
Interest and dividend income $ 2,923 $ 2,347 $ 10,156 $ 9,195
Interest Expense 414 266 1,031 930
Net interest income 2,509 2,081 9,125 8,265
Provision for loan losses − − − −
Net interest income after provision for loan losses 2,509 2,081 9,125 8,265
Noninterest income:
Service fees 306 273 1,238 1,093
Other income 404 234 1,010 1,099
Total noninterest income 710 507 2,248 2,192
Noninterest expense:
Salaries and benefits 1,686 1,301 5,836 5,112
Occupancy and equipment 415 365 1,382 1,341
Office expense 351 272 1,021 801
Professional fees 76 53 406 321
Other 216 203 1,548 1,042
Total noninterest expense 2,744 2,194 10,193 8,617
Income before provision for income taxes 475 394 1,180 1,840
Provision for income taxes 135 151 4,128 (12,617)
Net Income (loss) - Consolidated $ 340 $ 243 $ (2,948) $ 14,457
Net Income (loss) - Bank Only * $ 352 $ 260 $ (2,714) $ 14,196
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Beginning balance $ 42,600 $ 45,500 $ 45,500 $ 30,249
Net income (loss) 340 243 (2,948) 14,457
Unrealized gain on securities available for sale (419) 172 18 617
Reclassification for change in accounting principle − − − 177
Issuance of common stock (Series A) 3 − 75 −
Purchase of treasury stock − − (151) −
Sale of treasury stock − − 106 −
Total Equity $ 42,524 $ 45,915 $ 42,600 $ 45,500
*Operating results of Ixonia Bank only, and not consolidated with Ixonia Bancshares, Inc.
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Our success story.
For a century now, the Ixonia Bank commitment to serving our customers, supporting their dreams and
staying locally focused has given purpose to our success. Through the Great Depression, wars, culture
shifts, economic upturns and downturns, we've remained true to that purpose. Our success is grounded
in the relationships we build with individuals, families and businesses. We've earned a reputation for
providing exceptional service and for helping businesses and customers succeed by meeting their
needs as their financial lives evolve. Our foundation of fiscal responsibility has also served us well,
enabling us to grow our business and increase the prosperity of the communities we've served for the
last 100 years. Today, and in the future, Ixonia Bank looks forward to being a trusted partner and to
bringing the best solutions to our customers every time we have the opportunity.
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We have relationships with nearly 16,000 customers and serve their financial needs through a full range of products,
including: consumer banking, mortgages, commercial banking, investments and wealth management. Our desire
is to be the bank of choice for individuals and businesses throughout the communities we serve. And, to continue
to partner with our existing customers helping them find long-term success at every point in their financial lives.
Financing Home Ownership
Our mortgage and home equity products
help customers purchase a home and
access their home’s equity.
Investments & Retirement Planning
We work with our clients to plan for
retirement and create investment approaches
that meet their long and short term goals.
Comprehensive Products & Services
We offer a variety of checking and savings
accounts to fit any lifestyle and need.
More Ways to Bank
Customers can bank when and where it is
most convenient for them: Online, mobile
device, ATM or at one of our convenient
bank branches.
Committed to our Communities
We are dedicated to helping our employees and customers succeed by supporting and strengthening the many
local communities where we live, work and play. Beyond our corporate giving, helping organizations such as
United Way, UPAF, and the YMCA, our employees help hundreds of other organizations by giving their time,
talents and dollars. We are proud of our employees’ dedication to making a difference in their communities.
2017 LakeWalk for Cancer supporting ProHealth Care cancer services. Ixonia Bank has
participated since it began in 2004, and given a total of $37,500 in sponsorship dollars.
Our employees volunteering at
the Hartland Street Dance.
Ixonia Bank's "Casual for a Cause" program allows
employees to wear jeans one Friday a month to support a
local, non-for-profit organization. We've contributed funds
to YMCA (pictured), Special Olympics WI, Stars & Stripes
Honor Flight, local food pantries, and Lake Country Free
Clinic, to name a few.
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Helping Businesses Succeed
TJM Innovations
Thanks to help from Ixonia Bank, Julie and Ted McNamara were able to purchase their 104,000 square foot warehouse and
the equipment needed to expand their Women-Owned small business. They are now equipped to self-produce and distribute
GutterStuff ® foam products, while diversifying their business.
“We are very grateful to Ixonia Bank,” said Julie, CEO of TJM Innovations. “They invest in Milwaukee, and its people. They
have allowed us to take this leap from fabricator to manufacturer, which saves us a lot of money and allows us to bring in
new industries.”
HeatTek
Over the past fifteen years, Ixonia Bank has helped HeatTek navigate international business dealings and double the size
of their facilities. The bank has also introduced them to valuable vendors and set up lines of credit as assurance when they
needed to purchase materials and pay employees while products were being built for clients.
What sets Ixonia Bank apart? “It’s the personal touch,” CEO Craig Plowman said. With another facility expansion being
forecasted, their eyes are comfortably set on the future. “We signed with Ixonia Bank and never looked back.”
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Midwest Engineered Systems
Not everyone understands Midwest Engineered Systems (MWES) innovative “one off” business, the intangible collateral, and
the unique needs that exist during the procurement phase. Scott Woida, President and Founder of MWES, appreciates Ixonia
Bank’s progressive, forward-thinking approach. As MWES continues to pursue and attract new opportunities in the marketplace,
the access to capital they’ve been extended will assist them in achieving their goals.
“Ixonia Bank took a different kind of look at our business, instead of viewing each part and piece, they viewed the entire
project,” Scott had to say about the process. “It makes it a whole lot easier.”
Basin Precision Machining
Basin Precision Machining may be one of Ixonia Bank’s newest clients, but after only a few short months together, they find
themselves with a solid foundation and a growing partnership. Due to the bank’s unique approach of understanding Basin’s
business value, they were able to provide Basin with the opportunity to grow by securing them a working line of credit and
a term loan on their equipment.
“It’s a pleasant change from what we’re used to,” said Erik Anderson, President of Basin Precision Machining, “They truly
understand my business and their level of customer service is something that I’ve never quite seen before.”
For more in-depth stories, visit www.IxoniaBank100.com
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Ixonia Board of Directors
Ixonia Bancshares
Board of Directors
Ixonia Bank
Board of Directors
Sheldon B. Lubar
Ixonia Bancshares, Inc. | President and CEO
Daniel L. Westrope
Ixonia Bank | Chairman and CEO
David M. Bauer
Lubar & Co. | Chief Investment Officer
Kenneth Krei
TMI Holdings, Inc. | Vice Chairman
Michael J. Falbo
Retired Bank CEO
William E. Read
Wag-Aero Group | Owner and CEO
Allan H. (Bud) Selig
Major League Baseball | Commissioner Emeritus
Susan Lubar Solvang
Growing Minds | Founder and President
Jeffrey W. Yabuki
Fiserv | President and CEO
Sheldon B. Lubar
Ixonia Bancshares, Inc. | President and CEO
Daniel L. Westrope
Ixonia Bank | Chairman and CEO
William E. Read - Lead Director
Wag-Aero Group | Owner and CEO
David M. Bauer
Lubar & Co. | Chief Investment Officer
Brian G. Carroll
Reinhart Boerner Van Dueren, S.C. |
Attorney/Shareholder
Linda Gorens-Levey
General Capital Group | Partner
Richard R. Schumann
HeatTek Inc. | Consultant
Vincent R. Shiely
Lubar & Co. | Partner
Mark R. Wierman
Ixonia Bank | President
Beth R. Wnuk
Mount Mary University |
EVP for Administrative Services, Interim CFO
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Ixonia Bank Officers
Daniel L. Westrope
Chairman & Chief Executive Officer
Mark R. Wierman
President & Chief Lending Officer
Beth R. Wnuk
Senior Executive Vice President - Retail Banking & Wealth Management
Jeffrey M. Versluys
Executive Vice President - Chief Operations Officer
Mike Jones
Senior Vice President - Commercial Banking
Douglas A. Ortyn
Senior Vice President - Commercial Banking
Dennis J. Sampson
Senior Vice President - Commercial Lending
Brad W. Wessley
Senior Vice President - Chief Credit Officer
Jan E. Britt
Vice President - Retail Banking
Thomas S. Jones
Vice President - Loan Renewal & Collections Officer
Dave G. Kawleski
Vice President - Residential Lending
Mark R. Kohler
Vice President - Information Technology Officer
Susan K. Kopiness
Vice President - Special Projects
Mark D. Mallow
Vice President - Retail Lending
Becky D. Messmann
Vice President - Chief Accounting Officer
William J. Morris
Vice President - Retail Lending
Ryan M. Myhre
Vice President - General Counsel
Juliana H. Neu
Vice President - Compliance, BSA & CRA Officer
Erin J. Pechanach
Vice President - Senior Credit Analyst
Carrie L. Rosenau
Vice President - Human Resources & Training
Wendy M. Sowinski
Vice President - Business Banking
Matthew D. Zastrow
Vice President - Business Banking
Jim G. Bence
Assistant Vice President - Mortgage Lender
Corina Kasten
Assistant Vice President - Customer Solutions/IT
Erin K. LaCombe
Assistant Vice President - Watertown Area Manager
Karla L. Lauersdorf
Assistant Vice President - Branch Manager | Hartland
Amy B. McNutt
Assistant Vice President - Deposit Operations Manager
Mary Kay Pupak
Assistant Vice President - Loan Operations Manager
Lauren T. Ruff
Assistant Vice President - Marketing Director
Nancy A. Christian
Commercial Loan Specialist
Deb E. Cone
Senior Credit Analyst
Tari A. Hansen
Loan Administration Officer
Jamie D. Koch
Branch Manager | Oconomowoc (Summit Ave.)
Jeffrey S. Taylor
Ixonia Wealth Management Financial Advisor
Amanda M. Wendt
Branch Manager | Ixonia
Jessica A. Zuber
Branch Manager | Dousman
Tom C. Pasch
Vice President - Business Banking
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Mission Statement
The mission of Ixonia Bank is to provide unmatched value to our consumer and business customers. This
value will be delivered by knowledgeable and professional associates within an independent, locally-owned
community bank focused on soundness, profitability, and growth, in that order.
Annual Shareholder Meeting
Wednesday, April 25 th , 2018 •11:30am
Windwood of Watertown Golf Course • W5710 County Road CW, Watertown, WI 53098
Visit us online at: IxoniaBank.com