Ixonia Bank Annual Report 2017

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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