Notes to Consolidated Financial Statements

Transcription

T H E
F I R S T
F I F T Y
Y E A R S
D A C O T A H B A N K S , I N C .
2 0 1 3
A N N U A L
R E P O R T
D A C O TA H B A N K S , I N C .
contents
3
5
6
8
24
56
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Letter to Shareholders
Financial Highlights
Selected Consolidated Financial Data
Community Profiles
Financial Statements
Directors and Management
Employees
general offices
transfer agent
401 South Main Street
Suite 212
P.O. Box 1496
Aberdeen, South Dakota 57402-1496
Telephone: (605) 225-4850
Fax: (605) 225-4929
Website: www.dacotahbank.com
Email: info@dacotahbank.com
American Stock Transfer &
Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
annual meeting
The annual stockholders’ meeting will
be held Thursday, May 22, 2014 at 1:00 pm,
at the Dakota Event Center (DEC) in Aberdeen, SD.
Rolla
Bowbells
Belcourt
Minot
Jamestown (2015)
Valley City
M I N N E SOTA
Dickinson
Regent
Hettinger
New Effington
Lemmon
Bison
Mobridge
Aberdeen (2)
Cresbard
Faulkton
Sisseton
Roslyn
Morris
Chokio
Webster
Henry
Watertown
Clark
Willow Lake
Brookings
Rapid City (2)
Sioux Falls (4)
Custer
Dacotah Banks, Inc. is a one-bank holding company headquartered in Aberdeen, South Dakota. The company is the
shareholder of one commercial bank operating out of thirty-three full service banking locations. General insurance operations
are conducted in fourteen of the locations.
BANKING
Dacotah Bank offers something for every person or business.
We work to find the precise features and benefits that fit
each client’s unique financial needs.
INSURANCE
Protecting families, businesses, or farms and ranches from
loss requires experience. Dacotah Insurance has served over
three generations of local customers for 50 years – a Trusted
Choice independent agency.
MORTGAG E
When our clients make their biggest investment for their
family or their business, we are there with memorable
customer service and a commitment to no surprises.
TRUST AND
W E A LT H M A N A G E M E N T
We help clients plan for the future, build net worth, and
secure wealth. We manage money, farmland, and oil and
gas interests.
2
TO OUR SHAREHOLDERS
Dacotah Banks, Inc. experienced a slower than normal rate of asset growth during 2013, but once again produced
record earnings. Anticipating yet another year of low interest rates and strong competition for quality loans in the
banking industry, management chose to control growth, improve capital ratios and concentrate on maintaining net
interest margins. There was little incentive during the year to compete for deposits as the loan portfolio grew at a
rate of only 4.5 percent, and portfolio securities matured and re-priced at lower yields.
Interest rates remain very low; the prime rate
dropped to 3.25 percent on December 16,
2008, and it has stayed there since. Yields
on loans are low; however, yields available in
the securities portfolio are even lower. In the
current environment profitable asset growth
is dependent on growing the loan portfolio;
however, loan growth nationally was
negatively impacted by significant decreases
in mortgage lending activity, causing most
banks to compete aggressively for quality
loans, and the pricing reflects the competitive
environment.
The Company’s total assets increased 2.2
percent during 2013 and most of that
growth can be attributed to the purchase in
September of Donnelly Bancshares, Inc. of
Morris, Minnesota, and its affiliates, United
Farmers and Merchants State Bank, with
$40 million of assets, and United American
Agency, a casualty insurance agency.
We believe United Farmers and Merchants
State Bank, with locations in Morris and
Chokio, Minnesota, and United American
Agency will prove to be great additions
to the Company. United Farmers and
Merchants State Bank had been owned
and operated by three generations of the
Erstad family for 101 years and we are
pleased and honored to have
the opportunity to continue
the valuable service the
Erstads and their banking
professionals provided
the Donnelly, Morris and
Chokio communities.
3
FINANCIAL PERFORMANCE
The Company’s 2013 net income was
$18.38 million, an improvement of 3
percent compared to the $17.85 million
earned in 2012. Non-interest income was
a significant contributor to the higher
earnings, increasing 4 percent over 2012
despite a significant decrease in fees
earned from the sale of 1- to 4-family
residential loans, an important element
of non-interest income, from $2.6 million
during 2012 to $1.7 million during 2013.
Earnings contributions from insurance and
trust activities more than made up for the
drop in fees from the sale of mortgages.
Consistent with national trends, the
Company’s net income was positively
influenced by a lower level of provisions
for loan and lease losses. Provisions during
2013 were $5.25 million compared to
$6.75 million during 2012.
Net interest yield on earning assets
improved slightly form 3.84 percent to
3.86 percent and compares favorably with
the national average of 3.26 percent. The
Company’s loan ratios kept pace with its
growth: the loan-to-deposit and loan-toasset ratios at year end were 82.82 percent
and 72.99 percent respectively compared
to 80.76 percent and 71.39 percent at the
end of year 2012.
GROWTH
The Company’s total assets at the end
of 2013 were $2.111 billion compared to
$2.065 billion at the end of 2012. As
mentioned earlier, the Company chose
to control deposit growth during
the year. Quality loans were actively
pursued as were relationship-based
deposits; however, the Company
carefully monitored interest paid on
certificates of deposits, resulting in
total deposit growth of only
1.9 percent from $1.826
billion to $1.860 billion.
The loan portfolio
grew 4.5 percent
from $1.474 billion
to $1.540 billion in
a very competitive
environment, with
much of the growth
once again generated in our western North
Dakota markets.
The Dacotah Banks, Inc. Vision Statement
says that “[w]e will continue to pursue
opportunities to expand our presence in
South Dakota, North Dakota, Minnesota
and surrounding states when and where
appropriate.” As mentioned earlier, a
significant portion of the growth in assets
during 2013 came as a result of the purchase
of United Farmers and Merchants State Bank
and United American Agency. We believe
the bank and agency purchase provided the
Company with a good opportunity to enter
the state of Minnesota. The entities are in
excellent condition with modern buildings
and are located in a very good agricultural
area. Morris is a thriving county seat with
modern healthcare facilities, a branch of
the University of Minnesota and a strong
business sector. The purchase was of a size
and nature that had almost no impact on the
Company’s capital, and the market and staff
provide an excellent opportunity for growth.
STRENGTH
Dacotah Banks, Inc. capital levels remain
strong. The Company‘s measured growth
and good earnings during 2013 contributed
to improved capital levels. As of December
31, 2013, on a consolidated basis the
Company’s Tier 1 leverage ratio was 9.88
percent compared to 9.61 percent a year
earlier; Tier 1 risk-based capital was 12.04
percent compared to 11.71 percent a year
earlier; and total risk-based capital was
13.29 percent compared to 12.89 percent
a year earlier. The Company is wellpositioned to meet and exceed all capital
definitions and levels that are scheduled to
phase in over the next few years.
The Company continues to diversify and
add markets. Mention was made above of
the loan volume added through markets in
North Dakota. Increased lending to other
sectors reduces dependence on agricultural
loans. At December 31, 2013, loans to
agriculture still represent 43.3 percent of
total loans. The Company’s agriculture loan
portfolio is performing well as is the total
loan portfolio. On December 31, 2013,
non-performing loans represented only 1.06
percent of total loans compared to 1.61
percent one year earlier. The Company’s
allowance for loan and lease losses at the
end of 2013 was $21.3 million compared to
$18.9 million at the end of 2012.
SHAREHOLDER VALUE
The Company will be fifty years old on
November 10, 2014. Organized as Dacotah
Bank Holding Company, the Company
began operations by bringing banks held
by some of its original shareholders into
the newly formed bank holding company.
Those early banks in Mobridge, Webster
and Aberdeen were committed to serving
farms, ranches and small communities.
That commitment persists today and
is illustrated by activities described
throughout this letter.
Shareholder value cannot be discussed
without reflection on our growth since
the Company began and particularly our
growth and success since the farm and
ranch crisis of the 1980s. Looking back at
what contributed to those years of crisis
prompts us to make some comparisons.
Thirty years ago at the end of 1983, the
Company had $218 million in assets, $14.9
million in equity, $990 thousand in annual
earnings and a primary capital ratio, which
compares closely to today’s Tier I leverage
ratio, of 7.78 percent and the Company
paid a stock dividend during the year. At
the end of 2013, the Company had $2.111
billion in assets, $211.7 million in equity,
$18.4 million in annual earnings, a Tier I
Leverage Capital Ratio of 9.88 percent,
and the Company paid $3.6 million in cash
dividends during the year.
The dividends paid during 2013 totaled
$3.20 per share and marks the 25th
consecutive year of cash dividend
payments. Additionally, the relatively
restrained level of dividends provided for
significant retained earnings that will allow
the Company to grow organically while
taking advantage of strategic opportunities
to expand by acquisition or by developing
new branches. The book value per share of
the Company’s stock increased 5.5 percent
from $178.82 on December 31, 2012 to
$188.71 on December 31, 2013.
COMMENTS ON 2013
Flat asset growth, higher earnings, higher
capital levels, increased reserves and everincreasing resources applied to changing
banking law and regulation describe
activity at the Company during 2013.
By the end of 2013 total assets had
increased only $46 million, a 2.2 percent
increase over 2012. The growth was
roughly the size of the Morris, Minnesota
acquisition. The Company also enjoyed
significant liquidity, experienced modest
loan growth and had no need to
aggressively pursue deposit growth;
deposits had increased by only $35 million,
a 1.9 percent increase over 2012. The
controlled deposit growth coupled with a
4.5 percent increase in loans allowed the
Company to slightly increase its net interest
margin, maintain and improve earnings,
improve its capital levels and increase its
allowance for loan and lease losses.
Since the loan portfolio grew at a rate
faster than deposits, the Company was
able to utilize low-yielding liquidity in the
investment portfolio to fund loan growth.
The Company’s loan-to-deposit ratio
increased from 80.76 percent at year-end
2012 to 82.82 percent at year-end 2013.
We believe these levels are appropriate
and manageable.
The slower rate of growth coupled with
good earnings allowed the Company
to improve its capital ratios and the
Company’s allowance for loan and lease
losses improved from 1.27 percent at yearend 2012 to 1.36 percent at year-end 2013.
The Company’s Boards of Directors and
management are committed to growth,
but during 2013 it seemed prudent to
restrain growth and to concentrate instead
on earnings, capital and loan and lease
loss reserves. Difficulty in finding quality
loans has been a challenge for the entire
industry, and it has been particularly
challenging for smaller and rural banks.
During 2013, the Boards and management
devoted significant resources and effort
to two of the Company’s strategic plan
priorities: “management and delivery of
products and services that meet the needs
of current and prospective customers”
and “effective management of the variety
of risks inherent in operating a banking
and financial services company with $2.75
billion in assets.” The two priorities are
closely tied. To remain relevant and to
grow we must meet the needs of both our
traditional customers and generations of
customers who demand and will continue
to demand newer and more innovative
products and product delivery. New
products and delivery systems, however,
are costly and carry with them an increased
exposure to fraud and other risks, but it is
clear that if we are to remain competitive,
we need to make the investment in such
products and services and effectively
manage the risks.
and management envision a company
with 2.25 billion in assets by the end of
2014, and we continue to develop the
infrastructure for a $2.75 billion company.
The Company is nearing completion of a
comprehensive document imaging system
and is just beginning to reap the benefits
of a maturing data warehouse function,
both of which will greatly assist the Boards
and management as they execute growth
plans. The Company has the systems and
personnel to be competitive as the world
of banking changes.
Also during 2013 the Company began
planning for a de novo branch in
Jamestown, North Dakota. Regulatory
approval has been received, land has
been purchased, a market president is at
work, building plans have been developed
and construction on a new bank building
in Jamestown will begin during the
second quarter of 2014. Jamestown is
a growing community of over 15,000
people and is well located just 100 miles
north of Aberdeen at the intersection of
US Interstate 94 and US Highway 281.
Jamestown is the county seat of Stutsman
County and is a destination for healthcare,
education and business services for a
large portion of south central North
Dakota. According to the 2007 Census of
Agriculture, Stutsman County is the fourth
leading producer of agricultural products
in North Dakota.
During 2013, the Company’s Boards of
Directors engaged in succession planning
for both Boards and senior management.
The planning provides assurance that as
leadership changes occur on the Boards and
in management, those changes will be as
seamless and well thought out as possible.
In closing, we thank the Company’s
shareholders for their confidence; the
Boards of Directors for their advice and
guidance; and the outstanding team of
bankers who operate the Company day-today, serving our customers, communities
and shareholders in such a great way.
Rodney W. Fouberg
Chairman of the Board
LOOKING AHEAD
We believe that several factors that
contributed to very little asset growth
during 2013 will persist during 2014.
Increasing loan volume remains essential
to organic growth. The Company remains
committed to growth and the Boards
Richard L. Westra
President
and Chief Executive Officer
4
FINANCIAL STATEMENTS
Financial Highlights
(Dollars in Thousands, Except Per Share Data)
performance 2013
Net interest income............................................. $ 73,386
Provision for loan losses....................................... 5,250
Non-interest income .......................................... 16,679
Non-interest expense.......................................... 56,707
Net income......................................................... 18,382
Per share.......................................................... 16.43
Cash dividends declared....................................... 3,580
Per share............................................................. 3.20
Net interest margin............................................. 3.86%
Return on average assets...................................... 0.90
Return on average equity.................................... 8.93 at december 31ST
2013
2012
68,747
6,750
15,969
50,583
17,854
16.03
3,344
3.00
3.84
0.93
9.31
2012
Total assets.......................................................... $ 2,110,822 2,065,053
Investment securities and deposits with banks....... 343,613 363,606
Loans, net............................................................ 1,540,424 1,474,330
Deposits.............................................................. 1,860,232 1,825,560
Borrowings......................................................... 20,000
21,005
Stockholders’ equity............................................ 211,736 199,564
Book value per share........................................... 188.71
178.82
Shares of common stock outstanding................... 1,122
1,116
Tier I leverage ratio............................................. 9.88%
9.61
Total risk-based capital........................................ 13.29
12.89
5
% Change
6.7%
(22.2)
4.4
12.1
3.0
2.5
7.1
6.7
0.5
(3.2)
(4.1)
% Change
2.2%
(5.5)
4.5
1.9
(4.8)
6.1
5.5
0.5
2.8
3.1
selected consolidated financial condition data
December 31,
20132012201120102009
(Dollars in Thousands)
Total assets.................................................................. $ 2,110,822 2,065,053 1,905,762 1,805,538 1,654,896
Loans, net .................................................................. 1,540,4241,474,3301,365,8301,344,9711,326,809
Federal funds sold....................................................... ---
10,000-
Investment securities................................................... 332,519357,818325,556280,587187,095
Deposits...................................................................... 1,860,2321,825,5601,679,4201,587,6361,445,833
Borrowings................................................................. 20,00021,00525,00930,42833,944
Stockholders’ equity.................................................... 211,736199,564184,082167,725156,390
selected consolidated oper ation data
Years Ended December 31,
20132012201120102009
(Dollars in Thousands, Except Per Share Data)
Interest income............................................................... Interest expense.............................................................. Net interest income........................................................ Provision for loan losses.................................................. Net interest income after provision for loan losses........... Non-interest income:
Income from fiduciary activities................................. Service charges on deposit accounts........................... Insurance commissions............................................... Fees on sale of residential mortgages........................... Other........................................................................ Total non-interest income......................................... Non-interest expense:
Salaries and employee benefits.................................... Occupancy, furniture and equipment, net................... Other........................................................................ Total non-interest expense........................................ Income before income taxes........................................... Income tax expense........................................................ Net income.................................................................... Per share of common stock:
Net income............................................................... Cash dividends declared ............................................ $ 82,993
84,802
86,656
88,585
87,059
9,60716,05520,00224,65929,020
73,38668,74766,65463,92658,039
5,2506,7505,3006,1007,350
68,13661,99761,35457,82650,689
1,778
1,202912765892
3,8493,9564,2594,1664,224
4,169
4,0683,8893,8703,739
1,6602,6341,8972,2561,867
5,2234,1094,1523,3792,802
16,67915,96915,10914,43613,524
35,31631,69230,77629,62428,106
6,6646,1435,8615,9735,931
14,72712,74814,30812,91013,769
56,70750,58350,94548,50747,806
28,10827,38325,51823,75516,407
9,7269,5298,9728,6905,584
18,382
17,854
16,546
15,065
10,823
$16.4316.0314.8713.54 9.73
$3.203.002.602.002.20
6
selected financial r atios
At or for the years ended December 31,
2013 2012 201120102009
performance r atios
Return on average assets*........................................ 0.90%
0.930.910.880.68
Return on average stockholders’ equity................... 8.93
9.319.379.237.09
Net interest margin................................................. 3.863.843.924.023.92
Non-interest income to average assets..................... 0.810.830.830.840.84
Non-interest expense to average assets..................... 2.762.642.802.832.98
Efficiency ratio....................................................... 62.9559.7162.3161.9066.80
asset quality r atios
Nonperforming loans to total loans......................... 1.06%
1.611.741.29 1.03
Allowance for loan losses to total loans.................... 1.361.271.321.180.84
Allowance for loan losses to net charge-offs............. 7.41x
3.135.76 12.751.28
capital r atios
Tier I leverage ratio................................................ 9.88%
9.619.178.898.91
Tier I risk-based capital........................................... 12.0411.7111.9111.1210.32
Total risk-based capital............................................ 13.2912.8913.1612.2411.12
*Excluding
7
sale of title plants in 2009 calculations.
MID-DAKOTA REGION
ABERDEEN
“Aberdeen being known as
the Hub City certainly is a true
description,” said Brad Moore,
Mid-Dakota regional president. The
South Dakota city of 26,000 has
agriculture, manufacturing, and
healthcare as its main economic
drivers.
BRAD MOORE
Aberdeen’s
location in the
heart of the James
River valley has
been important for
corn production
in recent years.
There are several
ethanol refineries
operating in the
area.
Today, the region is also a hub
for medical care. Avera St. Luke’s
Hospital is the area’s largest
employer. Recently, Sanford Medical
Center entered the city, opening a
new hospital near the vibrant retail
area along Highway 12.
Autumn is the time the city shines.
Pheasant hunters from around the
country flock to the city. College
football games at Northern State
University and Presentation College
draw crowds as they enjoy the fall
colors of the tree-lined city streets.
Farmers are busy harvesting the
corn and soybeans from the fertile
James River Valley.
Brown County, in which Aberdeen
is located, and the Aberdeen Area
Convention and Visitors Bureau
offer the Million Dollar Bird contest
every fall. During
the hunting
season, 100
banded
pheasants
are released
in the area.
If a
hunter
bags one of the
tagged birds, they are entered in a
drawing for a $1 million cash prize.
In 2013, 31 bands were returned
for individual cash prizes of $100 to
$500.
largest brick passenger depot still
standing in South Dakota. It was
listed in the National Register for its
architecture and association with
the development of railroads in
South Dakota.
“In the municipality, the growth
of the Aberdeen Family YMCA has
added a lot to the community,”
said Moore. The YMCA recently
completed the Youth Development
Center that offers daycare,
preschool and afterschool programs
for over 350 children.
For over 50 years, employees at
the company’s flagship bank have
served the community and region
with volunteerism in the areas of
economic development, healthcare,
education, literacy, societal welfare,
recreation and tourism.
Moore has been in banking for 38
years and has seen how technology
has changed the way
customers use and
The railroad played
“People still want to access bank products
the most important
bring their questions and services. “What
role in the early
to a trusted advisor” has not changed is
development of the
how we need to be
Hub City. Aberdeen
in touch with the
was officially founded in July
consumer and understand their
1881 when the first Milwaukee
needs. What makes our banks
Railroad train steamed into the
successful is a solid customer
area. The city continues to utilize
relationship. People still want to bring
the historic Craftsman-style depot
their questions to a trusted advisor,”
built in 1911. The depot is the
he said.
Historic
Downtown
in Aberdeen,
South Dakota.
Photo by Troy McQuillen
8
MID-DAKOTA REGION
WEBSTER
Webster turned an act of Mother
Nature into a benefit for the local
economy. The Day County area was
flooded in 1997 and the destruction
resulted in area lakes now used
for recreation. The change helped
the area become
a destination
for hunting and
fishing. The
residents and
visitors can also
enjoy a 9-hole
golf course within
the city limits,
said market
DAN MENKING
president Dan
Menking. He reports the city
also has a new swimming
pool and soccer
complex.
Area attractions include
the Museum of Science,
Wildlife and Industry,
which has an 1880s
village with period buildings and
is slowly decreasing and our
furnishings. During the summer of
average age is slowly increasing,”
2014 the museum will host a special
said Menking. “We are still a very
exhibit from the South Dakota
agriculturally dependent economy,
Historical Society, “At
but have increased
“We are still a
Home and Abroad:
our tourist
very agriculturally
South Dakota in
World War II.”
dependent economy, industry.”
but have increased our The bank’s
The Chamber also
hosts the town’s
employees were
tourist industry”
main festival, the
very involved in
Pumpkin Fest held annually in early
building the new baseball complex,
October. The town dresses up in fall
Menking said. “We also have a
colors and there is a lighted evening
group who help with the Relay for
parade. The event has craft vendors,
Life and raise a lot of money for
a giant pumpkin weigh-in,
cancer research. Dacotah Bank has
baking contest, and a
a branch in nearby Roslyn and bank
children’s tractor pull.
employees are helping with the
Webster’s community
Roslyn Centennial in 2014. Other
makeup has the
employees are involved with the
same challenges as
many other rural
Chamber of Commerce, the nursing
Midwest towns.
home board, hospital foundation,
“Our population
and Kiwanis.“
SISSETON
“Sisseton, South Dakota has connections
to many aspects of American heritage.
It is a multicultural society,” said Kevin
Wegehaupt, market president.
In addition to residents
of Scandinavian heritage,
Sisseton is on the
Lake Traverse Indian
Reservation. The area is
home to the SissetonWahpeton Oyate tribe.
Wegehaupt said. Coteau des Prairies Health
Systems recently completed a $6 million
expansion on the hospital.
The Stavig House Museum showcases an
authentic 10-bedroom Victorian home built
by Norwegian immigrant Andrew Stavig.
There are period furnishings with immigrant
letters and historical photographs.
The letters were recently featured in a
documentary on South Dakota Public
Broadcasting.
The population of Sisseton
The Joseph N. Nicollet Tower and
was 2,470 in the 2010
Interpretive Center is breathtaking. Located
KEVIN WEGEHAUPT census. The county seat of
3.5 miles west of Sisseton, it is a 75-foot
Roberts County, the town
observation tower providing a view
is located in the midst
of the valley carved by glaciers some
of six state parks, with
“We have one of
40,000 years ago.
more than 30 glacial
the few locallylakes nearby.
On the first weekend in June each
owned hospitals
Sisseton industries
left in the state and year, Veterans Avenue in Sisseton’s
business district is the site of the
include Woodland
it is thriving”
Cabinetry. The custom
Sisseton Car and Motorcycle Show
cabinet company opened
and Swap Meet. The region is
in 1994. Also, the Sisseton-Wahpeton
also home to one of the oldest pow
Oyate tribe has SWO Plastics, Inc., which
wows in the nation. The Sissetonmakes plastic bags and has a staff of
Wahpeton Oyate 4th of July Pow Wow
around 40.
is a social gathering of family and
friends to observe and enjoy the Native
“We have one of the few locally-owned
hospitals left in the state and it is thriving,”
American culture.
9
Photo by Wikipedia
MID-DAKOTA REGION
MORRIS
As the newest location in Dacotah
Territory, Dacotah Bank in Morris,
Minnesota, is a perfect fit for
the organization. The Morris
community is located in a very
strong agricultural area which has
a population of over 5,200 people,
has many
locally-owned
businesses and
is home to the
University of
Minnesota,
Morris. Morris
sits on the
Pomme de
Terre River,
LARRY RINGGENBERG which means
“apple of the earth.” However, the
first settlers grew mostly potatoes,
turnips, and wheat. Today the fertile
land grows a variety of grains and
forages including corn, soybeans,
sugar beets, and edible beans.
Livestock is also an important driver
to the local economy and the area
has several swine, dairy, and beef
operations.
“The ag sector has been very
successful over the last 3 to 4
years,” said market president Larry
Ringgenberg.
Several industries located in Morris
and the surrounding communities
make manufacturing one of
the largest job creators. These
jobs range from fabrication to
engineering.
started one of the first internet
service providers in Minnesota
and has worked with over 500
clients to enhance Morris’ business
environment.
As changes in technology affect
banking, customer service still
needs to be the foundation of
the business, Ringgenberg said.
“Customer service is
“The
future
of
taken to another level
The University of
with internet banking,
banking will
Minnesota, Morris is a
smart phones, and online
change with
liberal arts college with
deposit. Technology
a focus on a renewable,
technology”
is great but it’s still
sustainable education
important to put boots on the
according to their website. There
ground or as I like to say, jeans on
are 1,900 students enrolled at
the farm. It’s part of our culture
the university on the 125-year-old
at Dacotah Bank. It’s more than a
campus. The university is a national
service, it’s a relationship,” he said.
leader in green initiatives, such as
“The future of banking will change
wind energy, biomass energy, and
with technology. Will we continue
local, sustainable food projects. The
to serve customers through brick
school has a goal to be a carbon
and mortar locations? Yes. However,
neutral campus.
I see internet banking and online
Ringgenberg is on the Stevens
deposit becoming more popular in
County Economic Improvement
the next few years. But for now, a
Board, an organization with a
hometown bank still provides critical
mission to retain and create jobs.
services to local businesses, farmers,
Founded in 1987, the board
and residents.”
The Science Building at the
University of Minnesota at
Morris opened in 2000, and
houses the Science and Math
Departments, as well as post
office and campus bookstore.
Photo by JC Shepard
10
MID-DAKOTA REGION
FAU L K TO N
Faultkon is a progressive community
has been banking for 38 years
attracting young people to its safe
and comes from a farm and ranch
streets and excellent schools, said
background. “Agriculture is the
Dwight Hossle, market president.
biggest part of our business and we
With around 750 people, Faulkton
are subject to mother nature and
is turning the tide against declining
the markets like a lot of our rural
rural population. “Faulkton is
banks. Agriculture has been very
a great place to raise a family,
good but like everything else, cycles
providing a great
do occur.”
environment
Faulkton holds Wild West Days
for kids of all
annually over the 4th of July.
ages. Our school
Dacotah Bank sponsors a brat
system provides a
feed during the festivial. There is
great education,
a city-wide parade, a tractor pull,
while providing
along with a barbecue and bull
a multitude of
riding event. Faulkton also provides
extracurricular
a great business
activities
“Agriculture
environment for young
limited is the biggest part entrepreneurs. Ace
DWIGHT HOSSLE
only by
of our business” Hardware recently
the students themselves.
opened a new location
They can bike all over town and
in Faulkton. Main Street businesses
parents don’t have to worry.” Hossle
are moving out to the highway
and Hossle said growth should
be accommodated not stifled.
“It is a challenge to repurpose
the old buildings on Main Street,
but Faulkton is up to challenges.”
Hunting is also vital to the area.
“We have three or four large lodges
in the area that host hunters from
around the country bringing in a lot
of outside dollars during the hunting
season.”
NORTHERN REGION
VA L L E Y C I T Y
Founded in 1874, Valley City, North
Dakota, was named for the lush,
green valley created by the winding
Sheyenne River and is known as the
City of Bridges. The Hi-Line Railroad
Bridge, the longest bridge for its
height in the world at the time, was
completed in 1908 by Northern
Pacific Railroad and continues to
serve as a vital link
in the country’s
transportation
system.
The center helps entrepreneurs
and companies through periods
of adjustment with office space at
reasonable rates. The development
group created a partnership with
Valley City State University to
provide a technologically-skilled
workforce. The effort has attracted
an international software-support
company and more than 75 career
positions to Valley City.
operators to engineers. They are
completing a $20 million expansion
to the factory and continue to be a
strong community partner.
As a community bank in Valley
City since 1969, Dacotah Bank
employees believe in the importance
of strong relationships throughout
“In the last 15 years the community
has worked diligently to attract
businesses, generating over 500 new
jobs. That is significant and impactful
for a city of 6,000 people,” said Dick
Gulmon, market president.
Valley City
community groups
are working to
bridge connections
and develop
“Being on the I-94 corridor
opportunities
DICK GULMON
certainly has its advantages and
for employment
disadvantages,” he said. “Our
growth and enhancing the quality of
retailors are creative and work hard
life. The Valley Development Group
to market their niches. They find
works to attract new business and
it important to have relationships
industry and assists
with customers beyond
“The
community
existing businesses
transactions.”
with improvements and
has worked
Located in Valley City
expansion. One such
diligently to
project is the Regional
attract business since 1995, John Deere
Seeding Group is the
Technology Center,
development,
area’s largest employer
a 20,000 squaregenerating over with more than 325
foot, state-of-the-art
business incubator.
500 new jobs” positions from line
the community. For that reason,
employees are encouraged and
supported to serve on elected and
non-elected board and committee
positions, with the belief that a
community bank succeeds along
with its community.
“Dacotah Bank is fortunate to
represent our type of community
banking. It’s the life blood of a
community,” Gulmon said.
Photo by VC-BC Development Corp
11
NORTHERN REGION
ROLLA
Situated on the eastern edge of
They help with the town’s annual
the Turtle Mountains, Rolla, North
Ragtop Festival. The event has a
Dakota, is an area of diverse people.
parade and fireworks, as well as a
The town celebrated its 125th
car and motorcycle show. Dacotah
anniversary in 2013 and highlighted
Bank employees also volunteer for
its heritage from the Scandinavian
the Chamber of Commerce, the
countries, as well as the Turtle
Rolla Jobs Development Authority,
Mountain Band of Chippewa
and high school
Indians. An
activities.
“Now we can
international
do more on our As the first 50 years
flavor is
of Dacotah Banks,
added with
cellphones than
Inc. conclude,
nearby
what that 1980s Vollmer reflected
Manitoba,
computer could” on how things have
Canada,
changed.
and the
International Peace
“To give some perspective on
Gardens. The
changes in the banking industry, I
town of almost
DAN VOLLMER
remember when we got our first
1,300 people is
computer in the 1980s, it was
the Rolette County seat.
$7,000. Now we can do more on
our cellphones than what that
Bank employees are very involved
in the community said Northern
computer could. The pieces of
regional president Dan Vollmer.
technology have gotten smaller
and smaller,” said Vollmer, who has
been in banking for 34 years.
Banking is still about a relationship,
Vollmer stresses. “We deliver many
of the same products, like checking
and money market accounts. But we
still need to make the relationship
personal. In the future, people will
move away from checks. It will
continue to evolve and we will see
more delivery of electronic services.”
MINOT
Dacotah Bank is very competitive in
Minot, North Dakota, according to
G.W. Melgaard, market president.
“The future for the area is very
bright. We have the 2011 flood
behind us and we have completely
rebuilt,” he said.
G.W. MELGAARD
The 2011 Mouse
River flood caused
extensive damage
throughout the
region. Around
12,000 people
were evacuated,
saving many lives,
but more than
7,000 homes were
affected.
to the region. This bricks and
mortar commitment indicates the oil
industry here looks to be more than
just a boom. “However, the city’s
explosive growth from the oil boom
has evened out. Where we were
looking at 99 percent capacity in
hotels and apartments, we are now
around 65 percent,” he said.
Melgaard pointed out the other
growth factors in the region. The
region is an agricultural hub with
access to both the Great Northern
and Canadian Pacific railroads.
The Minot Air Force Base has been a
long-time contributor to the region,
having opened in 1957. “The base
is instrumental in the city’s success
and growth. We have a strong
partnership with them,” he said.
One of the economic drivers is
the city’s proximity to the Bakken
formation. “Being near the oil region,
The government has signaled that
the city has mushroomed,” Melgaard
there will be some
said. “We have grown
“We could have military cuts in the
from around 40,000
future. However,
75,000 people
people in 2010 to close to
Melgaard is confident
50,000 now. Projections
living here in the the base will continue
suggest we could have
next 5 years”
its mission due to the
75,000 people living here
fact that the base has
in the next 5 years.”
two major wings, the 5th Bomb Wing
A half dozen of the country’s largest
oil companies have built offices in
Minot, showing their commitment
and 91st Missile Wing, both of the
Air Force Global Strike Command.
“I don’t think the governmental
drawdown will affect this base very
much. They are strategically located as
a northern base.”
Minot is also a regional retail draw.
“Being close to the Canadian border
increases trade, mostly in shopping and
airline services. We get visitors from
Regina and Estevan in Saskatchewan,
and Brandon in Manitoba, Canada,”
said Melgaard, who has been in
banking for 40 years.
In addition Minot is the home of the
North Dakota State Fair. The area
also hosts Norsk Hostfest. The early
October festival features authentic
Scandinavian entertainment, ethnic
food, and crafts. The five-day event
draws tens of thousands of people
and is the largest Nordic celebration
in North America, according to
festival literature.
12
NORTHERN REGION
JAMESTOWN
In 2013 the decision was made that
the newest Dacotah Bank location
would be in Jamestown, North
Dakota. Construction will begin on
an 8,000 square
foot building in
early 2014. The
grand opening for
Dacotah Bank’s
34th location is
planned for early
2015, and market
president Casey
Henderson is
CASEY HENDERSON looking forward
to the new
opportunity. “Dacotah Bank has
a commitment to growing with
the Dakotas and Minnesota,
and Jamestown is an exciting
location for us,” he said.
“Dacotah Bank is well-known
and respected for staying
close to customers through all
kinds of economic cycles. That
is very important for farmers
and business people who count
on a steady source of financing for
operations and growth.”
Henderson has been in Jamestown
pressure as the effects of the oil
the majority of his career and said
boom are pushing eastward, with
the last two years have shown that
various construction projects in
many sectors of business
the works for multi-family
are poised to grow. “As “Dacotah Bank housing.
we know, agriculture
has a
Jamestown’s population
in the last 5 years has
commitment is stable at almost
done extremely well.
16,000 and it is about
to growing”
That is a strong driver of
equal to the population
our local and regional
of 50 years ago. A number of
economies, and we look forward
significant employers have held a
to building relationships in the ag
long presence in the community
sector along with tapping those
including the Anne Carlson Center,
existing and emerging business
Jamestown University, Cavendish
financing opportunities in the
Farms, Jamestown Regional Medical
region.” Housing
Center, and UTC Aerospace. UTC is
in particular
one of the world’s largest suppliers
is feeling
of aerospace and defense products,
and employs more than 550 people
in Jamestown.
Henderson sees many opportunities
ahead with the recent completion
of Great River Energy Plant, and
current construction of the Dakota
Spirit corn-ethanol plant, along
with a planned $1.2 billion Central
Harvest States fertilizer plant and a
Menards home improvement store.
Photo by Wikipedia
SOUTHEASTERN REGION
CLARK
Clark, South Dakota, is proud to
LaBrie, market president. The
be called the potato king of the
employees are active in Rotary,
region. The town is home to Dakota
Relay for Life, and volunteering for
Style, which makes potato chips and
county extension activities, among
sunflower seeds. It’s one of the
many others. The
area’s main employers and its
bank sponsors an
“Nearly
extra-crunchy
accelerated reading
all of our major program at the
chips can be
employers
found all over
local elementary
the region.
are homegrown” school. “We
reward kids for
The town also
reading books with
hosts Potato
Clark
Bucks
that
they can cash in at
Days every August.
the
end
of
the
year
for gifts. They
The festival is over
deposit the “bucks” in an account
40 years old and
at the library, just as they would
the town goes all
TOM LABRIE
at a bank, so it teaches the kids
out. Mr. and Mrs.
about banking too. They even have
Potato Head make an appearance
deposit tickets,” LaBrie said. “We
and participants compete in a
stock a store at the school with
potato sculpture contest, a parade
posters, pens, movie rentals and
and more. Mashed potato wrestling
other fun items to purchase.”
has been on the list of activities
more than once and even found its
La Brie has been with Dacotah
way to national television one year.
Bank since 1976. He has seen the
Dacotah Bank is a leader in
community activities, said Tom
13
population of Clark decline, but
there is good news for the town,
he said. “Nearly all of our major
employers are homegrown. There
is a stable work environment. There
is good infrastructure with a strong
service club sector.”
SOUTHEASTERN REGION
S I O U X FA L L S
Dacotah Bank has four locations in
Sioux Falls, South Dakota’s largest
city. The bank and city have been on
a roll since coming together in 1991,
when Dacotah Bank opened its first
branch in Sioux
Falls.
The cable channel
CNN ranked Sioux
Falls as the 45th
best place in the
country to live and
launch a business
in 2009, and
Dacotah Bank’s
DAVE BANGASSER
sound community
service approach fits the city well.
growth the past thirty years. Among
the city’s major employers are
health care organizations. Sanford
Health and Avera together employ
more than 13,000 people.
“The customers we serve in the
Sioux Falls area are a good mix of
business owners and developers
and ag producers and we see our
customers on a regular basis. We try
to give the personal touch whenever
we can. We are a partner, we work
with our clients; we are not just a
lender,” Bangasser said.
“Cultural events are always
happening in Sioux Falls; from the
JazzFest in July to the holiday parade
“Sioux Falls is known for its diversity
in late November,” Bangasser said.
of economy, from agriculture,
“Our city’s downtown is a vibrant
medical services and financial
place for entertainment where the
services to retail and cultural
summer is crowded with events.”
activities,” said Dave Bangasser,
There is also a variety of unique
Southeastern regional president.
and professional shows at the
Washington Pavilion and the
The city, with over
“We are a
Orpheum Theater Center, as
160,000 people, is one of
well as a Sculpture Walk in
partner...we
the fastest growing urban
areas in South Dakota. The are not just a the downtown core area. The
exhibits change yearly and
census shows an increase
lender.”
most often reflect historical
of 22 percent since 2000.
significance and progressive
The business landscape in Sioux Falls
standards for the city.
is diversified, having evolved for
Employees are very active in the
generations from its early years as
community, Bangasser said. “We
an agribusiness center. Value-added
have employees who are members
ag production industrial operations,
of Rotary, the Shrine, Sertoma Club,
state-of-the-art healthcare,
and those who volunteer for the
attractive retail trade, and
Chamber of Commerce, the Sioux
sophisticated financial services have
Empire Fair, Sioux Empire Farm Show,
led the community’s commercial
Junior Achievement, and more.”
Technology has made banking
more efficient, at the same time
regulations have greatly increased,”
he said. “It has created a change
for us in terms of compliance. The
regulatory oversight does make it
more difficult for the traditional,
community bank model. Dacotah
Bank has prioritized the investment
of money and human resources to
meet the challenges.”
“The future will challenge us to
maintain the community banking
model. We are also challenged
to recruit young people to the
industry.”
Reflecting that the past 50 years
have been good for both the
company and Sioux Falls, the future
remains bright and he is optimistic.
“With interest rate increases on the
horizon, our clients are diversified
and strategically positioned. They
will not be greatly impacted by
changes in interest rates.”
The Falls in Sioux Falls,
South Dakota.
Photo by Wikipedia
14
SOUTHEASTERN REGION
W AT E R T O W N
Watertown, South Dakota
(population 22,000), is situated
at the intersection of Interstate
29 and Highway 212. Kip Hansen,
market president, said that along
with the two
major highways,
Watertown has
a major railway
system that
creates a strong
infrastructure
for business and
industry.
oil paintings; every original painting
since 1985 is on display. The
Egyptian-Revival building, designed
by Terry’s son, Charles, has several
acres of beautiful grounds used as a
conservation park.
Other visitor attractions are
Bramble Park Zoo, Codington
County Heritage Museum, Lake
Kampeska and Pelican Lake. The
lakes are a haven for camping,
fishing and boating in the summer
months. Annual events include the
Cookin on Kampeska BBQ CookOff Competion and the Vintiques
Car Show and Hot Rod Run. The
September car show event brings in
over 400 vintage and classic cars.
Watertown
employers who
employ 50
or more people include ESCO
Manufacturing, Inc., Benchmark
Lake Area Technical Institue in
Foam, Inc., and Terex, among many
Watertown has 1,800 students
others. ESCO is a wholesale sign
enrolled. LATI provides education
manufacturer, while
to those seeking a variety
Benchmark makes
“Providing
of careers from nursing to
specialty plastics
excellent
business to diesel technology.
used as insulation,
customer service Next to the new middle
architectural forms,
will continue to be school, the city has proposed
and dock floats.
what makes our to build a multipurpose
In addition, Terex,
headquartered in
bank stand out” activity center. Hansen said if
approved by the local voters,
Connecticut and
the facility would encompass
producer of Genie brand lifts, has
approximately 116,000 square feet.
an equipment manufacturing plant
The facility would house a statein Watertown.
of-the-art work out facility, indoor
Watertown has a host of recreation
walking track, competitive pool,
possibilities. For example, the Terry
zero entry pool, racquetball courts,
Redlin Art Center houses over 150
and a large amount of flat floor
of Terry Redlin’s original, wildlife,
space for various functions.
KIP HANSEN
Dacotah Bank employees volunteer
for many organizations. These
include the Jenkins Living Center
Board, and various Chamber of
Commerce committees.
Hansen said they are also ahead
of the game when it comes to
technology. “Our employees are
on the cutting edge because we
understand the technological needs
of the different generations whom
we serve. We have to be able to
respond and communicate through
one-on-one conversation utilizing
communication devices that our
customers may be utilizing.”
“While change is always going to be
a part of our industry, I do think that
providing excellent customer service
will continue to be what makes our
bank stand out.”
The Terry
Redlin Center
in Watertown,
South Dakota.
15
Photo by Wikipedia
SOUTHEASTERN REGION
BROOKINGS
Brookings is the state’s fourth
largest city and South Dakota State
University is the largest institution of
higher learning in the state. The city
has a broad base of manufacturing.
Brookings is very
well situated
geographically,
with agriculture
along the
Interstate-29
corridor. The
city has only
three percent
unemployment
DAVE GIBSON
and is home to Daktronics, Larson
“Most of the changes in banking
Manufacturing and a 3M plant to
have been changes in automation
name just a few. Later this year a
and delivery channels – not a
$130 million cheese plant from Bel
significant change in the products.
Brands USA, which is a part of the
A checking account is still a
Fromageries Bel, a family-owned
checking account, even though it
cheese maker headquartered in
has gone paperless and people use
Paris, France will begin operating
debit cards instead of checks.”
in Brookings. The
“We have a very
company makes
“One of the
diverse staff. We
Laughing Cow and
biggest assets of this offer a personal
BabyBel cheeses. The
touch at every
area is how well the
new project will bring
opportunity and
about 275 new jobs to university and the city offer a small
cooperate to get things
the area.
birthday gift or
done”
“One of the biggest
coupon to create
assets of this area
foot traffic. We
is how well the university and
have very content employees and
the city cooperate to get projects
they project that positive attitude
accomplished. Examples are
to customers and guests. Some
the SDSU wellness center and a
of the time-tested classic means
performing arts center. It is a unique
of connecting with community
and great working relationship. It’s a
members are still in play here. We
win-win situation for the community
will clip out and send articles from
and university,” said Dave Gibson,
the newspaper if they mention one
market president.
of our customers or their children.”
“Dacotah Bank is a Core 20
corporate sponsor for SDSU
athletics. We have a presence
at Frost Arena and at the new
Dykhouse football field. Employees
volunteer for the United Way, Junior
Achievement, Pheasants Forever,
and various Chamber of Commerce
committees.
“We have increased competition
from credit unions and other sources
of financing and financial services
including non-traditional internetonly banks. Looking into the future
they will continue to be our primary
competition but Dacotah Bank is in
it for the long-haul and I’m excited
about the future!”
SDSU is well
known for
its 165-foot
tall Coughlin
Campanile.
Photo by Wikipedia
Photo by City of Brookings
16
WESTERN REGION
RAPID CITY
Rapid City, South Dakota, and
the Black Hills depend heavily on
the tourism industry, said Rick
Rylance, Western regional president.
“Tourism really impacts our
economy. Recently,
there has been a
steady increase in
tourism numbers,”
he said.
Rapid City is
known as the
Gateway to the
Black Hills. The
pine-forested
RICK RYLANCE
mountains are
home to Mount Rushmore, Crazy
Horse Memorial, and Bear Country
USA. The region draws millions of
visitors each year, with the majority
during the summer months. The
Sturgis Motorcycle Rally can bring
anywhere from 350,000 to 750,000
visitors for the annual August event.
Rapid City has changed since
Dacotah Bank first opened here
in 2000, Rylance said. “It was
when the city was first starting
to blossom. Land for housing
and commercial enterprises
was becoming available for
development,” he said. The bank
now has two locations in Rapid City
along with a branch in Custer, South
Dakota. The metropolitan Rapid
City area has more than 125,000
residents. There are also more
than 4,000 people connected with
Ellsworth Air Force base just north
of the city.
There is a healthy retail sector
along the interstate with much
competition. As a counterpoint,
there has been an effective update to
downtown. Main Street Square with
ice skating in the winter is popular,
as is the Summer Concert Series
on Thursday nights, which attracts
3,000 to 4,000 people weekly. 0ver
70 shops and 33 restaurants can be
found downtown.
Banking trends run hot and cold,
according to Rylance. “For a time,
there was a push to have a branch in
every locale, such as supermarkets.
I don’t see the need to have brick
and mortar on every corner like we
did 10 years ago,” he said. “Younger
people don’t go into banks; they
may as they get older as their needs
change, but for now they access
everything electronically.”
Another continuing trend is drive-up
service. “Seventy percent of our
customers drive up versus those that
walk in,” he said. “That has doubled
in the last four to five years. People
still want to come to a bank, but
they don’t need to come in.”
Rylance said there have been
drastic changes to the banking
industry since he started 36 years
ago, when all transactions where
done manually. “Today we are so
dependent on technology. We can’t
The recent recession is in the rear
exist without it anymore. No doubt
view mirror for Rapid City. “The
today we can gather information
mortgage sector has seen its
and communicate
bottom and we are on the
“Our business upswing again,” Rylance
much better through
technology, but we must
here is mostly said. “We see consumer
remember that customer
retail customers less often
commercial
contact is always
in Rapid City, as there
lending”
important.”
is so much competition,
with
entities
such as credit unions
Dacotah Bank’s technology is a
and
online
banking.
Our business
priority of the company. “We are
here
is
mostly
commercial
lending.”
always updating to keep up with
customer technology needs. The
bank now has a presence on social
media with Facebook, Twitter and
LinkedIn. We have to be unafraid of
new technologies,” Rylance said.
The Federal Reserve has signaled
that interest rates may go up at
some point. “When interest rates
do eventually go up, there will be a
change in our deposit mix,” Rylance
said. “People will be getting out of
money market accounts and will go
back to certificates of deposit (CDs).
People may even get out of the
stock market and come back to CDs.
There may be some movement back
to traditional savings products when
interest rates start to stabilize.”
© Crazy Horse
Memorial
Foundation
17
WESTERN REGION
HETTINGER
Hettinger, North Dakota is the
region’s leader in health care. West
River Health Services is one of the
centerpieces of the community. It
is rated one of the top 100 rural
critical care medical units in the
country. The hospital and clinic
complex employs around 300
people with
14 doctors.
“Luckily, 50
years ago the
community
leaders saw
the need
and started
planning for
it,” said market
JOHN SCHERBENSKE president John
Scherbenske. West River Health
Services provides for 25,000 people
in 25,000 square miles with eight
clinics in the region.
serve the large medical complex
and others.
Scherbenske sees growth on the
horizon for the town. Hettinger is in
the middle of the Tyler oil-producing
formation. “Oil companies expect
to open here in the next two to four
years,” he said. The North Dakota
Geologic Survey indicates the Tyler
formation lies above the Bakken oil
formation and encompasses nearly
all of southwestern North Dakota
and extends into South Dakota.
Scherbenske, who has been in
banking for 41 years, and other
employees at the bank serve on
various community boards, including
the hospital board, the economic
development commission and
volunteer for high school athletics.
There have been drastic changes
in how banking is conducted in
the last 50 years. “When I started
Hettinger was founded in 1907
we had manual typewriters and
along the Milwaukee Road’s
full keyboard adding machines.
transcontinental rail line known as
With the changes technology has
the Pacific Extension. The town’s
brought, we are much
first bank was
“Oil companies
more efficient. Here in
opened that year
Hettinger, we have as much
expect
to
open
as the Security
foot traffic as we ever had.
Bank of Hettinger.
here in the next
Our demographic is older
two to four years” residents and they like to
Today the town
has 1,300 people,
get out and about and do face-toincluding a modern airport to
face business,” Scherbenske said.
LEMMON
The agricultural sector is as healthy
Lemmon gets its name from cattle
as it has ever been in Lemmon,
baron G.E. Lemmon, who had
one the largest fenced pastures in
South Dakota, according to Travis
the world at 865,000 acres. G.E.
Ellison, market
Lemmon also helped the railroad
president. “Many
find a river crossing here, so he was
of our customers
given naming rights to the town.
are diversified with
To this day, the community
both crops and
celebrates its beginnings with
livestock. Drought
the Boss Cowman Rodeo and
is always a major
Celebration each July.
concern for our
area but moisture
Like many ag communities,
conditions have
Lemmon has seen a decrease
been very good
TRAVIS ELLISON
in population, but
the
“The business they have been
last few years. Strong
able to counter
environment
commodity prices have
the outflow of
really helped as well,” he is healthy for a citizens, especially in
said.
town our size” recent years.
Cattle are the
“In 1950, there were 2,700 people
foundation that started the town.
here, now we have 1,200, but we
“We do provide clients with
technology solutions now with
online banking and online bill pay.
People are becoming so used to
interacting with machines but it’s a
competitive advantage for Dacotah
Bank to have a live person answer
the phone,” Scherbenske said.
“Lutheran Social Services is using
federal funding and local funding
to help provide housing. We have
a shortage of housing for people
in critical jobs, such as medical,
education and law enforcement.
They are planning a 24-unit housing
complex to help meet our needs. The
housing rental market is maxed out.”
Scherbenske said there is a wind
farm project that will start this
summer and could generate revenue
for the local tax base. The local
veterinary clinic is planning a major
expansion. It’s another sign that
business is good in Adams County.
are slowly recovering population,”
he said. “Also, the business
environment is healthy for a town
our size.”
Wheeler Manufacturing, Inc. is
headquartered in Lemmon and the
largest employer in the area.
The company is a jewelry
manufacturer and a leading
supplier for the tourism
industry.
There has also been some
economic overflow from
the Bakken oil formation
in North Dakota. Ellison
says there are people
moving to town to be closer
to their jobs in the oil fields.
The commute is reasonable and
Lemmon offers an affordable, safe
living environment.
Photo by Wheeler Manufacturing
18
WESTERN REGION
DICKINSON
It is no secret that business is
booming in Dickinson, North
Dakota. Jeff Moore, market
president, said the economy around
the Bakken oil formation has
changed everyone’s life. Moore,
who has been in banking since
1974, said it is a
metamorphosis.
“We will like what
we see in the end,
but at this point
there are certain
struggles.”
The city is one of the fastest
growing in the country. Dickinson
grew by only 1,000 people in the
ten years before the boom, from
2000 and 2010. In the following
two years to 2012, the
population surged with
10,000 new people
making the city
their home.
Dickinson has
many things to
offer, Moore
said. The tourism
Moore said the
hub of North
biggest changes
Dakota is nearby,
are in services that
with Medora and
JEFF MOORE
people take for
Theodore Roosevelt National Park
granted, such as mail and groceries.
in the area. “The geography is
“We don’t get mail on
unique with the Badlands
“In 2013,
a daily basis because
in the area. The people also
the postal service lacks
make it unique. They are
there was a
workers. People can
huge demand very friendly, self-reliant, and
work in the oil fields for
independent. We are also
for commercial home to Dickinson State
so much more money.
real estate” University.”
We have trouble finding
staples on the grocery
The university has 2,500 students
store shelves because supplies sell
with emphases on agriculture,
out so quickly.”
teaching, nature sciences, business,
and accounting. The DSU Blue
Hawks compete in the NAIA athletic
conference.
Dickinson hosts Rough Rider Days
at the beginning of July. This annual
festival has a fair, parades, and
expo. Dacotah Bank is a sponsor of
the PRCA rodeo during Rough
Rider Days. Locals and visitors
can also enjoy stock car races
at Southwest Speedway.
Moore said Dacotah Bank
in Dickinson will see
the most growth in
the commercial loan
area. “In 2013, there
was a huge demand for
commercial real estate.
The mortgage sector will also
see growth in Dickinson.”
When interest rates do return to
normal levels, Moore says the
Dickinson area won’t be affected.
“Interest rate increases won’t affect
our growth there,” he said. “The
demand will be here regardless of
the prices. Though, interest rate
increases will bring customers back
to CDs.”
MOBRIDGE
A bend in the Missouri River in
Darrell Schlepp, market president,
northern South Dakota is home
said the Mobridge employees are
to Mobridge. Founded as a bridge
involved in about every community
crossing for the railroads, it has
activity. “We pride ourselves on our
always been the
commitment to helping out. We
beginning
help wherever we
“We pride
of the West.
can. It’s what keeps
ourselves on our a small community
Fertile
commitment to going.”
croplands
east of the
helping out” Mobridge has seen
river give
some swings in
way to buttes and
the makeup of the community.
cattle grazing in
There had been a population
the west.
decrease, similar to what many
DARRELL SCHLEPP
Mobridge hosts
the Sitting Bull Stampede every 4th
of July. The jubilee is named for the
Sioux chief who is buried just west
of town. The PRCA-sanctioned
event will celebrate its 70th
anniversary in 2015. In addition to
the rodeo action, there is a carnival,
two big Main Street parades, and a
fireworks display on the night of the
4th after the rodeo. It is also a very
popular time for family and school
reunions.
19
rural communities in rural America
experienced, Schlepp said. “There
has been resurgence in the last
few years.” The South Dakota
Game, Fish and Parks
department has built a
new divisional center in
Mobridge to work with
the thousands of people
who hunt and fish that
visit the area. A new
National Guard
Armory, hospital
expansion, new high school, and city
library addition have all added to the
area resurgence.
The town recently completed
a major link in its river-front
development. Main Street was
renovated and extended across the
railroad tracks for access down to
the water. The road helps connect
miles of walking and biking trails
along the river.
Looking back at all the changes in
banking as Dacotah Bank’s holding
company marks its first 50 years,
Schlepp described a few. “Besides
regulation, technology has been the
biggest factor,” he said. “We still
offer our traditional products,
but the delivery has changed.
It’s a faster-paced society and
Dacotah Bank wants to be
there for customers in any
form they choose. We
are here to support new
technology and help
customers navigate the
changes.”
INSURANCE
INSURANCE
When Dacotah Insurance opened
for business 50 years ago, Lyndon
Johnson had just taken over as
President. The Beatles first came to
America and premiered on The Ed
Sullivan Show.
Dacotah Insurance is an
independent agency and represents
a number of insurance carriers in
order to deliver the proper coverage
to a varied mix of business and
individual needs.
In 1964, the
average annual
income was
$5,800 and gas
was 25 cents per
gallon. The year
also brought the
debut of color
television and the
Ford Mustang,
which cost a little
over $2,300.
Customers have a competitive
advantage at Dacotah Insurance,
as they get the newest technology
while still having personal service.
“Insurance is a legally-binding
contract, it is not just about price,”
Heisler said. “It’s a complicated
policy. Those individuals who
are concerned about what they
are getting for the money they
are paying want advice on that
product. We can fill that market
need,” he said.
TOM HEISLER
Tom Heisler, senior vice president
Heisler has seen the insurance
of Dacotah Insurance, has seen the
industry move from a paper process
regional insurance market change
to an electronic environment.
as well. “We have changed over the
years in that most branches were
“With Internet connectivity, we have
independent agencies. Now we are
the ability to support all locations.
one agency with 14 branches. With
For example, if any one particular
that structure, Dacotah Insurance
location would be down for some
can meet the specific needs of each
reason such as a weather event, we
community,” said Heisler, who has
can move all those phone calls and
been in the
customer service to any
“The consumer still
industry for
of our locations,” Heisler
over 40 years.
wants to do business
said. “We can work from
with a local agent,
any location. No location
Dacotah
Territory
someone they can go operates completely on its
has a mix of
and see in their office” own; it has support at the
touch of a button.”
economic
drivers including oil production,
The latest data say 14 percent of
agriculture, manufacturing, tourism
consumers get their insurance
and many diverse locally-owned
direct on the Internet. The market
businesses. Individual insurance
for online insurance has grown
needs also vary greatly from home,
steadily. Ten years ago, it was nine
auto, and personal belongings to life
percent. “With the figures I have
and health insurance.
seen, it grows at about a half to one
Photo by iStockPhoto
percent a year,” Heisler said. “With
$255 billion of premium out there,
that is a significant volume. The
other 86 percent of business is still
done with an insurance agent. The
consumer still wants to do business
with a local agent, someone they
can go and see in their office.
I don’t see that going away.
Independent insurance agencies,
like ours, continue to increase their
market share.”
Heisler said insurance is cyclical.
“There are times we will see rates
increase, conversely, there are times
we will see a decrease. Over the time
I have been in the insurance business,
I have seen about five cycles, where
prices go back and forth. Insurance
premiums are also affected by
the overall economy. Insurance
companies do depend on investment
income and this has a direct effect
on the premiums they charge.”
Dacotah Insurance is a Trusted
Choice independent agency.
Agents and account managers
are able to shop for the finest
protection at the best value from a
number of companies.
20
TRUST
TRUST
Today, more banks are looking to
non-interest income to comprise
a larger part of their financial
picture. Dacotah Bank’s trust and
wealth management department
has experienced dramatic growth
in recent years
and is becoming
a significant
contributor to
higher earnings
for Dacotah
Banks, Inc., as a
source of noninterest income.
Leveraging
South Dakota’s
favorable regulatory, trust, and
tax environment, trust and wealth
management now exceeds $600
STEVEN SCHAEFFER
management department. This
million in assets. “Dacotah Bank
unique service is a situation in which
can do so much under one roof,
from banking to
a wealthy family uses
insurance and wealth
“Dacotah Bank can an irrevocable trust
management” said
do so much under with Dacotah Bank
Steven Schaeffer, J.D.,
as trustee working in
one roof, from
senior vice president
concert with a family
insurance to wealth investment advisor.
of trust and wealth
management”
management for
“Since South Dakota
Dacotah Bank. He
has such a favorable
indicated that trust and wealth
tax environment and as we have
management touches on essentially
witnessed unprecedented growth
five services – Money management
in the value of farm land here in the
for individuals, families, and
Midwest, the department is fielding
businesses
several inquiries a month from
families and investment advisors
• Management of farm, ranch,
alike on the use of directed trusts.
and mineral rights assets
including nearly 70,000 acres
in the Dakotas and Minnesota
• Estate settlement serving
as personal representative
to protect and preserve a
family’s legacy
• Estate planning guidance
on estate planning concepts,
tools, and techniques
• Directed trust management;
a collaboration with a client’s
investment advisor
The South Dakota directed trust
business now comprises a significant
portion of new business for
Dacotah Bank’s trust and wealth
Schaeffer attributes the growth and
success of Dacotah Bank’s trust and
wealth management department
to the individual and collective
efforts of the wealth management
team. “We have a hands-on team
approach that relies on managing
client relationships and everyone
plays a role. In addition, every
member specializes in providing
a trust service unique to their
gifts and abilities. Our vision at
Dacotah Bank’s trust and wealth
management department calls
for controlled growth, increased
profitability, and to become a more
significant presence in Dacotah
Bank’s footprint.”
Oil rig used
in the Bakken
oil fields
21
Photo by iStockPhoto
Photo submitted by Kristen Fauth, Aberdeen, SD
22
Independent Auditor’s Report
The Stockholders and Board of Directors
Dacotah Banks, Inc.
Aberdeen, South Dakota
Independent Auditor’s Report
Report on the Financial Statements
Auditor’s
ReportBanks, Inc. and subsidiaries, which comprise the
We have audited the accompanying consolidated Independent
financial statements
of Dacotah
consolidatedThe
balance
sheets
as
of
December
31,
2013
and
2012,
and
the
related
consolidated statements of income, comprehensive
Stockholders and Board of Directors
income, changes
in
stockholders’
equity,
and
cash
flows
for
each
of
the
years
in
the
three-year
period ended December 31, 2013, and the
Dacotah Banks, Inc.
Stockholders
and
Board
of
Directors
related notesThe
to
the
financial
statements.
Dacotah Banks, Inc.
Aberdeen,
South Dakota
Management’s
Responsibility
for the Financial Statements
ManagementWe
is have
responsible
for
preparation and
fair presentation
of sheets
these consolidated
financial
statements
in accordance with
audited thetheaccompanying
consolidated
balance
of Dacotah Banks,
Inc.
and subsidiaries
accounting principles
generally
accepted
in
the
United
States
of
America;
this
includes
the
design,
implementation,
and maintenance
as of December 31, 2011 and 2010, and the related consolidated statements of income, stockholders’
We
have
audited
the
accompanying
consolidated
balance
sheets
of
Dacotah
Banks,
Inc.
and
subsidiaries
of internal control
relevant
to
the
preparation
and
fair
presentation
of
consolidated
financial
statements
that
are
free
from material
equity, and cash flows for each of the years in the three-year period ended December 31, 2011. These
as
of
December
31,
2011
and
2010,
and
the
related
consolidated
statements
of
income,
stockholders’
misstatement,
whether
due
to
fraud
or
error.
consolidated financial statements are the responsibility of the Company’s management. Our responsibility
equity,
and cash
flows for
each consolidated
of the years financial
in the three-year
period
is to express
an opinion
on these
statements
basedended
on ourDecember
audits. 31, 2011. These
consolidated
financial
statements
are
the
responsibility
of
the
Company’s
management.
Our responsibility
Auditor’s Responsibility
is
to
express
an
opinion
on
these
consolidated
financial
statements
based
on
our
audits.
Our responsibility
is to express
an opinion
on these consolidated
financial
statements
based
on our in
audits.
We conducted
We conducted
our audits
in accordance
with auditing
standards
generally
accepted
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accordance with
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statements. respects, the financial position of Dacotah Banks, Inc. and subsidiaries as of December 31, 2011 and
In
ourand
opinion,
the consolidated
financial
statements
referred
to above
in all material
2010,
the results
of their operations
and their
cash flows
for each
of thepresent
years infairly,
the three-year
period
respects,
the
financial
position
of
Dacotah
Banks,
Inc.
and
subsidiaries
as
of
December
31,the
2011
and
We believe that
the December
audit evidence
haveinobtained
is sufficient
and appropriate
to provide
a basisaccepted
for our audit
opinion.
ended
31, we
2011,
conformity
with accounting
principles
generally
in
United
2010,
and
the
results
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their
operations
and
their
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for
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in
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States of America.
Opinion ended December 31, 2011, in conformity with accounting principles generally accepted in the United
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ofconsolidated
America.
In our opinion,
financial
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referred
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present fairly,
in all material
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financial
We the
have
also audited
in accordance
with
attestation
standards
established
by the American
Institute
of position of
Dacotah Banks,
Inc. and
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as of December
2013 Inc.’s
and 2012,
and the
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and their
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December
31,
2011,
on
criteria
established
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Control-Integrated
Framework
by accepted
the
Certified
Public
Accountants,
Dacotah Banks,
Inc.’s internal
control over
financial
reporting
of
United States
of America.
Committee
of Sponsoring
Organizations
of the Treadway
Commission
(COSO),
and our
report as
dated
December
31, 2011,
based on
criteria established
Other Matter
March 30, 2012,
expressed
an unqualified
opinion.in Internal Control-Integrated Framework issued by the
Committee
of
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Organizations
of the
Treadway
Commission
(COSO),
and Institute
our report
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also examined, in accordance with attestation
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expressed
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opinion.
Certified
Public
Accountants,
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issued by the Committee
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March 30, 2012
March 30, 2012
April 14, 2014
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24 Second Ave. S.W. | P.O. Box 430 | Aberdeen, SD 57402-0430 | T 605.225.8783 | F 605.225.0508 | EOE
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24 Second Ave. S.W. | P.O. Box 430 | Aberdeen, SD 57402-0430 | T 605.225.8783 | F 605.225.0508 | EOE
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23
Consolidated Balance Sheets
DECEMBER 31, 2013 AND 2012
(Dollar Amounts in Thousands)
2013
2012
ASSETS
Cash and cash equivalents
Cash due from banks $67,333 $
87,850
Interest-bearing deposits in bank
36,30023,500
Total cash and cash equivalents Interest-bearing deposits in banks Securities Loans held for sale Loans, net of allowance for loan losses Interest receivable Premises and equipment, net Foreclosed assets Investment in life insurance contracts
Goodwill
Intangible assets Prepaid FDIC assessment Other assets Total assets 103,633 111,350
11,094 5,788
332,519 357,818
866 3,819
1,539,558 1,470,511
17,810 17,327
45,570 43,222
3,252 2,452
35,41033,552
6,4976,258
3,184 2,094
- 2,480
11,429 8,382
$2,110,822 $ 2,065,053
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits $1,860,232 $ 1,825,560
Borrowings 20,000 21,005
Interest payable 3,372 5,283
Accrued expenses and other liabilities 15,482 13,641
Total liabilities 1,899,086 1,865,489
STOCKHOLDERS’ EQUITY
Common stock, $4 par value; 5,000,000 shares
authorized, 1,428,598 shares issued and outstanding Capital surplus Retained earnings Accumulated other comprehensive income Treasury stock, 306,156 shares in 2013 and
312,346 shares in 2012, at cost 5,714 5,714
11,545 10,704
207,285 192,483
(1,374) 2,283
Total stockholders’ equity 211,736 199,564
Total liabilities and stockholders’ equity
(11,434) $ 2,110,822 (11,620)
$ 2,065,053
See Notes to Consolidated Financial Statements
24
Consolidated Statements of Income
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
201320122011
INTEREST INCOME
Loans $ 78,063 $ 79,398 $ 81,354
Securities
Taxable 3,661 4,133 4,202
Exempt from federal income taxes 1,089 1,038 884
Deposits in banks 82 88 104
Federal funds sold 98 145 112
82,993 84,80286,656
INTEREST EXPENSE
Deposits 8,983 15,344 19,211
Borrowings 624 711 791
9,607 16,055 20,002
NET INTEREST INCOME 73,386 68,747 66,654
PROVISION FOR LOAN LOSSES 5,250 6,750 5,300
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 68,136 61,997 61,354
NON-INTEREST INCOME
Income from fiduciary activities 1,778 1,202 912
Service charges on deposit accounts 3,849 3,956 4,259
Insurance commissions 4,169 4,068 3,889
Fees on sale of residential mortgages 1,660 2,634 1,897
Other income 5,223 4,109 4,152
16,679 15,969 15,109
NON-INTEREST EXPENSES
Salaries and employee benefits 35,316 31,692 30,776
Occupancy, net 4,372 3,967 3,896
Furniture and equipment 2,292 2,176 1,965
FDIC assessment 1,385 310 2,911
Other expenses 13,342 12,438 11,397
56,707 50,583 50,945
INCOME BEFORE INCOME TAXES 28,108 27,383 25,518
INCOME TAX EXPENSE 9,726 9,259 8,972
NET INCOME $ 18,382 $ 17,854 $ 16,546
PER SHARE OF COMMON STOCK
Net income - basic $ 16.43 $
16.03
$
14.87
3.20 $
3.00 $
2.60
Cash dividends declared See Notes to Consolidated Financial Statements.
25
$
Consolidated Statements of Income (continued)
NET INCOME 201320122011
$ 18,382 $ 17,854
$ 16,546
OTHER COMPREHENSIVE INCOME
Unrealized gains on securities:
Unrealized holding gains arising during period (5,644)
689
4,094
Tax expense
1,987
(241)
(1,433)
Other comprehensive income
(3,657)
448
2,661
Comprehensive Income
$14,725
$18,302
$19,207
26
Consolidated Statements of Stockholders’ Equity
BALANCE, DECEMBER 31, 2010 $ 167,725 CommonCapital
Stock
Surplus
$ 5,714 $ 9,876
Net income 16,546 - -
Other comprehensive loss
2,661
-
-
Executive incentive stock awards
160
-
122
Purchase of treasury stock, net (116)
-
190
Cash dividend declared, $2.60 per share
(2,894)
- -
BALANCE, DECEMBER 31, 2011 184,082 Net income 17,854 Other comprehensive income
448
5,714 10,188
- -
-
-
Executive incentive stock awards 319
-
242
Sale of treasury stock, net 205 - 274
Cash dividend declared, $3.00 per share (3,344) - -
BALANCE, DECEMBER 31, 2012 199,564 5,714 10,704
Net income 18,382 - -
Other comprehensive income (3,657)
- -
-
242
Sale of treasury stock, net
707
-
599
Cash dividend declared, $3.20 per share (3,580) - -
BALANCE, DECEMBER 31, 2013 See Notes to Consolidated Financial Statements.
27
Total
$ 211,736 $ 5,714 $ 11,545
Consolidated Statements of Stockholders’ Equity (continued)
Retained
Earnings
Accumulated
OtherShares
Comprehensive
Treasury
Income (Loss)
Stock
Common Treasury
$ 164,321 $
(826) $ (11,360) 16,546--
-
-
-
-
38
-
-
-
-
-
-
- 2,661
-
-
-
- (306)
(2,894)--
177,973 1,835 316
-
1,429 (11,628)
1,429 316
17,854--
-
-
-
448
-
-
-
-
-
77
-
(4)
-
-
(69)
-
-
-
-
1,429
312
-
(3,344)
-
192,483 2,283
(11,620) 18,382 -
-
-
-
- (3,657) -
-
-
- -
78 -
(6)
-
-
108
(3,580)--
207,285 (1,374) (11,434) -
-
-
-
1,429 306
28
Consolidated Statements of Cash Flows
201320122011
OPERATING ACTIVITIES
Net income $ 18,382 $ 17,854 $ 16,546
Adjustments to reconcile net income to
net cash from operating activities:
Provision for loan losses 5,250 6,750 5,300
Depreciation and amortization 7,018 6,896 6,924
Executive incentive stock awards 320 319
160
Provision for deferred income taxes (1,448) (390) (832)
Loss on sale of premises and equipment and foreclosed assets
217-Increase in cash surrender value of life insurance (1,095)(1,206) (498)
Decrease (increase) in loans held for sale 2,953 (932) 995
(Increase) decrease in interest receivable (261) 1,037
1,993
Decrease in other assets, net 2,754
1,144 2,587
Decrease in interest payable (1,941) (1,416) (1,679)
Increase (decrease) in accrued expenses and other liabilities 1,749 3,089 (819)
Net cash from operating activities 33,898 33,145 30,677
INVESTING ACTIVITIES
Proceeds from maturities and calls of securities available
for sale and interest-bearing deposits with banks 127,731 171,471 147,271
Purchases of securities available for sale and
interest-bearing deposits with banks (95,336) (206,875) (190,140)
Net increase in loans (63,181) (115,328) (27,557)
Proceeds from sale of premises and equipment
108--
Purchases of premises and equipment (4,388) (3,128) (3,695)
Sale of foreclosed assets, net 1,423 540 1,122
Purchase of investment in life insurance contracts
-(24,800)
Purchase of subsidiary bank, net of cash acquired
(3,063)-Purchase of subsidiary insurance agency, net of cash aquired
(575)
-Net cash used by investing activities (37,281) (178,120) (72,999)
FINANCING ACTIVITIES
Increase in non-interest-bearing deposits, net 16,222 123,879 Increase in interest-bearing deposits, net 64,512 104,677 Decrease from issuance of
certificates of deposit, net (81,268) (82,416) Repayments of borrowings (1,005) (4,004) Sale (purchase) of treasury stock, net 707 205 Dividends paid to stockholders (3,580) (3,344) Net cash from financing activities (4,412) 138,997 NET CHANGE IN CASH AND CASH EQUIVALENTS 41,033
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 111,350 117,328 76,295
See Notes to Consolidated Financial Statements.
29
(36,327)
(5,419)
(116)
(2,894)
83,355
(5,978) CASH AND CASH EQUIVALENTS, END OF YEAR (7,795) 62,423
65,688
$ 103,555 $ 111,350 $ 117,328
Notes to Consolidated Financial Statements
NOTE 1 – PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
Principal Business Activity
Dacotah Banks, Inc. (Company) is a one-bank holding company and provides a full range of banking services to individuals and businesses
through its market banks in Aberdeen, Brookings, Clark, Custer, Faulkton, Lemmon, Mobridge, Rapid City, Sioux Falls, Sisseton,Watertown,
and Webster, South Dakota, and Dickinson, Hettinger, Minot, Rolla, and Valley City, North Dakota, and Morris, Minnesota. Trust services
are provided to individuals and businesses in the South Dakota locations. General insurance operations are conducted in fifteen of the
thirty-three banking offices. The Company’s primary deposit products are demand deposits and certificates of deposit, and its primary
lending products are commercial, agricultural, real estate mortgage and consumer loans.
Basis of Presentation and Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiary bank and companies. All significant
intercompany accounts and transactions have been eliminated in consolidation. The subsidiary bank and companies employ, in all material
respects, similar accounting policies.
Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management
is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A material
estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for loan losses.
Significant Group Concentrations of Credit Risk
Most of the Company’s loans are with customers primarily in South Dakota and North Dakota. Concentrations of credit are present in the
agricultural industry. Due to the pervasive nature of agriculture in the economy of the Dakotas, all loans, regardless of type, are impacted
by agriculture. Loans for agricultural purposes comprised approximately 43% of total loans as of December 31, 2013 and 2012.
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash and cash equivalents include cash and balances due from banks, federal funds sold and
interest-bearing deposits in banks, all of which have original maturities of three months or less.
Interest-Bearing Deposits in Banks
Interest-bearing deposits in banks that are not classified as cash and cash equivalents mature within five years and are carried at cost.
Securities
The Company’s securities are all classified and accounted for as securities available for sale. Securities classified as available for sale are those
debt securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Securities available for sale
are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Premiums
and discounts are recognized in interest income using the interest method over the terms of the securities. Gains or losses on the sale and
calls of securities are recorded on the trade date and are determined using the specific identification method.
The Company is required to hold Federal Reserve Bank stock in order to be a member of the Federal Reserve Bank System and, because
of its borrowing arrangement with the Federal Home Loan Bank; the Company is required to own Federal Home Loan Bank stock. Since
their ownership is restricted, these securities are carried at cost and evaluated periodically for impairment.
The Company adheres to required recognition and presentation of other-than-temporary impairment. The guidance specifies that (a) if a
company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the
debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When
an entity does not intend to sell the security, and it is more likely than not, the entity will not have to sell the security before recovery of its
cost basis, it will recognize the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining
portion in other comprehensive income.
30
Notes to Consolidated Financial Statements (continued)
Fair Value Measurements
The Company determined the fair value of certain assets in accordance with the provisions of ASC 820, Fair Value Measurements and
Disclosures, which provides a framework for measuring fair value under generally accepted accounting principles.
FASB ASC Topic 820 defines fair value as the exchange price that would be received for an asset in the principal or most advantageous
market for the asset in an orderly transaction between market participants on the measurement date. FASB ASC Topic 820 requires that
valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. FASB ASC Topic 820 also
establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels.
Level 1 inputs consist of quoted prices in active markets for identical assets that the reporting entity has the ability to access at the
measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the related asset. Level
3 inputs are unobservable inputs related to the asset.
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net
unrealized losses, if any, are recognized through a valuation allowance by charges to income.
Loans
Loans are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses and
unearned discount.
Interest income is accrued on the unpaid principal balance. The accrual of interest on loans is discontinued at the time the loan is 90 days
delinquent unless the credit is well secured and in process of collection. Past due status is based on contractual terms of the loan. Loans are
placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful. All current year interest
accrued but not collected for loans that are placed on non-accrual or charged-off is reversed against interest income. All prior year interest
accrued but not collected is charged-off against the allowance for loan losses. The interest on these loans is accounted for on the cash-basis
or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest
amounts contractually due are brought current and future payments are reasonably assured.
The Company has determined that the accounting for nonrefundable fees and costs associated with originating or acquiring loans does not
have a material effect on their financial statements. As such, these fees and costs have been recognized during the period they are collected
and incurred, respectively.
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.
Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent
recoveries, if any, are credited to the allowance.
The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the
collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the
borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently
subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.
The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For
those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable
market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is
based on historical chargeoff experience and expected loss given default derived from the Company’s internal risk rating process. Other
adjustments can be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are
not fully reflected in the historical loss or risk rating data.
31
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect
the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered
by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal
and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified
as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the
borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on
a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s
effective interest rate, the loan’s obtainable market price, or the fair value of the collateral in the loan if the loan is collateral dependent.
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not
separately identify individual consumer and residential loans for impairment disclosures, unless such loans are subject of a restructuring
agreement due to financial difficulties of the borrower.
The general component relates to loans that are not classified as impaired. For those loans are not classified as impaired, an allowance
is established for each portfolio segment, based on historical losses adjusted for the effects of qualitative or environmental factors that
are likely to cause estimated credit losses associated with the institution’s existing portfolio to differ from historical loss experience.
Qualitative and environmental factors include the following: changes in lending policies and procedures, including changes in underwriting
standards and collection, charge-off and recovery practices; changes in national, regional and local economic and business conditions and
developments that affect the collectibility of the portfolio; changes in the nature and volume of the portfolio and in the terms of loans;
changes in the experience, ability and depth of lending management and other relevant staff; changes in the volume and severity of past
due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans; changes in the quality of the
institution’s loan review system; changes in the value of underlying collateral for collateral-dependent loans; the existence and effect of any
concentrations of credit, and changes in the level of such concentrations; and the effect of other external factors such as competition and
legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio.
Portfolio segments identified by the Company include commercial, commercial real estate, agricultural, residential real estate, and consumer
loans. Relevant risk characteristics for these portfolio segments generally include debt service coverage, loan-to-value ratios and financial
performance on commercial, commercial real estate and agricultural loans and credit scores, debt-to income, collateral type and loan-tovalue ratios for residential real estate and consumer loans.
Credit Related Financial Instruments
In the ordinary course of business, the Company has entered into commitments to extend credit and standby letters of credit. Such
financial instruments are recorded when they are funded.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets
is deemed to be surrendered when (1) the assets have been isolated from the Company – put presumptively beyond the reach of the
transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it
from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control
over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to
return specific assets.
Investment in Life Insurance Contracts
Investment in life insurance contracts is stated at cash surrender value of various insurance policies. The income of the investment is
included in non-interest income.The life insurance policies are intended to provide funding for salary continuation contracts for executive
officers of the Company and its subsidiaries.
32
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation. Depreciation for buildings and improvements is provided generally
by the straight-line method based on estimated useful lives of 10 to 50 years. Depreciation for furniture, fixtures and equipment is provided
generally by the double-declining balance method based on estimated useful lives of five to seven years.
Foreclosed Assets
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of the unrecovered loan balance
or fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically
performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses
from operations and changes in the valuation allowance are included in net expenses from foreclosed assets.
Goodwill and Other Intangible Assets
Intangible assets consist of goodwill and core deposits associated with the acquisition of banks and insurance agencies. Goodwill is not subject to
amortization. Core deposits are amortized on an accelerated basis over 10 to 15 years.The Company assesses goodwill for impairment annually,
and more frequently in certain circumstances. Goodwill is assessed for impairment on a reporting unit level by applying a fair-value-based test
using discounted estimated future net cash flows. Impairment exists when the carrying amount of the goodwill exceeds its implied fair value.
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return. The Company files separate state income tax returns. It is
the policy of the Company to allocate federal income taxes or credits to each subsidiary on the basis of the subsidiary’s taxable income or
loss included in the consolidated return.
The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense
reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or
excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under
this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and
liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.
Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized
if it is more likely than not, based on technical merits, that the tax position will be realized or sustained upon examination. The term more
likely than not means a likelihood of more than 50%; the terms examined and upon examination also include resolution of the related
appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently
measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority
that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not
recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s
judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not
that some portion or all of a deferred tax asset will not be realized.
The Company recognizes interest and penalties on income taxes as a component of income tax expense.
Advertising Costs
Advertising costs are expensed as incurred.
Comprehensive Income
The Company recognizes and includes revenue, expenses, gains and losses in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components of comprehensive income.
33
Earnings per Common Share
Basic earnings per share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period.
Earnings per common share have been computed based on the following:
201320122011
Average number of common shares outstanding (in thousands)
1,119
1,114
1,113
NOTE 2 - ACQUISITION OF DONNELLY BAUCSHARES, INC. AND UNITED FARMERS & MERCHANTS STATE BANK
On September 13, 2013, Dacotah Banks, Inc. purchased 100% of the outstanding common stock of Donnelly Bancshares, Inc., a one
bank holding company. Donnelly Bancshares, Inc. had one wholly-owned subsidiary, United Farmers & Merchants State Bank (UFMSB).
Donnelly Bancshares, Inc. was merged into Dacotah Banks, Inc. and UFMSB was merged into Dacotah Bank. Both mergers were tax-free
liquidations. The acquisition initiated the Company's presence into Minnesota.
The cash purchase price was allocated to the fair values of acquired assets and liabilities as follows:
Assets Acquired
Cash and due from banks
Federal funds sold
Certificates of deposit
Securities and FHLB stock
Loans
Interest receivable
Premises and equipment, net
Other assets
Core deposit intangible
Goodwill
Liabilities Acquired
Deposits
Interest payable
Accrued expenses and other liabilities
Total purchase price
$ 2,000
7,558
4,308
8,972
13,538
222
1,907
801
1,104
94
40,504
(35,206)
(30)
(205)
(35,441)
$ 5,063
The identified core deposit intangible will be amortized on a sum of the years digits basis over 50 months, resulting in amortization in
2013 of $128.
In conjunction with this acquisition, the Company acquired certain loans for which there was evidence of deterioration of credit quality
since origination and for which it was probable that not all contractually required payments would be collected.These loans were recorded
at their estimated net fair value as follows:
Contractually required payments
Credit quality discount
Cash flows expected to be collected
Accretable yield discount
Fair value of loans acquired
$ 13,872
(139)
13,733
(195)
13,538
34
On September 13, 2013, Dacotah Bank purchased 100% of the outstanding common stock of United American Agency, LLC, a company
licensed and operating as an insurance agency in Minnesota. The company was owned 100% by UFMSB and was acquired at the same
time as UFMSB.
The cash purchase price was allocated to the fair values of acquired assets and liabilities as follows:
Assets Acquired
Cash and due from banks
Other assets
Insurance files
Goodwill
Liabilities Acquired
Accrued expenses and other liabilities
Total purchase price
$ 119
152
381
155
807
(113)
$ 694
The insurance files intangible will be amortized on the straight line basis over 10 years.
The accompanying consolidated financial statements include the operations for United Farmers & Merchants State Bank and United
American Agency, LLC for the period from acquisition to December 31, 2013.
35
NOTE 3 – RESTRICTION ON CASH AND DUE FROM BANKS
Based on the type and amount of deposits received, the Company must maintain an appropriate amount of noninterest bearing cash balances in accordance with Federal Reserve Bank reserve requirements. The total of those reserve requirements was satisfied with vault cash.
NOTE 4 - SECURITIES
Debt and equity securities have been classified in the consolidated balance sheet according to management’s intent. The carrying amounts
of securities as of December 31, 2013 and 2012 consist of the following:
Securities available for sale, at fair value Investments in government corporations, at cost 2013 2012
$ 321,715 10,804 $ 332,519 $ 347,206
10,612
$ 357,818
The amortized cost and fair value of securities available for sale with gross unrealized gains and losses are as follows:
GrossGross
AmortizedUnrealizedUnrealized Fair
Cost Gains LossesValue
DECEMBER 31, 2013
Securities Available For Sale
U.S. Government And Federal Agency $ 218,912
State And Municipal 56,151
Mortgage-Backed 47,811
Other 973
$
$ 323,847 564 $ 2,396
$ 217,080
475 368 56,258
313 720 47,404
- - 973
$ 1,352 $ 3,484 $ 321,715
DECEMBER 31, 2012
Securities Available For Sale
U.S. Government And Federal Agency $ 239,990 $
State And Municipal 50,512 Mortgage-Backed 51,962 Other 1,230 1,866 $
1,176 735 - 103 $ 241,753
123 51,565
39 52,658
- 1,230
3,777 265 $ 343,694 $
$
$ 347,206
Investment securities with a carrying value of $179,088 and $175,577 as of December 31, 2013 and 2012, respectively, were pledged to
secure public deposits and for other purposes required by law.
36
The amortized cost and fair value of debt securities by contractual maturity at December 31, 2013 follows:
Amortized Cost Within one year $
Over one through five years Over five through ten years Over ten years Fair
Value
75,357 $
197,675 37,971 12,844 $ 323,847 75,748
196,227
37,325
12,415
$ 321,715
Mortgage-backed obligations are included in the preceding table based on management’s estimates of remaining life, after considering
prepayments.
There were no sales of securities during 2013, 2012 and 2011.
Information pertaining to securities with gross unrealized losses at December 31, 2013 and 2012 aggregated by investment category and
length of time that individual securities have been in a continuing loss position follows:
Less Than Twelve Months
Over Twelve Months
Gross Gross
Unrealized Fair Unrealized Fair
LossesValueLossesValue
DECEMBER 31, 2013
Securities available for sale
Agencies $ 2,290 $ 113,812 $
106 $ 7,929
State and municipal 270 15,944 98 1,699
Mortgage backed484
22,602236
4,696
$ 3,044 $ 152,358 $
440 $ 14,324
Less Than Twelve Months
Over Twelve Months
Gross Gross
Unrealized Fair Unrealized Fair
LossesValueLossesValue
DECEMBER 31, 2012
Securities available for sale
Agencies $
103 $ 41,609 $
-
$
State and municipal 40 10,883 83 468
Mortgage backed 38
13,810 1
1,652
$
181 $ 66,302 $
84 $ 2,120
At December 31, 2013, seven state and municipal securities and four mortgage backed securities had unrealized losses with aggregate depreciation of 5% or more from the Company’s amortized cost basis caused by interest rate changes. At December 31, 2012, three securities
had unrealized losses with aggregate depreciation of 5% or more from the Company’s amortized cost basis caused by interest rate changes.
In analyzing an issuer’s financial condition, management considers whether the securities are issued by federal, state, and municipal governments or their agencies; whether downgrades by bond rating agencies have occurred; and industry analysts’ reports. Because the Company
does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before
recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-thantemporarily impaired.
37
NOTE 5 - LOANS
A summary of the balances of loans follows:
2013 2012
Commercial
$ 245,371 $ 240,515
Commercial real estate 308,716 288,728
Agricultural
676,008634,982
Residential real estate 274,990 262,340
Consumer 56,043 62,838
Total loans 1,561,128 1,489,403
Allowance for loan losses (21,270) (18,892)
Accretable yield discount
(161) Credit quality discount
(139) Total loans, net $1,539,558 $ 1,470,511
Extension of agricultural credit is the primary lending activity of the Company.The Company generally requires collateral on all agricultural
loans. Collateral typically consists of livestock, feed, grain, machinery and farmland.
The Company has maintained a diversified loan portfolio. At December 31, 2013 and 2012, there were no customer loan concentrations
that exceeded 1.5% of total loans. However, a substantial portion of the Company’s customers’ ability to honor their loan agreements is
influenced by the agricultural economy.
Total loans to directors, executive officers and principal stockholders of the Company’s common stock including their affiliates were
$3,197 and $3,259 at December 31, 2013 and 2012. Management believes that such loans were made in the ordinary course of business
on substantially the same terms and conditions, including interest rates and collateral as those prevailing at the same time for comparable
transactions with other customers and do not represent more than a normal risk of collection.
Included in loans are overdrafts of $3,686 and $2,700 as of December 31, 2013 and 2012, respectively.
Changes in the allowance for loan losses are as follows:
2013 2012 2011
Balance, beginning of year $ 18,892 $ 18,180 $ 16,039
Provision for loan losses 5,250 6,750 5,300
Recoveries 598 724 360
Loans charged off (3,470) (6,762) (3,519)
Balance, end of year $ 21,270 $ 18,892 $ 18,180
38
The following table presents the activity in the allowance for loan losses for the years ended December 31, 2013 and 2012 and the
recorded investment in loans and impairment methods as of December 31, 2013 and 2012 by portfolio segment.
Commercial Residential
DECEMBER 31, 2013
Commercial
Real Estate
Agricultural
Real Estate
Consumer
Total
Balance, beginning of year $
4,915
$
5,290
$
3,788
$
3,354
$
1,545
$
18,892
Provision for loan losses
2,512
380
1,164
1,348
(154)
5,250
Loans charged off
(2,010)
(271)
(232)
(716)
(241)
(3,470)
Recoveries 185
4 147 154 108 598
Balance, end of year
$
5,602
$
5,403
$
4,867
$
4,140
$
1,258
$
21,270
Individually evaluated for
impairment
$
2,333
$
553
$
443
$
2,289
$
217
$
5,835
Collectively evaluated for
impairment 3,269
4,850
4,424
1,851
1,041
15,435
$
5,602
$
5,403
$
4,867
$
4,140
$
1,258
$
21,270
$
9,298
$
9,489
$
19,948
$
11,278
$
463
$
50,476
Loans
39
impairment
impairment
236,073
299,227
656,060
263,712
55,580 1,510,652
245,371
308,716
676,008
274,990
56,043
$
$
$
$
$
$ 1,561,128
Commercial Residential
DECEMBER 31, 2012
Commercial
Real Estate
Agricultural
Real Estate
Consumer
Total
Balance, beginning of year $
4,929
$
5,167
$
3,462
$
3,014
$
1,608
$
18,180
Provision for loan losses
1,901
249
572
3,765
263
6,750
Loans charged off
(2,006)
(131)
(382)
(3,772)
(471)
(6,762)
Recoveries 91
5 136 347 145 724
$
4,915
$
5,290
$
3,788
$
3,354
$
1,545
$
18,892
impairment
$
2,105
$
986
$
88
$
2,243
$
408
$
5,830
impairment 2,810
4,304
3,700
1,111
1,137
13,062
$
4,915
$
5,290
$
3,788
$
3,354
$
1,545
$
18,892
$
9,106
$
8,209
$
15,903
$
12,948
$
945
$
47,111
Loans
impairment
impairment
231,409
280,519
619,079
249,392
61,893 1,442,292
240,515
288,728
634,982
262,340
62,838
$
$
$
$
$
$ 1,489,403
Credit Quality Indicators
The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt
including current financial information, historical payment experience, collateral adequacy, credit documentation, public information,
current economic trends, and other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. This analysis
typically includes larger, non-homogeneous loans such as commercial real estate, agricultural real estate, commercial and agricultural loans.
This analysis is performed on an ongoing basis as new information is obtained. The Bank uses the following definitions for risk ratings:
Pass – Loans classified as pass represent loans that are evaluated and are performing under the stated terms. Pass rated assets are analyzed by
the paying capacity, the current net worth, and the value of the loan collateral of the obligor.
Watch – Loans classified as watch possess potential weaknesses that require management attention, but do not yet warrant adverse
classification. While the status of a loan placed in this classification may not technically trigger a classification as substandard or doubtful,
it is considered a proactive way to identify potential issues and address them before the situation deteriorates further and does result in a
loss for the Bank.
Substandard – Loans classified as substandard are inadequately protected by the current net worth, paying capacity of the obligor, or by the
collateral pledged. Substandard loans have a well-defined weakness or weaknesses that jeopardize the repayment of the credit as originally
contracted. They are characterized by the distinct possibility that the Bank will sustain a loss if the deficiencies are not corrected.
40
Doubtful – Loans classified as doubtful have the weaknesses of those classified as substandard, with the added characteristic that the
weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and
improbable. Loans in this category are allocated a specific reserve based on the estimated discounted cash flows from the loan (or collateral
value less cost to sell for collateral dependent loans) or are charged off if deemed uncollectible.
Based on the most recent analysis performed, the risk category of loans by portfolio segment as of December 31, 2013 and 2012 was as follows:
Credit risk profile by internally assigned grade – Commercial, Commercial Real Estate and Agricultural
Pass
Watch SubstandardDoubtful Total
DECEMBER 31, 2013
Commercial
$
220,047$19,675$ 5,340$ 309$
245,371
Commercial Real Estate
292,500
12,5153,701
-
308,716
Agricultural
609,161
54,487
12,301 59
676,008
$
1,121,708$86,677$21,342$
368$
1,230,095
Pass
Watch SubstandardDoubtful Total
DECEMBER 31, 2012
Commercial
$
198,021$33,860$ 8,117$ 517$
240,515
229,385
50,9858,358
-
288,728
Agricultural
532,726
89,235
12,788 233
634,982
$
960,132$
174,080$29,263$
750$
1,164,225
Credit risk profile by class based on payment activity – Residential and Consumer
Residential real estate and consumer loans are managed on a pool basis due to their homogeneous nature. Loans that are delinquent 90 days
or more or are not accruing interest are considered nonperforming. The following table presents the recorded investments in residential
real estate and consumer loans based on payment activity as of December 31, 2013 and 2012:
Non
Performingperforming Total
DECEMBER 31, 2013
Residential Real Estate$
270,162$ 4,828$
274,990
Consumer
55,765 278
56,043
$
325,927$ 5,106$
331,033
Non
Performingperforming Total
DECEMBER 31, 2012
Residential Real Estate$
256,276$ 6,064$
262,340
Consumer
62,397 441
62,838
$
318,673$ 6,505$
325,178
41
The following tables summarize the aging of the past due loans by portfolio segment as of December 31, 2013 and 2012:
Still Accruing
30-89 Days
Over 90 Days
Nonaccrual
DECEMBER 31, 2013
Past Due
Past Due
Balance
Commercial$ 765$
86$ 3,880
Commercial Real Estate 153
-1,765
Agricultural 741 1342,272
Residential Real Estate2,741 1964,632
Consumer 430 18 260
Total$ 4,830$
434$12,809
Still Accruing
30-89 Days
Over 90 Days
Nonaccrual
DECEMBER 31, 2012
Past Due
Past Due
Balance
Commercial$ 957$
36$ 3,544
Commercial Real Estate1,251 3173,808
Agricultural1,252 1383,115
Residential Real Estate1,977 1425,922
Consumer 605 42 398
Total$ 6,042$
675$16,787
The following table summarizes individually impaired loans by portfolio sement as of December 31, 2013 and 2012:
UnpaidAverage
Interest
RecordedPrincipal Related RecordedIncome
DECEMBER 31, 2013
Investment
Balance (1)
Allowance
Investment Recognized
With no related allowance recorded
Commercial
$ 2,947$ 2,947$
Commercial Real Estate6,2006,200
Agricultural
17,982
17,982
Residental Real Estate4,1814,181
Consumer 66 66
-$ 3,531$
-5,217
-
17,285
-4,804
- 243
-
-$31,080$
-
$31,376$31,376$
UnpaidAverage
Interest
DECEMBER 31, 2013
Investment
Balance (1)
Allowance
Investment
Recognized
With an allowance recorded
Commercial
$ 6,351$ 6,595$ 2,333$ 7,095$
Commercial Real Estate3,2893,333 5533,805
Agricultural1,9662,119 4431,776
Residental Real Estate7,0977,5092,2897,599
Consumer 397 426 217 553
-
-
$19,100$19,982$ 5,835$20,828$
(1) Represents the borrower’s loan obligation, gross of any previously charged-off amounts.
42
UnpaidAverage
Interest
DECEMBER 31, 2012
Investment
Balance (1)
Allowance
Investment Recognized
With no related allowance recorded
Commercial
$ 4,428$ 4,428$
Commercial Real Estate1,3581,358
Agricultural
12,736
12,736
Residental Real Estate4,5734,573
Consumer 197 197
-$ 4,278$
-2,997
-
10,328
-5,569
- 344
-
-$23,516$
-
$23,292$23,292$
UnpaidAverage
Interest
DECEMBER 31, 2012
Investment
Balance (1)
Allowance
Investment
Recognized
43
With an allowance recorded
Commercial
$ 4,679$ 5,513$ 2,105$ 4,434$
Commercial Real Estate6,8516,944 9865,065
Agricultural3,1673,400 882,506
Residental Real Estate8,3748,6782,2438,416
Consumer 748 861 408 709
-
-
$23,819$25,396$ 5,830$21,130$
The following table represents the effects of the trouble debt restructuring during the years ended December 31, 2013 and 2012.
The loans were added due to extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded
investment in the loan.
Troubled debt restructurings for commercial, commercial real estate, and agriculture were added during 2013 and 2012 due to modified
structure and extension of maturity.
Troubled debt restructurings for residential real estate and consumer were added during 2013 and 2012 due to modified terms.
2013
Pre-
Post
Modification
Modification
Number of
Recorded
Recorded
ContractsBalanceBalance
Troubled debt restructurings
Commercial Business
Agricultural
Residential Real Estate
Consumer
that subsequently defaulted
Commercial Business
10$ 1,091$ 1,091
4 503 503
82,0922,092
122,6562,556
1
3
3
1
1
20
90
2012
Pre-
Post
Modification
Modification
Number of
Recorded
Recorded
ContractsBalanceBalance
Commercial Business
Agricultural
Residential Real Estate
Consumer
9$ 3,615$ 3,560
52,3432,343
167,5437,543
61,8451,845
2 60 60
that subsequently defaulted
Agricultural
31,039
Troubled debt restructurings are treated as impaired loans and are included in the allowance for loan losses calculation. There are no
commitments to lend additional funds to debtors owing receivables whose terms have been modified in troubled debt restructurings as
of December 31, 2013 and 2012.
44
NOTE 6 - PREMISES AND EQUIPMENT
A summary of the cost and accumulated depreciation of premises and equipment follows:
2013 2012
Land $ 6,683 $ 6,470
Buildings and improvements 60,403 56,216
Furniture, fixtures and equipment 24,917 23,054
92,003 85,740
Accumulated depreciation and amortization (46,433) (42,518)
$ 45,570 $ 43,222
Depreciation and amortization charged to occupancy and furniture and equipment expense in the consolidated statements of income
amounted to $3,821 in 2013, $3,550 in 2012, and $3,386 in 2011.
NOTE 7- GOODWILL AND INTANGIBLE ASSETS
The summary of the net carrying amount of the intangible assets as of December 31, 2013, 2012 and 2011 follows:
2013 2012 2011
Core deposit intangible $ 4,314 $ 3,211
$ 3,211
Accumulated amortization 2,2591,9951,860
2,0551,2161,351
Insurance files
Accumulated amortization
2,0031,6351,635
874757638
1,129878997
Goodwill 6,6996,460 6,460
Accumulated amortization 202 202 202
6,497 6,258 6,258
$ 9,681
$ 8,352 $ 8,606
There were no impairment losses related to the intangible assets during the years ended December 31, 2013 and 2012. Impairment testing
is performed annually on goodwill. If certain factors become present that could lead to impairment of core deposit intangible, impairment
testing will be performed at that time. Amortization expense for intangible assets was $382, $254, and $312 for the years ended December
31, 2013, 2012 and 2011.
At December 31, 2013, the estimated amortization expense for intangible assets for the succeeding five years is as follows:
45
2014 2015 2016 2017 2018 $ 717
586
460
327
277
NOTE 8 - DEPOSITS
A summary of the balances of deposits follows:
2013 Demand $ 480,952 $ Interest checking 281,529 Money market accounts 283,331 Dacotah Gold money market accounts 232,148 Time, $100,000 and over 209,919 Other time 372,353 2012
458,625
241,643
234,842
233,541
232,316
424,593
$ 1,860,232 $ 1,825,560
At December 31, 2013, the scheduled maturities of certificates of deposit were as follows:
2014 2015 2016 2017 2018
Thereafter $ 323,375
71,199
72,423
78,928
36,144
203
$ 582,272
NOTE 9 - BORROWINGS
Borrowings consisted of the following:
2013 Federal Home Loan Bank advances $
9% contract for deed due in monthly installments to 2014 $
2012
20,000 $ 21,000
- 5
20,000 $ 21,005
The contractual maturities of borrowings are as follows: 2014 - $3,000; 2015 - $3,000; 2016 - $6,000; 2017 - $6,000; 2018 - $2,000 .
The Federal Home Loan Bank (FHLB) advances outstanding at December 31, 2013, mature from October 2014 through August 2018. All
advances have fixed rate interest, ranging from 0.84% to 5.50%. The Company maintains a collateral pledge agreement with the Federal
Home Loan Bank of Des Moines covering secured advances whereby the Company has agreed to retain, free of all other pledges, liens,
and encumbrances, agricultural, residential, and commercial real estate loans totaling $349,214 and $301,518 as of December 31, 2013
and 2012. The pledged loans are discounted at a factor of 135% to 200% when aggregating the amount of loans required by the pledge
agreement. In addition, these borrowings are collateralized by Federal Home Loan Bank stock of $8,470 and $8,478 as of December 31,
2013 and 2012. The net excess of pledged collateral over the outstanding indebtedness was $147,017 as of December 31, 2013.
As of December 31, 2013 and 2012, the Company pledged loans totaling $102,248 and $101,257 for an available borrowing line of
$91,610 and $71,491 under the Federal Reserve Bank’s Borrower in Custody (BIC) program.
The Company also has an unsecured federal funds purchased borrowing capacity of $60,000 and $40,000 at December 31, 2013 and 2012.
46
NOTE 10 – EMPLOYEE BENEFIT PLANS
The Dacotah Banks, Inc. 401(k) savings plan covers substantially all employees of the Company and its subsidiaries. Contributions to this
defined contribution plan are based on percentages of eligible employee salaries. Amounts contributed under the plan shall not exceed
the maximum amounts deductible for federal income tax purposes. Charges to employee benefits expense for the plan in the consolidated
statements of income amounted to $1,831 in 2013, $1,756 in 2012, and $1,700 in 2011.
The Company has salary continuation contracts with executive officers of the Company and its subsidiaries. The provision for salary
continuation expense amounted to $2,475, $838 and $825 in 2013, 2012, and 2011. Retirement payments of $223, $191 and $148 were
made in 2013, 2012 and 2011.The Company has life insurance policies in place to provide funding for these benefits. Cash surrender value
of these policies was $35,410 and $33,552 at December 31, 2013 and 2012.
The Dacotah Banks, Inc. 2003 Stock Incentive Plan (the “Stock Plan”) authorized the issuance of up to 100,000 common shares for the
grant of stock options and several other types of stock-based awards. The Company awarded 2,093 and 2,088 treasury shares in the form
of fully vested incentive stock grants to executive officers of the Company in 2013 and 2012. The fair market value of the stock award
was $153 per share or a total of $320 and $319 at December 31, 2013 and 2012. There were 87,775 and 89,868 unissued common shares
remaining under the Stock Plan at December 31, 2013 and 2012.
NOTE 11 - INCOME TAXES
Income tax expense for the three years ended December 31, 2013, 2012 and 2011 were:
2013 2012
2011
Current
Federal $ 9,728 $ 8,749 $ 8,566
State 1,446 1,170 1,238
11,174 9,919 9,804
Deferred
Federal (1,448) (389) (832)
$
9,726 $
9,529 $
8,972
Deferred income taxes are provided for the temporary differences between the financial reporting and the tax bases of the Company’s assets
and liabilities. Temporary differences comprising the net deferred tax asset, included in other assets on the consolidated balance sheet, are
as follows:
2013
Assets Liabilities Total 2012
Allowance for loan losses $ 7,821 $
- $ 7,821 $ 6,898
Property and equipment - 2,661 (2,661) (2,431)
Accrued salary continuation provision 3,633 - 3,633 2,736
Unrealized (gain) loss on
securities available for sale 758 - 758 (1,229)
Other 623 14 609 751
$ 12,835 $
2,675 $ 10,160 $ 6,725
The Company has determined that it is not necessary to establish a valuation reserve for the deferred tax asset since it is more likely than
not that the deferred tax asset of $12,835 will be principally realized.
47
The consolidated effective tax rates are reconciled to the statutory rate as follows:
Federal statutory income tax rate State income taxes, net of federal income
tax benefit Tax-exempt income Non-deductible expenses incidental to
business acquisitions New market tax credit Other, net 2013 2012 2011
35.0% 35.0% 35.0%
3.3 (1.8) 2.8 (1.7) 3.2
(1.1)
0.1 (1.2) (0.8)
0.1 (1.2) (0.2) 0.2
(1.3)
(0.8)
34.6% 34.8% 35.2%
Income taxes payable of $1,213 and $1,423 are included in accrued expenses and other liabilities at December 31, 2013 and 2012.
The Company complies with the provisions of FASB ASC 740-10 Accounting for Uncerainty in Income Taxes. The Company had no
unrecognized tax benefits as of December 31, 2013 and 2012. The Company recognized no interest and penalties on the underpayment
of income taxes during the years ended December 31, 2013, 2012 and 2011, and had no accrued interest and penalties on the balance
sheet as of December 31, 2013 and 2012. The Company has no tax positions for which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly increase with the next twelve months. The Company’s tax returns are subject to examination
for the past three years by the Federal and State tax authorities.
NOTE 12 - MINIMUM REGULATORY CAPITAL REQUIREMENTS
The Company and the subsidiary Bank are subject to various regulatory capital requirements administered by the federal and state banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the Company’s and Banks’ financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines
that involve quantitative measures of the Company’s and Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding
companies.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Banks to maintain minimum
amounts and ratios of Total and Tier I capital to risk-weighted assets and of Tier I capital to average assets. As of December 31, 2013 and
2012, management believes the Company and the Bank met all capital adequacy requirements to which they are subject.
As of December 31, 2013, the most recent regulatory financial reports filed with the Federal Deposit Insurance Corporation categorized
the Bank as well capitalized under the regulatory framework for prompt corrective action.To be categorized as well capitalized, a bank must
maintain minimum Total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table. There are no conditions
or events since the notification that management believes have changed the Company’s category.
48
The actual capital amounts and ratios for the Company and its bank subsidiary are presented in the following table (in thousands):
For Capital To Be Well
ActualAdequacy Purposes: Capitalized:
AmountRatio
Amount Ratio
Amount Ratio
DECEMBER 31, 2013
Total Capital
(to Risk Weighted Assets)
Company $224,932 13.3% >$135,399 8.0% N/A N/A
Bank $220,250 13.0% >$135,828 8.0% >$169,785 10.0%
Tier I Capital
Company Bank $203,774 $199,026 12.0% 11.7% >$67,700 >$67,914 4.0% N/A 4.0% >$101,871 N/A
6.0%
Tier I Capital
(to Average Assets)
Company Bank $203,774 $199,026 9.9% 9.7% >$82,479 >$82,257 4.0% N/A 4.0% >$102,821 N/A
5.0%
DECEMBER 31, 2012
Total Capital
Company Bank $207,820 $204,059 12.9%
12.6% >$129,022 >$129,726 8.0% N/A 8.0% >$162,158 N/A
10.0%
Tier I Capital
Company Bank $188,928 $185,167 11.7% 11.4% >$64,511 >$64,863 4.0% N/A 4.0% >$ 97,295 N/A
6.0%
Tier I Capital
(to Average Assets)
Company Bank $188,928 $185,167 9.6% 9.5% >$78,656 >$78,411 4.0% N/A 4.0% >$ 98,013 N/A
5.0%
NOTE 13 - OPERATING LEASES
The Company leases office space and bank premises under leases classified as operating leases.
Future minimum rental payments required under the above operating leases as of December 31, 2013 are as follows:
2014 $
2015 2016 2017 2018 Thereafter $
At the conclusion of the initial term and any succeeding renewal term, these leases
will automatically renew for an additional year. Rent expense for the above leases was as follows:
49
2013 160
160
157
142
142
569
1,330
2012 2011
Bank premises $ 18 $
Office space 156 17 $
147 5
124
Total 164 129
$ 174 $
$
NOTE 14 - LITIGATION
The Company and certain of its subsidiaries are defendants in various matters of litigation incidental to their business. In the opinion of
management, based upon the opinion of legal counsel, disposition of these matters will not materially affect the consolidated financial
position of the Company and its subsidiaries at December 31, 2013.
NOTE 15 - OFF-BALANCE-SHEET ACTIVITIES
The Company is a party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such
commitments involve, to varying degrees, elements of credit and interest risk in excess of the amount recognized in the balance sheet.
The Company’s exposure to credit loss is represented by the contractual amount of these instruments. The Company uses the same credit
policies in making commitments as it does for on-balance-sheet instruments.
At December 31, 2013 and 2012, the following financial instruments were outstanding whose contract amounts represent credit risk:
Contract Amount
2013 2012
Commitments to grant loans $ 357,407 $ 328,995
Standby letters of credit 11,360 9,652
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in
the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The
commitments for lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily
represent future cash requirements.The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s
credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment.
Unfunded commitments under revolving credit lines and overdraft protection agreements are commitments for possible future extensions
of credit to existing customers. These lines-of-credit are uncollateralized and usually do not contain a specified maturity date and may not
be drawn upon to the total extent to which the Company is committed.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.
Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have
expiration dates within one year.The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan
facilities to customers. The Company holds collateral supporting those commitments if deemed necessary.
NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced
liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices
for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the
instrument. FASB ASC Topic 825 excludes certain financial instruments and all non-financial instruments from its disclosure requirements.
Management estimates that the fair value of all financial instruments at December 31, 2013 and 2012 does not differ materially from the
aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have
been determined by management using available market information and appropriate valuation methodologies. Considerable judgment
is necessarily required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily
indicative of the amounts that the Company could realize in a current market exchange.
50
NOTE 17 - FAIR VALUE MEASUREMENTS
Assets measured at fair value on a recurring basis at December 31, 2013 and 2012 are as follows:
DECEMBER 31, 2013
Available-for-sale securities Quoted Prices in Active Markets
(Level 1) DECEMBER 31, 2012
Available-for-sale securities Other Observable
Inputs
(Level 2) Unobservable
Inputs
(Level 3) Total
$
-
$ 321,515 $
-
$
321,515
$
-
$ 347,206 $
-
$
347,206
The fair value of available-for-sale securities is estimated based on third-party pricing services information. This information is derived
from comparison to similar securities traded in active markets.
Assets measured at fair value on a non-recurring basis at December 31, 2013 and 2012 are as follows:
Range
Valuation
Unobservable(Weighted
2013
2012
Technique
Input
Average)
Impaired loans
$44,641
$41,281
Collateral
Valuation
Discount from
Market Value
0-100%
14%
Foreclosed assets
3,252
2,452
Collateral
Valuation
Discount from
Market Value
0-48%
5%
Total assets
$47,893
$43,733
The fair value of impaired loans is estimated based on either the present value of expected future cash flows discounted at the loan’s
effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. The fair value
of foreclosed assets is estimated based on reference to market prices and information for similar assets, less estimated costs to sell.
51
NOTE 18 - SUPPLEMENTAL DISCLOSURES RELATED TO STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information:
2013 2012 2011
Cash payments for
Interest $ 11,518 $ 17,471
$ 21,681
Income taxes 11,554 8,351 10,359
Supplemental schedule of non-cash investing and financing activities:
2013
Other real estate acquired in settlement of loans $ 2,422
$
2012 1,010 $
2011
403
NOTE 19 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date of the independent auditor’s report which is the date the financial
statements were available to be issued.
NOTE 20 - CONDENSED FINANCIAL INFORMATION OF PARENT
Balance Sheets
December 31,
2013 2012
ASSETS
Investments in subsidiaries:
Banks $ 206,685 $ 195,435
Insurance agencies and property companies 1 1
Loans 900 975
Investments in life insurance contracts
1,2431,168
Cash 5,319 3,362
Other assets 1,949 1,954
$ 216,097 $ 202,895
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Other liabilities $
STOCKHOLDERS’ EQUITY
Common stock, $4 par value; 5,000,000 shares
authorized, 1,428,598 shares issued and outstanding Capital surplus Retained earnings Accumulated other comprehensive income (loss) Treasury stock, 306,156 shares in 2013 and
312,346 shares in 2012 Total stockholders’ equity 4,361 $
3,331
5,714 5,714
11,545 10,704
207,285 192,483
(1,374)2,283
(11,434)(11,620)
211,736 199,564
$ 216,097 $ 202,895
52
Income Statements
Years Ended
December 31,
2013 2012
Dividend income from subsidiary bank $ 8,700 $ 2,300
Management fees and other income 3,147 2,263
Total income 11,847 4,563
Salaries and employee benefits expense Other expenses Total expenses 2,334 1,145 3,479 Income before income taxes and equity in
undistributed earnings of subsidiaries 8,3682,236
Income tax expense
57
170
Income before equity in undistributed
earnings of subsidiaries 8,538 2,293
Equity in undistributed earnings of subsidiaries 9,844 15,561
Net income 53
1,450
877
2,327
$ 18,382 $ 17,854
Statements Of Cash Flows
Years Ended
December 31,
2013 2012
OPERATING ACTIVITIES
Net income $ 18,382 $ 17,854
Adjustments to reconcile net income to
net cash from operating activities:
Equity in undistributed earnings of subsidiaries (9,844)(15,518)
Depreciation and amortization 267199
(Increase) decrease in cash surrender value of life insurance
(75) 24
Increase in other assets, net (53)(210)
Increase in other liabilities, net 1,030 63
Net Cash From Operating Activities 10,0272,683
INVESTING ACTIVITIES
Net decrease in loans Purchases of premises and equipment, net Purchases of subsidiary banks
75
93
(209) (782)
(5,063)-
(5,197) Net Cash Used By Investing Activities (689)
FINANCING ACTIVITIES
Sale (purchase) of treasury stock, net Dividends paid 707(205)
(3,580) (3,344)
Net Cash Used By Financing Activities (2,873) (3,139)
NET CHANGE IN CASH (1,957) (1,145)
CASH, BEGINNING OF YEAR CASH, END OF YEAR 3,3624,507
$ 5,319
$3,362
54
55
Photo submitted by Cherie Belgarde of Rolla, ND
D A C O TA H B A N K S , I N C . D I R E C T O R S
Back Row (L to R): Kent E. Edson, Richard L. Westra, Catherine O. Dutenhoffer, Arthur R. Russo, William S. Lamont
Front Row (L to R): Robert B. Lamont, II, Bradford J. Wheeler, J. Douglas Austin, Rodney W. Fouberg
Rodney W. Fouberg (1984*)
Arthur R. Russo (1985*)
Partner
RhodesAnderson Insurance
J. Douglas Austin (1992*)
Practicing Attorney
Austin, Hinderaker, Hopper,
Strait & Benson LLP
Bradford J. Wheeler (1997*)
Kent E. Edson (1996*)
Richard L. Westra (2005*)
Catherine O. Dutenhoffer (2012*)
President
Wheeler Manufacturing, Inc.
Lemmon, South Dakota
President and
Chief Executive Officer
William S. Lamont (1985*)
Architect and
Planning Consultant
Lamont Associates
Retired President and
Chief Financial Officer
Businesswoman
Robert B. Lamont, II (2001*)
Private Investor
Robert J. Fouberg – Secretary
*Year first elected.
D A C O TA H B A N K S , I N C . M A N A G E M E N T
Executive Vice President
President and
Senior Vice President and
Rodney W. Fouberg
Richard L. Westra
Joseph A. Senger
Chad D. Bergan
Senior Vice President
Human Resources
Bob L. Compton
Senior Vice President Risk
Management and General
Counsel
Robert J. Fouberg
56
D A C O TA H B A N K D I R E C T O R S
Back Row (L to R): Robert J. Gruman, Dale A. Melius, Arthur R. Russo, Kent E. Edson
Front Row (L to R): Donna M. Boekelheide, Richard L. Westra, Rodney W. Fouberg, JoAnn R. Hooper
Rodney W. Fouberg
Richard L. Westra
Retired President and
President and
Donna M. Boekelheide
Arthur R. Russo
Robert J. Gruman
Partner
RhodesAnderson Insurance
57
Kent E. Edson
Farming
Northville, South Dakota
Business Consultant
Bob Gruman Consulting
Dale A. Melius
Farming
Faulkton, South Dakota
JoAnn R. Hooper
Certified Public Accountant
Valley City, North Dakota
Robert J. Fouberg
Secretary
D A C O TA H B A N K S T E E R I N G C O M M I T T E E
Back Row (L to R): Robert J. Fouberg, Steven M. Schaeffer, Thomas Heisler, Jr., Stacy J. Sandvig, Diana L. Pfister, Bob L. Compton,
Michael K. Hollan and Chad D. Bergan
Front Row (L to R): Paul R. McDonald, Richard L. Westra and Joseph A. Senger
President and
Richard L. Westra
Senior Vice President Risk
Management and General
Counsel
Robert J. Fouberg
Executive Vice President
Joseph A. Senger
Senior Vice President and
Chad D. Bergan
Human Resources
Bob L. Compton
Operations and Technology
Michael K. Hollan
Vice President Marketing
Paul R. McDonald
Vice President Compliance
Diana L. Pfister
Vice President Treasury
Stacy J. Sandvig
Senior Vice President Trust
Steven M. Schaeffer
Insurance Services
Thomas Heisler, Jr.
58
D A C O TA H B A N K M A N A G E M E N T
David W. Bangasser
Sioux Falls, SD
Southeast Region
Bradley D. Moore
Aberdeen, SD
Mid-Dakota Region
Richard J. Rylance
Rapid City, SD
Western Region
Daniel R. Vollmer
Rolla, ND
Northern Region
regional presidents
(L to R) Bradley D. Moore, Richard J. Rylance, David W. Bangasser and Daniel R. Vollmer
market presidents
Back Row (L to R): G.W. Melgaard, Darrell D. Schlepp, Thomas R. LaBrie, Daniel N. Menking, Casey L. Henderson, Richard A. Gulmon, Jeff C. Moore and
David J. Gibson. Front Row (L to R): John V. Scherbenske, Larry D. Ringgenberg, Kip J. Hansen, Dwight D. Hossle, Travis J. Ellison and Kevin B. Wegehaupt
Travis J. Ellison
Daniel N. Menking
Richard A. Gulmon
David J. Gibson
Jeff C. Moore
Kip J. Hansen (July 1 - Dec. 31)
Dwight D. Hossle
John V. Scherbenske
Casey L. Henderson
Thomas R. LaBrie
Darrell D. Schlepp
Larry D. Ringgenberg
G.W. Melgaard
Kevin B. Wegehaupt
Steven A. Dutenhoffer
(Jan. 1 - June 30)
Lemmon, SD
Brookings, SD
Faulkton, SD
Clark, SD
Minot, ND
Webster, SD
Dickinson, ND
Hettinger, ND
Mobridge, SD
Sisseton, SD
Valley City, ND
Watertown, SD
Jamestown, ND
Morris, MN
Watertown, SD
59
Aberdeen Downtown
308 S Main Street
PO Box 1210
Aberdeen, SD 57402-1210
P - (605) 225-5611
F - (605) 229-5409
Cresbard
207 Main Street
PO Box 167
Cresbard, SD 57435
P - (605) 324-3601
F - (605) 324-3249
Aberdeen East Bank
3312 Sixth Avenue SE
PO Box 1500
Aberdeen, SD 57401-1500
P - (605) 225-1300
F - (605) 622-2467
Custer
35 S Sixth Street
PO Box 4060
Custer, SD 57730
P - (605) 673-5800
F - (605) 673-2562
Belcourt
4324 Highway 281
PO Box 840
Belcourt, ND 58316
P - (701) 477-6143
F - (701) 477-8671
Bison
101 E Main Street
PO Box 99
Bison, SD 57620
P - (605) 244-5261
F - (605) 244-5264
Bowbells
15 Main Street SE
Bowbells, ND 58721
P - (701) 377-2386
F - (701) 377-2430
Brookings
1441 6th Street
Brookings, SD 57006
P - (605) 692-8600
F - (605) 692-4350
Chokio
209 Main St
Chokio, MN 56221
P - (320) 324-7161
F - (320) 324-7165
Clark
113 N Commercial Street
PO Box 298
Clark, SD 57225
P - (605) 532-3626
F - (605) 532-3962
Dickinson
410 West Villard
Dickinson, ND 58602
P - (701) 225-1200
F - (701) 225-9474
Faulkton
105 8th Avenue South
PO Box 248
Faulkton, SD 57438
P - (605) 598-6211
F - (605) 598-4412
Henry
111 Main Street
PO Box 38
Henry, SD 57243
P - (605) 532-3672
F - (605) 532-3675
Hettinger
121 North Main Street
PO Box 309
Hettinger, ND 58639
P - (701) 567-4531
F - (701) 567-4534
Jamestown
Opening in 2015
Lemmon
321 Main Avenue
PO Box 359
Lemmon, SD 57638
P - (605) 374-3853
F - (605) 374-5998
Minot
1121 South Broadway
Minot, ND 58702
P - (701) 852-1200
F - (701) 852-1298
Mobridge
320 Main Street
Mobridge, SD 57601
P - (605) 845-3673
F - (605) 845-7037
Sioux Falls 57th & Cliff
1209 East 57th Street
Sioux Falls, SD 57108
P - (605) 334-8500
F - (605) 334-3379
Morris
4 Atlantic Ave
PO Box 380
Morris, MN 56267
P - (320) 589-3361
F - (320) 589-1525
Sioux Falls Phillips Centre
300 S Phillips Avenue, Suite #100
Sioux Falls, SD 57104-6323
P - (605) 331-4000
F - (605) 334-6724
New Effington
PO Box 177
New Effington, SD 57255-0177
P - (605) 637-5251
F - N/A
Rapid City
3535 Fifth Street
PO Box 4508
Rapid City, SD 57709-4508
P - (605) 342-3100
F - (605) 343-0599
Rapid City Downtown
125 Main Street
Rapid City, SD 57709-4508
P - (605) 394-9000
F - (605) 341-4425
Regent
24 Main Avenue S
PO Box 308
Regent, ND 58650
P - (701) 563-4316
F - (701) 563-4355
Rolla
15 East Main
PO Box 789
Rolla, ND 58367
P - (701) 477-3175
F - (701) 477-3178
Roslyn
506 Main Street
PO Box 167
Roslyn, SD 57261
P - (605) 486-4516
F - (605) 486-4518
©2014 Dacotah Banks, Inc. All rights reserved.
Sioux Falls Silver Valley
1707 S Marion Road
Sioux Falls, SD 57106-3624
P - (605) 361-5636
F - (605) 362-1331
Sioux Falls Town Centre
3302 E 10th Street
Sioux Falls, SD 57103
P - (605) 336-7700
F - (605) 336-3303
Sisseton
321 Veterans Avenue
Sisseton, SD 57262
P - (605) 698-3978
F - (605) 698-7913
Valley City
240 3rd Street NW
Valley City, ND 58072
P - (701) 845-2712
F - (701) 845-0781
Watertown
1310 Ninth Avenue SE
PO Box 207
Watertown, SD 57201
P - (605) 886-0645
F - (605) 886-0918
Webster
600 Main Street
Webster, SD 57274
P - (605) 345-3306
F - (605) 345-3234
Willow Lake
111 Garfield Street
Willow Lake, SD 57278
P - (605) 625-3316
F - (605) 625-3317

Notes to Consolidated Financial Statements

Transcription

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