2019 Annual Report

2019 Annual Report

Dear Stockholders:

Apollo Bancorp, Inc. produced a record year of earnings due to a notable increase in interest and fees on loans as well as significant valuation gains in equity securities. Net income totaled $2,083,000 in 2019, which was a 44.9% increase compared with $1,437,000 reported for 2018. Gains in equity securities, which were a very small balance sheet component, totaled $475,000 due to the historic market performance during 2019. The equity securities portfolio produces some earnings volatility while complementing net interest income, and it is expected to deliver long-term shareholder value.

In 2019, the core driver of profitability, which remains net interest income, increased by $142,000, or 2.4%, due to a $497,000, or 10.0%, increase in loan interest income, which was offset by a $340,000 reduction in securities income. The balance sheet continued transitioning assets to higher yielding loans and fewer investment securities. Interest expense increased only $17,000 as interest rates changed direction mid-year and began to decrease. Noninterest income from deposit service charges and fiduciary activities decreased $45,000, or 3.8%, in 2019.

Loan portfolio growth moderated to $5.4 million, or 4.7%, during 2019, following three years of extremely robust double digit increases. While asset yields increased from loans, prepayments in both the loan and investment securities portfolios accelerated due to the former’s larger balance as well as a decreasing interest rate environment. Nevertheless, the net interest margin remained strong and wholesale funding decreased. Exposure to changes in interest rates is modest regardless of their directional trend based upon emerging economic indicators and resulting monetary policy.

Asset quality remains consistently strong with few watchlist credits and low borrower delinquency. A vast majority of credit exposure is secured by investment and owner occupied real estate. Diligent management reporting systems are in place for credit risk and regulatory compliance using extensive internal procedures, frequent independent testing and thorough oversight from the Board of Directors.

Noninterest expense was well controlled and remained flat for the second consecutive year despite ongoing investment in technology and risk management. Retail deposit balances increased modestly and continued a trend of the past several years. There is continued focus on delivering a personalized approach to all community banking customers.

Earnings per share totaled $4.02 in 2019 compared with $2.77 in 2018. The quarterly dividend was increased from $0.51 to $0.52 per share, or 2.0%, in the fourth quarter. Total cash dividends per share increased from $2.01 in 2018 to $2.05 in 2019. In addition, stockholders’ equity increased 6.9% to $21,139,000, and retained earnings increased $1,021,000 in support of future growth. The Company’s performance compares favorably with its peer group, and its independent local ownership is consistently rewarded.

I am most appreciative of the longtime dedication and extensive contributions of Barbara R. Calizzi who retired as Executive Vice President, Secretary and Chief Operating Officer at year-end. She has left an indelible mark of excellence upon the organization and will be greatly missed by our employees, directors, stockholders and customers.

Thank you for your ongoing support and loyalty.


Nelson L. Person
President and CEO