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Ottawa Bancorp, Inc. Announces First Quarter 2020 Results

OTTAWA, Ill., May 05, 2020 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the “Company”) (Nasdaq CM: OTTW), the holding company for Ottawa Savings Bank, FSB (the “Bank”), announced net income of $0.1 million, or $0.029 per basic and diluted common share for the three months ended March 31, 2020, compared to net income of $0.4 million, or $0.130 per basic and diluted common share for the three months ended March 31, 2019.  During the first quarter of 2020, the Company experienced an increase in loan originations which drove growth in the loan portfolio.  The loan portfolio, net of allowance, increased to $250.3 million as of March 31, 2020 from $247.8 million as of December 31, 2019. Non-performing loans increased slightly from $2.3 million at December 31, 2019 to $2.6 million at March 31, 2020, which caused the ratio of non-performing loans to gross loans to increase from 0.90% at December 31, 2019 to 1.01% at March 31, 2020.  Additionally, through March 31, 2020, the Company has repurchased a total of 387,918 shares of its common stock at an average price of $13.92 per share as part of the stock repurchase program approved on November 20, 2019 and its previous stock repurchase programs that expired in November, 2018 and November, 2019. 

Craig Hepner, President and Chief Executive Officer of the Company, said “I am very pleased with the response of our organization to the challenges presented by the COVID-19 pandemic.  With the health and safety of our employees and customers being our top priority we suspended access to our lobbies on March 19, 2020 and efficiently transitioned to remote working for a number of our employees and leveraged the use of our recently upgraded digital banking platform to continue to serve our customers.”

“For over 148 years, the communities we serve have counted on Ottawa Savings Bank to help them manage through difficult times, and this current crisis will be no different.  We are actively working with our customers that have been impacted by the COVID-19 pandemic to support them through this temporary downturn in the economy.   We were able to assist a number of our commercial customers through participation in the Small Business Administration’s Paycheck Protection Program which will help support numerous employees in our markets.   Additionally, we are assisting those impacted by the effects of the COVID-19 pandemic through other programs to ease the financial demands during this hardship.   We are also participating in local efforts to further assist our communities.”

“While the duration of the COVID-19 pandemic and the timing and strength of the eventual economic recovery remain uncertain, we believe we are well positioned from a capital and liquidity standpoint to play a critical role in supporting our communities as we work together to manage through this crisis,” said Mr. Hepner.   

Comparison of Results of Operations for the Three Months Ended March 31, 2020 and March 31, 2019

Net income for the three months ended March 31, 2020 was $0.1 million compared to net income of $0.4 million for the three months ended March 31, 2019. Total interest and dividend income was comparable at $3.1 million for the three months ended March 31, 2019 and March 31, 2020.   Interest expense was $0.1 million higher during the three months ended March 31, 2020.   In addition. a provision of $450,000 was taken during the three months ended March 31, 2020.   Due to the anticipated impact of the COVID-19 pandemic on the local and national economies, qualitative factors were adjusted negatively which led to an increase in the provision level.   Thus, net interest income after provision for loan losses decreased by $0.4 million.   Total other income was comparable, however, total other expenses rose slightly by $0.1 million this quarter as compared to the first quarter of 2019.   Net income was $0.3 million lower for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019.   
   
Net interest income decreased by $0.1 million, or 3.5%, to $2.3 million for the three months ended March 31, 2020, from $2.4 million for the three months ended March 31, 2019.  Interest and dividend income were comparable between the periods.   There was an increase in the average balances of interest-earning assets of $18.8 million. The increase in interest and dividend income was slightly offset by a decrease in yield on earning assets from 4.62% for the three months ended March 31, 2019 to 4.23% for the three months ended March 31, 2020.  Additionally, there was an increase in interest expense as the average cost of funds increased 9 basis points to 1.34% for the three months ended March 31, 2020. The net interest margin decreased 47 basis points during the three months ended March 31, 2020 to 3.13% from 3.60% during the three months ended March 31, 2019.

The Company recorded a provision for loan losses of $0.4 million for the three month period ended March 31, 2020 as compared to $0.1 million for the three months ended March 31, 2019. The allowance for loan losses was $3.4 million, or 1.32% of total gross loans at March 31, 2020 compared to $2.9 million, or 1.17% of gross loans at March 31, 2019.  Net charge-offs during the first quarter of 2020 were $30 thousand compared to $0.1 million during the first quarter of 2019.  General reserves were higher at March 31, 2020, when compared to March 31, 2019, primarily due to the balances in most loan categories increasing during the twelve months ended March 31, 2020.  In addition, due to the anticipated impact of the COVID-19 pandemic on the local and national economies, qualitative factors were adjusted negatively which led to an increase in the provision level.   Although non-performing loans increased, the necessary reserves on non-performing loans as of March 31, 2020 were approximately $15,000 lower than they were as of December, 2019 due to the improvements in the payment status of several other non-performing loans and the new non-performing loans added requiring smaller specific reserves than those removed

Total other income was $0.4 million for the three months ended March 31, 2020 and March 31, 2019. There were fluctuations that led to an increase in gain on sale of loans, an increase in gain on sale of repossessed assets and an increase in other income.  These increases were mostly offset by a decrease in customer service fees and loan origination and servicing income.

Total other expense was $2.2 million for the three months ended March 31, 2020 as compared to $2.1 million for the three months ended March 31, 2019.  There was an increase in the salaries and employee benefits category, an increase in legal expenses and an increase in data processing.  Data processing increased due to the enhancement of our infrastructure to support the implementation of our new core processing system.  These increases were offset by decreases in deposit insurance premiums, loan expenses and other expenses. 

The Company recorded income tax expense of approximately $15,000 for the three month periods ended March 31, 2020 as compared to $0.2 million for the three months ended March 31, 2019 due to lower pre-tax earnings in 2020.

Comparison of Financial Condition at March 31, 2020 and December 31, 2019

Total consolidated assets as of March 31, 2020 were $307.1 million, an increase of $6.5 million, or 2.20%, from $300.5 million at December 31, 2019.  The increase was primarily due to an increase of $9.0 million in cash and cash equivalents, a $2.5 million increase in the net loan portfolio and a $0.8 million increase in other assets.  These increases were partially offset by a decrease in federal funds sold of $2.2 million, a decrease in securities available for sale of $1.6 million, a decrease of $0.8 million in time deposits, and a decrease in loans held for sale of $1.2 million.

Cash and cash equivalents increased $9.0 million, or 150.0%, to $15.0 million at March 31, 2020 from $6.0 million at December 31, 2019.  The increase in cash and cash equivalents was primarily a result of cash provided from financing activities of $8.7 million and cash provided by investing activities of $1.3 million exceeding cash used in operating activities of $1.0 million.

Securities available for sale decreased $1.6 million, or 6.6%, to $22.9 million at March 31, 2020 from $24.5 million at December 31, 2019, as paydowns, calls, and maturities exceeded new securities purchases. 

Net loans increased $2.5 million, or 1.0%, to $250.3 million at March 31, 2020 compared to $247.8 million at December 31, 2019 primarily as a result of a $0.6 million increase in one-to-four family loans, an increase of $1.0 million in multi-family loans and a $5.0 million increase in commercial loans.  The increases were offset by decreases of $0.2 million in non-residential real estate loans, of $2.1 million in consumer direct loans and $1.4 million in purchased auto loans.  Additionally, the allowance grew by $0.4 million.     

Total deposits increased $6.1 million, or 2.6%, to $242.4 million at March 31, 2020 from $236.3 million at December 31, 2019.  For the three months ended March 31, 2020, savings accounts increased by $2.1 million, non-interest bearing checking accounts increased $3.7 million and certificates of deposit increased by $4.4 million as compared to December 31, 2019.  The increases were offset by decreases in interest bearing checking accounts of $3.7 million and in money market accounts of $0.4 million as compared to December 31, 2019.

FHLB advances increased $4.5 million, or 49.5% to $13.6 million at March 31, 2020 compared to $9.1 million at December 31, 2019.  The increase was related to the low rate environment and management extending out maturities to fund future loan growth. 

Stockholders’ equity decreased $1.9 million, or 4.0% to $48.8 million at March 31, 2020 from $50.7 million at December 31, 2019.  The decrease reflects $0.6 million used to repurchase and cancel 47,249 outstanding shares of Company common stock, a decrease of $0.2 million in other comprehensive income due to a decrease in fair value of securities available for sale and $1.3 million in cash dividends.  The decreases were partially offset by net income of $0.1 million for the three months ended March 31, 2020 and proceeds from stock options exercised, equity incentive plan shares issued and the allocation of ESOP shares totaling $0.1 million.    

About Ottawa Bancorp, Inc.

Ottawa Bancorp, Inc. is the holding company for Ottawa Savings Bank, FSB which provides various financial services to individual and corporate customers in the United States. The Bank offers various deposit accounts, including checking, money market, regular savings, club savings, certificates of deposit, and various retirement accounts. Its loan portfolio includes one-to-four family residential mortgage, multi-family and non-residential real estate, commercial, and construction loans as well as auto loans and home equity lines of credit. Ottawa Savings Bank, FSB was founded in 1871 and is headquartered in Ottawa, Illinois. For more information about the Company and the Bank, please visit www.ottawasavings.com.

Cautionary Statement Regarding Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the federal securities laws. Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements, identified by words such as “will,” “expected,” “believe,” and “prospects,” involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. These risks and uncertainties involve general economic trends and changes in interest rates, increased competition, changes in consumer demand for financial services, the possibility of unforeseen events affecting the industry generally, the uncertainties associated with newly developed or acquired operations, market disruptions and the potential effects of the COVID-19 pandemic on the local and national economic environment, on our customers and on our operations as well as any changes to federal, state and local government laws, regulations and orders in connection with the pandemic.   Ottawa Bancorp, Inc. undertakes no obligation to release revisions to these forward-looking statements publicly to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission. 


Ottawa Bancorp, Inc. & Subsidiary
Consolidated Balance Sheets
March 31, 2020 and December 31, 2019
(Unaudited)
  March 31,   December 31,
    2020       2019  
Assets      
Cash and due from banks $   10,671,653     $   5,272,925  
Interest bearing deposits     4,309,495          765,486  
Total cash and cash equivalents     14,981,148         6,038,411  
Time deposits      745,500         1,483,500  
Federal funds sold     2,027,000         4,185,000  
Securities available for sale     22,898,813         24,515,759  
Loans, net of allowance for loan losses of $3,357,596 and $2,937,632      
at March 31, 2020 and December 31, 2019, respectively     250,324,233         247,775,814  
Loans held for sale      -         1,225,526  
Premises and equipment, net     6,449,871         6,517,922  
Accrued interest receivable     816,995         875,104  
Deferred tax assets     1,806,616         1,743,161  
Cash value of life insurance     2,402,228         2,389,530  
Goodwill     649,869         649,869  
Core deposit intangible     160,499         169,999  
Other assets     3,812,100         2,962,101  
Total assets $   307,074,872     $   300,531,696  
 

Liabilities and Stockholders' Equity
     
Liabilities      
Deposits:      
Non-interest bearing $   17,366,843     $   13,664,986  
Interest bearing     225,061,788         222,648,518  
Total deposits     242,428,631         236,313,504  
Accrued interest payable      89,832         8,146  
FHLB advances     13,569,123          9,068,030  
Other liabilities     2,229,358         4,431,141  
Total liabilities     258,316,944         249,820,821  
       
Stockholders' Equity      
Common stock, $.01 par value, 12,000,000 shares authorized; 3,190,280 and 3,159,494      
shares issued at March 31 2020 and December 31, 2019, respectively     31,190         31,594  
Additional paid-in-capital     32,263,029         32,845,639  
Retained earnings     17,770,596         18,938,633  
Unallocated ESOP shares     (1,366,815 )       (1,398,600 )
Unallocated management recognition plan shares     (66,982 )       (30,944 )
Accumulated other comprehensive income     126,910         324,553  
Total stockholders' equity     48,757,928         50,710,875  
Total liabilities and stockholders' equity $   307,074,872     $   300,531,696  


Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three Months Ended March 31, 2020 and 2019
(Unaudited)
  Three Months Ended
  March 31,
    2020       2019  
Interest and dividend income:      
Interest and fees on loans $  2,909,081     $  2,860,592  
Securities:      
Residential mortgage-backed and related securities     67,230       82,461  
State and municipal securities     95,944       97,411  
Dividends on non-marketable equity securities     6,590       6,434  
Interest-bearing deposits     40,148       45,378  
Total interest and dividend income     3,118,993       3,092,276  
Interest expense:      
Deposits     730,819       608,390  
Borrowings      61,896       72,701  
Total interest expense      792,715       681,091  
Net interest income     2,326,278       2,411,185  
Provision for loan losses      450,000       130,000  
Net interest income after provision for loan losses       1,876,278       2,281,185  
Other income:      
Gain on sale of loans     107,067       84,957  
Gain on sale of securities, net     857       -  
Loan origination and servicing income     114,958       154,283  
Origination of mortgage servicing rights, net of amortization     (10,443 )       (9,690 )
Customer service fees     106,840       115,866  
Increase in cash surrender value of life insurance     12,699       11,934  
Gain/(Loss) on sale of repossessed assets, net     16,031       (748 )
Other     37,673       21,762  
Total other income     385,682       378,364  
Other expenses:      
Salaries and employee benefits     1,264,646       1,098,558  
Directors fees     43,000       43,000  
Occupancy     178,525       170,950  
Deposit insurance premium     -       17,100  
Legal and professional services     104,622       95,535  
Data processing     223,273       186,588  
Loan expense     134,350       164,412  
Valuation adjustments and expenses on foreclosed real estate     559       5,584  
Other     211,665       282,887  
Total other expenses     2,160,640       2,064,614  
Income before income tax expense     101,320       594,935  
Income tax expense     15,364         194,865  
Net income $     85,956     $   400,070  
Basic earnings per share $      0.029     $   0.130  
Diluted earnings per share $      0.029     $   0.130  
Dividends per share $      0.418     $   0.060  


Ottawa Bancorp, Inc. & Subsidiary  
Selected Financial Data and Ratios  
(Unaudited)  
  At March 31,   At December 31,  
  2020   2019  
  (In thousands, except per share data)  
Financial Condition Data:        
Total Assets $  307,075   $  300,532  
Loans, net (1)    250,324     247,776  
Securities available for sale   22,899     24,516  
Deposits   242,429     236,314  
Stockholders' Equity   48,758     50,711  
Book Value per common share $ 15.28   $  16.05  
Tangible Book Value per common share (2) $ 15.03   $  15.79  
(1) Net of loans in process, deferred loan (cost) fees and allowance for loan losses.        
(2) Non-GAAP measure. Excludes goodwill and core deposit intangible.        
         
  Three Months Ended March 31,  
  2020   2019  
  (In thousands, except per share data)  
Operations Data:        
Total interest and dividend income $  3,119   $  3,092  
Total interest expense   793     681  
Net interest income   2,326     2,411  
Provision for loan losses   450     130  
Total other income   385     379  
Total other expense   2,160     2,065  
Income tax expense   15     195  
Net income $ 86   $ 400  
Basic earnings per share $ 0.029   $ 0.130  
Diluted earnings per share $ 0.029   $ 0.130  
Dividends per share $ 0.418   $ 0.060  
         
  At or for the  
  Three Months Ended  
  March 31,  
  2020   2019  
Performance Ratios:        
Return on average assets (5)   0.11 %     0.56 %
Return on average stockholders' equity (5)   0.61       2.76  
Average stockholders' equity to average assets   18.67       20.25  
Stockholders' equity to total assets at end of period   15.87       18.30  
Net interest rate spread (1) (5)   3.03       3.37  
Net interest margin (2) (5)   3.26       3.60  
Average interest-earning assets to average interest-bearing liabilities   120.87       122.97  
Other expense to average assets   0.71       0.72  
Efficiency ratio (3)   79.68       73.91  
Dividend payout ratio   1,461.54       46.15  
         


  At or for the   At or for the  
  Three Months Ended   Twelve Months Ended  
  March 31,   December 31,  
  2020   2019  
  (unaudited)  
Regulatory Capital Ratios (4):        
Total risk-based capital (to risk-weighted assets) 21.06 %  22.21 %
Tier 1 core capital (to risk-weighted assets) 19.81    20.96  
Common equity Tier 1 (to risk-weighted assets) 19.81    20.96  
Tier 1 leverage (to adjusted total assets) 14.19    15.00  
Asset Quality Ratios:        
Net charge-offs to average gross loans outstanding 0.05    0.11  
Allowance for loan losses to gross loans outstanding 1.32    1.17  
Non-performing loans to gross loans (6) 1.01    0.90  
Non-performing assets to total assets (6) 0.84    0.75  
Other Data:        
Number of full-service offices 3   3  
         
(1) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of funds on average interest-bearing liabilities.  
(2) Represents net interest income as a percent of average interest-earning assets.  
(3) Represents total other expenses divided by the sum of net interest income and total other income.  
(4) Ratios are for Ottawa Savings Bank.  
(5) Annualized.  
(6) Non-performing assets consist of non-performing loans, foreclosed real estate, and other foreclosed assets. Non-performing loans consist of all loans 90 days or more past due and all loans no longer accruing interest.