U.S. Markets closed

Ottawa Bancorp, Inc. Announces Fourth Quarter 2019 Results

OTTAWA, Ill., Feb. 10, 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 $0.6 million, or $0.18 per basic and diluted common share for the three months ended December 31, 2019, compared to net income of $0.6 million, or $0.18 per basic diluted common share for the three months ended December 31, 2018.  For the year ended December 31, 2019, net income was $1.94 million, or $0.62 per basic and diluted common share, compared to net income of $2.0 million, or $0.62 per basic and per diluted common share for the year ended December 31, 2018.   During the fourth quarter of 2019, the Company experienced an increase in loan originations which drove growth in the loan portfolio.  The loan portfolio increased to $247.8 million as of December 31, 2019 from $235.9 million as of December 31, 2018. Non-performing loans increased from $1.5 million at December 31, 2018 to $2.3 million at December 31, 2019, which caused the ratio of non-performing loans to gross loans to increase from 0.63% at December 31, 2018 to 0.90% at December 31, 2019.  Additionally, through December 31, 2019, the Company has repurchased a total of 340,669 shares of its common stock at an average price of $13.95 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. 

Comparison of Results of Operations for the Three Months Ended December 31, 2019 and December 31, 2018

Net income for the three months ended December 31, 2019 was $0.6 million compared to net income of $0.6 million for the three months ended December 31, 2018. Total interest and dividend income was $0.2 million higher for the three months ended December 31, 2019 than it was for the three months ended December 31, 2018.  This increase was offset by higher interest expense during the 2019 period. Net interest income after provision for loan losses increased slightly but was offset by a corresponding increase in total other expenses leaving net income comparable.   
   
Net interest income increased by $0.1 million, or 2.7%, to $2.4 million for the three months ended December 31, 2019, from $2.3 million for the three months ended December 31, 2018.  Interest and dividend income increased $0.2 million, or 8.4%, primarily due to an increase in the average balances of interest-earning assets of $13.1 million. The increase in interest and dividend income was partially offset by an increase in interest expense as the average cost of funds increased 24 basis points to 1.42% for the three months ended December 2019. The net interest margin decreased 7 basis points during the three months ended December 2019 to 3.34% from 3.41% for the three months ended December 31, 2018.

The Company recorded a provision for loan losses of $0.2 million for each of the three month periods ended December 2019 and 2018. The allowance for loan losses was $2.9 million, or 1.17% of total gross loans at December 31, 2019 compared to $2.6 million, or 1.10% of gross loans at December 31, 2018.  Net charge-offs during the fourth quarter of 2019 were $27 thousand compared to net charge-offs of $0.1 million during the fourth quarter of 2018.  General reserves were higher at December 31, 2019, when compared to December 31, 2018, primarily due to the balances in most loan categories increasing during the twelve months ended December 31, 2019.  This increase in the allowance due to loan growth was partially offset by improvements in historical loss levels.  Although non-performing loans increased, the necessary reserves on non-performing loans as of December 31, 2019 were approximately $17,000 lower than they were as of December, 2018 due to the transfer of one non-performing loan to foreclosed real estate, the charge-off of the specific reserve for a non-performing loan, improvements in the payment status of several other non-performing loans and the new loans added not requiring as large of specific reserves as those removed.

Total other income was $0.6 million for both the three months ended December 31, 2019 and December 31, 2018. The increase during the 2019 period was due to an increase in gains on the sale of loans and an increase in loan origination and servicing income.  These increases were due to the increase in loan originations during the 2019 period.  These increases were mostly offset by a decrease in customer service fees and other income.

Total other expense was $2.0 million for both the three months ended December 31, 2019 and December 31, 2018.  There was an increase in salaries and employee benefits expense during the 2019 period due to the addition of a commercial lender and a senior credit analyst.  Additionally, other expenses increased as well.  These increases were offset by decreases in deposit insurance premiums, legal and professional services and data processing fees. 

The Company recorded income tax expense of $0.2 million for both of the three month periods ended December 31, 2019 and 2018.

Comparison of Results of Operations for the Years Ended December 31, 2019 and December 31, 2018

Net income was $1.9 million for the year ended December 31, 2019 which is a $0.1 million or 2.9% decrease from $2.0 million for the year ended December 31, 2018.  The decrease in net income was primarily the result of total other expense and tax expense increasing more than the increase in total other income and net interest income after provision for loan losses.
   
Net interest income increased by $0.3 million, or 3.3%, to $9.4 million for the year ended December 31, 2019, from $9.1 million for the year ended December 31, 2018.  Interest and dividend income increased $1.4 million, or 12.8%, primarily due to an increase in the average balances of interest-earning assets of $21.0 million. The increase in interest and dividend income was partially offset by an increase in interest expense as the average cost of funds increased 40 basis points to 1.36% for the year ended December 31, 2019. The net interest margin decreased 16 basis points, or 4.67% during the year ended December 31, 2019 to 3.41% from 3.57% for the year ended December 31, 2018.

The Company recorded a provision for loan losses of $0.6 million for year ended December 31, 2019 and a provision for loan losses of $0.5 million for the year ended December 31, 2018.  The allowance for loan losses was $2.9 million, or 1.17% of total gross loans at December 31, 2019 compared to $2.6 million, or 1.10% of gross loans at December 31, 2018.  Net charge-offs were $0.3 million for the year ended December 31, 2019 compared $0.4 million for the year ended December 31, 2018.  General reserves were higher at December 31, 2019, when compared to December 31, 2018, primarily due to the balances in all loan categories increasing during the twelve months ended December 31, 2019. This increase in the allowance due to loan growth was partially offset by improvements in historical loss levels.  Although non-performing loans increased, the necessary reserves on non-performing loans as of December 31, 2019 were approximately $17,000 lower than they were as of December, 2018 due to the transfer of one non-performing loan to foreclosed real estate, the charge-off of the specific reserve for a non-performing loan, improvements in the payment status of several other non-performing loans and the new loans added not requiring as large of specific reserves as those removed.

Total other income increased to $2.5 million for year ended December 31, 2019, as compared to $2.3 million for the year ended December 31, 2018.  The increase was primarily due to an increase in gains on sale of loans, an increase in the origination of mortgage servicing rights, and an increase in loan origination and servicing income all of which were primarily the result of increased loan volume in 2019.  These increases were partially offset by a decrease in customer service fees and a decrease in gain on sale of foreclosed real estate.

Total other expense increased $0.4 million, or 5.2%, to $8.6 million for the year ended December 31, 2019, as compared to $8.2 million for the year ended December 31, 2018.  The increase was primarily due to higher salaries and employee benefits, occupancy, data processing and other costs.   These increases were offset slightly by reductions in loan expense, deposit insurance premiums, and legal and professional fees. 

The Company recorded income tax expense of approximately $0.7 million for both of the twelve-month periods ended December 31, 2019 and 2018.

Comparison of Financial Condition at December 31, 2019 and December 31, 2018

Total consolidated assets as of December 31, 2019 were $300.5 million, an increase of $7.7 million, or 2.63%, from $292.8 million at December 31, 2018.  The increase was primarily due to an increase of $11.9 million in the net loan portfolio, an increase in time deposits of $3.0 million and an increase in loans held for sale of $1.2 million.  These increases were partially offset by a decrease in cash and cash equivalents of $4.1 million, a decrease in federal funds sold of $1.5 million, a decrease in securities available for sale of $1.0 million and an overall $1.8 million decrease in the remaining other asset categories.

Cash and cash equivalents decreased $4.1 million, or 48.8%, to $4.3 million at December 31, 2019 from $8.4 million at December 31, 2018.  The decrease in cash and cash equivalents was primarily a result of cash used in investing activities of $12.5 million exceeding cash provided by financing activities of $5.1 million and cash provided by operating activities of $3.3 million.

Securities available for sale decreased $1.0 million, or 3.9%, to $24.5 million at December 31, 2019 from $25.5 million at December 31, 2018, as paydowns, calls, and maturities exceeded new securities purchases. 

Net loans increased $11.9 million, or 5.0%, to $247.8 million at December 31, 2019 compared to $235.9 million at December 31, 2018 primarily as a result of a $13.4 million increase in one-to-four family loans, a $6.6 million increase in commercial loans and a $5.1 million increase in consumer direct loans.  The increases were offset by decreases of $1.0 million in multi-family loans, $4.7 million in non-residential real estate loans and $7.5 million in purchased auto loans. 

Total deposits increased $12.9 million, or 5.8%, to $236.3 million at December 31, 2019 from $223.4 million at December 31, 2018.  For the year ended December 31, 2019, interest bearing checking accounts increased by $8.2 million and certificates of deposit increased by $8.4 million as compared to December 31, 2018.  The increases were offset by a decrease in non-interest bearing checking accounts of $0.4 million, a decrease in savings accounts of $0.7 million and a decrease in money market accounts of $2.6 million as compared to December 31, 2018.

FHLB advances decreased $3.0 million, or 24.9% to $9.1 million at December 31, 2019 compared to $12.1 million at December 31, 2018.  The decrease was related to the maturing of several advances that had been used to fund loan growth. 

Stockholders’ equity decreased $2.1 million, or 4.0% to $50.7 million at December 31, 2019 from $52.8 million at December 31, 2018.  The decrease reflects $2.8 million used to repurchase and cancel 204,448 outstanding shares of Company common stock and the payment of $1.9 million in cash dividends.  The decreases were partially offset by an increase of $0.4 million in other comprehensive income due to an increase in the fair value of securities available for sale, net income of $1.9 million for the year ended December 31, 2019 and proceeds from stock options exercised, equity incentive plan shares issued and the allocation of ESOP shares totaling $0.3 million.    

Annual Meeting of Stockholders

On February 10, 2020, the Company also announced that its annual meeting of stockholders will be held on Wednesday, May 20, 2020.

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, and market disruptions. 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
December 31, 2019 and December 31, 2018
(Unaudited)
  December 31,   December 31,
    2019       2018  
Assets      
Cash and due from banks $   3,534,925     $   2,416,568  
Interest bearing deposits     765,486         6,013,890  
Total cash and cash equivalents     4,300,411         8,430,458  
Time deposits     3,221,500         250,000  
Federal funds sold     4,185,000         5,663,000  
Securities available for sale     24,515,759         25,533,767  
Loans, net of allowance for loan losses of $2,937,632 and $2,627,738      
at December 31, 2019 and December 31, 2018, respectively     247,775,814         235,926,419  
Loans held for sale     1,225,526          -  
Premises and equipment, net     6,517,922         6,621,080  
Accrued interest receivable     875,104         824,542  
Deferred tax assets     1,743,161         1,898,141  
Cash value of life insurance     2,389,530         2,341,453  
Goodwill     649,869         649,869  
Core deposit intangible     169,999         228,000  
Other assets     2,962,101         4,469,350  
Total assets $   300,531,696     $   292,836,079  
 

Liabilities and Stockholders' Equity
     
Liabilities      
Deposits:      
Non-interest bearing $   13,664,986     $   14,057,719  
Interest bearing     222,648,518         209,390,810  
Total deposits     236,313,504         223,448,529  
Accrued interest payable      8,146         5,648  
FHLB advances     9,068,030         12,087,152  
Other liabilities     4,431,141         4,470,384  
Total liabilities     249,820,821         240,011,713  
       
Stockholders' Equity      
Common stock, $.01 par value, 12,000,000 shares authorized; 3,160,154 and 3,358,922      
shares issued at December 31, 2019 and December 31, 2018, respectively     31,594         33,589  
Additional paid-in-capital     32,845,639         35,579,606  
Retained earnings     18,938,633         18,859,232  
Unallocated ESOP shares     (1,398,600 )       (1,576,616 )
Unallocated management recognition plan shares     (30,944 )       (40,361 )
Accumulated other comprehensive income (loss)     324,553         (31,084 )
Total stockholders' equity     50,710,875         52,824,366  
Total liabilities and stockholders' equity $   300,531,696     $   292,836,079  


 
Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three and Twelve Months Ended December 31, 2019 and 2018
(Unaudited)
    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
      2019       2018       2019       2018  
Interest and dividend income:                  
Interest and fees on loans   $   2,948,853     $   2,687,618     $ 11,540,665     $ 10,229,770  
Securities:                  
Residential mortgage-backed and related securities       71,914         75,443       295,450       281,418  
State and municipal securities       100,357         102,547       399,547       408,467  
Dividends on non-marketable equity securities       6,688         10,062       25,786       24,535  
Interest-bearing deposits       74,212         79,458       255,664       155,322  
Total interest and dividend income       3,202,024         2,955,127       12,517,112       11,099,012  
Interest expense:                  
Deposits       767,510         574,632       2,822,675       1,762,113  
Borrowings       67,492         75,383       277,051       218,512  
Total interest expense       835,002         650,015       3,099,726       1,980,625  
Net interest income       2,367,022         2,305,112       9,417,386       9,118,387  
Provision for loan losses       190,000         150,000       595,000       527,500  
Net interest income after provision for loan losses        2,177,022         2,155,112       8,822,386       8,590,887  
Other income:                  
Gain on sale of loans       130,337         120,402       759,015       584,929  
Gain on sale of foreclosed real estate, net       16,128         17,187       16,128        116,295  
Loan origination and servicing income       303,371         242,718       949,439       858,087  
Origination of mortgage servicing rights, net of amortization       (10,686 )       (3,747 )      87,895       23,230  
Customer service fees       102,197         143,022       472,973       527,739  
Increase in cash surrender value of life insurance       12,666         12,032       48,077       47,653  
Gain/(Loss) on sale of repossessed assets, net       6,524         (11 )     18,502       4,917  
Other       30,126         47,371       118,604       119,977  
Total other income       590,663         578,974       2,470,633       2,282,827  
Other expenses:                  
Salaries and employee benefits       1,050,019         1,039,589       4,729,967       4,295,121  
Directors fees       43,000         43,000       172,000       180,750  
Occupancy       183,698         143,519       683,060       637,872  
Deposit insurance premium       -         16,077       33,565       66,010  
Legal and professional services       22,698         108,926       326,100       388,199  
Data processing       160,642         179,391       682,547       664,601  
Loan expense       179,759         172,642       718,198       725,125  
Valuation adjustments and expenses on foreclosed real estate       2,293         837       34,714       26,102  
Other       348,732         258,842       1,250,018       1,216,412  
Total other expenses       1,990,841         1,962,823       8,630,169       8,200,192  
Income before income tax expense       776,844         771,263       2,662,850       2,673,522  
Income tax expense       219,096         202,555         725,503         679,216  
Net income   $   557,748     $   568,708     $   1,937,347     $   1,994,306  
Basic earnings per share   $   0.18     $   0.18     $   0.62     $   0.62  
Diluted earnings per share   $    0.18     $   0.18     $   0.62     $   0.62  
Dividends per share   $    0.063     $    0.050     $   0.629     $   0.265  


   
Ottawa Bancorp, Inc. & Subsidiary  
Selected Financial Data and Ratios  
(Unaudited)  
            At December 31,   At December 31,  
              2019     2018  
               
            (In thousands, except per share data)  
Financial Condition Data:                  
Total Assets           $300,532   $292,836  
Loans, net (1)              247,776     235,926  
Securities available for sale             24,516     25,534  
Deposits             236,314     223,449  
Stockholders' Equity             50,711     52,824  
Book Value per common share           $16.05   $ 15.73  
Tangible Book Value per common share (2)           $15.79   $ 15.47  
(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 December 31,   Twelve Months Ended December 31,  
      2019     2018     2019     2018  
           
    (In thousands, except per share data)   (In thousands, except per share data)  
Operations Data:                  
Total interest and dividend income   $3,202   $2,955   $12,517   $11,099  
Total interest expense     835     650     3,100     1,981  
Net interest income     2,367     2,305     9,417     9,118  
Provision for loan losses     190     150     595     528  
Total other income     591     579     2,471     2,283  
Total other expense     1,991     1,963     8,630     8,200  
Income tax expense     219     202     726     679  
Net income   $558   $569   $1,937   $1,994  
Basic earnings per share   $0.18   $0.18   $0.62   $0.62  
Diluted earnings per share   $0.184   $0.18   $0.62   $0.62  
Dividends per share   $0.063   $0.05   $0.629   $0.265  
                   
    At or for the   At or for the  
    Three Months Ended   Twelve Months Ended  
    December 31,   December 31,  
      2019     2018     2019     2018  
                   
Performance Ratios:                  
Return on average assets (5)       0.74 %   0.79 %   0.65 %     0.73 %
Return on average stockholders' equity (5)       3.77      4.32     3.29       3.77  
Average stockholders' equity to average assets       19.56      18.20     19.86       19.29  
Stockholders' equity to total assets at end of period       16.87      18.04     16.87       18.04  
Net interest rate spread (1) (5)       3.10      3.19     3.17       3.39  
Net interest margin (2) (5)       3.34      3.41     3.41       3.57  
Average interest-earning assets to average interest-bearing liabilities       120.48     122.98     121.54       123.14  
Other expense to average assets       0.66       0.68     2.91       2.99  
Efficiency ratio (3)       67.30      68.06     72.59       71.92  
Dividend payout ratio       35.00      27.78     101.45       42.74  
                   


    At or for the   At or for the  
    Twelve Months Ended   Twelve Months Ended  
    December 31,   December 31,  
    2019   2018  
       
    (unaudited)  
Regulatory Capital Ratios (4):          
Total risk-based capital (to risk-weighted assets)   22.21 %  21.08 %
Tier 1 core capital (to risk-weighted assets)   20.96    19.88  
Common equity Tier 1 (to risk-weighted assets)   20.96    19.88  
Tier 1 leverage (to adjusted total assets)   15.00    15.16  
Asset Quality Ratios:          
Net charge-offs to average gross loans outstanding   0.11    0.16  
Allowance for loan losses to gross loans outstanding   1.17    1.10  
Non-performing loans to gross loans (6)   0.90    0.63  
Non-performing assets to total assets (6)   0.75    0.54  
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.