U.S. Markets closed

Ottawa Bancorp, Inc. Announces Second Quarter 2019 Results

OTTAWA, Ill., Aug. 02, 2019 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the “Company”) (Nasdaq CM: OTTW), the holding company for Ottawa Savings Bank, FSB (the “Bank”), announced net income of $0.4 million, or $0.14 per basic and diluted common share for the three months ended June 30, 2019, compared to net income of $0.4 million, or $0.11 per basic and diluted common share for the three months ended June 30, 2018.  For the six months ended June 30, 2019, the bank announced net income of $0.8 million, or $0.26 per basic and diluted common share, compared to net income of $0.8 million, or $0.26 per basic and diluted common share for the six months ended June 30, 2018.   During the second quarter of 2019, the Company experienced an increase in non-performing loans.  Non-performing loans increased from $1.5 million at December 31, 2018 to $1.9 million at June 30, 2019, which caused the ratio of non-performing loans to gross loans to increase from 0.63% at December 31, 2018 to 0.75% at June 30, 2019.  Additionally, through June 30, 2019, the Company has repurchased a total of 275,570 shares of its common stock at an average price of $14.20 per share as part of the stock repurchase program approved on November 7, 2018 and its previous program which expired in November, 2018. 

Comparison of Results of Operations for the Three Months Ended June 30, 2019 and June 30, 2018

Net income for the three months ended June 30, 2019 was $434,612 compared to net income of $355,873 for the three months ended June 30, 2018. The increase in net income of $78,739 or 22.1%, was primarily attributed to an increase in net interest income after provision for loan losses of $56,394 and a decrease in total other expenses of $58,134. The increases were partially offset by a decrease in total other income of $15,294 and an increase in taxes of $20,495.   
   
Net interest income increased by $0.04 million, or 1.71%, to $2.35 million for the three months ended June 30, 2019, from $2.31 million for the three months ended June 30, 2018.  Interest and dividend income increased $0.3 million, or 12.01%, primarily due to an increase in the average balances of interest-earning assets of $19.9 million. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased 45 basis points to 1.33% for the three months ended June 30, 2019. The net interest margin decreased 21 basis points during the three months ended June 30, 2019 to 3.45% from 3.66%.

We recorded a provision for loan losses of $0.2 million for the three-month periods ended June 30, 2019 and 2018. The allowance for loan losses was $2.6 million, or 1.07% of total gross loans at June 30, 2019 compared to $2.5 million, or 1.14% of gross loans at June 30, 2018.  Net charge-offs during the second quarter of 2019 were $150,559 compared to $211,547 during the second quarter of 2018.  General reserves were higher at June 30, 2019, when compared to June 30, 2018, primarily due to the balances in most loan categories increasing during the twelve months ended June 30, 2019. Additionally, changes in qualitative factors during the twelve months ended June 30, 2019, as compared to the twelve months ended June 30, 2018, increased the general reserve slightly.  These increases to the allowance were partially off-set by improvements in historical loss levels.  Although non-performing loans increased, specific reserves as of June 30, 2019 were approximately $90,000 lower than they were as of June 30, 2018 due to the transfer of one loan to OREO and the charge-off of the specific reserve for another loan.

Total other income decreased $0.02 million, to $0.54 million for the three months ended June 30, 2019, as compared to $0.56 million for the three months ended June 30, 2018. The decrease was primarily due to lower revenues related to mortgage banking activity as mortgage production continues to lag as compared to 2018 levels.

Total other expense decreased $0.1 million, or 2.6%, to $2.1 million for the three months ended June 30, 2019, as compared to $2.2 million for the three months ended June 30, 2018.  The decrease was primarily due to lower costs in the other expense category. Although most expense categories are lower for the 2019 period than in 2018, salaries and employee benefit costs increased over 2018 levels due to the addition of a commercial lender and a senior credit analyst, which offset most of the favorable results.

We recorded income tax expense of $0.1 million for both of the three-month periods ended June 30, 2019 and 2018.

Comparison of Results of Operations for the Six Months Ended June 30, 2019 and June 30, 2018

Net income was $0.8 million for both of the six-month periods ended June 30, 2019 and 2018.
   
Net interest income increased by $0.3 million, or 5.4%, to $4.8 million for the six months ended June 30, 2019, from $4.5 million for the six months ended June 30, 2018.  Interest and dividend income increased $0.8 million, or 15.7%, primarily due to an increase in the average balances of interest-earning assets of $22.3 million. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased 46 basis points to 1.29% for the six months ended June 30, 2019. The net interest margin decreased 12 basis points, or 3.30% during the six months ended June 30, 2019 to 3.52% from 3.64%.

We recorded a provision for loan losses of $0.3 million for both of the six-month periods ended June 30, 2019 and 2018.  The allowance for loan losses was $2.6 million, or 1.07% of total gross loans at June 30, 2019 compared to $2.5 million, or 1.14% of gross loans at June 30, 2018.  Net charge-offs during the first six months of 2019 were $279,934 compared to $238,960 during the first six months of 2018.  General reserves were higher at June 30, 2019, when compared to June 30, 2018, primarily due to the balances in all loan categories increasing during the twelve months ended June 30, 2019. These increases to the allowance were partially off-set by improvements in historical loss levels and changes in qualitative factors during the twelve months ended June 30, 2019, as compared to the twelve months ended June 30, 2018.  Although non-performing loans increased, specific reserves as of June 30, 2019 were approximately $90,000 lower than they were as of June 30, 2018 due to the transfer of one loan to OREO and the charge-off of the specific reserve for another loan.

Total other income decreased slightly to $0.9 million for the six months ended June 30, 2019, as compared to $1.1 million for the six months ended June 30, 2018.  The decrease was primarily due to decreases in loan origination and servicing income, gain on sale of foreclosed real estate and gain on sale of loans.

Total other expense increased $0.07 million, or 1.7%, to $4.21 million for the six months ended June 30, 2019, as compared to $4.14 million for the six months ended June 30, 2018.  The increase was primarily due to higher salaries and employee benefits, legal and professional fees and data processing costs which was offset by lower costs in loan expense and other expense. 

We recorded income tax expense of approximately $0.3 million for both of the six-month periods ended June 30, 2019 and 2018.

Comparison of Financial Condition at June 30, 2019 and December 31, 2018

Total consolidated assets as of June 30, 2019 were $301.6 million, an increase of $8.8 million, or 3.0%, from $292.8 million at December 31, 2018.  The increase was primarily due to an increase of $9.2 million in the net loan portfolio, an increase in federal funds sold of $2.5 million, an increase in OREO of $0.2 million as well as a $0.1 million increase in several asset categories, partially off-set by decreases in cash and cash equivalents of $2.2 million, securities available for sale of $0.6 million and other assets of $0.4 million.

Cash and cash equivalents decreased $2.2 million, or 26.5%, to $6.2 million at June 30, 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 $11.3 million exceeding cash provided by financing activities of $7.5 million and cash provided by operating activities of $1.6 million.

Securities available for sale decreased $0.6 million, or 2.4%, to $24.9 million at June 30, 2019 from $25.5 million at December 31, 2018, as paydowns, calls, and maturities exceeded new securities purchases. 

Net loans increased by $9.2 million, or 3.9%, to $245.1 million at June 30, 2019 compared to $235.9 million at December 31, 2018 primarily as a result of a $9.3 million increase in one-to-four family loans, a $6.9 million increase in commercial loans and a $3.3 million increase in consumer direct loans.  The increases were off-set by decreases of $6.4 million in non-residential real estate loans and $3.9 million in purchased auto loans. 

Total deposits increased $5.6 million, or 2.5%, to $229.0 million at June 30, 2019 from $223.4 million at December 31, 2018.  At June 30, 2019, non-interest bearing checking accounts increased $4.0 million, savings accounts increased by $2.1 million and certificates of deposit increased by $6.9 million as compared to December 31, 2018.  The increases were offset by a decrease in checking accounts which decreased by $6.4 million and money market accounts which decreased by $1.0 million as compared to December 31, 2018.

FHLB advances increased $5.5 million, or 45.4% to $17.6 million at June 30, 2019 compared to $12.1 million at December 31, 2018.  The additional FHLB advances were used to fund loan growth.

Stockholders’ equity decreased $2.2 million, or 4.3% to $50.6 million at June 30, 2019 from $52.8 million at December 31, 2018.  The decrease reflects $2.0 million used to repurchase and cancel 139,349 outstanding shares of Company common stock and $1.6 million in declared dividends.  The decreases were partially offset by other comprehensive income which increased by $0.3 million related to an increase in the fair value of securities available for sale and net income of $0.8 million for the six months ended June 30, 2019 and proceeds from stock options exercised. 

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
June 30, 2019 and December 31, 2018
(Unaudited)
  June 30,   December 31,
    2019       2018  
Assets      
Cash and due from banks $ 4,512,795     $ 2,416,568  
Interest bearing deposits   1,683,645       6,013,890  
Total cash and cash equivalents   6,196,440       8,430,458  
Time deposits   250,000       250,000  
Federal funds sold   8,118,000       5,663,000  
Securities available for sale   24,926,481       25,533,767  
Loans, net of allowance for loan losses of $2,647,805 and $2,627,738              
at June 30, 2019 and December 31, 2018, respectively   245,111,776       235,926,419  
Loans held for sale   121,125       -  
Premises and equipment, net   6,637,592       6,621,080  
Accrued interest receivable   846,113       824,542  
Foreclosed real estate   196,000       -  
Deferred tax assets   1,842,234       1,898,141  
Cash value of life insurance   2,365,299       2,341,453  
Goodwill   649,869       649,869  
Core deposit intangible   199,000       228,000  
Other assets   4,096,004       4,469,350  
Total assets $ 301,555,933     $ 292,836,079  
Liabilities and Stockholders' Equity              
Liabilities              
Deposits:              
Non-interest bearing $ 18,034,007     $ 14,057,719  
Interest bearing   210,959,119       209,390,810  
Total deposits   228,993,126       223,448,529  
Accrued interest payable   12,199       5,648  
FHLB advances   17,577,635       12,087,152  
Other liabilities   4,413,353       4,470,384  
Total liabilities   250,996,313       240,011,713  
Commitments and contingencies              
Stockholders' Equity              
Common stock, $.01 par value, 12,000,000 shares authorized; 3,223,318 and 3,358,922              
shares issued at June 30, 2019 and December 31, 2018, respectively   32,233       33,589  
Additional paid-in-capital   33,614,487       35,579,606  
Retained earnings   18,125,450       18,859,232  
Unallocated ESOP shares   (1,487,608 )     (1,576,616 )
Unallocated management recognition plan shares   (34,980 )     (40,361 )
Accumulated other comprehensive income (loss)   310,038       (31,084 )
Total stockholders' equity   50,559,620       52,824,366  
Total liabilities and stockholders' equity $ 301,555,933     $ 292,836,079  
               


Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2019 and 2018
(Unaudited)
    Three Months Ended   Six Months Ended
    June 30,   June 30,
      2019       2018       2019       2018  
Interest and dividend income:                
Interest and fees on loans   $ 2,852,347     $ 2,546,964     $ 5,712,939     $ 4,945,633  
Securities:                
Residential mortgage-backed and related securities     73,858       71,353       156,319       138,819  
State and municipal securities     100,610       103,203       198,021       203,651  
Dividends on non-marketable equity securities     6,277       5,208       12,711       9,394  
Interest-bearing deposits     54,168       29,554       99,547       45,348  
Total interest and dividend income     3,087,260       2,756,282       6,179,537       5,342,845  
Interest expense:                
Deposits     672,145       400,605       1,280,535       733,129  
Borrowings     68,445       48,401       141,146       96,545  
Total interest expense     740,590       449,006       1,421,681       829,674  
Net interest income     2,346,670       2,307,276       4,757,856       4,513,171  
Provision for loan losses     170,000       187,000       300,000       312,500  
Net interest income after provision for loan losses      2,176,670       2,120,276       4,457,856       4,200,671  
Other income:                
Gain on sale of loans     173,334       175,660       258,291       308,871  
Gain/(Loss) on sale of foreclosed real estate, net     -       (2,438 )     -       39,597  
Loan origination and servicing income     200,108       208,146       354,391       371,018  
Origination of mortgage servicing rights, net of amortization     (3,045 )     9,999       (12,735 )     22,853  
Customer service fees     125,079       126,012       240,945       249,007  
Increase in cash surrender value of life insurance     11,912       11,865       23,846       23,635  
Gain/(Loss) on sale of repossessed assets, net     8,544       2,470       7,796       (238 )
Other     24,184       23,696       45,946       48,634  
Total other income     540,116       555,410       918,480       1,063,377  
Other expenses:                                
Salaries and employee benefits     1,188,291       1,103,496       2,286,849       2,115,940  
Directors fees     43,000       46,750       86,000       94,750  
Occupancy     157,060       160,390       328,010       334,461  
Deposit insurance premium     14,465       16,430       31,565       32,826  
Legal and professional services     102,398       100,949       197,933       189,650  
Data processing     148,855       161,121       335,443       315,894  
Loan expense     172,623       193,862       337,035       362,669  
Valuation adjustments and expenses on foreclosed real estate     6,419       11,788       12,003       20,800  
Other     315,864       412,323       598,751       676,739  
Total other expenses     2,148,975       2,207,109       4,213,589       4,143,729  
Income before income tax expense     567,811       468,577       1,162,747       1,120,319  
Income tax expense     133,199       112,704       328,064       284,864  
Net income   $ 434,612     $ 355,873     $ 834,683     $ 835,455  
Basic earnings per share   $ 0.14     $ 0.11     $ 0.26     $ 0.26  
Diluted earnings per share   $ 0.14     $ 0.11     $ 0.26     $ 0.26  
Dividends per share   $ 0.43     $ 0.05     $ 0.49     $ 0.165  
                                 


Ottawa Bancorp, Inc. & Subsidiary  
Selected Financial Data and Ratios  
(Unaudited)  
            At June 30,   At December 31,  
              2019     2018  
               
            (In thousands, except per share data)  
Financial Condition Data:                  
Total Assets           $301,556   $292,836  
Loans, net (1)             245,112     235,926  
Securities available for sale             24,926     25,534  
Deposits             228,993     223,449  
Stockholders' Equity             50,560     52,824  
Book Value per common share           $15.69   $15.73  
Tangible Book Value per common share (2)           $15.42   $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 June 30,   Six Months Ended June 30,  
      2019     2018     2019     2018  
           
           
    (In thousands, except per share data)   (In thousands, except per share data)  
Operations Data:                  
Total interest and dividend income   $3,087   $2,756   $6,180   $5,343  
Total interest expense     740     449     1,422     830  
Net interest income     2,347     2,307     4,758     4,513  
Provision for loan losses     170     187     300     313  
Total other income     540     556     919     1,064  
Total other expense     2,149     2,207     4,214     4,144  
Income tax expense     133     113     328     285  
Net income   $435   $356   $835   $835  
Basic earnings per share   $0.14   $0.11   $0.26   $0.26  
Diluted earnings per share   $0.14   $0.11   $0.26   $0.26  
Dividends per share   $0.43   $0.05   $0.49   $0.165  
                   
    At or for the   At or for the  
    Three Months Ended   Six Months Ended  
    June 30,   June 30,  
      2019     2018     2019     2018  
Performance Ratios:                  
Return on average assets (5)     0.30 %   0.52 %   0.58 %   0.63 %
Return on average stockholders' equity (5)     1.48     2.71     2.85     3.17  
Average stockholders' equity to average assets     20.14     19.26     20.19     19.73  
Stockholders' equity to total assets at end of period     16.77     19.16     16.77     19.16  
Net interest rate spread (1) (5)     3.20     3.48     3.28     3.48  
Net interest margin (2) (5)     3.45     3.66     3.52     3.64  
Average interest-earning assets to average interest-bearing liabilities     122.3     124.06     122.67     123.91  
Other expense to average assets     0.73     0.81     1.45     1.55  
Efficiency ratio (3)     74.44     77.11     74.23     74.35  
Dividend payout ratio     188.46     45.45     141.03     63.46  
                           


            At or for the   At or for the  
            Six Months Ended   Twelve Months Ended  
            June 30,   December 31,  
            2019   2018  
               
            (unaudited)  
Regulatory Capital Ratios (4):                  
Total risk-based capital (to risk-weighted assets)           21.85 % 21.08 %
Tier 1 core capital (to risk-weighted assets)           20.62   19.88  
Common equity Tier 1 (to risk-weighted assets)           20.62   19.88  
Tier 1 leverage (to adjusted total assets)           15.45   15.16  
Asset Quality Ratios:                  
Net charge-offs to average gross loans outstanding (5)           0.23   0.16  
Allowance for loan losses to gross loans outstanding           1.07   1.10  
Non-performing loans to gross loans (6)           0.75   0.63  
Non-performing assets to total assets (6)           0.70   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.