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Ottawa Bancorp, Inc. Announces Third Quarter 2018 Results

/EIN News/ -- OTTAWA, Ill., Oct. 25, 2018 (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 September 30, 2018, compared to net income of $0.5 million, or $0.14 per basic and diluted common share, for the three months ended September 30, 2017.  During the third quarter of 2018 the Company continued to grow its loan portfolio as it increased to $226.7 million at September 30, 2018 from $223.0 million at June 30, 2018.   Non-performing loans increased slightly from $1.3 million at June 30, 2018 to $1.5 million at September 30, 2018, which increased the ratio of non-performing loans to gross loans from 0.58% at June 30, 2018 to 0.63% at September 30, 2018, but it remains lower than the 0.75% at December 31, 2017.  Additionally, through September 30, 2018, the Company has repurchased a total of 100,235 shares of its common stock at an average price of $14.08 per share as part of the stock repurchase program announced on November 15, 2017.  During the quarter ended September 30, 2018, the Company has repurchased a total of 17,000 shares of its common stock at an average price of $13.88 per share as part of this program.

Comparison of Results of Operations for the Three Months Ended September 30, 2018 and September 30, 2017

Net income for the three months ended September 30, 2018 was $0.6 million compared to net income of $0.5 million for the three months ended September 30, 2017. The increase in net income of $0.1 million, or 29.8%, was primarily attributed to an increase in net interest income after provision for loan losses of $0.2 million, partially offset by an increase in total other expenses of $0.1 million. 
   
Net interest income increased by $0.1 million, or 6.6%, to $2.3 million for the three months ended September 30, 2018, from $2.2 million for the three months ended September 30, 2017.  Interest and dividend income increased $0.4 million, or 15.4%, primarily due to an increase in the average balances of interest-earning assets of $28.9 million. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased 36 basis points to 0.97% for the three months ended September 30, 2018. The net interest margin decreased 22 basis points, or 5.6% during the three months ended September 30, 2018 to 3.61% from 3.83%.

We recorded a provision for loan losses of approximately $0.1 million for the three-month period ended September 30, 2018 compared to $0.2 million for the three-month period ended September 30, 2017.  The allowance for loan losses was $2.6 million, or 1.14% of total gross loans at September 30, 2018 compared to $2.4 million, or 1.23% of gross loans at September 30, 2017.  Net charge-offs during the third quarter of 2018 were approximately $17 thousand compared to $0.1 million during the third quarter of 2017.  General reserves were higher at September 30, 2018, when compared to September 30, 2017, as the balances in most loan categories increased during the twelve months ended September 30, 2018. These increases to the allowance were partially off-set by improvements in historical loss levels and augmented by changes in qualitative factors during the twelve months ended September 30, 2018, as compared to the same period ended September 30, 2017.  Additionally, specific reserves as of September 30, 2018 were higher than they were as of September 30, 2017.

Total other income remained consistent at $0.6 million for the three months ended September 30, 2018 and September 30, 2017.  

Total other expense increased $0.1 million, or 6.4%, to $2.1 million for the three months ended September 30, 2018, as compared to $2.0 million for the three months ended September 30, 2017.  The increase was primarily due to higher salaries and employee benefits.

We recorded income tax expense of approximately $0.2 million for both the three-month periods ended September 30, 2018 and September 30, 2017.  

Comparison of Results of Operations for the Nine Months Ended September 30, 2018 and September 30, 2017

Net income was $1.4 million for the nine-month period ended September 30, 2018 compared to $1.3 million for the nine-month period ended September 30, 2017.   The increase in net income of $0.1 million or 11.6% was primarily attributed to
an increase in net interest income after provision for loan losses of $0.6 million partially offset by an increase in total other expenses of $0.5 million.
   
Net interest income increased by $0.5 million, or 7.5%, to $6.8 million for the nine months ended September 30, 2018, from $6.3 million for the nine months ended September 30, 2017.  Interest and dividend income increased $1.1 million, or 15.5%, primarily due to an increase in the average balances of interest-earning assets of $30.0 million. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased 32 basis points to 0.88% for the nine months ended September 30, 2018. The net interest margin decreased 21 basis points, or 5.5% during the nine months ended September 30, 2018 to 3.63% from 3.84%.

We recorded a provision for loan losses of approximately $0.4 million for the nine-month period ended September 30, 2018 and approximately $0.5 million for the nine months ended September 30, 2017.  The allowance for loan losses was $2.6 million, or 1.14% of total gross loans at September 30, 2018 compared to $2.4 million, or 1.23% of gross loans at September 30, 2017.  Net charge-offs during the first nine months of 2018 were comparable as they were $0.3 million during the same period for the first nine months of 2017 as well.  General reserves were higher at September 30, 2018, when compared to September 30, 2017, as the balances in most loan categories increased during the twelve months ended September 30, 2018. These increases to the allowance were partially off-set by improvements in historical loss levels and augmented by changes in qualitative factors during the twelve months ended September 30, 2018, as compared to the same period ended September 30, 2017.  Additionally, specific reserves as of September 30, 2018 were higher than they were as of September 30, 2017.

Total other income was comparable for the nine months ended September 30, 2018 and 2017 as it was approximately $1.7 million for both periods.  

Total other expense increased $0.5 million, or 8.3%, to $6.3 million for the nine months ended September 30, 2018, as compared to $5.8 million for the nine months ended September 30, 2017.  The increase was primarily due to higher other expenses, increased loan expenses, and higher salaries and employee benefits.

We recorded income tax expense of approximately $0.5 million for both of the nine-month periods ended September 30, 2018 and 2017.  

Comparison of Financial Condition at September 30, 2018 and December 31, 2017

Total consolidated assets as of September 30, 2018 were $277.7 million, an increase of $22.3 million, or 8.75%, from $255.4 million at December 31, 2017.  The increase was primarily due to an increase of $17.1 million in the net loan portfolio, an increase in cash and cash equivalents of $7.0 million, an increase in other assets of $0.4 million, and an increase in deferred tax assets of $0.2 million, partially off-set by decreases in securities available for sale of $1.5 million, decreases in non-marketable equity securities of $0.1 million, a decrease in federal funds sold of $0.7 million and a decrease in foreclosed real estate of $0.1 million.

Cash and cash equivalents increased $7.0 million, or 186.1%, to $10.7 million at September 30, 2018 from $3.7 million at December 31, 2017.  The increase in cash and cash equivalents was primarily a result of cash provided by financing activities of $21.3 million and cash provided by operating activities of $1.4 million exceeding cash used in investing activities of $15.7 million.

Securities available for sale decreased $1.5 million, or 5.6%, to $24.6 million at September 30, 2018 from $26.0 million at December 31, 2017, as paydowns, calls, and maturities exceeded new securities purchases. 

Net loans increased by $17.1 million, or 8.2% to $224.1 million at September 30, 2018 compared to $207.0 million at December 31, 2017 primarily as a result of an $8.9 million increase in one-to-four family loans, a $4.0 million increase in purchased auto loans, a $5.2 million increase in consumer direct loans, a $2.6 million increase in non-residential real estate loans, and a $0.7 million increase in multi-family residential loans, partially off-set by a $4.2 million decrease in commercial loans.

Total deposits increased $26.1 million, or 14.3%, to $208.9 million at September 30, 2018 from $182.8 million at December 31, 2017.  At September 30, 2018 checking accounts increased by $14.6 million and certificates of deposit increased by $14.3 million as compared to December 31, 2017. Offsetting these increases, money market accounts decreased by $2.2 million, and savings accounts decreased by $0.9 million since December 31, 2017.

FHLB advances decreased $3.0 million, or 19.9% to $12.1 million at September 30, 2018 compared to $15.1 million at December 31, 2017.

Stockholders’ equity decreased approximately $0.5 million, or 0.9% to $52.6 million at September 30, 2018 from $53.1 million at December 31, 2017.  The decrease reflects $1.2 million to repurchase and cancel 82,635 outstanding shares of Company common stock, $0.7 million in dividends and a decrease in other comprehensive income of $0.3 million related to a decrease in the fair value of securities available for sale. These decreases were partially off-set by net income of $1.4 million for the nine months ended September 30, 2018 and proceeds from stock options exercised and the allocation of ESOP shares totaling approximately $0.2 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.

Safe-Harbor

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
September 30, 2018 and December 31, 2017
(Unaudited)
  September 30,   December 31,
    2018       2017  
Assets      
Cash and due from banks $   3,705,861     $   2,426,924  
Interest bearing deposits     7,039,083         1,328,893  
Total cash and cash equivalents     10,744,944         3,755,817  
Time deposits     250,000         250,000  
Federal funds sold      198,000         939,000  
Securities available for sale     24,591,561         26,045,675  
Non-marketable equity securities     835,368         918,387  
Loans, net of allowance for loan losses of $2,594,433 and $2,472,446      
at September 30, 2018 and December 31, 2017, respectively     224,089,736         207,035,091  
Loans held for sale     543,000         499,375  
Premises and equipment, net     6,632,149         6,670,088  
Accrued interest receivable     842,124         794,449  
Foreclosed real estate      -         84,100  
Deferred tax assets     2,092,546         1,870,490  
Cash surrender value of life insurance     2,329,421         2,293,800  
Goodwill     649,869         649,869  
Core deposit intangible     242,500         286,000  
Other assets     3,695,089         3,307,734  
Total assets $   277,736,307     $   255,399,875  
Liabilities and Stockholders' Equity      
Liabilities      
Deposits:      
Non-interest bearing $   11,911,007     $   11,562,801  
Interest bearing     196,951,697         171,211,823  
Total deposits     208,862,704         182,774,624  
Accrued interest payable     8,693         661  
FHLB advances     12,097,677         15,105,287  
Other liabilities     4,120,214         4,416,368  
Total liabilities     225,089,288         202,296,940  
Stockholders' Equity      
Common stock, $.01 par value, 12,000,000 shares authorized; 3,383,160 and 3,451,802      
shares issued at September 30, 2018 and December 31, 2017, respectively     33,832         34,518  
Additional paid-in-capital     35,923,153         36,949,508  
Retained earnings     18,450,924         17,720,962  
Unallocated ESOP shares     (1,621,120 )       (1,754,632 )
Accumulated other comprehensive (loss) income     (139,770 )       152,579  
Total stockholders' equity     52,647,019         53,102,935  
Total liabilities and stockholders' equity $   277,736,307     $   255,399,875  
               


 Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2018 and 2017
(Unaudited)
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
    2018     2017     2018     2017
Interest and dividend income:              
Interest and fees on loans $   2,596,019   $   2,204,397   $   7,541,652   $   6,291,581
Securities:              
Residential mortgage-backed and related securities     67,156       98,541       205,975       360,557
State and municipal securities     102,269       116,431       305,920       373,999
Dividends on non-marketable equity securities     5,079       1,812       14,473       5,154
Interest-bearing deposits     30,516       5,357       75,864       21,403
Total interest and dividend income     2,801,039       2,426,538       8,143,884       7,052,694
Interest expense:              
Deposits     454,352       247,897       1,187,481       676,374
Borrowings     46,584       20,564       143,129       35,624
Total interest expense     500,936       268,461       1,330,610       711,998
Net interest income     2,300,103       2,158,077       6,813,274       6,340,696
Provision for loan losses     65,000       210,000       377,500       460,000
Net interest income after provision for loan losses      2,235,103       1,948,077       6,435,774       5,880,696
Other income:              
Gain on sale of securities     -       77,028       -       98,230
Gain on sale of loans     155,656       205,375       464,527       522,360
Gain on sale of foreclosed real estate     59,511       5,182       101,546       29,242
Gain on sale of repossessed assets     8,911       1,123       13,094       15,419
Loan origination and servicing income     244,351       159,078       615,369       462,787
Origination of mortgage servicing rights, net of amortization     4,124       21,293       26,977       55,405
Customer service fees     135,710       123,288       384,717       360,359
Increase in cash surrender value of life insurance     11,986       11,999       35,621       36,182
Other     23,973       28,940       72,607       89,044
Total other income     644,222       633,306       1,714,458       1,669,028
Other expenses:              
Salaries and employee benefits     1,139,592       1,047,416       3,255,532       3,124,939
Directors fees     43,000       40,800       137,750       122,400
Occupancy     159,892       158,716       494,353       484,496
Deposit insurance premium     17,107       15,437       49,933       41,648
Legal and professional services     89,623       92,007       279,273       282,129
Data processing     169,316       144,137       485,210       435,244
Loss on sale of securities     -       47,603       -       55,169
Loan expense     189,814       152,645       552,483       403,088
Valuation adjustments and expenses on foreclosed real estate     4,465       2,662       25,265       10,184
Loss on sale of OREO     -       336       2,438       336
Loss on sale of repossessed assets     3,745       -       8,166       274
Other     280,830       269,710       957,569       807,889
Total other expenses     2,097,384       1,971,469       6,247,972       5,767,796
Income before income tax expense     781,941       609,914       1,902,260       1,781,928
Income tax expense     191,798       155,163       476,662       504,332
Net income $   590,143   $   454,751   $   1,425,598   $   1,277,596
Basic earnings per share $   0.18   $   0.14   $   0.44   $   0.39
Diluted earnings per share $   0.18   $   0.14   $   0.44   $   0.39
Dividends per share $   0.05   $   0.04   $   0.215   $   0.12
               


 
Ottawa Bancorp, Inc. & Subsidiary
Selected Financial Data and Ratios
(Unaudited)
    At September 30,     At December 31,          
    2018     2017          
    (In thousands, except per share data)          
Financial Condition Data:                    
Total Assets   $277,736     $255,400          
Loans, net (1)   224,090     207,035          
Securities available for sale   24,592     26,046          
Deposits   208,863     182,775          
Stockholders' Equity   52,647     53,103          
Book Value per common share   $15.56     $15.38          
Tangible Book Value per common share (2)   $15.30     $15.11          
 
(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 September 30,   Nine Months Ended September 30,
  2018   2017   2018   2017
  (In thousands, except per share data)
Operations Data:              
Total interest and dividend income  $2,801    $2,426    $8,144    $7,053
Total interest expense  501    268   1,331    712
Net interest income  2,300    2,158    6,813    6,341
Provision for loan losses  65    210    377    460
Other income  644    633    1,714   1,669
Other expense  2,097    1,971    6,248    5,768
Income tax expense  192    155    477    504
Net income $590   $455   $1,425   $1.278
Basic earnings per share $0.18   $0.14   $0.44   $0.39
Diluted earnings per share $0.18   $0.14   $0.44   $0.39
Dividends per share $0.05   $0.04   $0.215   $0.12
               


  At or for the Three Months Ended    At or for the Nine Months Ended
  September 30,   September 30, 
  2018   2017   2018   2017
Performance Ratios:                      
Return on average assets  0.86 %   0.74 %   0.71 %   0.71 %
Return on average stockholders' equity  4.48     3.44     3.61     3.24  
Average stockholders' equity to average assets 19.2     21.65     19.55     22.01  
Stockholders' equity to total assets at end of period 18.96     21.53     18.96     21.53  
Net interest rate spread (1) 3.43     3.69     3.47     3.72  
Net interest margin (2) 3.62     3.83     3.63     3.84  
Average interest-earning assets to average interest-bearing  liabilities 123.44      128.94      123.66     128.98  
Other expense to average assets 0.76     0.81     2.32     2.42  
Efficiency ratio (3) 71.23     70.62     73.27     72.01  
Dividend payout ratio 27.34     28.57     48.8     30.77  


  At September 30,   At December 31,
  2018   2017
  (unaudited)
Regulatory Capital Ratios (4):          
Total risk-based capital (to risk-weighted assets)  21.05 %    22.52 %
Tier 1 core capital (to risk-weighted assets)  19.84      21.27  
Common equity Tier 1 (to risk-weighted assets)  19.84      21.27  
Tier 1 leverage (to adjusted total assets)  15.71      16.21  
Asset Quality Ratios:          
Net charge-offs to average gross loans outstanding  0.23      0.18  
Allowance for loan losses to gross loans outstanding  1.14      1.18  
Non-performing loans to gross loans (5)  0.63      0.75  
Non-performing assets to total assets (5)  0.52      0.65  
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) Nonperforming loans and assets include accruing loans past due 90 days or more.
 

Jon Kranov 
President and Chief Executive Officer 
(815) 366-5436


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