OTTAWA, Ill., Aug. 12, 2020 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the “Company”) (OTCQX: OTTW), the holding company for Ottawa Savings Bank, FSB (the “Bank”), announced net income of $0.8 million, or $0.25 per basic and diluted common share for the three months ended June 30, 2020, compared to net income of $0.4 million, or $0.14 per basic and diluted common share for the three months ended June 30, 2019.  For the six months ended June 30, 2020, the Company announced net income of $0.8 million, or $0.27 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, 2019.  During the second 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 $254.6 million as of June 30, 2020 from $247.8 million as of December 31, 2019. Non-performing loans decreased from $2.3 million at December 31, 2019 to $1.9 million at June 30, 2020, which caused the ratio of non-performing loans to gross loans to decrease from 0.90% at December 31, 2019 to 0.74% at June 30, 2020.  Additionally, through June 30, 2020, the Company has repurchased a total of 401,214 shares of its common stock at an average price of $13.80 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 continue to be very pleased with the response of our organization to the challenges presented by the COVID-19 pandemic.  We reopened our lobbies on June 8, 2020 after suspending access to them on March 19, 2020.  We are following the Centers for Disease Control and Prevention (CDC) and Illinois Department of Health (IDPH) guidelines regarding operating in the COVID-19 pandemic environment to ensure the health and safety of our employees and customers.  We continue to have a number of our employees working remotely and to leverage 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 is no different.  We continue to actively work with our customers that have been impacted by the COVID-19 pandemic to support them through this temporary downturn in the economy.  We assisted a number of our commercial customers through participating in the Small Business Administration’s Paycheck Protection Program to 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 continue to participate 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 June 30, 2020 and June 30, 2019

Net income for the three months ended June 30, 2020 was $0.8 million compared to net income of $0.4 million for the three months ended June 30, 2019. Total interest and dividend income was $3.0 million for the three months ended June 30, 2020 as compared to $3.1 million for the three months ended June 30, 2019.  Interest expense was $0.1 million lower during the three months ended June 30, 2020.  In addition, a provision for loan losses of $130,000 was taken during the three months ended June 30, 2020.  Due to the anticipated impact of the COVID-19 pandemic on the local and national economies, a qualitative factor was adjusted negatively which led to the provision level for the quarter along with the growth in the loan portfolio.  Net interest income after provision for loan losses remained comparable at $2.2 million.  Total other income increased to $1.1 million for the three months ended June 30, 2020, an increase of $0.6 million from the three months ended June 30, 2019, primarily due to strong loan origination levels for one-to-four family loans during the second quarter and an increase in gain on sale of loans and loan origination and servicing income.  Total other expenses rose to $2.3 million for the three months ended June 30, 2020 from $2.1 million for the three months ended June 30, 2019.  The increase of $0.2 million this quarter as compared to the second quarter of 2019 is primarily due to salaries and employee benefits increasing by $0.2 million as commissions on loan production were higher and data processing increased by $0.1 million during the second quarter of 2020.  These increases were slightly offset by a decrease in other expenses of $0.1 million.    
   
Net interest income increased by $0.1 million, or 4.3%, to $2.4 million for the three months ended June 30, 2020, compared to $2.3 million for the three months ended June 30, 2019.  Interest and dividend income were comparable between the periods.  There was an increase in the average balances of interest-earning assets of $21.1 million. The increase in interest and dividend income was slightly offset by a decrease in yield on earning assets from 4.54% for the three months ended June 30, 2019 to 4.10% for the three months ended June 30, 2020.  Additionally, there was a decrease in interest expense as the average cost of funds decreased 23 basis points to 1.11% for the three months ended June 30, 2020. The net interest margin decreased 25 basis points during the three months ended June 30, 2020 to 3.20% from 3.45% during the three months ended June 30, 2019.

The Company recorded a provision for loan losses of $0.1 million for the three month period ended June 30, 2020 as compared to $0.2 million for the three months ended June 30, 2019. The allowance for loan losses was $3.5 million, or 1.30% of total gross loans at June 30, 2020 compared to $2.6 million, or 1.07% of gross loans at June 30, 2019.  Net charge-offs during the second quarter of 2020 were $26,902 compared to $150,560 during the second quarter of 2019.  General allocation of reserves were higher at June 30, 2020, when compared to June 30, 2019, primarily due to the balances in most loan categories increasing during the twelve months ended June 30, 2020.  In addition, due to the anticipated impact of the COVID-19 pandemic on the local and national economies, a qualitative factor was adjusted negatively which led to the allowance for loan losses level for the second quarter of 2020.  Since non-performing loans increased, the necessary reserves on non-performing loans as of June 30, 2020 were approximately $37,000 higher than they were as of June 30, 2019 due to the deterioration of some credits and the fact that some of the non-performing loans that were added required higher specific allocation of reserves than those removed.

Total other income was $1.1 million for the three months ended June 30, 2020 as compared to $0.5 million for the three months ended June 30, 2019.  Due to increased levels of loan originations for the one-to-four family residential loan category, gain on sale of loans increased by $0.3 million and loan origination and servicing income increased by $0.2 million.  Additionally, the origination of mortgage servicing rights, net of amortization grew by $0.1 million.  Offsetting these increases slightly were decreases in customer service fees, gain on sale of repossessed assets and other income.

Total other expense was $2.3 million for the three months ended June 30, 2020 as compared to $2.1 million for the three months ended June 30, 2019.  There was an increase of $0.2 million in the salaries and employee benefits category and an increase of $0.1 million in data processing.  Salaries and employee benefits increased due to the higher commissions paid to the mortgage loan originators and overtime for support staff to process the loan application volume during the period.  Data processing increased due to the enhancement of our infrastructure to support the implementation of our new core processing system.  These increases were partially offset by decreases in loan expenses and other expenses. 

The Company recorded income tax expense of approximately $0.3 million for the three month period ended June 30, 2020 as compared to $0.1 million for the three months ended June 30, 2019.

Comparison of Results of Operations for the Six Months Ended June 30, 2020 and June 30, 2019

Net income was $0.8 million for both of the six-month periods ended June 30, 2020 and 2019.
   
Net interest income decreased by $0.1 million, or 2.1%, to $4.7 million for the six months ended June 30, 2020, from $4.8 million for the six months ended June 30, 2019.  Interest and dividend income decreased $0.1 million, or 1.0%, primarily due to a decrease of 35 basis points in the average yield on assets as it declined to 4.23% for the six months ended June 30, 2020 from 4.58% for the six months ended June 30, 2019.  This decrease was partially offset by an increase in the average balances of interest-earning assets of $19.3 million.  Additionally, there was a decrease in interest expense as the average cost of funds decreased 6 basis points to 1.23% for the six months ended June 30, 2020 from 1.29% for the six months ended June 30, 2019.  Average interest bearing liabilities grew by $17.0 million which offset the savings due to the lower rate environment so overall interest expense was comparable at $1.4 million.  Overall, the net interest margin decreased 30 basis points, or 8.52% during the six months ended June 30, 2020 to 3.22% from 3.52% as the lower rates caused a larger decline in the yield on the portfolio.

We recorded a provision for loan losses of $0.6 million for the six-month period ended June 30, 2020 as compared to $0.3 million for the sixth-month period ended June 30, 2019.  The allowance for loan losses was $3.5 million, or 1.30% of total gross loans at June 30, 2020 compared to $2.6 million, or 1.07% of gross loans at June 30, 2019.  Net charge-offs during the first six months of 2020 were $0.1 million compared to $0.3 million during the first six months of 2019.  General allocation of reserves were higher at June 30, 2020, when compared to June 30, 2019, primarily due to the balances in all loan categories increasing during the twelve months ended June 30, 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 allowance level.  Since non-performing loans increased, the necessary reserves on non-performing loans as of June 30, 2020 were approximately $37,000 higher than they were as of June 30, 2019 due to the deterioration of some credits and the fact that some of the non-performing loans added required higher specific allocation of reserves than those removed.

Total other income was $1.5 million for the six months ended June 30, 2020 as compared to $0.9 million for the six months ended June 30, 2019.  Due to increased levels of loan originations for the 1 to 4 family residential loan category, gain on sale of loans increased by $0.3 million and loan origination and servicing income increased by $0.2 million.  Additionally, the origination of mortgage servicing rights, net of amortization grew by $0.1 million.  There was a slight decrease in customer service fees which slightly offset the increases.

Total other expense increased $0.2 million, or 4.7%, to $4.4 million for the six months ended June 30, 2020, as compared to $4.2 million for the six months ended June 30, 2019.  The increase was primarily due to higher salaries and employee benefits due to the commissions paid to loan originators for elevated levels of loan originations and overtime for staff to process the loan applications. Additionally, data processing costs were elevated due to the enhancement of our infrastructure to support the implementation of our new core processing system.  These increases were partially 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, 2020 and 2019.

Comparison of Financial Condition at June 30, 2020 and December 31, 2019

Total consolidated assets as of June 30, 2020 were $312.2 million, an increase of $11.7 million, or 3.8%, from $300.5 million at December 31, 2019.  The increase was primarily due to an increase of $8.4 million in cash and cash equivalents, a $6.8 million increase in the net loan portfolio and a $1.4 million increase in other assets.  These increases were partially offset by a decrease in federal funds sold of $0.9 million, a decrease in securities available for sale of $1.1 million, a decrease in time deposits of $1.2 million, and a decrease in loans held for sale of $1.2 million.  Various other categories decreased by $0.5 million.  

Cash and cash equivalents increased $8.4 million, or 150.0%, to $14.4 million at June 30, 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 $12.4 million exceeding cash used in operating activities of $0.2 million and cash used in investing activities of $3.8 million.

Securities available for sale decreased $1.1 million, or 4.7%, to $23.4 million at June 30, 2020 from $24.5 million at December 31, 2019, as paydowns, calls, and maturities exceeded new securities purchases. 

Net loans increased $6.8 million, or 2.7%, to $254.6 million at June 30, 2020 compared to $247.8 million at December 31, 2019 primarily as a result of a $1.5 million increase in one-to-four family loans, an increase of $1.3 million in multi-family loans, an increase of $4.7 million in non-residential real estate loans and a $5.6 million increase in commercial loans.  The increases were offset by decreases of $3.0 million in consumer direct loans and $2.8 million in purchased auto loans.  Additionally, the allowance for loan losses grew by $0.5 million.     

Total deposits increased $6.2 million, or 2.6%, to $242.5 million at June 30, 2020 from $236.3 million at December 31, 2019.  For the six months ended June 30, 2020, savings accounts increased by $4.4 million, non-interest bearing checking accounts increased by $9.2 million and money market accounts increased by $1.9 million as compared to December 31, 2019.  The increases were offset by decreases in interest bearing checking accounts of $4.3 million and in certificates of deposit of $5.0 million as compared to December 31, 2019.

FHLB advances increased $8.5 million, or 93.4% to $17.6 million at June 30, 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 $1.1 million, or 2.2% to $49.6 million at June 30, 2020 from $50.7 million at December 31, 2019.  The decrease reflects $0.8 million used to repurchase and cancel 60,545 outstanding shares of Company common stock, and $1.5 million in cash dividends.  The decreases were partially offset by net income of $0.8 million for the six months ended June 30, 2020, an increase of $0.3 million in other comprehensive income due to an increase in fair value of securities available for sale 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. 

Contact Information

Craig Hepner
1-815-433-2525

Ottawa Bancorp, Inc. & Subsidiary
Consolidated Balance Sheets
June 30, 2020 and December 31, 2019
(Unaudited)
	June 30,				December 31,
		2020				2019
Assets
Cash and due from banks	$	9,328,130			$	5,272,925
Interest bearing deposits		5,098,694				765,486
Total cash and cash equivalents		14,426,824				6,038,411
Time deposits		250,000				1,483,500
Federal funds sold		3,265,000				4,185,000
Securities available for sale		23,409,087				24,515,759
Loans, net of allowance for loan losses of $3,460,693 and $2,937,632
at June 30, 2020 and December 31, 2019, respectively		254,583,540				247,775,814
Loans held for sale		-				1,225,526
Premises and equipment, net		6,393,260				6,517,922
Accrued interest receivable		839,091				875,104
Foreclosed real estate		18,000				-
Deferred tax assets		1,489,692				1,743,161
Cash value of life insurance		2,415,132				2,389,530
Goodwill		649,869				649,869
Core deposit intangible		150,998				169,999
Other assets		4,333,403				2,962,101
Total assets	$	312,223,896			$	300,531,696
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest bearing	$	22,874,013			$	13,664,986
Interest bearing		219,578,389				222,648,518
Total deposits		242,452,402				236,313,504
Accrued interest payable		97,519				8,146
FHLB advances		17,558,339				9,068,030
Other liabilities		2,504,410				4,431,141
Total liabilities		262,613,670				249,820,821
Stockholders' Equity
Common stock, $.01 par value, 12,000,000 shares authorized; 3,108,270 and 3,159,494
shares issued at June 30, 2020 and December 31, 2019, respectively		31,083				31,594
Additional paid-in-capital		32,149,753				32,845,639
Retained earnings		18,291,035				18,938,633
Unallocated ESOP shares		(1,335,030	)			(1,398,600	)
Unallocated management recognition plan shares		(81,845	)			(30,944	)
Accumulated other comprehensive income		555,231				324,553
Total stockholders' equity		49,610,226				50,710,875
Total liabilities and stockholders' equity	$	312,223,896			$	300,531,696

Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three and Six Months Ended June 30 2020 and 2019
(Unaudited)
		Three Months Ended							Six Months Ended
		June 30,							June 30,
			2020			2019				2020			2019
Interest and dividend income:
Interest and fees on loans		$	2,822,581		$	2,852,347			$	5,731,661		$	5,712,939
Securities:
Residential mortgage-backed and related securities			61,180			73,858				128,411			156,319
State and municipal securities			94,618			100,610				190,562			198,021
Dividends on non-marketable equity securities			6,698			6,277				13,288			12,711
Interest-bearing deposits			19,293			54,168				59,411			99,547
Total interest and dividend income			3,004,369			3,087,260				6,123,362			6,179,537
Interest expense:
Deposits			563,727			672,145				1,294,546			1,280,535
Borrowings			65,928			68,445				127,824			141,146
Total interest expense			629,655			740,590				1,422,370			1,421,681
Net interest income			2,374,714			2,346,670				4,700,992			4,757,856
Provision for loan losses			130,000			170,000				580,000			300,000
Net interest income after provision for loan losses			2,224,714			2,176,670				4,120,992			4,457,856
Other income:
Gain on sale of loans			463,730			173,334				570,796			258,291
Gain on sale of securities, net			-			-				857			-
Loan origination and servicing income			437,814			200,108				552,771			354,391
Origination of mortgage servicing rights, net of amortization			84,951			(3,045	)			74,508			(12,735	)
Customer service fees			83,011			125,079				189,850			240,945
Increase in cash surrender value of life insurance			12,904			11,912				25,602			23,846
Gain/(Loss) on sale of repossessed assets, net			300			8,544				16,331			7,796
Other			21,274			24,184				58,949			45,946
Total other income			1,103,983			540,116				1,489,665			918,480
Other expenses:
Salaries and employee benefits			1,358,457			1,188,291				2,623,103			2,286,849
Directors fees			47,000			43,000				90,000			86,000
Occupancy			149,392			157,060				327,917			328,010
Deposit insurance premium			16,500			14,465				16,500			31,565
Legal and professional services			101,244			102,398				205,866			197,933
Data processing			251,468			148,855				474,742			335,443
Loan expense			122,102			172,623				256,452			337,035
Valuation adjustments and expenses on foreclosed real estate			389			6,419				948			12,003
Other			234,846			315,864				446,511			598,751
Total other expenses			2,281,398			2,148,975				4,442,038			4,213,589
Income before income tax expense			1,067,299			567,811				1,168,619			1,162,747
Income tax expense			317,035			133,199				332,398			328,064
Net income		$	750,264		$	434,612			$	836,221		$	834,683
Basic earnings per share		$	0.25		$	0.14			$	0.27		$	0.26
Diluted earnings per share		$	0.25		$	0.14			$	0.27		$	0.26
Dividends per share		$	0.08		$	0.43			$	0.63		$	0.49

Ottawa Bancorp, Inc. & Subsidiary
Selected Financial Data and Ratios
(Unaudited)
								At June 30,			At December 31,
									2020			2019
								(In thousands, except per share data)
Financial Condition Data:
Total Assets								$ 312,224			$ 300,532
Loans, net (1)									254,584			247,776
Securities available for sale									23,409			24,516
Deposits									242,452			236,314
Stockholders' Equity									49,610			50,711
Book Value per common share								$15.96			$ 16.05
Tangible Book Value per common share (2)								$15.70			$ 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 June 30,						Six Months Ended June 30,
			2020			2019			2020			2019
		(In thousands, except per share data)						(In thousands, except per share data)
Operations Data:
Total interest and dividend income		$ 3,004			$ 3,087			$ 6,123			$ 6,180
Total interest expense			630			740			1,422			1,422
Net interest income			2,374			2,347			4,701			4,758
Provision for loan losses			130			170			580			300
Total other income			1,104			540			1,490			919
Total other expense			2,281			2,149			4,442			4,214
Income tax expense			317			133			332			328
Net income		$750			$435			$836			$835
Basic earnings per share		$0.25			$0.14			$0.27			$0.26
Diluted earnings per share		$0.25			$0.14			$0.27			$0.26
Dividends per share		$0.08			$0.43			$0.63			$0.49
		At or for the						At or for the
		Three Months Ended						Six Months Ended
		June 30,						June 30,
			2020			2019			2020			2019
Performance Ratios:
Return on average assets (5)			0.49	%		0.30	%		0.55	%		0.58	%
Return on average stockholders' equity (5)			2.66			1.48			2.90			2.85
Average stockholders' equity to average assets			18.30			20.14			18.99			20.19
Stockholders' equity to total assets at end of period			15.89			16.77			15.89			16.77
Net interest rate spread (1) (5)			3.00			3.20			3.00			3.28
Net interest margin (2) (5)			3.20			3.45			3.22			3.52
Average interest-earning assets to average interest-bearing liabilities			123.15			122.30			122.01			122.67
Other expense to average assets			0.72			0.73			1.43			1.45
Efficiency ratio (3)			65.33			74.44			71.62			74.23
Dividend payout ratio			33.31			188.46			177.77			141.03

						At or for the		At or for the
						Six Months Ended		Twelve Months Ended
						June 30,		December 31,
						2020		2019
						(unaudited)
Regulatory Capital Ratios (4):
Total risk-based capital (to risk-weighted assets)						20.29	%	22.21	%
Tier 1 core capital (to risk-weighted assets)						19.04		20.96
Common equity Tier 1 (to risk-weighted assets)						19.04		20.96
Tier 1 leverage (to adjusted total assets)						14.10		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						1.30		1.17
Non-performing loans to gross loans (6)						0.74		0.90
Non-performing assets to total assets (6)						0.62		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.