OTTAWA, Ill., Feb. 04, 2021 (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 $0.30 per basic and diluted common share for the three months ended December 31, 2020, compared to net income of $0.6 million, or $0.18 per basic and diluted common share for the three months ended December 31, 2019. For the twelve months ended December 31, 2020, the Company announced net income of $2.48 million, or $0.84 per basic and diluted common share, compared to net income of $1.94 million, or $0.62 per basic and diluted common share for the twelve months ended December 31, 2019. The loan portfolio, net of allowance, increased to $255.1 million as of December 31, 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 December 31, 2020, which caused the ratio of non-performing loans to gross loans to decrease from 0.90% at December 31, 2019 to 0.62% at December 31, 2020. Additionally, through December 31, 2020, the Company has repurchased a total of 562,256 shares of its common stock at an average price of $12.98 per share as part of the stock repurchase program approved on November 19, 2019 and its previous stock repurchase programs that had expired prior to December 31, 2020.

Craig Hepner, President and Chief Executive Officer of the Company, said, “I am extremely pleased with the Company’s performance in the fourth quarter and throughout 2020. I cannot say enough about the outstanding job our team members did in working through the challenges faced, first with our data system conversion in early 2020 and throughout the year as a result of the COVID-19 pandemic. Everyone truly demonstrated what community banking is all about, supporting our customers and the communities we serve.”

“We remain cautiously optimistic as we enter 2021 that our national, state and local economies will fully re-open and begin to heal from one of the most challenging times in our history. Although the timing and strength of an economic recovery remain uncertain, we believe that the Company is well positioned, given our strong capital, asset quality and liquidity positions, to flourish as economic activity rebounds. We look forward to continuing to play a vital role in support of our customers, shareholders and communities as we work to overcome the challenges we still face in the wake of the pandemic,” said Mr. Hepner.

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

Net income for the three months ended December 31, 2020 was $0.8 million compared to net income of $0.6 million for the three months ended December 31, 2019. Total interest and dividend income was $3.1 million for the three months ended December 31, 2020 as compared to $3.2 million for the three months ended December 31, 2019. Interest expense was $0.3 million lower during the three months ended December 31, 2020 resulting in net interest income of $2.6 million as compared to $2.4 million for the three months ended December 31, 2019. In addition, there was no provision for loan losses taken during the three months ended December 31, 2020 as the economy stabilized and unemployment levels improved. Net interest income after provision for loan losses was $2.6 million for the three months ended December 31, 2020 as compared to $2.2 million for the three months ended December 31, 2019. Total other income was $0.8 million for the three months ended December 31, 2020 compared to $0.6 million for the three months ended December 31, 2019. Total other expenses were at $2.4 million for the three months ended December 31, 2020 compared to $2.0 million for the three months ended December 31, 2019.

Net interest income increased by $0.2 million, or 11.0%, to $2.6 million for the three months ended December 31, 2020, compared to $2.4 million for the three months ended December 31, 2019. Interest and dividend income declined slightly by $0.1 million to $3.1 million for the three months ended December 31, 2020 as compared to $3.2 million for the three months ended December 31, 2019. The yield on earning assets decreased from 4.52% for the three months ended December 31, 2019 to 4.38% for the three months ended December 31, 2020 causing the decline in interest and dividend income. This decrease was slightly offset by the growth in earning assets of $4.1 million. Additionally, interest expense declined $0.3 million due to lower interest rates as cost of funds declined from 1.42% to 0.89% as of December 31, 2020 or a reduction of 53 basis points or 37.3%. Due to the decrease in the cost of funds, the net interest margin grew by 31 basis points during the three months ended December 31, 2020, to 3.65% from 3.34% during the three months ended December 31, 2019.

The Company recorded no provision for loan losses for the three-month period ended December 31, 2020 as compared to $0.2 million for the three months ended December 31, 2019. The allowance for loan losses was $3.5 million, or 1.35% of total gross loans at December 31, 2020 compared to $2.9 million, or 1.17% of gross loans at December 31, 2019. Net recoveries during the fourth quarter of 2020 were ($19,956) compared to ($26,811) during the fourth quarter of 2019. General allocation of reserves was higher at December 31, 2020, when compared to December 31, 2019, primarily due to the balances in most loan categories increasing during the twelve months ended December 31, 2020 and increasing the qualitative factors throughout 2020 in anticipation of the negative economic impact as a result of the COVID-19 pandemic. As of December 31, 2020, non-performing loans decreased to $1.9 million which allowed the necessary reserves on non-performing loans as of December 31, 2020 to be approximately $131,000 lower than they were as of December 31, 2019 due to improvement in some credits which previously necessitated higher specific allocation of reserves.

Total other income was $0.8 million for the three months ended December 31, 2020 as compared to $0.6 million for the three months ended December 31, 2019. As a result of increased levels of originations in the one-to-four family residential loan category, gain on sale of loans increased by $0.3 million. Offsetting this increase slightly were decreases in loan origination and servicing income, customer service fees and origination of mortgage servicing rights, net of amortization. The origination of mortgage servicing rights, net of amortization was ($0.1) million due to the adjustment of the value of the servicing portfolio based on a third-party valuation that was conducted during the fourth quarter of 2020.

Total other expense was $2.4 million for the three months ended December 31, 2020 as compared to $2.0 million for the three months ended December 31, 2019 which primarily resulted from an increase of $0.4 million in the salaries and employee benefits category. Salaries and employee benefits increased due to the higher commissions paid to mortgage loan originators and overtime paid to support staff to process the increased loan application volume during the period. These increases were partially offset by decreases in other expenses.

The Company recorded income tax expense of approximately $0.1 million for the three-month period ended December 31, 2020 as compared to $0.2 million for the three months ended December 31, 2019.

Comparison of Results of Operations for the Twelve Months Ended December 31, 2020 and December 31, 2019

Net income was $2.48 million for the twelve-month period ended December 31, 2020 compared to $1.94 million for the twelve-month period ended December 31, 2019 or an increase of 28.1%. Interest expense for the period was $0.6 million lower due to the lower interest rate environment in 2020 which resulted in an increase in the net interest income for the period of $0.4 million to $9.8 million. Additionally, total other income increased by $0.8 million during the period to $3.3 million as a result of stronger mortgage loan origination levels throughout 2020. This increase was slightly offset by higher other expense levels which increased $0.7 million to $9.3 million for the twelve months ended December 31, 2020. The increase in other expense was the result of salaries and employee benefits increasing by $0.8 million due to overtime paid during our core data system conversion in the spring, higher commissions paid to mortgage loan originators throughout the year and overtime paid to support staff to process the increased loan application volume in 2020.

Net interest income increased by $0.4 million, or 4.4%, to $9.8 million for the twelve months ended December 31, 2020, from $9.4 million for the twelve months ended December 31, 2019. Interest and dividend income decreased $0.2 million, or 1.5%, primarily due to a decrease of 27 basis points in the average yield on assets which declined to 4.26% for the twelve months ended December 31, 2020 from 4.53% for the twelve months ended December 31, 2019. This decrease was partially offset by an increase in the average balances of non-interest-earning assets of $12.8 million. Interest expense decreased $0.6 million as the average cost of funds decreased 30 basis points to 1.06% for the twelve months ended December 31, 2020 from 1.36% for the twelve months ended December 31, 2019. This decrease in interest expense which is attributed to the interest rate reduction was slightly offset by an increase in interest expense due to an increase in average interest-bearing liabilities of $9.4 million. Overall, interest expense decreased by $0.6 million to $2.5 million for the twelve months ended December 31, 2020 as compared to $3.1 million for the twelve months ended December 31, 2019. The net interest margin decreased by 2 basis points, or 0.47%, during the twelve months ended December 31, 2020 to 3.39% from 3.41% as the lower interest rate environment had a larger negative impact on the yield on the earning asset portfolio.

We recorded a provision for loan losses of $0.7 million for the twelve-month period ended December 31, 2020 as compared to $0.6 million for the twelve-month period ended December 31, 2019. The allowance for loan losses was $3.5 million, or 1.35% of total gross loans at December 31, 2020 compared to $2.9 million, or 1.17% of gross loans at December 31, 2019. Net charge-offs during the first twelve months of 2020 were $0.1 million compared to $0.3 million during the first twelve months of 2019. General allocation of reserves were higher at December 31, 2020, when compared to December 31, 2019, primarily due to the balances in all loan categories increasing during the twelve months ended December 31, 2020. In addition, due to the anticipated negative impact of the COVID-19 pandemic on the local and national economies, qualitative factors in the allowance calculation were adjusted negatively which led to an increase in the allowance level. As of December 31, 2020, non-performing loans decreased to $1.9 million which allowed the necessary reserves on non-performing loans as of December 31, 2020 to be approximately $131,000 lower than they were as of December 31, 2019 due to the improvement of some credits which previously necessitated higher specific allocation of reserves.

Total other income was $3.3 million for the twelve months ended December 31, 2020 as compared to $2.5 million for the twelve months ended December 31, 2019. Due to increased levels of originations in the one to four family residential loan category, gain on sale of loans increased by $0.7 million and loan origination and servicing income increased by $0.3 million. There was a slight decrease in customer service fees of $0.1 million which slightly offset the increases. Origination of mortgage servicing rights, net of amortization was lower due to the adjustment of the value of the servicing portfolio based on a third-party valuation that was conducted during the fourth quarter of 2020.

Total other expense increased $0.7 million, or 7.6%, to $9.3 million for the twelve months ended December 31, 2020, as compared to $8.6 million for the twelve months ended December 31, 2019. The increase was primarily due to increases in salaries and employee benefits of $0.8 million and an increase in data processing costs of $0.3 million. Data processing costs were elevated due to the enhancement of our infrastructure to support the implementation of our new core processing system. Salaries and employee benefits increased due to the higher commissions paid to mortgage loan originators and overtime paid to support staff to process the increased loan application volume during the period. Additionally, salaries and employee benefits were higher due to overtime incurred during the implementation of our core processing system in the spring. These increases were partially offset by lower costs in loan expense and other expense.

We recorded income tax expense of approximately $0.7 million for both the twelve-month periods ended December 31, 2020 and December 31, 2019.

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

Total consolidated assets as of December 31, 2020 were $307.6 million, an increase of $7.1 million, or 2.4%, from $300.5 million at December 31, 2019. The increase was primarily due to an increase of $7.4 million in cash and cash equivalents, a $7.3 million increase in the net loan portfolio and a $1.3 million increase in other assets. These increases were partially offset by a decrease in federal funds sold of $0.7 million, a decrease in securities available for sale of $5.8 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 $0.1 million.

Cash and cash equivalents increased $7.4 million, or 12.3%, to $13.4 million at December 31, 2020 from $6.0 million at December 31, 2019. The increase in cash and cash equivalents was primarily a result of cash provided from financing activities of $5.3 million and cash provided from operating activities of $2.3 million exceeding cash used in investing activities of $0.2 million.

Securities available for sale decreased $5.8 million, or 23.7%, to $18.7 million at December 31, 2020 from $24.5 million at December 31, 2019, as paydowns, calls, and maturities exceeded new securities purchases.

Net loans increased $7.3 million, or 2.9%, to $255.1 million at December 31, 2020 compared to $247.8 million at December 31, 2019 primarily due to an increase of $2.8 million in multi-family loans, an increase of $11.7 million in non-residential real estate loans and a $5.0 million increase in commercial loans. The increases were offset by decreases of $2.7 million in one-to-four family loans, $3.4 million in consumer direct loans and $5.6 million in purchased auto loans. The allowance for loan losses increased by $0.5 million from December 31, 2019 to December 31, 2020.

Total deposits increased $1.3 million, or 0.56%, to $237.6 million at December 31, 2020 from $236.3 million at December 31, 2019. For the twelve months ended December 31, 2020, savings accounts increased by $6.3 million, non-interest bearing checking accounts increased by $5.7 million, interest-bearing checking accounts increased by $0.3 million and money market accounts increased by $1.2 million as compared to December 31, 2019. The increases were offset by decreases in certificates of deposit of $12.2 million as compared to December 31, 2019.

FHLB advances increased $8.5 million, or 93.4% to $17.6 million at December 31, 2020 compared to $9.1 million at December 31, 2019. The increase was related to the low-rate environment and the extension of maturities to fund future loan growth.

Stockholders’ equity decreased $2.5 million, or 4.8% to $48.2 million at December 31, 2020 from $50.7 million at December 31, 2019. The decrease reflects $2.5 million used to repurchase and cancel 221,587 outstanding shares of Company common stock, and $1.9 million in cash dividends. The decreases were partially offset by net income of $2.5 million for the twelve months ended December 30, 2020, an increase of $0.2 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.

Annual Meeting of Stockholders
On February 4, 2021 the Company also announced that its annual meeting of stockholders will be held on Wednesday, May 19, 2021.

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 under applicable law. 

Contact:
Craig Hepner
President and Chief Executive Officer
(815) 366-5437

Ottawa Bancorp, Inc. & Subsidiary
Consolidated Balance Sheets
December 31, 2020 and December 31, 2019
(Unaudited)
		December 31,				December 31,
			2020				2019
Assets
Cash and due from banks		$	7,831,004			$	5,272,925
Interest bearing deposits			5,581,139				765,486
Total cash and cash equivalents			13,412,143				6,038,411
Time deposits			250,000				1,483,500
Federal funds sold			3,486,000				4,185,000
Securities available for sale			18,711,631				24,515,759
Loans, net of allowance for loan losses of $3,479,151 and $2,937,632 at December 31, 2020 and December 31, 2019, respectively			255,103,053				247,775,814
Loans held for sale			-				1,225,526
Premises and equipment, net			6,312,256				6,517,922
Accrued interest receivable			972,602				875,104
Foreclosed real estate			107,100				-
Deferred tax assets			1,607,325				1,743,161
Cash value of life insurance			2,603,045				2,389,530
Goodwill			649,869				649,869
Core deposit intangible			131,996				169,999
Other assets			4,234,401				2,962,101
Total assets		$	307,581,421			$	300,531,696
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest bearing		$	19,324,166			$	13,664,986
Interest bearing			218,306,696				222,648,518
Total deposits			237,630,862				236,313,504
Accrued interest payable			65,837				8,146
FHLB advances			17,548,559				9,068,030
Other liabilities			3,124,052				4,431,141
Total liabilities			258,369,310				249,820,821
Commitments and Contingencies
ESOP Repurchase Obligation			957,167				-
Stockholders' Equity
Common stock, $.01 par value, 12,000,000 shares authorized; 2,954,557 and 3,159,494 shares issued at December 31, 2020 and December 31, 2019, respectively			29,545				31,594
Additional paid-in-capital			30,488,432				32,845,639
Retained earnings			19,423,899				18,938,633
Unallocated ESOP shares			(1,151,958	)			(1,398,600	)
Unallocated management recognition plan shares			(61,672	)			(30,944	)
Accumulated other comprehensive income			483,865				324,553
			49,212,111				50,710,875
Less:
ESOP Owned shares			(957,167	)			-
Total stockholders' equity			48,254,944				50,710,875
Total liabilities and stockholders' equity		$	307,581,421			$	300,531,696

Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three and Twelve Months Ended December 31, 2020 and 2019
(Unaudited)
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
			2020				2019				2020				2019
Interest and dividend income:
Interest and fees on loans		$	2,982,253			$	2,948,853			$	11,601,368			$	11,540,665
Securities:
Residential mortgage-backed and related securities			47,476				71,914				231,032				295,450
State and municipal securities			103,831				100,357				386,561				399,547
Dividends on non-marketable equity securities			8,675				6,688				30,180				25,786
Interest-bearing deposits			8,594				74,212				80,937				255,664
Total interest and dividend income			3,150,829				3,202,024				12,330,078				12,517,112
Interest expense:
Deposits			446,825				767,510				2,217,388				2,822,675
Borrowings			77,949				67,492				283,503				277,051
Total interest expense			524,774				835,002				2,500,891				3,099,726
Net interest income			2,626,055				2,367,022				9,829,187				9,417,386
Provision for loan losses			-				190,000				660,000				595,000
Net interest income after provision for loan losses			2,626,055				2,177,022				9,169,187				8,822,386
Other income:
Gain on sale of loans			412,897				130,337				1,455,255				759,015
Gain on sale of securities, net			-				16,128				857				16,128
Loan origination and servicing income			271,814				303,371				1,214,599				949,439
Origination of mortgage servicing rights, net of amortization			(107,168	)			(10,686	)			33,545				87,895
Customer service fees			88,323				102,197				367,556				472,973
Increase in cash surrender value of life insurance			35,996				12,666				74,652				48,077
Gain on sale of repossessed assets, net			550				6,524				21,433				18,502
(Loss) on sale of foreclosed real estate			(4,962	)			-				(4,962	)			-
Other			55,631				30,126				164,667				118,604
Total other income			753,081				590,663				3,327,602				2,470,633
Other expenses:
Salaries and employee benefits			1,442,790				1,050,019				5,533,139				4,729,967
Directors fees			40,000				43,000				160,000				172,000
Occupancy			145,142				183,698				636,814				683,060
Deposit insurance premium			(1,997	)			-				31,003				33,565
Legal and professional services			112,716				22,698				439,871				326,100
Data processing			244,873				160,642				951,855				682,547
Loan expense			165,955				179,759				586,766				718,198
Valuation adjustments and expenses on foreclosed real estate			3,760				2,293				5,263				34,714
Other			263,791				348,732				931,802				1,250,018
Total other expenses			2,417,030				1,990,841				9,276,513				8,630,169
Income before income tax expense			962,106				776,844				3,220,276				2,662,850
Income tax expense			112,823				219,096				739,356				725,503
Net income		$	849,283			$	557,748			$	2,480,920			$	1,937,347
Basic earnings per share		$	0.30			$	0.18			$	0.84			$	0.62
Diluted earnings per share		$	0.30			$	0.18			$	0.84			$	0.62
Dividends per share		$	0.083			$	0.063			$	0.711			$	0.629

Ottawa Bancorp, Inc. & Subsidiary
Selected Financial Data and Ratios
(Unaudited)
										At December 31,				At December 31,
											2020				2019
										(In thousands, except per share data)
Financial Condition Data:
Total Assets										$	307,581			$	300,532
Loans, net (1)											255,103				247,776
Securities available for sale											18,711				24,516
Deposits											237,631				236,314
Stockholders' Equity											48,255				50,711
Book Value per common share										$	16.33			$	16.05
Tangible Book Value per common share (2)										$	16.07			$	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 December 31,								Twelve Months Ended December 31,
			2020				2019				2020				2019
		(In thousands, except per share data)								(In thousands, except per share data)
Operations Data:
Total interest and dividend income		$	3,151			$	3,202			$	12,330			$	12,517
Total interest expense			525				835				2,501				3,100
Net interest income			2,626				2,367				9,829				9,417
Provision for loan losses			-				190				660				595
Total other income			753				591				3,328				2,471
Total other expense			2,417				1,991				9,277				8,630
Income tax expense			113				219				739				726
Net income		$	849			$	558			$	2,481			$	1,937
Basic earnings per share		$	0.30			$	0.18			$	0.84			$	0.62
Diluted earnings per share		$	0.30			$	0.184			$	0.84			$	0.62
Dividends per share		$	0.083			$	0.063			$	0.711			$	0.629
		At or for the								At or for the
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
			2020				2019				2020				2019
Performance Ratios:
Return on average assets (5)			1.10	%			0.74	%			0.80	%			0.65	%
Return on average stockholders' equity (5)			6.93				3.77				5.14				3.29
Average stockholders' equity to average assets			15.91				19.56				15.62				19.86
Stockholders' equity to total assets at end of period			15.69				16.87				15.69				16.87
Net interest rate spread (1) (5)			3.49				3.10				3.20				3.17
Net interest margin (2) (5)			3.65				3.34				3.39				3.41
Average interest-earning assets to average interest-bearing liabilities			121.78				120.48				122.13				121.54
Other expense to average assets			0.79				0.66				3.00				2.91
Efficiency ratio (3)			71.53				67.30				70.51				72.59
Dividend payout ratio			27.67				35.00				78.65				101.45

		At or for the			At or for the
		Twelve Months Ended			Twelve Months Ended
		December 31,			December 31,
		2020			2019
		(unaudited)
Regulatory Capital Ratios (4):
Total risk-based capital (to risk-weighted assets)		20.38	%		22.21	%
Tier 1 core capital (to risk-weighted assets)		19.12			20.96
Common equity Tier 1 (to risk-weighted assets)		19.12			20.96
Tier 1 leverage (to adjusted total assets)		14.25			15.00
Asset Quality Ratios:
Net charge-offs to average gross loans outstanding		0.18			0.11
Allowance for loan losses to gross loans outstanding		1.35			1.17
Non-performing loans to gross loans (6)		0.62			0.90
Non-performing assets to total assets (6)		0.67			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.