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Ottawa Bancorp, Inc. Announces Second Quarter 2017 Results

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OTTAWA, Ill., Aug. 02, 2017 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the "Company") (NASDAQ:OTTW), the holding company for Ottawa Savings Bank, FSB (the "Bank"), announced net income of $0.5 million, or $0.14 per basic and diluted common share for the three months ended June 30, 2017, compared to net income of $0.4 million, or $0.13 per basic and diluted common share, for the three months ended June 30, 2016. The strong second quarter results were positively impacted by increased loan demand. Additionally, non-performing loans continued to decrease during the three months ended June 30, 2017. Our collection of approximately $0.3 million in pay-offs on two non-performing loans and a principal reduction of $150,000 on another non-performing loan contributed to the further reduction in non-performing loans from $2.8 million at March 31, 2017 to $2.3 million at June 30, 2017, which in addition to loan growth, improved the ratio of non-performing loans to gross loans from 3.00% at December 31, 2016 to 1.63% at March 31, 2017 and 1.24% at June 30, 2017. 

Comparison of Results of Operations for the Three Months Ended June 30, 2017 and June 30, 2016

Net income for the three months ended June 30, 2017 increased $0.1 million, or 24.7%, to $0.5 million compared to net income of $0.4 million for the three months ended June 30, 2016. The increase was primarily attributed to an increase in net interest income after provision for loan losses of $0.2 million and a $0.2 million increase in total other income, partially offset by an increase of $0.3 million in other expenses. 
   
Net interest income increased by $0.2 million or 11.1% to $2.1 million for the three months ended June 30, 2017, from $1.9 million for the three months ended June 30, 2016.  Interest and dividend income increased $0.2 million or 11.0%, primarily due to an increase in the average balances of interest-earning assets of $22.7 million, partially off-set by a 0.5% decrease in the yield on interest-earning assets to 4.30%. The increase in net interest income was partially off-set by a slight increase in interest expense as the average cost of funds increased five basis points to 0.54%, for the three months ended June 30, 2017. The increase in cost of funds was slightly off-set by a decrease in the average balance of interest-bearing liabilities of $0.4 million during the three months ended June 30, 2017. The net interest margin decreased 0.3% during the three months ended June 30, 2017 to 3.89%.

We recorded a provision for loan losses of $0.2 million for both the three months ended June 30, 2017 and 2016. General reserves were slightly higher at June 30, 2017 when compared to June 30, 2016, as the balances in all loan categories increased during the twelve months ended June 30, 2017. These increases were off-set by improvements in historical loss levels and changes in qualitative factors during the twelve months ended June 30, 2017, as compared to the same period in 2016, and slightly lower specific reserves.  Net charge-offs during the second quarter of 2017 were $103,000 compared to $61,000 during the second quarter of 2016.  The allowance for loan losses was $2.2 million, or 1.21% of total loans at June 30, 2017 compared to $2.3 million, or 1.50%, at June 30, 2016.

Non-interest income increased $0.2 million, to $0.6 million for the three months ended June 30, 2017, as compared to the same period for 2016. The increase was primarily due to higher revenues related to mortgage loan activity.

Non-interest expense increased $0.3 million, or 19.0%, to $2.0 million for the three months ended June 30, 2017, as compared to the three months ended June 30, 2016.  The increase was primarily due to higher salaries and employee benefits as additional mortgage loan originators and staff were added to support loan growth.  Loan expense increased due to the increase in loan originations.

We recorded income tax expense of $0.2 million for both the three months ended June 30, 2017 and 2016.  

Comparison of Results of Operations for the Six Months Ended June 30, 2017 and June 30, 2016

Net income for the six months ended June 30, 2017 increased $0.2 million, or 30.2%, to $0.8 million compared to net income of $0.6 million for the six months ended June 30, 2016. The increase was primarily attributed to an increase in net interest income after provision for loan losses of $0.5 million and a $0.3 million increase in total other income, partially offset by an increase of $0.5 million in other expenses and an increase of $52,000 in income tax expense. 
   
Net interest income increased by $0.4 million or 11.7% to $4.2 million for the six months ended June 30, 2017, from $3.8 million for the six months ended June 30, 2016.  Interest and dividend income increased $0.5 million or 11.2%, primarily due to an increase in the average balances of interest-earning assets of $20.3 million and a 0.7% increase in the yield on interest-earning assets to 4.26%. The increase in net interest income was partially off-set by a slight increase in interest expense as the average cost of funds increased four basis points to 0.53%, for the six months ended June 30, 2017. The increase in cost of funds was slightly off-set by a decrease in the average balance of interest-bearing liabilities of $1.9 million during the six months ended June 30, 2017. The net interest margin increased 1.3% during the six months ended June 30, 2017 to 3.85%.

We recorded a provision for loan losses of $0.3 million for both the six months ended June 30, 2017 and 2016. General reserves were slightly higher at June 30, 2017 when compared to June 30, 2016, as the balances in all loan categories increased during the twelve months ended June 30, 2017. These increases were off-set by improvements in historical loss levels and changes in qualitative factors during the twelve months ended June 30, 2017, as compared to the same period in 2016, and slightly lower specific reserves.   Net charge-offs during the first six months of 2017 were $257,000 compared to $213,000 during the first six months of 2016.  The allowance for loan losses was $2.2 million or 1.21% of total loans at June 30, 2017 compared to $2.3 million, or 1.50%, at June 30, 2016.

Non-interest income increased $0.3 million, to $1.0 million for the six months ended June 30, 2017, as compared to the same period for 2016. The increase was primarily due to higher revenues related to mortgage loan activity.

Non-interest expense increased $0.5 million, or 15.6%, to $3.8 million for the six months ended June 30, 2017, as compared to the six months ended June 30, 2016.  The increase was primarily due to higher salaries and employee benefits as additional mortgage loan originators and staff were added to support loan growth.  Loan expense increased due to the increase in loan originations.

We recorded income tax expense of $0.3 million for both the six months ended June 30, 2017 and 2016, respectively. 

Comparison of Financial Condition at June 30, 2017 and December 31, 2016:

Total consolidated assets as of June 30, 2017 were $239.0 million, an increase of $8.8 million, or 3.8%, from $230.2 million at December 31, 2016.  The increase was primarily due to net increases in the loan portfolio of $18.4 million, off-set by decreases in securities available for sale of $6.4 million and decreases in cash and cash equivalents of $2.6 million.

Cash and cash equivalents decreased $2.6 million, or 44.0%, to $3.3 million at June 30, 2017 from $5.9 million at December 31, 2016.  The decrease in cash and cash equivalents was primarily a result of cash used in investing activities of $10.5 million exceeding cash provided by financing activities of $7.3 million and cash provided by operating activities of $0.6 million.

Securities available-for-sale decreased $6.4 million, or 14.4%, to $38.2 million at June 30, 2017 from $44.6 million at December 31, 2016, as paydowns, sales, calls, and maturities exceeded new securities purchases.

Net loans increased by $18.4 million to $179.0 million at June 30, 2017 compared to $160.6 million at December 31, 2016 primarily as a result of a $13.1 million increase in one-to-four family loans. The Company also experienced growth in most other loan categories during the six months ended June 30, 2017.

Total deposits increased $7.1 million, or 4.1%, to $179.6 million at June 30, 2017 from $172.5 million at December 31, 2016.  At June 30, 2017 checking/money market accounts increased by $4.0 million, savings accounts increased by $2.7 million and certificates of deposit increased by $0.3 million as compared to December 31, 2016.

Total stockholders' equity increased $0.7 million or 1.4% to $52.6 million at June 30, 2017 from $51.9 million at December 31, 2016.  The increase is primarily a result of net income of $0.8 million for the six months ended June 30, 2017, and an increase in other comprehensive income of $0.2 million related to an increase in market values of securities available for sale, partially off-set by dividends of $0.3 million paid to shareholders. 

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
June 30, 2017 and December 31, 2016
(Unaudited)
  June 30,   December 31,
    2017       2016  
Assets      
Cash and due from banks $  2,823,601     $  3,916,559  
Interest bearing deposits    507,496        2,030,090  
Total cash and cash equivalents    3,331,097        5,946,649  
Time deposits    250,000        250,000  
Federal funds sold    -        1,690,000  
Securities available for sale    38,158,992        44,560,680  
Non-marketable equity securities    752,221        753,321  
Loans, net of allowance for loan losses of $2,240,586 and $2,247,449      
at June 30, 2017 and December 31, 2016, respectively    178,959,773        160,586,129  
Loans held for sale    1,426,800        305,072  
Premises and equipment, net    6,778,433        6,843,906  
Accrued interest receivable    857,931        785,484  
Foreclosed real estate    -        33,000  
Deferred tax assets    2,320,296        2,593,786  
Cash value of life insurance    2,269,760        2,245,578  
Goodwill    649,869        649,869  
Core deposit intangible    321,636        359,000  
Other assets    2,954,876        2,558,910  
Total assets $  239,031,684     $  230,161,384  
Liabilities and Stockholders' Equity      
Liabilities      
Deposits:      
Non-interest bearing $  11,714,780     $  9,974,536  
Interest bearing    167,909,584        162,572,485  
Total deposits    179,624,364        172,547,021  
Accrued interest payable    1,704        224  
FHLB advances    1,113,262        1,121,153  
Federal funds purchased    438,000        -  
Other liabilities    4,177,857        3,748,953  
Total liabilities    185,355,187        177,417,351  
Commitments and contingencies      
Redeemable common stock held by ESOP plan    1,016,956        807,629  
Stockholders' Equity      
Common stock, $.01 par value, 12,000,000 shares authorized; 3,467,402      
shares issued at June 30, 2017 and December 31, 2016, respectively    34,674        34,674  
Additional paid-in-capital    37,153,871        37,117,311  
Retained earnings    18,016,621        17,455,472  
Unallocated ESOP shares    (1,843,640 )      (1,932,648 )
Accumulated other comprehensive income    314,971        69,224  
     53,676,497        52,744,033  
Less:      
Maximum cash obligation related to ESOP shares    (1,016,956 )      (807,629 )
Total stockholders' equity    52,659,541        51,936,404  
Total liabilities and stockholders' equity $  239,031,684     $  230,161,384  
       


Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
  Three Months Ended   Six Months Ended
  June 30,   June 30,
    2017     2016     2017     2016
Interest and dividend income:              
Interest and fees on loans $  2,114,434   $  1,851,755   $  4,087,184   $  3,575,053
Securities:              
Residential mortgage-backed and related securities    126,148      148,467      262,016      300,544
State and municipal securities    126,939      135,724      257,568      270,704
Dividends on non-marketable equity securities    1,548      1,970      3,342      4,160
Interest-bearing deposits    6,725      3,054      16,046      10,398
Total interest and dividend income    2,375,794      2,140,970      4,626,156      4,160,859
Interest expense:              
Deposits    223,208      203,220      428,477      405,690
Borrowings    8,064      7,120      15,060      11,740
Total interest expense    231,272      210,340      443,537      417,430
Net interest income    2,144,522      1,930,630      4,182,619      3,743,429
Provision for loan losses    160,000      157,500      250,000      277,500
Net interest income after provision for loan losses     1,984,522      1,773,130      3,932,619      3,465,929
Other income:              
Gain on sale of securities    21,160      8,322      21,202      8,418
Gain on sale of loans    209,892      148,740      316,985      187,670
Gain on sale of foreclosed real estate    -      46,251      24,060      111,448
Gain on sale of repossessed assets    11,252      1,048      14,296      1,680
Loan origination and servicing income    202,718      77,912      303,709      136,534
Origination of mortgage servicing rights, net of amortization    18,701      25,424      34,112      27,554
Customer service fees    121,212      101,656      237,071      199,927
Income on bank owned life insurance    12,158      12,554      24,183      24,726
Other    32,139      23,798      60,104      48,617
Total other income    629,232      445,705      1,035,722      746,574
Other expenses:              
Salaries and employee benefits    1,083,157      837,233      2,077,523      1,664,918
Directors fees    40,800      40,800      81,600      81,600
Occupancy    162,241      154,112      325,780      306,190
Deposit insurance premium    12,697      45,769      26,211      89,992
Legal and professional services    93,964      87,817      190,122      174,945
Data processing    152,614      120,711      291,107      255,733
Loss on sale of securities    7,566      3,261      7,566      3,261
Loan expense    132,120      101,279      250,443      159,821
Valuation adjustments and expenses on foreclosed real estate    2,060      32,423      7,522      68,936
Loss on sale of repossessed assets    -      -      274      -
Other    293,094      240,317      538,179      478,073
Total other expenses    1,980,313      1,663,722      3,796,327      3,283,469
Income before income tax expense    633,441      555,113      1,172,014      929,034
Income tax expense    167,896      181,797      349,169      296,812
Net income $  465,545   $  373,316   $  822,845   $  632,222
Basic earnings per share $  0.14   $  0.13   $  0.25   $  0.22
Diluted earnings per share $  0.14   $  0.13   $  0.25   $  0.22
Dividends per share $  0.04   $   -    $  0.08   $   - 


Ottawa Bancorp, Inc. & Subsidiary  
Selected Financial Data and Ratios  
(Unaudited)  
        At June 30,   At December 31,      
          2017       2016          
      (In thousands, except per share data)    
Financial Condition Data:                        
Total Assets       $  239,032     $  230,161          
Loans, net (1)          178,960        160,586          
Securities available for sale          38,159        44,561          
Deposits          179,624        172,547          
Stockholders' Equity          52,660        51,936          
Book Value per common share       $  15.19     $  14.98          
Tangible Book Value per common share       $  14.91     $  14.69          
(1) Net of loans in process, deferred loan (cost) fees and allowance for loan losses.          
                         
  Three Months Ended June 30,   Six Months Ended June 30,  
    2017     2016     2017     2016  
  (In thousands, except per share data)  
Operations Data:                        
Total interest and dividend income $  2,376     $  2,141     $  4,626     $  4,161    
Total interest expense    231        210        443        418    
Net interest income    2,145        1,931        4,183        3,743    
Provision for loan losses    160        158        250        278    
Other income    629        446        1,035        747    
Other expense    1,980        1,664        3,796        3,283    
Income tax expense    168        182        349        297    
Net income $  466     $  373     $  823     $  632    
Basic earnings per share $  0.14     $  0.13     $  0.25     $  0.22    
Diluted earnings per share $  0.14     $  0.13     $  0.25     $  0.22    
Dividends per share $  0.04     $   -      $  0.08     $   -     
                         
  At or for the Three Months Ended   At or for the Six Months Ended  
  June 30,   June 30,  
    2017     2016     2017     2016  
Performance Ratios:                        
Return on average assets    0.78 %    0.69 %    0.70 %      0.59 %  
Return on average stockholders' equity    3.54        4.75        3.14        4.05    
Average stockholders' equity to average assets    21.96        14.52        22.20        14.51    
Stockholders' equity to total assets at end of period    22.03        14.56        22.03        14.56    
Net interest rate spread (1)    3.76        3.83        3.73        3.74    
Net interest margin (2)    3.89        3.90        3.85        3.80    
Average interest-earning assets to average interest-bearing liabilities    129.67        116.09        129.19        115.85    
Other expense to average assets    0.83        0.77        1.61        1.53    
Efficiency ratio (3)    71.38        70.00        72.73        73.12    
Dividend payout ratio    28.57        -         32.00        -     
                         
                         
      At June 30,   At December 31,  
            2017     2016  
              (unaudited)  
Regulatory Capital Ratios (4):                        
Total risk-based capital (to risk-weighted assets)              25.29 %      26.76 %  
Tier 1 core capital (to risk-weighted assets)                24.04        25.51    
Common equity Tier 1 (to risk-weighted assets)              24.04        25.51    
Tier 1 leverage (to adjusted total assets)                17.14        16.84    
Asset Quality Ratios:                        
Net charge-offs to average gross loans outstanding                0.29        0.27    
Allowance for loan losses to gross loans outstanding              1.21        1.35    
Non-performing loans to gross loans (5)                1.24        3.00    
Non-performing assets to total assets (5)                0.98        2.18    
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 other noninterest expenses divided by the sum of net interest income and noninterest income.  
(4) Ratios are for Ottawa Savings Bank.                        
(5) Nonperforming loans and assets include accruing loans past due 90 days or more.          

Please contact Jon Kranov, President and Chief Executive Officer at 815-433-2525 with questions.

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