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Ottawa Bancorp, Inc. Announces Third Quarter 2017 Results

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OTTAWA, Ill., Oct. 31, 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 September 30, 2017, compared to net income of $0.4 million, or $0.15 per basic and diluted common share for the three months ended September 30, 2016. The third quarter results were positively impacted by increased loan demand and a continued decrease in non-performing loans. Non-performing loans decreased from $5.0 million at December 31, 2016 to $2.3 million at June 30, 2017 and $2.0 million at September 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 1.24% at June 30, 2017 and 1.00% at September 30, 2017. 

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

Net income for the three months ended September 30, 2017 increased $34,000, or 8.0%, to $455,000 compared to net income of $421,000 for the three months ended September 30, 2016. The increase was primarily attributed to an increase in net interest income after provision for loan losses of $67,000, a $136,000 increase in total other income, and a $68,000 decrease in income tax expense, partially offset by an increase of $238,000 in other expenses. 
   
Net interest income increased by $0.3 million, or 13.2%, to $2.2 million for the three months ended September 30, 2017, from $1.9 million for the three months ended September 30, 2016.  Interest and dividend income increased $0.3 million, or 14.1%, primarily due to an increase in the average balances of interest-earning assets of $6.8 million. The increase in net interest income was partially off-set by a slight increase in interest expense as the average cost of funds increased 15 basis points to 0.61% for the three months ended September 30, 2017. The increase in cost of funds was partially off-set by a decrease in the average balance of interest-bearing liabilities of $17.8 million during the three months ended September 30, 2017. The average balance of interest-bearing liabilities was temporarily inflated at September 30, 2016, due to $50.1 million of funds received late in the third quarter for the subscription and community offerings for shares of Company common stock in connection with the Bank's second-step conversion completed on October 11, 2016. The net interest margin increased 10.1% during the three months ended September 30, 2017 to 3.83%.

We recorded a provision for loan losses of $0.2 million and $25,000 for the three months ended September 30, 2017 and 2016, respectively. The increase in provision expense was primarily due to increases in the loan portfolio, and therefore the need to increase the provision for loan losses. Additionally, net charge-offs during the third quarter of 2017 were $84,000 compared to $5,000 during the third quarter of 2016.  The allowance for loan losses was $2.4 million or 1.19% of total gross loans at September 30, 2017 compared to $2.3 million, or 1.45%, at September 30, 2016. General reserves were higher at September 30, 2017 when compared to September 30, 2016, as the balances in all loan categories increased during the twelve months ended September 30, 2017. These increases were partially off-set by improvements in historical loss levels and changes in qualitative factors during the twelve months ended September 30, 2017, as compared to the same period in 2016. Additionally, specific reserves as of September 30, 2017 were lower than they were as of September 30, 2016, due to several large credits being resolved during 2017 that had larger reserves as of September 30, 2016.

Non-interest income increased $0.1 million, to $0.6 million for the three months ended September 30, 2017, as compared to the same period for 2016. The increase was primarily due to higher revenues related to mortgage banking activity. There was also an increase in the gain on sale of securities, but this was off-set by a decline in the gain on sale of foreclosed real estate.

Non-interest expense increased $0.2 million, or 13.7%, to $2.0 million for the three months ended September 30, 2017, as compared to the three months ended September 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 $155,000 and $223,000 for the three months ended September 30, 2017 and 2016, respectively.

Comparison of Results of Operations for the Nine Months Ended September 30, 2017 and September 30, 2016

Net income for the nine months ended September 30, 2017 increased $0.2 million, or 21.3%, to $1.3 million compared to net income of $1.1 million for the nine months ended September 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 $0.4 million increase in other income, partially offset by an increase of $0.7 million in other expenses. 
   
Net interest income increased by $0.7 million, or 12.2%, to $6.3 million for the nine months ended September 30, 2017, from $5.6 million for the nine months ended September 30, 2016.  Interest and dividend income increased $0.8 million, or 12.2%, primarily due to an increase in the average balances of interest-earning assets of $15.8 million and a 3.9% increase in the yield on interest-earning assets to 4.27%. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased eight basis points to 0.56% for the nine months ended September 30, 2017. The increase in cost of funds was slightly off-set by a decrease in the average balance of interest-bearing liabilities of $7.0 million during the nine months ended September 30, 2017. The average balance of interest-bearing liabilities was temporarily inflated at September 30, 2016, due to $50.1 million of funds received late in the third quarter as a result of the subscription and community offerings for shares of Company common stock in connection with the Bank's second-step conversion completed on October 11, 2016. The net interest margin increased 4.1% during the nine months ended September 30, 2017 to 3.84%.

We recorded a provision for loan losses of $0.5 million and $0.3 million for the nine months ended September 30, 2017 and 2016, respectively. The increase in provision expense was primarily due to increases in the loan portfolio, and therefore the need to increase the provision for loan losses. Additionally, net charge-offs during the nine months ended September 2017 were $0.3 million compared to $0.2 million during the same period of 2016.  The allowance for loan losses was $2.4 million, or 1.19% of total loans, at September 30, 2017 compared to $2.3 million, or 1.45% of total loans, at September 30, 2016. General reserves were higher at September 30, 2017 when compared to September 30, 2016, as the balances in all loan categories increased during the twelve months ended September 30, 2017. These increases were partially off-set by improvements in historical loss levels and changes in qualitative factors during the twelve months ended September 30, 2017, as compared to the same period in 2016. Additionally, specific reserves as of September 30, 2017 were lower than they were as of September 30, 2016, due to several large credits being resolved during 2017 that had larger reserves as of September 30, 2016.

Non-interest income increased $0.4 million, to $1.7 million for the nine months ended September 30, 2017, as compared to the same period for 2016. The increase was primarily due to higher revenues related to mortgage banking activity.

Non-interest expense increased $0.8 million, or 15.0%, to $5.8 million for the nine months ended September 30, 2017, as compared to the nine months ended September 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 $0.5 million for both the nine months ended September 30, 2017 and 2016, respectively. 

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

Total consolidated assets as of September 30, 2017 were $245.7 million, an increase of $15.6 million, or 6.8%, from $230.2 million at December 31, 2016.  The increase was primarily due to an increase of $30.2 million in the net loan portfolio, off-set by decreases in securities available for sale of $14.4 million and decreases in cash and cash equivalents of $3.0 million.

Cash and cash equivalents decreased $3.0 million, or 50.6%, to $2.9 million at September 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 $18.5 million exceeding cash provided by financing activities of $13.9 million and cash provided by operating activities of $1.6 million.

Securities available for sale decreased $14.4 million, or 32.3%, to $30.2 million at September 30, 2017 from $44.6 million at December 31, 2016, as paydowns, sales, calls, and maturities exceeded new securities purchases.  Cash proceeds from the sale of securities were used to fund the loan growth, as the yield earned on the loan originations was higher than those earned in the security portfolio.

Net loans increased by $30.2 million to $190.8 million at September 30, 2017 compared to $160.6 million at December 31, 2016 primarily as a result of a $14.6 million increase in one-to-four family loans, a $7.4 million increase in non-residential real estate loans, and a $6.2 million increase in purchased auto loans. The Company also experienced growth in most other loan categories during the nine months ended September 30, 2017.

Total deposits increased $6.3 million, or 3.7%, to $178.9 million at September 30, 2017 from $172.5 million at December 31, 2016.  At September 30, 2017 checking/money market accounts increased by $3.7 million, savings accounts increased by $1.8 million and certificates of deposit increased by $0.8 million as compared to December 31, 2016.

FHLB advances increased $8.0 million, to $9.1 million at September 30, 2017 compared to $1.1 million at December 31, 2016 to fund the loan growth experienced during the nine months ended September 30, 2017.

Total stockholders' equity increased $1.0 million, or 1.9%, to $52.9 million at September 30, 2017 from $51.9 million at December 31, 2016.  The increase is primarily a result of net income of $1.3 million for the nine months ended September 30, 2017, and an increase in other comprehensive income of $0.2 million related to an increase in the fair value of securities available for sale, partially off-set by dividends of $0.4 million paid to shareholders and an approximately $0.1 million net decrease related to ESOP shares. 

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, 2017 and December 31, 2016
(Unaudited)
  September 30,   December 31,
    2017       2016  
Assets      
Cash and due from banks $   2,093,049     $   3,916,559  
Interest bearing deposits     845,235         2,030,090  
Total cash and cash equivalents     2,938,284         5,946,649  
Time deposits     250,000         250,000  
Federal funds sold     3,705,000         1,690,000  
Securities available for sale     30,176,272         44,560,680  
Non-marketable equity securities     752,221         753,321  
Loans, net of allowance for loan losses of $2,366,245 and $2,247,449      
at September 30, 2017 and December 31, 2016, respectively     190,754,189         160,586,129  
Loans held for sale     659,099         305,072  
Premises and equipment, net     6,725,000         6,843,906  
Accrued interest receivable     781,619         785,484  
Foreclosed real estate     83,500         33,000  
Deferred tax assets     2,505,692         2,593,786  
Cash value of life insurance     2,281,760         2,245,578  
Goodwill     649,869         649,869  
Core deposit intangible     303,818         359,000  
Other assets     3,165,409         2,558,910  
Total assets $   245,731,732     $   230,161,384  
Liabilities and Stockholders' Equity      
Liabilities      
Deposits:      
Non-interest bearing $   12,693,586     $   9,974,536  
Interest bearing     166,196,571         162,572,485  
Total deposits     178,890,157         172,547,021  
Accrued interest payable     3,693         224  
FHLB advances     9,114,999         1,121,153  
Other liabilities     3,711,694         3,748,953  
Total liabilities     191,720,543         177,417,351  
Commitments and contingencies      
Redeemable common stock held by ESOP plan     1,098,101         807,629  
Stockholders' Equity      
Common stock, $.01 par value, 12,000,000 shares authorized; 3,469,402 and 3,467,402      
shares issued at September 30, 2017 and December 31, 2016, respectively     34,694         34,674  
Additional paid-in-capital     37,181,196         37,117,311  
Retained earnings     18,340,443         17,455,472  
Unallocated ESOP shares     (1,799,136 )       (1,932,648 )
Accumulated other comprehensive income     253,992         69,224  
      54,011,189         52,744,033  
Less:      
Maximum cash obligation related to ESOP shares     (1,098,101 )       (807,629 )
Total stockholders' equity     52,913,088         51,936,404  
Total liabilities and stockholders' equity $   245,731,732     $   230,161,384  
       


Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
    2017     2016     2017     2016
Interest and dividend income:          
Interest and fees on loans $ 2,204,397   $ 1,857,478   $ 6,291,581   $ 5,432,531
Securities:            
Residential mortgage-backed and related securities   98,541     122,919     360,557     423,463
State and municipal securities   116,431     133,429     373,999     404,133
Dividends on non-marketable equity securities    1,812     1,058     5,154     5,218
Interest-bearing deposits   5,357     11,903     21,403     22,301
Total interest and dividend income   2,426,538     2,126,787     7,052,694     6,287,646
Interest expense:            
Deposits   247,897     205,843     676,374     611,533
Borrowings   20,564     15,181     35,624     26,921
Total interest expense   268,461     221,024     711,998     638,454
Net interest income   2,158,077     1,905,763     6,340,696     5,649,192
Provision for loan losses    210,000     25,000     460,000     302,500
Net interest income after provision for loan losses    1,948,077     1,880,763     5,880,696     5,346,692
Other income:            
Gain on sale of securities   77,028       -    98,230     8,418
Gain on sale of loans   205,375     142,646     522,360     330,316
Gain on sale of foreclosed real estate   5,182     76,759     29,242     188,207
Gain on sale of repossessed assets   1,123       -    15,419     1,680
Loan origination and servicing income   159,078     102,652     462,787     239,186
Origination of mortgage servicing rights, net of amortization   21,293     14,879     55,405     42,433
Customer service fees   123,288     118,761     360,359     318,688
Income on bank owned life insurance   11,999     12,560     36,182     37,287
Other    28,940     29,269     89,044     77,885
Total other income   633,306     497,526     1,669,028     1,244,100
Other expenses:            
Salaries and employee benefits   1,047,416     840,038     3,124,939     2,504,956
Directors fees   40,800     40,800     122,400     122,400
Occupancy   158,716     171,425     484,496     477,615
Deposit insurance premium   15,437     37,122     41,648     127,114
Legal and professional services   92,007     83,012     282,129     257,957
Data processing   144,137     130,864     435,244     386,597
Loss on sale of securities   47,603       -    55,169     3,261
Loan expense   152,645     124,851     403,088     284,672
Valuation adjustments and expenses on foreclosed real estate   2,662     31,703     10,184     100,639
Loss on sale of OREO   336     4,716     336     4,716
Loss on sale of repossessed assets     -      -    274       - 
Other   269,710     269,245     807,889     747,318
Total other expenses   1,971,469     1,733,776     5,767,796     5,017,245
Income before income tax expense    609,914     644,513     1,781,928     1,573,547
Income tax expense    155,163     223,251     504,332     520,063
Net income  $ 454,751   $ 421,262   $ 1,277,596   $ 1,053,484
Basic earnings per share $ 0.14   $ 0.15   $ 0.39   $ 0.37
Diluted earnings per share $ 0.14   $ 0.15   $ 0.39   $ 0.36
Dividends per share $ 0.04   $   -    $ 0.12   $   - 
               


Ottawa Bancorp, Inc. & Subsidiary  
Selected Financial Data and Ratios  
(Unaudited)  
  At September 30,   At December 31,    
   2017     2016      
    (In thousands, except per share data)       
Financial Condition Data:          
Total Assets   $ 245,732   $ 230,161      
Loans, net (1)     190,754     160,586      
Securities available for sale     30,176     44,561      
Deposits     178,890     172,547      
Stockholders' Equity     52,913     51,936      
Book Value per common share   $ 15.25   $ 14.98      
Tangible Book Value per common share $ 14.98   $ 14.69      
(1) Net of loans in process, deferred loan (cost) fees and allowance for loan losses.          

 

      Nine Months Ended
September 30,
 
  Three Months Ended,
September 30,
    2017     2016     2017     2016  
  (In thousands, except per share data)  
Operations Data:      
Total interest and dividend income $ 2,426   $ 2,127   $ 7,053   $ 6,288  
Total interest expense   268     221     712     639  
Net interest income   2,158     1,906     6,341     5,649  
Provision for loan losses   210     25     460     303  
Other income   633     498     1,669     1,244  
Other expense   1,971     1,734     5,768     5,017  
Income tax expense   155     223     504     520  
Net income $ 455   $ 422   $ 1,278   $ 1,053  
Basic earnings per share  $ 0.14   $ 0.15   $ 0.39   $ 0.37  
Diluted earnings per share $ 0.14   $ 0.15   $ 0.39   $ 0.36  
Dividends per share $ 0.04   $   -    $ 0.12   $   -   
     

 

    At or for the
Three Months Ended
  At or for the
Nine Months Ended
 
  September 30,   September 30,  
  2017   2016   2017   2016  
Performance Ratios:
         
Return on average assets 0.74 % 0.71 %   0.71 %   0.63 %
Return on average stockholders' equity  3.44   5.18     3.24     4.43  
Average stockholders' equity to average assets 21.65   13.69     22.01     14.22  
Stockholders' equity to total assets at end of period 21.53   11.54     21.53     11.54  
Net interest rate spread (1) 3.69   3.43     3.72     3.63  
Net interest margin (2) 3.83   3.48     3.84     3.69  
Average interest-earning assets to average interest-bearing liabilities 128.94   113.55     128.98     115.02  
Other expense to average assets 0.81   0.73     2.42     2.25  
Efficiency ratio (3) 70.62   72.13     72.01     72.78  
Dividend payout ratio 28.57     -    30.77       -   
             


      At September 30,
2017
  At December 31,
2016
  (unaudited) 
Regulatory Capital Ratios (4):
 
Total risk-based capital (to risk-weighted assets)   24.11 % 26.76  
Tier 1 core capital (to risk-weighted assets)   22.86   25.51  
Common equity Tier 1 (to risk-weighted assets)   22.86   25.51  
Tier 1 leverage (to adjusted total assets)   17.07   16.84  
Asset Quality Ratios:    
Net charge-offs to average gross loans outstanding   0.25   0.27  
Allowance for loan losses to gross loans outstanding   1.19   1.35  
Non-performing loans to gross loans (5)   1.00   3.00  
Non-performing assets to total assets (5)   0.85   2.18  
Other Data:    
Number of full-service offices   3   3  
   

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

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