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Ottawa Bancorp, Inc. Announces Second Quarter 2018 Results

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OTTAWA, Ill., Aug. 02, 2018 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the "Company") (Nasdaq CM:OTTW), the holding company for Ottawa Savings Bank, FSB (the "Bank"), announced net income of $0.4 million, or $0.11 per basic and diluted common share for the three months ended June 30, 2018, compared to net income of $0.5 million, or $0.14 per basic and diluted common share for the three months ended June 30, 2017.  During the second quarter of 2018 the Company continued to experience strong loan demand.  Non-performing loans increased slightly from $1.3 million at March 31, 2018 to $1.4 million at June 30, 2018, which increased the ratio of non-performing loans to gross loans from 0.56% at March 31, 2018 to 0.58% at June 30, 2018, but it remains lower than the 0.75% at December 31, 2017.  Additionally, through June 30, 2018, the Company has repurchased a total of 83,235 shares of its common stock at an average price of $14.12 per share as part of the stock repurchase program announced on November 15, 2017.

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

Net income for the three months ended June 30, 2018 was $0.4 million compared to net income of $0.5 million for the three months ended June 30, 2017. The decrease in net income of $0.1 million, or 23.6%, was primarily attributed to an increase in total other expenses of $0.2 million and a decrease in total other income of $0.1 million, partially off-set by an increase in net interest income after provision for loan losses of $0.1 million and a decrease in income tax expense of $0.1 million.
   
Net interest income increased by $0.2 million, or 7.6%, to $2.3 million for the three months ended June 30, 2018, from $2.1 million for the three months ended June 30, 2017.  Interest and dividend income increased $0.4 million, or 16.0%, primarily due to an increase in the average balances of interest-earning assets of $31.6 million. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased 34 basis points to 0.88% for the three months ended June 30, 2018. The net interest margin decreased 23 basis points, or 5.9% during the three months ended June 30, 2018 to 3.66% from 3.89%.

We recorded a provision for loan losses of approximately $0.2 million for both of the three-month periods ended June 30, 2018 and 2017.  The allowance for loan losses was $2.5 million, or 1.14% of total gross loans at June 30, 2018 compared to $2.2 million, or 1.21% of gross loans at June 30, 2017.  Net charge-offs during the second quarter of 2018 were approximately $0.2 million compared to $0.1 million during the second quarter of 2017.  General reserves were higher at June 30, 2018, when compared to June 30, 2017, as the balances in all loan categories increased during the twelve months ended June 30, 2018. These increases to the allowance were partially off-set by improvements in historical loss levels and changes in qualitative factors during the twelve months ended June 30, 2018, as compared to the same period ended June 30, 2017.  Additionally, specific reserves as of June 30, 2018 were lower than they were as of June 30, 2017.

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

Total other expense increased $0.2 million, or 11.6%, to $2.2 million for the three months ended June 30, 2018, as compared to $2.0 million for the three months ended June 30, 2017.  The increase was primarily due to higher other expenses, increased loan expenses, and higher salaries and employee benefits.

We recorded income tax expense of approximately $0.1 million for the three-month period ended June 30, 2018, as compared to approximately $0.2 million for the three-month period ended June 30, 2017. The decrease in income tax expense was primarily a result of the Tax Cut and Jobs Act (the "TCJA") enacted on December 22, 2017, which reduces corporate tax rates from 34% to 21%.

Comparison of Results of Operations for the Six Months Ended June 30, 2018 and June 30, 2017

Net income was $0.8 million for both of the six-month periods ended June 30, 2018 and 2017.
   
Net interest income increased by $0.3 million, or 7.9%, to $4.5 million for the six months ended June 30, 2018, from $4.2 million for the six months ended June 30, 2017.  Interest and dividend income increased $0.7 million, or 15.5%, primarily due to an increase in the average balances of interest-earning assets of $30.6 million. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased 30 basis points to 0.83% for the six months ended June 30, 2018. The net interest margin decreased 21 basis points, or 5.5% during the six months ended June 30, 2018 to 3.64% from 3.85%.

We recorded a provision for loan losses of approximately $0.3 million for both of the six-month periods ended June 30, 2018 and 2017.  The allowance for loan losses was $2.5 million, or 1.14% of total gross loans at June 30, 2018 compared to $2.2 million, or 1.21% of gross loans at June 30, 2017.  Net charge-offs during the first six months of 2018 were approximately $0.2 million compared to $0.3 million during the first six months of 2017.  General reserves were higher at June 30, 2018, when compared to June 30, 2017, as the balances in all loan categories increased during the twelve months ended June 30, 2018. These increases to the allowance were partially off-set by improvements in historical loss levels and changes in qualitative factors during the twelve months ended June 30, 2018, as compared to the same period ended June 30, 2017.  Additionally, specific reserves as of June 30, 2018 were lower than they were as of June 30, 2017.

Total other income increased slightly to approximately $1.1 million for the six months ended June 30, 2018, as compared to approximately $1.0 million for the six months ended June 30, 2017.  The increase was primarily due to increases in loan origination and servicing income and in the gain on sale of foreclosed real estate, partially off-set by decreases in gains on sale of securities and other income.

Total other expense increased $0.4 million, or 9.3%, to $4.2 million for the six months ended June 30, 2018, as compared to $3.8 million for the six months ended June 30, 2017.  The increase was primarily due to higher other expenses, increased loan expenses, and higher salaries and employee benefits.

We recorded income tax expense of approximately $0.3 million for both of the six-month periods ended June 30, 2018 and 2017.

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

Total consolidated assets as of June 30, 2018 were $273.8 million, an increase of $18.4 million, or 7.2%, from $255.4 million at December 31, 2017.  The increase was primarily due to an increase of $13.5 million in the net loan portfolio, an increase in cash and cash equivalents of $2.3 million, an increase in federal funds sold of $2.7 million, and an increase in other assets of $0.4 million, partially off-set by decreases in securities available for sale of $0.5 million and decreases in non-marketable equity securities of $0.1 million.

Cash and cash equivalents increased $2.3 million, or 60.8%, to $6.1 million at June 30, 2018 from $3.8 million at December 31, 2017.  The increase in cash and cash equivalents was primarily a result of cash provided by financing activities of $17.9 million and cash provided by operating activities of $0.7 million exceeding cash used in investing activities of $16.3 million.

Securities available for sale decreased $0.4 million, or 1.9%, to $25.6 million at June 30, 2018 from $26.0 million at December 31, 2017, as paydowns, calls, and maturities exceeded new securities purchases. 

Net loans increased by $13.5 million, or 6.5% to $220.5 million at June 30, 2018 compared to $207.0 million at December 31, 2017 primarily as a result of a $5.9 million increase in one-to-four family loans, a $5.0 million increase in purchased auto loans, a $3.7 million increase in consumer direct loans, a $1.3 million increase in non-residential real estate loans, and a $0.6 million increase in multi-family residential loans, partially off-set by a $3.0 million decrease in commercial loans.

Total deposits increased $24.9 million, or 13.7%, to $207.7 million at June 30, 2018 from $182.8 million at December 31, 2017.  At June 30, 2018 checking accounts increased by $12.9 million, money market accounts increased by $0.4 million, savings accounts increased by $0.3 million and certificates of deposit increased by $11.3 million as compared to December 31, 2017.

FHLB advances decreased $6.0 million, or 39.8% to $9.1 million at June 30, 2018 compared to $15.1 million at December 31, 2017.

Stockholders' equity decreased approximately $0.6 million, or 1.2% to $52.5 million at June 30, 2018 from $53.1 million at December 31, 2017.  The decrease reflects $0.9 million to repurchase and cancel 65,635 outstanding shares, $0.5 million in dividends and a decrease in other comprehensive of $0.2 million related to a decrease in the fair value of securities available for sale. These decreases were partially off-set by net income of $0.8 million for the six months ended June 30, 2018 and proceeds from stock options exercised and the allocation of ESOP shares totaling approximately $0.2 million.

About Ottawa Bancorp, Inc.

Ottawa Bancorp, Inc. is the holding company for Ottawa Savings Bank, FSB which provides various financial services to individual and corporate customers in the United States. The Bank offers various deposit accounts, including checking, money market, regular savings, club savings, certificates of deposit, and various retirement accounts. Its loan portfolio includes one-to-four family residential mortgage, multi-family and non-residential real estate, commercial, and construction loans as well as auto loans and home equity lines of credit. Ottawa Savings Bank, FSB was founded in 1871 and is headquartered in Ottawa, Illinois. For more information about the Company and the Bank, please visit www.ottawasavings.com

Safe-Harbor

This news release contains forward-looking statements within the meaning of the federal securities laws. Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements, identified by words such as "will," "expected," "believe," and "prospects," involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. These risks and uncertainties involve general economic trends and changes in interest rates, increased competition, changes in consumer demand for financial services, the possibility of unforeseen events affecting the industry generally, the uncertainties associated with newly developed or acquired operations, and market disruptions. Ottawa Bancorp, Inc. undertakes no obligation to release revisions to these forward-looking statements publicly to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission. 

Ottawa Bancorp, Inc. & Subsidiary
Consolidated Balance Sheets
June 30, 2018 and December 31, 2017
(Unaudited)
  June 30,   December 31,
  2018     2017  
Assets      
Cash and due from banks $   4,214,064     $   2,426,924  
Interest bearing deposits     1,826,612         1,328,893  
Total cash and cash equivalents     6,040,676         3,755,817  
Time deposits     250,000         250,000  
Federal funds sold     3,653,000         939,000  
Securities available for sale     25,556,036         26,045,675  
Non-marketable equity securities     769,121         918,387  
Loans, net of allowance for loan losses of $2,545,986 and $2,472,446 at June 30, 2018 and December 31, 2017, respectively     220,488,283         207,035,091  
Loans held for sale     594,227         499,375  
Premises and equipment, net     6,613,552         6,670,088  
Accrued interest receivable     840,469         794,449  
Foreclosed real estate     85,000         84,100  
Deferred tax assets     1,991,467         1,870,490  
Cash surrender value of life insurance     2,317,435         2,293,800  
Goodwill     649,869         649,869  
Core deposit intangible     257,000         286,000  
Other assets     3,727,843         3,307,734  
Total assets $   273,833,978     $   255,399,875  
Liabilities and Stockholders' Equity      
Liabilities      
Deposits:      
Non-interest bearing $   12,309,330     $   11,562,801  
Interest bearing     195,420,844         171,211,823  
Total deposits     207,730,174         182,774,624  
Accrued interest payable     6,003         661  
FHLB advances     9,097,227         15,105,287  
Federal funds purchased     329,100         -  
Other liabilities     4,212,119         4,416,368  
Total liabilities     221,374,623         202,296,940  
Commitments and contingencies      
Redeemable common stock held by ESOP plan     -         1,202,014  
Stockholders' Equity      
Common stock, $.01 par value, 12,000,000 shares authorized; 3,400,160 and 3,451,802shares issued at June 30, 2018 and December 31, 2017, respectively     34,002         34,518  
Additional paid-in-capital     36,138,342         36,949,508  
Retained earnings     18,022,135         17,720,962  
Unallocated ESOP shares     (1,665,624 )       (1,754,632 )
Unearned management recognition plan shares     -         -  
Accumulated other comprehensive (loss) income     (69,500 )       152,579  
Total stockholders' equity     52,459,355         53,102,935  
Total liabilities and stockholders' equity $   273,833,978     $   255,399,875  
       


Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
  Three Months Ended   Six Months Ended
  June 30,   June 30,
   2018    2017    2018    2017
Interest and dividend income:              
Interest and fees on loans $   2,546,964   $   2,114,434   $   4,945,633   $   4,087,184
Securities:              
Residential mortgage-backed and related securities     71,353       126,148       138,819       262,016
State and municipal securities     103,203       126,939       203,651       257,568
Dividends on non-marketable equity securities     5,208       1,548       9,394       3,342
Interest-bearing deposits     29,554       6,725       45,348       16,046
Total interest and dividend income     2,756,282       2,375,794       5,342,845       4,626,156
Interest expense:              
Deposits     400,605       223,208       733,129       428,477
Borrowings     48,401       8,064       96,545       15,060
Total interest expense     449,006       231,272       829,674       443,537
Net interest income     2,307,276       2,144,522       4,513,171       4,182,619
Provision for loan losses     187,000       160,000       312,500       250,000
Net interest income after provision for loan losses      2,120,276       1,984,522       4,200,671       3,932,619
Other income:              
Gain on sale of securities     -       21,160       -       21,202
Gain on sale of loans     175,660       209,892       308,871       316,985
Gain on sale of foreclosed real estate     -       -       42,035       24,060
Gain on sale of repossessed assets     3,626       11,252       4,183       14,296
Loan origination and servicing income     208,146       202,718       371,018       303,709
Origination of mortgage servicing rights, net of amortization     9,999       18,701       22,853       34,112
Customer service fees     126,012       121,212       249,007       237,071
Increase in cash surrender value of life insurance     11,865       12,158       23,635       24,182
Other     23,696       32,139       48,634       60,105
Total other income     559,004       629,232       1,070,236       1,035,722
Other expenses:              
Salaries and employee benefits     1,103,496       1,083,157       2,115,940       2,077,523
Directors fees     46,750       40,800       94,750       81,600
Occupancy     160,390       162,241       334,461       325,780
Deposit insurance premium     16,430       12,697       32,826       26,211
Legal and professional services     100,949       93,964       189,650       190,122
Data processing     161,121       152,614       315,894       291,107
Loss on sale of securities     -       7,566       -       7,566
Loan expense     193,862       132,120       362,669       250,443
Valuation adjustments and expenses on foreclosed real estate     11,788       2,060       20,800       7,522
Loss on sale of OREO     2,438       -       2,438       -
Loss on sale of repossessed assets     1,156       -       4,421       274
Other     412,323       293,094       676,739       538,179
Total other expenses     2,210,703       1,980,313       4,150,588       3,796,327
Income before income tax expense     468,577       633,441       1,120,319       1,172,014
Income tax expense     112,704       167,896       284,864       349,169
Net income $   355,873   $   465,545   $   835,455   $   822,845
Basic earnings per share $   0.11   $   0.14   $   0.26   $   0.25
Diluted earnings per share $   0.11   $   0.14   $   0.26   $   0.25
Dividends per share $   0.05   $   0.04   $   0.165   $   0.08
               



Ottawa Bancorp, Inc. & Subsidiary
Selected Financial Data and Ratios
(Unaudited)
        At June 30,   At December 31,    
        2018     2017        
                                     (In thousands, except per share data)  
Financial Condition Data:                      
Total Assets       $ 273,834     $ 255,400        
Loans, net (1)          220,488        207,035        
Securities available for sale          25,556        26,046        
Deposits          207,730        182,775        
Stockholders' Equity          52,459        51,901        
Book Value per common share       $ 15.43     $ 15.04        
Tangible Book Value per common share (2)       $ 15.16     $ 14.76        
(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,
   2018    2017    2018    2017
  (In thousands, except per share data)
Operations Data:                      
Total interest and dividend income $2,756     $2,376     $5,343     $4,626  
Total interest expense    449        231       830        443  
Net interest income   2,307       2,145       4,513       4,183  
Provision for loan losses   187       160       312       250  
Other income   559       629       1,070       1,035  
Other expense   2,210       1,980       4,151       3,796  
Income tax expense    113        168        285        349  
Net income $ 356     $ 466     $ 835     $ 823  
Basic earnings per share $ 0.11     $ 0.14     $ 0.26     $ 0.25  
Diluted earnings per share $ 0.11     $ 0.14     $ 0.26     $ 0.25  
Dividends per share $ 0.05     $0.04     $ 0.165     $ 0.08  
                       
  At or for the
Three Months Ended
  At or for the
Six Months Ended
  June 30,   June 30,
   2018    2017    2018    2017
Performance Ratios:                      
Return on average assets   0.52 %   0.78 %   0.63 %     0.70 %
Return on average stockholders' equity   2.71       3.48       3.17       3.08  
Average stockholders' equity to average assets   19.26       22.36       19.73       22.58  
Stockholders' equity to total assets at end of period   19.16       20.79       19.16       20.79  
Net interest rate spread (1)   3.48       3.76       3.48       3.73  
Net interest margin (2)   3.66       3.89       3.64       3.85  
Average interest-earning assets to average interest-bearing liabilities   124.06       129.67       123.91       129.19  
Other expense to average assets   0.81       0.83       1.55       1.61  
Efficiency ratio (3)   77.11       71.38       74.33       72.73  
Dividend payout ratio   45.45       28.57       63.46       32.00  
                               
                       
      At June 30,   At December 31,
           2018    2017
              (unaudited)
Regulatory Capital Ratios (4):                      
Total risk-based capital (to risk-weighted assets)              21.47 %      22.52 %
Tier 1 core capital (to risk-weighted assets)                20.24        21.27  
Common equity Tier 1 (to risk-weighted assets)              20.24        21.27  
Tier 1 leverage (to adjusted total assets)                15.62        16.21  
Asset Quality Ratios:                      
Net charge-offs to average gross loans outstanding                0.21        0.18  
Allowance for loan losses to gross loans outstanding              1.14        1.18  
Non-performing loans to gross loans (5)                0.58        0.75  
Non-performing assets to total assets (5)                0.51        0.65  
Other Data:                      
Number of full-service offices                3        3  
                       
(1) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of funds on average interest-bearing liabilities.  
(2) Represents net interest income as a percent of average interest-earning assets.   
(3) Represents total other expenses divided by the sum of net interest income and total other income.  
(4) Ratios are for Ottawa Savings Bank.   
(5) Nonperforming loans and assets include accruing loans past due 90 days or more.   
   

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

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