Ottawa Bancorp, Inc. Announces First Quarter 2021 Results

OTTAWA, Ill., May 05, 2021 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the “Company”) (OTCQX: OTTW), the holding company for Ottawa Savings Bank, FSB (the “Bank”), announced net income of $0.6 million, or $0.20 per basic and diluted common share for the three months ended March 31, 2021, compared to net income of $0.1 million, or $0.029 per basic and diluted common share for the three months ended March 31, 2020. During the first quarter of 2021, the Company experienced an increase in loan originations which drove growth in the loan portfolio. The loan portfolio, net of allowance, increased to $270.8 million as of March 31, 2021 from $255.1 million as of December 31, 2020. Non-performing loans decreased slightly from $1.9 million at December 31, 2020 to $1.8 million at March 31, 2021, which caused the ratio of non-performing loans to gross loans to decrease from 0.62% at December 31, 2020 to 0.57% at March 31, 2021. Additionally, through March 31, 2021, the Company has repurchased a total of 576,585 shares of its common stock at an average price of $12.99 per share as part of the four stock repurchase programs approved by the Board since the Company’s second step conversion closed in 2016.

“2021 marks the 150^th year of operation for Ottawa Savings Bank, and the year is off to a very solid start,” said Craig Hepner, President and Chief Executive Officer of the Company. “We continued to experience extremely solid mortgage loan origination volume during the first quarter as interest rates remained at very favorable levels. This resulted in strong demand for refinance and purchase money mortgage loans during the quarter. As economic activity within our primary markets continued to rebound, overall loan volume was strong, resulting in a 6.2% increase in net loans and a 5.1% increase in total assets from the December 31, 2020 levels. Net earnings for the first quarter were solid, having benefitted from the strong loan origination volume and a continued pull-back in our cost of funds.”

Mr. Hepner went on to say further, “The support of our customers and the communities in which we operate continues to be a top priority for the Company as we all work together to navigate through the challenges brought about by the COVID-19 pandemic. We are pleased to continue to serve as a strong source of liquidity for our shareholders having returned $1 million in the form of dividends during the first quarter along with continuing our stock buyback program. We are encouraged by the economic recovery which has started to gain traction, and we are cautiously optimistic that conditions will continue to rebound in the coming months.”

Comparison of Results of Operations for the Three Months Ended March 31, 2021 and March 31, 2020

Net income for the three months ended March 31, 2021 was $0.6 million compared to net income of $0.1 million for the three months ended March 31, 2020. Total interest and dividend income decreased slightly to $2.9 million for the three months ended March 31, 2021 from $3.1 million for the three months ended March 31, 2020. Interest expense was $0.3 million lower during the three months ended March 31, 2021. In addition. a provision of $50 thousand was taken during the three months ended March 31, 2021 as compared to $450,000 for the three months ended March 31, 2020. During 2020, with the anticipated impact of the COVID-19 pandemic on the local and national economies, qualitative factors were adjusted negatively which led to an increase in the provision level. In 2021, with the economy improving, the qualitative factors were adjusted slightly more favorably which led to a more normalized level of provision for the period. Thus, net interest income after provision for loan losses increased by $0.5 million to $2.4 million for the three months ended March 31, 2021 from $1.9 million for the three months ended March 31, 2020. Total other income increased by $0.2 million to $0.6 million due to the strong loan origination levels which continued from 2020. Total other expenses rose slightly by $0.1 million this quarter as compared to the first quarter of 2020. Net income was $0.5 million higher for the three months ended March 31, 2021 as it rose to $0.6 million as compared to the three months ended March 31, 2020 when it was $0.1 million.

Net interest income increased by $0.2 million, or 5.6%, to $2.5 million for the three months ended March 31, 2021, from $2.3 million for the three months ended March 31, 2020. Interest and dividend income was $3.0 million which was lower by $0.1 million for the three months ended March 31, 2021 as compared to $3.1 million for the three months ended March 31, 2020. Although there was an increase in the average balances of interest-earning assets of $6.1 million, interest and dividend income decreased by $0.2 million as the yield on earning assets decreased from 4.37% for the three months ended March 31, 2020 to 4.01% for the three months ended March 31, 2021. Interest expense decreased $0.3 million as the average cost of funds decreased 56 basis points to 0.78% which led to interest expense declining from $0.8 million for the three months ended March 31, 2020 to $0.5 million for the three months ended March 31, 2021. Thus, net interest income increased to $2.5 million for the three months ended March 31, 2021 from $2.3 million for the three months ended March 31, 2020. Overall, the net interest margin increased 11 basis points during the three months ended March 31, 2021 to 3.37% from 3.26% for the three months ended March 31, 2020.

The Company recorded a provision for loan losses of $50 thousand for the three months ended March 31, 2021 as compared to $0.4 million for the three months ended March 31, 2020. The allowance for loan losses was $3.5 million, or 1.31% of total gross loans at March 31, 2021 compared to $3.4 million, or 1.35% of gross loans at March 31, 2020. Net charge-offs during the first quarter of 2021 were $0 compared to $30 thousand during the first quarter of 2020. General reserves were higher at March 31, 2021, when compared to March 31, 2020, primarily due to the balances in most loan categories increasing during the twelve months ended March 31, 2021. Non-performing loans decreased and the necessary reserves on non-performing loans as of March 31, 2021 were comparable to the reserves as of December 31, 2020.

Total other expense was $2.3 million for the three months ended March 31, 2021 as compared to $2.2 million for the three months ended March 31, 2020. There was an increase in the salaries and employee benefits category, an increase in deposit insurance premium, and an increase in loan expense. These increases were offset by decreases in legal and professional services, occupancy, and other expenses.

The Company recorded income tax expense of approximately $206 thousand for the three month periods ended March 31, 2021 as compared to $15 thousand for the three months ended March 31, 2020 due to lower pre-tax earnings in 2020.

Comparison of Financial Condition at March 31, 2021 and December 31, 2020

Total consolidated assets as of March 31, 2021 were $323.4 million, an increase of $15.8 million, or 5.1%, from $307.6 million at December 31, 2020. The increase was primarily due to an increase of $9.7 million in federal funds sold, a $15.7 million increase in the net loan portfolio and a $0.2 million increase in other assets. These increases were partially offset by a decrease in cash and cash equivalents of $6.5 million, a decrease in securities available for sale of $1.4 million, a decrease of $1.7 million in time deposits and a decrease of almost $0.2 million in accrued interest receivable.

Cash and cash equivalents decreased $6.5 million, or 61.9%, to $3.9 million at March 31, 2021 from $10.4 million at December 31, 2020. The decrease in cash and cash equivalents was primarily the result of cash used in investing activities of $22.6 million exceeding cash provided by operating activities of $1.4 million and cash provided by financing activities of $14.7 million.

Securities available for sale decreased $1.4 million, or 7.5%, to $17.3 million at March 31, 2021 from $18.7 million at December 31, 2020, as paydowns, calls, and maturities exceeded new securities purchases.

Net loans increased $15.7 million, or 6.2%, to $270.8 million at March 31, 2021 compared to $255.1 million at December 31, 2020 primarily as a result of a $10.4 million increase in one-to-four family loans, an increase of $1.1 million in multi-family loans, a $4.3 million increase in non-residential real estate loans and a $1.9 million increase in commercial loans. These increases were offset by decreases of $0.8 million in consumer direct loans and $1.2 million in purchased auto loans.

Total deposits increased $16.8 million, or 7.1%, to $252.9 million at March 31, 2021 from $236.1 million at December 31, 2020. For the three months ended March 31, 2021, savings accounts increased by $2.5 million, non-interest bearing checking accounts increased $3.3 million, interest bearing checking accounts increased $2.5 million, money market accounts increased $0.8 million and certificates of deposit increased by $7.7 million as compared to December 31, 2020.

FHLB advances decreased $1.0 million, or 5.7% to $16.5 million at March 31, 2021 compared to $17.5 million at December 31, 2020. The decrease was related to the maturity and repayment of a borrowing during the quarter.

Stockholders’ equity decreased $1.0 million, or 2.2% to $47.2 million at March 31, 2021 from $48.2 million at December 31, 2020. The decrease reflects $0.2 million used to repurchase and cancel 13,100 outstanding shares of Company common stock, a decrease of $0.1 million in other comprehensive income due to a decrease in fair value of securities available for sale and $1.0 million in cash dividends. Additionally, the ESOP owned shares increased by $0.4 million causing a decrease to equity. The decreases were partially offset by net income of $0.6 million for the three months ended March 31, 2021 and proceeds from stock options exercised, equity incentive plan shares issued and the allocation of ESOP shares totaling $0.1 million.

About Ottawa Bancorp, Inc.

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

Cautionary Statement Regarding Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the federal securities laws. Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements, identified by words such as “will,” “expected,” “believe,” and “prospects,” involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. These risks and uncertainties involve general economic trends and changes in interest rates, increased competition, changes in consumer demand for financial services, the possibility of unforeseen events affecting the industry generally, the uncertainties associated with newly developed or acquired operations, market disruptions and the potential effects of the COVID-19 pandemic on the local and national economic environment, on our customers and on our operations as well as any changes to federal, state and local government laws, regulations and orders in connection with the pandemic. Ottawa Bancorp, Inc. undertakes no obligation to release revisions to these forward-looking statements publicly to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

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

Ottawa Bancorp, Inc. & Subsidiary
Consolidated Balance Sheets
March 31, 2021 and December 31, 2020
(Unaudited)
	March 31,				December 31,
		2021				2020
Assets
Cash and due from banks	$	3,383,329			$	4,793,872
Interest bearing deposits		564,450				5,581,139
Total cash and cash equivalents		3,947,779				10,375,011
Time deposits		1,494,000				3,232,500
Federal funds sold		13,174,000				3,486,000
Securities available for sale		17,307,343				18,711,631
Loans, net of allowance for loan losses of $3,529,012 and $3,497,150
at March 31, 2021 and December 31, 2020, respectively		270,803,316				255,103,054
Premises and equipment, net		6,294,191				6,312,256
Accrued interest receivable		827,220				972,602
Foreclosed Real Estate		77,265				107,100
Deferred tax assets		1,677,413				1,666,339
Cash value of life insurance		2,615,547				2,603,046
Goodwill		649,869				649,869
Core deposit intangible		122,495				131,996
Other assets		4,428,675				4,234,003
Total assets	$	323,419,113			$	307,585,407
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest bearing	$	21,588,484			$	18,285,211
Interest bearing		231,345,946				217,774,806
Total deposits		252,934,430				236,060,017
Accrued interest payable		71,532				54,851
FHLB advances		16,548,752				17,548,560
Other liabilities		5,278,003				4,731,352
Total liabilities		274,832,717				258,394,780
Commitments and contingencies
ESOP Repurchase Obligation		1,415,674				957,167
Stockholders' Equity
Common stock, $.01 par value, 12,000,000 shares authorized; 2,944,465 and 2,949,324
shares issued at March 31 2021 and December 31, 2020, respectively		29,445				29,491
Additional paid-in-capital		30,320,124				30,415,091
Retained earnings		19,043,944				19,457,092
Unallocated ESOP shares		(1,101,057	)			(1,132,842	)
Unallocated management recognition plan shares		(122,107	)			(62,070	)
Accumulated other comprehensive income		416,047				483,865
		48,586,396				49,190,627
Less:
ESOP Owned Shares		(1,415,674	)			(957,167	)
Total stockholders' equity		47,170,722				48,233,460
Total liabilities and stockholders' equity	$	323,419,113			$	307,585,407

Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three Months Ended March 31, 2021 and 2020
(Unaudited)
		Three Months Ended
		March 31,
			2021				2020
Interest and dividend income:
Interest and fees on loans		$	2,795,387			$	2,909,081
Securities:
Residential mortgage-backed and related securities			41,442				67,230
State and municipal securities			67,924				95,944
Dividends on non-marketable equity securities			8,671				6,590
Interest-bearing deposits			6,172				40,148
Total interest and dividend income			2,919,596				3,118,993
Interest expense:
Deposits			376,138				730,819
Borrowings			86,522				61,896
Total interest expense			462,660				792,715
Net interest income			2,456,936				2,326,278
Provision for loan losses			50,000				450,000
Net interest income after provision for loan losses			2,406,936				1,876,278
Other income:
Gain on sale of loans			173,812				107,067
Gain on sale of securities, net			-				857
Loan origination and servicing income			305,606				114,958
Origination of mortgage servicing rights, net of amortization			9,616				(10,443	)
Customer service fees			90,334				106,840
Increase in cash surrender value of life insurance			12,501				12,699
Gain on sale of repossessed assets, net			956				16,031
Other			25,021				37,673
Total other income			617,846				385,682
Other expenses:
Salaries and employee benefits			1,348,392				1,264,646
Directors fees			40,000				43,000
Occupancy			147,714				178,525
Deposit insurance premium			18,178				-
Legal and professional services			79,209				104,622
Data processing			224,296				223,273
Loan expense			187,718				134,350
Valuation adjustments and expenses on foreclosed real estate			2,002				559
Other			204,013				211,665
Total other expenses			2,251,522				2,160,640
Income before income tax expense			773,260				101,320
Income tax expense			205,574				15,364
Net income		$	567,686			$	85,956
Basic earnings per share		$	0.200			$	0.029
Diluted earnings per share		$	0.200			$	0.029
Dividends per share		$	0.345			$	0.418

Ottawa Bancorp, Inc. & Subsidiary
Selected Financial Data and Ratios
(Unaudited)
		At or for the
		Three Months Ended
		March 31,
		2021				2020
Performance Ratios:
Return on average assets (5)			0.73	%			0.11	%
Return on average stockholders' equity (5)			4.56				0.61
Average stockholders' equity to average assets			15.97				18.67
Stockholders' equity to total assets at end of period			14.72				15.87
Book Value per common share		$	16.02			$	16.33
Tangible Book Value per common share (7)		$	15.76			$	16.07
Net interest rate spread (1) (5)			3.22				3.03
Other expense to average assets			0.72				0.71
Efficiency ratio (3)			73.20				79.68
Dividend payout ratio			172.50				1,461.54

	At or for the			At or for the
	Three Months Ended			Twelve Months Ended
	March 31,			December 31,
	2021			2020
	(unaudited)
Regulatory Capital Ratios (4):
Total risk-based capital (to risk-weighted assets)	20.98	%		20.39	%
Tier 1 core capital (to risk-weighted assets)	19.73			19.14
Common equity Tier 1 (to risk-weighted assets)	19.73			19.14
Tier 1 leverage (to adjusted total assets)	14.38			14.26
Asset Quality Ratios:
Net charge-offs to average gross loans outstanding	0.00			0.18
Allowance for loan losses to gross loans outstanding	1.31			1.35
Non-performing loans to gross loans (6)	0.57			0.62
Non-performing assets to total assets (6)	0.58			0.67
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.
(7) Non-GAAP measure. Excludes goodwill and core deposit intangible.