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