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Ottawa Bancorp, Inc. Announces Second Quarter 2022 Results and Cash Dividend

·18-min read

OTTAWA, Ill., Aug. 17, 2022 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the “Company”) (OTCQX: OTTW), the holding company for OSB Community Bank (the “Bank”), announced net income of $0.7 million, or $0.28 per basic and diluted common share, for the three months ended June 30, 2022, compared to net income of $0.7 million, or $0.26 per basic and diluted common share for the three months ended June 30, 2021. For the six months ended June 30, 2022, the Company announced net income of $1.6 million, or $0.59 per basic and diluted common share, compared to net income of $1.3 million, or $0.46 per basic and diluted common share, for the six months ended June 30, 2021. During the second quarter of 2022, the Company continued to grow the loan portfolio even though loan originations have tapered off significantly throughout 2022. The loan portfolio, net of allowance, increased to $290.6 million as of June 30, 2022 from $283.9 million as of December 31, 2021. Non-performing loans decreased from $1.6 million at December 31, 2021 to $1.0 million at June 30, 2022, resulting in the ratio of non-performing loans to gross loans decreasing from 0.57% at December 31, 2021 to 0.35% at June 30, 2022. Additionally, through June 30, 2022, the Company has repurchased a total of 823,085 shares of its common stock at an average price of $13.47 per share as part of the five stock repurchase programs approved by the Board of Directors since the Company’s second step conversion was completed in 2016.

Craig Hepner, President and Chief Executive Officer of the Company, said, “I am pleased to report solid results from the Company’s operations during the second quarter of 2022 and for the first six months ended June 30, 2022. Although overall asset growth has been flat during the first half of 2022, we have been able to grow the loan portfolio through the redeployment of cash and investments. This is in spite of a substantial increase in market interest rates during the first six months of the year.” Hepner went on to say, “Deposit growth has been steady as we continue to reduce our reliance on time deposits in favor of less costly core demand deposits as we continue to focus on maintaining our strong net interest margin.”

Comparison of Results of Operations for the Three Months Ended June 30, 2022 and June 30, 2021

Net income for the three-months ended June 30, 2022 and June 30, 2021 was $0.7 million. Total interest and dividend income was $3.2 million for the three months ended June 30, 2022 and for the three months ended June 30, 2021. Interest expense was $0.3 million for the three months ended June 30, 2022 and $0.4 million for the three months ended June 30, 2021. In addition, no provision for loan losses was taken during the three months ended June 30, 2022 as compared to $75,000 for the three months ended June 30, 2021. During the three months ended June 30, 2022, with the uncertainty of the impact that Federal Reserve interest rate hikes would have on the local and national economies, qualitative factors were unchanged during the period. In 2022, non-performing loan levels have improved as the economy continues to remain steady even though there are signs of it slowing. Net interest income after provision for loan losses improved to $2.9 million for the three months ended June 30, 2022 as compared to $2.7 million for the three months ended June 30, 2021. Total other income decreased from $0.8 million for the three months ended June 30, 2021, to $0.4 million for the three months ended June 30, 2022. This decrease of $0.4 million for the three months ended June 30, 2022 was primarily due to lower loan origination levels for one-to-four family loans during the second quarter which resulted in a corresponding decrease in gain on sale of loans and loan origination and servicing income. These decreases were slightly offset by an increase in customer service fees. Total other expenses decreased from $2.5 million at June 30, 2021 to $2.2 million for the three months ended June 30, 2022. The decrease was primarily due to a $0.2 million decline in compensation-related costs in the area of mortgage loan origination as a result of the significant reduction in mortgage volume in 2022 from 2021 levels.

The Company recorded no provision for loan losses for the three months ended June 30, 2022 as compared to $75,000 for the three months ended June 30, 2021. The allowance for loan losses was $3.6 million or 1.21% of total gross loans at June 30, 2022 compared to $3.6 million or 1.27% of total gross loans at June 30, 2021. Net charge-offs (recoveries) during the second quarter of 2022 were $(6,244) compared to $(21,438) during the second quarter of 2021. General allocation of reserves was slightly lower at June 30, 2022, when compared to June 30, 2021, even though balances in many loan categories were higher during the twelve months ended June 30, 2022. In addition, due to the uncertain impact of the Federal Reserve interest rate increases on the local and national economies, qualitative factors have been maintained at current levels. With non-performing loans decreasing, the necessary reserves on non-performing loans as of June 30, 2022 were approximately $41,000 lower than they were as of June 30, 2021 mostly due to the improvement of several credits and because the few loans that were added required little or no specific allocation of reserves when compared to those loans that were removed.

The Company recorded income tax expense of approximately $0.3 million for the three-months ended June 30, 2022 and June 30, 2021.

Comparison of Results of Operations for the Six Months Ended June 30, 2022 and June 30, 2021

Net income was $1.6 million for the six-month period ended June 30, 2022 compared to net income of $1.3 million for the six-month period ended June 30, 2021. Total interest and dividend income was $6.4 million for the six-month period ended June 30, 2022 and $6.1 million for the six-month period ended June 30, 2021. Interest expense was $0.2 million lower during the six months ended June 30, 2022. In addition, no provision for loan losses was taken during the six months ended June 30, 2022 as compared to $0.1 million for the six months ended June 30, 2021. During 2022, with the uncertainty of the impact that Federal Reserve interest rate hikes would have on the local and national economies, qualitative factors were unchanged during the period. In 2022, non-performing loan levels have improved as the economy continues to remain steady even though there are signs of it slowing. Net interest income after provision for loan losses improved to $5.7 million during the six months ended June 30, 2022 as compared to $5.1 million during the six months ended June 30, 2021. Total other income decreased from $1.4 million during the six months ended June 30, 2021 to $0.9 million during the six months ended June 30, 2022. This decrease of $0.5 million was primarily due to lower loan origination levels for one-to-four family loans during the period, which resulted in a corresponding decrease in gain on sale of loans and loan origination and servicing income of $0.4 million. Total other expenses decreased to $4.4 million for the six months ended June 30, 2022 from $4.7 million for the six months ended June 30, 2021. This decrease was primarily due to a $0.3 million decline in compensation-related costs and a $0.1 million reduction in loan expense during the six months ended June 30, 2022.

We recorded no provision for loan losses for the six-month period ended June 30, 2022 as compared to $0.1 million for the sixth-month period ended June 30, 2021. The allowance for loan losses was $3.6 million or 1.21% of total gross loans at June 30, 2022 compared to $3.6 million or 1.27% of gross loans at June 30, 2021. Net charge-offs (recoveries) during the first six months of 2021 were $(67,247) compared to $(21,299) during the first six months of 2021.

We recorded income tax expense of approximately $0.6 million during the six-month period ended June 30, 2022 as compared to $0.5 million during the six month period ended June 30, 2021.

Comparison of Financial Condition at June 30, 2022 and December 31, 2021

Total consolidated assets as of June 30, 2022 were $343.3 million, an increase of $0.8 million, or 0.2%, from $342.5 million at December 31, 2021. The increase was primarily due to an increase of $1.8 million in cash and cash equivalents, a $6.7 million increase in the net loan portfolio and a $0.7 million increase in deferred tax assets. These increases were offset by a decrease of $1.7 million in federal funds sold and a decrease of $6.2 million in securities available for sale.

Cash and cash equivalents increased by $1.8 million, or 28.0%, to $8.3 million at June 30, 2022 from $6.5 million at December 31, 2021. The increase in cash and cash equivalents was primarily the result of cash provided from financing activities of $2.0 million and cash provided by operating activities of $1.7 million exceeding cash used in investing activities of $1.9 million.

Securities available for sale decreased by $6.2 million, or 18.9% to $26.5 million at June 30, 2022 from $32.7 million at December 31, 2021, as paydowns, calls, and maturities exceeded new securities purchases.

Net loans increased by $6.7 million, or 2.4%, to $290.6 million at June 30, 2022 compared to $283.9 million at December 31, 2021 primarily as a result of an increase of $3.9 million in one-to-four family loans, an increase of $0.5 million in multi-family loans, an increase of $4.9 million in non-residential real estate loans and a $0.6 million increase in commercial loans. These increases were offset by decreases of $1.7 million in consumer direct loans and $1.5 million in purchased auto loans. The allowance for loan losses decreased by $0.1 million.

Total deposits increased $10.5 million, or 3.8%, to $283.6 million at June 30, 2022 from $273.1 million at December 31, 2021. During the six months ended June 30, 2022, savings accounts increased by $1.3 million, non-interest bearing checking accounts increased by $1.7 million, interest bearing checking accounts increased by $5.0 million and money market accounts increased by $2.6 million. These increases were offset by a $0.1 million decrease in certificates of deposits.

FHLB advances decreased $6.0 million to $10.5 million at June 30, 2022 as compared to $16.5 million at December 31, 2021.

Stockholders’ equity decreased $2.9 million, or 6.3%, to $43.1 million at June 30, 2022 from $46.0 million at December 31, 2021. The decrease reflects $1.7 million used to repurchase and cancel 118,500 outstanding shares of Company common stock, a decrease of $2.2 million in other comprehensive income due to a decrease in fair value of securities available for sale and $0.6 million in cash dividends paid. These were partially offset by net income of $1.6 million for the six months ended June 30, 2022.

Announcement of Quarterly Cash Dividend

The Company also announced today that its Board of Directors has declared a quarterly cash dividend of $0.11 per share, payable on or about September 14, 2022, to stockholders of record as of the close of business on August 31, 2022.

About Ottawa Bancorp, Inc.

Ottawa Bancorp, Inc. is the holding company for OSB Community Bank, 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. OSB Community Bank, FSB was founded in 1871 and is headquartered in Ottawa, Illinois. For more information about the Company and the Bank, please visit www.myosb.bank.

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.

 

Ottawa Bancorp, Inc. & Subsidiary

Consolidated Balance Sheets

June 30, 2022 and December 31, 2021

(Unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2022

 

 

 

2021

 

Assets

 

 

 

 

Cash and due from banks

 

$

7,210,389

 

 

$

5,266,361

 

Interest bearing deposits

 

 

1,124,335

 

 

 

1,249,947

 

Total cash and cash equivalents

 

 

8,334,724

 

 

 

6,516,308

 

Time deposits

 

 

250,000

 

 

 

250,000

 

Federal funds sold

 

 

-

 

 

 

1,716,000

 

Securities available for sale

 

 

26,513,985

 

 

 

32,700,414

 

Loans, net of allowance for loan losses of $3,572,898 and $3,640,145 at June 30, 2022 and December 31, 2021, respectively

 

 

290,567,027

 

 

 

283,877,203

 

Loans held for sale

 

 

234,125

 

 

 

403,920

 

Premises and equipment, net

 

 

6,239,067

 

 

 

6,331,188

 

Accrued interest receivable

 

 

968,292

 

 

 

1,007,399

 

Deferred tax assets

 

 

2,472,771

 

 

 

1,793,910

 

Cash value of life insurance

 

 

2,671,470

 

 

 

2,649,941

 

Goodwill

 

 

649,869

 

 

 

649,869

 

Core deposit intangible

 

 

83,227

 

 

 

100,326

 

Other assets

 

 

4,306,716

 

 

 

4,528,862

 

Total assets

 

$

343,291,273

 

 

$

342,525,340

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

Liabilities

 

 

 

 

Deposits:

 

 

 

 

Non-interest bearing

 

$

24,586,047

 

 

$

22,898,814

 

Interest bearing

 

 

258,993,647

 

 

 

250,152,124

 

Total deposits

 

 

283,579,694

 

 

 

273,050,938

 

Accrued interest payable

 

 

44,390

 

 

 

48,825

 

FHLB advances

 

 

10,512,322

 

 

 

16,524,555

 

Other liabilities

 

 

4,197,281

 

 

 

4,860,206

 

Total liabilities

 

 

298,333,687

 

 

 

294,484,524

 

Commitments and contingencies

 

 

 

 

ESOP Repurchase Obligation

 

 

1,873,688

 

 

 

2,066,911

 

Stockholders' Equity

 

 

 

 

Common stock, $.01 par value, 12,000,000 shares authorized; 2,694,262 and 2,818,517 shares issued at June 30, 2022 and December 31, 2021, respectively

 

 

26,942

 

 

 

28,185

 

Additional paid-in-capital

 

 

26,652,231

 

 

 

28,473,180

 

Retained earnings

 

 

21,550,391

 

 

 

20,536,121

 

Unallocated ESOP shares

 

 

(949,340

)

 

 

(949,340

)

Unallocated management recognition plan shares

 

 

(176,020

)

 

 

(99,352

)

Accumulated other comprehensive income (loss)

 

 

(2,146,618

)

 

 

52,022

 

 

 

 

44,957,586

 

 

 

48,040,816

 

Less:

 

 

 

 

ESOP Owned Shares

 

 

(1,873,688

)

 

 

(2,066,911

)

Total stockholders' equity

 

 

43,083,898

 

 

 

45,973,905

 

Total liabilities and stockholders' equity

 

$

343,291,273

 

 

$

342,525,340

 


Ottawa Bancorp, Inc. & Subsidiary

Consolidated Statements of Operations

Three and Six Months Ended June 30 2022 and 2021

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Interest and dividend income:

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

3,030,894

 

 

$

3,051,210

 

 

$

6,049,719

 

 

$

5,846,598

 

Securities:

 

 

 

 

 

 

 

 

Residential mortgage-backed and related securities

 

 

81,243

 

 

 

39,153

 

 

 

164,052

 

 

 

80,595

 

State and municipal securities

 

 

47,088

 

 

 

67,682

 

 

 

99,392

 

 

 

135,606

 

Dividends on non-marketable equity securities

 

 

9,672

 

 

 

8,469

 

 

 

18,647

 

 

 

17,140

 

Interest-bearing deposits

 

 

11,838

 

 

 

4,509

 

 

 

18,242

 

 

 

10,681

 

Total interest and dividend income

 

 

3,180,736

 

 

 

3,171,023

 

 

 

6,350,052

 

 

 

6,090,620

 

Interest expense:

 

 

 

 

 

 

 

 

Deposits

 

 

276,050

 

 

 

326,540

 

 

 

528,457

 

 

 

702,677

 

Borrowings

 

 

53,381

 

 

 

57,003

 

 

 

112,720

 

 

 

143,526

 

Total interest expense

 

 

329,431

 

 

 

383,543

 

 

 

641,177

 

 

 

846,203

 

Net interest income

 

 

2,851,305

 

 

 

2,787,480

 

 

 

5,708,875

 

 

 

5,244,417

 

Provision for loan losses

 

 

-

 

 

 

75,000

 

 

 

-

 

 

 

125,000

 

Net interest income after provision for loan losses

 

 

2,851,305

 

 

 

2,712,480

 

 

 

5,708,875

 

 

 

5,119,417

 

Other income:

 

 

 

 

 

 

 

 

Gain on sale of loans

 

 

31,490

 

 

 

345,029

 

 

 

121,823

 

 

 

518,842

 

Gain on sale of repossessed assets, net

 

 

-

 

 

 

5,118

 

 

 

-

 

 

 

6,074

 

Loan origination and servicing income

 

 

193,231

 

 

 

258,336

 

 

 

460,014

 

 

 

563,943

 

Origination of mortgage servicing rights, net of amortization

 

 

(4,279

)

 

 

52,374

 

 

 

10,360

 

 

 

61,990

 

Customer service fees

 

 

119,964

 

 

 

97,440

 

 

 

234,671

 

 

 

187,774

 

Increase in cash surrender value of life insurance

 

 

10,816

 

 

 

11,893

 

 

 

21,529

 

 

 

24,394

 

Other

 

 

10,159

 

 

 

21,768

 

 

 

25,246

 

 

 

46,788

 

Total other income

 

 

361,381

 

 

 

791,958

 

 

 

873,643

 

 

 

1,409,805

 

Other expenses:

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

1,339,518

 

 

 

1,561,034

 

 

 

2,627,883

 

 

 

2,909,426

 

Director fees

 

 

46,500

 

 

 

38,750

 

 

 

93,000

 

 

 

78,750

 

Occupancy

 

 

154,271

 

 

 

157,981

 

 

 

322,614

 

 

 

305,695

 

Deposit insurance premium

 

 

21,500

 

 

 

18,000

 

 

 

42,548

 

 

 

36,178

 

Legal and professional services

 

 

79,591

 

 

 

92,468

 

 

 

150,496

 

 

 

171,677

 

Data processing

 

 

282,634

 

 

 

284,235

 

 

 

564,008

 

 

 

508,531

 

Loss on sale of securities

 

 

2,823

 

 

 

-

 

 

 

2,823

 

 

 

-

 

Loan expense

 

 

71,117

 

 

 

107,676

 

 

 

155,859

 

 

 

295,394

 

Valuation adjustments and expenses on foreclosed real estate

 

 

-

 

 

 

7,712

 

 

 

-

 

 

 

9,714

 

Other

 

 

208,029

 

 

 

212,953

 

 

 

395,396

 

 

 

416,966

 

Total other expenses

 

 

2,205,983

 

 

 

2,480,809

 

 

 

4,354,628

 

 

 

4,732,331

 

Income before income tax expense

 

 

1,006,703

 

 

 

1,023,629

 

 

 

2,227,889

 

 

 

1,796,891

 

Income tax expense

 

 

276,386

 

 

 

275,017

 

 

 

618,756

 

 

 

480,591

 

Net income

 

$

730,317

 

 

$

748,612

 

 

$

1,609,133

 

 

$

1,316,300

 

Basic earnings per share

 

$

0.28

 

 

$

0.26

 

 

$

0.59

 

 

$

0.46

 

Diluted earnings per share

 

$

0.28

 

 

$

0.26

 

 

$

0.59

 

 

$

0.46

 

Dividends per share

 

$

0.11

 

 

$

0.10

 

 

$

0.23

 

 

$

0.44

 


Ottawa Bancorp, Inc. & Subsidiary

Selected Financial Data and Ratios

(Unaudited)

 

 

 

At or for the

 

At or for the

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2022

 

2021

 

2022

 

2021

Performance Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (5)

 

0.84

%

 

0.90

%

 

0.93

%

 

0.82

%

Return on average stockholders' equity (5)

 

6.55

 

 

6.65

 

 

7.13

 

 

5.37

 

Average stockholders' equity to average assets

 

12.82

 

 

13.57

 

 

13.00

 

 

15.23

 

Stockholders' equity to total assets at end of period

 

12.55

 

 

14.32

 

 

12.55

 

 

14.32

 

Net interest rate spread (1) (5)

 

3.48

 

 

3.44

 

 

3.49

 

 

3.34

 

Net interest margin (2) (5)

 

3.52

 

 

3.55

 

 

3.52

 

 

3.46

 

Other expense to average assets

 

0.63

 

 

0.75

 

 

1.26

 

 

1.47

 

Efficiency ratio (3)

 

68.66

 

 

69.29

 

 

66.17

 

 

71.12

 

Dividend payout ratio

 

39.29

 

 

37.86

 

 

37.38

 

 

95.88

 


 

 

At or for the

 

At or for the

 

 

Six Months Ended

 

Twelve Months Ended

 

 

June 30,

 

December 31,

 

 

 

2022

 

 

 

2021

 

 

 

(unaudited)

Regulatory Capital Ratios (4):

 

 

 

 

 

 

Total risk-based capital (to risk-weighted assets)

 

 

19.41

%

 

 

19.58

%

 

Tier 1 core capital (to risk-weighted assets)

 

 

18.16

 

 

 

18.32

 

 

Common equity Tier 1 (to risk-weighted assets)

 

 

18.16

 

 

 

18.32

 

 

Tier 1 leverage (to adjusted total assets)

 

 

13.10

 

 

 

13.27

 

 

Asset Quality Ratios:

 

 

 

 

 

 

Net charge-offs to average gross loans outstanding

 

 

0.47

 

 

 

(0.02

)

 

Allowance for loan losses to gross loans outstanding

 

 

1.21

 

 

 

1.27

 

 

Non-performing loans to gross loans (6)

 

 

0.35

 

 

 

0.57

 

 

Non-performing assets to total assets (6)

 

 

0.30

 

 

 

0.48

 

 

Other Data:

 

 

 

 

 

 

Book Value per common share

 

$

15.99

 

 

$

16.53

 

 

Tangible Book Value per common share (7)

 

$

15.72

 

 

$

16.26

 

 

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 OSB Community 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.

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