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

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

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