Attached files
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| 8-K - FORM 8-K - Ottawa Bancorp Inc | ottb20180802_8k.htm |
Exhibit 99.1
OTTAWA BANCORP, INC.
Announces Second Quarter 2018 Results
Ottawa, Illinois – August 02, 2018 - 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 income 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.
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Ottawa Bancorp, Inc. & Subsidiary |
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Consolidated Balance Sheets |
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June 30, 2018 and December 31, 2017 |
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(Unaudited) |
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June 30, |
December 31, |
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2018 |
2017 |
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Assets |
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Cash and due from banks |
$ | 4,214,064 | $ | 2,426,924 | ||||
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Interest bearing deposits |
1,826,612 | 1,328,893 | ||||||
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Total cash and cash equivalents |
6,040,676 | 3,755,817 | ||||||
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Time deposits |
250,000 | 250,000 | ||||||
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Federal funds sold |
3,653,000 | 939,000 | ||||||
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Securities available for sale |
25,556,036 | 26,045,675 | ||||||
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Non-marketable equity securities |
769,121 | 918,387 | ||||||
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Loans, net of allowance for loan losses of $2,545,986 and $2,472,446 |
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at June 30, 2018 and December 31, 2017, respectively |
220,488,283 | 207,035,091 | ||||||
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Loans held for sale |
594,227 | 499,375 | ||||||
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Premises and equipment, net |
6,613,552 | 6,670,088 | ||||||
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Accrued interest receivable |
840,469 | 794,449 | ||||||
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Foreclosed real estate |
85,000 | 84,100 | ||||||
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Deferred tax assets |
1,991,467 | 1,870,490 | ||||||
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Cash surrender value of life insurance |
2,317,435 | 2,293,800 | ||||||
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Goodwill |
649,869 | 649,869 | ||||||
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Core deposit intangible |
257,000 | 286,000 | ||||||
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Other assets |
3,727,843 | 3,307,734 | ||||||
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Total assets |
$ | 273,833,978 | $ | 255,399,875 | ||||
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Liabilities and Stockholders' Equity |
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Liabilities |
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Deposits: |
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Non-interest bearing |
$ | 12,309,330 | $ | 11,562,801 | ||||
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Interest bearing |
195,420,844 | 171,211,823 | ||||||
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Total deposits |
207,730,174 | 182,774,624 | ||||||
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Accrued interest payable |
6,003 | 661 | ||||||
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FHLB advances |
9,097,227 | 15,105,287 | ||||||
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Federal funds purchased |
329,100 | - | ||||||
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Other liabilities |
4,212,119 | 4,416,368 | ||||||
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Total liabilities |
221,374,623 | 202,296,940 | ||||||
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Commitments and contingencies |
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Redeemable common stock held by ESOP plan |
- | 1,202,014 | ||||||
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Stockholders' Equity |
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Common stock, $.01 par value, 12,000,000 shares authorized; 3,400,160 and 3,451,802 shares issued at June 30, 2018 and December 31, 2017, respectively |
34,002 | 34,518 | ||||||
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Additional paid-in-capital |
36,138,342 | 36,949,508 | ||||||
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Retained earnings |
18,022,135 | 17,720,962 | ||||||
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Unallocated ESOP shares |
(1,665,624 | ) | (1,754,632 | ) | ||||
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Unearned management recognition plan shares |
- | - | ||||||
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Accumulated other comprehensive (loss) income |
(69,500 | ) | 152,579 | |||||
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Total stockholders' equity |
52,459,355 | 53,102,935 | ||||||
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Total liabilities and stockholders' equity |
$ | 273,833,978 | $ | 255,399,875 | ||||
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Ottawa Bancorp, Inc. & Subsidiary |
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Consolidated Statements of Operations |
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Three and Six Months Ended June 30, 2018 and 2017 |
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(Unaudited) |
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Three Months Ended |
Six Months Ended |
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June 30, |
June 30, |
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2018 |
2017 |
2018 |
2017 |
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Interest and dividend income: |
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Interest and fees on loans |
$ | 2,546,964 | $ | 2,114,434 | $ | 4,945,633 | $ | 4,087,184 | ||||||||
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Securities: |
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Residential mortgage-backed and related securities |
71,353 | 126,148 | 138,819 | 262,016 | ||||||||||||
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State and municipal securities |
103,203 | 126,939 | 203,651 | 257,568 | ||||||||||||
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Dividends on non-marketable equity securities |
5,208 | 1,548 | 9,394 | 3,342 | ||||||||||||
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Interest-bearing deposits |
29,554 | 6,725 | 45,348 | 16,046 | ||||||||||||
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Total interest and dividend income |
2,756,282 | 2,375,794 | 5,342,845 | 4,626,156 | ||||||||||||
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Interest expense: |
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Deposits |
400,605 | 223,208 | 733,129 | 428,477 | ||||||||||||
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Borrowings |
48,401 | 8,064 | 96,545 | 15,060 | ||||||||||||
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Total interest expense |
449,006 | 231,272 | 829,674 | 443,537 | ||||||||||||
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Net interest income |
2,307,276 | 2,144,522 | 4,513,171 | 4,182,619 | ||||||||||||
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Provision for loan losses |
187,000 | 160,000 | 312,500 | 250,000 | ||||||||||||
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Net interest income after provision for loan losses |
2,120,276 | 1,984,522 | 4,200,671 | 3,932,619 | ||||||||||||
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Other income: |
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Gain on sale of securities |
- | 21,160 | - | 21,202 | ||||||||||||
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Gain on sale of loans |
175,660 | 209,892 | 308,871 | 316,985 | ||||||||||||
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Gain on sale of foreclosed real estate |
- | - | 42,035 | 24,060 | ||||||||||||
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Gain on sale of repossessed assets |
3,626 | 11,252 | 4,183 | 14,296 | ||||||||||||
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Loan origination and servicing income |
208,146 | 202,718 | 371,018 | 303,709 | ||||||||||||
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Origination of mortgage servicing rights, net of amortization |
9,999 | 18,701 | 22,853 | 34,112 | ||||||||||||
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Customer service fees |
126,012 | 121,212 | 249,007 | 237,071 | ||||||||||||
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Increase in cash surrender value of life insurance |
11,865 | 12,158 | 23,635 | 24,182 | ||||||||||||
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Other |
23,696 | 32,139 | 48,634 | 60,105 | ||||||||||||
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Total other income |
559,004 | 629,232 | 1,070,236 | 1,035,722 | ||||||||||||
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Other expenses: |
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Salaries and employee benefits |
1,103,496 | 1,083,157 | 2,115,940 | 2,077,523 | ||||||||||||
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Directors fees |
46,750 | 40,800 | 94,750 | 81,600 | ||||||||||||
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Occupancy |
160,390 | 162,241 | 334,461 | 325,780 | ||||||||||||
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Deposit insurance premium |
16,430 | 12,697 | 32,826 | 26,211 | ||||||||||||
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Legal and professional services |
100,949 | 93,964 | 189,650 | 190,122 | ||||||||||||
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Data processing |
161,121 | 152,614 | 315,894 | 291,107 | ||||||||||||
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Loss on sale of securities |
- | 7,566 | - | 7,566 | ||||||||||||
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Loan expense |
193,862 | 132,120 | 362,669 | 250,443 | ||||||||||||
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Valuation adjustments and expenses on foreclosed real estate |
11,788 | 2,060 | 20,800 | 7,522 | ||||||||||||
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Loss on sale of OREO |
2,438 | - | 2,438 | - | ||||||||||||
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Loss on sale of repossessed assets |
1,156 | - | 4,421 | 274 | ||||||||||||
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Other |
412,323 | 293,094 | 676,739 | 538,179 | ||||||||||||
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Total other expenses |
2,210,703 | 1,980,313 | 4,150,588 | 3,796,327 | ||||||||||||
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Income before income tax expense |
468,577 | 633,441 | 1,120,319 | 1,172,014 | ||||||||||||
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Income tax expense |
112,704 | 167,896 | 284,864 | 349,169 | ||||||||||||
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Net income |
$ | 355,873 | $ | 465,545 | $ | 835,455 | $ | 822,845 | ||||||||
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Basic earnings per share |
$ | 0.11 | $ | 0.14 | $ | 0.26 | $ | 0.25 | ||||||||
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Diluted earnings per share |
$ | 0.11 | $ | 0.14 | $ | 0.26 | $ | 0.25 | ||||||||
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Dividends per share |
$ | 0.05 | $ | 0.04 | $ | 0.165 | $ | 0.08 | ||||||||
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Ottawa Bancorp, Inc. & Subsidiary |
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Selected Financial Data and Ratios |
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(Unaudited) |
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At June 30, |
At December 31, |
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2018 |
2017 |
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(In thousands, except per share data) |
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Financial Condition Data: |
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Total Assets |
$ | 273,834 | $ | 255,400 | ||||
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Loans, net (1) |
220,488 | 207,035 | ||||||
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Securities available for sale |
25,556 | 26,046 | ||||||
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Deposits |
207,730 | 182,775 | ||||||
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Stockholders' Equity |
52,459 | 51,901 | ||||||
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Book Value per common share |
$ | 15.43 | $ | 15.04 | ||||
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Tangible Book Value per common share (2) |
$ | 15.16 | $ | 14.76 | ||||
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(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. |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2018 |
2017 |
2018 |
2017 |
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(In thousands, except per share data) |
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Operations Data: |
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Total interest and dividend income |
$ | 2,756 | $ | 2,376 | $ | 5,343 | $ | 4,626 | ||||||||
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Total interest expense |
449 | 231 | 830 | 443 | ||||||||||||
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Net interest income |
2,307 | 2,145 | 4,513 | 4,183 | ||||||||||||
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Provision for loan losses |
187 | 160 | 312 | 250 | ||||||||||||
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Other income |
559 | 629 | 1,070 | 1,035 | ||||||||||||
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Other expense |
2,210 | 1,980 | 4,151 | 3,796 | ||||||||||||
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Income tax expense |
113 | 168 | 285 | 349 | ||||||||||||
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Net income |
$ | 356 | $ | 466 | $ | 835 | $ | 823 | ||||||||
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Basic earnings per share |
$ | 0.11 | $ | 0.14 | $ | 0.26 | $ | 0.25 | ||||||||
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Diluted earnings per share |
$ | 0.11 | $ | 0.14 | $ | 0.26 | $ | 0.25 | ||||||||
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Dividends per share |
$ | 0.05 | $ | 0.04 | $ | 0.165 | $ | 0.08 | ||||||||
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At or for the Three Months Ended |
At or for the Six Months Ended |
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June 30, |
June 30, |
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2018 |
2017 |
2018 |
2017 |
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Performance Ratios: |
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Return on average assets |
0.52 |
% |
0.78 |
% |
0.63 |
% |
0.70 |
% |
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Return on average stockholders' equity |
2.71 | 3.48 | 3.17 | 3.08 | ||||||||||||
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Average stockholders' equity to average assets |
19.26 | 22.36 | 19.73 | 22.58 | ||||||||||||
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Stockholders' equity to total assets at end of period |
19.16 | 20.79 | 19.16 | 20.79 | ||||||||||||
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Net interest rate spread (1) |
3.48 | 3.76 | 3.48 | 3.73 | ||||||||||||
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Net interest margin (2) |
3.66 | 3.89 | 3.64 | 3.85 | ||||||||||||
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Average interest-earning assets to average interest-bearing liabilities |
124.06 | 129.67 | 123.91 | 129.19 | ||||||||||||
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Other expense to average assets |
0.81 | 0.83 | 1.55 | 1.61 | ||||||||||||
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Efficiency ratio (3) |
77.11 | 71.38 | 74.33 | 72.73 | ||||||||||||
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Dividend payout ratio |
45.45 | 28.57 | 63.46 | 32.00 | ||||||||||||
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At June 30, |
At December 31, |
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2018 |
2017 |
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(unaudited) |
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Regulatory Capital Ratios (4): |
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Total risk-based capital (to risk-weighted assets) |
21.47 |
% |
22.52 |
% |
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Tier 1 core capital (to risk-weighted assets) |
20.24 | 21.27 | ||||||
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Common equity Tier 1 (to risk-weighted assets) |
20.24 | 21.27 | ||||||
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Tier 1 leverage (to adjusted total assets) |
15.62 | 16.21 | ||||||
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Asset Quality Ratios: |
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Net charge-offs to average gross loans outstanding |
0.21 | 0.18 | ||||||
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Allowance for loan losses to gross loans outstanding |
1.14 | 1.18 | ||||||
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Non-performing loans to gross loans (5) |
0.58 | 0.75 | ||||||
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Non-performing assets to total assets (5) |
0.51 | 0.65 | ||||||
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Other Data: |
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Number of full-service offices |
3 | 3 | ||||||
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(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. |
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(2) Represents net interest income as a percent of average interest-earning assets. |
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(3) Represents total other expenses divided by the sum of net interest income and total other income. |
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(4) Ratios are for Ottawa Savings Bank. |
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(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