Ottawa Bancorp, Inc. Announces Fourth Quarter and Fiscal 2022 Results

OTTAWA, Ill., Feb. 06, 2023 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the “Company”) (OTCQX: OTTW), the holding company for OSB Community Bank (the “Bank”), announced net income of $0.6 million, or $0.22 per basic and diluted common share for the three months ended December 31, 2022, compared to net income of $0.8 million, or $0.28 per basic and diluted common share for the three months ended December 31, 2021. For the year ended December 31, 2022, the Company announced net income of $2.5 million, or $0.96 per basic and diluted common share, compared to net income of $2.90 million, or $1.03 per basic and diluted common share for the year ended December 31, 2021. The loan portfolio, net of allowance, increased to $307.8 million as of December 31, 2022 from $283.9 million as of December 31, 2021. Non-performing loans increased from $1.6 million at December 31, 2021 to $2.3 million at December 31, 2022, which caused the ratio of non-performing loans to gross loans to increase from 0.57% at December 31, 2021 to 0.73% at December 31, 2022.   Additionally, through December 31, 2022, the Company has repurchased a total of 954,042 shares of its common stock at an average price of $13.53 per share as part of the five stock repurchase programs approved by the Company’s Board since 2016.

Craig Hepner, President and Chief Executive Officer of the Company, said “We continue to manage through the higher interest rate environment, and in spite of a significant increase in our cost of funds throughout 2022, I’m pleased to report that our net interest margin has remained relatively constant as asset yields have improved as well. While the higher rate environment resulted in a substantial decline in mortgage origination volume during 2022, other areas of lending remained strong throughout the year, resulting in positive growth in the overall loan portfolio.” Mr. Hepner added, “The impaired loan relationship that was identified in the third quarter unfortunately had a substantial negative impact on earnings for 2022, however, we believe that we have this relationship fully reserved for at year-end as we continue to work to resolve the relationship. Overall asset quality has remained strong throughout the year, and we continue to closely monitor our asset quality levels as we manage through current economic conditions.”

Comparison of Results of Operations for the Three Months Ended December 31, 2022 and December 31, 2021

Net income for the three months ended December 31, 2022 was $0.6 million compared to net income of $0.8 million for the three months ended December 31, 2021. Total interest and dividend income was $3.6 million for the three months ended December 31, 2022 compared to $3.1 million at December 31, 2021. Interest expense was $0.8 million during the three months ended December 31, 2022 as compared to $0.3 million for the three months ended December 31, 2021. Net interest income was comparable at $2.8 million for the three months ended December 31, 2022 and December 31, 2021.

In the third quarter of 2022, a multi-loan commercial relationship with outstanding balances totaling approximately $2.2 million was identified as being impaired, meaning that it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreements. Based on our analysis, a specific reserve of approximately $1.0 million was initially established for this relationship. During the three months ended December 31, 2022, a charge-off of approximately $0.6 million was taken on several loans related to this relationship after we determined that the collateral on these loans did not support the balance. These losses were properly reserved for during the previous quarter. Additionally, during the fourth quarter, there was additional information about the deterioration of the credit that resulted in additional specific reserves of $0.4 million being recorded. During the three months ended December 31, 2022, there were three loans with balances of $0.5 million in this relationship in which the balance was paid in full. These loans had specific reserves of $0.1 million. This relationship as of December 31, 2022 has balances of $1.3 million remaining with a specific reserve of $0.6 million.

Net interest income after provision for loan losses was $2.4 million for the three months ended December 31, 2022 as compared to $2.8 million for the three months ended December 31, 2021.   Total other income was $0.5 million for the three months ended December 31, 2022 compared to $0.8 million for the three months ended December 31, 2021. This decrease of $0.3 million for the three months ended December 31, 2022 was primarily due to lower loan origination levels for one-to-four family loans during the fourth 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 origination of mortgage servicing rights, net of amortization. Total other expenses were $2.1 million for the three months ended December 31, 2022 compared to $2.4 million for the three months ended December 31, 2021. 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 reduction in mortgage volume in 2022 from 2021 levels.    Other expenses also declined about $0.1 million.
   
The Company recorded $0.4 million of provision for loan losses for the three-month period ended December 31, 2022 as compared to $25,000 provision for loan losses for the three months ended December 31, 2021. The allowance for loan losses was $4.3 million, or 1.38% of total gross loans at December 31, 2022 compared to $3.6 million, or 1.27% of gross loans at December 31, 2021. Net charge offs during the fourth quarter of 2022 were $566,036 compared to recoveries of ($1,533) during the fourth quarter of 2021.

The Company recorded income tax expense of $0.2 million for the three-month period ended December 31, 2022 as compared to $0.4 million for the three months ended December 31, 2021 as pre-tax income was lower during the three months ended December 31, 2022.

Comparison of Results of Operations for the Year Ended December 31, 2022 and December 31, 2021

Net income was $2.5 million for the year ended December 31, 2022 compared to $2.9 million for the year ended December 31, 2021, which is a decrease of 14.7%. Total interest and dividend income was $13.2 million for the year ended December 31, 2022 compared to $12.4 million for the year ended December 31, 2021. Interest expense for 2022 was $0.4 million higher due to the rising interest rates experienced during the year. Due to the growth in interest and dividend income, net interest income increased $0.4 million to $11.3 million as compared to $10.9 million for 2021.   Total other income decreased by $1.2 million during 2022 to $1.8 million as a result of the lower volume for mortgage loan originations in 2022 which resulted in a corresponding decrease in gain on sale of loans and loan origination and servicing income of $1.0 million.   Other expense levels were $1.1 million lower, decreasing to $8.5 million for the year ended December 31, 2022 as compared to $9.6 million for the year ended December 31, 2021. The decrease in other expense was the result of salaries and employee benefits decreasing by $1.0 million, loan expense decreasing by $0.2 million, other expense decreasing by $0.1 million and legal and professional services decreasing by $0.1 million. These decreases were slightly offset by increases in director fees, occupancy and data processing fees totaling about $0.1 million.
   
The Company recorded a provision for loan losses of $1.1 million for the twelve-month period ended December 31, 2022 as compared to $0.2 million for the twelve-month period ended December 31, 2021. Net charge-offs during the year ended 2022 were $486,839 compared to recoveries of $(10,994) during the year ended 2021. As discussed above, during the third quarter of 2022, a multi-loan commercial relationship with outstanding balances totaling approximately $2.2 million was identified as being impaired. As of December 31, 2022, this relationship now has a balance of $1.3 million with a specific reserve of $0.6 million. This relationship accounted for the majority of the provision taken during 2022.
  
We recorded income tax expense of $1.0 million for the year ended December 31, 2022 and $1.2 million for the year ended December 31, 2021 primarily due to pre-tax earnings being lower in 2022.

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

Total consolidated assets as of December 31, 2022 were $357.8 million, an increase of $15.3 million, or 4.5%, from $342.5 million at December 31, 2021.  The increase was primarily due to an increase of $23.9 million increase in the net loan portfolio, a $4.3 million increase in cash and cash equivalents and a $0.9 increase in deferred tax assets.   These increases were partially offset by a decrease in federal funds sold of $1.7 million, a decrease of $11.8 million in securities available for sale, a decrease in loans held for sale of $0.4 million and a $0.2 decrease in premises and equipment, net.

Cash and cash equivalents increased $4.3 million, or 66.7%, to $10.9 million at December 31, 2022 from $6.5 million at December 31, 2021. The increase in cash and cash equivalents was primarily a result of cash provided by operating activities of $2.0 million and cash provided by financing activities of $16.4 million exceeding cash used in investing activities of $14.1 million.

Securities available for sale decreased $11.8 million, or 36.1%, to $20.9 million at December 31, 2022 from $32.7 million at December 31, 2021, as paydowns, calls, and maturities and sales exceeded purchases of securities. During 2022, there were sales of securities of $3.3 million that generated a loss of approximately $13,000. Additionally, the valuation of the portfolio due to market conditions declined by $3.6 million.

Net loans increased $23.9 million, or 8.4%, to $307.8 million at December 31, 2022 compared to $283.9 million at December 31, 2021 primarily the result of an increase of $13.4 million in one-to-four family loans, an increase of $2.9 million in multi-family loans, an increase of $15.9 million in non-residential real estate loans and a $0.2 million increase in commercial loans. The increases were offset by decreases of $3.3 million in consumer direct loans and $4.6 million in purchased auto loans.   The allowance for loan losses increased by $0.7 million from December 31, 2021 to December 31, 2022.

Total deposits increased $17.0 million, or 6.2%, to $290.1 million at December 31, 2022 from $273.1 million at December 31, 2021. For the year ended December 31, 2022, savings accounts increased by $0.7 million, interest-bearing checking accounts increased by $5.9 million and certificates of deposit increased by $10.9 million while non-interest bearing checking accounts decreased by $0.2 million and money market accounts decreased by $0.2 million as compared to December 31, 2022.

FHLB advances increased $2.2 million, or 13.5% to $18.7 million at December 31, 2022 compared to $16.5 million at December 31, 2021 to fund loan growth.

Stockholders’ equity decreased $4.7 million, or 10.3% to $41.3 million at December 31, 2022 from $46.0 million at December 31, 2021. The decrease reflects $3.6 million used to repurchase and cancel 249,457 outstanding shares of Company common stock, $1.1 million in cash dividends, a $2.5 million decrease in other comprehensive income due to a decrease in fair value of securities available for sale and other decreases totaling $0.1 million. The decreases were partially offset by net income of $2.5 million for the year ended December 30, 2022.

Annual Meeting of Stockholders

On February 6, 2023 the Company also announced that its annual meeting of stockholders will be held on Wednesday, May 17, 2023.

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 under applicable law.

Ottawa Bancorp, Inc. & Subsidiary

Consolidated Balance Sheets

December 31, 2022 and December 31, 2021

(Unaudited)

 

December 31,

 

December 31,

 

 

2022

 

 

 

2021

 

Assets

 

 

 

Cash and due from banks

$

10,338,273

 

 

$

5,266,361

 

Interest bearing deposits

 

524,427

 

 

 

1,249,947

 

Total cash and cash equivalents

 

10,862,700

 

 

 

6,516,308

 

Time deposits

 

250,000

 

 

 

250,000

 

Federal funds sold

 

55,000

 

 

 

1,716,000

 

Securities available for sale

 

20,898,175

 

 

 

32,700,414

 

Loans, net of allowance for loan losses of $4,301,307 and $3,640,145

 

 

 

 

 

 

 

at December 31, 2022 and December 31, 2021, respectively

 

307,750,228

 

 

 

283,877,203

 

Loans held for sale

 

-

 

 

 

403,920

 

Premises and equipment, net

 

6,163,630

 

 

 

6,331,188

 

Accrued interest receivable

 

1,309,931

 

 

 

1,007,399

 

Deferred tax assets

 

2,652,355

 

 

 

1,793,910

 

Cash value of life insurance

 

2,672,025

 

 

 

2,649,941

 

Goodwill

 

649,869

 

 

 

649,869

 

Core deposit intangible

 

67,567

 

 

 

100,326

 

Other assets

 

4,515,880

 

 

 

4,528,862

 

Total assets

$

357,847,360

 

 

$

342,525,340

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Non-interest bearing

$

22,649,512

 

 

$

22,898,814

 

Interest bearing

 

267,431,407

 

 

 

250,152,124

 

Total deposits

 

290,080,919

 

 

 

273,050,938

 

Accrued interest payable

 

93,942

 

 

 

48,825

 

FHLB advances

 

18,750,000

 

 

 

16,524,555

 

Long Term Debt

 

2,100,000

 

 

 

-

 

Other liabilities

 

3,534,549

 

 

 

4,860,206

 

Total liabilities

 

314,559,410

 

 

 

294,484,524

 

Commitments and Contingencies
ESOP Repurchase Obligation

 

2,016,139

 

 

 

2,066,911

 

Stockholders' Equity

 

 

 

 

 

 

 

Common stock, $.01 par value, 12,000,000 shares authorized; 2,561,406 and 2,818,517

 

 

 

 

 

 

 

shares issued at December 31, 2022 and December 31, 2021, respectively

 

25,613

 

 

 

28,185

 

Additional paid-in-capital

 

24,847,455

 

 

 

28,473,180

 

Retained earnings

 

21,861,151

 

 

 

20,536,121

 

Unallocated ESOP shares

 

(815,766

)

 

 

(949,340

)

Unallocated management recognition plan shares

 

(150,663

)

 

 

(99,352

)

Accumulated other comprehensive income

 

(2,479,840

)

 

 

52,022

 

 

 

43,287,950

 

 

 

48,040,816

 

Less:

 

 

 

 

 

ESOP Owned Shares

 

(2,016,139

)

 

 

(2,066,911

)

Total stockholders' equity

 

41,271,811

 

 

 

45,973,905

 

Total liabilities and stockholders' equity

$

357,847,360

 

 

$

342,525,340

 


Ottawa Bancorp, Inc. & Subsidiary

Consolidated Statements of Operations

Three Months and Year Ended December 31, 2022 and 2021

(Unaudited)

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

Interest and dividend income:

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

3,429,290

 

$

2,969,101

 

 

$

12,642,349

 

$

11,906,772

 

Securities:

 

 

 

 

 

 

 

 

Residential mortgage-backed and related securities

 

 

72,658

 

 

68,993

 

 

 

313,240

 

 

204,046

 

State and municipal securities

 

 

28,611

 

 

74,368

 

 

 

161,593

 

 

263,212

 

Dividends on non-marketable equity securities

 

 

20,427

 

 

8,714

 

 

 

49,318

 

 

34,186

 

Interest-bearing deposits

 

 

26,296

 

 

4,518

 

 

 

59,172

 

 

21,330

 

Total interest and dividend income

 

 

3,577,282

 

 

3,125,694

 

 

 

13,225,672

 

 

12,429,546

 

Interest expense:

 

 

 

 

 

 

 

 

Deposits

 

 

708,463

 

 

273,400

 

 

 

1,615,157

 

 

1,266,314

 

Borrowings

 

 

94,898

 

 

53,906

 

 

 

279,357

 

 

272,709

 

Total interest expense

 

 

803,361

 

 

327,306

 

 

 

1,894,514

 

 

1,539,023

 

Net interest income

 

 

2,773,921

 

 

2,798,388

 

 

 

11,331,158

 

 

10,890,523

 

Provision for loan losses

 

 

418,000

 

 

25,000

 

 

 

1,148,000

 

 

150,000

 

Net interest income after provision for loan losses

 

 

2,355,921

 

 

2,773,388

 

 

 

10,183,158

 

 

10,740,523

 

Other income:

 

 

 

 

 

 

 

 

Gain on sale of loans

 

 

20,354

 

 

115,871

 

 

 

196,015

 

 

895,341

 

Loan origination and servicing income

 

 

135,126

 

 

290,015

 

 

 

758,859

 

 

1,149,174

 

Origination of mortgage servicing rights, net of amortization

 

 

253,778

 

 

235,131

 

 

 

263,859

 

 

326,083

 

Customer service fees

 

 

103,810

 

 

102,649

 

 

 

458,507

 

 

393,174

 

Increase in cash surrender value of life insurance

 

 

2,859

 

 

11,174

 

 

 

22,084

 

 

46,895

 

Gain on sale of repossessed assets, net

 

 

-

 

 

(7,791

)

 

 

-

 

 

(7,791

)

Gain (Loss) on sale of foreclosed real estate

 

 

-

 

 

14,334

 

 

 

-

 

 

18,390

 

Other

 

 

24,979

 

 

39,415

 

 

 

52,702

 

 

134,918

 

Total other income

 

 

540,906

 

 

800,798

 

 

 

1,752,026

 

 

2,956,184

 

Other expenses:

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

1,191,032

 

 

1,421,998

 

 

 

4,904,943

 

 

5,907,034

 

Directors fees

 

 

42,000

 

 

35,000

 

 

 

177,000

 

 

148,750

 

Occupancy

 

 

165,174

 

 

166,852

 

 

 

651,399

 

 

624,468

 

Deposit insurance premium

 

 

21,381

 

 

25,736

 

 

 

85,229

 

 

76,913

 

Legal and professional services

 

 

79,078

 

 

96,688

 

 

 

302,504

 

 

360,120

 

Data processing

 

 

301,755

 

 

297,237

 

 

 

1,150,203

 

 

1,077,576

 

Loss on sale of securities

 

 

-

 

 

-

 

 

 

13,291

 

 

-

 

Loan expense

 

 

97,596

 

 

91,534

 

 

 

333,210

 

 

500,256

 

Valuation adjustments and expenses on foreclosed real estate

 

 

-

 

 

(844

)

 

 

-

 

 

15,859

 

Other

 

 

222,643

 

 

287,308

 

 

 

864,079

 

 

927,446

 

Total other expenses

 

 

2,120,659

 

 

2,421,509

 

 

 

8,481,858

 

 

9,638,422

 

Income before income tax expense

 

 

776,168

 

 

1,152,677

 

 

 

3,453,326

 

 

4,058,285

 

Income tax expense

 

 

230,070

 

 

392,718

 

 

 

976,653

 

 

1,154,564

 

Net income

 

$

546,098

 

$

759,959

 

 

$

2,476,673

 

$

2,903,721

 

Basic earnings per share

 

$

0.22

 

$

0.28

 

 

$

0.96

 

$

1.03

 

Diluted earnings per share

 

$

0.22

 

$

0.28

 

 

$

0.96

 

$

1.03

 

Dividends per share

 

$

0.115

 

$

0.105

 

 

$

0.447

 

$

0.649

 


Ottawa Bancorp, Inc. & Subsidiary

 

Selected Financial Data and Ratios

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

At or for the

 

At or for the

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2022

 

2021

 

2022

 

2021

 

Performance Ratios:

 

 

 

 

 

 

 

 

Return on average assets (5)

0.65

%

0.89

%

0.71

%

0.87

%

Return on average stockholders' equity (5)

5.26

 

6.27

 

5.77

 

5.94

 

Average stockholders' equity to average assets

12.32

 

14.17

 

12.28

 

14.71

 

Stockholders' equity to total assets at end of period

11.53

 

13.59

 

11.53

 

13.59

 

Net interest rate spread (1) (5)

3.30

 

3.39

 

3.41

 

3.39

 

Net interest margin (2) (5)

3.38

 

3.48

 

3.48

 

3.50

 

Other expense to average assets

0.60

 

0.71

 

2.40

 

2.89

 

Efficiency ratio (3)

63.41

 

67.27

 

64.68

 

69.40

 

Dividend payout ratio

50.88

 

38.21

 

47.66

 

62.84

 

 

 

 

 

 

 

 

 

 


 

At or for the

 

At or for the

 

 

Year Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

(unaudited)

 

Regulatory Capital Ratios (4):

 

 

 

 

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

 

18.63

%

 

19.58

 

%

Tier 1 core capital (to risk-weighted assets)

 

17.38

 

 

18.32

 

 

Common equity Tier 1 (to risk-weighted assets)

 

17.38

 

 

18.32

 

 

Tier 1 leverage (to adjusted total assets)

 

12.47

 

 

13.27

 

 

Asset Quality Ratios:

 

 

 

 

Net charge-offs to average gross loans outstanding

 

0.17

 

 

(0.02

)

 

Allowance for loan losses to gross loans outstanding

 

1.38

 

 

1.27

 

 

Non-performing loans to gross loans (6)

 

0.73

 

 

0.57

 

 

Non-performing assets to total assets (6)

 

0.64

 

 

0.48

 

 

Other Data:

 

 

 

 

Book Value per common share

$16.11

 

$16.53

 

 

Tangible Book Value per common share (7)

$15.83

 

$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 Ottawa Savings Bank.

 

(5) Annualized.

 

(6) Non-performing assets consist of non-performing loans, foreclosed real estate and other foreclosed assets. Non-performing loans consist of all loans 90 days or more past due and all loans no longer accruing interest.

 

(7) Non-GAAP measure. Excludes goodwill and core deposit intangible.

 

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