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

Rhea-AI Summary

Ottawa Bancorp, Inc. (OTCQX: OTTW) reported a net income of $0.3 million for Q3 2022, down from $0.8 million in Q3 2021. Year-to-date net income was $1.9 million, slightly lower than $2.1 million in 2021. The loan portfolio grew to $299.6 million despite rising non-performing loans, which increased from $1.6 million to $3.3 million. The Board declared a quarterly dividend of $0.11 per share, payable on December 14, 2022. Rising interest rates have impacted operations, but net interest margin remained steady.

Positive

• Quarterly dividend of $0.11 per share announced, payable December 14, 2022.
• Total deposits increased by 8.1% to $295.3 million.
• Net loans rose by 5.5% to $299.6 million.

Negative

• Net income for Q3 2022 dropped by 62.5% year-over-year.
• Non-performing loans increased from $1.6 million to $3.3 million.
• Provision for loan losses of $730,000 recorded, significantly higher than $0 in Q3 2021.

OTTAWA, Ill., Nov. 16, 2022 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the “Company”) (OTCQX: OTTW), the holding company for OSB Community Bank (the “Bank”), announced net income of $0.3 million, or $0.13 per basic and diluted common share, for the three months ended September 30, 2022, compared to net income of $0.8 million, or $0.29 per basic and diluted common share for the three months ended September 30, 2021. For the nine months ended September 30, 2022, the Company announced net income of $1.9 million, or $0.73 per basic and diluted common share, compared to net income of $2.1 million, or $0.76 per basic and $0.75 per diluted common share, for the nine months ended September 30, 2021. During the third 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 $299.6 million as of September 30, 2022 from $283.9 million as of December 31, 2021. Non-performing loans increased from $1.6 million at December 31, 2021 to $3.3 million at September 30, 2022, resulting in the ratio of non-performing loans to gross loans increasing from 0.57% at December 31, 2021 to 1.07% at September 30, 2022.   Additionally, through September 30, 2022, the Company has repurchased a total of 953,685 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 Board of Directors since the Company’s second step conversion was completed in 2016.

“Rising interest rates have definitely impacted our operations during the first nine months of the year”, said Craig Hepner, President and Chief Executive Officer of the Company. “The higher rates have increased our cost of funds and have significantly slowed mortgage loan production, resulting in a lower level of non-interest income during the first three quarters of 2022. However, in spite of the higher interest rates, other areas of lending have remained strong which has allowed us to hold our net interest margin steady. Additionally, lower compensation-related expenses in the mortgage area have helped to off-set the decline in our non-interest income.” Mr. Hepner went on to say, “Aside from the impaired loan relationship discussed below, our asset quality remains strong as our borrowers continue to navigate through the challenges resulting from the extremely high inflation levels experienced throughout the year. We continue to closely monitor our asset quality levels, and we are confident that our strong loan underwriting standards will benefit us as we work through the economic challenges that lie ahead.”  

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

Net income for the three-months ended September 30, 2022 was $0.3 million compared to net income of $0.8 million for the three months ended September 30, 2021. Total interest and dividend income was $3.4 million for the three months ended September 30, 2022 and $3.2 million for the three months ended September 30, 2021. Interest expense was $0.4 million for the three months ended September 30, 2022 and $0.4 million for the three months ended September 30, 2021.   A provision for loan losses of $730,000 was taken during the three months ended September 30, 2022 as compared to $0 for the three months ended September 30, 2021.   During the three months ended September 30, 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 established for this relationship. Also, during the third quarter of 2022, a qualitative factor related to the changes in the nature and volume of the portfolio was upgraded in the 1 to 4 family and commercial segments of the portfolio as the performance in these segments warranted the upgrade. As a result of this upgrade, the general portion of the allowance decreased by approximately $0.2 million    Additionally, we had a recovery during the quarter related to a previously charged off loan of approximately $0.1 million.

Net interest income after provision for loan losses is $2.2 million for the three months ended September 30, 2022 as compared to $2.8 million for the three months ended September 30, 2021.   Total other income decreased to $0.3 million for the three months ended September 30, 2022, from $0.7 million for the three months ended September 30, 2021. This decrease of $0.4 million for the three months ended September 30, 2022 was primarily due to lower loan origination levels for one-to-four family loans during the third 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 September 30, 2021 to $2.0 million for the three months ended September 30, 2022. The decrease was primarily due to a $0.4 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 a provision for loan losses of $730,000 for the three months ended September 30, 2022 as compared to $0 for the three months ended September 30, 2021. The allowance for loan losses was $4.4 million or 1.46% of total gross loans at September 30, 2022 compared to $3.6 million or 1.31% of total gross loans at September 30, 2021. Net charge-offs (recoveries) during the third quarter of 2022 were $(146,714) compared to $(11,838) during the third quarter of 2021.

The Company recorded income tax expense of approximately $0.1 million for the three-months ended September 30, 2022 and $0.3 million for the three months ended September 30, 2021 due to pre-tax earnings being lower in 2022.

Comparison of Results of Operations for the Nine Months Ended September 30, 2022 and September 30, 2021

Net income was $1.9 million for the nine-month period ended September 30, 2022 compared to net income of $2.1 million for the nine-month period ended September 30, 2021.   Total interest and dividend income was $10.0 million for the nine-month period ended September 30, 2022 and $9.3 million for the nine-month period ended September 30, 2021. Interest expense was $0.1 million lower during the nine months ended September 30, 2022. A provision for loan losses of $730,000 was taken during the nine months ended September 30, 2022 as compared to $125,000 for the nine months ended September 30, 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, 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 established for this relationship. Also during the third quarter of 2022, a qualitative factor related to the changes in the nature and volume of the portfolio was upgraded in the 1 to 4 family and commercial segments of the portfolio as the performance in these segments warranted the upgrade. As a result of this upgrade, the general portion of the allowance decreased by approximately $0.2 million Additionally, we had a recovery during the quarter related to a previously charged off loan of approximately $0.1 million.  

Net interest income after provision for loan losses improved to $8.2 million during the nine months ended September 30, 2022 as compared to $8.0 million during the nine months ended September 30, 2021. Total other income decreased from $2.2 million during the nine months ended September 30, 2021 to $0.9 million during the nine months ended September 30, 2022. This decrease of $1.3 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 $1.2 million. Total other expenses decreased to $6.4 million for the nine months ended September 30, 2022 from $7.2 million for the nine months ended September 30, 2021. This decrease was primarily due to a $0.7 million decline in compensation-related costs and a $0.2 million reduction in loan expense during the nine months ended September 30, 2022.  

We recorded a provision for loan losses of $730,000 for the nine-month period ended September 30, 2022 as compared to $125,000 for the nine-month period ended September 30, 2021.   The allowance for loan losses was $4.4 million or 1.46% of total gross loans at September 30, 2022 compared to $3.6 million or 1.31% of total gross loans at September 30, 2021.   Net charge-offs (recoveries) during the first nine months of 2022 were $(79,467) compared to $(9,461) during the first nine months of 2021.

We recorded income tax expense of approximately $0.7 million during the nine-month period ended September 30, 2022 as compared to $0.8 million during the nine month period ended September 30, 2021 as pre-tax income is lower by $0.2 million during the nine month period ended September 30, 2022.

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

Total consolidated assets as of September 30, 2022 were $359.2 million, an increase of $16.7 million, or 4.9%, from $342.5 million at December 31, 2021.  The increase was primarily due to an increase of $6.5 million in cash and cash equivalents, a $15.7 million increase in the net loan portfolio, an increase of $5.5 million federal funds sold and a $1.0 million increase in deferred tax assets. These increases were offset by a decrease of $11.0 million in securities available for sale and a decrease of $1.0 million in other assets.   

Cash and cash equivalents increased by $6.5 million, or 100.0%, to $13.0 million at September 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 $17.6 million and cash provided by operating activities of $2.9 million exceeding cash used in investing activities of $14.0 million.

Securities available for sale decreased by $11.0 million, or 33.6% to $21.7 million at September 30, 2022 from $32.7 million at December 31, 2021, as paydowns, calls, and maturities and sales exceeded purchases of securities. During the third quarter of 2022, there were sales of securities of $3.3 million that generated a loss of approximately $10,500.

Net loans increased by $15.7 million, or 5.5%, to $299.6 million at September 30, 2022 compared to $283.9 million at December 31, 2021 primarily as a result of an increase of $7.3 million in one-to-four family loans, an increase of $0.3 million in multi-family loans, an increase of $15.2 million in non-residential real estate loans and a $0.8 million increase in commercial loans. These increases were offset by decreases of $2.5 million in consumer direct loans and $4.6 million in purchased auto loans.   During the third quarter, the Company sold the remaining balance of the purchased auto loan portfolio in the aggregate amount of $2.6 million to the institution that originally sold the loans to the Company. Additionally, the allowance for loan losses increased by $0.8 million.   

Total deposits increased $22.2 million, or 8.1%, to $295.3 million at September 30, 2022 from $273.1 million at December 31, 2021. During the nine months ended September 30, 2022, savings accounts increased by $1.5 million, non-interest-bearing checking accounts increased by $0.2 million, interest bearing checking accounts increased by $7.8 million and certificates of deposits increased by $12.8 million. These increases were offset by a $0.1 million decrease in money market accounts.   

FHLB advances decreased $0.2 million to $16.3 million at September 30, 2022 as compared to $16.5 million at December 31, 2021.  

Stockholders’ equity decreased $4.7 million, or 10.3%, to $41.3 million at September 30, 2022 from $46.0 million at December 31, 2021. The decrease reflects $3.2 million used to repurchase and cancel 225,500 outstanding shares of Company common stock, a decrease of $2.6 million in other comprehensive income due to a decrease in fair value of securities available for sale, $0.2 million in other changes, $0.9 million in cash dividends paid and $0.2 million in other changes.   These decreases were partially offset by the increase caused by net income of $1.9 million for the nine months ended September 30, 2022.   

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.11 per share, payable on or about December 14, 2022, to stockholders of record as of the close of business on November 30, 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
September 30, 2022 and December 31, 2021
(Unaudited)
	September 30,				December 31,
		2022				2021
Assets
Cash and due from banks	$	11,439,118			$	5,266,361
Interest bearing deposits		1,595,679				1,249,947
Total cash and cash equivalents		13,034,797				6,516,308
Time deposits		250,000				250,000
Federal funds sold		7,249,000				1,716,000
Securities available for sale		21,715,296				32,700,414
Loans, net of allowance for loan losses of $4,449,613 and $3,640,145
at September 30, 2022 and December 31, 2021, respectively		299,582,444				283,877,203
Loans held for sale		215,000				403,920
Premises and equipment, net		6,211,207				6,331,188
Accrued interest receivable		1,139,922				1,007,399
Deferred tax assets		2,800,337				1,793,910
Cash value of life insurance		2,669,167				2,649,941
Goodwill		649,869				649,869
Core deposit intangible		75,397				100,326
Other assets		3,584,880				4,528,862
Total assets	$	359,177,316			$	342,525,340
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest bearing	$	23,089,425			$	22,898,814
Interest bearing		272,172,963				250,152,124
Total deposits		295,262,388				273,050,938
Accrued interest payable		61,609				48,825
FHLB advances		16,262,322				16,524,555
Other liabilities		4,524,539				4,860,206
Total liabilities		316,110,858				294,484,524
Commitments and contingencies
ESOP Repurchase Obligation		1,809,099				2,066,911
Stockholders' Equity
Common stock, $.01 par value, 12,000,000 shares authorized; 2,583,095 and 2,818,517
shares issued at September 30, 2022 and December 31, 2021, respectively		25,830				28,185
Additional paid-in-capital		25,089,354				28,473,180
Retained earnings		21,586,365				20,536,121
Unallocated ESOP shares		(949,340	)			(949,340	)
Unallocated management recognition plan shares		(163,341	)			(99,352	)
Accumulated other comprehensive income (loss)		(2,522,410	)			52,022
		43,066,458				48,040,816
Less:
ESOP Owned Shares		(1,809,099	)			(2,066,911	)
Total stockholders' equity		41,257,359				45,973,905
Total liabilities and stockholders' equity	$	359,177,316			$	342,525,340

Ottawa Bancorp, Inc. & Subsidiary
Consolidated Statements of Operations
Three and Nine Months Ended September 30 2022 and 2021
(Unaudited)
	Three Months Ended							Nine Months Ended
	September 30,							September 30,
		2022				2021			2022			2021
Interest and dividend income:
Interest and fees on loans	$	3,229,962			$	3,080,510		$	9,564,957		$	8,927,109
Securities:
Residential mortgage-backed and related securities		76,531				54,459			240,583			135,054
State and municipal securities		33,589				53,238			132,981			188,844
Dividends on non-marketable equity securities		10,244				8,332			28,891			25,472
Interest-bearing deposits		19,897				6,132			38,139			16,812
Total interest and dividend income		3,370,223				3,202,671			10,005,551			9,293,291
Interest expense:
Deposits		378,237				290,237			906,694			992,914
Borrowings		71,739				64,714			184,459			208,240
Total interest expense		449,976				354,952			1,091,153			1,201,154
Net interest income		2,920,247				2,847,719			8,914,398			8,092,137
Provision for loan losses		730,000				-			730,000			125,000
Net interest income after provision for loan losses		2,190,247				2,847,719			8,184,398			7,967,137
Other income:
Gain on sale of loans		53,837				260,629			175,660			779,471
Gain on sale of repossessed assets, net		-				-			-			12,084
Loan origination and servicing income		86,571				295,215			261,309			859,159
Origination of mortgage servicing rights, net of amortization		(279	)			28,962			10,081			90,952
Customer service fees		120,026				102,751			354,691			290,524
Increase in cash surrender value of life insurance		(2,303	)			11,328			19,226			35,721
Other		7,740				37,436			32,991			84,224
Total other income		265,592				736,321			853,958			2,152,135
Other expenses:
Salaries and employee benefits		1,086,027				1,575,608			3,713,911			4,485,037
Director fees		42,000				35,000			135,000			113,750
Occupancy		163,611				151,921			486,225			457,616
Deposit insurance premium		21,300				18,000			63,848			54,178
Legal and professional services		72,930				91,755			223,426			263,431
Data processing		284,439				271,808			848,447			780,339
Loss on sale of securities		10,468				-			13,291			-
Loan expense		79,756				113,328			235,614			408,721
Valuation adjustments and expenses on foreclosed real estate		-				9,007			-			24,731
Other		246,039				183,503			641,436			600.469
Total other expenses		2,006,570				2,449,930			6,361,198			7,188,272
Income before income tax expense		449,269				1,134,110			2,677,158			2,931,000
Income tax expense		127,827				306,645			746,583			787,236
Net income	$	321,442			$	827,465		$	1,930 ,575		$	2,143,764
Basic earnings per share	$	0.13			$	0.29		$	0.73		$	0.76
Diluted earnings per share	$	0.13			$	0.29		$	0.73		$	0.75
Dividends per share	$	0.12			$	0.10		$	0.34		$	0.55

Ottawa Bancorp, Inc. & Subsidiary
Selected Financial Data and Ratios
(Unaudited)
	At or for the				At or for the
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Performance Ratios:
Return on average assets (5)	0.37	%	0.97	%	0.75	%	0.87	%
Return on average stockholders' equity (5)	2.90		6.73		5.56		5.79
Average stockholders' equity to average assets	12.92		14.38		13.52		15.02
Stockholders' equity to total assets at end of period	11.47		13.78		11.47		13.78
Net interest rate spread (1) (5)	3.50		3.47		3.49		3.45
Net interest margin (2) (5)	3.55		3.55		3.55		3.55
Other expense to average assets	0.59		0.72		1.86		2.19
Efficiency ratio (3)	62.99		68.34		65.11		70.14
Dividend payout ratio	92.00		34.20		46.67		72.20

	At or for the				At or for the
	Nine Months Ended				Twelve Months Ended
	September 30,				December 31,
		2022				2021
	(unaudited)
Regulatory Capital Ratios (4):
Total risk-based capital (to risk-weighted assets)		18.65	%			19.58	%
Tier 1 core capital (to risk-weighted assets)		17.39				18.32
Common equity Tier 1 (to risk-weighted assets)		17.39				18.32
Tier 1 leverage (to adjusted total assets)		13.07				13.27
Asset Quality Ratios:
Net charge-offs to average gross loans outstanding		(0.83	)			(0.02	)
Allowance for loan losses to gross loans outstanding		1.46				1.27
Non-performing loans to gross loans (6)		1.07				0.57
Non-performing assets to total assets (6)		0.91				0.48
Other Data:
Book Value per common share	$	15.95			$	16.53
Tangible Book Value per common share (7)	$	15.67			$	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

FAQ

What is Ottawa Bancorp's net income for Q3 2022?

Ottawa Bancorp reported a net income of $0.3 million for Q3 2022.

What dividend did Ottawa Bancorp announce?

Ottawa Bancorp declared a quarterly dividend of $0.11 per share.

When is the dividend payment date for Ottawa Bancorp?

The dividend is payable on December 14, 2022.

How much did non-performing loans increase for Ottawa Bancorp?

Non-performing loans increased from $1.6 million to $3.3 million.

What was the total deposits amount for Ottawa Bancorp?

Total deposits as of September 30, 2022, were $295.3 million.