Ottawa Bancorp, Inc. Announces Fourth Quarter and Fiscal 2020 Results

OTTAWA, Ill., Feb. 04, 2021 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the “Company”) (OTCQX: OTTW), the holding company for Ottawa Savings Bank, FSB (the “Bank”), announced net income of $0.8 million, or $0.30 per basic and diluted common share for the three months ended December 31, 2020, compared to net income of $0.6 million, or $0.18 per basic and diluted common share for the three months ended December 31, 2019. For the twelve months ended December 31, 2020, the Company announced net income of $2.48 million, or $0.84 per basic and diluted common share, compared to net income of $1.94 million, or $0.62 per basic and diluted common share for the twelve months ended December 31, 2019. The loan portfolio, net of allowance, increased to $255.1 million as of December 31, 2020 from $247.8 million as of December 31, 2019. Non-performing loans decreased from $2.3 million at December 31, 2019 to $1.9 million at December 31, 2020, which caused the ratio of non-performing loans to gross loans to decrease from 0.90% at December 31, 2019 to 0.62% at December 31, 2020. Additionally, through December 31, 2020, the Company has repurchased a total of 562,256 shares of its common stock at an average price of $12.98 per share as part of the stock repurchase program approved on November 19, 2019 and its previous stock repurchase programs that had expired prior to December 31, 2020.

Craig Hepner, President and Chief Executive Officer of the Company, said, “I am extremely pleased with the Company’s performance in the fourth quarter and throughout 2020. I cannot say enough about the outstanding job our team members did in working through the challenges faced, first with our data system conversion in early 2020 and throughout the year as a result of the COVID-19 pandemic. Everyone truly demonstrated what community banking is all about, supporting our customers and the communities we serve.”

“We remain cautiously optimistic as we enter 2021 that our national, state and local economies will fully re-open and begin to heal from one of the most challenging times in our history. Although the timing and strength of an economic recovery remain uncertain, we believe that the Company is well positioned, given our strong capital, asset quality and liquidity positions, to flourish as economic activity rebounds. We look forward to continuing to play a vital role in support of our customers, shareholders and communities as we work to overcome the challenges we still face in the wake of the pandemic,” said Mr. Hepner.

Comparison of Results of Operations for the Three Months Ended December 31, 2020 and December 31, 2019

Net income for the three months ended December 31, 2020 was $0.8 million compared to net income of $0.6 million for the three months ended December 31, 2019. Total interest and dividend income was $3.1 million for the three months ended December 31, 2020 as compared to $3.2 million for the three months ended December 31, 2019. Interest expense was $0.3 million lower during the three months ended December 31, 2020 resulting in net interest income of $2.6 million as compared to $2.4 million for the three months ended December 31, 2019. In addition, there was no provision for loan losses taken during the three months ended December 31, 2020 as the economy stabilized and unemployment levels improved. Net interest income after provision for loan losses was $2.6 million for the three months ended December 31, 2020 as compared to $2.2 million for the three months ended December 31, 2019. Total other income was $0.8 million for the three months ended December 31, 2020 compared to $0.6 million for the three months ended December 31, 2019. Total other expenses were at $2.4 million for the three months ended December 31, 2020 compared to $2.0 million for the three months ended December 31, 2019.

Net interest income increased by $0.2 million, or 11.0%, to $2.6 million for the three months ended December 31, 2020, compared to $2.4 million for the three months ended December 31, 2019. Interest and dividend income declined slightly by $0.1 million to $3.1 million for the three months ended December 31, 2020 as compared to $3.2 million for the three months ended December 31, 2019. The yield on earning assets decreased from 4.52% for the three months ended December 31, 2019 to 4.38% for the three months ended December 31, 2020 causing the decline in interest and dividend income. This decrease was slightly offset by the growth in earning assets of $4.1 million. Additionally, interest expense declined $0.3 million due to lower interest rates as cost of funds declined from 1.42% to 0.89% as of December 31, 2020 or a reduction of 53 basis points or 37.3%. Due to the decrease in the cost of funds, the net interest margin grew by 31 basis points during the three months ended December 31, 2020, to 3.65% from 3.34% during the three months ended December 31, 2019.

The Company recorded no provision for loan losses for the three-month period ended December 31, 2020 as compared to $0.2 million for the three months ended December 31, 2019. The allowance for loan losses was $3.5 million, or 1.35% of total gross loans at December 31, 2020 compared to $2.9 million, or 1.17% of gross loans at December 31, 2019. Net recoveries during the fourth quarter of 2020 were ($19,956) compared to ($26,811) during the fourth quarter of 2019. General allocation of reserves was higher at December 31, 2020, when compared to December 31, 2019, primarily due to the balances in most loan categories increasing during the twelve months ended December 31, 2020 and increasing the qualitative factors throughout 2020 in anticipation of the negative economic impact as a result of the COVID-19 pandemic. As of December 31, 2020, non-performing loans decreased to $1.9 million which allowed the necessary reserves on non-performing loans as of December 31, 2020 to be approximately $131,000 lower than they were as of December 31, 2019 due to improvement in some credits which previously necessitated higher specific allocation of reserves.

Total other income was $0.8 million for the three months ended December 31, 2020 as compared to $0.6 million for the three months ended December 31, 2019. As a result of increased levels of originations in the one-to-four family residential loan category, gain on sale of loans increased by $0.3 million. Offsetting this increase slightly were decreases in loan origination and servicing income, customer service fees and origination of mortgage servicing rights, net of amortization. The origination of mortgage servicing rights, net of amortization was ($0.1) million due to the adjustment of the value of the servicing portfolio based on a third-party valuation that was conducted during the fourth quarter of 2020.

Total other expense was $2.4 million for the three months ended December 31, 2020 as compared to $2.0 million for the three months ended December 31, 2019 which primarily resulted from an increase of $0.4 million in the salaries and employee benefits category. Salaries and employee benefits increased due to the higher commissions paid to mortgage loan originators and overtime paid to support staff to process the increased loan application volume during the period. These increases were partially offset by decreases in other expenses.

The Company recorded income tax expense of approximately $0.1 million for the three-month period ended December 31, 2020 as compared to $0.2 million for the three months ended December 31, 2019.

Comparison of Results of Operations for the Twelve Months Ended December 31, 2020 and December 31, 2019

Net income was $2.48 million for the twelve-month period ended December 31, 2020 compared to $1.94 million for the twelve-month period ended December 31, 2019 or an increase of 28.1%. Interest expense for the period was $0.6 million lower due to the lower interest rate environment in 2020 which resulted in an increase in the net interest income for the period of $0.4 million to $9.8 million. Additionally, total other income increased by $0.8 million during the period to $3.3 million as a result of stronger mortgage loan origination levels throughout 2020. This increase was slightly offset by higher other expense levels which increased $0.7 million to $9.3 million for the twelve months ended December 31, 2020. The increase in other expense was the result of salaries and employee benefits increasing by $0.8 million due to overtime paid during our core data system conversion in the spring, higher commissions paid to mortgage loan originators throughout the year and overtime paid to support staff to process the increased loan application volume in 2020.

Net interest income increased by $0.4 million, or 4.4%, to $9.8 million for the twelve months ended December 31, 2020, from $9.4 million for the twelve months ended December 31, 2019. Interest and dividend income decreased $0.2 million, or 1.5%, primarily due to a decrease of 27 basis points in the average yield on assets which declined to 4.26% for the twelve months ended December 31, 2020 from 4.53% for the twelve months ended December 31, 2019. This decrease was partially offset by an increase in the average balances of non-interest-earning assets of $12.8 million. Interest expense decreased $0.6 million as the average cost of funds decreased 30 basis points to 1.06% for the twelve months ended December 31, 2020 from 1.36% for the twelve months ended December 31, 2019. This decrease in interest expense which is attributed to the interest rate reduction was slightly offset by an increase in interest expense due to an increase in average interest-bearing liabilities of $9.4 million. Overall, interest expense decreased by $0.6 million to $2.5 million for the twelve months ended December 31, 2020 as compared to $3.1 million for the twelve months ended December 31, 2019. The net interest margin decreased by 2 basis points, or 0.47%, during the twelve months ended December 31, 2020 to 3.39% from 3.41% as the lower intere