Ottawa Bancorp, Inc. Announces First Quarter 2024 Results
OTTAWA, Ill., May 10, 2024 (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 $0.10 per basic and diluted common share for the three months ended March 31, 2024, compared to net income of $0.4 million, or $0.17 per basic and diluted common share for the three months ended March 31, 2023. The loan portfolio, net of allowance, decreased to $306.1 million as of March 31, 2024 from $312.2 million as of December 31, 2023 as payoffs and payments exceeded originations. Non-performing loans remained at $4.8 million at March 31, 2024 which is comparable to the level as of December 31, 2023. The ratio of non-performing loans to gross loans increased from 1.52% at December 31, 2023 to 1.55% at March 31, 2024.
“The elevated interest rate environment and strong local competition for deposit dollars continued to put upward pressure on our cost of funds during the first quarter” said Craig M. Hepner, President and Chief Executive Officer. “As a result, growth in interest expense continued to outpace growth in interest income resulting in a slightly lower net interest margin in the first quarter of 2024 compared to the fourth quarter of 2023.” Mr. Hepner went on to say, “Loan activity in our local markets remains sluggish due to the higher interest rates and lack of housing inventory. This lower loan origination volume continues to result in a lower level of non-interest income from loan fees and gains on sale of loans. In response to this, we continue to diligently manage the balance sheet with a strong focus on the level and cost of our wholesale funding, and we continue our efforts to improve efficiencies in order to hold operating expenses in check while providing superior banking products and services to our customers. Despite a modest increase in non-performing assets, our asset quality remains strong. The Board of Directors remains committed to implementing strategies to improve earnings, maximize stockholder value and make use of various capital management strategies, including the repurchase of common stock, as soon as possible.”
Mr. Hepner further stated, “During the first quarter, we recognized the retirement of Arthur Mueller from the Board of Directors, and we thank Art for his 37 years of service to the Bank and Company. We also welcomed two new directors, Greg Mueller and Mark Alcott, to the Board and look forward to their contributions as we move forward. In addition, we welcomed Tracy Young as our new Chief Operations Officer. Tracy has a great deal of operations and compliance knowledge and experience, and we feel she will be a great addition to the OSB team.”
Comparison of Results of Operations for the Three Months Ended March 31, 2024 and March 31, 2023
Net income for the three months ended March 31, 2024 was $0.3 million compared to net income of $0.4 million for the three months ended March 31, 2023. Total interest and dividend income increased to $3.9 million for the three months ended March 31, 2024 from $3.6 million for the three months ended March 31, 2023 due primarily to the increase in the yield on interest-earning assets and a slight increase in average balances of interest-earning assets of $2.3 million. Interest expense was $0.6 million higher during the three months ended March 31, 2024 due to average cost of funds increasing to 2.19% with the majority of that increase resulting from the higher rate environment. Net interest income was $2.2 million for the three months ended March 31, 2024 as compared to $2.5 million for the three months ended March 31, 2023. Net interest income after provision for credit losses was $2.2 million for the three months ended March 31, 2024 as compared to $2.3 million for the three months ended March 31, 2023. Total other income was $0.3 million for the three months ended March 31, 2024 compared to $0.3 million for the three months ended March 31, 2023. Total other expenses were $2.1 million for both the quarter ended March 31, 2024 and the quarter ended March 31, 2023.
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 initial analysis, a specific reserve of approximately $1.0 million was initially established for this relationship. After additional adjustments during the fourth quarter of 2022 which included some charge-offs and additional reserve requirements, this relationship as of December 31, 2022 had balances of $1.3 million with a specific reserve of $0.6 million. During 2023, we charged off $0.4 million against the reserve, the borrower paid off two loans, and the one additional loan in the relationship was downgraded to non-performing. There has been no activity in 2024. The relationship as of March 31, 2024 has balances of approximately $0.7 million with a specific reserve of $0.2 million. Based on collateral values, management does not believe additional reserves are required.
The Company recorded a recovery of approximately $37,000 for the three months ended March 31, 2024. The decrease in the loan balances of $6.1 million led to the decrease in the Allowance for Credit Losses (“ACL”) position. This compares to an expense of $137,500 for the three months ended March 31, 2023. The ACL was $4.3 million, or 1.40% of total gross loans at March 31, 2024 compared to $4.9 million, or 1.53% of gross loans at March 31, 2023. Net recoveries during the first quarter of 2024 were approximately $5 thousand compared to net recoveries of $12 thousand during the first quarter of 2023. The current period adjustment to the ACL is the result of the quarterly calculation of Current Expected Credit Losses (CECL) which was adopted as of January 1, 2023. The necessary reserves on non-performing loans as of March 31, 2024 were lower than the required reserves as of March 31, 2023 as one of the new non-performing loans of $3.1 million is still accruing and the workout on the large troubled relationship identified in the third quarter of 2022 is progressing as planned as discussed above.
The Company recorded income tax expense of $91 thousand for the three months ended March 31, 2024 as compared to $172 thousand for the three months ended March 31, 2023 due to lower pretax earnings for the first quarter of 2024.
Comparison of Financial Condition at March 31, 2024 and December 31, 2023
Total consolidated assets as of March 31, 2024 were $357.4 million, a decrease of $6.5 million, or 1.8%, from $363.9 million at December 31, 2023. The decrease was primarily due to a decrease of $6.1 million in the loan portfolio, a $0.8 million decrease in the securities available for sale portfolio, a $0.2 million decrease in accrued interest receivable and a $0.1 million decrease in deferred tax assets.
Cash and cash equivalents decreased $5.5 million, or 41.2%, to $7.9 million at March 31, 2024 from $13.4 million at December 31, 2023. The decrease in cash and cash equivalents was primarily the result of cash used in operating activities of $0.9 million and cash used in financing activities of $5.1 million partially offset by cash provided by investing activities of $0.5 million.
Securities available for sale decreased $0.8 million, or 3.9%, to $18.0 million at March 31, 2024 from $18.8 million at December 31, 2023 as paydowns, calls and maturities exceeded purchases of new securities.
Net loans decreased $6.1 million, or approximately 2.0%, to $306.1 million at March 31, 2024 compared to $312.2 million at December 31, 2023 primarily as a result of decreases of $2.1 million in one-to-four residential loans, $3.8 million in commercial loans, $2.6 million in non-residential real estate loans and $0.6 million in consumer direct loans. These decreases were offset by an increase of $3.0 million in multi-family loans. The allowance for loan losses also decreased by $32 thousand.
Total deposits increased $0.1 million, to $281.2 million at March 31, 2024 from $281.1 million at December 31, 2023. Certificates of deposit increased by $6.6 million during the quarter, savings increased by $0.8 million and money market accounts increased by $0.5 million. Offsetting these increases were decreases in non-interest-bearing accounts of $1.1 million and interest-bearing checking accounts of $6.7 million.
FHLB advances decreased $5.0 million to $25.75 million at March 31, 2024 as compared to $30.75 million at December 31, 2023 as we utilized cash from the decrease in the loan portfolio to pay down higher cost wholesale funding.
Stockholders’ equity decreased $0.1 million, or 0.4% to $41.5 million at March 31, 2024 from $41.6 million at December 31, 2023. The decrease reflects $0.3 million in cash dividends and a $0.1 million decrease to accumulated other comprehensive income. The decrease was partially offset by net income of $0.3 million for the three months ended March 31, 2024.
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 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, our ability to pay future dividends and if so at what level, our ability to receive any required regulatory approval or non-objection for the payment of dividends from the Bank to the Company or from the Company to stockholders, and our efforts to maximize stockholder value, including our ability to execute any capital management strategies, such as the repurchase of shares of the Company’s common stock, and our ability to execute any controlled growth and balance sheet strategies designed to lower the cost of funds and enhance earnings and liquidity. 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 applicable law.
| Ottawa Bancorp, Inc. & SubsidiaryConsolidated Balance SheetsMarch 31, 2024 and December 31, 2023(Unaudited) | ||||||||
| March 31,2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Cash and due from banks | $ | 4,427,100 | $ | 3,511,709 | ||||
| Interest bearing deposits | 3,457,233 | 9,884,710 | ||||||
| Total cash and cash equivalents | 7,884,333 | 13,396,419 | ||||||
| Federal funds sold | 6,111,000 | - | ||||||
| Securities available for sale | 18,046,148 | 18,781,463 | ||||||
| Loans, net of allowance for credit losses of $4,338,691 and $4,370,934 at March 31, 2024 and December 31, 2023, respectively | 306,068,788 | 312,181,918 | ||||||
| Loans held for sale | 222,000 | - | ||||||
| Premises and equipment, net | 5,960,258 | 5,998,742 | ||||||
| Accrued interest receivable | 1,475,034 | 1,700,911 | ||||||
| Deferred tax assets | 2,659,520 | 2,799,503 | ||||||
| Cash value of life insurance | 2,730,436 | 2,717,888 | ||||||
| Goodwill | 649,869 | 649,869 | ||||||
| Core deposit intangible | 24,160 | 31,909 | ||||||
| Other assets | 5,608,843 | 5,659,196 | ||||||
| Total assets | $ | 357,440,389 | $ | 363,917,818 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Liabilities | ||||||||
| Deposits: | ||||||||
| Non-interest bearing | $ | 22,741,777 | $ | 23,839,628 | ||||
| Interest bearing | 258,487,797 | 257,246,330 | ||||||
| Total deposits | 281,229,574 | 281,085,958 | ||||||
| Accrued interest payable | 488,760 | 320,238 | ||||||
| FHLB advances | 25,750,000 | 30,750,000 | ||||||
| Long term debt | 1,700,000 | 1,700,000 | ||||||
| Allowance for credit losses on off-balance sheet credit exposures | 81,427 | 94,136 | ||||||
| Other liabilities | 5,010,457 | 6,635,892 | ||||||
| Total liabilities | 314,260,218 | 320,586,224 | ||||||
| Commitments and contingencies | ||||||||
| ESOP Repurchase Obligation | 1,691,975 | 1,691,975 | ||||||
| Stockholders' Equity | ||||||||
| Common stock, $.01 par value, 12,000,000 shares authorized; 2,553,721 and 2,552,971 shares issued at March 31, 2024 and December 31, 2023, respectively | 25,539 | 25,529 | ||||||
| Additional paid-in-capital | 24,750,013 | 24,738,476 | ||||||
| Retained earnings | 21,790,273 | 21,798,054 | ||||||
| Unallocated ESOP shares | (682,192 | ) | (682,192 | ) | ||||
| Unallocated management recognition plan shares | (104,094 | ) | (103,417 | ) | ||||
| Accumulated other comprehensive loss | (2,599,368 | ) | (2,444,856 | ) | ||||
| 43,180,171 | 43,331,594 | |||||||
| Less: | ||||||||
| ESOP Owned Shares | (1,691,975 | ) | (1,691,975 | ) | ||||
| Total stockholders' equity | 41,488,196 | 41,639,619 | ||||||
| Total liabilities and stockholders' equity | $ | 357,440,389 | $ | 363,917,818 | ||||
| Ottawa Bancorp, Inc. & SubsidiaryConsolidated Statements of OperationsThree Months Ended March 31, 2024 and 2023(Unaudited) | ||||||||
| Three Months EndedMarch 31, | ||||||||
| 2024 | 2023 | |||||||
| Interest and dividend income: | ||||||||
| Interest and fees on loans | $ | 3,702,917 | $ | 3,443,535 | ||||
| Securities: | ||||||||
| Residential mortgage-backed and related securities | 78,672 | 69,094 | ||||||
| State and municipal securities | 18,601 | 29,907 | ||||||
| Dividends on non-marketable equity securities | 37,715 | 13,262 | ||||||
| Interest-bearing deposits | 63,541 | 34,557 | ||||||
| Total interest and dividend income | 3,901,446 | 3,590,355 | ||||||
| Interest expense: | ||||||||
| Deposits | 1,520,888 | 1,000,666 | ||||||
| Borrowings | 218,041 | 111,428 | ||||||
| Total interest expense | 1,738,929 | 1,112,094 | ||||||
| Net interest income | 2,162,517 | 2,478,261 | ||||||
| Provision for (recovery of) credit losses - loans | (37,143 | ) | 137,500 | |||||
| Recovery of credit losses – off-balance sheet credit exposures | (12,709 | ) | - | |||||
| Net interest income after provision for (recovery of) credit losses | 2,212,369 | 2,340,761 | ||||||
| Other income: | ||||||||
| Gain on sale of loans | 18,610 | 17,969 | ||||||
| Loan origination and servicing income | 132,826 | 136,127 | ||||||
| Net origination (amortization) of mortgage servicing rights | (23,174 | ) | 60,232 | |||||
| Customer service fees | 105,125 | 104,024 | ||||||
| Increase in cash surrender value of life insurance | 12,547 | 11,708 | ||||||
| Other | 6,929 | 8,268 | ||||||
| Total other income | 252,863 | 338,328 | ||||||
| Other expenses: | ||||||||
| Salaries and employee benefits | 1,181,559 | 1,186,093 | ||||||
| Directors fees | 40,000 | 45,000 | ||||||
| Occupancy | 157,021 | 160,474 | ||||||
| Deposit insurance premium | 41,800 | 25,144 | ||||||
| Legal and professional services | 118,047 | 78,622 | ||||||
| Data processing | 321,927 | 295,454 | ||||||
| Loan expense | 64,452 | 63,312 | ||||||
| Other | 184,199 | 210,477 | ||||||
| Total other expenses | 2,109 005 | 2,064,576 | ||||||
| Income before income tax expense | 356,227 | 614,513 | ||||||
| Income tax expense | 90,602 | 172,045 | ||||||
| Net income | $ | 265,625 | $ | 442,468 | ||||
| Basic earnings per share | $ | 0.10 | $ | 0.17 | ||||
| Diluted earnings per share | $ | 0.10 | $ | 0.17 | ||||
| Dividends per share | $ | 0.11 | $ | 0.11 | ||||
| Ottawa Bancorp, Inc. & SubsidiarySelected Financial Data and Ratios(Unaudited) | ||||||
| At or for theThree Months EndedMarch 31, | ||||||
| 2024 | 2023 | |||||
| Performance Ratios: | ||||||
| Return on average assets (5) | 0.30 | % | 0.49 | % | ||
| Return on average stockholders' equity (5) | 2.54 | 4.26 | ||||
| Average stockholders' equity to average assets | 11.70 | 11.59 | ||||
| Stockholders' equity to total assets at end of period | 11.61 | 11.16 | ||||
| Net interest rate spread (1) (5) | 2.45 | 2.85 | ||||
| Net interest margin (2) (5) | 2.63 | 2.96 | ||||
| Other expense to average assets | 0.59 | 0.58 | ||||
| Efficiency ratio (3) | 87.33 | 73.30 | ||||
| Dividend payout ratio | 106.19 | 62.94 | ||||
| At or for theThree Months EndedMarch 31, 2024 | At or for theTwelve Months EndedDecember 31,2023 | |||||||
| (unaudited) | ||||||||
| Regulatory Capital Ratios (4): | ||||||||
| Total risk-based capital (to risk-weighted assets) | 18.70 | % | 17.86 | % | ||||
| Tier 1 core capital (to risk-weighted assets) | 17.44 | 16.61 | ||||||
| Common equity Tier 1 (to risk-weighted assets) | 17.44 | 16.61 | ||||||
| Tier 1 leverage (to adjusted total assets) | 12.30 | 12.29 | ||||||
| Asset Quality Ratios: | ||||||||
| Net charge-offs to average gross loans outstanding | 0.00 | 0.07 | ||||||
| Allowance for loan losses to gross loans outstanding | 1.40 | 1.38 | ||||||
| Non-performing loans to gross loans (6) | 1.55 | 1.52 | ||||||
| Non-performing assets to total assets (6) | 1.35 | 1.32 | ||||||
| Other Data: | ||||||||
| Book Value per common share | $ | 16.25 | $ | 16.32 | ||||
| Tangible Book Value per common share (7) | $ | 15.98 | $ | 16.05 | ||||
| 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 averageinterest-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 loans90 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