Ottawa Bancorp, Inc. Announces Fourth Quarter and Fiscal 2024 Results and 2025 Annual Meeting Date
In This Article:
OTTAWA, Ill., Feb. 07, 2025 (GLOBE NEWSWIRE) -- Ottawa Bancorp, Inc. (the “Company”) (OTCQX: OTTW), the holding company for OSB Community Bank (the “Bank”), announced net income of $0.5 million, or $0.21 per basic and diluted common share, for the three months ended December 31, 2024, compared to net income of $0.2 million, or $0.08 per basic and diluted common share, for the three months ended December 31, 2023. For the twelve months ended December 31, 2024, the Company announced net income of $0.8 million, or $0.31 per basic and diluted common share, compared to net income of $1.7 million, or $0.66 per basic and diluted common share for the twelve months ended December 31, 2023. The loan portfolio, net of allowance, decreased to $301.7 million as of December 31, 2024 from $312.2 million as of December 31, 2023 as originations of $50.6 million were lower than payments and payoffs. Non-performing loans were $4.8 million at both December 31, 2024 and 2023. Due to the decrease in the loan balance, the ratio of non-performing loans to gross loans increased to 1.58% at December 31, 2024 from 1.52% at December 31, 2023.
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As announced on May 29, 2024, the Company initiated its sixth stock repurchase program approved by the Board of Directors since the Company completed its second step conversion in 2016. Under the current repurchase plan, as of December 31, 2024, the Company has repurchased a total of 127,332 shares of its common stock at an average price of $13.51 per share.
“During the fourth quarter, we continued to diligently manage our wholesale funding sources in order to take advantage of lower interest rates on the short-end of the yield curve resulting from the Federal Reserve rate cuts that began in the third quarter of 2024,” said Craig M. Hepner, President and Chief Executive Officer. “Although our cost of funds remains elevated, we are pleased with the improvement in our net interest income and net interest margin that we saw in the fourth quarter We continue to focus on organic deposit growth in order to reduce our dependency on wholesale funding and lower overall interest expense. Although we did see a slight increase in mortgage origination activity in the fourth quarter, elevated interest rates on the longer end of the curve have kept mortgage rates at higher levels. This combined with the scarcity of existing home inventory in our primary markets has resulted in a suppressed level of mortgage banking activity throughout 2024. Although we did see a reduction in our overall loan portfolio during 2024, our asset quality has remained strong, and we are optimistic about our lending opportunities in 2025.”
Mr. Hepner continued, “I am very pleased that in December we were able to successfully complete the stock repurchase plan announced earlier in the year. Through the stock repurchase plan and the payment of cash dividends, the Company returned over $2.8 million to our shareholders in 2024. The Board remains committed to serving as a source of liquidity to our shareholders and executing strategies to maximize overall shareholder value.”
Comparison of Results of Operations for the Three Months Ended December 31, 2024 and December 31, 2023
Net income for the three months ended December 31, 2024 was $0.5 million compared to $0.2 million for the three months ended December 31, 2023. Total interest and dividend income was $4.3 million for the three months ended December 31, 2024 compared to $3.9 million for the three months ended December 31, 2023 due to an increase in the average yield on interest-earning assets. The yield on interest-earning assets increased by 0.54% to 5.15%. Interest expense was $1.9 million for the three months ended December 31, 2024 compared to $1.6 million for the three months ended December 31, 2023 as our average cost of funds increased to 2.42% from 2.09%, with the majority of that increase resulting from the higher interest rate environment. Net interest income after provision for loan losses increased by $0.2 million to $2.5 million for the three months ended December 31, 2024 as compared to $2.3 million for the three months ended December 31, 2023. Total other income increased to $0.4 million for the three months ended December 31, 2024 from $0.3 million for the three months ended December 31, 2023. The origination of mortgage servicing rights, net of amortization, was approximately $40,000 higher due to a favorable adjustment to the value of the servicing portfolio during the fourth quarter of 2024. In addition, mortgage activity increased during the quarter resulting in an increase in gain on sale of loans as well as loan origination and servicing income. Total other expenses were $2.2 million for the three months ended December 31, 2024 compared to $2.3 million for the three months ended December 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 was no payment activity in 2024 although management continues to work to resolve the matter. The relationship as of December 31, 2024 has balances of approximately $0.7 million with a specific allocation of $0.2 million. Based on collateral values, management does not believe additional reserves are required.
The Company recorded a recovery of approximately $64 thousand for the three months ended December 31, 2024 to decrease the Allowance for Credit Losses (ACL) position. During the three months ended December 31, 2023, there was a recovery of approximately $45 thousand. The ACL on loans was $4.3 million, or 1.41% of total gross loans, at December 31, 2024 compared to $4.4 million, or 1.38% of gross loans, at December 31, 2023. Net recoveries during the fourth quarter of 2024 were approximately $40 thousand compared to net recoveries of approximately $17 thousand during the fourth quarter of 2023. The current period adjustment to the ACL is the result of the quarterly calculation of Current Expected Credit Losses (CECL). Although the required reserves on non-performing loans as of December 31, 2024 were higher than the required reserves as of December 31, 2023, the overall ACL position was lower due to the decrease in the size of the loan portfolio. Additionally, the workout of the troubled relationship identified in the third quarter of 2022 discussed above is progressing as planned.
The Company recorded income tax expense of $0.2 million for the three-month period ended December 31, 2024 as compared to $0.1 million for the three months ended December 31, 2023 as pre-tax income during the three months ended December 31, 2024 was higher as compared to pre-tax income in the three months ended December 31, 2023.
Comparison of Results of Operations for the Twelve Months Ended December 31, 2024 and December 31, 2023
Net income was $0.8 million for the twelve months ended December 31, 2024 compared to $1.7 million for the twelve months ended December 31, 2023. Total interest and dividend income was $16.2 million for the twelve months ended December 31, 2024 compared to $15.2 million for the twelve months ended December 31, 2023. Although earning assets decreased by $6.5 million, the average yield on interest-earning assets improved to 4.87% from 4.47% due primarily to the higher interest rate environment. Interest expense for the twelve months ended December 31, 2024 was $1.5 million higher due to the repricing of certificates of deposit and a shift in the deposit mix to higher costing term products. As a result, our cost of funds increased to 2.36% from 1.82%. Due to the increase in interest expense, net interest income for the twelve months ended December 31, 2024 decreased to $8.9 million as compared to $9.4 million for the twelve months ended December 31, 2023. Total other income decreased by $0.1 million during the twelve months ended December 31, 2024 to $1.2 million due primarily to the decline in value of the mortgage servicing rights portfolio. Other expenses were $0.6 million higher, increasing to $9.2 million for the twelve months ended December 31, 2024 as compared to $8.6 million for the twelve months ended December 31, 2023. The increase was due primarily to the net realized loss of $0.6 million on the restructuring of the investment portfolio during the second quarter of 2024. During the second quarter of 2024, the Company executed a balance sheet management strategy designed to re-position the investment portfolio, generate additional liquidity and improve net interest income on a go-forward basis. Twenty-one investment securities were sold generating about $4 million of cash and a realized loss of $0.6 million. Proceeds were utilized to purchase more favorable investment securities and pay down higher cost wholesale funding.
The Company recorded a recovery of $150 thousand for the twelve-month period ended December 31, 2024 to decrease the ACL position. This compares to a recovery of $250 thousand for the twelve-month period ended December 31, 2023. Net recoveries during the twelve months ended December 31, 2024 were approximately $40 thousand compared to net charge-offs of approximately $212 thousand during the twelve months ended December 31, 2023. The current period adjustment to the ACL is the result of the quarterly calculation of CECL which was adopted as of January 1, 2023.
We recorded income tax expense of approximately $0.3 million for the twelve months ended December 31, 2024 compared to $0.7 million for the twelve months ended December 31, 2023. This decrease is due primarily to lower pre-tax earnings in 2024 as compared to 2023.
Comparison of Financial Condition at December 31, 2024 and December 31, 2023
Total consolidated assets as of December 31, 2024 were $353.7 million, a decrease of $10.2 million, or 2.8%, from $363.9 million at December 31, 2023. The decrease was due primarily to a decrease of $10.4 million in the net loan portfolio, a decrease of $2.2 million in the cash value of life insurance, $0.2 million in deferred tax assets, a decrease of $0.9 million in cash and cash equivalents and a decrease of $2.0 million in the securities available for sale. These decreases were partially offset by an increase in federal funds sold of $4.5 million, an increase in loans held for sale of $0.2 million, an increase in other assets of $0.3 million and an increase of $0.4 million in accrued interest receivable.
Cash and cash equivalents decreased $0.9 million, or 6.6%, to $12.5 million at December 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 financing activities of $9.8 million exceeding cash provided by investing activities of $7.5 million and cash provided by operating activities of $1.4 million.
Securities available for sale decreased $2.0 million, or 10.4%, to $16.8 million at December 31, 2024 from $18.8 million at December 31, 2023, due to calls, payments and maturities exceeding purchase activity.
Net loans decreased $10.5 million, or 3.3%, to $301.7 million at December 31, 2024 compared to $312.2 million at December 31, 2023 primarily due to a decrease of $6.3 million in one-to-four family loans, a decrease of $5.3 million in non-residential real estate loans, a decrease of $1.4 million in commercial loans and a decrease of $2.7 million in consumer loans. These decreases were partially offset by an increase of $5.5 million in multi-family loans. The allowance for credit losses on loans increased by $95 thousand from December 31, 2023 to December 31, 2024.
Total deposits increased $1.8 million, or 0.7%, to $282.9 million at December 31, 2024 from $281.1 million at December 31, 2023. During the twelve months ended December 31, 2024, certificates of deposit increased by $6.8 million, money market accounts increased by $1.4 million. and savings accounts increased by $1.1 million. Offsetting these increases slightly, interest-bearing checking accounts decreased by $6.3 million, and non-interest-bearing checking accounts decreased by $1.2 million.
FHLB advances decreased $8.5 million, or 27.6%, to $22.3 million at December 31, 2024 compared to $30.8 million at December 31, 2023.
Stockholders’ equity decreased $1.4 million, or 3.5%, to $40.2 million at December 31, 2024 from $41.6 million at December 31, 2023. The decrease reflects $1.7 million used to repurchase and retire 127,332 outstanding shares of Company common stock and $1.1 million in cash dividends. These decreases were partially offset by a $0.2 million increase in other comprehensive income due to an increase in fair value of securities available for sale, net income of $0.8 million for the twelve months ended December 31, 2024 and other increases of $0.5 million.
Date of 2025 Annual Meeting of Shareholders
The Company also announced today that the Company’s annual meeting of shareholders will be held on Wednesday, May 21, 2025.
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. & Subsidiary | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| December 31, 2024 and December 31, 2023 | ||||||||||
| (Unaudited) | ||||||||||
| December 31, | December 31, | |||||||||
| 2024 | 2023 | |||||||||
| Assets | ||||||||||
| Cash and due from banks | $ | 9,863,824 | $ | 3,511,709 | ||||||
| Interest bearing deposits | 2,651,481 | 9,884,710 | ||||||||
| Total cash and cash equivalents | 12,515,305 | 13,396,419 | ||||||||
| Federal funds sold | 4,493,000 | - | ||||||||
| Securities available for sale | 16,821,297 | 18,781,463 | ||||||||
| Loans, net of allowance for credit losses of $4,276,409 and $4,370,934 | ||||||||||
| at December 31, 2024 and December 31, 2023, respectively | 301,741,977 | 312,181,918 | ||||||||
| Loans held for sale | 232,000 | - | ||||||||
| Premises and equipment, net | 6,005,515 | 5,998,742 | ||||||||
| Accrued interest receivable | 2,108,565 | 1,700,911 | ||||||||
| Deferred tax assets | 2,553,346 | 2,799,503 | ||||||||
| Cash value of life insurance | 528,129 | 2,717,888 | ||||||||
| Goodwill | 649,869 | 649,869 | ||||||||
| Core deposit intangible | - | 31,909 | ||||||||
| Other assets | 6,002,358 | 5,659,196 | ||||||||
| Total assets | $ | 353,651,361 | $ | 363,917,818 | ||||||
| Liabilities | ||||||||||
| Deposits: | ||||||||||
| Non-interest bearing | $ | 22,663,274 | $ | 23,839,628 | ||||||
| Interest bearing | 260,276,358 | 257,246,330 | ||||||||
| Total deposits | 282,939,632 | 281,085,958 | ||||||||
| Accrued interest payable | 853,122 | 320,238 | ||||||||
| FHLB advances | 22,250,000 | 30,750,000 | ||||||||
| Fed funds purchased | - | 2,235,000 | ||||||||
| Long term debt | 1,380,988 | 1,700,000 | ||||||||
| Allowance for credit losses on off-balance sheet credit exposures | 79,199 | 94,136 | ||||||||
| Other liabilities | 4,365,113 | 4,400,892 | ||||||||
| Total liabilities | 311,868,054 | 320,586,224 | ||||||||
| Commitments and contingencies | ||||||||||
| ESOP Repurchase Obligation | 1,583,522 | 1,691,975 | ||||||||
| Stockholders' Equity | ||||||||||
| Common stock, $.01 par value, 12,000,000 shares authorized; 2,419,911 and | ||||||||||
| 2,552,971 shares issued at December 31, 2024 and December 31, 2023, respectively | 24,199 | 25,529 | ||||||||
| Additional paid-in-capital | 22,898,558 | 24,738,476 | ||||||||
| Retained earnings | 21,503,222 | 21,798,054 | ||||||||
| Unallocated ESOP shares | (358,737 | ) | (682,192 | ) | ||||||
| Unallocated management recognition plan shares | (70,193 | ) | (103,417 | ) | ||||||
| Accumulated other comprehensive loss | (2,213,742 | ) | (2,444,856 | ) | ||||||
| 41,783,307 | 43,331,594 | |||||||||
| Less: | ||||||||||
| ESOP Owned Shares | (1,583,522 | ) | (1,691,975 | ) | ||||||
| Total stockholders' equity | 40,199,785 | 41,639,619 | ||||||||
| Total liabilities and stockholders' equity | $ | 353,651,361 | $ | 363,917,818 | ||||||
| Ottawa Bancorp, Inc. & Subsidiary | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| Three and Twelve Months Ended December 31, 2024 and 2023 | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Interest and dividend income: | ||||||||||||||||
| Interest and fees on loans | $ | 4,001,163 | $ | 3,691,951 | $ | 15,222,823 | $ | 14,465,536 | ||||||||
| Securities: | ||||||||||||||||
| Residential mortgage-backed and related securities | 108,121 | 81,518 | 372,829 | 318,790 | ||||||||||||
| State and municipal securities | 17,580 | 22,800 | 73,086 | 90,442 | ||||||||||||
| Dividends on non-marketable equity securities | 36,900 | 34,243 | 131,615 | 87,416 | ||||||||||||
| Interest-bearing deposits | 128,745 | 62,487 | 414,524 | 192,300 | ||||||||||||
| Total interest and dividend income | 4,292,509 | 3,892,999 | 16,214,877 | 15,154,484 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Deposits | 1,672,535 | 1,435,829 | 6,424,177 | 5,124,170 | ||||||||||||
| Borrowings | 206,874 | 205,773 | 858,772 | 629,246 | ||||||||||||
| Total interest expense | 1,879,409 | 1,641,602 | 7,282,949 | 5,753,416 | ||||||||||||
| Net interest income | 2,413,100 | 2,251,397 | 8,931,928 | 9,401,068 | ||||||||||||
| Provision for (recovery of) credit losses - loans | (66,414 | ) | (34,565 | ) | (134,826 | ) | (193,138 | ) | ||||||||
| Provision for (recovery of) credit losses – off-balance sheet credit exposures | 1,942 | (10,890 | ) | (14,937 | ) | (56,503 | ) | |||||||||
| Net interest income after provision for loan losses | 2,477,572 | 2,296,852 | 9,081,691 | 9,650,709 | ||||||||||||
| Other income: | ||||||||||||||||
| Gain on sale of loans | 57,910 | 23,174 | 184,652 | 119,572 | ||||||||||||
| Loan origination and servicing income | 159,383 | 131,283 | 596,315 | 564,984 | ||||||||||||
| Origination of mortgage servicing rights, net of amortization | 52,774 | 13,501 | (87,302 | ) | 70,192 | |||||||||||
| Customer service fees | 117,823 | 137,819 | 467,832 | 494,372 | ||||||||||||
| Increase in cash surrender value of life insurance | 11,671 | 9,328 | 51,159 | 45,863 | ||||||||||||
| Gain (Loss) on sale of foreclosed real estate | - | - | - | 5,653 | ||||||||||||
| Total other income | 399,561 | 315,105 | 1,212,656 | 1,300,636 | ||||||||||||
| Other expenses: | ||||||||||||||||
| Salaries and employee benefits | 1,189,539 | 1,172,457 | 4,728,765 | 4,711,855 | ||||||||||||
| Directors’ fees | 45,000 | 31,500 | 175,000 | 166,500 | ||||||||||||
| Occupancy | 156,952 | 154,114 | 622,292 | 625,463 | ||||||||||||
| Deposit insurance premium | 48,213 | 49,865 | 160,317 | 147,397 | ||||||||||||
| Legal and professional services | 87,882 | 167,954 | 391,989 | 452,341 | ||||||||||||
| Data processing | 310,084 | 318,507 | 1,213,852 | 1,239,742 | ||||||||||||
| Loss on sale of securities | - | - | 600,408 | - | ||||||||||||
| Loan expense | 72,208 | 70,272 | 305,919 | 264,536 | ||||||||||||
| Other | 289,996 | 345,048 | 1,020,670 | 1,017,637 | ||||||||||||
| Total other expenses | 2,199,874 | 2,309,717 | 9,219,212 | 8,625,471 | ||||||||||||
| Income before income tax | 677,259 | 302,240 | 1,075,135 | 2,325,874 | ||||||||||||
| Income tax expense | 181,232 | 98,557 | 317,654 | 657,123 | ||||||||||||
| Net income | $ | 496,027 | $ | 203,683 | $ | 757,481 | $ | 1,668,751 | ||||||||
| Basic earnings per share | $ | 0.21 | $ | 0.08 | $ | 0.31 | $ | 0.66 | ||||||||
| Diluted earnings per share | $ | 0.21 | $ | 0.08 | $ | 0.31 | $ | 0 66 | ||||||||
| Dividends per share | $ | 0.110 | $ | 0.111 | $ | 0.441 | $ | 0.433 | ||||||||
| Ottawa Bancorp, Inc. & Subsidiary | ||||||||||||
| Selected Financial Data and Ratios | ||||||||||||
| (Unaudited) | ||||||||||||
| At or for the | At or for the | |||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Performance Ratios: | ||||||||||||
| Return on average assets (5) | 0.56 | % | 0.23 | % | 0.21 | % | 0.46 | % | ||||
| Return on average stockholders' equity (5) | 4.88 | 1.97 | 1.85 | 4.04 | ||||||||
| Average stockholders' equity to average assets | 11.47 | 11.49 | 11.57 | 11.47 | ||||||||
| Stockholders' equity to total assets at end of period | 11.37 | 11.45 | 11.37 | 11.45 | ||||||||
| Net interest rate spread (1) (5) | 2.72 | 2.52 | 2.52 | 2.72 | ||||||||
| Net interest margin (2) (5) | 2.90 | 2.66 | 2.69 | 2.86 | ||||||||
| Other expense to average assets | 0.62 | 0.64 | 2.61 | 2.39 | ||||||||
| Efficiency ratio (3) | 78.21 | 90.02 | 90.88 | 80.60 | ||||||||
| Dividend payout ratio | 52.38 | 138.75 | 137.08 | 65.96 | ||||||||
| At or for the | At or for the | ||||||
| Twelve Months Ended | Twelve Months Ended | ||||||
| December 31, | December 31, | ||||||
| 2024 | 2023 | ||||||
| (unaudited) | |||||||
| Regulatory Capital Ratios (4): | |||||||
| Total risk-based capital (to risk-weighted assets) | 18.17 | % | 17.86 | % | |||
| Tier 1 core capital (to risk-weighted assets) | 16.92 | 16.61 | |||||
| Common equity Tier 1 (to risk-weighted assets) | 16.92 | 16.61 | |||||
| Tier 1 leverage (to adjusted total assets) | 12.06 | 12.29 | |||||
| Asset Quality Ratios: | |||||||
| Net charge-offs to average gross loans outstanding | 0.01 | 0.07 | |||||
| Allowance for credit losses on loans to gross loans outstanding | 1.41 | 1.38 | |||||
| Non-performing loans to gross loans (6) | 1.58 | 1.52 | |||||
| Non-performing assets to total assets (6) | 1.37 | 1.32 | |||||
| Other Data: | |||||||
| Book Value per common share | $ | 16.61 | $ | 16.32 | |||
| Tangible Book Value per common share (7) | $ | 16.34 | $ | 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 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. | |||||||
Contact:
Craig Hepner
President and Chief Executive Officer
(815) 366-5437