8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 2, 2019

OTTAWA BANCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	001-37914	81-2959182
(State or other jurisdiction of	(Commission	(IRS Employer
incorporation or organization)	File Number)	Identification No.)

925 LaSalle Street, Ottawa, Illinois 61350

(Address of principal executive offices) (Zip Code)

(815) 433-2525

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	OTTW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition

On August 2, 2019, Ottawa Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2019. A copy of the Company’s press release is attached as Exhibit 99.1 and is furnished herewith.

The information contained in this Item 2.02 and in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific references in such a filing.

Item 9.01 Financial Statements and Other Exhibits

(d) Exhibits

Number Description

99.1 Press Release dated August 2, 2019

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

		OTTAWA BANCORP, INC.
Date: August 2, 2019	By:	/s/ Jon Kranov
		Jon Kranov President and Chief Executive Officer

EX-99.1

Exhibit 99.1

OTTAWA BANCORP, INC.

Announces Second Quarter 2019 Results

Ottawa, Illinois – August 2, 2019 - Ottawa Bancorp, Inc. (the “Company”) (Nasdaq CM: OTTW), the holding company for Ottawa Savings Bank, FSB (the “Bank”), announced net income of $0.4 million, or $0.14 per basic and diluted common share for the three months ended June 30, 2019, compared to net income of $0.4 million, or $0.11 per basic and diluted common share for the three months ended June 30, 2018. For the six months ended June 30, 2019, the bank announced net income of $0.8 million, or $0.26 per basic and diluted common share, compared to net income of $0.8 million, or $0.26 per basic and diluted common share for the six months ended June 30, 2018.   During the second quarter of 2019, the Company experienced an increase in non-performing loans. Non-performing loans increased from $1.5 million at December 31, 2018 to $1.9 million at June 30, 2019, which caused the ratio of non-performing loans to gross loans to increase from 0.63% at December 31, 2018 to 0.75% at June 30, 2019. Additionally, through June 30, 2019, the Company has repurchased a total of 275,570 shares of its common stock at an average price of $14.20 per share as part of the stock repurchase program approved on November 7, 2018 and its previous program which expired in November, 2018.

Comparison of Results of Operations for the Three Months Ended June 30, 2019 and June 30, 2018

Net income for the three months ended June 30, 2019 was $434,612 compared to net income of $355,873 for the three months ended June 30, 2018. The increase in net income of $78,739 or 22.1%, was primarily attributed to an increase in net interest income after provision for loan losses of $56,394 and a decrease in total other expenses of $58,134. The increases were partially offset by a decrease in total other income of $15,294 and an increase in taxes of $20,495.

Net interest income increased by $0.04 million, or 1.71%, to $2.35 million for the three months ended June 30, 2019, from $2.31 million for the three months ended June 30, 2018. Interest and dividend income increased $0.3 million, or 12.01%, primarily due to an increase in the average balances of interest-earning assets of $19.9 million. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased 45 basis points to 1.33% for the three months ended June 30, 2019. The net interest margin decreased 21 basis points during the three months ended June 30, 2019 to 3.45% from 3.66%.

We recorded a provision for loan losses of $0.2 million for the three-month periods ended June 30, 2019 and 2018. The allowance for loan losses was $2.6 million, or 1.07% of total gross loans at June 30, 2019 compared to $2.5 million, or 1.14% of gross loans at June 30, 2018. Net charge-offs during the second quarter of 2019 were $150,559 compared to $211,547 during the second quarter of 2018. General reserves were higher at June 30, 2019, when compared to June 30, 2018, primarily due to the balances in most loan categories increasing during the twelve months ended June 30, 2019. Additionally, changes in qualitative factors during the twelve months ended June 30, 2019, as compared to the twelve months ended June 30, 2018, increased the general reserve slightly. These increases to the allowance were partially off-set by improvements in historical loss levels. Although non-performing loans increased, specific reserves as of June 30, 2019 were approximately $90,000 lower than they were as of June 30, 2018 due to the transfer of one loan to OREO and the charge-off of the specific reserve for another loan.

Total other income decreased $0.02 million, to $0.54 million for the three months ended June 30, 2019, as compared to $0.56 million for the three months ended June 30, 2018. The decrease was primarily due to lower revenues related to mortgage banking activity as mortgage production continues to lag as compared to 2018 levels.

Total other expense decreased $0.1 million, or 2.6%, to $2.1 million for the three months ended June 30, 2019, as compared to $2.2 million for the three months ended June 30, 2018.  The decrease was primarily due to lower costs in the other expense category. Although most expense categories are lower for the 2019 period than in 2018, salaries and employee benefit costs increased over 2018 levels due to the addition of a commercial lender and a senior credit analyst, which offset most of the favorable results.

We recorded income tax expense of $0.1 million for both of the three-month periods ended June 30, 2019 and 2018.

Comparison of Results of Operations for the Six Months Ended June 30, 2019 and June 30, 2018

Net income was $0.8 million for both of the six-month periods ended June 30, 2019 and 2018.

Net interest income increased by $0.3 million, or 5.4%, to $4.8 million for the six months ended June 30, 2019, from $4.5 million for the six months ended June 30, 2018. Interest and dividend income increased $0.8 million, or 15.7%, primarily due to an increase in the average balances of interest-earning assets of $22.3 million. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased 46 basis points to 1.29% for the six months ended June 30, 2019. The net interest margin decreased 12 basis points, or 3.30% during the six months ended June 30, 2019 to 3.52% from 3.64%.

We recorded a provision for loan losses of $0.3 million for both of the six-month periods ended June 30, 2019 and 2018. The allowance for loan losses was $2.6 million, or 1.07% of total gross loans at June 30, 2019 compared to $2.5 million, or 1.14% of gross loans at June 30, 2018. Net charge-offs during the first six months of 2019 were $279,934 compared to $238,960 during the first six months of 2018. General reserves were higher at June 30, 2019, when compared to June 30, 2018, primarily due to the balances in all loan categories increasing during the twelve months ended June 30, 2019. These increases to the allowance were partially off-set by improvements in historical loss levels and changes in qualitative factors during the twelve months ended June 30, 2019, as compared to the twelve months ended June 30, 2018. Although non-performing loans increased, specific reserves as of June 30, 2019 were approximately $90,000 lower than they were as of June 30, 2018 due to the transfer of one loan to OREO and the charge-off of the specific reserve for another loan.

Total other income decreased slightly to $0.9 million for the six months ended June 30, 2019, as compared to $1.1 million for the six months ended June 30, 2018. The decrease was primarily due to decreases in loan origination and servicing income, gain on sale of foreclosed real estate and gain on sale of loans.

Total other expense increased $0.07 million, or 1.7%, to $4.21 million for the six months ended June 30, 2019, as compared to $4.14 million for the six months ended June 30, 2018.  The increase was primarily due to higher salaries and employee benefits, legal and professional fees and data processing costs which was offset by lower costs in loan expense and other expense.

We recorded income tax expense of approximately $0.3 million for both of the six-month periods ended June 30, 2019 and 2018.

Comparison of Financial Condition at June 30, 2019 and December 31, 2018

Total consolidated assets as of June 30, 2019 were $301.6 million, an increase of $8.8 million, or 3.0%, from $292.8 million at December 31, 2018.  The increase was primarily due to an increase of $9.2 million in the net loan portfolio, an increase in federal funds sold of $2.5 million, an increase in OREO of $0.2 million as well as a $0.1 million increase in several asset categories, partially off-set by decreases in cash and cash equivalents of $2.2 million, securities available for sale of $0.6 million and other assets of $0.4 million.

Cash and cash equivalents decreased $2.2 million, or 26.5%, to $6.2 million at June 30, 2019 from $8.4 million at December 31, 2018. The decrease in cash and cash equivalents was primarily a result of cash used in investing activities of $11.3 million exceeding cash provided by financing activities of $7.5 million and cash provided by operating activities of $1.6 million.

Securities available for sale decreased $0.6 million, or 2.4%, to $24.9 million at June 30, 2019 from $25.5 million at December 31, 2018, as paydowns, calls, and maturities exceeded new securities purchases.

Net loans increased by $9.2 million, or 3.9%, to $245.1 million at June 30, 2019 compared to $235.9 million at December 31, 2018 primarily as a result of a $9.3 million increase in one-to-four family loans, a $6.9 million increase in commercial loans and a $3.3 million increase in consumer direct loans. The increases were off-set by decreases of $6.4 million in non-residential real estate loans and $3.9 million in purchased auto loans.

Total deposits increased $5.6 million, or 2.5%, to $229.0 million at June 30, 2019 from $223.4 million at December 31, 2018. At June 30, 2019, non-interest bearing checking accounts increased $4.0 million, savings accounts increased by $2.1 million and certificates of deposit increased by $6.9 million as compared to December 31, 2018. The increases were offset by a decrease in checking accounts which decreased by $6.4 million and money market accounts which decreased by $1.0 million as compared to December 31, 2018.

FHLB advances increased $5.5 million, or 45.4% to $17.6 million at June 30, 2019 compared to $12.1 million at December 31, 2018. The additional FHLB advances were used to fund loan growth.

Stockholders’ equity decreased $2.2 million, or 4.3% to $50.6 million at June 30, 2019 from $52.8 million at December 31, 2018. The decrease reflects $2.0 million used to repurchase and cancel 139,349 outstanding shares of Company common stock and $1.6 million in declared dividends. The decreases were partially offset by other comprehensive income which increased by $0.3 million related to an increase in the fair value of securities available for sale and net income of $0.8 million for the six months ended June 30, 2019 and proceeds from stock options exercised.

About Ottawa Bancorp, Inc.

Ottawa Bancorp, Inc. is the holding company for Ottawa Savings Bank, FSB 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. Ottawa Savings Bank, FSB was founded in 1871 and is headquartered in Ottawa, Illinois. For more information about the Company and the Bank, please visit www.ottawasavings.com.

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, and market disruptions. 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

June 30, 2019 and December 31, 2018

(Unaudited)

	June 30,			December 31,
	2019			2018
Assets
Cash and due from banks	$	4,512,795		$	2,416,568
Interest bearing deposits		1,683,645			6,013,890
Total cash and cash equivalents		6,196,440			8,430,458
Time deposits		250,000			250,000
Federal funds sold		8,118,000			5,663,000
Securities available for sale		24,926,481			25,533,767
Loans, net of allowance for loan losses of $2,647,805 and $2,627,738 at June 30, 2019 and December 31, 2018, respectively		245,111,776			235,926,419
Loans held for sale		121,125			-
Premises and equipment, net		6,637,592			6,621,080
Accrued interest receivable		846,113			824,542
Foreclosed real estate		196,000			-
Deferred tax assets		1,842,234			1,898,141
Cash value of life insurance		2,365,299			2,341,453
Goodwill		649,869			649,869
Core deposit intangible		199,000			228,000
Other assets		4,096,004			4,469,350
Total assets	$	301,555,933		$	292,836,079
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest bearing	$	18,034,007		$	14,057,719
Interest bearing		210,959,119			209,390,810
Total deposits		228,993,126			223,448,529
Accrued interest payable		12,199			5,648
FHLB advances		17,577,635			12,087,152
Other liabilities		4,413,353			4,470,384
Total liabilities		250,996,313			240,011,713
Commitments and contingencies
Stockholders' Equity
Common stock, $.01 par value, 12,000,000 shares authorized; 3,223,318 and 3,358,922 shares issued at June 30, 2019 and December 31, 2018, respectively		32,233			33,589
Additional paid-in-capital		33,614,487			35,579,606
Retained earnings		18,125,450			18,859,232
Unallocated ESOP shares		(1,487,608	)		(1,576,616	)
Unallocated management recognition plan shares		(34,980	)		(40,361	)
Accumulated other comprehensive income (loss)		310,038			(31,084	)
Total stockholders' equity		50,559,620			52,824,366
Total liabilities and stockholders' equity	$	301,555,933		$	292,836,079

Ottawa Bancorp, Inc. & Subsidiary

Consolidated Statements of Operations

Three and Six Months Ended June 30, 2019 and 2018

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Interest and dividend income:
Interest and fees on loans	$	2,852,347		$	2,546,964		$	5,712,939		$	4,945,633
Securities:
Residential mortgage-backed and related securities		73,858			71,353			156,319			138,819
State and municipal securities		100,610			103,203			198,021			203,651
Dividends on non-marketable equity securities		6,277			5,208			12,711			9,394
Interest-bearing deposits		54,168			29,554			99,547			45,348
Total interest and dividend income		3,087,260			2,756,282			6,179,537			5,342,845
Interest expense:
Deposits		672,145			400,605			1,280,535			733,129
Borrowings		68,445			48,401			141,146			96,545
Total interest expense		740,590			449,006			1,421,681			829,674
Net interest income		2,346,670			2,307,276			4,757,856			4,513,171
Provision for loan losses		170,000			187,000			300,000			312,500
Net interest income after provision for loan losses		2,176,670			2,120,276			4,457,856			4,200,671
Other income:
Gain on sale of loans		173,334			175,660			258,291			308,871
Gain/(Loss) on sale of foreclosed real estate, net		-			(2,438	)		-			39,597
Loan origination and servicing income		200,108			208,146			354,391			371,018
Origination of mortgage servicing rights, net of amortization		(3,045	)		9,999			(12,735	)		22,853
Customer service fees		125,079			126,012			240,945			249,007
Increase in cash surrender value of life insurance		11,912			11,865			23,846			23,635
Gain/(Loss) on sale of repossessed assets, net		8,544			2,470			7,796			(238	)
Other		24,184			23,696			45,946			48,634
Total other income		540,116			555,410			918,480			1,063,377
Other expenses:
Salaries and employee benefits		1,188,291			1,103,496			2,286,849			2,115,940
Directors fees		43,000			46,750			86,000			94,750
Occupancy		157,060			160,390			328,010			334,461
Deposit insurance premium		14,465			16,430			31,565			32,826
Legal and professional services		102,398			100,949			197,933			189,650
Data processing		148,855			161,121			335,443			315,894
Loan expense		172,623			193,862			337,035			362,669
Valuation adjustments and expenses on foreclosed real estate		6,419			11,788			12,003			20,800
Other		315,864			412,323			598,751			676,739
Total other expenses		2,148,975			2,207,109			4,213,589			4,143,729
Income before income tax expense		567,811			468,577			1,162,747			1,120,319
Income tax expense		133,199			112,704			328,064			284,864
Net income	$	434,612		$	355,873		$	834,683		$	835,455
Basic earnings per share	$	0.14		$	0.11		$	0.26		$	0.26
Diluted earnings per share	$	0.14		$	0.11		$	0.26		$	0.26
Dividends per share	$	0.43		$	0.05		$	0.49		$	0.165

Ottawa Bancorp, Inc. & Subsidiary

Selected Financial Data and Ratios

(Unaudited)

	At June 30,		At December 31,
	2019		2018
	(In thousands, except per share data)
Financial Condition Data:
Total Assets	$	301,556	$	292,836
Loans, net (1)		245,112		235,926
Securities available for sale		24,926		25,534
Deposits		228,993		223,449
Stockholders' Equity		50,560		52,824
Book Value per common share	$	15.69	$	15.73
Tangible Book Value per common share (2)	$	15.42	$	15.47

(1) Net of loans in process, deferred loan (cost) fees and allowance for loan losses.

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In thousands, except per share data)				(In thousands, except per share data)
Operations Data:
Total interest and dividend income	$	3,087	$	2,756	$	6,180	$	5,343
Total interest expense		740		449		1,422		830
Net interest income		2,347		2,307		4,758		4,513
Provision for loan losses		170		187		300		313
Total other income		540		556		919		1,064
Total other expense		2,149		2,207		4,214		4,144
Income tax expense		133		113		328		285
Net income	$	435	$	356	$	835	$	835
Basic earnings per share	$	0.14	$	0.11	$	0.26	$	0.26
Diluted earnings per share	$	0.14	$	0.11	$	0.26	$	0.26
Dividends per share	$	0.43	$	0.05	$	0.49	$	0.165

	At or for the Three Months Ended						At or for the Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Performance Ratios:
Return on average assets (5)		0.30	%		0.52	%		0.58	%		0.63	%
Return on average stockholders' equity (5)		1.48			2.71			2.85			3.17
Average stockholders' equity to average assets		20.14			19.26			20.19			19.73
Stockholders' equity to total assets at end of period		16.77			19.16			16.77			19.16
Net interest rate spread (1) (5)		3.20			3.48			3.28			3.48
Net interest margin (2) (5)		3.45			3.66			3.52			3.64
Average interest-earning assets to average interest-bearing liabilities		122.3			124.06			122.67			123.91
Other expense to average assets		0.73			0.81			1.45			1.55
Efficiency ratio (3)		74.44			77.11			74.23			74.35
Dividend payout ratio		188.46			45.45			141.03			63.46

	At or for the Six Months Ended			At or for the Twelve Months Ended
	June 30,			December 31,
	2019			2018
	(unaudited)
Regulatory Capital Ratios (4):
Total risk-based capital (to risk-weighted assets)		21.85	%		21.08	%
Tier 1 core capital (to risk-weighted assets)		20.62			19.88
Common equity Tier 1 (to risk-weighted assets)		20.62			19.88
Tier 1 leverage (to adjusted total assets)		15.45			15.16
Asset Quality Ratios:
Net charge-offs to average gross loans outstanding (5)		0.23			0.16
Allowance for loan losses to gross loans outstanding		1.07			1.10
Non-performing loans to gross loans (6)		0.75			0.63
Non-performing assets to total assets (6)		0.70			0.54
Other Data:
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.