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OTTAWA BANCORP, INC.

Announces Fourth Quarter 2018 Results

Ottawa, Illinois – February 14, 2019 – Ottawa Bancorp, Inc. (the “Company”) (Nasdaq CM: OTTW), the holding company for Ottawa Savings Bank, FSB (the “Bank”), announced net income of $0.6 million, or $0.18 per basic and diluted common share, for the three months ended December 31, 2018, compared to a net loss of $0.5 million, or $0.14 per basic and diluted common share, for the three months ended December 31, 2017. For the year ended December 31, 2018, net income was $2.0 million, or $0.62 per basic and $0.61 per diluted common share, compared to net income of $0.8 million, or $0.25 per basic and diluted common share for the year ended December 31, 2017. During the fourth quarter of 2018 the Company continued to grow its loan portfolio which increased to $235.9 million at December 31, 2018 from $224.1 million at September 30, 2018 and from $207.0 million at December 31, 2017. Non-performing loans totaled $1.5 million at both December 31, 2018 and September 30, 2018. At December 31,2017, non-performing loans were at $1.6 million. The ratio of non-performing loans to gross loans remained at 0.63% at September 30, 2018 and at December 31, 2018 but remained lower than the 0.75% at December 31, 2017.

Additionally, through December 31, 2018, the Company has repurchased a total of 136,221 shares of its common stock at an average price of $13.93 per share as part of its current stock repurchase program which was approved on November 7, 2018 and the previous stock repurchase program that expired on November 15, 2018. During the quarter ended December 31, 2018, the Company repurchased a total of 35,986 shares of its common stock at an average price of $13.52 per share as part of these programs. For 2018, the Company repurchased a total of 118,621 shares of its common stock at an average price of $13.85 per share as part of these programs.

Comparison of Results of Operations for the Three Months Ended December 31, 2018 and December 31, 2017

Net income for the three months ended December 31, 2018 was $0.6 million compared to a net loss of $0.5 million for the three months ended December 31, 2017. The increase in net income of $1.1 million, or 220.0%, was primarily attributed to a decrease in income tax expense of $0.8 million. Additionally, the Company experienced a slight increase in net interest income and total other income during the period and slightly lower total other expenses.

Net interest income increased by $0.1 million, or 2.5%, to $2.3 million for the three months ended December 31, 2018, from $2.2 million for the three months ended December 31, 2017. Interest and dividend income increased $0.4 million, or 14.5%, primarily due to an increase in the average balances of interest-earning assets of $34.9 million. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased 46 basis points to 1.18% for the three months ended December 31, 2018. The net interest margin decreased 41 basis points, or 11.0% to 3.41% during the three months ended December 31, 2018 as compared to 3.82% for the three months ended December 31, 2017.

We recorded a provision for loan losses of approximately $0.2 million for the three-month period ended December 31, 2018 compared to $0.1 million for the three-month period ended December 31, 2017. The allowance for loan losses was $2.6 million, or 1.10% of total gross loans at December 31, 2018 compared to $2.5 million, or 1.18% of gross loans at December 31, 2017. Net charge-offs during the fourth quarter of 2018 were approximately $0.1 million compared to $0.1 million during the fourth quarter of 2017. General reserves were higher at December 31, 2018, when compared to December 31, 2017, as the balances in most loan categories increased during the year ended December 31, 2018. These increases to the allowance for loan losses were slightly off-set by improvements in historical loss levels and augmented by changes in qualitative factors during the year ended December 31, 2018, as compared to the same period ended December 31, 2017. Additionally, specific reserves as of December 31, 2018 were higher than they were as of December 31, 2017.

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Total other income increased $0.1 million to $0.6 million for the three months ended December 31, 2018 from $0.5 million for the three months ended December 31, 2017. Loan origination and servicing income, customer service fees and other income increased slightly during the three months ended December 31, 2018 as compared to the prior year quarter but were offset by slightly lower income on gain on sale of loans.

Total other expense decreased $0.1 million, or 8.1%, to $2.0 million for the three months ended December 31, 2018, as compared to $2.1 million for the three months ended December 31, 2017.  The decrease was primarily due to lower salaries and employee benefits due to loan volume being lower during the fourth quarter of 2018 in comparison to the fourth quarter of 2017.

We recorded income tax expense of approximately $0.2 million for the three-month period ended December 31, 2018 compared to $1.0 million for the same period ended December 31, 2017. The fourth quarter 2017 results were negatively impacted by a reduction in value of the Company’s net deferred tax assets which resulted in a charge of approximately $0.8 million, or $0.25 per basic and diluted common share, to income tax expense. This income tax adjustment resulted from the December 22, 2017 enactment of the Tax Cuts and Jobs Act (the “TCJA”), which lowered the corporate tax rate from 34% to 21%. Prior to the enactment of TCJA, the Company’s net deferred tax assets were valued based upon the projection of a 34% future tax benefit.

Comparison of Results of Operations for the Years Ended December 31, 2018 and December 31, 2017

Net income was $2.0 million for the year ended December 31, 2018 compared to $0.8 million for the year ended December 31, 2017. The increase in net income of $1.2 million or 150.0% was primarily attributed to a decrease of income tax expense of $0.8 million, an increase of $0.5 million in net interest income, and a $0.1 million increase in other income. These increases were offset partially by an increase in total other expenses of $0.3 million.

Net interest income increased by $0.5 million, or 5.8%, to $9.1 million for the year ended December 31, 2018, from $8.6 million for the year ended December 31, 2017. Interest and dividend income increased $1.5 million, or 15.2%, primarily due to an increase in the average balances of interest-earning assets of $31.3 million. The increase in net interest income was partially off-set by an increase in interest expense as the average cost of funds increased 36 basis points to 0.96% for the year ended December 31, 2018. The net interest margin decreased 27 basis points, or 7.0% to 3.57% during the year ended December 31, 2018 as compared to 3.84% during the year ended December 31, 2017.

We recorded a provision for loan losses of approximately $0.5 million for the year ended December 31, 2018 and approximately $0.6 million for the year ended December 31, 2017. The allowance for loan losses was $2.6 million, or 1.10% of total gross loans at December 31, 2018 compared to $2.5 million, or 1.18% of gross loans at December 31, 2017. Net charge-offs totaled $0.4 million for both the years ended December 31, 2018 and 2017. General reserves were higher at December 31, 2018, when compared to December 31, 2017, as the balances in most loan categories increased during the year ended December 31, 2018. These increases to the allowance for loan losses were slightly off-set by improvements in historical loss levels and augmented by changes in qualitative factors during the year ended December 31, 2018, as compared to the same year ended December 31, 2017. Additionally, specific reserves as of December 31, 2018 were higher than they were as of December 31, 2017.

Total other income increased $0.1 million to $2.3 million for the year ended December 31, 2018, as compared to the year ended December 31, 2017. The increase was primarily due to higher revenues for loan origination and servicing income, customer service fees and gain on sale of foreclosed real estate offset slightly by a decrease in gain on sale of loans.

Total other expense increased $0.3 million, or 3.7%, to $8.2 million for the year December 31, 2018, as compared to $7.9 million for the year ended December 31, 2017.  The increase was primarily due to higher other expenses, increased loan expenses, and higher data processing expenses.

We recorded income tax expense of approximately $0.7 million for the year ended December 31, 2018 as compared to $1.5 million for the year ended December 31, 2017. The 2017 results were negatively impacted by a reduction in value of the Company’s net deferred tax assets which resulted in a charge of approximately $0.8 million, or $0.25 per basic and diluted common share, to income tax expense. This income tax adjustment resulted from the December 22, 2017 enactment of TCJA, which lowered the corporate tax rate from 34% to 21%. Prior to the enactment of TCJA, the Company’s net deferred tax assets were valued based upon the projection of a 34 percent future tax benefit.

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Comparison of Financial Condition at December 31, 2018 and December 31, 2017

Total consolidated assets as of December 31, 2018 were $292.7 million, an increase of $37.3 million, or 14.6%, from $255.4 million at December 31, 2017.  The increase was primarily due to an increase of $28.9 million in the net loan portfolio, an increase in cash and cash equivalents of $4.5 million, an increase in federal funds sold of $4.8 million and an increase in other assets of $0.4 million, partially off-set by decreases in securities available for sale of $0.5 million, non-marketable equity securities of $0.1 million, and loans held for sale of $0.5 million.

Cash and cash equivalents increased $4.5 million, or 120.0%, to $8.3 million at December 31, 2018 from $3.8 million at December 31, 2017. The increase in cash and cash equivalents was primarily a result of cash provided by financing activities of $35.1 million and cash provided by operating activities of $3.5 million exceeding cash used in investing activities of $34.1 million.

Securities available for sale decreased $0.5 million, or 2.0%, to $25.5 million at December 31, 2018 from $26.0 million at December 31, 2017, as paydowns, calls, and maturities exceeded new securities purchases.

Net loans increased by $28.9 million, or 14.0% to $235.9 million at December 31, 2018 compared to $207.0 million at December 31, 2017 primarily as a result of a $17.7 million increase in one-to-four family loans, a $1.5 million increase in purchased auto loans, a $9.1 million increase in consumer direct loans, a $3.2 million increase in non-residential real estate loans, and a $1.1 million increase in multi-family residential loans, partially off-set by a $3.5 million decrease in commercial loans.

Total deposits increased $40.5 million, or 22.2%, to $223.3 million at December 31, 2018 from $182.8 million at December 31, 2017. At December 31, 2018 checking accounts increased by $27.5 million and certificates of deposit increased by $15.7 million as compared to December 31, 2017. Offsetting these increases, money market accounts decreased by $2.5 million, and savings accounts decreased by $0.2 million since December 31, 2017.

FHLB advances decreased $3.0 million, or 19.9% to $12.1 million at December 31, 2018 compared to $15.1 million at December 31, 2017.

Stockholders’ equity decreased approximately $0.3 million, or 0.5% to $52.8 million at December 31, 2018 from $53.1 million at December 31, 2017. The decrease reflects $1.6 million to repurchase and cancel 118,621 outstanding shares of Company common stock, $0.9 million in dividends and a decrease in other comprehensive income of $0.2 million related to a decrease in the fair value of securities available for sale. These decreases were partially off-set by net income of $2.0 million for the year ended December 31, 2018 and proceeds from stock options exercised, equity incentive plan shares issued and the allocation of ESOP shares totaling approximately $0.4 million.

Annual Meeting of Stockholders

On February 14, 2019, the Company also announced that its annual meeting of stockholders will be held on Wednesday, May 15, 2019.

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.

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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.