"Our Lady of Blessed Acceleration, don't fail me now."
Ottawa Bancorp is a sleepy, 3-branch Illinois bank that trades at 90% of TBV. The bank has a little over
$300 million in assets. The bank did a 2nd step conversion on 10/12/2016, meaning that there are no
restrictions on the bank being sold. I think the bank will be sold in about three years for about $22/sh.
Meanwhile, sit back, collect some dividends, and see how the bank continues to deploy capitol through
buybacks and growing the balance sheet.
"There's 106 miles to Chicago, we've got a full tank of gas, half a pack of cigarettes, it's dark out, and
we're wearing sunglasses."
Background: Ottawa is actually about 84 miles west, south west of Chicago, along the Illinois River. The
two branches are located east along the river, as well as Route 6. Here is a map of the locations:
https://www.usbanklocations.com/map.php?zoom=4&lat=39.368279&lon=-
98.891603&ct=27989&q=Ottawa+Savings+Bank
As a side note, I have found the web site USBankLocations.com to be very useful. Not only can you see
all the branch locations on a map, but it also has history and financial information, albeit at the bank
subsidiary level. The catch is you have to look up by the bank subsidiary name, not the holding company
name.
The bank began operations in 1871 and did a 1st step MHC conversion in 2005. It acquired Twin Oaks
Savings Bank in 2014, which highlighted one of the benefits of the MHC structure as Twin Oaks was a
mutual bank. Twins Oaks merged with Ottawa for no cash consideration, although it had to contribute
776,143 shares to the MHC. In the process, it tripled its branch network!
"We're on a mission from God!"
Earnings: Earnings have improved over the past two years, but even with the change in tax rates, the
bank has yet to break a 4.0% ROE. The bank has relied more on flipping mortgages in recent years which
is not as high quality earnings when it comes to bank M&A.
"Five grand? No problem, we'll have it for you in the morning."
Loans: Mortgage loans make up 63% of the loan book. Commercial real estate is 12%, commercial loans
are 10%, consumer direct is 8% and purchased auto loans are 7%. In terms of trends, the purchased auto
loans are decreasing and commercial loans are increasing. Non-performing assets were 0.73% as of
9/30/2019.