Cortland Bancorp Doubles Net Income in 2014

CORTLAND, Ohio — Cortland Bancorp, holding company of Cortland Banks, Monday reported fourth-quarter net income of $543,000, or 12 cents a share, and full-year 2014 net income of $3.87 million, or 85 cents per share.

This compares with third-quarter net income of $955,000, or 21 cents a share, and a fourth-quarter 2013 net loss of $463,000, or 11 cents a share. Full-year 2013 income was $1.78 million.

The company attributed the year-ago quarterly loss to a one-time impairment pre-tax charge of $2 million ($1.3 million after taxes) as required by the “Volcker Rule.”

That rule, arising from the Dodd-Frank Act, required the company to recognize $10.5 million in losses on trust preferred securities, a form of collateralized debt obligations. Excluding that charge, fourth-quarter 2013 net income would have been $827,000, or 18 cents per share, the company said.

In a prepared statement, James Gasior, president and CEO of the holding company and the bank, said, “Our core banking operations continue to perform well, generating a solid performance in 2014, and we look forward to another productive year in 2015.”

Among the highlights the company cited:

• For full-year 2014, net interest income rose 7% to $17.78 million from $16.66 million.
• Fourth-quarter net income of $.53 million was 4% higher than $4.38 million the preceding quarter and 5% above $4.38 million the year-ago quarter.
• Total loans rose 9% to $360.18 million from $330.19 million at Sept. 30 and were 4% above the $346.83 million at Dec. 31, 2013.
• Net interest margin improved 26 basis points (0.26%) for the year to 3.67%. The margin rose five basis points during the fourth quarter. “Our net interest margin continues to improved,” Gasior commented, “again reflecting our strong growth in our loan portfolio.”

Key performance ratios for the quarters ended Dec. 31, Sept. 30 and Dec. 31, 2013:

• Return on average equity, 3.90%, 7.00%, (3.73%).
• Return on average assets, 0.39%, 3.64%, (0.35%).
• Net interest margin, 3.68%, 3.64%, 3.63%.
• Efficiency ratio, 72.72%, 70.89%, 74.14%.

Noninterest income (includes fees and service charges) in the fourth quarter was $898,000 compared to $776,000 the previous quarter and $747,000 the year-ago quarter. Full-year noninterest income was $3.21 million compared to $3.98 million in 2013, something the bank attributed to “the decline in mortgage banking revenues generated from wholesale mortgage lending operations during the first nine months of 2013.” Cortland exited the wholesale mortgage business at the end of the third quarter of 2013.

Noninterest or operating expenses (includes wages and benefits, rents, data processing, marketing and Federal Deposit Insurance Corp. premiums) fell 8%, or $1.36 million in 2014 from 2013, to $15.50 million from $16.88 million. Fourth-quarter operating expenses were $4.12 million compared to $3.85 million the third quarter and $3.97 million the fourth quarter of 2013.

“Our efficiency ratio of 69.78% for full-year 2014 reflects our continuing efforts to contain operating expenses,” said David Lucido, chief financial officer. The efficiency ratio for full-year 2014 was 7.52% lower than the 78.30% for full-year 2013.

Total assets stood at $568.93 million at Dec. 31, 2% higher than the $556.92 million at yearend 2013. Total deposits were $456.76 million and $448.67 million respectively.

Asset quality shows nonperforming assets were 1.77% of total assets at Dec. 31 compared to 1.50% at Sept. 30 and 1.32% at yearend 2013.

Nonperforming loans (those 90 days and longer past due) were 2.58% of total loans at Dec. 31, 2.26% at Sept. 30 and 1.77% at Dec. 31, 2013. “The increase from the year-ago quarter was primarily the result of a limited number of commercial accounts rather than a broad deterioration of asset quality of any specific loan type,” the company said. “As a result, Cortland increased the provision for loan losses during the fourth quarter” to $1.15 million. The provision for the full year was $1.64 million compared to $650,000 for all of 2013.

Regardless, net charge-offs during the fourth quarter were $26,000, or 0.03% of total average loans compare to $329,000, or 0.42%, the last quarter of 2013. On an annual basis, Cortland said, net charge-offs as a percentage of average loans were 0.06% for 2014 and 0.23% in 2013.

Cortland Bancorp, holding company of The Cortland Savings and Banking Co., engages in commercial, consumer and mortgage banking through its 12 full-service offices in Trumbull, Mahoning, Portage and Ashtabula counties.

SOURCE: Cortland Bancorp.

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