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8-K - FORM 8-K - CORTLAND BANCORP INC | c16161e8vk.htm |
Exhibit 99
April 28, 2011
|
Contact: | James Gasior | ||
President and CEO |
Press Release: | Cortland Bancorp Reports First Quarter 2011 Earnings |
CORTLAND BANCORP ( the Company, OTCBB: CLDB) today reported core earnings of $1.0 million
for the first quarter of 2011, representing a $49 thousand improvement from core earnings reported
for the same quarter of 2010. Net income which includes non-recurring items such as impairment
losses and reductions in retirement expense, such as those recorded in 2010 as a result of a
restructuring of the Companys management group, was $869 thousand for the quarter, or $0.19 per
share versus $894 thousand for the first quarter of 2010, or $0.20 per share.
Other results of operations are as follows:
| The Companys recognition of non-cash pre-tax other-than-temporary impairment (OTTI) losses on investment securities fell dramatically for the quarter to $202 thousand versus $544 thousand in 2010. |
| Net interest margin of 3.74% for the quarter is an improvement on both a linked quarter basis from 3.67% and year-over-year from 3.47% as the Company continues to optimally manage its balance sheet in this historically low interest rate environment. |
| The Company continues to excel in managing risks in the loan portfolio as asset quality measures are among the best for banks with similar asset totals. Net loan charge-offs were .05% of average loans in 2011 versus .27% in the first quarter of 2010. The allowance for loan loss (ALLL) to total loans ratio was 1.03% at both the 2011 and 2010 quarter ends. The Companys allowance for loan losses covers 70% of nonperforming loans at March 31, 2011. |
| The Companys total shareholders equity increased from $41.852 million on December 31, 2010 to $43.538 million at March 31, 2011, an increase of $1.7 million. The Company continues to remain well capitalized under all regulatory measures. The Companys total risk-based capital is $12.7 million in excess of the 10% well capitalized threshold. |
James Gasior, President and Chief Executive Officer stated, We are encouraged to report the
results of the first quarter. As the nation and our surrounding market area continues down the
path of economic recovery, Cortland Banks remains well capitalized and is optimistic that the
Company will continue to produce positive results.
Net interest income provides the core earnings base for the Company and increased 7.9% to $4.1
million in 2011 versus $3.8 million in 2010. The Company has benefited from increasing balances in
the loan portfolio yielding 5.91% during the quarter while reducing balances in the investment
portfolio earning 3.70%. Also, as liabilities continue to mature and reprice at lower rates, the
net interest margin has, and is expected to continue to improve.
Mr. Gasior noted, The Company restructured and expanded its commercial lending staff in the second
half of 2010 with the specific objective of growing loans. Despite the slow economic recovery in
the region, Cortland Banks remains committed to fulfilling the credit needs of creditworthy
customers.
Non-Interest Income for the quarter, excluding impairment (OTTI) charges and securities gains,
decreased by $56,000 from a year ago. This is mainly due to a decline in Fees for Customer Services
of $32,000 and losses on Other Real Estate of $(28,000) in 2011 versus 2010 losses of $(4,000).
Fees for Customer Services was negatively affected by new banking regulations effective in August
of 2010 limiting the ability of financial institutions to charge overdraft fees.
Non-Interest Expenses for the first quarter of 2011 were $3.4 million as compared to $2.7 million
for the same period in 2010. A one-time credit of $457,000 in the first quarter 2010 relating to
reductions in supplemental retirement benefits, net of severance, was the major cause for the
expense differential.
Despite the elevated unemployment level and slow economic recovery, the Company, to date, has not
experienced notable deterioration in credit quality. Nonperforming loans were $3.8 million at
March 31, 2011 or 1.47% of loans, relatively unchanged from $3.9 million at December 31, 2010.
Included in these totals is a single loan for $1.1 million fully secured by collateral for which no
loss is expected to be incurred. For the quarters ending March 31, 2011 and 2010 provisions for
loan loss were $174,000 and $175,000 respectively, more than covering the net charge-offs for the
respective periods. The allowance is considered adequate giving recognition to the risk inherent
in the loan portfolio and the expectation of a slow economic recovery.
Totals loans at March 31, 2011 were $257.7 million as compared to $237.1 million a year ago. Total
assets of $489.2 million at March 31, 2011 reflect a slight increase of .7% from year ago asset
totals of $485.9 million as management orchestrates balance sheet strategies designed to reinvest
cash flows from its investment portfolio and increase loan balances with no material change in
composite asset totals. This balance sheet strategy is designed to improve net interest income
margins and overall profitability while maintaining assets which support the Companys current
capital position.
The Companys investment portfolio contains trust preferred securities, which have resulted in
valuation charges against income of $13.7 million in 2009 and $2.7 million in 2010. The Company
continues to value these securities consistent with valuation techniques prescribed under
accounting standards. The market for these securities and similar securities, which had been
relatively active since 2003, became illiquid during the financial crisis of 2008 and is still
currently not active. Since 2008, the Company has modeled and analyzed the cash flow
characteristics and has concluded that a major portion of these devalued securities were not
recoverable. The charge for this other than temporary impairment for the first quarter of 2011
was $202 thousand versus $544 thousand in the first quarter of 2010.
Commenting on the OTTI charges, Mr. Gasior stated, The OTTI charges recognized are highly
dependent on the performance of the community bank collateral backing the issues. As most of the
weaker banks have exited the collateral pools by now, the valuation charges have substantially
declined over the past few quarters. However, Mr. Gasior continued, Although the Company has
recognized significant charges on impaired trust preferred securities to date, there is a continued
risk that future valuation reviews could result in recognition of additional OTTI charges on these
securities as well as for other securities which have not resulted in OTTI to date.
As a result of the decline in the quality of the Trust Preferred securities, the Company is
required to maintain higher levels of regulatory risk-based capital for these securities, due to
the greater perceived risk of default by the underlying bank and insurance company issuers.
Specifically, regulatory guidance requires the Company to apply a higher risk weighting formula
for these securities to calculate its regulatory capital ratios. In addition, as the company
increases loan balances while reducing securities balances, additional capital is required to
support the shift into the higher risk weighted loan categories and may have an offsetting impact
to the growth in capital generated by earnings. Upon applying the higher level of risk weighted
assets to the Companys regulatory capital ratios, the calculated ratios are as follows at March
31, 2011: a Tier 1 leverage ratio of 9.69% (compared to a well-capitalized threshold of 5.0%); a
Tier 1 risk-based capital ratio of 12.65% (compared to a well-capitalized threshold of 6.00%);
and a total risk based capital ratio of 13.38% (compared to a well-capitalized threshold of
10.00%). Despite these stringent capital rules, the Company remains well capitalized under all
measures. In fact, the Companys risk-based capital is $12.7 million in excess of the 10% well
capitalized threshold.
Mr. Gasior commented, In the midst of earnings pressures brought on by the economic downturn,
interest rate compression and investment impairment issues, the Company devoted substantial
attention to profit improvement measures, balance sheet restructuring and a reorganization of its
management structure. The Companys management team continues to focus on measures designed to
enhance capital and to provide for adequate liquidity for lending and business development
purposes. New strategies are being pursued to improve market penetration and product expansion,
with the objective of increasing both the interest income and non interest income revenue base.
Cortland Bancorp is a holding company headquartered in Cortland, Ohio. Cortland Banks, founded in
1892, the Companys bank subsidiary, conducts business through fourteen full-service community
banking offices located in the counties of Trumbull, Mahoning, Portage, Geauga and Ashtabula in
northeastern Ohio.
For additional information about Cortland Banks visit http://www.cortland-banks.com.
CORTLAND BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL DATA FOR QUARTER ENDED
(In thousands of dollars, except for ratios and per share amounts)
SELECTED FINANCIAL DATA FOR QUARTER ENDED
(In thousands of dollars, except for ratios and per share amounts)
Unaudited
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
SUMMARY OF OPERATIONS |
||||||||
Total interest income |
$ | 5,320 | $ | 5,549 | ||||
Total interest expense |
(1,253 | ) | (1,760 | ) | ||||
Net interest income (NII) |
4,067 | 3,789 | ||||||
Provision for loan losses |
(174 | ) | (175 | ) | ||||
NII after loss provision |
3,893 | 3,614 | ||||||
Total other income before impairment loss |
735 | 708 | ||||||
Total other noninterest expense |
(3,355 | ) | (2,739 | ) | ||||
Income before tax and impairment loss |
1,273 | 1,583 | ||||||
Net income before impairment loss |
1,002 | 1,253 | ||||||
Impairment loss net of tax benefit |
(133 | ) | (359 | ) | ||||
Net income |
$ | 869 | $ | 894 | ||||
PER COMMON SHARE DATA |
||||||||
Net income, both basic and diluted |
$ | 0.19 | $ | 0.20 | ||||
Book value |
9.62 | 8.59 | ||||||
BALANCE SHEET DATA |
||||||||
Assets |
$ | 489,224 | $ | 485,916 | ||||
Investments |
179,394 | 187,172 | ||||||
Net loans |
255,090 | 234,690 | ||||||
Deposits |
384,206 | 375,287 | ||||||
Borrowings |
52,565 | 58,619 | ||||||
Subordinated debt |
5,155 | 5,155 | ||||||
Shareholders equity |
43,538 | 38,732 |
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
ASSET QUALITY RATIOS |
||||||||
Loans 30 days or more beyond their contractual
due date as a percent of total loans |
1.47 | % | 0.69 | % | ||||
Nonperforming assets (1) as a percentage of: |
||||||||
Total assets |
1.67 | 1.08 | ||||||
Equity plus allowance for loan losses |
17.64 | 12.76 | ||||||
Tier I capital |
17.17 | 11.23 | ||||||
FINANCIAL RATIOS |
||||||||
Return on average equity |
8.14 | % | 9.83 | % | ||||
Return on average assets |
0.71 | 0.73 | ||||||
Effective tax rate |
18.86 | 13.96 | ||||||
Net interest margin |
3.74 | 3.47 | ||||||
Efficiency ratio |
71.10 | 60.91 | ||||||
CAPITAL RATIOS |
||||||||
Total risk-based capital to risk-weighted assets |
13.38 | % | 13.71 | % | ||||
Tier 1 capital to risk-weighted assets |
12.65 | 13.01 | ||||||
Tier 1 capital to average assets |
9.69 | 9.52 |
(1) | Nonperforming assets include non-accrual loans, OREO, restructured loans and non-accrual investments. |