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8-K - FORM 8-K - CORTLAND BANCORP INC | c23926e8vk.htm |
Exhibit 99
October 31, 2011 | Contact: James Gasior | |
President and CEO |
Press Release: | Cortland Bancorp Reports Third Quarter 2011 Earnings |
CORTLAND BANCORP ( the Company, OTCQB: CLDB) today reported net income of $1.05 million for the
quarter ending September 30, 2011, representing over $1 million improvement from net income
reported for the same period in 2010.
Excluding non-recurring items such as impairment losses and securities gains, the $1.05 million net
income was an increase of 6.8% over the $983,000 comparable number for the quarter in 2010.
Net income for the nine months to date was $3.24 million or $.72 per share in 2011 versus $2.24
million or $.49 per share for 2010, a 44.6% increase.
Highlights of operations for the current quarter are as follows:
| Net interest income increased by over $300,000 in 2011 versus 2010 as net interest margin expanded to 3.72% for the quarter, a 20 basis point improvement 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 (annualized) were .18% of average loans in 2011 and .15% in the third quarter of 2010. The allowance for loan loss (ALLL) to total loans ratio was 1.16% at September 30, 2011 versus 1.07% a year ago. The Companys allowance for loan losses covers 91% of nonperforming loans at September 30, 2011. |
| The Company had no other-than-temporary impairment (OTTI) losses on investment securities in the quarter versus $1.46 million in the same 2010 quarter. |
| The Companys total shareholders equity increased from $41.9 million on December 31, 2010 to $44.3 million at September 30, 2011, an increase of $2.4 million. The Company continues to remain well capitalized under all regulatory measures. The Companys total risk-based capital is $15.6 million in excess of the 10% well capitalized threshold. |
James Gasior, President and Chief Executive Officer stated, amid more rigorous regulatory standards
and an uncertain economy, the Company continues to follow its core strategic direction. Our
operating results reflect our commitment to growing loans and deposits in the markets in which we
operate and in producing consistent positive earnings. On the heels of the financial crisis, we
have now posted positive earnings in each of the last eight quarters dating back to the fourth
quarter of 2009.
Net interest income, which provides the core earnings base for the Company, increased 8.3% to
$4.117 million in the third quarter of 2011 versus $3.803 million in 2010. The Company has
benefited from increasing balances in the loan portfolio yielding 5.87% during the quarter in lieu
of allocating funds into the investment portfolio earning 3.39%. Also, as liabilities continue to
mature and reprice at lower rates, the net interest income has, and is expected to continue to
improve. During the most recent quarter, the cost of interest bearing deposits has fallen below 1%
for the first time. As deposit rates are periodically re-priced to reflect market trends, the
company has been able to both retain and grow deposits and has recorded a more than 6% increase in
balances over the past year.
Mr. Gasior noted, The Company restructured and expanded its commercial lending staff in the second
half of 2010 with the specific objective of growing its commercially-oriented loan portfolio.
Whether during the peak of the economic recession, or during the current post recessionary period,
the Company has continued its practice of working with businesses and consumers, in meeting their
financing needs, during prosperous and difficult times alike. We remain committed to fulfilling
the credit needs of customers in our markets.
Non-Interest Income for the quarter, excluding impairment (OTTI) charges and securities gains,
increased by $70,000 from a year ago. This is mainly due to realizing gains on Other Real Estate in
2011 of $28,000 versus losses in 2010 of $56,000. Despite the addition to the lending staff,
Non-Interest Expenses were held in check for the third quarter of 2011 at $3.291 million as
compared to $3.287 million for the same period in 2010.
The Company, to date, has not experienced notable deterioration in credit quality despite less than
favorable economic conditions over the past several years. Nonperforming loans were $4.5 million
at September 30, 2011 or 1.71% of loans, up slightly from $3.9 million at December 31, 2010.
Included in these totals is a single loan of $1 million fully secured by collateral for which no
loss is expected to be incurred. For the quarter ending September 30, 2011 the provision for loan
losses was $324,000, more than covering the net charge-offs for the period. Provision expense
during the past two quarters was increased in recognition of loan growth and a changing composition
of the loan portfolio as the Company takes aim at managing its balance sheet with a commercially
oriented focus.
Total loans at September 30, 2011 were $263.7 million as compared to $233.3 million a year ago, a
13% increase. Total assets of $497.8 million at September
30, 2011 reflect a modest increase of 3.1% from year ago asset totals of $482.9 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, $2.7 million in 2010, and $202 thousand
in the first quarter of 2011. 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. There was no charge for this other than temporary impairment
for the third quarter of 2011 versus $1.46 million in the third 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 charges on
impaired trust preferred securities has diminished over the past few quarters, 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.
In addition to building loan loss reserves, the Company has also continued to increase its capital
levels. With capital as the ultimate cushion to absorb any unforeseen negative consequences of the
struggling economy, capital levels for banks across the industry, have been under the watchful eye
of the regulators. The Companys regulatory capital ratios exceed the statutory well capitalized
thresholds by a comfortable margin. In the current regulatory environment, regulatory oversight
bodies expect banks to maintain ratios above the statutory levels as a margin of safety. The
calculated ratios are as follows at September 30, 2011: a Tier 1 leverage ratio of 10.25% (compared
to a well-capitalized threshold of 5.0%); a Tier 1 risk-based capital ratio of 13.27% (compared
to a well-capitalized threshold of 6.00%); and a total risk based capital ratio of 14.10%
(compared to a well-capitalized threshold of 10.00%).
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.
SELECTED FINANCIAL DATA
(In thousands of dollars, except for ratios and per share amounts)
(In thousands of dollars, except for ratios and per share amounts)
Unaudited
Three | Three | |||||||||||||||
months | months | Nine months | Nine months | |||||||||||||
ended | ended | ended | ended | |||||||||||||
September | September | September | September | |||||||||||||
30, 2011 | 30, 2010 | 30, 2011 | 30, 2010 | |||||||||||||
SUMMARY OF OPERATIONS |
||||||||||||||||
Total interest income |
$ | 5,275 | $ | 5,370 | $ | 15,933 | $ | 16,538 | ||||||||
Total interest expense |
(1,158 | ) | (1,567 | ) | (3,614 | ) | (4,951 | ) | ||||||||
Net interest income (NII) |
4,117 | 3,803 | 12,319 | 11,587 | ||||||||||||
Provision for loan losses |
(324 | ) | (30 | ) | (872 | ) | (325 | ) | ||||||||
NII after loss provision |
3,793 | 3,773 | 11,447 | 11,262 | ||||||||||||
Total other income before impairment loss |
870 | 753 | 2,945 | 3,188 | ||||||||||||
Total other noninterest expense |
(3,291 | ) | (3,287 | ) | (9,967 | ) | (9,236 | ) | ||||||||
Income before tax and impairment loss |
1,372 | 1,239 | 4,425 | 5,214 | ||||||||||||
Net income before impairment loss |
1,054 | 983 | 3,377 | 3,965 | ||||||||||||
Impairment loss net of tax benefit |
(966 | ) | (133 | ) | (1,730 | ) | ||||||||||
Net income |
$ | 1,054 | $ | 17 | $ | 3,244 | $ | 2,235 | ||||||||
CORE EARNINGS |
||||||||||||||||
GAAP earnings |
$ | 1,054 | $ | 17 | $ | 3,244 | $ | 2,235 | ||||||||
Impairment losses on investment securities |
1,464 | 202 | 2,621 | |||||||||||||
Investment gains not in the ordinary course
of business |
(14 | ) | (333 | ) | (920 | ) | ||||||||||
Credits related to reorganization net |
(457 | ) | ||||||||||||||
Tax effect of adjustments |
5 | (498 | ) | 45 | (423 | ) | ||||||||||
Core earnings |
$ | 1,045 | $ | 983 | $ | 3,158 | $ | 3,056 | ||||||||
PER COMMON SHARE DATA |
||||||||||||||||
Net income, both basic and diluted |
$ | 0.24 | $ | 0.00 | $ | 0.72 | $ | 0.49 | ||||||||
Book value |
9.78 | 8.99 | 9.78 | 8.99 | ||||||||||||
BALANCE SHEET DATA |
||||||||||||||||
Assets |
$ | 497,757 | $ | 482,886 | $ | 497,757 | $ | 482,886 | ||||||||
Investments |
188,712 | 201,366 | 188,712 | 201,366 | ||||||||||||
Net loans |
260,672 | 230,811 | 260,672 | 230,811 | ||||||||||||
Deposits |
402,121 | 376,638 | 402,121 | 376,638 | ||||||||||||
Borrowings |
42,449 | 55,865 | 42,449 | 55,865 | ||||||||||||
Subordinated debt |
5,155 | 5,155 | 5,155 | 5,155 | ||||||||||||
Shareholders equity |
44,268 | 40,706 | 44,268 | 40,706 | ||||||||||||
ASSET QUALITY RATIOS |
||||||||||||||||
Loans 30 days or more beyond their contractual
due date as a percent of total loans |
2.18 | % | 1.31 | % | 2.18 | % | 1.31 | % | ||||||||
Net Charge offs as a percent of total loans |
0.18 | 0.07 | 0.16 | 0.15 | ||||||||||||
Loan loss reserve as a percent of total loans |
1.16 | 1.07 | 1.16 | 1.07 | ||||||||||||
Non-accrual loans as a percent of total loans |
1.27 | 0.94 | 1.27 | 0.94 | ||||||||||||
FINANCIAL RATIOS |
||||||||||||||||
Return on average equity |
9.23 | % | 0.17 | % | 9.72 | % | 7.36 | % | ||||||||
Return on average assets |
0.85 | 0.01 | 0.88 | 0.61 | ||||||||||||
Effective tax rate |
23.18 | (107.56 | ) | 23.18 | 13.81 | |||||||||||
Net interest margin |
3.72 | 3.52 | 3.76 | 3.56 | ||||||||||||
Efficiency ratio |
67.23 | 72.87 | 69.26 | 67.09 | ||||||||||||
CAPITAL RATIOS |
||||||||||||||||
Total risk-based capital to risk-weighted
assets |
14.10 | % | 13.25 | % | 14.10 | % | 13.25 | % | ||||||||
Tier 1 capital to risk-weighted assets |
13.27 | 12.54 | 13.27 | 12.54 | ||||||||||||
Tier 1 capital to average assets |
10.25 | 9.32 | 10.25 | 9.32 |
(1) | Nonperforming assets include non-accrual loans, OREO, restructured loans and non-accrual investments. |