CORTLAND, Ohio, Oct. 25, 2016 (GLOBE NEWSWIRE) — Cortland Bancorp (OTCQB:CLDB), the holding company for Cortland Savings and Banking Company, today reported that for the first nine months of 2016, net income grew 13% to $3.7 million, or $0.85 per share, compared to $3.3 million, or $0.73 per share, for the first nine months of 2015. Net income was stable at $1.2 million, or $0.27 per share, for the third quarters of 2016 and 2015 and for the second quarter of 2016. All results are unaudited.
“We achieved solid financial results in the third quarter, with strong loan and deposit growth, solid contributions from our mortgage operation and improving asset quality.,” said James M. Gasior, President and Chief Executive Officer. “Compared to a year ago, deposits grew by $54 million, or 12%, and our loan portfolio increased by $36 million, or 10%. We delivered a 17% year-over-year increase and an 82% increase year-to-date in mortgage banking revenue, driven by new purchases, including new construction, and by strong refinancing activities because of lower long-term interest rates. Asset quality improved with NPAs to total assets at 1.46%.
“During the quarter we made important investments for our future by refreshing our brand, creating a unique image for our products and our presence in the market. “Branding is very important to us, as we aim to effectively establish a significant and differentiated presence in our markets to attract and retain loyal customers and generate long-term growth, commented Gasior.” During the quarter, we also received regulatory approval to locate our fourteenth full-service branch in Hudson, Ohio, with an expected opening in the fourth quarter this year.
Third Quarter 2016 (at, or for the period September 30, 2016):
- Diluted earnings per share grew 16% to $0.85 for the first nine months of 2016, compared to $0.73 per diluted share for the first nine months of 2015.
- Net interest income increased 6% to $4.9 million for the third quarter of 2016, compared to $4.6 million for the third quarter a year ago, and $5.0 million for the second quarter of 2016. Year-to-date, net interest income grew 6% to $14.6 million compared to $13.8 million for the first nine months of 2015.
- Non-interest income, excluding investment gains, was $1.0 million, level with the third quarter of 2015, and $1.2 million on a linked quarter basis. For the first nine months of 2016, non-interest income, excluding investment gains, grew 12% to $3.3 million from $2.9 million for the first nine months of 2015.
- For the third quarter of 2016, net interest margin (“NIM”) was 3.63% compared to 3.67% for the third quarter of 2015 and 3.77% for the second quarter of 2016. Net interest margin was 3.66% for both the year-to-date 2016 and for first nine months of 2015.
- Total loans increased 10%, to $395.8 million, compared to $359.8 million at September 30, 2015, and grew 3%, from $384.1 million at June 30, 2016.
- Mortgage banking revenue increased 17% year-over-year, and grew 82% year-to-date.
- Total deposits grew 12% to $508.5 million from a year ago, and increased 4% from $488.7 million at June 30, 2016, reflecting the popularity of our Kasasa personal checking products.
- Nonperforming assets decreased to $9.1 million, or 1.46% of total assets, at September 30, 2016, compared to $9.3 million, or 1.63% of total assets a year earlier, and $9.3 million, or 1.54% of total assets, at June 30, 2016.
- Allowance for loan losses as a percentage of total loans was 1.24% at September 30, 2016, compared to 1.44% at September 30, 2015.
- Cortland Bancorp remained well capitalized with total risk-based capital to risk-weighted assets of 15.03% and tangible equity to tangible assets of 9.93%.
- A quarterly cash dividend of $0.07 per share will be payable on December 1, 2016, to shareholders of record on November 10, providing a 1.8% current yield at recent market prices.
Operating Results
Net Interest Income
Primarily due to higher average loan balances, third quarter net interest income increased 6% to $4.9 million, compared to $4.6 million for the third quarter a year ago. Net interest income was $5.0 million for the second quarter of 2016. The decline in net interest income on a linked quarter basis was mainly due to additional interest collected on nonaccrual loans in the prior quarter. Year-to-date, net interest income increased 6% to $14.6 million, compared to $13.8 million for the first nine months of 2015.
Net Interest Margin
Net interest margin (“NIM”) was 3.63% for the third quarter of 2016, compared to 3.67% for the third quarter of 2015, and 3.77% for the second quarter of 2016. Year-to-date, and for the first nine months of 2015, NIM was flat at 3.66%. “Both the mix of our assets and slightly lower yields on loans and investment securities accounts for the slight compression in NIM from prior quarters,” said David Lucido, Senior Vice President and Chief Financial Officer.
“After repaying the $4.5 million in high-cost Federal Home Loan Bank (“FHLB”) advances in the first quarter of this year, the remaining $13.5 million in long-term FHLB advances are scheduled to mature in December 2016, January, May and September, 2017. These advances represent 19% of our third quarter funding costs. Upon maturity, we anticipate refinancing these advances at a much lower interest rate, reducing annual interest expense by approximately $300,000. The resulting improved funding mix is expected to have a positive impact on our net interest margin, which is already strong,” said Lucido.
Provision for loan losses for the third quarter of 2016 was $50,000, compared to $100,000 for the third quarter a year ago. No provision was taken for the second quarter of 2016, primarily because of the positive outcome on a customer bankruptcy case in the second quarter, which improved asset quality. For the first nine months of 2016, provision for loan losses was $50,000, compared to $390,000 for the first nine months of 2015. The loan loss allowance, as a percentage of loans, was 1.24%, at the September quarter end remaining in line with the 1.27% ratio at the June quarter end.
Non-Interest Income
Total non-interest income, excluding investment gains and losses, increased 4% to $1.0 million for the third quarter of 2016, compared to the third quarter of 2015, and declined 11% from $1.2 million for the second quarter of 2016. Non-interest income increased 12% to $3.3 million for the first nine months of 2016, from $2.9 million for the first nine months of 2015.
“Mortgage banking revenue increased 17% from a year ago and contributed meaningfully to our non-interest income in the quarter. Although mortgage banking revenues were down on a linked quarter basis, year-to-date, our mortgage banking gains grew 82%, compared to the first nine months of 2015,” added Gasior. “Strong loan demand and refinancing activities are robust reflecting the affordable interest rates currently available.” New home purchases and construction accounted for 74% of mortgage volume while refinancing transactions represented 26% of loan volumes for the second quarter.
Operating Expenses
Non-interest expense for the third quarter of 2016 totaled $4.5 million, compared to $4.0 million for the third quarter of 2015, and $4.7 million for the second quarter of 2016. For the first nine months of 2016, non-interest expense was $13.7 million, compared to $12.2 million for the first nine months of 2015. “The higher non-interest expense in 2016 is mainly related to additional staff to support commercial and private bank business growth. Investments in continued brand marketing and equipment expenses also contributed to the increase,” said Lucido.
The efficiency ratio for the third quarter of 2016 was 72.42%, compared to 67.42% for the third quarter of 2015, and 73.84% for the second quarter of 2016. The efficiency ratio for the nine months ended September 30, 2016 was 72.49%, compared to 69.86% for the nine months ended September 30, 2015. “We continue our efforts to increase our investment in personnel across business lines with a view to increasing revenues and reducing our efficiency ratio as the bank executes on organic growth initiatives.”
“The effective tax rate for the third quarter of 2016 was 20.8% compared to 23.4% in the third quarter a year ago reflecting the benefits of investments with tax incentives and tax free components of our revenue stream,” added Lucido.
Balance Sheet and Asset Quality
Total assets grew 9% year-over-year to $621.2 million at September 30, 2016, compared to $570.3 million at September 30, 2015, and increased 2% from $606.4 million at June 30, 2016.
Investment securities totaled $164.1 million at September 30, 2016, compared to $159.8 million at September 30, 2015, and $163.8 million at June 30, 2016. As of September 30, 2016, the securities primarily comprised of high-grade mortgage-back securities issued by U.S. Government sponsored entities. The increase in investment securities year-over-year, and from the preceding quarter, reflects the strong deposit growth generated during the year.
Total loans increased 10% to $395.8 million at September 30, 2016, compared to $359.8 million a year ago and grew 3% from $384.1 million at June 30, 2016. The loan portfolio remains diversified, and comprise of both retail and business relationships with commercial real estate loans accounting for 63%, of which 20% were owner-occupied by businesses. Commercial loans accounted for 16% while residential 1-4 loans accounted for 14%. Consumer and home equity loans accounted for 7% of total loans. “Our loan production remains solid, again boosted by the growth in commercial real estate and business loans,” added Gasior.
Total deposits grew $53.9 million, or 12%, to $508.5 million at September 30, 2016, from $454.5 million at September 30, 2015, and were up $19.8 million, or 4%, compared to $488.7 million at June 30, 2016. Both the new Canfield branch and the Kasasa brand of deposit products introduced last fall have played significantly into improving deposit levels. Noninterest-bearing deposits accounted for 22% of total deposits; interest-bearing demand deposits accounted for 9%, while money market and savings accounted for 43% of total deposits. Certificates of deposits were 26% of the deposit mix.
At September 30, 2016, nonperforming assets as a percentage of total assets was 1.46% of total assets, compared 1.63% of total assets at September 30, 2015, and 1.54% of total assets on a linked quarter basis. Nonperforming loans were $8.3 million at September 30, 2015, compared to $8.4 million a year earlier and $8.5 million, at June 30, 2016.
Performing restructured loans, that were not included in nonaccrual loans at the end of the third quarter of 2016, were $6.0 million compared to $3.5 million at the end of the third quarter a year ago and $6.1 million on a linked quarter basis. Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans. “We present restructured loans that are performing separately from those that are classified as nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans,” explained Lucido.
Capital
Cortland Bancorp continues to remain well capitalized under all regulatory measures, with capital ratios exceeding the statutory well-capitalized thresholds by an ample margin. For the quarter ended September 30, 2016, capital ratios were as follows:
| Ratio | Cortland Bancorp | Bank | Well-capitalized Minimum | |||||||||
| Tier 1 leverage ratio | 10.62 | % | 9.22 | % | 5.00 | % | ||||||
| Tier 1 risk-based capital ratio | 13.95 | % | 12.12 | % | 8.00 | % | ||||||
| Total risk-based capital ratio | 15.03 | % | 14.51 | % | 10.00 | % | ||||||
About Cortland Bancorp –
Cortland Bancorp is a financial holding company headquartered in Cortland, Ohio. Founded in 1892, the bank subsidiary, The Cortland Savings and Banking Company conducts business through thirteen full-service community banking offices located in the counties of Trumbull, Mahoning, Portage, and Ashtabula in Northeastern Ohio and two financial services centers, in Beachwood and Fairlawn, Ohio. For additional information about Cortland Banks visit http://www.cortland-banks.com.
Forward Looking Statement
This release may contain “forward-looking statements” that are subject to risks and uncertainties. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. All statements, other than statements of historical fact, regarding our financial position, business strategy and management’s plans and objectives for future operations are forward-looking statements. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” and “intend” and words or phrases of similar meaning, as they relate to Cortland Bancorp or management, are intended to help identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe that management’s expectations as reflected in forward-looking statements are reasonable, we cannot assure readers that those expectations will prove to be correct. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include our ability to maintain or expand our market share or net interest margins, and to implement our marketing and growth strategies. Further, actual results may be affected by our ability to compete on price and other factors with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy, as those factors relate to our cost of funds and return on assets. In addition, there are risks inherent in the banking industry relating to collectability of loans and changes in interest rates. Many of these risks, as well as other risks that may have a material adverse impact on our operations and business, are identified in our other filings with the SEC. However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations.
| SELECTED FINANCIAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands of dollars, except for ratios and per share amounts) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unaudited | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sept. 30, 2016 | Sept. 30, 2015 | Var % | June 30, 2016 | Var % | Sept. 30, 2016 | Sept. 30, 2015 | Var % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF OPERATIONS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 5,660 | $ | 5,295 | 7 | % | $ | 5,740 | (1 | )% | $ | 16,793 | $ | 15,718 | 7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | (743 | ) | (649 | ) | 14 | (719 | ) | 3 | (2,154 | ) | (1,928 | ) | 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | 4,917 | 4,646 | 6 | 5,021 | (2 | ) | 14,639 | 13,790 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for loan losses | (50 | ) | (100 | ) | (50 | ) | — | — | (50 | ) | (390 | ) | (87 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| NII after loss provision | 4,867 | 4,546 | 7 | 5,021 | (3 | ) | 14,589 | 13,400 | 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment security gains (losses) | 83 | 47 | 77 | 4 | 1,975 | 411 | 17 | 2,318 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest income | 1,037 | 999 | 4 | 1,161 | (11 | ) | 3,281 | 2,942 | 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense | (4,479 | ) | (3,990 | ) | 12 | (4,734 | ) | (5 | ) | (13,697 | ) | (12,171 | ) | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Income before tax | 1,508 | 1,602 | (6 | ) | 1,452 | 4 | 4,584 | 4,188 | 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal income tax expense | 313 | 375 | (17 | ) | 279 | 12 | 854 | 896 | (5 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | $ | 1,195 | $ | 1,227 | (3 | )% | $ | 1,173 | 2 | % | $ | 3,730 | $ | 3,292 | 13 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| PER COMMON SHARE DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of shares outstanding (000s) | 4,420 | 4,463 | (1 | )% | 4,420 | — | % | 4,420 | 4,463 | (1 | )% | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings per share, basic and diluted | $ | 0.27 | $ | 0.27 | — | $ | 0.27 | — | $ | 0.85 | $ | 0.73 | 16 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends per share | 0.07 | 0.06 | 17 | 0.07 | — | 0.21 | 0.18 | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Market value | 15.61 | 14.31 | 9 | 15.00 | 4 | 15.61 | 14.31 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Book value | 13.65 | 12.82 | 6 | 13.63 | — | 13.65 | 12.82 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Market value to book value | 114.36 | % | 111.62 | % | 2 | 110.05 | % | 4 | 114.36 | % | 111.62 | % | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE SHEET DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets | $ | 621,162 | $ | 570,250 | 9 | % | $ | 606,361 | 2 | % | $ | 621,162 | $ | 570,250 | 9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments securities | 164,138 | 159,809 | 3 | 163,796 | — | 164,138 | 159,809 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans | 395,763 | 359,834 | 10 | 384,058 | 3 | 395,763 | 359,834 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total deposits | 508,452 | 454,547 | 12 | 488,675 | 4 | 508,452 | 454,547 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Borrowings | 41,968 | 49,874 | (16 | ) | 41,942 | — | 41,968 | 49,874 | (16 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders’ equity | 60,334 | 57,235 | 5 | 60,223 | — | 60,334 | 57,235 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AVERAGE BALANCE SHEET DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average assets | $ | 611,465 | $ | 569,424 | 7 | % | $ | 602,749 | 1 | % | $ | 602,439 | $ | 564,139 | 7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Average total loans | 391,553 | 359,662 | 9 | 379,274 | 3 | 384,045 | 352,158 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average total deposits | 497,565 | 453,188 | 10 | 492,432 | 1 | 491,726 | 449,482 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average shareholders’ equity | 60,033 | 56,616 | 6 | 58,878 | 2 | 58,788 | 56,470 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ASSET QUALITY RATIOS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net (charge-offs) recoveries | $ | 5 | $ | (378 | ) | 99 | % | $ | (320 | ) | 98 | % | $ | (329 | ) | $ | (416 | ) | (21 | )% | ||||||||||||||||||||||||||||||||||||||||||||
| Net (charge-offs) recoveries to average loans | 0.01 | % | (0.42 | )% | 98 | (0.34 | )% | (97 | ) | (0.11 | )% | (0.16 | )% | (31 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Non-performing loans as a % of loans | 2.10 | 2.35 | (11 | ) | 2.22 | (5 | ) | 2.10 | 2.35 | (11 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-performing assets as a % of assets | 1.46 | 1.63 | (10 | ) | 1.54 | (5 | ) | 1.46 | 1.63 | (10 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for loan losses as a % of total loans | 1.24 | 1.44 | (14 | ) | 1.27 | (2 | ) | 1.24 | 1.44 | (14 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for loan losses as a % of non-performing loans | 59.22 | 61.31 | (3 | ) | 56.88 | 4 | 59.22 | 61.31 | (3 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FINANCIAL RATIOSSTATISTICS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Return on average equity | 7.96 | % | 8.67 | % | (8 | )% | 7.97 | % | — | % | 8.46 | % | 7.77 | % | 9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Return on average assets | 0.78 | 0.86 | (8 | ) | 0.78 | — | 0.83 | 0.78 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin | 3.63 | 3.67 | (1 | ) | 3.77 | (4 | ) | 3.66 | 3.66 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio | 72.42 | 67.42 | 7 | 73.84 | (2 | ) | 72.49 | 69.86 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average number of employees (FTE) | 168 | 151 | 11 | 162 | 4 | 162 | 151 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CAPITAL RATIOS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tier 1 leverage ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company | 10.62 | % | 10.89 | % | (2 | )% | 10.64 | % | — | % | 10.62 | % | 10.89 | % | (2 | )% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 9.22 | 9.39 | (2 | ) | 9.19 | — | 9.22 | 9.39 | (2 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common equity tier 1 ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company | 12.87 | 13.02 | (1 | ) | 12.74 | 1 | 12.87 | 13.02 | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 12.12 | 12.23 | (1 | ) | 11.95 | 1 | 12.12 | 12.23 | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tier 1 risk-based capital ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company | 13.95 | 14.17 | (2 | ) | 13.81 | 1 | 13.95 | 14.17 | (2 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 12.12 | 12.23 | (1 | ) | 11.95 | 1 | 12.12 | 12.23 | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total risk-based capital ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company | 15.03 | 15.37 | (2 | ) | 14.88 | 1 | 15.03 | 15.37 | (2 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank | 14.51 | 14.82 | (2 | ) | 14.32 | 1 | 14.51 | 14.82 | (2 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONTACT: CONTACT: James M. Gasior, President & CEO (330) 282-4111 The Cereghino Group IR CONTACT: 206-388-5785