Cortland Bancorp Trumpets Diversity at Annual Meeting
VIENNA, Ohio – Cortland Bancorp enjoyed net income of $2.9 million during 2012, as the company continues to diversify its services, grow its loan portfolio and expand its footprint across Ohio, its president and CEO, James M. Gasior, told shareholders Tuesday during the company's annual meeting.
Were it not for an impairment charge of $1.9 million during the fourth quarter, net income would have been even better.
"I'd be more concerned if this were a trend and an asset quality issue," Gasior said after the meeting. "This really was an isolated situation. Even with that, we've substantially performed at or above our peer levels. So, we've done pretty well."
Cortland opted to take the $1.9 million charge because a customer experienced financial difficulties that made it unlikely a loan would be repaid.
Excluding the impairment charge and associated provisions for loan losses, the company's net income would have been $4.1 million for 2012, said the chief financial officer, David Lucido, as he recapped the financial performance.
In 2011, Cortland reported net income of $4.07 million.
The one-bank holding company finished 2012 with $582 million in assets, up from $520 million at Dec. 31, 2011, the CFO reported. As of last Dec. 31, Cortland Banks had grown to 179 employees from 165 a year earlier, and increased its share value by 42% to $9.70 from $6.80 at Dec. 31, 2011.
The company is also "well capitalized" per regulatory standards, Lucido added. Cortland's capital adequacy ratio stands at 14.1%: regulators deem 10% as the minimum required for an institution to be considered well-capitalized. For Tier 1 capital, regulators use a minimum of 6%, and Cortland stands at 13.1%.
Net interest income climbed to $16.94 million during the year versus the $16.37 million reported a year earlier, Lucido said. "That's a pretty difficult feat to achieve in this unprecedented, extended low-interest-rate environment. A lot of that's been achieved because of increasing our loan balances."
Lucido explained that shifting funds from Cortland's securities portfolio to its loan portfolio helped increase the company's net interest income. "Shifting those funds into loans versus securities helped improve our net interest income by $664,000 in 2012," he said, noting the company's loan portfolio grew 9.7%.
Although securities carry less risk, loans provide a 2.4% greater return on average, Lucido added.
Deposits stood at $476.9 million in 2012, up from $422.7 million in 2011 and $391.5 million in 2010, according to Cortland's annual report. Total loans stood at $317.2 million, compared to $298 million in 2011 and $265.1 million in 2010.
Also helping Cortland's bottom line last year was the company's attention to its mortgage lending business, Lucido said. Noninterest income of $1.3 million, he shared, was nearly double that recorded in 2011.
"We attribute that to our mortgage banking operations," Lucido said, "as we continue to build that unit and shift gears into the retail arena."
Cortland's mortgage subsidiary, CSB Mortgage Co. Inc., is an example of how the company has used diversification to maneuver through very difficult terrain over the last three years, Gasior said.
Although the separate mortgage business was conceived in 2011, the company had to build up a management team before CSB was launched, the CEO said. "We have not even had a full year in the retail mortgage retail and wholesale operations," he reported.
Thus far, the response is "very good" – mostly from the still-robust refinancing market, Gasior noted. "We brought over a couple people who have been in the area for a long time. They've established relationships and had no problem working with Cortland Bank," he said. "They had a lot of confidence."
More important, it places Cortland in a strong position to gain share once interest rates rise and the refinancing market transitions to a more real estate purchase/build market, he noted.
Cortland recently opened a mortgage origination office in Canfield, and has plans to expand into the Dayton, Cleveland and Columbus markets, Gasior said. "The plan is to deviate outside of our market area and go into different parts of the state and bring in loan originators in those areas."
In business before shareholders, they re-elected Gasior, Richard B. Thompson and Joseph P. Langhenry to three-year terms as directors.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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