Cortland Reports Q1 Net Income of $830,000
CORTLAND, Ohio -- Cortland Bancorp, holding company of Cortland Banks, Tuesday reported net income of $830,000, or 18 cents per share for the quarter ended March 31, compared to net income of $1.2 million for the same three months a year ago, or 26 cents per share.
Cortland also reported its loan portfolio grew more than $20 million over the last year, standing at $297.5 million at March 31 compared to $277.4 million a year ago, a 7.2% increase.
Total assets of $546.5 million at March 31 reflect an increase of 7.5% from year-ago assets of $508.4 million with loans providing the core growth, the holding company said.
In a prepared statement, the president and CEO, James Gasior, said, “As anticipated, interest rates continue to persist at historical lows, resulting in a continued compression of our net interest margin and a parallel decrease in net income.”
With these continuing low rates, Gasior said, Cortland has been following a strategy of shifting earning assets from investment securities to the loan portfolio to help maintain a relatively level interest earnings stream. Interest and fees on loans for the first quarter were $4.06 million, a $92,000 improvement from the $3.97 million in interest and fees on loans recorded for the same period a year ago.
“With no upward movement in interest rates over the last several years and minimal improvement, if any, expected in the foreseeable future, a significant source of revenues for banks continues to dry out,” Gasior noted. “Recognizing a need to diversify revenue through additional sources of noninterest fee income, the company’s investment in fee-based businesses designed to generate revenues to complement sources of interest income from core operations has begun to produce the desired results.”
Total noninterest income improved to $1.31 million for the quarter ended March 31 from $695,000 a year ago, the company reported.
“Continued expansion of the mortgage banking and wealth management businesses is expected to provide additional revenue opportunities, further compensating for compression in the net interest margins,” Gasior stated.
Net interest income was $4.1 million, a declineof $107,000, or 2.5% from the same quarter a year ago. Absent the loan growth on a linked-quarter basis, net interest income fell $245,000, or 5.6%. Although the cost of funds has continued to decline, the decrease in interest expense was just short of absorbing the reduction in interest income, the bank said.
Net interest margin on a tax equivalent basis was 3.29% versus 3.44% the quarter ended Dec. 31 and 3.67% a year ago.
Cortland has maintained its asset quality, the bank said. Nonaccrual loans declined to $2.8 million at March 31, or 0.93% of loans, versus $3.0 million or 0.94% of loans at Dec. 31, and Cortland’s allowance for loan losses covers 140% of nonaccrual loans at March 31. Annualized net loan charge-offs were 0.17% of average loans in the first quarter and 0.27% for the first quarter of 2012. The allowance for loan loss to total loans ratio was 1.31% at March 31 versus 1.13% a year ago.
With the addition of substantial mortgage banking gains, the company saw continuing improve in noninterest income (see as fees, trust income). Noninterest income was $611,000 higher than the first quarter of 2012 and $422,000 higher on a linked quarter basis.
The wholesale mortgage unit, CSB Mortgage Co., had mortgage banking gains of $688,000 versus $154,000 in the same quarter of 2012. Fourth-quarter 2012 gains were $335,000.
Noninterest expense (such as salaries, benefits, rents, Federal Deposit Insurance Corp. premiums) increased 8.0% in the first quarter versus 2012, reflecting the additional personnel and other expenses needed to operate the mortgage banking operation. Noninterest expenses increased 2.28% over the previous quarter.
Gasior commented, “As the mortgage operation has transitioned from a startup unit in 2011 to an evolving, growing business unit in 2013, CSB Mortgage Co. has made a positive contribution to the company’s net income on just over $244 million of originations in fiscal 2012 and $102 million in the first quarter of 2013.”
Cortland Bancorp is a bank holding company whose primary subsidiary is Cortland Banks, which conducts business through 13 full-service community banking offices in Trumbull, Mahoning, Portage, Geauga and Ashtabula counties.
Published by The Business Journal, Youngstown, Ohio.
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