CORTLAND, Ohio -- Cortland Bancorp, holding company of Cortland Banks, Tuesday reported fourth-quarter net income of $828,000, or 18 cents a share, compared to $1.04 million, or 23 cents a share the same quarter in 2010.

For the full year, Cortland enjoyed net income of $4.07 million, or 90 cents a share, a 24% increase over 2010 when it recorded $3.27 million, or 72 cents a share.

“The improvement in earnings performance is highlighted by a 17% growth rate in the commercial loan portfolio and a composite loan portfolio growth rate of 9%,” said James Gasior, president and chief executive officer in a prepared statement.

“The loan portfolio growth combined with additional balance sheet strategies orchestrated by management produced an increase in net interest income of $873,000 from the previous year-end,” he continued.

“Earnings have also been enhanced through the effective management of overhead costs which resulted in a peer comparable efficiency ratio of 70%. This was accomplished with the startup of the new mortgage banking unit.”

Net interest income, which Gasior said “provides the core earnings base for the company,” was $4.06 million in the fourth quarter, 3.6% ahead of the $3.92 million recorded in the same period a year ago.

“The company benefited from increasing balances in the loan portfolio yielding 5.73% in lieu of allocating funds in the investment portfolio earning 3.17%,” Gasior explained.

And despite a low-interest-rate environment, Cortland saw deposits increased 8% over 2010, the CEO pointed out, Deposits stood at $422.77 million at Dec. 31; they were $391.51 a year earlier.

Credit quality remains a strength at Cortland Banks as reflected in its low rate of charge-offs – 0.49% of average loans in 2011, 0.31% in 2010. Its asset quality measures are among the best in the United States among banks of a similar size.

Cortland saw its assets grow to $519.83 million in 2011 compared to $500,27 million at the end of 2010.

Net charge off for loans was $324,000 fourth quarter for a net loan figure of $286.04 million at Dec. 31. For the full year, net charge offs were $639,000. In 2010, fourth-quarter net charge-offs were $185,000 and full-year $441,000 on a net loan figure of $391.51 million.

The company’s allowance for loan losses ($324,000 was added in the fourth quarter for a total in 2011 of $1.12 million), covers 86% of nonaccrual loans at Dec. 31, it said.

The $1.12 million for 2011 is more than double the $505,000 set aside during 2010.

Nonperforming loans – those 90 days and more past due – were $5.2 million at Dec. 31, of 1.78% of total loans, up from the $3.9 million recorded at Dec. 31, 2010. “Included in those loans,” Cortland noted, “is a single loan of $1 million fully secured by collateral for which no loss is expected to be incurred.”

Said Gasior, “The company stayed ahead of the game by aggressively setting aside reserves for future losses. …The company was able to do this and still achieve improved earnings results.”

Performance ratios for the quarters ended Dec. 31 and Dec. 31, 2010; and full year 2011 and 2010.

Return on average assets, 0.67%, 0.86; 0.82%, 0.67%.
Return on average equity, 7.38%, 10.45%; 9.13%, 8.29%.
Net interest margin, 3.64%, 3.67%; 3.72%, 3.59%.
Efficiency ratio, 72.11%, 67.26%; 69.98%, 67.13%.

Fourth-quarter noninterest expense -- salaries and benefits, rents, Federal Deposit Insurance Corp. premiums, maintaining repossessed real estate – was $3.51 million and includes a $200,000 charge associated with the startup of its mortgage banking unit, CSB Mortgage Co. Fourth-quarter 2010 noninterest expense was $3.21 million. For full year 2011, the figure was $13.48 million vis-à-vis $12.44 million in 2010.

Shares of Cortland Bancorp closed at $7.05 Tuesday, down 16 cents from Monday’s close, on a volume of 2,284.

Cortland Banks has 14 full-service community offices in Trumbull, Mahoning, Ashtabula, Portage and Geauga counties in northeastern Ohio.