VIENNA TOWNSHIP, Ohio -- Because of circumstances beyond its control, Cortland Bancorp recessed its annual meeting Tuesday and will reschedule.
Its transfer agent never forwarded the results of the shareholders’ votes -- a highly unusual circumstance, CEO and President James Gasior informed shareholders, employees and guests at the Avalon Country Club at Squaw Creek. Cortland’s repeated efforts last week and Tuesday morning to reach the transfer agent met with no response. “We have not been able to validate the vote totals,” Gasior announced.
On the agenda were the re-election of four directors to three-year terms, the approval of an advisory vote on the compensation of the executive officers of the bank holding company, a measure to allow the expansion of the board of directors to as many as 15 from 11, and the appointment of S.R. Snodgrass P.C. as independent auditor for the fiscal year ending Dec. 31.
On the performance of Cortland Banks, the sole subsidiary of the corporation, Gasior and the chief financial officer, David J. Lucido, noted how the company has persevered in an environment of low interest rates and grown.
Among Cortland Banks’ accomplishments:
- Core earnings were $3.5 million in 2013 compared to $2.8 million in 2012, an increase of 25% because less was set aside to cover loan losses.
- Earnings per share were 39 cents and would have been 68 cents had the Volcker Rule, part of the Dodd-Frank Act, not forced banks to sell its collateralized debt obligations. Sale of the CDOs “in an illiquid market,” as Gasior described it, forced the bank to recognize a $1.9 million impairment. Had the CDOs been held to maturity, Cortland Banks would have broken even.
“Our credit quality remained exceptional throughout 2013 and continues to improve,” Gasior told shareholders. “We have the cleanest balance sheet we’ve had in the last five years.”
The balance sheet shows an upward trend from 2009 to 2013 in total net loans, total deposits and total assets. Investors seem to be aware of the improved performance of Cortland Bancorp; the price of its common shares has risen 16% since Jan. 1 to the neighborhood of $12.50, where it opened last Friday. It opened at $12.35 Tuesday and had fallen to $12.05 at 4 p.m.
The improvement in credit quality reflects “the gradual improvement in the regional economy,” Cortland Bancorp says in its Form 10-K submitted to the U.S. Securities and Exchange Commission. Nonaccrual loans fell to $1.9 million at Dec. 31, or 0.56% of loans.
Gasior cited “minuscule net charge-offs” over the last five years, 0.25% of all loans -- $711,000 or 0.23% for 2013 -- and that the allowance for loan losses covers 193% of problem loans.
Moreover, loan growth was 9.3% in 2011, 9.7% in 2012 and 9% last year, he related, or just a hair under 31% for those three years. Commercial and industrial landing led the way.
Asked during the question-and-answer period whether that 9% can be sustained over the next three years, Gasior declined to speculate but noted it was 5% for the first quarter of this year. There is “heightened competition” for the good credits in the markets Cortland Banks serves, the CEO said, and assured shareholders, “We won’t do growth for the sake of growth. We will keep our credit quality.”
Capital adequacy is twice what the regulators deem “well-capitalized” for Tier 1 risk-based ratio and 1½ time that for the total risk-based capital ratio, he said.
The low interest rate environment hinders all banks ability to improve their efficiency ratios -- how much they spend to earn a dollar of revenue -- but Cortland succeeded in bringing its to below 70%, Gasior reported.
The net interest margin improved quarter by quarter in 2013: 3.27% at March 31, 3.34% at June 30, 3.42% at Sept. 30 and 3.63% at Dec. 31. It was 3.7% the first quarter of this year, “well above the industry average,” Gasior added.
“We’re off to a great start in 2014,” the CEO said. “We do have reason to be optimistic.”
Copyright 2014 The Business Journal, Youngstown, Ohio.
CLICK HERE to subscribe to our twice-monthly print edition and to our free daily email headlines.