GlobeNewswire Inc | Apr 27, 2021 09:00AM EDT

April 27, 2021

Net income more than doubles year over year with continued progress projected

Board authorizes $0.15 per share dividend, a 7% increase over prior quarterly dividend

CORTLAND, Ohio, April 27, 2021 (GLOBE NEWSWIRE) -- Cortland Bancorp (NASDAQ: CLDB) announced its first quarter 2021 financial results. Net income for the three months ending March 31, 2021 was $2.8 million, or $0.66 per share, which was twice the income level of $1.4 million, or $0.32 per share, for the first quarter of 2020 and equal to the $2.8 million, or $0.67 per share, for the fourth quarter of 2020.

The return on average assets ratio was 1.38% for the Company for this first quarter, while the return on average equity ratio was 13.56%. These returns were supported by 8% year-over-year loan growth and 15% deposit growth. James Gasior, President and CEO stated, The Banks participation in the first round of the Paycheck Protection Program (PPP) as part of the governments CARES Act contributed to our financial performance but, more importantly, helped more than 400 customers and saved nearly 8,000 local jobs. We are now participating in the second round of PPP loans and expect to assist more than 200 customers. At the same time, the Banks commercial loan pipeline is healthier than in recent quarters. With this volume of loan growth forthcoming, profitability enhancement is promising.

The Banks performance was also aided by the continued high volume of mortgage originations and sales, adding gains of $800,000 to non-interest income. The Company has benefited from the substantial reduction in interest rates nationally and the ongoing improvement in COVID-related conditions, continued Gasior. With interest rates at all-time lows, the reduction in the cost of funds has outweighed the lower yield on assets.

Gasior noted, Cost savings in marketing, as well as a reduction in travel, education and training expenses were part of our prudent cost containment measures that contributed to our profitability.Cortland Bancorp remained well capitalized with total risk-based capital to risk-weighted assets of 15.85% and tangible equity to tangible assets of 10.24%.

Performance was also aided year over year due to the increase in the provision for credit losses directly attributable to the COVID-19 pandemic in the first quarter 2020. Specifically, increases in the allowance for credit losses were recognized throughout 2020 in the qualitative factor allocations for specific concentrations of credit in various loan portfolio segments as a result of economic conditions. Elevated provisions occurred in each of the first three quarters of 2020 commensurate with COVID-related loan modifications. With substantially all of those loans now in full payment status, coupled with a reduction in nonperforming loans, no provision was necessary in the fourth quarter of 2020 or in this current quarter.

Thanks to additional government programs launched recently, businesses are able to tap those resources to make it through what is hopefully the tail end of this pandemic-stressed economy, said Gasior.

Outlook

Gasior characterized the balance of 2021 as having slow, but steady, progress flowing from anticipated improving economic and pandemic recoveries. Asset quality is stabilizing and natural expense inflation is being contained against a backdrop of current Federal Reserve guidance, said Gasior. In addition, stimulus payments provided by the government, as well as the PPP funds for our borrowers, have significantly contributed to deposit growth. Plus, in this pandemic-laden environment, depositors have increased their rates of saving.

As a result of the Companys continuing strong performance, its Board has authorized a dividend of $0.15 per share, an increase of 7% over the prior quarterly dividend. Gasior noted that the Board remains focused on its continuing strong total shareholder return track record in buildinglong-term shareholder value.

First Quarter 2021 Highlights (at or for the period ended March 31, 2021)

Net income of $2.8 million, or $.66 per share, for the first quarter of 2021 represented more than a 100% improvement on the $1.4 million, or $.32 per share, reported for the first quarter of 2020, and is equivalent to income for the fourth quarter of 2020. Likewise, pre-tax, pre-provision income for the first quarter 2021 was 49% higher than in the same quarter of 2020 and approximates the results of the previous quarter.

Even with interest margin under pressure, the Company managed a notable increase of $693,000 in net interest income for the first quarter ended March 31, 2021 versus the first quarter of 2020, as the cost of funds declined more than asset yields. Asset yields in the quarter were enhanced by PPP loan fee recognition of more than $400,000, as the ongoing forgiveness process accelerated the recognition of these fees. Also benefiting from the lower rate environment, the mortgage banking operation recognized gains of $800,000 on loan originations of $28.2 million for the first quarter of 2021 versus gains of $596,000 on loan originations of $15.7 million for the same period in 2020. Gains on mortgage originations accounted for 9% of all revenues for the first quarter compared to 7% of all revenues in the same quarter of 2020. The originations were comprised of both refinances of existing mortgage loans and new purchases of homes.

The efficiency ratio for the Company was 59.80% for the quarter versus 68.54% for the same period in 2020.

The return on average equity ratio for the Company was 13.56% for the quarter versus 6.89% for the same quarter in 2020.

Balance Sheet

Total assets were $792 million at March 31, 2021, compared to $821 million at December 31, 2020 and $713 million at March 31, 2020.

Total loans increased 8% year over year, with loans granted under the PPP accounting for a substantial portion of loan growth. Cortland assisted 419 customers in obtaining funds under this government program, providing payroll and operating expense relief worth $56.4 million in 2020. With nearly half of these loans forgiven by the Small Business Administration, the Company has begun issuing PPP loans in the second-round process.

Total deposits grew by $87 million, or 15%, to $680 million for the first quarter of 2021 from $593 million in the first quarter of 2020. Noninterest-bearing deposits accounted for 32% of total deposits, while certificates of deposits were 12% of the deposit mix.

Asset Quality

No provision for loan losses was recorded for the three months ended March 31, 2021 versus $600,000 a year ago. The decrease is attributable to substantial provisions throughout 2020, giving recognition to economic disruption and uncertainty associated with COVID-19.

Nonperforming loans were $7.9 million, compared to $8.2 million a year earlier and $7.6 million at December 31, 2020. The ratio of nonperforming assets to total assets at quarter end was .99%. This reflects an improvement from the 1.15% reported a year ago. The Companys ratio of allowance for loan losses to nonperforming loans was 76.43% at March 31, 2021.With the loan portfolio of predominantly commercial real estate at low loan-to-value ratios, collateral coverage weighs in as a significant risk mitigation factor in evaluating credit exposure.

Performing restructured loans that are included in nonperforming loans at the end of the quarter were $5.6 million, compared to $6.1 million a year ago and $5.7 million on a linked quarter basis.

The Bank had received requests to modify 127 loans aggregating $123.7 million through April of 2020. Most of the requests involved the deferral of principal and interest payments and/or the extension of the maturity dates. As of March 31, 2021, only 6 loans aggregating $15.6 million remain in deferral.

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 March 31, 2021, capital ratios were as follows:

Ratio Cortland Bancorp Bank Well-capitalized MinimumTier 1 leverage ratio 10.45% 9.41% 5.00%Tier 1 risk-based capital 14.77% 13.31% 8.00%ratioTotal risk-based capital ratio 15.85% 15.48% 10.00%

CERTAIN NON-GAAP MEASURES

Certain financial information has been determined by methods other than Generally Accepted Accounting Standards (GAAP). Specifically, certain financial measures are based on core earnings rather than net income. Pre-tax, pre-provision income excludes the provision for loan losses and the income tax provision. Such information may be useful to both investors and management and can aid them in understanding the Companys current performance trends and financial condition. Pre-tax, pre-provision income is a supplemental tool for analysis and not a substitute for GAAPnet income. Reconciliation from GAAPnet income to the non-GAAPmeasure of pre-tax, pre-provision income is referenced as part of managements discussion and analysis of quarterly and year-to-date financial results of operations.

The following is a reconciliation between pre-tax, pre-provision income and earnings under GAAP:

IN 000s THREE MONTHS ENDED Mar 31, 2021 Mar 31, 2020 Dec 31, 2020GAAP net income $ 2,766 $ 1,371 $ 2,798Provision for loan losses - 600 -Federal income tax expense 481 206 536Pre-tax, pre-provision income $ 3,247 $ 2,177 $ 3,334

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 13 full-service community banking offices located in the counties of Trumbull, Mahoning, Portage, Summit, and Cuyahoga in Northeastern Ohio and a financial service center in Fairlawn, Ohio. For additional information about Cortland Bank visit http://www.cortlandbank.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 managements views only as of the date hereof. All statements, other than statements of historical fact, regarding our financial position, business strategy and managements 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 managements 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.

Source: Cortland Bancorp

SELECTED FINANCIAL DATA(In thousands of dollars, except for ratios and per share amounts)Unaudited Three Months Ended Mar. 31, Mar. 31, Var % Dec. 31, Var % 2021 2020 2020SUMMARY OF OPERATIONS Interest income $ 6,932 $ 6,930 ? % $ 6,873 1 %Interest expense (534 ) (1,225 ) (56 ) (712 ) (25 )Net interest income 6,398 5,705 12 6,161 4 Provision for loan losses ? (600 ) (100 ) ? ? NII after loss provision 6,398 5,105 25 6,161 4 Investment security gains 71 ? ? 122 (42 )Non-interest income 1,713 1,452 18 2,246 (24 )Non-interest expense (4,935 ) (4,980 ) (1 ) (5,195 ) (5 )Income before tax 3,247 1,577 106 3,334 (3 )Federal income tax expense 481 206 133 536 (10 )Net income $ 2,766 $ 1,371 102 % $ 2,798 (1 ) % PER COMMON SHARE DATA Number of shares outstanding 4,213 4,228 ? % 4,223 ? %(000s)Earnings per share, basic and $ 0.66 $ 0.32 106 $ 0.67 (1 )dilutedDividends per share 0.19 0.19 ? 0.14 36 Market value 22.08 13.50 64 18.61 19 Book value 19.25 17.32 11 19.18 0 Market value to book value 114.70 % 77.94 % 47 97.02 % 18 BALANCE SHEET DATA Assets $ 791,705 $ 712,650 11 % $ 821,305 (4 ) %Investments securities 170,174 133,638 27 170,906 ? Total loans 518,618 482,239 8 556,760 (7 )Total deposits 680,311 593,256 15 700,510 (3 )Borrowings 16,948 30,830 (45 ) 24,643 (31 )Shareholders? equity 81,096 73,209 11 81,005 0 AVERAGE BALANCE SHEET DATA Average assets $ 799,967 $ 713,808 12 % $ 801,923 ? %Average total loans 535,597 502,398 7 541,319 (1 )Average total deposits 679,887 593,163 15 678,781 ? Average shareholders' equity 81,596 79,593 3 78,733 4 ASSET QUALITY RATIOS # Net recoveries (charge-offs) $ 1 $ 22 (95 ) $ (26 ) (104 ) % %Net recoveries (charge-offs) ? % 0.02 % (100 ) (0.02 ) (100 )to average loans %Non-performing loans as a % 1.52 1.71 (11 ) 1.37 11 of loansNon-performing assets as a % 0.99 1.15 (14 ) 0.93 7 of assetsAllowance for loan losses as 1.16 1.05 10 1.08 6 a % of total loansAllowance for loan losses as 76.43 61.81 24 78.91 (3 )a % of non-performing loans FINANCIAL RATIOS\STATISTICS Net interest margin 3.58 % 3.56 % 1 % 3.40 % 5 %Return on average equity - 13.56 6.89 97 14.22 (5 )Company- Bank 14.70 8.68 69 15.97 (8 )Return on average assets - 1.38 0.77 80 1.40 (1 )Company- Bank 1.44 0.93 55 1.50 (4 )Efficiency ratio - Company 59.80 68.54 (13 ) 60.79 (2 )- Bank 57.89 63.66 (9 ) 57.75 ? CAPITAL RATIOS Tier 1 leverage ratio - 10.45 % 10.65 % (2 ) 10.20 % 2 %Company %- Bank 9.41 9.49 (1 ) 9.18 3 Common equity tier 1 ratio - 13.88 12.31 13 13.15 6 Company- Bank 13.31 11.75 13 12.62 5 Tier 1 risk-based capital 14.77 13.18 12 14.01 5 ratio - Company- Bank 13.31 11.75 13 12.62 5 Total risk-based capital 15.85 14.08 13 15.07 5 ratio - Company- Bank 15.48 13.70 13 14.72 5

CONTACT:James M. Gasior President & CEO(330) 282-4111