CORTLAND - Cortland Bancorp's third-quarter earnings dipped to about half the net income reported this time last year, the bank reported last week.
Net income for the third quarter ended Sept. 30 was reported at $617,000, or 14 cents per share, compared to net income of $1.3 million for the same three-month period a year ago, or 28 cents per share. Year-to-date net income for the first nine months of the year was $2.2 million, about 50 cents per share, versus $3.4 million, or 75 cents per share, for the same period in 2012.
Bank officials blamed in large part increases in interest rates that drove down mortgage banking revenues by nearly 90 percent to $109,000 in the third quarter, compared to $1 million the same period a year ago. The driver of mortgage banking revenues is mortgage application volume, which declined to $42.7 million in the third quarter, 2013 compared to $123.9 million for the similar period in 2012, the company said in a prepared statement accompanying its quarterly earnings report.
"The increase in mortgage interest rates that occurred in the third quarter had a dramatic effect on mortgage volume," said Cortland Bancorp President and CEO James Gasior.
Mortgage banking revenues, by comparison, were $688,000 and $638,000, respectively, on application volume of $82.9 million and $94.2 million.
In response to the drastic dip, the bank on Sept. 13, exited the wholesale arena and limited residential mortgage lending operations to the retail banking footprint saying mortgage banking remains an important component of both the customer and shareholder value initiative, but the extraordinary mortgage lending opportunities of prior years are not expected to return.
Third quarter expenses include $249,000 in costs to exit, including severance and facility-related write-offs. "By rightsizing the residential mortgage lending operation, the remaining infrastructure is now commensurate with the expected in-market volume."