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News Article | January 30, 2017
Site: globenewswire.com

SIOUX FALLS, S.D., Jan. 30, 2017 (GLOBE NEWSWIRE) -- Meta Financial Group, Inc.® (Nasdaq:CASH) (“MFG,” “Meta” or the “Company”) Financial Highlights for the 2017 fiscal first quarter ended December 31, 2016 "We are excited that we closed two separate FinTech acquisitions during the first quarter of fiscal 2017," said Chairman and CEO J. Tyler Haahr. "In early November, we acquired EPS Financial and have already seen positive effects from this transaction. Then in mid-December, we closed the acquisition with SCS. We welcome EPS President Clark Gill and the entire EPS team along with SCS CEO Brent Turner and the SCS team to the Meta family. We believe that these transactions solidify Meta as a leader in the tax payments industry. "Much to our satisfaction, we didn't stop with the EPS and SCS acquisitions during the quarter, as we entered into agreements with both H&R Block and Jackson Hewitt. Meta will provide underwriting services, servicing and funding for interest-free refund advance loans for H&R Block customers throughout the 2017 tax season. Our agreement with Jackson Hewitt includes underwriting, servicing and originating Express Refund Advances to Jackson Hewitt customers during the upcoming tax season. Our collective tax businesses will see a significantly increased expense burden in the first and fourth quarters of fiscal year 2017, with approximately 85% to 90% of tax-related income expected to come in during the second quarter. The levels of income and expenses during the first quarter of fiscal 2017 were in line with our expectations. While it is too early in the tax season to accurately predict volume levels, we believe that our infrastructure and funding capacity is well prepared for the upcoming peak period. Meta is excited about these business developments and we are looking forward to continuing Meta's success into 2017 and beyond.” Total revenue for the fiscal 2017 first quarter was $39.2 million, compared to $34.4 million for the same quarter in 2016, an increase of $4.8 million, or 14%, primarily due to growth in card fee income, income from tax-exempt securities (included in other investment securities), and interest from loans, which was partially offset, as expected, by delayed securities purchases and higher cash balances. The Company recorded net income of $1.2 million, or $0.14 per diluted share, for the three months ended December 31, 2016, compared to net income of $4.1 million, or $0.49 per diluted share, for the three months ended December 31, 2015. The decrease in net income was due to an increase of $6.7 million in non-interest expense, partially offset by increases of $2.3 million in net interest income and $2.5 million in non-interest income. The 2017 fiscal first quarter pre-tax results included $1.5 million of amortization of intangibles and $1.0 million of acquisition related expenses. In preparation for the upcoming tax season, 2017 first quarter pre-tax results also included $1.2 million in securities losses, and $1.0 million in direct tax season startup expenses, which consisted primarily of legal and wholesale deposit interest expense. In addition, pre-tax results included $1.2 million in named executive officer ("NEO") non-cash stock related compensation associated with stock awards granted in connection with the Company's three highest paid executives signing long-term employment agreements to solidify their long term commitment to the Company. These stock awards vest over eight years. We expect non-cash stock related compensation associated with these agreements to be $8.0 million in fiscal year 2017 and $5.1 million in fiscal year 2018. The 2017 fiscal first quarter results highlight the increased seasonality of the Company's revenue due to the addition of the aforementioned tax-related acquisitions and agreements. Our tax divisions are expected to continue to generate the vast majority of their revenues in the Company's fiscal second quarter, with some additional revenues in the third quarter, while most expenses are spread throughout the year with some additional elevated expenses in the December and March quarters. Net interest income for the fiscal 2017 first quarter was $19.8 million, up $2.3 million, or 13%, from the same quarter in 2016, primarily due to increases in volume and rate in tax exempt and asset backed investments and continued sizable loan growth funded by non-interest bearing prepaid deposit growth.  Additionally, the overall increase was driven by a better mix and higher percentage of loans and higher yielding investments primarily in high credit quality tax-exempt municipal bonds.  While the Company carried a higher than typical cash balance due to testing and implementation of new funding programs to support the interest-free refund advance loans, overall net interest income was not materially affected as the funding costs were similar to the rate earned on excess cash balances. However, due to the student loan portfolio purchase and tax-related lending, the Company deferred significant securities purchases that would have historically taken place in the August to December months. As a result of the deferral of securities purchases, net interest income was negatively affected, as compared to the comparable prior fiscal year period. Given the significant, recent increase in interest rates, we expect these deferred purchases, which the Company anticipates will take place in February and March, will have significantly higher yields, providing a strong positive effect on earnings going forward. Net Interest Margin ("NIM") decreased from 3.21% in the fiscal 2016 first quarter to 2.90% in the 2017 first quarter. Excluding the subordinated debt issuance in 2016, NIM would have been 13 basis points higher for the quarter. As mentioned above, NIM during the 2017 first quarter was adversely impacted as the Company carried a higher than typical cash balance due to testing and implementation of new funding programs to support the interest-free tax refund advance lending program.  Removing the excess cash and its corresponding funding cost, the Company estimates NIM would have been an additional approximate 13-17 basis points higher. While the subordinated debt issuance in 2016 increased the cost of funds at the Company level, MetaBank's cost of funds remained at levels much lower than the overall Company cost of funds, though somewhat higher than historical levels due to preparation for the new tax season funding programs.  The overall tax equivalent yield (“TEY”) on average earning asset yields decreased by 9 basis points when comparing the fiscal 2017 first quarter to the 2016 first quarter, primarily due to the aforementioned higher cash balance.  Adjusting for a more normalized cash balance, the Company estimates the TEY earning asset yield would have been between 15 to 18 basis points higher. We believe that the Company's expanded portfolio of floating rate assets provides a runway for higher NIM levels should short-term interest rates continue to rise. The Company also seeks to remain diligent and disciplined when evaluating loan pool deal flow to continue to optimize the deployment of our national, non-interest bearing deposit base. We anticipate that many of these loan pools could add immediate earnings accretion with acceptable risk parameters, as we believe to be the case with the recent student loan portfolio purchase. In that respect, while the addition of the student loan portfolio did not materially affect NIM or the TEY on average earning assets in the current quarter as the portfolio purchase was completed near the end of the quarter, the impact should be positive going forward. The fiscal 2017 first quarter TEY on the securities portfolio increased by two basis points compared to the comparable prior year fiscal quarter primarily due to a shifting mix in the investment portfolio with new investments in overall higher yielding investment securities rather than mortgage-backed securities ("MBS").  We also expect margins to increase in 2017 with slower premium amortization on the MBS portfolio due to recent higher rates. The Company’s average interest-earning assets for the fiscal 2017 first quarter grew by $719.8 million, or 29%, to $3.22 billion, from the same quarter in 2016, primarily from growth in tax exempt investment securities, loan portfolios, and cash and fed funds sold of $230.3 million, $147.9 million, and $140.8 million, respectively. Overall, the cost of funds for all deposits and borrowings averaged 0.36% during the fiscal 2017 first quarter, compared to 0.12% for the 2016 first quarter, primarily due to the issuance of the Company's subordinated debt in 2016 and the testing and implementation of additional funding programs throughout the quarter. Notwithstanding this increase, the Company believes that its growing, low-cost deposit base gives it a distinct and significant competitive advantage over most banks, and even more so if interest rates rise, because the Company anticipates that its cost of funds will likely remain relatively low, increasing less than at many other banks. Average earning assets for the three months ended December 31, 2016 increased 29% from the comparable prior year period, while interest-bearing liabilities increased by 61% related to the wholesale deposits described above. The TEY of MBS and other investments was 2.92% for the three months ended December 31, 2016, and 2.90% for the same period in 2015, and is expected to increase further early in 2017 because of the recent increase in rates. Fiscal 2017 first quarter non-interest income of $19.3 million increased $2.5 million, or 15%, from $16.8 million in the same quarter of 2016, primarily due to an increase in card fee income of $3.2 million, or 21%, mainly from new and existing business partners and sales promotions from one of our largest business partners. This increase was partially offset by a loss on the sale of securities of $1.2 million. Non-interest expense increased $6.7 million, or 22%, to $36.8 million for the 2017 fiscal first quarter, compared to the same quarter in 2016.  Between these quarters, compensation expense increased $3.2 million, legal and consulting expense increased $1.6 million due primarily to the aforementioned acquisitions and loan funding transactions, other expense increased $0.6 million, occupancy and equipment expense increased $0.6 million and amortization expense increased $0.3 million, primarily due to the recent acquisitions. The increase in compensation was primarily due to the EPS and SCS acquisitions, non-cash stock related compensation associated with three NEOs signing long-term employment agreements, and additional staffing to support the Company’s growth initiatives. We expect the growth rate in compensation expense to decrease during the remainder of 2017 as staffing levels grow more modestly. Income tax expense for the fiscal 2017 first quarter was $0.3 million, or an effective tax rate of 21.6%, compared to a tax benefit of $0.5 million, or an effective tax rate of (12.9)%, for the 2016 first quarter. The increase in the effective tax rate is mainly due to increased annual projected taxable earnings for the fiscal 2017 year and the effective tax rate is expected to stay approximately at that level for the remainder of fiscal 2017. Total loans receivable, net of allowance for loan losses, increased $369.9 million, or 50%, from December 31, 2015 to December 31, 2016.  Among lending categories, this included a $138.3 million increase in consumer, $134.0 million of which was due to the student loan portfolio purchase, and a $118.4 million increase, or 37%, in commercial real estate, partially offset by a $7.0 million decrease, or 7%, in total agricultural loans. Premium finance loans increased $68.9 million, or 62%, from December 31, 2015 to December 31, 2016. Retail bank loans increased $158.4 million, or 26%, from December 31, 2015 to December 31, 2016. Excluding the purchased student loan portfolio, total loans receivable, net of allowance for loan losses, were up $236.0 million, or 32%, from December 31, 2015 to December 31, 2016. The Company recorded a provision for loan losses of $0.8 million during the three months ended December 31, 2016, primarily related to loan growth. The Company’s allowance for loan losses was $1.0 million, or 0.1% of total loans, at December 31, 2016, compared to an allowance of $0.8 million, or 0.1% of total loans, at September 30, 2016. MetaBank’s NPAs at December 31, 2016 were $2.3 million, representing 0.05% of total assets, compared to $6.6 million and 0.22% of total assets at December 31, 2015 and $1.2 million and 0.03% at September 30, 2016. Consistent with December 31, 2015 and September 30, 2016, the Payments segment did not include any NPAs at December 31, 2016. Total investment securities and MBS increased by $325.5 million, or 19%, to $2.08 billion at December 31, 2016, as compared to December 31, 2015. This included an increase in investment securities of $312.9 million, primarily from purchases of high credit quality non-bank qualified (“NBQ”) municipal securities and government-related asset-backed securities, and an increase in MBS of $12.6 million as purchases exceeded sales and pay downs. Average TEY on the securities portfolio increased two basis points in the first quarter of fiscal 2017 from the same quarter of 2016.  Overall TEY yields increased by five basis points on non-MBS investment securities over that same time period.  Yields decreased within MBS by 27 basis points in the first quarter of 2017 from the same quarter of 2016 due to the significant downward movement in longer term interest rates in late fiscal 2016 and the time it takes for rate increases late in the calendar year to funnel through the mortgage and refinancing market. The Company anticipates prepayments on its MBS holdings to decrease meaningfully by no later than March 2017, due to the recent increase in longer term rates, thereby slowing premium amortization and increasing yields and income realized from the MBS portfolio. For example, the Company estimates, based on projections provided by the Yield Book software in concert with management assumptions, on its fixed rate MBS portfolio as of December 31, 2016, in the base (Yield Book lifetime projected speeds at current rates) and in a +50 and +100 immediate, parallel shocked interest rate environment, interest earned on its fixed rate MBS securities and reinvested principal at market rates over one year’s time would increase by $3.48 million, $3.98 million and $4.45 million, respectively, from the current, historical three-month CPR income amount. MBS duration extension is also muted with extension expectations near 1.5 years in a +300 immediate, parallel interest rate shocked environment. The focus of the MBS portfolio remains on minimizing prepayment speed volatility by selecting agency MBS with characteristics intended to make the Company’s agency MBS holdings less susceptible to increased prepayment speeds, while still allowing yields to increase if interest rates increase with controlled extension risk. The Company continues to purchase high-quality investments within certain sectors of the municipal market, at what it believes to be attractive yields. Many of these new purchases are tax-exempt and also backed, or collateralized, by Ginnie Mae, Fannie Mae, and Freddie Mac, thereby enhancing credit quality. The Company also has opportunistically and carefully selected certain government related and guaranteed floating rate securities at yields that are expected to enhance the portfolio's projected performance in a rising interest rate environment. The Company continues to execute its investment strategy of primarily purchasing U.S. Government-related securities and U.S. Government-related MBS, as well as AAA and AA rated NBQ municipal bonds; however, the Company is also reviewing opportunities to add other diverse, high-quality securities at attractive relative rates when opportunities arise.  With the Company’s large percentage of non-interest bearing deposits, the TEY for these NBQ bonds is higher than a similar term investment in other investment categories of similar risk and higher than many other banks can realize on the same instruments due to the Company’s current cost of funds and its projected cost of funds if interest rates rise. Total end-of-period deposits increased $1.23 billion, or 51%, to $3.66 billion at December 31, 2016, compared to September 30, 2016. The increase in end-of-period deposits is primarily a result of wholesale deposits executed by the Company during the fiscal 2017 first quarter to prepare for the upcoming tax season and the student loan portfolio purchase. Total wholesale deposits at December 31, 2016 were $927.0 million. Total average deposits for the fiscal 2017 first quarter increased by $712.4 million, or 36%, compared to the same period in 2016; a portion of the growth is directly related to the testing and implementation of new funding programs to support the interest-free refund advance loans. Average non-interest bearing deposits for the 2017 first quarter were up $298.2 million, or 17%, compared to the same period in 2016. The Company experienced some volatility in the growth rate of its Meta Payment Systems (MPS)-related non-interest bearing deposits as a one-time program expires and the timing of new programs begins to accelerate, though long-term growth rates are expected to remain strong. The average balance of total deposits and interest-bearing liabilities was $3.06 billion for the three-month period ended December 31, 2016, compared to $2.38 billion for the same period in fiscal 2016. A portion of this increase was due to the previously mentioned testing and implementation of new funding programs as well as the Company's completion of the public offering of its subordinated notes in August 2016, which are due August 15, 2026. For the fiscal 2017 first quarter, Payments recorded income before tax of $0.7 million, compared to $1.2 million during the same period last year. As expected, our combined tax businesses (Refund Advantage, EPS, and SCS) incurred a pre-tax loss of $4.7 million during the quarter, compared to a loss of $1.6 million during the same quarter of the prior year. Total first quarter 2017 average Payments-generated deposits increased by $280.2 million, or 16%, compared to the same quarter in 2016. The Banking segment recorded income before tax of $5.2 million for the first quarter of fiscal 2017, compared to $3.5 million in the first quarter of 2016. This increase is primarily driven by the increase in interest income of $1.9 million as a result of growth in our loan portfolio. The Company and the Bank remain above the federal regulatory minimum capital requirements to remain classified as well-capitalized institutions. Regulatory capital ratios are stated in the table below. The tables below also include certain non-GAAP financial measures that are used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies.  Management reviews these measures along with other measures of capital as part of its financial analysis. The following table provides certain non-GAAP financial measures used to compute certain of the ratios included in the table above, as well as a reconciliation of such non-GAAP financial measures to the most directly comparable financial measure in accordance with GAAP: (1) Capital ratios were determined using the Basel III capital rules that became effective on January 1, 2015. Basel III revised the definition of capital, increased minimum capital ratios, and introduced a minimum CET1 ratio; those changes are being fully phased in through the end of 2021. The following table provides a reconciliation of tangible common equity used in calculating tangible book value data. Due to the predictable, quarterly cyclicality of MPS deposits in conjunction with tax season business activity, management believes that a six-month capital calculation is a useful metric to monitor the Company’s overall capital management process. As such, the Bank’s six-month average Tier 1 leverage ratio, Common equity Tier 1 capital ratio, Tier 1 capital ratio, and Total qualifying capital ratio as of December 31, 2016 were 9.80%, 21.14%, 21.14%, and 21.58%, respectively. The Company and MetaBank (the “Bank”) may from time to time make written or oral “forward-looking statements,” including statements contained in this press release, the Company’s filings with the Securities and Exchange Commission (“SEC”), the Company’s reports to stockholders, and in other communications by the Company and the Bank, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as “may,” “hope,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” “could,” “future,” or the negative of those terms, or other words of similar meaning or similar expressions. You should carefully read statements that contain these words because they discuss our future expectations or state other “forward-looking” information. These forward-looking statements are based on information currently available to us and assumptions about future events, and include statements with respect to the Company’s beliefs, expectations, estimates, and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company’s control. Such risks, uncertainties and other factors may cause our actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.  Such statements address, among others, the following subjects: the potential benefits of the acquisitions of assets from SCS and EPS, including, but not limited to, whether such acquisitions may increase the Company's growth; future operating results; customer retention; loan and other product demand; important components of the Company's statements of financial condition and operations; growth and expansion; new products and services, such as those offered by the Bank or MPS, a division of the Bank; credit quality and adequacy of reserves; technology; and the Company's employees. The following factors, among others, could cause the Company's financial performance and results of operations to differ materially from the expectations, estimates, and intentions expressed in such forward-looking statements: the risk that the businesses of the Bank, EPS and SCS may not be combined successfully, or any such combination may take longer or be more difficult, time-consuming or costly to accomplish than expected; the risk that sales of EPS and SCS products by the Bank may not be as high as anticipated; the risk that the expected growth opportunities or cost savings from the EPS and SCS acquisitions may not be fully realized or may take longer to realize than expected, that customer losses and business disruption following the EPS and SCS acquisitions, including adverse effects on relationships with former or current employees of EPS and SCS, may be greater than expected; the risk that the Company may incur unanticipated or unknown losses or liabilities in connection with the EPS and SCS acquisitions; the risk that loan production levels and other anticipated benefits related to the recent agreements signed with H&R Block and Jackson Hewitt may not be as much as anticipated, and that the Company may incur unanticipated or unknown risks, losses or liabilities in connection with such transactions; maintaining our executive management team; the strength of the United States' economy, in general, and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”), as well as efforts of the United States Treasury in conjunction with bank regulatory agencies to stimulate the economy and protect the financial system; inflation, interest rate, market, and monetary fluctuations; the timely development of, and acceptance of new products and services offered by the Company, as well as risks (including reputational and litigation) attendant thereto, and the perceived overall value of these products and services by users; the risks of dealing with or utilizing third parties; any actions which may be initiated by our regulators in the future; the impact of changes in financial services laws and regulations, including, but not limited to, laws and regulations relating to the tax refund industry and the insurance premium finance industry, our relationship with our primary regulators, the Office of the Comptroller of the Currency (“OCC”) and the Federal Reserve, as well as the Federal Deposit Insurance Corporation (“FDIC”), which insures the Bank’s deposit accounts up to applicable limits; technological changes, including, but not limited to, the protection of electronic files or databases; acquisitions; litigation risk, in general, including, but not limited to, those risks involving the Bank's divisions; the growth of the Company’s business, as well as expenses related thereto; continued maintenance by the Bank of its status as a well-capitalized institution, particularly in light of our growing deposit base, a substantial portion of which has been characterized as “brokered”; changes in consumer spending and saving habits; and the success of the Company at maintaining its high quality asset level and managing and collecting assets of borrowers in default should problem assets increase. The foregoing list of factors is not exclusive. We caution you not to place undue reliance on these forward-looking statements. The forward-looking statements included in this press release speak only as of the date hereof. Additional discussions of factors affecting the Company’s business and prospects are reflected under the caption “Risk Factors” and in other sections of the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended September 30, 2016, and in other filings made with the SEC. The Company expressly disclaims any intent or obligation to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Company or its subsidiaries, whether as a result of new information, changed circumstances or future events or for any other reason. The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Only the yield/rate have tax equivalent adjustments. Non-Accruing loans have been included in the table as loans carrying a zero yield. *Specialty Finance Loan Receivables include loan portfolios the Company deems as non-retail bank product offerings or loans not generated by the Retail Bank itself (for example, premium finance and purchased loan portfolios). The loan receivables included in this line item are included in the customary loan categories presented elsewhere within the Company's SEC filings. Meta Financial Group, Inc. ("MFG") is the holding company for MetaBank®, a federally chartered savings bank. MFG shares are traded on the NASDAQ Global Select Market® under the symbol CASH. Headquartered in Sioux Falls, S.D., MetaBank operates in both the Banking and Payments industries through: MetaBank, its traditional retail banking operation; Meta Payment Systems, its electronic payments division; AFS/IBEX, its insurance premium financing division; and Refund Advantage, EPS and SCS, its tax-related financial solutions divisions. For more information about Meta Financial Group, visit metafinancialgroup.com.


MOLINE, Ill., Oct. 27, 2016 (GLOBE NEWSWIRE) -- QCR Holdings, Inc. (NASDAQ:QCRH) today announced net income of $6.1 million and diluted earnings per share (“EPS”) of $0.46 for the quarter ended September 30, 2016.  This included $1.5 million of acquisition costs (after-tax) related to the previously announced acquisition of Community State Bank (“CSB”).  Excluding these acquisition costs and other non-core items, the Company reported core net income (non-GAAP) of $7.5 million and diluted EPS of $0.57.  By comparison, for the quarter ended June 30, 2016, the Company reported net income of $6.7 million and diluted EPS of $0.53.  This included $231 thousand of acquisition costs (after-tax) related to CSB.  For the third quarter of 2015, the Company reported net income of $6.5 million and diluted EPS of $0.55. For the nine months ended September 30, 2016, the Company reported net income of $19.2 million and diluted EPS of $1.52.  Excluding acquisition costs and other non-core items, the Company reported core net income (non-GAAP) of $20.6 million and diluted EPS of $1.64.  By comparison, for the nine months ended September 30, 2015, the Company reported net income of $10.1 million and diluted EPS of $1.01.  This included several nonrecurring items, including $4.5 million of losses on debt extinguishments (after-tax) related to the balance sheet restructuring that took place in the second quarter of 2015. “Our core operating performance for the first nine months of 2016 has been solid,” commented Douglas M. Hultquist, President and Chief Executive Officer, “and we continue to strategize and explore ways to improve our profitability through our ongoing key initiatives.  Our core return on average assets (non-GAAP) has improved from 0.77% to 1.02%, when comparing the first nine months of 2015 to the same period of the current year.  This is the result of solid loan growth, reductions in wholesale borrowings, continued margin improvements, and strong fee income.” Organic Loan and Lease Growth Strong at 10.6% Annualized Year-To-Date Swap Fee Income and Gains on the Sale of Government Guaranteed Loans Total $4.1 Million Year-To-Date During the third quarter of 2016, the Company’s total assets increased $597.6 million, or 22%, to a total of $3.28 billion, while total loans and leases grew $437.8 million.  Of the $437.8 million of loan growth, $419.5 million related to the acquisition of CSB, while the remaining $18.3 million was organic growth.  The organic loan and lease growth was funded primarily by deposits, which increased $140.1 million in the third quarter, excluding the acquisition of CSB.  This deposit growth also allowed the Company to further reduce borrowings. “Loan and lease growth, excluding the effects of the acquisition, totaled $143.1 million, or an annualized rate of 10.6%, for the first nine months of the year,” commented Todd A. Gipple, Executive Vice President, Chief Operating Officer and Chief Financial Officer.  “Strong loan and lease growth has helped us meet our targeted annual organic growth rate of 10-12% and continues to keep our loan and leases to asset ratio within our targeted range of 70-75%.” “Swap fee income and gains on the sale of government guaranteed loans were strong for the first nine months of 2016, totaling $4.1 million,” said Mr. Gipple.  “We plan to continue executing these types of transactions, as they provide unique and beneficial solutions for our clients.  We also look forward to offering these products in our newest market, Des Moines/Ankeny.” Net interest income totaled $23.6 million for the quarter ended September 30, 2016.  By comparison, net interest income totaled $21.0 million and $20.1 million for the quarters ended June 30, 2016 and September 30, 2015, respectively.  Net interest income totaled $65.2 million for the nine months ended September 30, 2016, an increase of 15.6% from the same period of the prior year.  Net interest income attributable to CSB totaled $2.3 million for the partial quarter. “Net interest margin increased nine basis points from the prior quarter to 3.71%,” stated Mr. Gipple.  He added, “The improvement in margin this quarter was attributable to the addition of Community State Bank.  CSB’s strong margin and solid earnings will contribute significantly to our efforts to achieve upper-quartile ROAA performance and continue to drive shareholder value.  For the month of September 2016, CSB had $546.0 million in average earning assets with a net interest margin of 4.99%.  CSB’s net interest margin prior to acquisition typically ranged from 3.80% to 4.00%.  This has increased due to purchase accounting adjustments, primarily the accretion of the loan discount, including the acceleration of discounts related to the payoff of purchased credit impaired loans.” Nonperforming Assets to Total Assets Ratio Flat During the Third Quarter Nonperforming assets (“NPAs”) increased $3.8 million in the current quarter, which was due to the acquisition of CSB.  The ratio of NPAs to total assets was 0.69% at September 30, 2016, which was down from 0.70% at June 30, 2016 and down from 0.80% a year ago. “Asset quality at our newest charter, CSB, is strong and very much in line with the rest of our subsidiaries, resulting in a slight reduction of our NPAs to total assets ratio this quarter.  We remain committed to further improving asset quality,” stated Mr. Hultquist. The Company’s provision for loan and lease losses totaled $1.6 million for the third quarter of 2016, which was up $410 thousand from the prior quarter, and flat as compared to the third quarter of 2015.  The increase in provision in the third quarter of 2016 is primarily attributable to the addition of CSB.  As of September 30, 2016, the Company’s allowance to total loans and leases was 1.22%, which was down from 1.46% at June 30, 2016 and down from 1.45% at September 30, 2015. In accordance with generally accepted accounting principles for acquisition accounting, the loans acquired through the acquisition of CSB were recorded at market value; therefore, there was no allowance associated with CSB’s loans at acquisition.  Management continues to evaluate the allowance needed on the acquired CSB loans factoring in the net remaining discount ($12.7 million at September 30, 2016).  When factoring this remaining discount into the Company’s allowance to total loans and leases calculation, the Company’s allowance as a percentage of total loans and leases increases from 1.22% to 1.76%. The Company’s total risk-based capital ratio was 11.45%, the common equity tier 1 ratio was 9.32% and the tangible common equity to tangible assets ratio decreased to 7.92%, all as of September 30, 2016.  For comparison, these respective ratios were 14.29%, 11.72% and 10.10% as of June 30, 2016.  The decrease in the Company’s capital ratios was primarily due to the acquisition of CSB. “We are excited about adding such a talented team to the Company and are encouraged by the opportunity for strong growth in Ankeny and the entire Des Moines MSA,” stated Mr. Gipple. As of September 30, 2016, CSB had total assets of $580.2 million, consisting primarily of loans totaling $419.5 million and a securities portfolio of $90.2 million.  These assets were funded by $481.3 million of deposits and $15.3 million of borrowings.  CSB reported net income for the partial quarter of $189 thousand, which included $473 thousand of after tax acquisition costs. Preliminary purchase accounting adjustments were recorded in the third quarter and the resulting accounting marks and the net dilution to tangible book value per share were more favorable than projected when the Company announced the CSB transaction in May of 2016. Actual dilution to tangible book value per share from the transaction, including the common stock issuance of $30.1 million in May of 2016, was only $1.03 per share, or 4.91%.  This compares favorably to the $1.25 per share and 6.11% dilution that was projected. “The terms of the transaction required CSB to retain its earnings through the closing date.  Due to better than projected CSB earnings and more favorable valuation marks, our earn-back on the tangible book value dilution from the transaction should be even more rapid than the three year earn-back we cited in our transaction announcement this past May,” stated Mr. Gipple. Significant One-Time Gain Used to Further Restructure Balance Sheet And Strengthen Net Interest Margin This quarter, the Company had the opportunity to sell an investment and recognize a gain of approximately $4.0 million.  This gain was utilized to further reduce wholesale borrowings by $60 million at a blended rate of 3.24% and further de-lever the balance sheet with the sale of $28 million in securities yielding 1.48%.  The remaining funding was replaced by a mix of core deposits and overnight borrowings.  These transactions were recorded near the end of the quarter.  The positive impact on future earnings will be an increase in net interest income of approximately $1.3 million annually, increasing NIM by approximately 10 basis points. The Company today filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission ("SEC").  When declared effective by the SEC, the registration statement will allow QCR Holdings, Inc. to offer and sell various types of securities, including common stock, preferred stock, debt securities and/or warrants, from time to time up to an aggregate amount of $100 million.  The Company utilized $30.1 million of its previous shelf registration filing through the offer and sale of its common stock in the second quarter of 2016 to help fund the acquisition of CSB.  This Form S-3 filing will replenish the amount available to the previous $100 million.  The specific terms and prices of any securities offered pursuant to the registration statement will be determined at the time of any future offering and described in a separate prospectus supplement, which would be filed with the SEC at the time of the particular offering, if any. QCR Holdings, Inc., headquartered in Moline, Illinois, is a relationship-driven, multi-bank holding company, which serves the Quad City, Cedar Rapids, Cedar Valley, Des Moines/Ankeny, and Rockford communities through its wholly owned subsidiary banks.  Quad City Bank & Trust Company, which is based in Bettendorf, Iowa, and commenced operations in 1994, Cedar Rapids Bank & Trust Company, which is based in Cedar Rapids, Iowa, and commenced operations in 2001, Community State Bank, which is based in Ankeny, Iowa and was acquired by the Company in 2016, and Rockford Bank & Trust Company, which is based in Rockford, Illinois, and commenced operations in 2005, provide full-service commercial and consumer banking and trust and wealth management services.  Quad City Bank & Trust Company also provides correspondent banking services.  In addition, Quad City Bank & Trust Company engages in commercial leasing through its wholly owned subsidiary, m2 Lease Funds, LLC, based in Milwaukee, Wisconsin.  Additionally, the Company serves the Waterloo/Cedar Falls, Iowa community through Community Bank & Trust, a division of Cedar Rapids Bank & Trust Company. Special Note Concerning Forward-Looking Statements.  This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company.  Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “predict,” “suggest,” “appear,” “plan,” “intend,” “estimate,” ”annualize,” “may,” “will,” “would,” “could,” “should” or other similar expressions.  Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.                 A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements.  These factors include, among others, the following: (i) the strength of the local, national and international economies; (ii) the economic impact of any future terrorist threats and attacks, and the response of the United States to any such threats and attacks; (iii) changes in state and federal laws, regulations and governmental policies concerning the Company’s general business, including the Basel III regulatory capital reforms, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations issued thereunder; (iv) changes in interest rates and prepayment rates of the Company’s assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) unexpected results of acquisitions (including the acquisition of CSB), which may include failure to realize the anticipated benefits of the acquisition and the possibility that the transaction costs may be greater than anticipated; (viii) the loss of key executives or employees; (ix) changes in consumer spending; (x)  unexpected outcomes of existing or new litigation involving the Company; and (xi) changes in accounting policies and practices.  These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filings with the SEC.


News Article | February 15, 2017
Site: www.eurekalert.org

Modern computer technology is based on the transport of electric charge in semiconductors. But this technology's potential will be reaching its limits in the near future, since the components deployed cannot be miniaturized further. But, there is another option: using an electron's spin, instead of its charge, to transmit information. A team of scientists from Munich and Kyoto is now demonstrating how this works. Computers and mobile devices continue providing ever more functionality. The basis for this surge in performance has been progressively extended miniaturization. However, there are fundamental limits to the degree of miniaturization possible, meaning that arbitrary size reductions will not be possible with semiconductor technology. Researchers around the world are thus working on alternatives. A particularly promising approach involves so-called spin electronics. This takes advantage of the fact that electrons possess, in addition to charge, angular momentum - the spin. The experts hope to use this property to increase the information density and at the same time the functionality of future electronics. Together with colleagues at the Kyoto University in Japan scientists at the Walther-Meißner-Institute (WMI) and the Technical University of Munich (TUM) in Garching have now demonstrated the transport of spin information at room temperature in a remarkable material system. In their experiment, they demonstrated the production, transport and detection of electronic spins in the boundary layer between the materials lanthanum-aluminate (LaAlO2) and strontium-titanate (SrTiO3). What makes this material system unique is that an extremely thin, electrically conducting layer forms at the interface between the two non-conducting materials: a so-called two-dimensional electron gas. The German-Japanese team has now shown that this two-dimensional electron gas transports not only charge, but also spin. "To achieve this we first had to surmount several technical hurdles," says Dr Hans Hübl, scientist at the Chair for Technical Physics at TUM and Deputy Director of the Walther-Meißner-Institute. "The two key questions were: How can spin be transferred to the two-dimensional electron gas and how can the transport be proven?" The scientists solved the problem of spin transfer using a magnetic contact. Microwave radiation forces its electrons into a precession movement, analogous to the wobbling motion of a top. Just as in a top, this motion does not last forever, but rather, weakens in time - in this case by imparting its spin onto the two-dimensional electron gas. The electron gas then transports the spin information to a non-magnetic contact located one micrometer next to the contact. The non-magnetic contact detects the spin transport by absorbing the spin, building up an electric potential in the process. Measuring this potential allowed the researchers to systematically investigate the transport of spin and demonstrate the feasibility of bridging distances up to one hundred times larger than the distance of today's transistors. Based on these results, the team of scientists is now researching to what extent spin electronic components with novel functionality can be implemented using this system of materials. The research was funded by the German Research Foundation (DFG) in the context of the Cluster of Excellence "Nanosystems Initiative Munich" (NIM). Strong evidence for d-electron spin transport at room temperature at a LaAlO3/SrTiO3 interface. R. Ohshima, Y. Ando, K. Matsuzaki, T. Susaki, M. Weiler, S. Klingler, H. Huebl, E. Shikoh, T. Shinjo, S.T.B Goennenwein and M. Shiraishi. Nature Materials, Advanced Online Publication 13. Februar 2017.


News Article | October 28, 2016
Site: www.marketwired.com

COLUMBUS, OH--(Marketwired - October 26, 2016) - Huntington Bancshares Incorporated ( : HBAN) (www.huntington.com) reported net income for the 2016 third quarter of $127 million, a $26 million, or 17%, decrease from the year-ago quarter, impacted by FirstMerit acquisition-related expenses. Earnings per common share for the 2016 third quarter were $0.11, down $0.07, or 39%, from the year-ago quarter. FirstMerit acquisition-related expenses totaled $159 million pretax, or $0.11 per common share. Total revenue increased 24% over the year-ago quarter. "We are very excited about the third-quarter acquisition of FirstMerit, which has strengthened the return profile of the company," said Steve Steinour, chairman, president and CEO. "We delivered solid core fundamental performance for the quarter. Acquisition-related expenses continue to be in line with our expectations and guidance. Auto and mortgage lending were among the significant drivers of organic loan growth during the quarter, complemented by acquisition-related growth. We are entering a new era for Huntington, as we introduce our customer-centric strategies and operating model to new geographies and improve our operating efficiency due to increased scale." "Integration execution is proceeding on schedule as we move closer to operating as one expanded company with each passing day," Steinour said. "We have completed workforce onboarding and initial training, and we are laser-focused on customer experience and retention. In addition, we remain confident we will complete the majority of system conversions during the first quarter of 2017, swiftly moving toward our target of realizing $255 million of annualized cost savings." "We continue to implement revenue synergies that were not included in the original FirstMerit financial model," Steinour said. "For example, as we look forward to further deploying Huntington's Small Business Administration lending expertise within our expanded customer base and geographies, we are again pleased to rank as the second-highest SBA 7(a) lender nationwide in terms of number of loans. Within our combined geography of Ohio, Indiana, Kentucky, Michigan, Pennsylvania and West Virginia, Huntington was ranked first in number of SBA 7(a) loans and total dollars lent. We look forward to an even stronger SBA fiscal year in 2017 as we add lending capabilities in Chicago and Wisconsin." "Finally, Huntington is honored today to have been recognized in MONEY Magazine's Best Banks in America for 2016-2017, as the Best Regional Bank: Great Lakes," Steinour said. "We are humbled that MONEY has chosen to recognize our commitment to value, transparency, fairness, service and convenience for our customers, including Huntington as a Best Bank for four out of the past six years." Table 2 lists certain items that we believe are significant in understanding corporate performance and trends (see Basis of Presentation). There was one Significant Item in the 2016 third quarter: $159 million of FirstMerit acquisition-related expense. On August 16, 2016, Huntington closed the previously announced acquisition of FirstMerit Corporation and its subsidiary FirstMerit Bank. The acquisition added approximately $26.8 billion of total assets, $15.5 billion of total loans and leases, $21.2 billion of total deposits, and 340 branches. 2016 third quarter results reflect inclusion of FirstMerit since August 16, 2016. Immediately following completion of the acquisition, FirstMerit Bank was merged into The Huntington National Bank. In addition, the management and organization structure was updated to reflect the combined organization. On-boarding of former FirstMerit colleagues and their initial training is complete. Certain of Huntington's products and services are being introduced across the legacy FirstMerit customer base, and customer-facing colleagues are focused on both growing and retaining customers. Technology conversions have commenced and are scheduled to be substantially complete by the middle of the 2017 first quarter. The branch conversion and 102 branch consolidations are scheduled to be completed during the 2017 first quarter. As part of the FirstMerit transaction, Huntington entered into an agreement to divest thirteen branches in the Canton, Ohio and Ashtabula, Ohio markets, including approximately $0.7 billion of total deposits and $0.1 billion of total loans and leases, to First Commonwealth Financial Corporation. This transaction is expected to close during the 2016 fourth quarter. Fully-taxable equivalent (FTE) net interest income for the 2016 third quarter increased $132 million, or 26%, from the 2015 third quarter. This reflected the benefit from the $16.4 billion, or 26%, increase in average earning assets coupled with a 2 basis point improvement in the FTE net interest margin (NIM) to 3.18%. Average earning asset growth included an $11.7 billion, or 24%, increase in average loans and leases, impacted by the mid-quarter FirstMerit acquisition, and a $4.4 billion, or 32%, increase in average securities, impacted by the mid-quarter FirstMerit acquisition. The NIM expansion reflected a 10 basis point increase in earning asset yields and a 2 basis point increase in the benefit from noninterest-bearing funds, partially offset by a 10 basis point increase in funding costs. The 2016 third quarter NIM included 11 basis points of purchase accounting favorable impact. Compared to the 2016 second quarter, FTE net interest income increased $120 million, or 23%. Average earning assets increased $11.8 billion, or 17%, sequentially, and the NIM increased 12 basis points. The increase in the NIM reflected an 11 basis point increase in earning asset yields and a 1 basis point decrease in the cost of interest-bearing liabilities. Average earning assets for the 2016 third quarter increased $16.4 billion, or 26%, from the year-ago quarter. The increase was driven by: Compared to the 2016 second quarter, average earning assets increased $11.8 billion, or 17%. On a reported basis, average loans and leases increased $8.8 billion, or 17%, primarily reflecting a $3.6 billion increase in average C&I loans, a $1.1 billion increase in average CRE loans, a $1.3 billion increase in average automobile loans, a $0.8 billion increase in home equity loans, and a $0.8 billion increase in residential mortgage loans, as well as the addition of $0.9 billion in RV & marine finance loans. Average securities increased $2.9 billion, or 19%. These increases primarily reflected the FirstMerit acquisition. While not affecting quarterly average balances, approximately $2.6 billion of total loans and leases, comprised of $1.5 billion of automobile loans, $1.0 billion of predominantly non-relationship C&I loans and leases, and $0.1 billion of predominantly non-relationship CRE loans were moved to loans held-for-sale at the end of the 2016 third quarter as part of a continued balance sheet optimization strategy following the closing of the FirstMerit acquisition. As shown on Page 5 of the Quarterly Financial Supplement, total originated loans and leases were $51.8 billion at the end of the 2016 third quarter, a $0.7 billion decrease from the end of the prior quarter. This decrease reflects the previously mentioned movement of loans to loans held-for-sale partially offset by organic loan growth across all categories except other consumer loans. Average total deposits for the 2016 third quarter increased $12.1 billion, or 22%, from the year-ago quarter, impacted by the mid-quarter FirstMerit acquisition, while average total core deposits increased $11.1 billion, or 22%, impacted by the mid-quarter FirstMerit acquisition. Average total interest-bearing liabilities increased $12.0 billion, or 27%, from the year-ago quarter, impacted by the mid-quarter FirstMerit acquisition. Year-over-year changes in total liabilities reflected: Compared to the 2016 second quarter, average total core deposits increased $10.1 billion, or 20%. The increase primarily reflected a $3.9 billion, or 46%, increase in average interest-bearing demand deposits, a $3.5 billion, or 21%, increase in average noninterest-bearing demand deposits, and a $3.5 billion, or 65%, increase in savings and other domestic deposits, partially offset by a $1.1 billion, or 6%, decrease in money market deposits. These increases primarily reflected the mid-quarter FirstMerit acquisition. Average total debt increased $0.9 billion, or 10%, reflecting the $1.0 billion senior debt issuance during the 2016 third quarter. Noninterest income for the 2016 third quarter increased $49 million, or 19%, from the year-ago quarter. The year-over-year increase primarily reflected: Compared to the 2016 second quarter, total noninterest income increased $31 million, or 12%. Service charges on deposit accounts increased $11 million, or 15%, primarily reflecting the benefit of continued new customer acquisition. Of the increase, $7 million was attributable to consumer deposit accounts, while $4 million was attributable to commercial deposit accounts. Mortgage banking income increased $9 million, or 29%, primarily driven by a 9% increase in mortgage origination volume and a $3 million impact from net MSR activity. Reported noninterest expense for the 2016 third quarter increased $186 million, or 35%, from the year-ago quarter. Changes in reported noninterest expense primarily reflect: Reported noninterest expense increased $189 million, or 36%, from the 2016 second quarter. Personnel costs increased $106 million, or 35%, primarily related to $76 million of Significant Items in the 2016 third quarter compared to $5 million of Significant Items in the prior quarter as well as a 17% increase in average full-time equivalent employees related to FirstMerit. Outside data processing and other services increased $28 million, or 45%, primarily reflecting the $28 million of Significant Items in the 2016 third quarter compared to $3 million of Significant Items in the prior quarter. Professional services expense increased $26 million, or 119%, primarily reflecting $34 million of Significant Items in the 2016 third quarter compared to $11 million of Significant Items in the prior quarter. Overall asset quality remains strong, with modest volatility, including the impact of the FirstMerit loan portfolio. The FirstMerit portfolio quality, composition, and geographic distribution was similar to the legacy Huntington portfolio. The only new loan classification is the RV/marine portfolio, which we are planning to continue offering. Nonaccrual loans and leases (NALs) increased $48 million, or 13%, from the year-ago quarter to $404 million, or 0.61% of total loans and leases. The year-over-year increase was exclusively centered in the Commercial portfolio and was primarily associated with a small number of energy sector loan relationships which were added to NALs during the 2016 first quarter. Nonperforming assets (NPAs) increased $94 million, or 25%, from the year-ago quarter to $475 million, or 0.72% of total loans and leases and net OREO. NALs decreased $56 million, or 12%, from the prior quarter, while NPAs decreased $14 million, or 3%, from the prior quarter. The linked-quarter decreases primarily resulted from significant pay-downs, offset by an increase in OREO balances from the FirstMerit acquisition. While the energy sector was a primary driver of the NAL activity over the last two quarters, the oil and gas exploration and production (E&P) portfolio continues to represent less than 1% of total loans outstanding at quarter end. The provision for credit losses increased $41 million, or 184%, year-over-year to $64 million in the 2016 third quarter. Net charge-offs (NCOs) increased $24 million, or 148%, to $40 million. NCOs represented an annualized 0.26% of average loans and leases in the current quarter, up from 0.13% in the prior quarter and 0.13% in the year-ago quarter. The linked-quarter increase was centered in the C&I portfolio and normal seasonal changes in the consumer portfolios. The year-over-year change was a function of material commercial recoveries in the year ago quarter combined with higher automobile and other consumer losses based on portfolio growth. We continue to be pleased with the net charge-off performance within each portfolio and in total. Commercial charge-offs were positively impacted by continued recoveries in the CRE portfolio and broader continued successful workout strategies, while consumer charge-offs remained within our expected range. Overall consumer credit metrics, led by the residential mortgage and home equity portfolios, continued to show an improving trend, while the commercial portfolios continued to experience some quarter-to-quarter volatility based on the absolute low level of problem loans. The period-end allowance for credit losses (ACL) as a percentage of total loans and leases decreased to 1.06% from 1.32% a year ago, while the ACL as a percentage of period-end total NALs decreased to 174% from 184%. We believe the level of the ACL is appropriate given the improvement in the credit quality metrics and the current composition of the overall loan and lease portfolio. The decline in the coverage ratios is a function of the purchase accounting impact associated with FirstMerit. The tangible common equity to tangible assets ratio was 7.14% at September 30, 2016, down 75 basis points from a year ago. Common Equity Tier 1 (CET1) risk-based capital ratio was 9.09% at September 30, 2016, down from 9.72% a year ago. The regulatory Tier 1 risk-based capital ratio was 10.40% compared to 10.49% at September 30, 2015. All capital ratios were impacted by the $1.3 billion of goodwill created and the issuance of $2.8 billion of common stock as part of the FirstMerit acquisition, as well as to a lesser extent the repurchase of 2.5 million common shares during the 2015 fourth quarter under the repurchase authorization included in the 2015 CCAR capital plan. The regulatory Tier 1 risk-based and total risk-based capital ratios benefited from the issuance of $400 million and $200 million of Class D preferred equity during the 2016 first and second quarters, respectively, and the issuance of $100 million of Class C preferred equity during the 2016 third quarter in exchange for FirstMerit preferred equity in conjunction with the acquisition. The total risk-based capital ratio was impacted by the repurchase of $25 million of trust preferred securities during the 2016 third quarter. The provision for income taxes in the 2016 third quarter was $25 million, compared to $47 million in the 2015 third quarter. The effective tax rates for the 2016 third quarter and 2015 third quarter were 16.3% and 23.5%, respectively. The variance between the 2016 third quarter and 2015 third quarter provision for income taxes and effective tax rates relates primarily to the Significant Items. At September 30, 2016, we had a net federal deferred tax asset of $172 million and a net state deferred tax asset of $43 million. "Our priority for the remainder of the year and for 2017 is the successful integration of FirstMerit," Steinour said. "We anticipate improving U.S. economic conditions in the fourth quarter. Guidance from the Federal Reserve also makes an interest rate increase appear likely in the near term, which would be incrementally helpful to our bottom line. We will remain diligent in the execution of our strategies, sensibly balancing investment and risk to stay on course for long-term growth. Our balance sheet optimization strategy will help rebuild our capital ratios more quickly, providing greater flexibility in our capital planning for 2017." Excluding Significant Items, we expect total revenues for the full year 2016 to increase 16%-18%, while we expect noninterest expenses to increase 13%-15%. We expect to deliver positive operating leverage for the fourth consecutive year. We expect the effective tax rate for the full year 2016 to be in the 24%-25% range, excluding Significant Items which are taxed at an approximate 35% rate. Overall, asset quality metrics are expected to remain near current levels, with moderate quarterly volatility. We anticipate NCOs for the full year 2016 will remain below our long-term normalized range of 35 to 55 basis points. Huntington's senior management will host an earnings conference call on October 26, 2016, at 9:00 a.m. (Eastern Daylight Time). The call may be accessed via a live Internet webcast at the Investor Relations section of Huntington's website, www.huntington.com, or through a dial-in telephone number at (844) 318-8148; Conference ID #84440833. Slides will be available in the Investor Relations section of Huntington's website about an hour prior to the call. A replay of the webcast will be archived in the Investor Relations section of Huntington's website. A telephone replay will be available approximately two hours after the completion of the call through November 3, 2016 at (855) 859-2056 or (404) 537-3406; conference ID #84440833. Please see the 2016 Third Quarter Quarterly Financial Supplement for additional detailed financial performance metrics. This document can be found on Huntington's Investor Relations website, www.huntington-ir.com. This communication contains certain forward-looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements, which are not historical facts and are subject to numerous assumptions, risks, and uncertainties. Statements that do not describe historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by words such as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or future or conditional verbs such as will, may, might, should, would, could, or similar variations. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in global capital and credit markets; movements in interest rates; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services implementing our "Fair Play" banking philosophy; the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations, including those related to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III regulatory capital reforms, as well as those involving the OCC, Federal Reserve, FDIC, and CFPB; the possibility that the anticipated benefits of the merger with FirstMerit Corporation are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where we do business; diversion of management's attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the merger with FirstMerit Corporation; our ability to complete the integration of FirstMerit Corporation successfully; and other factors that may affect our future results. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 2015 and our subsequent Quarterly Reports on Form 10-Q, including for the quarters ended March 31, 2016 and June 30, 2016, each of which is on file with the Securities and Exchange Commission (the "SEC") and available in the "Investor Relations" section of our website, http://www.huntington.com, under the heading "Publications and Filings" and in other documents we file with the SEC. All forward-looking statements speak only as of the date they are made and are based on information available at that time. We do not assume any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements. Use of Non-GAAP Financial Measures This document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Huntington's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this document, conference call slides, or the Form 8-K related to this document, all of which can be found on Huntington's website at www.huntington-ir.com. Certain returns, yields, performance ratios, or quarterly growth rates are presented on an "annualized" basis. This is done for analytical and decision-making purposes to better discern underlying performance trends when compared to full-year or year-over-year amounts. For example, loan and deposit growth rates, as well as net charge-off percentages, are most often expressed in terms of an annual rate like 8%. As such, a 2% growth rate for a quarter would represent an annualized 8% growth rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. This adjustment puts all earning assets, most notably tax-exempt municipal securities and certain lease assets, on a common basis that facilitates comparison of results to results of competitors. Significant income or expense items may be expressed on a per common share basis. This is done for analytical and decision-making purposes to better discern underlying trends in total corporate earnings per share performance excluding the impact of such items. Investors may also find this information helpful in their evaluation of the company's financial performance against published earnings per share mean estimate amounts, which typically exclude the impact of Significant Items. Earnings per share equivalents are usually calculated by applying an effective tax rate to a pre-tax amount to derive an after-tax amount, which is divided by the average shares outstanding during the respective reporting period. Occasionally, when the item involves special tax treatment, the after-tax amount is disclosed separately, with this then being the amount used to calculate the earnings per share equivalent. Please note that columns of data in this document may not add due to rounding. From time to time, revenue, expenses, or taxes are impacted by items judged by Management to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by Management at that time to be infrequent or short term in nature. We refer to such items as "Significant Items." Most often, these Significant Items result from factors originating outside the company -- e.g., regulatory actions/assessments, windfall gains, changes in accounting principles, one-time tax assessments/refunds, litigation actions, etc. In other cases they may result from Management decisions associated with significant corporate actions out of the ordinary course of business -- e.g., merger/restructuring charges, recapitalization actions, goodwill impairment, etc. Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not define a Significant Item. For example, changes in the provision for credit losses, gains/losses from investment activities, asset valuation write-downs, etc., reflect ordinary banking activities and are, therefore, typically excluded from consideration as a Significant Item. Management believes the disclosure of "Significant Items," when appropriate, aids analysts/investors in better understanding corporate performance and trends so that they can ascertain which of such items, if any, they may wish to include/exclude from their analysis of the company's performance -- i.e., within the context of determining how that performance differed from their expectations, as well as how, if at all, to adjust their estimates of future performance accordingly. To this end, Management has adopted a practice of listing "Significant Items" in its external disclosure documents (e.g., earnings press releases, quarterly performance discussions, investor presentations, Forms 10-Q and 10-K). "Significant Items" for any particular period are not intended to be a complete list of items that may materially impact current or future period performance. A number of items could materially impact these periods, including those described in Huntington's 2015 Annual Report on Form 10-K and other factors described from time to time in Huntington's other filings with the Securities and Exchange Commission. Huntington Bancshares Incorporated is a regional bank holding company headquartered in Columbus, Ohio, with $101 billion of assets and a network of 1,103 branches and 1,979 ATMs across eight Midwestern states. Founded in 1866, The Huntington National Bank and its affiliates provide consumer, small business, commercial, treasury management, wealth management, brokerage, trust, and insurance services. Huntington also provides auto dealer, equipment finance, national settlement and capital market services that extend beyond its core states. Visit huntington.com for more information.


TBC Bank Group PLC ("TBC PLC") Announces Full Year 2016 and 4Q 2016 IFRS Consolidated Unaudited Preliminary Results; Net Profit for 2016 up by 36.4% YoY to GEL 298.3 million   The European Union Market Abuse Regulation EU 596/2014 requires TBC Bank Group PLC to disclose that this announcement contains Inside Information, as defined in that Regulation       FY 2016 P&L Highlights    Net Profit for 2016 up by 36.4% YoY to GEL 298.3 million   Return on equity (ROE) amounted to 22.4% (20.6% without one-off effects) and Return on assets (ROA) to 3.9% (3.6% without one-off effects)   Total operating income for 2016 up by 18.0% YoY to GEL 681.1 million   Cost to income ratio stood at 45.8% (42.9% without one-off effects), compared to 43.9% in 2015   Cost of risk on loans stood at 1.0%, down by 0.7pp YoY   Net interest margin (NIM) stood at 7.8% in 2016, unchanged from 2015         Balance Sheet Highlights 31 December 2016   Total assets reached GEL 10,769.0 million as of 31 December 2016, up by 55.3% YoY and up by 42.0% QoQ   Gross loans and advances to customers increased to GEL 7,358.7 million as of 31 December 2016, up by 58.6% YoY and by 47.1% QoQ   Net loans to deposits and IFI funding stood at 93.4% and Net Stable Funding Ratio (NSFR) stood at 108.4%   NPLs stood at 3.5%, down by 1.3pp YoY and 1.1pp QoQ   NPLs coverage stood at 88.4%, (221.4% with collateral), compared to 84.3% as of 30 September 2016   Total customer deposits stood at GEL 6,454.9 million as of 31 December 2016, up by 54.5% YoY and up by 40.5% QoQ   Tier I and Total Capital Adequacy Ratios per Basel II/III stood at 10.4% and 14.2% respectively   Tier I and Total Capital Adequacy Ratios per Basel I stood at 21.3% and 28.1% respectively     4Q 2016 P&L Highlights   Net Profit for 4Q 2016 up by 31.6% YoY to GEL 88.0 million and up by 24.0% QoQ   Return on equity (ROE) amounted to 24.2% (23.5% without one-off effects) and return on assets (ROA) to 3.7% (3.5% without one-off effects)   Total operating income in 4Q 2016 up by 39.0% YoY and by 34.9% QoQ to GEL 218.3 million   Cost to income ratio stood at 51.2% (47.0% without one-offs), compared to 49.3% in 4Q 2015 and 40.5% in 3Q 2016   Cost of risk on loans stood at 0.6%, up by 0.5pp YoY and down by 0.5pp QoQ   Net interest margin (NIM) stood at 7.9%in 4Q 2016, compared to 8.3% in 3Q 2016 and 7.4% in 4Q 2015   FY 2016 P&L Highlights    Net Profit for 2016 up by 31.5% YoY to GEL 287.6 million   Return on equity (ROE) amounted to 21.6% (19.7% without one-off effects) and Return on assets (ROA) to 3.9% (3.6% without one-off effects).   Total operating income for 2016 up by 11.4% YoY to GEL 643.0 million   Cost to income ratio stood at 46.1% (43.4% without one-off effects), compared to 43.9% in 2015.   Cost of risk on loans stood at 0.8%, down by 0.9pp YoY.   Net interest margin (NIM) stood at 7.9% in 2016, up by 0.1pp   Balance Sheet Highlights 31 December 2016   Total assets reached GEL 9,212.5 million as of 31 December 2016, up by 32.8% YoY and up by 21.5% QoQ   Gross loans and advances to customers increased to GEL 5,911.2 million as of 31 December 2016, up by 27.4% YoY and by 18.1% QoQ   Net loans to deposits and IFI funding stood at 90.7%   NPLs stood at 4.0%, down by 0.8pp YoY and down 0.6pp QoQ   NPLs coverage stood at 90.5%, (216.8% with collateral), compared to 84.3% as of 30 September 2016.   Total customer deposits stood at GEL 5,641.1 million as of 31 December 2016, up by 35.0% YoY and up by 22.8% QoQ   4Q 2016 P&L Highlights   Net Profit for 4Q 2016 up by 15.6% YoY and up by 9.0% QoQ to GEL 77.4 million   Return on equity (ROE) amounted to 21.4% (20.0% without one-off effects) and return on assets (ROA) to 3.7% (3.4% without one-off effects).   Total operating income in 4Q 2016 up by 14.8% YoY and up by 11.4% QoQ to GEL 180.2 million   Cost to income ratio stood at 53.5% (49.7% without one-offs), compared to 49.3% in 4Q 2015 and 40.5% in 3Q 2016   Cost of risk on loans stood at -0.1%, down by 0.3pp YoY and down by 1.2pp QoQ.   Net interest margin (NIM) stood at 7.8%in 4Q 2016, compared to 8.3% in 3Q 2016 and 7.4% in 4Q 2015.   Description of One-off Incomes and Expenses Incurred during 2016   Recovery of previously written off principal and interest (FY '16: GEL35.8 million; Q4: GEL35.8 million)   Tax credit (FY '16: GEL17.9 million; Q4: GEL 0 million)   Premium Listing costs (FY '16: GEL16.2 million; Q4:  GEL0.3 million)   Currency effect on provisions (FY '16: GEL9.6 million; Q4: GEL16.8 million) or w/o BR (FY '16: GEL8.7 million; Q4: GEL16.0 million)   Gain on sale of investment securities (FY '16: GEL8.8 million; Q4: GEL 0 million)   Bank Republic acquisition related consulting costs (FY'16: GEL8.0 million; Q4: GEL8.0 million)   Interest income related to one large corporate customer (FY '16: GEL4.2 million; Q4: GEL 0 million)   Interest expense related to prepayment of subordinated loans (FY'16: GEL2.5 million; Q4:GEL2.5 million)   Staff redundancy provision (FY '16: GEL2.2 million; Q4: GEL 2.2 million)   Impairment of intangible assets of Bank Republic (FY '16: GEL2.0 million; Q4: GEL2.0 million)   Additional Information Disclosure   The following materials in connection with TBC PLC's financial results are disclosed on our Investor Relations website on http://tbcbankgroup.com/ under Results Announcement section:   4Q and FY 2016 Results Report   4Q and FY 2016 Results Call Presentation       For further enquiries, please contact: Head of Investor Relations Anna Romelashvili  ir@tbcbank.com.ge         About TBC PLC TBC PLC is a public limited company registered in England and Wales that was incorporated in February 2016. TBC PLC became the parent company of JSC TBC Bank ("TBC Bank") on 10 August 2016. TBC PLC is listed on the London Stock Exchange under the symbol TBCG.     About TBC Bank TBC Bank, together with its subsidiaries, is the leading universal banking group in Georgia, with a total market share of 31.1% of loans (or 38.9% taking into account TBC Bank's holding in JSC Bank Republic and 33.0% of non-banking deposits (or 37.8% taking into account TBC Bank's holding in JSC Bank Republic) as at 31 December 2016, according to the data published by the National Bank of Georgia.


News Article | November 1, 2016
Site: globenewswire.com

ANCHORAGE, Alaska, Oct. 31, 2016 (GLOBE NEWSWIRE) -- Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported lower earnings for the third quarter and first nine months of 2016 primarily reflecting a  non-cash accounting correction, higher operating expenses, and a decrease in net interest margin and mortgage income primarily due to slowing loan growth in both the commercial and mortgage market in Alaska compared to the same periods in 2015. Third quarter net income attributable to the Company declined to $3.1 million, or $0.44 per diluted share, compared to $4.4 million, or $0.63 per diluted share, in the second quarter of 2016, and $5.3 million, or $0.77 per diluted share, in the third quarter of 2015.  In the first nine months of 2016, net income attributable to the Company decreased to $10.8 million, or $1.55 per diluted share, compared to $13.7 million, or $1.97 per diluted share in the first nine months of 2015.  Excluding the accounting correction described below, third quarter net income attributable to the Company would have been $4.7 million, or $0.67 per diluted share, and $12.4 million, or $1.78 per diluted share, for the first nine months of 2016. Although  the non-cash accounting correction covered the period from December 1, 2014, through June 30, 2016, or the seven previous fiscal quarters, the Company made the correction in the third quarter of 2016 on a prospective basis, which resulted in an increase in expenses, net of tax, in the current quarter of $1.4 million, or $0.20 per diluted share relating to the accounting correction for the prior periods.  Prior periods have not been adjusted, consistent with the prospective method, for the change in accounting.  The correction reduced total shareholders' equity by $1.4 million, reduced goodwill by $7.3 million, and increased regulatory capital ratios as of September 30, 2016. The correction was due to a change in accounting treatment for the earn-out payments associated with the Company's 2014 acquisition of Residential Mortgage Holding Company, LLC ("RML").  This change in accounting treatment also reduced net income for the third quarter of 2016 by $213,000, or $0.03 per diluted share, for a total decrease in net income of $1.6 million, or $0.23 per share including the correction for the prior periods. Following the reductions in the balance sheet resulting from the accounting correction, book value per share decreased $0.23 or 1% and tangible book value* per share grew $0.83, or 3.5% to $24.61 as of September 30, 2016. “The accounting correction arose due to the complexity of the facts and circumstances and the nuances of accounting guidance for the payments related to our 2014 acquisition of RML, particularly because of the continued employment of some of the selling members of RML. The earn-out payments are based on RML's pretax income.  This payment, which is now reported as "compensation expense, RML acquisition payments" in the Company's Income Statement reflects 100% of the payments that the Company will pay to the selling members of RML.  Prior to the accounting correction, the Company had essentially capitalized its estimate of the fair value of all future earn-out payments as part of the price paid to acquire RML. The expenses recorded in prior periods as ‘change in fair value, RML earn-out liability’ represent the increase in payments owed to the sellers of RML in excess of our original estimate at the time of purchase due to higher than anticipated pretax income from RML's operations.” said Joseph Beedle, Chairman, President and CEO of Northrim Bancorp.  “The cash paid to the sellers of RML for the earn-out payments does not change under this new reporting method, only the way the Company is accounting for it in its financial statements.” * References to tax equivalent NIM, tangible book value per share, tangible common equity and tangible assets (all of which exclude intangible assets) represent non-GAAP financial measures. Management has presented these non-GAAP measurements in this earnings release, because it believes these measures are useful to investors. See the end of this release for reconciliations of these measures to GAAP financial measures. “Under the new accounting treatment, the quarterly net income in prior periods related to the earn-out payments would have decreased by approximately $213,000 per quarter.” said Latosha Frye, Chief Financial Officer.  “As it has since inception and regardless of this change in accounting method, expense related to the earn-out payments will fluctuate based on RML’s pretax income.” The following table outlines the impact of the accounting correction on the net income attributable to the Company from each of our reporting segments for the third quarter of 2016 and the results from those segments in the third quarter of 2015: Home mortgage lending contributed $8.3 million to pre-tax revenues and $0.20 to net earnings per share (“EPS”) in the third quarter of 2016, and $22.5 million to pre-tax revenue and $0.50 to net EPS in the first nine months of 2016. “The loan portfolio increased 3% in the third quarter of 2016 compared to the preceding quarter end and 2% year-over-year, mainly reflecting growth in both commercial and commercial real estate loans and offsetting payoffs in several large commercial construction projects in 2016,” said Joe Schierhorn, Northrim Bank’s President and CEO.  “Our commercial real estate (“CRE”) loan portfolio (both owner-occupied and investment properties) generated 13% year-over-year growth compared to the third quarter of 2015, and accounted for 50% of loans at the end of September 2016. “New construction projects in the Anchorage market are coming in at a slower pace than in the past few years, as the economy contracts mainly due to the effects of continued low oil prices,” Schierhorn continued.  “Construction loans were down 30% year-over-year in the third quarter of 2016, primarily due to approximately $84 million in projects which were completed and termed out in the last twelve months.  Of these construction loans, $55 million converted to the CRE term loan portfolio, which contributed to overall growth of $13.8 million, or 3%, in our CRE portfolio in the third quarter.”  We expect construction loans to decrease by another $10-15 million by the end of 2016. 1As of June 30, 2016, the SNL US Bank Index tracked 146 banks with assets between $1 billion and $5 billion with averages for the following ratios: NIM (tax equivalent) 3.60%, return on average assets 0.88%, and return on average equity 8.29% Northrim Bank sponsors the Alaskanomics blog to provide news, analysis, and commentary on Alaska’s economy.  Join the conversation at Alaskanomics.com or for more information on the Alaska economy, visit: www.northrim.com and click on the “About Northrim” link and then click “Alaska's Economy”. Information from our website is not incorporated into, and does not form a part of this press release. “According to the Alaska Department of Labor, preliminary data shows that average employment in the Alaska economy was down an estimated 0.2% or 689 jobs in the first nine months of 2016 as compared to the same period in 2015 as job losses in the oil and gas industry, construction, state government and professional and business services continue to be partially offset by growth in retail trade, health care, and leisure and hospitality jobs.  However, estimated employment as of the end of September 2016 compared to September 2015 was down 1.0% or 3,400 jobs,” said Beedle. "While the decreases in both average and period end estimated employment represent a more moderate overall impact from the decrease in the global price of oil compared to what other energy producing regions in the nation have experienced thus far, this is a larger decline than was originally predicted for 2016. Our loan demand has slowed moderately, as the Alaska economy contracts.” added Beedle. In the first nine months of 2016, Northrim generated a return on average assets of 0.96% and a return on average equity of 7.93%, as compared to a 0.88% return on average assets and 8.29% return on average equity posted by the 146 banks that make up the SNL U.S. Bank Index with assets between $1 billion and $5 billion as of June 30, 2016.  The accounting correction resulted in the Company’s return on average equity and return on average assets being lower by 0.25% and 1.80%, respectively, than they would have been without the accounting correction. NIM and tax equivalent NIM* for the first nine months of 2016 were 4.18% and 4.24%, respectively, compared to 3.60% tax equivalent NIM for the index peers. 1 Net interest income grew slightly to $14.2 million in the third quarter of 2016 as compared to $14.1 million in the previous quarter, primarily due to an increase in average portfolio loans, and fell 3% from $14.7 million in the year ago quarter mainly reflecting changes in the mix of earning assets.  In addition, net interest margin was boosted in the third quarter a year ago by the recovery of $267,000 in nonaccrual interest from a nonperforming loan that was paid off during that period.  Net interest income was unchanged in the first nine months of 2016 at $42.5 million compared to the first nine months of 2015 as an increase in earning assets was offset by changes in the mix of earning assets, as well as $646,000 in recoveries of nonaccrual interest from nonperforming loans that paid off in 2015 compared to $89,000 of recoveries in the first nine months of 2016. NIM and tax equivalent NIM* decreased in both the third quarter and first nine months of 2016 compared to prior year periods.  “We have experienced a gradual decline in our NIM primarily as a result of the flattening of the yield curve, slower growth in loan balances, and higher securities holdings,” said Schierhorn. Northrim tax equivalent NIM*, which is primarily comprised of activities in the community banking segment, remained well above the average for the 146 banks in the SNL U.S. Bank Index with assets between $1 billion and $5 billion of 3.60% as of June 30, 2016.  “We are lowering our expectations for both our NIM and our tax equivalent NIM* to stabilize in the 4.00% to 4.10% range for our NIM and the 4.05% and 4.15% range for our tax equivalent NIM*, primarily due to our expectation that the mix of our earning assets will continue to shift towards higher balances in investment securities, as we believe growth in the higher-yielding loan portfolio will continue to be adversely affected by the expected weakness of the Alaskan economy. We believe both NIM and tax equivalent NIM should both benefit in the event interest rates rise another 25 basis points or the yield curve steepens, and would be adversely affected if interest rates fall and the yield curve continues to flatten,” said Frye. The provision for loan losses was $652,000 in the third quarter of 2016 compared to $200,000 in the second quarter of 2016 and $676,000 in the third quarter of 2015.  The increase in the third quarter of 2016 as compared to the second quarter of 2016 was primarily due to a $332,000 increase in the specific impairment allocated to one $5.9 million residential land development project that was moved to nonaccrual loans in the second quarter of 2016 as well as growth in the overall loan portfolio during the quarter. The allowance for loan losses to portfolio loans at the end of the third quarter of 2016 increased to 1.95% from 1.90% at June 30, 2016 and 1.83% at September 30, 2015. In addition to home mortgage lending, Northrim has interests in other businesses that complement its core community banking activities.  It provides financial services to businesses and individuals through these interests, including purchased receivables financing, employee benefit plans, and wealth management.  These complementary business activities contributed $1.6 million, or 6% of total revenues in the third quarter of 2016, $1.5 million or 6% of revenues in the second quarter of 2016, and $1.6 million, or 6% of revenues in the third quarter a year ago. Other operating income was $11.9 million, or 46% of total revenues in the third quarter of 2016, which represented a decline of 4% from $12.4 million, or 46% of third quarter 2015 revenues. Impacting the quarter was lower other income generated from gains on the disposition of loans acquired in 2014.  On a year-to-date basis, other operating income decreased 5% to $32.9 million from $34.5 million in the first nine months of 2015, primarily due to high refinancing activity in the second quarter of 2015 and lower other income for the reasons indicated above. Operating expenses increased to $21.2 million in the third quarter of 2016 compared to $19.4 million in the second quarter of 2016 and $18.2 million in the third quarter of 2015.  The increase from the previous quarters was primarily the result of the change in the accounting treatment for the earn-out payments, including the correction for the prior periods, that added $2.6 million to pre-tax expenses in the current quarter, combined with higher salaries and other personnel expenses during the quarter.  These increases were partially offset by lower expenses associated with other real estate owned and a decrease in losses on the sale of premises and equipment in the third quarter of 2016 as compared to the second quarter of 2016.  The Company sold one branch location in the second quarter of 2016, but simultaneously entered into a long-term lease of the same branch location. Net income attributable to the Company for the community banking segment totaled $1.7 million, compared to $2.8 million in the second quarter of 2016 and $3.7 million in the third quarter of 2015, which represented a 39% and 54% decline in the current quarter compared to the second quarter of 2016 and the third quarter of 2015, respectively. Excluding the $1.6 million in additional after-tax expenses that resulted from the change in accounting, including the correction for prior periods in the third quarter of 2016, net income attributable to the Company in the current quarter would have increased 15% from the preceding quarter and decreased by 11% compared to the third quarter a year ago.  Lower other operating expenses, specifically due to the loss on the sale of the branch noted above in the second quarter of 2016 as well as lower expenses for other real estate owned in the third quarter of 2016 were primarily the reason that net income attributable to the Company would have been higher in the current quarter compared to the previous quarter if the accounting correction had not been applied.  Slower loan growth and lower gains from the sale of previously acquired loans primarily accounted for the year-over-year decline in the third quarter, outside of the effects of the accounting correction. Year-to-date, net income attributable to the Company for the community banking segment totaled $7.3 million, or $1.05 per diluted share for the first nine months of 2016, down 22% from $9.3 million in the first nine months of 2015.  Excluding the $1.6 million in additional after-tax expenses resulting from the change in accounting, net income attributable to the Company would have decreased by 5% from the same period in 2015.  Additionally, lower income from the Company's loan portfolio and lower other income from gains on the disposition of loans acquired in 2014 combined with increased personnel costs of $1.3 million in the first nine months of 2016, mainly consisting of salary and medical expenses, primarily accounted for the decline year-over-year. “RML continues to outperform our original projections made when we purchased the business at the end of 2014.  The accounting correction created a great deal of noise in the quarter for both the income statements and balance sheet. Excluding the effects of the accounting correction, third quarter earnings in the community banking segment increased compared to the prior quarter while profits were down year-over-year primarily due to a decreased yield on our loan portfolio, decreased gains from the disposition of loans from a previous acquisition, and increased salaries and other personnel expenses,” said Frye.  "While we are actively managing costs, we recognize a need to continue to invest to keep pace with compliance and risk management expectations.” The accounting correction related to the acquisition of RML is an obligation of Northrim Bank and is included in the community banking segment results. The following table provides highlights of the community banking segment of Northrim: Total mortgage production revenue in the third quarter of 2016 was $7.2 million compared to $7.6 million in the preceding quarter and $7.5 million a year ago.  “Although net realized gains on the sale of mortgage loans increased during the third quarter from the second quarter, the change in the fair value of our mortgage loan commitments generated a loss in the third quarter compared to a gain in the prior quarter primarily due to the decrease in total loan commitments in the third quarter as compared to the increase in commitments in the second quarter.  The fluctuation in commitments is primarily driven by normal seasonality,” said Schierhorn.   Third quarter 2016 mortgage lending volumes increased as compared to the second quarter, which is also a normal seasonal fluctuation, with refinancing activity accounting for 24% of total loans funded in the current quarter.  Refinancing activity accounted for 18% of loans funded in the second quarter of 2016 and 10% of third quarter 2015 production. “Seasonality also accounts for the 27% decline in mortgage commitments in the current quarter compared to the previous quarter,” Schierhorn noted. In the fourth quarter of 2015, Northrim began servicing the loans RML originates for the Alaska Housing Finance Corporation, which account for approximately 20% of loans originated by RML in 2016.  Northrim now services 970 loans in its $231.2 million servicing portfolio, which has more than doubled in size over the past year.  Servicing income contributed $782,000 to third quarter mortgage banking income, compared to $510,000 for the second quarter of 2016 and $308,000 in the third quarter a year ago. Operating expenses in the home mortgage lending segment increased to $6.3 million in the third quarter of 2016 compared to $6.2 million in the second quarter of 2016 and $5.6 million in the third quarter a year ago.  “In addition to higher commission costs, which increase when production increases, the increase in operating expenses for the home mortgage lending segment in the third quarter of 2016 compared to the third quarter of 2015 is primarily the result of increasing fixed costs for technology needs and additional staff in marketing and loan management, as well as increased employee medical costs, similar to the community banking segment,” said Frye. The following table provides highlights of the Home Mortgage Lending segment of Northrim: Northrim’s assets were $1.54 billion at September 30, 2016, mostly unchanged from a year ago and up 1% from $1.52 billion three months ago.  The mix of assets at each period end continued to shift from short term assets to portfolio investments and loans. Average investment securities decreased 1% from the preceding quarter and increased 24% from a year ago.  The investment portfolio generated an average net tax equivalent yield of 1.42% for the third quarter of 2016 and the average estimated duration of the investment portfolio was 1.2 years at September 30, 2016. Average loans held for sale increased 36% to $66.6 million in the third quarter of 2016 compared to the preceding  quarter, and increased 18% from the same quarter a year ago, primarily reflecting the seasonality of the mortgage business and the continuing steady demand for home loans in the Alaska marketplace. Year-over-year, portfolio loans increased 2% to $997.1 million at September 30, 2016, and average portfolio loans increased 1% to $976.3 million in the first nine months of 2016 compared to the same period a year ago. Construction and land development loans, which are by nature short-term, grew 13% in the third quarter of 2016 and fell 30% year-over year.  Partially offsetting this decline was the increase in commercial real estate term loans which grew 3% in the third quarter of 2016 and 13% year-over-year. Alaskans account for substantially all of Northrim’s deposit base, which is primarily made up of low-cost transaction accounts.  Balances in transaction accounts at September 30, 2016, represented 90% of total deposits.  At September 30, 2016, total deposits were $1.28 billion, up slightly from $1.26 billion both from the immediate prior quarter and the same quarter a year ago.  Year-over-year, average non-interest bearing deposits grew 7% in 2016 and average interest-bearing deposits increased 3%, bringing average total deposits up 3% to $1.26 billion at the end of the third quarter of 2016 compared to $1.23 billion at the end of the third quarter a year ago. Other borrowings declined to $4.4 million at September 30, 2016, down substantially from $12.5 million at September 30, 2015, as Northrim is now funding RML's short term borrowings from its internally generated liquidity. Shareholders’ equity increased 6% to $185.8 million, or $26.99 per share, at September 30, 2016, compared to $175.3 million, or $25.56 per share, a year ago.  Tangible book value per share* was $24.61 at September 30, 2016, compared to $22.09 per share a year ago.  Northrim remains well-capitalized with Tier 1 Capital to Risk Adjusted Assets of 14.24% at September 30, 2016. “The ratio of nonperforming assets to total assets, net of government guarantees decreased during the third quarter of 2016 to 0.78% of assets from 0.80% of assets at June 30, 2016, but increased from 0.37% a year ago primarily due to the addition of two lending relationships to non-accrual loans totaling $8.2 million in the second quarter 2016,” said Frye.  “One $5.9 million relationship is related to a residential land development project in the greater Anchorage market and has been included in adversely classified loans since December 31, 2015.  The other $2.3 million relationship is made up of three loans to a commercial business in the transportation industry, which was added to adversely classified loans in the second quarter of 2016.” “While adversely classified assets remain elevated at the end of the third quarter as compared to one year ago, we had a decrease in charge-offs in the third quarter of 2016 compared to the third quarter of 2015 and did not have any charge-offs related to the oil sector,” said Schierhorn. The following table details loan charge-offs, by industry: Net non-performing loans were 0.93% of portfolio loans compared to 1.00% at the end of the preceding quarter and 0.22% a year ago.  The increase compared to the same quarter of 2015 was primarily the result of the increase in nonaccrual loans that was discussed above. Performing restructured loans, that were not included in nonaccrual loans at the end of the third quarter of 2016, increased to $14.9 million from $11.2 million at the end of the second quarter primarily due to the restructuring of one $4.2 million oil sector relationship that included a concession for interest-only payment terms for one year.  Performing restructured loans were $3.2 million at the end of the third quarter a year ago, and the increase as of the third quarter of 2016 is primarily due to the addition of the oilfield services commercial business noted above and one medical business. The maturities of the loans to the medical business were extended to allow the amortization schedules for the loans to more closely mirror the cash flow of this business.  Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans. The Company presents restructured loans that are performing separately from those that are classified as nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans.  At September 30, 2016, performing restructured loans plus nonperforming loans, net of government guarantees, increased to 2.43% of total assets from 2.15% at the end of the preceding quarter and 0.55% a year ago. Other real estate owned ("OREO") increased slightly to $2.8 million at the end of the third quarter of 2016, compared to $2.6 million the preceding quarter and declined from $3.5 million a year ago. The allowance for loan losses was 1.95% of portfolio loans at September 30, 2016, compared to 1.90% at June 30, 2016, and 1.83% at the end of the third quarter of 2015.  Adversely classified loans totaled $41.5 million, or 4% of portfolio loans, at the end of the third quarter of 2016, compared to 4% at June 30, 2016, and 3% at the end of the third quarter of 2015.  Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees.  As of September 30, 2016, $34.7 million, or 84% of adversely classified loans net of government guarantees are attributable to five relationships in the following sectors; one retail commercial business, one commercial real estate construction project, one medical business, one residential land development project, and one oilfield services commercial business. Northrim estimates that $51.9 million, or approximately 5% of portfolio loans as of September 30, 2016, have direct exposure to the oil and gas industry in Alaska, and $4.2 million of these loans are adversely classified.  Northrim has an additional $44.4 million in unfunded commitments to companies with direct exposure to the oil and gas industry in Alaska, and none of these unfunded commitments are considered to be adversely classified loans.  “We continue to have no loans to oil producers or exploration companies," said Frye.  "We define direct exposure to the oil and gas sector as loans to borrowers that provide oilfield services and other companies that we have identified as significantly reliant upon activity in Alaska related to the oil and gas industry, such as lodging, equipment rental, transportation and other logistics services specific to this industry." Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 14 branches in Anchorage, the Matanuska Valley, Juneau, Fairbanks, Ketchikan, and Sitka serving 90% of Alaska’s population; and an asset based lending division in Washington; and a wholly-owned mortgage brokerage company, Residential Mortgage Holding Company, LLC. The Bank differentiates itself with its detailed knowledge of Alaska’s economy and its “Customer First Service” philosophy. Affiliated companies include Northrim Benefits Group, LLC; and Pacific Wealth Advisors, LLC. Forward-Looking Statement This release may contain “forward-looking statements” as that term is defined for purposes of Section 21E of the Securities and Exchange Act.  These statements are, in effect, management’s attempt to predict future events, and thus are subject to various risks and uncertainties. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. All statements, other than statements of historical fact, regarding our financial position, business strategy and management’s 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 Northrim and its management are intended to help identify forward-looking statements.  Although we believe that management’s 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 strong asset quality and to maintain or expand our market share or net interest margins; and our ability to execute our business plan.  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 the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and from time to time are disclosed in our other filings with the Securities and Exchange Commission.  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.  These forward-looking statements are made only as of the date of this release, and Northrim does not undertake any obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release. *Non-GAAP Financial Measures (Dollars in thousands, except per share data) (Unaudited) Tax equivalent NIM is a non-GAAP performance measurement in which interest income on non-taxable investments and loans is presented on a tax equivalent basis using a combined federal and state statutory rate of  41.11% in both 2016 and 2015. The most comparable GAAP measure is net interest margin and the following table sets forth the reconciliation of tax equivalent NIM to net interest margin. 2Calculated using actual days in the quarter divided by 366 for quarters ended in 2016 and actual days in the quarter divided by 365 for quarters ended in 2015. 3Calculated using actual days in the year divided by 366 for year-to-date period ended in 2016 and actual days in the year divided by 365 for year-to-date period ended in 2015. Tangible book value is a non-GAAP measure defined as shareholders' equity, less intangible assets, divided by shares outstanding.  The following table sets forth the reconciliation of tangible book value per share and book value per share. Tangible common equity to tangible assets is a non-GAAP ratio that represents total equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. This ratio has received more attention over the past several years from stock analysts and regulators.  The most comparable GAAP measure of shareholders' equity to total assets is calculated by dividing total shareholders' equity by total assets. Note Transmitted on GlobeNewswire on October 31, 2016, at 4:00 pm Alaska Standard Time.


News Article | November 1, 2016
Site: globenewswire.com

ANCHORAGE, Alaska, Oct. 31, 2016 (GLOBE NEWSWIRE) -- Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported lower earnings for the third quarter and first nine months of 2016 primarily reflecting a  non-cash accounting correction, higher operating expenses, and a decrease in net interest margin and mortgage income primarily due to slowing loan growth in both the commercial and mortgage market in Alaska compared to the same periods in 2015. Third quarter net income attributable to the Company declined to $3.1 million, or $0.44 per diluted share, compared to $4.4 million, or $0.63 per diluted share, in the second quarter of 2016, and $5.3 million, or $0.77 per diluted share, in the third quarter of 2015.  In the first nine months of 2016, net income attributable to the Company decreased to $10.8 million, or $1.55 per diluted share, compared to $13.7 million, or $1.97 per diluted share in the first nine months of 2015.  Excluding the accounting correction described below, third quarter net income attributable to the Company would have been $4.7 million, or $0.67 per diluted share, and $12.4 million, or $1.78 per diluted share, for the first nine months of 2016. Although  the non-cash accounting correction covered the period from December 1, 2014, through June 30, 2016, or the seven previous fiscal quarters, the Company made the correction in the third quarter of 2016 on a prospective basis, which resulted in an increase in expenses, net of tax, in the current quarter of $1.4 million, or $0.20 per diluted share relating to the accounting correction for the prior periods.  Prior periods have not been adjusted, consistent with the prospective method, for the change in accounting.  The correction reduced total shareholders' equity by $1.4 million, reduced goodwill by $7.3 million, and increased regulatory capital ratios as of September 30, 2016. The correction was due to a change in accounting treatment for the earn-out payments associated with the Company's 2014 acquisition of Residential Mortgage Holding Company, LLC ("RML").  This change in accounting treatment also reduced net income for the third quarter of 2016 by $213,000, or $0.03 per diluted share, for a total decrease in net income of $1.6 million, or $0.23 per share including the correction for the prior periods. Following the reductions in the balance sheet resulting from the accounting correction, book value per share decreased $0.23 or 1% and tangible book value* per share grew $0.83, or 3.5% to $24.61 as of September 30, 2016. “The accounting correction arose due to the complexity of the facts and circumstances and the nuances of accounting guidance for the payments related to our 2014 acquisition of RML, particularly because of the continued employment of some of the selling members of RML. The earn-out payments are based on RML's pretax income.  This payment, which is now reported as "compensation expense, RML acquisition payments" in the Company's Income Statement reflects 100% of the payments that the Company will pay to the selling members of RML.  Prior to the accounting correction, the Company had essentially capitalized its estimate of the fair value of all future earn-out payments as part of the price paid to acquire RML. The expenses recorded in prior periods as ‘change in fair value, RML earn-out liability’ represent the increase in payments owed to the sellers of RML in excess of our original estimate at the time of purchase due to higher than anticipated pretax income from RML's operations.” said Joseph Beedle, Chairman, President and CEO of Northrim Bancorp.  “The cash paid to the sellers of RML for the earn-out payments does not change under this new reporting method, only the way the Company is accounting for it in its financial statements.” * References to tax equivalent NIM, tangible book value per share, tangible common equity and tangible assets (all of which exclude intangible assets) represent non-GAAP financial measures. Management has presented these non-GAAP measurements in this earnings release, because it believes these measures are useful to investors. See the end of this release for reconciliations of these measures to GAAP financial measures. “Under the new accounting treatment, the quarterly net income in prior periods related to the earn-out payments would have decreased by approximately $213,000 per quarter.” said Latosha Frye, Chief Financial Officer.  “As it has since inception and regardless of this change in accounting method, expense related to the earn-out payments will fluctuate based on RML’s pretax income.” The following table outlines the impact of the accounting correction on the net income attributable to the Company from each of our reporting segments for the third quarter of 2016 and the results from those segments in the third quarter of 2015: Home mortgage lending contributed $8.3 million to pre-tax revenues and $0.20 to net earnings per share (“EPS”) in the third quarter of 2016, and $22.5 million to pre-tax revenue and $0.50 to net EPS in the first nine months of 2016. “The loan portfolio increased 3% in the third quarter of 2016 compared to the preceding quarter end and 2% year-over-year, mainly reflecting growth in both commercial and commercial real estate loans and offsetting payoffs in several large commercial construction projects in 2016,” said Joe Schierhorn, Northrim Bank’s President and CEO.  “Our commercial real estate (“CRE”) loan portfolio (both owner-occupied and investment properties) generated 13% year-over-year growth compared to the third quarter of 2015, and accounted for 50% of loans at the end of September 2016. “New construction projects in the Anchorage market are coming in at a slower pace than in the past few years, as the economy contracts mainly due to the effects of continued low oil prices,” Schierhorn continued.  “Construction loans were down 30% year-over-year in the third quarter of 2016, primarily due to approximately $84 million in projects which were completed and termed out in the last twelve months.  Of these construction loans, $55 million converted to the CRE term loan portfolio, which contributed to overall growth of $13.8 million, or 3%, in our CRE portfolio in the third quarter.”  We expect construction loans to decrease by another $10-15 million by the end of 2016. 1As of June 30, 2016, the SNL US Bank Index tracked 146 banks with assets between $1 billion and $5 billion with averages for the following ratios: NIM (tax equivalent) 3.60%, return on average assets 0.88%, and return on average equity 8.29% Northrim Bank sponsors the Alaskanomics blog to provide news, analysis, and commentary on Alaska’s economy.  Join the conversation at Alaskanomics.com or for more information on the Alaska economy, visit: www.northrim.com and click on the “About Northrim” link and then click “Alaska's Economy”. Information from our website is not incorporated into, and does not form a part of this press release. “According to the Alaska Department of Labor, preliminary data shows that average employment in the Alaska economy was down an estimated 0.2% or 689 jobs in the first nine months of 2016 as compared to the same period in 2015 as job losses in the oil and gas industry, construction, state government and professional and business services continue to be partially offset by growth in retail trade, health care, and leisure and hospitality jobs.  However, estimated employment as of the end of September 2016 compared to September 2015 was down 1.0% or 3,400 jobs,” said Beedle. "While the decreases in both average and period end estimated employment represent a more moderate overall impact from the decrease in the global price of oil compared to what other energy producing regions in the nation have experienced thus far, this is a larger decline than was originally predicted for 2016. Our loan demand has slowed moderately, as the Alaska economy contracts.” added Beedle. In the first nine months of 2016, Northrim generated a return on average assets of 0.96% and a return on average equity of 7.93%, as compared to a 0.88% return on average assets and 8.29% return on average equity posted by the 146 banks that make up the SNL U.S. Bank Index with assets between $1 billion and $5 billion as of June 30, 2016.  The accounting correction resulted in the Company’s return on average equity and return on average assets being lower by 0.25% and 1.80%, respectively, than they would have been without the accounting correction. NIM and tax equivalent NIM* for the first nine months of 2016 were 4.18% and 4.24%, respectively, compared to 3.60% tax equivalent NIM for the index peers. 1 Net interest income grew slightly to $14.2 million in the third quarter of 2016 as compared to $14.1 million in the previous quarter, primarily due to an increase in average portfolio loans, and fell 3% from $14.7 million in the year ago quarter mainly reflecting changes in the mix of earning assets.  In addition, net interest margin was boosted in the third quarter a year ago by the recovery of $267,000 in nonaccrual interest from a nonperforming loan that was paid off during that period.  Net interest income was unchanged in the first nine months of 2016 at $42.5 million compared to the first nine months of 2015 as an increase in earning assets was offset by changes in the mix of earning assets, as well as $646,000 in recoveries of nonaccrual interest from nonperforming loans that paid off in 2015 compared to $89,000 of recoveries in the first nine months of 2016. NIM and tax equivalent NIM* decreased in both the third quarter and first nine months of 2016 compared to prior year periods.  “We have experienced a gradual decline in our NIM primarily as a result of the flattening of the yield curve, slower growth in loan balances, and higher securities holdings,” said Schierhorn. Northrim tax equivalent NIM*, which is primarily comprised of activities in the community banking segment, remained well above the average for the 146 banks in the SNL U.S. Bank Index with assets between $1 billion and $5 billion of 3.60% as of June 30, 2016.  “We are lowering our expectations for both our NIM and our tax equivalent NIM* to stabilize in the 4.00% to 4.10% range for our NIM and the 4.05% and 4.15% range for our tax equivalent NIM*, primarily due to our expectation that the mix of our earning assets will continue to shift towards higher balances in investment securities, as we believe growth in the higher-yielding loan portfolio will continue to be adversely affected by the expected weakness of the Alaskan economy. We believe both NIM and tax equivalent NIM should both benefit in the event interest rates rise another 25 basis points or the yield curve steepens, and would be adversely affected if interest rates fall and the yield curve continues to flatten,” said Frye. The provision for loan losses was $652,000 in the third quarter of 2016 compared to $200,000 in the second quarter of 2016 and $676,000 in the third quarter of 2015.  The increase in the third quarter of 2016 as compared to the second quarter of 2016 was primarily due to a $332,000 increase in the specific impairment allocated to one $5.9 million residential land development project that was moved to nonaccrual loans in the second quarter of 2016 as well as growth in the overall loan portfolio during the quarter. The allowance for loan losses to portfolio loans at the end of the third quarter of 2016 increased to 1.95% from 1.90% at June 30, 2016 and 1.83% at September 30, 2015. In addition to home mortgage lending, Northrim has interests in other businesses that complement its core community banking activities.  It provides financial services to businesses and individuals through these interests, including purchased receivables financing, employee benefit plans, and wealth management.  These complementary business activities contributed $1.6 million, or 6% of total revenues in the third quarter of 2016, $1.5 million or 6% of revenues in the second quarter of 2016, and $1.6 million, or 6% of revenues in the third quarter a year ago. Other operating income was $11.9 million, or 46% of total revenues in the third quarter of 2016, which represented a decline of 4% from $12.4 million, or 46% of third quarter 2015 revenues. Impacting the quarter was lower other income generated from gains on the disposition of loans acquired in 2014.  On a year-to-date basis, other operating income decreased 5% to $32.9 million from $34.5 million in the first nine months of 2015, primarily due to high refinancing activity in the second quarter of 2015 and lower other income for the reasons indicated above. Operating expenses increased to $21.2 million in the third quarter of 2016 compared to $19.4 million in the second quarter of 2016 and $18.2 million in the third quarter of 2015.  The increase from the previous quarters was primarily the result of the change in the accounting treatment for the earn-out payments, including the correction for the prior periods, that added $2.6 million to pre-tax expenses in the current quarter, combined with higher salaries and other personnel expenses during the quarter.  These increases were partially offset by lower expenses associated with other real estate owned and a decrease in losses on the sale of premises and equipment in the third quarter of 2016 as compared to the second quarter of 2016.  The Company sold one branch location in the second quarter of 2016, but simultaneously entered into a long-term lease of the same branch location. Net income attributable to the Company for the community banking segment totaled $1.7 million, compared to $2.8 million in the second quarter of 2016 and $3.7 million in the third quarter of 2015, which represented a 39% and 54% decline in the current quarter compared to the second quarter of 2016 and the third quarter of 2015, respectively. Excluding the $1.6 million in additional after-tax expenses that resulted from the change in accounting, including the correction for prior periods in the third quarter of 2016, net income attributable to the Company in the current quarter would have increased 15% from the preceding quarter and decreased by 11% compared to the third quarter a year ago.  Lower other operating expenses, specifically due to the loss on the sale of the branch noted above in the second quarter of 2016 as well as lower expenses for other real estate owned in the third quarter of 2016 were primarily the reason that net income attributable to the Company would have been higher in the current quarter compared to the previous quarter if the accounting correction had not been applied.  Slower loan growth and lower gains from the sale of previously acquired loans primarily accounted for the year-over-year decline in the third quarter, outside of the effects of the accounting correction. Year-to-date, net income attributable to the Company for the community banking segment totaled $7.3 million, or $1.05 per diluted share for the first nine months of 2016, down 22% from $9.3 million in the first nine months of 2015.  Excluding the $1.6 million in additional after-tax expenses resulting from the change in accounting, net income attributable to the Company would have decreased by 5% from the same period in 2015.  Additionally, lower income from the Company's loan portfolio and lower other income from gains on the disposition of loans acquired in 2014 combined with increased personnel costs of $1.3 million in the first nine months of 2016, mainly consisting of salary and medical expenses, primarily accounted for the decline year-over-year. “RML continues to outperform our original projections made when we purchased the business at the end of 2014.  The accounting correction created a great deal of noise in the quarter for both the income statements and balance sheet. Excluding the effects of the accounting correction, third quarter earnings in the community banking segment increased compared to the prior quarter while profits were down year-over-year primarily due to a decreased yield on our loan portfolio, decreased gains from the disposition of loans from a previous acquisition, and increased salaries and other personnel expenses,” said Frye.  "While we are actively managing costs, we recognize a need to continue to invest to keep pace with compliance and risk management expectations.” The accounting correction related to the acquisition of RML is an obligation of Northrim Bank and is included in the community banking segment results. The following table provides highlights of the community banking segment of Northrim: Total mortgage production revenue in the third quarter of 2016 was $7.2 million compared to $7.6 million in the preceding quarter and $7.5 million a year ago.  “Although net realized gains on the sale of mortgage loans increased during the third quarter from the second quarter, the change in the fair value of our mortgage loan commitments generated a loss in the third quarter compared to a gain in the prior quarter primarily due to the decrease in total loan commitments in the third quarter as compared to the increase in commitments in the second quarter.  The fluctuation in commitments is primarily driven by normal seasonality,” said Schierhorn.   Third quarter 2016 mortgage lending volumes increased as compared to the second quarter, which is also a normal seasonal fluctuation, with refinancing activity accounting for 24% of total loans funded in the current quarter.  Refinancing activity accounted for 18% of loans funded in the second quarter of 2016 and 10% of third quarter 2015 production. “Seasonality also accounts for the 27% decline in mortgage commitments in the current quarter compared to the previous quarter,” Schierhorn noted. In the fourth quarter of 2015, Northrim began servicing the loans RML originates for the Alaska Housing Finance Corporation, which account for approximately 20% of loans originated by RML in 2016.  Northrim now services 970 loans in its $231.2 million servicing portfolio, which has more than doubled in size over the past year.  Servicing income contributed $782,000 to third quarter mortgage banking income, compared to $510,000 for the second quarter of 2016 and $308,000 in the third quarter a year ago. Operating expenses in the home mortgage lending segment increased to $6.3 million in the third quarter of 2016 compared to $6.2 million in the second quarter of 2016 and $5.6 million in the third quarter a year ago.  “In addition to higher commission costs, which increase when production increases, the increase in operating expenses for the home mortgage lending segment in the third quarter of 2016 compared to the third quarter of 2015 is primarily the result of increasing fixed costs for technology needs and additional staff in marketing and loan management, as well as increased employee medical costs, similar to the community banking segment,” said Frye. The following table provides highlights of the Home Mortgage Lending segment of Northrim: Northrim’s assets were $1.54 billion at September 30, 2016, mostly unchanged from a year ago and up 1% from $1.52 billion three months ago.  The mix of assets at each period end continued to shift from short term assets to portfolio investments and loans. Average investment securities decreased 1% from the preceding quarter and increased 24% from a year ago.  The investment portfolio generated an average net tax equivalent yield of 1.42% for the third quarter of 2016 and the average estimated duration of the investment portfolio was 1.2 years at September 30, 2016. Average loans held for sale increased 36% to $66.6 million in the third quarter of 2016 compared to the preceding  quarter, and increased 18% from the same quarter a year ago, primarily reflecting the seasonality of the mortgage business and the continuing steady demand for home loans in the Alaska marketplace. Year-over-year, portfolio loans increased 2% to $997.1 million at September 30, 2016, and average portfolio loans increased 1% to $976.3 million in the first nine months of 2016 compared to the same period a year ago. Construction and land development loans, which are by nature short-term, grew 13% in the third quarter of 2016 and fell 30% year-over year.  Partially offsetting this decline was the increase in commercial real estate term loans which grew 3% in the third quarter of 2016 and 13% year-over-year. Alaskans account for substantially all of Northrim’s deposit base, which is primarily made up of low-cost transaction accounts.  Balances in transaction accounts at September 30, 2016, represented 90% of total deposits.  At September 30, 2016, total deposits were $1.28 billion, up slightly from $1.26 billion both from the immediate prior quarter and the same quarter a year ago.  Year-over-year, average non-interest bearing deposits grew 7% in 2016 and average interest-bearing deposits increased 3%, bringing average total deposits up 3% to $1.26 billion at the end of the third quarter of 2016 compared to $1.23 billion at the end of the third quarter a year ago. Other borrowings declined to $4.4 million at September 30, 2016, down substantially from $12.5 million at September 30, 2015, as Northrim is now funding RML's short term borrowings from its internally generated liquidity. Shareholders’ equity increased 6% to $185.8 million, or $26.99 per share, at September 30, 2016, compared to $175.3 million, or $25.56 per share, a year ago.  Tangible book value per share* was $24.61 at September 30, 2016, compared to $22.09 per share a year ago.  Northrim remains well-capitalized with Tier 1 Capital to Risk Adjusted Assets of 14.24% at September 30, 2016. “The ratio of nonperforming assets to total assets, net of government guarantees decreased during the third quarter of 2016 to 0.78% of assets from 0.80% of assets at June 30, 2016, but increased from 0.37% a year ago primarily due to the addition of two lending relationships to non-accrual loans totaling $8.2 million in the second quarter 2016,” said Frye.  “One $5.9 million relationship is related to a residential land development project in the greater Anchorage market and has been included in adversely classified loans since December 31, 2015.  The other $2.3 million relationship is made up of three loans to a commercial business in the transportation industry, which was added to adversely classified loans in the second quarter of 2016.” “While adversely classified assets remain elevated at the end of the third quarter as compared to one year ago, we had a decrease in charge-offs in the third quarter of 2016 compared to the third quarter of 2015 and did not have any charge-offs related to the oil sector,” said Schierhorn. The following table details loan charge-offs, by industry: Net non-performing loans were 0.93% of portfolio loans compared to 1.00% at the end of the preceding quarter and 0.22% a year ago.  The increase compared to the same quarter of 2015 was primarily the result of the increase in nonaccrual loans that was discussed above. Performing restructured loans, that were not included in nonaccrual loans at the end of the third quarter of 2016, increased to $14.9 million from $11.2 million at the end of the second quarter primarily due to the restructuring of one $4.2 million oil sector relationship that included a concession for interest-only payment terms for one year.  Performing restructured loans were $3.2 million at the end of the third quarter a year ago, and the increase as of the third quarter of 2016 is primarily due to the addition of the oilfield services commercial business noted above and one medical business. The maturities of the loans to the medical business were extended to allow the amortization schedules for the loans to more closely mirror the cash flow of this business.  Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans. The Company presents restructured loans that are performing separately from those that are classified as nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans.  At September 30, 2016, performing restructured loans plus nonperforming loans, net of government guarantees, increased to 2.43% of total assets from 2.15% at the end of the preceding quarter and 0.55% a year ago. Other real estate owned ("OREO") increased slightly to $2.8 million at the end of the third quarter of 2016, compared to $2.6 million the preceding quarter and declined from $3.5 million a year ago. The allowance for loan losses was 1.95% of portfolio loans at September 30, 2016, compared to 1.90% at June 30, 2016, and 1.83% at the end of the third quarter of 2015.  Adversely classified loans totaled $41.5 million, or 4% of portfolio loans, at the end of the third quarter of 2016, compared to 4% at June 30, 2016, and 3% at the end of the third quarter of 2015.  Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees.  As of September 30, 2016, $34.7 million, or 84% of adversely classified loans net of government guarantees are attributable to five relationships in the following sectors; one retail commercial business, one commercial real estate construction project, one medical business, one residential land development project, and one oilfield services commercial business. Northrim estimates that $51.9 million, or approximately 5% of portfolio loans as of September 30, 2016, have direct exposure to the oil and gas industry in Alaska, and $4.2 million of these loans are adversely classified.  Northrim has an additional $44.4 million in unfunded commitments to companies with direct exposure to the oil and gas industry in Alaska, and none of these unfunded commitments are considered to be adversely classified loans.  “We continue to have no loans to oil producers or exploration companies," said Frye.  "We define direct exposure to the oil and gas sector as loans to borrowers that provide oilfield services and other companies that we have identified as significantly reliant upon activity in Alaska related to the oil and gas industry, such as lodging, equipment rental, transportation and other logistics services specific to this industry." Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 14 branches in Anchorage, the Matanuska Valley, Juneau, Fairbanks, Ketchikan, and Sitka serving 90% of Alaska’s population; and an asset based lending division in Washington; and a wholly-owned mortgage brokerage company, Residential Mortgage Holding Company, LLC. The Bank differentiates itself with its detailed knowledge of Alaska’s economy and its “Customer First Service” philosophy. Affiliated companies include Northrim Benefits Group, LLC; and Pacific Wealth Advisors, LLC. Forward-Looking Statement This release may contain “forward-looking statements” as that term is defined for purposes of Section 21E of the Securities and Exchange Act.  These statements are, in effect, management’s attempt to predict future events, and thus are subject to various risks and uncertainties. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. All statements, other than statements of historical fact, regarding our financial position, business strategy and management’s 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 Northrim and its management are intended to help identify forward-looking statements.  Although we believe that management’s 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 strong asset quality and to maintain or expand our market share or net interest margins; and our ability to execute our business plan.  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 the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and from time to time are disclosed in our other filings with the Securities and Exchange Commission.  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.  These forward-looking statements are made only as of the date of this release, and Northrim does not undertake any obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release. *Non-GAAP Financial Measures (Dollars in thousands, except per share data) (Unaudited) Tax equivalent NIM is a non-GAAP performance measurement in which interest income on non-taxable investments and loans is presented on a tax equivalent basis using a combined federal and state statutory rate of  41.11% in both 2016 and 2015. The most comparable GAAP measure is net interest margin and the following table sets forth the reconciliation of tax equivalent NIM to net interest margin. 2Calculated using actual days in the quarter divided by 366 for quarters ended in 2016 and actual days in the quarter divided by 365 for quarters ended in 2015. 3Calculated using actual days in the year divided by 366 for year-to-date period ended in 2016 and actual days in the year divided by 365 for year-to-date period ended in 2015. Tangible book value is a non-GAAP measure defined as shareholders' equity, less intangible assets, divided by shares outstanding.  The following table sets forth the reconciliation of tangible book value per share and book value per share. Tangible common equity to tangible assets is a non-GAAP ratio that represents total equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. This ratio has received more attention over the past several years from stock analysts and regulators.  The most comparable GAAP measure of shareholders' equity to total assets is calculated by dividing total shareholders' equity by total assets. Note Transmitted on GlobeNewswire on October 31, 2016, at 4:00 pm Alaska Standard Time.


News Article | November 18, 2016
Site: globenewswire.com

KENILWORTH, N.J., Nov. 18, 2016 (GLOBE NEWSWIRE) -- Enterprise Bank NJ (the “Bank”) (OTC:ENBN) recorded third quarter earnings of $454,000, or $0.14 per share, for the quarter ended September 30, 2016, compared to earnings of $440,000, or $0.15 per share for the quarter ended September 30, 2015 – an increase of $14,000, or 3.2%, year over year.  For the nine months ended September 30, 2016, the Bank reported a net profit of $1,381,000 or $0.44 per share compared to $1,161,000 or $0.40 per share for the same period in 2015 – an increase of $220,000, or 18.9%. Assets As of September 30, 2016, total assets were $207.3 million as compared to $192.8 million at December 31, 2015 – an increase of $14.5 million or 7.5%. Don Haake, President and CEO stated, "New business generation has been exceptional the past few years and although we did experience a dip in loan closings in the second quarter, we are back on track in the third quarter, with loan growth through third quarter reaching $12.7 million, or 7.1% over year-end 2015. As stated last quarter, we do not have anxiety over intermittent slowdowns as we believe our growth is based on relationships with customers and will continue to produce the consistent earnings we strive for, while maintaining sound asset quality and stable margins.” Capital Stockholders’ equity totaled $27.0 million at September 30, 2016, compared to $25.1 million at December 31, 2015. All of the Bank’s capital ratios remain strong and well in excess of the current regulatory definition of a “well capitalized” institution. At September 30, 2016, the Bank’s tier one leverage capital ratio was 13.31% and the Bank’s Total Risk Based Capital Ratio was 15.88%.  In addition, the new Common Equity Tier 1 Ratio was 14.63% for the third quarter, which continues to be well in excess of the 4.5% current minimum regulatory threshold and the fully transitioned ratio of 7.0% for the year 2019. Net Interest Income Net interest income was $1,936,000 for the quarter ending September 30, 2016 compared to $1,836,000 for the quarter ending September 30, 2015 – an increase of $100,000, or 5.4%. On a year to date basis, net interest income was $5,711,000 for the nine months ended September 30, 2016 compared to $5,224,000 for the nine months ended September 30, 2015 – an increase of $487,000 or 9.3%.  The Bank’s net interest margin (NIM) for the nine months ended September 30, 2016 remained strong at 3.89% compared to 4.13% for the same period in 2015. The slight decline in the NIM is attributed to higher rate loans paying off late last year compared to the market for new originations. Provision for Loan Loss During the nine months ended September 30, 2016, the Bank added an additional $234,000 to the provision.  The decrease year over year is $12,000 or 4.9% primarily due to a more moderate loan growth in 2016. Non-Interest Expense Total non-interest expense for the quarter ending September 30, 2016 was $1,154,000 compared to $1,051,000 for the quarter ended September 30, 2015.  For the nine months ended September 30, 2016, non-interest expense was $3,461,000 compared to $3,198,000 for the same period in 2015 – an increase of $263,000 or 8.2%.  On a year to date basis, compensation and benefits account for $153,000 of the increase related to staffing additions made late in 2015 and in the second quarter in preparation of the Newark Branch opening, which is anticipated to open before the end of November 2016.  IT related expenses increased $47,000 related the full impact of hardware and telephone system upgrades that occurred in the second half of 2015. In addition, other expenses are up approximately $40,000 primarily due to the gain on the sale of assets, which offset $33,000 in expenses in 2015 that did not recur in 2016. Asset Quality The bank had two non-performing loans totaling $220,000 at September 30, 2016, as compared to $360,000 for the same period last year. One non-performing loan paid off at year end in the amount of $240,000.  Currently, the two loans have been making payments as agreed.  In addition, an OREO property remains on the books for $1.25 million, but we received a letter of intent in October and hope to see the sale completed sometime in the first quarter of next year. THE BANK Enterprise Bank NJ, headquartered in Kenilworth, New Jersey, is listed on the Pink Sheets under the symbol "ENBN." The Bank focuses on serving the needs of small to medium sized businesses, commercial real estate borrowers, professional practices and consumers. Its services include business and personal checking, savings, money market and certificate of deposit accounts. Additionally, the Bank offers commercial and consumer loans, lines of credit, ATM cards, debit cards, E-Banking, remote deposit capture, and free telephone and online banking. Enterprise Bank has received approval for their application for its fourth banking office to be located in the “Ironbound” section of Newark, which is an up and coming urban/industrial community and the home to a growing customer base of the bank.  A rendering of the new branch is on our website and we are looking forward to serving the community more fully as it is set to open before Thanksgiving. This news release may contain forward-looking statements. We caution that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Such statements are also subject to certain factors that may cause the Bank's results to vary from those expected. These factors include changing economic and financial market conditions, competition, ability to execute the Bank's business plan, items already mentioned in this press release, and other factors. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of this date. The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect events and circumstances that arise after the date of this release.


News Article | November 18, 2016
Site: globenewswire.com

KENILWORTH, N.J., Nov. 18, 2016 (GLOBE NEWSWIRE) -- Enterprise Bank NJ (the “Bank”) (OTC:ENBN) recorded third quarter earnings of $454,000, or $0.14 per share, for the quarter ended September 30, 2016, compared to earnings of $440,000, or $0.15 per share for the quarter ended September 30, 2015 – an increase of $14,000, or 3.2%, year over year.  For the nine months ended September 30, 2016, the Bank reported a net profit of $1,381,000 or $0.44 per share compared to $1,161,000 or $0.40 per share for the same period in 2015 – an increase of $220,000, or 18.9%. Assets As of September 30, 2016, total assets were $207.3 million as compared to $192.8 million at December 31, 2015 – an increase of $14.5 million or 7.5%. Don Haake, President and CEO stated, "New business generation has been exceptional the past few years and although we did experience a dip in loan closings in the second quarter, we are back on track in the third quarter, with loan growth through third quarter reaching $12.7 million, or 7.1% over year-end 2015. As stated last quarter, we do not have anxiety over intermittent slowdowns as we believe our growth is based on relationships with customers and will continue to produce the consistent earnings we strive for, while maintaining sound asset quality and stable margins.” Capital Stockholders’ equity totaled $27.0 million at September 30, 2016, compared to $25.1 million at December 31, 2015. All of the Bank’s capital ratios remain strong and well in excess of the current regulatory definition of a “well capitalized” institution. At September 30, 2016, the Bank’s tier one leverage capital ratio was 13.31% and the Bank’s Total Risk Based Capital Ratio was 15.88%.  In addition, the new Common Equity Tier 1 Ratio was 14.63% for the third quarter, which continues to be well in excess of the 4.5% current minimum regulatory threshold and the fully transitioned ratio of 7.0% for the year 2019. Net Interest Income Net interest income was $1,936,000 for the quarter ending September 30, 2016 compared to $1,836,000 for the quarter ending September 30, 2015 – an increase of $100,000, or 5.4%. On a year to date basis, net interest income was $5,711,000 for the nine months ended September 30, 2016 compared to $5,224,000 for the nine months ended September 30, 2015 – an increase of $487,000 or 9.3%.  The Bank’s net interest margin (NIM) for the nine months ended September 30, 2016 remained strong at 3.89% compared to 4.13% for the same period in 2015. The slight decline in the NIM is attributed to higher rate loans paying off late last year compared to the market for new originations. Provision for Loan Loss During the nine months ended September 30, 2016, the Bank added an additional $234,000 to the provision.  The decrease year over year is $12,000 or 4.9% primarily due to a more moderate loan growth in 2016. Non-Interest Expense Total non-interest expense for the quarter ending September 30, 2016 was $1,154,000 compared to $1,051,000 for the quarter ended September 30, 2015.  For the nine months ended September 30, 2016, non-interest expense was $3,461,000 compared to $3,198,000 for the same period in 2015 – an increase of $263,000 or 8.2%.  On a year to date basis, compensation and benefits account for $153,000 of the increase related to staffing additions made late in 2015 and in the second quarter in preparation of the Newark Branch opening, which is anticipated to open before the end of November 2016.  IT related expenses increased $47,000 related the full impact of hardware and telephone system upgrades that occurred in the second half of 2015. In addition, other expenses are up approximately $40,000 primarily due to the gain on the sale of assets, which offset $33,000 in expenses in 2015 that did not recur in 2016. Asset Quality The bank had two non-performing loans totaling $220,000 at September 30, 2016, as compared to $360,000 for the same period last year. One non-performing loan paid off at year end in the amount of $240,000.  Currently, the two loans have been making payments as agreed.  In addition, an OREO property remains on the books for $1.25 million, but we received a letter of intent in October and hope to see the sale completed sometime in the first quarter of next year. THE BANK Enterprise Bank NJ, headquartered in Kenilworth, New Jersey, is listed on the Pink Sheets under the symbol "ENBN." The Bank focuses on serving the needs of small to medium sized businesses, commercial real estate borrowers, professional practices and consumers. Its services include business and personal checking, savings, money market and certificate of deposit accounts. Additionally, the Bank offers commercial and consumer loans, lines of credit, ATM cards, debit cards, E-Banking, remote deposit capture, and free telephone and online banking. Enterprise Bank has received approval for their application for its fourth banking office to be located in the “Ironbound” section of Newark, which is an up and coming urban/industrial community and the home to a growing customer base of the bank.  A rendering of the new branch is on our website and we are looking forward to serving the community more fully as it is set to open before Thanksgiving. This news release may contain forward-looking statements. We caution that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Such statements are also subject to certain factors that may cause the Bank's results to vary from those expected. These factors include changing economic and financial market conditions, competition, ability to execute the Bank's business plan, items already mentioned in this press release, and other factors. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of this date. The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect events and circumstances that arise after the date of this release.


News Article | October 25, 2016
Site: globenewswire.com

CORTLAND, Ohio, Oct. 25, 2016 (GLOBE NEWSWIRE) -- Cortland Bancorp (OTCQB:CLDB), the holding company for Cortland Savings and Banking Company, today reported that for the first nine months of 2016, net income grew 13% to $3.7 million, or $0.85 per share, compared to $3.3 million, or $0.73 per share, for the first nine months of 2015. Net income was stable at $1.2 million, or $0.27 per share, for the third quarters of 2016 and 2015 and for the second quarter of 2016. All results are unaudited. “We achieved solid financial results in the third quarter, with strong loan and deposit growth, solid contributions from our mortgage operation and improving asset quality.,” said James M. Gasior, President and Chief Executive Officer.  “Compared to a year ago, deposits grew by $54 million, or 12%, and our loan portfolio increased by $36 million, or 10%.  We delivered a 17% year-over-year increase and an 82% increase year-to-date in mortgage banking revenue, driven by new purchases, including new construction, and by strong refinancing activities because of lower long-term interest rates.  Asset quality improved with NPAs to total assets at 1.46%. “During the quarter we made important investments for our future by refreshing our brand, creating a unique image for our products and our presence in the market. “Branding is very important to us, as we aim to effectively establish a significant and differentiated presence in our markets to attract and retain loyal customers and generate long-term growth, commented Gasior.”  During the quarter, we also received regulatory approval to locate our fourteenth full-service branch in Hudson, Ohio, with an expected opening in the fourth quarter this year. Third Quarter 2016 (at, or for the period September 30, 2016): Net Interest Income Primarily due to higher average loan balances, third quarter net interest income increased 6% to $4.9 million, compared to $4.6 million for the third quarter a year ago.  Net interest income was $5.0 million for the second quarter of 2016.  The decline in net interest income on a linked quarter basis was mainly due to additional interest collected on nonaccrual loans in the prior quarter.  Year-to-date, net interest income increased 6% to $14.6 million, compared to $13.8 million for the first nine months of 2015. Net Interest Margin Net interest margin (“NIM”) was 3.63% for the third quarter of 2016, compared to 3.67% for the third quarter of 2015, and 3.77% for the second quarter of 2016.  Year-to-date, and for the first nine months of 2015, NIM was flat at 3.66%.  “Both the mix of our assets and slightly lower yields on loans and investment securities accounts for the slight compression in NIM from prior quarters,” said David Lucido, Senior Vice President and Chief Financial Officer. “After repaying the $4.5 million in high-cost Federal Home Loan Bank (“FHLB”) advances in the first quarter of this year, the remaining $13.5 million in long-term FHLB advances are scheduled to mature in December 2016, January, May and September, 2017.  These advances represent 19% of our third quarter funding costs.  Upon maturity, we anticipate refinancing these advances at a much lower interest rate, reducing annual interest expense by approximately $300,000.  The resulting improved funding mix is expected to have a positive impact on our net interest margin, which is already strong,” said Lucido. Provision for loan losses for the third quarter of 2016 was $50,000, compared to $100,000 for the third quarter a year ago.  No provision was taken for the second quarter of 2016, primarily because of the positive outcome on a customer bankruptcy case in the second quarter, which improved asset quality.  For the first nine months of 2016, provision for loan losses was $50,000, compared to $390,000 for the first nine months of 2015.  The loan loss allowance, as a percentage of loans, was 1.24%, at the September quarter end remaining in line with the 1.27% ratio at the June quarter end. Non-Interest Income Total non-interest income, excluding investment gains and losses, increased 4% to $1.0 million for the third quarter of 2016, compared to the third quarter of 2015, and declined 11% from $1.2 million for the second quarter of 2016.  Non-interest income increased 12% to $3.3 million for the first nine months of 2016, from $2.9 million for the first nine months of 2015. “Mortgage banking revenue increased 17% from a year ago and contributed meaningfully to our non-interest income in the quarter.  Although mortgage banking revenues were down on a linked quarter basis, year-to-date, our mortgage banking gains grew 82%, compared to the first nine months of 2015,” added Gasior.  “Strong loan demand and refinancing activities are robust reflecting the affordable interest rates currently available.”  New home purchases and construction accounted for 74% of mortgage volume while refinancing transactions represented 26% of loan volumes for the second quarter. Non-interest expense for the third quarter of 2016 totaled $4.5 million, compared to $4.0 million for the third quarter of 2015, and $4.7 million for the second quarter of 2016.  For the first nine months of 2016, non-interest expense was $13.7 million, compared to $12.2 million for the first nine months of 2015.   “The higher non-interest expense in 2016 is mainly related to additional staff to support commercial and private bank business growth.  Investments in continued brand marketing and equipment expenses also contributed to the increase,” said Lucido. The efficiency ratio for the third quarter of 2016 was 72.42%, compared to 67.42% for the third quarter of 2015, and 73.84% for the second quarter of 2016.  The efficiency ratio for the nine months ended September 30, 2016 was 72.49%, compared to 69.86% for the nine months ended September 30, 2015.  “We continue our efforts to increase our investment in personnel across business lines with a view to increasing revenues and reducing our efficiency ratio as the bank executes on organic growth initiatives.” “The effective tax rate for the third quarter of 2016 was 20.8% compared to 23.4% in the third quarter a year ago reflecting the benefits of investments with tax incentives and tax free components of our revenue stream,” added Lucido. Total assets grew 9% year-over-year to $621.2 million at September 30, 2016, compared to $570.3 million at September 30, 2015, and increased 2% from $606.4 million at June 30, 2016. Investment securities totaled $164.1 million at September 30, 2016, compared to $159.8 million at September 30, 2015, and $163.8 million at June 30, 2016.  As of September 30, 2016, the securities primarily comprised of high-grade mortgage-back securities issued by U.S. Government sponsored entities.  The increase in investment securities year-over-year, and from the preceding quarter, reflects the strong deposit growth generated during the year. Total loans increased 10% to $395.8 million at September 30, 2016, compared to $359.8 million a year ago and grew 3% from $384.1 million at June 30, 2016.  The loan portfolio remains diversified, and comprise of both retail and business relationships with commercial real estate loans accounting for 63%, of which 20% were owner-occupied by businesses.  Commercial loans accounted for 16% while residential 1-4 loans accounted for 14%.  Consumer and home equity loans accounted for 7% of total loans.  “Our loan production remains solid, again boosted by the growth in commercial real estate and business loans,” added Gasior. Total deposits grew $53.9 million, or 12%, to $508.5 million at September 30, 2016, from $454.5 million at September 30, 2015, and were up $19.8 million, or 4%, compared to $488.7 million at June 30, 2016.  Both the new Canfield branch and the Kasasa brand of deposit products introduced last fall have played significantly into improving deposit levels.  Noninterest-bearing deposits accounted for 22% of total deposits; interest-bearing demand deposits accounted for 9%, while money market and savings accounted for 43% of total deposits.  Certificates of deposits were 26% of the deposit mix. At September 30, 2016, nonperforming assets as a percentage of total assets was 1.46% of total assets, compared 1.63% of total assets at September 30, 2015, and 1.54% of total assets on a linked quarter basis.  Nonperforming loans were $8.3 million at September 30, 2015, compared to $8.4 million a year earlier and $8.5 million, at June 30, 2016. Performing restructured loans, that were not included in nonaccrual loans at the end of the third quarter of 2016, were $6.0 million compared to $3.5 million at the end of the third quarter a year ago and $6.1 million on a linked quarter basis.  Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans. “We present restructured loans that are performing separately from those that are classified as nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans,” explained Lucido. 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 September 30, 2016, capital ratios were as follows: 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 thirteen full-service community banking offices located in the counties of Trumbull, Mahoning, Portage, and Ashtabula in Northeastern Ohio and two financial services centers, in Beachwood and Fairlawn, Ohio.  For additional information about Cortland Banks visit http://www.cortland-banks.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 management’s views only as of the date hereof. All statements, other than statements of historical fact, regarding our financial position, business strategy and management’s 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 management’s 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.

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