Cortland Bancorp suspends cash dividends after loss

By Don Shilling

CORTLAND — Cortland Bancorp said it is suspending its cash dividends after reporting a fourth-quarter loss.

The cash dividend, which most recently was 22 cents a share, has been stopped as of the first quarter of this year and will be replaced by a stock dividend of 1 percent.

K. Ray Mahan, company chairman, called the move precautionary and said it would preserve capital.

“This is an exceptionally unusual measure taken by our board in recognition of the highly turbulent and uncertain circumstances surrounding the economy,” he said.

The company, which is the holding company for Cortland Banks, is well capitalized, but the move helps to ensure it remains on solid footing “even if general economic and financial conditions should continue to deteriorate,” he said.

He added that the stock dividend likely will replace the cash dividend for the rest of this year. The company said it would reinstitute cash dividends once the economy and financial markets have stabilized.

Cortland Bancorp said that it lost $564,000, or 13 cents a share, in the fourth quarter, compared with earnings of $1.12 million, or 25 cents a share, in the same period of 2007.

Earnings fell because of an increase in money set aside for loan losses and accounting charges to cover investment losses.

The investment charge of $1.25 million related to an investment in General Motors Corp. senior notes. Cortland Bancorp recorded the charge because it decided the notes had a long-term decline in value.

The company noted that GM’s credit ratings have fallen because of its financial problems, and part of its restructuring plan is to negotiate with bondholders to exchange corporate debt with company stock.

Cortland Bancorp also set aside $1.29 million in the fourth quarter to cover loan losses. The move was made to give “recognition to the economy’s steep slide into a serious and likely long-lasting recession,” the company said.

The company’s annual earnings for 2008 were $2.35 million, or 53 cents a share, compared with $4.35 million, or 96 cents a share, in the previous year.

shilling@vindy.com