Colony Bankcorp, Inc. Announces Second Quarter Results
Thursday, July 21st, 2016
Colony Bankcorp, Inc., reported net income available to shareholders of $1,761,000, or $0.21 per diluted share for the second quarter of 2016 compared to $1,555,000, or $0.18 per diluted share for the comparable 2015 period, while net income available to shareholders for the six month period ended June 30, 2016 was $3,417,000, or $0.40 per diluted share compared to $2,808,000, or $0.33 per share for the comparable 2015 period. This increase of 21.69 percent in net income for the comparable six month period was primarily driven by an increase in net interest income and a reduction in preferred stock dividends. “We are pleased to report another solid quarter despite the continued low interest rate environment. Of significance during the quarter was total loan growth of $9.92 million along with reduction of our substandard assets by $3.89 million,” said Ed Loomis, President and Chief Executive Officer. “With the productive first half of 2016, we are requesting approval from regulatory authorities to redeem $3,661,000 of preferred stock during third quarter. This will reduce the preferred stock to $14,360,000 and result in dividend savings of $329,000 on an annual basis. We continue to explore opportunities to enhance revenue and improve efficiency. Accordingly, we have invested in a new loan platform system that when fully implemented will provide consistency and efficiency in the loan approval process. In addition we are revamping our vendor management process for better control and monitoring of our vendor contracts.”
Capital
Colony continues to maintain a strong regulatory capital position to be categorized as “well-capitalized” by regulatory benchmarks. At June 30, 2016, the Company’s tier one leverage ratio, tier one ratio, total risk-based capital ratio and common equity tier one capital ratio were 10.94 percent, 16.13 percent, 17.32 percent and 10.84 percent, respectively, compared to 10.70 percent, 15.92 percent, 17.13 percent and 10.63 percent, respectively, at March 31, 2016. The Company’s capital ratios were all in excess of regulatory minimums required to be classified as “well-capitalized.”
Net Interest Margin
During the second quarter of 2016, the Company reported net interest income of $9.53 million and a net interest margin of 3.53 percent compared to $9.25 million and 3.44 percent, respectively, for second quarter 2015, while net interest income for first half 2016 was $18.98 million and a net interest margin of 3.50 percent compared to $18.45 million and 3.44 percent, respectively, for first half 2015. Net interest margin improvement resulted in the Company posting an increase in net interest income of approximately $532 thousand in the comparable first half period. The recent Brexit vote in Europe resulted in significant volatility in the markets and has likely delayed any action by Federal Reserve to move toward a “tightening” interest rate policy in the near term.
Asset Quality
The Company continues to monitor our substandard and non-performing assets and focus on problem asset resolution. Substandard assets that include non-performing assets totaled $42.56 million at June 30, 2016 compared to $41.24 million and $39.65 million, respectively, at December 31, 2015 and June 30, 2015. Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 31.12 percent, 31.36 percent and 28.74 percent, respectively, at June 30, 2016, December 31, 2015 and June 30, 2015. Non-performing assets increased from the previous quarter end to $23.33 million or 3.01 percent of total loans and other real estate owned as of June 30, 2016. This compares to $23.26 million or 3.03 percent and $26.16 million or 3.39 percent, respectively, as of December 31, 2015 and June 30, 2015.
Other real estate (“OREO”) totaled $10.18 million at June 30, 2016 compared to $8.84 million and $12.03 million, respectively, at December 31, 2015 and June 30, 2015. Though these levels remain at an elevated level, we continue to work diligently to dispose these properties at fair value. Colony has established a target of twelve months to liquidate improved properties due to the high carrying cost of taxes, insurance, maintenance and repairs associated with holding these properties on our books.
In the second quarter of 2016 net charge-offs were $513 thousand, or 0.07 percent of average loans as compared to net charge-offs of $25 thousand, or 0.00 percent of average loans in second quarter 2015, while first half 2016 net charge-offs (recoveries) were ($78) thousand, or (0.01) percent of average loans compared to $813 thousand, or 0.11 percent of average loans for the comparable 2015 period.. The loan loss reserve was $9.39 million or 1.23 percent of total loans on June 30, 2016 compared to $8.60 million or 1.13 percent and $8.48 million or 1.12 percent, respectively, at December 31, 2015 and June 30, 2015. Loan loss reserve methodology resulted in three months ended June 30, 2016 provision for loan losses of $354 thousand compared to $129 thousand for the comparable 2015 period, while first half 2016 provision for loan losses was $708 thousand compared to $491 thousand for the comparable 2015 period.
Noninterest Income
Total noninterest income declined modestly in the comparable periods as noninterest income for six months ended June 30, 2016 was $4.52 million compared to $4.57 million in the comparable 2016 period, or a decrease of 1.01 percent. Service charge income on deposits increased $6 thousand or 0.29 percent while all other noninterest income categories decreased $52 thousand or 2.06 percent.
Noninterest Expense
Total noninterest expense decreased in the comparable periods as noninterest expense for six months ended June 30, 2016 was $16.59 million compared to $16.61 million for the comparable 2015 period, or a decrease of 0.10 percent. Salaries and employee benefit expenses increased 2.52 percent, occupancy expense decreased 3.38 percent and other noninterest expense decreased 3.02 percent for the comparable periods. The efficiency ratio improved to 70.97 percent for six months ended June 30, 2016 compared to 71.99 percent for the comparable 2015 period, or a decrease of 1.39 percent. The company continues to explore opportunities to further improve its’ operating efficiency.