Colony Bankcorp, Inc. reported net income available to shareholders of $1,656,000, or $0.20 per diluted share for the first quarter of 2016 compared to $1,253,000, or $0.15 per diluted share for the comparable 2015 period.  This increase of 32.16 percent in net income for the comparable three month period was primarily driven by an increase in net interest income and a reduction in preferred stock dividends.  “In addition to marked improvement in earnings, we also had asset quality improvement as non-performing assets decreased to $21.73 million at March 31, 2016 which is a reduction of 18.83 percent from the comparable year ago period and 6.57 percent from the prior quarter end,” said Ed Loomis, President and Chief Executive Officer.  “The past year our focus was to improve profitability and credit quality while deleveraging the company.  We are committed to the same strategy in 2016; however given the improved financial condition of the company, we are also considering product and market expansion.  To that end, during the quarter we completed construction of a new banking facility in Tifton while beginning construction of new facilities in Statesboro and Savannah.  The new Tifton location resulted in closure of two leased offices in that market while two branch offices in Pitts and Chester were closed to improve operating efficiencies. We will again look for earnings improvement during 2016 with the redemption of additional shares of preferred stock.”   

Capital

Colony continues to maintain a strong regulatory capital position to be categorized as “well-capitalized” by regulatory benchmarks.  At March 31, 2016, the Company’s tier one leverage ratio, tier one ratio, total risk-based capital ratio and common equity tier one capital ratio were 10.70 percent, 15.92 percent, 17.13 percent and 10.63 percent, respectively, compared to 10.69 percent, 15.51 percent, 16.60 percent  and 10.29 percent, respectively, at December 31, 2015.  The Company’s capital ratios were all in excess of regulatory minimums required to be classified as “well-capitalized.”

Net Interest Margin 

During the first quarter of 2016, the Company reported net interest income of $9.46 million and a net interest margin of 3.47 percent compared to $9.20 million and 3.43 percent, respectively, for first quarter 2015.  Net interest margin improvement resulted in the Company posting an increase in net interest income of approximately $ 254 thousand in the comparable periods.   The low interest rate environment continues to be challenging for the banking industry; however recent Federal Reserve action suggests a move toward a “tightening policy” that would increase interest rates and offer some relief to the banking industry.  The global and U.S. economy will dictate the ability and timing of the Federal Reserve to accomplish their goal of an interest rate “tightening policy.”  

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 $46.44 million at March 31, 2016 compared to $41.24 million and $40.52 million, respectively, at December 31, 2015 and March 31, 2015.  Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 34.60%, 31.36% and 29.93%, respectively, at March 31, 2016, December 31, 2015 and March 31, 2015.  Non-performing assets decreased from the previous quarter end to $21.73 million or 2.85 percent of total loans and other real estate owned as of March 31, 2016.  This compares to $23.26 million or 3.03 percent and $26.77 million or 3.50 percent, respectively, as of December 31, 2015 and March 31, 2015.      

Other real estate (“OREO”) totaled $9.62 million at March 31, 2016 compared to $8.84 million and $11.98 million, respectively, at December 31, 2015 and March 31, 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 first quarter of 2016 net charge-offs (recoveries) were ($591) thousand, or (0.08) percent of average loans as compared to net charge-offs of $788 thousand, or 0.11 percent of average loans in first quarter 2015.  The loan loss reserve was $9.55 million or 1.27 percent of total loans on March 31, 2016 compared to $8.60 million or 1.13 percent and $8.38 million or 1.11 percent, respectively, at December 31, 2015 and March 31, 2015.  Loan loss reserve methodology resulted in three months ended March 31, 2016 provision for loan losses of $354 thousand compared to $362 thousand for the comparable 2015 period.

Noninterest Income

Total noninterest income declined modestly in the comparable periods as noninterest income for three months ended March 31, 2016 was $2.17 million compared to $2.21 million in the comparable 2015 period, or a decrease of 1.81 percent.  Service charge income on deposits increased $15 thousand or 1.52 percent while all other noninterest income categories decreased $55 thousand or 4.49 percent.       

Noninterest Expense

Total noninterest expense decreased in the comparable periods as noninterest expense for three months ended March 31, 2016 was $8.24 million compared to $8.29 million for the comparable 2015 period, or a decrease of 0.62 percent.  Salaries and employee benefit expenses remained flat for the comparable periods.  Occupancy expense decreased 2.92 percent.  The efficiency ratio improved to 70.65 percent for three months ended March 31, 2016 compared to 72.45 percent for the comparable 2015 period, or a decrease of 2.48 percent.   The company continues to explore opportunities to further improve its’ operating efficiency.