Colony Bankcorp, Inc., reported net income available to shareholders of $1,880,000, or $0.22 per diluted share for the third quarter of 2016 compared to $1,606,000, or $0.19 per diluted share for the comparable 2015 period, while net income available to shareholders for the nine month period ended September 30, 2016 was $5,297,000, or $0.62 per diluted share compared to $4,414,000, or $0.52 per share for the comparable 2015 period.  This increase of 20.00 percent in net income for the comparable nine month period was primarily driven by an increase in net interest income and a reduction in preferred stock dividends.  "In addition to solid earnings, we also redeemed $3,661,000 of preferred stock that on an annual basis reduces our dividend payment by $329,490.  Also of significance during the quarter was total loan growth of $11.91 million and a reduction in substandard assets of $1.07 million," said Ed Loomis, President and Chief Executive Officer.  "We have positioned the company to seek regulatory approval to redeem $5,000,000 of preferred stock during the fourth quarter.  This will reduce the preferred stock to $9,360,000 and result in dividend savings of $450,000 on an annual basis.  As we look to 2017, we believe we are positioned to continue to improve on earnings and asset quality, which in turn will enhance shareholder value."

Capital

Colony continues to maintain a strong regulatory capital position to be categorized as "well-capitalized" by regulatory benchmarks.  At September 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 10.85 percent, 15.79 percent, 16.95 percent and 11.01 percent, respectively, compared to 10.94 percent, 16.13 percent, 17.32 percent  and 10.84 percent, respectively, at June 30, 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 third quarter of 2016, the Company reported net interest income of $9.56 million and a net interest margin of 3.56 percent compared to $9.50 million and 3.58 percent, respectively, for third quarter 2015, while net interest income for nine months ended September 30, 2016 was $28.54 million and a net interest margin of 3.52 percent compared to $27.95 million and 3.48 percent, respectively, for the comparable 2015 period.  Net interest margin improvement resulted in the Company posting an increase in net interest income of approximately $591 thousand over the comparable 2015 period.  While we have been in a historical low interest rate environment for some time, recent Federal Reserve discussion suggests a modest move toward a "tightening" interest rate policy in December.

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 $41.49 million at September 30, 2016 compared to $41.24 million and $43.02 million, respectively, at December 31, 2015 and September 30, 2015.  Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 31.34 percent, 31.36 percent and 31.73 percent, respectively, at September 30, 2016, December 31, 2015 and September 30, 2015.  Non-performing assets increased slightly from the previous quarter end to $23.80 million or 3.03 percent of total loans and other real estate owned as of September 30, 2016.  This compares to $23.26 million or 3.03 percent and $24.57 million or 3.17 percent, respectively, as of December 31, 2015 and September 30, 2015.       

Other real estate totaled $9.81 million at September 30, 2016 compared to $8.84 million and $11.00 million, respectively, at December 31, 2015 and September 30, 2015. Though these levels remain at an elevated level, we continue to work diligently to dispose these properties at fair value.   We have approximately $2.5 million currently under contract and scheduled to close during fourth quarter. 

In the third quarter of 2016 net charge-offs were $541 thousand, or 0.07 percent of average loans as compared to net charge-offs of $328 thousand, or 0.04 percent of average loans in third quarter 2015, while year to date 2016 net charge-offs were $463 thousand, or 0.06 percent of average loans compared to $1.14 million, or 0.15 percent of average loans for the comparable 2015 period.  The loan loss reserve was $9.20 million or 1.19 percent of total loans on September 30, 2016 compared to $8.60 million or 1.13 percent and $8.40 million or 1.10 percent, respectively, at December 31, 2015 and September 30, 2015.  Loan loss reserve methodology resulted in three months ended September 30, 2016 provision for loan losses of $354 thousand compared to $250 thousand for the comparable 2015 period, while year to date 2016 provision for loan losses was $1.06 million compared to $741 thousand for the comparable 2015 period.

Noninterest Income

Total noninterest income increased in the comparable periods as noninterest income for nine months ended September 30, 2016 was $7.16 million compared to $6.80 million in the comparable 2015 period, or an increase of 5.26 percent.  Gain on sale of securities totaled $385 thousand compared to $12 thousand in the comparable 2015 period to primarily account for the increase.  Our initiative to increase secondary market mortgage fee income has resulted in an increase of $122 thousand, or 31.69 percent over the comparable 2015 period.      

Noninterest Expense

Total noninterest expense increased in the comparable periods as noninterest expense for nine months ended September 30, 2016 was $25.24 million compared to $24.94 million for the comparable 2015 period, or an increase of 1.21 percent.  Salaries and employee benefit expenses increased 4.18 percent, occupancy expense decreased 2.27 percent and other noninterest expense decreased 2.13 percent for the comparable periods.  The efficiency ratio improved to 71.22 percent for nine months ended September 30, 2016 compared to 71.61 percent for the comparable 2015 period, or a decrease of 0.54 percent.   The company continues to explore opportunities to further improve its' operating efficiency.