Colony Bankcorp, Inc. Announces First Quarter Results
Thursday, April 20th, 2017
Colony Bankcorp, Inc., reported net income available to shareholders of $1,906,000, or $0.22 per diluted share for the first quarter of 2017 compared to $1,656,000, or $0.20 per diluted share for the comparable 2016 period. This increase of 15.10 percent in net income for the comparable three month period was primarily driven by an increase in noninterest income and a reduction in preferred stock dividends. “We are pleased to report that we redeemed the remaining outstanding preferred stock of $9,360,000. This will be immediately accretive to earnings per share as we will eliminate the current quarterly dividend payment of $210,600. Also of significance during the quarter was total loan growth of $6.0 million and a reduction in substandard assets of $1.22 million,” said Ed Loomis, President and Chief Executive Officer. “In addition to this progress, our financial performance allowed the Company to reinstate a modest dividend payment of $0.025 per share payable to shareholders of record on March 1, 2017.”
Colony continues to maintain a strong regulatory capital position to be categorized as “well-capitalized” by regulatory benchmarks. At March 31, 2017, the Company’s tier one leverage ratio, tier one ratio, total risk-based capital ratio and common equity tier one capital ratio were 9.47 percent, 14.28 percent,15.39 percent and 11.34 percent, respectively, compared to 10.29 percent, 15.50 percent, 16.64 percent and 11.32 percent, respectively, at December 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 first quarter of 2017, the Company reported net interest income of $9.46 million and a net interest margin of 3.35 percent compared to $9.46 million and 3.47 percent, respectively, for first quarter 2016. The decline in net interest margin resulted from the Company having approximately $39 million more in average earning assets for the comparable periods. These excess funds were primarily deployed into lower yielding overnight funds and bond investments. 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 2017. The anticipated interest rate hikes along with shifting the lower yielding assets into higher yielding loans should improve the net interest margin.
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 $32.00 million at March 31, 2017 compared to $33.23 million and $46.44 million, respectively, at December 31, 2016 and March 31, 2016. Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 25.18 percent, 25.67 percent and 34.60 percent, respectively, at March 31, 2017, December 31, 2016 and March 31, 2016. Non-performing assets declined from the previous quarter end to $17.15 million or 2.24 percent of total loans and other real estate owned as of March 31, 2017. This compares to $18.79 million or 2.47 percent and $21.73 million or 2.85 percent, respectively, as of December 31, 2016 and March 31, 2016.
Other real estate totaled $5.90 million at March 31, 2017 compared to $6.44 million and $9.62 million, respectively, at December 31, 2016 and March 31, 2016. Though these levels remain at an elevated level, we continue to work diligently to dispose these properties at fair value. There are several contracts that we anticipate closing in the near future to further reduce our OREO holdings.
In the first quarter of 2017 net charge-offs were $394 thousand, or 0.05 percent of average loans as compared to net charge-offs of ($591) thousand, or (0.08) percent of average loans in first quarter 2016. The loan loss reserve was $8.86 million or 1.17 percent of total loans on March 31, 2017 compared to $8.92 million or 1.18 percent and $9.55 million or 1.27 percent, respectively, at December 31, 2016 and March 31, 2016. Loan loss reserve methodology resulted in three months ended March 31, 2017 provision for loan losses of $335 thousand compared to $354 thousand for the comparable 2016 period.
Total noninterest income increased in the comparable periods as noninterest income for three months ended March 31, 2017 was $2.40 million compared to $2.17 million in the comparable 2016 period, or an increase of 10.50 percent. Secondary mortgage fee income increased $86 thousand or 86.00 percent, service charges on deposits increased $53 thousand or 5.29 percent and debit card interchange fees increased $50 thousand or 8.42 percent to primarily account for the increase.
Total noninterest expense increased in the comparable periods as noninterest expense for three months ended March 31, 2017 was $8.41 million compared to $8.24 million for the comparable 2016 period, or an increase of 2.10 percent. Salaries and employee benefit expenses increased 6.95 percent, occupancy expense was relatively flat and other noninterest expense decreased 4.79 percent for the comparable periods. The efficiency ratio remained flat at 70.67 percent for three months ended March 31, 2017 compared to 70.65 percent for the comparable 2016 period. The company continues to explore opportunities to improve its’ operating efficiency.