Colony Bankcorp, Inc., today reported net income available to shareholders of $1,384,000, or $0.16 per diluted share for the third quarter of 2014 compared to $701,000, or $0.08 per diluted share for the comparable 2013 period, while net income available to shareholders for nine months ended September 30, 2014 was $3,533,000, or 0.42 per diluted share compared to $1,879,000, or $0.22 per share for the comparable 2013 period.  This increase of 88.03 percent in net income for the comparable nine month period was primarily driven by a reduction in provision for loan losses, an increase in net interest income and an increase in noninterest income.   “While we are pleased to report solid earnings for the second consecutive quarter, of particular significance is continued progress with our non-performing assets.  Total non-performing assets were $24.01 million at September 30, 2014 which is a 23.99 percent reduction from the previous quarter end of $31.59 million.  Substandard assets to tier one capital plus loan loss reserve now stands at 30.23 percent – down from the peak level of 98.52 percent in 2011,” said Ed Loomis, President and Chief Executive Officer.  “With strong regulatory capital, improved earnings and asset quality improvement, Colony is poised for sustained profitability and long-term success.”       

Capital 

Colony continues to maintain a strong regulatory capital position to be categorized as “well-capitalized” by regulatory benchmarks.  At September 30, 2014, the Company’s tier one leverage ratio, tier one and total risk-based capital ratios were 11.01 percent, 16.51 percent and 17.76 percent, respectively, compared to 10.57 percent, 15.81 percent  and 17.06 percent, respectively, at December 31, 2013 and to 10.40 percent, 15.40 percent and 16.66 percent, respectively, at September 30, 2013.  Regulatory benchmarks to be categorized as “well-capitalized” for tier one leverage ratio, tier one and total risk-based capital ratios are 5.00 percent, 6.00 percent and 10.00 percent, respectively.

Net Interest Margin  

During the third quarter of 2014, the Company reported net interest income of $9.74 million and a net interest margin of 3.73 percent compared to $9.49 million and 3.67 percent, respectively, for third quarter 2013, while net interest income for nine months ended September 30, 2014 was $28.46 million and a net interest margin of 3.60 percent compared to $28.00 million and 3.59 percent, respectively, for the comparable 2013 period.  Though the low interest rate environment continues to be challenging for the banking industry, the company continues to focus on maximizing its net interest margin through deposit and loan pricing guidance and balance sheet restructuring.     

Asset Quality 

The Company continues to closely monitor our substandard and non-performing assets and focus on problem asset resolution.  Substandard assets that include non-performing assets totaled $43.49 million at September 30, 2014 compared to $53.41 million and $55.39 million, respectively, at December 31, 2013 and September 30, 2013.  Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 30.23%, 38.18% and 40.94%, respectively, at September 30, 2014, December 31, 2013 and September 30, 2013.    Non-performing assets decreased significantly from the previous quarter end to $24.01 million or 3.18 percent of total loans and other real estate owned as of September 30, 2014.  This compares to $39.61 million or 5.17 percent and $40.64 million or 5.32 percent, respectively, as of December 31, 2013 and September 30, 2013.  Loan loss reserve methodology resulted in three months ended September 30, 2014 provision for loan losses of $0.50 million compared to $1.50 million for the comparable 2013 period, while in nine months ended September 30, 2014 the provision for loan losses was $1.31 million compared to $4.2 million for the comparable 2013 period. With continued stabilization in the economy, we expect continued improvement in our substandard assets.    

Other real estate (“OREO”) totaled $10.83 million at September 30, 2014 compared to $15.50 million and $16.11 million, respectively, at December 31, 2013 and September 30, 2013.  We continue to devote much time and effort in reducing our level of OREO properties and the current balance is at the lowest level in a number of quarters.  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 third quarter of 2014 net charge-offs were $1.18 million, or 0.16 percent of average loans as compared to net charge-offs of $1.51 million, or 0.20 percent of average loans in third quarter 2013, while  net charge-offs for nine months ended September 30, 2014 were $3.33 million, or 0.45 percent of average loans as compared to net charge-offs of $3.99 million, or 0.54 percent of average loans for the comparable 2013 period.  The loan loss reserve was $9.79 million on September 30, 2014, or 1.32 percent of total loans compared to $11.81 million, or 1.57 percent on December 31, 2013 and to $12.95 million, or 1.73 percent on September 30, 2013.  Management believes that the 2014 contributions to Allowance for Loan Losses address the level of non-performing assets and the related level of substandard assets to be adequately reserved at September 30, 2014.

Noninterest Income 

Total noninterest income increased in the comparable periods as noninterest income for nine months ended September 30, 2014 was $6.72 million compared to $6.36 million in the comparable 2013 period, or an increase of 5.65 percent. The significant increase was debit card interchange fees and ATM fees increasing $514 thousand, or 41.32 percent.  Offsetting the increase was service charge fee income on deposit accounts decreasing $115 thousand, or 3.30 percent, mortgage fee income decreasing $66 thousand, or 17.51 percent and gains on the sale of SBA/USDA loans decreasing $352 thousand, or 100.00 percent.         

Noninterest Expense 

Total noninterest expense remained relatively flat as noninterest expense for nine months ended September 30, 2014 was $25.69 million compared to $25.62 million for the comparable 2013 period, or an increase of 0.28 percent.  Credit-related expenses continue to be a strain on earnings as write down and losses on OREO property and repossessed assets along with repossession and foreclosure expenses totaled $1.82 million in nine months ended September 30, 2014 compared to $2.60  million in the comparable 2013 period, or an decrease of 30.00 percent.  Salaries and employee benefit expenses increased to $13.15 million in nine months ended September 30, 2014 compared to $12.50 million in the comparable 2013 period, or an increase of 5.23 percent.  Occupancy expenses increased to $3.07 million in the nine month period ended September 30, 2014 compared to $2.84 million in the comparable 2013 period, or an increase of 7.99 percent.   Other noninterest expense decreased to $9.47 million compared to $10.28 million, or a decrease of 7.86 percent.  A significant reduction in noninterest expense is FDIC insurance assessment which has decreased to $731 thousand in 2014 from $1.10 million from the comparable 2013 period, or 33.36 percent.