Colony Bankcorp First Quarter Profit Down
Press release from the issuing company
Sunday, April 22nd, 2012
Colony Bankcorp, Inc., today reported net income available to shareholders of $189,000, or $0.02 per diluted share for the first quarter of 2012 compared to first quarter 2011 net income available to shareholders of $706,000, or $0.08 per diluted share. The decrease was primarily attributable to an increase in loan loss provisions and a decrease in non-interest income for the comparable periods. This was partially offset by an increase in net interest income as Colony's loan and deposit pricing guidance resulted in Colony realizing an increase in net interest income compared to the prior period for the first time in several years. "Our pre-tax, pre-provision core earnings continue to provide solid support for the credit-related expenses needed to address our problem assets. We are cautiously optimistic about recent signs of improvement in the economy and housing and real estate market and that our substandard assets have peaked. Though we had a slight uptick in nonperforming assets to $60.72 million at March 31, 2012 from $59.71 million at December 31, 2011, the substandard assets to tier one equity plus loan loss allowance ratio improved to 72.25% at March 31, 2002 from 75.32% at December 31, 2011. Colony's management, staff and board of directors are committed to reducing our problem assets to an acceptable level and returning to our accustomed earnings standards," said Terry L. Hester, Executive Vice President and Chief Financial Officer. "Our goal during 2012 is to continue making incremental progress and we were able to accomplish that this quarter."
Colony continues to maintain a favorable capital position to be categorized as "well-capitalized" by regulatory benchmarks. At March 31, 2012, the Company's tier one leverage ratio, tier one and total risk-based capital ratios were 9.38 percent, 15.73 percent and 16.99 percent, respectively, compared to the previous quarter end of 9.51 percent, 15.24 percent and 16.50 percent, respectively, at December 31, 2011 and to 8.63 percent, 14.12 percent and 15.39 percent, respectively, at March 31, 2011. 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 first quarter of 2012, the Company reported net interest income of $8.89 million and a net interest margin of 3.23 percent, compared to $8.82 million and 2.98 percent, respectively, for first quarter 2011. The Company continues to focus on maximizing its net interest margin through deposit and loan pricing guidance. Anticipated loan growth along with pricing discipline should result in continued net interest margin improvement the balance of 2012.
The Company continues to closely monitor our substandard and non-performing assets and focus on problem asset resolution. Substandard assets totaled $90.19 million at March 31, 2012 compared to $92.09 million and $113.65 million, respectively, at December 31, 2011 and March 31, 2011. Substandard assets to tier one capital plus loan loss reserve ratio was 72.25%, 75.32% and 87.39%, respectively, at March 31, 2012, December 31, 2011 and March 31, 2011. Though much work remains to reduce substandard assets, improvement in these ratios reflects solid work in addressing and bringing resolution to substandard assets. Non-performing assets increased slightly from the previous quarter end to $60.72 million or 8.35 percent of total loans and other real estate owned as of March 31, 2012. This compares to $59.71 million or 8.10 percent and $51.02 million or 6.35 percent, respectively, as of December 31, 2011 and March 31, 2011. The level of non-performing assets ties directly to the elevated risk in our residential, land development and commercial real estate loan portfolio and has resulted in higher than normal loan loss provisions the past several years. Unusually high levels of loan loss provisions have been required the past several years as company management addresses asset quality deterioration associated with the housing and real estate downturn and the economy in general. Loan loss reserve methodology resulted in provision for loan losses of $1.94 million in three months ended March 31, 2012 compared to $1.50 million for the comparable 2011 period. Until we see stabilization in the economy and the housing and real estate market, we expect problem assets and charge-offs to be elevated above historical levels as we work through our problem assets.
Though other real estate balances appear to be basically flat over the past nine quarters, much resolution has taken place in liquidating these properties. Other real estate totaled $19.71 million at year end December 31, 2009 compared to $20.99 at March 31, 2012. During this period, $28.96 million has been added to other real estate, thus a reduction from sales and/or write-downs of $27.68 million. This significant movement of properties in a challenging real estate market is indicative of the commitment by Colony management to address its problem assets in a timely and prudent manner. 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 2012 net charge-offs were $1.68 million, or 0.24 percent of average loans as compared to net charge-offs of $7.31 million, or 0.92 percent of average loans in first quarter 2011. The loan loss reserve was $15.91 million on March 31, 2012, or 2.25 percent of total loans compared to $15.65 million on December 31, 2011, or 2.18 percent of total loans. Management believes that the 2012 contributions to Allowance for Loan Losses address the level of non-performing assets and the related level of classified assets to be adequately reserved at March 31, 2012.
Total noninterest income decreased in the comparable periods as three months ended March 31, 2012 noninterest income was $1.81 million compared to $2.10 million in the comparable 2011 period. Gains realized from the sale of securities totaled $137 thousand in three months ended March 31, 2012 compared to a gain recorded on security transactions during the comparable period in 2011 of $396 thousand to primarily account for the decrease. On a positive note, service charge on deposits increased 5.29% and mortgage fee income increased 30.65% over the prior comparable period. The Company began an initiative during first quarter 2012 to enhance our secondary mortgage lending operations. Mortgage lending training was provided to several current employees to boost our secondary market loan originators from six to sixteen. This will allow better penetration in the markets that Colony serves and result in increased mortgage fee income.
Total noninterest expense increased to $7.98 million in three months ended March 31, 2012 compared to $7.94 million in the comparable 2011 period, or an increase of 0.50 percent. Credit-related expenses continue to be a strain on earnings as write down and losses on OREO property and repossession and foreclosure expenses totaled $763 thousand in three months ended March 31, 2012 compared to $827 thousand in the comparable 2011 period. Salaries and employee benefits expenses increased to $3.82 million in three months ended March 31, 2012 compared to $3.57 million in the comparable 2011 period, or an increase of 7.00 percent. This increase is primarily attributable to an increase in headcount related to increased "back-office" regulatory compliance demands. Occupancy expenses decreased to $938 thousand in three months ended March 31, 2012 compared to $1.02 million in the same comparable 2011 period, or a decrease of 7.68 percent. The decrease was primarily attributable to less depreciation expense for the comparable periods.