Colony Bank Announces Third Quarter Results
Press release from the issuing company
Monday, October 22nd, 2012
Colony Bankcorp, Inc. reported net income available to shareholders of $411,000, or $0.05 per diluted share for the third quarter of 2012 compared to net income available to shareholders of $208,000, or $0.02 per diluted share for the comparable 2011 period, while net income available to shareholders for nine months ended September 30, 2012 was $1,003,000, or $0.12 per diluted share compared to $1,103,000, or $0.13 per share for the comparable 2011 period. "Our pre-tax, pre-provision core earnings continue to support the credit-related expenses needed to address our problem assets. We remain cautiously optimistic about recent signs of improvement in the economy and housing and real estate market. This is reflected on our balance sheet as total loans outstanding have increased over the previous quarter end for the second consecutive quarter. The Company focus continues to be problem asset resolution and those efforts resulted in further improvement during the quarter as nonperforming assets decreased to $51.74 million at September 30, 2012 from $53.97 million at June 30, 2012, or a decrease of 4.13 percent, while the substandard assets to tier one equity plus loan loss allowance ratio improved to 63.87% at September 30, 2012 from 67.97% at June 30, 2012. Though improvement was realized this quarter, we still have much work ahead to meet our goals of reducing our problem assets to an acceptable level and returning to acceptable earnings. Our board, management and staff remain committed to making incremental progress toward these goals during 2012 and we were able to again accomplish that this quarter," said Ed Loomis, President and Chief Executive Officer.
Capital
Colony continues to maintain a strong capital position to be categorized as "well-capitalized" by regulatory benchmarks. At September 30, 2012, the Company's tier one leverage ratio, tier one and total risk-based capital ratios were 10.07 percent, 15.39 percent and 16.65 percent, respectively, compared to the previous quarter end of 9.71 percent, 15.67 percent and 16.94 percent, respectively, at June 30, 2012 and to 9.33 percent, 15.38 percent and 16.64 percent, respectively, at September 30, 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 third quarter of 2012, the Company reported net interest income of $9.22 million and a net interest margin of 3.56 percent, compared to $8.74 million and 3.21 percent, respectively, for third quarter 2011, while net interest income for nine months ended September 30, 2012 was $27.20 million with a net interest margin of 3.39 percent, compared to $26.14 million with a net interest margin of 3.05 percent for the comparable 2011 period. The improvement is indicative of the Company's focus on maximizing its net interest margin through deposit and loan pricing guidance and balance sheet restructuring. Anticipated loan growth along with pricing discipline should result in continued net interest margin improvement for the balance of 2012.
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 $85.04 million at September 30, 2012 compared to $87.75 million and $108.93 million, respectively, at June 30, 2012 and September 30, 2011. Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 63.87%, 67.97% and 84.75%, respectively, at September 30, 2012, June 30, 2012 and September 30, 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 decreased from the previous quarter end to $51.74 million or 6.96 percent of total loans and other real estate owned as of September 30, 2012. This compares to $53.97 million or 7.35 percent and $63.29 million or 8.31 percent, respectively, as of June 30, 2012 and September 30, 2011. Loan loss reserve methodology resulted in nine months ended September 30, 2012 provision for loan losses of $5.63 million compared to $6.00 million for the comparable 2011 period. As we begin to see stabilization in the economy and the housing and real estate market, we expect continued improvement in our substandard assets.
Other real estate totaled $20.45 million at year end December 31, 2011 compared to $17.09 million at September 30, 2012. During this period, $5.76 million has been added to other real estate, thus a reduction from sales and/or write-downs of $9.12 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 third quarter of 2012 net charge-offs were $2.65 million, or 0.36 percent of average loans as compared to net charge-offs of $734 thousand, or 0.10 percent of average loans in third quarter 2011, while net charge-offs for nine months ended September 30, 2012 were $6.89 million, or 0.96% of average loans as compared to net charge-offs of $17.37 million, or 2.25% of average loans for the comparable 2011 period. The loan loss reserve was $14.39 million on September 30, 2012, or 1.98 percent of total loans compared to $15.29 million and $16.91 million, or 2.13 percent and 2.28 percent, respectively, at June 30, 2012 and September 30, 2011. Management believes that the 2012 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, 2012.
Noninterest Income
Total noninterest income decreased in the comparable periods as noninterest income for nine months ended September 30, 2012 was $7.09 million compared to $7.20 million in the comparable 2011 period. Fee income from the sale of SBA loans was $306 thousand in nine months ended September 30, 2012 compared to $864 thousand in the comparable 2011 period that primarily accounted for the decrease. On a positive note, service charge on deposits increased 5.69% and mortgage fee income increased 83.85% over the prior comparable period. The Company began an initiative during 2012 to enhance our secondary mortgage lending operations. Mortgage lending training was provided to several current employees to boost our secondary market loan originators. This has resulted in better penetration in the markets that Colony serves and resulted in increased mortgage fee income.
Noninterest Expense
Total noninterest expense increased to $25.64 million in nine months ended September 30, 2012 compared to $24.25 million in the comparable 2011 period, or an increase of 5.73 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 $3.85 million in nine months ended September 30, 2012 compared to $2.79 million in the comparable 2011 period. Salaries and employee benefit expenses increased to $11.49 million in nine months ended September 30, 2012 compared to $10.78 million in the comparable 2011 period, or an increase of 6.59 percent. This increase is primarily attributable to an increase in headcount related to additional "back-office" regulatory compliance demands. Occupancy expenses decreased to $2.90 million in nine months ended September 30, 2012 compared to $3.08 million in the same comparable 2011 period, or a decrease of 5.84 percent. The decrease was primarily attributable to less depreciation expense for the comparable periods.