Colony Bankcorp, Inc., today reported net income available to shareholders of $611,000, or $0.07 per diluted share for the second quarter of 2013 compared to $403,000, or $0.05 per diluted share for the comparable 2012 period, while net income available to shareholders for six months ended June 30, 2013 was $1,178,000, or $0.14 per diluted share compared to $592,000, or $0.07 per share for the comparable 2012 period. This increase of 98.99 percent in net income for the comparable six month period was primarily driven by an increase in net interest income and noninterest income - along with a reduction in provision for loan losses. "In addition to meaningful core earnings improvement, Colony again had marked improvement in asset quality. Substandard assets to tier one capital plus loan loss allowance ratio improved to 43.00 percent at June 30, 2013 from 45.85 percent at March 31, 2013. Though improvement was once again 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 2013," said Ed Loomis, President and Chief Executive Officer. "Though the economy continues to be less than robust and short term interest rates remain at historic low levels, we are cautiously optimistic that signs of economic recovery are surfacing. We had a modest increase in loans outstanding from the previous quarter end and have a healthy loan pipeline that should result in continued loan growth and core earnings improvement."    

Capital

Colony continues to maintain a strong capital position to be categorized as "well-capitalized" by regulatory benchmarks. At June 30, 2013, the Company's tier one leverage ratio, tier one and total risk-based capital ratios were 10.36 percent, 15.63 percent and 16.89 percent, respectively, compared to the previous quarter end of 10.18 percent, 15.60 percent  and 16.86 percent, respectively, at March 31, 2013 and to 9.71 percent, 15.67 percent and 16.94 percent, respectively, at June 30, 2012. 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 second quarter of 2013, the Company reported net interest income of $9.46 million and a net interest margin of 3.64 percent, compared to $9.09 million and 3.39 percent, respectively, for second quarter 2012, while net interest income for first half 2013 was $18.50 million and a net interest margin of 3.55 percent compared to $17.98 million and 3.31 percent, respectively, for first half 2012.  The improvement is indicative of the Company's focus on balance sheet restructuring and maximizing its net interest margin through deposit and loan pricing guidance.   

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 $58.15 million at June 30, 2013 compared to $61.91 million and $87.75 million, respectively, at March 31, 2013 and June 30, 2012. Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 43.00%, 45.85% and 67.97%, respectively, at June 30, 2013, March 31, 2013 and June 30, 2012.   Non-performing assets increased slightly from the previous quarter end to $41.18 million or 5.42 percent of total loans and other real estate owned as of June 30, 2013. This compares to $39.58 million or 5.24 percent and $53.97 million or 7.35 percent, respectively, as of March 31, 2013 and June 30, 2012.  Loan loss reserve methodology resulted in six months ended June 30, 2013 provision for loan losses of $2.70 million compared to $3.89 million for the comparable 2012 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.  Several pending transactions upon closing in the near term will result in further improvement in substandard and non-performing assets. 

Other real estate ("OREO") totaled $16.13 million at June 30, 2013 compared to $15.94 million and $18.77 million, respectively, at December 31, 2012 and March 31, 2013. During first half 2013, $6.34 million has been added to OREO, thus a reduction from sales and/or write-downs of $6.15 million.  An auction conducted in late June will result in additional reduction upon consummation of the sales contracts. 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 second quarter of 2013 net charge-offs were $1.17 million, or 0.16 percent of average loans as compared to net charge-offs of $2.56 million, or 0.36 percent of average loans in second quarter 2012, while first half 2013 net charge-offs were $2.48 million, or 0.34 percent of average loans as compared to net charge-offs of $4.24 million, or 0.60 percent of average loans in first half 2012. The loan loss reserve was $12.96 million on June 30, 2013, or 1.74 percent of total loans compared to $12.93 million, or 1.76 percent on March 31, 2013 and to $15.29 million, or 2.13 percent on June 30, 2012.  Management believes that the 2013 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 June 30, 2013.

Noninterest Income

Total noninterest income increased in the comparable periods as noninterest income for six months ended June 30, 2013 was $4.25 million compared to $4.19 million in the comparable 2012 period, or an increase of 1.48 percent. Service charge fee income on deposit accounts increased $638 thousand, or 39.63 percent. Mortgage fee income increased $67 thousand, or 34.72 percent and gains on the sale of SBA/USDA loans increased $145 thousand, or 70.05 percent. Offsetting these increases was security gains and losses in which losses were $2 thousand for first half 2013 compared to gains of $880 thousand for first half 2012. The company continues to explore revenue enhancement products and services to improve fee income.      

Noninterest Expense

Total noninterest expense increased to $17.13 million in six months ended June 30, 2013 compared to $16.39 million in the comparable 2012 period, or an increase of 4.53 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 $2.08 million in six months ended June 30, 2013 compared to $1.83 million in the comparable 2012 period. Salaries and employee benefit expenses increased to $8.32 million in six months ended June 30, 2013 compared to $7.65 million in the comparable 2012 period, or an increase of 8.69 percent. This increase is primarily attributable to an increase in headcount related to additional "back-office" regulatory compliance demands along with merit pay increases. Occupancy expenses remained flat in the comparable periods. Other noninterest expense increased to $6.95 million compared to $6.83 million, or an increase of 1.62 percent.