Colony Bankcorp, Inc., today reported net income available to shareholders of $814,000, or $0.10 per diluted share for the first quarter of 2014 compared to $567,000, or $0.07 per diluted share for the comparable 2013 period. This increase of 43.56 percent in net income was primarily driven by an increase in net interest income and a reduction in provision for loan losses. "We are pleased to report first quarter operating results that reflect significant improvement in core earnings and strong regulatory capital. While loan demand is still less than robust, we continue to see signs of economic recovery that should result in loan activity picking up. While our substandard assets to tier one capital plus loan loss allowance ratio remained relatively flat this quarter, we have several transactions that should settle during second quarter to further reduce our problem assets," said Ed Loomis, President and Chief Executive Officer. "Efforts to reduce our problem assets and increase our outstanding loan balances will reinforce our balance sheet and further position our company for prolonged success."

Capital

Colony continues to maintain a solid capital position to be categorized as "well-capitalized" by regulatory benchmarks. At March 31, 2014, the Company's tier one leverage ratio, tier one and total risk-based capital ratios were 10.62 percent, 16.09 percent and 17.34 percent, respectively, compared to the previous quarter end of 10.57 percent, 15.81 percent and 17.06 percent, respectively, at December 31, 2013 and to 10.18 percent, 15.60 percent and 16.86 percent, respectively, at March 31, 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 first quarter of 2014, the Company reported net interest income of $9.19 million and a net interest margin of 3.47 percent, compared to $9.05 million and 3.45 percent, respectively, for first quarter 2013.  While challenging in this low interest rate environment to maintain net interest margin, 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 $54.12 million at March 31, 2014 compared to $53.41 million and $61.91 million, respectively, at December 31, 2013 and March 31, 2013. Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 38.40%, 38.18% and 45.85%, respectively, at March 31, 2014, December 31, 2013 and March 31, 2013.   Non-performing assets decreased slightly from the previous quarter end to $39.16 million or 5.21 percent of total loans and other real estate owned as of March 31, 2014. This compares to $39.61 million or 5.17 percent and $39.58 million or 5.24 percent, respectively, as of December 31, 2013 and March 31, 2013.  Loan loss reserve methodology resulted in three months ended March 31, 2014 provision for loan losses of $0.33 million compared to $1.50 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 $14.23 million at March 31, 2014 compared to $15.50 million and $18.77 million, respectively, at December 31, 2013 and March 31, 2013. During the quarter three auctions were held to liquidate OREO properties. 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 2014 net charge-offs were $0.42 million, or 0.06 percent of average loans as compared to net charge-offs of $1.31 million, or 0.18 percent of average loans in first quarter 2013. The loan loss reserve was $11.71 million on March 31, 2014, or 1.59 percent of total loans compared to $11.81 million, or 1.57 percent on December 31, 2013 and to $12.95 million, or 1.76 percent on March 31, 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 March 31, 2014.

Noninterest Income

Total noninterest income decreased in the comparable periods as noninterest income for three months ended March 31, 2014 was $2.06 million compared to $2.22 million in the comparable 2013 period, or a decrease of 7.03 percent. Service charge fee income on deposit accounts decreased $34 thousand, or 3.09 percent. Mortgage fee income decreased $52 thousand, or 43.70 percent and gains on the sale of SBA/USDA loans decreased $352 thousand, or 100.00 percent. Offsetting these decreases was debit card interchange fees and ATM fees that increased $154 thousand, or 39.11 percent. The company continues to explore revenue enhancement products and services to improve fee income.      

Noninterest Expense

Total noninterest expense increased to $8.87 million in three months ended March 31, 2014 compared to $8.4 million in the comparable 2013 period, or an increase of 5.55%. 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 $955 thousand in three months ended March 31, 2014 compared to $700 thousand in the comparable 2013 period. Salaries and employee benefit expenses increased to $4.41 million in three months ended March 31, 2014 compared to $4.17 million in the comparable 2013 period, or an increase of 5.83 percent. Occupancy expenses increased to $1.02 million in the three month period ended March 31, 2014 compared to $0.93 million in the comparable 2013 period, or an increase of 9.32 percent.   Other noninterest expense increased to $3.43 million compared to $3.29 million, or an increase of 4.38 percent.

Colony Bankcorp, Inc. is a bank holding company headquartered in Fitzgerald, Georgia that consists of one operating subsidiary, Colony Bank. Colony Bank conducts a general full service commercial, consumer and mortgage banking business through twenty-nine offices located in the central, southern and coastal Georgia cities of Albany, Ashburn, Broxton, Centerville, Chester, Columbus, Cordele, Douglas, Eastman, Fitzgerald, Leesburg, Moultrie, Pitts, Quitman, Rochelle, Savannah, Soperton, Sylvester, Thomaston, Tifton, Valdosta and Warner Robins, Georgia.