Colony Bankcorp, Inc., today reported net income available to shareholders of $1,335,000, or $0.16 per diluted share for the second quarter of 2014 compared to $611,000, or $0.07 per diluted share for the comparable 2013 period, while net income available to shareholders for six months ended June 30, 2014 was $2,149,000, or 0.25 per diluted share compared to $1,178,000, or $0.14 per share for the comparable 2013 period. This increase of 82.43 percent in net income for the comparable six 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 the financial results reflect marked improvement, also noteworthy was the significant reduction in our non-performing assets to $31.59 million at June 30, 2014. This reflects a 19.35 percent reduction from the previous quarter end and marks the lowest level of non-performing assets since 2008," said Ed Loomis, President and Chief Executive Officer. "Our strong regulatory capital base combined with sustained earnings and credit quality improvement has positioned Colony for future market and operational opportunities."

Capital

Colony continues to maintain a strong regulatory capital position to be categorized as "well-capitalized" by regulatory benchmarks. At June 30, 2014, the Company's tier one leverage ratio, tier one and total risk-based capital ratios were 10.80 percent, 16.44 percent and 17.69 percent, respectively, compared to 10.57 percent, 15.81 percent and 17.06 percent, respectively, at December 31, 2013 and to 10.36 percent, 15.63 percent and 16.89 percent, respectively, at June 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 second quarter of 2014, the Company reported net interest income of $9.53 million and a net interest margin of 3.61 percent compared to $9.46 million and 3.64 percent, respectively, for second quarter 2013, while net interest income for first half 2014 was $18.72 million and a net interest margin of 3.54 percent compared to $18.50 million and 3.55 percent, respectively, for first half 2013. 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 $47.12 million at June 30, 2014 compared to $53.41 million and $58.15 million, respectively, at December 31, 2013 and June 30, 2013. Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 32.54%, 38.18% and 43.00%, respectively, at June 30, 2014, December 31, 2013 and June 30, 2013. Non-performing assets decreased significantly from the previous quarter end to $31.59 million or 4.22 percent of total loans and other real estate owned as of June 30, 2014. This compares to $39.61 million or 5.17 percent and $41.18 million or 5.42 percent, respectively, as of December 31, 2013 and June 30, 2013. Loan loss reserve methodology resulted in three months ended June 30, 2014 provision for loan losses of $0.48 million compared to $1.20 million for the comparable 2013 period, while in six months ended June 30, 2014 the provision for loan losses was $0.81 million compared to $2.7 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 $12.21 million at June 30, 2014 compared to $15.50 million and $16.13 million, respectively, at December 31, 2013 and June 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 second quarter of 2014 net charge-offs were $1.72 million, or 0.23 percent of average loans as compared to net charge-offs of $1.17 million, or 0.16 percent of average loans in second quarter 2013, while first half 2014 net charge-offs were $2.14 million, or 0.29 percent of average loans as compared to net charge-offs of $2.48 million, or 0.34 percent of average loans in first half 2013. The loan loss reserve was $10.47 million on June 30, 2014, or 1.42 percent of total loans compared to $11.81 million, or 1.57 percent on December 31, 2013 and to $12.96 million, or 1.74 percent on June 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 June 30, 2014.

Noninterest Income

Total noninterest income increased in the comparable periods as noninterest income for six months ended June 30, 2014 was $4.31 million compared to $4.25 million in the comparable 2013 period, or an increase of 1.36 percent. The significant increase was debit card interchange fees and ATM fees increasing $340 thousand, or 41.44 percent. Offsetting the increase were service charge fee income on deposit accounts decreasing $110 thousand, or 4.89 percent, mortgage fee income decreasing $79 thousand, or 30.38 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 six months ended June 30, 2014 was $17.16 million compared to $17.13 million for the comparable 2013 period, or an increase of 0.15 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 $1.31 million in six months ended June 30, 2014 compared to $1.94 million in the comparable 2013 period, or a decrease of 32.47 percent. Salaries and employee benefit expenses increased to $8.72 million in six months ended June 30, 2014 compared to $8.32 million in the comparable 2013 period, or an increase of 4.80 percent. Occupancy expenses increased to $2.02 million in the six month period ended June 30, 2014 compared to $1.87 million in the comparable 2013 period, or an increase of 8.14 percent. Other noninterest expense decreased to $6.42 million compared to $6.95 million, or a decrease of 7.56 percent.