Colony Bankcorp, Inc. reported net income available to shareholders of $1,584,000, or $0.19 per diluted share for the fourth quarter of 2015 compared to $1,310,000, or $0.16 per diluted share for the comparable 2014 period, while net income available to shareholders for calendar year 2015 was $5,998,000, or $0.71 per diluted share compared to $4,843,000, or $0.57 per share for the comparable 2014 period.  This increase of 23.85 percent in net income for the comparable twelve month period was primarily driven by a reduction in provision for loan losses, noninterest expense and preferred stock dividend payments.  “In addition to solid earnings for the year, we also had significant asset quality improvement.  Total non-performing assets were $23.25 million at December 31, 2015, which is a reduction of 19.10 percent from the prior year end.  Though modest, we also realized an increase in total loans, net of reserves to $749.68 million at December 31, 2015 compared to $736.93 a year ago,” said Ed Loomis, President and Chief Executive Officer.  “The highlight during the quarter was approval by regulatory agencies to redeem another 5,146 shares of preferred stock at par.   Total redemption in 2015 was $9.979 million which reduces our preferred stock by 35.64 percent from a year ago.  On an annual basis this reduces our dividend payment by $898 thousand.  We intend to further reduce our preferred stock during 2016 which will be immediately accretive to earnings.”

Capital

Colony continues to maintain a strong regulatory capital position to be categorized as “well-capitalized” by regulatory benchmarks.  At December 31, 2015, the Company’s tier one leverage ratio, tier one and total risk-based capital ratios were 10.69 percent, 15.51 percent and 16.59 percent, respectively, compared to 11.18 percent, 16.78 percent and 17.95 percent, respectively, at December 31, 2014 and to 10.57 percent, 15.81 percent and 17.06 percent, respectively, at December 31, 2013.  Effective January 1, 2015, new regulatory regulations (commonly referred to as Basel III capital regulation) required new risk-weighting of certain assets and an additional capital ratio to be calculated.  The common equity tier one capital ratio at December 31, 2015 of 10.29 percent exceeded the minimum requirement of 4.50 percent.   The Company’s capital ratios were all in excess of regulatory minimums required to be classified as “well-capitalized”.

Net Interest Margin 

During the fourth quarter of 2015, the Company reported net interest income of $9.76 million and a net interest margin of 3.63 percent compared to $9.50 million and 3.59 percent, respectively, for fourth quarter 2014, while net interest income for twelve months ended December 31, 2015 was $37.71 million and a net interest margin of 3.52 percent compared to $37.96 million and 3.60 percent, respectively, for the comparable 2014 period.  The low interest rate environment continues to be challenging for the banking industry.  In December, Federal Reserve initiated their first interest rate hike since 2006 and we anticipate further rate increases by the Federal Reserve in 2016.  This action should positively impact our margin going forward.

Asset Quality

The Company continues to monitor our substandard and non-performing assets and focus on problem asset resolution.  Substandard assets that include non-performing assets totaled $41.24 million at December 31, 2015 compared to $43.29 million and $53.45 million, respectively, at December 31, 2014 and December 31, 2013.  Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 31.36%, 32.39% and 39.22%, respectively, at December 31, 2015, December 31, 2014 and December 31, 2013.  The current quarter was slightly impacted due to the reduction in capital associated with the $5.146 million preferred stock redemption. Non-performing assets decreased from the previous quarter end to $23.25 million or 3.03 percent of total loans and other real estate owned as of December 31, 2015.  This compares to $28.74 million or 3.80 percent and $39.61 million or 5.17 percent, respectively, as of December 31, 2014 and December 31, 2013.       

Other real estate totaled $8.84 million at December 31, 2015 compared to $10.40 million and $15.50 million, respectively, at December 31, 2014 and December 31, 2013.  Activity during the fourth quarter resulted in a decrease of $2.16 million, or 19.63 percent reduction from the previous quarter end.  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 fourth quarter of 2015 net charge-offs (recoveries) were ($77) thousand, or (0.01) percent of average loans as compared to net charge-offs of $986 thousand, or 0.13 percent of average loans in fourth quarter 2014, while year to date 2015 net charge-offs were $1.06 million, or 0.14 percent of average loans as compared to net charge-offs of $4.31 million, or 0.58 percent of average loans for the comparable 2014 period.  The loan loss reserve was $8.60 million or 1.13 percent of total loans on December 31, 2015 compared to $8.80 million or 1.18 percent and $11.81 million or 1.57 percent, respectively, at December 31, 2014 and December 31, 2013.  Loan loss reserve methodology resulted in three months ended December 31, 2015 provision for loan losses of $125 thousand compared to $0 for the comparable 2014 period, while year to date 2015 provision for loan losses was $866 thousand compared to $1.31 million for the comparable 2014 period.

Noninterest Income

Total noninterest income declined modestly in the comparable periods as noninterest income for twelve months ended December 31, 2015 was $9.05 million compared to $9.13 million in the comparable 2014 period, or a decrease of 0.88 percent.  Service charge income on deposits decreased by $300 thousand or 6.57 percent while mortgage fee income increased by $107 thousand or 25.48 percent and other fee income increased $158 thousand or 6.40 percent to partially offset the service charge decline.

Noninterest Expense

Total noninterest expense decreased in the comparable periods as noninterest expense for twelve months ended December 31, 2015 was $33.73 million compared to $34.98 million for the comparable 2014 period, or a decrease of 3.59 percent.  Improved asset quality is attributable for much of the reduction with a significant decrease in credit-related expenses.  Repossession and foreclosure expense decreased from $850 thousand to $639 thousand for the comparable periods and loss on sale of OREO properties decreased from $1.85 million to $1.04 million.  Salaries and employee benefit expenses remained relatively flat with an increase of 0.47 percent.  Occupancy expense was also relatively flat with a decrease of 1.82 percent.  The efficiency ratio improved to 71.92 percent for twelve months ended December 31, 2015 compared to 74.16 percent for the comparable 2014 period, or a decrease of 3.02 percent.   The company continues to explore opportunities to further improve its operating efficiency.