Colony Bankcorp, Inc., reported net income available to shareholders of $2,622,000, or $0.30 per diluted share for the third quarter of 2017 compared to $1,880,000, or $0.22 per diluted share for the comparable 2016 period, while net income available to shareholders for the nine month period ended September 30, 2017 was $6,961,000, or $0.81 per diluted share compared to $5,297,000, or $0.62 per share for the comparable 2016 period.  This increase of 31.41 percent in net income for the comparable year ago period was primarily driven by an increase in net interest income and noninterest income and a reduction in preferred stock dividends and loan loss provision.  “We are delighted to report our highest earnings quarter in a number of years,” said Ed Loomis, President and Chief Executive Officer.  “As the economic recovery chugs along, we expect to benefit with increased loan opportunities.  While our operating efficiencies have improved the past several quarters, we continue to explore different initiatives for additional improvement and thus further enhance shareholder value.  We remain optimistic that tax reform proposals will become reality in the near term and also provide a boost to future earnings.” 

Capital

Colony continues to maintain a strong regulatory capital position to be categorized as “well-capitalized” by regulatory benchmarks.  At September 30, 2017, the Company’s tier one leverage ratio, tier one ratio, total risk-based capital ratio and common equity tier one capital ratio were 9.91 percent, 14.76 percent,15.75 percent and 11.84 percent, respectively, compared to 9.72 percent, 14.33 percent, 15.32 percent  and 11.44 percent, respectively, at June 30, 2017.  The Company’s capital ratios were all in excess of regulatory minimums required to be classified as “well-capitalized.”

Net Interest Margin 

During the third quarter of 2017, the Company reported net interest income of $9.84 million and a net interest margin of 3.50 percent compared to $9.56 million and 3.56 percent, respectively, for third quarter 2016, while net interest income YTD 2017 was $29.12 million and a net interest margin of 3.45 percent compared to $28.54 million and 3.52 percent, respectively, for the same comparable in 2016.  Second quarter 2017 net interest margin was 3.49 percent, thus a slight increase in net interest margin this quarter.   As we shift more dollars out of lower yielding investments into higher yielding loans, we should continue to realize net interest margin improvement.   

Asset Quality

Asset quality remains solid with marked improvement from a year ago.  Substandard assets that include non-performing assets totaled $30.54 million at September 30, 2017 compared to $33.23 million and $41.49 million, respectively, at December 31, 2016 and September 30, 2016.  Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 23.14 percent, 25.67 percent and 31.34 percent, respectively, at September 30, 2017, December 31, 2016 and September 30, 2016.  Non-performing assets increased slightly from the previous quarter end to $13.32 million or 1.72 percent of total loans and other real estate owned as of September 30, 2017.  This compares to $18.79 million or 2.47 percent and $23.80 million or 3.03 percent, respectively, as of December 31, 2016 and September 30, 2016.       

Other real estate (“OREO”) totaled $4.52 million at September 30, 2017 compared to $6.44 million and $9.81 million, respectively, at December 31, 2016 and September 30, 2016.   Though these levels remain at an elevated level, we continue to work diligently to dispose these properties at fair value.  There are several pending transactions  that we anticipate closing in the near future to further reduce our OREO holdings. 

In the third quarter of 2017 net charge-offs were $66 thousand, or 0.01 percent of average loans as compared to net charge-offs of $541 thousand, or 0.07 percent of average loans in third quarter 2016, while YTD 2017 net charge-offs were $1,281 thousand, or 0.17 percent of average loans compared to $463 thousand, or 0.06 percent of average loans for the comparable 2016 period.  The loan loss reserve was $7.98 million or 1.04 percent of total loans on September 30, 2017 compared to $8.92 million or 1.18 percent and $9.20 million or 1.19 percent, respectively, at December 31, 2016 and September 30, 2016.  Loan loss reserve methodology resulted in no loan loss provision for three months ended September 30, 2017  compared to $354 thousand for the comparable 2016 period, while YTD 2017 provision for loan losses was $335 thousand compared to $1,062 thousand for the comparable 2016 period.

Noninterest Income

Total noninterest income increased in the comparable periods as noninterest income for nine months ended September 30, 2017 was $7.22 million compared to $7.16 million in the comparable 2016 period, or an increase of 0.80 percent.  Secondary mortgage fee income increased $122 thousand or 24.06 percent, service charges on deposits increased $130 thousand or 4.08 percent and debit card interchange fees increased $144 thousand or 7.95 percent to primarily account for the increase.  Offset to these increases was gains on the sale of securities in 2016 of $385 thousand compared to no gains in 2017.    

Noninterest Expense

Total noninterest expense increased in the comparable periods as noninterest expense for nine months ended September 30, 2017 was $25.41 million compared to $25.24 million for the comparable 2016 period, or an increase of 0.67 percent.  Salaries and employee benefit expenses increased 4.64 percent, occupancy expense was relatively flat and other noninterest expense decreased 5.62 percent for the comparable periods.  The efficiency ratio improved to 69.69 percent for nine months ended September 30, 2017 compared to 71.22 percent for the comparable 2016 period.   The company continues to explore opportunities to improve its’ operating efficiency.