Colony Bankcorp, Inc., reported net income available to shareholders of $579,000, or $0.07 per diluted share for the fourth quarter of 2017 compared to $1,883,000, or $0.22 per diluted share for the comparable 2016 period, while net income available to shareholders for the twelve month period ended December 31, 2017 was $7,540,000, or $0.87 per diluted share compared to $7,180,000, or $0.84 per share for the comparable 2016 period.  During the quarter earnings were negatively impacted $2,041,000, or $0.24 per share due to additional income tax expense resulting from a one-time write down of deferred assets.  As a result of the Tax Reform Act signed by President Trump on December 22, 2017, FASB accounting standards required public companies to write down deferred tax assets to the new tax rate of 21% compared to the old rate of 35%.  Excluding the one-time tax adjustment, earnings for the quarter would have been $2,620,000, or $0.30 per share, while year to date earnings would have been $9,581,000 or $1.11 per share.  Though we were impacted this quarter by the one-time expense to earnings, the lower tax rates will be very positive for future earnings.  Earnings were positively impacted by an increase in net interest income and noninterest income and a reduction in preferred stock dividends and loan loss provision.  “We are pleased to report an outstanding year for Colony, said Ed Loomis, President and Chief Executive Officer.  Excluding the one-time tax adjustment, earnings was 33.44 percent over the prior year, capital remains well-capitalized with all regulatory requirements and asset quality reflects continued improvement from a year ago.   As we look forward to 2018, the new tax reform will result in improved earnings due to the lower tax rate.  We continue to explore options to improve operating efficiencies and to increase loan growth, which in turn will further enhance shareholder value.”

Capital

Colony continues to maintain a strong regulatory capital position to be categorized as “well-capitalized” by regulatory benchmarks.  At December 31, 2017, the Company’s tier one leverage ratio, tier one ratio, total risk-based capital ratio and common equity tier one capital ratio were 9.89 percent, 14.64 percent,15.56 percent and 11.78 percent, respectively, compared to 10.29 percent, 15.50 percent, 16.64 percent  and 11.32 percent, respectively, at December 31, 2016.  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 2017, the Company reported net interest income of $9.92 million and a net interest margin of 3.50 percent compared to $9.57 million and 3.48 percent, respectively, for fourth quarter 2016, while net interest income YTD 2017 was $39.04 million and a net interest margin of 3.46 percent compared to $38.11 million and 3.51 percent, respectively, for the same comparable period  in 2016.  As we shift more dollars out of lower yielding investments into higher yielding loans, we should realize net interest margin improvement.   Our focus in 2018 will be on loan and deposit pricing along with loan growth to maintain or improve its’ net interest margin.

Asset Quality

Asset quality remains solid with marked improvement from a year ago.  Substandard assets that include non-performing assets totaled $26.19 million at December 31, 2017 compared to $33.23 million at December 31, 2016.  Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 20.18 percent at December 31,2017compared to 25.67 percent a year ago.  Non-performing assets decreased significantly from the year ago period to $11.76 million or 1.53 percent of total loans and other real estate owned as of December 31, 2017.  This compares to $18.79 million or 2.47 percent at December 31, 2016.       

Other real estate (“OREO”) totaled $4.26 million at December 31, 2017 compared to $6.44 million at December 31, 2016.   Though these levels remain slightly elevated, 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 fourth quarter of 2017 net charge-offs were $525 thousand, or 0.07 percent of average loans as compared to net charge-offs of $280 thousand, or 0.04 percent of average loans in fourth quarter 2016, while YTD 2017 net charge-offs were $1,806 thousand, or 0.24 percent of average loans compared to $743 thousand, or 0.10 percent of average loans for the comparable 2016 period.  The loan loss reserve was $7.51 million or 0.98 percent of total loans on December 31, 2017 compared to $8.92 million or 1.18 percent at December 31, 2016.  Loan loss reserve methodology resulted in $55 thousand  loan loss provision for three months ended December 31, 2017  compared to no provision for the comparable 2016 period, while YTD 2017 provision for loan losses was $390 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 twelve months ended December 31, 2017 was $9.73 million compared to $9.55 million in the comparable 2016 period, or an increase of 1.89 percent.  Secondary mortgage fee income increased $177 thousand or 25.95 percent, service charges on deposits increased $160 thousand or 3.71 percent and debit card interchange fees increased $179 thousand or 7.41 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 decreased in the comparable periods as noninterest expense for twelve months ended December 31, 2017 was $33.86 million compared to $34.07 million for the comparable 2016 period, or an decrease of 0.63 percent.  Salaries and employee benefit expenses increased 4.00 percent, occupancy expense remained flat and other noninterest expense decreased 8.01 percent for the comparable periods.  The efficiency ratio improved to 69.19 percent for twelve months ended December 31, 2017 compared to 71.81 percent for the comparable 2016 period.   The company continues to explore opportunities to improve its’ operating efficiency.