Colony Bankcorp, Inc., reported net income available to shareholders of $2.70 million or $0.32 per diluted share for the third quarter of 2018 compared with $2.62 million or $0.30 per diluted share for same quarter last year, representing an increase of 7% on a per-share basis.  Similarly, net income available to shareholders for the first nine months of 2018 totaled $8.95 million or $1.04 per diluted share versus $6.96 million or $0.81 per share for the comparable 2017 period, representing an increase of 28% on a per-share basis.  

Commenting on the announcement, Heath Fountain, President and Chief Executive Officer, said, "We are pleased to report ongoing earnings growth for the third quarter and year-to-date period, reflecting in part higher net interest income, on a comparable period basis, due to both portfolio growth and expanding margins.  This growth, together with the positive impact of lower tax rates in 2018, was partially offset by an increase in noninterest expense, which included several charges of a nonoperating nature – like an impairment loss on assets held for sale and acquisition-related expenses related to our pending purchase of a branch office in Albany – that obscure the stronger underlying growth taking place.  Excluding these items, diluted earnings for the third quarter rose 13% compared with the same quarter last year."  See reconciliation of GAAP to non-GAAP financial measures later in this release.

Continuing, Fountain added, "In just a few short months since joining the Company as CEO, I have been impressed by the quality of our people and the potential that exists to expand our footprint, grow across our markets in ways that meet the current and emerging needs of our customers, and enhance the Company's financial performance.  Colony Bank is uniquely situated in our region – larger than most community banks, with greater capabilities, but much smaller and more nimble than the regional and national banks.  As a result, we are well positioned to deliver in a more responsive way as we create custom solutions to help our customers achieve their financial goals."

Fountain also noted that the Board of Directors has voted to change the schedule for the declaration and payment of quarterly cash dividends effective with the fourth quarter dividend, essentially accelerating the payment of dividends by more than a month.  Accordingly, and considering the ongoing strength of the Company's earnings and capital position, the Board has declared a regular cash dividend of $0.05 per share for the fourth quarter of 2018, which will be paid on November 15, 2018, to stockholders of record as of October 30, 2018.

Separately, Fountain reported that the Company's previously announced purchase of the Albany branch of Planters First Bank, which is located at 113 North Westover Boulevard, has received regulatory approval.  The transaction, which would provide Colony with a second location in Albany, is expected to close by the end of October.  The deal also includes vacant land located at the corner of Pointe North Boulevard and Old Dawson Road in Albany, on which Colony expects to build a branch during 2019.

Commenting on the transaction, Fountain said, "At Colony, we take pride in providing a solutions-based approach to banking and customer service, and we know that the strength and stability of our bank is important to our customers, as is the breadth of the services we offer.  Yet, we also recognize that the experience, knowledge and quality of our people are key to delivering the high service level that we strive to attain.  That is why we are pleased that we expect to retain the entire staff at the Albany branch of Planters First Bank, led by Regional President Cindy Griffin and Market President Tommy Clark, who greatly strengthen our team in Albany."

Capital

Colony continues to maintain a strong capital position, with ratios in excess of regulatory minimums required to be classified as "well-capitalized."  At September 30, 2018, the Company's tier one leverage ratio, tier one ratio, total risk-based capital ratio and common equity tier one capital ratio were 10.45%, 15.02%, 15.88% and 12.19%, respectively, compared with 10.17%, 14.87%, 15.74% and 12.02%, respectively, at June 30, 2018.

Net Interest Margin

For the third quarter of 2018, the Company reported net interest income of $10.11 million compared with $9.84 million for the comparable 2017 period.  For the nine months ended September 30, 2018, net interest income was $30.40 million compared with $29.12 million for the same period last year.  Net interest margin for the third quarter was 3.57%, unchanged from the second quarter of 2018, but up seven basis points compared with the third quarter of 2017.  Net interest margin for the nine months ended September 30, 2018, was 3.56%, up 11 basis points from 3.45% for the year-earlier period.  Given the recent surge in deposit pricing, the Company continues to focus on loan and deposit pricing, along with loan growth, to maintain or improve its net interest margin.

Asset Quality

Asset quality remains solid with significant improvement from a year ago.  Substandard assets, which include nonperforming assets, totaled $23.83 million at September 30, 2018, compared with $26.19 million and $30.54 million, respectively, at December 31, 2017 and September 30, 2017.  Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 17.00%, 20.18% and 23.14%, respectively, at September 30, 2018, December 31, 2017 and September 30, 2017.  Nonperforming assets decreased significantly to $10.31 million or 1.32% of total loans and other real estate owned ("OREO") as of September 30, 2018, versus $13.33 million or 1.72% at September 30, 2017.

OREO totaled $2.17 million at September 30, 2018, compared with $4.26 million and $4.52 million, respectively, at December 31, 2017 and September 30, 2017.  The Company anticipates several contracts closing during the fourth quarter of 2018 that will further reduce its OREO holdings.

In the third quarter of 2018, net charge-offs were $65 thousand or 0.01% of average loans compared with net charge-offs of $66 thousand or 0.01% of average loans in third quarter 2017, while net charge-offs for the nine months ended September 30, 2018, were $484 thousand or 0.06% of average loans compared with $1.28 million or 0.17% for the comparable 2017 period.  The loan loss reserve was $7.16 million or 0.92% of total loans on September 30, 2018, compared with $7.51 million or 0.98% and $7.98 million or 1.04%, respectively, at December 31, 2017 and September 30, 2017.  Loan loss reserve methodology resulted in a $61 thousand loan loss provision for the three months ended September 30, 2018, compared with $0 for the comparable 2017 period.  For the nine months ended September 30, 2018, the loan loss provision totaled $131 thousand compared with $335 thousand for the comparable period in 2017.

Noninterest Income

Total noninterest income has remained relatively flat in 2018 as noninterest income for the nine months ended September 30, 2018, was $7.16 million versus $7.22 million in the comparable 2017 period, or a decrease of 1%.  Service charges on deposits decreased $49 thousand or 1% and secondary mortgage fee income decreased $122 thousand or 19%.  Gain on the sale of securities was $116 thousand; there was no gain in the comparable 2017 period.

Noninterest Expense

Total noninterest expense increased 3% to $26.22 million for the nine months ended September 30, 2018, from $25.41 million for the same 2017 period.  Salaries and employee benefit expenses increased 4%, occupancy expense increased 4% and other noninterest expense increased 2% for the comparable periods.  The efficiency ratio decreased slightly to 69.90% for the nine months ended September 30, 2018, from 69.69% for the comparable 2017 period.  The Company continues to explore opportunities to improve its operating efficiency.