Colony Bankcorp, Inc. today reported net income available to shareholders of $2.97 million or $0.35 per diluted share for the fourth quarter of 2018 compared with $579 thousand or $0.07 per diluted share for the same quarter last year.  Net income available to shareholders for 2018 was $11.92 million or $1.40 per diluted share compared with $7.54 million or $0.87 per share for 2017.

Both prior-year periods referenced included a charge to income tax expense to remeasure the Company's deferred tax assets, caused by tax reform in December 2017.  Excluding this charge and other less significant items in both years, adjusted net income (a non-GAPP financial measure) would have been $3.10 million or $0.37 per diluted share and $12.14 million or $1.42 per diluted share, respectively, for fourth quarter and year ended December 31, 2018, versus $2.62 million or $0.30 per diluted share and $9.57 million or $1.11 per diluted share, respectively, for the fourth quarter and year ended December 31, 2017.  Accordingly, adjusted net income per diluted share for the fourth quarter and year ended December 31, 2018, increased 23% and 28%, respectively, compared with the year-earlier periods.  See the unaudited reconciliation of non-GAAP measures later in this release.

Separately, the Company also announced that the Board of Directors has voted to increase its quarterly cash dividend to $0.075 per share from $0.05 per share previously.  The Board's decision was based on the ongoing strength of the Company's earnings and capital position and an outlook for continued attractive growth.  The new dividend rate will apply to the next dividend to be paid on February 15, 2019, to stockholders of record as of January 30, 2019.

Commenting on the announcement, Heath Fountain, President and Chief Executive Officer, said, "We are pleased to report record earnings for 2018, which along with ongoing solid credit quality and capital strength, position us to extend our growth and expand our reach.  This success also reflects a building momentum in our business as many of the initiatives and disciplines we put in place recently are beginning to gain traction.  This progress, in turn, has allowed the Company to increase its cash dividend to stockholders significantly in 2019, marking the second consecutive year of higher dividend payouts.

"Clearly, this past year has been eventful and exciting for all of us at Colony Bank," Fountain continued.  "Loan portfolio and deposit growth for the year along with higher net interest margins underscore our solid core fundamentals, while new opportunities like our branch acquisition in Albany and our recently announced acquisition of Calumet Bank highlight additional pathways for future expansion.  These internal and external factors continue to strengthen what I see as Colony Bank's unique position in this regional market, with greater size and capabilities compared with most community banks and greater speed and agility than regional and national banks.  All of this bodes well for Colony, its customers and our stockholders, and we remain enthusiastic about our prospects for future growth and business enhancements as we move into 2019."

In December 2018, the Company announced the pending acquisition of LBC Bancshares, Inc. ("LBC"), parent company of Calumet Bank, a Georgia state-chartered bank, in a combined stock-and-cash transaction valued at approximately $34.1 million.  Calumet Bank has two branches – one each in LaGrange and Columbus – as well as a loan production office in Atlanta.  As of September 30, 2018, LBC had approximately $228 million in assets, $130 million in loans, $204 million in deposits and $19 million in tangible common equity.  Upon completion of the transaction, Colony is expected to have approximately $1.4 billion in assets, $930 million in loans, and $1.2 billion in deposits.  The transaction, which is expected to close in the first half of 2019, remains subject to customary conditions, including regulatory approval and approval by the shareholders of LBC.

Capital

Colony continues to maintain a strong capital position, with ratios that exceed regulatory minimums required to be classified as "well-capitalized."  At December 31, 2018, the Company's tier one leverage ratio, tier one ratio, total risk-based capital ratio and common equity tier one capital ratio were 10.24%, 15.00%, 15.86% and 12.22%, respectively, compared with 9.89%, 14.64%, 15.56% and 11.78%, respectively, at December 31, 2017.

Net Interest Margin

During the fourth quarter of 2018, the Company reported net interest income of $10.40 million compared with $9.92 million for the comparable 2017 period.  For the year ended December 31, 2018, net interest income was $40.80 million compared with $39.04 million for the comparable 2017 period.  Net interest margin for the fourth quarter of 2018 was 3.55%, down two basis points on a sequential quarter basis, but up five basis points from 3.50% for the year-earlier quarter.  Net interest margin for the year was 3.56%, reflecting an increase of 10 basis points from 3.46% for 2017.  Given the recent surge in deposit rates, 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 continued improvement from a year ago.  Substandard assets, which include non-performing assets, totaled $24.63 million at December 31, 2018, compared with $26.19 million at December 31, 2017.  Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 17.38% and 20.18%, respectively, at December 31, 2018 and December 31, 2017.  Non‑performing assets decreased slightly to $11.32 million or 1.45% of total loans and other real estate owned ("OREO") from $11.76 million or 1.53% at December 31, 2017.  OREO totaled $1.84 million at December 31, 2018, reflecting a 57% reduction from $4.26 million at December 31, 2017.

In the fourth quarter of 2018, net charge-offs (recoveries) were ($53) thousand or (0.01)% of average loans compared with net charge-offs of $525 thousand or 0.07% of average loans in the fourth quarter of 2017, while net charge-offs for year ended December 31, 2018, were $431 thousand or 0.06% of average loans compared with $1.81 million or 0.24% for 2017.  The loan loss reserve was $7.28 million or 0.93% of total loans on December 31, 2018, compared with $7.51 million or 0.98% at December 31, 2017.  Loan loss reserve methodology resulted in a $70 thousand loan loss provision for the three months ended December 31, 2018, compared with $55 thousand for the comparable 2017 period and a $201 thousand loan loss provision for the year ended December 31, 2018, compared with $390 thousand for 2017.

Noninterest Income

Total noninterest income declined 1% to $9.62 million for the year ended December 31, 2018, from $9.73 million in 2017.  Service charges on deposits for the year decreased $93 thousand or 2% and secondary mortgage fee income decreased $207 thousand or 24%.  In 2018, gain on the sale of securities was $116 thousand; there was no gain in 2017.

Noninterest Expense

Total noninterest expense increased 4% to $35.30 million for the year ended December 31, 2018, from $33.86 million for 2017.  Salaries and employee benefit expenses increased 5%, occupancy expense increased 6% and other noninterest expense increased 3% for the comparable years.  The efficiency ratio increased slightly to 70.05% for the year ended December 31, 2018, from 69.19% for 2017.  The Company continues to explore opportunities to improve its operating efficiency.