Colony Bankcorp, Inc. reported net income of $2.84 million or $0.34 per diluted share for the first quarter of 2019 compared with $3.2 million or $0.37 per diluted share for the same quarter last year.

Separately, the Company also announced that the Board of Directors has declared a quarterly cash dividend of $0.075 per share, to be paid on its common stock on May 15, 2019, to shareholders of record as of the close of business on April 30, 2019.  This continues the higher rate set in January 2019, an increase of 50%, which reflects the Board's ongoing confidence in the Company's strong earnings and capital position and the Company's prospects for continued attractive growth.

Commenting on the announcement, Heath Fountain, President and Chief Executive Officer, said, "Although we report a decline in net income year over year for the first quarter of 2019, these results do not fully reflect the extensive activity to lay the groundwork for sustainable and attractive long-term growth and improved profitability.  On loan production, we continue to implement a new model to create momentum and accountability in our calling efforts.  This takes time, but we are seeing positive gains and our loan production pipeline is building.  Additionally, we continue to actively refine our regional alignment and add new bankers to strengthen our team.  Our recent announcement of the addition of Mike Davis as Market President and Patricia Brooks as Commercial Banker in the Tifton market illustrates these realignments.  We are excited about the way our regional and market-by-market coverage is developing and believe these efforts will support loan growth over the long term.

"As to noninterest income, we continue to realign our products and marketing efforts to grow deposits and account fees, the effects of which should become more apparent beginning in the second half of this year," Fountain continued.  "We also are looking to add noninterest income from other lines of business.  A good example of this can be seen with our recent opening of a mortgage loan origination office in LaGrange, Georgia, led by The Whatley Team, one of the area's most experienced mortgage lending teams.  Also, we just announced an agreement to acquire PFB Mortgage, the secondary market mortgage business of Planters First Bank with offices in Albany, Athens, Macon, and Warner Robins.  This transaction, along with the addition of The Whatley team, is expected to substantially increase our mortgage lending revenue.

"Lastly, regarding our expense structure, we continue to explore opportunities to improve our operating efficiency," Fountain added.  "A key view in this regard is to leverage our infrastructure to support sustained growth, both internally and with the prospects of strategic acquisitions."   Fountain noted that the Company's recently announced acquisition of LBC Bancshares, Inc. ("LBC"), parent company of Calumet Bank, headquartered in LaGrange, Georgia, continues to proceed toward a May 1 closing date, having received stockholder and regulatory approvals.  LBC is the parent company for Calumet Bank, which has two branches – one each in LaGrange and Columbus – as well as a loan production office in Atlanta.  As of March 31, 2019, LBC had approximately $207 million in assets.

Capital

Colony continues to maintain a strong capital position, with ratios that exceed regulatory minimums required to be classified as "well-capitalized."  At March 31, 2019, the Company's tier one leverage ratio, tier one ratio, total risk-based capital ratio and common equity tier one capital ratio were 10.18%, 15.31%, 16.09% and 12.52%, respectively, compared with 10.14%, 14.97%, 15.88% and 12.11%, respectively, at March 31, 2019.

Net Interest Margin

During the first quarter of 2019, the Company reported net interest income of $10.36 million compared with $10.13 million for the comparable 2018 period.  Net interest margin for the first quarter of 2019 was 3.46%, down nine basis points on a sequential quarter basis and the year-earlier quarter.  The decline resulted from a continued mix of lower-yielding assets and an increase in cost of funds.

Asset Quality

Asset quality remained solid with continued improvement from a year ago.  Substandard assets, which include non-performing assets, totaled $24.26 million at March 31, 2019, compared with $27.94 million at March 31, 2018.  Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 16.89% at March 31, 2019, compared with 20.71% at March 31, 2018.  Non‑performing assets decreased to $9.17 million or 1.17% of total loans and other real estate owned ("OREO") from $10.35 million or 1.34% at March 31, 2018.  OREO totaled $1.64 million at March 31, 2019, reflecting a 57.84% reduction from $3.89 million at March 31, 2018.

In the first quarter of 2019, net charge-offs were $818 thousand or 0.10% of average loans compared with net charge-offs of $66 thousand or 0.01% of average loans in the first quarter of 2018.  The loan loss reserve was $6.59 million or 0.85% of total loans on March 31, 2019, compared with $7.47 million or 0.97% at March 31, 2018.  Loan loss reserve methodology resulted in a $131 thousand loan loss provision for the three months ended March 31, 2019, compared with $26 thousand for the comparable 2018 period.

Noninterest Income

Total noninterest income decreased 4.12% to $2.33 million for the three months ended March 31, 2019, from $2.43 million in the comparable 2018 period.  Service charges on deposits for the year decreased $137 thousand or 12.44%.

Noninterest Expense

Total noninterest expense increased 5.74% to $9.03 million for the three months ended March 31, 2019, from $8.54 million in the comparable 2018 period.  Salaries and employee benefit expenses increased 9.17%, occupancy expense decreased 2.01% and other noninterest expense increased 2.33% for the comparable years.  The efficiency ratio increased to 70.83% for the three months ended March 31, 2019, from 67.87% in the comparable 2018 period.