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Colony Bankcorp Reports Third Quarter Results

Company Declares Quarterly Cash Dividend of $0.075 Per Share

FITZGERALD, Ga., Oct. 18, 2019 (GLOBE NEWSWIRE) -- Colony Bankcorp, Inc. (CBAN) (“Colony” or the “Company”) today reported net income of $2.5 million or $0.27 per diluted share for the third quarter of 2019 compared with $2.7 million or $0.32 per diluted share for the same quarter last year. For the nine months ended September 30, 2019, net income was $7.5 million or $0.83 per diluted share compared with $9.0 million or $1.04 per diluted share for the same period in the prior year.

Results for the third quarter and nine months ended September 30, 2019, included charges for acquisition‑related expenses as well as gains on other real estate owned (“OREO”) property held for sale. Excluding these and other less significant items in both periods, adjusted net income (a non‑GAAP financial measure) for the third quarter and nine months ended September 30, 2019, would have been $3.2 million or $0.35 per diluted share and $9.3 million or $1.03 per diluted share, respectively, versus $2.9 million or $0.34 per diluted share and $9.1 million or $1.06 per diluted share, respectively, for the third quarter and nine months ended September 30, 2018. See the unaudited reconciliation of non-GAAP measures later in this release.

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 November 15, 2019, to shareholders of record as of the close of business on October 31, 2019.

Commenting on the announcement, Heath Fountain, President and Chief Executive Officer, said, “We are pleased to announce improved adjusted results both on a sequential quarter basis and compared with the same period last year.  These results reflect our efforts to improve our earning asset mix through organic loan growth and to grow our noninterest income through deposit account growth and our secondary market mortgage business.  We recruited three business development officers to the new Small Business Specialty Lending Group that we opened last quarter, and we are very optimistic about our loan pipeline. 

“Our business development initiatives have increased our loan volume and net interest income, both on a sequential quarterly basis as well as the nine-months year to date. This growth in net interest income was partially offset by acquisition-related expenses related to our purchases of LBC Bancshares, Inc. and PFB Mortgage, as well as increases in noninterest expense, primarily salaries and benefits, in connection with acquisitions. Further, I am happy to announce that we successfully completed the conversion of Calumet Bank’s core systems during the third quarter and anticipate a return to normalized technology expenses.

“We continue to see solid results from our initiatives to grow loan volume. Organic loan growth in the third quarter totaled $23.5 million, or 10.0% annualized, and are up $46.9 million, or 6.0% over the same period last year, excluding loans acquired through acquisitions. 

“Net interest margin increased seven basis points to 3.64% on both a sequential quarterly basis and compared with the year-earlier period. As the Federal Reserve Bank (FRB) lowered rates twice during the third quarter, the Company followed suit by lowering stated rates on most types of interest‑bearing deposit and certificates of deposit account types. However, as we believe we can opportunistically shift assets into loans, we anticipate margin improvement through loan volume growth.”

In closing, Fountain added, “While the competitive landscape remains intense, we continue to be optimistic about opportunities to continue the Company’s legacy of growth and performance. Our Board is confident with our operational structure and strategic planning as evidenced by the higher quarterly dividend set in January 2019. We look forward to the remainder of the year with enthusiasm based on our strong credit metrics, a strong loan production pipeline and the opportunities we see to continue to reward our shareholders.”

Capital
Colony continues to maintain a strong capital position, with ratios that exceed regulatory minimums required to be classified as “well-capitalized.”  At September 30, 2019, the Company’s tier one leverage ratio, tier one ratio, total risk-based capital ratio and common equity tier one capital ratio were 8.98%, 12.54%, 13.16% and 10.31%, respectively, compared with 10.45%, 15.02%, 15.88% and 12.19%, respectively, at September 30, 2018.

Net Interest Margin
During the third quarter of 2019, the Company reported net interest income of $12.6 million compared with $10.1 million for the comparable 2018 quarter. For the nine months ended September 30, 2019, net interest income was $34.8 million compared with $30.4 million for the comparable 2018 period. Net interest margin for the third quarter of 2019 was 3.64%, up seven basis points on both a sequential quarter basis and compared with the year-earlier quarter. Net interest margin for the nine months ended September 30, 2019, was flat at 3.56% compared with the first nine months of 2018. Net interest margin, excluding purchase accounting from the acquisition of LBC Bancshares, Inc., was 3.51%, up two basis points on a sequential quarter basis.

Asset Quality
Asset quality remained solid with continued improvement from a year ago. Substandard assets, which include non-performing assets, totaled $20.9 million at September 30, 2019, compared with $23.8 million at September 30, 2018. Substandard assets adjusted for SBA guarantees to tier one capital plus loan loss reserve ratio was 12.86% and 17.00% at September 30, 2019 and September 30, 2018, respectively. Non‑performing assets increased to $10.9 million, or 1.14% of total loans and OREO, from $10.3 million or 1.32% at September 30, 2018. OREO totaled $776 thousand at September 30, 2019, reflecting a 64.3% reduction from $2.2 million at September 30, 2018.

In the third quarter of 2019, net loan charge-offs were $403 thousand or 0.05% of average loans compared with net loan charge‑offs of $65 thousand or 0.01% of average loans in the third quarter of 2018, while net loan charge-offs for the first nine months of 2019 were $1.2 million or 0.14% of average loans compared with $484 thousand or 0.06% of average loans for the same period in 2018. The loan loss reserve was $6.6 million or 0.69% of total loans on September 30, 2019, compared with $7.2 million or 0.92% of total loans at September 30, 2018. Loan loss reserve methodology resulted in a $214 thousand loan loss provision for the three months ended September 30, 2019, compared with $61 thousand for the comparable 2018 period and a $524 thousand loan loss provision for the first nine months of 2019 compared with $131 thousand for the same comparable period in 2018.

Noninterest Income
Total noninterest income increased 44.81% to $10.4 million for the nine months ended September 30, 2019, from $7.2 million in the comparable 2018 period. Gain on the sale of OREO property for the year increased $828 thousand and secondary mortgage fee income increased $1.4 million.

Noninterest Expense
Total noninterest expense increased 35.03% to $35.4 million for the nine months ended September 30, 2019, from $26.2 million in the comparable 2018 period. Salaries and employee benefit expenses increased 25.39%, occupancy expense increased 12.41% and other noninterest expense increased 61.49% from the comparable 2018 period. The efficiency ratio increased to 78.19% for the nine months ended September 30, 2019, from 69.90% in the comparable 2018 period. The increase is attributable to an increase in salary and benefits of $2.3 million connected with the Calumet merger and additional headcount with Colony Bank Mortgage, or 60.2% of the overall salary and benefit increase. Also, acquisition expenses increased noninterest expense by $2.9 million or 31.78% of the overall other noninterest expense increase. Accounting for non‑GAAP items disclosed later in this release, the adjusted efficiency ratio (a non‑GAAP financial measure) would have been 72.47% and 69.16% for the first nine months ended September 30, 2019 and 2018, respectively. See the unaudited reconciliation of non-GAAP measures later in this release.

About Colony Bankcorp
Colony Bankcorp, Inc. is the bank holding company for Colony Bank. Founded in 1975 and headquartered in Fitzgerald, Georgia, Colony operates 28 full-service branches throughout Central, Southern and Coastal Georgia and a full-service website at www.colony.bank. The Bank also helps its customers achieve their goal of home ownership through Colony Bank Mortgage. Colony’s common stock is traded on the NASDAQ Global Market under the symbol “CBAN”. Follow the Company on Facebook or on Twitter @colony_bank.

Forward-Looking Statements
Certain statements contained in the preceding release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified. In addition, certain statements may be contained in the Company’s future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Company that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statement of plans and objectives of Colony Bankcorp, Inc. or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties. Factors that might cause such differences include, but are not limited to: the Company’s ability to implement its various strategic initiatives; competitive pressures among financial institutions increasing significantly; economic conditions, either nationally or locally, in areas in which the Company conducts operations being less favorable than expected; interest rate risk; legislation or regulatory changes which adversely affect the ability of the consolidated Company to conduct business combinations or new operations; and risks that the anticipated benefits from the transactions with LBC Bancshares, Inc. and PFB Mortgage are not realized in the time frame anticipated or at all as a result of changes in general economic and market conditions or other unexpected factors or events. These and other factors, risks and uncertainties could cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Many of these factors are beyond the Company’s ability to control or predict.

Forward-looking statements speak only as of the date on which such statements are made. These forward-looking statements are based upon information presently known to the Company’s management and are inherently subjective, uncertain and subject to change due to any number of risks and uncertainties, including, without limitation, the risks and other factors set forth in the Company’s filings with the Securities and Exchange Commission, the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, under the captions “Forward-Looking Statements and Factors that Could Affect Future Results” and “Risk Factors,” and in the Company’s quarterly reports on Form 10‑Q and current reports on Form 8-K. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on these forward-looking statements.

COLONY BANKCORP, INC.
Unaudited Reconciliation of Non-GAAP Measures
(in thousands, except per share data)

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2019     2018     2019     2018  
Total noninterest income $   4,039   $   2,405   $   10,373   $   7,163  
Securities gains   (34 )   -     (99 )   (116 )
Realized (gains) losses on
  OREO property held for sale
  61     (4 )   (790 )   39  
Adjusted noninterest income $   4,066   $   2,401   $   9,484   $   7,086  
         
Total noninterest expense $   13,358   $   9,078   $   35,397   $   26,215  
Acquisition-related expenses   (861 )   (62 )   (2,998 )   (80 )
Impairment loss on assets held for sale   -     (167 )   (151 )   (170 )
Realized losses on assets held for sale   (17 )   (1 )   (15 )   (1 )
Adjusted noninterest expense $   12,480   $   8,848   $   32,233   $   25,964  
         
Net income available to
common shareholders
$   2,518   $   2,695   $   7,455   $   8,952  
Total adjustments, net of tax*   716     178     1,798     137  
Adjusted net income $   3,234   $   2,873   $   9,253   $   9,089  
         
Diluted earnings per share $   0.27   $   0.32   $   0.83   $   1.04  
Total adjustments, net of tax*   0.08     0.02     0.20     0.02  
Adjusted diluted earnings per share $   0.35   $   0.34   $   1.03   $   1.06  
         
Efficiency ratio   79.94 %   72.44 %   78.19 %   69.90 %
Total adjustments   (5.53 %)   (1.82 %)   (5.72 %)   (0.74 %)
Adjusted efficiency ratio   74.41 %   70.62 %   72.47 %   69.16 %

* The effective tax rate for the period presented is used to determine net of tax amounts.

Net Income and Diluted Earnings Per Share represented in accordance with Generally Accepted Accounting Principles (“GAAP”). Adjusted Noninterest Income, Adjusted Noninterest Expense, Adjusted Income Taxes, Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted Efficiency Ratio are non‑GAAP financial measures. The Company believes that these non-GAAP measures aid in understanding and comparing current-year and prior-year results, both of which include unusual items of different natures. These non-GAAP measures should be viewed in addition to, and not as a substitute for, the Company’s reported results.

COLONY BANKCORP, INC.
Unaudited Segment Information
(in thousands, except per share data)

Total Loans Segmented By Legacy and Purchased

    Sept. 30,
2019
June 30,
2019
March 31,
2019
Dec. 31,
2018
Sept. 30,
2018
Legacy $   826,309 $   796,045 $   763,462 $   763,640 $   779,443
Purchased   132,414   139,226   16,529   18,387   -
Total $   958,723 $   935,271 $   779,991 $   782,027 $   779,443

Income Statement Segmented by Division

  Three Months Ended September 30, 2019
  Bank Mortgage
Banking
Small
Business
Specialty
Lending
Division
Holding
Company
Totals
Net interest income $   13,018 $   81   $   -   $   (451 ) $   12,648
Provision for loan losses   214   -     -     -     214
Noninterest income   2,737   1,245     -     57     4,039
Noninterest expenses   11,252   1,191     529     386     13,358
Income taxes   893   (15 )   (111 )   (170 )   597
Segment profit (loss) $   3,396 $   150   $   (418 ) $   (610 ) $   2,518
           
Segment assets at
  September 30, 2019
$ 1,461,210 $   10,209   $   149   $   6,114   $ 1,477,682
           
  Nine Months Ended September 30, 2019
  Bank Mortgage
Banking
Small
Business
Specialty
Lending
Division
Holding
Company
Totals
Net interest income $   35,850 $   100   $   -   $   (1,120 ) $   34,830
Provision for loan losses     524     -     -       -       524
Noninterest income   8,412   1,888     -     73     10,373
Noninterest expenses   31,461   2,037     561     1,338     35,397
Income taxes   2,448   (10 )   (118 )   (493 )   1,827
Segment profit (loss) $   9,829 $   (39 ) $   (443 ) $   (1,892 ) $   7,455
           
Segment assets at
  September 30, 2019
$ 1,461,210 $   10,209   $   149   $   6,114   $ 1,477,682



COLONY BANKCORP, INC.
Consolidated Balance Sheets
(in thousands)

  Sept. 30, 2019 Dec. 31, 2018 Sept. 30, 2018
  (unaudited) (audited) (audited)
ASSETS      
Cash and cash equivalents      
Cash and due from banks $   13,495   $   10,377   $   10,149  
Interest-bearing deposits   41,848     49,778     21,764  
Federal funds sold   266     -     -  
Investment securities      
Available for sale, at fair value   368,869     353,066     318,032  
Other investments, at cost   3,771     2,978     3,594  
Loans held for sale   8,734     -     -  
Loans   958,723     782,027     779,443  
Allowance for loan losses   (6,600 )   (7,277 )   (7,155 )
Unearned interest and fees   (564 )   (501 )   (515 )
    951,559     774,249     771,773  
Premises and equipment   32,886     29,494     27,744  
Other real estate   776     1,841     2,173  
Other intangible assets   19,402     759     18  
Other assets   36,076     29,336     30,949  
Total Assets $ 1,477,682   $ 1,251,878   $ 1,186,196  
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Deposits      
Noninterest-bearing $   216,680   $   192,847   $   177,261  
Interest-bearing   1,034,593     892,278     833,798  
    1,251,273     1,085,125     1,011,059  
Borrowed money      
Subordinated debentures   24,229     24,229     24,229  
Other borrowed money   66,813     44,000     58,500  
    91,042     68,229     82,729  
       
Other liabilities   5,716     2,832     3,420  
       
Stockholders’ equity      
Common stock, par value $1 a share; authorized 20,000,000 shares, issued 9,498,783 shares as of Sept. 30, 2019, 8,444,908 as of Dec. 31, 2018, and 8,444,908 as of Sept. 30, 2018, respectively   9,499     8,445     8,445  
Paid in capital   43,719     26,064     26,064  
Retained earnings   74,935     69,459     66,916  
Restricted stock - unearned compensation   (61 )   (86 )   (94 )
Accumulated other comprehensive income (loss), net of tax   1,559     (8,190 )   (12,343 )
    129,651     95,692     88,988  
Total Liabilities and Stockholders’ Equity $ 1,477,682   $ 1,251,878   $ 1,186,196  


COLONY BANKCORP, INC.
Consolidated Statements of Income
(in thousands, except per share data)

  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2019   2018   2019   2018
  (unaudited) (audited) (unaudited) (audited)
Interest income        
Loans, including fees $   13,653 $   10,255 $   36,436 $   30,048
Deposits with other banks   186   48   749   192
Federal funds sold   20   -   60   -
Investment securities
  U.S. Treasury
  1   -   1   -
U. S. Government agencies   2,230   1,847   6,738   5,635
State, county and municipal   24   25   82   77
Corporate debt   27   27   84   84
Dividends on other investments   49   49   150   134
    16,190   12,251   44,300   36,170
Interest expense        
Deposits   2,815   1,564   7,569   4,165
Federal funds purchased   1   3   1   4
Borrowed money   726   579   1,900   1,602
    3,542   2,146   9,470   5,771
Net interest income   12,648   10,105   34,830   30,399
Provision for loan losses   214   61   524   131
Net interest income after provision
  for loan losses
  12,434   10,044   34,306   30,268
         
Noninterest income        
Service charges on deposits   1,325   1,134   3,359   3,266
Other service charges, commissions and fees   1,100   803   3,110   2,414
Mortgage fee income   1,255   176   1,941   507
Securities gains   34   -   99   116
Other   325   292   1,864   860
    4,039   2,405   10,373   7,163
Noninterest expense        
Salaries and employee benefits   7,186   5,110   18,848   15,032
Occupancy and equipment   1,290   1,052   3,459   3,077
Other   4,882   2,916   13,090   8,106
    13,358   9,078   35,397   26,215
         
Income before income taxes   3,115   3,371   9,282   11,216
Income taxes   597   676   1,827   2,264
Net income $   2,518 $   2,695 $   7,455 $   8,952
Net income per share        
Basic $   0.27 $   0.32 $   0.83 $   1.06
Diluted $   0.27 $   0.32 $   0.83 $   1.04
Cash dividends declared per share $   0.075 $   0.05 $   0.225 $   0.15
Weighted average basic shares outstanding   9,494,771   8,439,415   9,008,196   8,439,310
Weighted average diluted shares outstanding   9,494,771   8,444,816   9,008,196   8,571,516


COLONY BANKCORP, INC.
Unaudited Financial Highlights
(in thousands, except per share data)

  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2019     2018     2019     2018  
EARNINGS SUMMARY        
Net interest income $   12,648   $   10,105   $   34,830   $   30,399  
Provision for loan losses   214     61     524     131  
Non-interest income   4,039     2,405     10,373     7,163  
Non-interest expense   13,358     9,078     35,397     26,215  
Income taxes   597     676     1,827     2,264  
Net income   2,518     2,695     7,455     8,952  
 
PER COMMON SHARE SUMMARY        
Common shares outstanding   9,498,783     8,444,908     9,498,783     8,444,908  
Weighted average basic shares   9,494,771     8,439,415     9,008,196     8,439,310  
Weighted average diluted shares   9,494,771     8,444,816     9,008,196     8,571,516  
Earnings per basic share $   0.27   $   0.32   $   0.83   $   1.06  
Earnings per diluted share $   0.27   $   0.32   $   0.83   $   1.04  
Cash dividends declared per share $   0.075   $   0.05   $   0.225   $   0.15  
Common book value per share $   13.65   $   10.54   $   13.65   $   10.54  
Tangible common book value per share $   11.61   $   10.54   $   11.61   $   10.54  
 
OPERATING RATIOS (ANNUALIZED)        
Net interest margin (a)   3.64 %   3.57 %   3.56 %   3.56 %
Return on average assets   0.67 %   0.91 %   0.72 %   1.00 %
Return on average total equity   7.86 %   12.10 %   8.82 %   13.37 %
Efficiency (b)   79.94 %   72.44 %   78.19 %   69.90 %
         
(a)  Computed using fully taxable-equivalent net income.
(b)  Computed by dividing non-interest expense by the sum of fully taxable-equivalent net interest income and non-interest income and excluding security gains/losses.


COLONY BANKCORP, INC.
Unaudited Financial Highlights (Continued)
(in thousands, except per share data)

  Three Months Ended
September 30,
Nine Months Ended
September 30,
    2019     2018     2019     2018  
AVERAGE BALANCES        
Total assets $ 1,492,852   $ 1,183,926   $ 1,388,072   $ 1,193,976  
Loans, net of reserves   942,356     764,716     858,592     759,660  
Deposits   1,272,561     1,012,770     1,195,273     1,027,180  
Total equity   128,172     89,083     112,704     89,298  
         
ASSET QUALITY        
Nonperforming loans $   10,143   $   8,136   $   10,143   $   8,136  
Nonperforming assets   10,918     10,309     10,918     10,309  
Substandard assets   20,879     23,833     20,879     23,833  
Net loan charge-offs   403     65     1,201     484  
Reserve for loan loss to total loans   0.69 %   0.92 %   0.69 %   0.92 %
Reserve for loan loss to non- performing loans   65.07 %   87.94 %   65.07 %   87.94 %
Reserve for loan loss to non-performing assets   60.45 %   69.41 %   60.45 %   69.41 %
       
Net loan charge-offs to average total loans   0.17 %   0.01 %   0.18 %   0.06 %
Nonperforming loans to total loans   1.06 %   1.04 %   1.06 %   1.04 %
Nonperforming assets to total assets   0.74 %   0.87 %   0.74 %   0.87 %
     
Nonperforming assets to total loans
  and other real estate
  1.14 %   1.32 %   1.14 %   1.32 %
Substandard assets to tier one capital
  and allowance for loan losses
  13.92 %   17.00 %   13.92 %   17.00 %


Quarterly Comparative Data (in thousands, except per share data)
           
  3Q2019 2Q2019 1Q2019 4Q2018 3Q2018
Assets $ 1,477,682   $ 1,506,972   $ 1,279,077   $ 1,251,878   $ 1,186,196  
Loans   951,559     927,917     772,889     774,249     771,773  
Deposits   1,251,273     1,297,723     1,111,678     1,085,125     1,011,059  
Total Equity   129,651     126,509     101,066     95,692     88,988  
Net Income   2,518     2,101     2,835     2,965     2,695  
Net Income Per Basic Share   0.27     0.23     0.34     0.35     0.32  
           
Key Performance Ratios          
Return on Average Assets   0.67 %   0.60 %   0.90 %   0.97 %   0.91 %
Return on Average Total Equity   7.86 %   7.43 %   11.76 %   13.18 %   12.10 %
Total Equity to Total Assets   8.77 %   8.39 %   7.90 %   7.64 %   7.50 %
Tangible Equity to
  Tangible Assets
  7.56 %   7.19 %   7.85 %   7.59 %   7.50 %
Net Interest Margin   3.64 %   3.57 %   3.46 %   3.55 %   3.57 %

For additional information, contact:
Tracie Youngblood
EVP & Chief Financial Officer
(229) 426-6000 (Ext 6003)