Colony Bank(US:CBAN)2019-07-30 20:07PART I – Financial Information Financial Statements Unaudited consolidated financial statements for June 30, 2019, show total assets grew to $1.51 billion due to acquisitions, though net income decreased to $4.9 million primarily from acquisition-related expenses Consolidated Balance Sheets As of June 30, 2019, total assets increased 20.4% to $1.51 billion, driven by loan and investment growth from acquisitions, with deposits rising to $1.30 billion and equity to $126.5 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 (Unaudited) | December 31, 2018 (Audited) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $1,506,972 | $1,251,878 | +20.4% | | Cash and Cash Equivalents | $75,412 | $60,156 | +25.4% | | Investment Securities Available for Sale | $409,839 | $353,066 | +16.1% | | Loans, Net | $927,917 | $774,249 | +19.8% | | Goodwill | $16,134 | $202 | +7887.1% | | Total Liabilities | $1,380,463 | $1,156,186 | +19.4% | | Total Deposits | $1,297,723 | $1,085,125 | +19.6% | | Total Stockholders' Equity | $126,509 | $95,692 | +32.2% | Consolidated Statements of Income Net income for Q2 2019 decreased to $2.1 million and for the six months to $4.9 million, primarily due to $1.9 million in acquisition-related expenses, despite growth in net interest income Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2019 | Q2 2018 | 6 Months 2019 | 6 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $11,825 | $10,165 | $22,182 | $20,294 | | Provision for Loan Losses | $179 | $44 | $310 | $70 | | Noninterest Income | $4,000 | $2,324 | $6,334 | $4,758 | | Noninterest Expense | $13,014 | $8,601 | $22,040 | $17,137 | | Acquisition Related Expenses | $1,928 | $0 | $1,961 | $0 | | Net Income | $2,101 | $3,069 | $4,936 | $6,257 | | Diluted EPS | $0.23 | $0.36 | $0.56 | $0.72 | | Cash Dividends Paid Per Share | $0.075 | $0.05 | $0.15 | $0.10 | Notes to Consolidated Financial Statements Notes detail accounting policies and acquisitions, including LBC Bancshares and PFB Mortgage in May 2019, which significantly impacted the balance sheet, loan portfolio, and regulatory capital, with subsequent events including a new lending group - On May 1, 2019, the Company completed its acquisition of LBC Bancshares, Inc. for consideration of 1,054,029 common shares (valued at $18.7 million) and $15.3 million in cash, adding approximately $210.5 million in assets and resulting in $15.4 million of goodwill7683 - On May 1, 2019, the Bank acquired PFB Mortgage from Planters First Bank for $833 thousand in cash, resulting in $541 thousand of goodwill8890 - The FASB has proposed delaying the effective date for the new credit loss standard (CECL) for smaller reporting companies, like Colony, until fiscal years beginning after December 15, 202264 - Subsequent to the quarter end, the company announced the startup of a Small Business Specialty Lending Group, declared a $0.075 per share dividend, and formed a captive insurance subsidiary, Colony Risk Management, Inc222223 Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights strategic expansion through acquisitions and new lending initiatives, driving 20.4% asset growth to $1.51 billion, though net income declined due to $1.93 million in acquisition expenses, while nonperforming assets decreased and capital remained strong - The company's strategic focus includes increasing deposits, solid loan growth, exploring new product lines, and market expansion, with key 2019 initiatives including the acquisition of LBC Bancshares, purchase of PFB Mortgage, and the launch of a Small Business Specialty Lending Group242245247 - Net income for the first six months of 2019 was $4.94 million, a decrease from $6.26 million in the prior year, primarily due to $1.93 million in acquisition-related expenses incurred in Q2 2019264 - Noninterest expense increased significantly, driven by acquisition costs, with a major component being a $1.08 million contract buyout of Calumet Bank's data processing system294 - Nonperforming assets decreased to $10.7 million (0.71% of total assets) at June 30, 2019, from $11.3 million (0.90% of total assets) at December 31, 2018316317 Results of Operations For the six months ended June 30, 2019, net income decreased 21.1% to $4.9 million due to a 28.6% rise in noninterest expense, including $1.96 million in acquisition costs, despite growth in net interest and noninterest income Key Operational Changes - Six Months Ended June 30 (2019 vs 2018) | Component | 2019 (in thousands) | 2018 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Taxable-equivalent net interest income | $22,291 | $20,328 | +9.7% | | Provision for loan losses | $310 | $70 | +342.9% | | Noninterest income | $6,334 | $4,758 | +33.1% | | Noninterest expense | $22,040 | $17,137 | +28.6% | | Net income | $4,936 | $6,257 | -21.1% | - The increase in noninterest income was primarily driven by a ~$1.0 million gain on the sale of other real estate owned properties and a 107.6% increase in mortgage fee income, attributed to the PFB Mortgage acquisition289290 - The rise in noninterest expense was mainly due to acquisitions, with salaries and benefits increasing by $1.7 million and acquisition-specific expenses totaling $1.96 million292 Financial Condition As of June 30, 2019, financial condition strengthened with total assets at $1.51 billion, loan portfolio at $935.3 million, and deposits at $1.3 billion, while nonperforming assets decreased and capital ratios remained strong - The total loan portfolio was composed of $796.0 million in legacy loans and $139.2 million in purchased loans as of June 30, 2019, reflecting the impact of recent acquisitions302303 - The allowance for loan losses (ALLL) was $6.8 million, or 0.73% of total loans, down from 0.93% at year-end 2018, with the ratio of ALLL to nonperforming loans at 69.61%316329 - The company's capital position is strong, with a Common Equity Tier 1 ratio of 10.41% and a Total Risk-Based Capital ratio of 13.37%, both significantly exceeding regulatory minimums of 4.50% and 8.00%, respectively346 - Liquidity remains solid with a loan-to-deposit ratio of 72.07% and access to multiple funding sources, including the FHLB and correspondent banks351355 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, which management mitigates by balancing assets and liabilities, with no material changes reported since the 2018 Form 10-K - The company's main market risk exposure is to U.S. dollar interest rate changes364 - There have been no material changes in market risk from the information provided in the Company's annual report on Form 10-K for the year ended December 31, 2018364 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2019365 - No material changes to internal control over financial reporting were identified during the quarter365 PART II – Other Information Legal Proceedings The company reported no material legal proceedings - None367 Risk Factors No material changes to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2018 - There have been no material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018367 Unregistered Sale of Equity Securities and Use of Proceeds No sales of the company's common stock occurred during the three-month period ended June 30, 2019 - There were no shares of the Company's common stock sold during the three-month period ended June 30, 2019368 Exhibits This section lists all exhibits filed with the report, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL interactive data files383