Colony Bankcorp, Inc. (Nasdaq: CBAN) (“Colony” or the “Company”) today reported financial results for the third quarter of 2023. Financial highlights are shown below.

Financial Highlights:

• Net income increased to $5.8 million, or $0.33 per diluted share, for the third quarter of 2023, compared to $5.3 million, or $0.30 per diluted share, for the second quarter of 2023, and $5.3 million, or $0.30 per diluted share, for the third quarter of 2022.

• Operating net income increased to $6.0 million, or $0.34 of adjusted earnings per diluted share, for the third quarter of 2023, compared to $5.7 million, or $0.33 of adjusted earnings per diluted share, for the second quarter of 2023, and $5.3 million, or $0.30 of adjusted earnings per diluted share, for the third quarter of 2022. (See Reconciliation of Non-GAAP Measures).

• Strong liquidity with available sources of funding of approximately $1.4 billion at September 30, 2023. No overnight borrowings utilized or Federal Reserve Bank Term Funding program used as of September 30, 2023.

• Estimated uninsured deposits of $740.0 million, or 28.21% of total Bank deposits at September 30, 2023. Adjusted uninsured deposit estimate (excluding deposits collateralized by public funds or internal accounts) of $451.9 million, or 17.22% of total Bank deposits at September 30, 2023.

• Provision for credit losses of $1.0 million was recorded in third quarter of 2023 compared to $200,000 in second quarter of 2023, and $1.3 million in third quarter of 2022.

• Total loans were $1.86 billion at September 30, 2023, an increase of $26.1 million, or 1.42%, from the prior quarter.

• Total deposits were $2.59 billion and $2.63 billion at September 30, 2023 and June 30, 2023, respectively, a decrease of $35.9 million.

• Mortgage production was $78.4 million, and mortgage sales totaled $53.3 million in the third quarter of 2023 compared to $106.4 million and $66.4 million, respectively, for the second quarter of 2023.

• Small Business Specialty Lending (“SBSL”) closed $34.5 million in Small Business Administration (“SBA”) loans and sold $14.6 million in SBA loans in the third quarter of 2023 compared to $26.0 million and $11.1 million, respectively, for the second quarter of 2023.

The Company also announced that on October 25, 2023, the Board of Directors declared a quarterly cash dividend of $0.11 per share, to be paid on its common stock on November 22, 2023, to shareholders of record as of the close of business on November 8, 2023. The Company had 17,567,983 shares of its common stock outstanding as of October 24, 2023.

“We continue to be pleased with our performance in the current environment. Our quarter over quarter earnings improved as we remain focused on enhancing our operational efficiency, even in the face of persistent industry-wide challenges. Noninterest expenses decreased as we diligently maintained our disciplined approach to expense control and saw the results of our previous quarter's efforts come to fruition.

"In light of the evolving economic landscape, we anticipate a more conservative approach to loan growth in the coming quarters. This outlook aligns with our commitment to prudent risk management and achieving appropriate returns with the current increased cost of funds. We prioritize the long-term financial health of our institution and the well-being of our customers as we navigate these market conditions,” said Heath Fountain, Chief Executive Officer and Acting Chief Financial Officer.

“Total deposits declined slightly from the previous quarter resulting from the seasonality of a small portion of our deposit base, however, we have seen total deposits increase on a year-to-date basis. Additionally, net-interest margin increased 1 basis point from the prior quarter, but we maintain our outlook of flat to slightly down over the next quarter as we continue to see mix and rate changes along with competition on deposit pricing.

“Asset quality remains strong as non-performing loans decreased from the previous quarter and non-performing loans in our commercial real estate portfolio continue to remain at low levels. The uptick in loan charge-offs pertains to the non-government guaranteed portion of a limited number of loans within our Small Business Specialty Lending Division.”

Balance Sheet

• Total assets were $3.09 billion at September 30, 2023, a decrease of $7.2 million from June 30, 2023.

• Total loans, including loans held for sale, were at $1.89 billion at September 30, 2023, an increase of $25.1 million from the quarter ended June 30, 2023.

• Total deposits were $2.59 billion and $2.63 billion at September 30, 2023 and June 30, 2023, respectively, a decrease of $35.9 million. Interest bearing demand deposits increased $7.0 million and savings and money market deposits increased $22.1 million, which was partially offset by a decrease in time deposits of $18.0 million from June 30, 2023 to September 30, 2023.

• Total borrowings at September 30, 2023 totaled $248.4 million, an increase of $30.0 million or, 13.7%, compared to June 30, 2023 related to increases in Federal Home Loan Bank advances.

Capital

• Colony continues to maintain a strong capital position, with ratios that exceed regulatory minimums required to be considered as “well-capitalized.”

• Preliminary tier one leverage ratio, tier one capital ratio, total risk-based capital ratio and common equity tier one capital ratio were 8.93%, 12.46%, 15.11%, and 11.36%, respectively, at September 30, 2023.

Third Quarter and September 30, 2023 Year to Date Results of Operations

• Net interest income, on a tax-equivalent basis, totaled $19.8 million for the third quarter ended September 30, 2023 compared to $21.0 million for the same period in 2022. Net interest income, on a tax-equivalent basis, for the nine months ended September 30, 2023 totaled $59.9 million, compared to $59.6 million for the nine months ended September 30, 2022. Quarter over quarter there was a decrease of $1.2 million and only a slight increase in year to date comparisons. Increases can be seen in both income on interest earning assets offset by expenses on interest bearing liabilities due to the significant rise in interest rates period over period along with increases in FHLB advances. Income on interest earning assets increased $8.9 million, to $32.8 million for the third quarter of 2023 and $26.8 million, to $92.3 million for the nine month period ended September 30, 2023, each compared to the respective period in 2022. Expense on interest bearing liabilities increased $10.1 million, to $13.0 million for the third quarter of 2023 and $26.5 million, to $32.3 million for the nine month period ended September 30, 2023, each compared to the respective period in 2022.

• Net interest margin for the third quarter of 2023 was 2.78% compared to 3.26% for the third quarter of 2022. Net interest margin was 2.87% for the nine months ended September 30, 2023 compared to 3.19% for the nine months ended September 30, 2022. The decrease for each period is the result of rate increases in interest earning liabilities outpacing the rate increases in interest bearing assets.

• Noninterest income totaled $9.7 million for the third quarter ended September 30, 2023, an increase of $1.6 million, or 19.30%, compared to the same period in 2022. This increase was related to increases in insurance commissions, equity investment income and income on wealth advisory services which are included in other noninterest income. Noninterest income totaled $26.3 million for the nine months ended September 30, 2023, a decrease of $1.0 million, or 3.68%, compared to the same period in 2022. This decrease was primarily attributable to decreases in mortgage fee income and SBSL loan sales offset by increases in insurance commissions, equity investment income and income on wealth advisory services which are included in other noninterest income.

• Noninterest expense totaled $20.9 million for the third quarter ended September 30, 2023, compared to $21.4 million for the same period in 2022. Noninterest expense totaled $63.5 million for the nine months ended September 30, 2023, compared to $67.6 million for the same period in 2022. These decreases were a result of overall decreases in salaries and employee benefits related to lower commissions and bonus expenses as well as a decreases in data processing expense as a result of cost savings upon renewal of the core processing contract partially offset by an increase in other loan related fees.

Asset Quality

• Nonperforming assets totaled $10.1 million and $11.9 million at September 30, 2023 and June 30, 2023, respectively, a decrease of $1.8 million due to charge offs and paid off loans during the quarter.

• Other real estate owned and repossessed assets totaled $812,000 at September 30, 2023 and $792,000 at June 30, 2023.

• Net loans charged-off were $898,000, or 0.19% of average loans for the third quarter of 2023, compared to net charge-offs of $200,000 or 0.04% for the second quarter of 2023.

• The credit loss reserve was $17.4 million, or 0.93% of total loans, at September 30, 2023, compared to $17.1 million, or 0.93% of total loans at June 30, 2023.

Earnings call information

The Company will host an earnings conference call at 9:00 a.m. ET on Thursday, October 26, 2023, to discuss the recent results and answer appropriate questions. The conference call can be accessed by dialing 1-888-259-6580 (or 1-416-764-8624 for international participants). The conference call access code is 97884160. A replay of the call will be available until Thursday, November 2, 2023. To listen to the replay, dial 1-877-674-7070 and enter the access code 884160#.