Picture supply: The Motley Idiot.
DATE
Oct. 23, 2025, 9 a.m. ET
CALL PARTICIPANTS
President & Chief Government Officer — T. Heath FountainChief Monetary Officer — Derek C. Shelnutt
TAKEAWAYS
Internet Curiosity Margin — Expanded by 5 foundation factors sequentially, marking a 53 foundation level enhance because the comparable quarter final 12 months.Working Return on Belongings — Improved to 1.06%, up from 0.81% a 12 months in the past, reflecting margin growth translating to core earnings.Annualized Mortgage Development Fee — Achieved 9% annualized within the quarter and roughly 14% annualized year-to-date, with moderation anticipated to the long-term 8%-12% goal.Mortgage Portfolio — Loans held for funding elevated $43.5 million from the prior quarter.Internet Curiosity Earnings — Rose by $314,000 in contrast with the prior quarter, pushed by mortgage development and asset repricing.Working Noninterest Earnings — Elevated by simply over $1 million quarter over quarter, led by $425,000 increased service cost and price earnings and $788,000 extra different noninterest earnings, together with a onetime acquire from a fintech fund partnership.Working Noninterest Bills — Grew by $624,000 sequentially, as a consequence of expertise funding and enterprise growth; partially offset by the upper noninterest earnings.Internet Noninterest Expense to Common Belongings — Improved by 4 foundation factors to 1.48% sequentially, with a 1.45% goal cited for future quarters.Provision for Mortgage Losses — Totaled $900,000 within the quarter, reflecting increased charge-offs within the SBA lending division.Cost-Offs — Greater within the SBSL portfolio; administration said, “this quarter represents the height for charge-offs at SBSL. We don’t anticipate them to extend from right here.”Complete Deposits — Up $28.1 million in comparison with the prior quarter, with seasonal dynamics famous for municipal funds returning within the subsequent quarter.Tangible Widespread Fairness (TCE) Ratio — Ended at 8%, up from 7.43% a 12 months earlier.Tangible E-book Worth Per Share — Rose to $14.20 from $12.76 12 months over 12 months.Onetime Merger Prices — $732,000 of non-recurring bills associated to the pending TC Bancshares merger; the transaction stays on observe for fourth quarter completion.Wire Fraud Impression — Acknowledged a $1.25 million loss this quarter after an insurance coverage protection dispute, with all different protection undisputed and restoration efforts ongoing.Common Yield on New and Renewed Loans — Stood at 7.83% for the quarter, offering yield elevate in comparison with loans rolling off.Securities Portfolio Motion — Bought funding securities at a pretax lack of round $1 million, producing roughly $75 million in proceeds and a modeled earn-back of lower than one 12 months.Board Actions — Declared a quarterly dividend of $0.115 per share in the course of the quarter.Mortgage Division — Skilled slower manufacturing and better bills from strategic hiring; market circumstances and rate of interest volatility cited as contributing to the slowdown.SBSL (Small Enterprise Specialty Lending) — Flat pretax earnings sequentially as charge-offs have been offset by diminished bills; outlook for the division consists of reduction as charges decline.Marine and RV Lending — Mortgage balances reached roughly $90 million, up $45 million 12 months over 12 months, with pretax earnings enhancing $100,000 quarter over quarter.Complementary Enterprise Strains — Service provider Providers and Colony Wealth Advisors reported significant pretax earnings will increase; Colony Insurance coverage earnings elevated following a latest acquisition.Merger Progress — Regulatory filings accomplished, S-4 efficient, and shareholder votes scheduled for November; administration confirmed alignment with the monetary metrics of the introduced deal.Credit score High quality — Previous-due and categorised loans improved quarter over quarter, whereas criticized loans and nonperforming property elevated however stay at “manageable ranges” relative to the portfolio.Publicity Profile — No shared nationwide credit or important NDFI (Non-Depository Monetary Establishment) publicity; lending stays centered on native, relationship-based credit.Authorities Shutdown — Recognized SBSL as most impacted, however administration said, “we don’t anticipate any materials adversarial impacts or credit score considerations because of the shutdown” if resolved promptly.
Want a quote from a Motley Idiot analyst? E mail [email protected]
RISKS
Administration reported, “Whereas criticized loans and nonperforming property elevated, they at present stay at manageable ranges.”The SBSL division skilled its peak charge-offs this quarter, with management noting, “Cost-offs have been a bit increased this quarter, primarily as a consequence of variability in our SBA portfolio.”A $1.25 million loss was recorded after an insurance coverage protection dispute relating to a beforehand disclosed $2.9 million alleged wire fraud occasion.Mortgage division confronted slower manufacturing and better prices as a consequence of each strategic hires and headwinds that contributed to the decrease manufacturing in the course of the quarter.
SUMMARY
Colony Bankcorp (CBAN +0.92%) delivered quarter over quarter and year-over-year enhancements in web curiosity margin, working ROA, and tangible e-book worth, with tangible capital strengthening notably. The corporate achieved double-digit annualized mortgage development year-to-date however expects an extra moderation towards an 8%-12% long-term goal as buyer demand softens. Noninterest earnings development, particularly from wealth, insurance coverage, and service provider providers, outpaced increased working prices incurred from strategic investments, leading to improved effectivity metrics. The financial institution reported increased charge-offs within the SBSL portfolio, elevated nonperforming property, and a disputed insurance coverage restoration on alleged wire fraud, however administration expressed confidence that these threat elements are contained and both at a peak or being actively managed. The pending merger with TC Bancshares and TC Federal Financial institution stays on schedule, with regulatory clearance and integration planning properly underway, and the corporate maintains readiness to capitalize on rising alternatives in M&A and market disruption.
The September Fed fee reduce is predicted to help additional, albeit reasonable, web curiosity margin growth within the fourth quarter as higher-yielding asset repricing continues.Administration said the SBSL charge-offs ought to “not enhance from right here,” and a declining fee surroundings might convey mortgage portfolio reduction.Liquidity was opportunistically elevated via a $75 million securities sale, concentrating on improved future yields and an earn-back interval of lower than a 12 months.Integration of newly acquired expertise and lately acquired insurance coverage operations contributed to rising, diversified noninterest earnings streams.
INDUSTRY GLOSSARY
SBSL (Small Enterprise Specialty Lending): Colony Financial institution’s division centered on lending partially or absolutely assured by authorities packages, similar to SBA loans.NDFI (Non-Depository Monetary Establishment): Monetary entities, similar to finance corporations, that aren’t banks or credit score unions and thus don’t settle for deposits.Shared Nationwide Credit: Giant syndicated loans shared by three or extra federally supervised establishments, usually a supply of systemic credit score threat within the banking sector.Tangible Widespread Fairness (TCE) Ratio: A measure of a financial institution’s core fairness capital in comparison with its tangible property, excluding intangible property similar to goodwill.
Full Convention Name Transcript
T. Fountain: Thanks, Brantley, and thanks to everybody for becoming a member of our third quarter earnings name at this time. We’re happy to report one other quarter of improved working efficiency. This can be a results of our group members’ continued dedication to serve our clients and communities with excellence, and our group’s efforts, are driving significant outcomes. We proceed to see enchancment in working earnings pushed by web curiosity margin growth for one more consecutive quarter. We additionally noticed enchancment in our working pre-provision web income, indicating continued enchancment in core earnings. This earnings enchancment, together with enhancements in our unrealized losses led to a powerful enhance in tangible e-book worth for the quarter.
We imagine we’re going to profit from the Fed fee cuts on the funding facet, and that may assist margin, however we do anticipate the speed of the growth to be slower than what we noticed within the earlier half of this 12 months and to be extra in line or barely greater than what we noticed in the course of the third quarter. I need to take a second to mirror on simply how a lot we’ve improved our margin over the past 12 months. Q3 of 2024 was the low level in our margin. And since then, we have seen our margin develop 53 foundation factors via disciplined relationship pricing, mortgage development and the repricing of property and deposits.
I am happy that almost all of this enhance after tax has fallen to the underside line as working ROA improved from 81 foundation factors in Q3 of final 12 months to 1.06% this quarter. The group has finished a fantastic job of permitting margin enchancment to extend our earnings whereas nonetheless making strategic investments for future development. That may proceed to be our plan as we transfer ahead and margin expands. We have been more than happy to see significant mortgage development all through the primary half of this 12 months. Whereas that tempo was exceptionally sturdy, we’re now observing that begin to settle right into a extra normalized and sustainable development fee, which aligns properly with our long-term projections and capital planning.
This previous quarter was round 9% annualized, which is decrease than the primary and second quarters of this 12 months, however for the 12 months, nonetheless round a 14% annualized mortgage development fee. We’re seeing buyer demand pull again a bit, a few of which we expect is clients being cautious in regards to the financial outlook and a few of which is clients ready for charges to fall additional earlier than they borrow more cash. Based mostly on the pipeline, we expect the fourth quarter mortgage development goes to be decrease than this previous quarter, which for the 12 months ought to put us proper round our long-term goal of 8% to 12% a 12 months.
Our bankers stay dedicated to serving our relationship clients and look to deepen {our relationships} with a consultative method that may develop core deposits and enhance price alternatives. Noninterest earnings remained stable regardless of a bit slowdown in our SBSL and mortgage divisions. On an working foundation, noninterest earnings elevated over $1 million from the prior quarter. Within the third quarter, we noticed a significant enhance in price earnings in addition to interchange earnings. As well as, Colony Monetary Advisors, Colony Insurance coverage and Service provider all noticed sturdy will increase in revenues as these traces of enterprise proceed to develop and scale. Working bills have been barely increased this quarter as we anticipated and talked about on the decision final quarter.
As we spend money on expertise and see extra exercise in varied services and products, we anticipate to see some expense enhance to go together with that. This extra expense was offset by extra noninterest earnings and our working web NIE to common property improved quarter-over-quarter by 4 foundation factors as we proceed to give attention to effectivity. Whereas latest headlines have centered on one-off credit score occasions at some bigger regional banks, our portfolio continues to carry out properly. Credit score high quality stays comparatively secure total. Late and categorised loans each improved quarter-over-quarter, reflecting continued sturdy credit score self-discipline throughout our portfolio. Whereas criticized loans and nonperforming property elevated, they continue to be at manageable ranges relative to our total portfolio.
Cost-offs have been a bit increased this quarter, primarily as a consequence of variability in our SBA portfolio, which we have mentioned beforehand. On the financial institution stage, web charge-offs stay at acceptable ranges and in step with our expectations. With the federal authorities at present in a shutdown, we have been intently monitoring potential impacts on our enterprise in addition to the impacts to our clients and communities. Our groups are ready to reply questions and supply steerage and help to our clients as wanted. We reviewed our portfolio to determine clients who could also be affected. And at the moment, we don’t anticipate any materials adversarial impacts or credit score considerations because of the shutdown.
We stay centered on staying proactive, supporting our clients and making certain enterprise continuity all through this era. The realm of our enterprise that’s most impacted by the shutdown is our SBSL group, which does government-guaranteed lending. In anticipation of a possible shutdown, we have been in a position to search approvals on quite a few loans previous to that shutdown. Our group is at present centered on persevering with to develop new enterprise and course of loans as far alongside as attainable throughout this time. Our capacity to get remaining approvals and loans offered might be impacted, however we imagine that so long as the federal government will get again open this quarter, the affect ought to be minimal.
Turning to our pending merger with TC Bancshares and TC Federal Financial institution, I am happy to report that all the pieces continues to progress as deliberate. We filed our regulatory purposes in August, and our S-4 registration assertion has been declared efficient by the SEC. Each corporations are properly into the method of shareholder approval, which we anticipate to have at our conferences in November. We proceed to anticipate the transaction to shut within the fourth quarter with system conversion deliberate for the primary quarter of subsequent 12 months. Coordination between our 2 organizations has been glorious. The groups are working intently collectively and integration planning is properly underway.
We’re very enthusiastic about bringing our corporations collectively and leveraging the strengths of TC Federal’s franchise to develop our market presence and create new alternatives for our mixed group. We have now made and communicated employment selections for the mixed firm put up the merger, and we’re on observe to attain the monetary metrics of the deal that we laid out on the announcement. As we take into consideration M&A going ahead, we’re optimistic that there might be alternatives for Colony to take part in additional M&A subsequent 12 months. We proceed to proactively have conversations with banks that we really feel might be a very good strategic match with Colony.
We additionally anticipate {that a} easy integration with TC might be useful to these discussions. We’re additionally being very strategic about alternatives to develop our buyer base and expertise pool from the disruption that’s occurring in our footprint with the opposite financial institution M&A that we’re seeing. By way of expertise, we’re very excited to welcome Mitch Watkins, a seasoned and well-respected banker to our Columbus, Georgia group. Mitch brings in depth expertise and powerful native relationships that may additional strengthen our presence on this essential market. We stay centered on investing in expertise acquisition that helps our development technique and helps us solidify and develop our market place throughout our footprint.
We glance to make very strategic additions the place it is smart in business banking, wealth and mortgage. Lastly, I might prefer to take a second and acknowledge one in all our group members, Hugh Holler, our Director of Homebuilder Finance, who was lately inducted into the Homebuilders Affiliation of Georgia Corridor of Fame. This can be a super and well-deserved honor that displays Hugh’s deep dedication to this trade and the respect he is earned all through the homebuilding group. We’re lucky to have Hugh on our group. He exemplifies distinctive customer support, servant management and powerful relationship banking, and we congratulate him on this excellent achievement. With that, I’ll flip it over to Derek to go over the financials in additional element.
Derek Shelnutt: Thanks, Heath. Working web earnings elevated $252,000 from the prior quarter. This enhance is attributed to increased web curiosity earnings and working noninterest earnings, offset some by elevated provision and working noninterest bills. Working pre-provision web income, proven on Slide 11 and in our earnings launch below non-GAAP measures, improved each quarter-over-quarter and year-over-year. This sustained development highlights the continued momentum and energy of our core earnings energy. Internet curiosity earnings elevated $314,000 in comparison with the prior quarter by continued asset repricing and mortgage development. Our value of funds for the quarter was 2.03% in contrast with 2.04% within the prior quarter. As talked about final quarter, we anticipated our total funding prices to stay flat.
The Fed reduce late within the quarter can have extra affect within the fourth quarter, and we anticipate to see that value of funds quantity decline. Internet curiosity margin elevated 5 foundation factors from the prior quarter, which was a bit slowdown from the will increase we noticed earlier within the 12 months. We anticipated this and talked about it on final quarter’s name. Our margin stands to learn from the September Fed reduce and every other cuts we might get within the fourth quarter. With extra normalized mortgage development expectations, we do not imagine will probably be an enormous soar in margin quarter-over-quarter, and we’re anticipating that to be within the single digits going ahead.
Third quarter working noninterest earnings elevated simply over $1 million. Service cost and price earnings elevated $425,000 with a few of that being activity-based and a few being a results of a course of we went via late within the second quarter to guage and alter our charges. Different noninterest earnings elevated $788,000, pushed by elevated interchange price earnings, improved earnings from wealth insurance coverage and service provider providers in addition to a onetime acquire from one in all our fintech funding fund partnerships. Slide 20 reveals the advance in third quarter for Wealth, Insurance coverage and Service provider Providers. Mortgage and SBSL exercise has been a bit slower this 12 months, and mortgage was even slower within the third quarter.
That is pushed by modifications in SBA lending tips on the SBA facet and a slower housing market on the mortgage facet. Working noninterest bills have been up $624,000 quarter-over-quarter, reflecting continued funding in our individuals and development initiatives. Compensation and profit prices have been increased within the quarter associated to strategic hires to help our development and enterprise growth technique. A portion of these new rent bills are short-term wage ensures for commission-based staff, and people will finish within the fourth quarter. Know-how and innovation stays a spotlight for our long-term development and expertise bills have been increased quarter-over-quarter as we proceed to spend money on methods to enhance long-term effectivity and supply for a state-of-the-art buyer expertise.
We stay very disciplined in managing bills and sustaining our give attention to effectivity. We’re assured in our capacity to stability value management with the strategic investments that place us for long-term natural development. On an working foundation, the rise in noninterest earnings greater than offset the rise in noninterest expense. Our working web noninterest expense to common property improved 4 foundation factors from the prior quarter to 1.48%. On a go-forward foundation, we nonetheless goal a web NIE to property of round 1.45%. Fourth quarter bills will doubtless embrace a minimum of 1 month of TC Federal bills put up merger.
Our methods conversion is deliberate for the primary quarter, and we plan to attain our focused value saves within the second quarter and past. Onetime merger-related prices in the course of the quarter have been $732,000, and that was an adjustment to working earnings. Additionally in the course of the quarter, in our 10-Q final quarter, we disclosed a wire fraud incident the place the corporate was the goal and losses totaled $2.9 million. Upon latest new data, a portion of that loss that we imagine to have been absolutely coated by insurance coverage has develop into disputed. And in accordance with accounting requirements, this quarter, we acknowledged a $1.25 million loss associated to the disputed protection. That is mirrored in our adjusted earnings. All different coverages stay undisputed.
We don’t anticipate every other losses associated to this matter, and we’ll proceed to pursue all avenues for restoration. Any restoration might be acknowledged as nonoperating earnings in future intervals. Provision expense totaled $900,000 for the quarter, a rise from the prior quarter, pushed by mortgage development and charge-offs in our SBSL division. As we have talked about earlier than, SBSL charge-offs can have some variability, and that is what we skilled this quarter. Many of those SBSL charge-offs are associated to older loans earlier than we tighten credit score necessities and sometimes contain decrease SBA assure percentages. This quarter represents the height for charge-offs at SBSL. We don’t anticipate them to extend from right here.
These are primarily variable fee loans, so a declining fee surroundings ought to present some reduction going ahead. On the financial institution facet, charge-offs stay low and previous dues improved quarter-over-quarter. We have seen extra exercise in loans shifting out and in of categorised and criticized, and our group has finished a very good job of working these loans. There’s been a number of latest media consideration on credit score challenges at some regional banks, significantly associated to shared nationwide credit. I need to notice that we don’t take part in any shared nationwide credit and our publicity to participation loans may be very restricted. Our lending technique stays centered on relationship-based regionally originated credit the place we all know our clients and markets properly.
Loans held for funding elevated $43.5 million from the prior quarter. As Heath talked about, we’re seeing that development fee reasonable some from the early half of the 12 months, and that may put us close to our long-term focused development fee. Slide 34 reveals our weighted common fee on new and renewed loans of seven.83% in the course of the quarter. And whenever you evaluate that to our repricing schedule on Slide 36, we nonetheless have alternative to realize yield on maturing fastened fee loans in addition to investments money circulation even when charges transfer down some from right here. Complete deposits elevated $28.1 million in the course of the quarter. A part of that development displays our strategic use of brokered funding to exchange seasonal municipal deposit runoff.
We anticipate these municipal funds to return within the fourth quarter as tax revenues are collected, which is in keeping with the historic seasonality we have usually skilled. We stay centered on constructing and deepening buyer relationships that usher in high-quality, lower-cost deposits, which proceed to be a core precedence for our development technique. In the course of the quarter, we offered securities for a pretax lack of round $1 million that netted near $75 million in proceeds. Underneath the belief of utilizing half of these proceeds to fund loans and half to extend liquidity, our modeling indicated an earn-back of lower than 1 12 months. The e-book yield offered on these investments was shut to three.16%.
So there’s alternative to select up significant yield there and enhance curiosity earnings. We are going to proceed to guage the necessity for future gross sales in addition to think about a bigger transaction as a part of these evaluations. We didn’t repurchase any shares in the course of the quarter, however proceed to evaluation the necessity for any repurchases based mostly on capital wants and market circumstances. This week, the Board additionally declared a quarterly dividend to shareholders of $0.115 per share. We’re nonetheless within the technique of submitting a brand new shelf registration as a part of our capital administration technique and anticipate that to be filed very quickly.
Our TCE ratio on the finish of the quarter was 8% in comparison with 7.43% for a similar quarter final 12 months. Tangible e-book worth per share elevated to $14.20 from $12.76 a 12 months in the past, reflecting constant development in tangible capital and our continued success in constructing long-term shareholder worth. Slide 20 highlights our quarter-over-quarter pretax revenue for our complementary enterprise traces. Mortgage had a slower quarter with manufacturing being down barely in comparison with the second quarter. Bills have been a bit increased as a consequence of some strategic hires of mortgage lending officers and the upfront value and short-term wage ensures related to these hires. We imagine these new MLOs will drive worthwhile development for our mortgage division.
The housing market and unstable rates of interest have additionally brought about some headwinds that contributed to the decrease manufacturing in the course of the quarter. SBSL was flat in comparison with pretax earnings within the prior quarter. The elevated charge-offs have been offset with decreased bills. And as we see prime fee transfer decrease, that ought to scale back a few of the stress on the charge-off facet. Marine and RV lending has had a very good 12 months and continues to enhance. Pretax earnings is up $100,000 quarter-over-quarter. Mortgage balances are actually round $90 million and have elevated $45 million year-over-year. We’re wanting into the potential for pool mortgage gross sales, which might present a very good supply of noninterest earnings.
Pretax earnings for each the Service provider Providers and Colony Wealth Advisors elevated meaningfully from the prior quarter as these enterprise traces proceed to develop and carry out properly. We’re excited in regards to the efficiency and the outlook of those 2 traces of enterprise. Colony Insurance coverage closed on the OE acquisition in Could and the second quarter was a give attention to integration. The group is now centered on development, referrals and gross sales targets with earnings rising within the third quarter and persevering with to scale. And that concludes my overview. And now I am going to flip it again over to Heath earlier than we take questions.
T. Fountain: Thanks, Derek. And once more, because of everybody for being on the decision at this time. We’re more than happy with our efficiency this quarter. That is all of our ready remarks. And with that, I am going to name on Joelle to open up the road for questions.
Operator: [Operator Instructions] Your first query comes from Dave Bishop at Hovde. How about given the disruption in D.C. seeing any trickle all the way down to your debtors and native economic system?
T. Fountain: All proper. Nicely, I recognize Dave getting that query in. As I discussed earlier, we’re looking out for that. We actually do not see lots at the moment. We have now supplied our group and our clients with assets to assist out as we see issues, and we scrub the portfolio to see if we’ve any exposures that we’re involved about. However at the moment, we do not suppose there might be a cloth affect. We do not see any points arising. After all, I did point out the SBSL group and the federal government assured loans and what — that there may very well be a possible affect there simply as if it drags out longer.
However we expect if we get a decision throughout the subsequent little bit, it should not have an excessive amount of of an affect on This fall. So we really feel fairly good about the place that’s total at the moment.
Operator: Associated to mortgage pricing, what’s the common roll-on versus roll fee this quarter and the way NIM outlook seems?
Derek Shelnutt: Sure, completely. I am going to take that one. Nice query. So whenever you take a look at the roll-off yields from our earlier repricing schedule or our earlier launched investor presentation for the prior quarter, we had fourth quarter roll-off yields within the 5% vary. And so our put-on yield for the brand new quarter can be in our investor presentation, and it was — the brand new and renewed fee was 7.83% for this quarter. So you may see there we’ve some significant pickup in yield. And even with charges shifting down a bit bit, we’ll proceed to see that. That may drive some web curiosity margin development.
We anticipate that web curiosity margin development to be each on the price of fund facet and the asset repricing facet. However finally, going ahead, we anticipate a modest development within the single-digit vary, however a bit bit increased than what we noticed this previous quarter as we make the most of a few of these Fed fee cuts.
Operator: Any NDFI mortgage publicity as properly?
T. Fountain: No, that is a fantastic query. I recognize Dave getting that query in, and we don’t have any significant publicity to that. And I do know that is been one other space that we have seen a number of considerations about and seen some conditions as another banks, bigger banks have reported. And again to our feedback that we made earlier, our actual focus in our natural development technique has been to financial institution clients that we all know, which might be in our footprint, that we’ve a relationship with and even that our bankers have possibly had relationships with at different banks up to now.
So we actually give attention to the purchasers we all know and the sorts of enterprise that we expect we will perceive and adequately assess the credit score threat.
Operator: There are not any additional questions at the moment. I’ll now flip the decision over to Heath for closing remarks.
T. Fountain: Okay. Nicely, thanks once more, everybody, for being on the decision at this time. We’re actually happy with how the quarter went and excited in regards to the issues occurred in This fall with TC and continued enchancment in our margins. So we’re very enthusiastic about the place Colony is headed, and we recognize you being on the decision at this time. Thanks.
Operator: Women and gents, this concludes your convention name for at this time. We thanks for taking part and ask that you just please disconnect your traces.
