Colony Bankcorp, Inc. today reported financial results for the second quarter of 2023. Financial highlights are shown below.

Financial Highlights:

• Net income increased to $5.3 million, or $0.30 per diluted share, for the second quarter of 2023, compared to $5.0 million, or $0.29 per diluted share, for the first quarter of 2023, and $3.4 million, or $0.19 per diluted share, for the second quarter of 2022.

• Operating net income increased to $5.7 million, or $0.33 of adjusted earnings per diluted share, for the second quarter of 2023, compared to $5.5 million, or $0.31 of adjusted earnings per diluted share, for the first quarter of 2023, and an increase from $5.2 million, or $0.30 of adjusted earnings per diluted share, for the second quarter of 2022. (See Reconciliation of Non-GAAP Measures).

• Continued controlling our noninterest expense through a reduction in force of 23 employees which decreases our fixed compensation expenses by $2.5 million per year going forward.

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

• Estimated uninsured deposits of $817.8 million, or 30.73% of total Bank deposits at June 30, 2023. Adjusted uninsured deposit estimate (excluding deposits collateralized by public funds or internal accounts) of $489.9 million, or 18.41% of total Bank deposits at June 30, 2023.

• Provision for credit losses of $200,000 was recorded in second quarter of 2023 compared to $900,000 in first quarter of 2023, and $1.1 million in second quarter of 2022.

• Total loans were $1.84 billion at June 30, 2023, an increase of $39.0 million, or 2.17%, from the prior quarter.

• Total deposits were $2.63 billion and $2.52 billion at June 30, 2023 and March 31, 2023, respectively, an increase of $111.1 million.

• Mortgage production was $106.4 million, and mortgage sales totaled $66.4 million in the second quarter of 2023 compared to $62.0 million and $37.6 million, respectively, for the first quarter of 2023.

• Small Business Specialty Lending (“SBSL”) closed $26.0 million in Small Business Administration (“SBA”) loans and sold $11.1 million in SBA loans in the second quarter of 2023 compared to $19.6 million and $11.5 million, respectively, for the first quarter of 2023.

The Company also announced that on July 26, 2023, the Board of Directors declared a quarterly cash dividend of $0.11 per share, to be paid on its common stock on August 23, 2023, to shareholders of record as of the close of business on August 9, 2023. The Company had 17,567,276 shares of its common stock outstanding as of July 25, 2023.

“We are pleased to announce improved quarter over quarter earnings. Non-interest income increased $1.3 million primarily related to higher volume in our mortgage division during the home buying season. Non-interest expenses increased slightly, but are trending lower when excluding variable commission-based expenses and severance costs.”

“Despite the challenging environment for deposits, we saw strong growth in core deposits across our footprint during the quarter as Colony remains committed to building our long-term customer relationships. This growth enhanced our already robust liquidity position and is a testament to the proactivity of our team and the confidence our customers place in Colony Bank,” said Heath Fountain, Chief Executive Officer and Acting Chief Financial Officer.

“Net interest margin declined 32 basis points from the previous quarter. This reduction is a product of the interest rate environment and the pressure of cost of funds that is being experienced industry wide. We continue to remain focused on managing our funding costs effectively relative to our growth outlook. At the end of this quarter, we entered into $50 million of cash flow hedges on our wholesale funding that will help protect funding costs in future quarters.”

“Although we did see a slight increase in non-performing loans, asset quality remains high, especially in our commercial real estate portfolio where the number of nonperforming loans remains low. The provision for credit losses was $200,000 for the quarter which is related to lower loan growth of 2.27%, down from 3.6% in the prior quarter, and a portion of that loan growth being the funding of loan commitments that were previously reserved for under the Current Expected Credit Losses (CECL) methodology.”

Balance Sheet

• Total assets were $3.10 billion at June 30, 2023, an increase of $104.1 million from March 31, 2023.

• Total loans, including loans held for sale, were at $1.87 billion at June 30, 2023, an increase of $53.6 million from the quarter ended March 31, 2023.

• Total deposits were $2.63 billion and $2.52 billion at June 30, 2023 and March 31, 2023, respectively, an increase of $111.1 million. Time deposits increased $91.5 million and savings and money market deposits increased $46.7 million, which was partially offset by a decrease in interest bearing demand deposits of $30.4 million from March 31, 2023 to June 30, 2023.

• Total borrowings at June 30, 2023 totaled $218.4 million, a decrease of $10.0 million or, 4.4%, compared to March 31, 2023 related to decreases 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 8.85%, 12.22%, 14.86%, and 11.12%, respectively, at June 30, 2023.

• Colony repurchased 41,481 shares of its common stock during the quarter at a weighted average price of $9.78.

Second Quarter and June 30, 2023 Year to Date Results of Operations

• Net interest income, on a tax-equivalent basis, totaled $19.3 million for the second quarter ended June 30, 2023 and 2022. Net interest income, on a tax-equivalent basis, for the six months ended June 30, 2023 totaled $40.1 million, compared to $38.6 million for the six months ended June 30, 2022. Although there was no change overall for the comparable quarterly periods and only a moderate 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. Income on interest earning assets increased $9.6 million, to $30.9 million for the second quarter of 2023 and $17.8 million, to $59.4 million for the six month period ended June 30, 2023, each compared to the respective period in 2022. Expense on interest bearing liabilities increased $9.6 million, to $11.6 million for the second quarter of 2023 and $16.3 million, to $19.4 million for the six month period ended June 30, 2023, each compared to the respective period in 2022.

• Net interest margin for the second quarter of 2023 was 2.77% compared to 3.15% for the second quarter of 2022. Net interest margin was 2.92% for the six months ended June 30, 2023 compared to 3.15% for the six months ended June 30, 2022. The decrease for both comparisons is the result of an increase in deposit rates along with an increase in borrowings, offset by higher yielding investment securities, an increase in rates paid on deposits with the Federal Reserve and an increase in loan rates.

• Noninterest income totaled $9.0 million for the second quarter ended June 30, 2023, a decrease of $1.1 million, or 10.88%, compared to the same period in 2022. Noninterest income totaled $16.6 million for the six months ended June 30, 2023, a decrease of $2.6 million, or 13.46%, compared to the same period in 2022. These decreases were primarily attributable to decreases in mortgage fee income and SBSL loan sales.

• Noninterest expense totaled $21.4 million for the second quarter ended June 30, 2023, compared to $24.5 million for the same period in 2022. Noninterest expense totaled $42.6 million for the six months ended June 30, 2023, compared to $46.3 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.

Asset Quality

• Nonperforming assets totaled $11.9 million and $7.8 million at June 30, 2023 and March 31, 2023, respectively, an increase of $4.1 million. This increase was primarily due to the repurchase of the government guaranteed portion of $2.3 million in nonperforming loans.

• Other real estate owned and repossessed assets totaled $792,000 at June 30, 2023 and $651,000 at March 31, 2023.

• Net loans charged-off were $200,000, or 0.04% of average loans for the second quarter of 2023, compared to net charge-offs of $237,000 or 0.05% for the first quarter of 2023.

• The credit loss reserve was $17.1 million, or 0.93% of total loans, at June 30, 2023, compared to $16.6 million, or 0.92% of total loans at March 31, 2023.