Colony Bankcorp Inc.
05/08/2026 | Press release | Distributed by Public on 05/08/2026 09:01
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The purpose of this discussion and analysis is to focus on significant changes in the financial condition of Colony Bankcorp, Inc. and our wholly owned subsidiary, Colony Bank, from December 31, 2025 through March 31, 2026 and on our results of operations for the three months ended March 31, 2026 and 2025. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto in the Company's 2025 Form 10-K, and information presented elsewhere in this Quarterly Report on Form 10-Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.
Forward-looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "strive," "projection," "goal," "target," "outlook," "aim," "would," "annualized" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors discussed elsewhere in this Quarterly Report on Form 10-Q and the following:
| ● | the impact of current and future economic and market conditions generally (including seasonality) and in the financial services industry, nationally and within the Company's primary market areas, including the effects of continued inflationary pressures, changes in interest rates, tariffs or trade wars (including reduced consumer spending, supply chain issues, and adverse impacts to credit quality), a sustained increase in commodity prices, slowdowns in economic growth or recession, and the potential for high unemployment rates, as well as the financial stress on borrowers and changes to customer and client behavior and credit risk as a result of the foregoing; |
| ● | the potential adverse developments in the banking industry highlighted by high-profile bank failures and the impact of such developments on customer confidence, liquidity and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments and the increased regulatory scrutiny), our ability to effectively manage our liquidity risk and any growth plans and the availability of capital and funding; |
| ● | governmental monetary and fiscal policies, including interest rate policies of the FRB, as well as risks related to legislative, tax and regulatory change, including those that impact the value of the U.S. Dollar in relation to the currencies of other advanced and emerging market countries, the money supply and inflation; |
| ● | the risk of continued changes in interest rates on the level and composition of deposits (as well as the cost of, and competition for, deposits), loan demand, liquidity and the values of loan collateral, securities and market fluctuations, and interest rate sensitive assets and liabilities; |
| ● | interest rate risks (including the impact of interest rates on macroeconomic conditions, customer and client behavior, and on our net interest income), sensitivities, and the shape of the yield curve, and its impact on our financial projections and models; |
| ● | prolonged periods of inflation and their effects on our business, profitability, and our stock price; |
| ● | changes in borrower credit risks and payment behaviors, including the ability for borrowers under deferred payment programs to return to making full payments; |
| ● | changes in the availability and cost of credit and capital in the financial markets; |
| ● | changes in the prices, values and sales volumes of residential and commercial real estate, especially as they relate to the value of collateral supporting the Company's loans; |
| ● | the concentration of our business within our geographic areas of operation in Georgia, Alabama, Florida and neighboring markets; |
| ● | the credit risks of lending activities, including our ability to estimate credit losses and the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs; |
| ● | the risk that our asset quality may deteriorate or that our allowance for credit losses may prove to be inadequate or may be negatively affected by credit risk exposures; |
| ● | factors that negatively impact our mortgage banking services, including declines in our mortgage originations or profitability due to rising or elevated interest rates and increased competition and regulation, the Bank's or third party's failure to satisfy mortgage servicing obligations, loan modifications, the effects of judicial or regulatory requirements or guidance, and the possibility of the Bank being required to repurchase mortgage loans or indemnify buyers; |
| ● | the effects of competition (including the inability to grow, or attrition of, deposits, customers and employees) from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, non-bank financial technology providers, securities brokerage firms, insurance companies, private credit funds, money market and other mutual funds and other financial institutions; |
| ● | our ability to realize the expected benefits from our strategic initiatives or other operational and executive goals in the time period expected, which could negatively affect our future profitability; |
| ● | risks relating to bank acquisitions, including the recent acquisition of TC Bancshares, Inc. ("TC Bancshares"), including, without limitation; the diversion of management's time on issues related to the integration; unexpected transaction costs, including the costs of integrating operations; the risks that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues following acquisitions being lower than expected; the risk of deposit and customer attrition; regulatory enforcement and litigation risk; any changes in deposit mix; unexpected operating and other costs, which may differ or change from expectations; the risks of customer and employee loss and business disruptions, including, without limitation, as the result of difficulties in maintaining relationships with employees; increased competitive pressures and solicitations of customers by competitors; as well as the difficulties and risks inherent with entering new markets; |
| ● | the risk that we may not be able to identify suitable bank and non-bank acquisition opportunities as part of our growth strategy and even if we are able to identify attractive acquisition opportunities, we may not be able to complete such transactions on favorable terms or realize the anticipated benefits from such acquisitions; |
| ● | the Company's ability to comply with any regulatory requirements and the risk that the regulatory environment may not be conducive to or may prohibit or delay the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and may reduce the anticipated benefit; |
| ● | risks related to our implementation of new lines of business, new products and services, new technologies, and expansion of our existing business opportunities; |
| ● | our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas; |
| ● | our ability to attract sufficient loans that meet prudent credit standards; |
| ● | our ability to successfully execute our business strategy to achieve profitable growth; |
| ● | our ability to manage our growth; |
| ● | our ability to increase our operating efficiency; |
| ● | the impact on the valuation of the Company's investments due to market volatility or counterparty payment risk, as well as the effect of a decline in stock market prices; |
| ● | inability of the risk management framework to manage risks associated with our business; |
| ● | our ability to maintain expenses in line with current projections; |
| ● | statutory and regulatory dividend restrictions; |
| ● | our ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets; |
| ● | restrictions or limitations on access to funds from historical and alternative sources of liquidity could adversely affect our overall liquidity, which could restrict our ability to make payments on our obligations and our ability to support asset growth and sustain our operations and the operations of the Bank; |
| ● | our ability to maintain adequate internal controls over financial reporting; |
| ● | our dependence on our management team and our ability to motivate and retain our management team; |
| ● | our ability to attract and retain qualified employees; |
| ● | our ability to identify and address potential cybersecurity risks, which may be exacerbated by recent developments in generative artificial intelligence, including brute force attacks (i.e., credential stuffing), ransomware or other malware, "denial-of-service" attacks, "hacking" and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation; |
| ● | our business relationships with, and reliance upon, third parties that have strategic partnerships with us or that provide key components of our business infrastructure, including the costs of services and products provided to us by third parties, and disruptions in service, security breaches, financial difficulties with or other adverse events affecting a third-party vendor or business relationship; |
| ● | our ability to oversee the performance of third-party service providers that provide material services to our business; |
| ● | failure to keep pace with technological change or difficulties when implementing new technologies; |
| ● | changes in technology or products that may be more difficult, costly, or less effective than anticipated; |
| ● | fraudulent and negligent acts by our clients, employees or vendors, which we may not be able to prevent, detect or mitigate; |
| ● | increased credit losses or impairment of goodwill and other intangibles; |
| ● | potential or actual claims, damages, penalties, fines, costs, unexpected outcomes, and reputational damage resulting from new, existing, pending, or future litigation, regulatory proceedings and enforcement actions; |
| ● | negative publicity and the impact on our reputation; including the speed and scale at which information can spread through social media or digital channels, which could amplify adverse market or customer reactions; |
| ● | changes in accounting policies, rules and practices; |
| ● | the impact of recent and future legislative and regulatory changes; |
| ● | uncertainties surrounding geopolitical events, trade policy, taxation policy, and monetary policy, which continue to impact the outlook for future economic growth, including the U.S. continuing to impose tariffs and consideration of responsive actions by the impacted nations and/or the expansion of import fees and tariffs among a larger group of nations, which may bring greater ambiguity to the outlook for future economic growth; |
| ● | the effects of war, regime change, civil unrest, or other conflicts, acts of terrorism, natural disasters, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions and/or increase costs; |
| ● | risks related to the development and execution of corporate strategies and initiatives, which could impact the Company's reputation, stakeholder relationships, or expose the Company to legal, regulatory, or compliance challenges; |
| ● | action or inaction by the federal government, including as a result of any prolonged government shutdown (including a partial shutdown) or government intervention in the U.S. financial system and those related to credit card interest rates; |
| ● | a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget; and |
| ● | other risks and factors identified in our 2025 Form 10-K, this Quarterly Report on Form 10-Q for the period ended March 31, 2026, and in any of the Company's other reports filed with the U.S. Securities and Exchange Commission and available on its website at www.sec.gov. |
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward-looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward-Oklooking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
Overview
The following discussion and analysis presents the more significant factors affecting the Company's financial condition as of March 31, 2026 and December 31, 2025, and results of operations for the three month periods ended March 31, 2026 and 2025. This discussion and analysis should be read in conjunction with the Company's consolidated financial statements, notes thereto and other financial information appearing elsewhere in this report.
At March 31, 2026, the Company had total consolidated assets of $3.7 billion, total loans, net of $2.4 billion, total deposits of $3.0 billion, and stockholders' equity of $380.4 million. The Company reported net income of $8.2 million, or $0.39 per diluted share, for the three months ended March 31, 2026 compared to net income of $6.6 million, or $0.38 per diluted share, for the three months ended March 31, 2025. The increase in net income for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was a result of an increase in interest income on loans and an increase in noninterest income, partially offset by an increase in interest expense and an increase in noninterest expense as well as the impact from the acquisition of TC Bancshares in December 2025.
Net interest income on a tax equivalent basis was $29.3 million for the first quarter of 2026 compared to $21.1 million for the first quarter of 2025, an increase of $8.2 million. This increase is the result of an increase in income on interest earning assets slightly offset with an increase in expense on interest bearing liabilities. Income on interest earning assets increased $9.3 million to $45.0 million for the first quarter of 2026 compared to the respective period in 2025. Expense on interest bearing liabilities increased $1.1 million to $15.7 million for the first quarter of 2026 compared to the respective period in 2025.
Provision for credit losses for the three months ended March 31, 2026 was $1.75 million, which represents $1.5 million in provision for credit losses on loans and $250,000 in provision for credit losses on unfunded commitments. This is compared to $1.5 million for the three months ended March 31, 2025, which represents $1.6 million in provision for credit losses on loans and $123,000 in release of credit losses on unfunded commitments. For the first quarter of 2026, there were net charge-offs of $1.7 million compared to $606,000 for the same period in 2025. Colony's allowance for credit losses on loans was $21.7 million, or 0.90% of total loans at March 31, 2026, compared to $23.0 million, or 1.04% of total loans, at December 31, 2025. The increase in net charge-offs was primarily due to SBA loans in the Small Business Specialty Lending (" SBSL") portfolio as well as increases in commercial, financial & agricultural and consumer loans. At March 31, 2026 and December 31, 2025, nonperforming assets were $19.9 million and $24.7 million, or 0.53% and 0.66% of total assets, respectively.
Noninterest income of $10.7 million for the first quarter of 2026 represents an increase of $1.7 million, or 18.5%, from the first quarter of 2025. These increases are a result of increases in service charges on deposits, mortgage fee income, insurance commissions, interchange fees, and income from Colony Financial Advisors, which is included in other noninterest income. See "Table 3 - Noninterest Income" for more detail and discussion on the primary drivers to the increase in noninterest income.
For the three months ended March 31, 2026, noninterest expense was $27.7 million, an increase of $7.5 million, or 36.9%, from the same period in 2025. Increases in noninterest expense for both periods were a result of increases in salaries and employee benefits, occupancy and equipment, acquisition related expenses, information technology expenses, professional fees and other noninterest expenses. See "Table 4 - Noninterest Expense" for more detail and discussion on the primary drivers to the increase in noninterest expense.
Critical Accounting Policies
Our accounting and reporting policies are in accordance with GAAP and conform to general practices within the banking industry. We have identified certain of its accounting policies as "critical accounting policies," consisting of those related to business combinations, allowance for credit losses and income taxes. In determining which accounting policies are critical in nature, we have identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee on a periodic basis, including the development, selection, implementation and disclosure of the critical accounting policies. The application of these policies has a significant impact on the Company's unaudited interim consolidated financial
statements. Our financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in Note 1 of our consolidated financial statements as of December 31, 2025, which are included in the Company's 2025 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. Other than our methodology for estimating allowance for credit losses (mentioned below), there have been no significant changes to the Significant Accounting Policies as described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2025, which are included in the Company's 2025 Form 10-K.
Allowance for Credit Losses
A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic conditions such as rising interest rates and the financial performance of borrower.
The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable. The allowance for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit. This allowance is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur.
Management's evaluation of the appropriateness of the reserve for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the reserve for credit losses is a critical accounting estimate as it requires significant reliance on the credit risk rating we assign to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows, reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), local/regional economic trends and conditions, changes in underwriting standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.
Liquidity sources and capital ratios
The Company's uninsured deposits represented 32.21% of total Bank deposits at March 31, 2026 compared to 31.65% of total Bank deposits at December 31, 2025. Adjusted uninsured deposits (which excludes deposits collateralized by public funds and internal accounts) represented 20.35% of total Bank deposits at March 31, 2026 compared to 18.62% of total Bank deposits at December 31, 2025. The Company continues to maintain strong liquidity with available sources of funding of approximately $1.9 billion at March 31, 2026. Furthermore, the Company's capital remains strong with common equity Tier 1 and total capital ratios of 12.5% and 15.8%, respectively, as of March 31, 2026.
Results of Operations
We reported net income and diluted earnings per share of $8.2 million and $0.39, respectively, for the first quarter of 2026. This compares to net income and diluted earnings per share of $6.6 million and $0.38, respectively, for the same period in 2025.
Net Interest Income
Net interest income, which is the difference between interest earned on assets and the interest paid on deposits and borrowed funds, is the single largest component of total revenue. Management strives to optimize this income while balancing interest rate, credit and liquidity risks.
The banking industry uses two key ratios to measure relative profitability of net interest income: net interest spread and net interest margin. The net interest spread measures the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities. The interest rate spread eliminates the effect of noninterest-bearing deposits and gives a direct perspective on the effect of market interest rate movements. The net interest margin is an indication of the profitability of a company's balance sheet and is defined as net interest income as a percent of average total interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and stockholders' equity.
Fully taxable equivalent net interest income for the first quarter of 2026 and 2025 was $29.4 million and $21.1 million, respectively. This increase period over period can be seen in increases in rates and volume on loans as well as a decrease in rates paid on deposits and other borrowings. The net interest margin for the first quarter of 2026 and 2025 was 3.48% and 2.93%, respectively. This increase in the net interest margin for the first quarter of 2026 compared to the same period in 2025 is the result of a combination of increased earnings asset yields through loan growth, repricing, and accretion income on acquired loans which was partially accelerated due to prepayments of acquired loans during the quarter. Additionally, a reduction in the overall cost of funds contributed to the increase in net interest margin when compared to the same period in 2025.
The following tables indicate the relationship between interest income and interest expense and the average amounts of assets and liabilities for the periods indicated. As shown in the tables below, both average assets and average liabilities increased for the three months ended March 31, 2026 compared to the same period in 2025. The increase in average assets was driven by the increase in loans of $530.5 million and deposits in banks of $10.5 million, which was partially offset by decreases in investment securities of $41.3 million. The increase in average assets was also attributable to the TC Bancshares acquisition. The increase in average liabilities of $396.8 million was primarily attributed to the TC Bancshares acquisition. The net interest spread, as well as the net interest margin, will continue to be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment.
The yield on total interest-bearing liabilities decreased from 2.46% in the first quarter of 2025 to 2.28% in the first quarter of 2026. This decrease was primarily due to decreases in the federal funds interest rate of 75 basis points during the fourth quarter of 2025, along with the addition of deposits from the TC Bancshares merger in December 2025.
Table 1 - Average Balance Sheet and Net Interest Analysis
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Three Months Ended March 31, |
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2026 |
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2025 |
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Average |
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Income/ |
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Yields/ |
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Average |
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Income/ |
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Yields/ |
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(dollars in thousands) |
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Balances |
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Expense |
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Rates |
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Balances |
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Expense |
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Rates |
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Assets |
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Interest-earning assets: |
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Loans held for sale |
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$ |
21,863 |
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$ |
454 |
8.42 |
% |
$ |
23,253 |
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$ |
328 |
5.73 |
% |
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Loans, net of unearned income(1) |
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2,399,971 |
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37,568 |
6.35 |
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1,869,476 |
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27,716 |
6.01 |
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Investment securities, taxable |
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668,824 |
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4,537 |
2.75 |
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710,293 |
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4,837 |
2.76 |
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Investment securities, tax-exempt(2) |
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94,588 |
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489 |
2.10 |
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94,379 |
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494 |
2.12 |
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Deposits in banks and short term investments |
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240,446 |
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1,993 |
3.36 |
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229,016 |
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2,322 |
4.11 |
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Total interest-earning assets |
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3,425,692 |
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45,041 |
5.33 |
% |
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2,926,417 |
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35,697 |
4.95 |
% |
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Noninterest-earning assets |
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272,971 |
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222,904 |
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Total assets |
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$ |
3,698,663 |
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$ |
3,149,321 |
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Liabilities and stockholders' equity |
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Interest-bearing liabilities: |
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Interest-earning demand and savings |
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$ |
1,725,632 |
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5,951 |
1.40 |
% |
$ |
1,549,509 |
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6,468 |
1.69 |
% |
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Other time |
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812,531 |
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6,863 |
3.43 |
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601,920 |
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5,305 |
3.57 |
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Total interest-bearing deposits |
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2,538,163 |
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12,814 |
2.05 |
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2,151,429 |
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11,773 |
2.22 |
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Federal Home Loan Bank advances |
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195,000 |
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1,985 |
4.13 |
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185,000 |
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1,873 |
4.10 |
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Other borrowings |
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63,141 |
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888 |
5.71 |
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63,048 |
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927 |
5.97 |
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Total other interest-bearing liabilities |
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258,141 |
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2,873 |
4.51 |
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248,048 |
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2,800 |
4.58 |
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Total interest-bearing liabilities |
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2,796,304 |
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15,687 |
2.28 |
% |
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2,399,477 |
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14,573 |
2.46 |
% |
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Noninterest-bearing liabilities: |
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Demand deposits |
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487,298 |
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455,277 |
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Other liabilities |
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35,479 |
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16,016 |
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Stockholders' equity |
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379,582 |
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278,551 |
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Total noninterest-bearing liabilities and stockholders' equity |
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902,359 |
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749,844 |
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Total liabilities and stockholders' equity |
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$ |
3,698,663 |
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$ |
3,149,321 |
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Interest rate spread |
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3.05 |
% |
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2.49 |
% |
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Net interest income |
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$ |
29,354 |
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$ |
21,124 |
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Net interest margin |
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3.48 |
% |
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|
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2.93 |
% |
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| 1. | The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recognized and recorded on the cash basis. Taxable-equivalent adjustments totaling $48,000 and $68,000 for the three months ended March 31, 2026 and 2025, respectively, are calculated using the statutory federal tax rate and are included in income and fees on loans. Accretion income of $1.3 million and $20,000 for the three months ended March 31, 2026 and 2025, respectively, are also included in income and fees on loans. |
| 2. | Taxable-equivalent adjustments totaling $103,000 and $104,000 for the three months ended March 31, 2026 and 2025, respectively, are calculated using the statutory federal tax rate and are included in tax-exempt interest on investment securities. |
Table 2 - Change in Interest Revenue and Expense on a Taxable Equivalent Basis
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Three Months Ended March 31, 2026 |
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Compared to Three Months Ended March 31, 2025 Increase (Decrease) Due to Changes in |
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(dollars in thousands) |
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Volume |
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Rate |
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Total |
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Interest-earning assets: |
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Loans held for sale |
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$ |
(2,713) |
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$ |
2,839 |
|
$ |
126 |
|
Loans, net of unearned fees |
|
3,882 |
|
5,970 |
|
9,852 |
|||
|
Investment securities, taxable |
|
(258) |
|
(42) |
|
(300) |
|||
|
Investment securities, tax-exempt |
|
376 |
|
(381) |
|
(5) |
|||
|
Deposits in banks and short term investments |
|
21,478 |
|
(21,807) |
|
(329) |
|||
|
Total interest-earning assets (FTE) |
|
22,765 |
|
(13,421) |
|
9,344 |
|||
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|||
|
Interest-Bearing Demand and Savings Deposits |
|
260,414 |
|
(260,931) |
|
(517) |
|||
|
Time Deposits |
|
148,733 |
|
(147,175) |
|
1,558 |
|||
|
Federal Home Loan Bank Advances |
|
71 |
|
41 |
|
112 |
|||
|
Other Borrowed Money |
|
185 |
|
(224) |
|
(39) |
|||
|
Total interest-bearing liabilities |
|
409,403 |
|
(408,289) |
|
1,114 |
|||
|
Increase (decrease) in net interest income (FTE) |
|
$ |
(386,638) |
|
$ |
394,868 |
|
$ |
8,230 |
Provision for Credit Losses
The provision for credit losses recorded in each period is based on the amount required such that the total allowance for credit losses reflects the appropriate balance, in the estimation of management, sufficient to cover expected credit losses over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur. Provision for credit losses for the three months ended March 31, 2026 was $1.75 million, compared to $1.5 million for the same period in 2025. The provision for credit losses for the three months ended March 31, 2026 includes $1.5 million in credit losses on loans and $250,000 in credit losses on unfunded commitments. The provision for credit losses for the three months ended March 31, 2025 includes $1.6 million in credit losses on loans and $123,000 in release of credit losses on unfunded commitments. See the section captioned "Loans and Allowance for Credit Losses" elsewhere in this discussion for further analysis of the provision for credit losses.
Noninterest Income
The following table represents the major components of noninterest income for the periods indicated.
Table 3 - Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
Change |
||||||||
|
(dollars in thousands) |
|
2026 |
|
2025 |
|
Amount |
|
Percent |
||||
|
Service charges on deposits |
|
$ |
2,561 |
|
$ |
2,172 |
|
$ |
389 |
17.90 |
% |
|
|
Mortgage fee income |
|
1,935 |
|
1,579 |
|
356 |
22.56 |
|
||||
|
Gain on sales of SBA loans |
|
962 |
|
1,035 |
|
(73) |
(7.01) |
|
||||
|
Other SBA income |
|
|
714 |
|
|
656 |
|
|
58 |
|
8.79 |
|
|
Interchange fees |
|
2,186 |
|
1,938 |
|
248 |
12.80 |
|
||||
|
BOLI income |
|
477 |
|
396 |
|
81 |
20.52 |
|
||||
|
Insurance commissions |
|
844 |
|
469 |
|
375 |
80.00 |
|
||||
|
Other |
|
1,013 |
|
799 |
|
214 |
26.84 |
|
||||
|
Total noninterest income |
|
$ |
10,692 |
|
$ |
9,044 |
|
$ |
1,648 |
18.22 |
% |
|
Noninterest income increased for the three month period ended March 31, 2026 as compared to the same period in 2025. The increase was primarily a result of increases in service charges on deposits, mortgage fee income, insurance commissions, interchange fees and other noninterest income partially offset by a decrease in gain on sales of SBA loans.
Service charges on deposits. For the three months ended March 31, 2026, service charges on deposits increased compared to the same period ended March 31, 2025. This increase was related to increases in deposit account fees implemented during the last half of 2025 as well as the impact of the TC Bancshares acquisition.
Mortgage Fee Income. For the three months ended March 31, 2026, mortgage fee income increased compared to the same period ended March 31, 2025. This increase in mortgage fee income was the result of higher mortgage production in first quarter of 2026 compared to the prior respective period in 2025.
Gain on sales of SBA loans. For the three months ended March 31, 2026, net realized gains on the sale of the guaranteed portion of SBA loans decreased as compared to the same period ended March 31, 2025. This decrease was related to decreased loan production and sales in first quarter of 2026 in the SBSL division.
Other SBA income. For the three months ended March 31, 2026, other SBA income increased slightly as compared to the same period ended March 31, 2025, primarily related to an increase in servicing fee income.
BOLI income. For the three months ended March 31, 2026, BOLI income was slightly higher when compared to the same period ended March 31, 2025 due to normal fluctuations in cash surrender value as well as the addition of BOLI polices from the TC Bancshares acquisition.
Interchange fees. For the three months ended March 31, 2026, interchange fee income was slightly higher than the same period ended March 31, 2025. This increase in interchange fees is the result of customer use of our card programs and fluctuating purchasing habits between periods.
Insurance commissions. For the three months ended March 31, 2026, insurance commissions increased compared to the same periods ended March 31, 2025. This variance is volume driven by activity in the Company's insurance division and was also impacted by the acquisition of the Ellerbee Insurance Agency in the second quarter of 2025.
Other noninterest income. For the three months ended March 31, 2026, other noninterest income increased as compared to the same period ended March 31, 2025. The increase in other noninterest income was primarily attributable to increases in wealth advisory and merchant services, and increases in gains on sales of other real estate and fixed assets along with decreased losses on repossessed assets, offset by a decrease in equity investment market valuation gains.
Noninterest Expense
The following table represents the major components of noninterest expense for the periods indicated.
Table 4 - Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
Change |
||||||||
|
(dollars in thousands) |
|
2026 |
|
2025 |
|
Amount |
|
Percent |
||||
|
Salaries and employee benefits |
|
$ |
15,923 |
|
$ |
11,905 |
|
$ |
4,018 |
33.75 |
% |
|
|
Occupancy and equipment |
|
1,957 |
|
1,580 |
|
377 |
23.88 |
|
||||
|
Acquisition related expenses |
|
1,637 |
|
- |
|
1,637 |
100.00 |
|
||||
|
Information technology expenses |
|
2,774 |
|
2,477 |
|
297 |
11.97 |
|
||||
|
Professional fees |
|
1,120 |
|
748 |
|
372 |
49.75 |
|
||||
|
Advertising and public relations |
|
1,106 |
|
805 |
|
301 |
37.38 |
|
||||
|
Communications |
|
224 |
|
205 |
|
19 |
9.50 |
|
||||
|
Other |
|
2,933 |
|
2,501 |
|
432 |
17.28 |
|
||||
|
Total noninterest expense |
|
$ |
27,674 |
|
$ |
20,221 |
|
$ |
7,453 |
36.86 |
% |
|
Noninterest expense increased for the three months ended March 31, 2026 compared to the same periods in 2025.
Salaries and employee benefits. Salaries and employee benefits for the three months ended March 31, 2026 increased as compared to the same period ended March 31, 2025. This increase was primarily due to the increase in salaries and employee benefits expenses attributed to the additional employees from the Ellerbee Insurance Agency acquisition in April 2025 and the TC Bancshares acquisition in December 2025. In addition, there were increases in commissions paid in 2026 related to SBSL and Colony Financial Advisors.
Occupancy and equipment. Occupancy and equipment expenses increased for the three months ended March 31, 2026 compared to the same period ended March 31, 2025. Increases occurred in utilities and lease expenses primarily due to the impact of the above listed acquisitions in 2025.
Acquisition related expenses. Acquisition related expenses increased for the three months ended March 31, 2026 compared to the same period ended March 31, 2025 and consists primarily of professional fees, information technology expenses, advertising, and costs associated with a lease buyout, all attributable to the merger with TC Bancshares.
Information technology expenses. Information technology expenses increased for the three months ended March 31, 2026 compared to the same period ended March 31, 2025. This increase relates primarily to increases in software, data processing and ATM expenses, which were all impacted by the above listed acquisitions in 2025.
Professional fees. Professional fees increased for the three months ended March 31, 2026 compared to the same periods ended March 31, 2025. These increases relate to increases in legal and consulting fees impacted by the TC Bancshares acquisition.
Advertising and public relations. Advertising and public relations expenses increased for the three months ended March 31, 2026 compared to the same period ended March 31, 2025. The quarter over quarter increase was related to increases in subscriptions, marketing and advertising, which were all impacted by the TC Bancshares acquisition.
Communications. Communications expense increased for the three months ended March 31, 2026 compared to the same period ended March 31, 2025. The change is related to fluctuations in data circuit fees.
Other noninterest expense. Other noninterest expense increased for the three months ended March 31, 2026 as compared to the same period ended March 31, 2025. The increase was primarily due to increases in travel, meals and entertainment, insurance, postage and stationery and supplies, all impacted by the above listed acquisitions.
Income Tax Expense
Income tax expense for the three months ended March 31, 2026 was $2.3 million, compared to $1.7 million for the same period in 2025. The Company's effective tax rate for the three months ended March 31, 2026 was 21.6% compared to 20.1% for the three months ended March 31, 2025. The largest driver of the difference is the tax-exempt income primarily from BOLI and tax-exempt interest as well as the impact related to the acquisition of TC Bancshares in the fourth quarter of 2025.
Balance Sheet Review
Total assets were $3.7 billion at March 31, 2026 and December 31, 2025.
Loans and Allowance for Credit Losses
At March 31, 2026, gross loans outstanding (excluding loans held for sale) were $2.41 billion, an increase of $32.2 million, or 1.35%, compared to $2.38 billion at December 31, 2025.
At March 31, 2026, approximately 64.2% of our loans were secured by commercial real estate. Our total commercial real estate loans have decreased slightly since December 31, 2025 while residential, commercial, financial & agricultural
and consumer loans all increased. We continue to maintain loan growth at disciplined pricing levels which has contributed to an improved net interest margin.
The following table presents a summary of the loan portfolio as of March 31, 2026 and December 31, 2025.
Table 5 - Loans Outstanding
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
March 31, 2026 |
|
December 31, 2025 |
||
|
Construction, land & land development |
|
$ |
309,161 |
|
$ |
302,512 |
|
Other commercial real estate |
|
1,240,210 |
|
1,249,720 |
||
|
Total commercial real estate |
|
1,549,371 |
|
1,552,232 |
||
|
Residential real estate |
|
483,247 |
|
459,549 |
||
|
Commercial, financial & agricultural |
|
220,933 |
|
218,532 |
||
|
Consumer and other |
|
159,914 |
|
150,911 |
||
|
Total loans |
|
$ |
2,413,465 |
|
$ |
2,381,224 |
Loans totaled $2.41 billion at March 31, 2026, an increase of 1.4% from $2.38 billion at December 31, 2025, which was primarily attributable to organic loan growth. The majority of the Company's loan portfolio is comprised of real estate loans. Commercial and residential real estate loans which is primarily for 1-4 family residential properties, nonfarm nonresidential properties and real estate construction loans made up 84.2% and 84.5% of total loans at March 31, 2026 and December 31, 2025, respectively. Commercial, financial and agricultural loans represents 9.1% of total loans at March 31, 2026 and 9.2% at December 31, 2025. Consumer and other loans increased to 6.6% of total loans at March 31, 2026 from 6.3% at December 31, 2025.
The following table presents total loans as of March 31, 2026 according to maturity distribution and/or repricing opportunity on adjustable rate loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After one year |
|
After five |
|
|
|
|
|
|
||
|
|
|
One year |
|
through five |
|
years through |
|
After fifteen |
|
|
|
||||
|
(dollars in thousands) |
|
or less |
|
years |
|
fifteen years |
|
years |
|
Total |
|||||
|
Construction, land & land development |
|
$ |
240,993 |
|
$ |
36,929 |
|
$ |
25,963 |
|
$ |
5,276 |
|
$ |
309,161 |
|
Other commercial real estate |
|
370,568 |
|
602,405 |
|
262,568 |
|
4,669 |
|
1,240,210 |
|||||
|
Total commercial real estate |
|
611,561 |
|
639,334 |
|
288,531 |
|
9,945 |
|
1,549,371 |
|||||
|
Residential real estate |
|
129,232 |
|
180,618 |
|
75,908 |
|
97,489 |
|
483,247 |
|||||
|
Commercial, financial & agricultural |
|
143,649 |
|
49,869 |
|
27,415 |
|
- |
|
220,933 |
|||||
|
Consumer and other |
|
8,698 |
|
48,041 |
|
49,401 |
|
53,774 |
|
159,914 |
|||||
|
Total loans, net of unearned fees |
|
$ |
893,140 |
|
$ |
917,862 |
|
$ |
441,255 |
|
$ |
161,208 |
|
$ |
2,413,465 |
The following table presents the maturity distribution of the Company's loans at March 31, 2026 split between loans that have fixed interest rates or loans with variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index such as the prime rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After One |
|
After Five |
|
|
|
|
|
|
||
|
|
|
Due in One |
|
Year, but |
|
Years, but |
|
|
|
|
|
|
|||
|
|
|
Year or |
|
within |
|
within Fifteen |
|
After Fifteen |
|
|
|
||||
|
(dollars in thousands) |
|
Less |
|
Five Years |
|
Years |
|
Years |
|
Total |
|||||
|
Loans with fixed interest rates: |
|
|
|
|
|
|
|
|
|
|
|||||
|
Construction, land & land development |
|
$ |
5,251 |
|
$ |
31,829 |
|
$ |
12,629 |
|
$ |
5,276 |
|
$ |
54,985 |
|
Other commercial real estate |
|
107,912 |
|
520,897 |
|
259,041 |
|
4,669 |
|
892,519 |
|||||
|
Total commercial real estate |
|
113,163 |
|
552,726 |
|
271,670 |
|
9,945 |
|
947,504 |
|||||
|
Residential real estate |
|
22,054 |
|
61,903 |
|
22,709 |
|
97,489 |
|
204,155 |
|||||
|
Commercial, financial & agricultural |
|
27,605 |
|
45,616 |
|
27,415 |
|
- |
|
100,636 |
|||||
|
Consumer and other |
|
8,168 |
|
48,028 |
|
49,401 |
|
53,774 |
|
159,371 |
|||||
|
Total loans with fixed interest rates, net of unearned fees |
|
170,990 |
|
708,273 |
|
371,195 |
|
161,208 |
|
1,411,666 |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans with floating interest rates: |
|
|
|
|
|
|
|
|
|
|
|||||
|
Construction, land & land development |
|
235,742 |
|
5,100 |
|
13,334 |
|
- |
|
254,176 |
|||||
|
Other commercial real estate |
|
262,656 |
|
81,508 |
|
3,527 |
|
- |
|
347,691 |
|||||
|
Total commercial real estate |
|
498,398 |
|
86,608 |
|
16,861 |
|
- |
|
601,867 |
|||||
|
Residential real estate |
|
107,178 |
|
118,715 |
|
53,199 |
|
- |
|
279,092 |
|||||
|
Commercial, financial & agricultural |
|
116,044 |
|
4,253 |
|
- |
|
- |
|
120,297 |
|||||
|
Consumer and other |
|
530 |
|
13 |
|
- |
|
- |
|
543 |
|||||
|
Total loans with floating interest rates, net of unearned fees |
|
722,150 |
|
209,589 |
|
70,060 |
|
- |
|
1,001,799 |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned fees |
|
$ |
893,140 |
|
$ |
917,862 |
|
$ |
441,255 |
|
$ |
161,208 |
|
$ |
2,413,465 |
The Company's risk mitigation processes include an independent loan review designed to evaluate the credit risk in the loan portfolio and to ensure credit grade accuracy. The analysis serves as a tool to assist management in assessing the overall credit quality of the loan portfolio and the adequacy of the allowance for credit losses. Loans classified as "substandard" are loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower and/or the collateral pledged. These assets exhibit well-defined weaknesses or are showing signs there is a distinct possibility the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as "doubtful" are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as "loss" are those loans which are considered uncollectible and are in the process of being charged off.
The Company regularly monitors the composition of the loan portfolio as part of its evaluation over the adequacy of the allowance for credit losses. The Company focuses on the following loan categories: (1) construction, land & land development; (2) other commercial real estate; (3) residential real estate; (4) commercial, financial & agricultural; and (5) consumer and other.
The allowance for credit losses for loans is a reserve established through charges to earnings in the form of a provision for credit losses. The provision for credit losses for loans is based on management's evaluation of the size and composition of the loan portfolio, the level of nonperforming and past due loans, historical trends of charged off loans and recoveries, prevailing economic conditions and other factors management deems appropriate. The Company's management has established an allowance for credit losses for loans which it believes is adequate to cover expected credit losses over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur. Based on a credit evaluation of the loan portfolio, management presents a quarterly review of the allowance for credit losses for loans and allowance for credit losses on unfunded commitments to the Company's Board of Directors, which primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner, the Company's management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for credit losses on loans.
The allowance for credit losses on loans is established by examining (1) the large classified loans, nonaccrual loans and loans considered impaired and evaluating them individually to determine the specific reserve allocation and (2) the remainder of the loan portfolio to allocate a portion of the allowance based on past loss experience and reasonable and supportable forecasts of economic conditions for the particular loan category. The Company also considers other factors such as changes in lending policies and procedures; changes in national, regional and/or local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of either the market president or lending staff; changes in the volume and severity of past due and classified loans; changes in the quality of the loan review system; and other factors management deems appropriate.
The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The ACL is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund.
The allowance for credit losses on loans was $21.7 million at March 31, 2026 compared to $20.0 million at March 31, 2025, an increase of $1.7 million, or 8.5%. The allowance for credit losses on loans as a percentage of loans was 0.90% and 1.04% at March 31, 2026 and 2025, respectively. The provision for credit losses was $1.75 million compared to $1.5 million for the three months ended March 31, 2026 and March 31, 2025, respectively. The provision for credit losses for the quarter ended March 31, 2026 includes $1.5 million in credit losses on loans and $250,000 in credit losses on unfunded commitments. The provision for credit losses for the quarter ended March 31, 2025 includes $1.6 million in credit losses on loans and a release of $123,000 in credit losses on unfunded commitments. For the three month period ended March 31, 2026, we experienced increases in net charge-offs primarily related to SBA loans in our SBSL portfolio which represented 55.1% of total net charge-offs for the period along with increases in commercial, financial & agricultural and consumer loans. Accordingly, the amount of provision expense recorded in each period was the amount required such that the total allowance for credit losses reflected the appropriate balance, in the estimation of management, that was sufficient to cover expected credit losses on loans over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur.
Additional information about the Company's allowance for credit losses is provided in Note 4 to our consolidated financial statements as of March 31, 2026, included elsewhere in this Quarterly Report on Form 10-Q.
The following table presents an analysis of the allowance for credit losses on loans as of and for the three months ended March 31, 2026 and 2025:
Table 6 - Analysis of Allowance for Credit Losses on Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2026 |
|
March 31, 2025 |
|||||||
|
(dollars in thousands) |
|
Reserve |
|
%* |
|
Reserve |
|
%* |
|||
|
Construction, land & land development |
|
$ |
2,252 |
12.8 |
% |
$ |
1,078 |
10.9 |
% |
||
|
Other commercial real estate |
|
6,309 |
51.4 |
% |
6,515 |
54.8 |
% |
||||
|
Residential real estate |
|
5,475 |
20.0 |
% |
5,753 |
18.0 |
% |
||||
|
Commercial, financial & agricultural |
|
4,112 |
9.2 |
% |
3,545 |
11.1 |
% |
||||
|
Consumer and other |
|
3,557 |
6.6 |
% |
3,106 |
5.2 |
% |
||||
|
|
|
$ |
21,705 |
100 |
% |
$ |
19,997 |
100 |
% |
||
|
* |
Percentage represents the loan balance in each category expressed as a percentage of total end of period loans. |
The following table presents a summary of allowance for credit loss for the three months ended March 31, 2026 and 2025.
Table 7 - Summary of Allowance for Credit Losses on Loans
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|||||
|
|
|
March 31, |
|
March 31, |
|||
|
(dollars in thousands) |
|
2026 |
|
2025 |
|||
|
Allowance for credit losses on loans - beginning balance |
|
$ |
23,014 |
|
$ |
18,980 |
|
|
Adjustment on acquired loans |
|
|
(1,100) |
|
|
- |
|
|
Charge-offs: |
|
|
- |
|
|
|
|
|
Other commercial real estate |
|
475 |
|
180 |
|
||
|
Residential real estate |
|
50 |
|
1 |
|
||
|
Commercial, financial & agricultural |
|
741 |
|
262 |
|
||
|
Consumer and other |
|
519 |
|
276 |
|
||
|
Total charge-offs |
|
1,785 |
|
719 |
|
||
|
Recoveries: |
|
|
|
|
|
|
|
|
Construction, land & land development |
|
1 |
|
1 |
|
||
|
Other commercial real estate |
|
- |
|
5 |
|
||
|
Residential real estate |
|
1 |
|
40 |
|
||
|
Commercial, financial & agricultural |
|
42 |
|
55 |
|
||
|
Consumer and other |
|
32 |
|
12 |
|
||
|
Total recoveries |
|
76 |
|
113 |
|
||
|
Net charge-offs |
|
1,709 |
|
606 |
|
||
|
Provision for credit losses on loans |
|
1,500 |
|
1,623 |
|
||
|
Allowance for credit losses on loans- ending balance |
|
$ |
21,705 |
|
$ |
19,997 |
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs to average loans (annualized) |
|
0.29 |
% |
0.13 |
% |
||
|
Allowance for credit losses on loans to total loans |
|
0.90 |
|
1.04 |
|
||
|
Allowance to nonperforming loans |
|
122.10 |
|
160.26 |
|
||
Management believes the allowance for credit losses for loans is adequate to provide for losses expected in the loan portfolio as of March 31, 2026.
Nonperforming Assets
Asset quality experienced improvement during the first three months of 2026. Nonperforming assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property and other real estate owned ("OREO"). Nonaccrual loans totaled $17.6 million at March 31, 2026, a decrease of $5.8 million, or 24.7%, from $23.4 million at December 31, 2025. There were fourteen loans contractually past due 90 days or more and still accruing totaling $178,000 at March 31, 2026, compared to eight loans totaling $95,000 at December 31, 2025. There was $205,000 in repossessed personal property at March 31, 2026, and $190,000 at December 31, 2025. OREO totaled $1.9 million at March 31, 2026, compared to $1.0 million at December 31, 2025, which represents the addition of seven properties totaling $1.7 million and the sale of two properties which totaled $659,000. As of March 31, 2026, total nonperforming assets as a percent of total assets decreased to 0.53% compared with 0.66% at December 31, 2025. The decrease in nonperforming assets was primarily the result of decreases in all loan segments except residential real estate loans, partially offset by repayments, payoffs and charged off loans.
Generally, loans are placed on non-accrual status if principal or interest payments become 90 days past due and/or management deems the collectability of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to a customer whose financial condition has deteriorated are considered for non-accrual status whether or not the loan is 90 days or more past due. Once interest accruals are discontinued, accrued but uncollected interest is charged to current year operations. Subsequent loan payments made on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Classification of a loan as nonaccrual does not preclude the ultimate collection of loan principal or interest.
Foreclosed property is initially recorded at fair value, less estimated costs to sell. If the fair value, less estimated costs to sell, at the time of foreclosure is less than the loan balance, the deficiency is charged against the allowance for credit losses on loans. If the lesser of the fair value, less estimated costs to sell, or the listed selling price, less the costs to sell, of the foreclosed property decreases during the holding period, a valuation allowance is established with a charge to foreclosed property expense. When the foreclosed property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property.
Nonperforming assets at March 31, 2026 and December 31, 2025 were as follows:
Table 8 - Nonperforming Assets
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
March 31, 2026 |
|
December 31, 2025 |
|||
|
Nonaccrual loans |
|
$ |
17,599 |
|
$ |
23,380 |
|
|
Loans past due 90 days and accruing |
|
178 |
|
95 |
|
||
|
Total nonperforming loans |
|
|
17,777 |
|
|
23,475 |
|
|
Other real estate owned |
|
1,873 |
|
1,048 |
|
||
|
Repossessed assets |
|
205 |
|
190 |
|
||
|
Total nonperforming assets |
|
$ |
19,855 |
|
$ |
24,713 |
|
|
Nonperforming loans by loan segment |
|
|
|
|
|
||
|
Construction, land & land development |
|
$ |
92 |
|
$ |
1,132 |
|
|
Commercial real estate |
|
6,629 |
|
9,663 |
|
||
|
Residential real estate |
|
4,662 |
|
4,501 |
|
||
|
Commercial, financial & agricultural |
|
5,985 |
|
7,883 |
|
||
|
Consumer & other |
|
409 |
|
296 |
|
||
|
Total nonperforming loans |
|
$ |
17,777 |
|
$ |
23,475 |
|
|
Nonperforming assets as a percentage of: |
|
|
|
|
|
|
|
|
Total loans, OREO and foreclosed assets |
|
0.82 |
% |
1.04 |
% |
||
|
Total assets |
|
0.53 |
% |
0.66 |
% |
||
|
Nonperforming loans as a percentage of total loans |
|
0.74 |
% |
0.99 |
% |
||
The Company had no loans modified due to financial difficulty during the three month period ended March 31, 2026. See Note 3 - Loans, included elsewhere in this Quarterly Report on Form 10-Q for additional details on loan modifications.
Deposits
Deposits at March 31, 2026 and December 31, 2025 were as follows:
Table 9 - Deposits
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
March 31, 2026 |
|
December 31, 2025 |
||
|
Noninterest-bearing demand |
|
$ |
495,234 |
|
$ |
526,803 |
|
Interest-bearing demand |
|
927,768 |
|
932,262 |
||
|
Savings and money market |
|
806,434 |
|
787,811 |
||
|
Time, $250,000 and over |
|
237,311 |
|
239,175 |
||
|
Other time |
|
581,672 |
|
581,470 |
||
|
Total deposits |
|
$ |
3,048,419 |
|
$ |
3,067,521 |
Total deposits decreased $19.1 million to $3.05 billion at March 31, 2026 from $3.07 billion at December 31, 2025. As of March 31, 2026, 16.2% of total deposits were comprised of noninterest-bearing accounts and 83.8% were comprised of interest-bearing deposit accounts, compared to 17.2% and 82.8% as of December 31, 2025, respectively. The overall decrease in our deposits was primarily due to a decrease in noninterest-bearing deposits, partially offset by increases in savings and money market deposits due to seasonality in customer deposit balances.
We had $136.9 million in brokered deposits at March 31, 2026 and $131.9 million at December 31, 2025. We use brokered deposits, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network, which are our principal source of funding. Our level of brokered deposits varies from time to time depending on competitive interest rate conditions and other factors, and tends to increase as a percentage of total deposits when the brokered deposits are less costly than issuing internet certificates of deposit or borrowing from the FHLB.
The Company's estimated uninsured deposits were $989.4 million at March 31, 2026, or 32.21% of total Bank deposits, compared to $980.0 million at December 31, 2025, or 31.65% of total Bank deposits. Adjusted uninsured deposit estimate (which excludes deposits collateralized by public funds and internal accounts) were $625.1 million at March 31, 2026, or 20.35% of total Bank deposits, compared to $576.5 million at December 31, 2025, or 18.62% of total Bank deposits. Adjusted uninsured deposits represent a small percentage of our overall deposits, which increases the stability of our deposit base and lowers our overall funding risk.
The following table presents average deposits outstanding and the average rate paid on deposits by the Company at March 31, 2026 and March 31, 2025.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
March 31, 2026 |
|
March 31, 2025 |
|||||||||
|
Noninterest-bearing demand |
|
$ |
487,298 |
|
|
- |
|
$ |
455,277 |
|
|
- |
|
|
Interest-bearing demand and savings |
|
|
1,725,632 |
|
|
1.40 |
% |
1,549,509 |
|
1.69 |
% |
||
|
Time deposits |
|
|
812,531 |
|
|
3.43 |
|
601,920 |
|
3.57 |
|
||
|
Total deposits |
|
$ |
3,025,461 |
|
|
1.72 |
% |
$ |
2,606,706 |
|
|
1.83 |
% |
The following table presents the maturities of the Company's time deposits as of March 31, 2026.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time |
|
Time |
|
|
|
||
|
|
|
Deposits |
|
Deposits |
|
|
|
||
|
|
|
$250,000 |
|
Less than |
|
|
|
||
|
(dollars in thousands) |
|
or Greater |
|
$250,000 |
|
Total |
|||
|
Months to Maturity |
|
|
|
|
|
|
|
|
|
|
3 months or less |
|
$ |
110,993 |
|
$ |
228,199 |
|
$ |
339,192 |
|
Over 3 months through 6 months |
|
64,516 |
|
178,175 |
|
242,691 |
|||
|
Over 6 months through 12 months |
|
53,812 |
|
124,275 |
|
178,087 |
|||
|
Over 12 months |
|
7,990 |
|
51,023 |
|
59,013 |
|||
|
|
|
$ |
237,311 |
|
$ |
581,672 |
|
$ |
818,983 |
Off-Balance Sheet Arrangements
The Company is a party to credit related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.
The Company's exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, upon extension of credit, is based on management's credit evaluation of the borrower. The type of collateral held varies, but may include cash or cash equivalents, unimproved or improved real estate, personal property or other acceptable collateral.
See Note 8 to our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for a table setting forth the financial instruments that were outstanding whose contract amounts represent credit risk and more information regarding our off-balance sheet arrangements as of March 31, 2026 and December 31, 2025.
Liquidity
An important part of the Bank's liquidity resides in the asset portion of the balance sheet, which provides liquidity primarily through loan interest and principal repayments and the maturities and sales of securities, as well as the ability to use these assets as collateral for borrowings on a secured basis.
The Bank's main source of liquidity is customer interest-bearing and noninterest-bearing deposit accounts. Liquidity is also available from wholesale funding sources consisting primarily of federal funds purchased, FHLB advances and brokered deposits. These sources of liquidity are generally short-term in nature and are used as necessary to fund asset growth and meet other short-term liquidity needs.
To manage long-term liquidity, the Bank may utilize long-term FHLB advances, subordinated debt issuances, or the sale of investment securities to support structural balance sheet growth and satisfy extended funding requirements.
To plan for contingent sources of funding not satisfied by both local and out-of-market deposit balances, the Company and the Bank have established multiple borrowing sources to augment their funds management. The Company has borrowing capacity through membership in the FHLB program. The Bank has also established overnight borrowing for federal funds purchased through various correspondent banks. There were no outstanding balances of federal funds purchased at March 31, 2026 and December 31, 2025, respectively.
Cash and cash equivalents at March 31, 2026 and December 31, 2025 were $295.8 million and $257.6 million, respectively. Cash and cash equivalents have increased since year end 2025, partially due to maturities and paydowns of investment securities and loan maturities and payoffs. Management believes the various funding sources discussed above are adequate to meet the Company's liquidity needs without any material adverse impact on our operating results.
Liquidity management involves the matching of cash flow requirements of customers and the ability of the Company to manage those requirements. These requirements of customers include, but are not limited to, deposits being withdrawn or providing assurance to borrowers that sufficient funds are available to meet their credit needs. We strive to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance we have in short-term assets at any given time will adequately cover any reasonably anticipated need for funds. Additionally, we maintain relationships with correspondent banks, which could provide funds on short notice, if needed. We have also invested in FHLB stock for the purpose of establishing credit lines with the FHLB. At March 31, 2026 and December 31, 2025, we had $195.0 million of outstanding advances from the FHLB for both periods. Based on the values of loans pledged as collateral, we had $921.2 million and $747.0 million of additional borrowing availability with the FHLB at March 31, 2026 and December 31, 2025, respectively.
Other sources of liquidity include availability from the Federal Reserve Discount Window of $121.8 million of which there was no outstanding balance at March 31, 2026. The Company also had unencumbered securities of $369.8 million, $242.8 million in FRB Reserves and $51.6 million in other cash and due from banks as of March 31, 2026. Unencumbered investment securities provide the ability to either be pledged as collateral with borrowing sources or sold and converted to cash.
The Company's material cash requirements consist primarily of unfunded loan commitments, trust preferred securities payments and dividends to shareholders. We believe our current cash and cash equivalents, expected cash flows from operations and existing liquidity will be sufficient to meet these requirements. However, external financing from our funding sources mentioned above may be utilized if necessary.
The Company is a separate entity from the Bank, and as such it must provide for its own liquidity. The Company is responsible for the payment of dividends declared for its common shareholders and payment of interest and principal on any outstanding debt or trust preferred securities. These obligations are met through internal capital resources such as service fees and dividends from the Bank, which are limited by applicable laws and regulations.
The liquidity position of the Company is continuously monitored, and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Management is not aware of any events that are reasonably likely to have a material adverse effect on the Company's liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity, which if implemented, would have a material adverse effect on the Company.
Capital Resources
The Company and the Bank are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution's exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution's ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution's overall capital adequacy.
The table below summarizes the capital requirements applicable to the Company and the Bank in order to be considered "well-capitalized" from a regulatory perspective, as well as the Company's and the Bank's capital ratios as of March 31, 2026 and December 31, 2025. The Company and the Bank exceeded all regulatory capital requirements and was considered to be "well-capitalized" as of March 31, 2026 and December 31, 2025. There have been no conditions or events since March 31, 2026 that management believes would change this classification.
Table 10 - Capital Ratio Requirements
|
|
|
|
|
|
|
|
|
|
Minimum |
|
|
|
|
|
|
Requirement |
|
Well-capitalized |
|
|
Risk-based ratios: |
|
|
|
|
|
|
Common equity tier 1 capital (CET1) |
4.5 |
% |
6.5 |
% |
|
|
Tier 1 capital |
6.0 |
8.0 |
|
||
|
Total capital |
8.0 |
10.0 |
|
||
|
Leverage ratio |
4.0 |
5.0 |
|
||
|
|
|
|
|
|
|
Table 11 - Capital Ratios
|
|
|
|
|
|
|
|
Company |
|
March 31, 2026 |
|
December 31, 2025 |
|
|
CET1 risk-based capital ratio |
12.53 |
% |
12.67 |
% |
|
|
Tier 1 risk-based capital ratio |
13.44 |
13.60 |
|
||
|
Total risk-based capital ratio |
15.75 |
15.95 |
|
||
|
Leverage ratio |
9.84 |
10.78 |
|
||
|
|
|
|
|
|
|
|
Colony Bank |
|
|
|
||
|
CET1 risk-based capital ratio |
13.59 |
% |
13.61 |
% |
|
|
Tier 1 risk-based capital ratio |
13.59 |
13.61 |
|
||
|
Total risk-based capital ratio |
14.45 |
14.48 |
|
||
|
Leverage ratio |
9.95 |
10.78 |
|
Colony Bankcorp Inc. published this content on May 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 08, 2026 at 15:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]