Colony Bankcorp Reports Third Quarter 2020 Results

Staff Report

Friday, October 16th, 2020

Colony Bankcorp, Inc. today reported financial results for the third quarter of 2020.

Third Quarter 2020 Financial Highlights:

  • Net income of $3.1 million, or $0.33 per diluted share

  • Operating net income of $3.7 million, or $0.39 adjusted earnings per diluted share (see Non-GAAP reconciliation)

  • Total assets of $1.8 billion

  • Total loans, including loans held for sale, of $1.2 billion

  • $1.1 million provision for loan losses

The Company also announced that on October 15, 2020, the Board of Directors declared a quarterly cash dividend of $0.10 per share, to be paid on its common stock on November 13, 2020, to shareholders of record as of the close of business on October 30, 2020.

Commenting on the announcement, Heath Fountain, President and Chief Executive Officer, said, “In this quarter of continued significant economic disruption due to the global pandemic, we delivered strong results, while prudently managing risk, as we continued to work diligently to support our customers, communities and employees. Our diluted earnings per share increased 21% over the same period last year and a strong 42% over the sequential quarter. Our results reflect the continued benefit of diversifying our business model, with income before income taxes increasing 28% over the prior-year period and 42% over the sequential quarter. Exceptional growth in mortgage banking income as well as revenue contribution from our Small Business Specialty Lending Division give all of us at Colony confidence in the future of our business. Additionally, our loan deferral balances related to the pandemic decreased 89% from $113.4 million in the second quarter 2020 to $12.6 million at the end of the third quarter, with the hotel sector representing $7.6 million.

“Growth in net interest income before provision for loan losses for the quarter of 9% year over year was offset by acquisition-related expenses related to core deposit intangible amortization, as well as the write-down of the Thomaston branch, the sale of which will close at the end of the fourth quarter. Despite strong growth in our interest earnings assets, our net interest margin decreased 28 basis points to 3.34% compared with the year-earlier period due to the addition of lower yielding PPP loans offset by a decrease in our borrowing costs during the quarter and lower interest on the level of deposits on our balance sheets. For the nine months ending September 30, 2020, our net interest margin was flat compared to the same period last year.

“Noninterest income saw strong growth, increasing 88% in the third quarter 2020 over the same period last year as a result of our continued strategic efforts to diversify our revenue streams. Mortgage fee income increased to $2.6 million in the current quarter compared to $1.3 million in the third quarter of 2019 due to the increasing number of our customers refinancing in the lower interest rate environment. Mortgage fee income now represents 35% of total noninterest income. We also saw increases in interchange fees as well as gains on sales of SBA loans and other securities. This increase in noninterest income was partially offset by increases in noninterest expense, such as increases in salaries and employee benefits due to the additional headcount, increases in occupancy, equipment, information technology expenses, and an FHLB prepayment penalty.

“Despite our strong asset quality, we recorded a higher provision for loan and losses in the third quarter of 2020 of $1.1 million, a substantial increase from $214,000 in the third quarter of 2019 due to increases in our loan portfolio and the current challenging economic operating environment. Our allowance for loan losses now represents 1.00% of total loans outstanding, an increase from 0.69% in the year-earlier quarter and 0.92% on a sequential-quarter basis. Total nonperforming assets in the third quarter of 2020 is 0.68% of total assets, compared to 0.70% in the year-earlier quarter and 0.75% on a sequential-quarter basis.

“As a final thought, I would like to express my sincere appreciation to every Colony team member for their efforts and contributions in serving our customers during this crisis. While some of our competitors are retrenching, due to our strategic efforts to diversify our business lines, we are adding talented bankers and loan officers in our growing markets. Our expenditures in technological enhancements to stay connected to our customers and our efforts to protect our credit metrics allow us to continue to drive our business forward. As the largest community bank outside of Atlanta, I am excited for our future and believe we will continue to grow our market share in Georgia while staying true to our heritage as a community bank,” concluded Fountain.

Balance Sheet

  • Total assets were $1.8 billion at September 30, 2020, an increase of $244.1 million, or 16%, from $1.5 billion at December 31, 2019.

  • Increased loan production associated with the funding of approximately 1,700 PPP loans, which also generated much higher balances in our interest-bearing deposits with other banks as of September 30, 2020.

  • Total loans, including loans held for sale, were $1.16 billion, an increase of $178.6 million, or 18%, from $978.9 million at December 31, 2019.

  • Growth in loans was primarily a result of PPP loan production during the second quarter 2020, which totaled $137.8 million in gross PPP loans at September 30, 2020.

  • Total deposits were $1.42 billion, an increase of $122.7 million, or 9%, compared to total deposits of $1.29 billion at December 31, 2019.

  • Noninterest-bearing deposits increased $91.5 million, or 39%, compared to December 31, 2019, and is attributable to PPP-related deposits.

  • Colony’s participation in the PPP loan program resulted in an increase in borrowings, specifically through the Payroll Protection Program Liquidity Facility (“PPPLF”), which totaled $134.5 million at September 30, 2020.


  • Colony continues to maintain a strong capital position, with ratios that exceed regulatory minimums required to be classified 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 9.36%, 14.29%, 15.29% and 12.16%, respectively.

Third Quarter Results of Operations

  • Net interest income before provision for loan losses increased $1.2 million on a sequential-quarter comparison.

  • Net interest margin was down seven basis points on a sequential-quarter basis and 28 basis points compared with the year-earlier quarter due to lower yielding PPP loans combined with an increase in lower yielding highly liquid assets.

  • Increase in noninterest income of $2.7 million, or 56%, on a sequential-quarter comparison, primarily due to mortgage loan productions from the refinancing in the lower interest rate environment and gain on sale of securities and Small Business Lending (“SBA”) loans.

  • Increase in noninterest expenses of $2.9 million, or 22%, on a sequential-quarter comparison, driven by the write down of the Thomaston branch pending the sale later this year, FHLB prepayment penalties and salaries and compensation expense.

Asset Quality

  • Nonperforming assets totaled $11.8 million and $10.4 million at September 30, 2020 and 2019, respectively.

  • OREO and repossessed assets totaled $1.9 million at September 30, 2020, an increase of $1.1 million, or 140.8%, compared to the same quarter in 2019.

  • Net loan charge-offs were $375,000, or 0.13% of average loans, compared to $317,000 in the third quarter of 2019.

  • The loan loss reserve was $11.0 million, or 1.00% of total loans, on September 30, 2020, compared with $6.6 million, or 0.69% of total loans, at September 30, 2019

While nonperforming assets have increased year over year primarily as a result of increased traditional loan production, asset quality remains strong with overall improvement as of the third quarter of 2020 compared to previous quarter and year-over-year comparisons. The increase in the provision for loan losses was directly impacted by the current economic disruptions resulting from the COVID-19 pandemic crisis.