Transcript: Colony Bankcorp Q2 2026 Earnings Conference Call

Colony Bankcorp (NASDAQ: CBAN ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

5 million from the last quarter. The company is advancing its merger with First Reliance Bank, with integration planning underway and regulatory applications submitted, aiming for a legal close in the fourth quarter. 5% annualized for the quarter, though future growth is expected to be slightly below the 8% threshold due to competitive pressures and pricing discipline. 2 million, attributed to seasonal trends and a competitive deposit landscape, but the average balance of total deposits showed slight stability.

Management highlighted the addition of experienced bankers in key markets to support organic growth and emphasized a primary focus on deposit generation. Operating noninterest income increased by about $950,000, driven by multiple business lines, while operating noninterest expense decreased by over $500,000 due to post-merger cost savings. The integration of First Reliance is expected to enhance market opportunities and organic growth, particularly in the Southeast region. Future profitability improvements are anticipated from margin expansion, fee income growth, and disciplined pricing strategies, with expected modest margin increases in coming quarters.

Full Transcript Prilla, Operator Thank you for standing by. My name is Prilla and I will be your conference operator today. At this time I would like to welcome everyone to the Colony Bankcorp second quarter 2026 conference call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad, and if you would like to withdraw your question, please press the star key again. Thank you. I would now like to turn the conference over to Bentley Collins, Communications Manager.

You may begin. Bentley Collins, Communications Manager Thanks, Prilla. Before we get started, I would like to go through our standard disclosures. Certain statements we make on this call could be construed as forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.

Current and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, but involve known and unknown risks and uncertainties. Factors that could cause these differences include, but are not limited to, pandemics; variations of the company's assets, businesses, cash flows, financial condition, prospects, and other results of operations. Additional cautionary statements related to the First Reliance merger are located in our merger press release, merger investor presentation, and SEC filings, all of which are available on our website.

I would also like to add that during our call today we will reference our second quarter earnings release and investor presentation which were both filed yesterday, so please have those available to reference. I will now turn the call over to our Chief Executive Officer, Heath Downton. Heath Downton, CEO Thanks, Bentley, and thank you to everyone for joining our second quarter earnings call today. We are pleased to report continued improvement in our financial performance for the quarter, and I'm proud of our team members for all the work they are doing to help us achieve our objectives.

A major highlight from the quarter was the announcement of our partnership with First Reliance Bank. Integration planning is already well underway with both management teams working closely together to ensure we remain on track for a legal close in the fourth quarter. On the regulatory front, our merger applications have been submitted and we expect to file the S-4 in the near future. The second quarter also marked our first full period of performance following the successful PC Federal Systems conversion and customer integration in Q1.

20% operating ROA this quarter. We believe this puts us in a good position to improve that operating ROA going forward. 5 million from last quarter. The primary drivers of the increase were continued margin expansion, improved operating noninterest income, as well as decreased operating noninterest expense.

5% annualized as we saw an increase in production compared to the first quarter. This brings us up to 7% annualized loan growth year to date. The weighted average pricing on new and renewed loans remains steady, actually increasing slightly from the first quarter as we keep pricing discipline a priority. I'm proud of our team's efforts on pricing, which is one of the key factors that drives our continued margin growth.

The lending environment is competitive and a rising rate outlook has resulted in some softening pipeline. While we previously expected loan growth to track towards the lower end of our 8 to 12% target, our commitment to disciplined pricing and strong underwriting standards means near-term growth could land slightly below our 8% threshold. We believe in the short term that achieving our financial objectives is important, and achieving organic growth near the low end of our range helps us achieve our long-term financial goals rather than growing in a way that puts pressure on our financial performance or diminishes the strength of our balance sheet.

We saw a slight decline in total deposits this quarter. While this is a normal seasonal trend for us, the deposit landscape across our footprint does remain competitive. We have managed to maintain a steady cost of funds, and our team members continue to focus on building deposit-first relationships with a focus on operating accounts and primary consumer account relationships. Operating noninterest income increased by about $950,000 from the first quarter, which was led by increased revenue from many of our business lines, and operating noninterest expense declined more than $500,000.

Our SBSL division had improvement on a pretax basis, as shown on slide 19. However, we still have a lot of opportunity for more improvement and expect that to start to show over the next few quarters. In addition to finding the right partners to grow with through M&A, organic growth is also a key part of our long-term strategy. We operate in some of the best markets in the Southeast and will continue to focus on growth across our existing footprint.

Our upcoming merger with First Reliance will add even more markets that are ideally suited for organic growth. During the quarter we added several experienced bankers to our team that will help us continue our focus on organic growth. In our Columbus market we added Colby Carden as a private banker. In our Douglas market we added Lee Taylor as Market President.

In our Savannah market we added Philip Anderson as Market President, and in our Jacksonville MSA we recently added Jeff Udy as Regional President with a focus on building core customer relationships in the suburban growth markets west of Jacksonville. These additions represent our commitment to organic growth by building core relationships in existing markets and further expand our market share as we work towards reaching our M&A milestones with First Reliance over the next several quarters. Our focus remains both on a seamless integration and driving organic growth across our core footprint. The First Reliance team is incredibly excited about our partnership.

They see the clear value in what we can build together, and their leadership is fully energized by the operational scale and broader opportunities the combined company brings to both our customers and our team members. With that, I'll turn it over to Derek to go over the financials in more detail. Derek Shelnutt — Executive Vice President, Chief Financial Officer Thank you, Heath. 2 million to over $16 million in the quarter.

52% last quarter. Net interest income increased approximately $700,000 during the quarter and is attributable to an earning asset yield increase of 6 basis points driven by loan growth and pricing on both new and renewed loans. On slide 36 we show the weighted average rate on new and renewed loans by quarter. 11% in the first quarter.

To Heath's point earlier, pricing discipline is a key focus of ours and that will continue to help with us gaining ground on margin. 95%, which is up 1 basis point from the first quarter, so relatively flat overall. We still expect to see modest increases in margin of a few basis points per quarter for the next several quarters. However, the competitive environment for both loans and deposits will really determine how much increase we see and could potentially slow that increase down if our cost of funds remain stable.

On the liability side, we still have some upward repricing on the asset side that we will be able to capture to improve margin. The repricing schedule is shown on slide 38 in the deck. 1 million from the same quarter of last year. On slide 19 we show pretax income by business line, an improvement both quarter over quarter and compared to the same quarter last year.

Colony Financial Advisors pretax income increased in the second quarter. In the second quarter was the first full quarter after our transition from a managed program to a dual program where Colony receives more of the commissions and fees but also takes on additional related expenses. Assets under management are up almost 15% quarter over quarter and are currently at $637 million, and that's up from $555 million in the prior quarter and up from $219 million in the second quarter of last year. Mortgage pretax income improvement was driven by higher production and sales in the second quarter as we enter a period of more seasonal activity.

Quality insurance had a better quarter with more premiums in force and higher revenue. Pricing on policy premiums has been a challenge for the insurance industry. We've seen that ease some and remain optimistic for continued improvement and positive impact on both customer retention and acquisition. Bank referrals are up year over year and we see that as good potential for increased sales revenue.

Our SBSL division improved from the prior quarter on a pretax income basis. However, revenue from gain on sale activity was softer. As Heath mentioned, we expect to see improvement there in the coming quarters. Charge-offs at SBSL were similar to the first quarter, and we're seeing those stabilize with expected improvement on the horizon.

There was an outsized BOLI death benefit during the quarter of about $700,000, and that was an adjustment to our operating earnings. Operating noninterest expenses declined about $550,000 from the prior quarter. This is largely a result of post-merger integration cost savings, and we expect expenses to stay around this level for the third quarter and then increase after legal close with First Reliance. 51% in the second quarter, an improvement from the first quarter.

45% will be driven primarily on the income side. We do expect that metric to increase again post legal close with First Reliance and then trend back towards our target later in 2027 after we complete systems conversion and customer integration. We'll be working to capture as much expense efficiency as possible immediately following the legal close of First Reliance in the fourth quarter. However, there are a lot of our identified cost savings that we will not be able to capture until we get through the systems conversion in mid-2027.

9 million and was a slight increase from the prior quarter. Net charge-offs were similar to last quarter and were primarily from SBSL. 6 million. 5% annualized.

And although we saw growth across several markets in our footprint, the Columbus and Tallahassee markets were the top two in terms of loan growth in the second quarter, and growth in our Valdosta market has been strong year to date. 4 million of brokered deposits. It is not unusual for us to see seasonal deposit runoff this time of year, and some of that was right around the end of the quarter. If you look at our average balance of total deposits on page nine in the earnings release, you can see that the average was stable with a slight increase during the quarter.

12 per share. 49% in the first quarter. 65 in the prior quarter. We did not purchase any shares in our stock buyback plan during the quarter.

However, we view our buyback plan as an important tool to managing capital and look to be consistently buying back shares over time, as well as being opportunistic during market pullbacks. Yesterday, First Reliance also reported their earnings for the quarter. Their release is available on their website, and overall they had a solid quarter. 1 million, which is a meaningful improvement compared to the same period last year.

They also had a quarter of good loan growth, and that came in a little higher than our forecast. First Reliance has a strong lending team in great markets that will help drive organic loan growth going forward. As a combined company, their results were largely in line with our model forecast, and so we do not expect any adjustments to the pro forma information we previously released. That concludes my overview, and now I will turn it back over to Heath.

Heath Downton, CEO Before we take questions. Thanks, Derek, and thanks to everyone for being on this call today. We're pleased with our performance this quarter, which met our internal expectations for performance and exceeded external expectations. I am proud of how our team executed on achieving our desired results from the TC Federal merger, which positions us well for our upcoming merger with First Reliance and demonstrates the strength of our M&A strategy to gain scale and improve operating performance.

Further, our expense and pricing discipline set us up well to finish the year strong. That wraps up our prepared comments. With that, I would like to call on Prilla to open up the line for questions. Prilla, Operator Thank you.

We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press it forward. Again with that, our first question comes from the line of David B.

Shop with Hobby Group. Please go ahead. David B. Shop, Analyst at Hobby Group Hey, good morning, Heath and Derek.

Heath Downton, CEO Morning, Dave. David B. Shop, Analyst at Hobby Group Hey Heath, just curious, you know, you mentioned, you know, some of the seasonality on the funding side on the deposit side. Just curious, you know, where does sort of the deposit generation rank in terms of, you know, priorities and when you're looking to, you know, list out new bankers within your, within your Georgia and Florida markets, is that sort of a key priority there?

Are you still looking for, you know, primarily, you know, commercial asset generators? Just curious how you're thinking holistically about the deposit generation engine. Heath Downton, CEO Yeah, Dave, great question. And while they're both important, our team clearly recognizes that deposits are priority one.

That's been our major focus and that will continue to be our major focus. I think that it's important for us to go out and secure, you know, the key commercial relationships but also to have the ancillary consumer business that comes along with those. So that's a priority. We mentioned, or I mentioned, in the comments about adding a private banker in Columbus.

We look to add some private banking resources in other markets as well, and that is primarily a deposit play and looking to grow assets under management for Colony Financial Advisors. So, you know, it's a real focus. We've got a lot of great wins in that area, and I think that's really important, especially in an environment where there's a lot of rate sensitivity on the deposit side. So I would just say going after key deposit relationships is priority one.

David B. Shop, Analyst at Hobby Group Got it.