Colony Bankcorp, Inc. (CBAN) — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are to 2022. Colony is a Georgia-based bank holding company operating primarily through Colony Bank, with 34 Georgia locations and expanded presence in Birmingham, Alabama, and Tallahassee and the Florida Panhandle. The filing reports approximately $3.1 billion in assets at year-end.
Financial results and condition
| Metric | 2023 | 2022 |
|---|---|---|
| Total assets, year-end | $3.053 billion | $2.937 billion |
| Total loans, before allowance, year-end | $1.883 billion | $1.737 billion |
| Total deposits, year-end | $2.545 billion | $2.491 billion |
| Net interest income | $78.2 million | $80.7 million |
| Net income | $21.7 million | $19.5 million |
| Diluted earnings per share | $1.24 | $1.14 |
| Cash and cash equivalents, year-end | $83.3 million | $80.7 million |
- Revenue and margins: Net interest income plus noninterest income totaled about $113.9 million, down from $115.7 million. Net interest margin declined to 2.83% from 3.20%; net interest spread fell to 2.42% from 3.07%. Higher loan yields and loan growth were outweighed by sharply higher deposit and borrowing costs.
- Noninterest items and expenses: Noninterest income rose 1.7% to $35.6 million. Higher deposit service charges and other income were offset by lower mortgage fees and SBA loan-sale gains. Noninterest expense fell 7.2% to $83.1 million, including lower compensation after a workforce reduction and savings from a renewed core-processing contract.
- Credit: Total provision for credit losses was $3.6 million, versus $3.4 million. Net charge-offs increased to $1.6 million from $0.2 million. The allowance for loan losses was $18.4 million, or 0.98% of loans, versus $16.1 million, or 0.93%. Nonperforming assets rose to $10.7 million (0.35% of assets) from $6.4 million (0.22%); nonaccrual loans increased to $9.8 million. Management attributed the provision increase mainly to downgrades and charge-offs on a small number of loans, not broad portfolio problems.
- Liquidity and funding: Average deposits increased, led by time deposits, while noninterest-bearing deposits declined. Year-end uninsured deposits were estimated at $777.8 million; brokered deposits were $93.6 million, or 3.68% of deposits. Loans-to-deposits rose to 74.0% from 69.7%. FHLB advances were $175 million, and the Company reported $596.2 million of additional FHLB borrowing availability, subject to eligible collateral. Management stated available funding sources were adequate.
- Debt and capital: Total borrowings were $238.4 million, including $175 million of FHLB advances, $39.2 million of subordinated notes, and $24.2 million of subordinated debentures. Consolidated regulatory ratios were 11.66% CET1, 12.77% Tier 1 risk-based capital, 15.47% total risk-based capital, and 9.17% Tier 1 leverage; the Company said it exceeded applicable requirements. Year-end stockholders’ equity was $254.9 million, up from $230.3 million.
- Cash flow: Operating cash flow was $21.0 million, down from $49.7 million; investing activities used $98.8 million, compared with $448.2 million; financing activities provided $80.4 million, compared with $281.9 million. Cash and cash equivalents ended the year at $83.3 million.
Material changes versus 2022
- Net income increased 11.3%, despite a $2.4 million decline in net interest income, as noninterest expense decreased by $6.4 million and provision expense rose modestly.
- Average loans increased $344.3 million, while the cost of total deposits increased 144 basis points. The higher funding costs compressed the net interest margin.
- Loans grew 8.4%; real estate loans remained the dominant exposure at 83.8% of total loans. Nonperforming assets and net charge-offs increased.
- Accumulated other comprehensive loss improved to $55.6 million from $66.4 million, primarily reflecting a recovery in available-for-sale securities’ fair values. At year-end, gross unrealized losses were $48.0 million on available-for-sale securities and $43.8 million on held-to-maturity securities. Management reported no credit-related impairment and no expected requirement to sell before recovery or maturity.
- Colony adopted CECL on January 1, 2023. Adoption reduced retained earnings by $1.2 million, net of tax, and established a $1.7 million allowance for unfunded commitments.
Outlook, risks, and unusual items
- The filing provides no specific earnings, loan-growth, or margin guidance. Management described an uncertain environment and identified interest-rate changes, deposit competition and funding costs, inflation, economic conditions, real estate values, credit quality, and liquidity as key risks.
- The loan book is concentrated in real estate and in the Company’s southeastern markets. Management reported CRE concentration measures below stated regulatory guidelines, but deterioration in property markets or borrower performance could increase losses.
- Interest-rate simulations indicated next-12-month net interest income could increase 0.54% with a 100-basis-point rate rise and 0.97% with a 200-basis-point rise, or decline 2.03% with a 100-basis-point decrease, versus a stable-rate scenario. Outcomes depend on deposit repricing and customer behavior.
- The Company entered two cash-flow hedging swaps in 2023, each with a $25 million notional amount, to manage variability in funding costs. It also paid $7.7 million in common dividends and repurchased 41,481 shares during 2023; the $12 million buyback authorization expired at year-end.
- There were no material pending legal proceedings reported. The independent auditor issued an unqualified opinion on the financial statements and internal controls. The allowance for credit losses was identified as a critical audit matter because it involves significant estimates and judgment.
Important facts for investors to verify
- Whether deposit pricing, deposit mix, and reliance on wholesale funding continue to pressure net interest margin and earnings.
- Trends in nonaccrual loans, past-due loans, charge-offs, and the allowance—especially within commercial real estate and residential real estate portfolios.
- The timing and liquidity implications of uninsured deposits, large time-deposit maturities, and available borrowing capacity, including collateral requirements.
- How unrealized securities losses, rate changes, and any need to sell securities could affect liquidity, equity, or reported results.
- Whether stated interest-rate sensitivity assumptions and management’s expectation of adequate liquidity remain valid as market and customer behavior change.