COLONY BANKCORP INC Q3 FY2024 earnings call

• Hurricane Helene Impact: Team stepped up, no team injuries, communities recovering with power restored. - Operating Results: Operating net income up $238k, net interest income and non-interest income increased. Margin saw slight decrease but expected to expand. - Efficiency: Operating net non-interest expense to average assets 1.32%, improving for 7 quarters. Hired Director of Optimization for efficiency. - Digital Platform: Launched new online banking platform to enhance customer experience and support growth.

Net Interest Income: Increased approximately $132,000 in the third quarter, with interest income up over $1.2 million due to loan growth and repricing, while interest expense on deposits increased ~$1 million from mix shift. Non-Interest Income: Increased about $417,000, led by strong quarters in mortgage banking and SBSL. Mortgage rates had fluctuations, and SBSL had net income growth with charge-offs expected to return to prior levels. Complementary Lines of Business: All were profitable in Q3. Mortgage banking had a good quarter but faced inventory challenges; SBSL saw net income increase. Other lines like marine/RV and insurance showed improvements. Deposits: Total deposits increased ~$64.7 million, with mix shift to money market and retail CDs. Loans: Increased $20 million (4% annualized), pipeline picking up but Q4 may have payoffs. Non-Performing Loans: Increased from historic lows but credit quality still good. Revenue contribution details: Complementary lines had pretax net income up over 20%, with no business line in loss in Q3.

• Margin expected to expand gradually, starting modestly and improving in 2025. - Loan growth expected to normalize in 2025, though Q4 may have payoffs affecting growth. - Deposit growth opportunities, especially with $70-80 million retail CDs maturing in Q4. - Complementary lines expected to continue improving, with mortgage and SBSL having specific outlooks.

• Impact of rate changes on funding costs and loan yields. - Deposit mix shifts and potential runoff if rates not aligned. - Seasonality affecting some business lines. - Uncertainty around mortgage market due to inventory and rate fluctuations.

Q: Christopher Marinac asked about profitability going forward and annualizing core earnings, particularly in 2025.

A: Derek Shelnutt said it's reasonable to annualize, with complementary lines improving and margin expected to expand.

Q: Christopher Marinac asked about asset sales being one-time or multiple quarters.

A: Derek Shelnutt and Heath Fountain said likely one-off larger than recent but mostly smaller transactions in future quarters.

Q: David Bishop asked about drivers of loan payoffs.

A: Heath Fountain said payoffs from project completions not typically bank-financed.

Q: David Bishop asked about types of construction projects underwritten.

A: Heath Fountain said across the board due to rate stability making sponsors comfortable moving forward.

Q: David Bishop asked about new loan origination yields.

A: Derek Shelnutt and Heath Fountain said average was just over 8% in Q3, coming down from peaks.

Q: David Bishop asked about fee income level moving forward.

A: Heath Fountain said comfortable with current level despite mortgage challenges and inventory issues