Colony Bankcorp, Inc. Q2 FY2025 earnings call

• Improved financial performance with core earnings, net interest income, and noninterest income. - Loan growth of 15% annualized in Q2, with a healthy pipeline but expected moderation in H2. - Net interest margin at 3.12%, expected to increase in H2 though softer than Q2. - Noninterest income improved QoQ, with a priority to enhance performance across business lines. - Credit quality stable, with nonperforming assets and criticized/classified loans improving. - Experienced seasonal deposit runoff in Q2, but core deposits up YOY. - Added Rex Rutledge as Chattanooga Market President and Kitty Griffith as commercial banker in Chattanooga MSA. - Celebrated 50th anniversary by ringing the NYSE opening bell. - Announced merger with TC Bancshares, strategic and cultural fit, expected to enhance earnings power and balance sheet strength.

Loan growth: Delivered 15% annualized loan growth in Q2, with loans held for investment increasing $72.3 million; expected to moderate to 10%-12% in H2. Net interest margin: Increased to 3.12% in Q2, expected to continue increasing but softer in H2. Noninterest income: Improved QoQ, particularly in mortgage and Marine/RV lending, with opportunity for further improvement. Credit quality: Stable, nonperforming assets and criticized/classified loans improved; net charge-offs increased slightly due to SBSL division. Deposits: Seasonally saw runoff in Q2, but core customer deposits up over $75M YOY. Merger: Announced with TC Bancshares, expected to be immediately accretive to EPS excluding one-time costs, close in Q4 2025, and convert core system early 2026.

• Loan growth expected to moderate to 10%-12% in the second half of the year. - Aim to maintain 1% or better ROA and move towards a 1.2% ROA. - Margin expected to increase in the second half of the year but with softer expansion than Q2. - Merger expected to close in Q4 2025, with core system conversion early 2026, and expected to be immediately accretive to EPS excluding one-time costs.

• Seasonal deposit runoff during Q2. - Variability in net charge-offs in the SBSL division. - Need for regulatory approvals for the merger with TC Bancshares. - Potential impact of short-term interest rate changes on cost of funds.

Q: Update on loan growth organic rate, deposit costs stability, and merger accretion.

A: Loan growth expected to be in the 10%-12% range for the second half of the year; deposit costs are flat barring action by the Fed; merger accretion due to timing and organic growth, with core system conversion expected in Q1 2026.

Q: Insight on loan portfolio health, especially in the SBA lending segment.

A: Nonperforming criticized and classified levels have decreased; SBA loans had older loans with lower initial rates affected by rate hikes, but premium revenue in that segment is strong.

Q: Additional color on loan repricing runway.

A: Still in a good position for asset repricing; new and renewed loans in Q2 had a weighted average rate of 7.78%, and there's still opportunity for improvement from the asset side even with potential rate cuts.