Colony Bankcorp (CBAN) 28 Apr 232023 Q1 Earnings call transcript

Hello, and a warm welcome to Colony Bank First Quarter 2023 Conference Call. My name is Candice, and I'll be your coordinator for today's call. [Operator Instructions].

I would now like to hand the conference over to, Derek Shelnutt, to begin. Derek, please go ahead.

Candice. Thanks,

these statements started Certain known like not differences this XXXX statements and limited be as get variations our go forward-looking prospects call and I such of flows, operations. prospective constituted disclosures. future of meaning investors of Act standard we forward-looking Current the today, any that Securities not we guarantees could but financial results statements Factors include, Act of are cause risks to are would to, unknown of but through could assets, that the Exchange Before and Securities the the XXXX. of condition, uncertainties. and within make involve cautioned businesses, other on performance, pandemics, are and Company's cash

also available reference. like our release earnings today, were filed please that both during yesterday, both which add and reference will to of for our so we those I call our quarterly presentation, investor would have

turn And Executive with that, I the call Heath Fountain. Officer, to Chief our over will

everyone, call this pleased results report solid unusual out today. what's a quarter. the for turned being to and environment to We're be Hi, on very

of of financial in industry Bank, and Valley a real industry. test received banking the test failures Signature strength the liquidity Following a Silicon really confidence and our of and

their deposit the customers had core team all franchises the majority the a did whole think the we that with in for As in and during ours. effort I work communicating I highlighted really disruption working thank during we and I like this time, banking our uncertain industry and quarter that value of our want passed the vast and test think that do extra to hard

Fed's end borrow the and quarter. We from Funding the overnight no Bank not Program have of borrowings outstanding at to Term had have we the

you the earnings on some run we'll and the our investor with Derek's going to and new “D” strength overview that. businesses. on our will quick liquidity share the and Copeland, we're and and operating liquidity highlight through of to in quarter and During update presentation, information then today our call, base then our an of a -- our going I'm deposit highlight to going give

good We uncertainty quarter, marketplace to stability see this earnings but excluding despite our we very From perspective, down operating last with our the were were see and in earnings quarter-over-quarter, in deposits that. the an items, earnings one-time did level were pleased quarter.

origination. the less weak is QX course shortest seasonally earn year fees, to interest period Of for the days mortgage and a of with and it's quarter

in-line to So, operating earnings we're pleased last with report quarter.

the the came in other on making improving there. as of quarters, D, operating the you and all quarter, division, this on Again, the of our significant process last strength which banking our mortgage highlights business. banking We're earnings core give businesses an couple will of our update of and focused profitability from our we're

quarter about slightly a remainder rate, this growth flat loan customer at demand, decrease would the be up to expect grew current but the of economic Loans and given or the outlook for we XX% year. annualized

growth expected outpaced earning as quarter-over-quarter increase to which the decline did due margin continuing in deposit Our the rates, yields. in asset our

given We in or the be rate to Xs and high expect to current low of Xs expect pressure that the remainder continue for forecast. XXXX margin interest

this held non-interest days mortgage. of non-interest guaranteed a remained Again, and less for seasonally and quarter. fairly seasonality the last other government to that we Mortgage decreases light compared is this the insurance our in this income the income due also quarter quarter. and was flat revenue to saw offset income Non-interest quarter level lending in us

throughout to we're that. non-interest income opportunities We the have so grow a about year, very see of lot excited

down were when related about down significant acquisition. areas one-time which severance quarter and the in operating saw to the from expenses $X.X improvement quarter termination you costs contract we and million SouthCrest costs was of this exclude last One $XXX,XXX

to were see glad we So, that.

level shares to given were levels better assets management, it's any the We as in buy the strong classified to we building attractive economy, certainly right recent shares did back remained think not we quality be environment uncertainty uncertainty the is very just in this be criticized in just our of remain think charge-offs. buying regulatory failures, the and following Asset a now. terms capital steady capital And the a then but quarter. bank net this time

So a up a end year. a sets rate to well to good includes this X% the to which our get ROA it run the all, all us first focus by year, in achieve quarter, goals of

So, over the now Accounting go it detail. going to over to turn Derek financials Chief to Officer our I'm more in Shelnutt,

Heath. Thanks,

like about We've First, some provide deposits. liquidity information a of our added presentation slides information on number our I'd liquidity cover in you more our deposit base. to and to with investor and

terms our in in Starting base total accounts. but some their out We're interest-bearing are environment our higher deposit as on customer expect accounts. slide customers rate growing interest might [DBA] we seeing from to we you our on accounts a XX, additional accounts of information shift lay balances (ph)

South On that strongest our with George footprint. can are footprint deposits see you spread the our deposit base XX, in our being slide throughout legacy

type. our a customers On deposit with breakdown we've business slide XX, industry by provided you of

banks highlight we that nature recently, of challenges the with with diversified was are. it how have customers the just business concentrated thought our liquidity important struggled of Given some the deposits to

inflow from some [ICS] can some of general in uninsured see some you decrease maximize to their quarter. did insurance. restructuring of accounts slide the this show you as FDIC we products On our coverage of And in our just we uninsured (ph) also deposits to our customers trends deposits. a see, and we XX, And saw

deposits, deposits municipalities collateralized. we Overall, really have low of their our exclude adjusted uninsured a level who have which would

AOCI, losses securities to We is sheet on all uninsured our also to which our stress have sufficient by I'd highlighted our as address adjusted unrealized a off-balance deposits XX, situation. portfolio. cover of slide liquidity driven in liquidity like in

million $XX quarter. to from went this million quarter AOCI last about Our $XX

XX portfolio, rate credit our driving it's XX we investment lot breakdown that give interest are a Slide through of in a of and those exposure the have portfolio, you our don't losses. the changes

continue yields and and decreasing quarter to life see the in quarter up back our see the average creeping second their durations last year. from and we of We third also peaks

quarter flat $X.XX There's was basis, rates last significant EPS opportunity and this to come recover book to tangible quarter. to as stabilize from from or And last mentioned On $X.XX quarter as we and an Heath earnings value, at earnings was share $X.XX here. perspective, see earlier, quarter. down per this operating compared down an

from was that half quarter to being with little quarter. $XXX,XXX last the income Our net interest over due down shorter about

the at increase interest-bearing earning saw X.XX% going last the to Our was the in And at the of compared X.XX%. X.XX% This around end the looks of you quarter was quarter cost of interest-bearing liabilities. our funds to quarter XX interest-bearing compared whole around our idea was the our basis deposits yield increased end quarter. whole for to like the forward, asset by for basis of an of X.XX% that points And point cost quarter. X.XX% exceeded XX give from what we to

resulted by to in-line capital requirement is driven loan one-time to the did commitment. CECL the We for a the primarily $X.X primarily charge our adopt first was in provision for last loan in million which losses $XXX,XXX, and related during quarter and growth. with for Our unfunded to quarter CECL that being quarter reserve

detail quarter. mentioned, we the discuss of as strong our was the saw will compared Heath was to last D, flat decrease traditionally enter towards last end later, season. income as As and stable more in as non-interest our to significant Mortgage compared in a rates home-buying increases and we quarter income spring the quarter, pipeline

to our expenses down quarterly down per run We we and end $XX of quarter want the are by focused to rate operating drive expenses on year. the million driving operating of

focus around one-time outlook leverage outlook. staffing $XX.X This making given our We million. and for growth internally team's we that quarter, remain appropriate ensure excluding our and shifted adjustments levels our are our were lower to for charges, technology current we

banking From second those and the through particularly and quarter, our in perspective, down already back mortgage numbers implemented in a we'll we're office. in significantly those We've to mortgage, in in continue of the division and come attrition through in both quarter, force. FTE see this reductions reduction down some staffing both

compensation when expense severance expenses. quarter-over-quarter you flat exclude was Our

offset Of on FTE down see see course in our the annual hold. the decreases were increases take reductions those basis, by should compensation first these that we number first that occur in staffing quarter, come in some as we of And a quarter. should go-forward

Leveraging technology to part always has of profitability. path our been a

opportunity continue for lower system expense make we during we savings into resulted would outlook contract portion by realized in our However, grow core adjustments and and of we'll the current given some we contract our and to but see growth, of adding our believe annual renewed the we the capacity, quarter, core thought million down. base come for expenses you about that Also in to to that quarter. we continue or first this to a other $X the we

our to like to plans. hand I'd D, Now, it over business discuss to

Thanks, Derek.

to side had me bank. let I'd about growth. like the the First, of loans. the touch a on talk growth another quarter We commercial great on loan loan of little bit

for it significantly mentioned, on year. rate was grew than XX% That's about last Heath quarter. lower annualized As an the

the and to loans we slightly for to continue see this remainder expect of We up flat year. down year, the to slow likely stays will

you'll Alabama loan growth we On strong page Atlanta the loan And breakdown had see in a you'll both by growth and the different XX, see different markets. of that markets. the

breakdown of the of lot has a quarter institutions I further On have investors information that you office slide lot there, thought overall give out looks what we gotten of and One down a our on an sector, office are and financial we loan attention other which broke bit area portfolio. is XX, additional this portfolio XX, the slide of our I'd on line. little a from that

any our is office doing storeys. in ours, lot portfolio offices office we at buildings, of play. of XX% We high-rise three that Over and offices sector, do total of look and the our a the that, really have is you we single-storey not other half over loan have the really don't no if do. portfolio of institutions Roughly

are the portion of to provided, But they to of very values good zero As this our most you had of the sector and the can have those, in the see in one low X% is telling see only office about at the of is quarter, in We strong loan stats the values. book both and can past information we in as of you portfolio loan dues our probably sector. feel we non-recourse. end

now grow quarter-over-quarter. I'll deposits. X% to slightly Deposits did switch

we the for If broker virtually will quarter flat you deposits, exclude well. as

the majority by you at very very give breakdown Georgia stable that's for the If of historic portfolio, think very, our we’ll story a deposit a is is are of XX, a I base. slide you telling which South look And deposits rural markets us very that in market. much

opportunity the We we have to and in higher tremendous our markets for in long-term growth that growth a look opportunity. deposit forward

commercial all of been to have at the moved the of the banker on events heavily that for and the and beginning side, are prior XXXX. focused On really our place deposits this year incentives year took

We these rolled and well, are have incentive out that place as in focused have plans retail implemented also the the year. been incentive beginning and of plans since on deposits

added and us Now, feel markets that be the acquisition very we in side can this very help can in in we we talent hope have deposits on we sales treasury, of and competitive the pick-up there. recently

couple a business. of now of I'll to our switch lines

business small the loans. of about in variable quarter just We reminder, and are a plus there, those two talk are general type and I'll a lending. in prime they the rates good specialty as had First, and

us will they rate to So be they do. making rates in loans move as today's for are environment, as good

rates, eight. at slide You that consistently though good production. there This has see pressure And business, with time, imagine that been you we on been group can the same profitable. those can has had but on

excess loans other In mentioned lending adding I have addition are of exploring in specialty just portfolio by and within dollar we that, yields small would SBSL those what previously. groups other to opportunities and the

the during first side, the a we mortgage quarter. had shift On significant

have loans. profitability more March to that for from at That March March. in most was moved were January there. wanted you apparent to closed have as February so did out and -- to heavily And and we things of year-end. Just moved look we market that We it, in the month some the in secondary we we back

up moving in in needed already Slide that to expenses nine, the expenses show and done. will actions mortgage addition in to we well. also but have shows additional to the reduced as March, that April had, be We production back we the in office second first reduced took profitability quarter in quarter

profitability. which good positive, we were and March, we now excess is much We are where locks of turn in seeing to production April, very good a in

We be environment of the are to expect this we in remainder stay the the rate to year, profitable be mortgage for we assuming today. that

touch the markets new of me Let business. a and couple other on start-up

is If on seven, there's you that a there. slide information look of different lot

I to that, this those think to is over the come thing the each note turn one continue that year, in losses key profitability quarter in remainder businesses the is of every one to should peaked and businesses. and of they fourth down and those in

in making I'll first Alabama. we're good team touch on with Alabama, progress the

shifting lending CRE Our focused of first pipeline We in double Alabama which over we beginning of done at million and have more team the generation where good deposit and we closed at with well. a the course about C&I almost loans to as $XX have were our is this quarter. still

really had quarter in this we in operation. quarter The the RV, with million this Marine full have is closed about out-standings. that $X the group We first

on in We at which adding that is April. To-date, have -- $X business continue with we really had of ramp-up are this roughly not so and about see the a million the strong significantly portfolio. returns another production we've to put scores up in positive. had go of today beginning today, this credit is enough is this there we've business. thing one should $X The Expenses strong great million, through we this

get And add so we'll profitability. just more should we and be it as assets, more

fees. the great this it to it class asset the is in us to and but positive future long-term generation to and us we if for a is originate gives great another sell a the opportunity addition, over portfolios also In want

on I merchant And touch services. team want merchant having The then lastly, good is to success.

have really month, the calling customers this As on every a and profitability. main bankers consistently referrals is factor increasing, business growing in our volumes continue lead grow out, product deposits great and is our our found to for to for are which

well. We see at continue for this as expect be profitability a good very to trajectory to XXXX and during

over I'll With turn that, to it back Heath. you,

Thanks, D. That today. for prepared our comments up wraps

any And to so with Candice, call up on line the we have. open questions might that, I'll for

Instructions]. Thank you. [Operator

Group. from line the David our comes So, question first Hovde of Bishop of

is line go ahead. open. Your Please now

Yes. gentlemen. Good morning,

Good morning.

I or D the am disclosure the I curious, in on appreciate term, Heath start-ups.

see sort by drag just As of like pre-tax may and of peaked. you can see those Do overall this even end potentially that you noted, expense breaking profitability have looks maybe where you provide it profitability or the term trending the year, year profit? the you throughout the

to the those loan expect all given to close do a profitable growth the there. we be run-rate basis. pretty Alabama is Yes, of be end by on the year

end or the see then we and quarter next, should of that others year. the So, this towards the

So, year-end. we do to expect by to those profitability get

Yes.

any the loans just in in difference year. All of loans, this similar the And nature there's profitable those those making them are of the if within be the tenor core to of Alabama. C&I should loans or the types of ones markets, curious your markets, those in you're sort

talking type the things do. Alabama. a that would you’re if they’re very It's we exact I customer. Atlanta and same absolutely, similar Yes, say about

be but other of they slightly banking type in than smaller it's, larger markets. Some not big, exactly the size customer are our them but we're our in may same

worry least side? at eliminated addressed banking office, Got back won't meat that's that some on the it. excess impacting you've just about and of of already Do you headcount FTE it's production sounds unit. or it And into mostly impact it curious, of production then mortgage the such the sort revenues, some -- the been think like cutting the in you

Yeah.

great production be just capacity base match in built that won't that, needed to on hard to out, side. the make the folks impact while worked going -- the and a needed had bring on just had the really wasn't team, on team and we expectation Our to office to back we be to is as origination go expense so excess but going production. We've it we we that for sure and wasn't got

mortgage lot of real you of good activity we're Georgia, still housing comes the we in Savannah, good So, production Augusta and and that from have limited markets very active but inventory a is our and a good in, markets very amount origination challenge have markets. and for outlook those Middle

lot rates we've a And a activity there. leveling so, with out seen more bit, little

see being you years, attrition some Got it. sounds re-segment And with concentration say still the that probably to pretty the you'll then, construction it D, see the ratio Heath, loan relatively it pretty -- is like in down? growth preamble there safe still that through got from be the move Still there, flat. a to cautious to

we're we think I Well, out.

Let's call course attrition loans we there the lot lot would will at today's on in on side. amortization I but of those, of get rates. happening. mean, for payoffs of those We'll see refinancing a CRE to but not higher selective been historic while continue a a be maybe some environment, and are have

same a more but So, that we that selective I in loans generate time, I have we be new we'll ton of attrition, at the think portfolio. think the will don't on

what there made on and it that the And doing. Savannah, those just having back we're that of cycle Dave, housing they're builders that's they're through these little kind seeing the seeing, back on turning Georgia, We're and the bit of South Augusta, starts finance the pull even the no a fact business Atlanta. amount still been think we the also are construction remember I time. problems last through builders they inventory despite selling, side, homebuilder Middle, like mortgage, have pulling have and

we're as back well. that pull sector seeing So,

there, of balanced there in down inventory being not you with the markets last of are been signs Yes. if I demand, terms to sure. guys any well haven't versus overbuilding through crisis the pretty time, you seeing

real very is in a these are and time markets. very happening. see still are these really that turn still don't low still all net seeing There population growth of and any We level markets shortage, fast just inventory overbuilding

of So, deterioration a big thing key go the which lots sign it's at that lot that got that's own there's the to really of mean, you've environment. builders we inventory the becomes of inventory. a is today's the is the lack that their lot any are thing where biggest in into bad to having as of out this point. not And because where do I to lot

in I'll -- Got hop queue. it. back Thanks. the hop into

you. Thank

you. Thank

Our of Feddie the next Scott. Strickland Janney from comes line Montgomery of question

now Please ahead. open. is line Your go

Hi, good morning.

Feddie. morning, Good

Just the is wondering deposit retention. if like you think Georgia I could talk and deposit you between South versus about front, sounds right? that kind peers help that on balance mean costs of the you it deposit

we've A less a it's also of probably environment it an difference of from and but makes up, been it moving makes on bit a have or competition earning that, you with depositor markets things difference size the we're in to less And moves larger where than big couple smaller, so $XXX,XXX is little that nothing when the on markets. it's are of on rates and $X,XXX. deposits X% the your that average the that were X% in level

we're same -- but drastically balances, this and up balance see those at to doing good we're goes terms in single at our base is the day, up are something need fair balance time. as see up. job to continue are the more just I pretty and -- so, up, move we're large can that's stay expense not and deposit as rates obviously that deposit our we just you trying see from balancing to of rates at to number best every a can in given the but customers, the a point, it don't move of interest And like we that our you and helpful, but freight rates those but that's manage the time on we said deposit level, have going consumer the rates that customers, as to this move continue going we paying for And blowing think to

makes That cash flows. you us gears, Thanks, Heath. securities sense. remind can And the switching of

what over get of next months out unwind Just months, the peg trying XX incremental might XX tangible figuring you out AOCI book that? to and

maybe prospects going just the a I'm say, our some Derek, stock, going valuation tangible in that's think when but to is let, about through upside roll to I'll for book you value and significant. of time, give numbers, back the we amount it that

and mentioned those. left with are you'll that's that that really lot we so, for have up And the and I on course slides, that moving And seeing we're that during just rolling we're on a time, maturities, there's our the opportunity of rates think of too. as as curve we the see

some so, there value a book think lot opportunity do to there's accretion. cash of And flow Derek, us good numbers? for see, want give you I a of to And, the bit of

Yes.

we're now quarter interest right right that million So, around $XX with plus minus. mark principal maturities, per or and

through going we're much I pretty or which significantly, pass we're rates move could where be pretty especially interest portfolio, our investments. to -- up extend rate so And given that's think that's -- environment to down on interest or this shorten going unless our at

Got it. Thanks. helpful. That's

helpful, hope I that’s Feddie?

from that. I've super but for just using question that's the window? thinking there the realm you is a is now it banks, the what same or more penalty or pre-payment Funding have know just FHLB consider do last tap helpful. in from know just it, about it up of the of heard Thank one didn't moved I view from Term other rates where and Bank guys where discount less to kind you considering you situation you I No, kind Program, me, as And

it they see presume coming the I there first -- larger didn't FHLB Term it the at that banks between public and Funding that way. time think investor you spread you utilize was with or regulators -- clear and concern the that you if first getting you from And, then that rolled is -- the Program available had was was out, very that though, that stigma to I from Bank from made are when it and some Loan all significant. regional Federal related Home the hit it Bank it advances, had was when So,

have home And as nice, was. so still as And ability out -- no to where is at but bank you being flexibility potentially that differential, you're outlet confidence since of The things think time course repay looking as without the loan it I large damaged. banking settled any isn't away provide the having penalty we're in of any just one industry. positive but about news new public environment is this story to from mentioned, news

it's now so, probably just And given I especially not worth think it that differential.

I think a we that, situation look our more at pledged of more of it at you that. it some we at backup under we a there. securities does -- as in have a significantly backup like more But looked water and because look we have and to flexibility give

right there. are we others as be don't that's but Just outlier look what doing, to situation an we evolving at want an now,

Makes it. sense questions. taking my to Thanks Got me. for

Thank you.

next Our question Davidson. of Kevin comes line of D.A. from the Fitzsimmons

now is go Please ahead. line Your open.

on actually for morning good is [Christian] (ph) Kevin. gentlemen. This Hi,

morning. Good

or up. you I this on mentioned So, that slightly loan know flat might just growth, guys year be

sort So, any pullback, areas loan a just a you're that. more certain are definitely specific wondering being there slow-down I on understand in has if but I'm seen the pipeline? mortgage of experiencing

it’s looks good. still Yes, on I'll really our I think that, pipeline touch Christian,

the and I shift environment. of the an that appetite in been of some today's was a side just has think year some has a for CRE where our side CRE it lot the growth of lot in been last intentional shift so of reducing

that relationships on that kind And deposits can with businesses of focus making so, with be we with actually ancillary would that reducing sure really our lines and and loans get of selling other it full business more them. we

So it's really that. more about

of we next see in think a tick-up for -- or crowd, the building season. it's month two because just slight homebuilder may the I the

watch that, slowing down more just we'll reality but the the is CRE I side. it's think So, on

looked Got any And yields provide you loan re-pricing, then on the it. just color how replaced and going into just if wondering quarter? on Thank new the you. can loan

do can we Yes, that.

X%, I quarter, was weighted a just over it put under think I X%. think yield a last little quarter, little average this on that, and our

So, nicely. we're up that move seeing

And continue today. to so, are move that given continue yield get rates and we think pickups we where nice to higher in will

lower lead loan And little -- has doing able and they're as now to we're so, demands all times and and the growth we're loan amount that I is longer looking some as our rates to we probably other being of a is get doing think get seeing portfolio what the need having. our competition of than slower to we're

And you. from me. one Thank one Great. final just

as So, for that? of should slows, this color have kind provision know was if additional any that wondering I'm that, just demand going wondering forward. the think just how on we flat I about you quarter

Yes.

in with increases negative might mean, not we at surprised given in there come some provisions in getting but we those I loan forward coming to see wouldn't CECL provisions I as think that looking go coming think, nothing major not probably see that would provisions we looking as and down this this much factors probably is there see will -- quarters. be now, down charge-offs see out CECL of slight I be will though very even we wasn't taking economic uncertainty growth much look if slow just might some, environment, under much that forward a And this net the just that down, a some of as forecast.

Thank you your Great. for time.

Thank you.

We David Hovde Bishop follow-up Group. have a of question now from

now Your Please ahead. go line open. is

increase just weighted Maybe deposits? the in of well. on and maybe deposit the question tender broker A terms as of on details cost the those deposits, there in duration Yes, average down some thanks. drilling portfolio broker quick

look was looked a if a there more the But, brokered of to and happening opportunity the will than end given liquidity we we hit some make we've let get during have quarter need of probably got relative we sure quarter but it. Derek just of just what Yes, broker of lot I little otherwise I'll on say, deposits specifics, a to ensure still level very ratios room fine, a we liquidity would. or lot low

We overall a in bit. market see brokered. very come low are starting And to a little you have total that

versus broker markets we there large markets as bank was, And those after so, get it say can failures. customer what our is differential the not as between right in

you that to those we'll what out. to So, talk Derek, want us? continue about weigh cost

Yes.

out brought year have and more and had or tenor terms cost. back cost put we they've of been so, has we've those kind of or rolled-off there, shorter a or year deposits than broker So, less term those more the recently some in been of into What rolling-off. on has so that in, staggered last we've at terms been lower different

broker that just are kind there. So, increase minus we overall has of would cost or we've And plus give you to some range. been X% somewhere putting what rates been see on the on the indication

where to especially cost that year to, we roll expect took as to we great. that's see these were out and we last brokers doing some of lower be which off, So, moving those starting

Okay. Got it. Thank you.

Dave. Thanks,

additional at the got I've remarks. over questions back conference to for time. this Heath I'll Fountain, hand waiting closing no

Well, I you just call. want support appreciate for appreciate being We on on day. and Bankcorp, today. the great being a your of to we call Colony thank everyone you. the Have Thank

ahead. joining. a great call. this gentlemen, day Thank for and concludes Have Ladies you today's

You may line. disconnect now your