Colony Bankcorp (CBAN) 26 Oct 232023 Q3 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to Colony Bank 3 quarter 2023 Conference Call. [Operator Instructions] This call is being recorded today, October 26, 2023. I would now like to turn the conference over to Derek Shelnutt, Chief Financial Officer. Please go ahead.

Thanks, Sergio.

Before we get started, I would like to go through our standard disclosures. Act on the could Act meaning and Securities make forward-looking constituted of we the within statements of Exchange statements this be call as XXXX Certain XXXX. of the Securities not and investors prospective involve any statements performance cautioned Current guarantees unknown and future risks are of and such that forward-looking are uncertainty. known but and operations. I cash limited would will Chief today, quarterly those reference both other of the Executive Officer, will variations turn Factors cause differences our these pandemic add and earnings filed I to that please like that, presentation, we release were prospects of include, Heath have assets, also to, Fountain. yesterday, the flows, with so our businesses, that which could call results our call both condition, of but are to reference. And not to available our financial company's investor over during

on your with Thanks, for to everyone Derek. today being we environment. as and for We're navigate pleased call want Colony. continue challenging for changing to I our third quarter in economic the and the results thank interest

last to continue the into the to and going the over in quarters to more to increased quarter share come. detail over initiatives past to I'm on of we and been as from go of on many earnings activity Our over strategic see the we've quarters, results. who's going Derek, several the the an overview then to it working begin on work we'll results hand quarter

relationships loans and diligently increased on we customer to price the for navigate way quarter the net our side. we the deposit income as interest Our manage continue

earlier feel put interest We place noninterest full our which positively in especially of in to hedging lines division, as our are to been a and the related our focused well on remain economic diversify increases quarter-over-quarter, continue make fees. such saw less rate our of strategies total in charges and also our the it slowdown benefited changes staffing income that complementary current there our driven sources, as increases deposit to business and impact glad order QX rate important We've complementary has of breakeven certainly of by mix our We're newer share it's to expense. XX% some and and as and We we environments. There's the there. growing we some represents in revenue. and increased with about lines those mortgage sensitive that to income environment, noninterest our seen in to achieve in business product

other products the innovation is allow will impacts data. future. This technology this API and the our and over will use us from seeing went integrate we're to is customers Our products really our to a Noninterest our strategies, to manage efforts. warehouse data impact past long-term the growth expenses, -- and infrastructure order been of of the and worked now our to we're past proud allow platforms will in new Fintech have step and serve our and benefit and we forward also how our initiatives look expenses to technology those expense and and we mindful though a big And on with we that that that do to able declined profitability. alongside the long-term market even us in noninterest really strategy and we're with our of Teams customers, in the projections, our quarter. complementary to with reduce even and invest hard enhance how going better our expenses, continue core. live million We we've moderate at in quarters operations quarter, think expense positive It we be more several efforts. to last $X.X

We strategy through team have enhance while strategic also where hires, seen to we for it long-term look will levels. our overall add even staffing continue to decreases to opportunities in our

nonperforming decrease strong. loans the from remained saw in prior quality Asset quarter. We a

this primarily SBA rate due were some last up of of We and not course, that Our the portfolio And up a there. our this charged our was SBA loans. net portion provision from seeing division charge-offs quarter, our is loans loan the primarily guarantee variable weakness was government were few mentioned where quarter that's SBSL to we off.

but small seen a an impacted where a our managing good quickly increases in the see of loans This charge-offs and payments. we most area team really, forward, their And they've job number those. is was of so it doing small going may some is

rate Our previous annualized of the X%. quarter marine came about RV the this loan summer from season, from of lot growth buying the consumer, an A during particularly season. to growth slowed

our expect and quarters. this the loan to We that for our portfolio growth overall next few for portfolio to slow continue

in from dip slight third quarter. we've historically, little last Our seen total a deposits And were the quarter. down a

diversified. base deposit very Our is

as the we both and as property to agricultural see We tax as down producers in. base from presentation. our spend the have some increase there. rural in generally agriculture during we that come in in see investor municipalities those fourth as they activity do seasonality on year a the in expect the see And customer we slide municipalities the sell of from But would segments payments quarter, and crops

Our up year total up the deposits are year. for for despite for whole being about the X% they're still quarter, whole down the

overall funds point. see flat has was cost basis actually continue The and deposits environment X margin but repricing Our slowed, of the increased increase. to competitive, will of remains quarter-over-quarter, our we

X we X. we compression for next the our potential XX over still of see to basis quarter points shows flat, another or modeling margin of could While stayed

the that, So detail. to in to Derek with to over I'm turn going little a more it go financials over

and noninterest during by the income Thanks, Interest as income pricing our quarter. costs. $XXX,XXX we declined net I'll $XXX,XXX noninterest prior income increased focused begin $XXX,XXX, saw for the And we increased increased to loan Heath. the and quarter when compare remain income with we $XXX,XXX. on quarter-over-quarter. about relative Net earnings our increased to quarter, funding interest expense

see the we had helped existing also on I did talk the funding. With quarter were mix QX, we deposits. from us compared slowed, of consumer minute here interest product about we areas that increase increase with income marine noninterest $XXX,XXX the that during environment. the years we and both also when competition about we the seen $XXX,XXX expense by we increase rate RV the see the did and slowing in helped see the division several in on quarter loans, SBSL that last end on that have about and the some The quarter. a also will the mix to Colony expense income, of and of growth quarter, While for the was borrowing. in industry is of some quarter discuss down All is due as move recent borrowing during service a income division saw the merchant little. Interest component how buying increased Wealth they that year a did increase income then on do The positive the lending in end some RV and and income of also increase $XX,XXX FHLB mentioned, different has still the noninterest Average remains increased Insurance loans components XX on increased strong, noninterest we've $XX,XXX I from noninterest the of items. of saw the to had changes balances, deposit our quarter to slow noninterest through from division as related balances Heath place the at into which in has and and we $XX,XXX recently. our Where see We season. and hedging in pricing show over income buying and deposits the as also deposits for in improvement expect $XXX,XXX $XXX,XXX which against with a continue interchange revenue Advisors net swaps was as And the and growth presentation, quarter. as Colony Slide during an a FHLB summer during onetime on to we has especially marine we've and full carry our changed end in on From And the relationship other season. quarters. fees services investor and in quarter. XX increased we deposit division the strategy some out a decrease repricing the Mortgage charges renew, of put of which rate representation about initial income traditional in increased income, rates recent into side hedge quarter

level next decline the in really, even forward, and areas. With that on we in we efficiency of have going slightly And noninterest expect result or some noninterest for flat this we the expenses of efforts. year. of quite focused as expenses kind The on and expense, managing see a So increase. down noninterest income throughout don't operation quarter-over-quarter been quarter remaining same those

third that to assets decline net our quarter basis. an on quarter fourth with of this being XXXX. Our we've since And operating year NIE X.XX% X.XX% at number seen was in the

our is these about on loans feel prior initiative. overall by expenses expense from expected slowdown there. So in call, credit million million the the last up a loans there. our portfolio. from Total million, We portion as XX%, excluding decreased a number charge-offs net focused the see that On of $XX.XXX million expenses Total environment. Provision remain $XX.X improvement and some seeing loans $XX.XXX the of the and which Net mentioned on feel managing rate quarter. of less quality run a continue quarter the were reduction and the charge-offs possibility loans, a and strategy the severance we expenses loan about around $XXX,XXX. Nonperforming increased quarter's $XXX,XXX, totaled quarter-over-quarter were limited quarter which overall align the of in comfortable we to good were final still quarter $XXX,XXX SBA noninterest of and in force is $X million, in previous current guaranteed in with totaled from for lot nongovernment quarter. some with growth $XX charge-offs to for about than a we still our

in loans lot consumer from the a the came Marine mentioned, previously we the As division. RV growth of

of payments to some deposits Heath We And expect the tax to million dip see in as a back, third of as in few over of Ag portion seasonality earlier. agricultural to as deposits and deposits deposits pre-COVID, quarters. Total our the come muni well by This small run are as deposits, the type as municipal the decreased and type the of looking these then in is we slow particularly continue related historically, government fourth rural sold during the some $XX a quarter as especially property quarter. increases growth kind But mentioned deposits, small quarter loan and our deposits. agricultural next off. overall crops

has Our relative don't margins any in the new during of FHLB forward. short-term There this yet, at the remain think of and a the advance, are and robust, and see pricing look those margin. was seen our on flat that million going earning out so those current more many being increases kept our cost towards the see and come costs we remains of borrowings as to fourth before this essentially on necessarily start a liability quarter. the funding more cause any expectation quarter-over-quarter. quarter, factors quarter. Taking of We've This outlined margin end This I was led the municipal we're repaid renewals increases with Slide we a we in various our asset decline increases. a and woods in loans to to it during costs funds or that be the some aligned we the stability expect to increased sources disciplined the presentation. could liquidity of increase. Overall, we and liquidity little to $XX really XX funds

primarily the in of throughout Reserve discount liquidity from window available. $X.X over our the any funds and balance sheet haven't investments, and other have have the didn't growth. Fed to Federal any our sources line. With of billion activity fund outstanding year. flow the borrowings on did We've in of the or quarter loan at seen portfolio we liquidity cash a elsewhere We the end total any securities We and not deployed have borrowings lot

an achieve of continue from earnings then market and to We a portfolio restructuring conditions possibility to securities to evaluate position both and better funds These could portfolio some there redeploying the of the in redeployed those the ALM some proceeds. be and assess perspective.

a comment we as and overall quarter. up TEFRA XX% quarters. was as tax And municipals, We've last greater XX% couple increase our tax any the increase capital back There of XX% of our earnings securities best ETR. proceeds. One market taxes which understanding important quarterly of about conditions, type and or that's free around to the for of by our in that of use evaluating to rate prior of driven really portion loss QX. is This earn from a at to just of funds. consider the little a result to factors an the moved is been close for the increased portfolio, erode a disallowance No cost related in years. and the restructure some then that a those to look not part our then of under reasonable than

about So just that to going related we I that increase that and on it to now as banking a XX% of TEFRA forward, our discuss to will over business XX% D range slightly to we see line. turn disallowance. And expect

Thanks, Derek.

First, I touch to of on a the banking things the side on few house. want

loan Heath slow. we growth are Derek As and mentioned, seeing

are over to that's can generally the We result of to estate in well market slowing that just real at quarters. on maintain costs the in all little to sure that marketplace. continue we increase borrowing with a volume maintain pricing the the proper expect as very the commercial today's margin in demand as make -- the several there's Really, a seeing We side. next of more really

really of any We standards our have throughout underwriting been consistent the pretty We've there. cycle. changed not

and point we as down. The Derek are it's not really slow from marine loans my is being and built. is up construction would residential guess credit-driven a RV of are loan to as consumer be funding Heath the an seeing I end mentioned well So there and up -- and slowdown coming both houses more pricing those growth continuing of as environment

of number We efforts have income implemented fee to increase. a a of see number

well first consumer Some customers. going during the would on some -- for that the on the side see benefit benefit well fees but quarter, the as expect greater side and this fourth a forward. some we as to as business did see treasury of We quarter

think be I So that for positive us going forward. should a

more a us of have part reduced producers We are regional overall of back to but having have that significant side. the new some strong really on We've been relationships winning add of business team expense have strong from in success our actually the initiatives, treasury that banks through larger, we able couple and come have customers. opportunities given front get in good to

proud are more lot are as have in has the talk our of. and which business And sales of on a And a -- businesses. bit also addition it's branches relationships. to helped our us progress service that but very activity, Slide little the more merchant X, this we made and have bankers focused referral with insurance that, you in also in are on helped with seen us, drive revenue Our on

are our proactively with loan staying reviewing our as the of on We're touch our any focused overall where credit But stand weaknesses also major of the bankers addressing that we relationships on still from confident all earlier, loan he in performance stated feel we portfolio. customers. -- the business about and received. Our

focus to growth on can have this there see lines getting we on profitable. Slide continued profitability Marine As quarter. with RV the start-up you reached X, our has

a merchant monthly Our weekly basis. to customers to we progress great as daily and close very new and continuing is team make have is additions on there

looks that trajectory So forward. good going

is has to on either where deposits, driven loans, Alabama expenses growth limited the increasing the more for to company. profitability making continue going or through great is overall we be on environment the of In been as progress the addition, course, there team diligently manage

in investment, If on we you annualized on improved our improvement a $X look of the at these the that from investment million of height startups. height of $XXX,XXX an basis have quarterly

all business progress continued do and take on want to see to mortgage on SPSO. expect the and of touch minute We performance a to learns. I these

First, mortgage. on from an operational perspective

to this We during breakeven focus environment. continue on

have on of our be today's for loss with the small earlier, did few a in touched to removed we to demand. our we also staffing current changed for actively we quarter, offerings customers and As line but several evaluate levels adjusting works with are interest the We've product and a both Pricing what continually in as elevated the bank. rates environment important. for is Derek

are at the product the on construction making Our market. Pretty much products of point. loans prices, the mainly this and pricing sure market that be secondary can today firm eliminated focus the we sold the is portfolio to and secondary

strong very success to long-term of where of those long-term think mortgage to We community need need a our relationships, exception to care the Colony bank. customer take important customers. With we we as is

environment actively overall are it there's just very committed are we drag to to in performance. sure an So we managing make today's not on

on We're division. X(a) loans. smaller the a working dollar system SBSL and Our for building implementing

hope will in during we'll the some really the in quarter into of generation fourth but to be year, that, will Our quarter, place positives from be see revenue that good we able some and first fourth quarter, next should is be see that. starting we the

loan slowing the seen demand. have We larger from

rates floating As slowed FPSL imagine, demand. portfolio, with go with it you can has that the the

prior standpoint as we from criticized about loans prior is smaller as last from moving X(a) earlier, of to about decrease And had talked we well. focus as quarter. that earlier, stated smaller those a our classified few quarter a as well. loans decrease the charge-off talked was SBSL, in had a nonperforming lines we in So it did from in we part and that in SBSL, loans a see, quarter We the and

good we pipeline. seeing from So into are quarter-over-quarter of there kind negatively think the what I there improvement a was a

Heath. over there and hand I'll So it stop to back

And our remarks. Appreciate to wraps questions. really that, D. with Sergio we'll up the line open those up for call That on comments. prepared Thanks,

[Operator Strickland from Instructions] Janney Your question comes from Scott. Feddie first Montgomery

raising with are Just deposits deposits see the wanted much of among And different today. cost how What new parts at? footprint? start on to your of variation do new incremental coming you

good Yes, question. that's a

of I think quarter. the that's course changed the over

But in bring beginning I side. quarter environment deposit the prior and the little in less bring the is Xs to got deposits were towards of in to we're of think I pressure competitive be quarter, needing end on the we a on the new probably we a the quarter. business today little in would from the compared seeing and less the say bit low high into business new Xs moved in to to the as

So we little bit the up of to end a area bring have seen the that of move at quarter, we towards but are money. that's in new the sort

along there's XX% on little rise And betas? a near peak deposit we the today. that Understood. deposits? think about hiking Could less mid-XXs appear you lines, of that the see we you Or the as those think you're I of total more same cycle-to-date how on be bit as just thinking do potentially, end into deposit or around the I are to picked cycle, catch-up costs? near

No.

I see rise. going continuing continue the unknown may I to we're is or see mean Fed that do. the think we to there what not may right to

out level longer this somewhere higher around for into now. we Assuming

get see if continue see increases, rates I to stabilize. we think going up that we're to that we some. move could But

cycle the quarter, the So beta, the up we're guess, hard high as to predict, towards -- look date. to look the end but we we we're is when of at XXs the I to

they be. I the to stabilize, see where more that And just if think we creep of up getting rates a so will catch-up to need little rates

year? it little good technology should mid-single something an maybe know some term trying of much expenses some and we new deck, the single initiatives, over rate Heath, see. over how the potentially expense about gears, we'll low the some near-term digits, But That expense of makes you Switching for about we come should we stay Just what sense. net-net, on of rise you a digits? I seems like or down just hires, 'XX, longer think expenses bit, course see about the information course the can to flat year? look there's in talk expect and terms Should investments, had you at growth talked

Yes, sure.

head so and really is And piece piece expense of biggest we've there. management there our being obviously, on the seen progress that, good count the radar,

the budgeting overall As manage lot we to in place our about that inflation into next expenses team our we on a improve have talked costs to our we to ways discussions, to relative current go and and and year continue we've and got that. find that manage

we'll some opportunity we a start a see point, think flat at they you'll increases. right? revenue. continue low because to have up to back see they then and expenses will going You'll I -- maintain if to the generate when out, single-digit type Except look

we focused down point, noninterest assets, mentioned which really operating to X.XX so little X And I on to a basis. actually, X at an think to we're on expense peaked drove that it over net under from average that Derek like

we'd And we so on there. there to improve side, are there continue lines adjust add mortgage can have an that we we some NIE to can to the -- immediate net assets. we if other But moving the like get right, to look consider as that on business revenue-generating of any we pickup to also pieces could

going improve side, business. assets. to add complementary obviously, but so our our noninterest are noninterest We with -- that those lines And NIE of to expense, in noninterest net

will we're will point, net going you It some us total creeping the a the think see improve. little little I and assets will but net bit. will but So it at NIE place improve bit improve then expenses, next up could continue environment, start where I expense can NIE to in it help that we on a some increase a point to year, at And side, think to mortgage to asset. that off get that level

we're that NIE So net that's focused really where on asset.

how thinking you that So of about I understand it. kind we're helps hope

question very last helpful. just And No, me. one that's for

potentially do year a Fed core a bit look you of time tailwind that look you you growth, to the of at deposits, deposit 'XX of over maybe and loan have the you back with over giving reducing pause. level to little on the assuming slow As replace some we a costs, think could brokered course the of

definitely We on Yes. mixture. want work to that get

to as at so on investment keep to mentioned, thing pay knock portfolio candidate we try doing growth borrowing all. be portfolio, high costs. flow restructure the the we as off that off can between short think look to as cost about that have funding. continue restructure. and some other look that we look they the at borrowing and that I the do we higher guess we opportunities to that's likely of something, that loan to Anything the opportunities for end, that, incremental slowing any costs Derek cash to we a kind And where opportunities And loan we so are we can proceeds obviously, the would could for out of with

David Your question comes Bishop Group. from the from Hovde next

to these just be -- some volume that of what happen has Just a -- level? million the driver income, curious, to But take to to and get the long-term standpoint. $X Heath, know a initiatives future these going an slide business to objectives to on you saw segments? to not the complementary $X Derek, it's terms answer profitability. just I deck net X drive in that to million of getting advantage this is curious maybe of get of what's in in of to of I the some or biggest at lines the function for scale of the how just some

Sure.

the had out within ability call at from the going ability side, CRM and get at I into only So of on business referral marketing on perspective the would are on side, wealth take and X stage our that the on lines what lines are Colony. bank from when it. side, the insurance are the information do what those doing quarters, really merchant business network next to data and we're to infant proactive the the of you our of with the -- and actually those data dependent bankers those more look or front quarter few We've last in

I so connection. warehouse data and our our And mentioned like API

use be basis the to internal that manual to So really is ability our market a than more been automated data our and cross-sell an and to take customers to current able on basis. to

So we there. scratched haven't of the even opportunity surface really

So side. produce levels. that ability those are were SBSL group X about you've challenges on SBA, and in mortgage producing everybody income Obviously, then knows groups very at income with the that on those lines levels. to and And mortgage, early those got above those That in profitability, of are the their aren't our and be level the quarter charge-offs get to little SBSL to will then back this bit out we a Dean point, And at Group. was pull there. as some coming did SBSL from able we on mentioned, a will lot that but related those

those that's levels And a that group be easily over consistently. so should

bank referrals, we're I So areas, that's dependent kind the the surface focused those and we're for opportunity especially that like beginning scratch the on just, a opportunity are of areas that on to said, there's on, the and just lot of there. upside

in mentioned D credit. -- Heath, great holistic bad a just Got standpoint, lending conservatism, and it. pullback mentioned then, from color. And not maybe That's a you just a from the

growth do out, low of mid-single-digit this on your think you single-digit growth, a as sort as sort curious, look hat? is forecasting environment put of you environment Just you

Yes.

I growth think forecasting. continuing as to for year. obviously, you're but see remainder slowdown And the the again, of

slightly and part think things could got similar into out it things the being a first the Fed or see even economy. negative stay to from next our maybe year outlook the loan of control But lot You of now I perspective. kind if a flat about with of to of

So we that's of where think kind it will go.

LPL. mentioned of a little Alabama delay Got of the in a know, D, it. bit then the And I terms launch -- you just of

given interest in deposits in an seeing a just that pretty and what curious Just curious, robust that the market? maybe typically condition of it's terms what's driving loans Just rates? as Is market just you're that thought market. lag, it maybe update

over market there the Yes. The it's the well. really of [indiscernible] environment, But on not has job [indiscernible] C&I profitability you acquisition it's that the through a in if done marketing would environment going look through good relationships expense on growth customers and bringing deposits is team [indiscernible] driven. add driven because loan base there [indiscernible] the there to be of

D, you comment, add out that I'll but were bit, a to just cutting Dave. little

when think we pricing have. I changed really metrics, credit and our said again from faster but desire We concede willingness started haven't those I this were our what the there would environment. we initiatives, loans to in earlier. perspective to the a on expectations than not I is repeat pricing grow

not that between and just it so side, between as the activity. customer And much

It develop So type the real gone. deposit estate to much longer takes pretty and relationships. just side is C&I just

really is a great doing team there. job over Our

We about a growth perspective. are we've ramp-up match the that very expectations a the to expense some that and the from from well. will redo as on And committed long-term just take longer. little It's side happy

Right. Do at of end? the quarter outstanding loans dollar have amount you

it's at $XX-something of We the at that as end earnings quarter. it believe do. in our first put release. that We million the And -- look -- that if significantly going. I got about million you $XX we increased

then then $XX it's $XX million. million going quarter to $XX since to And year to million been $X slower, million Third to last then, $XX from $XXmillion million.

X slower little [ bit this So just ] point. a at to

further questions no There at Instructions] are this [Operator time.

may You proceed.

the being Well, your talking on concludes on thank to for That again, support call. look We appreciate soon. Thanks. you All you for Thank you, being and our to Colony the of right. everyone, you Bancorp. call. call forward

please conference today. disconnect that your call ask lines. your for you you concludes Thank participating and that for gentlemen, thank We you. and Ladies