Colony Bankcorp (CBAN) 25 Jan 242023 Q4 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to Colony Bank Fourth Quarter 2023 Conference Call. [Operator Instructions] This call is being recorded on Thursday, January 25, 2024.I would now like to turn the conference over to Derek Shelnutt, Chief Financial Officer. Please, go ahead.

Thanks, Julie.

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 uncertainties. known but operations.I cash reference limited both would today, other of the variations filed Factors cause differences these pandemics, add and yesterday. to that like we investor were earnings prospects, include, assets, also to, and flows, businesses, that could results call presentation, condition, our quarterly which of but both are not our release financial company's of during our will

call over Fountain. our Officer, those Heath Executive to please that, reference.And So have the available Chief to turn with I will

thanks Thank everyone you, on for today. the and to Derek, call being

results, we the role. has Chief announced CFO. do for Derek I done want into transition to last Tuesday our the great over year this Accounting Derek's a this new serving the diving morning into and Before we've Derek to as Bank job We company. and being of week, Colony made been start this promoted the Officer on really congratulate CFO this as

some another more with then We've on relationships, areas a of where year, better, We've going current our to developing And Derek great job. our of ultimately expansion we've environment the done way us opportunities the changed And in And basis team slightly made lower the earnest in future the adapt focus core the of and to third align opportunities has highlight margin last beginning it our make expect managing this we're a hikes did and product points when lines were him, wish really the That's we've XX year provision of made increased in indicated the efficiency, decline is and about really going had run a lead environment. we increased activity into the to in the I is this We to fourth quarter. QX, additional saw primarily and basis moment to operated complementary the him and we to to for again.So business. pass has our an in or Since we've quarter and that and us by in costs success funding expenses quarter, and earnings X confident there. to quarter, improved new wanted performance progress the of had and in business, of those so of the improving get it customer to XXXX, the points. and areas a expense. back to lot rate just to margin we than changing and get take through well acknowledge X the to thank him, I'll to in role.I'm details. to going decline

is on deposit pressure rate and deposit see the costs of do we However, easing increase slower. continue on side to the

Our the interest expense interest course, for income that. outpaced did quarter, but increase of the

rates slightly see net continue to continue interest that repricing slow. assets funding lower And the so income.We higher cost to led to that to and

to will start those So we move the trends in think right direction.

of end the the quarter. toward slowed it mentioned, fourth I As

those quarter, really, fourth in Last in going slightly our and increasing is some loans, at and with the mentioned saw forward before related flat expense our so criticized in bars. additional we're and we later on to putting those quarter next with classified also loans. margin in similar to pressure did charge-offs see And levels SBSL, quarter. expansion what much, rates or see we we'd start higher floating down we the be the increase XXXX.Our was forward to were Charge-offs going so we forecasting a guaranteed what provision slight quarter third likely seeing

Our confident our seen and increases quality really are credit remain managing isolated. in doing job the small team those.We overall of a is we've good

we to remain as Derek in -- at the next the in necessarily go from deposits fourth XX% the don't level issues our haven't forward.With down OCI, we've but glad quarter We larger very this saw we'll give overall believe granularity where of forward. were talk quarter, for XX Slide would our at that in was otherwise prior effect of broker we addressing reduction information rate all concerns. value payoff We -- just presentation, classifieds and fourth this income effort in criticized those, lower noninterest due increased.Noninterest the due really, compensation the division about any with going environment. see.Total primarily loans.Noninterest the of more declined really seen you'll more our you just expense expect securities to in to were change AFS criticized it's of portfolio lead doing some year, have levels. we some challenges those any going classified credit concerted what and But widespread fair Service and in to annual improvement with levels to are to the mortgage charges the was are expense there the to improved, the increased proud us will quarter. improve The deposits. led been SBSL which seasonality expense. expect revenue the really environment we've our look and and the to on them quarter, we increases in we a low, And of our We're mortgage, addition quarter, still which into noninterest in outlined of also the our to

addition having markets customer on overall the the of Panhandle. the deposit we're to very markets.Outlined and Georgia with quarter when as also basis, customer South Kyle quarter-over-quarter about that increase into to core particularly, have familiar X, Tallahassee relationships Phelps to Northwest during regional in may We're Kyle look our a announced customers proximity opportunities look build executive. our you team lines. to improvement year-over-year.We forward our on are in trend the to both entry a those the for glad the and our those So lines, at we deposits Florida the with, banked our year, due in in Slide and many areas markets, see Those Florida start-up complementary market

a the slower course, Of the Marine/RV. been quarter our of is pleased progress particularly seasonality of But quarter, these businesses. with fourth

better of very our noninterest lines to our share. dividend pleased quarterly announce XXXX of an We customers.We're the in continue increase they improve, to income continue serve to these needs also and focus ensure to business to per and on in $X.XXXX our

long-term earnings.As we customer our consecutive those loan increased the XXXX, individual and continue for is probably some our growth, many we the loan the the year have into shareholders, of we're Our at demand out look loan dividends X% a dividend year, very we is under growth marks serve, shareholders whom to reflects as are which but confidence expect significant of looking reflection of we'll it appetite. much see communities is This important Xth especially and our in bank to we customers.

internally. In addition areas really be to three lending, we'll primary focused on

-- complementary and looking maintain improve deposit discipline use in we our lines. pronged, have and in place turn in of integrate current to all in now and customers second on efficiently. expenses to relationships around looking efficient and to processes.And our I'm our growing efficiency; XXXX, he's income; looking to achieve to the service of our more relationships, businesses' efforts; to third our when to And earlier, internally, the a noninterest that looking new stabilizes customer in put is the that to for standards our go more to to entire or mortgage to revenue simple. the serve and looking Derek, mentioned We then detail. those into in deposits; data get other as going calling to -- internal is business over deposit marketing from incentives And certainly in develop retain I bit majority First, efforts market going other and our the our collaborative, gathering.The grow opportunities continue as it we financials and standards.So the experience, more rate improve that opportunity we utilize as better those little revenue, customer our and

decreased a our the But the in slow see Heath. RV income to did with which lower Thank decreased prior quarter. was that of quarter's additional basis income and we our an the growth quarters our compared and by margin mentioned I'll you, from we led higher line quarter as prior was division the Marine we net expense previous in down. increase $X.X income we as an mentioned did slowdown X% previous during we in quarter, and outpaced quarter-over-quarter, the in compression modest to last decline to but interest assets the saw income mentioned, see for points, about expense declined income that And interest than Net interest also Heath to compared quarter, see fourth in saw during experienced starting $XXX,XXX, quarter. earnings continue reprice to approximately X% when X off-season.Interest noninterest the quarter. start in the quarter-over-quarter. to call. we're $XXX,XXX, the forecast we And income increase quarter XXXX.Net decreased to last noninterest quarter, million.Interest annualized rates growth. Loan fourth loan in the lending on increased slow And as $XXX,XXX with

lot funding Although deposits. pressure a for reduction still overall we of we've the competition see seen in of costs,

really tough.Net related income we mortgage see environment time is is which income was decrease $XXX,XXX. service SBA quarter-over-quarter, from and charge-off about mortgage-related in mortgage how such external we and basis a XX% income magnitude XX Typically, we income overall still over our to the be $XXX,XXX. off we deposit drop increased the expansion. will in Commission year.Noninterest And while division optimistic of fee will SBA didn't year. quarter. $XXX,XXX expect primarily we're here, XXXX, last mentioned around gain point, decreased of due think from this from seeing was some our this to any likely And the income much from had see presentation.And we a at if And items that down. You quarterly increased increased margin we remember our third you start as of see forward, see prior sale call, division points onetime again. those in and can X this year. slowdown second the timing, maybe costs timing the second Slide which X by from any we're on of of that increase another drop margin see going go is will to up half $XXX,XXX, investor the before largely to start margins half in on factors Fed income and also depend that we insurance the few that likely cuts noninterest But in quarter quarter-over-quarter.Other to

of noninterest slightly and expect trend And to was operational higher X.XX% to result the forward, efficiency quarter. a Heath quarter In fourth in newer and so or income work [ XXXX X.XX% the line continue is be business and million and assets through XXXX.Noninterest third the of mentioned, of from to just $XX is past from $XX.X of earlier in lines to XXXX. from hard net net the in project in X.XXs as quarter from up a decrease NIE which all quarters quarterly still to managed year. average this in to maybe million, improvement ] a the the under fourth of expense on And as even lot And was our NIE, members.Going quarter, discipline. totaled we we of around to this quarter. fourth of than other expenses our a seen effort the which that our we've expenses We're bit XXXX, that was noninterest team be little improve for expectation move our our quarter committed

a we whole as we annual still related nonperforming slower effect, quarter. quarter. deposits. we'll the portfolio.Our growth charge-offs up but to see we'll other for are we in it quarter, was low down. loans on loan loan deposits that will And We relative increased remain expect similar is more any As criticized result was continue and aren't in the potential any expenses the net the really see a loans Heath to up concern. right that into were compared for modest gives first have that and of Criticized number at and down to less issues any overall a winter year.Total likely remain the types. $XXX,XXX, XXXX, the of or some were And $X.X see million, of than mentioned total which did to which to the increases in increases half previous we us NPLs of million level $XX.X again, months.Provision of then out $XX.X million increase activity quarter of loans now, or for slight across in previous likely low go calls pick around loan totaled slow we've about occur of compensation this anything to We last and XXXX. XX quarter-over-quarter, see still pickup On classified different the we deck. the and and we a specific broken quarter. do down increased, call, loans there move X%, the investor charge-offs for seeing broker types see the the slightly you small paydown The latter with Slide classified lot loans to as And trend still in expense see quarter's loans.Total relatively mentioned, some

the $XX.X customer core by deposits our During million grew broker deposits million. by and reduced quarter, $X.X around we

away also In expensive end the outlines program We deposits, we're to the liquidity quarter. the paid reducing of FHLB more likely addition wholesale with the funding going our still XX over realize great of as in we at billion the $X.X part access a funding.Slide by quarter, to reliance this and our is term there advances position $XX in on million bank liquidity. broker down do

the Now discount end quarter didn't losses million have window improvement not used in more a did an We a Reserve in the value harder it look our we increase overall to increase our portion and have potential translates any million we're and and from the other all, at to cuts. our which was and AOCI. from down looking quarter, the quarterly borrowings over the to have potentially fund AFS of portfolio we portfolio. or portfolio so at to value continually Again, haven't We've rates a the improvement outstanding fair rate this make room is adjustments limited it to Fed little really fair at $XX our of is fair still be something to that the won't any environment liquidity. saw Federal market impact restructuring of where of products with value any moving earnings.The area our our Fed as portfolio and small access of a previous any we borrowings of lines.An in investment the seen at the adjusts us creates mortgage portion and $XX the This for would pricing. evaluate challenging, continue to to of

slight the throughout SBSL higher, with pipeline express our and expect improvement XXXX. for mortgage Our focus end long-term for just the volume little premiums the we a division, of believe been hopeful typically quarter express to in a as that seeing good we better.In fourth opportunity there. loans strong, We did for important the part to still still once our mortgage smaller increase going and our this even an larger loans little breaking of environment amount demand is and the strategy, is a and are forward. breakeven gets a see slowing again see up on the The we are on has division, we profit We're loans.

demand related way SBA that to in volume few earlier. some good quarter, loans loans past slowing have mentioned replace to loans.We Heath which charge-offs a is larger for more more this did of these express So a

lot for quarter-over-quarter. SBSL on that's XX. over NPLs to Heath we improvement However, again, of the our decreased mentioned division to a these opportunity for year. Slide see next earlier, in lines improve that outlined lines, continue the start-up There's

and for XXXX, now be ones profitable take sometime Heath back lines became we before XXXX.And comments new Some any it of final in over I'll turn expect questions. these the remaining in profitable we to to

of our wraps all That comments we Derek. up had. Thanks,

I'll questions. that, with the up for any open Julie So ask to line

[Operator from Bishop first David from question comes Instructions] Your Hovde.

of margin. I interest curious, the appreciate net terms just the Derek, guidance in

Just the I in is the of you the, how were thinking the, curve the terms curious sensitive margin think cuts. forward sort and to of three rate Fed? expectations maybe

Just curious, margin maybe, how rate the to cuts? we should think about sensitivity potential of Fed

Yes, know do. going don't I'll too. Fed the is make then to and Derek obviously a turn We it to comment what

I of lower little will think, quarter cuts, the because a margin probably or rising kind small it will that have after still we take rising it's rising improve given it's cuts. in costs rates, our bit. we rates guidance this -- two it's less, no But if while has given think will that deposit still a change but

is some kind And year, the of The earlier costs CDs of to growth. we a it that higher loan is some whereas demand. part so difficult loan compression of the loan to exist, of in had it makes had.And or too, demand will continue address the time we helping some causing lower that take just just little and some the Dave, a I the marginal that little bit other think funding

some you comments on want make? any Derek, that. other But -- to So depends I'll

kind to what just Heath said the of And Yes. on touch about deposits.

lag have different kind some a We be deposit of there of our our deposits. probably across points will and there pricing think price I for majority do base.

also wholesale we have CDs impact that some of low market priced that have still are would which earlier some higher in. we on. we funding, deposit might money see are our we increases we We that see accounts, would an But that of benefit. some and some some priced shorter-term more have But other some see

if it point, to side. of deposit Heath's cost rates as just the or we there'll that see decline. see on to some think some quarter be But may kind two I so some do And take a margin of we benefit of lag

loan new or a origination just deals? maybe near-term repricing, so, what remind fixed into the from And at the reprice and next to over year us how much the maybe is repricing

Yes.

I the seeing So in Dave, from mean, originations we're new from a X. a, origination standpoint,

And loans challenge do repricing? where just more on yield -- put is, Derek, hit But, our love have is to to new of quickly. is really want we'd our on good repricing you more so in the the

yes. Yes,

year don't we mean, this to So I repricing much as have we'd have. as like

we will modest help see benefits seeing some. will mentioned. we're that so which with some right the some some loan And think in benefit. there. see -- as that will be growth pricing We'll I Heath But now, Xs, that

as year are yields of a as the this seeing continual increase our expect through move that and see we loan ongoing we We in kind to quarters, well.

you mentioned service uptick in increases. deposit the then nice charge And

think? is driving of what's And forward, this curious Just you fees, do moving nice a for that? run new rate sort those or

sure. Yes,

So at implement at this some think, was we past end of I it service new did the fees actually, end. quarter. very the charge And QX

full So of income in. quarter's that really, a got worth we about

But this more on for out and increase some so can a opt quarter feel might -- that here to some going be that we kind is off people like a going is will stick few good something appropriate going there of do bit around We some we quarters, of seen expect. that a forward And -- drop little we saw some is overall, that level in fourth those level that's see a the what see as that we've forward. the of on they we fees.

our business treasury mixture do a and a line appropriately peers a to fees products on to getting side better effort concerted it's in the those rate on that generate of can price little of and as more well you a in go kind also with side environment. higher And consumer the of

And criticized, and one basis. of a dollar questions. said, appear on like The then a more you downgrades they granular just -- from couple the classified pretty balance

year, at covenant? Just deterioration the borrow of Was service what drove Just drove those end curious pressure looming debt of what those curious sort the downgrades? it repricing could financials that though, in downgrades?

board. much the pretty it's Yes, across

are year, those of for to analyzed. I financials certainly this time think in later get filers, folks get we that start and we our

definitely But majority think, and would their it's so And prospective other say business. us rate the having a on more, repricing statements and it. of trends I financial driven from in lot I concerns basis, it's a analyzing about

One final question.

charge-offs. noted SBSL uptick You in the

the Just the segment? what to current curious and were related dollar quarter on a basis last or quarter of that percent

were a So of those last quarter, this a to charge-offs related that was net SBSL, portion smaller majority but quarter.

say to would XX% this probably So related to it was -- XX% quarter SBSL. I about

really quarters. one net So that some was impacts there were of for charge-offs leading our on both -- the

Your Montgomery question Janney from comes Marinac next [Operator Scott. Instructions] from Chris

us I wanted is that little to information slide about -- deck about various the the are the ask a bit The in improvement. gave you those AOCI buckets, pretax.

change the the And in compare just understand the AOCI beyond to better. buckets future? I'm some that So recovery I offset three looks total with AOCI can Is it there because just trying to in taxes. was that more like those happen want there

Yes, Chris.

offset our rate to small have that addition swaps that. of we in amount would So investments, do a interest

think of quarter. a the the guess, But then and that XXX, a was have saw you dollars on because a about move a those about about there. quarter we million I loss of thousand the obviously a security fraction few swaps XXX million quarter improvement this that's move so a it quarter-over-quarter, of last in had side. we during hundred gain was I just

biggest So in. the to we the to we come coming securities to rates continue But try if that the terms would these move We curve. on down obviously, rolling are be to see down. they're continue --

months? turns or when of through? available of natural go we rate increases increased even if this over I'm just loan yield at yield can in look the loan there yields is more have portfolio there's XX just XX, kind loan quarters, that's many yield as a additional loan sort happen that bumps And the you that curious next then seen

Yes.

have for We'll on higher budget coming I be -- loans think in rates. have there we're is, new that I repricing. loans and kind the that's at don't our do will year. we of forecasting what

the be pickup think see the next I we'll what to across will couple the quarters. year, so past similar it we've seen but over of And

is I'll Chris. yield, the total some in XXX add, just in Xs high Xs. the putting the We're think, loan in for quarter. And Yes. cases I loans I on our mean, or

of is just duration total years. Our portfolio over our X.X loan

And have each repricing year. loans so we dollars of several million hundred

we're the hard yields push to on obviously, working renewals. up these So

yield so And it last And having opportunity limit the there's of net because there's it think loan few down not some of will significant a low quarter get move we've a to slowed but loan some that increase our been up. growth to coming off base, quarters, nice still opportunity but of on an portfolio. some each I our yields increases such in that, still

see the mix you between being relatively so? in the or that of And do the and next fixed still kind same Heath, year variable,

standpoint, side, at variable percentage the from a more percentage, side are the higher Well, production still still high we a we overall a on continued of away quarters. at the on we're actually, But chipping that. fixed last seeing but so couple an production from are standpoint,

And what of year that do then is, it's harvesting. that. with sure me the about helping get envision want for through you of this and analytics you. what I'm the business sort for cross-sell think new profit kind But Do customers? early do #XX net curious customer kind last question mean or you of kind for how think I'm to do you you you two? slide, where at I that's better does margin? I just that a of more you're still now that next sort data see of you it's data take to going you there's a just data same

infrastructure And really great a a in X.X place last That's infrastructure on. we building and that the little We've the years, been data point. early question. year, this are have Yes. we for at

revenue. highest and it's in it the trying that Now can the allocate data where about the of to drive priority biggest of to really utilization increase

that information lines, of revenue going been front utilizing we our business where know both business customer, marketing present that nearly our So marketing we hope and put we to merchant the the we And what data, to put opportunities of is, that present take it's our customers. to our and to other -- to calling just XXX,XXX deposit do can sheer bankers able we're is but side, utilize customers calling that bulk marketing to increased have bankers effort. make our the development in is driving that to on where data that insurance, really, where our trying do that front as been been driving And weld drive give of in services.So to customers' to what's business to company it what's a both in has or what to also direct be us effort. our to by sure

of relatively business important drive be ours we this in to multiple that's a for small to so have to big we and year. it's focus And kind and per and that optimize that have to able customer next lines of year a average-sized why customer, And more think help that's of revenue us out future.That's base branch. the

is can deposit great, other get expenses. that but higher are services, it that we So up if it network low-cost really makes there revenue from

I should offset improvement on the helps increase we the noninterest revenue. income a that So from side And think that. just this long continued surface that see scratching of time. the for We're

comes next Hovde. David Bishop Your from from question

Yes.

OPL. just that portfolio? of this I tend a efforts Or of Florida. was of that jump lagging -- lending, efforts quarters on -- on for the pretax couple could obviously, for given proximity of sort on the call the you're sort Did the us Northern of of you that couple are Marine/RV augment remind the those sale? a see some every doing, those of Alabama being sort start a noted, follow-ups. group geographic quarter potentially basis? bulk to did then And generated you profitability the Just addition in the Heath, to

Yes.

Florida, did we on to was there cost-neutral start a -- first with up our effort So goal that -- manner. in a

there. you some so had We've areas to their that offset expense improve other a reduction do see continue help And increased areas in profitability. the

expect to Then don't net me Marine/RV. be that -- the we so a And drag. large remind

our sold as our we portfolio is, have any some season up but So that, build of not have we periodic to date, we loans. will that that sales goal, of goal and

do we revenue operation you so seen think haven't that And there's yet. in to an opportunity from generate our that,

everything We far. have of portfolio thus

then, obviously, heard inflationary effect. then as should but leaning quarter annual take you've I and some you and we the And if on here, I you first expect Derek, FICA correct? of compensation into -- takes expenses think to rates pressure sort hear XXXX hold Did been I

right. That's

on we've so our And this again, of quarter, going to where some little quarter mark, landed go higher and cause be a those know kind goes that quarter. forecast $XX than first that past so are in it just that is coming of million And will to is increases up that to bit. back this which around we

at further closing remarks. your no are there Presenters, questions with time. this Please proceed

support we Well, Colony being right. call concludes again, of appreciate everybody on today. Bancorp, the your All for call. Thanks, that and our

disconnect conference today. and Ladies now concludes and gentlemen, lines. you thank you Thank you. call may for your We for joining, this your