Colony Bankcorp, Inc. (CBAN) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals solid financial performance, with increased net interest income and margin, strong noninterest income, and a dividend hike. Despite higher operating expenses due to an acquisition, cost savings are expected post-conversion. The Q&A section highlights a strategic approach to M&A and disciplined growth, with confidence in funding loan growth through deposits. The positive guidance, alongside a dividend increase, suggests a positive stock price movement. However, the lack of aggressive hiring and cautious M&A plans temper expectations slightly, leading to a 'Positive' sentiment rating.
Key Financial Performance
Operating Net Income Increased by $675,000 compared to the third quarter, driven by an increase in net interest margin and strong noninterest income.
Return on Assets (ROA) Achieved 1% operating ROA for the 2025 fiscal year, consistent with the target set earlier in the year.
Core Loan Growth 10.5% year-over-year, excluding the impact of the TC Federal acquisition. Growth attributed to disciplined pricing and credit strategies despite increased competition.
Net Interest Income Increased by approximately $3.2 million compared to the prior quarter, driven by improved earning asset yields, reduced cost of funds, and the addition of TC Federal loans.
Net Interest Margin Increased by 15 basis points to 3.32% in the quarter, supported by loan repricing and accretion income from TC Federal loans.
Loan Yields Increased to 6.19% from 6.15% in the previous quarter, reflecting positive loan repricing and the addition of TC Federal loans.
Cost of Funds Decreased to 1.96% from 2.03% in the third quarter, driven by short-term rate cuts and seasonal inflow of lower-cost deposits.
Noninterest Income $11.1 million in the fourth quarter, reflecting strong performance in complementary business lines like mortgage and SBSL.
Operating Noninterest Expenses $24.4 million, higher due to TC Federal acquisition-related costs. Expected to decrease after systems conversion in the first quarter of 2026.
Charge-offs $1.6 million in the fourth quarter, slightly lower than the prior quarter. Primarily from SBA and marketplace loans, which represent 5% of the portfolio.
Deposits Organically flat year-over-year, excluding the TC Federal acquisition. Growth attributed to a focus on core customer relationships and deposit-first strategies.
Dividend Increased to $0.12 per share, up by $0.02 on an annualized basis, reflecting a commitment to shareholder returns.
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Operating Highlights
TC Federal merger: The legal close of the TC Federal merger occurred in December, with systems conversion expected in Q1 2026. The merger is on track to meet or exceed financial targets.
Portfolio mortgage pool sale: Executed a $10 million portfolio mortgage pool sale with a $100,000 gain. Plans to sell another $30 million in Q1 2026 to manage mortgage loan exposure.
Marine/RV-Lending and Merchant Services: Both divisions showed improvement in Q4 2025.
Colony Financial Advisers: Transitioned to a dual employee model, doubling assets under management to over $460 million by year-end 2025.
Loan growth: Core loan growth was 10.5% in 2025, excluding the TC Federal acquisition. 2026 loan growth is projected at 8%, at the lower end of the 8%-12% target.
Deposit growth: Deposits increased in Q4 2025, with organic growth flat year-over-year excluding the TC Federal acquisition. Focus remains on building core customer relationships.
M&A activity: Actively pursuing new M&A opportunities, with potential announcements expected in 2026.
Net interest margin: Increased by 15 basis points to 3.32% in Q4 2025, with further modest increases expected in 2026.
Noninterest income: Improved in Q4 2025, driven by mortgage and SBSL performance.
Operating expenses: Higher in Q4 2025 due to TC Federal acquisition, but expected to decrease post-systems conversion in Q2 2026.
Dividend increase: Quarterly dividend increased to $0.12 per share, reflecting a $0.02 annualized increase.
M&A strategy: Focused on leveraging increased M&A activity for customer and talent acquisition, as well as expanded fee income.
Recognition: Named one of American Bankers 2025 Best Banks to Work for, highlighting commitment to culture and team members.
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Risk or Challenges
Loan Growth: The company anticipates organic loan growth for 2026 to be at the lower end of its 8%-12% target due to increased competition in lending across its footprint.
Deposit Growth: Deposit growth was flat year-over-year, excluding the TC Federal acquisition. Aggressive rate cuts led to the loss of some non-relationship price-sensitive accounts.
Charge-offs: Charge-offs were slightly elevated, primarily from the SBSL division and marketplace loans. While not expected to be a long-term trend, these charge-offs could impact financial performance.
Nonperforming Loans: Nonperforming loans increased quarter-over-quarter, with $6 million of the $9 million increase attributed to the TC Federal acquisition.
Operating Expenses: Operating expenses were higher in the fourth quarter due to the TC Federal acquisition, and cost savings from the merger are not expected to be fully realized until the second quarter of 2026.
Retention Rates in Insurance: Retention rates in the insurance segment were impacted by significant rate increases from carriers, although some market softening is expected in 2026.
M&A Integration Risks: The integration and core conversion of TC Federal is ongoing, with potential risks related to customer integration and system conversion.
Credit Quality: Classified and criticized loans increased, with 68% of criticized loans and 93% of classified loans coming from the TC Federal acquisition.
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Guidance & Outlook
Return on Assets (ROA): The company achieved a 1% operating ROA for the 2025 fiscal year and aims to reach a 1.20% ROA on a quarterly basis starting in the second quarter of 2026, with a full-year target of 1.20% for 2026.
Loan Growth: Core loan growth in 2025 was 10.5%, excluding the TC Federal acquisition. For 2026, the company expects loan growth to be closer to the lower end of its 8%-12% long-term target due to increased competition in lending.
Net Interest Margin: The company projects a modest increase in net interest margin throughout 2026, with mid-single-digit growth each quarter driven by loan repricing and expected loan growth.
Noninterest Income: Noninterest income is expected to improve slightly in 2026 due to enhancements in business lines and fee income.
Deposit Growth: The company is focused on driving deposit account growth and expects to grow the right kinds of deposit relationships. As rates stabilize, the company plans to become more competitive for interest-bearing deposits.
Mortgage Loan Sales: The company plans to sell $30 million of portfolio mortgage loans in the first quarter of 2026 to manage concentration and take advantage of improved secondary market conditions for non-agency loans.
Operating Expenses: Operating expenses are expected to decrease starting in the second quarter of 2026 as the company realizes cost savings from the TC Federal acquisition.
Mergers and Acquisitions (M&A): The company is actively pursuing M&A opportunities and expects to announce another transaction in 2026.
Insurance Market: The company anticipates improvements in retention and production in 2026 as the insurance market softens.
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Shareholder Return Plan
Quarterly Dividend Increase: The Board declared an increase to the quarterly dividend to $0.12 per share, which is an increase of $0.02 on an annualized basis.
Share Repurchase: Total share repurchases during the quarter were 47,000 shares at an average price of $16.50.
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Key Q&A
Q:Does the small business lending line become a higher risk-adjusted business with potentially higher charge-offs but better returns?
A:The CEO acknowledged that small business lending is higher risk but offers higher returns. Programs like Flash and Lightning previously allowed for higher volume of high-risk, high-return loans, but their activity has decreased. The CEO expects improvement from the current run rate but not a return to previous levels of high activity.
Q:What is the outlook for M&A activity in the coming years?
A:The CEO stated that they aim for negotiated or limited marketing deals, similar to the TC Federal transaction, focusing on partnerships rather than competitive bidding. While some bid situations may arise, the company plans to be selective and prioritize shareholder value. They anticipate plenty of M&A opportunities over the next several years.
Q:What is the hiring outlook within the company's footprint for lending and deposit roles?
A:The CEO mentioned no aggressive hiring plans but indicated they would be opportunistic, particularly in cases of displacement from other M&A activity. Hiring will likely be limited to a handful of roles rather than large-scale recruitment.
Q:What are the factors affecting organic growth and the competitive environment on the commercial side?
A:The CEO noted increased competition and emphasized disciplined pricing based on relationships. They aim to balance margin improvement with competitive pricing to achieve growth. The company expects loan yields to align closer to prime rates as rates stabilize, narrowing the competitive pricing range.
Q:Can the company organically fund loan growth with deposits this year, and what are the trends in deposit pricing?
A:The CEO expressed confidence in organic deposit growth to fund loans over the next few years, though it may not align each quarter. They have been aggressive in deposit pricing to reflect rate cuts and aim to grow noninterest-bearing and low-interest DDA accounts. The CFO added that investment roll-offs in 2026 would reprice upwards, supporting funding efforts.
Q:What is the company's geographic and size focus for future M&A targets?
A:The CEO stated a focus on Georgia and contiguous states like South Carolina, Tennessee, Alabama, and Florida. They are open to larger transactions but recognize more opportunities in the $750 million and below range. The company is prepared to execute multiple deals in succession if opportunities arise.
Q:What is the outlook for the net operating expense ratio and effective tax rate?
A:The CFO expects the net operating expense ratio to return to mid-140s later in the year after system conversions and seasonal income increases. The effective tax rate is expected to remain around 21%.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer on whether the small business lending line would definitively become a higher risk-adjusted business with better returns, as the response was conditional on program opportunities and market changes.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AOCI
Charge offs
Federal acquisition
Federal loan
Federal merger
ROA
SBA loan
TC Federal
accounting standard
acquisition TC
addition
adviser
cost saving
customer relationship
dealer
end
gain
loan payoff
loan yield
marketplace loan
mortgage loan
pool
portfolio mortgage
program
rate cut
rate loan
standard CECL
system conversion
term rate
track
trend
value
CBAN Transcript
Colony Bankcorp, Inc. (CBAN) Q4 2025 Earnings Call Transcript
Positive1-29
The earnings call reveals solid financial performance, with increased net interest income and margin, strong noninterest income, and a dividend hike. Despite higher operating expenses due to an acquisition, cost savings are expected post-conversion. The Q&A section highlights a strategic approach to M&A and disciplined growth, with confidence in funding loan growth through deposits. The positive guidance, alongside a dividend increase, suggests a positive stock price movement. However, the lack of aggressive hiring and cautious M&A plans temper expectations slightly, leading to a 'Positive' sentiment rating.
Colony Bankcorp, Inc. (CBAN) Q3 2025 Earnings Call Transcript
Unknown10-23
The earnings call presents a mixed picture. Financial performance shows improvement in net interest margin and ROA, but loan growth is slowing due to economic caution. Risks such as government shutdown impacts, increased charge-offs, and a wire fraud incident add uncertainty. While noninterest income and deposits have increased, operating expenses have risen too. The Q&A session did not reveal any major concerns, but uncertainties remain. Overall, the earnings call suggests a stable outlook with potential risks, leading to a neutral sentiment.
Colony Bankcorp, Inc. (CBAN) Q2 2025 Earnings Call Transcript
Unknown7-24
The earnings call presents a mixed picture: solid financial performance with improved net income and noninterest income, yet concerns over increased noninterest expenses, net charge-offs, and seasonal deposit runoff. The Q&A highlights uncertainties in the merger integration, deposit costs, and loan growth moderation, balancing positive aspects like stable loan portfolio health and strong shareholder returns. Despite some positive financial metrics, the risks and uncertainties, particularly around the merger and loan growth moderation, suggest a neutral impact on the stock price over the next two weeks.
Colony Bankcorp, Inc. (CBAN) Q1 2025 Earnings Call Transcript
Unknown4-24
The earnings call reflects mixed sentiments: modest financial growth and strategic initiatives like digital banking and M&A discussions are positive. However, challenges such as declining mortgage revenue, regulatory risks, and supply chain issues offset these gains. The Q&A reveals uncertainties in loan growth and asset quality, with management providing unclear guidance. Despite a share repurchase program, financial metrics show mixed performance. Given these factors, the stock price is likely to remain stable in the short term, resulting in a neutral sentiment rating.
CBAN Slides
CBAN Report
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