Colony Bankcorp, Inc. today reported financial results for the second quarter of 2022. Financial highlights are shown below.

Financial Highlights:

• Net income decreased to $3.4 million, or $0.19 per diluted share, for the second quarter of 2022, compared to $5.3 million, or $0.34 per diluted share, for the first quarter of 2022, and $4.0 million, $0.42 per diluted share, for the second quarter of 2021.

• Operating net income of $5.2 million, or $0.30 per diluted share, for the second quarter of 2022 as compared to $5.4 million, or $0.37 per diluted share, for the first quarter of 2022, and $4.5 million, or $0.49 per diluted share, for the second quarter of 2021 (see Reconciliation of Non-GAAP Measures).

• The Company made significant progress in its hiring initiatives, including hiring several new commercial bankers and promoting a new Chief Financial Officer.

• $1.1 million in provision for loan losses was recorded in second quarter of 2022, compared to $50,000 recorded in first quarter of 2022, and no provision recorded in second quarter of 2021.

• Non-recurring charges of $1.35 million related to previously announced efficiency efforts were incurred during the second quarter of 2022.

• Due to the unusual interest rate environment, the company experienced accelerated amortization on purchased callable FHLB advances totaling $751,000 and a valuation decline of its SBSL servicing asset of $316,000.

• Total loans, excluding loans held for sale and loans that originated under the Paycheck Protection Program (the “PPP”), totaled $1.5 billion at June 30, 2022, an increase of $99.0 million, or 7.3% from the prior quarter.

• Mortgage production was $113.7 million, and mortgage sales totaled $82.3 million in the second quarter of 2022.

• Small Business Specialty Lending (“SBSL”) closed $21.0 million in Small Business Administration (“SBA”) loans and sold $18.4 million in SBA loans in the second quarter of 2022.

The Company also announced that on July 21, 2022, the Board of Directors declared a quarterly cash dividend of $0.1075 per share, to be paid on its common stock on August 20, 2022, to shareholders of record as of the close of business on August 6, 2022. The Company had 17,581,212 shares of its common stock outstanding as of July 20, 2022.

Commenting on the announcement, Heath Fountain, President and Chief Executive Officer, said, “While there were several moving parts during the quarter, we continue to position Colony for strong financial performance. In the quarter, we completed a $40 million subordinated debt offering, hired commercial bankers in the Atlanta, Birmingham and Huntsville markets, and grew loans, excluding loans held for sale, by almost $100 million, or nearly 30% annualized. Atypical expenses during the quarter totaled approximately $2.3 million, primarily for the previously announced charge for the efficiency project, and $751,000 of accelerated amortization of purchased FHLB borrowings called during the quarter. While asset quality metrics are strong and improving, we recorded higher provision expense than anticipated due to loan growth being meaningfully higher than projected.”

“Finally, we do expect to show continued strong asset generation for the next few quarters. The current loan pipelines remain very strong, and we continue to recruit seasoned banking professionals throughout our footprint.”

Balance Sheet

• Total assets were $2.7 billion at June 30, 2022, a slight increase of $41.6 million from March 31, 2022.

• Total loans, including loans held for sale, were at $1.49 billion at June 30, 2022, an increase of $113.1 million from the quarter ended March 31, 2022.

• Total deposits were $2.3 billion and $2.4 billion at June 30, 2022 and March 31, 2022, respectively, with a slight decrease of $19.3 million.

• Total borrowings at June 30, 2022 totaled $152.1 million, an increase of $92.1 million or, 153.3%, compared to March 31, 2022 related to the subordinated debt issued in May 2022 and federal funds purchased outstanding at June 30, 2022.

Capital

• Colony continues to maintain a strong capital position, with ratios that exceed regulatory minimums required to be considered as “well-capitalized.”

• Preliminary tier one leverage ratio, tier one capital ratio, total risk-based capital ratio and common equity tier one capital ratio were 10.74%, 15.80%, 16.55%, and 12.39%, respectively, at June 30, 2022.

Second Quarter and June 30, 2022 Year to Date Results of Operations

• Net interest income, on a tax-equivalent basis, for the second quarter of 2022 totaled $19.3 million, compared to $15.2 million for the second quarter of 2021. Net interest income, on a tax-equivalent basis, for the six months ended June 30, 2022 totaled $38.6 million, compared to $29.6 million for the six months ended June 30, 2021. The increase during the quarter and six months ended June 30, 2022 compared to the same period in 2021 is primarily attributable to interest income related to loans acquired in the acquisition of SouthCrest Financial Group, Inc. (“SouthCrest”) in August of 2021.

• Net interest margin decreased 53 basis points from the second quarter of 2021, but increased two basis point from the first quarter of 2022. Net interest margin for the six months ended June 30, 2022 decreased 42 basis points from the six months ended June 30, 2021, but increased one point from the first quarter 2022. Two borrowings from the acquisition of SouthCrest were called and the remaining mark of approximately $750,000 was recognized in interest expense this quarter.

• Noninterest income totaled $10.1 million for the second quarter ended June 30, 2022, an increase of $2.3 million, or 29.8%, compared to the same period in 2021. The increase was primarily attributable to SBSL loan sales, SouthCrest and insurance company acquisitions, growth in interchange fee income and service charges on deposits offset by a decrease in mortgage fee income. Noninterest income totaled $19.2 million for the six months ended June 30, 2022, an increase of $2.9 million, or 17.45%, compared to the same period in 2021. The increase was primarily attributable to SBSL loan sales, SouthCrest and insurance company acquisitions, growth in interchange fee income and service charges on deposits offset by a decrease in mortgage fee income.

• Noninterest expense totaled $24.5 million for the second quarter ended June 30, 2022, compared to $17.5 million for the same period in 2021. Noninterest expense totaled $46.3 million for the six months ended June 30, 2022, compared to $33.2 million for the same period in 2021. The increases were primarily related to increase in salaries, information technology, and communications related to the acquisition of SouthCrest in August of 2021.

Asset Quality

• Nonperforming assets totaled $5.2 million and $6.5 million at June 30, 2022 and March 31, 2022, respectively, a decrease of $1.2 million.

• Other real estate owned and repossessed assets totaled approximately $293,000 at June 30, 2022, and March 31, 2022.

• Net loans charged-off were $58,000, or 0.02% of average loans for the second quarter of 2022, compared to net charge-offs of $41,000 or 0.01% for the first quarter of 2022.

• The loan loss reserve was $14.0 million, or 0.96% of total loans, at June 30, 2022, compared to $12.9 million, or 0.95% of total loans, at March 31, 2022.

As noted above and in the Selected Financial Information table, overall asset quality remains strong.