Colony Bankcorp Reports First Quarter 2021 Results

Declares Quarterly Cash Dividend of $0.1025 Per Share

Colony Bankcorp, Inc. (Nasdaq: CBAN) (“Colony” or the “Company”) today reported net income of $4.9 million, $0.52 per diluted share, for the quarter ended March 31, 2021, compared with $1.6 million, or $0.17 per diluted share, for the quarter ended March 31, 2020. The Company reported operating net income of $5.1 million, or $0.53 per diluted share, for the quarter ended March 31, 2021, compared with $1.8 million, or $0.19 per diluted share for the same period in 2020. Operating net income for March 31, 2021 and 2020 excludes after-tax acquisition related expenses, and the net income tax expense (benefit) for the adjustments.

First Quarter 2021 Financial Highlights:

• Net income remained stable at $4.9 million, or $0.52 per diluted share, compared to the fourth quarter of 2020.
• Operating net income of $5.1 million, or $0.53 per diluted share, an increase of $845,000, or $0.09, compared to the fourth quarter of 2020 (see Non-GAAP reconciliation).
• Growth in total assets of $35.1 million, or 1.99%, compared to the fourth quarter of 2020.
• Increase in noninterest income from mortgage banking activity of $550,000 compared to the fourth quarter of 2020.
• $500,000 provision for loan losses, a decrease of $796,000, or 61.4%, compared to the fourth quarter 2020.
• Mortgage production of $101.7 million, with $40.0 million in refinances, $56.7 million in purchases, and $5.0 million in construction related loans.
• Small Business Specialty Lending (“SBSL”) closed $64.0 million in SBA loans ($46.9 million in PPP loans and $17.1 million in core SBA loans) and sold $11.8 million in SBA loans.

The Company also announced that on April 22, 2021, the Board of Directors declared a quarterly cash dividend of $0.1025 per share, to be paid on its common stock on May 17, 2021, to shareholders of record as of the close of business on May 3, 2021.

Commenting on the announcement, Heath Fountain, President and Chief Executive Officer, said, “While we continue to operate in a highly uncertain and difficult environment due to the ongoing pandemic, we remain optimistic based on our financial achievements and solid credit metrics. I am pleased to report strong earnings growth for the first quarter. Diluted earnings per share increased 205% over the same period last year to $0.52 per diluted share. First quarter saw continued strength in mortgage banking income as well as in our Small Business Specialty Lending Division, with significant increases in both on a year-over-year and sequential quarter basis. We also experienced growth in our balance sheet metrics for the period, including growth in total deposits and total assets, while organic loan growth increased 5%. We continue to actively participate in the latest round of the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) enacted as part of the Coronavirus Aid, Relief and Economic Security Act.

“Net interest income increased 12.4% year-over-year despite lower yields on loans and deposits held at other banks, as well as lower interest expenses. Due to continued pressure on interest rates and low rates on PPP loans, our net interest margin decreased 13 basis points to 3.50% compared with the year-earlier period.

“Our continuing efforts to diversify our revenue streams produced multiple gains. Noninterest income saw very strong growth, increasing 90% year over year, with mortgage fee income increasing to $4.0 million in the current quarter compared to $1.3 million in the first quarter of 2020. This increase in noninterest income was offset by increases in noninterest expense, such as salaries and employee benefits due to the additional headcount, as well as increases in information technology to support our growth.

“We took a lower provision for loan loss of $500,000 this quarter, a substantial decrease from the $2.0 million in the first quarter of 2020, primarily due to performance of loans as well as increased clarity in the current operating environment. Our allowance for loan and lease losses now represents 1.19% of total loans outstanding, an increase from 0.85% in the year-earlier quarter and 1.14% on a sequential-quarter basis. Total nonperforming assets decreased to 0.62% of total assets from 0.91% in the year-earlier quarter, and slightly increased from 0.58% on a sequential-quarter basis.

“We ended the year with total interest earning assets of $1.7 billion, up $260.0 million, or 18%, while growing total assets to $1.8 billion, a record for the Company. Total loans, including acquisition activity and loans from the Small Business Administration Paycheck Protection Program (“PPP”), increased 10% year-over-year, while organic loan growth increased 5%

In closing, Fountain added, “We have strived to pursue a vision of community banking that we have advanced since our founding. Our solid quarter and credit metrics allows us to continue to execute our business model while staying true to our community banking heritage. Our Board remains confident in our strategic business model as evidenced by the continued dividend payment. We look forward to the coming year with excitement and optimism as we grow our Bank and reward our shareholders.”

Balance Sheet

• Total assets totaled $1.8 billion at March 31, 2021, an increase of $289.0 million, or 19.1%, compared to the same period in 2020.
• Interest-bearing deposits in banks and federal funds sold at March 31, 2021, totaled $165.4 million, an increase of $90.2 million, or 120.0% compared to the same period in 2020. The increase is primarily attributable to the funding of approximately 2,400 PPP loans beginning in second quarter 2020, which also generated growth in our interest-bearing deposits in banks as of March 31, 2021.
• Total loans, including loans held for sale, totaled $1.09 billion at March 31, 2021, an increase of $91.2 million, or 9.1%, from the same period in 2020. Growth in core loans was primarily attributable to PPP loan originations, while mortgage demand substantially increased during 2020 into 2021 as a result of historically low interest rates.
• Total deposits totaled $1.53 billion at March 31, 2021, an increase of $233.6 million, or 18.1%, compared to the same period in 2020. The increase in deposits was primarily in noninterest-bearing and interest bearing demand deposits as a result of the PPP loan activity during 2020 and 2021.
• Total borrowings at March 31, 2021, totaled $120.6 million, an increase of $81.3 million or 94.8% compared to the same period in 2020. While the Company prepaid $24.5 million in FHLB advances, funding of PPP loans through the Paycheck Protection Program Liquidity Facility (“PPPLF”) increased outstanding borrowings substantially during 2020. At March 31, 2021, the PPPLF totaled $60.6 million with comparison to prior year not applicable.

Capital

• Colony continues to maintain a strong capital position, with ratios that exceed regulatory minimums required to be classified 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 8.70%, 12.49%, 13.57%, and 10.49%, respectively at March 31, 2021.

First Quarter Results of Operations

• Net interest income on a tax-equivalent basis for the first quarter 2021 totaled $14.3 million, compared to $12.7 million for the first quarter 2020. The increase during the quarter is primarily attributable to increases in accretion income on acquired loans and loan fee income recognized on PPP loans forgiven and a decrease in the cost of interest-bearing liabilities.
• Net interest margin was down 13 basis points over the sequential quarter primarily driven by decreased accretion income on acquired loans, a decrease in deferred fee income recognized on PPP loans and reductions in loan rates driven by Federal Reserve interest rate decreases during 2020. During the quarter ended March 31, 2021, PPP loans totaling approximately $45.4 million were forgiven through the SBA, with an additional $46.9 million of PPP loans closed related to Round 2.
• Noninterest income totaled $8.6 million for the first quarter ended March 31, 2021, an increase of $4.1 million, or 90.3%, compared to the same period in 2020. The increase was primarily attributable to growth in mortgage production income as a result of increased loan demand resulting from a historically low interest rate environment.
• Noninterest expense totaled $15.8 million for the first quarter ended March 31, 2021, compared to $13.3 million for the same period in 2020. The increase in noninterest expense primarily resulted from a $2.5 million increase in salary expense largely related to the increase in mortgage and SBSL loan production.

Asset Quality

• Nonperforming assets totaled $11.2 million and $10.2 million at March 31, 2021 and December 31, 2020, respectively.
• OREO and repossessed assets totaled $547,000 at March 31, 2021, a decrease of $489,000, or 47.2%, compared to December 31, 2020.
• Net loan recoveries were $66,000, or (0.02%) of average loans for the first quarter of 2021, compared to net charge-offs of $189,000 in the fourth quarter of 2020.
• The loan loss reserve was $12.7 million, or 1.19% of total loans, at March 31, 2021, compared to $12.1 million, or 1.14% of total loans, at December 31, 2020.

While nonperforming assets have increased year-over-year primarily as a result of increased traditional loan production, asset quality remains strong with overall improvement in asset quality ratios as of the first quarter 2021 on a year-over-year comparison.

About Colony Bankcorp

Colony Bankcorp, Inc. is the bank holding company for Colony Bank. Founded in 1975 and headquartered in Fitzgerald, Georgia, Colony operates 29 locations throughout Georgia. The Homebuilder Finance Division helps the local construction industry with building and construction loans, and the Small Business Specialty Lending Division assists small businesses with government guaranteed loans. The Bank also helps its customers achieve their goal of home ownership through Colony Bank Mortgage. Colony’s common stock is traded on the NASDAQ Global Market under the symbol “CBAN.” For more information, please visit www.colony.bank. You can also follow the Company on Facebook or on Twitter @colony_bank.

Forward-Looking Statements

Certain statements contained in this press release that are not statements of historical fact constitute “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, certain statements may be contained in the Company’s future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Company that are not statements of historical fact and constitute “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Examples of forward-looking statements include, but are not limited to: (i) projections and/or expectations of revenues, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statement of plans and objectives of Colony Bankcorp, Inc. or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; (iv) statements regarding growth strategy, capital management, liquidity and funding, and future profitability; (v) statements regarding the potential effects of the COVID-19 pandemic on the Company’s business and financial results and conditions; and (vi) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties. Factors that might cause such differences include, but are not limited to: the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; potential increases in the provision for loan losses resulting from the COVID-19 pandemic; the Company’s ability to implement its various strategic and growth initiatives; competitive pressures among financial institutions increasing significantly; economic conditions, either nationally or locally, in areas in which the Company conducts operations being less favorable than expected; interest rate risk; legislation or regulatory changes which adversely affect the ability of the consolidated Company to conduct business combinations or new operations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to COVID-19; adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic; risks that the anticipated benefits from the acquisition and disposition transactions we have engaged in or may engage in the future are not realized in the time frame anticipated or at all as a result of changes in general economic and market conditions or other unexpected factors or events. These and other factors, risks and uncertainties could cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Many of these factors are beyond the Company’s ability to control or predict.

Forward-looking statements speak only as of the date on which such statements are made. These forward-looking statements are based upon information presently known to the Company’s management and are inherently subjective, uncertain and subject to change due to any number of risks and uncertainties, including, without limitation, the risks and other factors set forth in the Company’s filings with the Securities and Exchange Commission, the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, under the captions “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors,” and in the Company’s quarterly reports on Form 10-Q and current reports on Form 8-K. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on these forward-looking statements.

Explanation of Certain Unaudited Non-GAAP Financial Measures

The measures entitled operating net income; adjusted earnings per diluted share; tangible book value per common share and operating efficiency ratio are not measures recognized under U.S. generally accepted accounting principles (GAAP) and therefore are considered non-GAAP financial measures. The most comparable GAAP measures are net income, diluted earnings per share, book value per common share and efficiency ratio, respectively.

Management uses these non-GAAP financial measures in its analysis of the Company's performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company's performance, and if not provided would be requested by the investor community. The Company believes the non-GAAP measures enhance investors' understanding of the Company's business and performance. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions. The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently.

These disclosures should not be considered an alternative to GAAP. The computations of operating net income; adjusted earnings per diluted share; tangible book value per common share and operating efficiency ratio and the reconciliation of these measures to net income, diluted earnings per share, book value per common share and efficiency ratio are set forth in the table below.