8-K: Colony Bankcorp Q3 2025: Net Income Dips, Loan Growth Strong

Colony Bankcorp, Inc. reports third quarter 2025 financial results with a decrease in net income but strong loan growth and continued net interest margin expansion.

Summary

• Net income was $5.8 million, or $0.33 per diluted share, for the third quarter of 2025, compared to $8.0 million, or $0.46 per diluted share, for the second quarter of 2025, and $5.6 million, or $0.32 per diluted share, for the third quarter of 2024.
• Operating net income was $8.2 million, or $0.47 of adjusted earnings per diluted share, for the third quarter of 2025, compared to $8.0 million, or $0.46 of adjusted earnings per diluted share, for the second quarter of 2025, and $6.2 million, or $0.35 of adjusted earnings per diluted share, for the third quarter of 2024.
• Provision for credit losses was $900,000 in the third quarter of 2025, compared to $450,000 in the second quarter of 2025, and $750,000 in the third quarter of 2024.
• Total loans, excluding loans held for sale, were $2.04 billion at September 30, 2025, an increase of $43.5 million, or 2.18%, from the prior quarter.
• Total deposits were $2.58 billion at September 30, 2025, an increase of $28.1 million from $2.56 billion at June 30, 2025.
• Mortgage production was $87.3 million, and mortgage sales totaled $65.1 million in the third quarter of 2025, compared to $94.9 million and $65.3 million, respectively, for the second quarter of 2025.
• Small Business Specialty Lending (SBSL) closed $28.4 million in SBA loans and sold $18.2 million in SBA loans in the third quarter of 2025, compared to $15.8 million and $17.9 million, respectively, for the second quarter of 2025.
• The Board of Directors declared a quarterly cash dividend of $0.1150 per share, to be paid on November 19, 2025, to shareholders of record as of November 5, 2025.
• Net interest margin for the third quarter of 2025 was 3.17%, compared to 2.64% for the third quarter of 2024 and 3.12% for the second quarter of 2025.
• Nonperforming assets totaled $15.2 million at September 30, 2025, an increase of $3.8 million from $11.4 million at June 30, 2025.
• Net loans charged-off were $1.8 million, or 0.36% of average loans, for the third quarter of 2025, compared to $1.0 million, or 0.21%, for the second quarter of 2025.
• The credit loss reserve was $18.1 million, or 0.89% of total loans, at September 30, 2025, compared to $19.2 million, or 0.96% of total loans, at June 30, 2025.
• Total assets were $3.15 billion at September 30, 2025, an increase of $37.1 million from June 30, 2025.
• The planned merger with TC Federal Bank is progressing smoothly and is anticipated to close in the fourth quarter of 2025, with systems conversion in the first quarter of next year.

Sentiment

Score: 6

Explanation: The company reported strong operating performance with continued net interest margin expansion and loan growth, and the TC Federal Bank merger is on track. However, GAAP net income declined quarter-over-quarter, and there was an increase in provision for credit losses, nonperforming assets, and noninterest expenses, including a significant wire fraud loss and acquisition-related costs.

Positives

• Operating net income increased to $8.2 million, or $0.47 adjusted diluted EPS, for Q3 2025, showing strong underlying performance compared to both prior quarter and prior year.
• Net interest margin expanded for the fourth consecutive quarter to 3.17% in Q3 2025, up from 2.64% in Q3 2024 and 3.12% in Q2 2025.
• Total loans, excluding loans held for sale, increased by $43.5 million (2.18% quarter-over-quarter) to $2.04 billion, reflecting healthy customer demand.
• Total deposits increased by $28.1 million to $2.58 billion, with a significant increase in time deposits of $71.1 million.
• Small Business Specialty Lending (SBSL) loan closings significantly increased to $28.4 million in Q3 2025 from $15.8 million in Q2 2025.
• A regular quarterly cash dividend of $0.1150 per share was declared, maintaining shareholder returns.
• The company maintained a strong capital position, with ratios exceeding regulatory minimums required to be considered 'well-capitalized' (e.g., preliminary Tier One Leverage Ratio of 9.91% and Total Risk-Based Capital Ratio of 16.00%).
• Strategic investment in talent is proceeding well, with the successful addition of highly experienced bankers in several key markets.
• The planned merger with TC Federal Bank is progressing smoothly and is on track for a Q4 2025 closing, with systems conversion expected in Q1 2026.
• Tangible book value per common share increased to $14.20 at September 30, 2025, from $13.73 at June 30, 2025.

Negatives

• GAAP net income decreased to $5.8 million ($0.33 diluted EPS) in Q3 2025 from $8.0 million ($0.46 diluted EPS) in Q2 2025.
• Provision for credit losses increased to $900,000 in Q3 2025 from $450,000 in Q2 2025.
• Mortgage production decreased to $87.3 million in Q3 2025 from $94.9 million in Q2 2025.
• Noninterest expense increased to $24.6 million in Q3 2025 from $20.8 million in Q3 2024, driven by increases in salaries and employee benefits, occupancy and equipment, information technology expenses, professional fees, acquisition-related expenses, and a $1.252 million loss related to a wire fraud incident.
• Nonperforming assets increased by $3.8 million to $15.2 million at September 30, 2025, from $11.4 million at June 30, 2025.
• Net loans charged-off increased to $1.8 million (0.36% of average loans) in Q3 2025 from $1.0 million (0.21%) in Q2 2025.
• The allowance for credit losses to total loans decreased to 0.89% at September 30, 2025, from 0.96% at June 30, 2025, despite the increase in nonperforming assets and charge-offs.
• A loss on sales of securities of $1.039 million was recorded in Q3 2025.

Risks

• The impact of current and future economic conditions, including declines in the real estate market, tariffs or trade wars, high unemployment rates, inflationary pressures, changes in interest rates (including prolonged elevated rates), and slowdowns in economic growth, as well as financial stress on borrowers.
• The risk of reductions in benchmark interest rates and their resulting impacts on net interest income.
• Potential impacts of adverse developments in the banking industry, such as high-profile bank failures, on customer confidence, deposit outflows, liquidity, and regulatory response.
• Risks arising from negative media coverage and perceived instability in the banking industry or sector.
• The risks of changes in interest rates and their effects on the level, cost, and composition of, and competition for, deposits, loan demand and timing of payments, and the values of loan collateral, securities, and interest-sensitive assets and liabilities.
• The ability to attract new or retain existing deposits, to retain or grow loans or additional interest and fee income, or to control noninterest expense.
• The effect of pricing pressures on the company's net interest margin.
• The failure of assumptions underlying the establishment of reserves for possible credit losses, fair value for loans, and other real estate owned.
• Changes in real estate values.
• The company's ability to implement its various strategic and growth initiatives.
• Increased competition in the financial services industry, particularly from regional and national institutions, as well as from fintech companies.
• Economic conditions, either nationally or locally, in areas where the company operates being less favorable than expected.
• Changes in the prices, values, and sales volumes of residential and commercial real estate.
• Developments in the mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance.
• Legislation or regulatory changes which adversely affect the ability of the consolidated company to conduct business combinations or new operations.
• Adverse results from current or future litigation, regulatory examinations, or other legal and/or regulatory actions.
• Significant turbulence or a disruption in the capital or financial markets and the effect of a fall in stock market prices on investment securities.
• The effects of war or other conflicts.
• General risks related to the company's merger and acquisition activity, including integrating and realizing the expected financial benefits of previous or pending acquisitions, and the pursuit of future acquisitions.
• Risks associated with the Proposed Merger with TC Bancshares, Inc., including: cost savings and revenue synergies may not be realized or take longer than anticipated; disruption from the Proposed Merger with customers, suppliers, employees, or other business partners; occurrence of any event that could terminate the merger agreement; risk of successful integration of TC Bancshares' business; failure to obtain necessary shareholder or governmental approvals; the amount of costs, fees, expenses, and charges related to the Proposed Merger; reputational risk and reaction of stakeholders; failure of closing conditions or unexpected delays; integration operations being materially delayed, more costly, or difficult than expected; the possibility that the Proposed Merger may be more expensive to complete than anticipated; and dilution caused by the company's issuance of additional shares of its common stock.
• The impact of emerging technologies, such as generative artificial intelligence.
• Fraud or misconduct by internal or external actors, and system failures, cybersecurity threats or security breaches, and the cost of defending against them.
• A deterioration of the credit rating for U.S. long-term sovereign debt, actions the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding debt ceiling and the federal budget.
• A potential U.S. federal government shutdown and its resulting impacts.
• General competitive, economic, political, and market conditions or other unexpected factors or events.

Future Outlook

Management anticipates the merger with TC Federal Bank to close in Q4 2025, with systems conversion in Q1 2026, positioning the company to realize strategic benefits early next year. They are excited about future growth, with strategic investments in talent expected to deliver significant long-term shareholder value. Loan growth momentum is expected to moderate to a more normalized, sustainable pace, and the company aims to return to an 8-12% organic growth run rate by the end of 2025.

Management Comments

• "We are proud of our performance in the third quarter, which demonstrates the success of our team in executing our strategic priorities while continuing to provide a superior level of service to our customers." Heath Fountain, Chief Executive Officer.
• "Our financial performance this quarter was highlighted by an increase in our operating revenue, driven by another consecutive quarter of net interest margin expansion and strong noninterest income." Heath Fountain, Chief Executive Officer.
• "Loan growth has been especially strong this year, reflecting healthy customer demand and the strength of our lending teams across our markets. As expected, we are now seeing that momentum moderate to a more normalized pace consistent with our growth strategy, which positions us well for balanced, sustainable performance." Heath Fountain, Chief Executive Officer.
• "Our planned merger with TC Federal Bank is progressing smoothly and in line with expectations. We continue to anticipate closing the transaction in the fourth quarter and completing the systems conversion in the first quarter of next year, positioning us to realize the strategic benefits of the combination early next year." Heath Fountain, Chief Executive Officer.
• "Looking ahead, we are excited about the future growth trajectory of the company. Our strategic investment in talent is proceeding exceptionally well, with the successful addition of highly experienced bankers in several key markets. We are confident that these investments will deliver significant long-term value to our shareholders." Heath Fountain, Chief Executive Officer.

Industry Context

The company positions itself as Georgia's largest community bank by deposit market share (among banks under $10 billion in assets), indicating a strong regional presence. Its M&A strategy, targeting smaller banks in Georgia and contiguous states, aligns with broader industry consolidation trends in community banking. The focus on managing interest rate changes, deposit competition, and asset quality reflects common challenges faced by financial institutions. Furthermore, the company's investment in fintech funds, partnerships, and leveraging AI for efficiency and customer experience demonstrates an adaptation to emerging technologies and evolving customer expectations within the financial services sector.

Comparison to Industry Standards

• Colony Bankcorp is identified as Georgia's largest community bank by deposit market share, specifically among institutions with less than $10.0 billion in total assets, according to FDIC data.
• The company aims to achieve a return on assets target of 1.00% and to be in the top quartile of its peers, indicating a strategic goal to outperform industry averages.
• The operating net noninterest expense to average assets ratio of 1.48% is stated as being maintained below the peer median, suggesting a favorable position in terms of operational efficiency compared to competitors.
• The M&A strategy targets a significant number of smaller banks (306 banks under $600 million and 88 banks between $600 million and $1.2 billion) in Georgia and contiguous states, indicating a specific market segment for consolidation efforts.

Stakeholder Impact

• Shareholders: Will receive a quarterly cash dividend of $0.1150 per share. Face potential dilution from the stock consideration in the TC Federal Bank merger. Expected to benefit from long-term value creation through strategic investments and the merger.
• Customers: Will benefit from a continued focus on superior service, enhanced convenience through technology, and expanded product offerings via fintech partnerships.
• Employees: Strategic investment in talent and the addition of experienced bankers indicate growth opportunities. Potential for integration challenges or opportunities arising from the TC Federal Bank merger.
• Suppliers/Business Partners: May experience disruption related to the Proposed Merger with TC Bancshares.
• Creditors: The company maintains a strong capital position, exceeding regulatory minimums, which is favorable for creditors.

Next Steps

• Host an investor earnings conference call on Thursday, October 23, 2025, at 9:00 a.m. ET.
• Anticipate closing the merger with TC Federal Bank in the fourth quarter of 2025.
• Anticipate completing the systems conversion for the TC Federal Bank merger in the first quarter of next year (Q1 2026).
• Continue strategic investment in talent, adding experienced bankers in key markets.
• Aim to return to an 8-12% organic growth run rate by the end of 2025.
• Focus on process improvement and customer experience, including utilization of Robotic Process Automation ("RPA") and other innovative technology.
• Leverage AI to streamline workflows, reduce manual processes, and scale operations efficiently.
• Continue investing in fintech funds and expanding through fintech partnerships.
• Implement a data warehouse to unify information across the organization.
• Proactive outreach effort to generate M&A opportunities in Georgia and contiguous states.

Key Dates

Recommendation

While Colony Bankcorp demonstrated strong operating performance with expanding net interest margin and solid loan growth, the quarter-over-quarter decline in GAAP net income, increased provision for credit losses, and a rise in nonperforming assets warrant caution. The significant noninterest expenses, including a wire fraud loss and acquisition costs, impacted profitability. The ongoing merger with TC Federal Bank presents future growth potential and synergies, but also integration risks and near-term dilution. Given the mixed financial signals and the pending merger, a "hold" recommendation is appropriate as investors await clearer execution on integration and sustained improvement in GAAP profitability and asset quality.

Keywords

Colony Bankcorp, CBAN, Q3 2025 Earnings, Financial Results, Banking, Net Interest Margin, Loan Growth, Deposits, Dividend, SEC Filing, 8-K, TC Federal Bank Merger, SBA Lending, Mortgage Banking, Asset Quality, Nonperforming Assets, Credit Losses, Georgia Banking, Financial Services