Colony Bankcorp, Inc.

Good morning, ladies and gentlemen, and welcome to Colony Bank three-quarter 2023 conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded today, October 26, 2023. I would now like to turn the conference over to Derek Sheldon, Chief Financial Officer. Please go ahead.

Thanks, Sergio. Before we get started, I would like to go through our standard disclosures. Certain statements we make on this call could be constituted as forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Current prospective investors are cautioned that any such forward-looking statements are not guarantees for future performance but involve known and unknown risk and uncertainty. Factors that could cause these differences include but are not limited to pandemics, variations of the company's assets, businesses, cash flows, financial condition, prospects, and other results of operation. I would also like to add that during our call today, we will reference both our earnings release and our quarterly investor presentation, both of which were filed yesterday. So please have those available to reference. And with that, I will turn the call over to our Chief Executive Officer, Keith Fountain.

Thanks, Derek. I want to Thank everyone for being on the call today and for your interest in Colony. We're pleased with our results for the third quarter as we continue to navigate a challenging and changing economic environment. Our earnings increased over last quarter as we began to see the results of many strategic initiatives we've been working on over the past several quarters and will continue to work on in the quarters to come. I'm going to share an overview of the activity from the quarter and then hand it over to Derek, who's going to go into more detail results. Our net interest income for the quarter increased as we continued to diligently navigate the way we price loans and manage our customer relationships on the deposit side. We also saw a full impact of some earlier strategies, such as the hedging we put in place in Q2, which has positively benefited our interest expense. We're glad to share that our non-interest incomes increase quarter over quarter, and it represents about 33% of our total revenue. We've seen increases in our newer complementary lines of business as well as increases in deposit-related charges and fees. We remain focused on growing our complementary lines of business and feel it's important to diversify our non-interest income sources, especially with those that are less sensitive to the rate and economic environments. There's certainly been some slowdown in our mortgage division driven by the current rate environment, and we continue to make changes there to our staffing and product mix in order to achieve break-even there. We're really proud of our non-interest expense efforts. Non-interest expenses declined half a million dollars from last quarter. Teams worked really hard over the past several quarters to reduce expenses in order to reduce be more complimentary to the moderate growth projections, and we're seeing the impact of those efforts. And even though we're mindful of the expenses, and we do look at that alongside our long-term strategies, and we've been able, even with the expense initiatives, to continue to invest in technology and infrastructure that will benefit our customers now and in the future. This past quarter, we went live with a new data warehouse and API technology that will allow us to better manage and use our data. It'll also allow us to integrate other platforms and FinTech products with our core. We think this is a big step forward in our long-term innovation strategy and is going to have positive impacts on how we serve our customers. how we market our products and enhance our operations and profitability. We also continue to look for opportunities to add to our team through strategic hires where it will enhance long-term strategy, even while we have seen decreases in our overall staffing levels. Asset quality remains strong. We saw a decrease in non-performing loans from the prior quarter. Our provision was up this quarter and our net charge-offs were up primarily due to a few SBA loans from our SBSL division where the portion of the loan that's not government guaranteed was charged off. We mentioned this last quarter that we were seeing some weakness there and of course our SBA Portfolio is primarily variable rate loans, and so they've seen the most increases quickly in their payments. This is an area where we may see some small charge-offs going forward, but really it was a small number of loans impacted, and our team's doing a good job of managing those. Our loan growth slowed significantly. from the previous quarter to an annualized rate of about 6%. A lot of the growth came from consumer, particularly marine RV during this season, the summer buying season. We expect that our loan portfolio growth for this and our overall portfolio to continue to slow for the next few quarters. Our total deposits We're down a little from last quarter. And historically, we've seen a slight dip in the third quarter. Our deposit base is very diversified. We have a slide on that in the investor presentation. But we do see some seasonality from municipalities as they spin down during the year and from our rural customer base and agriculture. as we see the activity there. And we would generally expect both of those segments to increase in the fourth quarter as agricultural producers sell crops and as municipalities see property tax payments come in. Our total deposits are still up for the whole year, despite being down for the quarter. They're up about 4% for the whole year. Our margin was flat quarter over quarter, actually increased one basis point. The repricing of deposits has slowed, but the environment remains competitive, and we will continue to see our overall cost of funds increase. While we stayed flat, our modeling shows we could see still a potential for another five to ten basis points of margin compression over the next quarter or two. So with that, I'm going to turn it over to Derek to go over the financials in a little more detail.