Colony Bankcorp Reports First Quarter 2022 Results and New Cost Initiative

Declares Quarterly Cash Dividend of $0.1075 Per Share

Colony Bankcorp, Inc. (Nasdaq: CBAN) (“Colony” or the “Company”) today reported financial results for the first quarter of 2022. Financial highlights are shown below.

Financial Highlights:

• Net income increased to $5.3 million, or $0.34 per diluted share, for the first quarter of 2022, compared to net income for the fourth quarter of 2021 of $4.2 million, or $0.30 per diluted share, and $4.9 million, or $0.52 per diluted share, for the first quarter of 2021.
• Operating net income of $5.8 million, or $0.37 per diluted share, for the first quarter of 2022 as compared to $5.5 million, or $0.40 per diluted share, for the fourth quarter of 2021, and $5.0 million, or $0.53 per diluted share, for the first quarter of 2021 (see Reconciliation of Non-GAAP Measures).
• $50,000 in provision for loan losses was recorded in first quarter of 2022.
• Total loans, excluding loans held for sale and loans that originated under the Paycheck Protection Program (the “PPP”), totaled $1.4 billion at March 31, 2022, an increase of $24.2 million, or 1.8% from the prior quarter.
• The Company announced a cost efficiency initiative that is expected to save $3.0 million per year starting in late third quarter 2022.
• Mortgage production was $97.2 million, with $23.9 million in refinances, and $70.0 million in purchases in the first quarter of 2022.
• Small Business Specialty Lending (“SBSL”) closed $5.8 million in Small Business Administration (“SBA”) loans and sold $13.5 million in SBA loans in the first quarter of 2022.
• In February of 2022, the Company issued and sold approximately 3.85 million shares of its common stock in an underwritten public offering, with aggregate proceeds totaling approximately $63.5 million and net proceeds totaling approximately $59.3 million.

The Company also announced that on April 21, 2022, the Board of Directors declared a quarterly cash dividend of $0.1075 per share, to be paid on its common stock on May 20, 2022, to shareholders of record as of the close of business on May 6, 2022. The Company had 17,586,333 shares of its common stock outstanding as of April 20, 2022.

Commenting on the announcement, Heath Fountain, President and Chief Executive Officer, said, “We are happy to kick off 2022 with a successful first quarter, and we are also excited to partner with the new investors and existing shareholders that participated in our capital raise. The resulting increase in common equity continues to strengthen our ability to take advantage of the myriad of opportunities available to Colony.

“I am proud of the way our team handled the truly unprecedented changes in interest rates during the quarter. For Colony, the impacts of the volatility were primarily experienced in unrealized losses in securities driving a lower tangible book value per share and in lower mortgage revenues. Even during this volatility, our lending team was able to grow loan balances (excluding PPP forgiveness) at an over 7% annualized rate during the quarter. We remain comfortable with our expectations of 8-12% loan growth for 2022.

“Today, we are also announcing a new efficiency initiative. Our plan is to reduce our banking division workforce by 24 team members, or 6% of total workforce, which includes closing two branches (Soperton and Luthersville) subject to customary regulatory approvals. This effort will save approximately $3.0 million per year when completed (which is currently expected to be late in the third quarter of 2022), and we are projecting $2.0 million of expenses related to this initiative to be recognized in second quarter of 2022. We are targeting a bank level efficiency ratio of 60% over the next three years, and this will push us further down that road.

“We still have significant opportunities to grow earnings at Colony through merger activity, market dislocation due to other acquisitions, ancillary business line acquisition and additional production hires. We continue to optimize the existing platform to take advantage of these opportunities, and expect to continue our growth as Georgia’s pre-eminent community bank.

“We recently announced that our CFO, Tracie Youngblood is leaving the Company. I would like to personally thank Ms. Youngblood for her contributions to our success during her tenure. We could not have made the progress we have without her efforts. Further, I look forward to the contributions our new CFO, Andy Borrmann will make in his new role. During his brief tenure with us, he has demonstrated an ability to add significant value to the execution of our strategy. His significant experience and results focused mindset will benefit our team and our shareholders.”

Balance Sheet

• Total assets were $2.7 billion at March 31, 2022, a slight decrease from December 31, 2021.
• Total loans, including loans held for sale, were at $1.38 billion at March 31, 2022, a slight increase of $2.1 million for the quarter from quarter ended December 31, 2021.
• Total deposits were $2.4 billion at March 31, 2022 and December 31, 2021.
• Total borrowings at March 31, 2022 totaled $75.9 million, a decrease of $12.5 million or, 14.1%, compared to December 31, 2021.

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 9.47%, 14.65%, 15.40%, and 13.29%, respectively, at March 31, 2022.

First Quarter Results of Operations

• Net interest income, on a tax-equivalent basis, for the first quarter of 2022 totaled $19.3 million, compared to $14.4 million for the first quarter 2021. The increase during the quarter 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 37 basis points from first quarter 2021, but only decreased three basis points from fourth quarter 2021.
• Noninterest income totaled $9.2 million for the first quarter ended March 31, 2022, an increase of $576,000, or 6.7%, 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 decrease in mortgage fee income.
• Noninterest expense totaled $21.8 million for the first quarter ended March 31, 2022, compared to $15.8 million for the same period in 2021. The increase in noninterest expense primarily resulted from a $3.3 million increase in salaries and benefits expense, $1.1 million in information technology expenses and professional fees, as well as $448,000 increase in acquisition related expenses primarily due to the amortization of intangibles related to prior acquisitions.

Asset Quality

• Nonperforming assets totaled $6.5 million and $5.8 million at March 31, 2022 and December 31, 2021, respectively, an increase of $686,000.
• OREO and repossessed assets totaled $294,000 at March 31, 2022, a decrease of $36,000, or 11% compared to the previous quarter.
• Net loans charged-off were $41,000, or 0.01% of average loans for the first quarter of 2022, compared to net recoveries of $17,000 or (0.01)% for the fourth quarter of 2021.
• The loan loss reserve was $12.9 million, or 0.95% of total loans, at March 31, 2022, compared to $12.9 million, or 0.96% of total loans, at December 31 2021.

As noted above and in the table on page 7, overall asset quality remains strong.

Earnings call information

The Company will host a teleconference at 9:00 a.m. EDT on Friday, April 22, 2022, to discuss the recent results and answer appropriate questions. The conference call can be accessed by dialing 1-844-200-6205 (or 1-929-526-1599 for international participants). The conference call access code is 583813. A replay of the call will be available until Friday, April 29, 2022. To listen to the replay, dial 1-866-813-9403 and enter the access code 904958.

About Colony Bankcorp

Colony Bankcorp, Inc. is the bank holding company for Colony Bank. Founded in 1975 and headquartered in Fitzgerald, Georgia, Colony operates 41 locations throughout Georgia. At Colony Bank, we offer a wide range of banking services including personal banking, business banking, mortgage solutions, government guaranteed lending solutions, and more. We have expanded our services to also include consumer insurance products, such as automotive, homeowners, and other insurance needs for our community. 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 social media.

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 effects of the COVID-19 pandemic and related variants 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 continued impact of the COVID-19 pandemic and related variants on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; 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; 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 and related variants; higher inflation and its impacts; the effects of war or other conflicts including the impacts related to or resulting from Russia’s military action in Ukraine; risks related to the Company’s recently completed acquisitions, including that the anticipated benefits from the recently completed acquisitions 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; the risks associated with the Company’s pursuit of future acquisitions; and general competitive, economic, political 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, 2021, 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, tangible equity to tangible assets, 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, total equity to total assets, and efficiency ratio, respectively. Operating net income and operating efficiency ratio both exclude acquisition-related expenses. Acquisition-related expenses include fees associated with current period acquisitions and ongoing amortization of intangibles related to prior acquisitions. Adjusted earnings per diluted share includes the adjustments to operating net income. Tangible book value per common share and tangible equity to tangible assets exclude goodwill and other intangibles.

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, tangible equity to tangible assets, and operating efficiency ratio and the reconciliation of these measures to net income, diluted earnings per share, book value per common share, total equity to total assets, and efficiency ratio, are set forth in the table below.