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CB

COLONY BANKCORP INC (CBAN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 marked a clear inflection: net interest margin expanded 20 bps sequentially to 2.84%, lifting net interest income by ~$1.9M QoQ, with support from stronger low-cost deposits and easing funding competition; GAAP EPS rose to $0.42 and adjusted EPS to $0.44 .
  • Noninterest income improved 2% QoQ and 11% YoY, led by Small Business Specialty Lending (SBSL) gains on sale; operating efficiency ratio improved to 67.8% from 70.3% in Q3 as revenue outpaced expenses .
  • Balance sheet mix improved: deposits +$43.0M QoQ, with growth in interest-bearing DDA and savings and a $27.3M decline in time deposits; loans declined $43.1M on anticipated payoffs at lower rates (minimal yield impact) .
  • Capital returns and positioning: dividend raised to $0.115 per share; 35,000 shares repurchased at $15.40; listing moved to NYSE in November 2024, improving liquidity optics .
  • 2025 setup: management guides to modest NIM expansion through 2025, loan growth of ~4–6% weighted to 2H, ~21% effective tax rate, and ~$21M+ quarterly NIE as the bank invests in growth; securities sales paused given improved liquidity/margin trajectory .

What Went Well and What Went Wrong

What Went Well

  • Margin and NII inflected: “margin…gained 20 basis points up to 2.84%,” driving NII up ~+$1.9M QoQ as low/no-cost DDA improved and funding competition cooled .
  • Diversified fee strength: Noninterest income up to $10.3M (+$0.2M QoQ; +$1.0M YoY), led by SBA gain-on-sale; operating efficiency improved (67.8%) .
  • Deposit quality improved: Deposits +$43.0M QoQ with mix shift toward interest-bearing DDA (+$44.7M) and savings (+$3.2M), partially offset by time deposits (-$27.3M), reducing cost-of-funds pressure .

Quotes:

  • CEO: “Strong deposit growth…lower overall cost of funds…resulted in an increase in margin of 20 basis points compared to the prior quarter” .
  • CFO: “We expect to see a modest increase in margin throughout 2025” and “effective tax rate around 21%” .

What Went Wrong

  • Loan balances fell: Loans (ex-HFS) -$43.1M QoQ on anticipated large payoffs; net charge-offs rose to $1.5M (0.33% of avg loans) on one bank-side loan .
  • Operating expenses stepped up: Noninterest expense rose to $21.3M (+$0.4M QoQ), partly from digital platform implementation costs and production-related comp; management signaled NIE likely ~$21M+ per quarter as growth investments resume .
  • Mortgage softer QoQ: Mortgage sales fell QoQ on the 10-year spike late in the quarter; management expects seasonal softness in Q1 2025 in SBSL and Mortgage .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Net Interest Income ($MM)18.87 18.41 18.54 20.47
Noninterest Income ($MM)9.31 9.50 10.08 10.31
Total Income (NII + Noninterest) ($MM)28.18 27.91 28.62 30.78
Provision for Credit Losses ($MM)1.50 0.65 0.75 0.65
Net Income ($MM)5.60 5.47 5.63 7.43
Diluted EPS ($)0.32 0.31 0.32 0.42
Adjusted Diluted EPS ($)0.31 0.34 0.35 0.44
Net Interest Margin (%)2.70 2.68 2.64 2.84
Efficiency Ratio (%)69.51 72.85 72.79 69.11
Operating Efficiency Ratio (%)70.35 70.62 70.27 67.80
Consensus EPS (S&P Global)N/AN/AN/AN/A
Consensus Revenue (S&P Global)N/AN/AN/AN/A
  • Note on estimates: Wall Street consensus from S&P Global was unavailable at time of analysis; therefore, beat/miss vs estimates cannot be determined.

Segment results (pre-tax “Segment income”):

Segment ($MM)Q4 2023Q3 2024Q4 2024
Banking5.02 3.86 5.79
Mortgage0.02 0.28 -0.09
SBSL0.57 1.50 1.73
Total Consolidated Net Income5.60 5.63 7.43

Key balance sheet & credit KPIs:

KPIQ4 2023Q3 2024Q4 2024
Loans, Net ($MM)1,865.10 1,866.37 1,824.00
Deposits ($MM)2,544.79 2,524.97 2,567.94
NPLs / Total Loans (%)0.54 0.65 0.59
NPAs / Total Assets (%)0.35 0.41 0.36
ACL / Total Loans (%)0.98 1.04 1.03
Net Charge-offs / Avg Loans (%)0.15 0.03 0.33

Guidance Changes

MetricPeriodPrevious Guidance (Q3 Call)Current Guidance (Q4 Call/PR)Change
Net Interest Margin2025Gradual expansion beginning late 2024 into 2025; margin bottomed Modest increase throughout 2025; QoQ expansion smaller than Q4 step-up Maintained (refined cadence)
Loan Growth2025Return to more normalized growth in 2025; pipelines improving ~4–6% for 2025, back-half weighted Clarified (quantified)
Noninterest Expense (quarterly)2025Operating net NIE/avg assets ~1.40% target; discipline to continue NIE around ~$21M per quarter or slightly higher as growth investments resume Maintained with investment caveat
Effective Tax Rate2025N/A~21% New
Securities Portfolio Actions2025Potential for continued restructuring; possibly larger one-off Pause quarterly sales near term; re-evaluate as conditions evolve Lowered (pause)
DividendOngoing$0.1125 declared in Q3 Increased to $0.115 per share Raised
Share Repurchase2025Ongoing program; 35k shares repurchased in Q3 35k shares repurchased in Q4; authorization extended through end of 2025 Maintained/Extended

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Net Interest MarginQ2: NIM near trough, expect modest 2H improvement . Q3: bottoming; gradual expansion ahead .+20 bps QoQ to 2.84%; modest 2025 increases expected .Improving, inflected
Deposit Costs/MixQ2: Seasonality, cost increases slowing . Q3: cost pressures easing, rate cuts would help .Deposits +$43M QoQ; growth in low-cost transaction DDA; cost of funds down 13 bps .Favorable mix shift
Loan GrowthQ2: Modest; pipelines building; Q4 payoffs expected . Q3: similar activity; payoffs likely .Loans -$43M on expected payoffs; 2025 growth guided 4–6% in 2H .Near-term headwind; improving pipeline
Securities PortfolioQ2/Q3: Ongoing small restructurings; one-time larger sale possible .Q4: $401k loss on sales; plan to pause quarterly sales near term .Shift to pause
Fee Businesses (SBSL/Mortgage)Q2: Mortgage profitable; SBSL strong; seasonality noted . Q3: Both solid; seasonality expected .SBSL revenue up QoQ; mortgage softer on 10Y spike; Q1 2025 seasonal softness likely .Steady; seasonal
Technology/Process (RPA, Digital)Q2: New digital platform; data-driven growth . Q3: Director of Optimization hire .RPA projects slated mid-year; efficiency to enable scalable growth; online banking implementation costs .Execution continues
M&A/Team BuildsQ2/Q3: Opportunistic adds; M&A picked up .Opportunistic hiring; focus on long-term growth and strategy; leadership promotions .Increasing focus
Listing/Liquidity—Transferred to NYSE Nov-2024; liquidity/visibility benefit .Positive structural

Management Commentary

  • CEO (Heath Fountain): “Strong deposit growth…along with easing from the Federal Reserve contributed to a lower overall cost of funds which resulted in an increase in margin of 20 basis points compared to the prior quarter.” On loan balances: “several anticipated large payoffs…carried lower rates and had minimal impact on earning asset yields.” Loan growth to “resume in 2025…stronger in the latter half of the year.”
  • CFO (Derek Shelnutt): “Net interest income increased over $1.9 million and margin increased 20 basis points to 2.84%…We expect to see a modest increase in margin throughout 2025.” “Noninterest expenses around $21 million per quarter or slightly higher as we shift back to…growth.” “Anticipate a 2025 effective tax rate around 21%.”
  • Capital/returns: Dividend increased to $0.115 per share; 35,000 shares repurchased at $15.40; buyback authorization extended through 2025 . NYSE listing completed Nov-2024 to enhance liquidity .

Q&A Highlights

  • Loan growth composition: Expect broad-based growth without a specific vertical; CRE likely to grow given portfolio mix; activity picked up post-election .
  • Expense cadence: Hiring to be steady but opportunistic (M&A-driven talent availability may create lumpiness); emphasis on profitable growth and pricing discipline .
  • Technology priorities: Leverage new digital platform; expand treasury capabilities; deploy RPA mid-year to scale growth efficiently (not immediate opex cuts) .
  • Seasonality/near-term cadence: Expect Q1 2025 to be softer for SBSL and Mortgage; margin increases in 2025 smaller QoQ than Q4 step-up given seasonal DDA declines and a slower Fed .

Estimates Context

  • Consensus estimates for Q4 2024 EPS and revenue from S&P Global were unavailable at the time of analysis due to service limits. As a result, we cannot assess beats/misses versus Wall Street. Management’s results show sequential improvements in NIM, NII, and adjusted EPS, with total income up QoQ and YoY .

Key Takeaways for Investors

  • Margin has turned: 20 bps QoQ NIM expansion to 2.84% with cost-of-funds easing and improved deposit mix; expect modest additional expansion in 2025, albeit smaller QoQ steps than Q4 .
  • Fee diversification working: SBSL delivered strong gain-on-sale revenue; mortgage profitability is rate- and seasonality-sensitive, but overall noninterest income trend is positive YoY .
  • Near-term loan growth muted by payoffs; 2025 growth a 2H story: guided 4–6% for 2025 with back-half weighting as pipelines build .
  • Expense base stepping up to support growth: NIE likely ~$21M+ per quarter as the bank invests in digital, RPA, and talent; watch for opex leverage as revenue expands .
  • Securities restructuring pause reduces one-off losses; combined with lower funding costs, supports earnings durability into 2025 .
  • Capital return intact and stock liquidity improved: dividend raised; buyback extended; NYSE listing enhances visibility and potential trading liquidity .
  • Setup for 2025: Management targets ~21% tax rate and 1.00% ROA by Q4 2025, contingent on margin progress, fee execution, and measured loan growth .

Appendix: Additional Context from Q2/Q3 2024

  • Q2 2024: NIM 2.68%; adjusted EPS $0.34; deposit seasonality impacted balances; mortgage profitable; SBSL strong .
  • Q3 2024: Early signs of NII improvement despite slight NIM compression; expectation that NIM bottomed; continued securities restructuring and deposit repricing to aid 2025 .