Going
beyond.
2O23 Annual Report to Shareholders
Colony Bankcorp, Inc. is the bank holding company for Colony Bank. Founded
in Fitzgerald, Georgia in 1975, Colony operates locations throughout Georgia
and has expanded to serve Birmingham, Alabama, as well as Tallahassee
and the Florida Panhandle. At Colony Bank, we offer a range of banking
solutions for personal and business customers. In addition to traditional
banking services, Colony provides specialized solutions including mortgage,
government guaranteed lending, consumer insurance, wealth management,
and merchant services. 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.
$3.05B
Total Assets
Net Income
Growth 11.3%
2.2 %
Increase in
Total Deposits
The Colony Bank logo features a symbolic lotus flower within its icon, representing the Company’s strength
and resilience. Paired with upward rays of sunshine, it signifies the potential for a new day and highlights
our commitment to supporting our customers’ needs. This design further reflects our dedication to enabling
progress and making a positive impact in the lives of those we serve.
1
(dollars in thousands, except per share amounts)
2023
2022
Financial position at December 31,
Total assets
$ 3,053,422
$ 2,936,570
Loans (net of unearned income)
1,883,470
1,737,106
Allowance for credit losses
18,371
16,128
Deposits
2,544,790
2,490,997
Stockholders’ equity
254,935
230,268
Common book value per share
14.51
13.08
Tangible common book value per share
11.49
9.98
Operations for the year ended December 31,
Net interest income
$
78,244
$
80,672
Provision for credit losses
3,600
3,370
Net interest income after provision for
credit losses
74,644
77,302
Noninterest income
35,634
35,025
Noninterest expense
83,065
89,475
Income before income taxes
27,213
22,852
Income taxes
5,466
3,310
Net income
$
21,747
$
19,542
Net income available to common
shareholders
$
21,747
$
19,542
Basic earnings per share
$
1.24
$
1.14
Diluted earnings per share
$
1.24
$
1.14
Cash dividends per share
$
0.44
$
0.43
Operating ratios
Net interest margin
2.83%
3.20 %
Return on average assets
0.72%
0.71 %
Return on average total equity
9.10%
8.27 %
Efficiency
72.94%
77.34 %
Financial Highlights
1
Since our founding in 1975, Colony Bank has
existed to enable progress for the customers,
team members, shareholders, and communities
we serve. To ensure our success in carrying
out this purpose, we remain focused on our
mission to build a sustainable, high-performing
independent bank. Despite navigating through
a challenging year across the industry, we are
pleased with the strides we made that propelled
us even closer to our mission.
Throughout 2023, the banking industry faced
strong headwinds from three bank failures,
a volatile interest rate environment, and
rampant fraud. In the face of these persistent
challenges, Colony Bank remained nimble
in adapting to the changing landscape and
is well-positioned for future challenges and
opportunities.
We want to start by thanking our team members
for their hard work and dedication through
the challenges of this past year. Through their
efforts, we successfully adapted our business
model, maintained stability in earnings and
asset quality, invested in new technology, and
expanded our presence in new markets.
Adapting to Economic Conditions
Since the start of the Federal Reserve’s series of
rate hikes, we have changed the way we operate
our business. This involved a heightened
focus on efficiency, developing core customer
relationships, improving our complementary
lines of business, and managing expenses to
align with the current environment.
We started last year with an initiative to
enhance operational efficiency by reducing
noninterest expenses and sustained this focus
throughout the year. Through this disciplined
approach to expense management, we have
positioned ourselves to withstand economic
challenges and ensure long-term success.
Additionally, we prioritized creating efficiencies
through process enhancements, streamlining
workflows, and optimizing resource utilization.
These efforts enable us to dedicate more time
to serving our customers promptly and with a
more simple process.
While our lending appetite remains
prudently lower than in recent years, we have
concentrated on deposit growth and sought
opportunities to leverage our comprehensive
suite of banking solutions. Our efforts
have yielded success in expanding our core
customer relationships. Furthermore, we have
implemented robust internal referral initiatives
to enhance cross-selling opportunities for our
complementary lines of business.
Amidst industry-wide concerns about rising
interest rates and the stability of the banking
industry following the bank failures, we
seized the opportunity during this past year
to communicate and educate our customers
on what differentiates Colony Bank from our
competitors. As a community bank, dedicated
to delivering solutions that exceed our
customers’ expectations, it’s our collaborative
approach and consultative advice that sets
us apart as a trusted partner in helping them
achieve their financial goals.
2
To Our Shareholders
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
3
Mark H. Massee
Chairman of the Board
Heath Fountain
Chief Executive Officer
As we celebrate the 50th anniversary of Colony Bank next
year, we reflect on the remarkable journey that has brought
us to this significant occasion. We have never been more
excited or optimistic about the future of the Company.
$35,634
$1,865,099
$2,936,570
4
Total Assets
(in Thousands)
$2,000,000
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
‘19
‘20 ‘21
‘22 ‘23
Total Net Loans
(in Thousands)
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
‘19
‘20 ‘21
‘22 ‘23
Non-Interest Income
(in Thousands)
$1,515,313
$1,763,974
$2,691,715
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
‘19
‘20 ‘21
‘22 ‘23
$14,762
$24,244
$36,290
$961,951
$1,047,376
$1,325,067
Investing in the Future
In 2023, we took decisive actions to keep moving
forward on our long-term mission and to
ensure stability in our returns. While we made
necessary adjustments to our business model,
we stayed true to who we are as an organization
and continued to make strategic investments in
people, technology, and growth opportunities.
In early August, we were pleased to open a new
state-of-the-art, full-service banking center
in the heart of Northwest Macon. With two
established offices located in the neighboring
cities of Warner Robins and Centerville, this
addition was in line with our commitment to
strengthening our presence in this area.
Later in the year, we announced our expansion
into the state of Florida with the addition of an
industry veteran to lead our efforts in fostering
connections and identifying opportunities
to deepen customer relationships beginning
in the Tallahassee and Florida Panhandle
markets with future expansion through North
Florida. These areas represent key growth
markets where we believe our community
bank model will greatly benefit customers in
the region.
As we navigate an ever-evolving landscape of
customer preferences, we remain dedicated
to enhancing their experience through
innovation and personalization. Last year
we began working on a new online banking
platform and online account opening, both of
which will launch later this year. In addition,
we are focused on data mining and analysis to
better serve our customers.
Cultivating a Strong
Organizational Culture
At Colony Bank, we recognize that our
long-term success hinges on the strength
of our team. To this end, we established
a Culture Focus Group last year consisting
of team members in various areas across
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
$3,053,422
$1,720,978
$35,025
5
the organization. This group is tasked with
fostering a vibrant work environment. Based
on feedback received from this group and
other organizational feedback channels, we
have already implemented positive changes to
our internal communication, created greater
team building opportunities, and identified
new ways to celebrate our team members.
When you have a team that is passionate about
the work they do and equipped with the right
resources, you set the stage for them to deliver
great results.
Financial Highlights
In the fiscal year ending 2023, our net income
reached a total of $21.7 million, or $1.24 per
diluted share, marking an overall increase of
$2.2 million and an increase on a per share
basis of $0.10 per share. Total assets reached a
record $3.1 billion, up from $2.9 billion at the
end of 2022.
We are pleased with the strides we have made
in enhancing our efficiency. Our operating
net noninterest expense to average assets
improved significantly, dropping from
1.92% in 2022 to 1.53% this fiscal year. These
enhancements position us for improved
performance down the line, especially when
our net interest margin expands.
Maintaining a strong capital position is
paramount, and we are proud to report ratios
that exceed the minimum requirements for
classification as “well-capitalized” by our
regulators. Our tier one leverage ratio, tier
one capital ratio, total risk-based capital ratio,
and common equity tier one capital ratio
stood at 9.17%, 12.77%, 15.47%, and 11.66%,
respectively—levels that either meet or exceed
the previous year’s benchmarks.
Based on our solid performance and our
confidence in the future growth of net income,
we have raised our dividend by 2.3% or $0.01
per share to $0.44. This marks the seventh
consecutive year of increased dividend
payouts and underscores our commitment to
delivering value to our shareholders.
In Conclusion
During this past year, Colony Bank has once
again proven its resilience and determination
to build a sustainable, high-performing
independent bank. In carrying out this mission,
we remain steadfast in our commitment to
delivering above average returns at below
average risk for our shareholders and enabling
progress for the customers, team members, and
communities we serve.
Our team’s dedication in 2023 was instrumental
in preparing Colony Bank for the opportunities
ahead. Looking forward, we continue to seek
growth opportunities while investing in our
team, technology, and innovation to improve our
customer experience.
As we celebrate the 50th anniversary of Colony
Bank next year, we reflect on the remarkable
journey that has brought us to this significant
occasion. We have never been more excited or
optimistic about the future of the Company.
Thank you for your continued investment in
Colony Bank. We are grateful for your support
that allows us to be on this mission.
Mark H. Massee
Chairman of the Board
T. Heath Fountain
Chief Executive Officer
6
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Melissa Hill vividly recalls her shock and dismay upon discovering
that fraudsters had stolen checks from her via U.S. mail, washed
them to remove the original contents, and then used the cleaned
checks to steal over $10,000 from the bank accounts of her
business, M. Hill Interiors. She believes the thieves targeted mail in
envelopes displaying her company logo.
In a panic, she called and texted Tommy Clark, Colony’s
Regional President.
Tommy sprang into action. “Colony had my money back in my
accounts right away,” Melissa recalls. “They helped me close my
accounts, open new ones, told me exactly what steps to take, set
everything up for me, and got me new checks. Tommy made getting
back in business almost effortless. Dealing with Colony was a
pleasant experience after a very bad experience.”
Paper checks are essential to Melissa’s business; she hires
painters, carpenters, and other contractors who prefer payment by
check to complete high-end residential and commercial interior
design work for her clients. When she’s not meeting with clients
at their homes or businesses, Melissa and her six employees work
together at her unique shop in a renovated Methodist church
building. “Former church members sometimes drop by,” she says.
“I’m a Methodist, so this building holds special meaning to me.”
Now, one of Tommy’s first tasks each morning involves sending
Melissa scans of checks from her business and personal accounts
so she can confirm they’re valid. “Some days it’s just one or two,”
Tommy says. “Some days it’s a dozen.”
Melissa finds it reassuring that her banker would make this
effort on her behalf. “A hometown bank really does take the extra
steps to support you and your business,” she says, “and it’s good to
know they’re looking out for me.”
Going beyond
expectations.
“Our kids play on the same school sports
teams. She’s helped decorate our house and
even the banking center here in Albany.
Melissa is even more than a customer. She’s
a neighbor and friend.” – Tommy Clark
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
7
We’re relationship
focused. Just like you.
To our people, banking
transactions are never just
transactional. Instead, we
see every interaction as an
opportunity to accentuate
what makes Colony Bank
distinctive: our commitment.
Melissa Hill
Owner, M. Hill Interiors
We don’t make excuses.
We make progress.
Dr. Vernard L. Hodges
Co-owner, Critter Fixer
8
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Dr. Vernard Hodges remembers the first veterinary clinic he and
Dr. Terrence Ferguson opened two decades ago. “We were just two
kids with DVM degrees,” Dr. Hodges says. “We had a leasehold in
a building with a liquor store, and we wanted to have a building of
our own.
“We had no assets, only ourselves. A lot of banks weren’t
interested in us. We just had each other and our dreams.”
“Colony,” says Dr. Ferguson, “took a chance on us. They saw
something in us beyond the metrics. They were the ones who
believed in us.”
The bank’s faith proved well-founded. The first building Colony
funded has grown from 3,500 to 12,000 SF, and the practice added a
second location. Nationally, Dr. Hodges and Dr. Ferguson are known
for their popular “Critter Fixers” reality show.
Closer to home, they launched a vet-for-a-day program at local
schools to introduce students to veterinary medicine; the program
has spread nationwide. They provide care for police dogs in Warner
Robins, where Dr. Hodges serves on Colony Bank’s Community
Advisory Board.
As the doctors tell it, the bank continued to go the extra mile
even after they became successful. They particularly remember
the day their banker, Kirk Scott, walked in to tell them about a
special promotion that would lower the rate on one of their notes.
“We didn’t know about that promotion,” says Dr. Ferguson, “but
Kirk brought that to us and is one of the many ways he’s always
supported us.”
The relationship between the doctors and Kirk goes beyond
business. It extends to their families as well. Dr. Hodges recalls
his son participating in Colony’s inaugural leadership academy.
Similarly, Dr. Ferguson reminisces on the earlier years when his
children and Kirk’s children played sports together. When his
daughter returned from school recently, he took her to the bank
to open an account. “Hopefully, she’ll have the same kind of
relationship over time with Colony that we’ve had. They’ve been
with us every step of the way. We’re all like a family.”
Going beyond
possibilities.
“We just had each other
and our dreams. Colony
believed in us.”
9
For us, building revenues
starts with building
relationships. Our team
members have always
understood the distinction
between banking services
and banking service.
– Dr. Terrence Ferguson
Kirk Halpern, Founder and CEO of Farmers and Fishermen Purveyors and
a recipient of Atlanta Business Chronicle’s 2023 Most Admired CEO award,
remembers the day—March 16, 2020—his world changed. That’s when the
restaurants supplied by his company, Farmers & Fishermen, were ordered
to close amid the Covid-19 pandemic.
“I was going to lose 97% of my customers,” Kirk remembers. “My
receivables would go stale, and my inventory values would go upside down.
I knew I had to make dramatic moves.”
Over the next 13 hours, Kirk rewrote his entire business plan. He
would pivot to home delivery. Because he knew the market intimately, he
understood that certain meat and seafood items, like tenderloin, would
drop dramatically in price. He would need to find buyers for those items,
now worth much less than he’d paid for them. “But I also needed to hold
onto my cash,” he says, “so I could keep my employees.”
As he drafted his plan, Kirk’s first call was to his banker, Brian Fisher.
“I needed to untie my borrowing from my receivables and inventory so I
didn’t bleed cash every week,” he says. “Brian made a couple of calls and
called me back within 30 minutes. He said, ‘We have faith in you, and
we’re going to do this.’ That allowed me to keep my relationships with my
customers and execute my business model.
“I reduced my inventory positions on my expensive products. Then I
was able to buy products at historically low prices. When the market shot
back up, and I had thousands of cases of tenderloin I had bought at $4.10 a
pound and could sell for $10.” Not only did Kirk keep his entire team, with
no salary reductions, but he hired employees’ spouses and family members
to meet the booming demand for home delivery.
“Because of our relationship, and because I was dealing with a bank
who cared and knew me and my business, I could get to the right guys and
I knew they would say yes,” Kirk says. “I was able to save my business and
have it prosper because of Colony Bank.”
Going beyond
obstacles.
“We meet for lunch at least quarterly, just to
discuss what’s happening in Kirk’s business
and in consumer retail, to understand what he
needs, and to share what we’re seeing. It’s all
about the relationship.”
10
– Brian Fisher
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
11
The path to success is
never straightforward.
It’s full of detours,
pitfalls, and roadblocks.
To some, these are
barriers—reasons to stop;
excuses to slow down. To
us, they’re opportunities.
Opportunities to build
better plans, bridge gaps,
and find new solutions
to age-old problems.
And through our efforts,
our customers find that
reaching their success is
a little easier.
Our customized
financial solutions that
fit your unique needs.
Kirk Halpern
Founder and CEO of Farmers and Fishermen Purveyors
12
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Going beyond
the bottom line.
Colony Bank was honored to be nominated
and selected by fellow Georgia business
leaders as a goBeyondProfit Champion,
a testament to our commitment to serving
local communities.
Right: Heath Fountain,
CEO, accepts the
goBeyondProfit
Champion Award on
behalf of the Colony
Bank team.
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
At Colony Bank, giving back means investing our time, talent, and resources
in the places we call home. In 2023, our commitment to making a difference
materialized through a series of initiatives.
In addressing the urgent needs of our communities, Colony Bank actively invests
in organizations such as Georgia HEART, Georgia GOAL, and the Fostering
Success Act. Since 2022, we have proudly contributed $900,000 to the Georgia
HEART Hospital Program, which aims to increase healthcare funding and foster
community well-being. Additionally, last year, we allocated $195,000 to the Georgia
GOAL Scholarship Program which provides financial assistance to students seeking
higher education, and another $50,000 to the Fostering Success Act, aiding those
transitioning out of foster care to combat poverty and homelessness.
Our community commitment goes beyond financial contributions. We believe in
hands-on community involvement, promoting financial literacy, and developing the
leaders of tomorrow. Through our partnership with the Dave Ramsey Organization,
we’ve empowered over 5,000 students with essential lessons they need to make strong
financial decisions. In addition, we continue to develop future leaders through
Colony Leadership Academy, a year-long leadership style program designed for high
school students. Since its inception, we’ve had over 140 students from across Georgia
participate in the program.
As a result of our team’s incredible efforts to make a positive impact, this past year
we were honored as a goBeyondProfit Champion. This award recognizes businesses
that exhibit corporate generosity and help improve people’s lives and is a testament
to our commitment to serving local communities.
Top left: Colony Leadership Academy students enjoy
getting hands-on experience at Phoebe Putney Memorial
Hospital’s simulation lab. Bottom left: Two Colony
Leadership Academy students celebrate their graduation
from the program. Above: Colony Bank donates $400,000
to the Georgia HEART Hospital Program in 2023.
13
Board of Directors
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
14
T. Heath Fountain
Scott L. Downing
Jonathan W.R. Ross
Brian D. Schmitt
Harold W. Wyatt, III
Harold W. Wyatt, III has been
involved in the commercial real
estate industry since 1994 and is the
founder of Wyatt Capital, LLC and
Wyatt Realty Company, LLC. Mr.
Wyatt has previously served on the
Board of Directors for Darlington
School, Trinity School, and
Peachtree Golf Club. He was elected
to the SouthCrest board in 2010 and
served as Chairman of the Board of
Directors of SouthCrest Financial
Group, Inc. beginning in 2018 until
its merger with Colony in August
2021. He has served as a Director of
the Company since August 2021.
Brian D. Schmitt served as Executive
Vice Chairman of Colony Bank and
Colony Bankcorp from August 2021
until his retirement in August of
2023. Since August 2021, Mr. Schmitt
has also been a Director of the
Company. Previously, he served as
President and Chief Executive Officer
of SouthCrest Financial Group, Inc.
and SouthCrest Bank until its merger
with the Company. Mr. Schmitt has 40
years of banking experience and has
held many other executive leadership
positions with other banks, including
The PrivateBank, Premier Bank and
Heritage Financial Group.
Jonathan W.R. Ross has served as
President of Ross Construction
Company, a heavy highway
commercial construction company,
for the past 20 years. He previously
served as a Director of the Colony
Bank Worth charter until the
merger in 2008 and presently serves
as an Advisory Board Member of the
Colony Bank Sylvester office since
2008. Mr. Ross has been a Director
of the Company since May 2007.
Audrey D. Hollingsworth
Edward P. Loomis, Jr.
Meagan M. Mowry
Matthew D. Reed
Matthew D. Reed is the owner
and Chief Executive Officer of
Georgia CEO, a network of local
websites focused on the business
communities across Georgia.
Mr. Reed serves on the Board of
Governors for the Georgia Chamber
of Commerce and sits on the UGA
Small Business Development
Center’s State Advisory Board. He
has served as an Advisory Board
Member of the Colony Bank Albany
office since December 2018 and has
been a Director of the Company
since March 2019.
Meagan M. Mowry is the co-
founder and co-owner of Simcoe
Investments and its development
and construction subsidiaries,
Homes of Integrity Construction
and Integrity Real Estate. Ms.
Mowry entered the real estate
industry in 2004 and is a licensed
real estate agent through the
Savannah Board of Realtors. She
currently serves as a board member
for the Sales and Marketing Council
of the Savannah Home Builders
Association and has been a Director
of the Company since March 2019.
Edward P. Loomis, who served
as President and Chief Executive
Officer of Colony Bankcorp, Inc.
from May 2012 until his retirement
in July 2018, is an experienced
executive officer with nearly 50
years of banking experience. He
served as President and Chief
Executive Officer of Atlantic
Southern Bank from 2009 to 2011
and First Macon Bank & Trust from
1987 to 1998, both based in Macon,
Georgia. Mr. Loomis has been a
Director of the Company since
May 2012.
Audrey D. Hollingsworth is VP and
Chief Human Resources Officer for WC
Bradley Co. Previously, she was VP of
People Services for Goodwill Industries
of the Southern Rivers, President of
the Hollingsworth Group, and Group
Executive and Chief People Officer
for Synovus Financial Corporation,
where she led a 26-year career. She
serves on several boards including the
Development Authority Foundation
Board and University of Georgia’s
J.W. Fanning Institute for Leadership
Development Advisory Board. She
is an alumna, Past President, and
Chairman of Leadership Georgia.
T. Heath Fountain has served as
Chief Executive Officer of Colony
Bankcorp, Inc. since July 2018.
He also served as President of
the Company from July 2018 until
September 2022. Mr. Fountain is an
experienced executive officer who
brings significant public-company
experience and market-area
knowledge. Mr. Fountain previously
served as the President and Chief
Executive Officer of Planters
First Bank and as Executive Vice
President and Chief Financial
Officer of Heritage Financial Group.
Mark H. Massee (Chairman)
Scott L. Downing is the President
of SDI Investments and President
of Lowell Packing Company. He is
very active in community affairs
and currently serves as Chairman
of the Dorminy Medical Center
Foundation. Mr. Downing has
also served as Ben Hill County
Commissioner and Chairman of the
ACCG for Economic Development
and Transportation. Mr. Downing
has been a Director of the Company
since January 2012.
Mark H. Massee is the retired
President of Massee Builders with
which he was affiliated for 42 years.
He is currently the Owner/Manager
of MHM Properties and is Owner/
President of Dorminy-Massee
House, a bed and breakfast inn.
Mr. Massee is the former mayor of
Fitzgerald, Georgia. He has been
a Director of the Company since
February 2007 and was previously
Vice Chairman of the Board.
Mr. Massee has been serving as
Chairman of the Board since
June 2016.
T. Heath Fountain
Chief Executive Officer
Roy D. Copeland, Jr.
President
Edward L. Bagwell, III
Executive Vice President/General
Counsel/Chief Risk Officer
Leonard H Bateman, Jr.
Executive Vice President/
Chief Credit Officer
Kimberly C. Dockery
Executive Vice President/
Chief of Staff
Derek Shelnutt
Executive Vice President/
Chief Financial Officer
Executive Officers
Jason Barnes
President of Colony Insurance
Buddy Bennett
Regional President/Northwest
Georgia
Steven Bernaski
President of Marine &
RV Lending
Stephen Browning
Market President/Eastman
Ed Canup
Chief Revenue Officer &
President of Banking Solutions
Tommy Clark
Regional President/Southwest
Darren Davis
President of Small Business
Specialty Lending
Mike Davis
President of Community
Banking
Brian Fisher
Corporate Banker
Warren Giardina
Central Alabama Market
Executive, Corporate Banking
Jeffrey Hester
Market President/Cordele
Hugh Hollar
President of Home Builder
Finance
Drew Hulsey
Regional President/Coastal
Jesse Kight
President of Mortgage Division
Jamie Knight
Market President/Leesburg
Joe Little
Market President/LaGrange
Dexter Lummus
Corporate Banker
Chris McLaughlin
Market President/Augusta
Jud Moritz
Market President/ Valdosta
Jan Morris
Corporate Banker
Jason Morris
Regional President/
West Central Region
Kyle Phelps
Regional Market Executive of
Florida
Cole Posey
Market President/Moultrie
Steve Raines
Director of Merchant Services
Kirk Scott
Regional President/Mid-State
Mike Smith
Market President/Fitzgerald
Justin Truelove
Director of Healthcare Lending
Michael Washburn
President of Corporate Banking
Mike Welch
Market President/Columbus
David Wilson
Market President/Macon
Nic Worthy
Market President/Rochelle
Market and Division Leaders
Bagwell
Bateman
Fountain
Clark
Jason Morris
Kight
Scott
Hulsey
Smith
M. Davis
Browning
D. Davis
Hollar
Welch
Little
Worthy
Dockery
Washburn
Barnes
Wilson
15
Copeland
Hester
Knight
McLaughlin
Posey
Bernaski
Raines
Canup
Giardina
Truelove
Moritz
Shelnutt
Phelps
Bennett
Fisher
Lummus
Jan Morris
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
16
GEORGIA
Albany
2900 Old Dawson Rd
Albany, GA 31721
(229) 430-8080
Ashburn
515 E Washington Ave
Ashburn, GA 31714
(229) 567-4383
Athens
Loan Production Office
1586 Mars Hill Rd
Suite C
Watkinsville, GA 30677
(478) 273-3199 Ext. 4111
Atlanta
780 Johnson Ferry Rd NE
Suite 625
Sandy Springs GA, 30342
(800) 873-6404
Augusta
Loan Production Office
1201 Town Park Lane
Evans, GA 30809
(706) 294-4682
Broxton
401 Alabama St North
Broxton, GA 31519
(912) 359-2351
Cedartown
967 North Main Street
Cedartown, GA 30125
(678) 747-5200
Canton
Loan Production Office
341 E Main St
Canton, GA 30114
229-426-6000 ext. 6174
Centerville
200 Gunn Rd
Centerville, GA 31028
(478) 953-1010
Chickamauga
12691 North Highway 27
Chickamauga, GA 30707
(706) 375-3112
Columbus
1581 Bradley Park Dr
Columbus, GA 31904
(706) 571-6419
Covington
Small Business
Specialty Lending -
Loan Production Office
10115 Crown Ridge
Drive, Suite 103
Covington, Ga 30014
(470) 207-3376
Cordele
1031 E 24th Ave
Cordele, GA 31015
(229) 271-2100
Douglas
625 Ward St W
Douglas, GA 31533
(912) 384-3100
Eastman
5510 Oak St
Eastman, GA 31023
(478) 374-4739
Fayetteville
741 West Lanier Avenue
Fayetteville, GA 30214
(678) 783-4111
Fitzgerald
Corporate Office
115 South Grant St
Fitzgerald, GA 31750
(229) 426-6000
302 South Main St
Fitzgerald, GA 31750
(229) 423-5446
LaGrange
101 Calumet Center Rd
LaGrange, GA 30241
(706) 884-6000
Leesburg
137 Robert B Lee Dr
Leesburg, GA 31763
(229) 759-2800
Macon
1412 Bass Road
Macon, GA 31210
Manchester
406 West Main Street
Manchester, GA 31816
(706) 846-8471
Moultrie
621 Veterans Pkwy N
Moultrie, GA 31788
(229) 985-1380
Quitman
602 E Screven St
Quitman, GA 31643
(229) 263-7538
Rochelle
920 1st Ave
Rochelle, GA 31079
(229) 365-7871
Rockmart
131 West Elm Street
Rockmart, GA 30153
(770) 684-1919
Savannah
Hwy 17 Office
5987 Ogeechee Rd
Savannah, GA 31419
(912) 927-1277
7011 Hodgson Memorial Dr
Savannah, GA 31406
(912) 303-9449
Statesboro
104 Springhill Drive
Statesboro, GA 30458
(912) 225-1460
Sylvester
601 N Main St
Sylvester, GA 31791
(229) 776-7641
Thomaston
108 South Church Street
Thomaston, GA 30286
(706) 938-3151
Tifton
104 2nd St W
Tifton, GA 31794
(229) 386-2265
Valdosta
3774 Old US Hwy 41 N
Valdosta, GA 31602
(229) 241-9900
Warner Robins
1290 S. Houston Lake Rd
Warner Robins, GA 31088
(478) 987-1009
ALABAMA
Birmingham
Loan Production Office
2151 Highland Avenue
Suite 120
Birmingham, AL 35205
(659) 202-0120
FLORIDA
Tallahassee
Loan Production Office
1309 Thomasville Road
Tallahassee, FL 32303
(850) 815-6405
Banking Centers
Loan Production Office
Colony Financial Advisors
Colony Insurance
Locations, as of March 31, 2024
17
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Colony Bankcorp, Inc.
Financial Section
17
18
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our consolidated financial statements and related notes included
elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking
statements that involve risk, uncertainties and, assumptions. Certain risks, uncertainties and other
factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-
Looking Statements,” “Risk Factors,” and elsewhere in this Annual Report on Form 10-K, may cause
actual results to differ materially from those projected in the forward-looking statements. We assume
no obligation to update any of these forward-looking statements.
The Company
Colony Bankcorp, Inc. is a bank holding company headquartered in Fitzgerald, Georgia that
provides, through its wholly-owned subsidiary Colony Bank (collectively referred to as the Company),
a broad array of products and services throughout north, central, south and coastal Georgia markets,
Birmingham, Alabama and Tallahassee, Florida. The Company offers commercial and consumer
banking services as well as specialized solutions including mortgage, government guaranteed lending,
consumer insurance, wealth management and merchant services.
Recent Developments
The Company paid dividends to its shareholders throughout 2023 and 2022 on a quarterly basis. In
2023, we had a quarterly dividend of $0.11 per share of common stock and in 2022, we had a quarterly
dividend of $0.1075 per share of common stock.
On January 1, 2023, the Company adopted ASC Topic 326 which replaced the incurred loss
approach for measuring credit losses with an expected loss model, referred to the current expected
credit loss (“CECL”) model. CECL applies to financial assets subject to credit losses and measured at
amortized cost and certain off-balance-sheet credit exposures, which include, but are not limited to,
loans, leases, held-to-maturity securities, loan commitments and financial guarantees. The adoption
of this guidance resulted in a decrease of the allowance for credit losses on loans of $53,000, the
creation of an allowance for unfunded commitments of $1.7 million and a reduction of retained
earnings of $1.2 million, net of the increase in deferred tax assets of $410,000.
Going forward, the impact of utilizing the CECL approach to calculate the allowance for credit
losses will be significantly influenced by the composition, characteristics and quality of our loan
portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes
to these and other relevant factors may result in greater volatility to the provision for credit losses,
and therefore, greater volatility to our reported earnings. See Notes 1 and 4, included elsewhere in
this Form 10-K, for additional information on the allowance for credit losses and the allowance for
unfunded commitments.
In June 2023, the Company entered into two derivative instruments, specifically interest rate
swaps, to help manage its interest rate risk position and mitigate exposure to the variability of future
cash flows or other forecasted transactions. The interest rate swaps are designated as cash flow
hedges of certain variable rate liabilities. Gains are recorded on the swap transactions as a component
of interest expense in the consolidated statements of income. Amounts reported in accumulated
OCI related to swaps are reclassified to interest expense as interest payments are made on the Bank’s
variable rate liabilities. For additional discussion of the Company’s derivative instruments, see “Note
10 - Derivatives”.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Reconciliation and Management Explanation of Non-GAAP Financial Measures
Our accounting and reporting policies conform to generally accepted accounting principles
(GAAP) in the United States and prevailing practices in the banking industry. However, certain non-
GAAP measures are used by management to supplement the evaluation of our performance. These
include the fully-taxable equivalent measures: tax-equivalent net interest income, tax-equivalent net
interest margin and tax-equivalent net interest spread, which include the effects of taxable-equivalent
adjustments using a statutory federal income tax rate of 21% to increase tax-exempt interest income
to a tax-equivalent basis for the years ended December 31, 2023 and 2022. Tax-equivalent adjustments
are reported to the Average Balances with Average Yields and Rates table under Rate/Volume Analysis
in the tables that follow. Management believes that non-GAAP financial measures provide additional
useful information that allows investors to evaluate the ongoing performance of the company and
provide meaningful comparisons to its peers. Management believes these non-GAAP financial
measures also enhance investors’ ability to compare period-to-period financial results and allow
investors and company management to view our operating results excluding the impact of items that
are not reflective of the underlying operating performance.
Tax-equivalent net interest income, net interest margin and net interest spread.
Net interest income on a tax-equivalent basis is a non-GAAP measure that adjusts for the tax-
favored status of net interest income from loans and investments. We believe this measure to be the
preferred industry measurement of net interest income and it enhances comparability of net interest
income arising from taxable and tax-exempt sources. The most directly comparable financial measure
calculated in accordance with GAAP is our net interest income. Net interest margin on a tax-equivalent
basis is net interest income on a tax-equivalent basis divided by average interest-earning assets on a
tax-equivalent basis. The most directly comparable financial measure calculated in accordance with
GAAP is our net interest margin. Net interest spread on a tax-equivalent basis is the difference in the
average yield on average interest-earning assets on a tax equivalent basis and the average rate paid
on average interest-bearing liabilities. The most directly comparable financial measure calculated in
accordance with GAAP is our net interest spread.
These non-GAAP financial measures should not be considered alternatives to GAAP-basis
financial statements, and other bank holding companies may define or calculate these non-GAAP
measures or similar measures differently.
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
A reconciliation of these performance measures to GAAP performance measures is included in the
tables below.
Non-GAAP Performance Measures Reconciliation
Years Ended December 31,
(Dollars in thousands, except per share data)
2023
2022
Operating noninterest income reconciliation
Noninterest income (GAAP)
$
35,634
$
35,025
Gain on sale of bank premises
(361)
—
Operating noninterest income
$
35,273
$
35,025
Operating noninterest expense reconciliation
Noninterest expense (GAAP)
$
83,065
$
89,475
Severance costs
(1,286)
(1,346)
Acquisition-related expenses
(161)
(142)
Operating noninterest expense
$
81,618
$
87,987
Operating net income reconciliation
Net income (GAAP)
$
21,747
$
19,542
Acquisition-related expenses
161
142
Severance costs
1,286
1,346
Gain on sale of bank premises
(361)
—
FHLB mark from called borrowings
—
751
Income tax benefit
(196)
(298)
Operating net income
$
22,637
$
21,483
Weighted average diluted shares
17,578,294
17,191,079
Adjusted earnings per diluted share
$
1.29
$
1.25
Tangible book value per common share reconciliation
Book value per common share (GAAP)
$
14.51
$
13.08
Effect of goodwill and other intangibles
(3.02)
(3.10)
Tangible book value per common share
$
11.49
$
9.98
Tangible equity to tangible assets reconciliation
Equity to assets (GAAP)
8.35 %
7.84 %
Effect of goodwill and other intangibles
(1.62)
(1.74)
Tangible equity to tangible assets
6.73 %
6.10 %
Operating efficiency ratio calculation
Efficiency ratio (GAAP)
72.94 %
77.34 %
Severance costs
(1.13)
(1.16)
Acquisition-related expenses
(0.14)
(0.12)
Gain on sale of bank premises
0.32
—
FHLB mark from called borrowings
—
(0.65)
Operating efficiency ratio
71.99 %
75.41 %
Operating net noninterest expense(1) to average assets calculation
Net noninterest expense to average assets
1.57 %
1.98 %
Severance costs
(0.04)
(0.05)
Acquisition-related expenses
(0.01)
(0.01)
Gain on sale of bank premises
0.01
—
Operating net noninterest expense to average assets
1.53 %
1.92 %
Pre-provision net revenue
Net interest income before provision for credit losses
$
78,244
$
80,672
Noninterest income
35,634
35,025
Total income
113,879
115,697
Noninterest expense
83,065
89,475
Pre-provision net revenue
$
30,814
$
26,222
(1) Net noninterest expense is defined as noninterest expense less noninterest income.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Critical Accounting Policies and Estimates
The consolidated financial statements of Colony are prepared in conformity with U.S. generally
accepted accounting principles (“GAAP”) and follow general practices within the industry in which
it operates. This preparation requires management to make estimates, assumptions and judgments
that affect the amounts reported in the consolidated financial statements and accompanying notes.
These estimates, assumptions and judgments are based on information available as of the date of the
consolidated financial statements; accordingly, as this information changes, actual results could differ
from the estimates, assumptions and judgments reflected in the consolidated financial statements.
Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments
and, as such, have a greater possibility of producing results that could be materially different than
originally reported. Estimates that are particularly susceptible to significant change include the
valuation of loan acquisition transactions, as well as the determination of the allowance for
credit losses and income taxes and, therefore, are critical accounting policies. In addition to the
discussion that follows, the accounting policies related to these estimates are further described in
Note 1, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial
Statements, under Part II, Item 8.
Reserve for Credit Losses
A consequence of lending activities is that we may incur credit losses. The amount of such losses
will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic
conditions such as rising interest rates and the financial performance of the borrower.
The reserve for credit losses consists of the allowance for credit losses (“ACL”) and the allowance
for unfunded commitments. As a result of our January 1, 2023 adoption of ASU No. 2016-13, and
its related amendments, our methodology for estimating the reserve for credit losses changed
significantly from December 31, 2022. The standard replaced the “incurred loss” approach with an
“expected loss” approach known as the Current Expected Credit Losses (“CECL”). The CECL approach
requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It
removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was
“probable” a loss event was “incurred.”
The estimate of expected credit losses under the CECL approach is based on relevant information
about past events, current conditions, and reasonable and supportable forecasts that affect the
collectability of the reported amounts. Historical loss experience is generally the starting point for
estimating expected credit losses. We then consider whether the historical loss experience should
be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did
not exist over the period from which historical experience was used. Finally, we consider forecasts
about future economic conditions that are reasonable and supportable. The allowance for unfunded
commitments represents the expected credit losses on off-balance sheet commitments such as
unfunded commitments to extend credit. This allowance is estimated by loan segment at each balance
sheet date under the CECL model using the same methodologies as portfolio loans, taking into
consideration the likelihood that funding will occur.
Management’s evaluation of the appropriateness of the reserve for credit losses is often the most
critical of accounting estimates for a financial institution. Our determination of the amount of the
reserve for credit losses is a critical accounting estimate as it requires significant reliance on the credit
risk rating we assign to individual borrowers, the use of estimates and significant judgment as to the
amount and timing of expected future cash flows, reliance on historical loss rates on homogenous
portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the
reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each
portfolio segment also includes an amount for inherent risks not reflected in the historical analyses.
Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large
borrower, and industry), local/regional economic trends and conditions, changes in underwriting
standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies,
and the volume and terms of loans.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Income Taxes
The assessment of income tax assets and liabilities involves the use of estimates, assumptions,
interpretation, and judgment concerning certain accounting pronouncements and federal and state tax
codes. There can be no assurance that future events, such as court decisions or positions of federal and
state taxing authorities, will not differ from management’s current assessment, the impact of which
could be significant to the consolidated results of operations and reported earnings.
Colony files a consolidated federal income tax return and a combined state income tax return
(both of which include Colony and its wholly owned subsidiaries). Accordingly, amounts equal to tax
benefits of those companies having taxable federal losses or credits are reimbursed by the companies
that incur federal tax liabilities. Amounts provided for income tax expense are based on income
reported for financial statement purposes and do not necessarily represent amounts currently payable
under tax laws. Deferred income tax assets and liabilities are computed quarterly for differences
between the financial statement and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax law rates applicable to the periods in which the
differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred
tax assets and liabilities are adjusted through provision for income tax expense. Valuation allowances
are established when it is more likely than not that a portion of the full amount of the deferred tax
asset will not be realized. In assessing the ability to realize deferred tax assets, management considers
the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning
strategies. Colony may also recognize a liability for unrecognized tax benefits from uncertainty in
income taxes. Unrecognized tax benefits represent the differences between a tax position taken
or expected to be taken in a tax return and the benefit recognized and measured in the financial
statements. Penalties related to unrecognized tax benefits are classified as income tax expense.
Overview
The following discussion and analysis present the more significant factors affecting the Company’s
financial condition as of December 31, 2023 and 2022 and results of operations for each of the two year-
periods ended December 31, 2023. This discussion and analysis should be read in conjunction with the
Company’s consolidated financial statements, notes thereto and other financial information appearing
elsewhere in this report.
Taxable-equivalent adjustments are the result of increasing income from tax-free loans and
investments by an amount equal to the taxes that would be paid if the income were fully taxable
based on a 21% federal tax rate for 2023 and 2022, thus making tax-exempt yields comparable to taxable
asset yields.
Dollar amounts in tables are stated in thousands, except for per share amounts.
Results of Operations
The Company’s results of operations are determined by its ability to effectively manage interest
income and expense, to minimize loan and investment losses, to generate noninterest income and to
control noninterest expense. Since market forces and economic conditions beyond the control of the
Company determine interest rates, the ability to generate net interest income is dependent upon the
Company’s ability to obtain an adequate spread between the rate earned on interest-earning assets
and the rate paid on interest-bearing liabilities. Thus, the key performance for net interest income is
the interest margin or net yield, which is taxable-equivalent net interest income divided by average
interest-earning assets. Net income available to common shareholders totaled $21.7 million, or $1.24
per diluted shares in 2023, compared to $19.5 million, or $1.14 per diluted shares in 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
23
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Net Interest Income
Net interest income is the difference between interest income on earning assets, such as loans and
securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund
those assets. Net interest income is the Company’s largest component of income, representing 68.7% of
total income during 2023 and 69.7% of total income during 2022.
Net interest margin is the taxable-equivalent net interest income as a percentage of average
interest-earning assets for the period. The level of interest rates and the volume and mix of interest-
earning assets and interest-bearing liabilities impact net interest income and net interest margin.
The Company’s loan portfolio is significantly affected by changes in the prime interest rate. The
prime interest rate, which is the rate offered on loans to borrowers with strong credit, was 8.50% as of
December 31, 2023 and 7.50% as of December 31, 2022. The Federal Reserve Board sets general market
rates of interest, including the deposit and loan rates offered by many financial institutions. During
2023, the prime interest rate increased 1.00%. During 2022, the prime interest rate increased 4.25%.
The following table presents the changes in taxable-equivalent net interest income and identifies
the changes due to differences in the average volume of interest-earning assets and interest-bearing
liabilities and the changes due to changes in the average interest rate on those assets and liabilities. The
changes in net interest income due to changes in both average volume and average interest rate have
been allocated to the average volume change or the average interest rate change in proportion to the
absolute amounts of the change in each. The Company’s consolidated average balance sheets along with
an analysis of taxable-equivalent net interest earnings are presented in the Rate/Volume Analysis.
Rate/Volume Analysis
The rate/volume analysis presented hereafter illustrates the change from year to year for each
component of the taxable equivalent net interest income separated into the amount generated through
volume changes and the amount generated by changes in the yields/rates.
Changes From 2022 to 2023 (a)
(Dollars in thousands)
Volume
Rate
Total
Interest income
Loans, net of unearned fees
$ 16,214
$ 12,354
$ 28,568
Investment securities, taxable
(1,230)
4,664
3,434
Investment securities, exempt
(68)
265
197
Deposits in banks and short-term investments
(272)
1,726
1,454
Total interest income
14,644
19,009
33,653
Interest expense
Interest-bearing demand and savings deposits
(103)
12,888
12,785
Time deposits
1,890
14,913
16,803
Federal funds purchased
(1)
94
93
FHLB advances
3,181
1,018
4,199
Other borrowings
803
1,124
1,927
Total interest expense
5,770
30,037
35,807
Net interest income
$
8,874
$ (11,028)
$ (2,154)
(a) Changes in net interest income for the periods, based on either changes in average balances or changes in average rates for interest-
earning assets and interest-bearing liabilities, are shown on this table. During each year there are numerous and simultaneous
balance and rate changes; therefore, it is not possible to precisely allocate the changes between balances and rates. For the purpose
of this table, changes that are not exclusively due to balance changes or rate changes have been attributed to rates.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
24
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
The Company maintains about 15.32% of its loan portfolio in adjustable rate loans that reprice
with prime rate changes, while a little over half of its other loans mature within 5 years. The liabilities
to fund assets are primarily in non-maturing core deposits and short-term certificates of deposit that
mature within one year. During 2023, Federal Reserve rates increased 100 basis points. During 2022,
Federal Reserve rates increased 425 basis points. We have seen the net interest margin decrease to
2.83% for 2023, compared to 3.20% for 2022 primarily due to increases in rates on interest bearing
liabilities outpacing rate increases on interest earning assets.
Taxable-equivalent net interest income for 2023 decreased by $2.2 million or 2.7%, compared to
2022, primarily due to increases in loan volume and rates, offset by increases in deposit rates and
increases in borrowings to fund loan growth. The average volume of interest-earning assets during
2023 increased $256.2 million compared to 2022, primarily related to increases in loans. The total
yield on interest-earning assets increased year over year with increases in loan volume, partially
offset by decreases in investment securities balances along with increased rates on all interest-
earning assets.
The average volume of loans increased $344.3 million in 2023 compared to 2022, which primarily
reflects organic loan growth. The average yield on loans increased by 67 basis points in 2023
compared to 2022, primarily due to the increased loan volume in addition to the increase in rates.
The average volume of interest-bearing deposits increased $199.7 million in 2023 compared to 2022.
Average savings and interest-bearing demand deposits decreased $49.0 million offset by an increase in
average time deposits of $248.7 million in 2023 compared to 2022.
Accordingly, the ratio of average interest-bearing deposits to total average deposits was 79.47% in
2023 and 76.23% in 2022. For 2023, this deposit mix, combined with an increase in interest rates, had
the effect of increasing the average cost of total deposits by 144 basis points in 2023 compared to 2022.
The Company used borrowings to fund loan growth during 2023. The funds borrowed in 2023 were
at higher interest rates and were a contributing factor in the increase of 87 basis points in total other
interest-bearing liabilities in 2023 compared to 2022.
The Company’s net interest spread, which represents the difference between the average rate
earned on interest-earning assets and the average rate paid on interest-bearing liabilities, decreased
to 2.42% in 2023 from 3.07% in 2022 and was also a result of deposit rate increases and an increase in
borrowings, partially offset by increases in loan volume and rates. The net interest spread, as well as
the net interest margin, will be impacted by future changes in short-term and long-term interest rate
levels, as well as the impact from the competitive environment. A discussion of the effects of changing
interest rates on net interest income is set forth in “Market Risk and Interest Rate Sensitivity” included
elsewhere in this report.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
25
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Average Balance Sheets
2023
2022
Average
Income/
Yields/
Average
Income/
Yields/
(Dollars in thousands)
Balances
Expense
Rates
Balances
Expense
Rates
Assets
Loans, net of unearned fees (1)
$ 1,850,043
$
99,472
5.38%
$ 1,505,792
$
70,903
4.71%
Investment securities, taxable
770,707
21,388
2.78
827,388
17,954
2.17
Investment securities, exempt (2)
105,797
2,444
2.31
109,122
2,247
2.06
Deposits in banks and
short term investments
63,806
2,341
3.67
91,825
887
0.97
Total interest-earning assets
2,790,353
125,645
4.50%
2,534,127
91,991
3.63%
Total noninterest-earning assets
226,198
215,723
Total assets
$ 3,016,551
$ 2,749,850
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Savings and interest-bearing
demand deposits
$ 1,390,247
15,833
1.14%
$ 1,439,234
3,047
0.21%
Time deposits
619,083
19,632
3.17
370,375
2,829
0.76
Total interest-bearing deposits
2,009,330
35,465
1.76
1,809,609
5,876
0.32
Federal funds purchased
2,783
147
5.29
2,835
54
1.89
FHLB advances (3)
160,548
6,763
4.21
71,690
2,564
3.58
Other borrowings
70,807
4,298
6.07
52,872
2,371
4.48
Total other interest-bearing liabilities
234,138
11,208
4.79
127,397
4,989
3.92
Total interest-bearing liabilities
2,243,468
46,673
2.08%
1,937,006
10,865
0.56%
Noninterest-bearing demand deposits
519,225
564,322
Other liabilities
14,947
12,173
Stockholders’ equity
238,911
236,349
Total liabilities and
stockholders’ equity
$ 3,016,551
$ 2,749,850
Interest rate spread
2.42%
3.07%
Net interest income
$
78,972
$
81,126
Net interest margin
2.83%
3.20%
(1) The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recognized and recorded
on the cash basis. Taxable-equivalent adjustments totaling $216,000 and $139,000 for the year ended December 31, 2023 and 2022,
respectively, are calculated using the statutory federal tax rate and are included in income and fees on loans. Accretion income of
$165,000 and $590,000 for the year ended December 31, 2023 and 2022 are also included in income and fees on loans.
(2) Taxable-equivalent adjustments totaling $513,000 and $315,000 for the year ended December 31, 2023 and 2022, respectively, are
calculated using the statutory federal tax rate and are included in tax-exempt interest on investment securities.
(3) Federal Home Loan Bank advances interest expense includes $751,000 for the year ended December 31, 2022 and is the recognized
mark on two advances that were acquired in the SouthCrest Financial Group, Inc. acquisition that were called early.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Provision for Credit Losses
Provision for credit losses totaled $3.6 million in 2023 compared to $3.4 million in 2022. The
amount of provision expense recorded in each period was the amount required such that the total
allowance for credit losses reflected the appropriate balance, in the estimation of management,
sufficient to cover expected credit losses over the expected life of a loan exposure and unfunded
commitments where the likelihood is that funding will occur. The provision for credit losses for
the year ended December 31, 2023 includes $3.9 million in provision for credit losses on loans and
$286,000 in release of credit losses on unfunded commitments. See the section captioned “Allowance
for Credit Losses” elsewhere in this discussion for further analysis of the provision for credit losses.
The increase in provision for credit losses for the year ended December 31, 2023 compared to 2022 is
due to downgrades and charge-offs on a small number of loans and does not represent systemic issues
across the entire loan portfolio. See the sections captioned “Loans” and “Allowance for Credit Losses”
elsewhere in this discussion for further analysis of the provision for credit losses. Net charge-offs
for the year ended December 31, 2023 were $1.6 million compared to $152,000 for the same period in
2022. As of December 31, 2023, Colony’s allowance for credit losses was $18.4 million, or 0.98% of total
loans, compared to $16.1 million, or 0.93% of total loans, at December 31, 2022. At December 31, 2023
and 2022, nonperforming assets were $10.7 million and $6.4 million, or 0.35% and 0.22% of total assets,
respectively, with credit quality in the overall loan portfolio remaining strong.
Noninterest Income
The components of noninterest income were as follows:
$
%
(Dollars in thousands)
2023
2022
Variance
Variance
Service charges on deposit accounts
$
8,735
$ 7,875
$
860
10.92%
Mortgage fee income
6,131
8,550
(2,419)
(28.29)
Gain on sales of SBA loans
5,063
6,216
(1,153)
(18.55)
Gain (loss) on sales of securities
—
(82)
82
100.00
Interchange fees
8,460
8,381
79
0.94
BOLI income
1,396
1,313
83
6.34
Insurance commissions
1,873
1,777
96
5.40
Other
3,976
995
2,981
299.61
Total
$ 35,634
$ 35,025
$
609
1.74%
Noninterest income in 2023 increased $609,000, or 1.74% from 2022. The Company’s increases
were primarily seen in service charges on deposit accounts and other noninterest income, which
included increases in equity investment income and income on wealth advisory and merchant
services. These increases were offset by decreases in mortgage fee income and gain on sales of
SBA loans. The increase of $860,000 in service charges on deposit accounts can be attributed to our
strong retail banking center footprint and our ability to continue to grow our core deposits despite
the challenging rate environment. The increase of $3.0 million in other noninterest income was
attributable to equity investment market valuation gains of $156,000 in 2023 compared to market
valuation losses of $503,000 in 2022, an increase of $729,000 in wealth advisory and merchant services,
gains on sales of assets of $379,000 along with increases in SBA servicing and other related fee income
of $656,000. The decrease in mortgage fee income was a result of a reduction in mortgage production
and changes in allocation between portfolio and secondary market. The increase in mortgage rates
was partially attributable to the 525 basis point increase in the national federal funds rate during 2022
and 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
27
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Noninterest Expense
The components of noninterest expense were as follows:
$
%
(Dollars in thousands)
2023
2022
Variance
Variance
Salaries and employee benefits
$ 49,233
$ 52,809
$ (3,576)
(6.77)%
Occupancy and equipment
6,283
6,534
(251)
(3.83)
Information technology
8,553
9,947
(1,394)
(14.01)
Professional Fees
3,097
3,432
(335)
(9.76)
Advertising and public relations
3,486
3,664
(178)
(4.87)
Communications
947
1,602
(655)
(40.88)
Other
11,466
11,487
(21)
(0.19)
Total
$ 83,065
$ 89,475
$ (6,410)
(7.16)%
Decreases were seen in all categories of noninterest expense. The decrease in salaries and
employee benefits of $3.6 million was primarily attributable to a reduction of force initiative
in 2023 along with lower commissions and bonus expenses. The decrease in occupancy and
equipment expenses can be seen in decreases in repair and maintenance expense as well as
rental and leasehold expenses. The decrease in information technology expenses of $1.4 million
relates to a decrease in data processing expenses due to a renewed contract with the Company’s
core processor resulting in cost savings year over year. The decrease in professional fees is the
result of lower consulting and legal fees in 2023 compared to 2022 which included fees associated
with the acquisition of SouthCrest Financial Group, Inc. The decrease in advertising and public
relations can be attributed to the expense control initiative implemented in 2023. The decrease in
communications expense is the result of telephone service contracts related to the acquisition of
SouthCrest Financial Group, Inc. that were paid through the end of the contracts in 2022.
Sources and Uses of Funds
The following table illustrates, during the years presented, the mix of the Company’s funding
sources and the assets in which those funds are invested as a percentage of the Company’s average
total assets for the period indicated. Average assets totaled $3.0 billion in 2023 compared to $2.7
billion in 2022.
(Dollars in thousands)
2023
2022
Sources of Funds:
Noninterest-bearing deposits
$ 519,225
17.21%
$ 564,322
20.52%
Interest-bearing deposits
2,009,330
66.61
1,809,609
65.81
FHLB advances
160,548
5.32
71,690
2.61
Federal funds purchased
2,783
0.09
2,835
0.10
Other borrowings
70,807
2.35
52,872
1.92
Other noninterest-bearing liabilities
14,947
0.50
12,173
0.44
Equity capital
238,911
7.92
236,349
8.60
Total
$ 3,016,551
100.00%
$ 2,749,850
100.00%
Uses of Funds:
Loans held for sale and loans
$ 1,850,043
61.33%
$ 1,505,792
54.76%
Investment securities
876,504
29.05
936,510
34.06
Deposits in banks and short term investments
63,806
2.12
91,825
3.34
Other noninterest-bearing assets
226,198
7.50
215,723
7.84
Total
$ 3,016,551
100.00%
$ 2,749,850
100.00%
Management’s Discussion and Analysis of Financial Condition and Results of Operations
28
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Deposits continue to be the Company’s primary source of funding. Over the comparable periods,
interest-bearing deposits continues to be the largest component of the Company’s mix of deposits.
Average interest-bearing deposits totaled 79.5% in 2023 compared to 76.2% of total average deposits
in 2022.
The Company primarily invests funds in loans and securities. Loans continue to be the largest
component of the Company’s mix of invested assets.
Loans
The following table presents the composition of the Company’s loan portfolio as of December 31
for the past five years.
(Dollars in thousands)
2023
2022
2021
2020
2019
Construction, land
& land development
$
247,146
$ 229,435
$ 165,446
$ 121,093
$
96,097
Other commercial real estate
974,375
975,447
787,392
520,391
540,239
Total commercial real estate
1,221,521
1,204,882
952,838
641,484
636,336
Residential real estate
356,234
290,054
212,527
183,021
194,796
Commercial, financial
& agricultural
242,756
223,923
154,048
213,380
114,360
Consumer and other
62,959
18,247
18,564
21,618
23,322
Total loans, net of unearned fees
1,883,470
1,737,106
1,337,977
1,059,503
968,814
Allowance for credit losses on loans
(18,371)
(16,128)
(12,910)
(12,127)
(6,863)
Loans, net
$ 1,865,099
$ 1,720,978
$ 1,325,067
$ 1,047,376
$
961,951
Maturity and Repricing Opportunity
The following table presents total loans as of December 31, 2023 according to maturity distribution
and/or repricing opportunity on adjustable rate loans.
After One
After Five
Year
Years
One Year
Through
Through
After
(Dollars in thousands)
or Less
Five Years
Fifteen Years Fifteen Years
Total
Construction, land
& land development
$
118,546
$
46,782
$ 69,504
$
12,314
$
247,146
Other commercial real estate
85,535
469,921
384,233
34,686
974,375
Total commercial real estate
204,081
516,703
453,737
47,000
1,221,521
Residential real estate
42,786
82,223
162,414
68,811
356,234
Commercial, financial
& agricultural
70,918
108,206
56,969
6,663
242,756
Consumer and other
5,808
23,181
16,023
17,947
62,959
Total loans, net of unearned fees
$
323,593
$ 730,313
$ 689,143
$ 140,421
$ 1,883,470
Overview. Loans totaled $1.9 billion at December 31, 2023, up 8.4% from $1.7 billion at
December 31, 2022. The majority of the Company’s loan portfolio is comprised of real estate loans.
Commercial and residential real estate which is primarily 1-4 family residential properties, nonfarm
nonresidential properties and real estate construction loans made up 83.8% and 86.1% of total loans at
December 31, 2023 and December 31, 2022, respectively. Commercial, financial and agriculture loans
represents 12.9% of the loans at December 31, 2023 and 2022. Consumer and other loans increased to
3.3% of total loans at December 31, 2023 from 1.1% at December 31, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Loan origination/risk management. In accordance with the Company’s decentralized banking
model, loan decisions are made at the local bank level. The Company utilizes both an Executive
Loan Committee and a Director Loan Committee to assist lenders with the decision making and
underwriting process of larger loan requests. Due to the diverse economic markets served by the
Company, evaluation and underwriting criterion may vary slightly by market. Overall, loans are
extended after a review of the borrower’s repayment ability, collateral adequacy, and overall
credit worthiness.
Commercial purpose, commercial real estate, and agricultural loans are underwritten similarly
to how other loans are underwritten throughout the Company. The properties securing the Company’s
commercial real estate portfolio are diverse in terms of type and geographic location. In addition, the
Company restricts total loans to $10 million per borrower, subject to exception and approval by the
Director Loan Committee. This diversity helps reduce the Company’s exposure to adverse economic
events that affect any single market or industry. Management monitors and evaluates commercial
real estate loans monthly based on collateral, geography, and risk grade criteria. The Company also
utilizes information provided by third-party agencies to provide additional insight and guidance about
economic conditions and trends affecting the markets it serves.
The Company extends loans to builders and developers that are secured by non-owner occupied
properties. In such cases, the Company reviews the overall economic conditions and trends for
each market to determine the desirability of loans to be extended for residential construction and
development. Sources of repayment for these types of loans may be pre-committed permanent
loans from approved long-term lenders, sales of developed property or an interim mini-perm loan
commitment from the Company until permanent financing is obtained. In some cases, loans are
extended for residential loan construction for speculative purposes and are based on the perceived
present and future demand for housing in a particular market served by the Company. These loans
are monitored by on-site inspections and are considered to have higher risks than other real estate
loans due to their ultimate repayment being sensitive to interest rate changes, general economic
conditions and trends, the demand for the properties, and the availability of long-term financing.
The Company originates consumer loans at the bank level. Due to the diverse economic markets
served by the Company, underwriting criterion may vary slightly by market. The Company is
committed to serving the borrowing needs of all markets served and, in some cases, adjusts certain
evaluation methods to meet the overall credit demographics of each market. Consumer loans
represent relatively small loan amounts that are spread across many individual borrowers to help
minimize risk. Additionally, consumer trends and outlook reports are reviewed by management
on a regular basis.
The Company utilizes an independent third-party company for loan review and validation of
the credit risk program on an ongoing quarterly basis. Results of these reviews are presented to
management and the audit committee. The loan review process complements and reinforces the
risk identification and assessment decisions made by lenders and credit personnel, as well as the
Company’s policies and procedures.
For additional discussion of our loan portfolio and deposit accounts, see “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations - Loans” and “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Deposits.”
Commercial, financial & agricultural. Commercial, financial and agricultural loans at December
31, 2023 increased by $18.8 million, or 8.4% to $242.8 million from December 31, 2022 at $223.9 million.
This increase was related to organic growth of commercial and industrial loans. The Company’s
commercial, financial and agricultural loans are a diverse group of loans to small, medium and large
businesses. The purpose of these loans varies from supporting seasonal working capital needs to term
financing of equipment. These agricultural lines typically reduce in size at year end as crops are sold.
While some short-term loans may be made on an unsecured basis, most are secured by the assets
being financed with collateral margins that are consistent with the Company’s loan policy guidelines.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
30
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Construction, land & land development. Construction, land and land development loans increased
by $17.7 million, or 7.7%, at December 31, 2023 to $247.1 million from $229.4 million at December 31,
2022. This increase was primarily attributable to organic growth of consumer residential construction
loans.
Other commercial real estate. Other commercial real estate loans decreased by $1.1 million, or
0.1%, at December 31, 2023 to $974.4 million from $975.4 million at December 31, 2022. This decrease
was primarily attributable to decreases in both owner occupied and non-owner occupied commercial
real estate and due to the current lending environment, rate environment, and the Company’s lending
appetite. At December 31, 2023, the Company’s other commercial real estate loans were comprised of
60.9% of non-owner occupied loans and 39.1% of owner occupied loans.
The Company’s non-owner occupied portfolio is well diversified as can be seen in the table below
as of December 31, 2023.
(Dollars in thousands)
December 31, 2023
Multifamily
$
74,914
Hotel/Motel
54,493
Retail
185,909
Office
68,008
Industrial & Warehouse
63,538
Health Care
14,895
Other Specialty
121,006
Government guaranteed SBSL
10,713
Total
$ 593,476
Residential Real Estate Loans. Residential real estate loans increased by $66.2 million or 22.8%,
at December 31, 2023 to $356.2 million from $290.1 million at December 31, 2022. This increase was
attributable to growth of portfolio 1-4 family residential real estate loans. Residential real estate loans
consist of revolving, open-end and closed-end loans as well as those secured by closed-end first and
junior liens.
Consumer and other. Consumer and other loans include loans to individuals for personal and
household purposes, including secured and unsecured installment loans and revolving lines of credit.
Consumer and other loans at December 31, 2023 increased $44.7 million or 245.0% to $63.0 million
from $18.2 million at December 31, 2022. This increase was primarily attributable to increases in the
Company’s marine and RV lending division.
Industry concentrations. As of December 31, 2023 and December 31, 2022, there were no
concentrations of loans within any single industry in excess of 10% of total loans, as segregated by
Standard Industrial Classification code (“SIC code”). The SIC code is a federally designed standard
industrial numbering system used by the Company to categorize loans by the borrower’s type of
business. The Company has established industry-specific guidelines with respect to maximum loans
permitted for each industry with which the Company does business.
Collateral concentrations. Concentrations of credit risk can exist in relation to individual
borrowers or groups of borrowers, certain types of collateral, certain types of industries, or certain
geographic regions. The Company has a concentration in real estate loans as well as a geographic
concentration that could pose an adverse credit risk. At December 31, 2023, approximately 83.8% of
the Company’s loan portfolio was concentrated in loans secured by real estate. A substantial portion
of borrowers’ ability to honor their contractual obligations is dependent upon the viability of the real
estate economic sector. In addition, a large portion of the Company’s foreclosed assets are also located
in these same geographic markets, making the recovery of the carrying amount of foreclosed assets
susceptible to changes in market conditions. Management continues to monitor these concentrations
and has considered these concentrations in its allowance for credit loss analysis. In recent years, we
have seen real estate values stabilizing in our markets. The stabilization of rates has resulted in a
decrease in the number of loans being classified as impaired over the past several years.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
31
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Large credit relationships. The Company currently operates 34 locations in north, central, south
and coastal Georgia and includes metropolitan markets in Fulton, Fayette, Dougherty, Lowndes,
Houston, Chatham and Muscogee counties. The Company has also expanded its presence in 2023
into Birmingham, Alabama as well as Tallahassee and the Florida panhandle. As a result, the
Company originates and maintains large credit relationships with several commercial customers in
the ordinary course of business. The Company considers large credit relationships to be those with
commitments equal to or in excess of $5.0 million prior to any portion being sold. Large relationships
also include loan participations purchased if the credit relationship with the agent is equal to or in
excess of $5.0 million. In addition to the Company’s normal policies and procedures related to the
origination of large credits, the Company’s Executive Loan Committee and Director Loan Committee
must approve all new and renewed credit facilities which are part of large credit relationships. At
December 31, 2023, our largest 20 relationships consisted of loans and loan commitments, where
the total committed balance was $354.1 million with $266.7 million outstanding. At December 31,
2022, our largest 20 relationships had total committed balance of $327.2 million with $227.2 million
outstanding.
Maturities and sensitivities of loans to changes in interest rates. The following table presents
the maturity distribution of the Company’s loans at December 31, 2023. The table also presents the
portion of loans that have fixed interest rates or variable interest rates that fluctuate over the life of
the loans in accordance with changes in an interest rate index such as the prime rate.
Due in
After One
After Five years
One Year
but Within
but Within
After
(Dollars in thousands)
or Less
Five Years
Fifteen Years Fifteen Years
Total
Loans with fixed interest rates:
Construction, land
& land development
$
104,421
$
39,932
$ 45,049
$
12,314
$
201,716
Other commercial real estate
69,295
447,084
382,369
34,686
933,434
Total commercial real estate
173,716
487,016
427,418
47,000
1,135,150
Residential real estate
12,400
64,858
47,242
68,790
193,290
Commercial, financial
& agricultural
44,426
95,854
56,969
6,663
203,912
Consumer and other
5,415
23,158
16,023
17,947
62,543
Total loans with fixed interest
rates, net of unearned fees
235,957
670,886
547,652
140,400
1,594,895
Loans with floating interest rates:
Construction, land
& land development
14,125
6,850
24,455
—
45,430
Other commercial real estate
16,240
22,837
1,864
—
40,941
Total commercial real estate
30,365
29,687
26,319
—
86,371
Residential real estate
30,386
17,365
115,172
21
162,944
Commercial, financial
& agricultural
26,492
12,352
—
—
38,844
Consumer and other
393
23
—
—
416
Total loans with floating interest
rates, net of unearned fees
87,636
59,427
141,491
21
288,575
Total loans, net of unearned fees
$
323,593
$ 730,313
$ 689,143
$ 140,421
$ 1,883,470
The Company may renew loans at maturity when requested by a customer whose financial
strength appears to support such renewal or when such renewal appears to be in the Company’s
best interest. In such instances, the Company generally requires payment of accrued interest and
may adjust the rate of interest, require a principal reduction or modify other terms of the loan at
the time of renewal.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
32
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Nonperforming Assets and Potential Problem Loans
Asset quality experienced a slight decrease during the year ended December 31, 2023,
primarily due to the repurchase of the government guaranteed portion of nonperforming
loans, which were repurchased as part of the liquidation process and have no expected losses.
Nonperforming assets include nonaccrual loans, accruing loans contractually past due 90 days
or more, repossessed personal property and other real estate owned (“OREO”). Nonaccrual loans
totaled $9.8 million at December 31, 2023, an increase of $4.1 million, or 72.4%, from $5.7 million
at December 31, 2022. There were two loans contractually past due 90 days or more and still
accruing at December 31, 2023 and none at December 31, 2022. At December 31, 2023, OREO totaled
$448,000, a decrease of $203,000, or 31.2%, compared with $651,000 at December 31, 2022. The
change in OREO is primarily the result of four properties added to other real estate totaling $3.1
million offset by $3.3 million from the sale of five OREO properties. At the end of the year ended
December 31, 2023, total nonperforming assets as a percentage of total assets increased to 0.35%
compared with 0.22% at December 31, 2022.
Year-end nonperforming assets and accruing past due loans were as follows:
(Dollars in thousands)
2023
2022
2021
Loans accounted for on nonaccrual
$
9,839
$
5,706
$
5,449
Loans accruing past due 90 days or more
370
—
—
Other real estate foreclosed
448
651
281
Repossessed assets
—
—
49
Total nonperforming assets
$ 10,657
$ 6,357
$
5,779
Nonperforming loans by segment
Construction, land & land development
$
85
$
149
$
31
Other commercial real estate
4,219
1,509
837
Residential real estate
3,911
2,686
3,839
Commercial, financial & agricultural
1,956
1,341
708
Consumer and other
38
21
34
Total nonperforming loans
$ 10,209
$
5,706
$
5,449
Nonperforming assets as a percentage of:
Total loans, other real estate and foreclosed assets
0.57%
0.37%
0.43%
Total assets
0.35%
0.22%
0.21%
Nonperforming loans as a percentage of:
Total loans
0.55%
0.33%
0.41%
Supplemental data:
Accruing past due loans:
30-89 days past due
$
6,069
$
1,793
$
4,567
90 or more days past due
370
—
—
Total accruing past due loans
$
6,439
$
1,793
$
4,567
Allowance for credit losses
$ 18,371
$ 16,128
$ 12,910
Allowance for credit losses as a percentage of:
Total loans
0.98%
0.93%
0.96%
Nonperforming loans
179.95
282.65
236.92
Nonperforming assets include nonaccrual loans, loans past due 90 days or more, foreclosed real
estate, repossessed assets and nonaccrual securities. Nonperforming assets at December 31, 2023
increased 67.6% from December 31, 2022, as a result of the increase in nonaccrual loans and loans
accruing past due 90 days or more, offset by a slight decrease in other real estate owned property.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
33
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Generally, loans are placed on nonaccrual status if principal or interest payments become
90 days past due and/or management deems the collectability of the principal and/or interest to
be in question, as well as when required by regulatory requirements. Loans to a customer whose
financial condition has deteriorated are considered for nonaccrual status whether or not the loan
is 90 days or more past due. For consumer loans, collectability and loss are generally determined
before the loan reaches 90 days past due. Accordingly, losses on consumer loans are recorded at the
time they are determined. Consumer loans that are 90 days or more past due are generally either in
liquidation/payment status or bankruptcy awaiting confirmation of a plan. Once interest accruals
are discontinued, accrued but uncollected interest is charged to current year operations. Subsequent
receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is
recorded only after principal recovery is reasonably assured. Classification of a loan as nonaccrual
does not preclude the ultimate collection of loan principal or interest.
The Company had two loans modified due to financial difficulty during the year ended
December 31, 2023. See Note 3. Loans, for additional details on loan modifications.
Foreclosed assets represent property acquired as the result of borrower defaults on loans.
Foreclosed assets are recorded at estimated fair value, less estimated selling costs, at the time of
foreclosure. Write-downs occurring at foreclosure are charged against the allowance for credit
losses. On an ongoing basis, properties are appraised as required by market indications and
applicable regulations. Write-downs are provided for subsequent declines in value and are included
in other non-interest expense along with other expenses related to maintaining the properties.
Allowance for Credit Losses
The allowance for credit losses for loans is a reserve established through charges to earnings in
the form of a provision for credit losses. The provision for credit losses is based on management’s
evaluation of the size and composition of the loan portfolio, the level of non-performing and past
due loans, historical trends of charged-off loans and recoveries, prevailing economic conditions
and other factors management deems appropriate. The Company’s management has established
an allowance for credit losses for loans which it believes is adequate to cover expected credit losses
over the expected life of a loan exposure and unfunded commitments where the likelihood is
that funding will occur. Based on a credit evaluation of the loan portfolio, management presents
a quarterly review of the allowance for credit losses for loans and allowance for credit losses on
unfunded commitments to the Company’s Board of Directors, which primarily focuses on risk by
evaluating individual loans in certain risk categories. These categories have also been established
by management and take the form of loan grades. By grading the loan portfolio in this manner,
the Company’s management is able to effectively evaluate the portfolio by risk, which management
believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of
the allowance for credit losses on loans.
The allowance for credit losses on loans is established by examining (1) the large classified
loans, nonaccrual loans and loans considered impaired and evaluating them individually to
determine the specific reserve allocation and (2) the remainder of the loan portfolio to allocate a
portion of the allowance based on past loss experience and reasonable and supportable forecasts
of economic conditions for the particular loan category. The Company also considers other factors
such as changes in lending policies and procedures; changes in national, regional and/or local
economic and business conditions; changes in the nature and volume of the loan portfolio; changes
in the experience, ability and depth of either the market president or lending staff; changes in
the volume and severity of past due and classified loans; changes in the quality of the loan review
system; and other factors management deems appropriate.
The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision
for credit loss expense. The estimate includes consideration of the likelihood that funding will occur
and an estimate of expected credit losses on commitments expected to be funded over its estimated
life. The ACL is calculated using the same aggregate reserve rates calculated for the funded
portion of loans at the portfolio level applied to the amount of commitments expected to fund.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
34
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Management evaluates the adequacy of the allowance for credit losses for each of these
components on a quarterly basis. Peer comparisons, industry comparisons, and regulatory
guidelines are also used in the determination of the valuation allowance. Loans identified as
losses by management, internal loan review, and/or bank examiners are charged off. Additional
information about the Company’s allowance for credit losses is provided in the Notes to the
Consolidated Financial Statements for Allowance for Credit Losses.
The following table sets forth the breakdown of the allowance for credit losses on loans by loan
category for the periods indicated. The allocation of the allowance to each category is subjective
and is not necessarily indicative of future losses and does not restrict the use of the allowance to
absorb losses in any other category.
December 31,
2023
2022
2021
2020
2019
(Dollars in thousands)
Reserve
%(1)
Reserve
%(1)
Reserve
%(1)
Reserve
%(1)
Reserve
%(1)
Construction, land &
land development
$ 2,204 13.1% $ 1,959 13.2%
$ 1,127 12.4% $ 1,013 11.4% $
215
9.9%
Other commercial
real estate
7,064 51.7
8,886 56.1
7,691 58.8
6,880 49.1
3,908 55.8
Residential real estate
5,105 18.9
2,354 16.7
1,805 15.9
2,278 17.3
980 20.1
Commercial, financial
& agricultural
2,110 12.9
2,709 12.9
1,083 11.5
1,713 20.1
1,657 11.8
Consumer & other
1,888 3.4
220
1.1
1,204
1.4
243
2.1
103
2.4
$ 18,371 100.0% $ 16,128 100.0%
$ 12,910 100.0% $ 12,127 100.0% $ 6,863 100.0%
(1) Percentage represents the loan balance in each category expressed as a percentage of total end of period loans.
The following table presents an analysis of the Company’s allowance for credit losses on loans for
the periods indicated.
(Dollars in thousands)
2023
2022
2021
2020
2019
Allowance for credit losses on loans at
beginning of year
$ 16,128
$ 12,910
$ 12,127
$ 6,863
$
7,277
Adoption of ASU 2016-13
(53)
—
—
—
—
Charge-offs
Construction, land & land development
—
—
—
4
29
Other commercial real estate
69
58
568
226
119
Residential real estate
771
48
3
206
758
Commercial, financial & agricultural
1,069
314
274
242
403
Consumer and other
35
60
68
1,103
784
Total charge-offs
1,944
480
913
1,781
2,093
Recoveries
Construction, land & land development
10
25
466
45
82
Other commercial real estate
42
85
118
153
218
Residential real estate
79
50
274
142
174
Commercial, financial & agricultural
201
139
91
43
36
Consumer and other
22
29
47
104
65
Total recoveries
354
328
996
487
575
Net charge-offs/(recoveries)
1,590
152
(83)
1,294
1,518
Provision for credit losses on loans
3,886
3,370
700
6,558
1,104
Allowance for credit losses on loans
at end of year
$ 18,371
$ 16,128
$ 12,910
$ 12,127
$
6,863
Ratio of net charge-offs/(recoveries)
to average loans
0.09%
0.01%
(0.01)%
0.12%
0.11%
Management’s Discussion and Analysis of Financial Condition and Results of Operations
35
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
The allowance for credit losses on loans increased from $16.1 million or 0.93% of total loans at
December 31, 2022 to $18.4 million, or 0.98% of total loans at December 31, 2023. The provision for
credit losses on loans reflects loan quality trends, including the level of net charge-offs or recoveries,
among other factors. The primary reason for the increase year over year was due to a few loans
that faced downgrades and charge-offs. These loans represented a small number of loans and
circumstances, and management has no concern that there are systemic issues across the portfolio.
The amount of provision expense recorded in 2023 was the amount required such that the total
allowance for credit losses reflected the appropriate balance, in the estimation of management, that
was sufficient to cover expected credit losses on loans over the expected life of a loan exposure and
unfunded commitments where the likelihood is that funding will occur. The amount of provision
expense recorded in 2022 and prior periods was the amount required such that the total allowance for
credit losses reflected the appropriate balance, in the estimation of management, sufficient to cover
probable, inherent losses in the loan portfolio.
Investment Portfolio
The following table presents carrying values of investment securities available-for-sale held by the
Company as of December 31, 2023, 2022 and 2021.
(Dollars in thousands)
2023
2022
2021
U.S. treasury securities
$
498
$
1,622
$ 87,551
U.S. agency securities
4,139
4,585
17,781
Asset backed securities
24,630
29,988
—
State, county and municipal securities
109,036
104,756
250,153
Corporate debt securities
47,390
49,585
48,408
Mortgage-backed securities
221,689
242,017
534,271
Total debt securities
$ 407,382
$ 432,553
$ 938,164
The following table presents investment securities held-to-maturity, carried at cost by the
Company as of December 31, 2023, 2022 and 2021.
(Dollars in thousands)
2023
2022
2021
U.S. treasury securities
$ 93,306
$ 91,615
$
—
U.S. agency securities
16,282
16,409
—
State, county and municipal securities
136,685
136,138
—
Mortgage-backed securities
202,758
221,696
—
Total debt securities
$ 449,031
$ 465,858
$
—
The following table represents expected maturities and weighted-average yields of investment
securities held by the Company as of December 31, 2023 (mortgage-backed securities are based on
the average life at the projected speed, while State and Political Subdivisions reflect anticipated calls
being exercised).
After 1 Year But After 5 Years But
Available for Sale
Within 1 Year Within 5 Years Within 10 Years After 10 Years
(Dollars in thousands)
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
U.S. treasury securities
$
498 2.91%
$
—
—%
$
—
—% $
—
—%
U.S. agency securities
—
—
888
0.76
875
2.43
2,376
2.89
Asset backed securities
—
—
52
1.33
5,933
6.11
18,645
6.80
State, county and municipal securities
215 5.48
4,059
1.49
46,085
2.05
58,677
2.10
Corporate debt securities
—
—
9,698
4.80
35,746
4.34
1,946 11.12
Mortgage-backed securities
20,887 7.53
41,940
3.45
6,775
1.94
152,087
2.47
Total debt securities
$ 21,600 7.40%
$ 56,637
3.50%
$ 95,414
3.16% $ 233,731
2.80%
Management’s Discussion and Analysis of Financial Condition and Results of Operations
36
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
After 1 Year But After 5 Years But
Held to Maturity
Within 1 Year Within 5 Years Within 10 Years After 10 Years
(Dollars in thousands)
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
U.S. treasury securities
$
3,937 1.21%
$ 84,506
1.05%
$ 4,863
1.33% $
—
—%
U.S. agency securities
—
—
7,838
1.17
8,444
1.47
—
—
State, county and municipal securities
—
—
1,850
1.06
63,222
2.20
71,613
1.94
Mortgage-backed securities
—
—
24,115
1.74
45,058
1.95
133,585
2.13
Total debt securities
$
3,937 1.21%
$ 118,309
1.20%
$ 121,587
2.02% $ 205,198
2.06%
Securities are classified as held to maturity and carried at amortized cost when management has
the positive intent and ability to hold them to maturity. Securities are classified as available for sale
when they might be sold before maturity. Securities available for sale are carried at fair value, with
unrealized holding gains and losses reported in other comprehensive income. The Company had both
held to maturity and available for sale securities in the investment portfolio at December 31, 2023.
Management also evaluates its securities portfolio for any credit-related impairment on a quarterly
basis. The Company did not identify any credit-related impairment in its held to maturity or available
for sale portfolios at December 31, 2023.
At December 31, 2023, there were no holdings of any one issuer, other than the U.S. government
and its agencies, in an amount greater than 10% of the Company’s stockholders’ equity.
The average yield of the securities portfolio was 2.72% in 2023 and 2.16% in 2022. The increase
in the average yield from 2022 to 2023 was primarily attributed to paydowns of lower yielding
investments and repricing of variable rate securities.
Deposits
The following table presents the average amount outstanding and the average rate paid on deposits
by the Company for the years 2023, 2022, and 2021.
2023
2022 2021
Average
Average
Average
Average
Average
Average
(Dollars in thousands)
Amount
Rate
Amount
Rate
Amount
Rate
Noninterest-bearing
demand deposits
$ 519,225
—%
$ 564,322
—%
$ 449,445
—%
Interest-bearing demand
and savings deposits
1,390,247
1.14%
1,439,234
0.21%
1,073,824
0.09%
Time deposits
619,083
3.17%
370,375
0.76%
297,704
0.56%
Total deposits
$ 2,528,555
1.40%
$ 2,373,931
0.25%
$ 1,820,973
0.14%
The following table presents the maturities of the Company’s time deposits as of December 31, 2023.
Time
Time
Deposits
Deposits
$250,000
Less Than
(Dollars in thousands)
or Greater
$250,000
Total
Months to Maturity
3 months or less
$ 29,203
$ 150,150
$ 179,353
Over 3 months through 6 months
67,382
121,717
189,099
Over 6 months through 12 months
54,580
125,802
180,382
Over 12 months
16,515
60,839
77,354
$ 167,680
$ 458,508
$ 626,188
Management’s Discussion and Analysis of Financial Condition and Results of Operations
37
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Average deposits increased $154.6 million in 2023 compared to 2022. The increase in 2023 included
$248.7 million, or 67.2% in time deposits, which were partially offset by decreases in interest-bearing
demand and savings deposits of $49.0 million, or 3.4% and noninterest-bearing deposits of $45.1 million,
or 8.0%. The increase in our overall deposits is due primarily to the increase in the rate the Company
offers on its time deposit products as well as the increase in brokered deposits. The increase in deposit
rates is attributable to the 100 basis point increase in the national federal funds rate during 2023.
As of December 31, 2023 and 2022, $777.8 million and $882.2 million, respectively, of our deposit
portfolio was uninsured. The uninsured amounts are estimated based on the methodologies and
assumptions used for the Bank’s regulatory reporting requirements.
The Company supplements deposit sources with brokered deposits. As of December 31, 2023, the
Company had $93.6 million, or 3.68% of total deposits, in brokered certificates of deposit attracted
by external third parties. Additional information is provided in the Notes to Consolidated Financial
Statements for Deposits.
Off-Balance-Sheet Arrangements and Contractual Obligations
In the ordinary course of business, our Bank has granted commitments to extend credit to
approved customers. Generally, these commitments to extend credit have been granted on a
temporary basis for seasonal or inventory requirements or for construction period financing and
have been approved within the Bank’s credit guidelines. Our Bank has also granted commitments to
approved customers for financial standby letters of credit. These commitments are recorded in the
financial statements when funds are disbursed or the financial instruments become payable. The
Bank uses the same credit policies for these off-balance-sheet commitments as it does for financial
instruments that are recorded in the consolidated financial statements. Commitments generally have
fixed expiration dates or other termination clauses and may require payment of a fee. Since many of
the commitment amounts expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
The following table summarizes commitments and contractual obligations outstanding at December
31, 2023.
Payments Due by Period
Less Than
More Than
(Dollars in thousands)
Total
1 Year
1 – 3 Years
3 – 5 Years
5 Years
Contractual obligations:
Borrowings
$ 238,445
$ 70,000
$ 25,000
$ 80,000
$ 63,445
Operating lease liabilities
1,967
642
956
369
—
Time Deposits
626,188
548,834
67,891
9,195
268
866,600
619,476
93,847
89,564
63,713
Other Commitments:
Loan commitments
362,878
172,757
51,873
11,930
126,318
Standby letters of credit
5,656
4,702
954
—
—
368,534
177,459
52,827
11,930
126,318
Total Contractual Obligations
and Other Commitments
$ 1,235,134
$ 796,935
$ 146,674
$ 101,494
$ 190,031
Loan Commitments. The Company enters into contractual commitments to extend credit,
normally with fixed expiration dates or termination clauses, at specified rates and for specific
purposes. Substantially all of the Company’s commitments to extend credit are contingent upon
customers maintaining specific credit standards at the time of loan funding. The Company minimizes
its exposure to loss under these commitments by subjecting them to credit approval and monitoring
procedures. Management assesses the credit risk associated with certain commitments to extend
credit in determining the level of the allowance for credit losses. Loan commitments outstanding at
December 31, 2023 are included in the preceding table.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
38
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Standby Letters of Credit. Letters of credit are written conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. In the event the customer
does not perform in accordance with the terms of the agreement with the third party, the Company
would be required to fund the commitment. The maximum potential amount of future payments the
Company could be required to make is represented by the contractual amount of the commitment. If
the commitment is funded, the Company would be entitled to seek recovery from the customer. The
Company’s policies generally require that standby letters of credit arrangements contain security and
debt covenants similar to those contained in loan agreements. Standby letters of credit outstanding at
December 31, 2023 are included in the preceding table.
Capital Requirements
The Bank and the Company are each required under federal law to maintain certain minimum
capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required
capital ratios are minimums, and the federal banking agencies may determine that a banking
organization, based on its size, complexity or risk profile, must maintain a higher level of capital
in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the
risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the
economic value of its capital due to changes in interest rates, and an institution’s ability to manage
those risks are important factors that are to be taken into account by the federal banking agencies
in assessing an institution’s overall capital adequacy. For more information, see “Item 1. Business –
Supervision and Regulation – Regulation of the Company – Capital Requirements.”
At December 31, 2023, shareholders’ equity totaled $254.9 million compared to $230.3 million
at December 31, 2022. In addition to net income of $21.7 million, another significant change in
shareholders’ equity during 2023 included $7.7 million of dividends declared on common stock. The
accumulated other comprehensive loss component of stockholders’ equity totaled $55.6 million at
December 31, 2023 compared to $66.4 million at December 31, 2022. This fluctuation was mostly
related to the after-tax effect of changes in the fair value of securities available for sale. Under
regulatory requirements, the unrealized gain or loss on securities available for sale does not increase
or reduce regulatory capital and is not included in the calculation of risk-based capital and leverage
ratios. Regulatory agencies for banks and bank holding companies utilize capital guidelines designed
to measure Tier 1 and total capital and take into consideration the risk inherent in both on-balance
sheet and off-balance sheet items.
Tier 1 capital consists of common stock and qualifying preferred securities less goodwill,
intangibles and disallowed deferred tax assets. Tier 2 capital consists of certain convertible,
subordinated and other qualifying debt and the allowance for credit losses up to 1.25% of risk-
weighted assets. The Company’s Tier 2 capital consists of subordinated notes and the allowance for
credit losses.
Using the capital requirements presently in effect, the Tier 1 ratio as of December 31, 2023 was
12.77% and total Tier 1 and 2 risk-based capital was 15.47%. Both of these measures compare favorably
with the regulatory minimum of 6.0% for Tier 1 and 8% for total risk-based capital. The Company’s
common equity Tier 1 ratio as of December 31, 2023 was 11.66%, which exceeds the regulatory
minimum of 4.50%. The Company’s Tier 1 leverage ratio as of December 31, 2023 was 9.17%, which
exceeds the required ratio standard of 4.0%.
For the year ended December 31, 2023, average capital was $238.9 million representing 7.9% of
average assets for the year. This compares to average capital of $236.3 million, representing 8.6% of
average assets for 2022.
For the years ended December 31, 2023 and 2022, the Company did not have any material
commitments for capital expenditures.
The Company granted 55,210 and 139,720 restricted shares of common stock for the years ended
December 31, 2023 and 2022, respectively. All restricted shares vest over a three year period.
A cash dividend of $7.7 million and $7.2 million was paid for the year ended December 31, 2023
and 2022, respectively.
39
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Liquidity
The Company, primarily through the actions of its subsidiary bank, engages in liquidity
management to ensure adequate cash flow for deposit withdrawals, credit commitments and
repayments of borrowed funds. Needs are met through loan repayments, net interest and fee income
and the sale or maturity of existing assets. In addition, liquidity is continuously provided through the
acquisition of new deposits, the renewal of maturing deposits and external borrowings.
Cash and cash equivalents at December 31, 2023 and 2022 were $83.3 million and $80.7 million,
respectively. The increase in cash and cash equivalents was primarily due to increases in deposits
and other borrowings needed to fund loan growth. Management believes the various funding sources
discussed above are adequate to meet the Company’s liquidity needs in these unsettled times without
any material adverse impact on our operating results.
Management monitors deposit flow and evaluates alternate pricing structures to retain and
grow deposits. To the extent needed to fund loan demand, traditional local deposit funding sources
are supplemented by the use of FHLB borrowings, brokered deposits and other wholesale deposit
sources outside the immediate market area. Internal policies have been updated to monitor the use of
various core and non-core funding sources, and to balance ready access with risk and cost. Through
various asset/liability management strategies, a balance is maintained among goals of liquidity, safety
and earnings potential. Internal policies that are consistent with regulatory liquidity guidelines are
monitored and enforced by the Bank.
The investment portfolio provides a ready means to raise cash if liquidity needs arise. As of
December 31, 2023, the available-for-sale bond portfolio totaled $407.4 million. At December 31, 2022,
the available for sale bond portfolio totaled $432.6 million. This decrease is primarily attributable to
maturities, calls and paydowns on the portfolio during 2023. Only marketable investment grade bonds
are purchased. Although approximately 50.2% of the Bank’s bond portfolio is encumbered as pledges
to secure various public funds deposits, repurchase agreements, and for other purposes, management
can restructure and free up investment securities for sale if required to meet liquidity needs.
Management continually monitors the relationship of loans to deposits as it primarily determines
the Company’s liquidity posture. Colony had ratios of loans to deposits of 74.0% as of December 31,
2023 and 69.7% as of December 31, 2022. Management employs alternative funding sources when
deposit balances will not meet loan demands. The ratios of loans to all funding sources (excluding
Subordinated Debentures) at December 31, 2023 and December 31, 2022 were 69.3% and 66.0%,
respectively. Management continues to emphasize programs to generate local core deposits as our
Company’s primary funding sources. The stability of the Banks’ core deposit base is an important
factor in Colony’s liquidity position. A heavy percentage of the deposit base is comprised of accounts
of individuals and small businesses with comprehensive banking relationships and limited volatility.
At December 31, 2023 and December 31, 2022, the Bank had $167.7 million and $114.8 million,
respectively, in certificates of deposit of $250,000 or more. These larger deposits represented 6.6% and
4.6% of total deposits as of December 31, 2023 and 2022, respectively. Management seeks to monitor
and control the use of these larger certificates, which tend to be more volatile in nature, to ensure
an adequate supply of funds as needed. Relative interest costs to attract local core relationships
are compared to market rates of interest on various external deposit sources to help minimize the
Company’s overall cost of funds.
The Company supplemented deposit sources with brokered deposits. As of December 31, 2023, the
Company had $93.6 million or 3.68% of total deposits in brokered deposits. Additional information
is provided in the Notes to the Consolidated Financial Statements regarding these brokered deposits.
Additionally, the Company uses external deposit listing services to obtain out-of-market certificates
of deposit at competitive interest rates when funding is needed. The deposits obtained from listing
services are often referred to as wholesale or internet CDs.
To plan for contingent sources of funding not satisfied by both local and out-of-market deposit
balances, Colony and its subsidiary have established multiple borrowing sources to augment their
funds management. The Company has borrowing capacity through membership of the Federal
Home Loan Bank program. The Bank has also established overnight borrowing for Federal Funds
Purchased through various correspondent banks. Management believes the various funding sources
discussed above are adequate to meet the Company’s liquidity needs in the future without any material
Management’s Discussion and Analysis of Financial Condition and Results of Operations
40
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Management’s Discussion and Analysis of Financial Condition and Results of Operations
adverse impact on operating results. At December 31, 2023 and 2022, we had $175.0 million and $125.0
million, respectively, of outstanding advances from the FHLB. Based on the values of loans pledged as
collateral, we had $596.2 million and $574.9 million of additional borrowing availability with the FHLB
at December 31, 2023 and 2022, respectively.
Other sources of liquidity include overnight borrowings from the Federal Reserve Discount
Window, as well as access to the FRB Term Funding Program which offers loans to eligible depository
institutions of up to one year in length. The Company also has unencumbered investment securities
which provide the ability to either be pledged as collateral with borrowing sources or sold and
converted to cash.
Liquidity measures the ability to meet current and future cash flow needs as they become due.
The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate
possible outflows in deposits and to take advantage of interest rate market opportunities. The ability
of a financial institution to meet its current financial obligations is a function of balance sheet
structure, the ability to liquidate assets, and the availability of alternative sources of funds. The
Company seeks to ensure its funding needs are met by maintaining a level of liquid funds through
asset/liability management.
Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which
will mature in the near future. Liquid assets include cash, interest-bearing deposits in banks,
securities available for sale and federal funds sold and securities purchased under resale agreements.
Liability liquidity is provided by access to funding sources which include core deposits. Should
the need arise, the Company also maintains relationships with the Federal Home Loan Bank, Federal
Reserve Bank, three correspondent banks and repurchase agreement lines that can provide funds on
short notice.
Since Colony is a bank holding Company and does not conduct operations, its primary sources of
liquidity are dividends up streamed from the subsidiary bank and borrowings from outside sources.
The liquidity position of the Company is continuously monitored and adjustments are made to the
balance between sources and uses of funds as deemed appropriate. Management is not aware of any
events that are reasonably likely to have a material adverse effect on the Company’s liquidity, capital
resources or operations. In addition, management is not aware of any regulatory recommendations
regarding liquidity, which if implemented, would have a material adverse effect on the Company.
Impact of Inflation and Changing Prices
The Company’s financial statements included herein have been prepared in accordance with
accounting principles generally accepted in the United States (GAAP). GAAP presently requires the
Company to measure financial position and operating results primarily in terms of historic dollars.
Changes in the relative value of money due to inflation or recession are generally not considered. The
primary effect of inflation on the operations of the Company is reflected in increased operating costs,
and the Company has experienced material effects of inflation during the last three fiscal years due
to the government’s monetary policies and the current economic climate. In management’s opinion,
changes in interest rates affect the financial condition of a financial institution to a far greater
degree than changes in the inflation rate. While interest rates are greatly influenced by changes in
the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the
inflation rate. Interest rates are highly sensitive to many factors that are beyond the control of the
Company, including changes in the expected rate of inflation, the influence of general and local
economic conditions and the monetary and fiscal policies of the United States government, its agencies
and various other governmental regulatory authorities, among other things, as further discussed in
the next section.
Regulatory and Economic Policies
The Company’s business and earnings are affected by general and local economic conditions
and by the monetary and fiscal policies of the United States government, its agencies and various
other governmental regulatory authorities, among other things. The Federal Reserve Board regulates
the supply of money in order to influence general economic conditions. Among the instruments of
monetary policy available to the Federal Reserve Board are (i) conducting open market operations
41
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Management’s Discussion and Analysis of Financial Condition and Results of Operations
in United States government obligations, (ii) changing the discount rate on financial institution
borrowings, (iii) imposing or changing reserve requirements against financial institution deposits,
and (iv) restricting certain borrowings and imposing or changing reserve requirements against certain
borrowings by financial institutions and their affiliates. These methods are used in varying degrees
and combinations to directly affect the availability of bank loans and deposits, as well as the interest
rates charged on loans and paid on deposits. For that reason alone, the policies of the Federal Reserve
Board have a material effect on the earnings of the Company.
Governmental policies have had a significant effect on the operating results of commercial
banks in the past and are expected to continue to do so in the future; however, the Company cannot
accurately predict the nature, timing or extent of any effect such policies may have on its future
business and earnings.
Recently Issued Accounting Pronouncements
See Note 1 - Summary of Significant Accounting Policies included in the Notes to the
Consolidated Financial Statements.
Market Risk and Interest Rate Sensitivity
Our financial performance is impacted by, among other factors, interest rate risk and credit risk.
We utilize derivatives to help manage our interest rate risk position and mitigate exposure to the
variability of future cash flows or other forecasted transactions. We mitigate our credit risk through
reliance on an extensive loan review process and our allowance for credit losses.
Interest rate risk is the change in value due to changes in interest rates. The Company is exposed
only to U.S. dollar interest rate changes and, accordingly, the Company manages exposure by
considering the possible changes in the net interest margin. The Company does not have any trading
instruments nor does it classify any portion of its investment portfolio as held for trading. The
Company has no exposure to foreign currency exchange rate risk, commodity price risk and other
market risks. Interest rate risk is addressed by our Risk Management Committee which includes
senior management representatives. The Risk Management Committee monitors interest rate risk
by analyzing the potential impact to the net portfolio of equity value and net interest income from
potential changes to interest rates and considers the impact of alternative strategies or changes in
balance sheet structure.
Interest rates play a major part in the net interest income of financial institutions. The repricing
of interest earnings assets and interest-bearing liabilities can influence the changes in net interest
income. The timing of repriced assets and liabilities is Gap management and our Company has
established its policy to maintain a Gap ratio in the one-year time horizon of .80 to 1.20.
Our exposure to interest rate risk is reviewed at least quarterly by our Board of Directors and
by our Risk Management Committee. Interest rate risk exposure is measured using interest rate
sensitivity analysis to determine our change in net portfolio value in the event of assumed changes
in interest rates. In order to reduce the exposure to interest rate fluctuations, we have implemented
strategies to more closely match our balance sheet composition. The Company has engaged Stifel
to run a quarterly asset/liability model for interest rate risk analysis. We are generally focusing our
investment activities on securities with terms or average lives in the 3 ½ - 5 ½ year range.
Market risk reflects the risk of economic loss resulting from adverse changes in market prices and
interest rates. This risk of loss can be reflected in either reduced current market values or reduced
current and potential net income. Colony’s most significant market risk is interest rate risk. This risk
arises primarily from Colony’s extension of loans and acceptance of deposits.
Managing interest rate risk is a primary goal of the asset liability management function. Colony
attempts to achieve stability in net interest income while limiting volatility arising from changes in
interest rates. Colony seeks to achieve this goal by balancing the maturity and repricing characteristics
of assets and liabilities. Colony manages its exposure to fluctuations in interest rates through policies
established by the Risk Management Committee and approved by the Board of Directors. The
Risk Management Committee meets at least quarterly and has responsibility for developing asset
liability management policies, reviewing the interest rate sensitivity of Colony, and developing and
implementing strategies to improve balance sheet structure and interest rate risk positioning.
42
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Colony measures the sensitivity of net interest income to changes in market interest rates through
the utilization of Asset/Liability simulation modeling. On at least a quarterly basis, the following
twenty-four month time period is simulated to determine a baseline net interest income forecast and
the sensitivity of this forecast to changes in interest rates. These simulations include all of Colony’s
earning assets and liabilities. Forecasted balance sheet changes, primarily reflecting loan and deposit
growth and forecasts, are included in the periods modeled. Projected rates for loans and deposits are
based on management’s outlook and local market conditions.
The magnitude and velocity of rate changes among the various asset and liability groups exhibit
different characteristics for each possible interest rate scenario; additionally, customer loan and
deposit preferences can vary in response to changing interest rates. Simulation modeling enables
Colony to capture the expected effect of these differences. Assumptions utilized in the model are
updated on an ongoing basis and are reviewed and approved by the Risk Management Committee of
the Board of Directors.
Colony has modeled its baseline net interest income forecast assuming a flat interest rate
environment with the federal funds rate at the Federal Reserve’s targeted range of 5.25% and the
prime rate of 8.50% at December 31, 2023. Colony has modeled the impact of a gradual increase
in short-term rates of 100 and 200 basis points and a decline of 100 basis points to determine the
sensitivity of net interest income for the next twelve months. As illustrated in the table below, the
net interest income sensitivity model indicates that, compared with a net interest income forecast
assuming stable rates, net interest income is projected to increase by 0.54% and 0.97% if interest rates
increased by 100 and 200 basis points, respectively. Net interest income is projected to decline by 2.03%
if interest rates decreased by 100 basis points. These changes were within Colony’s policy limit of a
maximum 15% negative change.
Twelve Month Net Interest Income Sensitivity
Estimated Change in Net Interest Income
As of December 31,
Change in short-term interest rates (in basis points)
2023
2022
+200
0.97%
2.59%
+100
0.54%
1.37%
Flat
—%
—%
-100
2.03%
-0.61%
The measured interest rate sensitivity indicates an asset sensitive position over the next year,
which could serve to improve net interest income in a rising interest rate environment. The actual
realized change in net interest income would depend on several factors, some of which could serve to
reduce or eliminate the asset sensitivity noted above. These factors include a higher than projected
level of deposit customer migration to higher cost deposits, such as certificates of deposit, which would
increase total interest expense and serve to reduce the realized level of asset sensitivity. Another factor
which could impact the realized interest rate sensitivity in a rising rate environment is the repricing
behavior of interest-bearing non-maturity deposits. Assumptions for repricing are expressed as a beta
relative to the change in the prime rate. For instance, a 25% beta would correspond to a deposit rate
that would increase 0.25% for every 1% increase in the prime rate. Projected betas for interest bearing
non-maturity deposit repricing are a key component of determining the Company’s interest rate risk
position. Should realized betas be higher than projected betas, the expected benefit from higher
interest rates would be reduced.
Colony is also subject to market risk in certain of its fee income business lines. Mortgage banking
income is subject to market risk. Mortgage loan originations are sensitive to levels of mortgage interest
rates and therefore, mortgage banking income could be negatively impacted during a period of rising
interest rates. The extension of commitments to customers to fund mortgage loans also subjects Colony
to market risk. This risk is primarily created by the time period between making the commitment
and closing and delivering the loan. Colony seeks to minimize this exposure by utilizing various risk
management tools, the primary of which are forward sales commitments and best efforts commitments.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
43
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
To the Board of Directors and Stockholders
Colony Bankcorp, Inc. and Subsidiaries / Fitzgerald, Georgia
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Colony Bankcorp, Inc. and Subsidiaries (the Company) as of December 31, 2023
and 2022 and the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the years
then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its
cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 14, 2024,
expressed an unqualified opinion.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
was communicated or required to be communicated to the Audit Committee and that: (1) relates to accounts or disclosures that are material to the
consolidated financial statements and (2) involved especially challenging, subjective, or complex judgements. The communication of the critical audit
matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Loan Losses
Description of the Matter
As described in Note 4 to the Company’s consolidated financial statements, the Company has a gross loan portfolio of $1.9 billion and related
allowance for credit losses of $18.4 million as of December 31, 2023. As described by the Company in Note 1, the Company computes quantitative and
qualitative components for the allowance for credit losses. The quantitative component is evaluated on a collective (pool) basis, segregated by class of
loans (the quantitative collective ACL). The Company estimated the quantitative collective ACL utilizing a discounted cash flow (DCF) methodology
applied to their loan pools segregated by similar risk characteristics. The Company’s DCF methodology generates cash flow projections at the loan level
wherein payment expectations are adjusted for estimated prepayment speeds, curtailments, time to recovery, probability of default (PD), and loss given
default (LGD). The modeling of expected prepayment speeds and curtailment rates are based on historical internal data and consider current conditions
and reasonable and supportable forecasts of future economic conditions. The Company uses regression analysis of historical internal and peer loss
data to determine suitable macroeconomic variables to utilize when modeling lifetime PD and LGD. This analysis also determines how expected PD and
LGD will react to forecasted levels of the macroeconomic variables over a reasonable and supportable forecast period. At the end of the four-quarter
reasonable and supportable forecast period, the Company reverts to a historical loss rate on a straight-line basis over eight quarters. For loans that have
elevated risk characteristics when compared to the collectively pooled loans, they are evaluated on an individual basis.
The qualitative component is comprised of measurements used to quantify the risks within each of these loans classes and are subjectively selected
by management but measured by objective measurements period over period. The data for each measurement is obtained from internal and external
sources. These adjustments are based upon quarterly trend assessments in certain economic factors as well as loan segment specific risks that cannot be
addressed in the quantitative methods.
We identified the Company’s estimate of the allowance for credit losses as a critical audit matter. The principal considerations for our
determination of the allowance for credit losses as a critical audit matter related to the subjective and complex auditor judgment involved in the
assessment of the quantitative collective ACL due to significant measurement uncertainty and the high degree of subjectivity in the Company’s
judgments in determining the qualitative factors. Auditing these complex judgments and assumptions by the Company involves especially challenging
auditor judgment due to the nature and extent of audit evidence and effort required to address these matters, including the extent of specialized skill or
knowledge needed.
The primary procedures we performed to address this critical audit matter included the following:
• We tested the design and operating effectiveness of controls relating to the Company’s determination of the allowance for credit losses, including
controls over development of the quantitative and qualitative factors.
• We evaluated the Company’s allowance for credit losses methodology for compliance with U.S. generally accepted accounting principles.
• We tested the design and operating effectiveness of controls relating to management’s review of reliability and accuracy of data used to calculate and
estimate the various components of the allowance for credit losses, including accuracy of the calculation and validation procedures over the models.
• We evaluated the relevance and the reasonableness of assumptions related to evaluation of the loan portfolio, current and forecasted economic
conditions, and other risk factors used in development of the qualitative factors.
• We evaluated the reasonableness of assumptions and data used by the Company in developing the qualitative factors by comparing these data points
to internally developed and third-party sources, and other audit evidence gathered.
• We assessed the overall trends in credit quality by comparing the overall allowance for credit losses to those recorded by the Company’s peer
institutions.
• We evaluated subsequent events and transactions and considered whether they corroborated or contradicted the Company’s conclusion.
We have served as the Company’s auditor since 2021.
Albany, Georgia / March 14, 2024
Report of Independent Registered Public Accounting Firm
44
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
To the Board of Directors and Stockholders
Colony Bankcorp, Inc. and Subsidiaries
Fitzgerald, Georgia
Opinion on Internal Control Over Financial Reporting
We have audited Colony Bankcorp, Inc. and Subsidiaries (the Company) internal control over financial
reporting, as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2023, based on the criteria established in Internal Control – Integrated Framework (2013)
issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the consolidated balance sheets of Colony Bankcorp, Inc. and Subsidiaries
(the “Company”) as of December 31, 2023 and 2022 and the related consolidated statements of income,
comprehensive income (loss), changes in stockholders’ equity, and cash flows for the years then ended, and
the related notes to the consolidated financial statements (collectively, the financial statements) and our
report dated March 14, 2024 expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is
to express an opinion on the Company’s internal control over financial reporting based on our audit. We are
a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Albany, Georgia
March 14, 2024
Report of Independent Registered Public Accounting Firm
45
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
December 31,
(Dollars in thousands)
2023
2022
Assets
Cash and due from banks
$
25,339
$
20,584
Interest-bearing deposits in banks and federal funds sold
57,983
60,094
Cash and cash equivalents
83,322
80,678
Investment securities available for sale, at fair value
(amortized cost $455,294 and $490,206, respectively)
407,382
432,553
Investment securities held to maturity, at amortized cost
(fair value $405,576 and $411,264, respectively)
449,031
465,858
Other investments
16,868
13,793
Loans held for sale
27,958
17,743
Loans, net of unearned income
1,883,470
1,737,106
Allowance for credit losses
(18,371)
`(16,128)
Loans, net
1,865,099
1,720,978
Premises and equipment
39,870
41,606
Other real estate owned
448
651
Goodwill
48,923
48,923
Other intangible assets
4,192
5,664
Bank-owned life insurance
56,925
55,504
Deferred income taxes, net
25,405
28,199
Other assets
27,999
24,420
Total assets
$ 3,053,422
$ 2,936,570
Liabilities and stockholders’ equity
Deposits:
Noninterest-bearing
$
498,992
$
569,170
Interest-bearing
2,045,798
1,921,827
Total deposits
2,544,790
2,490,997
Federal Home Loan Bank advances
175,000
125,000
Other borrowed money
63,445
78,352
Other liabilities
15,252
11,953
Total liabilities
2,798,487
2,706,302
Commitments and Contingencies (Note 14)
Stockholders’ equity
Preferred stock, stated value $1,000; 10,000,000 shares authorized,
0 shares issued and outstanding as of December 31, 2023 and 2022
—
—
Common stock, par value $1; 50,000,000 shares authorized,
17,564,182 and 17,598,123 shares issued and outstanding as of
December 31, 2023 and 2022
17,564
17,598
Paid-in capital
168,614
167,537
Retained earnings
124,400
111,573
Accumulated other comprehensive loss, net of tax
(55,643)
(66,440)
Total stockholders’ equity
254,935
230,268
Total liabilities and stockholders’ equity
$ 3,053,422
$ 2,936,570
See accompanying notes which are an integral part of these financial statements.
Consolidated Balance Sheets
46
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
For The Years Ended
December 31,
(Dollars in thousands, except per share data)
2023
2022
Interest income
Loans, including fees
$
99,256
$
70,764
Investment securities
23,319
19,887
Deposits with other banks and short term investments
2,341
886
Total interest income
124,916
91,537
Interest expense
Deposits
35,464
5,876
Federal funds purchased
147
54
Federal Home Loan Bank advances
6,763
2,564
Other borrowings
4,298
2,371
Total interest expense
46,672
10,865
Net interest income
78,244
80,672
Provision for credit losses
3,600
3,370
Net interest income after provision for credit losses
74,644
77,302
Noninterest income
Service charges on deposits
8,735
7,875
Mortgage fee income
6,131
8,550
Gain on sales of SBA loans
5,063
6,216
Loss on sales of securities
—
(82)
Interchange fees
8,460
8,381
BOLI income
1,396
1,313
Insurance commissions
1,873
1,777
Other
3,976
995
Total noninterest income
35,634
35,025
Noninterest expenses
Salaries and employee benefits
49,233
52,809
Occupancy and equipment
6,283
6,534
Information technology expense
8,553
9,947
Professional fees
3,097
3,432
Advertising and public relations
3,486
3,664
Communications
947
1,602
Other
11,466
11,487
Total noninterest expense
83,065
89,475
Income before income taxes
27,213
22,852
Income taxes
5,466
3,310
Net income
$
21,747
$
19,542
Net income per share of common stock
Basic
$
1.24
$
1.14
Diluted
$
1.24
$
1.14
Cash dividends declared per share of common stock
$
0.44
$
0.43
Weighted average shares outstanding, basic
17,578,294
17,191,079
Weighted average shares outstanding, diluted
17,578,294
17,191,079
See accompanying notes which are an integral part of these financial statements.
Consolidated Statements of Income
47
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
For The Years Ended
December 31,
(Dollars in thousands)
2023
2022
Net income
$
21,747
$
19,542
Other comprehensive income (loss):
Net unrealized gains (losses) on investment securities
arising during the period
11,440
(77,080)
Tax effect
(2,403)
10,790
Reclassification adjustment for amortization of unrealized
holding (gains) losses from the transfer of securities from
available for sale to held to maturity
2,641
6,925
Tax effect
(555)
(970)
Realized losses on sales of securities available
for sale included in net income
—
82
Tax effect
—
(11)
Unrealized losses on derivative instruments designated
as cash flow hedges
(64)
—
Tax effect
14
—
Realized gains on derivative instruments recognized in net income
(349)
—
Tax effect
73
—
Total other comprehensive income (loss)
10,797
(60,263)
Comprehensive income (loss)
$
32,544
$
(40,721)
See accompanying notes which are an integral part of these financial statements.
Consolidated Statements of Comprehensive Income (Loss)
48
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Accumulated
Other
Preferred Stock Common Stock
Paid-In
Retained
Comprehensive
(Dollars in thousands)
Shares
Amount
Shares
Amount
Capital
Earnings
Income (Loss)
Total
Balance, December 31, 2021
—
$
—
13,673,898
$ 13,674
$ 111,021
$ 99,189
$
(6,177)
$ 217,707
Other comprehensive loss
—
—
—
—
—
—
(60,263)
(60,263)
Dividends on common shares
—
—
—
—
—
(7,158)
—
(7,158)
Issuance of common stock
—
—
3,848,485
3,848
55,620
—
—
59,468
Issuance of restricted stock,
net of forfeitures
—
—
130,720
131
(131)
—
—
—
Tax withholding related to
vesting of restricted stock
—
—
(14,980)
(15)
(216)
—
—
(231)
Repurchase of shares
—
—
(40,000)
(40)
(500)
—
—
(540)
Stock-based compensation
expense, net
—
—
—
—
1,743
—
—
1,743
Net income
—
—
—
—
—
19,542
—
19,542
Balance, December 31, 2022
—
$
—
17,598,123
$ 17,598
$ 167,537
$ 111,573
$ (66,440)
$ 230,268
Other comprehensive income
—
—
—
—
—
—
10,797
10,797
Cumulative change in
accounting principle for
ASU 2016-13, net of tax(1)
—
—
—
—
—
(1,198)
—
(1,198)
Dividends on common shares
—
—
—
—
—
(7,722)
—
(7,722)
Issuance of restricted stock,
net of forfeitures
—
—
32,351
32
(32)
—
—
—
Tax withholding related to
vesting of restricted stock
—
—
(24,811)
(25)
(227)
—
—
(252)
Repurchase of shares
—
—
(41,481)
(41)
(365)
—
—
(406)
Stock-based compensation
expense, net
—
—
—
—
1,701
—
—
1,701
Net income
—
—
—
—
—
21,747
—
21,747
Balance, December 31, 2023
—
$
—
17,564,182
$ 17,564
$ 168,614
$ 124,400
$ (55,643)
$ 254,935
(1) Represents the impact of the adoption of Accounting Standards Update (“ASU”) No. 2016-13: CECL
See accompanying notes which are an integral part of these financial statements.
Consolidated Statements of Changes in Stockholders’ Equity
49
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
For The Years Ended
December 31,
(Dollars in thousands)
2023
2022
Cash flows from operating activities
Net income
$
21,747
$
19,542
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
3,600
3,370
Depreciation, amortization and accretion
8,702
11,629
Stock-based compensation expense
1,701
1,743
Loss on sales of securities available for sale
—
82
Net change in servicing asset
(416)
(554)
Loss on sales of other real estate and repossessions
70
—
Gain on sales of premises & equipment
(205)
(62)
Gain on sales of bank owned buildings and land
(249)
—
Change in bank owned life insurance
(1,421)
(1,353)
Equity method investment (loss) income
(169)
364
Deferred tax (benefit) expense
(485)
1,130
Donation of other real estate owned
—
35
Gain on sales of SBA loans
(5,063)
(6,216)
Origination of loans held for sale
(257,753)
(317,997)
Proceeds from sales of loans held for sale
252,601
344,620
Change in other assets
(3,163)
(7,593)
Change in other liabilities
1,486
1,001
Net cash provided by operating activities
20,983
49,741
Cash flows from investing activities
Purchases of investment securities available for sale
(3,917)
(174,219)
Proceeds from maturities, calls, and paydowns of investment securities available for sale
36,711
54,859
Proceeds from sales of investment securities available for sale
—
60,924
Proceeds from maturities, calls, and paydowns of investment securities held to maturity
19,567
11,592
Net change in loans
(148,601)
(399,871)
Purchase of premises and equipment
(3,618)
(2,895)
Proceeds from sales of other real estate and repossessions
412
—
Redemption of other investments
800
3,306
Proceeds from bank owned life insurance
—
1,008
Purchase of Federal Home Loan Bank stock
(3,706)
(3,451)
Proceeds from sales of bank owned buildings and land
3,167
—
Proceeds from sales of premises and equipment
433
519
Net cash used in investing activities
(98,752)
(448,228)
Cash flows from financing activities
Change in noninterest-bearing customer deposits
(70,178)
16,594
Change in interest-bearing customer deposits
123,971
99,795
Dividends paid on common stock
(7,722)
(7,158)
Proceeds from Federal Home Loan Bank advances
785,000
430,000
Repayments of Federal Home Loan Bank advances
(735,000)
(357,500)
Issuance of subordinated debt, net
—
39,068
Proceeds from other borrowings
450,000
162,437
Repayments on other borrowings
(465,000)
(160,000)
Issuance of common stock, net
—
59,468
Repurchase of shares
(406)
(540)
Cash paid for tax withholding related to vesting of restricted stock
(252)
(231)
Net cash provided by financing activities
80,413
281,933
Net increase (decrease) in cash and cash equivalents
2,644
(116,554)
Cash and cash equivalents at beginning of period
80,678
197,232
Cash and cash equivalents at end of period
$
83,322
$
80,678
Supplemental disclosures of cash flow information
Cash paid during the period for interest
$
44,855
$
10,222
Cash paid during the period for income taxes
5,209
3,836
Noncash investing and financing activities
Transfers to other real estate
3,083
405
Change in goodwill
—
(3,984)
Carrying amount of securities AFS transferred to HTM, net of $34.0 million unrealized loss
—
510,956
See accompanying notes which are an integral part of these financial statements.
Consolidated Statements of Cash Flows
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Colony Bankcorp, Inc. and subsidiaries (the “Company”) is a financial holding company
headquartered in Fitzgerald, Georgia, whose primary business is presently conducted by Colony
Bank, its wholly owned banking subsidiary (the “Bank”). The Company operates locations throughout
Georgia and has expanded its presence in 2023 to serve Birmingham, Alabama, as well as Tallahassee
and the Florida Panhandle. Through the Bank, the Company offers a broad range of banking solutions
for personal and business customers. In addition to traditional banking services, the Bank provides
specialized solutions including mortgage, government guaranteed lending, wealth management, and
merchant services. The Company also provides an option for its customers to purchase insurance
services including vehicle, home, renters and life insurance. Additionally, Colony Risk Management,
Inc. is a subsidiary of the Company and is located in Las Vegas, Nevada. It is a captive insurance
subsidiary which insures various liability and property damage policies for the Company and
its related subsidiaries. Colony Risk Management is regulated by the State of Nevada Division of
Insurance. The Company is subject to the regulations of certain state and federal agencies and are
periodically examined by those regulatory agencies.
Basis of Presentation and Accounting Estimates
The consolidated financial statements include the accounts of Colony Bankcorp, Inc. and its
wholly owned subsidiaries, Colony Bank and Colony Risk Management. All significant intercompany
transactions and balances have been eliminated in consolidation.
In preparing the consolidated financial statements in conformity with generally accepted
accounting principles in the United States, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the date of the balance
sheet and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Transfer of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been
relinquished. Control over transferred assets is deemed to be surrendered when the assets have been
isolated from the Company, the transferee obtains the right (free of conditions that constrain it from
taking advantage of that right) to pledge or exchange the transferred assets, and the Company does
not maintain effective control over the transferred assets through an agreement to repurchase them
before their maturity.
Cash and Cash Equivalents
For purposes of reporting cash flow, cash and cash equivalents include cash on hand, cash items
in process of collection, amounts due from banks, interest-bearing deposits in banks and federal
funds sold.
Investment Securities
The Company classifies its debt securities in one of three categories: (i) trading, (ii) held to
maturity or (iii) available for sale. Trading securities are bought and held principally for the purpose of
selling them in the near term. Held to maturity securities are those securities for which the Company
has the ability and intent to hold until maturity. All other debt securities are classified as available for
sale. As of the periods ended December 31, 2023 and 2022, debt securities were classified as either held
to maturity or available for sale.
Available for sale securities are carried at fair value. Unrealized holding gains and losses, net
of the related deferred tax effect, on available for sale securities are excluded from earnings and
are reported in other comprehensive income as a separate component of shareholders’ equity until
realized. Held to maturity securities are carried at amortized cost. Transfers of securities between
Notes to Consolidated Financial Statements
51
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
categories are recorded at fair value at the date of transfer. Unrealized holding gains or losses
associated with transfers of securities from held to maturity to available for sale are recorded as a
separate component of shareholders’ equity. These unrealized holding gains or losses are amortized
into income over the remaining life of the security as an adjustment to the yield in a manner
consistent with the amortization or accretion of the original purchase premium or discount on the
associated security.
The amortization of premiums and accretion of discounts are recognized in interest income using
methods approximating the interest method over the expected life of the securities. Realized gains and
losses, determined on the basis of the cost of specific securities sold, are included in earnings on the
trade date. The Company has made a policy election to exclude accrued interest from the amortized
cost basis of debt securities and report accrued interest in other assets in the consolidated balance
sheets. A debt security is placed on nonaccrual status at the time any principal or interest payments
become more than 90 days delinquent or if full collection of interest or principal becomes uncertain.
Accrued interest for a security placed on nonaccrual is reversed against interest income. There was
no accrued interest related to debt securities reversed against interest income for the years ended
December 31, 2023 and 2022. Accrued interest receivable on debt securities totaled $4.3 million and
$4.5 million as of December 31, 2023 and 2022, respectively.
The Company evaluates available for sale securities in an unrealized loss position to determine
if credit-related impairment exists. The Company first evaluates whether it intends to sell or more
likely than not will be required to sell an impaired security before recovering its amortized cost
basis. If either criteria is met, the entire amount of unrealized loss is recognized in earnings with a
corresponding adjustment to the security’s amortized cost basis. If either of the above criteria is not
met, the Company evaluates whether the decline in fair value is attributable to credit or resulted from
other factors. If credit-related impairment exists, the Company recognizes an allowance for credit
losses (“ACL”), limited to the amount by which the fair value is less than the amortized cost basis.
Any impairment not recognized through an ACL is recognized in other comprehensive income, net of
tax, as a non credit-related impairment. As of December 31, 2023 and 2022, the Company had $407.4
million and $432.6 million available for sale securities, respectively, with no related allowance for
credit losses.
The Company uses a systematic methodology to determine its ACL for debt securities held to
maturity considering the effects of past events, current conditions, and reasonable and supportable
forecasts on the collectability of the portfolio. The ACL is a valuation account that is deducted from
the amortized cost basis to present the net amount expected to be collected on the held to maturity
portfolio. The Company monitors the held to maturity portfolio on a quarterly basis to determine
whether a valuation account would need to be recorded. As of December 31, 2023 and 2022, the
Company had $449.0 million and $465.9 million held to maturity securities, respectively, with no
related allowance for credit losses.
Other Investments
Other investments include managed investment funds which are carried at their fair value and
unrealized gains or losses are recorded through earnings as a component of noninterest income.
Federal Home Loan Bank (“FHLB”) and First National Bankers Bank (“FNBB”) stock are also
included in other investments. These investments do not have a readily determinable market value due
to restrictions placed on transferability and therefore are carried at cost.
These other investments are periodically evaluated for credit-related impairment based on
ultimate recovery of par value or cost basis. Both cash and stock dividends are reported as income.
Loans Held for Sale
Mortgage and SBA loans held for sale are carried at the lower of aggregate cost or estimated
fair value, as determined by outstanding commitments from third party investors in the secondary
market. Adjustments to reflect unrealized gains and losses resulting from changes in fair value
of mortgage loans held for sale and realized gains and losses upon ultimate sale of the mortgage
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
loans held for sale are classified as mortgage fee income in the consolidated statements of income.
Adjustments to reflect unrealized gains and losses resulting from changes in fair value of SBA loans
held for sale and realized gains and losses upon ultimate sale of the SBA loans held for sale are
classified as gain on sale of SBA loans in the consolidated statements of income.
Servicing Rights
When mortgage and SBA loans are sold with servicing retained, servicing rights are initially
recorded at fair value with the income statement effect recorded in mortgage banking activity or
gain on sale of SBA loans accordingly. Fair value is based on market prices for comparable servicing
contracts, when available or alternatively, is based on a valuation model that calculates the present
value of estimated future net servicing income. All classes of servicing assets are subsequently
measured using the amortization method which requires servicing rights to be amortized into
noninterest income in proportion to, and over the period of, the estimated future net servicing income
of the underlying loans.
Servicing fee income, which is reported on the income statement in mortgage banking activity
for serviced mortgage loans and other noninterest income for all other serviced loans, is recorded for
fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding
principal or a fixed amount per loan and are recorded as income when earned. The amortization of
servicing rights is netted against loan servicing fee income.
Servicing rights are evaluated for impairment based upon the fair value of the rights as compared
to carrying amount. Impairment is determined by stratifying rights into strata based on predominant
risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized for a
particular stratum through a valuation allowance, to the extent that fair value is less than the carrying
amount. If the Company later determines that all or a portion of the impairment no longer exists for a
particular stratum, a reduction of the valuation allowance may be recorded as an increase to income.
Changes in valuation allowances related to servicing rights are reported in mortgage banking activity
and other noninterest income on the income statement.
The Company’s servicing rights are a result of SBA loans that are sold with servicing retained
and are recorded at fair value and follow the amortization method. As of December 31, 2023 and
2022, the Company had $2.3 million and $1.9 million in servicing rights, respectively, and no related
valuation allowance.
Loans
Loans are reported at their outstanding principal balances less unearned income, net of deferred
fees and origination costs. Interest income is accrued on the outstanding principal balance. For all
classes of loans, the accrual of interest on loans is discontinued when, in management’s opinion, the
borrower may be unable to make payments as they become due, unless the loan is well secured and
in the process of collection. Generally, loans are placed on nonaccrual status if principal or interest
payments become 90 days past due. Loans may be placed on nonaccrual status regardless of whether
such loans are considered past due. All interest accrued, but not collected for loans that are placed on
nonaccrual or charged off, is reversed against interest income. Interest income on nonaccrual loans is
applied against principal until the loans are returned to accrual status. Loans are returned to accrual
status when all the principal and interest amounts contractually due are brought current and future
payments are reasonably assured.
Allowance for Credit Losses (“ACL”) – Loans
The current expected credit loss (“CECL”) approach requires an estimate of the credit losses
expected over the life of an exposure (or pool of exposures). It replaced the incurred loss approach’s
threshold that delayed the recognition of a credit loss until it was probable a loss event was incurred.
The estimate of expected credit losses is based on relevant information about past events, current
conditions, and reasonable and supportable forecasts that affect the collectability of the reported
amounts. Historical loss experience is generally the starting point for estimating expected credit
Notes to Consolidated Financial Statements
53
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
losses. The Company then considers whether the historical loss experience should be adjusted for
asset-specific risk characteristics or current conditions at the reporting date that did not exist over
the historical period used. The Company also considers future economic conditions and portfolio
performance as part of a reasonable and supportable forecast period.
The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present
the net amount expected to be collected on the loans. Loans are charged off against the ACL when
management believes the uncollectibility of a loan balance is confirmed. Accrued interest receivable
is excluded from the estimate of credit losses.
Management determines the ACL balance using relevant available information from internal
and external sources, relating to past events, current conditions, and reasonable and supportable
forecasts. Historical credit behaviors along with model judgments provide the basis for the estimation
of expected credit losses. Adjustments to modeled loss estimates may be made for differences in
current loan-specific risk characteristics such as differences in underwriting standards, portfolio
mix, delinquency level, or term as well as for changes in environmental conditions, such as changes
in economic conditions, property values, or other relevant factors. For the majority of loans and leases
the ACL is calculated using a discounted cash flow methodology applied at a loan level with a one-year
reasonable and supportable forecast period and a two-year straight-line reversion period.
The ACL-loans is measured on a collective basis when similar risk characteristics exist. The
Company has identified the following portfolio segments and calculates the ACL for each using a
discounted cash flow methodology at the loan level, with loss rates, prepayment assumptions and
curtailment assumptions driven by each loan’s collateral type:
• Construction, land & land development - Risks common to construction, land & development
loans are cost overruns, changes in market demand for property, inadequate long-term financing
arrangements and declines in real estate values.
• Other commercial real estate - Loans in this category are susceptible to business failures and
declines in general economic conditions, including declines in real estate value, declines in
occupancy rates, and lack of suitable alternative use for the property.
• Residential real estate - Residential real estate loans are susceptible to weakening general economic
conditions, increases in unemployment rates and declining real estate values.
• Commercial, financial & agricultural - Risks to this loan category include the inability to monitor
the condition of the collateral, which often consists of inventory, accounts receivable and other
non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in
general economic conditions and other events can cause cash flows to fall to levels insufficient to
service debt.
• Consumer and other - Risks common to consumer direct loans include unemployment and
changes in local economic conditions as well as the inability to monitor collateral consisting of
personal property.
When management determines that foreclosure is probable or when the borrower is experiencing
financial difficulty at the reporting date and repayment is expected to be provided substantially
through the operation or sale of the collateral, expected credit losses are based on the fair value of the
collateral at the reporting date, adjusted for selling costs as appropriate.
Allowance for Credit Losses – Off-Balance Sheet Credit Exposures
Financial instruments include off-balance sheet credit instruments, such as commitments to make
loans and standby letters of credit, issued to meet customer financing needs. The face amount for
these items represents the exposure to loss, before considering customer collateral or ability to repay.
Such financial instruments are recorded when they are funded.
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Management estimates expected credit losses on commitments to extend credit over the
contractual period during which the Company is exposed to credit risk on the underlying
commitments. The ACL on off-balance sheet credit exposures is adjusted as a provision for credit loss
expense. The estimate includes consideration of the likelihood that funding will occur and an estimate
of expected credit losses on commitments expected to be funded over its estimated life. The ACL is
calculated using the same aggregate reserve rates calculated for the funded portion of loans at the
portfolio level applied to the amount of commitments expected to fund.
Allowance for Credit Losses – Held-to-Maturity Securities (“HTM”)
Management measures current expected credit losses on HTM debt securities on a collective
basis by major security type. The estimate of current expected credit losses considers historical
credit loss information that is adjusted for current conditions and reasonable and supportable
forecasts. Management classifies the HTM portfolio into the following major security types: U.S.
Treasury securities, U.S. agency securities, State, county & municipal securities, and Mortgage-backed
securities. Accrued interest receivable on HTM debt is excluded from the estimate of credit losses.
All of the residential and commercial mortgage-backed securities held by the Company as HTM
are issued by U.S. Government agencies and government sponsored entities. These securities are
either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating
agencies and have a long history of no credit losses. The state and political subdivision securities are
also highly rated by major rating agencies.
Allowance for Credit Losses – Available-for-Sale Securities (“AFS”)
For AFS debt securities in an unrealized loss position, the Company first assesses whether it
intends to sell, or whether it is more likely than not that it will be required to sell the security before
recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is
met, the security’s amortized cost basis is written down to fair value through income. For AFS debt
securities that do not meet the aforementioned criteria, the Company evaluates whether the decline
in fair value has resulted from credit losses or other factors. In making this assessment, management
considers the extent to which fair value is less than amortized cost, any changes to the rating of the
security by a rating agency, and adverse conditions specifically related to the security, among other
factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected
to be collected from the security are compared to the amortized cost basis of the security. If the
present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss
exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than
the amortized cost basis. Any amount of unrealized loss that has not been recorded through an ACL
is recognized in other comprehensive income. Accrued interest receivable on AFS debt securities is
excluded from the estimate of credit losses.
Changes in the ACL are recorded as provision for (or reversal of) credit loss expense. Losses
are charged against the ACL when management believes the uncollectibility of an AFS security is
confirmed or when either of the criteria regarding intent or requirement to sell is met.
Premises and Equipment
Land is carried at cost. Other premises and equipment are carried at cost, less accumulated
depreciation computed on the straight-line method over the estimated useful lives of the assets. In
general, estimated lives for buildings are up to 40 years, furniture and equipment useful lives range
from five to 10 years and the lives of software and computer related equipment range from three to
five years. Leasehold improvements are amortized over the life of the related lease, or the related
assets, whichever is shorter. Expenditures for major improvements of the Company’s premises
and equipment are capitalized and depreciated over their estimated useful lives. Minor repairs,
maintenance and improvements are charged to operations as incurred. When assets are sold or
disposed of, their cost and related accumulated depreciation are removed from the accounts and any
gain or loss is reflected in earnings.
Notes to Consolidated Financial Statements
55
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
Leases
The Company has entered into various operating leases for certain branch locations, ATM
locations, loan production offices, and corporate support services locations. Generally, these leases
have initial lease terms of 6 years or less. Many of the leases have one or more lease renewal options.
The exercise of lease renewal options is at the Company’s sole discretion and is considered on a case-
by-case basis. Certain of our lease agreements contain early termination options. If renewal options
or early termination options are determined by management to be reasonably certain, then they are
included in the calculation of the operating right-of-use assets or operating lease liabilities. Certain
of our lease agreements provide for periodic adjustments to rental payments for inflation. At the
commencement date of the lease, the Company recognizes a lease liability at the present value of
the lease payments not yet paid, discounted using the discount rate for the lease or the Company’s
incremental borrowing rate. As the majority of the Company’s leases do not provide an implicit rate,
the Company uses its incremental borrowing rate at the commencement date in determining the
present value of lease payments. The incremental borrowing rate is based on the term of the lease.
At the commencement date, the company also recognizes a right-of-use asset measured at (i) the
initial measurement of the lease liability; (ii) any lease payments made to the lessor at or before the
commencement date less any lease incentives received; and (iii) any initial direct costs incurred by
the lessee. Leases with an initial term of 12 months or less are not recorded on the balance sheet. For
these short-term leases, lease expense is recognized on a straight-line basis over the lease term. At
December 31, 2023, the Company had no leases classified as finance leases.
Goodwill and Intangible Assets
Goodwill represents the excess of the cost of businesses acquired over the fair value of the net
assets acquired. Goodwill is assigned to reporting units and tested for impairment at least annually, or
on an interim basis if an event occurs or circumstances change that would more likely than not reduce
the fair value of the reporting unit below its carrying value.
Intangible assets consist of core deposit and customer relationship intangibles acquired in
connection with a business combination. The core deposit intangible is initially recognized based
on an independent valuation performed as of the acquisition date. The core deposit intangible is
amortized by the straight-line method over the average remaining life of the acquired customer
deposits. The customer relationship intangible is associated with the acquisition of several insurance
companies during 2021. The customer intangible assets were also initially recognized based on
independent valuations performed as of the acquisition date and are being amortized by the straight-
line method over 10 years.
Cash Value of Bank Owned Life Insurance
The Company has purchased life insurance policies on certain officers. The life insurance is
recorded at the amount that can be realized under the insurance contract at the balance sheet date,
which is the cash surrender value adjusted for other charges or other amounts due that are probable
at settlement.
Other Real Estate
Other real estate generally represents real estate acquired through foreclosure and is initially
recorded at estimated fair value at the date of acquisition less the cost of disposal. Losses from the
acquisition of property in full or partial satisfaction of debt are recorded as loan losses. Properties
are evaluated regularly to ensure the recorded amounts are supported by current fair values, and
valuation allowances are recorded as necessary to reduce the carrying amount to fair value less
estimated cost of disposal. Routine holding costs and gains or losses upon disposition are included in
foreclosed property expense.
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Derivatives
The Company records cash flow hedges at the inception of a derivative contract based on
management’s intentions and belief as to the likely effectiveness of the hedge. Cash flow hedges
represent a hedge of a forecasted transaction or the variability of cash flows to be received or paid
related to a recognized asset or liability. For a cash flow hedge, the gain or loss on the derivative is
recorded in other comprehensive income (“OCI”) and is reclassified into earnings in the same period
during which the hedged transaction affects earnings. The changes in the fair value of a derivative
that is not highly effective in hedging the expected cash flows of the hedged item are recognized
immediately as interest expense in the consolidated statements of income.
Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest
income or interest expense, based on the item being hedged. Net cash settlements on derivatives that
do not qualify for hedge accounting are reported in noninterest income or noninterest expense. Cash
flows from hedges are classified in the consolidated statements of cash flows in the same manner as
the items being hedged.
The Company formally documents the relationship between derivatives and hedged items, as well
as the risk management objective and the strategy for undertaking hedge transactions at the inception
of the hedging relationship. This documentation includes linking cash flow hedges to specific assets
and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The
Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the
derivative instruments that are used are highly effective in offsetting changes in cash flows of the
hedged item. The Company discontinues hedge accounting when it determines that the derivative is
no longer effective in offsetting changes in cash flows of the hedged item, the derivative is settled or
terminated, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no
longer firm or treatment of the derivative as a hedge is no longer appropriate or intended.
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are
recorded as interest expense. When a cash flow hedge is discontinued but the hedged cash flows or
forecasted transactions are still expected to occur, gains or losses that were accumulated in OCI are
amortized into earnings over the same periods which the hedged transactions will affect earnings.
Income Taxes
The provision for income taxes is based upon income for financial statement purposes, adjusted
for nontaxable income and nondeductible expenses. Deferred income taxes have been provided when
different accounting methods have been used in determining income for income tax purposes and for
financial reporting purposes.
Deferred tax assets and liabilities are recognized based on future tax consequences attributable
to differences arising from the financial statement carrying values of assets and liabilities and their
tax basis. The differences relate primarily to depreciable assets (use of different depreciation methods
for financial statement and income tax purposes) and allowance for credit losses (use of the allowance
method for financial statement purposes and the direct write-off method for tax purposes). In the
event of changes in the tax laws, deferred tax assets and liabilities are adjusted in the period of the
enactment of those changes, with effects included in the income tax provision. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The Company and its subsidiary file
a consolidated federal income tax return. The subsidiary pays its proportional share of federal income
taxes to the Company based on its taxable income.
The Company’s federal and state income tax returns for tax years 2023, 2022, 2021 and 2020 are
subject to examination by the Internal Revenue Service (IRS) and the Georgia Department of Revenue,
generally for three years after filing.
Notes to Consolidated Financial Statements
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
The Company believes that its income tax filing positions taken or expected to be taken on its
tax returns will more likely than not be sustained upon audit by the taxing authorities and does not
anticipate any adjustments that will result in a material adverse impact on the Company’s financial
condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax
positions have been recorded.
Revenue Recognition
The Company’s contracts with customers generally do not contain terms that require significant
judgment to determine the amount of revenue to recognize. The Company’s’ policies for recognizing
noninterest income that falls within the scope of ASC Topic 606, and include service charges on
deposits, interchange fees, and insurance revenue (included with other noninterest income).
Service charges on deposits include both account maintenance fees and overdraft fees and
revenue from safe deposit box rental fees and lockbox services and ATM fees. Revenue is recognized
for these services either over time, corresponding with deposit accounts’ monthly cycle, or at a point
in time for transaction-related services and fees. Payment for service charges on deposit accounts is
primarily received immediately or in the following month through a direct charge to clients’ accounts.
Safe deposits and lockbox service fees are recognized over time, on a monthly basis, as the Company’s’
performance obligation for services is satisfied. ATM fees are transaction-based fees recognized at the
time the transaction is executed as that is the point at which the Company satisfies the performance
obligation.
Interchange fees include debit card interchange fees. Debit card interchange fees are earned from
debit card holder transactions conducted through various payment networks. Interchange fees from
debit card holders transactions represent a percentage of the underlying transaction amount and are
recognized daily, concurrently with the transaction processing services provided to the
debit cardholder.
Other income includes insurance revenue (included in other noninterest income on the
consolidated statements of income): Insurance revenue primarily consists of commissions received
on insurance products sold. The commissions are recognized as revenue when the client executes an
insurance policy with the insurance carrier. In some cases, the company receives payment of trailing
commissions each year when the client pays its annual premium.
Earnings per Share
Basic earnings per share are computed by dividing net income allocated to common shareholders
by the weighted-average number of shares of common stock outstanding during the period. Diluted
earnings per common share are computed by dividing net income allocated to common shareholders
by the sum of the weighted-average number of shares of common stock outstanding and the effect
of the issuance of potential common shares that are dilutive. Potential common shares consist of
restricted shares for the years ended December 31, 2023 and 2022, and are determined using the
treasury stock method. The Company has determined that its outstanding non-vested stock awards are
participating securities, and all dividends on these awards are paid similar to other dividends.
Comprehensive Income (Loss)
Accounting principles generally require that recognized revenue, expenses, gains and losses be
included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses
on securities available for sale, represent equity changes from economic events of the period other
than transactions with owners. Such items are considered components of other comprehensive
income (loss). Accounting standards codification requires the presentation in the consolidated
financial statements of net income and all items of other comprehensive income as total
comprehensive income (loss).
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Fair Value Measures
Fair values of assets and liabilities are estimated using relevant market information and other
assumptions, as more fully disclosed in Note 16. Fair value estimates involve uncertainties and matters
of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially
in the absence of broad markets for particular items. Changes in assumptions or in market conditions
could significantly affect these estimates.
Operating Segments
The Company has three reportable segments, the Banking Division, the Retail Mortgage Division
and the Small Business Specialty Lending Division. The Banking Division derives its revenues from the
delivery of full service financial services to include commercial loans, consumer loans and
deposit accounts. The Retail Mortgage Division derives its revenues from the origination, sales and
servicing of one-to-four family residential mortgage loans. The Small Business Specialty Lending
Division derives its revenues from origination, sales and servicing of SBA and USDA government
guaranteed loans.
The Banking, Retail Mortgage and Small Business Specialty Lending Divisions are managed as
separate business units because of the different products and services they provide. The Company
evaluates performance and allocates resources based on profit or loss from operations. There are no
material intersegment sales or transfers.
Reclassifications
Certain amounts, previously reported, have been reclassified to state all periods on a comparable
basis and had no effect on stockholders’ equity or net income.
Accounting Standards Updates
ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments, as amended, was adopted by the Company on January 1, 2023, which
replaced the incurred loss methodology with an expected loss methodology that is referred to as the
current expected credit loss (CECL) methodology. The measurement of expected credit losses under
the CECL methodology is applicable to financial assets measured at amortized cost, including loan
receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures
not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and
other similar instruments) and net investments in leases recognized by a lessor in accordance with
Topic 842 on leases. In addition, ASC 326 made changes to the accounting for available-for-sale debt
securities. One such change is to require credit losses to be presented as an allowance rather than as
a write-down on available-for-sale debt securities when management does not intend to sell or believes
that it is more likely than not they will not be required to sell.
The Company adopted ASC 326 using the modified retrospective method for all financial assets
measured at amortized cost, and off-balance sheet credit exposures. Results for reporting periods
beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to
be reported in accordance with previously applicable GAAP. The Company recorded a net decrease to
retained earnings of $1.2 million, net of tax, as of January 1, 2023 for the cumulative effect of adopting
ASC 326, primarily related to credit losses for unfunded commitments.
ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and
Vintage Disclosures, was adopted by the Company on January 1, 2023. This ASU provides guidance on
eliminating the requirement for classification of and disclosures around troubled debt restructurings
(TDRs). The purpose of this guidance is to eliminate unnecessary and overly-complex disclosures of
Notes to Consolidated Financial Statements
59
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
loans that are already incorporated into the allowance for credit losses and related disclosures while
enhancing disclosure requirements for certain loan refinancing and restructurings by creditors
when a borrower is experiencing financial difficulty. Modified terms include one or a combination
of the following: a reduction of the stated interest rate of the loan, an extension of the term or
amortization period, a more than insignificant payment delay or principal forgiveness. As of
December 31, 2023, the Company had two loans that met the requirements of this disclosure and are
included in Note 3 - Loans. This ASU further requires the disclosure of current-period gross charge-
offs by year of origination. Current period gross charge-offs are included in the term loan vintage
table in Note 3 - Loans.
In March 2023, the FASB issued ASU 2023-02, “Investments – Equity Method and Joint Ventures
(Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization
Method.” ASU 2023-02 expands the population of investments for which an investor may elect to apply
the proportional amortization method. Under the ASU, an investor in a tax equity investment may
elect the proportional amortization method for qualifying investments on a tax credit program-by-
program basis. To qualify for the proportional amortization method, an investment must meet the
criteria previously applicable to low income housing tax credit investments, as clarified by the ASU.
The required date of adoption for ASU 2023-02 is January 1, 2024 and is not expected to have a material
impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Reform (Topic 848) Facilitation of the
Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This ASU provides optional
guidance for a limited period of time to ease the potential burden in accounting for (or recognizing
the effects of) reference rate reform on financial reporting. It provides optional expedients and
exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by
reference rate reform if certain criteria are met. The updated guidance was originally effective for
all entities from March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU
2022-06 which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The
Company has been diligent in responding to reference rate reform and does not anticipate a significant
impact to its financial statements as a result.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) Improvements
to Reportable Segment Disclosures (“ASU 2023-07”). This ASU was issued to improve segment
reporting disclosures. The amendments in this ASU improve financial reporting by requiring
disclosure of incremental segment information including significant segment expenses regularly
provided to the chief operating decision maker as well as the amount and composition of other
segment items on an annual and interim basis for all public entities to enable investors to develop
more decision-useful financial analyses. Retrospective application is required in all prior periods
unless impracticable to do so. The Company will adopt the new disclosure requirements for the
annual period beginning on January 1, 2024 and interim periods beginning on January 1, 2025. The
Company is currently evaluating the impact of the incremental segment information that will be
required to be disclosed as well as the impact to the Segment Reporting footnote.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements
to Income Tax Disclosures (“ASU 2023-09”). This ASU was issued to enhance the transparency
and decision usefulness of income tax disclosures. The ASU addresses investor requests for more
transparency about income tax information through improvements to income tax disclosures
primarily related to the rate reconciliation and income taxes paid information. Retrospective
application in all prior periods is permitted. The Company will adopt the new disclosures for the
annual periods beginning on January 1, 2025. The Company is currently evaluating the impact of the
incremental income taxes information that will be required to be disclosed as well as the impact to the
Income Taxes footnote.
60
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
2. INVESTMENT SECURITIES
The amortized cost and estimated fair value of securities available-for-sale and held-to-maturity,
along with gross unrealized gains and losses are summarized as follows:
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
(Dollars in thousands)
Cost
Gains
Losses
Value
December 31, 2023
Securities Available for Sale:
U.S. treasury securities
$
500
$
—
$
(2)
$
498
U.S. agency securities
4,500
—
(361)
4,139
Asset backed securities
25,035
—
(405)
24,630
State, county and municipal securities
124,524
6
(15,494)
109,036
Corporate debt securities
53,834
16
(6,460)
47,390
Mortgage-backed securities
246,901
36
(25,248)
221,689
Total
$ 455,294
$
58
$ (47,970)
$ 407,382
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
(Dollars in thousands)
Cost
Gains
Losses
Value
December 31, 2023
Securities Held to Maturity:
U.S. treasury securities
$
93,306
$
—
$ (3,212)
$
90,094
U.S. agency securities
16,282
—
(1,424)
14,858
State, county & municipal securities
136,685
356
(13,859)
123,182
Mortgage-backed securities
202,758
—
(25,316)
177,442
Total
$ 449,031
$
356
$ (43,811)
$ 405,576
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
(Dollars in thousands)
Cost
Gains
Losses
Value
December 31, 2022
Securities Available for Sale:
U.S. treasury securities
$
1,644
$
—
$
(22)
$
1,622
U.S. agency securities
5,035
—
(450)
4,585
Asset backed securities
31,468
—
(1,480)
29,988
State, county and municipal securities
126,119
—
(21,363)
104,756
Corporate debt securities
54,741
164
(5,320)
49,585
Mortgage-backed securities
271,199
9
(29,191)
242,017
Total
$ 490,206
$
173
$ (57,826)
$ 432,553
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
(Dollars in thousands)
Cost
Gains
Losses
Value
December 31, 2022
Securities Held to Maturity:
U.S. treasury securities
$
91,615
$
—
$
(4,149)
$
87,466
U.S. agency securities
16,409
—
(1,838)
14,571
State, county & municipal securities
136,138
32
(19,518)
116,652
Mortgage-backed securities
221,696
—
(29,121)
192,575
Total
$ 465,858
$
32
$ (54,626)
$ 411,264
Notes to Consolidated Financial Statements
61
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
The Company elected to exclude accrued interest receivable from the amortized cost basis of
available-for-sale and held-to-maturity securities disclosed throughout this note. As of December 31,
2023 and December 31, 2022, accrued interest receivable for available-for-sale and held-to-maturity
securities totaled $2.4 million and $2.6 million, and $1.9 million and $1.9 million, respectively, and is
included in the “other assets” line item on the Company’s consolidated balance sheet.
The Company transferred certain agency-issued securities from the available-for-sale to held-
to-maturity portfolio on January 1, 2022 and September 1, 2022, having a combined book value of
approximately $511.0 million and a combined market value of approximately $477.0 million. As of
the date of each transfer, the related pre-tax net unrecognized losses of approximately $34.0 million
included in other comprehensive loss and remained in other comprehensive loss, to be amortized
out of other comprehensive loss over the remaining term of the securities using the effective interest
method. This transfer was completed after careful consideration of the Company’s intent and ability
to hold these securities to maturity. Factors used in assessing the ability to hold these securities to
maturity were future liquidity needs and sources of funding. The Company has had no other transfers
of securities since September 1, 2022.
Information pertaining to available-for-sale securities with gross unrealized losses at December
31, 2023 and December 31, 2022 aggregated by investment category and length of time that securities
have been in a continuous unrealized loss position are summarized as follows:
Less Than 12 Months
12 Months or More
Total
Estimated
Estimated
Estimated
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
(Dollars in thousands)
Value
Losses
Value
Losses
Value
Losses
December 31, 2023
U.S. treasury securities
$
—
$
—
$
498
$
(2)
$
498
$
(2)
U.S. agency securities
—
—
4,139
(361)
4,139
(361)
Asset backed securities
6,196
(75)
17,424
(330)
23,620
(405)
State, county
and municipal securities
1,033
(138)
107,443
(15,356)
108,476
(15,494)
Corporate debt securities
1,446
(105)
45,044
(6,355)
46,490
(6,460)
Mortgage-backed securities
5,921
(49)
212,876
(25,199)
218,797
(25,248)
Total debt securities
$ 14,596
$
(367)
$ 387,424
$ (47,603)
$ 402,020
$
(47,970)
December 31, 2022
U.S. treasury securities
$
1,377
$
(17)
$
245
$
(5)
$
1,622
$
(22)
U.S. agency securities
3,221
(257)
1,364
(193)
4,585
(450)
Asset backed securities
10,780
(319)
19,208
(1,161)
29,988
(1,480)
State, county
and municipal securities
29,284
(3,629)
75,472
(17,734)
104,756
(21,363)
Corporate debt securities
17,258
(1,463)
30,651
(3,857)
47,909
(5,320)
Mortgage-backed securities 122,031
(7,890)
119,409
(21,301)
241,440
(29,191)
Total debt securities
$ 183,951
$ (13,575)
$ 246,349
$ (44,251)
$ 430,300
$
(57,826)
62
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Information pertaining to held-to-maturity securities with gross unrealized losses at December 31,
2023 and December 31, 2022 aggregated by investment category and length of time that individual
securities have been in a continuous loss position is summarized as follows:
Less Than 12 Months
12 Months or More
Total
Gross
Gross
Gross
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
(Dollars in thousands)
Value
Losses
Value
Losses
Value
Losses
December 31, 2023
U.S. treasury securities
$
—
$
—
$
90,094
$
(3,212)
$
90,094
$
(3,212)
U.S. agency securities
—
—
14,858
(1,424)
14,858
(1,424)
State, county
and municipal securities
1,461
(78)
103,500
(13,781)
104,961
(13,859)
Mortgage-backed securities
—
—
177,442
(25,316)
177,442
(25,316)
$
1,461
$
(78)
$ 385,894
$ (43,733)
$ 387,355
$
(43,811)
December 31, 2022
U.S. treasury securities
$
—
$
—
$
87,466
$
(4,149)
$
87,466
$
(4,149)
U.S. agency securities
—
—
14,571
(1,838)
14,571
(1,838)
State, county
and municipal securities
9,858
(1,392)
105,734
(18,126)
115,592
(19,518)
Mortgage-backed securities
13,580
(729)
178,995
(28,392)
192,575
(29,121)
$ 23,438
$ (2,121)
$ 386,766
$ (52,505)
$ 410,204
$
(54,626)
Management evaluates available for sale securities in an unrealized loss position at least on a
quarterly basis, and more frequently when economic or market concerns warrant such evaluation to
determine if credit-related impairment exists. Management first evaluates whether they intend to sell
or more likely than not will be required to sell an impaired security before recovering its amortized
cost basis. If either criteria is met, the entire amount of unrealized loss is recognized in earnings with
a corresponding adjustment to the security’s amortized cost basis. If either of the above criteria is not
met, management evaluates whether the decline in fair value is attributable to credit or resulted from
other factors. The Company does not intend to sell these investment securities at an unrealized loss
position at December 31, 2023, and it is more likely than not that the Company will not be required
to sell these securities prior to recovery or maturity. Based on management’s review, the Company’s
available for sale securities have no expected credit losses and no related allowance for credit losses
has been established.
The Company uses a systematic methodology to determine its ACL for debt securities held to
maturity considering the effects of past events, current conditions, and reasonable and supportable
forecasts on the collectability of the portfolio. The ACL is a valuation account that is deducted from
the amortized cost basis to present the net amount expected to be collected on the held to maturity
portfolio. The Company monitors the held to maturity portfolio on a quarterly basis to determine
whether a valuation account would need to be recorded. Based on management’s review, the
Company’s held to maturity securities have no expected credit losses and no related allowance for
credit losses has been established.
Notes to Consolidated Financial Statements
63
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
At December 31, 2023, there were 273 available-for-sale securities and 146 held-to-maturity
securities that have unrealized losses from the Company’s amortized cost basis. These securities are
guaranteed by either the U.S. Government, other governments or U.S. corporations. In analyzing an
issuer’s financial condition, management considers whether the securities are issued by the federal
government or its agencies, whether downgrades by bond rating agencies have occurred and the
results of reviews of the issuer’s financial condition. The unrealized losses are largely due to increases
in market interest rates over the yields available at the time the underlying securities were purchased.
As management has the ability to hold debt securities until maturity, or for the foreseeable future if
classified as available-for-sale, no declines are due to reasons of credit quality.
The amortized cost and fair value of investment securities as of December 31, 2023, by contractual
maturity, are shown hereafter. Expected maturities may differ from contractual maturities for certain
investments because issuers may have the right to call or prepay obligations with or without call or
prepayment penalties. This is often the case with mortgage-backed securities, which are disclosed
separately in the table below.
Available for Sale Held to Maturity
(Dollars in thousands)
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Due in one year or less
$
715
$
713
$
3,937
$
3,882
Due after one year through five years
15,714
14,697
94,194
90,873
Due after five years through ten years
102,474
88,639
76,529
68,260
Due after ten years
89,490
81,644
71,613
65,119
$ 208,393
$ 185,693
$ 246,273
$
228,134
Mortgage-backed securities
246,901
221,689
202,758
177,442
$ 455,294
$ 407,382
$ 449,031
$
405,576
The Company had no sales of investment securities in 2023. For the year ended 2022, proceeds
from sales of investments available for sale were $60.9 million. Gross realized gains totaled $24,000
and gross realized losses totaled $106,000 in 2022.
Investment securities having a carrying value totaling $429.9 million and $541.8 million as of
December 31, 2023 and 2022, respectively, were pledged to secure public deposits and for other
purposes.
The Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326), as amended
on January 1, 2023 which included evaluation of expected credit losses on debt securities. As part of
the Company’s calculated credit losses, the allowance for credit losses on investment securities was
determined to be de minimis due to the high credit quality of the portfolio, which includes securities
issued or guaranteed by the U.S. Treasury, U.S. Government agencies and high quality municipalities.
Therefore, no allowance for credit losses was recorded as of December 31, 2023. See Note 1 for
additional details on the allowance for credit losses as it relates to the securities portfolio.
64
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
3. LOANS
The following table presents the composition of loans segregated by class of loans, as of
December 31, 2023 and 2022.
December 31,
(Dollars in thousands)
2023
2022
Construction, land & land development
$
247,146
$
229,435
Other commercial real estate
974,375
975,447
Total commercial real estate
1,221,521
1,204,882
Residential real estate
356,234
290,054
Commercial, financial & agricultural(*)
242,756
223,923
Consumer and other
62,959
18,247
Total loans
$ 1,883,470
$ 1,737,106
(*) Includes $95,000 in PPP loans as of December 31, 2022.
Included in the above table are government guaranteed loans totaling $86.8 million at December
31, 2023 and $58.4 million at December 31, 2022. The following table presents the composition of
government guaranteed loans segregated by class of loans for each respective period.
December 31,
(Dollars in thousands)
2023
2022
Construction, land & land development
$
7,027
$
5,888
Other commercial real estate
40,852
32,642
Total commercial real estate
47,879
38,530
Residential real estate
12,170
8,036
Commercial, financial & agricultural
26,716
11,787
Total loans
$
86,765
$
58,353
The Company elected to exclude accrued interest receivable from the amortized cost basis of
loans disclosed throughout this note. As of December 31, 2023 and 2022, respectively, accrued interest
receivable for loans totaled $8.8 million and $6.8 million and is included in the “other assets” line item
on the Company’s consolidated balance sheet.
Commercial, financial and agricultural loans are extended to a diverse group of businesses within
the Company’s market area. These loans are often underwritten based on the borrower’s ability to
service the debt from income from the business. Real estate construction loans often require loan
funds to be advanced prior to completion of the project. Due to uncertainties inherent in estimating
construction costs, changes in interest rates and other economic conditions, these loans often pose a
higher risk than other types of loans. Consumer loans are originated at the bank level. These loans are
generally smaller loan amounts spread across many individual borrowers to help minimize risk.
Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the loan
portfolio, management tracks certain credit quality indicators including trends related to (1) the risk
grade assigned to commercial and consumer loans, (2) the level of classified commercial loans, (3)
net charge-offs, (4) nonperforming loans, and (5) the general economic conditions in the Company’s
geographic markets.
Notes to Consolidated Financial Statements
65
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
The Company uses a risk grading matrix to assign a risk grade to each of its loans. Loans are
graded on a scale of 1 to 10. A description of the general characteristics of the grades is as follows:
•
Grades 1, 2 and 3 - Borrowers with these assigned risk grades range from virtual absence
of risk to minimal risk. Such loans may be secured by Company-issued and controlled
certificates of deposit or properly margined equity securities or bonds. Other loans comprising
these grades are made to companies that have been in existence for a long period of time with
many years of consecutive profits and strong equity, good liquidity, excellent debt service
ability and unblemished past performance, or to exceptionally strong individuals with
collateral of unquestioned value that fully secures the loans. Loans in this category fall into
the “pass” classification.
•
Grades 4 and 5 - Loans assigned these “pass” risk grades are made to borrowers with
acceptable credit quality and risk. The risk ranges from loans with no significant weaknesses
in repayment capacity and collateral protection to acceptable loans with one or more risk
factors considered to be more than average. These loans are also included in the “pass”
classification.
•
Grade 6 - This grade includes “special mention” loans on management’s watch list and is
intended to be used on a temporary basis for pass grade loans where risk-modifying action is
intended in the short-term.
•
Grades 7 and 8 - These grades includes “substandard” loans in accordance with regulatory
guidelines. This category includes borrowers with well-defined weaknesses that jeopardize the
payment of the debt in accordance with the agreed terms. Loans considered to be impaired are
assigned grade 8, and these loans often have assigned loss allocations as part of the allowance
for credit losses. Generally, loans on which interest accrual has been stopped would be
included in this grade.
•
Grades 9 and 10 - These grades correspond to regulatory classification definitions of
“doubtful” and “loss,” respectively. In practice, any loan with these grades would be for a very
short period of time, and generally the Company has no loans with these assigned grades.
Management manages the Company’s problem loans in such a way that uncollectible loans
or uncollectible portions of loans are charged off immediately with any residual, collectible
amounts assigned a risk grade of 7 or 8.
66
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
The following table presents the loan portfolio segregated by class of loans and the risk
category of term loans by vintage year, which is the year of origination or most recent renewal, as
of December 31, 2023. Those loans with a risk grade of 1, 2, 3, 4 and 5 have been combined in the
pass column for presentation purposes. There were no loans with a risk rating of “doubtful” or
“loss” at December 31, 2023.
Term Loans Amortized Cost Basis by Origination Year
Revolvers
Converted to
(Dollars in thousands)
2023
2022
2021
2020
2019
Prior
Revolvers
Term Loans
Total
December 31, 2023
Construction, land & land development
Risk rating
Pass
$ 112,587
$ 91,981
$ 27,332
$
5,654
$ 1,000
$ 5,765
$
605
$
31
$ 244,955
Special Mention
792
—
25
—
—
29
282
—
1,128
Substandard
—
888
4
—
20
151
—
—
1,063
Total Construction, land
& land development
113,379
92,869
27,361
5,654
1,020
5,945
887
31
247,146
Current period gross write offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Other commercial real estate
Risk rating
Pass
61,816
341,656
204,145
88,629
79,123
145,374
24,158
2,031
946,932
Special Mention
75
3,251
766
2,113
5,733
4,694
545
48
17,225
Substandard
2,303
2,615
211
—
486
4,395
208
—
10,218
Total Other commercial real estate 64,194
347,522
205,122
90,742
85,342
154,463
24,911
2,079
974,375
Current period gross write offs
—
—
69
—
—
—
—
—
69
Residential real estate
Risk rating
Pass
78,088
116,704
50,986
21,892
8,510
43,038
22,642
100
341,960
Special Mention
856
466
10
50
679
4,687
424
—
7,172
Substandard
—
1,169
384
296
272
4,735
246
—
7,102
Total Residential real estate
78,944
118,339
51,380
22,238
9,461
52,460
23,312
100
356,234
Current period gross write offs
253
492
26
—
—
—
—
—
771
Commercial, financial & agricultural
Risk rating
Pass
66,820
51,439
21,673
12,489
4,734
14,002
58,607
306
230,070
Special Mention
4,186
894
376
745
188
40
974
—
7,403
Substandard
164
1,872
1,979
190
25
165
866
22
5,283
Total Commercial, financial
& agricultural
71,170
54,205
24,028
13,424
4,947
14,207
60,447
328
242,756
Current period gross write offs
150
168
408
200
9
134
—
—
1,069
Consumer and other
Risk rating
Pass
53,117
4,021
2,004
1,240
925
908
462
1
62,678
Special Mention
79
42
38
12
25
1
—
—
197
Substandard
43
20
3
5
4
9
—
—
84
Total Consumer and other
53,239
4,083
2,045
1,257
954
918
462
1
62,959
Current period gross write offs
9
12
10
2
—
2
—
—
35
Total Loans
Risk rating
Pass
372,428
605,801
306,140
129,904
94,292
209,087
106,474
2,469
1,826,595
Special Mention
5,988
4,653
1,215
2,920
6,625
9,451
2,225
48
33,125
Substandard
2,510
6,564
2,581
491
807
9,455
1,320
22
23,750
Total Loans
$ 380,926
$ 617,018
$ 309,936
$ 133,315
$ 101,724
$ 227,993
$ 110,019
$ 2,539
$ 1,883,470
Total current period
gross write offs
$
412
$
672
$
513
$
202
$
9
$
136
$
—
$
—
$
1,944
Notes to Consolidated Financial Statements
67
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
The following table presents the loan portfolio by credit quality indicator (risk grade) as of
December 31, 2022. Those loans with a risk grade of 1, 2, 3, 4, and 5 have been combined in the pass
column for presentation purposes. There were no loans with a risk rating of “doubtful” or “loss” at
December 31, 2022.
Special
Total
(Dollars in thousands)
Pass
Mention
Substandard
Loans
December 31, 2022
Construction, land & land development
$
228,494
$
290
$
651
$
229,435
Other commercial real estate
951,126
17,562
6,759
975,447
Total commercial real estate
1,179,620
17,852
7,410
1,204,882
Residential real estate
277,930
6,574
5,550
290,054
Commercial, financial & agricultural
220,908
885
2,130
223,923
Consumer and other
18,157
54
36
18,247
Total loans
$ 1,696,615
$ 25,365
$ 15,126
$ 1,737,106
A loan’s risk grade is assigned at the inception of the loan and is based on the financial strength of
the borrower and the type of collateral. Loan risk grades are subject to reassessment at various times
throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned
risk grade of 7 or worse and an outstanding balance of $500,000 or more are reassessed on a quarterly
basis. During this reassessment process individual reserves may be identified and placed against
certain loans which are not considered impaired. In assessing the overall economic condition of the
markets in which it operates, the Company monitors the unemployment rates for its major service
areas. The unemployment rates are reviewed on a quarterly basis as part of the allowance for credit
loss determination.
Loans are considered past due if the required principal and interest payments have not been
received as of the date such payments were due. Generally, loans are placed on nonaccrual status
if principal or interest payments become 90 days past due or when, in management’s opinion, the
borrower may be unable to meet payment obligations as they become due, as well as when required by
regulatory provision. Loans may be placed on nonaccrual status regardless of whether such loans are
considered past due.
Loans are classified as collateral-dependent when the borrower is experiencing financial
difficulty, and we expect repayment to be provided substantially through the operation or sale of
collateral. Our commercial loans have collateral that is comprised of real estate and business assets.
Our consumer loans have collateral that is substantially comprised of residential real estate.
The following table represents an age analysis of past due loans and nonaccrual loans, segregated by
class of loans, as of December 31, 2023 and 2022.
Accruing Loans
90 Days
Total
30-89
or More
Accruing
Days Past
Past
Loans Past
Nonaccrual
Current
Total
(Dollars in thousands)
Due
Due
Due
Loans
Loans
Loans
December 31, 2023
Construction, land
& land development
$
812
$
—
$
812
$
85
$
246,249
$
247,146
Other commercial real estate
1,796
—
1,796
4,219
968,360
974,375
Total commercial real estate
2,608
—
2,608
4,304
1,214,609
1,221,521
Residential real estate
2,503
350
2,853
3,561
349,820
356,234
Commercial, financial
& agricultural
775
—
775
1,956
240,025
242,756
Consumer and other
183
20
203
18
62,738
62,959
Total loans
$ 6,069
$
370
$ 6,439
$ 9,839
$ 1,867,192
$ 1,883,470
68
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Accruing Loans
90 Days
Total
30-89
or More
Accruing
Days Past
Past
Loans Past
Nonaccrual
Current
Total
(Dollars in thousands)
Due
Due
Due
Loans
Loans
Loans
December 31, 2022
Construction, land
& land development
$
—
$
—
$
—
$
149
$
229,286
$
229,435
Other commercial real estate
395
—
395
1,509
973,543
975,447
Total commercial real estate
395
—
395
1,658
1,202,829
1,204,882
Residential real estate
882
—
882
2,686
286,486
290,054
Commercial, financial
& agricultural
476
—
476
1,341
222,106
223,923
Consumer and other
40
—
40
21
18,186
18,247
Total loans
$ 1,793
$
—
$ 1,793
$ 5,706
$ 1,729,607
$ 1,737,106
The following table is a summary of the Company’s nonaccrual loans by major categories for the
periods indicated.
December 31,
December 31,
2023
2022
Nonaccrual
Nonaccrual
Total
Loans with No Loans with a
Nonaccrual
Nonaccrual
(Dollars in thousands)
Related ACL
Related ACL
Loans
Loans
Construction, land
& land development
$
27
$
58
$
85
$
149
Other commercial real estate
2,806
1,413
4,219
1,509
Total commercial real estate
2,833
1,471
4,304
1,658
Residential real estate
725
2,836
3,561
2,686
Commercial, financial & agricultural
—
1,956
1,956
1,341
Consumer and other
—
18
18
21
Total loans
$
3,558
$
6,281
$ 9,839
$
5,706
Notes to Consolidated Financial Statements
69
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
As of December 31, 2023, loans secured by 1-4 family residential properties that were in the
process of foreclosure were $1.0 million and are included in the total nonaccrual loan balance above.
As of December 31, 2022, there were no loans in process of foreclosure.
The following table details impaired loan data, including purchased credit impaired loans, as of
December 31, 2022.
Unpaid
Contractual
Average
Principal
Recorded
Related
Recorded
(Dollars in thousands)
Balance
Investment
Allowance
Investment
With no related allowance recorded
Construction, land & land development
$
40
$
40
$
—
$
10
Other commercial real estate
3,754
3,754
—
5,311
Residential real estate
62
62
—
570
Commercial, financial & agricultural
—
—
—
306
Consumer and other
—
—
—
1
3,856
3,856
—
6,198
With An Allowance Recorded
Construction, land & land development
474
474
44
177
Other commercial real estate
—
—
—
503
Residential real estate
—
—
—
588
Commercial, financial & agricultural
—
—
—
369
Consumer and other
—
—
—
—
474
474
44
1,637
Purchase credit impaired
Construction, land & land development
—
—
—
—
Other commercial real estate
798
798
33
760
Residential real estate
—
—
—
13
Commercial, financial & agricultural
—
—
—
—
Consumer and other
—
—
—
65
798
798
33
838
Total
Construction, land & land development
514
514
44
187
Other commercial real estate
4,552
4,552
33
6,574
Residential real estate
62
62
—
1,171
Commercial, financial & agricultural
—
—
—
675
Consumer and other
—
—
—
66
$
5,128
$
5,128
$
77
$
8,673
70
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Interest income recorded on impaired loans during the year ended December 31, 2023 was
$430,000, and reflects interest income recorded on nonaccrual loans prior to them being placed on
nonaccrual status. Had nonaccrual loans performed in accordance with their original contractual
terms, the Company would have recognized additional interest income of approximately $3.1
million for the year ended December 31, 2023.
Interest income recorded on impaired loans during the year ended December 31, 2022 was
$724,000, and reflects interest income recorded on nonaccrual loans prior to them being placed
on nonaccrual status and interest income recorded on TDRs. Had nonaccrual loans performed in
accordance with their original contractual terms, the Company would have recognized additional
interest income of approximately $1.3 million for the year ended December 31, 2022.
The allowance for credit losses incorporates an estimate of lifetime expected credit losses
and is recorded on each asset upon asset origination or acquisition. The starting point for the
estimate of the allowance for credit losses is historical loss information, which includes losses
from modifications of receivables to borrowers experiencing financial difficulty. The Company
uses a discounted cash flow model to determine the allowance for credit losses. An assessment of
whether a borrower is experiencing financial difficulty is made on the date of a modification.
Because the effect of most modifications made to borrowers experiencing financial difficulty
is already included in the allowance for credit losses because of the measurement methodologies
used to estimate the allowance, a change to the allowance for credit losses is generally not
recorded upon modification. Occasionally, the Company modifies loans by providing principal
forgiveness on certain of its real estate loans. When principal forgiveness is provided, the
amortized cost basis of the asset is written off against the allowance for credit losses. The amount
of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is
written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment
to the allowance for credit losses.
In some cases, the Company will modify a certain loan by providing multiple types of
concessions. Typically, one type of concession, such as a term extension, is granted initially. If
the borrower continues to experience financial difficulty, another concession, such as principal
forgiveness, may be granted. Upon the Company’s determination that a modified loan, or portion of
a loan, has subsequently been deemed uncollectible, the loan, or portion of the loan, is written off.
The following table presents loans modified due to a financial difficulty under the above
terms during the year ended December 31, 2023.
Loans modified due to financial difficulty
Term Extension
Term
and Payment
(Dollars in thousands)
Extension
Delay
Total*
Residential real estate
$
12
$
—
$
12
Commercial, financial & agricultural
—
10
10
Total Loans
$
12
$
10
$
22
* less than .01% of total class of receivable
There was one loan in each of the above categories. The residential real estate loan had a term
extension of two years. The commercial, financial & agricultural loan had a term extension of two
years and was given a payment delay.
Prior to the adoption of ASU 2022-02 on January 1, 2023, the restructuring of a loan was
considered a troubled debt restructuring (“TDR”) if both the borrower was experiencing financial
difficulties and the Company had granted a concession to the terms of the loan. Concessions
may have included interest rate reductions to below market interest rates, principal forgiveness,
restructured amortization schedules and other actions intended to minimize potential losses.
Notes to Consolidated Financial Statements
71
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
As discussed in Note 1 of the Notes to Consolidated Financial Statements for the year ended
December 31, 2022, which are included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2022, once a loan was identified as a TDR, it was accounted for as an
impaired loan. The Company had no unfunded commitments to lend to a customer that had a
troubled debt restructured loan as of December 31, 2022. Loans modified in a TDR were considered
to be in default once the loan became 90 days past due. A TDR ceased being classified as impaired
if the loan was subsequently modified at market terms and, had performed according to the
modified terms for at least six months, and there had not been any prior principal forgiveness on a
cumulative basis.
The Company had no loans that subsequently defaulted during the years ended December 31,
2023 and December 31, 2022.
4. ALLOWANCE FOR CREDIT LOSSES
As previously mentioned in Note 1, since the adoption of ASC 326 on January 1, 2023, the ACL for
loans represents management’s estimate of life of loan credit losses in the portfolio as of the end of the
period. The ACL related to unfunded commitments is included in other liabilities in the consolidated
balance sheet. The following table presents the balance sheet activity in the ACL by portfolio segment
for loans, using the CECL methodology for the year ended December 31, 2023.
CECL
Balance,
Provision for
Balance,
December 31, Adoption of
credit losses December 31,
(Dollars in thousands)
2022
ASU 2016-13
Charge-offs
Recoveries
on loans
2023
Year ended
December 31, 2023
Construction, land
& land development
$
1,959
$
148
$
—
$
10
$
87
$
2,204
Other commercial real estate
8,886
(630)
(69)
42
(1,165)
7,064
Total commercial real estate
10,845
(482)
(69)
52
(1,078)
9,268
Residential real estate
2,354
1,053
(771)
79
2,390
5,105
Commercial, financial
& agricultural
2,709
(690)
(1,069)
201
959
2,110
Consumer and other
220
66
(35)
22
1,615
1,888
Total allowance for
credit losses on loans
$ 16,128
$
(53)
$
(1,944)
$
354
$ 3,886
$
18,371
Colony used a one-year reasonable and supportable forecast period. The changes in loss rates
used as the basis for the estimate of credit losses during this period were modeled using historical
data from peer banks and macroeconomic forecast data obtained from a third party vendor, which
were then applied to Colony’s recent default experience as a starting point. As of December 31,
2023, the Company expects that the markets in which it operates will experience stable economic
and unemployment conditions with the trend of delinquencies returning to more normalized levels,
over the next two years. Management adjusted the historical loss experience for these expectations.
No reversion adjustments were necessary, as the starting point for the Company’s estimate was a
cumulative loss rate covering the expected contractual term of the portfolio.
72
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
The following table details activity in the allowance for loan losses, segregated by class of loans,
using the incurred loss methodology for the year ended December 31, 2022. Allocation of a portion of
the allowance to one category of loans does not preclude its availability to absorb losses in other loan
categories and periodically may result in reallocation within the provision categories.
Incurred Loss
Balance,
Balance,
December 31,
December 31,
(Dollars in thousands)
2021
Charge-offs
Recoveries
Provision
2022
Year ended
December 31, 2022
Construction, land
& land development
$
1,127
$
—
$
25
$
807
$
1,959
Other commercial real estate
7,691
(58)
85
1,168
8,886
Total commercial real estate
8,818
(58)
110
1,975
10,845
Residential real estate
1,805
(48)
50
547
2,354
Commercial, financial & agricultural
1,083
(314)
139
1,801
2,709
Consumer and other
1,204
(60)
29
(953)
220
Total allowance for loan losses
$
12,910
$
(480)
$
328
$
3,370
$
16,128
The following table represents the recorded investment in loans by portfolio segment and the
balance of the allowance assigned to each segment based on the incurred loss methodology of
evaluating the loans for impairment as of December 31, 2022.
Construction,
Land and
Other
Commercial,
Consumer
Land
Commercial
Residential
Financial and
and
(Dollars in thousands)
Development
Real Estate
Real Estate
Agricultural
Other
Total
Year ended
December 31, 2022
Period-end amount allocated to:
Individually evaluated
for impairment
$
44
$
—
$
—
$
—
$
—
$
44
Collectively evaluated
for impairment
1,915
8,853
2,354
2,709
220
16,051
Purchase credit impaired
—
33
—
—
—
33
Ending balance
$
1,959
$
8,886
$
2,354
$
2,709
$
220
$
16,128
Loans:
Loans individually
evaluated for impairment $
514
$
3,754
$
62
$
—
$
—
$
4,330
Loans collectively
evaluated for impairment 228,921
970,895
289,992
223,923
18,247
1,731,978
Purchase credit impaired
—
798
—
—
—
798
Ending balance
$ 229,435
$ 975,447
$ 290,054
$ 223,923
$ 18,247
$ 1,737,106
Notes to Consolidated Financial Statements
73
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
The Company determines its individual reserves during its quarterly review of substandard loans.
This process involves reviewing all loans with a risk grade of 7 or greater and an outstanding balance
of $500,000 or more, regardless of the loans impairment classification.
The Company maintains an allowance for off-balance sheet credit exposures such as unfunded
balances for existing lines of credit, commitments to extend future credit, as well as both standby
and commercial letters of credit when there is a contractual obligation to extend credit and when
this extension of credit is not unconditionally cancellable. The allowance for off-balance sheet credit
exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the
likelihood that funding will occur, which is based on a historical funding study derived from internal
information, and an estimate of expected credit losses on commitments expected to be funded over its
estimated life, which are the same loss rates that are used in computing the allowance for credit losses
on loans. The allowance for credit losses for unfunded commitments is separately classified on the
balance sheet within Other liabilities.
The following table presents the balance and activity in the allowance for credit losses for
unfunded commitments for the year ended December 31, 2023.
Total Allowance for Credit
(Dollars in thousands)
Losses-Unfunded Commitments
Year Ended
Balance, December 31, 2022
$
—
Adjustment to allowance for unfunded commitments for adoption of ASU 2016-13
1,661
Change in unfunded commitments
(286)
Balance, December 31, 2023
$
1,375
5. PREMISES AND EQUIPMENT
Premises and equipment are comprised of the following as of December 31:
(Dollars in thousands)
2023
2022
Land
$ 11,559
$ 12,944
Building
38,567
37,718
Furniture, fixtures and equipment
20,670
19,524
Leasehold improvements
1,384
1,099
Construction in progress
182
942
Total cost
72,362
72,227
Accumulated depreciation
(32,492)
(30,621)
Total premises and equipment
$ 39,870
$ 41,606
Depreciation charged to operations totaled $2.4 million in 2023 and $2.7 million in 2022.
Construction in progress consists of building and land improvements to five of the Company’s bank
branches and equipment improvements at three of the Company’s bank branches. Costs to complete
these projects is expected not to exceed $72,000.
74
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
6. OTHER REAL ESTATE OWNED
The following is a summary of the activity in other real estate owned during the years ended
December 31, 2023 and 2022:
(Dollars in thousands)
2023
2022
Balance, Beginning of year
$
651
$
281
Loans transferred to other real estate
482
—
Sales proceeds
(3,477)
(35)
Transfer from premises and equipment
2,601
405
Net gain on sale
191
—
Ending balance
$
448
$
651
7. GOODWILL AND INTANGIBLE ASSETS
The following is an analysis of the core deposit intangible activity for the years ended December 31:
2023
2022
Gross
Gross
Carrying
Accumulated
Carrying Accumulated
(Dollars in thousands)
Amount
Amortization
Amount Amortization
Amortizable intangible assets:
Core deposit intangible
$
7,685
$
5,211
$
7,685
$
3,965
Customer relationship intangible
2,250
532
2,250
306
Total
9,935
5,743
9,935
4,271
Unamortizable intangible assets:
Goodwill
$ 48,923
$ 48,923
Amortization expense related to the intangible assets was $1.5 million and $1.7 million at
December 31, 2023 and 2022, respectively. The estimated future amortization expense for intangible
assets remaining as of December 31, 2023 is as follows:
(Dollars in thousands)
Amount
2024
$
1,217
2025
962
2026
658
2027
453
Thereafter
902
Total
$
4,192
8. INCOME TAXES
The income tax expense in the consolidated statements of income for the years ended December
31, 2023 and 2022 are as follows:
(Dollars in thousands)
2023
2022
Current federal expense
$
5,837
$
2,855
Deferred federal expense
(430)
782
Federal income tax expense
5,407
3,637
Current state expense
115
(474)
Deferred state expense
(56)
147
State income tax expense
59
(327)
Provision for income taxes
$
5,466
$
3,310
Notes to Consolidated Financial Statements
75
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
The Company’s income tax expense differs from amounts computed by applying the federal
statutory rates to income before income taxes. A reconciliation of the differences for the years ended
December 31, 2023 and 2022 is as follows:
(Dollars in thousands)
2023
2022
Tax at federal income tax rate
$
5,715
$
4,799
Change resulting from:
State taxes
47
(258)
Tax-exempt interest
(238)
(541)
Income in cash value of bank owned life insurance
(293)
(329)
Tax-exempt insurance premiums
(192)
(248)
Other
427
(113)
Provision for income taxes
$
5,466
$
3,310
The components of deferred income taxes for the years ended December 31, 2023 and 2022 are
as follows:
(Dollars in thousands)
2023
2022
Deferred tax assets
Allowance for credit losses
$
4,675
$
4,108
Lease liability
465
483
Net operating loss carryforwards
2,223
3,160
Tax credit carryforwards
469
501
Deferred compensation
278
282
Unrealized loss on securities available for sale
18,903
22,703
Restricted stock
251
308
Investment in partnerships
186
195
Unrealized loss on hedging investments
111
—
Nonaccrual interest
521
50
Allowance for unfunded commitments
350
—
Other
113
—
Gross deferred tax assets
28,545
31,790
Deferred tax liabilities
Premises and equipment
559
707
Right of use lease asset
402
467
Purchase accounting adjustments
1,831
1,779
Core deposit intangible
348
638
Gross deferred tax liabilities
3,140
3,591
Net deferred tax assets
$ 25,405
$ 28,199
9. DEPOSITS
The aggregate amount of overdrawn deposit accounts reclassified as loan balances totaled
$662,000 and $612,000 as of December 31, 2023 and 2022, respectively.
Components of interest-bearing deposits as of December 31 are as follows:
(Dollars in thousands)
2023
2022
Interest-bearing demand
$
759,299
$ 831,152
Savings and money market deposits
660,311
617,135
Time, $250,000 and over
167,680
114,780
Other time
458,508
358,760
Total interest-bearing deposits
$ 2,045,798
$ 1,921,827
76
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
We had $93.6 million and $50.8 million in brokered deposits at December 31, 2023 and 2022,
respectively. We use brokered deposits, subject to certain limitations and requirements, as a source
of funding to support our asset growth and augment the deposits generated from our branch
network, which are our principal source of funding. Our level of brokered deposits varies from time
to time depending on competitive interest rate conditions and other factors, and tends to increase
as a percentage of total deposits when the brokered deposits are less costly than issuing internet
certificates of deposit or borrowing from the FHLB.
The aggregate amount of jumbo certificates of deposit, each with a minimum denomination of
$250,000 was $167.7 million and $114.8 million as of December 31, 2023 and 2022, respectively.
As of December 31, 2023, the scheduled maturities of certificates of deposit are as follows:
(Dollars in thousands)
Amount
Year ending December 31
2024
$ 548,834
2025
60,154
2026
7,737
2027
4,964
2028
4,231
Thereafter
268
Total time deposits
$ 626,188
10. DERIVATIVES
As part of its asset liability management activities, the Company may enter into interest rate swaps
to help manage its interest rate risk position and mitigate exposure to the variability of future cash
flows or other forecasted transactions. The Company entered into two interest rate swaps during the
second quarter of 2023, to hedge the variability of cash flows due to changes in the benchmark SOFR
interest rate risk for its short-term funding over the term of these cash flow hedges.
The notional amount of an interest rate swap does not represent the amount exchanged by the
parties. The exchange of cash flows is determined by reference to the notional amount and the other
terms of the interest rate swap agreements.
On June 23, 2023, the Company entered into a five-year interest rate swap with a notional amount
totaling $25.0 million. On June 26, 2023 the Company entered into a three-year interest rate swap with
a notional amount totaling $25.0 million. Both of the swaps were designated as cash flow hedges of
certain variable rate liabilities.
The derivatives are recorded in other liabilities on the Company’s balance sheet and has a value of
$438,000 as of December 31, 2023.
Gains were recorded on the swap transactions, which totaled $349,000 for the year ended
December 31, 2023, as a component of interest expense in the consolidated statements of income.
Amounts reported in accumulated OCI related to swaps are reclassified to interest expense as interest
payments are made on the Bank’s variable rate liabilities.
The following table presents the amounts recorded in the consolidated statements of income and
the consolidated statements of comprehensive income relating to the interest rate swaps for the year
ended December 31, 2023.
Year ending
December 31,
(Dollars in thousands)
2023
Amount of loss recognized in OCI
$
326
Amount of gain reclassified from OCI to interest expense
$
349
Notes to Consolidated Financial Statements
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
11. BORROWINGS
The following table presents information regarding the Company’s outstanding borrowings at
December 31, 2023:
(Dollars in thousands)
Description
Maturity Date
Amount
Interest Rate
FHLB Advances
December 22, 2027
$ 15,000
4.00%
FHLB Advances
January 28, 2028
20,000
3.87%
FHLB Advances
February 15, 2028
20,000
3.83%
FHLB Advances
April 5, 2028
25,000
3.69%
FHLB Advances
April 6, 2026
25,000
3.90%
FHLB Advances
September 30, 2024
20,000
5.57%
FHLB Advances
March 25, 2024
25,000
5.51%
FHLB Advances
March 26, 2024
25,000
5.51%
Subordinated notes
May 20, 2032
39,216
5.25%
Subordinated debentures
(1)
24,229
(1)
Total borrowings
$ 238,445
(1) See individual maturity dates and interest rates in table below.
The following table presents information regarding the Company’s outstanding borrowings at
December 31, 2022:
(Dollars in thousands)
Description
Maturity Date
Amount
Interest Rate
FHLB Advances
March 21, 2028
$
5,000
2.67%
FHLB Advances
January 5, 2023
20,000
4.18%
FHLB Advances
January 9, 2023
20,000
4.15%
FHLB Advances
March 8, 2023
10,000
4.65%
FHLB Advances
January 17, 2023
20,000
4.15%
FHLB Advances
January 20, 2023
15,000
4.23%
FHLB Advances
December 22, 2027
15,000
4.00%
FHLB Advances
January 30, 2023
20,000
4.23%
FRB Discount Window
January 5, 2023
15,000
4.10%
Subordinated notes
May 20, 2032
39,123
5.25%
Subordinated debentures
(1)
24,229
(1)
Total borrowings
$ 203,352
(1) See individual maturity dates and interest rates in table below.
As collateral on the outstanding FHLB advances, the Company has provided a blanket lien
on its portfolio of qualifying residential first mortgage loans, commercial loans, farmland loans,
multifamily loans and HELOC loans, as well as U.S. Treasury and Agency securities. At December
31, 2023 and 2022, the lendable collateral value of those loans and securities pledged was $235.2
million and $150.0 million, respectively. At December 31, 2023, the Company had remaining credit
availability from the FHLB of $596.2 million. At December 31, 2022, the Company had remaining
credit availability from the FHLB of $574.9 million. The Company may be required to pledge additional
qualifying collateral in order to utilize the full amount of the remaining credit line.
At December 31, 2023 and 2022, the Company also has available federal funds lines of credit
with various financial institutions totaling $64.5 million, of which there were none outstanding at
December 31, 2023 and 2022.
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
The Company has the ability to borrow funds from the Federal Reserve Bank (FRB) of Atlanta
utilizing the discount window. The discount window is an instrument of monetary policy that allows
eligible institutions to borrow money from the FRB on a short-term basis to meet temporary liquidity
shortages caused by internal or external disruptions. The Company had borrowing capacity available
under this arrangement, with none outstanding at December 31, 2023 and 2022. The Company could be
required to pledge certain available-for-sale investment securities as collateral under this agreement.
The Company also has the ability to participate in the FRB Term Funding Program, a new form
of one-year emergency funding, with an available line of $100.0 million. The Company would be
required to purchase Treasury securities or other debt obligations. The Company has not utilized this
source of funding as of December 31, 2023.
On May 20, 2022, the Company completed a private placement of $40.0 million in fixed-to-floating
rate subordinated notes due 2032 (the “Notes”). The Notes will bear a fixed rate of 5.25% for the
first five years and will reset quarterly thereafter to then current three-month Secured Overnight
Financing Rate, as published by the Federal Reserve Bank of New York, plus 265 basis points for the
five year floating term. The Company is entitled to redeem the Notes, in whole or in part, on any
interest payment date on or after May 20, 2027, or at any time, in whole but not in part, upon certain
other specified events. At December 31, 2023, $39.2 million of the Notes, net of debt issuance costs
were outstanding. The notes are recorded as other borrowings on the consolidated balance sheets
and, subject to certain limitations, qualify as Tier 2 Capital for regulatory capital purposes.
Subordinated Debentures (Trust Preferred Securities)
During the second quarter of 2004, the Company formed Colony Bankcorp Statutory Trust III for
the sole purpose of issuing $4,500,000 in Trust Preferred Securities through a pool sponsored by FTN
Financial Capital Market. The securities have a maturity of thirty years and are redeemable after five
years with certain exceptions.
During the second quarter of 2006, the Company formed Colony Bankcorp Capital Trust I for the
sole purpose of issuing $5,000,000 in Trust Preferred Securities through a pool sponsored by Truist
Capital Markets. The securities have a maturity of thirty years and are redeemable after five years
with certain exceptions.
During the first quarter of 2007, the Company formed Colony Bankcorp Capital Trust II for the
sole purpose of issuing $9,000,000 in Trust Preferred Securities through a pool sponsored by Trapeza
Capital Management, LLC. The securities have a maturity of thirty years and are redeemable after
five years with certain exceptions. Proceeds from this issuance were used to pay off trust preferred
securities issued on March 26, 2002 through Colony Bankcorp Statutory Trust I.
During the third quarter of 2007, the Company formed Colony Bankcorp Capital Trust III for the
sole purpose of issuing $5,000,000 in Trust Preferred Securities through a pool sponsored by Trapeza
Capital Management, LLC. The securities have a maturity of thirty years and are redeemable after
five years with certain exceptions. Proceeds from this issuance were used to pay off trust preferred
securities issued on December 19, 2002 through Colony Bankcorp Statutory Trust II.
The Company is not in default of any outstanding Trust Preferred Securities as of December 31, 2023.
The following table presents the information regarding the Company’s subordinated debentures
at December 31, 2023 and 2022. All subordinated debentures are at benchmark rates based on SOFR at
December 31, 2023.
(Dollars in thousands)
Added
5-Year
Description
Date
Amount
Points
Maturity
Call Option
Colony Bankcorp Statutory Trust III
June 16, 2004
$ 4,640
2.68%
June 17, 2034
June 17, 2009
Colony Bankcorp Capital Trust I
April 13, 2006
5,155
1.50%
June 30, 2036
April 13, 2011
Colony Bankcorp Capital Trust II
March 12, 2007
9,279
1.65%
March 30, 2037
March 12, 2012
Colony Bankcorp Capital Trust III September 14, 2007
5,155
1.40%
October 30, 2037 September 14, 2012
Notes to Consolidated Financial Statements
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
The Trust Preferred Securities are recorded as subordinated debentures on the consolidated
balance sheets and, subject to certain limitations, qualify as Tier 1 Capital for regulatory capital
purposes. The proceeds from these offerings were used to fund certain acquisitions, pay off
holding company debt and inject capital into the Bank subsidiary. The Trust Preferred Securities
pay interest quarterly.
12. LEASES
A lease is defined as a contract, or part of a contract, that conveys the right to control the use
of identified property, plant or equipment for a period of time in exchange for consideration. On
January 1, 2019, the Company adopted ASU No. 2016-2 and all subsequent ASUs that modified this topic
(collectively referred to as “Topic 842”). For the Company, Topic 842 primarily affected the accounting
treatment for operating lease agreements in which the Company is the lessee.
Substantially all of the leases in which the Company is the lessee are comprised of real estate
for branches and office space with terms extending through 2028. All of our leases are classified
as operating leases, and therefore, were previously not recognized on the Company’s consolidated
balance sheet. With the adoption of Topic 842, operating lease arrangements are required to be
recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and a corresponding
lease liability.
The following table represents the consolidated balance sheet classification of the Company’s ROU
assets and liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms
of twelve months or less), or equipment leases (deemed immaterial) on the consolidated balance sheet.
December 31,
December 31,
(Dollars in thousands)
Classification
2023
2022
Assets
Operating lease right-of-use assets
Other assets
$ 1,579
$ 1,834
Liabilities
Operating lease liabilities
Other liabilities
$ 1,829
$ 1,895
The calculated amount of the ROU assets and lease liabilities in the table above are impacted by
the length of the lease term and the discount rate used to present value the minimum lease payments
and lease incentive payments. The Company’s lease agreements often include one or more options
to renew at the Company’s discretion. If at lease inception the Company considers the exercising
of a renewal option to be reasonably certain, the Company will include the extended term in the
calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires
the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is
rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a
collateralized basis, over a similar term. For operating leases existing prior to January 1, 2019, the rate
for the remaining lease term as of January 1, 2019 was used.
For the year ended December 31, 2023 and 2022, operating lease cost was $626,000 and $615,000,
respectively.
As of December 31, 2023, the weighted average remaining lease term was 3.89 years and the
weighted average discount rate was 4.31%.
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The following table represents the future maturities of the Company’s operating lease liabilities
and other lease information.
Lease
(Dollars in thousands)
Liability
Year
2024
$
642
2025
596
2026
360
2027
297
2028
72
Total Lease Payments
1,967
Less: Interest
(138)
Present Value of Lease Liabilities
$
1,829
December 31,
December 31,
(Dollars in thousands)
2023
2022
Supplemental lease information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (cash payments)
$
645
$
549
Operating lease right-of-use assets obtained in exchange for leases
entered into during the period
500
1,750
13. COMPENSATION PLANS
The Company offers a defined contribution 401(k) Profit Sharing Plan (the “Plan”) which covers
substantially all employees who meet certain age and service requirements. The Plan allows
employees to make voluntary pre-tax salary deferrals to the Plan. The Company, at its discretion, may
elect to make an annual contribution to the Plan equal to a percentage of each participating employee’s
salary. Such discretionary contributions must be approved by the Company’s board of directors.
Employees are fully vested in the Company contributions after six years of service. In 2023 and 2022,
the Company made total contributions of $1.9 million and $1.9 million to the Plan, respectively.
Colony Bank, the wholly-owned subsidiary, has deferred compensation plans covering certain
former directors and certain officers choosing to participate through individual deferred compensation
contracts. In accordance with terms of the contracts, the Bank is committed to pay the participant’s
deferred compensation over a specified number of years, beginning at age 65. In the event of a
participant’s death before age 65, payments are made to the participant’s named beneficiary over a
specified number of years, beginning on the first day of the month following the death of the participant.
Liabilities accrued under the plans totaled $1.1 million and $1.1 million as of December 31, 2023
and 2022, respectively. Benefits accrued monthly under the contracts totaled $32,000 in 2023 and
$39,000 in 2022. Payments were $140,000 in 2023 and $151,000 in 2022.
The Company has purchased life insurance policies on the plans’ participants and uses the cash flow
from these policies to partially fund the plan. There was no fee income recognized in 2023 and 2022.
The Company awards restricted shares of the Company’s common stock to various bank
employees with a grant price equal to the market price of the Company’s common stock on the grant
date. The restricted shares vest in equal installments over three years, subject to continued service
through each applicable vesting date, or earlier upon the occurrence of a change in control. With the
restricted stock, there will be no cash consideration to the Company for the shares. The employees will
have the right to vote all shares subject to such grant and receive all dividends with respect to such
shares, whether or not the shares have vested.
Notes to Consolidated Financial Statements
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
The following table presents the outstanding balance for restricted stock awards as of December
31, 2023 and 2022.
Quantity
Weighted-Average Grant
Date Fair Value
Outstanding at December 31, 2021
187,300
17.93
Granted
139,720
16.11
Vested
(71,154)
17.93
Forfeited
(9,000)
17.36
Outstanding at December 31, 2022
246,866
16.92
Granted
55,210
9.67
Vested
(103,224)
17.12
Forfeited
(22,859)
16.29
Outstanding at December 31, 2023
175,993
14.67
Compensation expense for restricted stock is based on the market price of the Company stock at
the time of the grant and amortized on a straight-line basis over the vesting period. Compensation
expense recognized for the years ended December 31, 2023 and 2022 was $1.7 million and $1.7 million,
respectively. Total compensation expense unrecognized for the restricted shares granted for the year
ended December 31, 2023 was $1.6 million, which is expected to be recognized over a weighted average
period of 1.4 years.
14. COMMITMENTS AND CONTINGENCIES
Credit-related financial instruments. The Company is a party to credit-related financial
instruments with off-balance sheet risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include commitments to extend credit, standby letters
of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.
The Company’s exposure to credit loss is represented by the contractual amount of these
commitments. The Company follows the same credit policies in making commitments as it does for
on-balance sheet instruments.
At December 31, 2023 and 2022, the following financial instruments were outstanding whose
contract amounts represent credit risk:
Contract Amount
(Dollars in thousands)
2023
2022
Commitments to extend credit
$ 362,878
$ 379,997
Standby letters of credit
5,656
3,333
Commitments to extend credit are agreements to lend to a customer as long as there is no violation
of any condition established in the contract. Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee. The commitments for equity lines
of credit may expire without being drawn upon. Therefore, the total commitment amounts do not
necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed
necessary by the Company, is based on management’s credit evaluation of the customer.
Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft
protection agreements are commitments for possible future extensions of credit to existing customers.
These lines of credit are uncollateralized and usually do not contain a specified maturity date and may
not be drawn upon to the total extent to which the Company is committed.
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Standby and performance letters of credit are conditional lending commitments issued by the
Company to guarantee the performance of a customer to a third party. Those letters of credit are
primarily issued to support public and private borrowing arrangements. Essentially all letters of credit
issued have expiration dates within one year. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
Legal Contingencies. In the ordinary course of business, there are various legal proceedings
pending against Colony and its subsidiaries. The aggregate liabilities, if any, arising from such
proceedings would not, in the opinion of management, have a material adverse effect on Colony’s
consolidated financial position.
15. RELATED PARTY TRANSACTIONS
The following table reflects the activity and aggregate balance of direct and indirect loans to
directors, executive officers or principal holders of equity securities of the Company. All such loans
were made on substantially the same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with other persons and do not involve more than a normal
risk of collectability. A summary of activity of related party loans is shown below:
(Dollars in thousands)
2023
2022
Balance, beginning
$
3,443
$
7,732
New loans
4,095
1,182
Repayments
(1,146)
(5,471)
Transactions due to changes in directors
(285)
—
Balance, ending
$
6,107
$
3,443
16. FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Generally accepted accounting standards in the U.S. require disclosure of fair value information
about financial instruments, whether or not recognized on the face of the balance sheet, for which it is
practicable to estimate that value. The assumptions used in the estimation of the fair value of Colony
Bancorp, Inc. and subsidiaries financial instruments are detailed hereafter. Where quoted prices
are not available, fair values are based on estimates using discounted cash flows and other valuation
techniques. The use of discounted cash flows can be significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Generally accepted accounting principles related to Fair Value Measurements define fair
value, establish a framework for measuring fair value, establish a three-level valuation hierarchy
for disclosure of fair value measurement and enhance disclosure requirements for fair value
measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of
an asset or liability as of the measurement date. The three levels are defined as follows:
•
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets
or liabilities in active markets.
•
Level 2 inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or liability, either
directly or indirectly, for substantially the full term of the financial instrument.
•
Level 3 inputs to the valuation methodology are unobservable and represent the Company’s
own assumptions about the assumptions that market participants would use in pricing the
assets or liabilities.
Notes to Consolidated Financial Statements
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
The following disclosures should not be considered a surrogate of the liquidation value of
the Company, but rather a good-faith estimate of the increase or decrease in value of financial
instruments held by the Company since purchase, origination or issuance.
Cash and short-term investments – For cash, due from banks, bank-owned deposits and federal
funds sold, the carrying amount is a reasonable estimate of fair value and is classified Level 1.
Investment securities – Fair values for investment securities are based on quoted market prices
where available and classified as Level 1. If quoted market prices are not available, estimated fair
values are based on quoted market prices of comparable instruments and classified as Level 2. If a
comparable is not available, the investment securities are classified as Level 3.
Other investments, at cost – The fair value of other bank stock approximates carrying value and
is classified as Level 2. Fair values for investment funds are based on quoted market prices where
available and classified as Level 1. If quoted market prices are not available, estimated fair values are
based on quoted market prices of comparable instruments and classified as Level 2. If a comparable is
not available, the investment securities are classified as Level 3.
Loans held for sale – The fair value of loans held for sale is determined on outstanding
commitments from third party investors in the secondary markets and is classified within Level 2 of
the valuation hierarchy.
Loans, net – The fair value of fixed rate loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with similar credit ratings.
For variable rate loans, the carrying amount is a reasonable estimate of fair value. Loans are classified
as Level 3.
Derivative instruments – The fair values of interest rate swaps are determined using the market
standard methodology of netting the discounted future fixed cash receipts and the discounted
expected variable cash payments. The variable cash payments are based on an expectation of future
interest rates (forward curves) derived from observable market interest rate curves. The interest rate
swaps are classified as Level 2.
Deposit liabilities – The fair value of demand deposits, savings accounts and certain money market
deposits is the amount payable on demand at the reporting date and is classified as Level 1. The fair
value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using
the rates currently offered for deposits of similar remaining maturities and is classified as Level 2.
Federal Home Loan Bank advances – The fair value of Federal Home Loan Bank advances is
estimated by discounting the future cash flows using the current rates at which similar advances
would be obtained. Federal Home Loan Bank advances are classified as Level 2.
Other borrowings – The fair value of other borrowings is calculated by discounting contractual
cash flows using an estimated interest rate based on current rates available to the Company for debt
of similar remaining maturities and collateral terms. Other borrowings is classified as Level 2 due to
their expected maturities.
Disclosures of the fair value of financial assets and financial liabilities, including those financial
assets and financial liabilities that are not measured and reported at fair value on a recurring basis or
non-recurring basis, are required in the financial statements.
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
The carrying amount, estimated fair values, and placement in the fair value hierarchy of the
Company’s financial instruments are as follows:
Carrying
Estimated
Level
(Dollars in thousands)
Amount
Fair Value
1
2
3
December 31, 2023
Assets
Cash and short-term investments
$
83,322
$
83,322
$ 83,322
$
—
$
—
Investment securities available for sale
407,382
407,382
—
396,568
10,814
Investment securities held to maturity
449,031
405,576
—
405,576
—
Other investments
16,868
16,868
—
16,868
—
Loans held for sale
27,958
27,958
—
27,958
—
Loans, net
1,865,099
1,699,870
—
—
1,699,870
Liabilities
Deposits
2,544,790
2,538,477
—
2,538,477
—
Federal Home Loan Bank advances
175,000
176,022
—
176,022
—
Other borrowed money
63,445
51,056
—
51,056
—
Derivative instruments
438
438
—
438
—
December 31, 2022
Assets
Cash and short-term investments
$
80,678
$
80,678
$ 80,678
$
—
$
—
Investment securities available for sale
432,553
432,553
—
416,957
15,596
Investment securities held to maturity
465,858
411,264
—
411,264
—
Other investments
13,793
13,793
—
13,003
790
Loans held for sale
17,743
17,743
—
17,743
—
Loans, net
1,720,978
1,469,707
—
—
1,469,707
Liabilities
Deposits
2,490,997
2,489,481
—
2,489,481
—
Federal Home Loan Bank advances
125,000
125,163
—
125,163
—
Other borrowed money
78,352
69,930
—
69,930
—
Fair value estimates are made at a specific point in time, based on relevant market information
and information about the financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the Company’s entire holdings of a
particular financial instrument. Because no market exists for a significant portion of the Company’s
financial instruments, fair value estimates are based on many judgments. These estimates are
subjective in nature and involve uncertainties and matters of significant judgment and therefore
cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet financial instruments without
attempting to estimate the value of anticipated future business and the value of assets and liabilities
that are not considered financial instruments. Significant assets and liabilities that are not considered
financial instruments include deferred income taxes and premises and equipment. In addition, the tax
ramifications related to the realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in the estimates.
Following is a description of the valuation methodologies used for instruments measured at fair
value on a recurring and nonrecurring basis, as well as the general classification of such instruments
pursuant to the valuation hierarchy:
Notes to Consolidated Financial Statements
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
Securities – Where quoted prices are available in an active market, securities are classified within
level 1 of the valuation hierarchy. Level 1 inputs include securities that have quoted prices in active
markets for identical assets. If quoted market prices are not available, then fair values are estimated
by using pricing models, quoted prices of securities with similar characteristics, or discounted cash
flow. Examples of such instruments, which would generally be classified within level 2 of the valuation
hierarchy, include certain collateralized mortgage and debt obligations and certain high-yield debt
securities. In certain cases where there is limited activity or less transparency around inputs to the
valuation, securities are classified within level 3 of the valuation hierarchy. When measuring fair
value, the valuation techniques available under the market approach, income approach and/or cost
approach are used. The Company’s evaluations are based on market data and the Company employs
combinations of these approaches for its valuation methods depending on the asset class.
Collateral Dependent Impaired Loans – Impaired loans are those loans which the Company has
measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally
determined based upon independent third-party appraisals of the properties, or discounted cash flows
based upon the expected proceeds. These assets are included as level 3 fair values, based upon the
lowest level of input that is significant to the fair value measurements.
Other Real Estate Owned – Other real estate owned assets are adjusted to fair value less estimated
selling costs upon transfer of the loans to other real estate owned. Typically, an external, third-party
appraisal is performed on the collateral upon transfer into the other real estate owned account to
determine the asset’s fair value. Subsequent adjustments to the collateral’s value may be based upon
either updated third-party appraisals or management’s knowledge of the collateral and the current
real estate market conditions. Appraised amounts used in determining the asset’s fair value, whether
internally or externally prepared, are discounted 10 percent to account for selling and marketing
costs. Adjustments are routinely made in the appraisal process by the appraisers to adjust for
differences between the comparable sales and income data available. Such adjustments are typically
significant and result in a level 3 classification of the inputs for determining fair value. Because of the
high degree of judgment required in estimating the fair value of other real estate owned assets and
because of the relationship between fair value and general economic conditions, we consider the fair
value of other real estate owned assets to be highly sensitive to changes in market conditions.
Assets Measured at Fair Value on a Recurring and Nonrecurring Basis – The following table
presents the recorded amount of the Company’s assets measured at fair value on a recurring and
nonrecurring basis as of December 31, 2023 and 2022, aggregated by the level in the fair value
hierarchy within which those measurements fall. The table below includes collateral dependent loans
and other real estate properties at December 31, 2023 and 2022. Those collateral dependent loans and
other real estate properties are shown net of the related specific reserves and valuation allowances.
Fair Value Measurements at
Reporting Date Using
Quoted Prices
Significant
in Active
Other
Significant
Markets for
Observable
Unobservable
Total Fair
Identical Assets
Inputs
Inputs
(Dollars in thousands)
Value
(Level 1)
(Level 2)
(Level 3)
December 31, 2023
Nonrecurring
Collateral dependent loans
$
1,410
$
—
$
—
$
1,410
Other real estate
$
448
$
—
$
—
$
448
December 31, 2022
Nonrecurring
Collateral dependent loans
$
521
$
—
$
—
$
521
Other real estate
$
651
$
—
$
—
$
651
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
The following tables present quantitative information about the significant unobservable inputs
used in the fair value measurements for assets in level 3 of the fair value hierarchy measured on a
nonrecurring basis at December 31, 2023 and 2022. These tables are comprised primarily of collateral
dependent impaired loans and other real estate owned:
December 31,
Valuation
Unobservable
Range
(Dollars in thousands)
2023
Techniques
Inputs
Weighted Avg
Collateral
Appraised Value Discounts to reflect current market
dependent loans
$
1,410
conditions, ultimate collectability,
and estimated costs to sell
25%-50%
Other Real Estate
$
448
Appraised Value/ Discounts to reflect current market
Comparable Sales
conditions and estimated
costs to sell
0%-20%
December 31,
Valuation
Unobservable
Range
(Dollars in thousands)
2022
Techniques
Inputs
Weighted Avg
Collateral
$
521
Appraised Value Discounts to reflect current market
dependent loans
conditions, ultimate collectability,
and estimated costs to sell
25%-50%
Other Real Estate
Appraised Value/ Discounts to reflect current market
$
651
Comparable Sales
conditions and estimated
costs to sell
0%-20%
The following tables present quantitative information about recurring level 3 fair value
measurements as of December 31, 2023 and 2022.
December 31, 2023
Valuation
Unobservable
Range
(Dollars in thousands)
Fair Value
Techniques
Inputs
Weighted Avg
Available for sale securities $
10,814
Discounted Cash Flow
Discount Rate or Yield
N/A*
December 31, 2022
Valuation
Unobservable
Range
(Dollars in thousands)
Fair Value
Techniques
Inputs
Weighted Avg
Available for sale securities $
15,596
Discounted Cash Flow
Discount Rate or Yield
N/A*
Other investments
$
790
Discounted Cash Flow
Discount Rate or Yield
N/A*
* The Company relies on a third-party pricing service to value its securities. The details of the unobservable inputs and other
adjustments used by the third-party pricing service were not readily available to the Company.
Notes to Consolidated Financial Statements
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
The following table presents a reconciliation and statement of income classification of gains and
losses for all assets measured at fair value on a recurring basis using significant unobservable inputs
(level 3) for the year ended December 31, 2023 and 2022:
Available for Sale Securities
Other Investments
(Dollars in thousands)
2023
2022
2023
2022
Beginning balance
$
15,596
$
—
$
790
$
4,255
Additions
—
—
—
—
Redemptions
(2,733)
—
(800)
(3,306)
Total unrealized/realized gains (losses)
included in earnings
(270)
—
10
(159)
Transfers between levels
(1,779)
15,596
—
—
Ending balance
$
10,814
$
15,596
$
—
$
790
The Company’s policy is to recognize transfers in and transfers out of levels 1, 2 and 3 as of the
end of a reporting period. There were $1.8 million in transfers between levels for the period ended
December 31, 2023 and $15.6 million in transfers for the period ended December 31, 2022.
17. REGULATORY CAPITAL MATTERS
The amount of dividends payable to the parent company from the subsidiary bank is limited by
various banking regulatory agencies. Upon approval by regulatory authorities, the Bank may pay cash
dividends to the parent company in excess of regulatory limitations.
The Company is subject to various regulatory capital requirements administered by the federal
banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory
and, possibly, additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company’s consolidated financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Company must meet
specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and
certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s
capital amounts and classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company
to maintain minimum amounts and ratios of total and Tier I capital to risk-weighted assets, and of
Tier I capital to average assets. As of December 31, 2023, the interim final Basel III rules (Basel III)
require the Company to also maintain minimum amounts and ratios of common equity Tier 1 capital
to risk weighted assets. These amounts and ratios as defined in regulations are presented hereafter.
Management believes, as of December 31, 2023, the Company meets all capital adequacy requirements
to which it is subject under the regulatory framework for prompt corrective action. In the opinion of
management, there are no conditions or events since prior notification of capital adequacy from the
regulators that have changed the institution’s category.
The Basel III rules also require the Company to maintain a capital conservation buffer comprised
of common equity Tier 1 capital. The capital conservation buffer is 2.5 percent of risk-weighted assets.
88
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
The following table summarizes regulatory capital information as of December 31, 2023 and
December 31, 2022 on a consolidated basis and for the subsidiary, as defined. Regulatory capital ratios
for December 31, 2023 and 2022 were calculated in accordance with the Basel III rules.
To Be Well
Capitalized Under
For Capital
Prompt Corrective
Actual
Adequacy Purposes
Action Provisions
(Dollars in thousands)
Amount
Ratio
Amount
Ratio
Amount
Ratio
As of December 31, 2023
Total Capital to Risk-Weighted Assets
Consolidated
$ 337,159
15.47%
$ 174,355
8.00%
$ 217,944
10.00%
Colony Bank
300,497
13.85
173,572
8.00
216,965
10.00
Tier I Capital to Risk-Weighted Assets
Consolidated
278,196
12.77
130,711
6.00
174,281
8.00
Colony Bank
280,751
12.94
130,178
6.00
173,571
8.00
Common Equity Tier 1 Capital
to Risk-Weighted Assets
Consolidated
253,967
11.66
98,015
4.50
141,577
6.50
Colony Bank
280,751
12.94
97,634
4.50
141,026
6.50
Tier I Capital to Average Assets
Consolidated
278,196
9.17
121,350
4.00
151,688
5.00
Colony Bank
280,751
9.28
121,013
4.00
151,267
5.00
As of December 31, 2022
Total Capital to Risk-Weighted Assets
Consolidated
$ 318,250
15.11%
$ 168,498
8.00%
N/A
N/A
Colony Bank
272,812
12.99
168,014
8.00
$ 210,017
10.00%
Tier I Capital to Risk-Weighted Assets
Consolidated
262,999
12.49
126,341
6.00
N/A
N/A
Colony Bank
256,684
12.22
126,031
6.00
168,042
8.00
Common Equity Tier 1 Capital
to Risk-Weighted Assets
Consolidated
238,770
11.34
94,750
4.50
N/A
N/A
Colony Bank
256,684
12.22
94,524
4.50
136,534
6.50
Tier I Capital to Average Assets
Consolidated
262,999
9.17
114,721
4.00
N/A
N/A
Colony Bank
256,684
8.97
114,463
4.00
143,079
5.00
Notes to Consolidated Financial Statements
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Notes to Consolidated Financial Statements
18. FINANCIAL INFORMATION OF COLONY BANKCORP, INC. (PARENT ONLY)
The parent company’s balance sheets as of December 31, 2023 and 2022 and the related statements
of operations and comprehensive income (loss) and cash flows for each of the years in the two-year
period then ended are as follows:
Balance Sheets
December 31,
(Dollars in thousands)
2023
2022
Assets
Cash
$
29,057
$
40,361
Investment in subsidiaries
283,968
249,868
Other
6,413
5,115
Total Assets
$
319,438
$
295,344
Liabilities and stockholders’ equity
Liabilities
Other
$
1,058
$
1,724
Subordinated notes
39,216
39,123
Subordinated debentures
24,229
24,229
Total Liabilities
64,503
65,076
Stockholders’ equity
Stockholders’ Equity
Common stock, par value $1.00; 50,000,000 shares authorized,
17,564,182 and 17,598,123 shares issued and outstanding
as of December 31, 2023 and 2022, respectively
17,564
17,598
Paid-in capital
168,614
167,537
Retained earnings
124,400
111,573
Accumulated other comprehensive loss, net of tax
(55,643)
(66,440)
Total Stockholder’s Equity
254,935
230,268
Total Liabilities and Stockholders’ Equity
$
319,438
$
295,344
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
Statements of Income
For The Years Ended
December 31,
(Dollars in thousands)
2023
2022
Income
Interest on deposits with banks
$
3
$
—
Dividends from subsidiaries
1,055
10,295
Other
138
22
Total income
1,196
10,317
Expenses
Interest
3,920
2,299
Salaries and employee benefits
457
457
Other
254
450
Total expenses
4,631
3,206
Income (loss) before income taxes and equity in
undistributed earnings of subsidiaries
(3,435)
7,111
Income tax benefit
(680)
(914)
Income (loss) before equity in undistributed earnings of subsidiaries
(2,755)
8,025
Equity in undistributed earnings of subsidiaries
24,502
11,517
Net income
$
21,747
$
19,542
Statements of Cash Flows
For The Years Ended
December 31,
(Dollars in thousands)
2023
2022
Cash flows from operating activities
Net income
$
21,747
$
19,542
Adjustments to reconcile net income to net cash
provided by operating activities:
Stock-based compensation expense
1,701
1,743
Equity in undistributed earnings of subsidiaries
(24,502)
(11,517)
Amortization of debt issuance costs
93
55
Change in deferred taxes
—
(2,125)
Change in interest payable
14
45
Other
(1,977)
215
Net cash (used in) provided by operating activities
(2,924)
7,958
Cash flows from investing activities
Capital injection into Bank subsidiary
—
(53,000)
Net cash used in investing activities
—
(53,000)
Cash flows from financing activities
Net increase (decrease) in other borrowed money
—
26,560
Issuance of common stock
—
59,468
Cash paid for tax withholding related to vesting of restricted stock
(252)
(231)
Repurchase of shares
(406)
(540)
Dividends paid on common stock
(7,722)
(7,158)
Net cash (used in) provided by financing activities
(8,380)
78,099
Net increase (decrease) in cash and cash equivalents
(11,304)
33,057
Cash and cash equivalents at beginning of period
40,361
7,304
Cash and cash equivalents at end of period
$
29,057
$
40,361
Notes to Consolidated Financial Statements
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C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
19. EARNINGS PER SHARE
The following table presents earnings per share for the years ended December 31, 2023 and 2022:
(Dollars in thousands, except per share amounts)
2023
2022
Numerator
Net income available to common stockholders
$
21,747
$
19,542
Denominator
Weighted average number of common shares outstanding
for basic earnings per common share
17,578,294
17,191,079
Weighted average number of common shares outstanding
for diluted earnings per common share
17,578,294
17,191,079
Earnings per share - basic
$
1.24
$
1.14
Earnings per share - diluted
$
1.24
$
1.14
20. SEGMENT INFORMATION
The Company’s operating segments include banking, mortgage banking and small business
specialty lending division. The reportable segments are determined by the products and services
offered, and internal reporting. The Bank segment derives its revenues from the delivery of full-
service financial services, including retail and commercial banking services and deposit accounts.
The Mortgage Banking segment derives its revenues from the origination and sales of residential
mortgage loans held for sale. The Small Business Specialty Lending Division segment derives its
revenue from the origination, sales and servicing of Small Business Administration loans and other
government guaranteed loans. Segment performance is evaluated using net interest income and
noninterest income. Income taxes are allocated based on income before income taxes, and indirect
expenses (includes management fees) are allocated based on various internal factors for each segment.
Transactions among segments are made at fair value. The following tables present information
reported internally for performance assessment as of December 31, 2023 and 2022:
December 31, 2023
Small
Business
Specialty
Mortgage
Lending
(Dollars in thousands)
Bank
Banking
Division
Totals
Net Interest Income
$
75,464
$
109
$ 2,671
$
78,244
Provision for Loan Losses
2,225
—
1,375
3,600
Noninterest Income
22,576
6,223
6,835
35,634
Noninterest Expenses
68,734
6,926
7,405
83,065
Income Taxes
5,454
(117)
129
5,466
Net income/(loss)
$
21,627
$
(477)
$
597
$
21,747
Total assets
$ 2,956,121
$ 7,890
$ 89,411
$ 3,053,422
Full Time Employees
378
42
33
453
December 31, 2022
Small
Business
Specialty
Mortgage
Lending
(Dollars in thousands)
Bank
Banking
Division
Totals
Net interest income
$
79,240
$
102
$ 1,330
$
80,672
Provision for loan losses
3,370
—
—
3,370
Noninterest income
18,035
9,630
7,360
35,025
Noninterest expenses
72,781
9,735
6,959
89,475
Income taxes
3,010
98
202
3,310
Net income/(loss)
$
18,114
$
(101)
$ 1,529
$
19,542
Total assets
$ 2,857,893
$ 18,221
$ 60,456
$ 2,936,570
Full time employees
427
65
30
522
Notes to Consolidated Financial Statements
92
C o l o n y B a n k c o r p A n n u a l R e p o r t 2 0 2 3
The common shares of Colony Bankcorp are listed
on the NASDAQ Global Market under the symbol
CBAN. As of March 12, 2024, there were 17,558,611
shares of our common stock outstanding held by
980 holders of record.
The following table sets forth the high and low
common stock prices and cash dividends paid to
public stockholders in 2022 and 2023:
Dividends
2023
High
Low
Declared
First quarter
$ 13.98
$ 10.00 $ 0.1100
Second quarter
$ 10.31
$ 8.59 $ 0.1100
Third quarter
$ 11.34
$ 9.03
$ 0.1100
Fourth quarter
$ 13.58
$ 9.36 $ 0.1100
2022
High
Low
Declared
First quarter
$ 19.00
$ 15.95
$ 0.1075
Second quarter
$ 18.74
$ 14.75
$ 0.1075
Third quarter
$ 16.18
$ 12.89
$ 0.1075
Fourth quarter
$ 14.47
$ 12.64
$ 0.1075
Like many banks in the wake of the Great
Recession, Colony suspended dividend payments
in 2009. In 2017, the Company reinstated its
quarterly cash dividend at a rate of $0.025 per
share, or an annual rate of $0.10 per share. The
Company has increased its dividend rate each
year since dividends were reinstated in 2017 and
continued to pay the dividend throughout the
COVID-19 pandemic. In January 2023, Colony
raised the quarterly rate to $0.1100 per share,
which represents an indicated annual rate of
$0.44 per share and over 340% growth in the
annual dividend rate since 2017.
The continued payment of dividends will
depend on a number of factors, including
the Company’s capital requirements, its
financial condition and results of operations,
tax considerations, statutory and regulatory
limitations, and general economic conditions.
No assurance can be given that the Company
will continue to pay dividends or that they will
not be reduced or suspended in the future.
For information regarding restrictions on
the payment of dividends by the Bank to the
Company, see Note 17 of Notes to Consolidated
Financial Statements.
The performance graph below compares the
cumulative total shareholder return on the
Company’s Common Stock with the cumulative
total return on the equity securities of
companies included in the NASDAQ Composite
Index and the SNL Southeast Bank Index,
measured at the last trading day of each year
shown. The graph assumes an investment of
$100 on December 31, 2018 through December
31, 2023, and assumes the reinvestment of
dividends, if any. The performance graph
represents past performance and should not
be considered to be an indication of future
performance.
Total Return Performance
Period Ending
Index
12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23
Colony Bankcorp, Inc. 100.00
115.12
105.58
126.14
96.45
105.34
NASDAQ
Composite Index
100.00
136.69
198.10
242.03
163.28
236.17
SNL Southeast
Region Index
100.00
140.94
126.37
180.49
146.81
151.44
Market and Dividend Information
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
$300
$250
$200
$150
$100
$50
Colony Bankcorp, Inc.
NASDAQ Composite Index
SNL Southeast Bank Index
Corporate Headquarters
Post Office Box 989
115 South Grant Street
Fitzgerald, Georgia 31750
(229) 426-6000
Company Website
www.Colony.Bank
Stock Registrar and Transfer
Agent
Shareholders should report
lost or destroyed stock
certificates or direct inquiries
concerning dividend payments,
change of name, address or
ownership, or consolidation
of accounts to the Company’s
transfer agent at:
Equiniti Trust Company, LLC
48 Wall Street, Floor 23
New York, NY 10005
(800) 937-5449
www.equiniti.com
Independent Registered Public
Accounting Firm
Mauldin & Jenkins, LLC
2911 Meredyth Drive
Albany, GA 31721
Special Counsel
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309-3424
Annual Report on Form 10-K
A copy of the Company’s
Annual Report on Form 10-K
for the fiscal year ended
December 31, 2023, as filed
with the Securities and
Exchange Commission, will be
furnished without charge to
shareholders as of the record
date for the 2024 Annual
Meeting upon written request
to Derek Shelnutt Executive
Vice President/Chief Financial
Officer, Colony Bankcorp,
Inc., 115 South Grant Street,
Fitzgerald, Georgia 31750. In
addition, the Company makes
available free of charge its
annual reports on Form 10-K,
quarterly reports on Form 10-Q,
current reports on Form 8-K,
and all amendments to those
reports filed with or furnished
to the SEC. The reports are
available as soon as reasonably
practical after the Company
electronically files such material
with the SEC, and may be
found on the Internet at www.
Colony.Bank, under Shareholder
Information. Shareholder
and other investor-oriented
inquiries may be directed to
Derek Shelnutt Executive
Vice President/Chief Financial
Officer at the Company’s
corporate headquarters.
Annual Meeting of Shareholders
The 2024 Annual Meeting
of Shareholders will be held
at 11:00 a.m., local time, on
Thursday, May 16, 2024.
The meeting will be held
at our corporate office,
115 S Grant Street, Fitzgerald,
GA. Shareholders as of
March 22, 2024, the record
date for the meeting, are
cordially invited to attend.
Corporate Information
CORPORATE OFFICE
115 SOUTH GRANT ST
FITZGERALD, GA 31750
(229) 426-6000
WWW.COLONY.BANK