- Earnings call transcript Q3 2022

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Operator

Hello, and welcome to today's Colony Bank 3Q 2022 Earnings Conference Call. My name is Jordan and I'll be coordinating your call today. [Operator Instructions] I'm now going to hand over to Andy Borrmann, Chief Financial Officer to begin. Andy, please go ahead.

Andy Borrmann

Thanks, Jordan. everybody. morning, Good us joining Thanks this for morning. to of statement going quick opening disclosures to a some keep I'm make the happy. lawyers statements we Securities the statements XXXX. constituted the make this Act within forward-looking Securities call of the XXXX Exchange Act Certain of meaning could on as and be of Current but forward-looking and involve are and unknown cautioned guarantees not risks such investors any are uncertainties. known of prospective and that statements future performance, the these cause results COVID differences include, asset, not financial are flows, to of of other could but pandemic, limited condition, variations that company's and cash businesses, Factors prospects operations. I'll over With turn that you. Heath, it to

Heath Fountain

Thanks, compared coming interest on more the in to earnings Particularly, I the Andy. in highlight an call continued revenue. from pleased for and growth We're is earnings strong. our your recurring our Loan report second earnings quality as compared to our quarter. appreciate up years. of And of earnings and XX% thanks, up to of our Colony. improvement of want everyone quarter today. the earnings third being this traditional our quarter, in in We businesses, this the you banking our as quarter to XX% And previous about the transactional banking business from that's remained year-to-date. about growth two XX% makes and Businesses, earnings see, as about core the

quarter. Our last over loans from X% increased

for base. growth -- its target deposit our still that too at raise have in. base much whole customer pretty to gross we're but an XXX up slightly to but acquisition considering a versus an margin, range. both This felt need with keep despite the provided to -- we whole dollars growth quality improvement for the origination level from last the XXX, targeted just do and accelerated rate. to really second loan so. we've see the the asset went really growth That which for make net overtime that's increase X.X up deposits significant from accelerated to our loan quarter of up to loan annualized this our is our from time progress pipeline the And and continued Mortgage that so in the is, interest deposit environment the We growth up Colony, hard XX% on about XX% from or there. we of led our quarter. to importantly, during to next the that's and profitability lot fund I provided loan more key growth. achieving rate to growth sure but quarter, XX%-ish remains in improvements loan last best growth a ensure we that to through ratio, this last million something talked year, this XX% quarter, last from allowed income increasing Due the XX% our quarter solid goals specials So X% in get to to both even on environment. were we're the pleased to move tough strong rates needle the as accelerated customer to trends, a able continued really is increases in end to the was across to consecutive of loan of more strategies, to We've about the down continues a quarter, the growth, moving been in and loan deposit quarter we to quarter The XX% strong seen growth X% side deposit also long selective up at working expect to losses a post trying deposit core we've to pretty us think

origination due so Middle we which shortage us. Georgia, big that continue Savannah Augusta, of markets, mortgage our to for markets, also especially are see still inventory to and markets in a And

And used. shortage, so doing perm. rate seeing then given the given higher being And ARM environment, to inventory we're the course, more of construction and we're more also portfolio products

sold So this our loans of XX% quarter, about we what wise. only production had of

a originating call business our so rate like And our business, tough We've a that little feel our there in we a upfront income decreases got good good year course of quarter. that we bit still what last job interest group, doing small government lending, really specialty our guaranteed strong front. In over and think we'll down environment. on but I mortgage they're SBSL, this of throughout were pipeline the end

of we at expect to you And XXXX. making, is XX we're Day in this put point I'd path like to and quarter earnings a to we to to our Slide look that performance. the Investor As that by end the we we XXX the to our ROA high discussed a slide progress get

wanted is This opportunities our because and really it outsized grow certainly and do is the where And progress. increase of is one making We of you to we we things normal are this that we're -- through have things to and basis think things of -- we our where loans, also causes we that. levels points, course, walk that the to quarter environment, on advantage provision of XX think ROA large big in loan as we above at what on some the of loans a wise us But take it that we're so the the to of do expense quality well. opportunity kind drags provision have growth.

so versus as more loan hitting the our of were our at ROA middle a points growing And we our long-term is -- we basis if about at range in that XX% about -- were that's XX growth.

hitting start-up in and are that lines us the business quarter. running that not per expect profitability term, net new Our long the about levels we are our in markets those $XXX,XXX expense

those items. between so basis so And just we're all those. on points, progress X And that's making X of another

X basis, about right those X percentage we just points on X picking our of points XX conservative fairly up about estimating items. between think, ratio, there basis move loan-to-deposit points we a ROA. that's we're Each so And basis

So made we've significant progress. that's another where place

our a as business, ROA If and through even up this Colony, back and big basis been from you it's in points are of XXs. business XXs, move markets our are are that this XXs which able quarter, SBA, the great that where since history environment. to the of of led rates hit added years And only and I've some to over and have the XX going another we the And ratio now back over think mortgage continue stabilize only a to at then important we're here time. last about that into This was last year in Those into recall X%. moving mid-XXs the be and a few 'XX, pandemic lines at X%. our moved part XXXX at those teams now have the we stabilize. doing But stabilize expect and then we level up area, great point more to job to to and course up normal the it

want we things, to path We're place clear confident we want. between to So we get are the a where in term. to to loan those intermediate in to growth achieve a the near-term be have in profitability that very

bank really the to we team board more any do that on team the have the growth certainly are of on can, always are today. on with loan but we look our we can we we And and the out the bankers, members can strategically we where we'll that get the basing that. that and from we hire have for although go lookout team today We to in add have that need ability

highlight we're I confident we're A on on work each rapid rising AOCI, of in that, the negative on team's of to so things a quarter, in the did declining given a a as to the operating because this showing that environment Proud environment. the held-to-maturity impact happen, the quarter. our change and the And potential securities declining in in happening our rates. especially securities such move few of quarter $XXX want progress million other rate of with monitor making tough we value we the rate and to doing

the the a execute prices, we have X% emphasis great whole investments. of really current is on given And stock a confidence think we've $XX year in market pricing the how $X.XXXX. the market then just think the we dividend on declared at of that's equity we the -- creates is us lack current strategy, long-term made the market and in of authorize this an the that's current rate a securities decision happening in and levels banks going think, in our in I I for about Board Our at been equity million, tangible going also, which to valuation for for which too of we buyback that's interest general, Board our plan opportunity outstanding declines at shares value believe book

were we glad we think sits support where in believe see and to So that that today. Colony

lines So be And I'll have call to guys and on remarks. time, happy at Jordan my this up that questions, open questions those are you for all prepared answer to today. the we'd any

Operator

comes Scott. Christopher Janney of Marinac question Montgomery first from Our Instructions] [Operator

Christopher Marinac

the Birmingham. Georgia, we and Atlanta, like wanted of couple next other to that of strength the I quarters? How seems of kind but split Heath, markets. Andy play saw the to kind and market. in by Middle the the loan pipelines growth in curious out not between ask about should and Georgia just It various be Just now markets on Coastal

Heath Fountain

Yes.

the in newer, the Obviously, to just that and So we there pleased seeing we, footprint. across starting too, are have gain where Certainly, across that Birmingham footprint. in Huntsville. Birmingham the we we're think really market capacity momentum we're it's

base to we're footprint. growth number, I we there. growth percentage a But some coming see outsized definitely from off so think And expect low -- a you'll across see because the

potential strong footprint, still strong as look we the we're we good just continue up to have across growth. think tighten we to opportunity seeing across really credits credit and the at footprint, macro We concerns see boxes, due even pipelines to

potentially would across bit other it pretty out. some of stronger Birmingham, opportunities the spread the in footprint the than So a expect see little But see I it and you areas. to area Atlanta should could be

Christopher Marinac

big I as but that Georgia, couple picture. Coastal Great. of And possibility know that's over as, in time, is a that probably away, can say, Birmingham a if become big Georgia? just curious years Middle Heath,

Heath Fountain

and markets And big We for big We great think to there. there's we areas. where regional regional we new Yes, by outsized a that compete opportunity very that be strong those, against the larger there's those markets banks, that's in absolutely. share think to focus our we certainly we one of really try on a and think and opportunity well have over there.

Andy Borrmann

bankers corporate just would have our there folks to that. here I the Atlanta over The have. Chris, in type hired And add capacity of we've that that

X realistically, a guys next of produce So significant years. or portfolio pretty the over X could X those

Christopher Marinac

Great. And and moved the sale? there for then between were HTM, that remained last difference that the ones into securities securities available question, Andy, any those was

Andy Borrmann

So attacked front. quarters Chris, is the way similar incrementally moved done we've what to the this we've where last we couple along of highly it

maintain to the trying we're with maximum So flexibility portfolio. available-for-sale

we still every we every So just in. invested have, we're category about in bonds available-for-sale that have sector

if opportunity and around So that get when the to the may to. than we need taxables if example, have rates or and of case whatever frees advantage turn more an for be, that tax go other expensive we and take way,

Operator

comes Hovde question from next Our of Group. Bishop Dave

Dave Bishop

overall yields that, Andy, here. loan loan like But you in. expansion margin noted calculations, curious, just Heath, noted it's average yields, look, the pulled on my Yes.

of Just sounds near-term a a deposit growth, terms that do funding dynamic ratchet Or growth still of costs. the it force could you does the pedal really does perspective. and capability? think from curious, just you to outstrip metal that But reach the ratchet point, like up sort in you'll you -- the it got here,

near equation the you Just the funding curious versus of sort how term? the growth balance here over

Andy Borrmann

Yes.

So -- basically. we of daily operational one David, the that's it's have questions

We have been we up as yields ratcheting loan go. our

a to deposit we're haven't willing say, deals, But the opportunity right the XX, interest range. really get to to see when better ratio as ratcheting competitive. think We the some days. last be competitive very can rate the be been there's peers that You our is we we environment good up fact the maybe XXX in still given loan our for in XX, maybe deals, much as XX%

do If what it we're can funding changed And So we wholesale we as to for have last the shake make be time being. we'll deposit -- to then foreseeable it's these can is we'll We second funding. funding if to way have, the get out, which down, as settle we that we in -- organic. of sort wholesale organic the that can't, the organic slows have quarter, sort of not get it with the change hopefully, it. and sure during did the sort we days, we'll will secondary it be we'll sort said organic, strategies itself we and XX the for loan growth And future. more when continue all incent again, let of of gathering we doing run we'll incentive trying dust

Dave Bishop

good quarter. the in And some noted second of it. control, expense Got choppiness the

look curious, you we expenses. operating XXXX? expense As you the is we model inflationary modest at expense a should think Just this out run rate some increases into near outlook, think in expense the about good operating or do should or term? over how Or

Andy Borrmann

Yes.

biggest our is think line obviously I personnel expense. item

on pressure think I everybody. to that's a be going

there excluded from everybody be personnel some category. think want expense be pressure. don't do that the So think I I we're going will to to

and we We've we in business, much like I'd of the invested people, that. need be the relationship sort those in Colony side, think pretty the and in people, term going folks. hired next will of to the intermediate of of, we for life have to X for I we're This overall of sort invest we to have them bring we But is to team we after a the we're people least see to in. where next, If believe we X -- continue short think on we ballpark going cycle strong generally, have at we're nonpersonnel on. to we'll sort months, believe good opportunities bring to Bank. have and of

Dave Bishop

then here. And it. Got one final question

you You out the noted obviously good broke growth geographic the region.

provide terms is can loan Just curious quarter quarter? terms last of growth segments you growth what color in versus of any this in

Heath Fountain

a our well, X amount look loan portfolio. commercial you generally to of across across X, significant estate, seeing as we're of obviously, when similar all growth growth portfolio, significant board, amount to real We're kind across of seeing the the And our mortgage categories.

expect in are, retail, some despite would the of see some we tighten commercial We continue I we said, in like for category CRE good continue you the box, metrics. areas tightening of like us credit to office. opportunities to in that And example, the credit areas our those

So and estate about commercial we but real do we because heavy is across commercial is real it feel our current coming portfolio heavy good that, the what board, in estate.

Andy Borrmann

go there's do to it say, add the of that trying bank well be the Heath -- And which in right and you've our I during things off forward, to people. would going we're past, we are right there to seen the the peers has always some quarter put with that and categories. as back to to start is to of with certain people,

reflect than the box for a or certain a areas We And are not from from that we're standpoint, categories of the paid been are we're higher but changing risk credit year taking. standpoint a on get to X trying pricing risk fact to at prices sort might have ago. also our just that they

Operator

question comes Kevin, of Davidson. the Kevin is next yours. from D.A. Our line Fitzsimmons

Kevin Fitzsimmons

trade-off, growth the comfortable much been maybe think and guys keep too, seen, just at also signaling little bit margin, Just talked expand that The on get a have that But lot guess way loan they're banks the the growth, didn't you I step I percentage -- of the -- a to going as how have like, as loan margin trade-off brakes and doing book they're terms NII going either put margin about up I have you about right, Is in stronger you're guess lined. little the have growth, about here. to a we've what you're seem is thought quite taking about would of lot or but to like margin a as because that of much expanded are growing all? it kind it's loan banks a it way how but back. looking or signaling you pipelines and tapping seeing guys of where a you're to

Heath Fountain

Yes.

as remarks, the think interest in margin said Kevin, income to of dollars net is the I think, more expansion us than important my I I growth.

growth need credit like in And cognizant and be XX% but of side, the made Obviously, investments so with ours bank built to in not the an team the production We credit bank XX% to that's and the loan a have only the strong loan-to-deposit operationally. we've to and environment team, we occur. credit need our to boxes, into metrics to we we to get be that team growth that we be. have We to which the want want bank. to right make opportunity -- sure want customers, but that rate. can important don't on mentioned whatever profitability bank really to tighten, to want the the We will deal bring lose the loan that we continue when is to

those rates We been those get we've sure and we so we've bankers. those moving want new make to And things continuing move to But we've -- up hired also up. see profitable.

balance manage on should, get we we the the books. So our to get and appropriately, deals the make loans sheet sure

growth that's I kind very proud to team been pretty So and we've think been the think approach, of the and systematic, achieve. of our been it's I and able I'm

we that are are why cognizant expanding. and Now we are out, of pipelines they said, looking being

decide on get gas on spent getting a As out. foot we Andy whole What the within to banks to make lot prefer either full be -- gas as said, larger my there's full from just foot the opportunities they the brakes, to time we the pedal or of the do, loans full banks other prefer career areas. when on adjustments

of is a a whole sector. in and comes than higher the that that stuff the adjustments, those in credit quality make credit as higher we as maybe portfolio so quality And

we to, to a an and opportunity year an And the offers, customers a give And if who banks if a investor so on we've today, X when we to even box. area had ago, have rate. he try competing out have solid tight credit in offer all our X been went it's we gotten

we're deal. have and better or probably structure. going ago Now knows that a rate X And going they're a higher on credit X year a to have who than to

new to good the a we books time about. think relationships some it's we that feel put So good on

Andy Borrmann

margin have customers would And look XYZ not were that, taken thing just of a I'd I I now recall being can that fast, they say in But not one because and slowed customers we that Kevin, to wouldn't down, come would bit anymore. have normally not rate Bank's we stop, also about have so it least at before of category" gives we're your chance at echo Kevin, I margin, change well. in of always Yes. at I because probably care refis hurt -- us XYZ sort was that to said, -- our my has looked doing that that "pick other is an experienced as a has that full and little have career, think the complete sort

Kevin Fitzsimmons

So banks, we're are whereas it other like you peak Andy, expand maybe but and seeing a and for longer sooner? other by margin leaps creeps banks maybe bounds going period doesn't see the to of would time think in kind higher of

Andy Borrmann

can the now. more looking it that's going Short time we're a hope mean place replace rate money term, have in the with over for hopefully, money. the I is, it with we to Kevin, to some continues we're Yes, deposits. we're fund the expensive loan that putting at I growth future way if our incentives But long case. in

out past of like we saying, some our And a bit that of get tail little -- so sort there some maybe a it's you're peers.

Kevin Fitzsimmons

pre-pandemic you getting of tough kind it's because banks, their not than to you loan-to-deposit get up have banks a and be so. deposit know little are aggressive I to the back on good seem flexibility gives ratio you some the it to relative loans it's to ratios flexibility, facing. guys and want environment other earlier, And a limiting of their it's a loan Because other I you are and mentioned but a deposit higher, thing to -- guess, more

Andy Borrmann

capital a Yes, side, to and the on the we that. loan the ability feel ton of just cash that down sure still We And capacity, going we We still fair that's have allocating some at have pushed we're about just to additional we so our make just buyback, And still of company. of the holding levering we -- position. to we're quarter the loan -- Obviously, amount given announced the not the to right. do best have growth. support good that our capital during a dynamics. we but ability, up we

Kevin Fitzsimmons

short to have case the buyback. I mentioned say see you that's have to was it about in fair ask is And disruption hand it expect we to going something Is Great. use in the we you should something more that. to Or more really that's on it market? insurance order? in

Heath Fountain

Yes.

aggressive. marketplace. can would in say, we also in to I stack the the us not what I think plan available had have But and don't say market I happens be past. management in that that our we to sure like We looks the wanted tool capital what have to not

to on it. to So if really of just But be opportunities in pull the more to we less will marketplace see that, that, what have the trigger need what and but happens. on ability have we aggressive it basically

Kevin Fitzsimmons

on One know whether D observations but if now Copeland on role, he's last place. and stepping in putting sense. I he's curious his for don't been makes in focusing one the That know or his the changes I in, just he's any time I'm me. President what with call,

-- Just at the want affecting change to see effecting how company. he's

Heath Fountain

Yes, running sure. is but the hitting not is he well. the call, ground, He on

pieces the are things the we and quarters, want I integrated think lending because commercial especially really that D’s really the some of those, few well. those some lines have we working on some that on -- that our goals get get we initial already of started is to focus the been of the and more ensuring ancillary in profitability last

been built ensure get capacity he we're really to the these But on a part that is doing to already some relationships need of So a throughout team, good an areas seeing And there. had the that for in we the out his focus having company. advisory are profitability. things first those year,

So doing. a positive good change, he's ideas what big it's some but changes really to great bringing and not real some we're

Operator

a have follow-up from of We Bishop question Group. Dave Hovde

Dave Bishop

basis some drag new business, markets, hiring on honestly expense the a think lines [indiscernible] a the Marine, curious of allocated some growth new and in and ROA of perspective a points positive? may decent any Heath, you becomes terms dollars the lenders if From a of be Indirect the new of -- drag sort you've RV XX there. the amount of you breakeven have visibility or line just profitability or perspective, that time a obviously when

Andy Borrmann

Andy. is this Dave, So

I of think -- time that will obviously, those will vary. line for the lines business

Our gone goal $XXX,XXX in sometime that be to XXXX. drag internally have overall is late

is in I late profitable, think current Alabama, little internally, of 'XX. target already bit. sort insurance our if in if we're speed But is lending up successful modestly successful, that may a

Dave Bishop

there's -- homebuilder And segment. know then it. of guys -- do I aspect you finance builder Got some

you're you're be Just a perspective. that well? their project seeing able what you issue, you they to from national of inventory? to talk flow those as Are business they curious, which up manage builders the Just of you're -- pretty with, are the holding credit balance and noted doing curious inventory, to on financial sort front health seems looking your of a builders,

Heath Fountain

Yes.

a Southwest there and their inventory. bit live In of inventory most Savannah Atlanta. the of lack I think that in Middle very and conservative we how are Those a is Georgia, development. of side and on of Augusta in their the that have each been there's the those definitely little do markets, that in builders manage -- they markets

through. go continuing they're so And to

warehouses, and as I were. things the was quick really, margin, a aggressive think still the it's it's normal, but and -- as has I think, may had mismatch it they're than demands. But that there's selling in they -- at not housing, just bidders real the now built really maybe multiple in been have they where in faster

or on see are that, continuing we the profit the not of and a for any price that really selling good them despite We're builders, pretty at like seeing stuff we outlook rate And see like from that levels reductions so real challenge good meaningful forward. the buyers. things

Dave Bishop

Got I of available. the but get it. one at last either Then this, end deposits know maybe don't you was the cost margin, have to or if curious question. if either quarter that

Andy Borrmann

funds the quarter Give just a end second, good me Dave. cost going you. I'm right The of a it one Hang just was touch. number to a on second. second. this of up the have at Get for Well, not

I were about to of off but quarter. end at of think exactly, -- quote we XX bps think I'm the top don't my head of so the XX me I bps here, cost going funds the

Dave Bishop

have end by margin any you Did September? the at the chance of

Andy Borrmann

XXX Yes, than little the we a just higher it was reported. bit

Operator

have on We no questions further the phone line.

hand So I'll back for any closing remarks.

Heath Fountain

of for today. forward to We look we soon. call being appreciate Colony, and Thank Appreciate you speaking on support your everyone, again Thanks, it. you, with the Thanks. Jordan.

Colony Bankcorp (CBAN) 21 Oct 222022 Q3 Earnings call transcript