Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen and welcome to the Colony Bank Second Quarter 2023 Conference Call. At this time, all lines are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, July 27, 2023.

I would now like to turn the conference over to Mr. Officer. Financial Chief Shelnutt, Derek Please go ahead.

Derek Shelnutt

Thanks Helena.

get go to we would like our standard I to disclosures. Before started,

Certain statements pandemic could any are Securities we as make future investors Act on unknown this call assets, and Current flows, statements risks within Factors of to, and that and Securities prospective meaning not are of company's XXXX XXXX. forward-looking but cautioned could but the and operations. include, of forward-looking known cause of of involve the performance differences businesses, that Act guarantees financial are the Exchange such of statements and be constituted these the conditions, variations limited other uncertainties. cash prospects not results

our our both please reference call today, I also yesterday, were to would we reference. earnings investor presentation, and during both our of quarterly which those available so filed like to have that release will add

turn Heath that, our with to I will the Fountain. call over And Officer, Executive Chief

Heath Fountain

and I with our Thanks pleased for some quarter the second the in really We're want during on everyone Derek, times. today. results call to thank unusual being

We last proud we core where forward. many going able grow to First priorities really has be who a changed move time how able quarters as execute earnings to a strategic environment me had the pivot do we're all I our gives to been of our really objectives of presents in confidence as that, few in how the lot to Colony the to challenges. deposits on economic and have team were able increase a over and want and our that foremost, members have thank team and

quarter, complementary of detail our provide initiatives I'm some accomplishments our banking and Copeland, and and on more earnings to an Derek, balance business. provide it who President, lines briefly of hand on then who to And D update during highlight going our to over then and sheet. I'm will going our the will

During strong on increase core in overall happened bank strong the with we an focused customer that quarter, quarter. building and the deposits end first our ensuring in failures as the following at growth relationships we of the saw deposits liquidity

Our outlook ahead of on lot us. with opportunity of positive pipeline a deposit our remains

quarter-over-quarter income, From primarily perspective, by result of the increased increased in an as home mortgage demand earnings a buying earnings driven non-interest strong busy season.

of government lending has which move will guaranteed non-interest and we line Marine/RV profitability being business. increase rest as to Our drive to in pipeline year. remains lending look We income our this steady of forward that able the throughout increased,

have we to severance did quarter, and growth initiatives outlook. our related we expenses production evaluate as adjust one-time based This continue costs to on

the to other provide remain stakeholders operations future. and customers this we We to don't the will initiative dedicated ability in in them our our going the benefit and expect enhance staffing areas for most still to expenses investment grow, our We we able to reduce we value these outcome the be expect adjust believe changes future. forward to salary and in to of long-term our and our expect

saw the about more have but this enhancing expected, on Loan that. improved and other update than last in provide D lower our mortgage quarters. profitability to slowed seeing committed lines the of we and business a of we It's those than will are We we in few quarter growth quarter. it's what been higher And complementary this areas X%. what

of the see rate throughout year. the to continue lower and slow interest our environment this We to rest demand growth expect further in

a experienced in we as margin. continues quarter-over-quarter pressure decline Margin

you And pressure cognizant of on we've our the strategies that more cost and our that during will some those. quarter Our funding is hedging We funds overall outpacing some of release on to give the costs. of still assets. implemented earning other growth of detail in yield pressure and remain Derek

Non-interest expenses under quarter. $XXX,XXX this a up were little

However, one-time of million. our lines increased variable and non-interest severance expenses $X.X from quarter expenses more income last business compensation than $XXX,XXX were

course, We're income increases lowered expense Of offset proud those for we've income business. particularly of were noninterest non-interest and improved how our of recurring by noninterest base. those lines increases in

businesses, Given a our expense from measured in as ratio. continue to like improve many to X.XX% average our we expect quarter, we've non-interest fee to by efficiency as and improved measure this this ago income an to we operating basis, net our efficiency our assets, and on this X.XX% quarter to that year

a areas SBA at bit very that is and seen anything quality in slight still a CRE these a these give and low even non-performing our in in in a strong, increase lot for of we concern in Non-performing though our levels portfolios. we us portfolio. Asset primarily saw little loans lot residential quarter, remain the loans haven't

We this our quarter shares under did XX,XXX stock repurchase also plan. buyback authorized

capital continue building to management We prudent capital are levels. committed and

levels a pricing However, attractive the a of of in we limited some like given use market at the reaction industry, buybacks to capital. felt of the prudent were amount banking events

the that be to objective continued initially getting our the hoped by the year, there pressure end margin, but Given rate increases [Technical we Difficulty]. projecting of will to ROA. us continued X% take are achieve short-term given to the longer of on had this it We

turn financials to we'll detail. through in it more Derek, on Now, go who'll

Derek Shelnutt

start To footprint. Difficulty] Heath. [Technical Thanks

shifting interest or in MMA, accounts Our bearing seeing still and accounts, to market are some money deposit interest DDA and growth from bearing was we primarily CDs.

to quarter-over-quarter. manage non-interest deposits million about did grow $X we However, bearing by

taking adjusted at uninsured quarter-over-quarter, our presentation. deposits, slide uninsured And in on flat and that's indicated remained they investor and look relatively the XX then a

access on to XX of investor strong presentation. the In sources that's in slide terms of liquidity, position to outlined a we liquidity, and various continue with maintain

Bank funding. have debt quarter, the $XX used cash FHLB which at Program. overall we assets. level increased million, X% during Funding the $XXX We million outstanding represents -- banks to over declined Feds quarter, Total our not million overnight total of which advances nor quarter, roughly $XX the Term of the any of the reduced the a of During have did end borrowings

driven about of which our that increase an the at of of by move period. from that's look that portfolio primarily end interest under previous at rates bit little seen end our quarter, went this in $XX overview the time a $XX an to a at take We quarter million of the million investment just is AOCI. onto gives Slide composition. over XX we've the Moving

We quality aren't seeing this is being in of portfolio portfolio investment with government portion guaranteed the biggest the at securities. time. any credit half portfolio concerns our high municipal the of agency Over or

rating private sub performing debt securities well our from label And still issues some and would that our cause We at which or credit includes are concerns a bank haven't seen any point. our mortgage-backed with downgrades credit this perspective. munis any corporate,

basis, From was EPS compared saw quarter. up quarter last quarter $X.XX $X.XX this from earnings the to to an we an perspective, this an in previous increase operating $X.XX On to of quarter. EPS $X.XX

from the quarter. yields basis $X.X basis increase basis margin X.X% quarter, from increased interest of by bearing which to coming X.XX%, led Earning Non-interest income asset about most was with mortgage increased points, XX XX to liabilities for the points prior up that XX our division. million decline points to but of

CECL, sheet liability. expected the the when the a and on was Provision recognized commitments as quarter losses, is and those $XXX,XXX balance losses for commitment made under are expected sit credit expense they unfunded on

commitments And funded, shifted funded of And it those unfunded quarter-over-quarter that has to loan as decreased. commitment loans. over are activity our has in kind of slowed balance so, some loan on those

over And of that for in so, what the also the are from of as what re-class was allowance previous to is kind periods seen commitments. unfunded we've funded, some And kind moves time account. provisioned loans those those

already So provisioned -- re-provision been didn't had for for. to that that's a funded we loans have those

We guarantee SBA $X.X this, ultimately million which SBA. portion the repurchase of non-performing in see loans, million will increase was an the be assets of to $X.X by nonperforming related did of the about repaid quarter. the in Of

yields. cost that driven is rates we And and going earning seeing take moment seeing increase the market to liabilities in increase the deposits. higher margin then and of exceeding primarily of I'd for it's in in the interest margin to and in by we're forward. we're stronger like was to cost bearing interest kind increase what talk about liabilities competition our deposit our with decline the more primarily bearing asset The in a the due expect what The

done we've a we portion that costs. our what that with help should on of the advances sensitivity take we're funding have extended FHLB to longer is advantage some funding curve short-term and out the So, of side, the in seeing of

those were then approximately also, hedged swaps. swaps. due in entering benefit And of savings on the the that $XXX,XXX we've the end interest on see should we borrowings to of expect year quarter, of carry the into short-term near interest initial that our by quarter, expense and we some swaps positive so These starting third a a rate portion

to slowing like markets of At seen quarter. we're cost the elevated, was is deposits of and X.XX%. in ultimately our kind our of Competition we've some but bearing the and assets. remained down difference to to end liabilities is in slow that starting between our see. that down feel starting stability deposits increase slow We there this some to that our quarter, help earning But for provide going outpacing from interest the earlier close

indicate up assumptions quarters, over of lower should from at then move slightly we next or start there. maybe current the margin to Our see couple level and this

we've be mix but may the in seen deposit down to first of some year. changes Continued what more, mix less slow the drive those margin from or the we down expect half changes

million On to commission non-interest offset about of about $X.X expenses point non-interest were income. first from second non-interest expenses, T's quarter. increase in business earlier, for in quarter, But the based variable income that the non-interest the was lines compensation up by $XXX,XXX our increased expenses

net quarter. to of little quarter have severance reduction going to and employees occurred to about over the second a a annual savings the in is force $X.X expected from that $XXX,XXX, the of of $XXX,XXX up XX quarter. the expenses led an forward. This severance initiative reduction which full-time have did previous We in million during related was cost These were expenses

in XXX Net the non-interest operating down was the On assets quarter basis X.XX% quarter, X.XX%. net is second points NIE the was XX basis, second from first in quarter. which to expense an -- X.XX%

expected that over around that to approach Our on our alongside slightly under our manage areas or to rate commitment and long-term. is we per going continued the run expenses disciplined in forward expenses million value add invest non-interest quarter and $XX

talk think I to I it lines. those over D that, to hand about with more And business

Dallis “D” Copeland

Derek. Thanks

commercial the continue the of X% remainder the loans lower probably is in of a mentioned, rate. going Heath forecast forward. we did see as had would but been, annualized we at on to expected That than than the an throughout side year. slowdown is we growth grow That about higher the On bank, little

our earnings each the growth details loan Page our release by of XX in markets.

estate real of So, feel at still where still have loans look We the assets that. asset commercial level quality, to low. are particularly very the portfolio, solid free in non-performing

XX which that presentation seeing our rise high any Slide the one any We details breakdown have portfolio, or a feel and office very gives in and is investor believe signs It office aren't we one buyers majority with buildings we credit of gives on office buildings. we portfolio, comfortable our or our of conservative. do are not slide concerns XX portfolio, X is further loan the of there. story note and of

good we So, that feel portfolio. about

core as Deposits, that growth in XX% grew deposits. quarter-over-quarter of mentioned, X.X%, was

the As can Derek our mentioned, see quarter. bearing for deposits. up deposits slightly you in XX, On non-interest slide growth our were

and pipeline strong. deposit our referrals are both Our

in to and customer continued expect deposits growth see we in So, relationships. new

Production about the quarter. in the bit complementary lines little a our business. SBSL in second group of talk increased I'll

eight As indicated the presentation. of in slide you can see,

with So, they and environment, performance remain continue we're rate that the profitable. in pleased to

sell portion we which think for construction, production, production that those as future one to and is in future. see a the note that we're being ends do in larger guaranteed are positive able to thing to we're -- of as completed, in portion up a able being the I the

previous nine slide to And first we like market the quarter, see, the mix a from shows which mortgage million the Mortgage, quarter. always to secondary about for as was quarter. in more relative had our positive. production was we quarters, the second up Mortgage $XX which profitable was

some On provides of seven, the lines start-up details slide on business. it of

First, lot of touch Alabama. have our I'll opportunity Alabama We market. in on still a

X% there. growth, -- Our we team is from million had we doing a loan just $XX there. well We are and over standpoint, over

efficiency but we to but lending loans. be this it part want the as growth still team primarily towards efforts, and -- And in We provides that continue him The our is future. us opportunities Birmingham grow opposed in By burning profitable to and on focus and move quickly as back on us to Alabama, in still to pipeline have those allow more doing base will Huntsville. Alabama decided environment strong. I pull touch in as did this, profitability the great we of to

Marine, was very solid and RV quarter. a

a Marine we space. the For million Page the Group the $XX in this into entered quarter. and as for a loans end season, still RV we There's see shows say of and XX demand a of of the and for grew are Marine/RV, the glad breakdown the release in earnings spring on we lot to buying Marine of to basis. at expect go-forward turn this profitable quarter RV. profitability the volumes

merchant one to internal a other see merchant We services. lot The group. continue of from be improvement referral services. -- touch We I'll on can would the referrals in see

month. grow to Our processing volume every continues

during profitable continuing profitability grow of see We the in that to we that line. the solid a expect half then and business second be that expect as continue, and to to year would see

to that, back With I'll it over Heath. turn

Heath Fountain

That up our wraps D. comments. Thanks

with on have. so up the call I'll for that, that to open questions Helena any And line we

Operator

Thank you.

begin will Instructions] now question-and-answer session. We the [Operator

have Bishop we a And Please go Group. question ahead. from from Hovde David

David Bishop

Good morning, gentlemen.

Heath Fountain

morning, Good Dave.

David Bishop

in looks flow like you the saw regards margin flows took deposit a pretty bearing again. end just Derek, it Heath and question the deposits. on there's and this chin significant to But obviously, quarter it back of non-interest A

think in ended -- around but sitting, is million dollars. the act that you And wins? would quarter and few would average to anything success a think, I the that maybe account end next. up of should that drove happening margin tailwind the as that $XXX the quarter, Your in new back the right maybe I in a million third quarter Is for

Heath Fountain

tax see Yeah. D Dave, a historically tax let of where second the of one in Derek outflows I'll we a quarter, further thing as to note, and we quarter that terms or do quarter lot comments. But payments. have

And that quarter. lot early saw so, of a we in the

know efforts, think, further I from add anything I just to that, the gentlemen thing, of both our if rebuilding during also quarter. so, customers don't And balances just calling but rebuilding that. there's

Derek Shelnutt

we Yeah. a what look good as I mean saw pretty that's quarter. as of the in far much kind on flows

I think changes to to continue still some interest see going from bearing non-interest. to mix we're

depends But towards during environment that most was where saw this up. the end. it what this -- what outflows and rate quarter ends of those on the the beginning rebuilding then at So, tax of we some

Dallis “D” Copeland

with consistent year. Yeah, in way which would the last it have flowed been exactly XXXX,

David Bishop

-- parked assume cash, deployed should that that assume I period as here into little bit and a maybe end was And elevated, sort would I of of how was was it paydown [indiscernible]. stat maybe we or being think loans, that

using Just curious thinking how you're cash. of the excess

Heath Fountain

Yeah.

Derek on comment we higher But level this. liquidity. think, I and are clearly of more can at

concerns don't think liquidity. real about we have I any

home as so, quarter. some down we during And loan bank you saw, advances the paid

focused in customer the failures in runs I bank certainly think were following first earlier the we liquidity during second. -- of probably were and that happening quarter, the the profitability relationship on industry, the and liquidity

a this are out than deposits don't rates walk point meet at if the were more our we willing I think earlier. so, hurdles lot let we And to

have we And the move and pricing to deposit CDs, able where to just I look to that. our we there things specials would So, that rate on been see during think go best quarter. deploy down

not I demand want demand and are our to rate to from customers to think that customer. the loan just down, to as continues go expectations hurdles in in causing we've have the mentioned both need the from call, that the

combination So, can a all it things, those be of Dave.

David Bishop

CRE over I in CRE little of costs dated portfolio would view assuming in two in these embedded stops terms to market. year Fed higher yields next skew into of stabilize, just pickup and the raising up tailwind or rates some the portfolio, just Maybe of a portfolio. loan structurally re-pricing tend bit longer loan then, you'd the deposit And here or sort see so, some I the yield the potential think yielding loans with it. Got re-priced from CRE the still of a you asset earning guess, to your

Heath Fountain

certainly will seen I we mean, tick to see and Yeah. ups continue have there.

three-year with average just four is weighted life loan under just under portfolio portfolio total years duration. Our our of

that the getting should more we more to portfolio. loan So, see as go continue from momentum we forward and

than just longer it's So, the taking side. deposit

up think prices that. to move and quarters we some and So, much, don't we stabilize definitely next as start outpace At of year. earning should assets in as couple into next liability point, see the

David Bishop

Curious what that you're seeing onboard yields you're this in terms of new loan able origination to quarter?

Derek Shelnutt

Yeah.

seeing, obviously, we're So, little quarter a better. each

of was average this the quarter think weighted weighted quarter. I rate our for of average our X.X% production about

beginning. at the continuing we're see quarter was course, the So, than end higher to of up. of at move that And it's it the

see pricing to would higher our And be so, than are we think we continue today move and that I up where that.

David Bishop

And say you Is you that fourth guys was starting I with thought then, starting at expectations the million. third it -- this remain think move hear it. I quarter, in quarter? maybe guidance quarter? Heath, until Got running up $XX around I the the comfortable I but heard expense you previous by

Heath Fountain

Yeah.

expense reductions quarter So, took the the first quarter. had I -- second the of our in place towards the we end mean, --

have would SPSL of didn't good some will QX mortgage the only full and to -- run expense we have caveat say in the be rate experience if production. we reduction of and activities, forward. to really a continue we should So, that which I

be happy $XX should if we million case, the compensation We we'd we have that kicker that into that as go-forward. and to mark variable it right but the place were up, to be that could move around be

David Bishop

queue. I'll it. back the hop Thanks. into Got

Operator

you. Thank

Our Scott. next Janney go Marinac question Please ahead. from comes from Montgomery Christopher

Christopher Marinac

Good morning. thanks. Hey,

I And play to modestly I'm interest to Derek you for to you? my fall, swap us back does if how just guess is, that out rates walk Heath that? Can of mentioned. the explain go and to want trying mechanics were that Just through the scenario

Heath Fountain

Yeah. Sure.

of terms. different entered different into we two So, swaps

positive about on initial there's basis so, those. blended between points the two. carry And XXX It's

us significant that rates And modest will offset carry. in some reverse, of It that a take would for interest be rates changes still of sheet if from those would position So, these that. their there fall declines if positive kind good to initial balance in swaps. in of kind keep on happen, would you with will will, swaps other the

are So interest on on we see and that's a that we those where benefit swaps, expense forward. going as the

Christopher Marinac

Gotcha.

I it D Did And next as on for overall. obviously, channel SBA had look those the benefits just said gain question sort lot, in as short-term, in And get then the of the a you Okay. the possibly you sale a so. prospectively we about year? better

Dallis “D” Copeland

Yes. It's the first bit place year, moving the in over a been all of over little the been from XX. half X It's to good bit. anywhere a

were I do we the some XX%. of on an were to year liquidity second I that that. folks to there's touching think loan continue quarter, just where I half originations, end in seeing the But think lot how depends it seen as say, the would opportunity above think for the reductions a those we've on of much market. at of gain the just have in sale is I first best the numbers But of

Christopher Marinac

Gotcha.

your a Okay. Great. give Heath reminder us just you to hopefully about of of funds can you then relationship. a with That's Derek, that pause as really, And you tenure start helpful. that. sort the deposit Thank for have I I the for of customers. really just or changes? you've we that sort pause feel like the paper -- of kind just wanted cost to get long on got

Heath Fountain

have accounts. will the our rates lot adjust that to mean, time we as to in at closer at And a a level competitive done the up. a have the XX-ish-year portfolio. deposit on as kept ongoing see long deposit going with think, had same certainly just growth starting where business getting we deposit continued core historically has we're rates our this rates rates relationships side have we up. see, be to I very job, We we had in think We good Yeah. good lasted I

good it. we feel about So,

the of to past indicated, last this out that. that we if was bank think liquidity get on marketplace wanted try I as the very to up we focused quarter, quarter ensuring tightening front in were failures

deposit little they environment And would searching going so out up for think, a been liquidity. drove, than costs that an in everybody maybe have I our more where wasn't

said, pull I we've that back. seen Like

has think focused and our but base. the And taking And on on you our our indicate the the our counts. we're that that so, time, number current customer where we've our see in growing at average of had total But certainly, same slide deposit customers stability great we in environment care balances, base. I of heightened

are to balances over than which are average got in have of move that lot sense the of bearing, excess low. cash make even the a this customers Our But -- then, decided lower we environment. interest makes

Christopher Marinac

Gotcha.

have sort that's risk what all just for of you those within for just any office the last background. anything next just that or maturing related of coming question Thank And Do in a of and months your about is as Great. due Okay. has rate XX for of system on kind the whomever, kind to happen sort downgrades portfolio. loans? you to

Heath Fountain

coming due. really lot that's don't a have We

The chunk of occupied, it's other see a -- big and really owner in a well, piece as nature. you'll really small as in that's of part is ours, it so they're large the

any small there risk I really just So, is that in office there in them. our have not a big themselves small, are our units standpoint, are projects say portfolio and lot the of would from

Christopher Marinac

We of this Great. Thank you questions appreciate it. for our all morning.

Heath Fountain

Thanks Chris.

Operator

you. Instructions] Thank [Operator

There with time. proceed are at remarks. further no closing this Please questions

Heath Fountain

on again we Bankcorp. the being today, to Thanks. call to you support Colony talking appreciate soon. thanks Well, We everybody you forward for to your look of and

Operator

Thank conference. you. lines. Please your your Ladies and gentlemen, this disconnect concludes

Colony Bankcorp (CBAN) 27 Jul 232023 Q2 Earnings call transcript