Colony Bankcorp NYSE: CBAN executives highlighted a “solid start to the year” in the company’s first-quarter 2026 earnings call, pointing to a completed core systems conversion and customer integration tied to the TC Federal merger, improving margin trends, and strength across several fee-based business lines.
Post-merger integration reaches key milestone
Chief Executive Officer Heath Fountain said the quarter marked a “pivotal operational milestone” as Colony finalized its core systems conversion and completed customer integration following the TC Federal merger. Fountain said operating income rose $580,000 from the prior quarter as the company began seeing post-merger impacts, and he expects additional operational efficiencies and cost savings to materialize beginning in the second quarter.
With major integration work completed, Fountain said management is “confident in our ability to scale toward a 1.20% ROA benchmark in Q2.”
Margin expands, but accretion uplift expected to moderate
Colony’s net interest margin increased 16 basis points to 3.48% in the first quarter, according to Chief Financial Officer Derek Shelnutt. Net interest income rose about $3.3 million, which Shelnutt attributed to a full quarter of post-merger contribution as well as ongoing repricing on both sides of the balance sheet.
Fountain and Shelnutt both pointed to accelerated accretion income on acquired loans as a driver of the stronger-than-expected margin outcome. Fountain said the acceleration was tied to early payoffs of acquired loans, including participations obtained in the merger. Shelnutt said the company’s core margin, excluding the accelerated accretion impact, was approximately 3.41%.
Looking ahead, Shelnutt said projections call for modest core margin increases over time but noted that reported margin could be “a few basis points lower” in the second quarter as the pull-forward accretion benefit does not repeat at the same level.
On funding, Shelnutt said the overall cost of funds decreased 2 basis points from the prior quarter to 1.94% and is expected to remain around that level unless short-term interest rates change.
Loan growth slowed amid payoffs and demand softness; pipeline improving
Fountain said first-quarter loan growth was lower than the pace achieved in 2025, reflecting both payoffs and lighter demand that he partially attributed to a volatile rate environment tied to conflict in the Middle East. He reiterated the company’s expectation that 2026 loan growth will likely land closer to the “8% end” of its 8% to 12% target range.
Shelnutt reported loans held for investment increased $32.2 million, or about 5.4% annualized, during the quarter. He said early payoffs on acquired TC Federal loans affected growth, with some tied to legacy participation loans.
In the Q&A, Hovde Group’s David Bishop asked about where Colony is seeing the best growth opportunities and how pricing is trending. Fountain said new and renewed loan pricing averaged “a little over 7%” for the quarter and described the market as competitive, which could pressure yields modestly as volume improves. He said opportunities are appearing across the footprint in both commercial real estate and commercial and industrial lending, with growth likely to resemble the current portfolio mix.
Shelnutt also addressed loan yield dynamics in response to Brean Capital’s Christopher Marinac, noting that the 7.11% weighted average rate on new and renewed loans (shown on slide 34) suggests room for incremental improvement in overall loan yields over time, though he did not expect “anything drastic,” particularly given competitive pricing.
Credit metrics improve; provision reflects reserve replenishment and growth
On credit, Fountain said the company saw a quarter-over-quarter contraction in non-performing loans and a decline in criticized loans, adding that the credit team has been effective in resolving issues and preventing buildup in criticized or classified categories.
Shelnutt said provision expense totaled $1.75 million, up about $100,000 from the prior quarter. Net charge-offs on core bank loans increased slightly but totaled $315,000, or about five basis points of average loans, he said. The allowance for credit losses stood at 0.90% of total loans and 122% of non-performing loans.
During the Q&A, Bishop asked whether the small business lending division (SBSL) was a key factor in the recent increase in provisioning and whether a roughly $2 million quarterly provision pace might persist. Shelnutt said the company expects to “generally see backfilling any charge-offs” at current allowance levels and that provisioning could remain around current levels, moving “down a little, up a little,” depending on charge-off activity and loan growth.
Fee businesses show gains; expenses expected to improve after conversion costs
Management highlighted performance across several complementary business lines. Fountain said mortgage loan production and sales were higher than a year ago, and the division’s pre-tax income improved meaningfully. Shelnutt quantified mortgage pre-tax income at $222,000, up from $31,000 in the first quarter of 2025. Fountain cautioned that interest rate fluctuations and housing inventory remain challenges likely to affect mortgage performance through 2026.
Fountain also said Marine and RV Lending and Merchant Services continued to show progress, with seasonal activity expected to support Marine and RV lending in coming months. In discussing Merchant Services, Fountain told Marinac the business functions as a “really good deposit acquisition” channel and part of a broader “banking solutions” group that includes treasury and credit card services. He said winning merchant relationships can establish settlement deposit accounts and create an avenue to expand broader deposit relationships, while generating recurring revenue without requiring significant incremental expense as the business scales.
Colony Financial Advisors and Colony Insurance both delivered what Fountain described as their “best quarter to date” in pre-tax income. Fountain said Colony Financial Advisors benefited from advisor recruiting and a shift in its broker-dealer relationship from a managed to a dual program that offers a larger revenue share while also shifting expenses to the company. Shelnutt said it was the division’s best quarter on a pre-tax basis, and Fountain cited assets under management of $555 million at quarter-end, up from $198 million at the end of the first quarter of 2025.
For Colony Insurance, Fountain said bank referrals were strong and that recent rate reductions following 2025 premium increases could support higher policy volume. In response to Bishop, Fountain said improvements in sales training and banker referral integration are contributing to better performance, and he expects continued momentum.
SBSL was a weaker spot, according to management. Fountain said the unit had a lighter quarter due to lower sales revenue and variability in charge-offs, though past dues fell about 30% and nonaccruals declined around 24%. Shelnutt said SBSL pre-tax income decreased to $95,000, driven by lower revenue and higher charge-offs, and noted that the first quarter is seasonally lighter. Both executives said they are seeing a stronger SBSL pipeline, with Shelnutt indicating a potential trend toward improvement in subsequent quarters. Fountain also noted the company hired John Kay as National Sales Manager for SBSL.
On expenses, Shelnutt said operating non-interest expenses were $26 million, reflecting costs and personnel needed to complete systems conversion and customer integration. He said the company is positioned to begin realizing additional cost savings in the second quarter, though some benefit may be offset by seasonally higher variable expenses in business lines.
Fountain told analysts the company is focused on improving efficiency, highlighting operating net non-interest expense to average assets of 1.68% in the quarter and management’s expectation that it will trend toward a 1.45% target over the coming quarters as merger-related staffing and contract expenses roll off and revenue grows.
Additional items discussed included a sale of approximately $30 million of portfolio mortgages for a gain of about $110,000, with Shelnutt stating the company does not anticipate other pool sales in the near term; a $19 million decline in deposits tied to the repositioning of municipal funds after year-end tax collections; and capital actions including about 89,000 shares repurchased at an average price of $19.78 and a newly declared quarterly cash dividend of $0.12 per share.
Fountain also said Kroll Bond Rating Agency affirmed the company’s and the bank’s credit ratings with a stable outlook, which he called validation of capital strength and platform stability. He added that ongoing consolidation in the banking industry is creating disruption in Colony’s markets, which management views as an opportunity to capture customer relationships seeking stability and service.
In response to a question about M&A, Fountain said Colony is actively evaluating potential acquisitions within Georgia and contiguous states, with a focus on cultural alignment and strategic fit. He said the company feels prepared to pursue another transaction following the TC Federal integration and is holding conversations with other management teams across its footprint.
About Colony Bankcorp NYSE: CBAN
Colony Bankcorp, Inc is a bank holding company headquartered in Baxley, Georgia, that operates through its primary subsidiary, The Colony Bank. The company's core focus is on delivering community banking services tailored to individuals, small businesses and agricultural customers throughout Georgia and Florida. Colony Bankcorp's structure supports a full suite of deposit and lending solutions designed to meet the needs of local markets.
The company offers a range of deposit products, including personal and business checking accounts, savings and money market accounts, and certificates of deposit.
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