Colony Bankcorp Q3 2026 Earnings: Net Interest Margin Expands as Profit Rises

Colony Bankcorp (NYSE: CBAN) reported Q3 2026 net income of $10.5 million, up from $5.8 million a year earlier, while diluted EPS increased to $0.50 from $0.33. For the quarter ended September 30, tax-equivalent net interest income rose to $30.5 million and net interest margin widened to 3.59%. Higher spread income and fees outweighed increased operating expenses and credit-loss provisioning, although GAAP net income edged down from the preceding quarter.

Core Earnings Data

Year-over-year profit growth was led by higher net interest income and noninterest income. The Q4 2025 acquisition of TC Bancshares contributed to the comparison, while higher earning-asset yields and a lower cost of funds also supported the margin increase.

These benefits were partly offset by higher compensation, occupancy, technology, and acquisition-related expenses. The provision for credit losses also increased by $800,000 from the prior-year quarter.

Tax-equivalent net interest income, net interest margin, and operating EPS are non-GAAP measures. Sequentially, GAAP net income declined from $10.9 million in Q2 2026, while non-GAAP operating net income increased from $11.0 million to $11.6 million.

Lending and Fee Businesses

Loans excluding loans held for sale reached $2.48 billion, an increase of $12.3 million, or 0.5%, from June 30. Management attributed the slower pace of loan growth to pricing discipline in a changing rate environment and said growth is likely to remain softer in the near term.

Mortgage production declined to $96.5 million from $115.4 million in the preceding quarter, a decrease of approximately 16.4%. Mortgage sales were comparatively stable, increasing to $69.2 million from $67.3 million.

Small Business Specialty Lending activity accelerated sequentially. SBA loan closings increased to $29.9 million from $13.0 million, while SBA loan sales rose to $12.7 million from $5.5 million. However, gains on SBA loan sales were lower than in the prior-year quarter.

Noninterest income benefited from higher deposit service charges, mortgage fee income, interchange fees, wealth advisory income, and an $813,000 insurance gain related to a previous branch fire.

Funding, Capital, and Credit Quality

Total deposits declined by $14.5 million from the preceding quarter to $2.96 billion. Noninterest-bearing demand deposits fell by $6.8 million and interest-bearing demand deposits decreased by $44.1 million, partly offset by a $15.1 million increase in savings and money market deposits and a $21.4 million increase in time deposits.

Borrowings increased by $30.0 million to $263.2 million as deposits declined. Total assets rose by $20.3 million to $3.65 billion. Colony remained above regulatory thresholds for well-capitalized institutions, with a preliminary common equity tier one ratio of 13.50% and a total risk-based capital ratio of 16.78%.

Credit indicators were mixed. Nonperforming assets increased to $25.0 million from $20.9 million at the end of Q2, while other real estate owned and repossessed assets rose to $3.9 million from $2.0 million. The company said the increase in classified and criticized loans was primarily related to the downgrade of one construction relationship with borrower-specific circumstances.

Net charge-offs improved slightly to $1.7 million, or 0.27% of average loans, from $1.8 million, or 0.29%, in Q2. The allowance for credit losses increased to $22.5 million, representing 0.91% of total loans, compared with 0.89% at June 30.

The board also declared a quarterly cash dividend of $0.12 per share, payable on November 25, 2026, to shareholders of record on November 11.

Sale-Leaseback Will Fund a Securities Portfolio Repositioning

After the quarter ended, Colony Bank agreed to sell three branch properties for an aggregate gross price of approximately $19.9 million and lease them back under a 15-year agreement. The transaction will not involve branch closures or market exits.

Colony estimates a pre-tax sale gain of approximately $15 million, but expects that gain to be offset by realized losses from a planned repositioning of its investment securities portfolio. First-year base rent will be approximately $1.65 million, with annual increases of 2%.

The bank intends to use the net proceeds to improve liquidity, support future lending, and adjust its interest-rate risk profile. Management expects the combined transactions to add to tangible book value per share and recurring earnings, although the recurring lease expense and execution of the securities repositioning remain important factors.

Management Commentary

CEO Heath Fountain said margin improvement reflected rising earning-asset yields and consistent pricing on new and renewed loans. While Colony’s long-term loan-growth target remains unchanged, management expects softer growth in the near term.

Colony has obtained the necessary regulatory and shareholder approvals for its combination with First Reliance. The companies are preparing for legal close, while systems conversion and customer integration are expected in Q2 2027. Expenses related to the pending transaction already contributed to the year-over-year increase in noninterest expense.

Risks Investors Need to Watch

• Credit-quality deterioration: Nonperforming assets and other real estate owned both increased during the quarter. Although the rise in criticized and classified loans was mainly tied to one construction relationship, further deterioration could require additional provisioning.
• Slower loan growth: Management expects near-term loan growth to soften as it maintains pricing discipline, limiting one potential source of balance-sheet expansion.
• Funding mix changes: Deposits declined while borrowings increased, and deposit composition shifted away from demand balances toward savings, money market, and time deposits. Continued changes could affect funding costs and net interest margin.
• Integration and restructuring execution: The First Reliance integration, TC Bancshares-related costs, and securities portfolio repositioning create execution and expense risks. The sale-leaseback also introduces recurring rent starting at approximately $1.65 million in the first year.

Summary

Colony Bankcorp’s Q3 2026 results showed substantial year-over-year profit growth as net interest margin expanded and fee income increased. Higher expenses and credit provisioning limited some of the benefit, while slower loan growth, declining deposits, and rising nonperforming assets warrant monitoring. The next major operational milestones are the First Reliance integration and the sale-leaseback-funded securities portfolio repositioning.