Colony Bankcorp Q3 Earnings Rise as Margin Expands

Colony Bankcorp, Inc. reported sharply higher year-over-year earnings for the third quarter of 2026 as its net interest margin expanded for an eighth consecutive quarter. The Georgia-based bank also outlined preparations for its pending First Reliance Bancshares merger and a post-quarter-end balance-sheet restructuring intended to support recurring earnings and tangible book value.

GAAP net income was $10.5 million, or $0.50 per diluted share, compared with $5.8 million, or $0.33 per share, a year earlier. Second-quarter 2026 net income was $10.9 million, or $0.51 per share.

Operating net income, a non-GAAP measure excluding specified items such as acquisition-related expenses and certain gains and losses, rose to $11.6 million from $8.2 million in the third quarter of 2025 and $11.0 million in the preceding quarter. Operating earnings were $0.54 per diluted share, up from $0.47 a year earlier and $0.52 in the second quarter.

The net interest margin reached 3.59%, compared with 3.52% in the prior quarter and 3.17% a year earlier. Colony said margin expansion helped drive the increase in earnings. Operating return on average assets was 1.26%, while operating return on average equity was 11.71% and operating return on average tangible equity was 14.25%, all non-GAAP measures.

Loans increased by $12.3 million during the quarter. The yield on bank-originated loans rose to 6.04% from 5.93% in the second quarter, while the weighted-average rate on new and renewed loans was 7.26%. Colony reported a 1.78% overall cost of deposits; the cost of interest-bearing deposits was 2.12%, compared with 2.08% in the preceding quarter.

Operating pre-provision net revenue increased to $16.3 million from $16.0 million in the second quarter and $11.2 million a year earlier. Operating net noninterest expense as a percentage of average assets was 1.53%, versus 1.51% in the prior quarter and 1.48% a year ago. Tangible book value per common share, another non-GAAP measure, rose to $15.16 from $15.12 at June 30 and $14.20 at September 30, 2025.

Complementary businesses deliver mixed results

Colony’s complementary business lines generated combined pretax profit of $1.3 million, down from $1.9 million in the second quarter but above $930,000 a year earlier.

The Small Business Specialty Lending group produced $29.9 million of loans and recorded pretax profit of $504,000, compared with $188,000 in the preceding quarter. Marine and recreational-vehicle lending contributed $281,000, while merchant services generated $128,000.

Colony Financial Advisors reported $347,000 of pretax profit, down from $469,000 in the second quarter. Assets under management increased to $654 million from $637 million, with quarterly net inflows of $20 million.

The mortgage division posted a $74,000 pretax loss after earning $432,000 in the second quarter. Mortgage production totaled $96.5 million, compared with $115.4 million in the prior quarter, while sales volume increased to $69.2 million from $67.3 million. Management said the business remains focused on secondary-market products and gain-on-sale revenue while adjusting staffing, distribution models and its product mix to support profitability.

Colony Insurance generated $88,000 of pretax profit. Premiums in force remained at $34.4 million, while items in force declined slightly to 20,044. The company said retention pressure began easing in May 2026, although customer moves continued to affect policy counts and premiums. Bank referrals to the insurance operation increased 6.8% during the first nine months of 2026 from the comparable 2025 period.

First Reliance merger approaches planned closing

Colony’s pending acquisition of First Reliance Bancshares is expected to expand the company into South Carolina, including Greenville, Charleston, Columbia, Myrtle Beach and Florence. The transaction had received regulatory and shareholder approvals, and Colony anticipated a legal closing on November 1, 2026.

The combination would create a company with approximately $5 billion in pro forma assets. At announcement, the transaction had an implied aggregate value of $163 million, with consideration consisting of 80% stock and 20% cash.

Colony estimated tangible book value dilution of approximately 12%, with an earnback period of less than 3.5 years. It projected roughly 20% earnings accretion after fully realizing cost savings. Those savings are estimated at about 35% of First Reliance’s projected 2028 noninterest expense of $37.6 million, with 60% expected to be achieved in 2027 and the full amount thereafter. The company cautioned that the pro forma effects remain subject to final purchase-accounting adjustments.

Management’s near-term priorities include completing the merger, growing core deposits and customer relationships, maintaining expense discipline and working toward a return on assets above 1.35%. Longer term, Colony is targeting annual customer-base growth of 8% to 12% and greater scale across five complementary business lines.

Property sale and securities restructuring planned

On October 27, 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 triple-net lease. First-year base rent will be $1.65 million, with annual increases of 2%. Colony expects the arrangement to add about $1.8 million to annual GAAP expense, net of current depreciation, but said it will not close the branches or leave the affected markets.

The bank expects a pretax gain of approximately $15 million from the property sale. It intends to offset that gain with realized losses from the proposed sale of about $100 million of available-for-sale securities yielding approximately 2.00%. Colony assumed a 5.5% weighted-average return when redeploying the proceeds into a mix of loans, interest-bearing cash and potentially short- to medium-duration securities. The company expects the combined transactions to be neutral to regulatory capital, accretive to tangible book value and accretive to recurring earnings after the additional lease expense.

At September 30, Colony had $3.6 billion in assets and reported $1.69 billion of total liquidity sources. Its common equity Tier 1 capital ratio was 13.5%, while the total risk-based capital ratio was 16.8%.

The outlook remains subject to changes in interest rates, deposit pricing and competition, loan demand, credit quality and real-estate values. Additional uncertainties include the timing and cost of integrating First Reliance, realization of expected merger savings, the execution and accounting effects of the sale-leaseback and securities restructuring, cybersecurity threats, regulatory changes and broader economic conditions.