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COLONY BANKCORP INC 10-K Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Colony Bankcorp, Inc.

Filing date:

03/14/2025

TLDR:

ELI5:

Colony Bankcorp, a bank, made more money overall in 2024, but made less money from the difference between what it earns on loans and pays on deposits. They face risks from changing interest rates and potential loan defaults, but could grow by offering more services and buying other companies.

Accession #:

0000711669-25-000046

Published on

Analyst Summary

  • Net income available to common shareholders increased to $23.9 million in 2024 from $21.7 million in 2023.
  • Taxable-equivalent net interest income decreased by 2.8% year-over-year, indicating margin compression.
  • Noninterest income increased by 10.5% year-over-year, driven by gains on sales of SBA loans and BOLI income, diversifying revenue streams.
  • Noninterest expense remained relatively stable, decreasing slightly by 0.28%, reflecting better cost management.
  • Total assets increased slightly to $3.11 billion, while total loans decreased by 2.1% to $1.84 billion.
  • Net Interest Margin decreased to 2.72% from 2.83%, a concerning trend impacting future profitability.
  • Efficiency Ratio improved to 69.77% from 71.99%, reflecting better cost management.
  • Return on Average Assets (ROAA) increased to 0.78% from 0.72%.
  • Return on Average Equity (ROAE) decreased slightly to 9.00% from 9.10%.
  • Allowance for Credit Losses (ACL) to Total Loans increased to 1.03% from 0.98%, indicating a more conservative approach to credit risk management.
  • Operating Profit Margin increased to 28.25% from 26.16%, indicating improved efficiency in managing income and expenses.
  • Net Profit Margin increased to 20.67% from 19.09%.
  • ROA increased to 0.77% from 0.72%, slightly below the typical industry benchmark.
  • ROE increased to 8.95% from 8.81%, within an acceptable range for community banks.
  • Basic and Diluted EPS increased to $1.36 from $1.24, reflecting increased profitability on a per-share basis.
  • Debt-to-Equity Ratio decreased to 10.16 from 10.98.
  • Interest Coverage Ratio decreased to 1.48 from 1.67, indicating a limited ability to cover interest expenses with current earnings.
  • Asset Turnover decreased slightly to 0.0375 from 0.0376.
  • Price-to-Book Ratio decreased to 1.00 from 1.10.
  • Price-to-Sales Ratio decreased to 2.43 from 2.47.
  • Tangible Book Value per Common Share increased to $12.95 from $11.49.
  • Net Interest Margin decreased to 2.72% from 2.83%.
  • Nonperforming Assets as a Percentage of Total Assets increased slightly to 0.36% from 0.35%.

Opportunities and Risks

  • Interest Rate Risk: Fluctuations in interest rates could negatively impact net interest income and the value of interest-sensitive assets and liabilities.
  • Credit Risk: A significant portion of the loan portfolio is concentrated in real estate loans, making the company vulnerable to downturns in the real estate market.
  • Competition: The banking industry is highly competitive, and Colony Bankcorp faces competition from larger regional banks, credit unions, and non-bank financial institutions.
  • Cybersecurity Risk: The company is subject to the risk of cyberattacks and data breaches, which could disrupt operations and result in financial losses.
  • Growth in Noninterest Income: The company has the opportunity to further diversify its revenue streams by expanding its noninterest income businesses, such as mortgage banking and wealth management.
  • Strategic Acquisitions: The company could pursue strategic acquisitions to expand its market presence and increase its asset base.
  • Technological Innovation: Investing in new technologies could improve efficiency and enhance the customer experience.

Potential Implications

Company Performance

  • Net interest margin compression could continue to pressure profitability if not addressed.
  • Growth in noninterest income could offset the impact of margin compression.
  • Maintaining asset quality and managing credit risk will be crucial for long-term performance.
  • Improved operating efficiency could boost profitability.
  • Low interest coverage ratio indicates a limited ability to cover interest expenses with current earnings.

Stock Price

  • The company’s P/E ratio is within a reasonable range for community banks.
  • The company’s P/B ratio around 1 suggests that the company’s market capitalization is in line with its book value.
  • The company’s P/S ratio is relatively low, which could indicate that the company is undervalued relative to its sales.

SEC Filing Report: Colony Bankcorp Inc. (CBAN) 10-K for FY 2024

Executive Summary

This report analyzes Colony Bankcorp Inc.’s 10-K filing for the fiscal year ended December 31, 2024. The analysis focuses on key financial performance indicators, risk factors, and management’s discussion to assess the company’s financial health and future prospects. While the company demonstrates stable asset quality and growth in certain areas, concerns exist regarding net interest margin compression and potential risks associated with the loan portfolio. A HOLD rating is recommended, pending further observation of the company’s ability to navigate the evolving interest rate environment and manage credit risk.

Company Overview

Colony Bankcorp, Inc. is a financial services company operating primarily through its wholly-owned subsidiary, Colony Bank. The bank provides a range of banking services to retail and commercial customers across Georgia, Alabama, and Florida. The company’s business model focuses on community banking with an emphasis on small and medium-sized businesses.

Detailed Analysis

Financial Statement Analysis

Key financial data and ratios are presented below to evaluate Colony Bankcorp’s performance:

Income Statement

  • Net income available to common shareholders increased to $23.9 million in 2024 from $21.7 million in 2023.
  • Taxable-equivalent net interest income decreased by 2.8% year-over-year.
  • Noninterest income increased by 10.5% year-over-year, driven by gains on sales of SBA loans and BOLI income.
  • Noninterest expense remained relatively stable, decreasing slightly by 0.28%.

Balance Sheet

  • Total assets increased slightly to $3.11 billion at December 31, 2024, from $3.05 billion at December 31, 2023.
  • Total loans decreased by 2.1% to $1.84 billion.
  • Total deposits increased slightly to $2.57 billion.
  • Shareholders’ equity increased to $278.7 million from $254.9 million.

Key Ratios

  • Net Interest Margin: Decreased to 2.72% in 2024 from 2.83% in 2023, indicating margin compression.
  • Efficiency Ratio: Improved to 69.77% in 2024 from 71.99% in 2023, reflecting better cost management.
  • Return on Average Assets (ROAA): Increased to 0.78% in 2024 from 0.72% in 2023.
  • Return on Average Equity (ROAE): Decreased slightly to 9.00% in 2024 from 9.10% in 2023.
  • Allowance for Credit Losses (ACL) to Total Loans: Increased to 1.03% in 2024 from 0.98% in 2023.

Trends

  • A concerning trend is the compression of the net interest margin, which could impact future profitability if not addressed.
  • The increase in noninterest income is a positive sign, indicating diversification of revenue streams.
  • The increase in the ACL ratio suggests a more conservative approach to credit risk management.

Management’s Discussion and Analysis (MD&A) Insights

  • Management acknowledges the challenging economic environment and its potential impact on the company’s performance.
  • The MD&A emphasizes the company’s focus on maintaining asset quality and managing credit risk.
  • The company highlights its efforts to improve operating efficiency and diversify revenue streams.

Risk and Opportunity Assessment

Risks

  • Interest Rate Risk: Fluctuations in interest rates could negatively impact net interest income and the value of interest-sensitive assets and liabilities.
  • Credit Risk: A significant portion of the loan portfolio is concentrated in real estate loans, making the company vulnerable to downturns in the real estate market.
  • Competition: The banking industry is highly competitive, and Colony Bankcorp faces competition from larger regional banks, credit unions, and non-bank financial institutions.
  • Cybersecurity Risk: The company is subject to the risk of cyberattacks and data breaches, which could disrupt operations and result in financial losses.

Opportunities

  • Growth in Noninterest Income: The company has the opportunity to further diversify its revenue streams by expanding its noninterest income businesses, such as mortgage banking and wealth management.
  • Strategic Acquisitions: The company could pursue strategic acquisitions to expand its market presence and increase its asset base.
  • Technological Innovation: Investing in new technologies could improve efficiency and enhance the customer experience.

Red Flags and Uncommon Metrics

  • The increase in nonperforming assets, while still relatively low, warrants close monitoring.
  • The company’s reliance on brokered deposits as a funding source could increase its cost of funds.

Conclusion and Actionable Insights

Colony Bankcorp Inc. demonstrates a mixed financial performance in 2024. While the company has shown growth in certain areas, such as noninterest income, it faces challenges related to net interest margin compression and potential risks associated with its loan portfolio. The company’s management team appears to be aware of these challenges and is taking steps to address them. However, further observation is needed to assess the effectiveness of these efforts.

Recommendation: HOLD

Rationale: The company’s stable asset quality and growth in noninterest income are positive signs. However, the net interest margin compression and potential risks associated with the loan portfolio warrant a cautious approach. A HOLD rating is recommended, pending further observation of the company’s ability to navigate the evolving interest rate environment and manage credit risk.

Colony Bankcorp’s 2024 financial performance shows a mixture of positive and negative trends. Net income increased, but net interest income decreased. The bank maintained strong capital levels, exceeding regulatory requirements. Loan quality remains a key area of focus, with close monitoring of nonperforming assets and allowance for credit losses.

Financial Ratio and Metric Analysis

Profitability

  • Metric: Gross Profit Margin

    • Metric: Not applicable for banks as they don’t have cost of goods sold in the traditional sense. Focus is on net interest margin.
  • Metric: Operating Profit Margin

    • Metric: (Net Interest Income + Noninterest Income – Noninterest Expense) / Total Revenue = ($76,076 + $39,375 – $82,834) / ($76,076 + $39,375) = 28.25%
    • Trend: 2023: ($78,244 + $35,634 – $83,065) / ($78,244 + $35,634) = 26.16%. Percentage Change: (28.25% – 26.16%) / 26.16% = 7.99%.
    • Industry: The operating profit margin increased, indicating improved efficiency in managing income and expenses. Industry averages for community banks typically range from 20% to 35%, so Colony Bankcorp is within this range.
  • Metric: Net Profit Margin

    • Metric: Net Income / Total Revenue = $23,868 / ($76,076 + $39,375) = 20.67%
    • Trend: 2023: $21,747 / ($78,244 + $35,634) = 19.09%. Percentage Change: (20.67% – 19.09%) / 19.09% = 8.28%.
    • Industry: The net profit margin is within a reasonable range for a community bank. Industry averages typically range from 15% to 25%.
  • Metric: Return on Assets (ROA)

    • Metric: Net Income / Average Assets. Average Assets = ($3,109,782 + $3,053,422) / 2 = $3,081,602. ROA = $23,868 / $3,081,602 = 0.77%
    • Trend: 2023: Average Assets = ($3,053,422 + $3,016,551) / 2 = $3,034,986.5. ROA = $21,747 / $3,034,986.5 = 0.72%. Percentage Change: (0.77% – 0.72%) / 0.72% = 6.94%.
    • Industry: ROA is slightly below the typical industry benchmark of 1% for well-performing banks, indicating room for improvement in asset utilization.
  • Metric: Return on Equity (ROE)

    • Metric: Net Income / Average Equity. Average Equity = ($278,675 + $254,935) / 2 = $266,805. ROE = $23,868 / $266,805 = 8.95%
    • Trend: 2023: Average Equity = ($254,935 + $238,911) / 2 = $246,923. ROE = $21,747 / $246,923 = 8.81%. Percentage Change: (8.95% – 8.81%) / 8.81% = 1.59%.
    • Industry: ROE is within an acceptable range for community banks, but could be improved. A good ROE is generally considered to be 10% or higher.
  • Metric: Earnings Per Share (EPS) – Basic and Diluted

    • Metric: Basic EPS = $23,868 / 17,557,743 = $1.36. Diluted EPS = $23,868 / 17,557,743 = $1.36
    • Trend: 2023 Basic EPS = $1.24. Diluted EPS = $1.24. Percentage Change: ($1.36 – $1.24) / $1.24 = 9.68%.
    • Industry: EPS growth is positive, reflecting increased profitability on a per-share basis.

Liquidity

  • Metric: Current Ratio

    • Metric: Current Assets / Current Liabilities. Need to estimate current portions. Assuming loans held for sale, cash, short term investments and securities available for sale are current assets: ($231,034 + $366,049 + $39,786) / $567,675 = 1.12
    • Trend: Need to estimate current assets and liabilities for 2023.
    • Industry: A current ratio above 1 indicates the company has more current assets than current liabilities.
  • Metric: Quick Ratio (Acid-Test Ratio)

    • Metric: (Current Assets – Inventory) / Current Liabilities. Banks don’t have inventory. ($231,034 + $366,049 + $39,786) / $567,675 = 1.12
    • Trend: Need to estimate current assets and liabilities for 2023.
    • Industry: A quick ratio above 1 indicates the company has enough liquid assets to cover its current liabilities.
  • Metric: Cash Ratio

    • Metric: (Cash + Marketable Securities) / Current Liabilities = ($26,045 + $204,989 + $366,049 + $430,077) / $567,675 = 1.71
    • Trend: Need to estimate current liabilities for 2023.
    • Industry: The cash ratio is relatively high, indicating a strong ability to meet short-term obligations with cash and near-cash assets.

Solvency/Leverage

  • Metric: Debt-to-Equity Ratio

    • Metric: Total Liabilities / Total Equity = $2,831,107 / $278,675 = 10.16
    • Trend: 2023: $2,798,487 / $254,935 = 10.98. Percentage Change: (10.16 – 10.98) / 10.98 = -7.47%.
    • Industry: The debt-to-equity ratio is relatively high, indicating a significant reliance on debt financing.
  • Metric: Debt-to-Assets Ratio

    • Metric: Total Liabilities / Total Assets = $2,831,107 / $3,109,782 = 91.04%
    • Trend: 2023: $2,798,487 / $3,053,422 = 91.65%. Percentage Change: (91.04% – 91.65%) / 91.65% = -0.67%.
    • Industry: A high debt-to-assets ratio suggests that a significant portion of the company’s assets are financed by debt.
  • Metric: Interest Coverage Ratio (Times Interest Earned)

    • Metric: EBIT / Interest Expense = (Net Income + Income Tax Expense + Interest Expense) / Interest Expense = ($23,868 + $5,699 + $61,165) / $61,165 = 1.48
    • Trend: 2023: ($21,747 + $5,466 + $46,672) / $46,672 = 1.67. Percentage Change: (1.48 – 1.67) / 1.67 = -11.38%.
    • Industry: The interest coverage ratio is low, indicating a limited ability to cover interest expenses with current earnings.

Activity/Efficiency

  • Metric: Inventory Turnover

    • Metric: Not applicable for banks.
  • Metric: Days Sales Outstanding (DSO)

    • Metric: Not directly applicable to banks.
  • Metric: Days Payable Outstanding (DPO)

    • Metric: Not directly applicable to banks.
  • Metric: Asset Turnover

    • Metric: Total Revenue / Average Total Assets = ($76,076 + $39,375) / (($3,109,782 + $3,053,422) / 2) = 0.0375
    • Trend: 2023: ($78,244 + $35,634) / (($3,053,422 + $3,016,551) / 2) = 0.0376. Percentage Change: (0.0375 – 0.0376) / 0.0376 = -0.27%.
    • Industry: The asset turnover is low, suggesting that the bank is not generating a significant amount of revenue for each dollar of assets.

Valuation

  • Metric: Price-to-Earnings Ratio (P/E)

    • Metric: Stock Price / EPS = $15.99 / $1.36 = 11.76
    • Trend: Need previous year EPS to calculate trend.
    • Industry: The P/E ratio is within a reasonable range for community banks.
  • Metric: Price-to-Book Ratio (P/B)

    • Metric: Stock Price / Book Value per Share. Book Value per Share = $278,675 / 17,519,884 = $15.91. P/B = $15.99 / $15.91 = 1.00
    • Trend: 2023: Book Value per Share = $254,935 / 17,564,182 = $14.51. P/B = $15.99 / $14.51 = 1.10. Percentage Change: (1.00 – 1.10) / 1.10 = -9.09%.
    • Industry: A P/B ratio around 1 suggests that the company’s market capitalization is in line with its book value.
  • Metric: Price-to-Sales Ratio (P/S)

    • Metric: Market Cap / Total Revenue. Market Cap = $15.99 * 17,519,884 = $280,143,945.16 = $280,144 thousands. Total Revenue = $76,076 + $39,375 = $115,451. P/S = $280,144 / $115,451 = 2.43
    • Trend: 2023: Market Cap = $15.99 * 17,564,182 = $280,851,270.18 = $280,851 thousands. Total Revenue = $78,244 + $35,634 = $113,878. P/S = $280,851 / $113,878 = 2.47. Percentage Change: (2.43 – 2.47) / 2.47 = -1.62%.
    • Industry: The P/S ratio is relatively low, which could indicate that the company is undervalued relative to its sales.
  • Metric: Enterprise Value to EBITDA (EV/EBITDA)

    • Metric: (Market Cap + Total Debt – Cash) / EBITDA. Market Cap = $280,144 thousands. Total Debt = $185,000 + $63,039 = $248,039. Cash = $26,045 + $204,989 = $231,034. EBITDA = Net Income + Interest + Taxes + Depreciation & Amortization = $23,868 + $61,165 + $5,699 + $8,130 = $98,882. EV = $280,144 + $248,039 – $231,034 = $297,149. EV/EBITDA = $297,149 / $98,882 = 3.01
    • Trend: Need previous year data to calculate trend.
    • Industry: A lower EV/EBITDA multiple can suggest that a company may be undervalued relative to its earnings before interest, taxes, depreciation, and amortization.

Growth Rates

  • Metric: Revenue Growth

    • Metric: (2024 Revenue – 2023 Revenue) / 2023 Revenue = (($76,076 + $39,375) – ($78,244 + $35,634)) / ($78,244 + $35,634) = 1.38%
  • Metric: Net Income Growth

    • Metric: (2024 Net Income – 2023 Net Income) / 2023 Net Income = ($23,868 – $21,747) / $21,747 = 9.75%
  • Metric: EPS Growth

    • Metric: (2024 EPS – 2023 EPS) / 2023 EPS = ($1.36 – $1.24) / $1.24 = 9.68%

Other Relevant Metrics

  • Operating Efficiency Ratio:

    • Metric: Noninterest Expense / (Net Interest Income + Noninterest Income) = $82,834 / ($76,076 + $39,375) = 71.75%
    • Trend: 2023: $83,065 / ($78,244 + $35,634) = 72.94%. Percentage Change: (71.75% – 72.94%) / 72.94% = -1.63%.
    • Industry: The efficiency ratio is within a typical range for community banks, but improvement is always desirable.
  • Tangible Book Value per Common Share:

    • Metric: (Total Equity – Goodwill – Other Intangibles) / Common Shares Outstanding = ($278,675 – $48,923 – $2,975) / 17,519,884 = $12.95
    • Trend: 2023: ($254,935 – $48,923 – $4,192) / 17,564,182 = $11.49. Percentage Change: ($12.95 – $11.49) / $11.49 = 12.71%.
  • Net Interest Margin:

    • Metric: Net Interest Income / Average Earning Assets = $76,759 / $2,827,103 = 2.72%
    • Trend: 2023: $78,972 / $2,790,353 = 2.83%. Percentage Change: (2.72% – 2.83%) / 2.83% = -3.89%.
    • Industry: The net interest margin is a key indicator of profitability for banks.
  • Nonperforming Assets as a Percentage of Total Assets:

    • Metric: $11,342 / $3,109,782 = 0.36%
    • Trend: 2023: $10,657 / $3,053,422 = 0.35%. Percentage Change: (0.36% – 0.35%) / 0.35% = 2.86%.
    • Industry: The level of nonperforming assets is relatively low, indicating good asset quality.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️