COLONY BANKCORP INC - Quarter Report: 2025 March (Form 10-Q)

See accompanying notes to consolidated financial statements (unaudited).

COLONY BANKCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity (unaudited)

(dollars in thousands, except per share data)

Common Stock

Three Months Ended

Amount

Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total

Balance, December 31, 2024

()

Other comprehensive income

—

Dividends on common shares ($ per share)

—

()

—

()

Issuance of restricted stock, net of forfeitures

()

—

Tax withholding related to vesting of restricted stock

()

—

()

Repurchase and retirement of shares

()

—

()

Stock-based compensation expense

—

Net income

—

Balance, March 31, 2025

()

Balance, December 31, 2023

()

Other comprehensive income

—

Dividends on common shares ($ per share)

—

()

—

()

Issuance of restricted stock, net of forfeitures

()

—

Tax withholding related to vesting of restricted stock

()

—

()

Stock-based compensation expense

—

Net income

—

Balance, March 31, 2024

()

(dollars in thousands, except per share data)

Common Stock

Originations of loans held for sale()()Proceeds from sales of loans held for sale Change in bank-owned life insurance()()Deferred tax expense Change in other assets()()Change in other liabilities()()Net cash provided by operating activities Investing ActivitiesPurchases of investment securities, available-for-sale()()Proceeds from maturities, calls, and paydowns of investment securities, available-for-sale Proceeds from sales of investment securities, available-for-sale Proceeds from maturities, calls and paydowns of securities, held-to-maturity Change in loans, net() Purchase of premises and equipment()()Proceeds from insurance-Branch fire Proceeds from sales of other real estate owned Proceeds from bank-owned life insurance Redemption (purchase) of Federal Home Loan Bank Stock() Net cash provided by (used in) investing activities() Financing ActivitiesChange in noninterest-bearing customer deposits()()Change in interest-bearing customer deposits Dividends paid for common stock()()Repayments on Federal Home Loan Bank Advances()()Proceeds from Federal Home Loan Bank Advances Redemption of subordinated debt () Repurchase and retirement of shares() Tax withholding related to vesting of restricted stock()()Net cash provided by (used in) financing activities ()Net increase (decrease) in cash and cash equivalents() Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period$ $

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)


	Three Months Ended
(dollars in thousands)	March 31, 2025	March 31, 2024
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	$	$
Cash paid during the period for income taxes
Noncash Investing and Financing Activities
Transfers to other real estate

See accompanying notes to consolidated financial statements (unaudited).

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(1)

% of the Company’s loan portfolio was concentrated in loans secured by real estate. A substantial portion of borrowers’ ability to honor their

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(2)

$ $()$ U.S. agency securities  () Asset backed securities  () State, county & municipal securities  () Corporate debt securities  () Mortgage-backed securities  () Total$ $ $()$ March 31, 2025Amortized
CostGross
Unrealized
GainsGross
Unrealized
LossesFair ValueSecurities Held-to-Maturity:U.S. treasury securities$ $ $()$ U.S. agency securities  () State, county & municipal securities  () Mortgage-backed securities  () Total$ $ $()$ December 31, 2024Amortized
CostGross
Unrealized
GainsGross
Unrealized
LossesFair ValueSecurities Available-for-Sale:U.S. treasury securities$ $ $ $ U.S. agency securities  () Asset backed securities  () State, county & municipal securities  () Corporate debt securities  () Mortgage-backed securities  () Total$ $ $()$ December 31, 2024Amortized
CostGross
Unrealized
GainsGross
Unrealized
LossesFair ValueSecurities Held-to-Maturity:U.S. treasury securities$ $ $()$ U.S. agency securities  () State, county & municipal securities  () Mortgage-backed securities  () Total$ $ $()$

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

million and $ million, and $ million and $ million, respectively, and is included in the "Other assets" line item on the Company’s consolidated balance sheet.

The amortized cost and fair value of investment securities as of March 31, 2025, by contractual maturity, are shown hereafter. Expected maturities may differ from contractual maturities for certain investments because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. $ $ $ Due after one year through five years Due after five years through ten years Due after ten years $ $ $ $ Mortgage-backed securities $ $ $ $

The Company had sales of investment securities for the three month period ended March 31, 2025. For the three month period ended March 31, 2024, the Company had proceeds from the sale of investment securities of $ million which resulted in gross realized losses of $. The purpose of these sales was to restructure underperforming assets and reinvest in assets with higher yields.

Investment securities having a carrying value of approximately $ million and $ million were pledged to secure public deposits and for other purposes as of March 31, 2025 and December 31, 2024, respectively.

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

$()$ $ $ $()U.S. agency securities () ()Asset backed securities () () ()State, county & municipal securities () () ()Corporate debt securities () () ()Mortgage-backed securities () () ()$ $()$ $()$ $()December 31, 2024U.S. treasury securities$ $ $ $ $ $ U.S. agency securities () ()Asset backed securities () () ()State, county & municipal securities () () ()Corporate debt securities () () ()Mortgage-backed securities () () ()$ $()$ $()$ $()

Information pertaining to held-to-maturity securities with gross unrealized losses at March 31, 2025 and December 31, 2024 aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows:

Less Than 12 Months

12 Months or Greater

Total

(dollars in thousands)

Fair
Value

Gross
Unrealized
Losses

Fair
Value

Gross
Unrealized
Losses

Fair
Value

Gross
Unrealized
Losses

March 31, 2025

U.S. treasury securities

()

U.S. agency securities

()

State, county & municipal securities

()

Mortgage-backed securities

()

December 31, 2024

U.S. treasury securities

()

U.S. agency securities

()

State, county & municipal securities

()

Mortgage-backed securities

()

))))))))))

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(6)

(8)

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

$ Letters of credit

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

Standby and performance letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within . The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Legal Contingencies. In the ordinary course of business, there are various legal proceedings pending against the Company and the Bank. As of March 31, 2025, the aggregate liabilities, if any, arising from such proceedings would not, in the opinion of management, have a material adverse effect on the Company’s consolidated financial position.

(9)

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Disclosures of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis, are required in the financial statements.

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

$ $ $ $ Investment securities available-for-sale Investment securities held-to-maturity Other investments Loans held for sale Loans, net Derivative assets LiabilitiesDeposits %

The following table presents quantitative information about recurring level 3 fair value measurements as of March 31, 2025 and December 31, 2024.

As of March 31, 2025

(dollars in thousands)

Fair Value

Valuation
Techniques

Unobservable
Inputs

Range
(Weighted Avg)

Available-for-sale securities

Discounted Cash Flow

Discount Rate or Yield

N/A

As of December 31, 2024

(dollars in thousands)

Fair Value

Valuation
Techniques

Unobservable
Inputs

Range
(Weighted Avg)

Available-for-sale securities

Discounted Cash Flow

Discount Rate or Yield

N/A

The Company’s policy is to recognize transfers in and transfers out of levels 1, 2 and 3 as of the end of a reporting period. There were transfers between levels for the three months ended March 31, 2025.

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(10)

$ $ $ Provision for Credit Losses Net Interest Income after Provision for Credit Losses Mortgage Fee Income Gain on Sale of SBA Loans Other (1) (2) Total Noninterest Income Salaries and Employee Benefits

Other (3)

Total Noninterest Expense Income Taxes Segment Profit$ $ $ $ Segments Assets at March 31, 2025$ $ $ $ Full time employees March 31, 2025(1) Includes service charges on deposits, interchange fees, BOLI income, insurance commissions and other noninterest income.(2) Represents SBA loan related fee income.(3) Includes occupancy and equipment, information technology expense, professional fees, advertising and public relations, communications and other noninterest expenses.

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Other (3)

() Total Noninterest Expense Income Taxes Segment Profit$ $()$ $ Segments Assets at December 31, 2024$ $ $ $ Full time employees at March 31, 2024(1) Includes service charges on deposits, loss on sales of securities, interchange fees, BOLI income, insurance commissions and other noninterest income. (2) Represents SBA loan related fee income.(3) Includes occupancy and equipment, information technology expense, professional fees, advertising and public relations, communications and other noninterest expenses.

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(11)

%$ %$ %Colony Bank Tier 1 Capital to Risk-Weighted AssetsConsolidated Colony Bank Common Equity Tier 1 Capital to Risk-Weighted AssetsConsolidated Colony Bank Tier 1 Capital to Average AssetsConsolidated Colony Bank

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(12)

per share, to be paid on its common stock on May 21, 2025, to shareholders of record as of the close of business on May 7, 2025.

Acquisition of Insurance Company

On April 1, 2025, the Company acquired The Ellerbee Agency, an Allstate appointed consumer property and casualty insurance agency. The agency became part of Colony Insurance, the Company's wholly-owned insurance subsidiary. This acquisition expanded Colony Insurance's footprint and customer base through new office locations in Monroe and Greensboro, Georgia. The purchase price was $ million and should be immediately accretive to earnings per share of approximately $ in the first full year with expected increases thereafter.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of Colony Bankcorp, Inc. and our wholly owned subsidiary, Colony Bank, from December 31, 2024 through March 31, 2025 and on our results of operations for the three months ended March 31, 2025 and 2024. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto in the Company's 2024 Form 10-K, and information presented elsewhere in this Quarterly Report on Form 10-Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.

Forward-looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors discussed elsewhere in this Quarterly Report on Form 10-Q and the following:

•the impact of current and future economic and market conditions generally (including seasonality) and in the financial services industry, nationally and within our primary market areas, including the effects of inflationary pressures, changes in interest rates, supply chain issues, slowdowns in economic growth, and the potential for high unemployment rates, as well as the financial stress on borrowers and changes to customer and client behavior (including the velocity of loan repayment) and credit risk as a result of the foregoing

•changes in interest rate environment (including changes to the federal funds rate, the level and composition of deposits (as well as the cost of, and competition for, deposits), loan demand, liquidity and the values of loan collateral, securities and market fluctuations, and interest rate sensitive assets and liabilities), and competition in our markets may result in increased funding costs or reduced earning assets yields, thus reducing our margins and net interest income;

•uncertainties surrounding geopolitical events, trade policy, taxation policy, and monetary policy which continue to impact the outlook for future economic growth, including U.S. imposition of tariffs and consideration of responsive actions by the impacted nations and/or the expansion of import fees and tariffs among a larger group of nations, which is bringing greater ambiguity to the outlook for future economic growth;

•our ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets;

•the risk that a future economic downturn and contraction, including a recession, could have a material adverse effect on our capital, financial condition, credit quality, results of operations and future growth, including the risk that the strength of the current economic environment could be weakened by the impact of prolonged elevated interest rates, persistent inflation, trade wars or economic uncertainty as a result of the foregoing;

•factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health and credit quality of our borrowers and the success of various projects that we finance;

•concentration of our loan portfolio in real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate;

•changes in the prices, values and sales volumes of commercial and residential real estate, especially as they relate to the value of collateral supporting the Company's loans;

•weakness in the real estate market, which can affect, among other things, the value of collateral securing mortgage loans, mortgage loan originations and delinquencies, and mortgage fee income;

•credit and lending risks associated with our loan portfolios;

•factors that negatively impact our mortgage banking services, including declines in our mortgage originations or profitability due to rising or elevated interest rates and increased competition and regulation, the Bank’s or third party’s failure to satisfy mortgage servicing obligations, loan modifications, the effects of judicial or regulatory requirements or guidance, and the possibility of the Bank being required to repurchase mortgage loans or indemnify buyers;

•the impact of prolonged elevated interest rates on our financial projections and models;

•our ability to attract sufficient loans that meet prudent credit standards;

•our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas;

•our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses ("ACL");

•the adequacy of our reserves (including ACL) and the appropriateness of our methodology for calculating such reserves;

•adverse developments in the banking industry highlighted by high-profile bank failures and the impact of such developments on customer confidence, liquidity and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments and increased regulatory scrutiny), our ability to effectively manage our liquidity risk and any growth plans and the availability of capital and funding;

•our ability to successfully execute our business strategy to achieve profitable growth;

•the concentration of our business within our geographic areas of operation in Georgia, Alabama, Florida and neighboring markets;

•our focus on small and mid-sized businesses;

•our ability to manage our growth;

•our ability to increase our operating efficiency;

•significant turbulence or a disruption in the capital or financial markets and the effect of a fall in stock market prices on our investment securities;

•risks that our cost of funding could increase, in the event we are unable to continue to attract stable, low-cost deposits and reduce our cost of deposits;

•inability of our risk management framework to effectively mitigate credit risk, interest rate risk, liquidity risk, price risk, compliance risk, operational risk (including by virtue of our relationships with third party business partners, as well as our relationships with third party vendors and other service providers), strategic risk, reputational risk and other risks inherent to the business of banking;

•our ability to maintain expenses in line with current projections;

•the makeup of our asset mix and investments;

•external economic, political and/or market factors, such as changes in monetary and fiscal policies and laws, and also including the interest rate policies of the Federal Reserve, inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition;

•the potential implementation of a regulatory reform agenda under the current presidential administration that is significantly different than that of the prior administration, impacting rulemaking, supervision, examination and enforcement priorities of the federal banking agencies;

•continued or increasing competition from other financial institutions (including fintech companies), credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are;

•challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services;

•restraints on the ability of the Bank to pay dividends to us, which could limit our liquidity;

•increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;

•a failure in the internal controls we have implemented to address the risks inherent to the business of banking;

•inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance;

•changes in our management personnel or our inability to retain, motivate and hire qualified management personnel;

•the dependence of our operating model on our ability to attract and retain experienced and talented bankers in each of our markets, which may be impacted as a result of labor shortages;

•our ability to prevent, identify and address cyber-security risks (which may be exacerbated by the development of generative artificial intelligence), fraud and systems errors;

•disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems, and the cost of defending against them and any reputational or other financial risks following such a cybersecurity incident;

•our business relationships with, and reliance upon, third parties that have strategic partnerships with us or that provide key components of our business infrastructure, including the costs of services and products provided to us by third parties, and disruptions in service, security breaches, financial difficulties with or other adverse events affecting a third-party vendor or business relationship;

•an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies;

•fraudulent and negligent acts by our clients, employees or vendors and our ability to identify and address such acts;

•risks related to potential acquisitions, including the risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and may reduce the anticipated benefit;

•the impact of any claims or legal actions to which we may be subject, including any effect on our reputation;

•compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with commercial mortgage origination, sale and servicing operations;

•changes in the scope and cost of Federal Deposit Insurance Corporation ("FDIC") insurance and other coverage;

•changes in our accounting standards;

•changes in tariffs and trade barriers;

•changes in federal tax law or policy;

•the institution and outcome of litigation and other legal proceedings against us or to which we may become subject to;

•the impact of recent and future legislative and regulatory changes;

•examinations by our regulatory authorities;

•the effects of war or other conflicts, civil unrest, acts of terrorism, acts of God, natural disasters, health emergencies, epidemics or pandemics, climate changes, or other catastrophic events that may affect general economic conditions;

•risks related to diversity, equity and inclusion ("DEI") and environmental, social and governance (“ESG”) strategies and initiatives, the scope and pace of which could alter the Company’s reputation and shareholder, associate, customer and third-party affiliations or result in litigation in connection with anti-DEI and anti-ESG laws, rules or activism;

•a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget; and

•other risks and factors identified in our 2024 Form 10-K, this Quarterly Report on Form 10-Q for the period ended March 31, 2025, and in any of the Company's other reports filed with the U.S. Securities and Exchange Commission and available on its website at www.sec.gov.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Overview

The following discussion and analysis presents the more significant factors affecting the Company’s financial condition as of March 31, 2025 and December 31, 2024, and results of operations for the three month periods ended March 31, 2025 and 2024. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements, notes thereto and other financial information appearing elsewhere in this report.

At March 31, 2025, the Company had total consolidated assets of $3.2 billion, total loans, net of $1.9 billion, total deposits of $2.6 billion, and stockholders’ equity of $286.9 million. The Company reported net income of $6.6 million, or $0.38 per diluted share, for the three months ended March 31, 2025 compared to net income of $5.3 million, or $0.30 per diluted share, for the three months ended March 31, 2024. The increase in net income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily a result of increases in interest income, seen in the loan and deposit in banks categories, that was partially offset by decreases in interest expense and noninterest income.

Net interest income on a tax equivalent basis was $21.1 million for the first quarter of 2025 compared to $18.8 million for the first quarter of 2024, an increase of $2.3 million. This increase is the result of an increase in income on interest earning assets along with a decrease in expense on interest bearing liabilities. Income on interest earning assets increased $2.2 million to $35.7 million for the first three months of 2025 compared to the respective period in 2024. Expense on interest bearing liabilities decreased $83,000 to $14.6 million for the first three months of 2025 compared to the respective period in 2024.

Provision for credit losses for the three months ended March 31, 2025 was $1.5 million which represents $1.6 million in provision for credit losses on loans and $123,000 in release of credit losses on unfunded commitments. This is compared to $1.0 million for the three months ended March 31, 2024, which represents $950,000 in provision for credit losses on loans and $50,000 in provision for credit losses on unfunded commitments. For the first quarter of 2025, there were net charge-offs of $606,000 compared to $664,000 for the same period in 2024. Colony’s allowance for credit losses on loans was $20.0 million, or 1.04% of total loans at March 31, 2025, compared to $19.0 million, or 1.03% of total loans, at December 31, 2024. At March 31, 2025 and December 31, 2024, nonperforming assets were $13.0 million and $11.3 million, or 0.41% and 0.36% of total assets, respectively.

Noninterest income of $9.0 million for the first quarter of 2025 represents a decrease of $443,000, or 4.67%, from the first quarter of 2024. This decrease is a result of decreases in service charges on deposit accounts, gain on sales of SBA loans and BOLI income which were partially offset by increases in mortgage fee income and reduced losses on sales of securities. See "Table 3 - Noninterest income" for more detail and discussion on the primary drivers to the decrease in noninterest income.

For the three months ended March 31, 2025, noninterest expense was $20.2 million, a decrease of $176,000, or 0.86%, from the same period in 2024. Decreases in noninterest expense were a result of decreases in salaries and employee benefits, professional fees and advertising and public relation expenses which were partially offset by increases in occupancy and equipment and information technology expenses. See "Table 4 - Noninterest expense" for more detail and discussion on the primary drivers to the decrease in noninterest expense.

Critical Accounting Policies

Our accounting and reporting policies are in accordance with GAAP and conform to general practices within the banking industry. We have identified certain of its accounting policies as “critical accounting policies,” consisting of those related to business combinations, allowance for credit losses and income taxes. In determining which accounting policies are critical in nature, we have identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee on a periodic basis, including the development, selection, implementation and disclosure of the critical accounting policies. The application of these policies has a significant impact on the Company’s unaudited interim consolidated financial statements. Our financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in Note 1 of our consolidated financial statements as of December 31, 2024, which are included in the Company’s 2024 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. Other than our methodology for estimating allowance for credit losses (mentioned below), there have been no significant changes to the Significant Accounting Policies as described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2024, which are included in the Company’s 2024 Form 10-K.

Allowance for Credit Losses

A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic conditions such as rising interest rates and the financial performance of borrower.

The reserve for credit losses consists of the allowance for credit losses (“ACL”) and the allowance for unfunded commitments. As a result of our January 1, 2023 adoption of ASU No. 2016-13, and its related amendments, our methodology for estimating the reserve for credit losses changed significantly from prior years. The standard replaced the "incurred loss" approach with an "expected loss" approach known as the Current Expected Credit Losses (“CECL”). The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred.”

The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable. The allowance for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit. This allowance is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur.

Management’s evaluation of the appropriateness of the reserve for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the reserve for credit losses is a critical accounting estimate as it requires significant reliance on the credit risk rating we assign to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows, reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), local/regional economic trends and conditions,

changes in underwriting standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.

Liquidity sources and capital ratios

The Company’s uninsured deposits represented 32.60% of total Bank deposits at March 31, 2025 compared to 33.03% of total Bank deposits at December 31, 2024. The Company continues to maintain strong liquidity with available sources of funding of approximately $1.3 billion at March 31, 2025. Furthermore, the Company’s capital remains strong with common equity Tier 1 and total capital ratios of 12.62% and 16.52%, respectively, as of March 31, 2025.

Results of Operations

We reported net income and diluted earnings per share of $6.6 million and $0.38, respectively, for the first quarter of 2025. This compares to net income and diluted earnings per share of $5.3 million and $0.30, respectively, for the same period in 2024.

Net Interest Income

Net interest income, which is the difference between interest earned on assets and the interest paid on deposits and borrowed funds, is the single largest component of total revenue. Management strives to optimize this income while balancing interest rate, credit and liquidity risks.

The banking industry uses two key ratios to measure relative profitability of net interest income: net interest spread and net interest margin. The net interest spread measures the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities. The interest rate spread eliminates the effect of noninterest-bearing deposits and gives a direct perspective on the effect of market interest rate movements. The net interest margin is an indication of the profitability of a company's balance sheet and is defined as net interest income as a percent of average total interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and stockholders' equity.

Fully taxable equivalent net interest income for the first quarters of 2025 and 2024 was $21.1 million and $18.8 million, respectively. This increase period over period can be seen in increases in rates on loans and deposits in banks as well as the decrease in rates paid on deposits and other borrowings. The net interest margin for the first quarter of 2025 and 2024 was 2.93% and 2.69%, respectively. The increase in the net interest margin for the first quarter of 2025 compared to the same period in 2024 is primarily a result of increases in rates on loans and deposits in banks as well as the decrease in rates paid on deposits and other borrowings.

The following tables indicates the relationship between interest income and interest expense and the average amounts of assets and liabilities for the periods indicated. As shown in the tables, both average assets and average liabilities increased for the three months ended March 31, 2025 compared to the same period in 2024. The increase in average assets was primarily driven by the increase in deposits in banks of $157.6 million, which was partially offset by decreases in investment securities of $39.4 million and the loan portfolio of $3.3 million. The increase in average liabilities was primarily attributed to an increase in borrowings of $28.0 million as well as an increase in interest bearing deposits of $87.7 million. The net interest spread, as well as the net interest margin, will continue to be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment.

The yield on total interest-bearing liabilities decreased from 2.58% in the first quarter of 2024 to 2.46% in the first quarter of 2025. This decrease was primarily due to decreases in the federal funds interest rate of 100 basis points during the fourth quarter of 2024 along with low cost deposit growth during the first quarter of 2025, which illustrates the Company's continued focus on its deposit first culture and building customer relationships.


Table 1 - Average Balance Sheet and Net Interest Analysis
	Three Months Ended March 31,
	2025						2024
(dollars in thousands)	Average Balances		Income/ Expense		Yields/ Rates		Average Balances		Income/ Expense		Yields/ Rates
Assets
Interest-earning assets:
Loans held for sale	$	23,253	$	328	5.73	%	$	24,612	$	434	7.09	%
Loans, net of unearned income(1)	1,869,476		27,716		6.01		1,871,402		26,711		5.74
Investment securities, taxable	710,293		4,837		2.76		737,257		5,042		2.75
Investment securities, tax-exempt(2)	94,379		494		2.12		106,819		605		2.28
Deposits in banks and short term investments	229,016		2,322		4.11		71,431		693		3.90
Total interest-earning assets	$	2,926,417	$	35,697	4.95	%	$	2,811,521	$	33,485	4.79	%
Noninterest-earning assets	222,904						224,572
Total assets	$	3,149,321					$	3,036,093
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-earning demand and savings	$	1,549,509	$	6,468	1.69	%	$	1,451,490	$	6,408	1.78	%
Other time	601,920		5,305		3.57		612,241		5,683		3.73
Total interest-bearing deposits	2,151,429		11,773		2.22		2,063,731		12,091		2.36
Federal funds purchased	—		—		—		13		—		—
Federal Home Loan Bank advances	185,000		1,873		4.10		156,978		1,572		4.03

The following table presents the effect of net interest income for changes in the average outstanding volume amounts of interest-earning assets and interest-bearing liabilities and the rates earned and paid on these assets and liabilities for the three month period ended March 31, 2025 compared to the three month period ended March 31, 2024.


(dollars in thousands)	Volume		Rate		Total
Interest-earning assets:
Loans held for sale	$	(96)	$	(10)	$	(106)
Loans, net of unearned fees	(111)		1,116		1,005
Investment securities, taxable	(742)		537		(205)
Investment securities, tax-exempt	(284)		173		(111)
Deposits in banks and short term investments	6,146		(4,517)		1,629
Total interest-earning assets (FTE)	4,913		(2,701)		2,212
Interest-bearing liabilities:
Interest-Bearing Demand and Savings Deposits	1,745		(1,685)		60
Time Deposits	(385)		7		(378)

Federal Home Loan Bank Advances	1,129		(828)		301

Other Borrowed Money	(2)		(64)		(66)
Total interest-bearing liabilities	2,487		(2,570)		(83)
Increase (decrease) in net interest income (FTE)	$	2,426	$	(131)	$	2,295

Provision for Credit Losses

The provision for credit losses recorded in each period is based on the amount required such that the total allowance for credit losses reflects the appropriate balance, in the estimation of management, sufficient to cover expected credit losses over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur. Provision for credit losses for the three months ended March 31, 2025 was $1.5 million compared to $1.0 million for the same period in 2024. The provision for credit losses for the three months ended March 31, 2025 includes $1.6 million in credit losses on loans and $123,000 in release of credit losses on unfunded commitments. The provision for credit losses for the three months ended March 31, 2024 includes $950,000 in credit losses on loans and $50,000 in provision for credit losses on unfunded commitments. See the section captioned “Loans and Allowance for Credit Losses” elsewhere in this discussion for further analysis of the provision for credit losses.

Noninterest Income

The following table represents the major components of noninterest income for the periods indicated.


Table 3 - Noninterest Income
(dollars in thousands)	2025		2024		Amount		Percent
Service charges on deposits	$	2,172	$	2,373	$	(201)	(8.5)	%
Mortgage fee income	1,579		1,249		330		26.4
Gain on sales of SBA loans	1,035		2,046		(1,011)		(49.4)
Loss on sales of securities	—		(555)		555		100.0
Interchange fees	1,938		2,028		(90)		(4.4)
BOLI income	396		533		(137)		(25.7)
Insurance commissions	469		465		4		0.9
Other noninterest income	1,455		1,348		107		7.9
Total noninterest income	$	9,044	$	9,487	$	(443)	(4.7)	%

Noninterest income decreased for the three month period ended March 31, 2025 as compared to the same period in 2024. The decrease is primarily a result of decreases in service charges on deposit accounts, gain on sales of SBA loans and BOLI income which were partially offset by increases in mortgage fee income and reduced losses on sales of securities.

Service charges on deposits. For the three months ended March 31, 2025, service charges on deposits experienced a decrease compared to the same period ended March 31, 2024. This decrease in service charges is primarily related to the impact of lower NSF fees on deposit accounts period over period.

Mortgage Fee Income. For the three months ended March 31, 2025, mortgage fee income increased as compared to the same period ended March 31, 2024. The increase in mortgage fee income was the result of higher mortgage production period over period.

Gain on sales of SBA loans. For the three months ended March 31, 2025, net realized gains on the sale of the guaranteed portion of SBA loans decreased as compared to the same period ended March 31, 2024. This decrease is related to decreased production and sales in 2025 in the Small Business Specialty Lending division, which hit its highest mark during the first quarter of 2024.

BOLI income. For the three months ended March 31, 2025, BOLI income was lower when compared to the same period ended March 31, 2024. This decrease is primarily related to reduced income due to the payout of death benefits during the first quarter of 2024.

Interchange fees. For the three months ended March 31, 2025, interchange fee income was slightly lower than the same period ended March 31, 2024. This minimal decrease in interchange fees is the result of customer use of our card programs whose buying habits can fluctuate between periods.

Insurance commissions. For the three months ended March 31, 2025, insurance commissions increased slightly compared to the same period ended March 31, 2024. This variance is volume driven by activity in the Company's insurance division.

Other noninterest income. For the three months ended March 31, 2025, other noninterest income increased as compared to the same period ended March 31, 2024. The increase in other noninterest income for the three month period ended March 31, 2025 was primarily attributable to increases in wealth advisory and merchant services, SBA servicing and other related fee income and an increase in equity investment market valuation gains, offset by a decrease in gains on sales of other real estate.

Noninterest Expense

The following table represents the major components of noninterest expense for the periods indicated.


Table 4 - Noninterest Expense
(dollars in thousands)	2025		2024		Amount		Percent
Salaries and employee benefits	$	11,905	$	12,018	$	(113)	(0.9)	%
Occupancy and equipment	1,580		1,507		73		4.8
Information technology expenses	2,477		2,110		367		17.4
Professional fees	748		834		(86)		(10.3)
Advertising and public relations	805		960		(155)		(16.1)
Communications	205		226		(21)		(9.3)


Other noninterest expense	2,501		2,742		(241)		(8.8)
Total noninterest expense	$	20,221	$	20,397	$	(176)	(0.9)	%

Noninterest expense decreased for the three months ended March 31, 2025 compared to the same period in 2024.

Salaries and employee benefits. Salaries and employee benefits for the three months ended March 31, 2025 decreased as compared to the same period ended March 31, 2024. The decrease in salaries and employee benefits expense is related to an increase in FAS91-deferred costs due to growth in loans as well as a decrease in total number of employees period over period.

Occupancy and equipment. Occupancy and equipment expenses increased for the three months ended March 31, 2025 compared to the same period ended March 31, 2024. This increase relates primarily to increases in repair and maintenance, real estate taxes and lease expenses.

Information technology expenses. Information technology expenses increased for the three months ended March 31, 2025 compared to the same period ended March 31, 2024. This increase relates primarily to an increase in software expenses.

Professional fees. Professional fees decreased for the three months ended March 31, 2025 compared to the same period ended March 31, 2024. This decrease is the result of decreased legal fees partially offset by increased audit and consulting fees.

Advertising and public relations. Advertising and public relations expenses decreased for the three months ended March 31, 2025 compared to the same period ended March 31, 2024. This decrease related primarily to the timing of donations during the first quarter of 2024 compared to first quarter of 2025 related to the Georgia Scholarship Program.

Communications. Communications expense decreased for the three months ended March 31, 2025 compared to the same period ended March 31, 2024. The change is related to fluctuations in data circuit fees.

Other noninterest expense. Other noninterest expense decreased for the three months ended March 31, 2025 as compared to the same period ended March 31, 2024. This decrease relates primarily to decreases in amortization of intangibles and FDIC assessment expenses which are partially offset by increased deposit and loan related costs.

Income Tax Expense

Income tax expense for the three months ended March 31, 2025 was $1.7 million compared to $1.4 million for the same period in 2024. The Company’s effective tax rate for the three months ended March 31, 2025 was 20.1% compared to 20.9% for the three months ended March 31, 2024. The largest driver of the difference is the tax-exempt income primarily from BOLI and tax exempt interest. Also, in the first quarter of 2024, the Company experienced a favorable tax impact from the donation made to the Georgia Scholarship Program.

Balance Sheet Review

Total assets increased to $3.2 billion for March 31, 2025 from $3.1 billion at December 31, 2024.

Loans and Allowance for Credit Losses

At March 31, 2025, gross loans outstanding (excluding loans held for sale) were $1.92 billion, an increase of $78.3 million, or 4.25%, compared to $1.84 billion at December 31, 2024.

At March 31, 2025, approximately 65.7% of our loans were secured by commercial real estate. Our total commercial real estate loans have increased since December 31, 2024 as well as our residential real estate and consumer lending, while commercial, financial & agricultural saw a slight decrease. We continue to maintain competitive loan pricing and tightened credit standards, reflected by our loan growth in the first quarter of 2025 performing better than anticipated, and sets a solid foundation for performance going forward.

The following table presents a summary of the loan portfolio as of March 31, 2025 and December 31, 2024.


Table 5 - Loans Outstanding
(dollars in thousands)	March 31, 2025		December 31, 2024
Construction, land & land development	$	208,872	$	205,046
Other commercial real estate	1,052,967		990,648
Total commercial real estate	1,261,839		1,195,694
Residential real estate	345,521		344,167
Commercial, financial & agricultural	213,355		213,910
Consumer and other	100,548		89,209
Total loans	$	1,921,263	$	1,842,980

The Company's risk mitigation processes include an independent loan review designed to evaluate the credit risk in the loan portfolio and to ensure credit grade accuracy. The analysis serves as a tool to assist management in assessing the overall credit quality of the loan portfolio and the adequacy of the allowance for credit losses. Loans classified as "substandard" are loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower and/or the collateral pledged. These assets exhibit well-defined weaknesses or are showing signs there is a distinct possibility the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as "doubtful" are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as "loss" are those loans which are considered uncollectible and are in the process of being charged off.

The Company regularly monitors the composition of the loan portfolio as part of its evaluation over the adequacy of the allowance for credit losses. The Company focuses on the following loan categories: (1) construction, land & land development; (2) other commercial real estate; (3) residential real estate; (4) commercial, financial & agricultural; and (5) consumer and other.

The allowance for credit losses for loans is a reserve established through charges to earnings in the form of a provision for credit losses. The provision for credit losses for loans is based on management’s evaluation of the size and composition of the loan portfolio, the level of nonperforming and past due loans, historical trends of charged off loans and recoveries, prevailing economic conditions and other factors management deems appropriate. The Company’s management has established an allowance for credit losses for loans which it believes is adequate to cover expected credit losses over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur. Based on a credit evaluation of the loan portfolio, management presents a quarterly review of the allowance for credit losses for loans and allowance for credit losses on unfunded commitments to the Company’s Board of Directors, which primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner, the Company’s management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for credit losses on loans.

The allowance for credit losses on loans is established by examining (1) the large classified loans, nonaccrual loans and loans considered impaired and evaluating them individually to determine the specific reserve allocation and (2) the remainder of the loan portfolio to allocate a portion of the allowance based on past loss experience and reasonable and supportable forecasts of economic conditions for the particular loan category. The Company also considers other factors such as changes in lending policies and procedures; changes in national, regional and/or local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of either the market president or

lending staff; changes in the volume and severity of past due and classified loans; changes in the quality of the loan review system; and other factors management deems appropriate.

The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The ACL is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund.

The allowance for credit losses on loans was $20.0 million at March 31, 2025 compared to $18.7 million at March 31, 2024, an increase of $1.3 million, or 7.2%. The allowance for credit losses on loans as a percentage of loans was 1.04% and 1.00% at March 31, 2025 and 2024, respectively. The provision for credit losses was $1.5 million compared to $1.0 million for the three months ended March 31, 2025 and March 31, 2024, respectively. The provision for credit losses for the quarter ended March 31, 2025 includes $1.6 million in credit losses on loans and a release of $123,000 in credit losses on unfunded commitments. The provision for credit losses for the quarter ended March 31, 2024 includes $1.0 million in credit losses on loans and a provision of $50,000 in credit losses on unfunded commitments. The amount of provision expense recorded in each period was the amount required such that the total allowance for credit losses reflected the appropriate balance, in the estimation of management, that was sufficient to cover expected credit losses on loans over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur.

Additional information about the Company’s allowance for credit losses is provided in Note 4 to our consolidated financial statements as of March 31, 2025, included elsewhere in this Quarterly Report on Form 10-Q.

The following table presents an analysis of the allowance for credit losses on loans as of and for the three months ended March 31, 2025 and 2024:


Table 6 - Analysis of Allowance for Credit Losses on Loans
	March 31, 2025				March 31, 2024
(dollars in thousands)	Reserve		%*		Reserve		%*
Construction, land & land development	$	1,078	10.9	%	$	2,046	12.6	%
Other commercial real estate	6,515		54.8	%	7,389		52.2	%
Residential real estate	5,753		18.0	%	5,327		18.7	%
Commercial, financial & agricultural	3,545		11.1	%	2,020		12.9	%
Consumer and other	3,106		5.2	%	1,875		3.6	%
	$	19,997	100	%	$	18,657	100	%

*Percentage represents the loan balance in each category expressed as a percentage of total end of period loans.

The following table presents a summary of allowance for credit loss for the three months ended March 31, 2025 and 2024.


Table 7 - Summary of Allowance for Credit Losses on Loans
(dollars in thousands)	March 31, 2025			March 31, 2024
Allowance for credit losses on loans - beginning balance	$	18,980		$	18,371

Charge-offs:

Other commercial real estate	180			20
Residential real estate	1			70
Commercial, financial & agricultural	262			658
Consumer and other	276			120
Total charge-offs	719			868
Recoveries:
Construction, land & land development	1			1
Other commercial real estate	5			9
Residential real estate	40			168
Commercial, financial & agricultural	55			22
Consumer and other	12			4
Total recoveries	113			204
Net charge-offs	606			664
Provision for credit losses on loans	1,623			950
Allowance for credit losses on loans- ending balance	$	19,997		$	18,657

Net charge-offs to average loans (annualized)	0.13		%	0.14		%
Allowance for credit losses on loans to total loans	1.04			1.00
Allowance to nonperforming loans	160.26			290.11

The Company had ten loans modified due to financial difficulty as of March 31, 2025. See Note 3 - Loans, included elsewhere in this Quarterly Report on Form 10-Q for additional details on loan modifications.

Deposits

Deposits at March 31, 2025 and December 31, 2024 were as follows:


Table 9 - Deposits
(dollars in thousands)	March 31, 2025		December 31, 2024
Noninterest-bearing deposits	$	449,818	$	462,283
Interest-bearing deposits	873,156		813,783
Savings	689,446		687,603
Time, $250,000 and over	189,466		185,176
Other time	420,645		419,098
Total deposits	$	2,622,531	$	2,567,943

Total deposits increased $54.6 million to $2.62 billion at March 31, 2025 from $2.57 billion at December 31, 2024. As of March 31, 2025, 17.2% of total deposits were comprised of noninterest-bearing accounts and 82.8% were comprised of interest-bearing deposit accounts, compared to 18.0% and 82.0% as of December 31, 2024, respectively. The overall increase in our deposits was primarily due to the Company's ability to continue to attract interest-bearing deposits despite the challenging interest rate environment, and the decrease in noninterest-bearing deposits due to customer cash flow needs.

We had $59.5 million in brokered deposits at both March 31, 2025 and December 31, 2024. We use brokered deposits, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network, which are our principal source of funding. Our level of brokered deposits varies from time to time depending on competitive interest rate conditions and other factors, and tends to increase as a percentage of total deposits when the brokered deposits are less costly than issuing internet certificates of deposit or borrowing from the FHLB.

The Company's estimated uninsured deposits were $863.2 million at March 31, 2025, or 32.60% of total Bank deposits, compared to $857.6 million at December 31, 2024, or 33.03% of total Bank deposits. Adjusted uninsured deposit estimate (which excludes deposits collateralized by public funds and internal accounts) were $475.2 million at March 31, 2025, or 17.94% of total Bank deposits, compared to $457.3 million at December 31, 2024, or 17.61% of total Bank deposits. Adjusted uninsured deposits represent a small percentage of our overall deposits, which increases the stability of our deposit base and lowers our overall funding risk.

Off-Balance Sheet Arrangements

The Company is a party to credit related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, upon extension of credit, is based on management’s credit evaluation of the borrower. The type of collateral held varies, but may include cash or cash equivalents, unimproved or improved real estate, personal property or other acceptable collateral.

See Note 8 to our consolidated financial statements as of March 31, 2025, included elsewhere in this Form 10-Q, for a table setting forth the financial instruments that were outstanding whose contract amounts represent credit risk and more information regarding our off-balance sheet arrangements as of March 31, 2025 and December 31, 2024.

Liquidity

An important part of the Bank's liquidity resides in the asset portion of the balance sheet, which provides liquidity primarily through loan interest and principal repayments and the maturities and sales of securities, as well as the ability to use these assets as collateral for borrowings on a secured basis.

The Bank's main source of liquidity is customer interest-bearing and noninterest-bearing deposit accounts. Liquidity is also available from wholesale funding sources consisting primarily of federal funds purchased, FHLB advances and brokered deposits. These sources of liquidity are generally short-term in nature and are used as necessary to fund asset growth and meet other short-term liquidity needs.

To plan for contingent sources of funding not satisfied by both local and out-of-market deposit balances, the Company and the Bank have established multiple borrowing sources to augment their funds management. The Company has borrowing capacity through membership in the FHLB program. The Bank has also established overnight borrowing for federal funds purchased through various correspondent banks. There were no outstanding balances of federal funds purchased at March 31, 2025 and December 31, 2024, respectively.

Cash and cash equivalents at March 31, 2025 and December 31, 2024 were $221.2 million and $231.0 million, respectively. Cash and cash equivalents have decreased slightly since year end 2024, primarily due to increases in loans. Management believes the various funding sources discussed above are adequate to meet the Company’s liquidity needs without any material adverse impact on our operating results.

Liquidity management involves the matching of cash flow requirements of customers and the ability of the Company to manage those requirements. These requirements of customers include, but are not limited to, deposits being withdrawn or providing assurance to borrowers that sufficient funds are available to meet their credit needs. We strive to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance we have in short-term assets at any given time will adequately cover any reasonably anticipated need for funds. Additionally, we maintain relationships with correspondent banks, which could provide funds on short notice, if needed. We have also invested in FHLB stock for the purpose of establishing credit lines with the FHLB. At March 31, 2025 and December 31, 2024, we had $185.0 million of outstanding advances from the FHLB for both periods. Based on the values of loans pledged as collateral, we had $589.7 million and $578.7 million of additional borrowing availability with the FHLB at March 31, 2025 and December 31, 2024, respectively.

Other sources of liquidity include overnight borrowings from the Federal Reserve Discount Window of $104.4 million of which there was no outstanding balance at March 31, 2025. The Company also had unencumbered securities of $341.7 million, $185.7 million in FRB Reserves and $31.8 million in other cash and due from banks as of March 31, 2025. Unencumbered investment securities provide the ability to either be pledged as collateral with borrowing sources or sold and converted to cash.

The Company is a separate entity from the Bank, and as such it must provide for its own liquidity. The Company is responsible for the payment of dividends declared for its common shareholders and payment of interest and principal on any outstanding debt or trust preferred securities. These obligations are met through internal capital resources such as service fees and dividends from the Bank, which are limited by applicable laws and regulations.

Capital Resources

The Company and the Bank are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution’s overall capital adequacy.

The table below summarizes the capital requirements applicable to the Company and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company's and the Bank’s capital ratios as of March 31, 2025 and December 31, 2024. The Company and the Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of March 31, 2025 and December 31, 2024. There have been no conditions or events since March 31, 2025 that management believes would change this classification.


Table 10 - Capital Ratio Requirements
	Minimum Requirement		Well-capitalized
Risk-based ratios:
Common equity tier 1 capital (CET1)	4.5	%	6.5	%
Tier 1 capital	6.0		8.0
Total capital	8.0		10.0
Leverage ratio	4.0		5.0


Table 11 - Capital Ratios
Company	March 31, 2025		December 31, 2024
CET1 risk-based capital ratio	12.62	%	13.08	%
Tier 1 risk-based capital ratio	13.75		14.26
Total risk-based capital ratio	16.52		17.10
Leverage ratio	9.43		9.50

Colony Bank
CET1 risk-based capital ratio	14.05	%	14.33	%
Tier 1 risk-based capital ratio	14.05		14.33
Total risk-based capital ratio	15.01		15.29
Leverage ratio	9.62		9.55

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's primary market risk exposures are credit risk, interest rate risk, and to a lesser degree, liquidity risk. The Bank operates under an Asset Liability Management Policy which is approved by the Asset/Liability Management Committee, which is a Board committee that meets regularly. The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the net market values of assets and liabilities over certain changes in interest rate environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on the Bank's assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk and the process for the approval, implementation and monitoring of interest rate risk strategies to achieve the Bank's interest rate risk objectives.

The following table presents our interest sensitivity position at the dates indicated.


Table 12 - Interest Sensitivity
	Increase (Decrease) in Net Interest Income from Base Scenario at
	March 31, 2025	December 31, 2024
Changes in rates
200 basis point increase	5.59%	5.66%
100 basis point increase	2.91	3.03
100 basis point decrease	(1.16)	(1.80)
200 basis point decrease	(2.68)	(3.77)

See Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of the Company’s 2024 Form 10-K for additional disclosures related to market and interest rate risk.

There are no material changes during the period covered by this Report to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” previously disclosed in the Company's 2024 Form 10-K.

ITEM 4 – CONTROLS AND PROCEDURES

Under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for ensuring that information the Company is required to disclose in reports that it files or submits under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to the Company's senior management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended March 31, 2025, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

In the ordinary course of business, there are various legal proceedings pending against the Company and the Bank. The aggregate liabilities, if any, arising from such proceedings would not, in the opinion of management, have a material adverse effect on the Company’s consolidated financial position.

ITEM 1A – RISK FACTORS

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in "Part I - Item IA - Risk Factors” of the Company’s 2024 Form 10-K, which could materially affect its business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.

There are no material changes during the period covered by this Report to the risk factors previously disclosed in the Company's 2024 Form 10-K.

ITEM 2 – UNREGISTERED SALE OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) There were no unregistered shares of the Company’s common stock sold during the three-month period ended March 31, 2025.

(b) Not applicable.

(dollars in thousands, except per share data)

Total Number of Shares Repurchased

Average Price Paid per Share

Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs

Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

10.1

Employment Agreement between Colony Bankcorp, Inc. and Leonard Bateman, Jr. - filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File No. 001-42397), file d with the Commission on January 22, 2025 and incorporated herein by reference.

31.1

Certificate of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

31.2

Certificate of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024; (ii) Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2025 and 2024; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2025 and 2024; (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2025 and 2024; (v) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements*

104

The cover page from Colony Bankcorp’s Quarterly Report on Form 10-Q for the three months ended March 31, 2025 (formatted in Inline XBRL and included in Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Colony Bankcorp, Inc.


			/s/ T. Heath Fountain
Date: May 9, 2025			T. Heath Fountain
			Chief Executive Officer
			(Principal Executive Officer)



Date: May 9, 2025			/s/ Derek Shelnutt
			Derek Shelnutt
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

COLONY BANKCORP INC - Quarter Report: 2025 March (Form 10-Q)

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