Colony Bank Achieves 1.20% ROA Target, Sets Stage for First Reliance Merger
The Southeast regional bank is squeezing more from its balance sheet while keeping loan growth disciplined.
CBAN · Earnings Call · 2026-07-23
Executing on M&A and Operating Leverage
Colony Bankcorp reported a strong second quarter, achieving a key profitability milestone: a 1.20% operating ROA. This came just two quarters after the TC Federal systems conversion, highlighting the success of its M&A strategy. The company is now gearing up for the First Reliance merger, with a legal close expected in Q4. CEO Heath Fountain noted, “We are pleased to report continued improvement in our financial performance for the quarter” — Heath Fountain, CEO · 2026-07-23. The stock trades near its 52-week high, reflecting investor confidence.
Our expectation was to achieve a 1.20% operating ROA after fully realizing our targeted cost saves, we were able to hit that 1.20% operating ROA this quarter.
The path to this target was driven by continued margin expansion and expense discipline. CFO Derek Shelnutt highlighted that earning asset yields increased six basis points, lifting net interest income by approximately $700,000. He added, “we still have some upward repricing on the asset side that we will be able to capture to improve margin” — Derek Shelnutt, CFO · 2026-07-23. The bank's repricing schedule remains a key tailwind, with new and renewed loan yields at 7.14% versus a portfolio yield around 6.35%.
Balancing Growth with Profitability
While loan growth came in at 8.5% annualized, management acknowledged a softening pipeline due to a rising rate outlook. The pricing discipline that helped achieve the ROA target is also tempering volume. CEO Heath Fountain explained, “our team clearly recognizes that deposits are priority one” — Heath Fountain, CEO · 2026-07-23, and the bank is adding private banker talent in markets like Columbus and Savannah to drive core deposit relationships. This approach echoes prior quarters: in April, Fountain noted, “we've been able to do is price things from a relationship perspective, be willing to be disciplined on that, walk away from deals that don't hit return objectives” — T. Fountain, CEO · 2026-01-29. The consistent focus on high-quality growth is paying off, as evidenced by the margin expansion.
Financially, the company's momentum is clear. Net interest income rose to $29 million, up 39% year-over-year, driven by both loan growth and repricing. The efficiency ratio improved to 49.8%, and tangible book value per share climbed to $15.12. The bank is also generating meaningful fee income across mortgage, insurance, and merchant services, with assets under management surging to $637 million. As it integrates First Reliance, the combined company will benefit from larger lending limits and expanded market share, setting up for continued organic growth. This steady execution, combined with a supportive rate environment for repricing, suggests Colony Bank is well-positioned to deliver on its long-term profitability and growth targets.