Colony Bank(US:CBAN)2022-10-21 15:57Financial Data and Key Metrics Changes - The company reported an improvement in earnings in Q3 2022 compared to Q2 2022, with core banking business contributing approximately 93% of earnings this quarter, up from about 75% in the previous two years [4] - Loan growth increased over 9% from the previous quarter, translating to an annualized growth rate of approximately 37% [5] - The loan-to-deposit ratio improved from 62% last quarter to 66% this quarter, up from 56% at the end of the previous year [6] - Net interest income increased by 9% from the previous quarter, with the margin rising from 3.15% to 3.25% [6] Business Line Data and Key Metrics Changes - Mortgage origination was slightly down from the previous quarter but remained strong given the current rate environment, with a noted shortage of inventory in key markets [8] - The government guaranteed business, referred to as SBSL, experienced a slight decline compared to the previous quarter, but the company expects a strong finish to the year [9] - The company is focusing on improving profitability in new business lines, which currently incur a drag of about $800,000 in net expenses per quarter [11] Market Data and Key Metrics Changes - The company is seeing loan growth across various markets, including Atlanta, Middle Georgia, Coastal Georgia, and Birmingham, with strong pipelines in these areas [18][20] - Birmingham is identified as a new market with significant growth potential, expected to compete well against larger regional banks [22] Company Strategy and Development Direction - The company aims to achieve a return on assets (ROA) of 1.20% by the end of 2024, currently at 0.75% [9] - A stock buyback plan of $12 million has been authorized, representing about 5% of shares outstanding, to take advantage of current market conditions [16] - The company is focused on organic funding strategies and will resort to wholesale funding only if necessary [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving near-term loan growth and emphasized the importance of maintaining a strong credit quality despite tightening credit boxes [14][40] - The company is monitoring the potential negative impact on its accumulated other comprehensive income (AOCI) due to declining securities values in a rising rate environment [15] - Management acknowledged the challenges posed by the current deposit environment but remains optimistic about the company's ability to grow loans and manage expenses effectively [31][32] Other Important Information - The company moved $190 million of securities to held-to-maturity to mitigate potential negative impacts from rising interest rates [15] - The cost of funds at the end of the quarter was approximately 50 to 55 basis points [59] Q&A Session Summary Question: Loan growth by market - Management noted strength in loan growth across various markets, including Birmingham, with expectations for continued growth [18][20] Question: Potential of Birmingham market - Management believes Birmingham has significant growth potential and can become as large as Middle Georgia and Coastal Georgia over time [21][22] Question: Margin expansion and funding capabilities - Management discussed the balance between loan growth and funding capabilities, indicating a focus on organic funding [27][29] Question: Operating expense outlook - Management anticipates some pressure on personnel expenses but believes overall operating expenses will remain stable in the near term [31][32] Question: Loan segments growth - Management reported loan growth across all segments, particularly in commercial real estate and mortgage categories [34][35] Question: Impact of new business lines on profitability - Management aims to eliminate the drag from new business lines by late 2023, with a focus on profitability [53] Question: Builder finance segment and inventory management - Builders in key markets are managing inventory conservatively, with a positive outlook despite challenges from rising rates [55][56]