Q2 2026 Colony Bankcorp Inc Earnings Call

July 23, 2026

Speaker #1: Thank you for standing by. My name is Prila, and I will be your conference operator today. At this time, I would like to welcome everyone to the Colony Bankcorp Q2 2026 conference call.

Operator: Thank you for standing by. My name is Prilla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Colony Bankcorp, Inc. Q2 2026 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star followed by the number 1 on your telephone keypad.

Operator: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the conference over to Brantley Collins, Communications Manager. You may begin.

Speaker #1: If you would like to withdraw your question, please press star 1 again. Thank you. I would now like to turn the conference over to Bradley Collins, Communications Manager. You may begin.

Operator: If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the conference over to Brantley Collins, Communications Manager. You may begin.

Speaker #2: Thanks, Prila. Before we get started, I would like to go through our standard disclosures. Certain statements we make on this call could be construed as forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.

Brantley Collins: Thanks, Prilla. Before we get started, I would like to go through our standard disclosures. Certain statements we make on this call could be constituted as forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Current and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance but involve known and unknown risks and uncertainties. Factors that could cause these differences include, but are not limited to, pandemics, variations of the company's assets, businesses, cash flows, financial condition, prospects, and other results of operations. Additional cautionary statements related to the First Reliance merger are located in our merger press release, merger investor presentation, and SEC filings, all of which are available on our website.

Speaker #2: Current and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, but involve known and unknown risks and uncertainties.

Speaker #2: Factors that could cause these differences include, but are not limited to: pandemics; variations in the company's assets, businesses, cash flows, financial condition, prospects, and other results of operations. Additional cautionary statements related to the First Reliance merger are located in our merger press release, merger investor presentation, and SEC filings, all of which are available on our website.

Brantley Collins: Factors that could cause these differences include, but are not limited to, pandemics, variations of the company's assets, businesses, cash flows, financial condition, prospects, and other results of operations. Additional cautionary statements related to the First Reliance merger are located in our merger press release, merger investor presentation, and SEC filings, all of which are available on our website.

Speaker #2: I would also like to add that during our call today, we will reference our second quarter earnings release and investor presentation, which were both filed yesterday, so please have those available to reference.

Brantley Collins: I would also like to add that during our call today, we will reference our Q2 earnings release and investor presentation, which were both filed yesterday. Please have those available to reference. With that, I will turn the call over to our Chief Executive Officer, Heath Fountain.

Speaker #2: And with that, I will turn the call over to our Chief Executive Officer, Heath Fountain.

Speaker #3: Thanks, Bradley, and thank you to everyone for joining our second quarter earnings call today. We are pleased to report continued improvement in our financial performance for the quarter, and I'm proud of our team members for all the work they are doing to help us achieve our objectives.

T. Heath Fountain: Thanks, Brantley, thank you to everyone for joining our Q2 earnings call today. We are pleased to report continued improvement in our financial performance for the quarter, and I'm proud of our team members for all the work they are doing to help us achieve our objectives. A major highlight from the quarter was the announcement of our partnership with First Reliance Bank. Integration planning is already well underway, with both management teams working closely together to ensure we remain on track for a legal close in the Q4. On the regulatory front, our merger applications have been submitted, we expect to file the S4 in the near future. The Q2 also marked our first full period of performance following the successful TC Federal systems conversion and customer integration in Q1.

Speaker #3: A major highlight from the quarter was the announcement of our partnership with First Reliance Bank, integration planning is already well underway with both management teams working closely together to ensure we remain on track for a legal close in the fourth quarter.

T. Heath Fountain: Integration planning is already well underway, with both management teams working closely together to ensure we remain on track for a legal close in the Q4. On the regulatory front, our merger applications have been submitted, we expect to file the S4 in the near future. The Q2 also marked our first full period of performance following the successful TC Federal systems conversion and customer integration in Q1.

Speaker #3: On the regulatory front, our merger applications have been submitted and we expect to file the S4 in the near future. The second quarter also marked our first full period of performance following the successful TC Federal Systems conversion and customer integration in Q1.

Speaker #3: Our expectation was to achieve a 1.20% operating ROA after fully realizing our targeted cost saves and we were able to hit that 1.20% operating ROA this quarter.

T. Heath Fountain: Our expectation was to achieve a 1.20% operating ROA after fully realizing our targeted cost saves, and we were able to hit that 1.20% operating ROA this quarter. We believe this puts us in a good position to improve on that operating ROA going forward. Operating net income increased over $1.5 million from last quarter. The primary drivers of the increase were continued margin expansion, improved operating non-interest income, as well as decreased operating non-interest expense. Loan growth during the quarter was about 8.5% annualized as we saw an increase in production compared to the Q1. This brings us up to 7% annualized loan growth year to date. The weighted average pricing on new and renewed loans remained steady and actually increasing slightly from the Q1 as we keep pricing discipline a priority.

Speaker #3: We believe this puts us in a good position to improve on that operating ROA going forward. Operating net income increased over 1.5 million dollars from last quarter.

Speaker #3: The primary drivers of the increase were continued margin expansion, improved operating non-interest income, as well as decreased operating non-interest expense. Loan growth during the quarter was about 8.5% annualized as we saw an increase in production compared to the first quarter.

T. Heath Fountain: Loan growth during the quarter was about 8.5% annualized as we saw an increase in production compared to the Q1. This brings us up to 7% annualized loan growth year to date. The weighted average pricing on new and renewed loans remained steady and actually increasing slightly from the Q1 as we keep pricing discipline a priority.

Speaker #3: This brings us up to 7% annualized loan growth year to date. The weighted average pricing on new and renewed loans remained steady, actually increasing slightly from the first quarter, as we keep pricing discipline a priority.

Speaker #3: I'm proud of our team's efforts on pricing, which is one of the key factors that drives our continued margin growth. The lending environment is competitive and a rising rate outlook has resulted in some softening of the pipeline.

T. Heath Fountain: I'm proud of our team's efforts on pricing, which is one of the key factors that drives our continued margin growth. The lending environment is competitive and a rising rate outlook has resulted in some softening of the pipeline. While we previously expected loan growth to track towards the lower end of our 8% to 12% target, our commitment to disciplined pricing and strong underwriting standards means near-term growth could land slightly below our 8% threshold. We believe in the short term that achieving our financial objectives is important, achieving organic growth near the low end of our range helps us achieve our long-term financial goals rather than growing in a way that puts pressure on our financial performance or diminishes the strength of our balance sheet. We saw a slight decline in total deposits this quarter.

Speaker #3: While we previously expected loan growth to track towards the lower end of our 8 to 12% target, our commitment to discipline pricing and strong underwriting standards means near-term growth could land slightly below our 8% threshold.

Speaker #3: We believe in the short term that achieving our financial objectives is important, and achieving organic growth near the low end of our range helps us achieve our long-term financial goals rather than growing in a way that puts pressure on our financial performance or diminishes the strength of our balance sheet.

T. Heath Fountain: We believe in the short term that achieving our financial objectives is important, achieving organic growth near the low end of our range helps us achieve our long-term financial goals rather than growing in a way that puts pressure on our financial performance or diminishes the strength of our balance sheet. We saw a slight decline in total deposits this quarter.

Speaker #3: We saw a slight decline in total deposits this quarter, while this is a normal seasonal trend for us. Deposit landscape across our footprint does remain competitive.

T. Heath Fountain: While this is a normal seasonal trend for us, deposit landscape across our footprint does remain competitive. We have managed to maintain a steady cost of funds, and our team members continue to focus on building deposit-first relationships with a focus on operating accounts and primary consumer account relationships. Operating non-interest income increased by about $950,000 from Q1, which was led by increased revenue from many of our business lines and operating non-interest expense declined more than $500,000. Our SBSL division had improvement on a pre-tax basis, as shown on slide 19. However, we still have a lot of opportunity for more improvement and expect that to start to show over the next few quarters. In addition to finding the right partners to grow with through M&A, organic growth is also a key part of our long-term strategy.

Speaker #3: We have managed to maintain a steady cost of funds and our team members continue to focus on building deposit-first relationships with a focus on operating accounts and primary consumer account relationships.

Speaker #3: Operating non-interest income increased by about $950,000 from the first quarter, which was led by increased revenue from many of our business lines and operating non-interest expense declined more than $500,000.

Speaker #3: Our SBSL division had improvement on a pre-tax basis as shown on slide 19. However, we still have a lot of opportunity for more improvement and expect that to start to show over the next few quarters.

T. Heath Fountain: Our SBSL division had improvement on a pre-tax basis, as shown on slide 19. However, we still have a lot of opportunity for more improvement and expect that to start to show over the next few quarters. In addition to finding the right partners to grow with through M&A, organic growth is also a key part of our long-term strategy.

Speaker #3: In addition to finding the right partners to grow with through M&A, organic growth is also a key part of our long-term strategy. We operate in some of the best markets in the Southeast and will continue to focus on growth across our existing footprint.

T. Heath Fountain: We operate in some of the best markets in the Southeast, and we'll continue to focus on growth across our existing footprint. Our upcoming merger with First Reliance will add even more markets that are ideally suited for organic growth. During the quarter, we added several experienced bankers to our team that will help us continue our focus on organic growth. In our Columbus market, we added Colby Carden as a private banker. In our Douglas market, we added Lee Taylor as market president. In our Savannah market, we added Phillip Anderson as market president. In our Jacksonville MSA, we've recently added Jeff Eudy as regional president with a focus on building core customer relationships in the suburban growth markets west of Jacksonville. These additions represent our commitment to organic growth by building core relationships in existing markets and further expand our market share.

Speaker #3: Our upcoming merger with First Reliance will add even more markets that are ideally suited for organic growth. During the quarter, we added several experienced bankers to our team who will help us continue our focus on organic growth.

Speaker #3: In our Columbus market, we added Colby Carden as a private banker. In our Douglas market, we added Lee Taylor as market president. In our Savannah market, we added Philip Anderson as market president.

T. Heath Fountain: In our Douglas market, we added Lee Taylor as market president. In our Savannah market, we added Phillip Anderson as market president. In our Jacksonville MSA, we've recently added Jeff Eudy as regional president with a focus on building core customer relationships in the suburban growth markets west of Jacksonville. These additions represent our commitment to organic growth by building core relationships in existing markets and further expand our market share.

Speaker #3: And in our Jacksonville MSA, we've recently added Jeff Udy as regional president with a focus on building core customer relationships and the suburban growth markets west of Jacksonville.

Speaker #3: These additions represent our commitment to organic growth by building core relationships in existing markets and further expand our market share. As we work towards reaching our M&A milestones with First Reliance over the next several quarters, our focus remains both on a seamless integration and driving organic growth across our core footprint.

T. Heath Fountain: As we work towards reaching our M&A milestones with First Reliance over the next several quarters, our focus remains both on a seamless integration and driving organic growth across our core footprint. The First Reliance team is incredibly excited about our partnership. They see the clear value in what we can build together, and their leadership is fully energized by the operational scale and broader opportunities the combined company brings to both our customers and our team members. With that, I'll turn it over to Derek to go over the financials in more detail.

Speaker #3: The First Reliance team is incredibly excited about our partnership. They see the clear value in what we can build together and their leadership is fully energized by the operational scale and broader opportunities that combine company brings to both our customers and our team members.

T. Heath Fountain: They see the clear value in what we can build together, and their leadership is fully energized by the operational scale and broader opportunities the combined company brings to both our customers and our team members. With that, I'll turn it over to Derek to go over the financials in more detail.

Speaker #3: With that, I'll turn it over to Derek to go over the financials in more detail.

Speaker #2: Thank you, Heath. Operating net income increased to $11 million in the first quarter and operating pre-provision net revenue increased approximately 2.2 million to over $16 million in the quarter.

Derek Shelnutt: Thank you, Heath. Operating net income increased to $11 million in Q1, and operating pre-provision net revenue increased approximately $2.2 million to over $16 million in the quarter. Earning asset yields continue to increase, driving margin higher quarter over quarter to 3.52% last quarter. Net interest income increased approximately $700,000 during the quarter and is attributable to an earning asset yield increase of 6 basis points, driven by loan growth and pricing on both new and renewed loans. On slide 36, we show the weighted average rate on new and renewed loans by quarter. That rate for Q2 was 7.14%, and that's up from 7.11% in Q1. To Heath's point earlier, pricing discipline is a key focus of ours, and that will continue to help with us gaining ground on margin.

Speaker #2: Earning asset yields continue to increase, driving margin higher quarter over quarter to 3.52% last quarter. Net interest income increased approximately $700,000 during the quarter and is attributable to an earning asset yield increase of 6 basis points driven by loan growth and pricing on both new and renewed loans.

Derek Shelnutt: Net interest income increased approximately $700,000 during the quarter and is attributable to an earning asset yield increase of 6 basis points, driven by loan growth and pricing on both new and renewed loans. On slide 36, we show the weighted average rate on new and renewed loans by quarter. That rate for Q2 was 7.14%, and that's up from 7.11% in Q1. To Heath's point earlier, pricing discipline is a key focus of ours, and that will continue to help with us gaining ground on margin.

Speaker #2: On slide 36, we show the weighted average rate on new and renewed loans by quarter. That rate for the second quarter was 7.14%, and that's up from 7.11% in the first quarter.

Speaker #2: To Heath's point earlier, pricing discipline is a key focus of ours, and that will continue to help with us gaining ground on margin. Our overall cost of funds for the second quarter was $1.95%, which is up 1 basis point from the first quarter, so relatively flat overall.

Derek Shelnutt: Our overall cost of funds for Q2 was 1.95%, which is up 1 basis point from Q1, relatively flat overall. We still expect to see modest increases in margin of a few basis points per quarter for the next several quarters. However, the competitive environment for both loans and deposits will really determine how much increase we see and could potentially slow that increase down. If our cost of funds remains stable on the liability side, we still have some upward repricing on the asset side that we will be able to capture to improve margin. The repricing schedule is shown on slide 38 in the deck. Operating non-interest income increased to $11.6 million, that's up from $10.1 million from the same quarter of last year.

Speaker #2: We still expect to see modest increases in margin of a few basis points per quarter for the next several quarters. However, the competitive environment for both loans and deposits will really determine how much increase we see and could potentially slow that increase down.

Speaker #2: If our cost of funds remains stable on the liability side, we still have some upward repricing on the asset side that we will be able to capture to improve margin.

Derek Shelnutt: If our cost of funds remains stable on the liability side, we still have some upward repricing on the asset side that we will be able to capture to improve margin. The repricing schedule is shown on slide 38 in the deck. Operating non-interest income increased to $11.6 million, that's up from $10.1 million from the same quarter of last year.

Speaker #2: The repricing schedule is shown on slide 38 in the deck. Operating non-interest income increased to $11.6 million and that's up from 10.1 million from the same quarter of last year.

Speaker #2: On slide 19, we show pre-tax income by business line, and improvement in both quarter over quarter and compared to the same quarter last year.

Derek Shelnutt: On slide 19, we show pre-tax income by business line, an improvement in both quarter-over-quarter and compared to the same quarter last year. Colony Financial Advisors pre-tax income increased in Q2, and Q2 was the first full quarter after our transition from a managed program to a dual program where Colony receives more of the commissions and fees, but also takes on additional related expenses. Assets under management are up almost 15% quarter-over-quarter and are currently at $637 million, that's up from $555 million in the prior quarter and up from $219 million in Q2 of last year. Mortgage pre-tax income improvement was driven by higher production and sales in Q2 as we enter a period of more seasonal activity. Colony Insurance had a better quarter with more premiums in force and higher revenue.

Speaker #2: Colony Financial Advisors pre-tax income increased in the second quarter and the second quarter was the first full quarter after our transition from a managed program to a dual program where Colony receives more of the commissions and fees but also takes on additional related expenses.

Speaker #2: Assets under management are up almost 15% quarter over quarter and are currently at $637 million, and that's up from $555 million in the prior quarter and up from $219 million in the second quarter of last year.

Derek Shelnutt: Assets under management are up almost 15% quarter-over-quarter and are currently at $637 million, that's up from $555 million in the prior quarter and up from $219 million in Q2 of last year. Mortgage pre-tax income improvement was driven by higher production and sales in Q2 as we enter a period of more seasonal activity. Colony Insurance had a better quarter with more premiums in force and higher revenue.

Speaker #2: Mortgage pre-tax income improvement was driven by higher production and sales in the second quarter as we enter a period of more seasonal activity. Colony Insurance had a better quarter with more premiums in force and higher revenue.

Speaker #2: Pricing on policy premiums has been a challenge for the insurance industry, we've seen that ease some and remain optimistic for continued improvement and positive impact on both customer attention and acquisition.

Derek Shelnutt: Pricing on policy premiums has been a challenge for the insurance industry. We've seen that ease some and remain optimistic for continued improvement and positive impact on both customer retention and acquisition. Bank referrals are up year-over-year, and we see that as good potential for increased sales revenue. Our SBSL division improved from the prior quarter on a pre-tax income basis. However, revenue from gain-on-sale activity was softer. As Heath mentioned, we expect to see improvement there in the coming quarters. Charge-offs in SBSL were similar to Q1, and we're seeing those stabilize with expected improvement on the horizon. There was an outsized BOLI death benefit during the quarter of about $700,000, that was an adjustment to our operating earnings. Operating non-interest expenses declined about $550,000 from the prior quarter.

Speaker #2: Bank referrals are up year over year and we see that as good potential for increased sales revenue. Our SBSL division improved from the prior quarter on a pre-tax income basis.

Speaker #2: However, revenue from gain on sale activity was softer, as Heath mentioned. We expect to see improvement there in the coming quarters. Charge-offs in SBSL were similar to the first quarter, and we're seeing those stabilize with expected improvement on the horizon.

Derek Shelnutt: However, revenue from gain-on-sale activity was softer. As Heath mentioned, we expect to see improvement there in the coming quarters. Charge-offs in SBSL were similar to Q1, and we're seeing those stabilize with expected improvement on the horizon. There was an outsized BOLI death benefit during the quarter of about $700,000, that was an adjustment to our operating earnings. Operating non-interest expenses declined about $550,000 from the prior quarter.

Speaker #2: There was an outsized bully death benefit during the quarter of about $700,000 and that was an adjustment to our operating earnings. Operating non-interest expenses declined about $550,000 from the prior quarter.

Speaker #2: This is largely a result of post-merger integration cost savings, and we expect expenses to stay around this level for the third quarter, then increase after legal close with First Reliance.

Derek Shelnutt: This is largely a result of post-merger integration cost savings, we expect expenses to stay around this level for Q3 then increase after legal close with First Reliance. Operating net non-interest expense to average assets was 1.51% in Q2, an improvement from Q1. We're still targeting a 1.45% or better net NIE for the long term, getting to that 1.45% will be driven primarily on the income side. We do expect that metric to increase again post legal close with First Reliance then trend back towards our target later in 2027 after we complete systems conversion and customer integration. We'll be working to capture as much expense efficiency as possible immediately following the legal close with First Reliance in Q4.

Speaker #2: Operating net non-interest expense to average assets was $1.51% in the second quarter and improvement from the first quarter. We're still targeting a $1.45% or better net NIE for the long term and getting to that $1.45% will be driven primarily on the income side.

Speaker #2: We do expect that metric to increase again post-legal close with First Reliance and then trend back towards our target later in 2027 after we complete systems conversion and customer integration.

Derek Shelnutt: We do expect that metric to increase again post legal close with First Reliance then trend back towards our target later in 2027 after we complete systems conversion and customer integration. We'll be working to capture as much expense efficiency as possible immediately following the legal close with First Reliance in Q4.

Speaker #2: We'll be working to capture as much expense efficiency as possible immediately following the legal close with First Reliance in the fourth quarter. However, there are a lot of our identified cost savings that we will not be able to capture until we get through the systems conversion in mid-2027.

Derek Shelnutt: However, there are a lot of our identified cost savings that we will not be able to capture until we get through the systems conversion in mid-2027. Provision expense totaled $1.9 million and was a slight increase from the prior quarter. Net charge-offs were similar to last quarter and were primarily from SBSL. Criticized loans remained stable, and classified loans declined by about 14%, or $5.6 million. Loans held for investment increased $51.4 million, or about 8.5% annualized. Although we saw growth across several markets in our footprint, the Columbus and Tallahassee markets were the top two in terms of loan growth in Q2, and growth in our Valdosta market has been strong year to date. Total deposits declined $76.2 million, and included in that reported number was the payoff of about $13.4 million of brokered deposits.

Speaker #2: Provision expense totaled $1.9 million and was a slight increase from the prior quarter. Net charge-offs were similar to last quarter and were primarily from SBSL.

Speaker #2: Criticized loans remained stable and classified loans declined by about 14% or 5.6 million. Loans held for investment increased 51.4 million or about 8.5% annualized.

Derek Shelnutt: Loans held for investment increased $51.4 million, or about 8.5% annualized. Although we saw growth across several markets in our footprint, the Columbus and Tallahassee markets were the top two in terms of loan growth in Q2, and growth in our Valdosta market has been strong year to date. Total deposits declined $76.2 million, and included in that reported number was the payoff of about $13.4 million of brokered deposits.

Speaker #2: And although we saw growth across several markets in our footprint, the Columbus and Tallahassee markets were the top two in terms of loan growth in the second quarter and growth in our Val Dosta market has been strong year to date.

Speaker #2: Total deposits declined 76.2 million and included in that reported number was the payoff of about 13.4 million of brokered deposits. It is not unusual for us to see seasonal deposit runoff this time of year and some of that was right around the end of the quarter.

Derek Shelnutt: It is not unusual for us to see seasonal deposit runoff this time of year, and some of that was right around the end of the quarter. If you look at our average balance of total deposits on page nine in the earnings release, you can see that the average was stable with a slight increase during the quarter. This week, the board declared a quarterly cash dividend of $0.12 per share. TCE at the end of the quarter was 8.99%, compared to 8.49% in Q1. Tangible book value per share also increased to $15.12, and that's up from $14.65 in the prior quarter. We did not purchase any shares in our stock buyback plan during the quarter.

Speaker #2: If you look at our average balance of total deposits on page nine in the earnings release, you can see that the average was stable, with a slight increase during the quarter.

Speaker #2: This week, the Board declared a quarterly cash dividend of $0.12 per share. TCE at the end of the quarter was 8.99% compared to 8.49% in the first quarter.

Derek Shelnutt: This week, the board declared a quarterly cash dividend of $0.12 per share. TCE at the end of the quarter was 8.99%, compared to 8.49% in Q1. Tangible book value per share also increased to $15.12, and that's up from $14.65 in the prior quarter. We did not purchase any shares in our stock buyback plan during the quarter.

Speaker #2: Tangible book value per share also increased to $15.12. And that's up from $14.65 in the prior quarter. We did not purchase any shares in our stock buyback plan during the quarter.

Speaker #2: However, we view our buyback plan as an important tool to managing capital. And look to be consistently buying back shares over time as well as being opportunistic during market pullbacks.

Derek Shelnutt: However, we view our buyback plan as an important tool to managing capital and look to be consistently buying back shares over time, as well as being opportunistic during market pullbacks. Yesterday, First Reliance also reported their earnings for the quarter. Their release is available on their website, and overall, they had a solid quarter. They reported operating EPS of $0.38, operating ROA of 1.10%, and operating earnings of $3.1 million, which is a meaningful improvement compared to the same period last year. They also had a quarter of good loan growth, and that came in a little higher than our forecast. First Reliance has a strong lending team and great markets that will help drive organic loan growth going forward as a combined company.

Speaker #2: Yesterday, First Reliance also reported their earnings for the quarter. Their release is available on their website and overall they had a solid quarter. They reported operating EPS of $0.38, operating ROA of $1.10%, and operating earnings of $3.1 million, which is a meaningful improvement compared to the same period last year.

Derek Shelnutt: They reported operating EPS of $0.38, operating ROA of 1.10%, and operating earnings of $3.1 million, which is a meaningful improvement compared to the same period last year. They also had a quarter of good loan growth, and that came in a little higher than our forecast. First Reliance has a strong lending team and great markets that will help drive organic loan growth going forward as a combined company.

Speaker #2: They also had a quarter of good loan growth and that came in a little higher than our forecast. First Reliance has a strong lending team and great markets that will help drive organic loan growth going forward as a combined company.

Speaker #2: Their results were largely in line with our model forecast and so we do not expect any adjustments to the pro forma information we previously released.

Derek Shelnutt: Their results were largely in line with our model forecast, and so we do not expect any adjustments to the pro forma information we previously released. That concludes my overview, and now I will turn it back over to Heath before we take questions.

Speaker #2: That concludes my overview and now I'll turn it back over to Heath before we take questions.

Speaker #1: Thanks, Derek. And thanks to everyone for being on this call today. We're pleased with our performance this quarter, which met our internal expectations for performance and exceeded external expectations.

T. Heath Fountain: Thanks, Derek, and thanks to everyone for being on this call today. We're pleased with our performance this quarter, which met our internal expectations for performance and exceeded external expectations. I am proud of how our team executed on achieving our desired results from the TC Federal merger, which positions us well for our upcoming merger with First Reliance and demonstrates the strength of our M&A strategy to gain scale and improve operating performance. Further, our expense and pricing discipline set us up well to finish the year strong. That wraps up our prepared comments. With that, I would like to call on Priscilla to open up the line for questions.

Speaker #1: I am proud of how our team executed on achieving our desired results from the TC Federal merger. Which positions us well for our upcoming merger with First Reliance.

T. Heath Fountain: I am proud of how our team executed on achieving our desired results from the TC Federal merger, which positions us well for our upcoming merger with First Reliance and demonstrates the strength of our M&A strategy to gain scale and improve operating performance. Further, our expense and pricing discipline set us up well to finish the year strong. That wraps up our prepared comments. With that, I would like to call on Priscilla to open up the line for questions.

Speaker #1: And demonstrates the strength of our M&A strategy to game scale and improve operating performance. Further, our expense and pricing discipline set us up well to finish the year strong.

Speaker #1: That wraps up our prepared comments with that. I would like to call on Prilla to open up the line for questions.

Speaker #3: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press a star one on your telephone keypad to raise your hand and join the queue.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press star one again. With that, our first question comes from the line of David Bishop with Hovde Group. Please go ahead.

Speaker #3: If you would like to inquire your question, please press a star one again. With that, our first question. Comes from the line of David Bishop with Hub Day Group.

Speaker #3: Please go ahead.

David Bishop: Hey, good morning, Heath and Derek.

David Bishop: Good morning, Heath and Derek.

Speaker #4: Hey, good morning, Heath and Derek.

Speaker #1: Morning, Dave.

T. Heath Fountain: Morning, Dave.

Derek Shelnutt: Morning.

Speaker #5: Morning.

David Bishop: Hey, Heath, just curious, you mentioned some of the seasonality on the funding side, on the deposit side. Just curious, where does the deposit generation rank in terms of priorities and where you're looking to lift out new bankers within your Georgia and Florida markets? Is that sort of a key priority there? Are you still looking for primarily commercial asset generators? Just curious how you're thinking holistically about the deposit generation engine.

Speaker #4: Hey, Heath, just curious. You mentioned some of the seasonality on the funding side, on the deposit side. Just curious, where does the deposit generation rank in terms of priorities, and where you're looking to lift out new bankers within your Georgia and Florida markets?

David Bishop: Heath, just curious, you mentioned some of the seasonality on the funding side, on the deposit side. Just curious, where does the deposit generation rank in terms of priorities and where you're looking to lift out new bankers within your Georgia and Florida markets? Is that sort of a key priority there? Are you still looking for primarily commercial asset generators? Just curious how you're thinking holistically about the deposit generation engine.

Speaker #4: Is that sort of a key priority there? Are you still looking for primarily commercial asset generators? Just curious how you're thinking. Holistically about the deposit generation engine.

Speaker #1: Yeah, Dave, great question. And while they're both important, our team clearly recognizes that deposits are priority one. That's been our major focus and that will continue to be our major focus.

T. Heath Fountain: Yeah, Dave, great question. While they're both important, our team clearly recognizes that deposits are priority one. That's been our major focus, and that will continue to be our major focus. I think that it's important for us to go out and secure the key commercial relationships, but also to have the ancillary consumer business that comes along with those. That's a priority. We mentioned, or I mentioned in the comments about adding a private banker in Columbus. We look to add some private banking resources in other markets as well, and that is primarily a deposit play and looking to grow assets under management for Colony Financial Advisors. It's a real focus. We've got a lot of great wins in that area. I think that's really important, especially in an environment where there's a lot of rate sensitivity on the deposit side.

Speaker #1: I think that it's important for us to go out and secure the key commercial relationships, but also to have the ancillary consumer business that comes along with those.

Speaker #1: So that's a priority. We mentioned or I mentioned in the comments about adding a private banker in Columbus. We look to add some private banking resources and other markets as well.

T. Heath Fountain: We mentioned, or I mentioned in the comments about adding a private banker in Columbus. We look to add some private banking resources in other markets as well, and that is primarily a deposit play and looking to grow assets under management for Colony Financial Advisors. It's a real focus. We've got a lot of great wins in that area. I think that's really important, especially in an environment where there's a lot of rate sensitivity on the deposit side. I would just say going after key deposit relationships is priority one.

Speaker #1: And that is primarily a deposit play and looking to grow assets under management for Colony Financial Advisors. So it's a real focus. We've got a lot of great wins in that area.

Speaker #1: And I think that's really important, especially in an environment where there's a lot of rate sensitivity on the deposit side. So I would just say going after key deposit relationships is priority one.

T. Heath Fountain: I would just say going after key deposit relationships is priority one.

David Bishop: Got it. Then you recognized achieving the 120 operating ROA target. Just putting aside the benefits from the First Reliance deal Just organically, where would the incremental improvements in terms of profitability come from here? Is it generating more from the fee income platform? Sounds like expenses are probably leveled out. Just curious where the organic improvement comes from a profitability standpoint.

Speaker #4: Got it. And then you recognized achieving the 1.20 operating ROA target. Just putting aside the benefits from the First Reliance deal, just organically, where would the incremental improvements in terms of profitability come from here?

Speaker #4: Is it generating more from the fee income platform? Sounds like expenses are probably leveled out. Just curious where the organic improvement comes from a profitability standpoint.

Speaker #1: Yeah. So definitely we think we have opportunity to improve margin. I think as we've indicated and as we show in our deck, we still got a lot of asset repricing that is going to be beneficial to us.

T. Heath Fountain: Yeah. Definitely, we think we have opportunity to improve margin. I think, as we've indicated and as we show in our deck, we still got a lot of asset repricing that is going to be beneficial to us. That plus the growth provides opportunity on the asset side. As you mentioned, as we mentioned in the call, on the liability side, we've about hit where we are. On the fee income side, there's a lot of opportunity. I mentioned our SBSL being down a little bit. I think we have a big opportunity there, and I think you'll see that pipeline and those revenues increasing. Opportunity, again, on all the fee income businesses. This H2 is usually better for mortgage than the H1.

Speaker #1: And so that plus the growth provides opportunity on the asset side. As you mentioned, as we mentioned the call on the liability side, we've about hit where we are.

Speaker #1: On the fee income side, there's a lot of opportunity. I mentioned our SBSL being down a little bit. I think we have a big opportunity there.

T. Heath Fountain: On the fee income side, there's a lot of opportunity. I mentioned our SBSL being down a little bit. I think we have a big opportunity there, and I think you'll see that pipeline and those revenues increasing. Opportunity, again, on all the fee income businesses. This H2 is usually better for mortgage than the H1.

Speaker #1: And I think you'll see that pipeline and those revenues increasing. Opportunity on, again, on all the fee income businesses this second half of the year is usually better for mortgage than the first half of the year.

Speaker #1: Of course, as we get to the end of the year, we have the opportunity to add the First Reliance mortgage and Colony together, which will create some greater opportunity for scale.

T. Heath Fountain: Of course, as we get to the end of the year, we have the opportunity to add the First Reliance mortgage and Colony together, which will create some greater opportunity for scale. We're excited about that. We continue to see assets under management grow with our financial advisors team, and I think we'll see that continue. Of course, insurance, we talked about. A lot of good momentum in that area as well. In terms of other account-generated fees, deposit service charges, debit, our merchant, those are all continuing to do well and continuing to grow. Feel like we're in a position where not all of those things have to hit just right to create improvements in ROA. I think we'll see continued improvement across the fee side.

Speaker #1: So we're excited about that. We continue to see assets grow—assets under management grow—with our financial advisors team, and I think we'll see that continue.

Speaker #1: Of course, insurance, we talked about a lot of good momentum in that area as well. And then in terms of other account generated fees, deposit service charges, debit, our merchant, those are all continuing to do well and continuing to grow.

T. Heath Fountain: Of course, insurance, we talked about. A lot of good momentum in that area as well. In terms of other account-generated fees, deposit service charges, debit, our merchant, those are all continuing to do well and continuing to grow. Feel like we're in a position where not all of those things have to hit just right to create improvements in ROA. I think we'll see continued improvement across the fee side.

Speaker #1: So I feel like we're in a position where not all of those things have to hit just right to create improvements in ROA. But I think we'll see continued improvement across the fee side.

Speaker #4: Awesome. Great color. Appreciate the color. I'll hop out of the queue and get back on.

David Bishop: Awesome. Great color. Appreciate the color. I'll pop out of the queue and get back on.

Speaker #3: Thank you. And your next question comes from the line of Christopher Marinak with Green Capital. Please go ahead.

Operator: Thank you. Your next question comes from the line of Christopher Marinac with Green Capital. Please go ahead.

Operator: Thank you. Your next question comes from the line of Christopher Marinac with Brean Capital. Please go ahead.

Speaker #6: Hey, good morning. I wanted to go back to the First Reliance merger and just better understand how much of their loan growth is going to impact earnings, in terms of kicking existing clients and doing more with them.

Christopher Marinac: Hey, good morning. I wanted to go back to the First Reliance merger and just better understand how much of their loan growth is going to impact earnings in terms of taking existing clients and doing more with them. Is any of that in your numbers, or would that be upside as next year comes into focus?

Christopher Marinac: Good morning. I wanted to go back to the First Reliance merger and just better understand how much of their loan growth is going to impact earnings in terms of taking existing clients and doing more with them. Is any of that in your numbers, or would that be upside as next year comes into focus?

Speaker #6: Is any of that in your numbers or would that be upside as next year comes into focus?

Speaker #1: Yeah, Chris, that's a good question. We looked at, really, and if you look at this quarter, the organic loan growth that the First Reliance team had, it was strong and similar.

T. Heath Fountain: Yeah. Christopher, that's a good question. We looked at, really, and if you look at this quarter, the organic loan growth that the First Reliance team had, it was strong and similar to our loan growth. I think that they have the opportunity, even without adding the additional capacity for growth at similar levels and within the range of our organic growth forecast of 8% to 12% a year. There is upside opportunity. I think just given the larger balance sheet of the combined company, larger lending limits will be effective in a number of those larger markets that they're in. I think there is upside to what we forecasted. I think we tried to be conservative, I think there is upside to generate assets at a little bit faster level over time than what we projected.

Speaker #1: To our loan growth. So, I think that they have the opportunity, even without adding additional capacity, for growth at similar levels and within the range of our organic growth forecast of 8% to 12% a year.

Speaker #1: So there is upside opportunity I think just given the larger balance sheet of the combined company. Larger lending limits, will be effective in a number of those larger markets that they're in.

T. Heath Fountain: There is upside opportunity. I think just given the larger balance sheet of the combined company, larger lending limits will be effective in a number of those larger markets that they're in. I think there is upside to what we forecasted. I think we tried to be conservative, I think there is upside to generate assets at a little bit faster level over time than what we projected.

Speaker #1: So I think there is upside to what we've forecasted. I think we've tried to be conservative and but I think there is upside to generate assets at a little bit faster level over time than what we projected.

Speaker #6: Sounds good. And then if we go back to the merchant servicing business or services business, as you've been expanding there for several quarters, is that ahead of schedule?

Christopher Marinac: Sounds good. If we go back to the merchant servicing business or services business, as you've been expanding there for several quarters, is that ahead of schedule? What is the opportunity as you bring in First Reliance for that business line, too?

Speaker #6: And then what is the opportunity as you bring in First Reliance for that business line too?

Speaker #1: Yeah. The merchant services is going well. The great thing about that business is it's a lot of recurring revenue and we just continue to see that build.

T. Heath Fountain: Yeah. The merchant services is going well. The great thing about that business is it's a lot of recurring revenue, and we just continue to see that build. Our team does a great job with servicing on that, and that's where we get a real advantage, I think, over our competition. There's a lot of moving around in that business. Other providers, the clients see their primary contact change a lot. With Colony, it's very consistent. We do have the opportunity. That's been an outsourced product at First Reliance, and there's not a lot of customer penetration into that. We think that gives it a big opportunity to grow. As well, this has been a great deposit account acquisition tool to us. Being able to go in is really very easy for us.

Speaker #1: Our team does a great job with servicing on that. And that's where we get a real advantage, I think, over our competition. There's a lot of moving around in that business.

Speaker #1: So other providers the clients see their primary contact change a lot. And with Colony, it's very consistent. So we do have the opportunity that's been an outsourced product at First Reliance and there's not a lot of customer penetration into that.

T. Heath Fountain: Other providers, the clients see their primary contact change a lot. With Colony, it's very consistent. We do have the opportunity. That's been an outsourced product at First Reliance, and there's not a lot of customer penetration into that. We think that gives it a big opportunity to grow. As well, this has been a great deposit account acquisition tool to us. Being able to go in is really very easy for us.

Speaker #1: So we think that gives it a big opportunity to grow and then as well this has been a great deposit account acquisition tool to us being able to go in.

Speaker #1: It's really very easy for us. A lot of our prospects are disenfranchised with their current merchant provider, and we're able to go in and start the relationship with that.

T. Heath Fountain: A lot of our prospects are disenfranchised with their current merchant provider. We're able to go in and start the relationship with that, then continue to grow the relationship, open a deposit account for settlement when we go in with that business. That's a real positive, both just from the fee income side, but also as a primary deposit relationship acquisition tool. It's been even better. Last year, we put our whole banking solutions group together where we have, it's what I would call the payments group. It's the group focused on treasury, merchant, card, any way commercial customers get money into their account from their customers and out of their account to pay their vendors and their employees.

Speaker #1: And then continue to grow the relationship—open a deposit account for settlement when we go in with that business. So that's a real positive, both just from the fee income side, but also as a primary deposit relationship acquisition tool.

Speaker #1: And it's been even better last year. We put our whole banking solutions group together where we have it's what I would call the payments group.

T. Heath Fountain: Last year, we put our whole banking solutions group together where we have, it's what I would call the payments group. It's the group focused on treasury, merchant, card, any way commercial customers get money into their account from their customers and out of their account to pay their vendors and their employees.

Speaker #1: It's the group focused on treasury, merchant, card, any way customers get commercial customers get money into their account from their customers. And out of their account to pay their vendors.

Speaker #1: Their and their employees. And so as we put that group together, we found it's easier for our bankers to go calling on customers and prospects.

T. Heath Fountain: As we put that group together, we found it's easier for our bankers to go calling on customers and prospects, have one point of contact internally, then our advisors in that group are really looking to solve the problems that the customers are having and not just sell a product or service. That consultative approach, I think is shown well, and I look forward to that whole group being able to further support that. We'll have First Reliance team members become part of that group that are doing treasury services now, that already know those customers, then being able to serve more products and service to them. I think there's a lot of upside opportunity there.

Speaker #1: Have one point of contact internally and then our advisors in that group are really looking to solve the problems that the customers are having.

Speaker #1: And not just sell a product or service, and so that consultative approach I think is shown well. I look forward to that whole group being able to further support that.

T. Heath Fountain: That consultative approach, I think is shown well, and I look forward to that whole group being able to further support that. We'll have First Reliance team members become part of that group that are doing treasury services now, that already know those customers, then being able to serve more products and service to them. I think there's a lot of upside opportunity there.

Speaker #1: We'll have First Reliance team members become part of that group that are doing treasury services now. And but being able to serve that already know those customers and then being able to serve more products and service to them.

Speaker #1: So I think there's a lot of upside opportunity there.

Speaker #6: Great. Thanks for all that background. And my last question just goes back to kind of the progress you keep making in counts like Columbus and wanted to kind of understand is the opportunity in Columbus as great as it is in Savannah and perhaps as you've been realizing in Augusta, just using those kind of tree as examples of them.

Christopher Marinac: Great, Heath. Thanks for all that background. My last question just goes back to kind of the progress you keep making in towns like Columbus and wanted to kind of understand, is the opportunity in Columbus as great as it is in Savannah and perhaps as you've been realizing in Augusta, just using those kind of three as examples of footprint expanding?

Speaker #6: What expanding?

Speaker #1: Sure. Yeah. No, that's a great question. And there is a lot of opportunity in Columbus. Obviously, our president, D. Copeland, is in that market.

T. Heath Fountain: Sure. Yeah. That's a great question. There is a lot of opportunity in Columbus. Obviously, our President, D. Copeland, is in that market. We've added to that team in that market. Of course, you have the Synovus Pinnacle deal, which is creating disruption, and they have an unbelievably outsized share of the market there in Columbus. Whether it's them or other larger regional banks, we see that as one of our primary opportunities for growth and one of the ways that we can go out and acquire customers. You look at markets like that, you look at markets like Valdosta, Tifton, and Albany as well, where some of these regional banks have large market share. It's an opportunity for us to grow faster than those markets are growing.

Speaker #1: We've added to that team in that market. Of course, you have the Synovis Pinnacle deal, which is creating disruption and they have a unbelievably outsized share of the market.

Speaker #1: They're in Columbus. And so, whether it's them or other larger regional banks, we see that as one of our primary opportunities for growth and one of the ways that we can go out and acquire customers.

T. Heath Fountain: Whether it's them or other larger regional banks, we see that as one of our primary opportunities for growth and one of the ways that we can go out and acquire customers. You look at markets like that, you look at markets like Valdosta, Tifton, and Albany as well, where some of these regional banks have large market share. It's an opportunity for us to grow faster than those markets are growing.

Speaker #1: And so you look at markets like that. You look at markets like Val d'Aosta and Tifton and Albany as well, where some of these regional banks have large market share.

Speaker #1: It's an opportunity for us to grow faster than those markets are growing those some of those markets are not historically high growth markets. Like Savannah or Charleston, or in Atlanta.

T. Heath Fountain: Some of those markets are not historically high growth markets, like Savannah or Charleston or Atlanta. The market share has heavily shifted, due to the M&A over time, to some of these regional banks, and there's a real opportunity for us to grow faster than the markets grow in those markets.

Speaker #1: But the market share has shifted significantly over time due to M&A activity, particularly to some of these regional banks. There's a real opportunity for us to grow faster than the market in those areas.

Speaker #6: Excellent. I'll leave it there. Thank you for hosting us this morning.

Christopher Marinac: Excellent. I'll leave it there. Thank you for hosting us this morning.

Speaker #1: Thanks, Chris.

T. Heath Fountain: Thanks, Chris.

Speaker #5: And we do have a follow-up question coming from David Bishop with Hovde Group. Please go ahead.

Operator: We do have a follow-up question coming from David Bishop with Hovde Group. Please go ahead.

Speaker #7: Yeah, Heath here. Just wanted to circle back on the loan guidance. I'm just curious—does that reflect more of a cautiousness, do you think, in your outlook, or does that reflect more borrower behavior in terms of maybe what's happening from a geopolitical standpoint?

David Bishop: Yeah. Heath, Derek. Just wanted to circle back on the loan guidance. Just curious, does that reflect more sort of a cautiousness, you think, in your outlook? Or does that reflect, do you think, more borrower behavior in terms of maybe what's happening from a geopolitical standpoint? Just curious maybe what you're seeing out there in terms of demand and how that sort of comports with the outlook. Thanks.

Speaker #7: Just curious—maybe what you're seeing out there in terms of demand, and how that sort of comports with the outlook. Thanks.

Speaker #1: Yeah, thanks, Dave. I think it's a little bit of both. We're in this place where the expectations have been, until recently, for rates going down.

T. Heath Fountain: Yeah. Thanks, Dave. I think it's a little bit of both. We're in this place where the expectations have been, till recently, rates going down, and now we're in a time where the expectation is that rates may go up a little bit. I think that's changing the customers' thoughts a little bit, and it's changing their ideas on whether they need to go with floating or fixed rate loans. You are seeing just, I think, some more consideration to that as they look at deals going forward and cash flows from expansions or CRE opportunities or things like that. I think a little bit of that as well is our pricing discipline. I've been really proud of what we've been able to do on new and renewed loans with keeping that new and renewed loan rate in the low sevens.

Speaker #1: And now we're in a time where the expectation is that rates may go up a little bit. And so I think that's changing the customers' thoughts a little bit.

Speaker #1: And it's changing their ideas on whether they need to go with floating or fixed-rate loans. And so you are seeing just, I think, some more consideration to that.

T. Heath Fountain: You are seeing just, I think, some more consideration to that as they look at deals going forward and cash flows from expansions or CRE opportunities or things like that. I think a little bit of that as well is our pricing discipline. I've been really proud of what we've been able to do on new and renewed loans with keeping that new and renewed loan rate in the low sevens.

Speaker #1: As they look at deals going forward and cash flows from expansions or CRE opportunities or things like that. And then I think a little bit of that as well is our pricing discipline. Been really proud of what we've been able to do on new and renewed loans.

Speaker #1: With keeping that new and renewed loan rate in the low sevens. When you look at just our core commercial business out of that, it's probably around 6.80%.

T. Heath Fountain: When you look at just our core commercial business out of that, it's around 680, which is above prime, which is great place, I think, to be. It's really a combination of that. I do feel like over the last couple of quarters, as the rate expectations change from down rates to flat or up rates, our spread between some of our competition that has been more aggressive has been narrowing. I feel like competitively, it felt like there were some folks out there sort of betting heavily that rates were going to go down, and then they didn't, and so they pulled their pricing up some. I feel like we're more competitive on rates now than maybe where we were a couple of quarters ago.

Speaker #1: And so which is above prime, which is great place, I think, to be. So it's really a combination of that. I do feel like over the last couple of quarters, as the rate expectations change from down rates to flat or up rates, our spread between some of our competition that has been more aggressive has been narrowing.

Speaker #1: I feel like competitively it felt like there were some folks out there sort of betting heavily that rates were going to go down. And then they didn't.

T. Heath Fountain: I feel like competitively, it felt like there were some folks out there sort of betting heavily that rates were going to go down, and then they didn't, and so they pulled their pricing up some. I feel like we're more competitive on rates now than maybe where we were a couple of quarters ago.

Speaker #1: And so they pulled their pricing up some. So I feel like we're more competitive on rates now than maybe where we were a couple of quarters ago.

Speaker #1: But there's just a lot of factors that go into that and as I mentioned, for us, with the amount of balance sheet repricing that we have, that's going to help improve margin and then still getting good pricing and getting growth rates either at the lower end of our range or year-to-date just below it.

T. Heath Fountain: There's just a lot of factors that go into that, and as I mentioned, for us, with the amount of balance sheet repricing that we have that's going to help improve margin and then still getting good pricing and getting growth rates either at the lower end of our range or year to date just below it, if we can still get a growth rate up to that point by maintaining pricing. I think that improving margin, improving operating earnings, opens up more opportunities for us to reinvest in the business, to reinvest in technology, to reinvest in hiring and deepening our market share in some of our really good markets, and invest back in the business. We're willing to give up a little bit of organic growth to keep getting that higher margin, and I think that's the right thing for us to do at this point.

Speaker #1: If we can still get a growth rate up to that point by maintaining pricing, I think that improving margin and improving operating earnings opens up more opportunities for us to reinvest in the business—to reinvest in technology, to reinvest in hiring, to deepen our market share in some of our really good markets, and to invest back in the business.

T. Heath Fountain: I think that improving margin, improving operating earnings, opens up more opportunities for us to reinvest in the business, to reinvest in technology, to reinvest in hiring and deepening our market share in some of our really good markets, and invest back in the business. We're willing to give up a little bit of organic growth to keep getting that higher margin, and I think that's the right thing for us to do at this point.

Speaker #1: So we're willing to give up a little bit of organic growth to keep getting that higher margin and I think that that's the right thing for us to do at this point.

Speaker #2: And I would just add to that too, if you look at our new and renewed pricing, last quarter, 7.14%. I mean, even if that were to come down a little bit, given our repricing and that's laid out in the repricing schedule on the deck, I mean, there's still room there to capture that repricing and if we keep this stabilized funding cost kind of in line going forward, then we still have the opportunity to see an increase in margin even if that 7.14 comes down a little bit.

Derek Shelnutt: I would just add to that too, if you look at our new and renewed pricing, last quarter, 7.14%. Even if that were to come down a little bit, given our repricing, and that's laid out in the repricing schedule on the deck, there's still room there to capture that repricing. If we keep this stabilized funding cost kind of in line going forward, we still have the opportunity to see an increase in margin, even if that 7.14% comes down a little bit. That may slow down the increase in margin some, but there's still a lot of opportunity to capture that and continue to see margin expansion.

Derek Shelnutt: If we keep this stabilized funding cost kind of in line going forward, we still have the opportunity to see an increase in margin, even if that 7.14% comes down a little bit. That may slow down the increase in margin some, but there's still a lot of opportunity to capture that and continue to see margin expansion.

Speaker #2: And so that may slow down the increase in margin some, but there's still a lot of opportunity to capture that and continue to see margin expansion.

Speaker #1: And Dave, one other thing, a little bit lower growth gives opportunity to focus more on deposits.

T. Heath Fountain: David, one other thing, a little bit lower growth gives opportunity to focus more on deposits.

Speaker #7: Absolutely. Appreciate the color, Jeff.

David Bishop: Absolutely. Appreciate the color, Jim.

David Bishop: Absolutely. Appreciate the color, Heath.

Speaker #5: And I'm showing no further questions. At this time, I would like to turn it back to Mr. Heath Fountain for closing remarks.

Operator: I'm showing no further questions at this time. I would like to turn it back to Mr. Heath Fountain for closing remarks.

Speaker #1: Thanks, Priya Lune. Again, thanks to all of you for being on the call today and for your support of COLONY BANK. We're excited about the opportunities ahead and appreciate you all being here today.

T. Heath Fountain: Thanks, Priya Lu. Again, thanks all of you for being on the call today and for your support of Colony Bank. We're excited about the opportunities ahead and appreciate you all being here today. Look forward to speaking with you soon.

T. Heath Fountain: Thanks, Prilla. Again, thanks all of you for being on the call today and for your support of Colony Bank. We're excited about the opportunities ahead and appreciate you all being here today. Look forward to speaking with you soon.

Speaker #1: Look forward to speaking with you soon.

Operator: Thank you, presenters, ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.

Q2 2026 Colony Bankcorp Inc Earnings Call

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