On May 12, 2023, KBRA affirmed the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Fitzgerald, Georgia-based Colony Bankcorp, Inc. (NASDAQ: CBAN) ("the company"). In addition, KBRA affirmed the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for Colony Bank ("the bank"), the main subsidiary. The Outlook for all long-term ratings is Stable.

KBRA favorably views the company’s durable, branch-based deposit franchise with a footprint largely in smaller Georgia markets that, in our opinion, reflects lower interest rate sensitivity and allows for lower funding costs than peers (82 bps total cost of deposits in 1Q23 compared to a KBRA-rated median of 127 bps). CBAN also has a diversified revenue stream with noninterest income contributing ~30% of total operating revenue, a level stronger than most peers. After CBAN’s $59.3 million common equity raise in 1Q22, the company has maintained capital ratios in line with peers, though we note that a negative AOCI balance represents ~25% of shareholder equity and has constrained TCE. Although M&A has been the main source of growth since 2019, CBAN is not presently contemplating acquisitions, preferring to focus on organic growth and capital accretion. CBAN's operating structure and efficiency ratio are some- what impacted by the bank’s branch-heavy model, which partly explains the company's below peer earnings. However, management seeks to achieve 1.20% ROA and a 60% efficiency ratio within the next year via attrition and overhead cost reductions. KBRA views CBAN’s loss absorption capacity derived from the LLR, in combination with its core capital position (CET1 of 11.0% at 1Q23), to be appropriate for its risk profile. The company’s credit management practices appear to be supportive of a relatively stable credit profile as CBAN’s loan portfolio performed well throughout the pandemic and into the post-pandemic economy. CBAN’s loan portfolio is granular with sufficient concentration limits established, although is concentrated in CRE.

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