COLONY BANKCORP INC

Previous wording

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, 2023 through September 30, 2024 and on our results of operations for the three and nine months ended September 30, 2024 and 2023. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto in the Company's 2023 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.

Current wording

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.

Previous wording

•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 (including the impact of prolonged elevated interest rates on our financial projections and models), 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

Current wording

•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

Previous wording

•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 and inflation;

Current wording

•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;

Previous wording

•credit and lending risks associated with our construction and development, commercial real estate, commercial and industrial and residential real estate loan portfolios;

Current wording

•credit and lending risks associated with our loan portfolios;

Previous wording

•our ability to attract sufficient loans that meet prudent credit standards, including in our construction and development, commercial and industrial and owner-occupied commercial real estate loan categories;

Current wording

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

Previous wording

•external economic, political and/or market factors, such as changes in monetary and fiscal policies and laws (including as a result of the United States presidential election and, including the interest rate policies of the Federal Reserve), the possibility that the U.S. could default on its debt obligations, 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;

Current wording

•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;

Previous wording

•the effects of war or other conflicts (including the military conflict between Russia and Ukraine or the conflict in Israel and surrounding areas), 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;

Current wording

•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;

Previous wording

•risks related to 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;

Current wording

•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;

Previous wording

The following discussion and analysis presents the more significant factors affecting the Company’s financial condition as of September 30, 2024 and December 31, 2023, and results of operations for the three and nine month periods ended September 30, 2024 and 2023. 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.

Current wording

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.

Previous wording

At September 30, 2024, the Company had total consolidated assets of $3.1 billion, total loans, net of $1.9 billion, total deposits of $2.5 billion, and stockholders’ equity of $276.1 million. The Company reported net income of $5.6 million, or $0.32 per diluted share, for the three months ended September 30, 2024 and $16.4 million, or $0.94 per diluted share, for the first nine months of 2024 compared to net income of $5.8 million, or $0.33 per diluted share, for the three months ended September 30, 2023 and $16.1 million, or $0.92 per diluted share, for the first nine months of 2023. The decrease in net income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily a result of the increase in interest expense that more than offset the increase in interest income due to higher interest rates period over period. The increase in net income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily the result of increased net interest income as detailed above along with increases in noninterest income from service charges on deposits, gains on sales of SBA loans and increases in our complementary lines of business which include mortgage, small business specialty lending, marine/RV lending, insurance and wealth and merchant services.

Current wording

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.

Previous wording

Provision for credit losses for the three and nine months ended September 30, 2024 was $750,000 and $2.4 million, which represents $996,000 and $2.8 million in provision for credit losses on loans and $246,000 and $362,000 in release of credit losses on unfunded commitments, respectively. This is compared to $1.0 million and $2.1 million for the three and nine months ended September 30, 2023, which represents $1.0 million and $2.2 million in provision for credit losses on loans and $0 and $91,000 in release of credit losses on unfunded commitments, respectively. For the third quarter of 2024, there were net charge-offs of $139,000 compared to $698,000 for the same period in 2023. Net charge-offs for the first nine months of 2024 were $1.5 million compared to $898,000 for the same period in 2023. Colony’s allowance for credit losses on loans was $19.7 million, or 1.04% of total loans at September 30, 2024, compared to $18.4 million, or 0.98% of total loans, at December 31, 2023. At September 30, 2024 and December 31, 2023, nonperforming assets were $12.5 million and $10.7 million, or 0.41% and 0.35% of total assets, respectively.

Current wording

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.

Previous wording

Noninterest income of $10.1 million for the third quarter of 2024 represents an increase of $364,000, or 3.75%, from the third quarter of 2023. Noninterest income of $29.1 million for the nine months ended September 30, 2024 represents an increase of $2.7 million, or 10.40%, compared to the same period of 2023. These increases were primarily related to increases in service charges on deposits, gain on sales of SBA loans and BOLI income which were partially offset by decreases in interchange fee income and losses on sales of securities. See "Table 3 - Noninterest income" for more detail and discussion on the primary drivers to the variances in noninterest income.

Current wording

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.

Previous wording

For the three months ended September 30, 2024, noninterest expense was $20.8 million, a decrease of $46,000, or 0.22%, from the same period in 2023. For the nine months ended September 30, 2024, noninterest expense was $61.6 million, a decrease of $1.9 million, or 3.02%, from the same period in 2023. Decreases in noninterest expense were a result of decreases in occupancy and equipment expenses, communications expenses and deposit related expenses which were partially offset by an increase in advertising and public relation expenses. See "Table 4 - Noninterest expense" for more detail and discussion on the primary drivers to the decrease in noninterest expense.

Current wording

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.

Previous wording

The allowance for credit losses consists of the allowance for credit losses (“ACL”) and the allowance for unfunded commitments. The standard replaced the “incurred loss” approach, which was used prior to our adoption of ASU No. 2016-13 on January 1, 2023, 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.”

Current wording

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.”

Previous wording

During 2023, the banking industry experienced significant volatility with multiple high-profile bank failures which led to industry wide concerns related to liquidity, deposit outflows, uninsured deposit concentrations, unrealized securities losses and eroding consumer confidence in the banking system, which has begun to soften in 2024. These negative industry developments did not impact the Company’s liquidity position and our balance sheet remains robust. The Company’s total deposits did experience a minimal decline of 0.78% as compared to December 31, 2023, to $2.52 billion at September 30, 2024 which was due to wholesale deposit payoffs. The Company’s uninsured deposits represented 31.64% of total Bank deposits at September 30, 2024 compared to 30.22% of total Bank deposits at December 31, 2023. The Company continues to maintain strong liquidity with available sources of funding of approximately $1.3 billion at September 30, 2024. Furthermore, the Company’s capital remains strong with common equity Tier 1 and total capital ratios of 12.51% and 16.48%, respectively, as of September 30, 2024.

Current wording

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.

Previous wording

We reported net income and diluted earnings per share of $5.6 million and $0.32, respectively, for the third quarter of 2024. This compares to net income and diluted earnings per share of $5.8 million and $0.33, respectively, for the same period in 2023. We reported net income and diluted earnings per share of $16.4 million and $0.94, respectively, for the first nine months of 2024. This compares to net income and diluted earnings per share of $16.1 million and $0.92, respectively, for the same period in 2023.

Current wording

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.

Previous wording

Fully taxable equivalent net interest income for the third quarter of 2024 and 2023 was $18.7 million and $19.8 million, respectively. This decrease quarter over quarter can be seen in increases in rates paid on deposits and other borrowings which outpaced the increases in rates and volume on loans and deposits in banks. The net interest margin for the third quarter of 2024 and 2023 was 2.64% and 2.78%, respectively. This decrease in net interest margin for the third quarter of 2024 compared to the same period in 2023 is primarily a result of the increase in higher yields paid on deposits that outpaced the increase in rates on loans and deposits in banks. Fully taxable equivalent net interest income for the nine months ended September 30, 2024 and 2023 was $56.1 million and $59.9 million, respectively. This decrease quarter over quarter can be seen in increases in rates paid on deposits and other borrowings which outpaced the increases in rates and volume on loans and deposits in banks. The net interest margin for the nine months ended September 30, 2024 compared to the same period in 2023 was 2.67% and 2.87%, respectively. This decrease in net interest margin is primarily a result of the increase in higher yields paid on deposits that outpaced the increase in rates on loans and deposits in banks. While we had anticipated margin expansion in the second half of the year, we did not see it materialize in the third quarter of 2024. However, we believe that the margin has now reached its lowest point and we are optimistic about seeing improvement going forward as changes in the rate environment and easing from the Federal Reserve will allow us to relieve pressure on our funding costs.

Current wording

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.

Previous wording

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, average assets decreased and average liabilities increased for the three months ended September 30, 2024 compared to the same period in 2023. The decrease in average assets was primarily driven by the decrease in investment securities of $52.5 million, which was partially offset by an increase in deposits in banks of $10.3 million and the loan portfolio of $32.6 million. The increase in average liabilities was primarily attributed to an increase in borrowings of $25.2 million as well as an increase in interest bearing deposits of $8.3 million. For the nine months ended September 30, 2024, both average assets and average liabilities increased compared to the same period in 2023. The increase in average assets was primarily driven by the increase in the loan portfolio and deposits in banks of $71.5 million and $6.4 million, respectively, partially offset by a decrease in investment securities of $59.3 million. The increase in average liabilities was funded through an increase in interest bearing deposits of $52.6 million along with a slight increase in borrowings of $1.8 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.

Current wording

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.

Previous wording

The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recognized and recorded on the cash basis. Taxable-equivalent adjustments totaling $59,000 and $54,000 for the three months ended September 30, 2024 and 2023, respectively, are calculated using the statutory federal tax rate and are included in income and fees on loans. Accretion income of $25,000 and $36,000 for the three months ended September 30, 2024 and 2023 are also included in income and fees on loans.

Current wording

The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recognized and recorded on the cash basis. Taxable-equivalent adjustments totaling $68,000 and $48,000 for the three months ended March 31, 2025 and 2024, respectively, are calculated using the statutory federal tax rate and are included in income and fees on loans. Accretion income of $20,000 and expense of $5,000 for the three months ended March 31, 2025 and 2024, respectively, are also included in income and fees on loans.

Previous wording

Taxable-equivalent adjustments totaling $105,000 and $128,000 for the three months ended September 30, 2024 and 2023, respectively, are included in tax-exempt interest on investment securities.

Current wording

Taxable-equivalent adjustments totaling $104,000 and $127,000 for the three months ended March 31, 2025 and 2024, respectively, are calculated using the statutory federal tax rate and are included in tax-exempt interest on investment securities.

Previous wording

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 and nine month periods ended September 30, 2024 compared to the three and nine month periods ended September 30, 2023.

Current wording

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.

Previous wording

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 and nine months ended September 30, 2024 was $750,000 and $2.4 million, respectively, compared to $1.0 million and $2.1 million, respectively, for the same period in 2023. The provision for credit losses for the three and nine months ended September 30, 2024 includes $996,000 and $2.8 million, respectively, in credit losses on loans and $246,000 and $362,000, respectively, in release of credit losses on unfunded commitments. The provision for credit losses for the three and nine months ended September 30, 2023 includes $1.0 million and $2.2 million, respectively, in credit losses on loans and $0 and $91,000, respectively, in release of 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.

Current wording

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.

Previous wording

Noninterest income increased for the three and nine month periods ended September 30, 2024 as compared to the same periods in 2023. The increases in both periods is a result of increases in service charges on deposits, gain on sales of SBA loans and BOLI income which were partially offset by decreases in interchange fee income and losses on sales of securities.

Current wording

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.

Previous wording

Service charges on deposits. For thethree and nine months ended September 30, 2024, service charges on deposits experienced increases compared to the same periods ended September 30, 2023. These increases in service charges on deposits can be attributed to the Company's ability to maintain a strong deposit base despite the challenging rate environment.

Current wording

Service charges on deposits. For thethree 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.

Previous wording

Mortgage Fee Income. For the three and nine months ended September 30, 2024, mortgage fee income increased and decreased, respectively, as compared to the same periods ended September 30, 2023. The three month increase in mortgage fee income was the result of improved mortgage production during the third quarter of 2024. The nine month decrease in mortgage fee income was the result of decreases in mortgage production which can be partially attributed to the Federal Reserve's decision to leave interest rates unchanged until the end of the third quarter of 2024.

Current wording

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.

Previous wording

Gain on sales of SBA loans. For the three and nine months ended September 30, 2024, net realized gains on the sale of the guaranteed portion of SBA loans increased as compared to the same periods ended September 30, 2023. These increases are related to increased production and sales in the Small Business Specialty Lending division which hit its highest mark in five consecutive quarters during the first quarter of 2024 and continues to perform at a high level.

Current wording

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.

Previous wording

BOLI income. For thethree and nine months ended September 30, 2024, BOLI income was higher when compared to the same periods ended September 30, 2023. These increases are primarily related to income from the payout of death benefits during the first quarter of 2024.

Current wording

BOLI income. For thethree 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.

Previous wording

Interchange fees. For thethree and nine months ended September 30, 2024, interchange fee income was slightly lower than the same periods ended September 30, 2023. These minimal decreases in interchange fees are the result of customer use of our card programs whose buying habits can fluctuate between periods.

Current wording

Interchange fees. For thethree 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.

Previous wording

Insurance commissions. For thethree and nine months ended September 30, 2024, insurance commissions decreased slightly compared to the same periods ended September 30, 2023. These variances are volume driven by activity in the Company's insurance division.

Current wording

Insurance commissions. For thethree 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.

Previous wording

Other noninterest income. For thethree and nine months ended September 30, 2024, other noninterest income decreased and increased, respectively, ascompared tothe same periods ended September 30, 2023. The decrease in other noninterest income for the three month period ended September 30, 2024 was primarily due to a decline in commissions received from our partnership with Innovation Refunds related to the Employee Retention Credit as well as recording a loss on the sale of assets in the third quarter of 2024 compared to a gain on the sale of assets in the third quarter of 2023. The increase in other noninterest income for the nine month period ended September 30, 2024 was primarily attributable to increases in wealth advisory and merchant services, gains on sales of other real estate along with increases in SBA servicing and other related fee income, partially offset by a writedown of Bank premises in the second quarter of 2024.

Current wording

Other noninterest income. For thethree months ended March 31, 2025, other noninterest income increased ascompared tothe 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.

Previous wording

Noninterest expense decreased for the three and nine months ended September 30, 2024 compared to the same periods in 2023.

Current wording

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

Previous wording

Salaries and employee benefits. Salaries and employee benefits for the three and nine months ended September 30, 2024 increased and decreased, respectively, as compared to the same periods ended September 30, 2023. The increase in salaries and employee benefits expenses for the three month comparison is a result of an increase in FAS91-deferred costs due to accelerated marine/RV lending costs and the increase in Upstart costs. The decrease in salaries and employee benefits expenses for the nine month comparison is related to the Company's expense reduction initiative in 2023 which lowered total number of employees period over period.

Current wording

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.

Previous wording

Information technology expenses. Information technology expenses increased slightly for the three and nine months ended September 30, 2024 compared to the same periods ended September 30, 2023. These increases relate primarily to an increase in software expenses.

Current wording

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.

Previous wording

Professional fees. Professional fees decreased for the three and nine months ended September 30, 2024 compared to the same periods ended September 30, 2023. These decreases are the result of decreased legal fees partially offset by increased audit and consulting fees.

Current wording

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.

Previous wording

Communications. Communications expenses decreased for the three and nine months ended September 30, 2024 compared to the same periods ended September 30, 2023. The changes in each period are related to fluctuations in data circuit fees and postage and freight charges.

Current wording

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.

Previous wording

Other noninterest expense. Other noninterest expense decreased for the three and nine months ended September 30, 2024 as compared to the same periods ended September 30, 2023. These decreases relate primarily to decreases in deposit related costs, amortization of intangibles and printing and supplies expenses which are partially offset by increased loan related costs.

Current wording

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.

Previous wording

Income tax expense for the three and nine months ended September 30, 2024 was $1.4 million and $4.3 million, respectively, compared to $1.7 million and $4.0 million, respectively, for the same periods in 2023. The Company’s effective tax rate for the three and nine months ended September 30, 2024 was 20.0% and 20.6%, respectively, compared to 22.2% and 19.7%, respectively, for the three and nine months ended September 30, 2023. The largest driver of the difference is the tax-exempt income primarily from BOLI and tax exempt interest. Also, in both the first quarter of 2024 and 2023, the Company experienced a favorable tax impact from the donation made to the Georgia Scholarship Program.

Current wording

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.

Previous wording

At September 30, 2024, gross loans outstanding (excluding loans held for sale) were $1.89 billion, an increase of $2.6 million, or 0.14%, compared to $1.88 billion at December 31, 2023.

Current wording

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.

Previous wording

At September 30, 2024, approximately 64.1% of our loans were secured by commercial real estate. Our total commercial real estate loans have decreased slightly since December 31, 2023 as well as our residential real estate and commercial, financial & agricultural loans while increases can be seen in consumer lending which is driven by our marine and RV division. These movements are largely due to the sale of portfolio mortgages and credit related payoffs of a limited number of loans, along with the general slowdown in loan production over the past several quarters. We continue to maintain competitive loan pricing and tightened credit standards.

Current wording

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.

Previous wording

The allowance for credit losses on loans was $19.7 million at September 30, 2024 compared to $17.4 million at September 30, 2023, an increase of $2.3 million, or 13.2%. The allowance for credit losses on loans as a percentage of loans was 1.04% and 0.93% at September 30, 2024 and 2023, respectively. The provision for credit losses was $750,000 compared to $1,000,000 for the three months ended September 30, 2024 and September 30, 2023, respectively. The provision for credit losses for the quarter ended September 30, 2024 includes $996,000 in credit losses on loans and a release of $246,000 in credit losses on unfunded commitments. The provision for credit losses for the quarter ended September 30, 2023 includes $1.0 million in credit losses on loans and a release of $0 in credit losses on unfunded commitments. The provision for credit losses was $2.4 million compared to $2.1 million for the nine months ended September 30, 2024 and 2023, respectively. The provision for credit losses for the nine months ended September 30, 2024 includes $2.8 million in credit losses on loans and a release of $362,000 in credit losses on unfunded commitments. The provision for credit losses for the nine months ended September 30, 2023 includes $2.2 million in credit losses on loans and a release of $91,000 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.

Current wording

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.