Colony Bank Soars in Q3 2026: Record-Breaking ROA and Strong Non-Interest Income Mark a Significant Milestone
Colony Bank has made significant strides in the third quarter of 2026, with the company reporting improved financial performance and progress towards achieving its goals. According to Heath Fountain, Chief Executive Officer, regulatory and shareholder approvals have been obtained for the partnership with First Reliance, with a legal close expected on November 1st.
The partnership is expected to bring about a smooth transition for both the upcoming legal close in November and the scheduled systems conversion and customer integration that will occur in the second quarter of next year. Colony Bank's team has been working diligently towards ensuring this process goes smoothly, with Fountain expressing pride in the progress made so far.
One notable highlight from the third quarter is the company's operating Return on Assets (ROA), which has surpassed a record 1.25%. This achievement marks a significant milestone for Colony Bank and demonstrates the company's commitment to growth and profitability. However, as the company integrates First Reliance, they expect ROA to pull back by 10-15 basis points over the next few quarters due to higher expenses associated with operating on two core systems until conversion in the second quarter of 2027.
The loan growth for the third quarter was around 2% annualized, bringing the year-to-date annualized loan growth to approximately 5.4%. While this is lower than Colony Bank's long-term target of 8-12%, the company remains optimistic about future growth prospects. As Fountain explained, repricing of loan renewals from lower rates will continue to provide opportunities for increased interest income and driving growth in earning asset yields even as near-term net loan growth is softer.
Margins also improved significantly during this quarter, rising seven basis points from the prior quarter to 3.59%. This improvement reflects continued balance sheet improvements and a healthy weighted average rate on new and renewed loans. As illustrated in the company's investor presentation, their expected base case repricing unlocks substantial value heading into 2027.
Non-interest income was also strong during this quarter, expanding over the prior quarter thanks to disciplined execution and steady growth across business lines. However, as the rate environment remains relatively elevated, mortgage origination volumes are expected to moderate. Colony Bank is actively rightsizing expenses and operational infrastructure to match expected mortgage volumes while preserving capacity needed to scale effectively over the long term.
Core deposits remain a strategic priority for the company, with their team prioritizing relationship-driven, low-cost operating accounts over high-cost, rate-sensitive deposits that compromise net interest margin. Despite increased competition across their footprint in this rate environment, Colony Bank remains committed to preserving its core deposit base and promoting long-term profitability.
As the company looks ahead to next year, they expect mortgage production to be softer than originally projected. This is largely due to higher mortgage rates naturally creating a cooling effect on home sales and refinance pipelines. However, Colony Bank's focus remains steadfast on achieving their long-term targets while managing the current economic environment.
With these developments, it appears that Colony Bank is well-positioned for continued success in the coming quarters and years. As they continue to navigate the changing market landscape, their commitment to growth, profitability, and customer satisfaction will undoubtedly remain at the forefront of their operations.
