KBRA Assigns Ratings to Colony Bankcorp, Inc.

KBRA assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to Fitzgerald, Georgia-based Colony Bankcorp, Inc. (NASDAQ: CBAN) (“Colony” or “the company”). In addition, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 to 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 with lower interest rate sensitivity. CBAN also has a diversified revenue stream with complementary noninterest income contributing approximately 20% - 36% of total revenue, although less durable sources of revenue, such as gain on sale of SBAs and mortgages, have accounted for the majority of the noninterest income more recently. KBRA expects the newly formed Colony Insurance to improve the durability of the noninterest income revenue streams going forward. The company’s operating structure and efficiency ratio have been negatively impacted by M&A and are below peer levels. However, CBAN recently implemented a cost reduction plan to realize scale efficiencies from its recent acquisitions. The company has a solid deposit franchise with core deposits to total funding in the low to mid 90% range, strengthened by NIB accounts of 24% of total deposits, which contributes to the company’s low deposit funding costs pre-pandemic (2019, 83 bps) and more recently (1Q21, 11 bps). KBRA views CBAN’s loss absorption capacity derived from the LLR, in combination with its recently rebuilt capital position (CET1 13.3% at 1Q22), 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 has performed well throughout the pandemic. CBAN’s loan portfolio is granular with sufficient concentration limits established, although the loan portfolio is concentrated in CRE.

The ratings are based on KBRA’s Bank & Bank Holding Company Global Rating Methodology published on November 8, 2021 and KBRA’s ESG Global Rating Methodology published on June 16, 2021.

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Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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