COLONY BANKCORP INC (CBAN) stock intrinsic value fair value estimate & owner earnings analysis

Colony Bankcorp is the holding company for Colony Bank, headquartered in Fitzgerald, Georgia. At the end of 2025 it ran 37 locations in Georgia, one in Birmingham, Alabama and five in Florida, lending mainly to small and mid-sized businesses and real estate borrowers, funded by about $3.0 billion of deposits. It also has a mortgage division and a Small Business Specialty Lending division that originates government-guaranteed SBA and USDA loans and sells them. At June 30, 2026 it had $3.6 billion of assets, $2.4 billion of loans and tangible book value of about $15.12 per share. Deposits are the raw material of the business, so no debt is subtracted from our values; the loan-to-deposit ratio is about 82%, and borrowings (Federal Home Loan Bank advances of $170 million and other borrowings of $63 million) are modest. EARNINGS LEVEL. We measure earnings the way an owner would: cash from operations, leaving out swings in loans held for sale and other working balances, less stock compensation, less the annual provision for loan losses (a recurring cost of lending), less maintenance capital spending. Per diluted share this was $1.02 in 2016, $1.38 in 2018, $1.58 in 2021, $1.65 in 2022, $1.36 in 2023, $1.72 in 2024 and $2.04 in 2025. It runs roughly 25% above reported net income mainly because the cash flow statement adds back depreciation, bond-premium amortization, core deposit intangible amortization (only about $1.1 million of the $7.7 million 2025 add-back) and similar non-cash items. The median of 2022 to 2025 is $1.69; we skipped 2021 because shares were still ramping after the SouthCrest acquisition, and earlier years describe a bank under half the current size. We set the earnings level at $1.90 per share, a little above that median, because TC Bancshares joined on December 1, 2025 (3.84 million shares issued plus $15.4 million of cash) and the two quarters since have both been strong: net income of $8.2 million in the first quarter and $10.9 million in the second ($0.90 per share for the half, on about 21.2 million shares). On our measure the first half was about $1.13 per share, or roughly $2.25 a year; we chose $1.90 because two quarters is a short record and the first quarter alone, converted to our measure, supports about that figure. Those results already carry about $2.6 million of acquisition costs. BASE CASE ($33.81). Per-share earnings grew 18.6% in 2025; the base case assumes only 2% in year one and 2% a year for ten years, then flat at about $2.32 and no growth after that. The 2% is growth we regard as in the bag: it is loan growth paid for out of the bank's own retained profit, and we deduct the capital needed to support it (about $0.37 per share in year one) from what owners receive. Organic loans grew 8.4% in 2023, fell 2.2% in 2024 and rose 3.6% in the first half of 2026, so 2% is below the record. Because a bank's results cycle, the base case also includes one mild credit episode in year five, like 2020 when the provision rose from $1.1 million to $6.6 million, costing about $0.37 per share. The earnings after year ten are credited because the bank has been profitable every year from 2014 through 2025 and survived the 2009 to 2010 losses; no growth is assumed. Left out as not in the bag: further acquisitions (they have been large relative to the bank and paid in stock, not small steady steps), a rebound in SBA gain-on-sale income, share gains and margin expansion. If the plain 2022 to 2025 median of $1.69 were used instead of $1.90, the base case would be about $29.72. BEAR CASE ($19.99). Colony has been through a real-estate credit cycle. In 2009 its provision was $43.5 million on a bank about a third of today's size, non-performing assets reached 5.6% of loans and other real estate, and it lost $20.5 million; in 2010 the provision was $13.4 million and it lost $0.9 million (company earnings release, January 2011). Earnings were still only $8.4 million on $1.2 billion of assets in 2015. We apply that to today's $2.4 billion book, which is 74% commercial real estate and commercial loans and 83% secured by real estate: in year three a provision of 4.5% of loans (about $110 million, against a normal $7 million), then 1.4% in year four and 0.5% in year five; underlying earnings 20%, 25% and 15% lower in those years, 20% lower in year six, and about 15% lower than today permanently afterwards. Year three then produces roughly a $2.48 per share loss on our earnings measure (about $52 million), which tangible equity of about $320 million absorbs without new shares; on our estimate tangible book falls to roughly $14 per share at the trough. The bear value exceeds today's tangible book of $15.12 because the franchise (about $3 billion of deposits) kept generating pre-provision earnings through the last cycle: after the worst year, 2009, the loss narrowed from $20.5 million to $0.9 million, and by 2015 the bank was earning $8.4 million. The bank owes its depositors, and is treated as a lender, so no separate debt is deducted. BULL CASE ($44.89). The first-half 2026 pace of about $2.25 per share holds, and earnings grow 4% a year for ten years (a little below the roughly 4.5% average of organic loan growth in 2023, 2024 and the annualized first half of 2026), with only ordinary credit costs, then flat afterwards. WHAT HAS CHANGED. Our August 2026 estimate used a different valuation basis, so the figures are not comparable. In the business: the second quarter earned $10.9 million versus $8.0 million a year ago, nonaccrual loans fell from $23.4 million at year-end to $18.9 million, and in June 2026 Colony agreed to acquire First Reliance Bancshares (about $163 million, roughly 80% in stock, closing expected in the fourth quarter of 2026, with regulatory approvals reported in September). Nothing about that deal is in our cases, because its benefit is not yet secured and it will add a large number of shares; we will revisit after it closes. RISKS TO WATCH. Nonaccrual loans more than doubled in 2025 (to $23.4 million from $10.7 million), and nearly 80% of the bank's non-performing loans were commercial real estate and commercial loans. The SBA lending unit's gain on sales fell from $9.2 million to $5.4 million in 2025 and it bore $3.2 million of the bank's $4.5 million provision. Management also excluded TC Bancshares from its 2025 internal-control assessment while integration was incomplete. MARGIN-OF-SAFETY PRICE ($12.00). We are fairly confident in the earnings floor (reported net income was $28.3 million in 2025 and $19.1 million in just the first half of 2026) but less sure how much of the cash-flow add-back is truly distributable. The worst plausible outcome is a Georgia and Florida real-estate downturn like 2009 to 2010 during a period when the bank is also digesting a second acquisition; its funding (a loan-to-deposit ratio near 82%, equity of roughly 11% of assets) would survive it, and the unmodeled risk is dilution if First Reliance goes badly. If we are wrong about the earnings level, the base case falls to about $29.72; if we are wrong about the cycle and losses are twice as bad as 2009, the bear case falls from $19.99 to about $16. The price assumes a holding period of up to four years, and the bank currently pays $0.48 a share in dividends. For a 20% annual return over four years from $12, the shares would need to be worth about $23 by then; our bear case is worth about $23.7 and our base case about $35.6 at that point. The margin-of-safety price is not higher because in our bear case a single year swings from a normal profit to a loss larger than a normal year's earnings, and tangible book of $15.12 is not a safe floor when losses of that size are on the table. $12.00 sits below tangible book and leaves room for a mistake in either direction.