Colony Bankcorp to acquire First Reliance in $163 million Southeast banking expansion

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Colony Bankcorp acquires First Reliance

Highlights

Colony Bankcorp will acquire First Reliance Bancshares for $163 million (80% stock, 20% cash), entering South Carolina markets and creating a combined entity with $5.0 billion in assets.
Management projects 35% cost savings from First Reliance's noninterest expense base, roughly 20% EPS accretion by 2027, and tangible book value dilution of 12% earned back in under 3.5 years.
Pro forma commercial real estate concentration will remain at 270% of risk-based capital, $9 million gross pre-tax credit mark will be recorded, and noninterest-bearing deposits will comprise 27% post-merger.

Merger terms and expansion plan

As reported by Kroll Bond Rating Agency, Colony Bankcorp and First Reliance Bancshares jointly announce a definitive merger agreement under which First Reliance merges into Colony and First Reliance Bank merges into Colony Bank.

The transaction is valued at $163 million, with consideration made up of 80% stock and 20% cash. Colony says the acquisition fits its strategy of expanding into contiguous markets through both acquisitions and organic growth, while giving it an established community banking platform in South Carolina across several of the state's largest metropolitan areas.

Once the deal closes, the combined company is expected to have about $5.0 billion in assets, $3.2 billion in loans, and $4.0 billion in deposits. The limited geographic overlap between the two banks is seen as a positive because it allows Colony to enter South Carolina with an experienced management team and an existing franchise rather than building a presence from scratch.

Under the agreement, First Reliance Chief Executive Officer Rick Saunders joins Colony as executive vice chairman and a member of the board, while other senior managers from First Reliance take leadership roles including oversight of South Carolina operations. The management structure is expected to support integration by preserving customer relationships, local market knowledge, and First Reliance's community banking model.

Capital, earnings and credit profile

KBRA says the merger is expected to improve Colony's operating profile, with projected cost savings of about 35% relative to First Reliance's projected noninterest expense base. Management also projects roughly 20% earnings-per-share accretion by 2027 and tangible book value dilution of about 12%, with that dilution earned back in less than 3.5 years.

Colony reports a CET1 ratio of 12.5% at the first quarter of 2026, and management expects pro forma CET1 to decline to about 11% at closing. KBRA says that level remains supportive of the current rating and that the combined company's stronger earnings profile should help rebuild capital over time.

On asset quality, both banks have posted sound performance over time, and the pro forma loan portfolio is not expected to change materially because their loan books are complementary. Commercial real estate remains the largest lending category, while pro forma CRE concentration is expected to stay at 270% of total risk-based capital, below the 300% supervisory guidance threshold.

Colony conducted a review covering 53% of First Reliance's total loans and expects to record a total gross pre-tax credit mark of $9 million, equal to 1.05% of First Reliance's loans. Management also plans to early adopt FASB's new accounting standard for purchased financial assets, eliminating non-PCD credit marks and the related double count of expected credit losses.

From a funding standpoint, First Reliance adds a relationship-based deposit franchise, with noninterest-bearing deposits accounting for 27% of total deposits and deposit costs at 1.70%. KBRA says the deal strengthens Colony through broader geographic diversification, larger scale, and a solid core funding base, while execution risk is moderated by Colony's acquisition experience, retained local leadership, and limited operational overlap.

Our earlier article on Anchorage’s general obligation bond outlook revision explained that the city’s rating trend improved as finances stabilized after the pandemic downturn. It highlighted stronger revenue performance, steps to rebuild reserves, and the remaining exposure to Alaska’s energy-sector risks despite diversified revenues and strategic planning.

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