SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 2001 COMMISSION FILE NUMBER 0-12436
COLONY BANKCORP, INC.
--------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-1492391
------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
115 SOUTH GRANT STREET, FITZGERALD, GEORGIA 31750
-------------------------------------------------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES
229/426-6000
------------
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED REPORTS REQUIRED TO
BE FILED BY SECTIONS 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT.
CLASS OUTSTANDING AT JUNE 30, 2001
----- ----------------------------
COMMON STOCK, $1 PAR VALUE 4,445,526
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED FOR COLONY BANKCORP, INC. AND
SUBSIDIARIES: COLONY BANK OF FITZGERALD, COLONY BANK ASHBURN, COLONY BANK
WILCOX, COLONY BANK OF DODGE COUNTY, COLONY BANK WORTH, COLONY BANK SOUTHEAST
AND COLONY MANAGEMENT SERVICES, INC.
A. CONSOLIDATED BALANCE SHEETS - JUNE 30, 2001 AND DECEMBER 31, 2000.
B. CONSOLIDATED STATEMENTS OF INCOME - FOR THE THREE MONTHS ENDED
JUNE 30, 2001 AND 2000 AND FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND
2000.
C. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - FOR THE THREE MONTHS
ENDED JUNE 30, 2001 AND 2000 AND FOR THE SIX MONTHS ENDED JUNE 30,
2001 AND 2000.
D. CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION - FOR THE SIX
MONTHS ENDED JUNE 30, 2001 AND 2000.
THE CONSOLIDATED FINANCIAL STATEMENTS FURNISHED HAVE NOT BEEN AUDITED BY
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, BUT REFLECT, IN THE OPINION OF
MANAGEMENT, ALL ADJUSTMENTS NECESSARY FOR A FAIR PRESENTATION OF THE RESULTS OF
OPERATIONS FOR THE PERIODS PRESENTED.
THE RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2001 ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
June 30, 2001 Dec 31, 2000
------------------ ---------------
ASSETS (Unaudited)
Cash and Balances Due from Depository Institutions $ 19,351 $ 18,594
Federal Funds Sold 10,893 21,675
Investment Securities
Available for Sale, at Fair Value 80,369 70,222
Held to Maturity, at Cost (Fair Value of $264 and
$291, Respectively) 265 293
Loans Held for Sale 1,810 1,513
Loans 431,320 388,007
Allowance for Loan Losses (5,888) (5,661)
Unearned Interest and Fees 0 (4)
-------- --------
425,432 382,342
Premises and Equipment 14,571 14,047
Other Real Estate 542 349
Other Assets 12,084 10,868
-------- --------
Total Assets $565,317 $519,903
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-Bearing $ 36,424 $ 38,649
Interest-Bearing 439,806 411,363
-------- --------
476,230 450,012
Borrowed Money 42,174 25,086
Other Liabilities 3,904 4,595
Stockholders' Equity
Common Stock, Par Value $1, Authorized 20,000,000
Shares, Issued 4,445,526 and 4,440,276 Shares as of
June 30, 2001 and December 31, 2000, Respectively 4,446 4,440
Paid-In Capital 21,650 21,603
Retained Earnings 16,384 14,436
Restricted Stock - Unearned Compensation (79) (47)
Accumulated Other Comprehensive Income, Net of Tax 608 (222)
-------- --------
43,009 40,210
-------- --------
Total Liabilities and Stockholders' Equity $565,317 $519,903
======== ========
The accompanying notes are an integral part of these balance sheets.
3
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 2001 AND 2000
AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Three Months Ended Six Months Ended
06/30/01 06/30/00 06/30/01 06/30/00
----------- ----------- ------------ -----------
Interest Income
Loans, including fees $ 10,113 $ 8,737 $ 20,066 $ 16,729
Federal Funds Sold 144 210 404 398
Deposits with Other Banks 78 147 118 325
Investment Securities
U.S. Treasury & Federal Agencies 785 773 1,588 1,547
State, County and Municipal 84 96 167 192
Other Investments 300 15 546 26
Dividends on Other Investments 31 31 64 64
---------- ---------- ---------- ----------
11,535 10,009 22,953 19,281
---------- ---------- ---------- ----------
Interest Expense
Deposits 6,044 4,711 12,106 9,068
Federal Funds Purchased 4 7 11 9
Borrowed Money 520 446 973 868
---------- ---------- ---------- ----------
6,568 5,164 13,090 9,945
---------- ---------- ---------- ----------
Net Interest Income 4,967 4,845 9,863 9,336
Provision for Loan Losses 373 605 659 1,082
---------- ---------- ---------- ----------
Net Interest Income After Provision for loan losses 4,594 4,240 9,204 8,254
---------- ---------- ---------- ----------
Noninterest Income
Service Charges on Deposits 749 620 1,447 1,182
Other Service Charges, Commissions & Fees 135 110 260 255
Security Gains, net 49 0 64 0
Other Income 129 105 263 245
---------- ---------- ---------- ----------
1,062 835 2,034 1,682
---------- ---------- ---------- ----------
Noninterest Expense
Salaries and Employee Benefits 2,114 1,841 4,162 3,576
Occupancy and Equipment 648 585 1,323 1,086
Other Operating Expenses 1,030 927 1,993 1,773
---------- ---------- ---------- ----------
3,792 3,353 7,478 6,435
---------- ---------- ---------- ----------
Income Before Income Taxes 1,864 1,722 3,760 3,501
Income Taxes 642 577 1,278 1,143
---------- ---------- ---------- ----------
Net Income $ 1,222 $ 1,145 $ 2,482 $ 2,358
========== ========== ========== ==========
Net Income Per Share of Common Stock
Basic $ 0.27 $ 0.26 $ 0.56 $ 0.53
========== ========== ========== ==========
Diluted $ 0.27 $ 0.26 $ 0.56 $ 0.53
========== ========== ========== ==========
Weighted Average Shares Outstanding 4,445,526 4,440,276 4,445,526 4,440,276
========== ========== ========== ==========
The accompanying notes are an integral part of these statements.
4
COLONY BANKCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30, 2001 AND 2000
AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Three Months Ended Six Months Ended
06/30/01 06/30/00 06/30/01 06/30/00
--------- --------- --------- ---------
Net Income $ 1,222 $ 1,145 $ 2,482 $ 2,358
Other Comprehensive Income, Net of Tax
Gains (Losses) on Securities Arising During Year 97 11 872 53
Reclassification Adjustment (32) 0 (42) 0
--------- --------- --------- ---------
Unrealized Gains (Losses) on Securities 65 11 830 53
--------- --------- --------- ---------
Comprehensive Income $ 1,287 $ 1,156 $ 3,312 $ 2,411
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
5
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED)
(DOLLARS IN THOUSANDS)
2001 2000
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 2,482 $ 2,358
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sale of investment securities (64) 0
Depreciation 684 610
Provision for loan losses 659 1,082
Amortization of excess costs 27 26
Other prepaids, deferrals and accruals, net (702) (14)
-------- --------
Total Adjustments 604 1,704
-------- --------
Net cash provided by operating activities 3,086 4,062
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of other assets (FHLB stock) (454) 0
Purchases of securities available for sale (47,366) (1,242)
Proceeds from sales of securities available for sale 13,670 0
Proceeds from maturities, calls, and paydowns of
investment securities:
Available for Sale 23,056 1,770
Held to Maturity 32 257
Decrease (Increase) in interest-bearing deposits in banks (3,079) (382)
(Increase) in loans (43,614) (47,269)
Purchase of premises and equipment (1,208) (909)
-------- --------
Net cash provided by investing activities (58,963) (47,775)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Net increase in deposits 26,218 32,479
Federal funds purchased 0 700
Dividends paid (533) (355)
Net (decrease) increase in other borrowed money 17,088 10,302
-------- --------
Net cash provided by financing activities 42,773 43,126
-------- --------
Net increase (decrease) in cash and cash equivalents (13,104) (587)
Cash and cash equivalents at beginning of period 37,357 31,126
-------- --------
Cash and cash equivalents at end of period $ 24,253 $ 30,539
======== ========
The accompanying notes are an integral part of these statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
------------------------------------------
Basis of presentation
Colony Bankcorp, Inc. is a multi-bank holding company located in Fitzgerald,
Georgia. The consolidated financial statements include the accounts of Colony
Bankcorp, Inc. and its wholly-owned subsidiaries, Colony Bank of Fitzgerald,
Fitzgerald, Georgia; Colony Bank Ashburn, Ashburn, Georgia; Colony Bank Worth,
Sylvester, Georgia; Colony Bank of Dodge County, Eastman, Georgia; Colony Bank
Wilcox, Rochelle, Georgia; Colony Bank Southeast, Broxton, Georgia (the Banks);
and Colony Management Services, Inc., Fitzgerald, Georgia. All significant
intercompany accounts have been eliminated in consolidation. The accounting and
reporting policies of Colony Bankcorp, Inc. conform to generally accepted
accounting principles and practices utilized in the commercial banking industry.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the balance sheet date and revenues and expenses for the period. Actual results
could differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near-term relate to the
determination of the allowance for loan losses, the valuation of real estate
acquired in connection with foreclosure or in satisfaction of loans and the
valuation of deferred tax assets.
All dollars in notes to consolidated financial statements are rounded to the
nearest thousand.
Description of Business
The Banks provide a full range of retail and commercial banking services for
consumers and small to medium size businesses primarily in South Georgia.
Lending and investing activities are funded primarily by deposits gathered
through its retail branch office network. Lending is concentrated in
agricultural, commercial and real estate loans to local borrowers. In
management's opinion, although the Banks have a high concentration of
agricultural and real estate loans, these loans are well collateralized and do
not pose an adverse credit risk. In addition, the balance of the loan portfolio
is sufficiently diversified to avoid significant concentration of credit risk.
Although the Banks have a diversified loan portfolio, a substantial portion of
borrowers' ability to honor their contracts is dependent upon the viability of
the real estate economic sector.
The success of Colony is dependent, to a certain extent, upon the economic
conditions in the geographic markets it serves. No assurance can be given that
the current economic conditions will continue. Adverse changes in the economic
conditions in these geographic markets would likely have a material adverse
effect on the Company's results of operations and financial condition The
operating results of Colony depend primarily on its net interest income.
Accordingly, operations are subject to risks and uncertainties surrounding the
exposure to changes in the interest rate environment.
Investment Securities
The Company records investment securities under Statement of Financial
Accounting Standards (SFAS) No. 115 Accounting for Certain Investments in Debt
and Equity Securities. Under the provisions of SFAS No. 115, the Company must
classify its securities as trading, available for sale or held to maturity.
Trading securities are purchased and held for sale in the near term. Securities
held to maturity are those which the Company has the ability and intent to hold
until maturity. All other securities not classified as trading or held to
maturity are considered available for sale.
Securities available for sale are measured at fair value with unrealized gains
and losses reported net of deferred taxes as a separate component of
stockholders' equity. Fair value represents an approximation of realizable
value as of June 30, 2001 and December 31, 2000. Realized and unrealized gains
and losses are determined using the specific identification method. Premiums
and discounts are recognized in interest income using the interest method over
the period to maturity.
Loans Held for Sale
Mortgage loans held for sale are reported at the lower of cost or market value.
The method used to determine this amount is the individual loan method.
Loans
Loans are generally reported at principal amount less unearned interest and
fees. Impaired loans are recorded under SFAS 114, Accounting by Creditors for
Impairment of a Loan and SFAS 118, Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures. Impaired loans are loans for which
principal and interest are unlikely to be collected in accordance with the
original loan terms and, generally, represent loans delinquent in excess of 120
days which have been placed on nonaccrual status and for which collateral values
are less than outstanding principal and interest. Small balance, homogeneous
loans are excluded from impaired loans. Generally, interest payments received
on impaired loans are applied to principal. Upon receipt of all loan principal,
additional interest payments are recognized as interest income on the cash
basis.
Other nonaccrual loans are loans for which payments of principal and interest
are considered doubtful of collection under original terms but collateral values
equal or exceed outstanding principal and interest.
7
(1) Summary of Significant Accounting Policies (continued)
- ----------------------------------------------------------
Allowance for Loan Losses
The allowance method is used in providing for losses on loans. Accordingly, all
loan losses decrease the allowance and all recoveries increase it. The
provision for loan losses is based on factors which, in management's judgment,
deserve current recognition in estimating possible loan losses. Such factors
considered by management include growth and composition of the loan portfolio,
economic conditions and the relationship of the allowance for loan losses to
outstanding loans.
An allowance for loan losses is maintained for all impaired loans. Provisions
are made for impaired loans upon changes in expected future cash flows or
estimated net realizable value of collateral. When determination is made that
impaired loans are wholly or partially uncollectible, the uncollectible portion
is charged-off.
Management believes the allowance for possible loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's allowance for loan
losses. Such agencies may require the Company to recognize additions to the
allowance based on their judgment about information available to them at the
time of their examination.
Premises and Equipment
Premises and equipment are recorded at acquisition cost net of accumulated
depreciation.
Depreciation is charged to operations over the estimated useful lives of the
assets. The estimated useful lives and methods of depreciation are as follows:
Description Life in Years Method
- ----------- ------------- -------
Banking Premises 15-40 Straight-Line and Accelerated
Furniture and Equipment 5-10 Straight-Line and Accelerated
Expenditures for major renewals and betterments are capitalized. Maintenance
and repairs are charged to operations as incurred. When property and equipment
are retired or sold, the cost and accumulated depreciation are removed from the
respective accounts and any gain or loss is reflected in other income or
expense.
Cash Flows
For reporting cash flows, cash and cash equivalents include cash on hand,
noninterest-bearing amounts due from banks and federal funds sold. Cash flows
from demand deposits, NOW accounts, savings accounts, loans and certificates of
deposit are reported net.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
consolidated financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes are recognized for differences between the
basis of assets and liabilities for financial statement and income tax purposes.
The differences relate primarily to depreciable assets (use of different
depreciation methods for financial statement and income tax purposes) and
allowance for loan losses (use of the allowance method for financial statement
purposes and the experience method for tax purposes). The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
Other Real Estate
Other real estate generally represents real estate acquired through foreclosure
and is initially recorded at the lower of cost or estimated market value at the
date of acquisition. Losses from the acquisitions of property in full or
partial satisfaction of debt are recorded as loan losses. Subsequent declines
in value, routine holding costs and gains or losses upon disposition are
included in other losses.
Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Certain changes in assets and
liabilities, such as unrealized gains and losses on securities available for
sale, represent equity changes from economic events of the period other than
transactions with owners and are not reported in the consolidated statement of
income but as a separate component of the equity section of the consolidated
balance sheets. Such items are considered components of other comprehensive
income. Statement of Financial Accounting Standards 130 requires the
presentation in the financial statements of net income and all items of other
comprehensive income as total comprehensive income.
Changes in Accounting Principles and Effects of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards requiring that
8
every derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gain or loss to offset related results on the hedged item
in the income statement, and requires that a company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. In June 1999, the FASB issued SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date of
FASB Statement No. 133, which delays the original effective date of SFAS No. 133
until fiscal year beginning after June 15, 2000. In June 2000, the FASB issued
SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities an Amendment of FASB Statement No. 133, which addresses a limited
number of issues causing implementation difficulties for certain entities that
apply Statement 133. Management does not anticipate that the derivative
statements will have a material effect, if any, on the financial position and
result of operations of Colony.
On July 20, 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. This statement discontinues the practice of amortizing goodwill and
indefinite-lived intangible assets and initiates an annual review for
impairment. Impairment would be examined more frequently if certain indicators
are encountered. Intangible assets with a determinable useful life will
continue to be amortized over that period. The amortization provisions apply to
goodwill and intangible assets acquired after June 30, 2001. Goodwill and
intangible assets on the books at June 30, 2001 will be affected when the
Company adopts the statement. At this time, the Company has not determined what
effect the impairment tests of goodwill will be on earnings and the financial
position of the Company.
Restricted Stock - Unearned Compensation
In 1999, the board of directors of Colony Bankcorp, Inc. adopted a restricted
stock grant plan which awards certain executive officers common shares of the
Company. The maximum number of shares which may be subject to restricted stock
awards is 44,350. During 2000, 5,250 shares were issued and in 2001, 5,250
shares were issued under this plan. The shares are recorded at fair market
value (on the date granted) as a separate component of stockholder's equity.
The cost of these shares is being amortized against earnings using the straight-
line method over 3 years (the restriction period).
(2) Cash and Balances Due from Depository Institutions
- ------------------------------------------------------
Components of cash and balances due from depository institutions at June 30,
2001 and December 31, 2000 are as follows:
June 30, 2001 December 31, 2000
------------- -----------------
Cash on Hand and Cash Items $ 4,745 $ 4,846
Noninterest-Bearing Deposits with Other Banks 8,615 10,836
Interest-Bearing Deposits with Other Banks 5,991 2,912
------- -------
$19,351 $18,594
======= =======
(3) Investment Securities
- -------------------------
Investment securities as of June 30, 2001 are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
Securities Available for Sale
U.S. Government Agencies
Mortgage-Backed $46,024 $ 603 $(118) $46,509
Other 5,736 84 0 5,820
State, County & Municipal 8,836 89 (34) 8,891
Corporate Obligations 17,629 574 (4) 18,199
Marketable Equity Securities 1,130 0 (180) 950
------- ------ ----- -------
$79,355 $1,350 $(336) $80,369
======= ====== ===== =======
Securities Held to Maturity:
State, County and Municipal $ 265 $ 0 $ (1) $ 264
======= ====== ===== =======
9
The amortized cost and fair value of investment securities as of June 30, 2001,
by contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because issuers have the right to call or prepay
obligations with or without call or prepayment penalties.
Securities
---------------------------------------------------------------------------
Available for Sale Held to Maturity
------------------ ----------------
Amortized Cost Fair Value Amortized Cost Fair Value
-------------- ---------- --------------- ----------
Due in One Year or Less $ 1,305 $ 1,320 $100 $100
Due After One Year Through Five Years 6,822 6,872 0 0
Due After Five Years Through Ten Years 4,322 4,418 0 0
Due After Ten Years 2,123 2,101 165 164
------- ------- ---- ----
14,572 14,711 265 264
Corporate Obligations 17,629 18,199 0 0
Marketable Equity Securities 1,130 950 0 0
Mortgage-Backed Securities 46,024 46,509 0 0
------- ------- ---- ----
$79,355 $80,369 $265 $264
======= ======= ==== ====
Investment securities as of December 31, 2000 are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
Securities Available for Sale:
U.S. Government Agencies
Mortgage-Backed Securities $15,112 $ 45 $(36) $15,121
Other 35,509 57 (300) 35,266
State, County & Municipal 8,044 33 (57) 8,020
The Banker's Bank Stock 50 0 0 50
Federal Home Loan Bank Stock 1,610 1,610
Marketable Equity Securities 1,130 0 (188) 942
Corporate Obligations 9,007 206 0 9,213
------- ---- ----- -------
$70,462 $341 $(581) $70,222
======= ==== ===== =======
Securities Held to Maturity:
State, County and Municipal $ 293 $ 0 $ (2) $ 291
======= ==== ===== =======
Proceeds from sales of investments available for sale were $13,670 during the
first half of 2001. Gross realized gains totaled $78 during the first half of
2001. Gross realized losses totaled $14 during the first half of 2001.
Investment securities having a carry value approximating $35,031 and $32,658 as
of June 30, 2001 and December 31, 2000, respectively, were pledged to secure
public deposits and for other purposes.
(4) Loans
- ---------
The composition of loans as of June 30, 2001 and December 31, 2000 was as
follows:
June 30, 2001 December 31, 2000
------------- -----------------
Commercial, Financial and Agricultural $ 48,655 $ 77,448
Real Estate - Construction 7,640 5,961
Real Estate - Farmland 27,334 23,411
Real Estate - Other 268,693 207,396
Installment Loans to Individuals 63,058 59,862
All Other Loans 15,940 13,929
-------- --------
$431,320 $388,007
======== ========
10
Nonaccrual loans are loans for which principal and interest are doubtful of
collection in accordance with original loan terms and for which accruals of
interest have been discontinued due to payment delinquency. Nonaccrual loans
totaled $7,235 and $5,164 as of June 30, 2001 and December 31, 2000,
respectively. On June 30, 2001, the Company had 90 day past due loans with
principal balances of $764 and restructured loans with principal balances of
$206.
(5) Allowance for Loan Losses
- ------------------------------
Transactions in the allowance for loan losses are summarized below for six
months ended June 30, 2001 and June 30, 2000 as follows:
June 30, 2001 June 30, 2000
--------------- --------------
Balance, Beginning $5,661 $4,682
Provision Charged to Operating Expenses 659 1,082
Loans Charged Off (649) (793)
Loan Recoveries 217 116
------ ------
Balance, Ending $5,888 $5,087
====== ======
(6) Premises and Equipment
- ---------------------------
Premises and equipment are comprised of the following as of June 30, 2001 and
December 31, 2000:
June 30, 2001 December 31, 2000
------------------ ----------------------
Land $ 2,092 $ 1,769
Building 11,056 11,013
Furniture, Fixtures and Equipment 8,999 8,771
Leasehold Improvements 262 262
Construction in Progress 632 48
------- -------
23,041 21,863
------- -------
Accumulated Depreciation (8,470) (7,816)
------- -------
$14,571 $14,047
======= =======
Depreciation charged to operations totaled $684 and $610 for June 30, 2001 and
June 30, 2000 respectively.
Certain Company facilities and equipment are leased under various operating
leases. Rental expense approximated $72 and $77 for six months ended June 30,
2001 and 2000.
Future minimum rental payments to be paid are as follows:
Year Ending
December 31 Amount
----------- ------
2001 $149
2002 96
2003 69
2004 10
2005 1
----
$325
====
(7) Income Taxes
- -----------------
The Company records income taxes under SFAS No. 109, Accounting for Income
Taxes, which requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.
11
(8) Deposits
- ------------
Components of interest-bearing deposits as of June 30, 2001 and December 31,
2000 are as follows:
June 30, 2001 December 31, 2000
------------- -----------------
Interest-Bearing Demand $ 71,792 $ 72,833
Savings 15,995 13,072
Time, $100,000 and Over 116,075 111,875
Other Time 235,944 213,583
-------- --------
$439,806 $411,363
======== ========
The aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of one hundred thousand, was approximately $97,717 and
$99,263 as of June 30, 2001 and December 31, 2000, respectively.
As of June 30, 2001 and December 31, 2000, the scheduled maturities of
certificates of deposits are as follows:
Maturity June 30, 2001 December 31, 2000
-------- ------------- -----------------
One Year and Under $289,642 $268,753
One to Three Years 51,076 46,016
Three Years and Over 11,301 10,689
-------- --------
$352,019 $325,458
======== ========
(9) Borrowed Money
- --- --------------
Borrowed money at June 30, 2001 and December 31, 2000 is summarized as follows:
June 30, 2001 December 31, 2000
------------- -----------------
Federal Home Loan Bank Advances $41,100 $23,800
First Port City Note Payable 578 674
The Banker's Bank Note Payable 496 612
------- -------
$42,174 $25,086
======= =======
Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from
2001 to 2010 and interest rates ranging from 3.90 percent to 6.98 percent.
Under the Blanket Agreement for Advances and Security Agreement with the FHLB,
residential first mortgage loans are pledged as collateral for the FHLB advances
outstanding.
First Port City note payable was renewed on January 29, 2000 with additional
funds added for an amount totaling $963. Annual principal payments of $96 are
due with interest paid quarterly at The Wall Street Prime minus one half
percent. The debt is secured by commercial real estate in downtown Fitzgerald,
which includes the parent company's facilities. Any unpaid balance is due
January 29, 2003.
The Banker's Bank note payable was renewed on October 23, 2000 for $625 at a
rate of The Wall Street Prime minus one half percent. Payments are due monthly
with the entire unpaid balance due October 23, 2003. The debt is secured by all
furniture, fixtures, machinery, equipment and software of Colony Management
Services, Inc.
The aggregate stated maturities of borrowed money at June 30, 2001 are as
follows:
Year Amount
---- ------
2001 $ 5,700
2002 13,400
2003 6,574
2004 3,000
2005 and Thereafter 13,500
-------
$42,174
=======
12
(10) Profit Sharing Plan
- ------------------------
The Company has a profit sharing plan that covers substantially all employees
who meet certain age and service requirements. It is the Company's policy to
make contributions to the plan as approved annually by the board of directors.
The total provision for contributions to the plan was $369 for 2000, $328 for
1999 and $264 for 1998.
(11) Commitments and Contingencies
- ----------------------------------
In the normal course of business, certain commitments and contingencies are
incurred which are not reflected in the consolidated financial statements.
Commitments under standby letters of credit to U.S. addresses approximate $1,523
as of June 30, 2001 and $1,770 as of December 31, 2000. Unfulfilled loan
commitments as of June 30, 2001 and December 31, 2000 approximated $40,687 and
$40,495 respectively. No losses are anticipated as a result of commitments and
contingencies.
Colony Bank Ashburn is currently constructing a new branch to be located in the
Dougherty/Lee County market. The total estimated cost to complete construction
and furnish the facility is $1,200. At June 30, 2001 the bank had paid
approximately $675 of the total estimated cost.
(12) Regulatory Capital Matters
- -------------------------------
The amount of dividends payable to the parent company from the subsidiary banks
is limited by various banking regulatory agencies. The amount of cash dividends
available from subsidiaries for payment in 2001 without prior approval from the
banking regulatory agencies approximates $2,256. Upon approval by regulatory
authorities, the banks may pay cash dividends to the parent company in excess of
regulatory limitations.
The Company is subject to various regulatory capital requirements administered
by federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and, possibly, additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Company's consolidated financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Company must meet
specific capital guidelines that involve quantitative measures of the Company's
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. The Company's capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios of total and Tier 1
capital to risk-weighted assets, and of Tier 1 capital to average assets. The
amounts and ratios as defined in regulations are presented hereafter.
Management believes, as of June 30, 2001, the Company meets all capital adequacy
requirements to which it is subject and is classified as well capitalized under
the regulatory framework for prompt corrective action. In the opinion of
management, there are no conditions or events since prior notification of
capital adequacy from the regulators that have changed the institution's
category.
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------------ -------------------------- ---------------------------
Amount Ratio Amount Ratio Amount Ratio
----------- --------- ------------ ---------- ------------- ---------
As of June 30, 2001
Total Capital
to Risk-Weighted Assets $47,448 10.50% $36,141 8.00% $45,177 10.00%
Tier 1 Capital
to Risk-Weighted Assets 41,798 9.25% 18,071 4.00% 27,106 6.00%
Tier 1 Capital
to Average Assets 41,798 7.60% 22,002 4.00% 27,503 5.00%
As of December 31, 2000
Total Capital
to Risk-Weighted Assets $44,990 10.88% $33,068 8.00% $41,335 10.00%
Tier 1 Capital
to Risk-Weighted Assets 39,817 9.63% 16,534 4.00% 24,801 6.00%
Tier 1 Capital
to Average Assets 39,817 7.80% 20,397 4.00% 25,496 5.00%
13
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only)
- -----------------------------------------------------------------
The parent company's balance sheets as of June 30, 2001 and December 31, 2000
and the related statements of income and comprehensive income and cash flows are
as follows:
COLONY BANKCORP, INC. (PARENT ONLY)
BALANCE SHEETS
FOR PERIOD ENDED JUNE 30, 2001 AND DECEMBER 31, 2000
ASSETS June 30, 2001 December 31, 2000
------------- -----------------
(Unaudited)
Cash $ 30 $ 4
Investments in Subsidiaries at Equity 42,497 39,875
Other 1,331 1,354
------- -------
Totals Assets $43,858 $41,233
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Dividends Payable $ 266 $ 266
Notes and Debentures Payable 578 674
Other 5 83
------- -------
849 1,023
Stockholders' Equity
Common Stock, Par Value $1 a Share; Authorized 20,000,000
Shares, Issued 4,445,526 and 4,440,276 Shares
as of March 31, 2001 and December 31, 2000
Respectively 4,446 4,440
Paid-In Capital 21,650 21,603
Retained Earnings 16,384 14,436
Restricted Stock - Unearned Compensation (79) (47)
Accumulated Other Comprehensive Income, Net of Tax 608 (222)
------- -------
Total Stockholders' Equity 43,009 40,210
------- -------
Total Liabilities and Stockholders' Equity $43,858 $41,233
======= =======
14
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only) (continued)
- -----------------------------------------------------------------------------
COLONY BANCORP, INC. (PARENT ONLY)
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2000
(UNAUDITED)
June 30, 2001 June 30, 2000
------------- -------------
Income
Dividends from Subsidiaries $ 994 $1,038
Other 34 36
------ ------
1,028 1,074
------ ------
Expenses
Interest 23 29
Amortization 9 9
Other 458 379
------ ------
490 417
------ ------
Income Before Taxes and Equity in Undistributed
Earnings of Subsidiaries 538 657
Income Tax (Benefits) (152) (123)
------ ------
Income Before Taxes and Equity in Undistributed
Earnings of Subsidiaries 690 780
Equity in Undistributed Earnings of Subsidiaries 1,792 1,578
------ ------
Net Income 2,482 2,358
------ ------
Other Comprehensive Income, Net of Tax
Gains (losses) on Securities Arising During Year 872 53
Reclassification Adjustment (42) 0
------ ------
Unrealized Gains (Losses) in Securities 830 53
------ ------
Comprehensive Income $3,312 $2,411
====== ======
15
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only) (continued)
- -----------------------------------------------------------------------------
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2000
(UNAUDITED)
June 30, 2001 June 30, 2000
------------- -------------
Cash Flows from Operating Activities
Net Income $ 2,482 $ 2,358
Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities
Depreciation and Amortization 44 45
Equity in Undistributed Earnings of Subsidiary (1,792) (1,578)
Other (60) (49)
------- -------
674 776
------- -------
Cash Flows from Investing Activities
Capital Infusion in Subsidiary 0 (500)
Purchase of Premises and Equipment (19) 0
------- -------
(19) (500)
------- -------
Cash Flows from Financing Activities
Dividends Paid (533) (354)
Proceeds from Issuance of Common Stock 0 0
Principal Payments on Notes and Debentures (96) 0
Proceeds from Notes and Debentures 0 0
------- -------
(629) (354)
------- -------
Increase (Decrease) in Cash and Cash Equivalents 26 (78)
Cash and Cash Equivalents, Beginning 4 247
------- -------
Cash and Cash Equivalents, Ending $ 30 $ 169
======= =======
(14) Legal Contingencies
- -------------------------
In the ordinary course of business, there are various legal proceedings pending
against Colony and its subsidiaries. The aggregate liabilities, if any, arising
from such proceedings would not, in the opinion of management, have a material
adverse effect on Colony's consolidated financial position.
(15) Stock Grant Plan
- ----------------------
On February 16, 1999, a restricted stock grant plan was approved by the Board.
The plan was adopted for the purpose of establishing incentives designed to
recognize, reward and retain executive employees whose performance, contribution
and skills are critical to the Company. The plan period commences February 16,
1999 and ends February 15, 2009 with the maximum number of shares subject to
restricted stock awards being 22,175 shares (44,350 shares after the two-for-one
stock split effective September 30, 1999). On January 3, 2000, the Company
issued 5,250 shares under the stock grant plan to increase the total outstanding
shares from 4,435,026 at December 31, 1999 to 4,440,276 at December 31, 2000 and
the Company issued 5,250 shares on January 2, 2001 to increase the total
outstanding shares to 4,445,526 at June 30, 2001.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Liquidity represents the ability to provide adequate sources of funds for
funding loan commitments and investment activities, as well as the ability to
provide sufficient funds to cover deposit withdrawals, payment of debt and
financing of operations. Converting assets to cash for these funds is primarily
with proceeds from collections on loans and maturities of investment securities
or by attracting and obtaining new deposits. In the six month period ended June
30, 2001, the Company was successful in meeting its liquidity needs by
increasing deposits 5.83% to $476,230,000 from deposits of $450,012,000 on
December 31, 2000, by reducing Federal Funds 49.74% to $10,893,000 from
$21,675,000 on December 31, 2000 and by increasing other borrowed money 68.12%
to $42,174,000 from $25,086,000 on December 31, 2000. Should the need arise;
the Company also maintains relationships with the Federal Home Loan Bank and
several correspondent banks that can provide funds on short notice.
The Company's liquidity position remained acceptable in the six month period
ended June 30, 2001. Average liquid assets (cash and amounts due from banks,
interest-bearing deposits in other banks, funds due and securities) represented
23.78 percent of average deposits in the six month period ended June 30, 2001 as
compared to 25.22 percent of average deposits in the six month period ended June
30, 2000 and 25.22 percent for calendar year 2000. Average loans represented
89.09 percent of average deposits in the six month period ended June 30, 2001 as
compared to 87.31 percent in the six month period ended June 30, 2000 and 87.97
percent for calendar year 2000. Average interest-bearing deposits were 83.53
percent of average earning assets in the six month period ended June 30, 2001 as
compared to 82.39 percent in the six month period ended June 30, 2000 and 82.96
percent for calendar year 2000.
The Company satisfies most of its capital requirements through retained
earnings. During the first three months of 2001, retained earnings provided
$994,000 of increase in equity. Additionally, equity had an increase of
$765,000 resulting from the change during the quarter in unrealized gains on
securities available for sale, net of taxes and an increase of $10,000 resulting
from the stock grant plan. Thus, total equity increased by a net amount of
$1,769,000 in the three month period ended March 31, 2001. During the second
quarter of 2001, retained earnings provided $955,000 of increase in equity.
Additionally, equity had an increase of $65,000 resulting from the change during
the quarter in unrealized gains on securities available for sale, net of taxes
and an increase of $10,000 resulting from the stock grant plan. Thus, total
equity increased by a net amount of $1,030,000 in the three month period ended
June 30, 2001 and increased by a net amount of $2,799,000 in the six month
period ended June 30, 2001. This compares to growth in equity of $1,036,000
from retained earnings, $42,000 increase resulting from changes in unrealized
losses on securities and $6,000 increase resulting from the stock grant plan, or
total equity increase of $1,084,000 in the three month period ended March 31,
2000. During the second quarter of 2000, retained earnings provided $944,000 of
increase in equity, the change in unrealized gains on securities available for
sale, net of taxes resulted in equity capital increasing $11,000 and the change
in stock grant plan resulted in a $6,000 increase. Thus, total equity increased
by a net amount of $961,000 in the second quarter of 2000 and by a net amount of
$2,045,000 in the six month period ended June 30, 2000. Total equity increased
by a net amount of $5,199,000 for calendar year 2000.
As of June 30, 2001, the Company's capital totaled approximately $43,009,000 and
the only outstanding commitment for capital expenditures was by a subsidiary
bank for construction of a branch facility in Lee County. Total cost of the
facility will be approximately $1,200,000 with approximately $675,000 paid as of
June 30, 2001 for construction completed.
The Federal Reserve Board and the FDIC have issued risk-based capital guidelines
for U. S. banking organizations. The objective of these efforts was to provide
a more uniform framework that is sensitive to differences in risk assets among
banking organizations. The guidelines define a two-tier capital framework.
Tier 1 capital consists of common stock and qualifying preferred stockholders'
equity less goodwill. Tier 2 capital consists of certain convertible,
subordinated and other qualifying term debt and the allowance for loan losses up
to 1.25 percent of risk-weighted assets. The Company has no Tier 2 capital
other than the allowance for loan losses.
Using the capital requirements presently in effect, the Tier 1 ratio as of June
30, 2001 was 9.25 percent and total Tier 1 and 2 risk-based capital was 10.50
percent. Both of these measures compare favorably with the regulatory minimum
of 4 percent for Tier 1 and 8 percent for total risk-based capital. The
Company's Tier 1 leverage ratio was 7.60 percent as of June 30, 2001 which
exceeds the required ratio standard of 4 percent.
In the six month period ended June 30, 2001, average capital was $41,702,000
representing 7.75 percent of average assets for the quarter. This compares to
7.94 percent in the six month period ended June 30, 2000 and 7.81 percent for
calendar year 2000.
For the first and second quarter of 2001, the Company paid quarterly dividends
of $0.06 per share or $0.12 for the first two quarters of 2001 compared to $0.04
per share for the first quarter of 2000 and $0.045 for the second quarter of
2000 or $0.085 for the first two quarters of 2000. The dividend payout ratio,
defined, as dividends per share divided by net income per share, was 21.43
percent in the six month period ended June 30, 2001 as compared to 16.04 percent
in the six month period ended June 30, 2000.
17
As of June 30, 2001, management was not aware of any recommendations by
regulatory authorities which if they were to be implemented, would have a
material effect on the Company's liquidity, capital resources or results of
operations. However, it is possible that examinations by regulatory authorities
in the future could precipitate additional loss charge-offs that could
materially impact the Company's liquidity, capital resources and results of
operations.
Results of Operations
The Company's results of operations are determined by its ability to effectively
manage interest income and expense, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Since market
forces and economic conditions beyond the control of the Company determine
interest rates, the ability to generate net interest income is dependent upon
the Company's ability to obtain an adequate spread between the rate earned on
earning assets and the rate paid on interest-bearing liabilities. Thus, the key
performance for net interest income is the interest margin or net yield, which
is taxable-equivalent net interest income divided by average earning assets.
Net Income
Net income in the three month period ended June 30, 2001 was $1,222,000 as
compared to $1,145,000 in the three month period ended June 30, 2000, or an
increase of 6.72 percent while net income in the six month period ended June 30,
2001 was $2,482,000 as compared to $2,358,000 in the six month period ended June
30, 2000, or an increase of 5.26 percent. This modest increase is primarily
attributable to net interest margin compression that resulted from the U. S.
Federal Reserve lowering interest rates 275 basis points during the first half
of the year. The company's net interest margin declined 50 basis points to 3.94
percent in the six month period ended June 30, 2001 compared to 4.44 percent in
the six month period ended June 30, 2000. The negative impact of declining net
interest margins was offset by increased growth as Colony continues to
experience strong loan demand in both its established markets and its newer
markets. On a fully diluted share basis, net income increased to $0.27 per
share in the three month period ended June 30, 2001 from $0.26 for the same
period in 2000, or an increase of 3.85 percent while net income increased to
$0.56 per share in the six month period ended June 30, 2001 from $0.53 for the
same period in 2000, or an increase of 5.66 percent.
Net Interest Margin
Net interest margin decreased by 63 basis points to 3.87 percent in second
quarter 2001 as compared to 4.50 percent in second quarter 2000. Net interest
margin decreased by 36 basis points to 4.02 percent in first quarter 2001 as
compared to 4.38 percent in first quarter 2000. The company's net interest
margin declined 50 basis points to 3.94 percent in the six month period ended
June 30, 2001 compared to 4.44 percent for the same period a year ago. The net
interest margin compression was primarily attributable to U. S. Federal Reserve
lowering interest rates 275 basis points during the first half of 2001. Margin
compression during the second quarter was offset by an increase in average
earning assets that resulted in net interest income increasing by 2.52 percent
to $4,967,000 in second quarter 2001 from $4,845,000 for the same period in
2000. Net interest income increased 5.64 percent to $9,863,000 in the six month
period ended June 30, 2001 from $9,336,000 for the same period in 2000. Average
earning assets increased to $506,731,000 in the six month period ended June 30,
2001 from $426,823,000 for the same period a year ago. For the six months ended
June 30, 2001 compared to the same period in 2000, average loans increased by
$71,838,000 or 21.25 percent, average funds sold increased by $1,570,000 or
11.74 percent, average investment securities increased by $10,315,000 or 15.94
percent, average interest-bearing deposits in other banks decreased by
$5,643,000 or 52.94 percent and average interest-bearing other assets increased
$1,828,000 or 100.00 percent resulting in a net increase in average earning
assets of $79,908,000 or 18.72 percent.
The net increase in average assets was funded by a net increase in average
deposits of 18.83 percent to $460,094,000 in the six month period ended June 30,
2001 from $387,184,000 for the same period a year ago. Average interest-bearing
deposits increased by 20.37 percent to $423,287,000 in the six month period
ended June 30, 2001 compared to $351,641,000 for the same period a year ago,
while average noninterest-bearing deposits increased 3.56 percent to $36,807,000
in the six month period ended June 30, 2001 compared to $35,543,000 for the same
period a year ago. Average noninterest-bearing deposits represented 8.00
percent of average total deposits in the six month period ended June 30, 2001 as
compared to 9.18 percent for the same period a year ago and 8.52 percent for
calendar year 2000.
Interest expense increased in the three month period ended June 30, 2001 by
$1,404,000 compared to the same period a year ago and increased by $3,145,000 in
the six month period ended June 30, 2001 compared to the same period in 2000.
The increase is primarily attributable to the increase in average interest-
bearing deposits to $423,287,000 in the six month period ended June 30, 2001
compared to $351,641,000 for the same period in 2000. The combination of the
increase in average earning assets and the decrease in the net interest margin
resulted in an increase of net interest income of $122,000 in the three month
period ended June 30, 2001 compared to the same period a year ago and an
increase of net interest income of $527,000 in the six month period ended June
30, 2001 compared to the same period a year ago.
18
Provision for Loan Losses
The allowance for loan losses represents a reserve for potential losses in the
loan portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on nonaccruing, past due and other loans that management believes
require attention.
The provision for loan losses is a charge to earnings in the current period to
replenish the allowance for loan losses and maintain it at a level management
has determined to be adequate. The provision for loan losses was $373,000 in
the three month period ended June 30, 2001 as compared to $605,000 in the three
month period ended June 30, 2000, representing a decrease of $232,000 or 38.35
percent. The provision for loan losses was $659,000 in the six month period
ended June 30, 2001 as compared to $1,082,000 in the six month period ended June
30, 2000, representing a decrease of $423,000 or 39.09 percent. Net loan
charge-offs represented 129.49 percent of the provision for loan losses in the
three month period ended June 30, 2001 as compared to 40.50 percent for the same
period a year ago and represented 65.55 percent in the six month peirod ended
June 30, 2001 as compared to 62.57 percent for the same period a year ago. Net
loan charge-offs in the six month period ended June 30, 2001 were 0.11 percent
of average loans, down from 0.20 percent for the same period a year ago. During
the first six months of 2001 and 2000, a net of $432,000 and $677,000,
respectively, was charged-off. The leveling off of loan charge-offs results
from management's effort the past several years to improve credit quality and to
eliminate weak and marginal credits. As of June 30, 2001, the allowance for
loan losses was 1.36 percent of total loans outstanding as compared to an
allowance for loan losses of 1.40 percent of total loans outstanding as of June
30, 2000. The loan loss reserve of 1.36 percent of total loans outstanding
provided coverage of 73.61 percent of nonperforming loans and 68.94 percent of
nonperforming assets as of June 30, 2001 compared to 95.73 percent and 89.76
percent, respectively as of June 30, 2000. The determination of the reserve
rests upon management's judgment about factors affecting loan quality and
assumptions about the economy. Management considers the June 30, 2001 allowance
for loan losses adequate to cover potential losses in the loan portfolio.
Noninterest Income
Noninterest income consists primarily of service charges on deposit accounts.
Service charges on deposit accounts totaled $749,000 in second quarter 2001
compared to $620,000 in second quarter 2000 or an increase of 20.81 percent and
totaled $1,447,000 in six months ended June 30, 2001 compared to $1,182,000 in
the same period a year ago, or an increase of 22.42 percent. This increase is
attributable to the increase in noninterest-bearing and interest-bearing demand
deposit accounts and increased fee income associated with the mortgage company.
All other noninterest income increased to $313,000 in second quarter 2001 from
$215,000 a year ago, or a 45.58 percent increase, while all other noninterest
income increased to $587,000 in the six month period ended June 30, 2001 from
$500,000 a year ago, or an increase of 17.40 percent. The primary increase in
noninterest income is attributable to $49,000 gain on bonds sold in second
quarter 2001 and $64,000 gain on bonds sold in the six month period ended June
30, 2001 compared to zero gains for both periods in 2000. Thus, total
noninterest income in second quarter 2001 was $1,062,000 compared to $835,000 in
second quarter 2000, or an increase of 27.19 percent and was $2,034,000 in six
months ended June 30, 2001 compared to $1,682,000 in the same period a year ago,
or an increase of 20.93 percent.
Noninterest Expense
Noninterest expense increased by 13.09 percent to $3,792,000 in three months
ended June 30, 2001 from 3,353,000 in the same period a year ago and increased
by 16.21 percent to $7,478,000 in six months ended June 30, 2001 from $6,435,000
in the same period a year ago. Salaries and employee benefits increased 14.83
percent to $2,114,000 in second quarter 2001 from $1,841,000 in second quarter
2000 and increased 16.39 percent to $4,162,000 in six months ended June 30, 2001
from $3,576,000 in the same period a year ago. These increases are primarily
due to increased staffing with two new branches opened in Fall 2000 and the
acquisition of a mortgage company in March 2000. Occupancy and equipment expense
increased by 10.77 percent to $648,000 in second quarter 2001 from $585,000 in
second quarter 2000 and by 21.82 percent to $1,323,000 in six months ended June
30, 2001 from $1,086,000 in the same period a year ago. The increases are
primarily due to additional depreciation and occupancy expense with the new
offices opened during 2000. All other noninterest expense increased 11.11
percent to $1,030,000 in second quarter 2001 from $927,000 in second quarter
2000 and by 12.41 percent to $1,993,000 in six months ended June 30, 2001 from
$1,773,000 in the same period a year ago. Other increases in noninterest
expense are primarily attributable to expenses incurred in opening two new
offices and the mortgage company during 2000.
Income Tax Expense
Income before taxes increased by $142,000 to $1,864,000 in second quarter 2001
from $1,722,000 in second quarter 2000 and by $259,000 to $3,760,000 in six
months ended June 30, 2001 from $3,501,000 in the same period a year ago.
Income tax expense increased 11.27 percent to $642,000 in second quarter 2001
from $577,000 in second quarter 2000 and by 11.81 percent to $1,278,000 in six
months ended June 30, 2001 from $1,143,000 in the same period a year ago.
Income tax expense as a percentage of income
19
before taxes was 34.44 percent in second quarter 2001 compared to 33.51 percent
in second quarter 2000, or an increase of 2.78 percent while income tax expense
as a percentage of income before taxes was 33.99 percent in six months ended
June 30, 2001 compared to 32.65 percent in the same period a year ago, or an
increase of 4.10 percent.
Future Outlook
Colony is an emerging company operating in an industry filled with nonregulated
competitors and a rapid pace of consolidation. The year brings with it new
opportunities for growth in our existing markets, as well as opportunities to
expand into new markets through branch acquisitions and branching. Colony
completed two new branches in 2000, which are located in Moultrie and Soperton,
Georgia. In addition Colony acquired Georgia First Mortgage Company located in
Albany, Georgia during 2000. For 2001, Colony has targeted one new branch office
to be located in the Dougherty/Lee County market and one new branch to be
located in the Warner Robins market. The Company will close the Lee County
supermarket office when the new facility in the Dougherty/Lee County market is
ready for occupancy during the third quarter of 2001. The Warner Robins office
will open in temporary offices during the third quarter of 2001 while a
permanent facility is being constructed that will be completed in 2002.
Liquidity
The Company's goals with respect to liquidity are to ensure that sufficient
funds are available to meet current operating requirements and to provide
reserves against unforeseen liquidity requirements. Management continuously
reviews the Company's liquidity position, which is maintained on a basis
consistent with established internal guidelines and the tests and reviews of the
various regulatory authorities. The Company's primary liquidity sources at June
30, 2001 included cash, due from banks, federal funds and short-term investment
securities. The Company also has the ability, on a short-term basis, to borrow
funds from Federal Home Loan Bank and correspondent banks. The mix of asset
maturities contributes to the company's overall liquidity position.
Certain Transactions
In the normal course of business, officers and directors of the Banks, and
certain business organizations and individuals associated with them, maintain a
variety of banking relationships with the bank. Transactions with senior
officers and directors are made on terms comparable to those available to other
bank customers.
Forward-Looking Statements
This document contains statements that constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The words
"believe," "estimate," "expect," "intend," "anticipate" and similar expressions
and variations thereof identify certain of such forward-looking statements,
which speaks only as of the dates which they were made. The Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise. Users are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those indicated in the forward-looking statements as a
result of various factors. Users are therefore cautioned not to place undue
reliance on these forward-looking statements.
BUSINESS
General
The Company was organized in 1983 as a bank holding company through the merger
of Colony Bank of Fitzgerald with a subsidiary of the Company. Since that time,
Colony Bank of Fitzgerald, which was formed by principals of Colony Bankcorp,
Inc. in 1976, has operated as a wholly-owned subsidiary of the Company. In
April 1984, Colony Bankcorp, Inc. acquired Colony Bank Wilcox, and in November
1984, Colony Bank Ashburn became a wholly-owned subsidiary of Colony Bankcorp,
Inc. Colony Bankcorp, Inc. continued its growth with the acquisition of Colony
Bank of Dodge County in September 1985. In August 1991, Colony Bankcorp, Inc.
acquired Colony Bank Worth. In November 1996, Colony Bankcorp, Inc. acquired
Colony Bank Southeast and in November 1996 formed a non-bank subsidiary Colony
Management Services, Inc.
Through its six subsidiary banks, Colony Bankcorp, Inc. operates a full-service
banking business and offers a broad range of retail and commercial banking
services including checking, savings, NOW accounts, money market and time
deposits of various types; loans for business, agriculture, real estate,
personal uses, home improvement and automobiles; credit card; letters of credit;
investment and discount brokerage services; IRA's; safe deposit box rentals,
bank money orders; electronic funds transfer services, including wire transfers
and automated teller machines and internet accounts. Each of the Banks is a
state chartered institution whose customer deposits are insured up to applicable
limits by the Federal Deposit Insurance Corporation.
20
On April 2, 1998, the Company was listed on Nasdaq National Market. The
Company's common stock trades on the Nasdaq Stock Market under the symbol
"CBAN". The Company presently has approximately 1,150 shareholders as of June
30, 2001. "The Nasdaq Stock Market" or "Nasdaq" is a highly-regulated
electronic securities market comprised of competing Market Makers whose trading
is supported by a communications network linking them to quotation
dissemination, trade reporting and order execution systems. This market also
provides specialized automation services for screen-based negotiations of
transactions, on-line comparison of transactions, and a range of informational
services tailored to the needs of the securities industry, investors and
issuers. The Nasdaq Stock Market is operated by The Nasdaq Stock Market, Inc.,
a wholly-owned subsidiary of the National Association of Securities Dealers,
Inc.
PART II- OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Shareholders of the Company was held on April 24,
2001. At the Annual Meeting of the Shareholders, proxies were solicited under
Regulation 14 of the Securities and Exchange Act of 1934. Total shares amount
to 4,445,526. A total of 3,125,697.68 shares (70.3 percent) were represented by
shareholders in attendance or by proxy. The following directors were elected by
yes votes totaling 3,111,041.25, no votes totaling 3,956.43 and abstained votes
totaling 10,700 to serve one year until the next annual meeting:
Marion H. Massee, III Milton N. Hopkins, Jr. W. B. Roberts, Jr.
Terry L. Coleman Harold E. Kimball R. Sidney Ross
L. Morris Downing, Jr. Ben. B. Mills, Jr. Walter Patten
Terry L. Hester James D. Minix Curtis Summerlin
Ralph Roberts Joe Shiver
Shareholders voted upon no other matters.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits - None
B. There have been no reports filed on Form 8-K for the quarter ended
June 30, 2001.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLONY BANKCORP, INC.
August 8, 2001 /s/ James D. Minix
- ------------------------------ -----------------------------------------
Date James D. Minix, President and
Chief Executive Officer
/s/ Terry L. Hester
-----------------------------------------
Terry L. Hester, Executive Vice President
And Chief Financial Officer
21