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 SEPTEMBER 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 SEPTEMBER 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 - SEPTEMBER 30, 2001 AND DECEMBER 31,
2000.
B. CONSOLIDATED STATEMENTS OF INCOME - FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2001 AND 2000.
C. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000.
D. CONSOLIDATED STATEMENTS OF CASH FLOWS - FOR THE NINE MONTHS ENDED
SEPTEMBER 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 NINE MONTH PERIOD ENDED SEPTEMBER 30, 2001 ARE
NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.
2
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
Sept 30, 2001 Dec 31, 2000
------------- ------------
ASSETS (Unaudited)
Cash and Balances Due from Depository Institutions $ 17,989 $ 18,594
Federal Funds Sold 18,801 21,675
Investment Securities
Available for Sale, at Fair Value 76,387 70,222
Held to Maturity, at Cost (Fair Value of $157 and
$291, Respectively) 157 293
Loans Held for Sale 1,427 1,513
Loans 453,036 388,007
Allowance for Loan Losses (6,093) (5,661)
Unearned Interest and Fees (2) (4)
446,941 382,342
Premises and Equipment 14,797 14,047
Other Real Estate 1,375 349
Other Assets 12,901 10,868
-------------- ------------
Total Assets $ 590,775 $ 519,903
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-Bearing $ 36,849 $ 38,649
Interest-Bearing 462,491 411,363
-------------- ------------
499,340 450,012
Federal Funds Purchased 572 0
Borrowed Money 42,120 25,086
Other Liabilities 4,046 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
Sept 30, 2001 and December 31, 2000, Respectively 4,446 4,440
Paid-In Capital 21,650 21,603
Retained Earnings 17,278 14,436
Restricted Stock - Unearned Compensation (69) (47)
Accumulated Other Comprehensive Income, Net of Tax 1,392 (222)
-------------- -------------
44,697 40,210
-------------- -------------
Total Liabilities and Stockholders' Equity $ 590,775 $ 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 SEPTEMBER 30, 2001 AND 2000
AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Three Months Ended Nine Months Ended
09/30/01 09/30/00 09/30/01 09/30/00
-------- -------- -------- --------
Interest Income
Loans, including fees $ 10,305 $ 9,607 $ 30,371 $ 26,336
Federal Funds Sold 116 313 520 711
Deposits with Other Banks 45 115 163 440
Investment Securities
U.S. Treasury & Federal Agencies 740 633 2,328 2,180
State, County and Municipal 96 83 263 275
Other Investments 318 175 864 201
Dividends on Other Investments 34 29 98 93
----------- ----------- ----------- -----------
11,654 10,955 34,607 30,236
----------- ----------- ----------- -----------
Interest Expense
Deposits 5,999 5,416 18,105 14,483
Federal Funds Purchased 2 7 13 16
Borrowed Money 533 535 1,506 1,404
----------- ----------- ----------- -----------
6,534 5,958 19,624 15,903
----------- ----------- ----------- -----------
Net Interest Income 5,120 4,997 14,983 14,333
Provision for Loan Losses 453 752 1,112 1,834
----------- ----------- ----------- -----------
Net Interest Income After Provision for loan losses 4,667 4,245 13,871 12,499
----------- ----------- ----------- -----------
Noninterest Income
Service Charges on Deposits 754 694 2,201 1,876
Other Service Charges, Commissions & Fees 129 128 389 383
Security Gains, net 0 (494) 64 (494)
Other Income 107 71 370 316
----------- ----------- ----------- -----------
990 399 3,024 2,081
----------- ----------- ----------- -----------
Noninterest Expense
Salaries and Employee Benefits 2,087 1,904 6,249 5,480
Occupancy and Equipment 720 646 2,043 1,732
Other Operating Expenses 1,092 855 3,085 2,628
----------- ----------- ----------- -----------
3,899 3,405 11,377 9,840
----------- ----------- ----------- -----------
Income Before Income Taxes 1,758 1,239 5,518 4,740
Income Taxes 598 400 1,876 1,543
----------- ----------- ----------- -----------
Net Income $ 1,160 $ 839 $ 3,642 $ 3,197
=========== =========== =========== ===========
Net Income Per Share of Common Stock
Basic $ 0.26 $ 0.19 $ 0.82 $ 0.72
=========== =========== =========== ===========
Diluted $ 0.26 $ 0.19 $ 0.82 $ 0.72
=========== =========== =========== ===========
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 SEPTEMBER 30, 2001 AND 2000
AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Three Months Ended Nine Months Ended
09/30/01 09/30/00 09/30/01 09/30/00
-------- -------- -------- --------
Net Income $ 1,160 $ 839 $ 3,642 $ 3,197
Other Comprehensive Income, Net of Tax
Gains (Losses) on Securities Arising During Year 784 437 1,656 490
Reclassification Adjustment 0 326 (42) 326
------- -------- -------- --------
Unrealized Gains (Losses) on Securities 784 763 1,614 816
------- -------- -------- --------
Comprehensive Income $ 1,944 $ 1,602 $ 5,256 $ 4,013
======= ======== ======== ========
The accompanying notes are an integral part of these statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
(DOLLARS IN THOUSANDS)
2001 2000
---- ----
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 3,642 $ 3,197
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sale of investment securities (64) 494
Depreciation 1,048 946
Provision for loan losses 1,112 1,834
Amortization of excess costs 41 40
Other prepaids, deferrals and accruals, net (2,906) (1,253)
-------- --------
Total Adjustments (769) 2,061
-------- --------
Net cash provided by operating activities 2,873 5,258
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of other assets (FHLB stock) (454) 0
Purchases of securities available for sale (48,191) (20,879)
Proceeds from sales of securities available for sale 13,670 17,475
Proceeds from maturities, calls, and paydowns of
investment securities:
Available for Sale 29,010 2,999
Held to Maturity 140 371
Decrease (Increase) in interest-bearing deposits in banks (2,632) (301)
(Increase) in loans (64,945) (63,073)
Purchase of premises and equipment (1,716) (2,002)
-------- --------
Net cash provided by investing activities (75,118) (65,410)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Net increase in deposits 49,328 50,948
Federal funds purchased 572 230
Dividends paid (800) (555)
Net (decrease) increase in other borrowed money 17,034 10,252
-------- --------
Net cash provided by financing activities 66,134 60,875
-------- --------
Net increase (decrease) in cash and cash equivalents (6,111) 723
Cash and cash equivalents at beginning of period 37,357 31,126
-------- --------
Cash and cash equivalents at end of period $ 31,246 $ 31,849
======== ========
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 September 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.
7
(1) Summary of Significant Accounting Policies (continued)
- ----------------------------------------------------------
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.
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.
8
(1) Summary of Significant Accounting Policies (continued)
- ----------------------------------------------------------
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 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 September
30, 2001 and December 31, 2000 are as follows:
September 30, 2001 December 31, 2000
------------------ -----------------
Cash on Hand and Cash Items $ 4,859 $ 4,846
Noninterest-Bearing Deposits with Other Banks 7,586 10,836
Interest-Bearing Deposits with Other Banks 5,544 2,912
--------- ---------
$ 17,989 $ 18,594
========= =========
(3) Investment Securities
Investment securities as of September 30, 2001 are summarized as follows:
9
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- -------- -------- --------
Securities Available for Sale
U.S. Government Agencies
Mortgage-Backed $ 43,539 $ 1,179 ($ 16) $ 44,702
Other 2,736 119 0 2,855
State, County & Municipal 9,158 168 (3) 9,323
Corporate Obligations 17,625 926 0 18,551
Marketable Equity Securities 1,130 0 (174) 956
---------- --------- --------- ----------
$ 74,188 $ 2,392 ($ 193) $ 76,387
========== ========= ========= ==========
Securities Held to Maturity:
State, County and Municipal $ 157 $ 0 $ 0 $ 157
========== ======== ========= ==========
The amortized cost and fair value of investment securities as of September 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 $ 301 $ 305 $ 0 $ 0
Due After One Year Through Five Years 6,343 6,477 0 0
Due After Five Years Through Ten Years 3,830 3,961 0 0
Due After Ten Years 1,420 1,435 157 157
------- ------- ---- ----
11,894 12,178 157 157
Corporate Obligations 17,625 18,551 0 0
Marketable Equity Securities 1,130 956 0 0
Mortgage-Backed Securities 43,539 44,702 0 0
------- ------- ---- ----
$74,188 $76,387 $157 $157
======= ======= ==== ====
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 nine months of 2001. Gross realized gains totaled $78 during the first
nine months of 2001. Gross realized losses totaled $14 during the first nine
months of 2001.
10
Investment securities having a carry value approximating $36,777 and $32,658 as
of September 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 September 30, 2001 and December 31, 2000 was as
follows:
September 30, 2001 December 31, 2000
------------------ -----------------
Commercial, Financial and Agricultural $50,568 $77,448
Real Estate - Construction 7,572 5,961
Real Estate - Farmland 28,947 23,411
Real Estate - Other 282,200 207,396
Installment Loans to Individuals 66,106 59,862
All Other Loans 17,643 13,929
-------- --------
$453,036 $388,007
======== ========
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 $7,259 and $5,164 as of September 30, 2001 and December 31, 2000,
respectively. On September 30, 2001, the Company had 90 day past due loans with
principal balances of $630 and restructured loans with principal balances of
$583.
(5) Allowance for Loan Losses
- ------------------------------
Transactions in the allowance for loan losses are summarized below for nine
months ended September 30, 2001 and September 30, 2000 as follows:
September 30, 2001 September 30,2000
------------------ -----------------
Balance Beginning $5,661 $4,682
Provision Charged to Operating Expenses 1,112 1,834
Loans Charged Off (951) (1,275)
Loan Recoveries 271 193
------ ------
Balance, ending $6,093 $5,434
====== ======
(6) Premises and Equipment
- ---------------------------
Premises and equipment are comprised of the following as of September 30, 2001
and December 31, 2000:
September 30, 2001 September 30,2000
------------------ -----------------
Land $ 2,079 $ 1,769
Building 11,059 11,013
Furniture, Fixtures and Equipment 9,261 8,771
Leasehold Improvements 262 262
Construction in Progress 967 48
------- -------
23,628 21,863
------- -------
Accumulated Depreciation (8,831) (7,816)
------- -------
$14,797 $14,047
======= =======
Depreciation charged to operations totaled $1,048 and $946 for September 30,
2001 and September 30, 2000 respectively.
Certain Company facilities and equipment are leased under various operating
leases. Rental expense approximated $113 and $117 for nine months ended
September 30, 2001 and 2000.
11
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.
(8) Deposits
- ------------
Components of interest-bearing deposits as of September 30, 2001 and December
31, 2000 are as follows:
September 30, 2001 December 31, 2000
------------------ -----------------
Interest-Bearing Demand $ 79,983 $ 72,833
Savings 18,617 13,072
Time, $100,000 and Over 114,216 111,875
Other Time 249,675 213,583
-------- --------
$462,491 $411,363
======== ========
The aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of one hundred thousand, was approximately $99,034 and
$99,263 as of September 30, 2001 and December 31, 2000, respectively.
As of September 30, 2001 and December 31, 2000, the scheduled maturities of
certificates of deposits are as follows:
Maturity September 30, 2001 December 31, 2000
-------- ------------------ -----------------
One Year and Under $300,380 $268,753
One to Three Years 51,975 46,016
Three Years and Over 11,536 10,689
-------- --------
$363,891 $325,458
======== ========
(9) Borrowed Money
--------------
Borrowed money at September 30, 2001 and December 31, 2000 is summarized as
follows:
September 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 442 612
------- -------
$42,120 $25,086
======= =======
Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from
2001 to 2010 and interest rates ranging from 2.64 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.
12
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 September 30, 2001 are as
follows:
Year Amount
---- ------
2001 $2,000
2002 17,100
2003 6,520
2004 3,000
2005 and Thereafter 13,500
-------
$42,120
=======
(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 $1,621
as of September 30, 2001 and $1,770 as of December 31, 2000. Unfulfilled loan
commitments as of September 30, 2001 and December 31, 2000 approximated $43,805
and $40,495 respectively. No losses are anticipated as a result of commitments
and contingencies.
Colony Bank Fitzgerald is currently constructing a new branch to be located in
the Warner Robins/Houston County market. The total estimated cost to complete
construction and furnish the facility is $1,200. At September 30, 2001 the bank
had paid approximately $13 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 September 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.
13
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of September 30, 2001
Total Capital
to Risk-Weighted Assets $48,622 10.30% $37,758 8.00% $47,197 10.00%
Tier 1 Capital
to Risk-Weighted Assets 42,720 9.05% 18,879 4.00% 28,318 6.00%
Tier 1 Capital
to Average Assets 42,720 7.44% 22,956 4.00% 28,695 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%
14
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only)
- -----------------------------------------------------------------
The parent company's balance sheets as of September 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 SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
ASSETS Sept 30, 2001 Dec 31, 2001
------------- ------------
(Unaudited)
Cash $ 47 $ 4
Investments in Subsidiaries at Equity 44,252 39,875
Other 1,322 1,354
-------- --------
Totals Assets $ 45,621 $ 41,233
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Dividends Payable $ 266 $ 266
Notes and Debentures Payable 578 674
Other 80 83
-------- --------
924 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 Sept 30, 2001 and December 31, 2000
Respectively 4,446 4,440
Paid-In Capital 21,650 21,603
Retained Earnings 17,278 14,436
Restricted Stock - Unearned Compensation (69) (47)
Accumulated Other Comprehensive Income, Net of Tax 1,392 (222)
-------- --------
Total Stockholders' Equity 44,697 40,210
-------- --------
Total Liabilities and Stockholders' Equity $ 45,621 $ 41,233
======== ========
15
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only) (continued)
- -----------------------------------------------------------------------------
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000
(UNAUDITED)
Sept 30, 2001 Sept 30, 2000
------------- -------------
Income
Dividends from Subsidiaries $ 1,350 $ 1,656
Other 50 54
------- --------
1,400 1,710
------- -------
Expenses
Interest 31 43
Amortization 14 14
Other 711 584
------- -------
756 641
------- -------
Income Before Taxes and Equity in Undistributed Earnings
of Subsidiaries 644 1,069
Income Tax (Benefits) (236) (190)
------- -------
Income Before Taxes and Equity in Undistributed Earnings of Subsidiaries 880 1,259
Equity in Undistributed Earnings of Subsidiaries 2,762 1,938
------- -------
Net Income 3,642 3,197
------- -------
Other Comprehensive Income, Net of Tax
Gains (losses) on Securities Arising During Year 1,656 490
Reclassification Adjustment (42) 326
------- -------
Unrealized Gains (Losses) in Securities 1,614 816
------- -------
Comprehensive Income $ 5,256 $ 4,013
======= =======
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only) (continued)
- -----------------------------------------------------------------------------
16
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000
(UNAUDITED)
Sept 30, 2001 Sept 30,2000
------------- ------------
Cash Flows from Operating Activities
Net Income $ 3,642 $ 3,197
Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities
Depreciation and Amortization 67 73
Equity in Undistributed Earnings of Subsidiary (2,762) (1,938)
Other 11 (1)
-------- --------
958 1,331
-------- --------
Cash Flows from Investing Activities
Capital Infusion in Subsidiary 0 (1,000)
Purchase of Premises and Equipment (19) 0
-------- --------
(19) (1,000)
-------- --------
Cash Flows from Financing Activities
Dividends Paid (800) (554)
Proceeds from Issuance of Common Stock 0 0
Principal Payments on Notes and Debentures (96) 0
Proceeds from Notes and Debentures 0 0
-------- --------
(896) (554)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents 43 (223)
Cash and Cash Equivalents, Beginning 4 247
-------- --------
Cash and Cash Equivalents, Ending $ 47 $ 24
======== ========
(14) Legal Contingencies
- ------------------------
In the ordinary course 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.
17
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 nine month period ended
September 30, 2001, the Company was successful in meeting its liquidity needs by
increasing deposits 10.96% to $499,340,000 from deposits of $450,012,000 on
December 31, 2000, by reducing Federal Funds 13.26% to $18,801,000 from
$21,675,000 on December 31, 2000 and by increasing other borrowed money 67.90%
to $42,120,000 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 nine month period
ended September 30, 2001. Average liquid assets (cash and amounts due from
banks, interest-bearing deposits in other banks, funds due and securities)
represented 22.90 percent of average deposits in the nine month period ended
September 30, 2001 as compared to 25.38 percent of average deposits in the nine
month period ended September 30, 2000 and 25.22 percent for calendar year 2000.
Average loans represented 89.94 percent of average deposits in the nine month
period ended September 30, 2001 as compared to 88.08 percent in the nine month
period ended September 30, 2000 and 87.97 percent for calendar year 2000.
Average interest-bearing deposits were 83.29 percent of average earning assets
in the nine month period ended September 30, 2001 as compared to 82.43 percent
in the nine month period ended September 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. During
the third quarter of 2001, retained earnings provided $894,000 of increase in
equity. Additionally, equity had an increase of $784,000 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 $1,688,000 in the three month
period ended September 30, 2001 and increased by a net amount of $4,487,000 in
the nine month period ended September 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. During the third quarter of 2000, retained earnings provided
$639,000 of increase in equity, the change in unrealized gains on securities
available for sale, net of taxes resulted in equity capital increasing $763,000
and the change in the stock grant plan resulted in a $6,000 increase. Thus,
total equity increased by a net amount of $1,408,000 in the third quarter of
2000 and by a net amount of $3,453,000 in the nine month period ended September
30, 2000. Total equity increased by a net amount of $5,199,000 for calendar year
2000.
As of September 30, 2001, the Company's capital totaled approximately
$44,697,000 and the only outstanding commitment for capital expenditures was by
a subsidiary bank for construction of a branch facility in Warner Robins/
Houston County. Total cost of the facility will be approximately $1,200,000 with
approximately $13,000 paid as of September 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
September 30, 2001 was 9.05 percent and total Tier 1 and 2 risk-based capital
was 10.30 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 7.44 percent as of September 30, 2001 which
exceeds the required ratio standard of 4 percent.
18
In the nine month period ended September 30, 2001, average capital was
$42,333,000 representing 7.69 percent of average assets for the quarter. This
compares to 7.85 percent in the nine month period ended September 30, 2000 and
7.81 percent for calendar year 2000.
For the first three quarters of 2001, the Company paid quarterly dividends of
$0.06 per share or $0.18 for the first three quarters of 2001 compared to $0.04
per share for the first quarter of 2000 and $0.045 for the second and third
quarter of 2000 or $0.13 for the first three quarters of 2000. The dividend
payout ratio, defined, as dividends per share divided by net income per share,
was 21.95 percent in the nine month period ended September 30, 2001 as compared
to 18.06 percent in the nine month period ended September 30, 2000.
As of September 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 September 30, 2001 was $1,160,000 as
compared to $839,000 in the three month period ended September 30, 2000, or an
increase of 38.26 percent while net income in the nine month period ended
September 30, 2001 was $3,642,000 as compared to $3,197,000 in the nine month
period ended September 30, 2000, or an increase of 13.92 percent. This increase
is primarily attributable to management effecting an $18 million bond swap
transaction during third quarter 2000 that resulted in a loss on sale of
securities of $494,000 pretax ($326,000 after tax). The company also realized
net interest margin compression that resulted from the U. S. Federal Reserve
lowering interest rates 350 basis points during the first nine months of 2001.
The company's net interest margin declined 52 basis points to 3.90 percent in
the nine month period ended September 30, 2001 compared to 4.42 percent in the
nine month period ended September 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. Operating income, which excludes the loss on sale of securities was
$1,160,000 for the quarter ended September 30, 2001 compared to $1,165,000 for
the same quarter a year ago. Operating income for the nine months ended
September 30, 2001 was $3,600,000 as compared to $3,523,000 for the same period
a year ago. On a fully diluted share basis, net income increased to $0.26 per
share in the three month period ended September 30, 2001 from $0.19 for the same
period in 2000, or an increase of 36.84 percent while net income increased to
$0.82 per share in the nine month period ended September 30, 2001 from $0.72 for
the same period in 2000, or an increase of 13.89 percent.
Net Interest Margin
The company's net interest margin decreased by 56 basis points to 3.83 percent
in third quarter 2001 as compared to 4.39 percent in third quarter 2000. The
company's net interest margin declined 52 basis points to 3.90 percent in the
nine month period ended September 30, 2001 compared to 4.42 percent for the same
period a year ago. The net interest margin compression was primarily
attributable to U. S. Federal Reserve lowering interest rates 350 basis points
during the first three quarters of 2001. Margin compression during the third
quarter was offset by an increase in average earning assets that resulted in net
interest income increasing by 2.46 percent to $5,120,000 in third quarter 2001
from $4,997,000 for the same period in 2000. Net interest income increased 4.53
percent to $14,983,000 in the nine month period ended September 30, 2001 from
$14,333,000 for the same period in 2000. Average earning assets increased to
$518,562,000 in the nine month period ended September 30, 2001 from $438,170,000
for the same period a year ago. For the nine months ended September 30, 2001
compared to the same period in 2000, average loans increased by $72,021,000 or
20.62 percent, average funds sold decreased by $649,000 or 4.31 percent, average
investment securities increased by $11,328,000 or 17.60 percent, average
interest-bearing deposits in other banks decreased by $4,232,000 or 44.68
percent and average interest-bearing other assets increased $1,924,000 or 100.00
percent resulting in a net increase in average earning assets of $80,392,000 or
18.35 percent.
The net increase in average assets was funded by a net increase in average
deposits of 18.13 percent to $468,423,000 in the nine month period ended
September 30, 2001 from $396,548,000 for the same period a year ago. Average
interest-bearing deposits increased by 19.58 percent to $431,917,000 in the nine
month period ended September 30, 2001 compared to $361,194,000 for the
19
same period a year ago, while average noninterest-bearing deposits increased
3.26 percent to $36,506,000 in the nine month period ended September 30, 2001
compared to $35,354,000 for the same period a year ago. Average noninterest-
bearing deposits represented 7.79 percent of average total deposits in the nine
month period ended September 30, 2001 as compared to 8.92 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 September 30, 2001 by
$576,000 compared to the same period a year ago and increased by $3,721,000 in
the nine month period ended September 30, 2001 compared to the same period in
2000. The increase is primarily attributable to the increase in average
interest-bearing deposits to $431,917,000 in the nine month period ended
September 30, 2001 compared to $361,194,000 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 $123,000
in the three month period ended September 30, 2001 compared to the same period a
year ago and an increase of net interest income of $650,000 in the nine month
period ended September 30, 2001 compared to the same period a year ago.
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 $453,000 in the
three month period ended September 30, 2001 as compared to $752,000 in the three
month period ended September 30, 2000, representing a decrease of $299,000 or
39.76 percent. The provision for loan losses was $1,112,000 in the nine month
period ended September 30, 2001 as compared to $1,834,000 in the nine month
period ended September 30, 2000, representing a decrease of $722,000 or 39.37
percent. Net loan charge-offs represented 54.75 percent of the provision for
loan losses in the three month period ended September 30, 2001 as compared to
53.86 percent for the same period a year ago and represented 61.15 percent in
the nine month period ended September 30, 2001 as compared to 59.00 percent for
the same period a year ago. Net loan charge-offs in the nine month period ended
September 30, 2001 were 0.16 percent of average loans, down from 0.31 percent
for the same period a year ago. During the first nine months of 2001 and 2000, a
net of $680,000 and $1,082,000, 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
September 30, 2001, the allowance for loan losses was 1.34 percent of total
loans outstanding as compared to an allowance for loan losses of 1.44 percent of
total loans outstanding as of September 30, 2000. The loan loss reserve of 1.34
percent of total loans outstanding provided coverage of 71.92 percent of
nonperforming loans and 61.88 percent of nonperforming assets as of September
30, 2001 compared to 103.60 percent and 97.14 percent, respectively as of
September 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 September 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 $754,000 in third quarter 2001
compared to $694,000 in third quarter 2000 or an increase of 8.65 percent and
totaled $2,201,000 in nine months ended September 30, 2001 compared to
$1,876,000 in the same period a year ago, or an increase of 17.32 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 $236,000 in
third quarter 2001 from ($295,000) a year ago, or a 180.00 percent increase,
while all other noninterest income increased to $823,000 in the nine month
period ended September 30, 2001 from $205,000 a year ago, or an increase of
301.46 percent. The primary increase in noninterest income is attributable to
$64,000 gain on bonds sold in first nine months of 2001 and ($494,000) loss on
bonds sold in the same period a year ago. Thus, total noninterest income in
third quarter 2001 was $990,000 compared to $399,000 in third quarter 2000, or
an increase of 148.12 percent and was $3,024,000 in nine months ended September
30, 2001 compared to $2,081,000 in the same period a year ago, or an increase of
45.31 percent.
Noninterest Expense
Noninterest expense increased by 14.51 percent to $3,899,000 in three months
ended September 30, 2001 from 3,405,000 in the same period a year ago and
increased by 15.62 percent to $11,377,000 in nine months ended September 30,
2001 from $9,840,000 in the same period a year ago. Salaries and employee
benefits increased 9.61 percent to $2,087,000 in third quarter 2001 from
$1,904,000 in third quarter 2000 and increased 14.03 percent to $6,249,000 in
nine months ended September 30, 2001 from $5,480,000 in the same period a year
ago. These increases are primarily due to increased staffing with two new
branches opened in Summer 2001 and two new branches opened in Fall 2000.
Occupancy and equipment expense increased by 11.46 percent to $720,000 in third
quarter 2001 from $646,000 in third quarter 2000 and by 17.96 percent to
$2,043,000 in nine months ended September 30, 2001 from $1,732,000 in the same
period a year ago. The increases are primarily due to additional depreciation
and occupancy expense with the new offices
20
opened during 2000 and 2001. All other noninterest expense increased 27.72
percent to $1,092,000 in third quarter 2001 from $855,000 in third quarter 2000
and by 17.39 percent to $3,085,000 in nine months ended September 30, 2001 from
$2,628,000 in the same period a year ago. Other increases in noninterest expense
are primarily attributable to expenses incurred in opening the new offices.
Income Tax Expense
Income before taxes increased by $519,000 to $1,758,000 in third quarter 2001
from $1,239,000 in third quarter 2000 and by $778,000 to $5,518,000 in nine
months ended September 30, 2001 from $4,470,000 in the same period a year ago.
Income tax expense increased 49.50 percent to $598,000 in third quarter 2001
from $400,000 in third quarter 2000 and by 21.58 percent to $1,876,000 in nine
months ended September 30, 2001 from $1,543,000 in the same period a year ago.
Income tax expense as a percentage of income before taxes was 34.02 percent in
third quarter 2001 compared to 32.28 percent in third quarter 2000, or an
increase of 5.39 percent while income tax expense as a percentage of income
before taxes was 34.00 percent in nine months ended September 30, 2001 compared
to 32.55 percent in the same period a year ago, or an increase of 4.45 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 opened two new branches, one
located in the Dougherty/Lee County market and the other located in the Warner
Robins market. Additionally, the Company announced in October, 2001 the signing
of a definitive agreement to acquire Quitman Bancorp, Inc. located in
Quitman/Brooks County, Georgia. This acquisition is expected to close by April,
2002. Quitman Bancorp with $65 million in assets as of September 30, 2001, is a
unitary thrift holding company that operates one subsidiary, Quitman Federal
Savings Bank, through a single branch in Quitman. Quitman Federal has
approximately $55 million in deposits and for fiscal year-end 2000 earned $272
thousand and for fiscal year-end 1999 earned $348 thousand.
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
September 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
21
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.
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
September 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 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
September 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.
November 2, 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
22