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, 1999 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
912/426-6000
------------
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, 1999
----- ---------------------------------
COMMON STOCK, $1 PAR VALUE 4,435,026
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED FOR COLONY BANKCORP, INC. AND
SUBSIDIARIES: THE BANK OF FITZGERALD, ASHBURN BANK, COMMUNITY BANK OF WILCOX,
THE BANK OF DODGE COUNTY, BANK OF WORTH, COLONY BANK SOUTHEAST AND COLONY
MANAGEMENT SERVICES, INC.
A. CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 1999 AND DECEMBER 31, 1998.
B. CONSOLIDATED STATEMENTS OF INCOME - FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998.
C. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1999 AND 1998 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
D. CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION - FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998.
THE CONSOLIDATED FINANCIAL STATEMENTS FURNISHED HAVE NOT BEEN EXAMINED 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, 1999 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, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
ASSETS Sept 30, 1999 Dec 31, 1998
------------- ------------
Cash and Balances Due from Depository
Institutions (Note 2) $ 19,043 $ 12,265
Federal Funds Sold 8,980 27,795
Investment Securities
Available for Sale, at Fair Value 63,611 70,240
Held to Maturity, at Cost (Fair Value of $1,059 and
$1,537 respectively) (Note 3) 1,088 1,558
Loans (Notes 4 and 5) 313,607 252,869
Allowance for Loan Losses (4,658) (4,726)
Unearned Interest and Fees (6) (5)
--------- ---------
Total Loans 308,943 248,138
Premises and Equipment (Note 6) 12,669 11,686
Other Real Estate 817 907
Other Assets 9,167 8,759
--------- ---------
Total Assets $ 424,318 $ 381,348
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-Bearing $ 30,001 $ 29,216
Interest-Bearing (Note 8) 331,441 301,530
--------- ---------
Total Deposits 361,442 330,746
Borrowed Money:
Federal Funds Purchased 750 0
Other Borrowed Money (Note 9) 23,979 14,521
--------- ---------
Total Borrowed Money 24,729 14,521
Other Liabilities 3,511 2,985
Commitments and Contingencies (Note 11)
Stockholders' Equity:
Common Stock, Par Value $1 & $10, respectively. Authorized
20,000,000 and 5,000,000 shares respectively, Issued
4,435,026 and 2,217,573 shares as of September 30, 1999
and December 31, 1998, respectively* 4,435 22,175
Paid-In Capital 19,320 1,580
Retained Earnings 12,154 9,425
Accumulated Other Comprehensive Income, Net of Tax (1,273) (84)
--------- ---------
Total Stockholders' Equity 34,636 33,096
--------- ---------
Total Liabilities and Stockholders' Equity $ 424,318 $ 381,348
========= =========
*Par Value was reduced from $10 to $1 per share by Board of Director action on
February 16, 1999.
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, 1999 AND 1998
AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Three Months Ended Nine Months Ended
9/30/99 9/30/98 9/30/99 9/30/98
------- ------- ------- -------
Interest Income:
Loans, including fees $ 7,459 $ 6,644 $ 20,670 $ 19,239
Federal Funds Sold 128 220 490 762
Deposits with Other Banks 100 8 329 63
Investment Securities:
U.S. Treasury & Federal Agencies 753 791 2,436 2,306
State, County and Municipal 109 113 325 289
Other Investments 38 48 152 146
----------- ----------- ----------- -----------
Total Interest Income 8,587 7,824 24,402 22,805
----------- ----------- ----------- -----------
Interest Expense:
Deposits 4,064 3,717 11,756 10,791
Federal Funds Purchased 8 19 14 21
Other Borrowed Money 330 254 779 652
----------- ----------- ----------- -----------
Total Interest Expense 4,402 3,990 12,549 11,464
Net Interest Income 4,185 3,834 11,853 11,341
Provision for Loan Losses 226 270 669 780
----------- ----------- ----------- -----------
Net Interest Income After Provision 3,959 3,564 11,184 10,561
----------- ----------- ----------- -----------
Noninterest Income:
Service Charge on Deposits 587 521 1,612 1,519
Other Service Charges,
Commissions & Fees 102 101 348 311
Security Gains, net 0 29 (2) 31
Other Income 103 71 395 153
----------- ----------- ----------- -----------
Total Noninterest Income 792 722 2,353 2,014
----------- ----------- ----------- -----------
Noninterest Expense:
Salaries and Employee Benefits 1,752 1,566 4,835 4,290
Occupancy and Equipment 487 477 1,439 1,296
Other Operating Expenses 976 904 2,692 2,529
----------- ----------- ----------- -----------
Total Noninterest Expense 3,215 2,947 8,966 8,115
----------- ----------- ----------- -----------
Income Before Income Taxes 1,536 1,339 4,571 4,460
Income Taxes 473 422 1,399 1,412
----------- ----------- ----------- -----------
Net Income $ 1,063 $ 917 $ 3,172 $ 3,048
=========== =========== =========== ===========
Net Income Per Share of Common Stock
Basic $ 0.24 $ 0.21 $ 0.72 $ 0.69
=========== =========== =========== ===========
Diluted $ 0.24 $ 0.21 $ 0.72 $ 0.69
=========== =========== =========== ===========
Weighted Average Shares Outstanding* 4,435,026 4,435,026 4,435,026 4,423,360
=========== =========== =========== ===========
*All per share data has been adjusted to reflect a 2-for-1 stock split effected
as a 100% stock dividend on March 31, 1999.
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, 1999 AND 1998
AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Three Months Ended Nine Months Ended
9/30/99 9/30/98 9/30/99 9/30/98
------- ------- ------- -------
Net Income $ 1,063 $ 917 $ 3,172 $ 3,048
Other Comprehensive Income,
Net of Tax
Gains (Losses) on Securities,
Arising During Year (311) 134 (1,190) 110
Reclassification Adjustment 0 (10) 1 (11)
------- ------- ------- -------
Unrealized Gains (Losses) on Securities (311) 124 (1,189) 99
------- ------- ------- -------
Comprehensive Income $ 752 $ 1,041 $ 1,983 $ 3,147
======= ======= ======= =======
The accompanying notes are an integral part of these statements.
5
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1999 1998
---- ----
CASH FLOW FROM OPERATING ACTIVITIES
Net Income (loss) $ 3,172 $ 3,048
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sale of investment securities 2 (31)
Depreciation 842 707
Provision for loan losses 669 780
Amortization of excess costs 36 35
Other prepaids, deferrals and accruals, net (209) 1,417
-------- --------
Total Adjustments $ 1,340 $ 2,908
-------- --------
Net cash provided by operating activities $ 4,512 $ 5,956
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of securities available for sale $(32,193) $(53,309)
Proceeds from sales of securities available for sale 2,286 3,167
Proceeds from maturities, calls, and paydowns
of investment securities:
Available for Sale 34,926 48,323
Held to Maturity 480 1,064
Decrease (Increase) in interest-bearing deposits in banks (5,653) 620
(Increase) in loans (60,739) (26,959)
Purchase of premises and equipment (1,792) (2,371)
-------- --------
Net cash (used in) investing activities $(62,685) $(29,465)
CASH FLOW FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits $ 30,696 $ 7,379
Proceeds from issuance of common stock 0 885
Federal funds purchased 750 90
Dividends paid (421) (353)
Net (decrease) increase in other borrowed money 9,458 1,955
-------- --------
Net cash provided by financing activities 40,483 9,956
-------- --------
Net increase (decrease) in cash and cash equivalents (17,690) (13,553)
Cash and cash equivalents at beginning of period 39,003 36,289
-------- --------
Cash and cash equivalents at end of period $ 21,313 $ 22,736
The accompanying notes are an integral part of these statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(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, The Bank of Fitzgerald,
Fitzgerald, Georgia; Ashburn Bank, Ashburn, Georgia; Bank of Worth, Sylvester,
Georgia; The Bank of Dodge County, Eastman, Georgia; Community Bank of Wilcox,
Pitts, Georgia; Colony Bank Southeast (formerly Broxton State Bank), Broxton,
Georgia; and Colony Management Services, Inc., Fitzgerald, Georgia (the Banks).
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.
In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings Per Share (SFAS 128). SFAS 128 replaced the
calculation of primary and fully diluted earnings per share (EPS) with basic and
diluted EPS. Unlike primary EPS basic EPS excludes any dilutive effects of
options, warrants and convertible securities. Diluted EPS is very similar to
fully diluted EPS. All EPS amounts presented have been restated as applicable,
to conform with the new requirements.
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, 1999 and December 31, 1998. 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
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.
Colony Bankcorp, Inc.'s loans consist of commercial, financial and agricultural
loans, real estate mortgage loans and consumer loans primarily to individual's
and entities located throughout central and south Georgia. Accordingly, the
ultimate collectability of the loans is largely dependent upon economic
conditions in the central and south Georgia area.
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.
7
(1) Summary of Significant Accounting Policies (continued)
- ----------------------------------------------------------
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 accumulate
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
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 130, Reporting Comprehensive Income, with an
effective date for fiscal years beginning after December 15, 1997, and earlier
application encouraged. Upon adoption, comparative statements for prior years
must be reclassified. SFAS 130 has been applied to the financial statements of
all years presented herein.
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 reported as a separate component of the equity
section of the consolidated balance sheets. Such items are considered
components of other comprehensive income. The purpose of SFAS 130 is to present
in the financial statements net income and all items of other comprehensive
income as total comprehensive income. The adoption of SFAS 130 had no effect on
Colony Bankcorp, Inc. and Subsidiaries' consolidated net income or stockholders'
equity.
8
(2) Cash and Balances Due from Depository Institutions
- ------------------------------------------------------
Components of cash and balances due from depository institutions at September
30, 1999 and December 31, 1998 are as follows:
September 30, 1999 December 31, 1998
------------------ -----------------
Cash on Hand and Cash Items $ 6,213 $ 2,933
Noninterest-Bearing Deposits with Other Banks 6,120 8,275
Interest-Bearing Deposits with Other Banks 6,710 1,057
------- -------
$19,043 $12,265
======= =======
(3) Investment Securities
- -------------------------
Investment securities as of September 30, 1999 are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Securities Available for Sale:
U.S. Treasury $ 0 $ 0 $ 0 $ 0
U.S. Government Agencies:
Mortgage-Backed Securities 4,920 0 (142) 4,778
Other 48,296 0 (1,300) 46,996
State, County & Municipal 9,602 10 (156) 9,456
The Banker's Bank Stock 50 0 0 50
Federal Home Loan Bank Stock 1,426 0 0 1,426
Marketable Equity Securities 1,130 0 (225) 905
-------- -------- -------- --------
$ 65,424 $ 10 $ (1,823) $ 63,611
======== ======== ======== ========
Securities Held to Maturity:
U.S. Government Agencies $ 0 $ 0 $ 0 $ 0
State, County and Municipal 1,088 0 (29) 1,059
-------- -------- -------- --------
$ 1,088 $ 0 $ (29) $ 1,059
======== ======== ======== ========
The amortized cost and fair value of investment securities as of September 30,
1999 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 $ 3,044 $ 3,040 $ 410 $ 410
Due After One Year Through Five Years 51,987 50,658 400 399
Due After Five Years Through Ten Years 2,505 2,398 0 0
Due After Ten Years 362 356 278 250
------- ------- ------ ------
57,898 56,452 1,088 1,059
Federal Home Loan Bank Stock 1,426 1,426 0 0
The Banker's Bank Stock 50 50 0 0
Marketable Equity Securities 1,130 905 0 0
Mortgage-Backed Securities 4,920 4,778 0 0
------- ------- ------ ------
$65,424 $63,611 $1,088 $1,059
======= ======= ====== ======
9
(3) Investment Securities (continued)
- -------------------------------------
Investment securities as of December 31, 1998 are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Securities Available for Sale:
U.S. Treasury $ 0 $ 0 $ 0 $ 0
U.S. Government Agencies:
Mortgage-Backed Securities 8,434 40 (26) 8,448
Other 51,186 97 (59) 51,224
State, County & Municipal 7,380 101 (6) 7,475
The Banker's Bank Stock 50 0 0 50
Federal Home Loan Bank Stock 2,094 0 0 2,094
Marketable Equity Securities 1,130 0 (181) 949
------- ---- ----- -------
$70,274 $238 $(272) $70,240
======= ==== ===== =======
Securities Held to Maturity:
U.S. Government Agencies $ 300 $ 0 $ 0 $ 300
State, County and Municipal 1,258 17 (38) 1,237
------- ---- ----- -------
$ 1,558 $ 17 $ (38) $ 1,537
======= ==== ===== =======
Investment securities having a carry value approximating $29,106 and $26,373 as
of September 30, 1999 and December 31, 1998, respectively, were pledged to
secure public deposits and for other purposes.
(4) Loans
- ---------
The composition of loans as of September 30, 1999 and December 31, 1998 was as
follows:
September 30, 1999 December 31, 1998
----------------------- ----------------------
Commercial, Financial and Agricultural $ 50,116 $ 44,878
Real Estate - Construction 4,558 998
Real Estate - Farmland 20,796 18,980
Real Estate - Other 174,638 133,858
Installment Loans to Individuals 55,323 40,928
All Other Loans 8,176 13,227
-------- --------
$313,607 $252,869
======== ========
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 $5,906 and $5,822 as of September 30, 1999 and December 31, 1998,
respectively. On September 30, 1999, the Company had 90 day past due loans with
principal balances of $399 and restructured loans with principal balances of
$284.
Colony Bankcorp, Inc. recognizes impaired loans as nonaccrual loans delinquent
in excess of 120 days for which collateral values are insufficient to recover
outstanding principal and interest under original loan terms. Impaired loan
data as of September 30, 1999 and December 31, 1998 was as follows:
Total Investment in Impaired Loans $1,353
Less Allowance for Impaired Loan Losses (375)
------
Net Investment, September 30, 1999 and December 31, 1998 $ 978
======
10
(5) Allowance for Loan Losses
- -----------------------------
Transactions in the allowance for loan losses are summarized below for nine
months ended September 30, 1999 and September 30, 1998 as follows:
Sept 30, 1999 Sept 30, 1998
------------- -------------
Balance, Beginning $ 4,726 $ 4,575
Provision Charged to Operating Expenses 669 780
Loans Charged Off (1,107) (904)
Loan Recoveries 370 322
------- -------
Balance, Ending $ 4,658 $ 4,773
======= =======
(6) Premises and Equipment
- --------------------------
Premises and equipment are comprised of the following as of September 30, 1999
and December 31, 1998:
Sept 30, 1999 December 31, 1998
------------- -----------------
Land $ 1,572 $ 1,437
Building 9,781 8,720
Furniture, Fixtures and Equipment 7,561 7,220
Leasehold Improvements 206 206
-------- --------
19,120 17,583
Accumulated Depreciation (6,451) (5,897)
-------- --------
$ 12,669 $ 11,686
======== ========
Certain Company facilities and equipment are leased under various operating
leases. Future minimum rental payments to be paid are as follows:
Year Ending
December 31 Amount
----------- ------
1999 84
2000 73
2001 71
2002 70
2003 49
----
$347
====
(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, 1999 and December
31, 1998 are as follows:
Sept. 30, 1999 December 31, 1998
---------------------- ------------------------
Interest-Bearing Demand $ 59,993 $ 61,840
Savings 13,171 13,795
Time, $100,000 and Over 89,729 70,996
Other Time 168,548 154,899
-------- --------
$331,441 $301,530
======== ========
11
(8) Deposits (continued)
- ------------------------
The aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of $100,000, was approximately $76,857 and $61,088 as of
September 30, 1999 and December 31, 1998, respectively.
As of September 30, 1999 and December 31, 19998, the scheduled maturities of
time deposits are as follows:
Maturity Sept 30, 1999 December 31, 1998
- ------------------------ ------------- -----------------
One Year and Under $201,457 $183,027
One to Three Years 40,083 33,437
Three Years and Over 16,737 9,431
-------- --------
$258,277 $225,895
======== ========
(9) Other Borrowed Money
- ------------------------
Other borrowed money at September 30, 1999 and December 31, 1998 is summarized
as follows:
Sept. 30, 1999 December 31, 1998
-------------- -----------------
Federal Home Loan Bank Advances $22,300 $12,700
Debentures Payable 267 267
The Bank of Fitzgerald 0 0
First Port City Note Payable 770 771
The Bankers Bank Note Payable 642 783
------- -------
$23,979 $14,521
======= =======
Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from
1999 to 2008 and interest rates ranging from 5.00 percent to 6.98 percent.
Under the Blanket Agreement for Advances and Security Agreement with the FHLB,
residential mortgage loans are pledged as collateral for the FHLB advances
outstanding.
Debentures payable were issued November 28, 1984 for $4,360. The debentures are
due in annual payments of $267 plus variable interest with the unpaid balance
due November 1, 1999. Collateral for the outstanding debt consists of 100
percent of the common stock of Ashburn Bank. Effective interest rate as
September 30, 1999 was 8.0 percent.
The Bank of Fitzgerald note is a credit line issued on December 24, 1998 in the
amount of $150 to Colony Management Services, Inc. The note is secured by
assignment of contracts of Colony Management Services with interest tied to Wall
Street Prime Indicator.
First Port City note payable was renewed on January 30, 1997 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, 2000.
The Bankers Bank note payable originated on September 5, 1997 for $1,000 at a
rate of The Wall Street Prime minus one half percent. Payments are due monthly
with the entire unpaid balance due September 5, 2002. The debt is secured by
all furniture, fixtures, machinery, equipment and software of Colony Management
Services, Inc. Colony Bankcorp, Inc. guarantees the debt.
The aggregate stated maturities of other borrowed money at September 30, 1999
are as follows:
Year Amount
---- ------
1999 $ 417
2000 10,670
2001 200
2002 2,592
2003 and Thereafter 10,100
-------
$23,979
=======
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 $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. The
Bank had commitments under standby letters of credit to U.S. addresses
approximating $1,678 as of September 30, 1999 and $1,346 as of December 31,
1998. Unfulfilled loan commitments as of September 30, 1999 and December 31,
1998 approximated $39,480 and $35,980 respectively. No losses are anticipated
as a result of commitments and contingencies.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitment amounts expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The credit risk involved in issuing these
financial instruments is essentially the same as that involved in extending
loans to customers. The amount of collateral obtained, if deemed necessary by
the Banks upon extension of credit, is based on management's credit evaluation
of the borrower. Collateral held varies, but may include accounts receivable,
inventory, property, plant and equipment and income-producing commercial
properties.
The Banks do not anticipate any material losses as a result of the commitments
and contingent liabilities.
The nature of the business of the Banks is such that it ordinarily results in a
certain amount of litigation. In the opinion of management and counsel for the
company and the Banks, there is no litigation in which the outcome will have a
material effect on the consolidated financial statement.
(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 1999 without prior approval from the
banking regulatory agencies approximates $2,127. 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 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, 1999, 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
(12) Regulatory Capital Matters (continued)
- -------------------------------------------
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of September 30, 1999
Total Capital
to Risk-Weighted Assets $39,388 11.99% $26,285 8.00% $32,856 10.00%
Tier 1 Capital
to Risk-Weighted Assets 35,274 10.74% 13,143 4.00% 19,714 6.00%
Tier 1 Capital
to Average Assets 35,274 8.49% 16,625 4.00% 20,782 5.00%
As of December 31, 1998
Total Capital
to Risk-Weighted Assets $35,891 13.21% $21,735 8.00% $27,169 10.00%
Tier 1 Capital
to Risk-Weighted Assets 32,478 11.95% 10,871 4.00% 16,307 6.00%
Tier 1 Capital
to Average Assets 32,478 8.51% 15,266 4.00% 19,082 5.00%
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only)
- -----------------------------------------------------------------
The parent company's balance sheets as of September 30, 1999 and December 31,
1998 and the related statements of income are as follows:
COLONY BANKCORP, INC. (PARENT ONLY)
BALANCE SHEETS
FOR PERIOD ENDED SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
ASSETS September 30, 1999 December 31, 1998
------------------ -----------------
Cash $ 576 $ 111
Investments in Subsidiaries
at Equity 33,862 32,718
Other 1,482 1,508
------- -------
Total Assets $35,920 $34,337
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Dividends Payable $ 155 $ 133
Notes and Debentures Payable 1,037 1,037
Other 92 92
------- -------
Stockholders' Equity 1,284 1,241
Common Stock, Par Value $10;
20,000,000 Shares Authorized,
4,435,026 and 2,173,263 Shares
Issued and Outstanding as of
September 30, 1999 and December 31,
1998, respectively $ 4,435 $22,175
Paid-In Capital 19,320 1,580
Retained Earnings 12,154 9,425
Accumulated Other Comprehensive Income,
Net of Tax (1,273) (84)
------- -------
Total Stockholders' Equity 34,636 33,096
------- -------
Total Liabilities and
Stockholders' Equity $35,920 $34,337
======= =======
14
(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, 1999 AND SEPTEMBER 30, 1998
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
Income $ 1,213 $2,075
Dividends from Subsidiaries 0 132
Management Fees from Subsidiaries 65 59
------- ------
Other $ 1,278 $2,266
Expenses 58 95
Interest 271 247
Salaries and Benefits 302 289
------- ------
Other $ 631 $ 631
------- ------
Income Before Taxes and Equity in
Undistributed Earnings of
Subsidiaries 647 1,635
Income Tax (Benefits) (192) (115)
------- ------
Income Before Equity in Undistributed
Earnings of Subsidiaries 839 1,750
Equity in Undistributed Earnings
of Subsidiaries 2,333 1,298
------- ------
Net Income 3,172 3,048
Other Comprehensive Income, Net of Tax
Gains (losses) on Securities Arising
During Year (1,190) 110
Reclassification Adjustment 1 (11)
------- ------
Unrealized Gains (Losses) in Securities (1,189) 99
------- ------
Comprehensive Income $ 1,983 $3,147
======= ======
15
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only) (continued)
- -----------------------------------------------------------------------------
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
Cash Flows from Operating Activities
Net Income $ 3,172 $ 3,048
Adjustments to Reconcile Net Income
to Net Cash
Provided from Operating Activities
Depreciation and Amortization 64 64
Equity in Undistributed Earnings
of Subsidiary (2,333) (1,298)
Other 8 56
------- -------
911 1,870
Cash Flows from Investing Activities
Capital Infusion in Subsidiary 0 (1,000)
Purchase of Premises and Equipment (25) (5)
------- -------
(25) (1,005)
Cash Flows from Financing Activities
Dividends Paid (421) (353)
Proceeds from Issuance of Common Stock 0 885
Principal Payments on Notes and
Debentures 0 (918)
Proceeds from Notes and Debentures 0 0
------- -------
(421) (386)
Increase (Decrease) in Cash and Cash
Equivalents 465 479
Cash and Cash Equivalents, Beginning 111 9
------- -------
Cash and Cash Equivalents, Ending $ 576 $ 488
======= =======
(14) Common Stock Split
- -----------------------
On February 16, 1999, the board of directors approved a 100 percent stock split
to be effected on March 31, 1999 in the form of a dividend to stockholders of
record on March 31, 1999. Weighted average shares and per share data for all
periods presented in the accompanying consolidated financial statements and
related notes have been retroactively restated to reflect the additional shares
outstanding resulting from the stock split.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
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. These funds are obtained by converting assets to cash
(representing primarily proceeds from collections on loans and maturities of
investment securities) or by attracting new deposits. For the nine months ended
September 30, 1999, the Company was successful in meeting its liquidity needs by
increasing deposits 9.28% to $361,442,000 from deposits of $330,746,000 on
December 31, 1998, by reducing Federal Funds 67.69% to $8,980,000 from
$27,795,000 on December 31, 1998 and by increasing borrowings 65.13% to
$23,979,000 from $14,521,000 on December 31, 1998. Should the need arise, the
Company also maintains relationships with several correspondent banks that can
provide funds on short notice.
The Company's liquidity position remained acceptable for the nine months ended
September 30, 1999. Average liquid assets (cash and amounts due from banks,
interest-bearing deposits in other banks, funds sold and investment securities)
represented 29.59% of average deposits for nine months ended September 30, 1999
as compared to 29.89% of average deposits for nine months ended September 30,
1998 and 30.24% for calendar year 1998. Average loans represented 81.20% of
average deposits for nine months ended September 30, 1999 as compared to 81.03%
for nine months ended September 30, 1998 and 80.60% for calendar year 1998,
Average interest-bearing deposits were 84.99% of average earning assets for nine
months ended September 30, 1999 as compared to 84.55% for the same period in
1998 and 85.08% for calendar year 1998.
The Company satisfies most of its capital requirements through retained
earnings. During the first half of 1999 retained earnings provided $1,821,000
of increase in equity and unrealized losses on securities available-for-sale,
net of taxes resulted in equity decreasing by $878,000 for a net change in
equity of $943,000 for the first six months of 1999. During the third quarter,
retained earnings provided an increase in equity of $908,000 and unrealized
losses on available-for-sale securities, net of taxes decreased by $311,000 for
a net change in equity of $597,000. Thus, total equity increased by a net
amount of $597,000 for the third quarter of 1999 and by a net amount of
$1,540,000 for the nine months ended September 30, 1999. During the first half
of 1998, retained earnings increased equity by $1,887,000, equity decreased by
$24,000 due to changes in unrealized loss on available-for-sale securities and
equity increased with stock proceeds of $885,000 from a stock offering for a net
change in equity during the first half of 1998 of $2,748,000. During the third
quarter of 1998, retained earnings provided $784,000 of increase in equity in
addition to equity increasing $123,000 as a result of changes in unrealized
gains on available-for-sale securities for a net increase in equity of $907,000.
Thus total equity increased by a net amount of $3,655,000 for the nine months
ended September 30, 1998. Total equity increased by a net amount of $4,276,000
for calendar year 1998.
At September 30, 1999, total capital of Colony amounted to approximately
$34,636,000. At September 30, 1999 there was no outstanding commitments for
capital expenditures.
The Federal Reserve Bank Board and the FDIC have issued capital guidelines for
U. S. banking organizations. The objective of these efforts was to provide a
more uniform capital framework that is sensitive to differences in risk assets
among banking organizations. The guidelines define a two-tier capital
framework. Tier I capital consists of common stock and qualifying preferred
stockholders' equity less goodwill. Tier 2 capital consists of 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 I ratio at
September 30, 1999 was 10.74% and total Tier I and 2 risk-based capital was
11.99%. Both of these measures compare favorably with the regulatory minimums of
4% for Tier 1 and 8% for total risk-based capital. The Company's leverage ratio
as of September 30, 1999 was 8.49% which exceeds the required leverage ratio
standard of 4%.
For the first three quarters of 1999, the Company has paid quarterly cash
dividends of $0.03, 0.035 and 0.035, respectively or $0.10 per share for the
nine months ended September 30, 1999 as compared to $0.085 for the same period
in 1998. The dividend payout ratio, defined as dividends per share divided by
net income per share, was 14.08% for nine months ended September 30, 1999 as
compared to 12.41% for the nine months ended September 30, 1998.
At September 30, 1999, 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 operations.
However, it is possible that examination by regulatory authorities in the future
could precipitate additional loan charge-offs which could materially impact the
Company's liquidity, capital resources and operations.
17
RESULTS OF OPERATION
The Company's results of operations are determined by its ability to effectively
manage interest income and expenses, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Since interest
rates are determined by market forces and economic conditions beyond the control
of the Company, the ability to generate net interest income is dependent upon
the Bank'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 measure 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 for the three months ended September 30, 1999 was $1,063,000 as
compared to $917,000 for the same period in 1998, or an increase of 15.92% while
net income for the nine months ended September 30, 1999 was $3,172,000 as
compared to $3,048,000 for the same period in 1998, or an increase of 4.07%.
Earnings increased modestly the first nine months of 1999 compared to the same
period in 1998 primarily due to the additional overhead associated with the
three new offices opened during the second half of 1998; however, these new
offices are largely responsible for Colony's excellent growth as they have
provided approximately $49 million of the $68 million asset growth from a year
ago. Additionally, net income was impacted by a decrease of 40 basis points
with the net interest margin for the first nine months of 1999 as compared to
the same period in 1998.
Net Interest Margin
- -------------------
The net interest margin decreased by 32 basis points to 4.38% in third quarter
1999 as compared to 4.70% in third quarter 1998 and decreased by 40 basis points
to 4.34% for nine months ended September 30, 1999 as compared to 4.74% for the
same period in 1998. Net interest income increased 9.15% as third quarter 1999
net interest income was $4,185,000 compared to $3,834,000 for the same period in
1998 on an increase in average earning assets to $386,529,000 in third quarter
1999 from $332,742,000 in third quarter 1998. Net interest income increased
4.51% to $11,853,000 for nine months ended September 30, 1999 from $11,341,000
for the same period in 1998 on an increase in average earning assets to
$369,920,000 for the nine months ended September 30, 1999 from $324,728,000 for
the same period in 1998. For the nine months ended September 30, 1999 compared
to the same period in 1998, average loans increased by $34,055,000 or 13.95%,
average funds sold decreased by $5,999,000 or 32.88%, average investment
securities increased by $8,883,000 or 14.52% and average interest-bearing
deposits in other banks increased by $8,253,000 or 688.90%, resulting in a net
increase in average earning assets of $45,192,000 or 13.92%.
The net increase in average earning assets was funded by a net increase in
average deposits of 14.38% to $344,610,000 for nine months ended September 30,
1999 from $301,273,000 for the same period in 1998. Average interest-bearing
deposits increased by 14.50% to $314,391,000 for nine months ended September 30,
1999 compared to $274,573,000 for nine months ended September 30, 1998, while
average noninterest-bearing deposits represented 8.77% of average total deposits
for nine months ended September 30, 1999 compared to 8.86% for the same period
in 1998 and 8.55% for calendar year 1998.
Interest expense increased for the three months ended September 30, 1999 by
$412,000 compared to the same period in 1998 and increased by $1,085,000 for the
nine months ended September 30, 1999 compared to the same period in 1998. The
increase in interest expense is primarily attributable to the increase in
average interest-bearing deposits to $314,391,000 for the nine months ended
September 30, 1999 compared to $274,573,000 for the nine months ended September
30, 1998 and an increase in average borrowings to $17,011,000 for nine months
ended September 30, 1999 compared to $12,587,000 for the nine months ended
September 30, 1998. The combination of a decrease in the net interest margin
and an increase in average earning assets resulted in an increase in net
interest income of $351,000 for third quarter 1999 compared to third quarter
1998 and an increase in net interest income of $512,000 for nine months ended
September 30, 1999 compared to the same period in 1998.
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 non-accruing, past due and other loans that management believes
requires 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 that
management has determined to be adequate. The provision for loan losses was
$226,000 for third quarter 1999 as compared to $270,000 for third quarter 1998
and $669,000 for nine months ended September 30, 1999 compared to $780,000 for
the same period in 1998. The decrease in the provision for loan losses in both
periods is attributable to a leveling off of problem loans and an adequate
build-up in the loan loss reserve for any future losses. Net loan charge-offs
represented (21.68%) of the provision for loan losses in third quarter 1999 as
compared to 117.41% in third quarter l998. Net loan charge-offs represented
110.01% of the provision for loan losses in the nine month period ended
September 30, 1999 as compared to 74.62% for the same period in 1998. During
the first nine months of 1999 and 1998, a net of $736,000 and $582,000,
respectively, was charged-off. Net loan charge-offs for the nine
18
months ended September 30, 1999 represented 0.26% of average loans outstanding
as compared to 0.24% for the nine months ended September 30, 1998. At September
30, 1999 the allowance for loan losses was 1.49% of total loans outstanding as
compared to an allowance for loan losses of 1.83% at September 30, 1998 and
1.87% at December 31, 1998. The allowance for loan losses of 1.49% of total
loans at September 30, 1999 provided coverage of 73.89% of nonperforming loans
and 65.41% of nonperforming assets, compared to 63.26% and 59.21%, respectively
at September 30, 1998. 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, 1999 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 amounted to $587,000 in third quarter 1999
compared to $521,000 in third quarter 1998, or an increase of 12.67% and
amounted to $1,612,000 for nine months ended September 30, 1999 compared to
$1,519,000 for the nine months ended September 30, 1998 or an increase of 6.12%.
All other non-interest income increased by $4,000 to $205,000 for third quarter
1999 from $201,000 for third quarter 1998 and all other noninterest income
increased by $246,000 to $741,000 for nine months ended September 30, 1999 from
$495,000 for the same period in 1998. The primary increase of other noninterest
income was a recovery of $94,000 on a previously written down investment
security at one of the subsidiary banks. Other accounts with increases over the
prior year included mortgage origination fees, check order income, gain on sale
of assets and investment fee income. Total noninterest income for nine months
ended September 30, 1999 was $2,353,000 compared to $2,014,000 for the same
period in 1998, or an increase of 16.83%.
Noninterest Expense
- -------------------
Noninterest expense increased by 9.09% to $3,215,000 for third quarter 1999 from
$2,947,000 for the same period in 1998 and increased by 10.49% to $8,9696,000
for nine months ended September 30, 1999 from $8,115,000 for the same period in
1998. Salaries and benefits and occupancy expense had significant increases due
to the three new offices opened during the second half of 1998. Salaries and
benefits increased 11.88% to $1,752,000 in third quarter 1999 compared to
$1,566,000 for the same period in 1998 and increased 12.70% to $4,835,000 for
nine months ended September 30, 1999 compared to $4,290,000 for the same period
a year ago. Occupancy expense increased 2.10% to $487,000 for third quarter
1999 from $477,000 for the same period in 1998 and increased 11.03% to
$1,439,000 for nine months ended September 30, 1999 from $1,296,000 for the same
period a year ago. All other noninterest expense remained relatively flat with
an increase of 6.45% to $2,692,000 for nine months ended September 30, 1999 from
$2,529,000 for the same period a year ago.
Income Tax Expense
- ------------------
Income before taxes increased by 14.71% to $1,536,000 in third quarter 1999 from
$1,339,000 in third quarter 1998 and increased by 2.49% to $4,571,000 for nine
months ended September 30, 1999 from $4,460,000 for the same period in 1998.
Income taxes as a percentage of income before taxes decreased by 2.32% to 30.79%
in third quarter 1999 from 31.52% in third quarter 1998 and decreased by 3.32%
to 30.61% for nine months ended September 30, 1999 from 31.66% for nine months
ended September 30, 1998. Income tax expense increased 12.09% to $473,000 for
third quarter 1999 as compared to $422,000 for third quarter 1998 and decreased
by 0.92% to $1,399,000 for nine months ended September 30, 1999 compared to
$1,412,000 for the same period in 1998.
Future Outlook
- --------------
Colony is an emerging company operating in an industry filled with non-regulated
competitors and a rapid pace of consolidation. Colony reached a record in
assets during the third quarter of 1999 as total assets reached 424 million.
1999 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 three new branches in 1998 and one in 1999 which
are located in Douglas, Tifton, Leesburg and Cordele, and these new offices are
largely responsible for Colony's excellent growth as they have provided
approximately $49 million of the $68 million asset growth from a year ago. A
new office is scheduled to open in Moultrie during the second quarter of 2000.
Colony Management Services, Inc. continues to stay abreast of technology changes
and its back-office consolidation effort will allow for continued reduction in
overhead, while allowing the Company to better serve our customers through
improved customer data resources and state-of-the-art technological services.
Year 2000 Compliance Issue
- --------------------------
Colony has initiated a company-wide program to identify and address issues
associated with the ability of its in-house systems and outside service
providers to properly recognize date-sensitive information as a result of the
century change on January 1, 2000 (Year 2000).
19
Colony has established a five-phase methodology for use in assessing the Year
2000 project's state of readiness. These phases are awareness, assessment,
renovation, validation and implementation. An appointed Year 2000 steering
committee monitors progress within these phases. These five phases are briefly
defined as follows: (1) awareness - defining the problem and establishing the
resources needed to achieve compliance; (2) assessment - identify all areas of
operations affected by the Year 2000 date change issue: (3) renovation -
updating or replacement of affected systems; (4) validation - testing systems
and evaluating the results of testing; (5) implementation - certification and
acceptance of Year 2000 compliance.
The majority of the Year 2000 issues facing the Company are information
technology ("IT") in nature. All IT systems, which includes mainframe and
midrange computer systems are 100% complete in all phases. Testing of these
systems has produced satisfactory results. Non-IT systems, which include
embedded technology such as micro controllers, are also being considered. In
addition, all third party service providers have provided the Company with
documentation regarding the tested or anticipated compliance of their services.
Although the Company has obtained and continues to obtain these written
verifications, there can be no assurance that the potential impact of a major
interruption of failure in the service provided by these companies would not
have a material adverse effect on the Company's financial condition or results
of operations.
Colony has established contingency plans in the event of a failure caused by the
Year 2000 date change. This plan is designed to address the most likely risks
facing the Company during the rollover period. Some of these risks include
application system failures, power outages, security and environmental systems
failures.
Colony has completed all phases of Year 2000 compliance with minimal additional
costs to be provided by Company earnings. The majority of remaining costs will
be spent on customer assurance related expenditures.
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, 1999 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 the Federal Reserve System and to invest in Federal Funds
Sold from other financial institutions. 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 The Bank of Fitzgerald with a subsidiary of the Company. Since that time,
The Bank of Fitzgerald, which was formed by principals of Colony Bankcorp, Inc.
in 1976, has operated as wholly-owned subsidiary of the Company. In April 1984,
Colony Bankcorp, Inc. acquired Community Bank of Wilcox, and in November 1984,
Ashburn Bank became a wholly-owned subsidiary of Colony Bankcorp, Inc. Colony
Bankcorp, Inc. continued its growth with the acquisition of The Bank of Dodge
County in September 1985. In August 1991, Colony Bankcorp, Inc.
20
acquired The Bank of 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;
trust services investment, and discount brokerage services; IRA's, safe deposit
box rentals, bank money orders, and electronic funds transfer services,
including wire transfers and automated teller machines. 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 900 shareholders of record as of September
30, 1999. "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, 1999.
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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 8, 1999 /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