<PAGE>
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1996 COMMISSION FILE NUMBER 0-12436
COLONY BANKCORP, INC.
---------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-1492391
------- ----------
(STATE OF OTHER JURISDICTION) (I.R.S. EMPLOYER)
OF INCORPORATION OR ORGANIZATION IDENTIFICATION NUMBER
302 SOUTH MAIN 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 JUNE 30, 1996
----- ----------------------------
COMMON STOCK, $10 PAR VALUE 1,291,110
<PAGE>
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, AND THE BANK OF WORTH.
A. CONSOLIDATED BALANCE SHEETS - JUNE 30, 1996 AND DECEMBER 31, 1995.
B. CONSOLIDATED STATEMENTS OF INCOME - FOR THE THREE MONTHS ENDED JUNE 30,
1996 AND 1995 AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995.
C. CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION - FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1995.
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 SIX MONTH PERIOD ENDED JUNE 30, 1996 ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.
2
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1996 DECEMBER 31, 1995
-------------- ------------------
<S> <C> <C>
Cash and Balances Due from Depository
Institutions (Note 2) $ 7,890 $ 9,517
Federal Funds Sold 8,590 24,325
Investment Securities (Aggregate Fair Value
of $50,890 and $45,917 Respectively) (Note 3) 51,012 46,023
Loans (Notes 4 and 5) 201,561 188,396
Allowance for Loan Losses (4,157) (3,885)
Unearned Interest and Fees (9) (11)
-------- --------
Total Loans 197,395 184,500
Premises and Equipment (Note 6) 5,625 5,624
Other Real Estate 2,521 1,721
Other Assets 6,974 6,858
-------- --------
TOTAL ASSETS $280,007 $278,568
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-Bearing $ 23,817 $ 25,152
Interest-Bearing (Note 8) 227,649 228,091
-------- --------
Total Deposits 251,466 253,243
Borrowed Money:
Federal Funds Purchased 1360 -0-
Other Borrowed Money (Note 9) 3,400 2,504
-------- --------
Total Borrowed Money 4,760 2,504
Other Liabilities 1,911 1,766
Commitments and Contingencies (Note 11)
Stockholders' Equity:
Common Stock, Par Value $10 a Share; Authorized
5,000,000 shares, Issued 1,291,110 shares as of June 30,
1996 and December 31, 1995 Respectively 12,911 12,911
Paid-In Capital 1,117 1,117
Retained Earnings 8,410 7,203
Net Unrealized Loss on Securities Available for Sale,
Net of Tax Benefit of $194 in 1996 and $20 in 1995 (568) (176)
-------- --------
Total Stockholders'' Equity 21,870 21,055
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $280,007 $278,568
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
6/30/96 6/30/95 6/30/96 6/30/95
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees $ 5,185 $ 5,269 $ 10,256 $ 9,988
Federal Funds Sold 157 126 416 229
Deposits with Other Banks 1 15 4 33
Investment Securities:
U.S. Treasury & Federal Agencies 693 605 1,310 1,248
State, County and Municipal 53 65 108 123
---------- ---------- ---------- ----------
Total Interest Income 6,089 6,080 12,094 11,621
---------- ---------- ---------- ----------
Interest Expense:
Deposits 2,945 2,707 5,900 5,021
Federal Funds Purchased 1 13 3 29
Other Borrowed Money 74 84 145 162
---------- ---------- ---------- ----------
Total Interest Expense 3,020 2,804 6,048 5,212
---------- ---------- ---------- ----------
Net Interest Income 3,069 3,276 6,046 6,409
Provision for Loan Losses 491 810 1,130 1,187
---------- ---------- ---------- ----------
Net Interest Income After Provision 2,578 2,466 4,916 5,222
---------- ---------- ---------- ----------
Noninterest Income:
Service Charge on Deposits 411 377 801 758
Other Income 192 138 418 334
Security Gains, net 0 10 3 18
---------- ---------- ---------- ----------
Total Noninterest Income 603 525 1,222 1,110
---------- ---------- ---------- ----------
Noninterest Expense:
Salaries and Employee Benefits 1,193 1,133 2,265 2,180
Occupancy and Equipment 258 263 498 524
Other Operating Expenses 707 788 1,340 1,550
---------- ---------- ---------- ----------
Total Noninterest Expense 2,158 2,184 4,103 4,254
---------- ---------- ---------- ----------
Income Before Income Taxes $ 1,023 $ 807 $ 2,035 $ 2,078
Income Taxes 320 257 634 681
---------- ---------- ---------- ----------
Net Income $ 703 $ 550 $ 1,401 $ 1,397
========== ========== ========== ==========
Net Income Per Share of Common Stock $0.54 $0.45 $1.09 $1.15
========== ========== ========== ==========
Weighted Average Shares Outstanding 1,291,110 1,216,110 1,291,110 1,216,110
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
4
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) $ 1,401 $ 1,397
Adjustments to reconcile net income to net cash provided
by operating activities:
(Gain) loss on sale of investment securities (3) (18)
Depreciation 227 260
Provision for loan losses 1,130 1,187
Amortization of excess costs 24 24
Other prepaids, deferrals and accruals, net (765) (1,323)
--------- ---------
Total Adjustments $ 613 $ 130
--------- ---------
Net cash provided by operating activities $ 2,014 $ 1,527
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale $ (11,528) $ (5,290)
Proceeds from sales of securities available for sale 498 2,908
Proceeds from maturities of securities available for sale 5,371 5,454
Purchase of securities held for investment -0- -0-
Proceeds from maturities of securities held for investment 36 289
Proceeds from sales of securities held for investment -0- -0-
Decrease (Increase) in interest-bearing deposits in banks 99 1,882
(Increase) in loans (14,023) (21,383)
Purchase of premises and equipment (213) (343)
--------- ---------
Net cash (used in) investing activities $ (19,760) $ (16,483)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits $ (1,777) $ 11,146
Net increase in short-term borrowings and Federal Funds
Purchased 2,560 1,680
Dividends paid (194) (170)
Net (decrease) increase in long-term borrowings (304) (104)
--------- ---------
Net cash provided by financing activities $ 285 $ 12,552
--------- ---------
Net increase (decrease) in cash and cash equivalents (17,461) (2,404)
Cash and cash equivalents at beginning of period 33,743 15,343
--------- ---------
Cash and cash equivalents at end of period $ 16,282 $ 12,939
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------
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; The Bank of Worth,
Sylvester, Georgia; The Bank of Dodge County, Eastman, Georgia and Community
Bank of Wilcox, Pitts, 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. The
following is a description of the more significant of those policies
BASIS OF PRESENTATION
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 foreclosures or in
satisfaction of loans and the valuation of deferred tax assets.
INVESTMENT SECURITIES
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115
Accounting for Certain Investments in Debt and Equity Securities, as of January
1, 1994. Under the provisions of SFAS No. 115, the Company must classify its
securities as trading, available for sale or held to maturity. Trading
securities are purchased and held for sale in the near term. Securities held to
maturity are those which the Company has the ability and intent to hold until
maturity. All other securities not classified as trading or held to maturity
are considered available for sale.
Securities available for sale are measured at fair value with unrealized gains
and losses reported net of deferred taxes as a separate component of
stockholders' equity. Fair value represents an approximation of realizable
value as of June 30, 1996 and December 31, 1995. Realized and unrealized gains
and losses are determined using the specific identification method.
LOANS
Loans are generally reported at principal amount less unearned interest and
fees. On January 1, 1995, the Company adopted SFAS No. 114, Accounting by
Creditors for Impairment of a Loan and SFAS No. 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.
6
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Colony Bankcorp, Inc.'s loans consist of commercial, financial and agricultural
loans, real estate mortgage loans and consumer loans primarily to individuals
and entities located throughout central and south Georgia. Accordingly, the
ultimate collectibility 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.
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:
<TABLE>
<CAPTION>
DESCRIPTION LIFE IN YEARS METHOD
----------- ------------- ------
<S> <C> <C>
Banking Premises 15-40 Straight-Line and Accelerated
Furniture and Equipment 5-10 Straight-Line and Accelerated
</TABLE>
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.
7
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
STOCKHOLDERS' EQUITY
Banking regulations impose minimum capital levels in relation to assets. To be
considered "well capitalized," a financial institution must generally have a
leverage ratio of at least 5 percent, a tier 1 risk-based capital ratio of a
least 6 percent and a total risk-based capital ratio of at least 10 percent. As
of June 30, 1996, the Company is in compliance with its minimum regulatory
capital requirements and is considered "well capitalized" as defined by FDICIA.
(2) CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
- ------------------------------------------------------
Components of cash and balances due from depository institutions at June 30,
1996 and December 31, 1995 are as follows:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Cash on Hand and Cash Items $2,317 $3,299
Noninterest-Bearing Deposits with Other Banks 5,375 6,119
Interest-Bearing Deposits with Other Banks 198 99
------ ------
$7,890 $9,517
====== ======
</TABLE>
(3) INVESTMENT SECURITIES
- -------------------------
Investment securities as of June 30, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities Available for Sale:
U.S. Treasury $ 497 $-0- $ -0- $ 497
U.S. Government Agencies:
Mortgage-Backed 19,256 31 (294) 18,993
Other 23,563 9 (353) 23,219
State, County & Municipal 3,012 51 (16) 3,047
The Banker's Bank Stock 50 -0- -0- 50
Federal Home Loan Bank Stock 250 -0- -0- 250
Marketable Equity Securities 1,130 -0- (191) 939
------- ------- ----- -------
$ 47,758 $ 91 $(854) $46,995
======= ======= ===== =======
Securities Held to Maturity:
U.S. Government Agencies $ 2,149 $-0- $ (46) $ 2,103
State, County and Municipal 1,868 -0- (76) 1,792
------- ------- ----- -------
$ 4,017 $-0- $(122) $ 3,895
======= ======= ===== =======
</TABLE>
8
<PAGE>
(3) INVESTMENT SECURITIES (CONTINUED)
- -------------------------------------
The amortized cost and fair value of investment securities as of June 30, 1996
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.
<TABLE>
<CAPTION>
SECURITIES
AVAILABLE FOR SALE HELD TO MATURITY
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
<S> <C> <C> <C> <C>
Due in One Year or Less $ 9,454 $ 9,449 $ 145 $ 145
Due After One Year Through Five Years 13,659 13,460 3,176 3,100
Due After Five Years Through Ten Years 3,853 3,754 100 96
Due After Ten Years 106 100 596 554
------- ------- ------ -------
27,072 26,763 4,017 3,895
Federal Home Loan Bank Stock 250 250
The Banker's Bank Stock 50 50
Marketable Equity Securities 1,130 939
Mortgage-Backed Securities 19,256 18,993
------- -------
$47,758 $46,995 $4,017 $ 3,895
======= ======= ====== =======
</TABLE>
Investment securities as of December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities Available for Sale:
U.S. Government and Agencies $15,438 $ 72 $ (29) $15,481
Mortgage-Backed Securities 22,210 81 (255) 22,036
State, County & Municipal 3,065 81 (8) 3,138
Marketable Equity Securities 1,430 -0- (138) 1,292
------- ------- ------ -------
$42,143 $ 234 $ (430) $41,947
======= ======= ====== =======
Securities Held to Maturity:
U.S. Government and Agencies $ 2,150 $ -0- $ (24) $ 2,126
State, County and Municipal 1,926 -0- (82) 1,844
------- ------- ------ -------
$ 4,076 $ -0- $ (106) $ 3,970
======= ======= ====== =======
</TABLE>
Investment securities having a carrying value approximating $26,115 and $29,163
as of June 30, 1996 and December 31, 1995, respectively, were pledged to secure
public deposits and for other purposes.
9
<PAGE>
(4) LOANS
- ---------
The composition of loans as of June 30, 1996 and December 31, 1995 was as
follows:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Loans Secured by Real Estate
Construction and Land Development $ 848 $ 371
Secured by Farmland (Including Farm Residential and
Other Improvements) 25,853 23,441
Other 88,644 89,797
Loans to Finance Agricultural Production and Other Loans
to Farmers 24,009 17,244
Commercial and Industrial Loans (U.S. Addresses) 15,626 13,907
Loans to Individuals for Household, Family and Other Personal
Expenditures 37,632 36,393
All Other Loans 8,949 7,243
-------- -------
$201,561 $188,396
======== =======
</TABLE>
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 $6,321 and $5,229 as of June 30, 1996 and December 31, 1995,
respectively. On June 30, 1996, the Company had 90 day past due loans with
principal balances of $620 and restructured loans with principal balances of
$322 that were not on non-accrual or past due 90 days or more.
Effective January 1, 1995, Colony Bankcorp, Inc. recognized impaired loans as
nonaccrual loans delinquent in excess of 120 days for which collateral values
were insufficient to recover outstanding principal and interest under original
loan terms. Impaired loan data as of June 30, 1996 and December 31, 1995 was as
follows:
<TABLE>
<CAPTION>
<S> <C>
Total Investment in Impaired Loans $245
Less Allowance for Impaired Loan Losses (10)
----
Net Investment, March 31, 1996 $235
====
Total Investment in Impaired Loan 517
Less Allowance for Impaired Loan Losses (39)
----
Net Investment, December 31, 1995 $478
====
</TABLE>
(5) ALLOWANCE FOR LOAN LOSSES
- -----------------------------
Transactions in the allowance for loan losses are summarized below for six
months ended June 30, 1996 and June 30, 1995 as follows:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
-------------- --------------
<S> <C> <C>
Balance, Beginning $ 3,885 $ 3,029
Provision Charged to Operating Expenses 1,130 1,187
Loans Charged Off (1,450) (1,170)
Loan Recoveries 592 269
------- -------
Balance, Ending $ 4,157 $ 3,315
======= =======
</TABLE>
10
<PAGE>
(6) PREMISES AND EQUIPMENT
- --------------------------
Premises and equipment are comprised of the following as of June 30, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
-------------- ------------------
<S> <C> <C>
Land $ 848 $ 838
Building 4,779 4,791
Furniture, Fixtures and Equipment 4,350 4,267
Leasehold Improvements 17 17
------- -------
9,994 9,913
Accumulated Depreciation (4,369) (4,289)
------- -------
$ 5,625 $ 5,624
======= =======
</TABLE>
(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 June 30, 1996 and December 31,
1995 are as follows:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Interest-Bearing Demand $ 44,541 $ 50,440
Savings 9,998 9,856
Time, $100,000 and Over 50,152 48,111
Other Time 122,958 119,684
-------- --------
$227,649 $228,091
======== ========
</TABLE>
(9) OTHER BORROWED MONEY
- ------------------------
Other borrowed money is comprised of the following as of June 30, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Advance agreement with Federal Home Loan Bank
of Atlanta, dated March 31, 1995, payable in full on
December 31, 1995. Interest rate determined under the
fixed rate credit program. Effective interest rate of 6.86%
as of December 31, 1995. $ -0- $ 200
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
(9) OTHER BORROWED MONEY (CONTINUED)
- ------------------------------------
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Variable interest debentures payable, due in annual
payments of $266,867, plus interest, on November 1,
1996 through November 1, 1999, collateralized by 100%
of the common stock of Ashburn Bank. Effective interest
rate of 8.00% as of June 30, 1996. $1,067 $1,067
Variable interest at prime note payable, due in annual
payments of $207,143 plus quarterly interest, balance
due December 19, 1997. Collateralized by 100% of the
common stock of The Bank of Fitzgerald and 100% of the
common stock of The Bank of Worth. Effective interest
rate of 8.25% as of June 30, 1996. 1,133 1,237
Advance agreement with Federal Reserve Bank of Atlanta
dated June 28, 1996, payable in full on July 1, 1996. Interest
determined under the fixed rate credit program. Effective
interest rate of 5.375% as of June 30, 1996. 1,200 -0-
---------- --------
$3,400 $2,504
========== ========
</TABLE>
Maturities of borrowed money for the next five years as of June 30, 1996:
<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C>
1996 $1,570
1997 1,296
1998 267
1999 267
2000 -0-
Thereafter -0-
---------
$3,400
=========
</TABLE>
(10) PROFIT SHARING PLAN
- ------------------------
The Company has a profit sharing plan that covers substantially all employees
who meet certain age and service requirement. It is the Company's policy to
make contributions to the plan as approved annually by the board of directors.
(11) COMMITMENTS AND CONTINGENT LIABILITIES
- -------------------------------------------
In the ordinary course of business, the Banks have entered into off balance
sheet financial instruments which are not reflected in the consolidated
financial statements. These instruments include commitments to extend credit,
standby letters of credit, guarantees and liability for assets held in trust.
Such financial instruments are recorded in the financial statements when funds
are disbursed or the instruments become payable. The Banks use the same credit
policies for these off balance sheet financial instruments as they do for
instruments that are recorded in the consolidated financial statements.
12
<PAGE>
(11) COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
- -------------------------------------------------------
Following is an analysis of significant off balance sheet financial instruments:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995 June 30, 1995
------------- ----------------- -------------
<S> <C> <C> <C>
Commitments to extend credit $22,757 $17,753 $17,759
Standby letters of credit 3,268 3,499 4,938
------- ------- -------
$26,025 $21,252 $22,697
======= ======= =======
</TABLE>
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 statements.
(12) EARNINGS PER SHARE
- -----------------------
Earnings per share are calculated on the basis of the weighted average number of
shares outstanding.
13
<PAGE>
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 and obtaining new deposits. For the
six months ended June 30, 1996, the Company was successful in meeting its
liquidity needs with deposits decreasing $1,777,000 from December 31, 1995 by
converting Federal Funds into cash. Federal Funds decreased 64.69% to
$8,590,000 at June 30, 1996 from $24,325,000 at December 31, 1995.
The Company's liquidity position remained acceptable for the six months ended
June 30, 1996. Average liquid assets (cash and amounts due from banks,
interest-bearing deposits in other banks, funds sold and investments securities)
represented 28.96% of average deposits for six months ended June 30, 1996 as
compared to 27.10% of average deposits for six months ended June 30, 1995 and
26.82% for calendar year 1995. Average loans represented 77.65% of average
deposits for six months ended June 30, 1996 as compared to 77.92% for six months
ended June 30, 1995 and 79.09% for calendar year 1995. Average interest-bearing
deposits were 87.01% of average earnings assets for six months ended June 30,
1996 as compared to 87.14% for six months ended June 30, 1995 and 87.91% for
calendar year 1995.
The Company satisfies most of its capital requirements through retained
earnings. During first quarter 1996, retained earnings provided $601,000 of
increase in equity and during second quarter 1996, retained earnings provided
$606,000 of increase in equity. Additionally, equity capital decreased by
$101,000 in first quarter 1996 and $291,000 in second quarter 1996, resulting
from the change during the first two quarters of 1996 in unrealized losses on
securities available for sale, net of taxes. Thus, total equity increased by a
net amount of $815,000 for the six month period ended June 30, 1996. This
compares to growth in equity of $1,102,000 in first quarter 1995 and $987,000 in
second quarter 1995 for a total increase in equity of $2,089,000 for the six
month period ended June 30, 1995 and $4,305,000 for the 1995 calendar year.
At June 30, 1996, total capital of Colony amounted to approximately $21,870,000.
At June 30, 1996, there were no outstanding commitments for any major
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 1 capital consists of common stock and qualifying preferred
stockholder's 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 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 at June 30,
1996 was 10.03% and total Tier 1 and 2 risk-based capital was 11.29%. 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 at June 30,
1996 was 7.89% which exceeds the required leverage ratio standard of 4%.
In first and second quarter 1996, the Company paid dividends of $0.15. The
dividend payout ratio, defined as dividends per share divided by net income per
share, was 13.76% as compared to $0.15 for six month period ended June 30, 1995
and a dividend payout ratio of 13.04%.
At June 30, 1996, 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 examinations by regulatory authorities in the future could
precipitate additional loss charge-offs which could materially impact the
Company's liquidity, capital resources and operations.
14
<PAGE>
RESULTS OF OPERATION
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 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 for the three months ended June 30, 1996 was $703,000 as compared
with $550,000 for the three months ended June 30, 1995, or an increase of 27.82%
and net income for the six months ended June 30, 1996 was $1,401,000 as compared
with $1,397,000 for the six months ended June 30, 1995, or an increase of 0.29%.
Second quarter 1996 earnings increased significantly over the same period in
1995 primarily due to a reduction in the bad debt provision to $491,000 in
second quarter 1996 compared to $810,000 in second quarter 1995. The Company
experienced a reduction in its net interest margin with a decrease in its net
overhead expense to realize flat earnings for the six month period ended June
30, 1996 compared to the same period in 1995.
The net interest margin decreased by 40 basis points to 4.83% in second quarter
1996 as compared to 5.23% in second quarter 1995 and decreased by 59 basis
points to 4.78% for six months ended June 30, 1996 as compared to 5.37% for the
same period in 1995. Net interest income decreased by 6.32% to $3,069,000 in
second quarter 1996 from $3,276,000 for the same period in 1995 on an increase
in average earning assets to $258,528,000 in second quarter 1996 from
$240,818,000 in the same period in 1995. Net interest income decreased by 5.66%
to $6,046,000 for six months ended June 30, 1996 from $6,409,000 for the same
period in 1995 on an increase in average earnings assets to $257,045,000 for six
months ended June 30, 1996 from $235,893,000 in the same period in 1995. For
the six months ended June 30, 1996 compared to the same period in 1995, average
loans increased by $11,576,000 or 6.42%, average funds sold increased by
$7,865,000 or 102.38%, average investment securities increased by $2,669,000 or
5.72% and average interest-bearing deposits in other banks decreased by $957,000
or 87.96%, resulting in a net increase in average earning assets of $21,152,000
or 8.97%.
The net increase in average earning assets was funded by a net increase in
average deposits of 8.22% to $247,325,000 for six months ended June 30, 1996
from $228,538,000 for the same period in 1995. Average interest-bearing
deposits increased by 8.81% to $223,668,000 for six months ended June 30, 1996,
compared to $205,558,000 for six months ended June 30, 1995, while average
noninterest-bearing deposits represented 9.57% of average total deposits for six
months ended June 30, 1996 as compared to 10.15% for the same period in 1995 and
9.93% for calendar year 1995.
Interest expense increased for the three months ended June 30, 1996 by $216,000
compared to the same period in 1995 and increased by $836,000 for the six months
ended June 30, 1996 compared to the same period in 1995. The increase in
interest expense is primarily attributable to the increase in interest rates in
1996 as compared to 1995 and the increase in our average interest-bearing
deposits to $223,668,000 for six months ended June 30, 1996 compared to
$205,558,000 for six months ended June 30, 1995. The combination of the reduced
net interest margin, increased average earnings assets along with increased
rates on interest-bearing deposits resulted in a decrease in net interest income
of $207,000 for the three months ended June 30, 1996 compared to the same period
in 1995 and a decrease of $363,000 for the six months ended June 30, 1996
compared to the same period in 1995.
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 management
has determined to be adequate. The provision for loan losses was $491,000 for
the three months ended June 30, 1996 as compared to $810,000 for the same period
in 1995 representing a decrease in the provision of $319,000 or 39.38%. The
provision for loan losses was $1,130,000 for the six months ended June 30, 1996
compared to $1,187,000 for the same period in 1995 representing a decrease of
$57,000 or 4.80%. Net loan charge-offs represented 16.70% of the provision for
loan losses in second quarter 1996 as compared to 91.73% in second quarter 1995.
15
<PAGE>
Net loan charge-offs represented 75.93% of the provision for loan losses in the
six month period ended June 30, 1996 and 75.99% of the provision for loan losses
in the six month period ended June 30, 1995. Charge-offs in both periods are
attributable to weakness in the local market and in particular to the
agricultural sector which experienced a difficult year in 1995 due to poor
weather conditions. During the first six months of 1996 and 1995, a net of
$858,000 and $902,000 was charged off. Net loan charge-offs for six months
ended June 30, 1996 represented 0.45% of average loans outstanding as compared
to 0.50% for six months ended June 30, 1995. At June 30, 1996 the allowance for
loan losses was 2.06% of total loans outstanding as compared to an allowance for
loan losses of 1.70% at June 30, 1995 and 2.06% at December 31, 1995. The
determination of the reserve rests upon management's judgment about factors
affecting loan quality and assumptions about the economy. Management considers
the June 30, 1996 allowance for loan losses adequate to cover potential losses
in the loan portfolio.
Non-interest income consists principally of service charges on deposit accounts.
Service charges on deposit accounts amounted to $411,000 in second quarter 1996
compared to $377,000 in second quarter 1995, or an increase of 9.02% and
amounted to $801,000 for six months ended June 30, 1996 compared to $758,000 for
six months ended June 30, 1995, or an increase of 5.67%. All other non-interest
income increased by $44,000 to $192,000 for second quarter 1996 from $148,000
for second quarter 1995 and all other non-interest income increased by $69,000
to $421,000 for six months ended June 30, 1996 from $352,000 for six months
ended June 30, 1995. The increase in other non-interest income was primarily
attributable to a recovery realized on the sale of other real estate of
approximately $58,000 during the period.
Non-interest expense decreased by 1.19% to $2,158,000 for three months ended
June 30, 1996 from $2,184,000 in the same period in 1995. Salaries and benefits
increased by 5.30% to $1,193,000 in second quarter 1996 from $1,133,000 in
second quarter 1995. All other non-interest expense decreased by 8.18% to
$965,000 in second quarter 1996 from $1,051,000 in second quarter 1995. Non-
interest expense decreased by 3.55% to $4,103,000 for six month period ended
June 30, 1996 compared to $4,254,000 for the same period in 1995. This decrease
was primarily attributable to a reduction in FDIC insurance premiums of $223,000
to $58,000 for six month period ended June 30, 1996 from $281,000 for the same
period in 1995.
Income before taxes increased by $216,000 to $1,023,000 in second quarter 1996
from $807,000 in second quarter 1995 and decreased by $43,000 to $2,035,000 for
six months ended June 30, 1996 from $2,078,000 for the same period in 1995. The
increase for the three months ended June 30, 1996 is primarily attributable to
the decrease in the bad debt provision and reduced net interest margin. Income
taxes as a percentage of income before taxes decreased by 1.79% to 31.28% in
second quarter 1996 as compared to 31.85% in second quarter 1995 while income
taxes as a percentage of income before taxes decreased by 4.94% to 31.15% for
six month period ended June 30, 1996 as compared to 32.77% for the same period
in 1995. Income tax expense decreased 6.90% to $634,000 for six months ended
June 30, 1996 compared to $681,000 for the same period in 1995.
The Bank of Fitzgerald is operating under a Memorandum of Understanding dating
back to October, 1992 that was revised in October, 1995 due to portions of the
old Memorandum of Understanding not being relevant to the bank's current
situation. The current Memorandum requires that the Bank maintain specified
minimum capital ratios and minimum reserves for loan losses. The Bank of
Fitzgerald was in substantial compliance with the provisions of the Memorandum
of Understanding at June 30, 1996.
LIQUIDITY
- ---------
The Company's goals with respect to liquidity are to insure that sufficient
funds are available to meet current operating requirements, to provide reserves
against unforeseen liquidity requirements. Management continuously reviews the
Company's liquidity position, which is maintained on a basis consistent with
established internal guidelines and the tests and reviews of the various
regulatory authorities. The Company's primary liquidity sources at June 30,
1996 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.
16
<PAGE>
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.
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 a 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. acquired
The Bank of Worth.
Through its five 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.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
The Annual Meeting of the Shareholders of the Company was held on April 23,
1996. At the Annual Meeting of the Shareholders, proxies were solicited under
Regulation 14 of the Securities and Exchange Act of 1934. Total shares amounted
to 1,291,110. A total of 795,649 shares (61.63%) were represented by
Shareholders in attendance or by proxy. The following directors were elected
unanimously to serve one year until the next annual meeting:
Marion H. Massee, III Ben B. Mills, Jr.
Paul Branch, Jr. James D. Minix
Terry L. Coleman Ralph D. Roberts, Jr.
L. Morris Downing W. B. Roberts, Jr.
Terry L. Hester R. Sidney Ross
Milton N. Hopkins, Jr. Joe K. Shiver
Harold E. Kimball, Jr.
No other matters were voted upon by the shareholders.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
A. Exhibits - None
B. There have been no reports filed on Form 8-K for the quarter ended June 30,
1996.
18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities 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.
July 31, 1996 /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
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,692
<INT-BEARING-DEPOSITS> 198
<FED-FUNDS-SOLD> 8,590
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,995
<INVESTMENTS-CARRYING> 4,017
<INVESTMENTS-MARKET> 3,895
<LOANS> 201,561
<ALLOWANCE> 4,157
<TOTAL-ASSETS> 280,007
<DEPOSITS> 251,466
<SHORT-TERM> 2,560
<LIABILITIES-OTHER> 1,911
<LONG-TERM> 2,200
0
0
<COMMON> 12,911
<OTHER-SE> 8,959
<TOTAL-LIABILITIES-AND-EQUITY> 280,007
<INTEREST-LOAN> 10,256
<INTEREST-INVEST> 1,418
<INTEREST-OTHER> 420
<INTEREST-TOTAL> 12,094
<INTEREST-DEPOSIT> 5,900
<INTEREST-EXPENSE> 6,048
<INTEREST-INCOME-NET> 4,916
<LOAN-LOSSES> 1,130
<SECURITIES-GAINS> 3
<EXPENSE-OTHER> 4,103
<INCOME-PRETAX> 2,035
<INCOME-PRE-EXTRAORDINARY> 1,401
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,401
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
<YIELD-ACTUAL> 4.78
<LOANS-NON> 6,321
<LOANS-PAST> 620
<LOANS-TROUBLED> 322
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,885
<CHARGE-OFFS> 1,450
<RECOVERIES> 592
<ALLOWANCE-CLOSE> 4,157
<ALLOWANCE-DOMESTIC> 4,157
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
