<PAGE>
-------------------------------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------------------------------------
Colony Bankcorp, Inc.
------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Georgia
-----------------------------------------------
(State or Other Jurisdiction of Incorporation)
58-1492391
-------------------------------------------
(I.R.S. Employer ID No.)
6060
--------------------------------------------------------------------------
(Primary Standard Industrial Classification Code No.)
302 South Main Street
Fitzgerald, Georgia 31750
(912) 426-6000
------------------------------------------------------------------------
(Address, including zip code and telephone number,
Including area code, of Registrant's Principal Executive Offices)
James D. Minix
302 South Main Street
Fitzgerald, Georgia 31750
(912) 426-6000
-----------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate date of commencement of the proposed sale of the securities to the
public: As soon as practicable after the effective date of the Registration
Statement and the receipt of all requisite regulatory approvals.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box:
======
======
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities To Be Registered Offering Price Aggregate Registration Fee
Registered Per Unit Offering Price
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$10.00 Par Value
Per Share 200,000.00 * * $1,194.96
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
* As provided in the Agreement and Plan of Reorganization, each of the 50,730
shares of common stock of Broxton State Bank will be converted into and
exchanged for a number of shares of common stock of the registrant with a value
equal to 1.65 times the per share book value of the Broxton State Bank common
stock to be acquired, as defined in the Agreement. For purposes of the exchange
ratio, the per share value of the shares of the registrant to be issued equals
1.25 times the sum of the registrant's common stock, surplus, undivided profits
and year-to-date earnings or losses. On June 30, 1996, the book value of Broxton
State Bank, as defined, was $41.40 per share, entitling the holders of its
common stock to receive in the aggregate $3,465,378 of common stock of the
registrant. On that date, the defined per share value of the registrant's common
stock was $21.73 per share, resulting in the issuance of 159,475 shares, or
$3,465,378 in the aggregate. The registration fee is based on that aggregate
amount. The registrant is registering additional shares in order to insure
registration of a sufficient number of shares, but will amend the registration
statement at such time as the actual number of shares to be issued can be
determined.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
TOTAL NUMBER OF PAGES ___________
EXHIBIT INDEX ___________
<PAGE>
COLONY BANKCORP, INC.
Cross Reference Sheet
[Pursuant to Reg. Section 230.404(a) and Reg. Section 229.501 Item 501(b)]
<TABLE>
<S> <C> <C>
Item 1. Forepart of Registration Facing Sheet, Cross Reference
Statement and Outside Front Sheet, and Forepart of
Cover Page of Prospectus Prospectus
Item 2. Inside Front and Outside Available Information and
Back Cover Pages of Table of Contents
Prospectus
Item 3. Summary Information, Risk Introduction, Summary of
Factors, Ratio of Earnings Proxy Statement, Certain
to Fixed Charges, and Risk Factors, and Pro Forma
Other Information Selected Financial Information
and Per Share Data
Item 4. Terms of the Transaction The Proposed Reorganization;
Appendix "A"; Federal Income
Tax Consequences;
Description of Securities;
Certain Risk Factors; Price
Ranges of Capital Stock of
Broxton and Colony
Item 5. Pro-Forma Financial Selected Pro Forma Financial
Information Information and Per Share
Data; Financial Statements
Item 6. Material Contracts with Material Contracts Between
the Company being Acquired Broxton and Colony
Item 7. Additional Information Resale of Colony Common Stock
Required for Reoffering by Received in the Reorganization
Persons and Parties Deemed
to be Underwriters
Item 8. Interest of Named Experts Legal Opinions and Accountants
and Counsel
Item 9. Disclosure of Commission Indemnification of Directors,
Position on Indemnification Officers, and Controlling
for Securities Act Liabilities Persons
Item 10. Information with Respect Not Applicable
to S-3 Registrants
Item 11. Incorporation of Certain Not Applicable
Information by Reference
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Item 12. Information with Respect Not Applicable
to S-2 or S-3 Registrants
Item 13. Incorporation of Certain Not Applicable
Information by Reference
Item 14. Information with Respect History and Business of Colony
to Registrants Other than Bankcorp, Inc.; Price Ranges of
S-3 Capital Stock of Broxton and
Colony; Dividend Policy of Colony
and Broxton; Summary of Operations
Colony (Unaudited); Management's
Discussion and Analysis of
Summary of Operations; Selected
Financial Information; Legal
Opinions and Accountants; Material
Contracts between Broxton and Colony
Item 15. Information with Respect Not Applicable
to S-3 Companies
Item 16. Information with Respect Not Applicable
to S-2 or S-3 Companies
Item 17. Information with Respect History and Business of Broxton
to Companies Other than State Bank; Price Ranges of
S-3 or S-2 Companies Capital Stock of Colony and Broxton;
Selected Financial Information;
Summary of Operations - Broxton
(unaudited); and Management's
Discussion and Analysis of Summary
of Operations - Broxton
Item 18. Information if Proxies, Introduction; Rights of Dissenting
Consents, or Authorizations Shareholders; Management of Broxton
are to be Solicited State Bank; Principal Shareholders
Broxton and Colony; Your Vote is
Important; Expenses of Soliciting
Proxies
Item 19. Information if Proxies, Not Applicable
Consents or Authorizations
are not to be Solicited or
in an Exchange Offer
</TABLE>
<PAGE>
Broxton State Bank
PROXY STATEMENT
Special Meeting of Shareholders of Broxton State Bank
to be held on September _____, 1996
______________________
COLONY BANKCORP, INC.
PROSPECTUS
This prospectus relates to the shares of common stock of Colony Bankcorp, Inc.
("Colony"), a Georgia corporation registered as a bank holding company, offered
hereby to the shareholders of Broxton State Bank ("Broxton"), upon consummation
of a proposed merger of Broxton Interim, Inc., a wholly-owned subsidiary of
Colony, with and into Broxton State Bank, with Broxton State Bank as the
surviving corporation which will be operated after the merger as a wholly-owned
subsidiary of Colony. Upon completion of the merger, each share of Broxton
State Bank common stock will be converted into the right to receive shares of
the $10.00 par value common stock of Colony which have a value equal to 1.65
times the per share book value of the Broxton common stock as of the effective
date of the merger. The method of calculating the exchange ratio is more
particularly set forth in the Agreement.
COLONY BANKCORP, INC. HAS FILED A REGISTRATION STATEMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION COVERING THE ESTIMATED SHARES OF COMMON STOCK OF COLONY
BANKCORP, INC. TO BE ISSUED IN CONNECTION WITH THE REORGANIZATION. THIS PROXY
STATEMENT ALSO CONSTITUTES A PROSPECTUS OF COLONY BANKCORP, INC. FILED AS A PART
OF SUCH REGISTRATION STATEMENT.
_______________________________
A DISCUSSION OF MATERIAL RISKS IN CONNECTION WITH THE ACQUISITION OF THE
SECURITIES OFFERED HEREUNDER IS CONTAINED ON PAGE 10 OF THE PROXY STATEMENT.
______________________________
THE SHARES OF COMMON STOCK OF COLONY BANKCORP, INC. TO BE ISSUED IN CONNECTION
WITH THE REORGANIZATION HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________
THE SHARES OF COLONY BANKCORP, INC. COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS OR BANK DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
This Proxy Statement and Prospectus is first being mailed to shareholders of
Broxton State Bank on or about August _____, 1996.
<PAGE>
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction........................................................ 3
Summary of Proxy Statement.......................................... 5
Time, Date and Place........................................... 5
Record Date.................................................... 5
Purposes of the Meeting........................................ 5
Shares Outstanding on the Record Date
and Entitled to Vote........................................ 5
Terms of the Reorganization Plan............................... 6
Business of Broxton and Colony................................. 6
Reasons for the Reorganization................................. 6
Determination of the Purchase Price............................ 7
Operations of Broxton and Colony
after the Reorganization.................................... 7
Vote Required to Approve Merger - Voting Rights................ 7
Rights of Dissenting Shareholders.............................. 8
Effect of Reorganization on Broxton's
Shareholders................................................ 8
Risk Factors................................................... 8
Tax Consequences............................................... 8
Regulatory Approval............................................ 9
Principal Ownership of Colony and Broxton...................... 9
Market Value of Shares of Broxton and Colony................... 9
Certain Risk Factors................................................ 10
No Established Trading Market for Colony's
Stock..................................................... 10
Restrictions on Dividends...................................... 10
Regulation..................................................... 10
Competitive and Economic Conditions............................ 11
Voting Control................................................. 11
Adequacy of Loan Losses........................................ 11
Effect of Reorganization on Rights
of Shareholders........................................... 12
Selected Financial Information for Colony Bankcorp, Inc............. 13
The Proposed Reorganization......................................... 16
Description of Reorganization.................................. 16
Reasons for the Reorganization................................. 17
Determination of Purchase Price................................ 18
Conditions to the Reorganization............................... 20
Surrender of Certificates...................................... 20
Shareholder Approval........................................... 21
Effect of Reorganization on Broxton's Shareholders............. 21
Accounting Treatment........................................... 23
Income Tax Consequences........................................ 23
Rights of Dissenting Shareholders................................... 23
Resale of Colony Common Stock Received
in the Reorganization.......................................... 26
Federal Income Tax Consequences..................................... 28
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
History and Business of Colony Bankcorp, Inc........................ 30
Business of Colony Bankcorp, Inc............................... 30
Market Area of Colony.......................................... 31
Lending Policies............................................... 31
Regulation - Colony Bankcorp, Inc.............................. 33
Regulation - Subsidiary Banks.................................. 36
Capital Requirements........................................... 36
Insurance Premiums............................................. 38
Employees...................................................... 38
History and Business of Broxton State Bank.......................... 39
History........................................................ 39
Business of Broxton............................................ 39
Banking Premises............................................... 40
Competition.................................................... 40
Employees...................................................... 40
Monetary Policies.............................................. 40
Supervision and Regulation..................................... 41
Regulation and Legislative Changes............................. 41
Legal Proceedings.............................................. 42
Legal Proceedings for Colony................................... 42
Financial Statements................................................ 42
Price Ranges of Capital Stock of Broxton
and of Colony.................................................. 43
Dividend Policy of Colony and Broxton............................... 44
Selected Financial Information and Pro Forma Per Share Data......... 46
Summary of Operations (Unaudited) -
Broxton State Bank............................................. 52
Management's Discussion and Analysis of Financial
Condition and Results of Operations -
Broxton State Bank............................................. 55
Broxton State Bank - Selected Historical
Financial Data................................................. 68
Summary of Operations of Colony Bankcorp, Inc.
(Unaudited).................................................... 70
Management's Discussion and Analysis of Financial
Condition and Results of Operations -
Colony Bankcorp,Inc............................................ 73
Solicitation of Proxies............................................. 83
Management of Colony Bankcorp, Inc.................................. 83
Directors and Principal Officers............................... 83
Information About Meetings and Committees
of the Board of Directors...................................... 86
Transactions with Management................................... 87
Compensation of Colony's Executive Officers
and Directors.................................................. 87
Principal Shareholders of Broxton and Colony........................ 90
Operation of Colony and Broxton Upon
Consummation of the Reorganization............................. 91
Colony......................................................... 91
Broxton........................................................ 92
Description of Securities........................................... 93
Common Stock of Colony......................................... 93
Common Stock of Broxton........................................ 94
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
Material Contracts Between Broxton and Colony....................... 94
Legal Opinion and Accountants....................................... 95
Expenses of Solicitation............................................ 95
Indemnification of Directors, Officers and
Controlling Persons 95
Other Matters....................................................... 97
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
Financial Statements........................................Appendix "A"
Agreement by and Among Broxton State Bank,
Colony Bankcorp, Inc. and Broxton
Interim, Inc...........................................Appendix "B"
Georgia Business Corporation Code Article 13 -
Rights of Dissenting Shareholders......................Appendix "C"
</TABLE>
(iv)
<PAGE>
- --------------------------------------------------------------------------------
AVAILABLE INFORMATION
- --------------------------------------------------------------------------------
Colony Bankcorp, Inc. has filed a Registration Statement (herein together
with all amendments thereto called the "Registration Statement") with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933, as amended, with respect to shares of common stock to be issued in the
Reorganization. This Proxy Statement does not contain all of the information set
forth in the Registration Statement. For further information, reference is made
to the Registration Statement, including the exhibits filed or incorporated by
reference as a part thereof. The Registration Statement and other information
filed by Colony Bankcorp, Inc. can be inspected and copied at the Public
Reference Facilities maintained by the Commission at Room 1024 of the
Commission's Office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the Commission's Regional Offices in New York (7 World Trade
Center, Suite 1300, New York, New York 10048), and in Chicago (Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511). Copies of
such material can also be obtained from the Public Reference Section of the
Commission, at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates.
Colony Bankcorp, Inc. is registered with the Securities and Exchange
Commission as a reporting company under the Securities Exchange Act of 1934, and
as such is subject to the informational requirements of the Exchange Act.
Colony is required to file reports, proxy and informational statements with the
Securities and Exchange Commission. Such reports and other information filed by
Colony Bankcorp, Inc. can be inspected and copied at the Public Reference
Facilities maintained by the Commission in Washington, D.C. and at certain of
its regional offices at the addresses furnished in the preceding paragraph.
Copies of such material can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates.
Broxton State Bank has previously furnished to its shareholders an annual
report for the year ended December 31, 1995. Both Colony and Broxton State Bank
are required by rules and regulations of the Georgia Department of Banking and
Finance to furnish financial statements to their shareholders which contain
certain financial information, including year end balance sheets, statements of
income and expenses, changes in capital accounts, and statements of cash flows.
Colony Bankcorp, Inc. furnishes its shareholders annually with a report which is
required by law to contain financial information that has been examined and
reported upon, with an opinion expressed by, an independent public or certified
public accountant. That report is furnished prior to the annual meeting of the
shareholders of Colony Bankcorp, Inc.
1
<PAGE>
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
- --------------------------------------------------------------------------------
Approval of the Reorganization requires the affirmative vote of two-thirds
of Broxton's common stock. To assure your representation at the special meeting,
you are requested to sign, date and complete the enclosed proxy card promptly
and return it in the accompanying postage pre-paid, self-addressed envelope,
whether or not you expect to attend the special meeting. Any shareholder giving
a proxy has the right to revoke it at any time before it is voted.
This notice of special shareholders meeting and the accompanying Proxy
Statement (of which the Summary is a part) also constitute a Prospectus of the
$10.00 par value common stock of Colony Bankcorp, Inc. to be issued in
connection with the Reorganization.
IF YOU SIGN AND RETURN THE PROXY BUT DO NOT MARK YOUR PROXY EITHER "FOR" OR
"AGAINST" THE PROPOSED REORGANIZATION, THE PROXY WILL BE VOTED "FOR" THE
REORGANIZATION. IF ANY OTHER BUSINESS IS PRESENTED AT SAID MEETING, THE PROXY
SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT.
2
<PAGE>
- --------------------------------------------------------------------------------
INTRODUCTION
- --------------------------------------------------------------------------------
This proxy statement and prospectus is being furnished to the holders of
shares of common stock of Broxton State Bank, ("Broxton"), Broxton, Georgia, in
connection with the solicitation by management of Broxton of proxies for use at
the special meeting of shareholders of Broxton to be held on September ____,
1996 at the time and place and for the purposes set forth in the accompanying
notice of special meeting and at any adjournments thereof.
At the special meeting, Broxton's shareholders will be asked to consider
and act upon an Agreement containing a Plan of Reorganization and Agreement of
Merger ("Agreement"; "Reorganization") entered into by and among Broxton, Colony
Bankcorp, Inc. ("Colony"), a Georgia corporation registered as a bank holding
company, and Broxton Interim, Inc. ("Interim"), a wholly-owned subsidiary of
Colony formed for the sole purpose of effectuating the merger and which will be
merged with and into Broxton, with Broxton as the surviving corporation. A copy
of the Agreement is attached as Appendix "B" hereto. Under the terms of the
Agreement, each of the shares of Broxton common stock, other than any shares
which may be owned by Colony as of the effective date of the merger, shall be
converted into the right to receive a number of shares of the $10.00 par value
common stock of Colony which have a value equal to 1.65 times the per share book
value of the Broxton common stock as of that date (the "Exchange Ratio"). For
purposes of determining the Exchange Ratio, the per share book value of the
Broxton common stock to be acquired by Colony shall be the sum of the bank's
common stock, surplus, undivided profits and year-to-date earnings or losses as
shown on Broxton's general ledger using generally accepted accounting principles
consistently applied as of the close of business on the effective date of the
merger, without adjustment for net unrealized gains or losses on securities
available for sale as provided by Statement of Financial Accounting Standards
No. 115, divided by the number of issued and outstanding shares of Broxton. For
purposes of determining the Exchange Ratio, the per share value of the shares of
common stock of Colony to be issued in connection with the acquisition shall be
equal to 1.25 times the sum of Colony's common stock, surplus, undivided profits
and year-to-date earnings or losses as shown on Colony's general ledger using
generally accepted accounting principles consistently applied as of the close of
business on the effective date of the merger, without any adjustment for net
unrealized gains or losses on securities available for sale as provided by
Statement of Financial Accounting Standards No. 115, divided by the number of
issued and outstanding shares of Colony as
3
<PAGE>
of the effective date. No fractional shares shall be issued; instead, fractional
shares distributable to shareholders of Broxton shall be paid for in cash by
Colony at a price equal to the value of Colony common stock as calculated for
purposes of the Exchange Ratio.
As a result of the merger, Colony will own all (100%) of the issued and
outstanding shares of common stock of Broxton, which will thereafter be operated
as a wholly-owned subsidiary of Colony.
Any proxy given pursuant to this solicitation may be revoked at any time
before it is voted by so notifying the secretary of Broxton, Martha K.
Summerlin, 401 Alabama Street, North, P.O. Box 309, Broxton, Georgia 31519, in
writing prior to the special meeting or by appearing at the meeting and
requesting the right to vote in person at the meeting, without compliance with
any other formalities. If the proxy is properly signed and returned by the
shareholder and is not revoked, it will be voted at the special meeting in the
manner specified therein. If a shareholder signs and returns the proxy but does
not specify how the proxy is to be voted, the proxy will be voted in favor of
the Reorganization.
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be paid by Colony. In addition to the
solicitation by mail, directors, officers, and regular employees of Broxton may
solicit proxies by telephone, telegram, or personal interview for which they
will receive no compensation in addition to their regular salaries.
This Proxy Statement was mailed on August _____, 1996 and on that date,
Broxton had issued and outstanding 50,730 shares of $10.00 par value common
stock, which constitutes its only class of voting securities, with each share
entitled to one vote. Only shareholders of record at the close of business on
August ____, 1996, are entitled to notice of and to vote at the special meeting
of shareholders or any adjournments thereof.
The principal executive offices of Broxton are located at 401 Alabama
Street, North, P.O. Box 309, Broxton, Georgia 31519, and the telephone number
at that address is (912) 359-2351.
The principal executive offices of Colony are located at 302 South Main
Street, P.O. Box 989, Fitzgerald, Georgia 31750, and the telephone number at
that address is (912) 426-6000.
4
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF PROXY STATEMENT
- --------------------------------------------------------------------------------
The following is a brief summary of certain information contained elsewhere
in the Proxy Statement and prospectus. References made to the Agreement in this
summary are qualified in their entirety by the more detailed information
contained in this Proxy Statement, the appendices to this Proxy Statement, and
the documents referred to in this Proxy Statement.
Time, Date, and Place
- ---------------------
The special meeting of shareholders of Broxton State Bank will be held at
__________ o'clock __.m., local time, on September ___, 1996, at the main
offices of Broxton located at 401 Alabama Street, North, Broxton, Georgia
31519.
Record Date
- -----------
Only holders of record of Broxton's common stock at the close of business
on August ____, 1996, will be entitled to notice of this meeting and to vote at
such meeting.
Purposes of the Meeting
- -----------------------
(1) To consider and vote upon an Agreement containing a Plan of
Reorganization and Agreement of Merger by and among Broxton, Colony Bankcorp,
Inc., a Georgia corporation registered as a bank holding company, and Broxton
Interim, Inc., a wholly-owned subsidiary of Colony, pursuant to which, among
other things (i) Interim will be merged with and into Broxton, which will be the
surviving corporation to the merger and which will thereafter be operated as a
wholly-owned subsidiary of Colony; and (ii) each of the 50,730 shares of common
stock of Broxton, $10.00 par value, will be converted into and exchanged for the
right to receive shares of the $10.00 par value common stock of Colony, all as
more fully set forth in the accompanying Proxy Statement and in the copy of the
Agreement dated June 4, 1996 annexed to this Proxy Statement as Appendix "B"
hereof.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shares Outstanding on the Record Date and Entitled to Vote
- ----------------------------------------------------------
All 50,730 shares of Broxton's $10.00 par value common stock are entitled
to one vote per share. These are the only voting securities of Broxton
outstanding.
5
<PAGE>
Terms of the Reorganization Plan
- --------------------------------
Pursuant to the Reorganization, Broxton Interim, Inc., a wholly-owned
subsidiary of Colony formed for the sole purpose of effectuating the proposed
merger, will be merged with and into Broxton, with Broxton as the surviving
corporation. As a result of the merger, each of the 50,730 shares of the $10.00
par value common stock of Broxton will be converted into shares of common stock
of Colony in accordance with the Exchange Ratio more particularly set forth in
the Agreement. Broxton, as the surviving corporation to the merger, will
thereafter be operated as a wholly-owned subsidiary of Colony, which in turn
will operate as a bank holding company pursuant to the laws of Georgia and of
the United States. See: "THE PROPOSED REORGANIZATION".
Business of Broxton and Colony
- ------------------------------
Broxton operates a full service banking business in Broxton, Coffee County,
Georgia. It provides such customary banking services as checking and savings,
various other types of time deposits, safe deposit facilities, and money
transfers. It also finances commercial and consumer transactions, makes secured
and unsecured loans, and provides other financial services to its customers.
See: "BUSINESS OF BROXTON".
Broxton Interim, Inc. is a Georgia corporation which has been formed for
the sole purpose of consummating the Reorganization and which will not engage in
any active business operations prior to the merger with Broxton. Colony is a
Georgia corporation registered as a bank holding company which conducts
virtually all of its business operations through its five wholly-owned
subsidiary banks. See: "BUSINESS OF COLONY AND BROXTON UPON CONSUMMATION OF
THE REORGANIZATION".
Reasons for the Reorganization
- ------------------------------
The Reorganization is to be accomplished to implement the terms of an
Agreement between Broxton and Colony which will effectuate the sale of Broxton
to Colony. Although Broxton has performed well financially in recent years, it
is the opinion of management of Broxton that the proposed affiliation with
Colony will enhance the profitability of the operations of Broxton by allowing
it to reduce its operating expenses and by increasing, through its loan
participations with the subsidiaries of Colony, its flexibility in extending
credit to its customers. Management is of the further opinion that the exchange
of Broxton stock for that of Colony is beneficial to shareholders of Broxton in
that the common stock of Colony, although not actively traded, is more liquid
than that of Broxton.
Management believes the terms of the merger to be fair in terms of the
price and exchange ratio offered to shareholders of
6
<PAGE>
Broxton, and believes that the combination of Broxton with Colony affords it the
best opportunity to fully realize its banking potential, since the holding
company has greater flexibility in areas such as purchasing its own shares and
diversifying into bank-related business activities. See: "THE PROPOSED
REORGANIZATION - Reasons for the Merger".
Determination of the Purchase Price
- -----------------------------------
The purchase price was negotiated at arms-length between management of
Broxton and management of Colony. The Exchange Ratio provided for in the
Agreement would have resulted, assuming an effective date of the merger of June
30, 1996, in the receipt of Colony common stock, valued in accordance with the
Exchange Ratio contained in the Agreement, in the amount of $68.31 for each
share of Broxton common stock as of that date, or 1.65 times the per share book
value of the Broxton common stock as of that date as defined in the Agreement.
An independent appraisal was not obtained in connection with these negotiations.
See: "THE PROPOSED REORGANIZATION- Determination of Purchase Price".
Operations of Broxton and Colony after the Reorganization
- ---------------------------------------------------------
If the Reorganization is consummated, Broxton, as the surviving corporation
to the merger, will continue to operate as a state bank and engage in
substantially the same business and activities in which Broxton is presently
engaged. No significant change in the officers or directors of Broxton will be
effected as a result of the Reorganization. Upon completion of the
Reorganization, Colony will continue to be operated as a bank holding company
under the Federal Bank Holding Company Act of 1956, as amended, and the bank
holding company laws of Georgia. See: "OPERATION OF COLONY AND BROXTON UPON
CONSUMMATION OF THE REORGANIZATION", "MANAGEMENT OF BROXTON", and "MANAGEMENT OF
COLONY".
Vote Required to Approve Merger - Voting Rights
- -----------------------------------------------
Approval of the Agreement requires the affirmative vote by the holders of
at least 33,821 (66.67%) of the outstanding shares of Broxton's common stock
entitled to vote at the special meeting of shareholders. Colony does not
presently own any of the common stock of Broxton, nor do any directors or
executive officers of Broxton own any of the common stock of Colony. The Board
of Directors of Broxton, who own in the aggregate 31,438 shares (61.97%) of
Broxton, have unanimously approved and recommended to the shareholders of
Broxton that they adopt the Agreement and are contractually obligated to vote in
favor of it.
The Board of Directors of Broxton has unanimously approved the Plan of
Reorganization and Agreement of Merger and recommends a vote by the shareholders
in favor of the proposal.
7
<PAGE>
The enclosed proxy, if properly executed, duly returned and not revoked,
will be voted in accordance with the instructions contained therein. If no
instructions are given, properly executed and returned proxies will be voted in
favor of the Reorganization Plan.
Rights of Dissenting Shareholders
- ---------------------------------
If the merger is consummated, those shareholders of Broxton who dissent
will be entitled, under Section 7-1-537 of the Financial Institutions Code of
Georgia, upon compliance with the provisions of Article 13 of the Georgia
Business Corporation Code, to receive the "fair value" of their shares in cash.
Management believes the payments to the selling shareholders provided for by the
Agreement represents the "fair value" of the shares of any dissenting
shareholders. See: "RIGHTS OF DISSENTING SHAREHOLDERS" AND APPENDIX "C".
Effect of Reorganization on Broxton's Shareholders
- --------------------------------------------------
If the merger is consummated, the holders of 50,730 shares of common stock
of Broxton will receive common stock of Colony in exchange, and will have no
further ownership interest in Broxton.
Holders of common stock of Colony do not have pre-emptive rights to acquire
in proportion to their present share ownership any additional shares of capital
stock which may in the future be sold or issued by Colony; shareholders of
Broxton presently have such rights. Stock of Colony may be issued for property
or services as well as for cash. See "THE PROPOSED MERGER - Effect of Merger on
Broxton's Shareholders"; "DESCRIPTION OF SECURITIES".
Risk Factors
- ------------
Owners of shares of common stock of Colony will incur risks substantially
different from those associated with the ownership of shares of common stock of
Broxton. Broxton's shareholders are urged to carefully review the section of
this Proxy Statement entitled "CERTAIN RISK FACTORS".
Tax Consequences
- ----------------
Consummation of the Reorganization is conditioned upon, among other things,
the parties to the Reorganization receiving an opinion from Colony's special
counsel, Martin, Snow, Grant & Napier, Macon, Georgia, to the effect that under
the applicable provisions of the Internal Revenue Code of 1954, as amended (the
"Code"), no gain or loss will be recognized for federal income tax purposes by
Broxton, Colony, or the shareholders of Broxton who will receive common stock of
Colony in connection with the proposed Reorganization. Cash received for
fractional shares and cash received by shareholders of Broxton exercising their
dissenter's
8
<PAGE>
rights will be treated as amounts distributed in redemption of their shares and
will be taxable under the provisions of Section 302 of the Code as either
ordinary income or capital gain or loss depending upon the circumstances of the
individual shareholder. No ruling with respect to the federal income tax effects
of the proposed merger will be requested from the Internal Revenue Service. The
full tax opinion rendered by Martin, Snow, Grant & Napier is attached to the
registration statement of Colony as an exhibit and addresses all material tax
consequences of the merger to shareholders of Colony. See: "FEDERAL INCOME TAX
CONSEQUENCES".
Regulatory Approval
- -------------------
Consummation of the proposed merger is subject to and conditioned upon
approval of the Georgia Department of Banking and Finance, the Federal Deposit
Insurance Corporation, and the Federal Reserve Board. Application to each of
those agencies has been made by Colony and Broxton. As of this date neither the
Federal Reserve Board nor the Georgia Department of Banking and Finance has
approved or denied the applications. The Federal Deposit Insurance Corporation
will not approve or reject the application pending before it until after the
special meeting of shareholders.
Principal Ownership of Colony and Broxton
- -----------------------------------------
Colony presently has issued and outstanding 1,291,110 shares of its common
stock, which are owned by approximately 808 shareholders. R. Sidney Ross is the
owner of approximately 12.45% of the issued and outstanding common stock of
Colony; no other person is the beneficial owner of more than 5% of the issued
and outstanding common stock of Colony.
Directors, executive officers and their affiliates own 31,438 shares
(61.97%) of the issued and outstanding shares of Broxton as of June 30, 1996.
The affirmative vote of 33,820 (66.67%) of the issued and outstanding shares of
Broxton is required for approval of the transaction.
Broxton presently has issued and outstanding 50,730 shares of its common
stock, which are owned by approximately ninety (90) shareholders. Carl C.
Atkinson and Curtis A. Summerlin, who own in the aggregate 32,761 shares of
Broxton's common stock, are the only persons who own more than 5% of Broxton's
common stock.
Market Value of Shares of Broxton and Colony
- --------------------------------------------
There is no established trading market for shares of the common stock of
Broxton. The common stock of Colony is not traded in the over-the-counter
market or on any stock exchange. However, Sterne, Agee and Leach, Inc. attempts
to make a market for the
9
<PAGE>
company's common stock, and as a consequence it is more actively traded than is
the common stock of Broxton.
- --------------------------------------------------------------------------------
CERTAIN RISK FACTORS
- --------------------------------------------------------------------------------
No Established Trading Market for Colony's Stock
- ------------------------------------------------
There is no established public trading market for shares of Colony's common
stock and the stock of Colony is not traded in the over-the-counter market or on
any stock exchange. Although the market for Colony's common stock has been
enhanced through the efforts of the brokerage firm of Sterne, Agee and Leach,
Inc. to locate prospective sellers and buyers of the Company's stock, management
has no reason to expect that an established trading market will develop in the
shares of Colony in the foreseeable future. See generally, "PRICE RANGES OF
CAPITAL STOCK OF BROXTON AND OF COLONY".
Restrictions on Dividends
- -------------------------
The earnings of Colony consist almost entirely of dividends paid to it from
its five subsidiary banks, The Bank of Fitzgerald, Ashburn Bank, Community Bank
of Wilcox, The Bank of Dodge County and The Bank of Worth. Each of those
companies is restricted by law with respect to the dividends which can be paid
to Colony. Dividends paid by the subsidiary banks may not exceed fifty percent
(50%) of the net profits of the Bank after taxes for the previous fiscal year
without prior approval of the Georgia Department of Banking and Finance. In
addition, The Bank of Fitzgerald may not pay any cash dividends without the
prior written consent of the Regional Director of the Federal Deposit Insurance
Commission or that of the Commissioner of the Georgia Department of Banking and
Finance.
Regulation
- ----------
Both Colony and its subsidiaries are subject to considerable regulation by
both federal and state governments and regulatory agencies. Regulations
promulgated by the regulatory agencies exercising regulatory control over Colony
and its subsidiary banks restrict in many respects the activities in which
Colony and its subsidiaries can engage. Changes in those regulations can
significantly affect the operations of Colony and its subsidiaries. Laws and
regulations promulgated by federal and state governments and agencies address,
without limitation, establishment of branch offices, the maintenance of adequate
capital by Colony and its subsidiary banks, necessary levels of reserves against
deposits, and the types and amounts of loans and investments. The Federal
10
<PAGE>
Reserve Board, Federal Deposit Insurance Corporation, and Georgia Department of
Banking and Finance possess extensive powers to prevent or remedy unsafe or
unsound practices by the entities which they regulate. See generally, "BUSINESS
OF COLONY".
Competitive and Economic Conditions
- -----------------------------------
Colony and its subsidiaries operate in a very competitive market, and
compete with other commercial banks, savings and loan associations, finance
companies, credit unions, and agricultural credit associations. A recent trend
towards deregulation of the financial services industry is likely to result in
increased financial competition from non-banking financial institutions, such as
insurance companies, securities brokerage funds, and money market mutual funds.
In addition, the financial performance of Colony and its subsidiaries is in
large measure dependent upon the economic conditions of Colony's market area.
The general economic conditions of the geographic markets served by the
subsidiary banks of Colony have generally been favorable in recent years, but no
assurance can be given that those economic conditions will continue, and an
adverse change in those economic conditions could severely impair the ability of
the Bank's customers to repay extensions of credit. Most of the subsidiary
banks of Colony are located in rural, predominantly agricultural areas, the
economies of which are particularly subject to fluctuations in weather and, to a
lesser extent, fluctuations in government price supports. See generally,
"BUSINESS OF COLONY - Market Area of Colony".
Voting Control
- --------------
Directors and executive officers of Colony are the beneficial owners, in
the aggregate, of approximately 37.63% of Colony's outstanding stock. It is
anticipated, based upon the financial condition of Colony and of Broxton as of
June 30, 1996, that approximately 159,475 additional shares of Colony's common
stock will be issued to shareholders of Broxton, resulting in a decrease in the
beneficial ownership of those persons who are presently directors and executive
officers of Colony to approximately 33.49% of Colony's outstanding stock. The
directors and executive officers, although not parties to any voting trust or
other agreements with respect to the voting of their shares, as a group exert
considerable influence on the outcome of all matters submitted to Colony's
shareholders for approval. See generally, "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
Adequacy of Loan Losses
- -----------------------
The subsidiary banks of Colony maintain a reserve to protect against future
loan losses. The allowance for loan losses is established through a provision
for loan losses charged to
11
<PAGE>
expenses. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely. The
allowance is an amount that management believes will be adequate to absorb
possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. The
adequacy of the loan loss reserve is evaluated periodically by management. The
allowance for potential loan losses is based upon a percentage of the
outstanding balances and for specific loans when their ultimate collectibility
is considered questionable.
The allowance for loan losses at June 30, 1996 was 2.06% of total loans
outstanding, compared to an allowance for loan losses of 2.06% as of December
31, 1995 and 1.74% of total loans outstanding at December 31, 1994. The
provision for loan losses was $3,216,050 in 1995, as compared to a provision of
$2,080,500 in 1994, an increase of 54.58%, reflecting a deterioration of the
quality of the collateral held as security on loans and the ability of debtors
to service their indebtedness. 47.57% of the net chargeoffs for 1995 were
attributable to one commercial line and one agricultural line. Net loan
chargeoffs for 1995 represented 1.26% of average loans outstanding, as compared
to 0.94% for 1994. An increase in the allowance for loan losses will adversely
impact the earnings of Colony. Management believes the allowance for loan losses
as of June 30, 1996 to be adequate, as of that date, to cover potential losses
in the loan portfolio. However, should Colony's allowance for loan losses prove
to be inadequate, future additions to the allowance for loan loss will result in
a decrease in Colony's net income and could result in a decrease in or
elimination of Colony's dividends.
The loan portfolio of Colony has a relatively high concentration in the
agricultural sector of the economy. As of December 31, 1995 Colony had
approximately $46 million in agricultural-related loans, of which $20.5 million
were loans to either finance crop production expenses or to finance the purchase
of farm-related equipment, and $25.5 million for loans secured by mortgages on
farm land. Management believes that in addition, given the prevalence of the
agricultural industry in its market area, a substantial portion of its
commercial, industrial, and consumer installment loans should be considered to
be agricultural-related, and the financial performance of the Bank is therefore
susceptible to fluctuations in the agricultural economy. Accordingly, in the
event of an adverse change in the agricultural economy of the market area served
by the subsidiary banks of Colony, Colony's provisions for loan losses could
prove inadequate.
Effect of Reorganization on Rights of Shareholders
- --------------------------------------------------
Holders of common stock of Colony will have substantially different rights
from shareholders of Broxton.
12
<PAGE>
Shares of Broxton have pre-emptive rights, which entitle the shareholders
of Broxton to acquire in proportion to their present share ownership any
additional shares of common stock of Broxton which may in the future be sold or
issued for cash by Broxton; the holders of common stock of Colony have no such
pre-emptive rights. Colony will in most cases be able to issue additional
shares without shareholder approval, and in the event Colony offers such shares
for cash without affording on an elective basis pre-emptive rights to its
shareholders, the issuance of such shares will dilute the percentage ownership
interest of shareholders of Colony, although the effect of such issuance on the
net value of the ownership interest of shareholders in Colony will depend upon
the price at which such shares are issued. See generally, "DESCRIPTION OF
SECURITIES".
- --------------------------------------------------------------------------------
SELECTED FINANCIAL INFORMATION FOR COLONY BANKCORP, INC.
- --------------------------------------------------------------------------------
The following selected financial data is derived from the consolidated
financial statements of Colony Bankcorp, Inc. The data for the six months ended
June 30, 1995 and 1996 (which is unaudited) and for the years ended December 31,
1991 through 1995 is derived from financial statements which reflect, in the
opinion of management, all normal recurring adjustments necessary to summarize
fairly such information for such periods. The following data should be read in
conjunction with Colony's consolidated financial statements and the related
notes contained elsewhere in this registration statement.
13
<PAGE>
COLONY BANKCORP, INC. SELECTED HISTORICAL INFORMATION
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended
----------------
June 30 (Unaudited) Year Ended December 31
------------------------ -------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
INCOME STATEMENT DATA:
- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Interest Income $ 12,094 $ 11,621 $ 24,089 $ 20,993 $ 20,072 $ 20,097 $ 21,780
Total Interest Expense 6,048 5,212 11,441 8,995 9,157 10,636 13,721
Net Interest Income 6,046 6,409 12,648 11,998 10,915 10,271 8,059
Provision for Loan
Losses 1,130 1,187 3,216 2,080 4,089 3,680 1,245
Net Interest Income After
Loan Loss Provision 4,916 5,222 9,432 9,918 6,826 6,591 6,814
Total Noninterest Income
excluding security gains
(losses) 1,219 1,092 2,010 1,756 1,598 1,763 1,699
Security Gains (Losses) 3 18 42 8 11 566 71
Total Noninterest
Expense 4,103 4,254 8,420 8,441 7,717 7,525 6,610
Income Tax Expense 634 681 923 1,022 121 291 488
Net Income 1,401 1,397 2,141 2,219 597 1,104 1,486
PER SHARE DATA:
- ----------------
Net Income 1.09 1.15 1.75 1.82 0.49 0.91 1.25
Cash Dividends 0.15 0.15 0.30 0.26 0.26 0.26 0.24
Book Value 16.94 15.49 16.31 13.77 13.12 12.89 12.25
OTHER INFORMATION:
- -------------------
Average Number of
Shares Outstanding 1,291,110 1,216,110 1,221,200 1,216,110 1,216,110 1,216,110 1,188,859
STATEMENT OF CONDITION
- -----------------------
DATA; PERIOD END:
- ------------------
Total Assets 279,507 263,985 278,568 248,816 234,934 229,157 213,933
Securities 51,012 44,965 46,023 46,781 45,336 32,183 43,244
Loans, Net of
Unearned Income 201,552 194,742 188,385 173,359 164,615 164,030 148,515
Total Deposits 251,466 238,189 253,243 227,043 214,508 208,773 193,565
Long-Term Borrowings 3,400 3,775 2,504 2,779 3,206 3,112 3,517
Stock Holder's Equity 21,870 18,838 21,055 16,750 15,957 15,673 14,903
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE RATIOS:
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Return on Average
Assets /(1)/ 1.02% 0.85% 0.82% 0.89% 0.24% 0.48% 0.68%
Return on Average
Stockholder's Equity/(1)/ 12.75% 11.59% 11.16% 12.95% 3.67% 7.21% 10.69%
Net Interest Margin/(1)/ 4.78% 5.37% 5.24% 5.24% 4.82% 4.84% 4.08%
Efficiency/(2)/ 55.98% 56.11% 56.96% 60.78% 61.02% 61.83% 66.62%
Dividend Payout 13.76% 13.04% 17.14% 14.29% 53.06% 28.57% 19.20%
ASSET QUALITY RATIOS:
- ---------------------
Net Charge - Offs to
Average Loans Net of
Unearned Income/(1)/ 0.90% 1.00% 1.26% 0.94% 2.28% 1.77% 0.61%
Problem Assets to Net
Loans and Other Real
Estate/(3)/ 4.58% 3.36% 4.05% 2.29% 2.23% 3.01% 1.62%
Nonperforming Assets to
Net Loans and Other
Real Estate/(4)/ 4.89% 3.79% 4.13% 2.42% 2.46% 3.14% 2.03%
Allowance for Loan
Losses to Loans, Net
of Unearned Income 2.06% 1.70% 2.06% 1.75% 1.60% 1.51% 1.21%
Allowance for Loan
Losses to Nonperforming
Assets/(4)/ 42.49% 45.27% 50.45% 72.83% 65.70% 48.30% 60.36%
LIQUIDITY AND CAPITAL RATIOS:
- -----------------------------
Average Stockholder's
Equity to Average Assets 7.94% 7.10% 7.16% 6.73% 6.64% 6.68% 6.53%
Average Loans to
Average Deposits 77.65% 77.92% 79.09% 79.56% 77.12% 81.90% 75.91%
Tier 1 Risk-Based
Capital/(5)/ 10.03% 8.78% 9.96% 9.72% 8.97% 8.87% 9.33%
Total Risk-Based
Capital/(5)/ 11.29% 10.03% 11.22% 10.98% 10.22% 10.12% 10.52%
Tier 1 Leverage/(5)/ 7.89% 7.16% 7.50% 6.82% 6.58% 6.52% 6.10%
</TABLE>
(1) Interim period ratios are annualized.
(2) Noninterest expense divided by the sum of net interest income (taxable -
equivalent basis) and noninterest income net of gains (losses) from
security transactions.
(3) Problem assets include loans on a nonaccrual basis, reconstructed loans,
and foreclosed properties.
(4) Nonperforming assets include loans on a nonaccrual basis, reconstructed
loans, loans 90 days or more past due, and foreclosed properties.
(5) The required minimum Tier 1 and total risk-based capital ratios are 4.0%
and 8.0%, respectively. The minimum leverage ratio of Tier 1 capital to
total adjusted assets is 3.0% and 5.0%, depending on the risk profile of
the institution and other factors.
15
<PAGE>
- --------------------------------------------------------------------------------
THE PROPOSED REORGANIZATION
- --------------------------------------------------------------------------------
Reference is made to a copy of the Agreement, set forth in full as Appendix
"B" hereto, for a complete statement of the terms of the proposed Agreement.
The statements contained herein with respect to the Reorganization are qualified
in their entirety by reference to Appendix "B".
Description of Reorganization
- -----------------------------
Colony is a business corporation under the laws of the State of Georgia
which is a registered as a bank holding company and which presently owns all of
the issued and outstanding stock of The Bank of Fitzgerald, Fitzgerald, Georgia;
Community Bank of Wilcox, Pitts, Georgia; Ashburn Bank, Ashburn, Georgia; The
Bank of Dodge County, Eastman, Georgia and The Bank of Worth, Sylvester,
Georgia.
Broxton is a commercial bank chartered and existing under the laws of the
State of Georgia which operates a banking business in Coffee County, Georgia.
The Reorganization will consummate a sale of Broxton to Colony.
Interim is a wholly-owned subsidiary of Colony which has been organized
solely for the purpose of effectuating the proposed merger and reorganization,
and has not actively engaged in or transacted any business.
The Reorganization will be accomplished by merging Interim with and into
Broxton, with Broxton as the surviving corporation. Upon the effective date of
the merger, each of the 50,730 shares of Broxton will be converted into and
exchanged for shares of the $10.00 par value common stock of Colony having a
value, as of the effective date of the merger, of 1.65 times the per share book
value of Broxton as of that date (the "Exchange Ratio"). For purposes of
determining the Exchange Ratio, the per share book value of Broxton's common
stock shall be the sum of the bank's common stock, surplus, undivided profits
and year-to-date earnings or losses as shown on the general ledger maintained by
the bank as of the close of business on the effective date of the merger,
without adjustment for net unrealized gains or losses on securities available
for sale as provided by Statement of Financial Accounting Standards No. 115
SFAS, divided by the number of issued and outstanding shares of the bank as of
that date. For purposes of determining the Exchange Ratio, the per share value
of the shares of common stock of Colony to be issued in connection with the
acquisition shall be 1.25 times the sum of Colony's common stock, surplus,
undivided profits and year-to-date earnings or losses as shown on the general
ledger maintained by Colony as of the
16
<PAGE>
effective date, without any adjustment for net unrealized gains or losses on
securities available for sale as provided by Statement of Financial Accounting
Standards No. 115 SFAS, divided by the number of issued and outstanding shares
of Colony as of that date. No fractional shares shall be issued; instead,
fractional shares shall be paid in cash by Colony at a price equal to the value
of Colony's common stock for purposes of the Exchange Ratio. A description of
the common stock of Colony to be issued in connection with the Reorganization
appears in the section headed "DESCRIPTION OF SECURITIES".
As a result of the Reorganization, Colony will own all (100%) of the issued
and outstanding shares of Broxton after the merger, which will thereafter
continue to operate as a bank but which will function as a wholly-owned
subsidiary of Colony. The charter, bylaws, officers and directors of Broxton
will not be changed as a result of the merger.
Reasons for the Reorganization
- ------------------------------
The Reorganization is proposed to implement the sale of Broxton to Colony.
Although the management of Broxton has been satisfied with its financial
performance in recent years, it has become increasingly difficult for a
financial institution with assets of approximately $21.0 million to compete
effectively with larger organizations, and it is the opinion of management of
Broxton that affiliation with a multi-bank holding company will enable it to
achieve economies of scale and reduce its operating expenses. In addition, the
shares of Broxton's common stock, particularly those owned by minority
shareholders, lack liquidity. Approximately 388 shares of Broxton's common
stock have been traded or exchanged since January 1, 1993, at prices
approximating 75% of the book value of Broxton.
As a consequence, the Board of Directors of Broxton authorized Curtis A.
Summerlin, President and Chief Executive Officer, to engage in negotiations with
several entities which had expressed an interest in acquiring the bank,
including Colony. Management determined that the offer of Colony represented
the best value reasonably available to shareholders of Broxton (see
"Determination of the Purchase Price"), and on April 29, 1996 Broxton entered
into a non-binding letter of intent which outlined the preliminary understanding
of the parties with respect to the proposed acquisition of Broxton by Colony.
Thereafter, after extensive discussions between the parties and their legal
counsel, and with the unanimous vote of the Board of Directors of both
institutions, the parties entered into an Agreement and Plan of Reorganization
dated June 4, 1996, a true and correct copy of which is attached hereto as
Appendix "A".
Colony offered to purchase Broxton because of its familiarity with the
operations of that institution; the attractiveness of the
17
<PAGE>
Coffee County market, which Colony considers to be a natural extension of its
banking market, and the similarity of the Coffee County market to that market
presently served by Colony; and anticipated increased profits resulting from
consolidation of operations of the two entities.
Determination of Purchase Price
- -------------------------------
The Agreement provides for the acquisition of all of the 50,730 issued and
outstanding shares of the $10.00 par value common stock of Broxton in exchange
for shares of the $10.00 par value common stock of Colony. The Agreement
provides that each share of Broxton common stock will be entitled to receive in
connection with the merger a number of shares of the common stock of Colony
which have a value, as defined in the Agreement, equal to 1.65 times the per
share book value of the bank as of the date of closing (the "Exchange Ratio").
The per share book value of the bank for purposes of the Exchange Ratio consists
of the sum of the bank's common stock, surplus, undivided profits and year-to-
date earnings or losses as shown on the general ledger maintained by the bank as
of the effective date of the merger, divided by the number of issued and
outstanding shares of the bank as of that date. The per share value of the
shares of common stock of Colony to be issued in connection with the acquisition
for purposes of the Exchange Ratio is 1.25 times the sum of Colony's common
stock, surplus, undivided profits and year-to-date earnings or losses as shown
on the general ledger maintained by it as of the effective date of the merger,
divided by the number of issued and outstanding shares of Colony as of the
closing date. Net unrealized gains or losses on securities available for sale
as provided by Statement of Financial Accounting Standards No. 115 SFAS will not
be considered in determining the book value of Broxton or the value of the
common stock of Colony. No fractional shares will be issued; instead,
fractional shares shall be paid in cash by Colony at a price equal to the value
of Colony's common stock determined by the Exchange Ratio. That Exchange Ratio
was negotiated between management of Colony and Broxton. No appraisal of
Broxton's shares or of the common stock of Colony was obtained in connection
with those negotiations. However, the Board of Directors of Colony and Broxton
believe the terms of the merger, including the Exchange Ratio, are fair and
equitable. In assessing the fairness of the Exchange Ratio, the Board of
Broxton considered, among other matters, the financial condition of Colony; the
earning power of Broxton and Colony based on both historical and anticipated
operations; recent trading prices of stock of Broxton and of Colony as to which
management of each entity has knowledge, and the volume of shares of each entity
traded in recent years; the prices paid in recent purchases of other financial
institutions in Georgia; and the anticipated effect of recent changes in
Georgia's branch banking laws which permit the expansion of branching operations
by banks in Georgia.
18
<PAGE>
The Agreement also provides for the execution of a covenant not to compete
by Curtis A. Summerlin, President and majority shareholder of Broxton, which
will preclude Mr. Summerlin from competing in the banking business with Colony
and its subsidiaries in Coffee County and other counties in which Colony
conducts a banking business, in consideration of the sum of $100,000.00 to be
paid by Colony to Mr. Summerlin.
As of June 30, 1996, the common stock of Broxton has a book value, without
adjustment for net unrealized gains or losses on securities available for sale
as provided by Financial Accounting Standards No. 115, of $41.40 per share. On
that same date, the book value of Colony's common stock, determined in that same
manner, was $17.38 per share, and the per share value of Colony's common stock
on that date, determined in accordance with the Agreement as 1.25 times the per
share book value, was $21.73 per share. Had the merger been consummated on June
30, 1996, shareholders of Broxton would have been entitled to receive for each
share of Broxton owned by him or her 3.14 shares of Colony common stock for each
share of Broxton stock owned. In assessing the desirability of the merger, the
Board of Directors of Broxton also determined that the financial, managerial and
other resources of Colony will facilitate the operation of Broxton and will
enhance its ability to compete with other financial institutions operating in
Coffee County and surrounding counties and its ability to serve existing
customers.
The tax-free nature of the Reorganization and the liquidity of the shares
of Colony to be received by Broxton shareholders in connection with the merger
relative to the liquidity of Broxton's common stock was a material factor in its
decision to enter into the Agreement. Management of Broxton is aware of the
trade of only 8 shares of its common stock in 1993 at a price of $50.00 per
share; 255 shares of its stock in 1994 at a price of $30.00 per share; and 121
shares of its common stock in 1995 at a price of $30.00 per share.
Although there is no established trading market for the shares of Colony,
it is the opinion of management of both Colony and Broxton that the shares of
Colony's stock are more liquid and marketable than are those of Broxton. As of
June 30, 1996 there were approximately 1,291,110 shares of Colony common stock
issued and outstanding, held by approximately 808 shareholders of record.
Sterne, Agee and Leach, Inc. attempts to make a market for Colony's common
stock. Management of Colony is aware of the purchase and sale of 35,098 shares
of its common stock in 1994 at prices ranging from a low of $12.50 per share to
a high of $15.50 per share; 25,697 shares of its common stock in 1995 at prices
ranging from a low of $15.00 per share to a high of $22.50 per share; and of
62,974 shares of its common stock traded through the six months ended June 30,
1996 at prices ranging from a low of $20.00 per share to a high of $21.00 per
share. In addition, in the fall of
19
<PAGE>
1995 Colony issued an additional 75,000 shares of its common stock in a public
offering at a price of $20.00 per share, which was approximately 1.25 times the
book value of Colony's common stock of $16.08 per share as of September 30,
1995. See "PRICE RANGES OF CAPITAL STOCK OF BROXTON AND COLONY".
Conditions to the Reorganization
- --------------------------------
Consummation of the Reorganization, which has been approved unanimously by
the Board of Directors of Broxton and Colony, is conditioned upon approval by
the shareholders of Broxton as required by law and the receipt of certain
required regulatory approvals, including the Georgia Department of Banking and
Finance, the Federal Reserve Bank Board, and the Federal Deposit Insurance
Corporation. Applications for approval of the Reorganization have been filed
with these regulatory authorities. Neither the Federal Reserve Bank Board nor
the Georgia Department of Banking and Finance has passed upon the application
submitted to them; the Federal Deposit Insurance Corporation will not pass upon
the application submitted to it until after the vote by the shareholders of
Broxton.
Further, the Reorganization will not be completed until a favorable tax
opinion has been received from Broxton's special counsel, Martin, Snow, Grant &
Napier. As a condition to the issuance of a favorable tax opinion, special
counsel has required Colony to make a representation that payments to
dissenting shareholders and expenses incident to the Reorganization will not
total 10% of the fair market value of the net assets of Broxton as determined
immediately prior to the Reorganization. If payments to dissenters and
organizational expenses exceed 10% of the fair market value of Broxton's net
assets and if, in the opinion of special counsel to Colony, such payments
jeopardize the tax-free status of the Reorganization, the Reorganization will
not be consummated. All of the foregoing conditions may not be waived, and must
be fully satisfied before the Reorganization will be completed.
Surrender of Certificates
- -------------------------
Upon consummation of the proposed merger, each of the 50,730 shares of
Broxton State Bank common stock issued and outstanding on the effective date of
the merger shall, as of the effective date, by virtue of the merger and without
any action on the part of the holders thereof, be converted into the right to
receive common stock of Colony, resulting in the receipt of an estimated 159,475
shares of Colony's common stock by the shareholders of Broxton. As soon as
practicable after consummation of the merger, each holder as of the effective
date of any of the shares of Broxton State Bank owned by him or her shall be
entitled, upon presentation and surrender to Colony of the certificates
representing such shares, to receive in exchange a stock certificate which will
evidence the
20
<PAGE>
shares of Colony common stock to which he or she is entitled under the terms of
the merger and cash in lieu of any fractional shares. Until so surrendered, each
outstanding certificate which before the merger represented stock of Broxton
will be deemed solely to evidence the shareholder's right to receive
certificates evidencing his or her ownership of common stock in Colony, and to
receive cash in lieu of any fractional shares, but will not in any event
evidence ownership of any shares of stock of Broxton, all of which shall be
owned after the merger by Colony. Until certificates owned by holders of common
stock of Broxton immediately prior to the merger are surrendered, the holder of
any such certificates who is entitled to receive shares of common stock of
Colony or cash in lieu of fractional shares will not have the right to receive
dividends paid with respect to shares of common stock of Colony to which the
holder is otherwise entitled as a result of the merger or to cash in lieu of
fractional shares, but when such certificates are surrendered, Colony will issue
to the holder stock certificates representing the holder's ownership of common
shares of Colony to which he or she is entitled under the terms of the merger,
together with any dividends accrued in connection therewith, and cash for any
fractional shares to which the shareholder may be entitled.
Shareholder Approval
- --------------------
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Broxton's common stock entitled to vote at the special
meeting is required for approval of the Reorganization. On August _____, 1996,
the record date for the determination of shareholders entitled to notice of and
to vote at the special meeting, the outstanding voting securities of Broxton
consisted of 50,730 shares of $10.00 par value common stock, with the registered
holders thereof being entitled to one vote per share.
Effect of Reorganization on Broxton's Shareholders
- --------------------------------------------------
If the Reorganization is consummated, the holders of 50,730 shares of the
$10.00 par value common stock of Broxton will be entitled to receive common
stock of Colony. There were 1,291,110 shares of Colony's common stock issued
and outstanding as of June 30, 1996, and if the merger were consummated as of
that date an additional 159,475 shares would have been issued in connection with
the acquisition of Broxton. Accordingly, the proportionate interest of each of
Broxton's existing shareholders in Colony's common stock, including directors,
executive officers and beneficial owners of more than 5% of any class of
Broxton's common stock, will be approximately 10.99% of the issued and
outstanding common stock of Colony.
After the proposed Reorganization, the rights and privileges of holders of
the common stock of Colony will be governed by the provisions of the Georgia
Business Corporation Code rather than the
21
<PAGE>
Financial Institutions Code of Georgia. As shareholders of Colony, such persons
will have rights generally comparable to those which they presently have as
shareholders of Broxton. Shareholders of Broxton have pre-emptive rights which
enable them to acquire in proportion to their present share ownership any
additional shares of capital stock which may in the future be sold or issued for
cash by Broxton; shareholders of Colony have no such pre-emptive rights. Stock
of Broxton, subject to certain exceptions, may be issued only for cash
consideration; stock of Colony may be issued for consideration consisting of any
tangible or intangible property or benefit to Colony, including cash, promissory
notes, services performed, contracts for services to be performed, or other
securities to the corporation. See "DESCRIPTION OF SECURITIES".
The authorized capital stock of Broxton consists of 50,730 shares of $10.00
par value common stock, all of which are presently issued and outstanding. The
authorized common stock of Colony consists of five million shares of $10.00 par
value common stock, of which 1,291,110 shares are issued and outstanding. It is
estimated that after consummation of the Reorganization, approximately 1,485,585
shares will then be outstanding and approximately 3,549,415 shares will be
available for issuance by the Board of Directors without shareholder approval.
The additional number of authorized but unissued shares of Colony is
advantageous as it will provide the flexibility to issue additional shares, to
raise additional equity capital, and to use in connection with acquisitions
without requiring a vote of the shareholders to amend Colony's articles of
incorporation to increase the authorized capital stock. Management has no
present plans or intentions to issue additional shares in the future.
The affirmative vote of two-thirds of the shareholders of Broxton is
required to approve a merger. Only a majority vote of the shareholders of
Colony is required to approve a merger, share exchange, consolidation or sale,
lease, transfer, exchange, or other disposition of all or substantially all of
the assets of Colony.
Neither the articles of incorporation of Broxton nor those of Colony
provide for any other class of its stock. Neither the common stock of Broxton
nor that of Colony is by its terms convertible or redeemable. There are no
options or warrants issued, outstanding or contemplated with respect to the
shares of common stock of either Colony or of Broxton.
Directors of Broxton and of Colony owe a duty of loyalty to the
corporations which they serve, and must discharge their duties as a director in
good faith and in a manner they believe to be in the best interests of the
corporation and with the care an ordinarily prudent person in a like position
would exercise under similar circumstances. The articles of incorporation of
Colony eliminate the personal liability of directors of Colony to the
22
<PAGE>
corporation and its shareholders for monetary damages for breach of the duty of
care or other duty imposed upon them as directors; provided, however, that no
provision of the articles of incorporation of Colony eliminates or limits the
liability of any director (i) for any appropriation, in violation of his or her
duties, of any business opportunity of the corporation; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) for voting for, or assenting to, the declaration of an
improper dividend, or (iv) for any other circumstances enumerated in O.C.G.A.
(S)14-2-832; or for any transaction from which the director derived an improper
personal benefit. The articles of incorporation of Broxton do not contain any
such provisions.
Accounting Treatment
- --------------------
The proposed transaction will be treated for accounting purposes as a
"pooling of interests".
Income Tax Consequences
- -----------------------
In general, no gain or loss will be recognized for federal income tax
purposes by Broxton, Colony or the shareholders of Broxton who will receive
common stock of Colony in connection with the proposed Reorganization. Cash
received by those holders of shares of Broxton in lieu of fractional shares will
be taxable as either ordinary income or capital gain or loss, depending upon the
circumstances of the individual shareholder. See "FEDERAL INCOME TAX
CONSEQUENCES".
THE MANAGEMENT OF BROXTON STATE BANK RECOMMENDS THAT THE BANK'S SHAREHOLDERS
VOTE "FOR" THE PROPOSAL TO RATIFY, CONFIRM, AND APPROVE THE REORGANIZATION.
- --------------------------------------------------------------------------------
RIGHTS OF DISSENTING SHAREHOLDERS
- --------------------------------------------------------------------------------
Any holder of record of common stock of Broxton who objects to the proposed
merger and fully complies with all of the provisions of Section 1320 et seq. of
-- ---
the Georgia Business Corporation Code, shall be entitled to demand and receive
payment of an amount equal to the "fair value" of all, but not less than all, of
his or her shares of common stock of Broxton, provided the merger is
consummated.
Any shareholder of Broxton who desires to dissent from the proposed
reorganization and to receive payment for the "fair value" of his or her common
stock shall do the following: (1) deliver to
23
<PAGE>
Broxton prior to the special meeting of shareholders at which the vote will be
taken on the merger, or at the special meeting but before the vote is taken, a
written notice of his or her intent to demand payment for his or her shares if
the proposed merger is effectuated; and (2) abstain from voting or vote against
the merger.
A vote against the proposed merger will not in itself constitute the
separate written notice of the shareholder's intention to demand payment for his
or her shares required by O.C.G.A. (S)14-2-1321(a). Any notice required to be
given to Broxton must be forwarded to Broxton State Bank, 401 Alabama Street,
North, P.O. Box 309, Broxton, Georgia 31519; Attention: Martha K. Summerlin.
If the merger is approved at the special meeting of shareholders, Broxton
will, no later than ten (10) days after the merger is effectuated, deliver to
each shareholder who shall have complied with conditions (1) and (2) above
written notice of approval of the proposed merger at such address as the
shareholder has furnished Broxton in writing, or, if none, at the shareholder's
address as it appears on the records of Broxton. The notice by Broxton to the
dissenting shareholder will be accompanied by a copy of Article 13 of the
Georgia Business Corporation Code and will advise the dissenting shareholder
where the demand for payment must be sent and where and when certificates for
certificated shares must be deposited; will inform holders of uncertificated
shares to what extent transfer of the shares will be restricted after the
payment demand is received; and will set a date by which Broxton must receive
the payment demand, which date may not be fewer than thirty (30) nor more than
sixty (60) days after the date the notice to the shareholder is delivered.
WITHIN THE TIME PROVIDED BY SUCH NOTICE, THE DISSENTING SHAREHOLDER MUST DEMAND
PAYMENT AND DEPOSIT HIS OR HER CERTIFICATES WITH BROXTON IN ACCORDANCE WITH THE
TERMS OF THE NOTICE. ANY SHAREHOLDER WHO FAILS TO DEMAND PAYMENT WITHIN THE
TIME AND IN THE MANNER PROVIDED WILL NOT BE ENTITLED TO BE PAID FOR HIS OR HER
SHARES.
If all of the preceding conditions above are fully satisfied, Broxton will
be required within ten (10) days of the later of the date the proposed merger is
effectuated or receipt of a payment demand by notice to each shareholder who has
complied with all of the conditions set forth herein to pay each dissenter the
amount Broxton estimates to be the fair value of his or her shares, plus accrued
interest. The offer of payment will be accompanied by a balance sheet of
Broxton as of the end of a fiscal year ending not more than sixteen (16) months
before the date of payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and the latest available interim
financial statements, if any; a statement of the corporation's estimate of the
fair value of the shares; an explanation of how the interest was calculated; a
statement of the dissenter's right to demand
24
<PAGE>
payment under O.C.G.A. (S)14-2-1327; and a copy of Article 13 of the Georgia
Business Corporation Code. If Broxton does not complete the merger within sixty
(60) days after the date set for demanding payment and depositing share
certificates, Broxton must return the deposited certificates and, if Broxton
then completes the proposed merger, it must send a new notice to those
shareholders who perfected their dissenter's rights under O.C.G.A. (S)14-2-1322.
If the shareholder accepts the corporation's offer by written notice to the
corporation within thirty (30) days after the corporation's offer or is deemed
to have accepted such offer by failure to respond within thirty (30) days,
payment for his or her shares shall be made within sixty (60) days after the
making of the offer or the taking of the proposed corporate action, whichever is
later.
Any dissenting shareholder who is dissatisfied with Broxton's offer of
payment may demand payment of his or her estimate of the fair value of his or
her shares, together with interest due, if he or she notifies the corporation in
writing of that estimate and if either (1) the dissenter believes the amount
offered by Broxton is less than the fair value of his or her shares or that the
interest due is incorrectly calculated, or (2) Broxton, having failed to
effectuate the proposed merger, does not return the deposited certificates
within sixty (60) days after the date set for demanding payment. ANY
SHAREHOLDER WHO FAILS TO NOTIFY THE CORPORATION OF HIS OR HER DEMAND IN WRITING
WITHIN THIRTY (30) DAYS AFTER BROXTON OFFERS PAYMENT FOR HIS OR HER SHARES
WAIVES HIS OR HER RIGHT TO DEMAND PAYMENT FOR HIS OR HER ESTIMATED VALUE OF THE
SHARES.
If the shareholder's demand for payment remains unsettled, Broxton will
commence legal proceedings within sixty (60) days after receiving the payment
demand in the Superior Court of Coffee County to determine the fair value of the
shares and accrued interest; if it fails to take such action within that period,
it must pay to each dissenter whose demand remains unsettled the amount
demanded. All dissenters whose demands remain unsettled will be made parties to
the proceeding. The court will assess all costs of the proceeding, including
the reasonable compensation and expenses of appraisers appointed by the court,
but not including fees and expenses of attorneys and experts for the parties,
against Broxton, except that the court may assess the costs against all or some
of the dissenters in amounts the court finds equitable to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment. The court may also assess fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable,
against Broxton and in favor of any or all dissenters if the court finds the
corporation did not substantially comply with the requirements of Georgia law
relating to dissenters' rights, or against either Broxton or a dissenter, in
favor of any other party, if the court
25
<PAGE>
finds the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect to the rights
provided by Article 13 of the Georgia Business Corporation Code. No action by
any dissenter to enforce dissenter's rights may be brought more than three (3)
years after consummation of the proposed merger.
The foregoing does not purport to be a complete statement of the provisions
of Article 13 of the Georgia Business Corporation Code and is qualified in its
entirety by reference to said Article, which is reproduced in full as Appendix
"C" to the Proxy Statement.
- --------------------------------------------------------------------------------
RESALE OF COLONY COMMON STOCK
RECEIVED IN THE REORGANIZATION
- --------------------------------------------------------------------------------
For those shareholders of Broxton who are not deemed "affiliates" of
Broxton or Colony, there will be no restrictions on resale of the securities of
Colony to be issued to such shareholders under the Securities Act of 1933, as
amended. "Affiliates" are generally defined as persons or entities who control,
or are controlled by, or are under common control with Broxton or Colony at the
time of the special meeting of shareholders called to vote on the proposed
Reorganization (generally, executive officers, directors and shareholders who
own ten percent (10%) or more of the stock of Broxton). Subsequent transfers of
the shares of Colony common stock received by Broxton shareholders who are
deemed affiliates of Broxton may be transferred only pursuant to (a) a further
registration under the Securities Act of the shares of Colony common stock to be
transferred, (b) compliance with Rule 145 promulgated under the Securities Act
of 1933, or (c) an applicable exemption from registration. Rule 145 of the
Securities and Exchange Commission will permit in general the public resale of
the common stock of Colony to be received by affiliates of Broxton within
certain limitations as to the amount of Colony common stock sold in any three-
month period and as to the manner of sale. After that two-year period,
affiliates of Broxton who are not also affiliates of Colony may resell their
shares without restriction. It is anticipated that upon consummation of the
proposed Reorganization the holders of the 50,730 shares of Broxton common stock
will receive approximately 159,475 shares of the common stock of Colony, and
that of that amount approximately 98,827 shares will be held by persons
considered to be underwriters of Broxton and the sale of such shares subject to
restrictions imposed by Rule 145 of the Securities and Exchange Commission.
It is anticipated that Curtis A. Summerlin, President and Chief Executive
Officer, will be a director of Colony upon
26
<PAGE>
consummation of the merger, but that otherwise no affiliates of Broxton will be
affiliates of Colony after consummation of the proposed Reorganization. However,
those persons who may be deemed affiliates of Colony following the merger have
been advised that the resale of shares of Colony owned by such affiliates must
be in compliance with the provisions of Rule 144 of the Securities and Exchange
Commission, pursuant to an effective registration statement under the Securities
Act of 1933 and the Georgia Securities Act of 1973, as amended, unless those
securities are exempt from registration thereunder. Such persons have further
been advised that in the event Colony should cease to be a registered company
with the Securities and Exchange Commission or should Colony fail to satisfy its
reporting requirements under the Securities Exchange Act of 1934, Rule 144 of
the Securities and Exchange Commission will not be available to affiliates of
Colony. Accordingly, sales of such shares by affiliates of Colony in that event
must either be exempt under federal or state securities laws or registered with
either the Securities and Exchange Commission or the Georgia Commissioner of
Securities. The Securities Act of 1933 exempts sales by affiliates to persons
who reside solely in the State of Georgia and transactions not involving a
"public offering". However, even if the affiliate establishes such an exemption
under the Securities Act of 1933, the affiliate must nevertheless comply with
the registration provisions of the Georgia Securities Act of 1973, unless an
exemption is also available under that statute. The most common exemption
available to affiliates of Colony is that set forth in Section 9(m) of the
Georgia Securities Act of 1973, which provides an exemption under state law for
affiliate sales of the securities of Colony if certain conditions are met,
including the limitation of 15 persons in the aggregate in Georgia purchasing
such securities from all affiliates of Colony during the 12-month period ending
on the date of such sale. Each purchaser must also execute a statement that he
is purchasing such securities as investment for his own account, and not with
the intent of participating, directly or indirectly, in distribution of such
securities, and any certificate representing such securities must be marked for
a period of one year from the date of such sale to clearly indicate the
securities evidenced thereby were issued or sold in reliance on that exemption
and cannot be sold or transferred except in a transaction which is likewise
exempt.
Broxton has agreed to use its reasonable efforts to cause each person who
may be deemed to be an affiliate of Broxton to execute and deliver to Colony not
later than 30 days prior to the effective date of the merger an agreement
providing that such affiliate will not sell, pledge, transfer or otherwise
dispose of any Colony common stock obtained as a result of the merger (i) except
in compliance with the Securities Act of 1933 and the rules and regulations of
the Securities and Exchange Commission thereunder. Certificates representing
shares of Broxton common stock surrendered for exchange by any person who is an
affiliate of Broxton for purposes of Rule 145(c) under the Securities Act of
27
<PAGE>
1933 shall not be exchanged for certificates representing shares of Colony
common stock until Colony has received such a written agreement from such
person. The stock certificates representing Colony common stock issued to
affiliates in the merger may bear a legend summarizing the foregoing
restrictions.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX CONSEQUENCES
- --------------------------------------------------------------------------------
Provided the merger is consummated in accordance with the Agreement, the
merger will be treated for federal income tax purposes under the Internal
Revenue Code of 1954, as amended (the "Code"), as a sale of the stock of
Broxton, and the federal income tax consequences of the merger to the
shareholders of Broxton will be as follows:
(1) No federal income tax gain or loss will be recognized by shareholders
of Broxton upon transfer of their common stock of Broxton in exchange for common
stock of Colony. The basis of the stock of Colony received by shareholders of
Broxton will be the same as their basis in the exchanged common stock of Broxton
(less any proportionate part of such basis allocable to any fractional interest
in any shares of Colony common stock). The holding period of the shares of
common stock of Broxton received by shareholders of Broxton will be the same as
the holding period for the common stock of Broxton exchanged, provided Broxton
stock was held as a capital asset on the date of the exchange.
(2) Cash received in appraisal proceedings by shareholders of Broxton who
dissent from the merger will be treated as having been received as a
distribution and redemption of stock pursuant to (S)302 of the Code; and gain or
loss will be recognized for such shareholders measured by the difference between
the amount of cash received and the adjusted basis of Broxton's stock exchanged;
and such gain or loss will be capital gain or loss, provided Broxton's stock is
a capital asset in the hands of such shareholders.
(3) No gain or loss will be recognized by Broxton or by Interim, as the
surviving corporation, upon the receipt by the surviving corporation of the
assets of Broxton or of Interim in exchange for the common stock of Interim.
(4) No gain or loss will be recognized by Colony upon the receipt of
common stock of the surviving corporation in exchange for the common stock of
Colony.
(5) The receipt of cash in lieu of fractional shares will be treated as if
the fractional shares were distributed as part of the
28
<PAGE>
exchange and then redeemed by Colony, and gain or loss will be recognized in an
amount equal to the difference between the cash received and the basis of the
Broxton common stock surrendered, which gain or loss will be a capital gain or
loss if the Broxton common stock was a capital asset in the hands of the
shareholder.
Any opinion as to the federal income tax consequences of the Reorganization
will be conditioned on the assumption that Broxton, as the surviving corporation
to the merger, upon consummation of the Reorganization, will: (i) hold at least
90% of the fair market value of the net assets and (ii) at least 70% of the fair
market value of the gross assets held by Broxton immediately prior to the
Reorganization. All amounts paid by Broxton for any Reorganization expenses and
payments made to any dissenting shareholders will be considered assets held by
Broxton immediately prior to the Reorganization. The Reorganization will not be
completed if payments to dissenting shareholders and expenses of the
Reorganization total 10% of the fair market value of the net assets of Broxton
and if in the opinion of special counsel to Colony such payments jeopardize the
tax-free nature of the Reorganization.
In general, cash received by holders of Broxton's common stock exercising
their rights of dissent will be treated as amounts distributed in redemption of
their shares, and will be taxable under the provisions of Section 302 of the
Code. However, it is possible that, as a result of the applicable rules
attributing stock ownership among related individuals and entities in which they
have an interest (such as partnerships, trusts, estates, and corporations), the
Section 302 rules may not apply, and the distribution will be treated as either
a dividend or return of capital under Section 301 of the Code. Moreover, even
if the distribution is treated as being subject to Section 302, the gain over
the basis of the redeemed stock may be taxable as either ordinary income or
capital gain, depending upon the circumstances of the individual shareholder.
Receipt of a favorable tax opinion from Colony's special counsel, Martin,
Snow, Grant & Napier, in form and substance satisfactory to the Board of
Directors of Broxton, is a condition to the consummation of the Reorganization.
No ruling will be requested from the Internal Revenue Service. The full tax
opinion, which has been rendered by Martin, Snow, Grant & Napier, Macon,
Georgia, special counsel to Colony, appears as an exhibit to the registration
statement, and that full tax opinion addresses all material federal income tax
consequences of the merger to shareholders of Broxton unless otherwise
specified.
Shareholders are advised to consult their own tax advisors to make a
personal evaluation of the federal income tax consequences, and as to any state
or local tax consequences incident to the Reorganization.
29
<PAGE>
- --------------------------------------------------------------------------------
HISTORY AND BUSINESS OF COLONY BANKCORP, INC.
- --------------------------------------------------------------------------------
Business of Colony Bankcorp, Inc.
- ---------------------------------
Colony Bankcorp, Inc. is a Georgia business corporation organized for the
purpose of operating as a bank-holding company under the Federal Bank Holding
Company Act of 1956, as amended, and the Bank Holding Company Laws of Georgia
(Georgia Laws 1976, pp. 168 et. seq.). Colony owns all of the issued and
outstanding common stock of the following commercial banks: The Bank of
Fitzgerald, Fitzgerald, Georgia, which it acquired on July 22, 1983; Pitts
Banking Company, Pitts, Wilcox County, Georgia, which it acquired on April 30,
1984; Ashburn Bank, Ashburn, Turner County, Georgia, which it acquired on
November 1, 1984; The Bank of Dodge County, Eastman, Dodge County, Georgia,
which it acquired on September 30, 1985; and The Bank of Worth, Sylvester, Worth
County, Georgia, which it acquired on July 31, 1991. Colony conducts virtually
all of its operations through its bank subsidiaries. Each bank operates a full
service banking business and engages in a broad range of commercial banking
activities, including accepting customary types of demand and time deposits;
making individual, consumer, commercial and installment loans; money transfers;
safe deposit services; and making investments in the United States Government
and municipal services. None of the banks offer trust services other than
acting as a custodian for individual retirement accounts.
The Company owns no real estate, and its assets consist almost exclusively
of the stock of its subsidiaries. The assets of each of the subsidiaries
consist primarily of loans and investment securities, though each subsidiary
owns the real estate and facilities out of which it conducts its business and
the equipment located therein. The Bank of Fitzgerald also owns the real estate
and improvements upon which are located the principal offices of the Company,
and it leases those facilities to the Company.
All of the banks offer their customers a variety of checking and savings
accounts. The installment loan departments of the banks make both direct
consumer loans and also purchase retail installment contracts from local
automotive dealers and other sellers of consumer goods. All of the banks are
located in predominantly rural areas of the State of Georgia with a large
agricultural industry.
The data processing work of the banks is processed through Colony.
30
<PAGE>
Market Area of Colony
- ---------------------
The subsidiary banks of Colony are located in five contiguous counties in
South Central Georgia, with offices in Dodge, Wilcox, Turner, Ben Hill, and
Worth Counties. That five-county area had a population in 1990 of approximately
69,308, as reported by the United States Bureau of Census. The market area of
Colony's subsidiary banks extends to the surrounding, contiguous counties and
encompasses an area within an approximately 45-50 mile radius, the geographical
center of which is Fitzgerald. The Bank of Fitzgerald operates in Ben Hill
County, Georgia out of two locations in Fitzgerald. Ashburn Bank competes in
Turner County, Georgia out of three locations in Ashburn. Community Bank of
Wilcox operates out of two locations in Wilcox County, Georgia, one of which is
in Pitts and the other of which is in Rochelle. The Bank of Dodge County
operates out of an office in Eastman, Georgia and maintains a branch in Chester,
Georgia. The Bank of Worth operates out of a single location in Sylvester,
Worth County, Georgia.
The ten (10) banking facilities operated by the banks are located in areas
which are predominantly rural in nature, and the economies of the market area
served by those facilities have a significant agricultural segment. As of March
31, 1996, approximately 23.88% of Colony's consolidated loan portfolio was
comprised of agricultural-related loans, including crop production loans and
loans made to finance the purchase of farm equipment, and real estate mortgages
secured by farm land. This represents a significant, although not undue,
concentration of loans in a specific industry and necessarily subjects the
earnings of Colony to a degree of volatility. However, Colony employs, through
its subsidiary banks, several loan officers with extensive experience in making
agricultural and agricultural-related loans, and in evaluating the credit
worthiness of agricultural borrowers, as a result of which the agricultural-
related loans of Colony have generally been profitable. The agricultural loans
are generally collateralized by an interest in the crops or farm-related
equipment of the borrower, by a mortgage on real estate, or by an assignment of
crop insurance proceeds, or some combination of those items. A substantial
portion of Colony's agricultural loans are guaranteed by agencies or programs of
the United States. All agricultural loans are analyzed at the end of each year
before further funds of the banks are committed, and generally the prior year's
financial performance is required to be documented by tax returns or financial
statements.
Lending Policies
- ----------------
The lending policies of Colony are embodied in comprehensive statements of
lending policy adopted by the subsidiary banks, which are reviewed and modified
periodically. In general, those policies delegate to lending officers of Colony
authority to approve loans
31
<PAGE>
which do not exceed a specified maximum amount, depending upon the seniority and
experience of the lending officer. Loans in excess of those specified limits,
but not in excess of $300,000.00, must be approved by the officer's loan
committee, composed of the bank's President and all of its Vice-Presidents.
Loans in excess of $300,000.00 must be approved by the director's loan
committee, which consists of at least three (3) outside directors of the bank
and the bank's President or senior lending officer.
In general, Colony authorizes loans to be made only in those counties in
which the subsidiary banks are located and in contiguous counties, except with
the approval of the President or the director's loan committee of the bank. An
analysis of the borrower's projected cash flow and debt-service ability as well
as an evaluation of any collateral proposed by the borrower or required by
Colony is made in connection with each proposed extension of credit. Lending
officers of each bank actively solicit customers in the commercial, agricultural
and consumer sectors.
All requested loans are reviewed carefully before made, with particular
consideration to the borrower's character, repayment capacity and collateral.
Significant loans require review of documentation of the borrower's financial
history, such as tax returns and financial statements. Loans secured by real
estate are generally limited to a specified percentage of the value of the real
estate, supported by competent appraisals. The lending policy requires that
before real estate is accepted as collateral it must be personally viewed by a
representative of the bank, with particular attention given to observance of
potential environmental hazards. Special procedures are in place to insure that
loans to directors and executive officers are not made on terms more favorable
than such loans are made to other borrowers in similar circumstances.
All loans are subject to an independent audit and review by someone other
than the officer transacting the loan. Colony has adopted a loan review
program, providing for a review of significant loans by the subsidiary banks by
a loan review officer of Colony. All loans officers are required to prepare
written evaluations at least annually on all credit lines in excess of
$250,000.00 which are assigned to them, addressing the history, current credit
standing, balances and plans to collect repayment.
Colony seeks to avoid an undue concentration of loans in any particular
sector of the economy, although it attempts primarily to make loans to small
businesses, including farmers, and consumers. In addition to the agricultural
loans of Colony discussed above, the subsidiaries make general commercial and
industrial loans, primarily to manufacturers, wholesalers and retailers of
goods, service companies and other industries. As of March 31, 1996,
approximately $10.9 million in Colony's consolidated loan
32
<PAGE>
portfolio, or 5.66%, consisted of such general commercial and industrial loans.
A significant percentage of those loans are guaranteed by the United States
Small Business Administration, and are generally secured by inventory,
equipment, accounts receivable and other assets.
Colony seeks generally to avoid long term, fixed-rated loans secured by
real estate, especially where such loans are not matched by liabilities of
similar maturities. As of March 31, 1996, Colony, on a consolidated basis, had
outstanding loans secured by real estate mortgages, excluding farm land, in the
amount of $88,257,000.00, or approximately 45.80% of its loan portfolio. These
loans generally have maturities of 2-3 years, and interest rates are generally
adjusted at least annually, or more frequently. Colony had outstanding on that
date construction loans of only $864,000.00. A substantial portion of Colony's
consolidated loan portfolio, approximately 20.11% as of March 31, 1996, consists
of consumer loans, including home equity, motor vehicle, student and signature
loans, as well as small personal lines of credit. All of the subsidiary banks
offer credit cards to their customers.
The Community Reinvestment Act seeks to ensure that each financial
institution meets the credit needs of the entire community served by that
institution, including low-and moderate-income neighborhoods, consistent with
the safe and sound operation of that institution. In accordance with that
statute and rules and regulations promulgated by the Board of Governors of the
Federal Reserve System, each of the subsidiary banks has established a Community
Reinvestment Act program designed to further the purposes of the Act and to
ensure compliance with it. Each program is overseen by a Community Reinvestment
Act officer, and each of the banks has adopted written Community Reinvestment
Act statements.
Regulation - Colony Bankcorp, Inc.
- ----------------------------------
Colony Bankcorp, Inc. is registered as a bank holding company with both the
Georgia Department of Banking and Finance as well as with the Board of Governors
of the Federal Reserve System. It is required to file annual reports and other
information regarding its business operations and those of its subsidiaries with
both of those regulatory agencies and is subject to examination by both of those
agencies.
The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Board of Governors of the Federal Reserve System (i)
before it may acquire direct or indirect ownership or control of any voting
shares of any bank if, after such acquisitions, such bank holding company will
directly or indirectly own or control more than 5% of the voting shares of such
bank; (ii) before it may acquire all or substantially all of the assets of a
bank; and (iii) before it may merge or be consolidated with another bank holding
company. This Act further requires that
33
<PAGE>
consummation of approved acquisitions or mergers be delayed, generally for a
period of not less than thirty (30) days following the date of such approval,
during which time complaining parties may obtain a review of the Board's order
granting its approval by filing a petition in the appropriate United States
Court of Appeals petitioning that the order be set aside. Historically, the
Board of Governors could not approve the acquisition by Colony of any voting
shares of, or substantially all the assets of, any bank located outside Georgia
unless such acquisition was specifically authorized by the statutes of the state
in which the bank to be acquired was located. The State of Georgia enacted
legislation which enabled holding companies located in other southeastern states
to acquire banks located in the State of Georgia, provided the southeastern
states in which such holding companies were located passed reciprocal
legislation which allowed bank holding companies in Georgia to acquire banks
located in those states. However, effective September 29, 1995, the Board of
Governors of the Federal Reserve System may approve an application by a bank
holding company which is adequately capitalized and adequately managed to
acquire control of, or acquire all or substantially all the assets of, a bank
located in a state other than the home state of the bank holding company,
without regard to whether such transaction is prohibited or permitted under
state law. Such approval will not be granted to the acquisition of a bank in a
host state by an out-of-state bank holding company if the applicable law of the
host state provides that the acquired bank be in existence for a minimum period
of time not to exceed at least five years.
The Bank Holding Company Act prohibits (with specific exceptions) Colony
from engaging in non-banking activities or from acquiring direct or indirect
control of any company engaged in non-banking activities. The Board of
Governors by regulation or order may make exceptions for activities determined
to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto, in determining whether a particular activity is
permissible, the Board of Governors is to consider whether the performance of
such an activity can reasonably be expected to produce benefits to the public,
such as a greater convenience, increased competition or gains in efficiency,
that outweigh possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest or unsound
banking practices. For example, making, acquiring or servicing loans, providing
discount securities brokerage services, leasing personal property, providing
certain investment or financial advice, performing certain data processing
services, acting as agent or broker in selling life insurance and certain other
types of insurance in connection with credit transactions and certain
underwriting activities have all been determined by regulations of the Board of
Governors to be permissible activities. The Bank Holding Company Act does not
place territorial limitations on permissible bank-related activities of bank
holding companies. However, despite prior approval, the Board of Governors does
have
34
<PAGE>
the power to order a holding company or its subsidiaries to terminate any
activity, or terminate its ownership or control of any subsidiary, when it has
reasonable cause to believe the continuation of such activity or such ownership
or control constitutes a serious risk to the financial safety, soundness or
stability of any bank subsidiary of that holding company. The Federal Reserve
Board considers whether the performance of such activities by an affiliate of
the holding company can reasonably be expected to produce benefits to the public
which outweigh possible adverse effects.
Under applicable federal law, Colony and its subsidiaries are prohibited
from extending credit, selling or leasing property, and furnishing any service
to any customer on the condition or requirement that the customer obtain any
additional property, service or credit from Colony and its subsidiaries, refrain
from obtaining any property, service or credit from any competitor of Colony or
its subsidiaries, or furnish any property, service or credit to Colony or its
subsidiaries. In addition, Colony is required, unless it satisfies certain
threshold supervisory requirements, to give the Federal Reserve Board prior
written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with a net consideration paid for all such purchases or redemptions
during the preceding twelve (12) months, is equal to ten percent (10%) or more
of Colony's consolidated net worth. The Federal Reserve Board may disapprove
such a purchase or redemption under certain prescribed circumstances.
The Federal Reserve Board has been vested with substantial enforcement
powers over bank-holding companies and non-banking subsidiaries in those
circumstances which represent unsafe or unsound practices or constitute
violations of law. The Federal Reserve Board, for instance, may issue cease and
desist orders to prohibit unsafe or unsound practices or practices which
constitute violations of the law. In addition, the Federal Reserve Board may
assess civil penalties against companies or individuals who violate the Bank
Holding Company Act or orders or regulations promulgated pursuant thereto in
amounts up to $1 million for each day of the violation; may order termination of
non-banking activities of non-banking subsidiaries or bank holding companies;
and may order termination of ownership and control of a non-banking subsidiary
by a bank holding company. Certain violations may also result in criminal
penalties.
Colony is also subject to regulation as a bank holding company by the State
of Georgia. Georgia law requires an annual registration of all Georgia bank
holding companies with the Department of Banking and Finance. Such registration
includes information with respect to the financial condition, operation,
management and intercompany relationships of the bank holding
35
<PAGE>
company and its subsidiaries and such related matters as the Department of
Banking and Finance deems necessary or appropriate to carry out the purposes of
Georgia law. Furthermore, the Department of Banking and Finance may from time to
time require reports under oath to keep itself informed as to whether the
provisions of Georgia banking laws, regulations, and orders issued thereunder by
the Department have been complied with, and may make examinations of each bank
holding company and subsidiary thereof.
In addition, Georgia law provides that, without prior approval of the
Commissioner of the Department of Banking and Finance, it is unlawful (i) for
any bank holding company to acquire direct or indirect ownership or control of
more than 5% of the voting shares of any bank; (ii) for any bank holding company
or subsidiary thereof, other than a bank, to acquire all or substantially all of
the assets of a bank; or (iii) for any bank holding company to merge or
consolidate with any other bank holding company. It is also unlawful for any
bank holding company to acquire direct or indirect ownership or control of more
than 5% of the voting shares of any bank unless such bank has been in existence
and continually operated as a bank for five years or more prior to the date of
application to the Commissioner for approval of such acquisition, except in
instances in which the bank is organized to facilitate the acquisition of a bank
meeting the five-year requirement.
Colony and its banking subsidiaries are deemed "affiliates" within the
meaning of Section 23A of the Federal Reserve Act and are subject to
restrictions contained in the Act on loan and other transactions between
affiliates. A transaction between affiliates of the Corporation may not exceed
10% of the capital stock and surplus of the banking subsidiary involved and the
total of all transactions by a banking subsidiary may not exceed 20% of its
capital stock and surplus. All extensions of credit may not exceed 20% of its
capital stock and surplus. All extensions of credit by the bank subsidiaries to
affiliates of the corporation must be secured.
Regulation - Subsidiary Banks
- -----------------------------
Each of the subsidiary banks of Colony are chartered under the laws of the
State of Georgia, are not members of the Federal Reserve System, but are subject
to regulation by the Federal Deposit Insurance Corporation (FDIC) since their
deposits are insured by the FDIC to the extent provided by law. As such, they
are subject to regulation in the same manner and fashion as is Broxton State
Bank. See "HISTORY AND BUSINESS OF BROXTON - SUPERVISION AND REGULATION".
Capital Requirements
- --------------------
Both Colony and its subsidiary banks are required to maintain minimum
capital ratios. The minimum ratio of Total Capital to
36
<PAGE>
Total-Risk Weighted Assets is 8%, of which at least 4% must be in the form of
Tier 1 Capital (Core). Core Capital elements include common stockholder's
equity, qualifying non-cumulative perpetual preferred stock, qualifying
cumulative perpetual preferred stock, and minority interest in the equity
accounts of consolidated subsidiaries. Tier 1 Capital is defined generally as
the sum of those Core Capital elements less good will and other tangible assets
required to be deducted in accordance with applicable regulations. Tier 2
Capital consists of allowances for loan and lease losses (subject to applicable
limitations), perpetual preferred stock and related surplus, hybrid capital
instruments, perpetual debt, and mandatory convertible debt securities, and term
subordinated debt and intermediate-term preferred stock.
As of March 31, 1996, the Tier 1 Capital ratio of Colony, on a consolidated
basis, was 10.07%, and its total Tier 1 and Tier 2 risk-based capital was
11.33%. Both of those measures were in excess of regulatory minimums of 4% for
Tier 1 and 8% for total risk-based capital.
In addition, Colony is required to maintain a leverage capital ratio of not
less than 4%. As of March 31, 1996, Colony's leverage capital ratio was 7.77%.
Banking institutions which do not meet applicable capital requirements are
subject to corrective action taken by the appropriate federal banking agencies.
A financial institution which is notified by the appropriate banking agency that
it is under-capitalized, significantly under-capitalized or critically under-
capitalized must submit an acceptable capital restoration plan, and financial
institutions are prohibited from making capital distribution if thereafter it is
under-capitalized. An under-capitalized institution is also prohibited from
increasing its average total assets until its capital restoration plan has been
accepted, and is also generally prohibited from making acquisitions,
establishing any branches or engaging in any new line of business except in
accordance with the capital restoration plan or the approval of the appropriate
agency. An under-capitalized institution which fails to submit an acceptable
capital restoration plan or fails to implement a capital restoration plan
accepted by the appropriate agency may be required to sell additional stock,
merge with another institution, remove or replace members of management or take
other appropriate action.
Under regulations recently adopted by the Board of Governors of the Federal
Reserve System, a bank's exposure to declines in the economic value of its
capital due to changes in interest rates is one factor the agencies will
consider in evaluating a bank's capital adequacy. Additional capital may be
required if, in the judgment of the applicable regulatory agency, the bank's
capital provisions for interest rate risks are inadequate. Additional
regulations are being considered which will address in greater
37
<PAGE>
detail the role of interest rate risks in assessing the adequacy of a bank's
capital.
Insurance Premiums
- ------------------
The deposits of each of Colony's subsidiary banks are insured by the
Federal Deposit Insurance Corporation to the extent authorized by law. Each
subsidiary bank is assessed a premium by the FDIC for that coverage and the FDIC
has developed a risk-based system to determine a bank's assessment rate. The
risk-based system places institutions into one of nine risk categories using a
two-step process based first on capital ratios and then on other supervisory
information, and the insurance premiums for each commercial bank depends upon
the level of capitalization and other supervisory concerns. Pursuant to these
regulations, the deposit insurance rates for each of the subsidiary banks was
established at .023% of its domestic deposits, except that the assessment rate
for The Bank of Fitzgerald was 0.26% of domestic deposits. In 1995 the Bank
Insurance Fund achieved a designated reserve ratio of 1.25%, as a result of
which a new assessment schedule has been adopted and Bank Insurance Fund
members, will be assessed rates ranging from 0.00% of domestic deposits to 0.31%
of domestic deposits with a minimum annual assessment of $2,000.00. The
assessment rate of each financial institution will reflect the risk posed to the
Insurance Fund by the bank. It is anticipated the assessment rate of all of the
subsidiary banks of Colony except The Bank of Fitzgerald and The Bank of Worth
will be the minimum annual assessment of $2,000.00; the assessment rate of The
Bank of Fitzgerald is presently .03% of its domestic deposits. However, the
FDIC is authorized to increase or decrease the assessment rates by a maximum of
five basis points without engaging in a notice-and-comment rule making
proceeding, and no assurance can be furnished that the assessment rates of the
subsidiary banks of Colony will not be increased by that five-basis point
maximum in the future, or in excess of that amount with appropriate notice by
the Federal Deposit Insurance Corporation.
The Bank of Worth is a member of the Savings Association Insurance Fund,
and the regulations recently adopted by the Federal Deposit Insurance
Corporation do not alter the manner in which the premiums are assessed against
members of that Fund.
Employees
- ---------
As of June 30, 1996, Colony Bankcorp, Inc. and its subsidiaries had 128
full-time employees and 10 part-time employees.
38
<PAGE>
- --------------------------------------------------------------------------------
HISTORY AND BUSINESS OF BROXTON STATE BANK
- --------------------------------------------------------------------------------
History
- -------
Broxton State Bank was chartered under the laws of the State of Georgia on
August 4, 1966 and opened for business on September 1, 1966, having absorbed
"Citizens Bank", a private, unincorporated bank. It has conducted a general
banking business from a single location at 401 North Alabama Street in Broxton,
Georgia since that time. Broxton has not undergone any merger, consolidation,
acquisition of assets or assumption of deposit liabilities of another bank in
its history. Since opening for business, Broxton has experienced steady growth
in assets and earnings. As of June 30, 1996 the bank has assets of $19.1
million; loans of $12.3 million; and equity capital of $2.1 million.
Business of Broxton
- -------------------
The bank is a full-service bank offering a wide variety of banking services
targeted at all sectors of the bank's primary market area. The bank offers
customary types of demand, savings, time, and individual retirement accounts;
installment, commercial and real estate loans; home mortgages and personal lines
of credit; Visa and Master Card services through its correspondent, Columbus
Bank & Trust; safe deposit and night depository services; cashier's checks,
money orders, travelers checks, wire transfers and various other services that
can be tailored to the customer's needs. The bank does not offer trust services
at this time.
FiServ, Inc. (formerly Basis Information Technologies, which was wholly
owned by First Financial Management Corporation) provides data processing
services for the bank. SunTrust Bank Atlanta, Georgia, supplies data processing
services for the bank's bond accounting portfolio. The bank utilizes the
services of the Georgia Bankers Bank, Atlanta, Georgia, for all clearing and
overnight federal funds investments through a sweep investment account.
The bank serves the residents of Coffee County, Georgia, which has a
population of approximately 32,000.
The bank has correspondent relationships with: NationsBank; SunTrust Bank;
Columbus Bank & Trust; Georgia Bankers Bank; Bank of Fitzgerald; Ashburn Bank;
Bank of Dodge County; Bank of Worth; and Wilcox County Bank.
39
<PAGE>
Banking Premises
- ----------------
The bank has only one banking office located at 401 North Alabama Street,
Broxton, Georgia. The building consists of approximately 5,000 square feet of
space. The building is equipped with four alarm-equipped vaults, one for safe-
deposit boxes and cash storage, one for night depository service, and two for
record storage. The building has two drive-in systems, one commercial drawer
and one pneumatic tube system.
Competition
- -----------
The banking business in Coffee County is highly competitive. Although
Broxton State Bank is the only bank in Broxton, there are five other banks with
offices in Douglas, Georgia, approximately eight (8) miles from Broxton: Coffee
County Bank, which operates out of three locations; NationsBank, which operates
out of one location; SunTrust Bank, South Georgia, N.A., which maintains its
main office in Albany but which operates out of three locations in Douglas;
Southeastern Bank, which maintains its main office in Darien, but which operates
out of two locations in Nichols and Douglas; First National Bank of Coffee
County, which has one office in Douglas; and SouthTrust, which operates out of
one location in Douglas. In addition, Atlantic Coastal Credit Union maintains
an office in Douglas.
Employees
- ---------
As of March 1, 1996, the bank had 13 full-time employees. In the opinion
of management, the bank enjoys an excellent relationship with its employees.
The bank is not a party to any collective bargaining agreement.
Monetary Policies
- -----------------
The results of operation of Broxton are affected by the credit policies of
monetary authorities, particularly the Board of Governors of the Federal Reserve
System, even though Broxton is not a member of the Federal Reserve. The
instruments of monetary policy employed by the Federal Reserve include open
market operations in U.S. Government Securities, changes in discount rates on
member bank borrowings, and changes in reserve requirements against member bank
deposits. In view of changing conditions in the national economy and in the
money markets, as well as the effect of action by monetary and fiscal
authorities, including the Federal Reserve System, no prediction can be made as
to possible future changes in interest rates, deposit levels, loan demand, or
the business and earnings of Broxton.
40
<PAGE>
Supervision and Regulation
- --------------------------
Upon consummation of the Reorganization, Broxton will continue to operate
as a banking institution incorporated under the laws of the state of Georgia and
subject to examination by the Georgia Department of Banking and Finance. The
Department regulates all areas of Broxton's commercial banking operations,
including reserves, loans, mergers, payment of dividends, interest rates,
establishment of branches and other aspects of its operations. Broxton must
also comply with state usury laws which limit the rates of interest which may be
charged on certain types of loans.
In addition to state banking laws and regulations applicable to Broxton as
a state banking institution, Broxton is also insured and regulated by the
Federal Deposit Insurance Corporation ("FDIC"). The major functions of the FDIC
with respect to insured banks include paying off depositors to the extent
provided by law in the event a bank is closed without adequate provisions having
been made to pay the claims of depositors, acting as the receiver of state banks
placed in receivership when appointed receiver by state authorities, and
preventing the continuation or development of unsound and unsafe banking
practices. In addition, the FDIC is authorized to examine insured banks which
are not members of the Federal Reserve System to determine the condition of such
banks for insurance purposes. The FDIC is also authorized to approve mergers,
consolidations, and assumption of deposit liability transactions between insured
banks and non-insured banks or institutions, and to prevent capital or surplus
diminution in such transactions where the resulting, continued, or assumed bank
is an insured non-member state bank. Also, the FDIC closely examines non-member
banks for compliance with certain federal statutes such as the Community
Reinvestment Act and the Truth-in-Lending Act.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act, as amended, on any extensions
of credit to the bank holding company or any of its subsidiaries, on investments
in the stock or other securities thereof, and on the taking of such stock or
securities as collateral for loans to any borrower.
Regulation and Legislative Changes
- ----------------------------------
The business in which Broxton presently engages is particularly subject to
government regulation. Both the FDIC and the Georgia Department of Banking and
Finance are granted wide latitude in enforcing sanctions against any bank which
does not operate in accordance with applicable regulations, policies and
directives. Proceedings may be brought against any bank or any director,
officer, or employee of the bank that is engaged in any unsafe and unsound
practice, including the violation of applicable laws and regulations. Civil
penalties may be assessed against such companies or individuals for violations
of federal statutes, orders
41
<PAGE>
or regulations in an amount not to exceed $1,000,000 for each day's violations.
The FDIC has the additional authority to terminate insurance of accounts, after
notice and hearing, upon a finding by the FDIC that the insured institution is
or has engaged in unsafe or unsound practices that have not been corrected, or
is in an unsafe and unsound condition to continue operations, or has violated
any applicable law, regulation, rule or order of, or condition imposed, by the
appropriate supervisors. In addition, the FDIC is empowered, upon notice and
hearing, to remove any director, officer or employee of any bank under its
jurisdiction which has violated any law or regulation, any final cease and
desist order, or any written condition or agreement to which the bank is a
party, or has engaged in any unsafe or unsound practice in connection with the
bank, or has breached a fiduciary duty to the bank. The Georgia Department of
Banking and Finance has similar powers.
Legal Proceedings
- -----------------
Broxton is not a party to any legal proceedings except for ordinary routine
litigation which is incidental to the business of Broxton. The possible
outcomes of that ordinary routine litigation is not expected, in the opinion of
management, to have a material impact on the future operations of Broxton.
Legal Proceedings for Colony
- ----------------------------
Colony and its subsidiaries are involved periodically in legal proceedings
which are incidental to the business in which they are engaged. Among other
such proceedings, The Bank of Fitzgerald is a defendant in a complaint brought
in the Superior Court of Ben Hill County, in which the plaintiff complains of a
claimed wrongful foreclosure and seeks damages in excess of $1,000,000.00. It
is the opinion of Colony that the complaint of the plaintiff is without merit,
and that the complaint does not expose either The Bank of Fitzgerald or Colony
to any material loss. Otherwise, neither Colony nor its subsidiary banks is
presently a party to any litigation which is not routine litigation incidental
to the business of Colony or of the subsidiary banks. Colony is not aware of
any material legal proceedings contemplated or threatened against Colony or its
subsidiary banks.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Certain financial statements concerning Broxton and Colony are attached
hereto as Appendix "A". Also included in the Proxy Statement under the heading
"PRO FORMA FINANCIAL STATEMENTS" is certain pro forma financial information
restating certain historical financial information of Broxton and of Colony to
42
<PAGE>
reflect the effect of the proposed Reorganization on the financial performance
of Broxton and of Colony.
- --------------------------------------------------------------------------------
PRICE RANGES OF CAPITAL STOCK OF BROXTON AND OF COLONY
- --------------------------------------------------------------------------------
There is no established trading market for shares of the common stock of
either Broxton or Colony. Further, although there has been a significant
increase in the trading volume of Colony's common stock in recent years,
management of Colony has no reason to expect that an established trading market
will develop in its common stock after completion of the Reorganization.
The following table reflects the sale of shares of Broxton stock occurring
in 1993, 1994, 1995 and for the six months ended June 30, 1996:
<TABLE>
<CAPTION>
================================================================================
YEAR NUMBER OF SELLING
SHARES PRICE
TRADED
- --------------------------------------------------------------------------------
<S> <C> <C>
1993 8 $50.00
- --------------------------------------------------------------------------------
1994 255 $30.00
- --------------------------------------------------------------------------------
1995 121 $30.00
- --------------------------------------------------------------------------------
1996 (6 Months) -0- ---
================================================================================
</TABLE>
There are approximately 90 shareholders of Broxton State Bank.
Management of Colony is frequently advised of the terms upon which shares
of its common stock are traded. Management of Colony is aware of the purchase
and sale of 6,621 shares of its common stock in 1993; 35,098 shares of its
common stock in 1994; 25,697 shares of its common stock in 1995; and 62,974
shares of its common stock through the six months ended June 30, 1996.
According to information available to Colony, its stock traded in the following
ranges:
<TABLE>
<CAPTION>
================================================================================
HIGH LOW
================================================================================
<S> <C> <C>
FIRST QUARTER 1993 $15.00 $12.50
- --------------------------------------------------------------------------------
SECOND QUARTER 1993 $15.00 $12.50
- --------------------------------------------------------------------------------
THIRD QUARTER 1993 $15.00 $12.50
- --------------------------------------------------------------------------------
FOURTH QUARTER 1993 $15.00 $12.50
- --------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
FIRST QUARTER 1994 $15.00 $12.50
- --------------------------------------------------------------------------------
SECOND QUARTER 1994 $15.00 $12.50
- --------------------------------------------------------------------------------
THIRD QUARTER 1994 $15.00 $12.50
- --------------------------------------------------------------------------------
FOURTH QUARTER 1994 $15.50 $15.00
- --------------------------------------------------------------------------------
FIRST QUARTER 1995 $16.50 $15.00
- --------------------------------------------------------------------------------
SECOND QUARTER 1995 $18.50 $15.00
- --------------------------------------------------------------------------------
THIRD QUARTER 1995 $20.00 $18.50
- --------------------------------------------------------------------------------
FOURTH QUARTER 1995 $22.50 $20.00
- --------------------------------------------------------------------------------
FIRST QUARTER 1996 $20.50 $20.00
- --------------------------------------------------------------------------------
SECOND QUARTER 1996 $21.00 $20.00
================================================================================
</TABLE>
The prices reflected in the above table have been adjusted to reflect the
issuance by Colony as of July 1, 1995 of a 100% stock dividend paid to
shareholders of record of Colony, increasing the number of issued and
outstanding shares of its common stock from 608,055 to 1,216,110.
In the fourth quarter of 1995 Colony conducted a stock offering, pursuant
to which it issued and sold 75,000 shares of its $10.00 par value common stock
at a price of $20.00 per share, or approximately 1.25 times the book value of
Colony's common stock at the time of the offering.
As of June 30, 1996, Colony had approximately 808 shareholders.
- --------------------------------------------------------------------------------
DIVIDEND POLICY OF COLONY AND BROXTON
- --------------------------------------------------------------------------------
Holders of common stock of Broxton are entitled to such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. Dividends paid may not exceed 50% of net profits of Broxton
after taxes for the previous fiscal year without prior approval of the Georgia
Department of Banking and Finance. Broxton does not pay cumulative dividends on
its common stock. Broxton paid a dividend of $2.00 per share for the years
1992, 1993, 1994 and 1995. It has not declared any dividend in 1996.
Broxton is also allowed to declare and pay dividends in authorized but
unissued shares of its stock, provided there is
44
<PAGE>
transferred to capital stock an amount equal to the value of the shares
distributed and provided further that after payment of the dividend, Broxton
continues to maintain required levels of paid-in capital and appropriated
retained earnings. Broxton has paid a stock dividend to its shareholders on
several occasions, most recently in 1981.
Colony has historically paid quarterly cash dividends to its shareholders.
The following table sets forth the amount of each dividend paid per share for
each quarter of Colony's operation since January 1, 1993 (figures have been
adjusted to reflect the 100% stock dividend declared by Colony as of July 1,
1995):
<TABLE>
<CAPTION>
================================================================================
1996 1995 1994 1993
(Six Months)
================================================================================
<S> <C> <C> <C> <C>
FIRST QUARTER $.075 $.075 $.065 $.065
- --------------------------------------------------------------------------------
SECOND QUARTER $.075 $.075 $.065 $.065
- --------------------------------------------------------------------------------
THIRD QUARTER N/A $.075 $.065 $.065
- --------------------------------------------------------------------------------
FOURTH QUARTER N/A $.075 $.065 $.065
================================================================================
</TABLE>
Colony Bankcorp, Inc. has paid stock dividends to its shareholders on
several occasions, most recently on June 30, 1995, when it declared a 100% stock
dividend, increasing the number of issued and outstanding shares of its common
stock from 608,055 to 1,216,110.
The Board of Directors of both Colony and Broxton hope future operations of
Colony and its subsidiaries will result in a payment of dividends to
shareholders. However, neither Broxton nor Colony can assure the future payment
of dividends, either in cash or in stock, as the payment of such dividends will
depend on the net earnings and capital ratios of Colony's subsidiary banks which
are more fully discussed under "CERTAIN RISK FACTORS".
45
<PAGE>
SELECTED FINANCIAL INFORMATION
AND PRO FORMA PER SHARE DATA
The following unaudited pro forma condensed financial statements give effect to
the Merger as contemplated herein. The transaction is under the "pooling of
interests" method of accounting. These pro forma financial statements are
presented for illustrative purposes only and, therefore, are not necessarily
indicative of the operating results and financial position that might have been
achieved had the Merger occurred as of an earlier date, nor are they necessarily
indicative of the operating results and financial position which may occur in
the future.
The pro forma condensed balance sheet as of June 30, 1996 gives effect to the
Merger as thought the transaction has been consummated on that date. Pro forma
condensed statements of income for the six-month period ended June 30, 1996 and
for the fiscal years ended December 31, 1995 and 1994 give effect to the
Merger as though the transaction had occurred at the beginning of the earliest
period presented. Certain pro forma adjustments to the pro forma condensed
balance sheet have been made to give effect to the issuance of additional shares
of common stock and to anticipated transaction costs as of June 30, 1996 and for
the six-month period then ended. Additional costs related to the proposed merger
will be recorded in the statements of income as incurred.
The pro forma condensed financial statements are derived from the historical
financial statements of Colony Bankcorp, Inc. and Subsidiaries and Broxton State
Bank as of June 30, 1996 and for the six-month period ended June 30, 1996 and
for the fiscal years ended December 31, 1995 and 1994 and should be read in
conjunction with Colony's and Broxton's historical financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference or contained elsewhere in the
Prospectus/Proxy Statement.
46
<PAGE>
COLONY BANKCORP, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET AT JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Actual
Pro Forma Pro Forma
Colony Broxton Adjustments Combined
------ ------- ----------- --------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and Balances Due From
Depository Institutions $ 7,382 $ 1,134 $ $ 8,516
Federal Funds Sold 8,590 600 9,190
Investment Securities 51,012 6,167 57,179
Loans, Net 197,395 12,327 209,722
Premises and Equipment, net 5,625 603 6,228
Other Assets 9,503 544 10,047
------------ ------------ ------------ -------------
TOTAL ASSETS $ 279,507 $ 21,375 $ 0 $ 300,882
============ =========== ============ =============
LIABILITIES
Deposits $ 251,466 $ 19,189 $ $ 270,855
Notes Payable and Other Borrowed
Money 3,400 0 3,400
Other Liabilities 2,771 125 16(b) 2,912
------------ ------------ ------------ -------------
TOTAL LIABILITIES 257,637 19,314 16 276,967
------------ ------------ ------------ -------------
STOCKHOLDERS' EQUITY
Common Stock 12,911 507 1,088 (a) 14,506
Paid-in-Capital 1,117 1,093 (1,088)(a) 1,122
Retained Earnings 8,140 500 (16)(b) 8,894
Net Unrealized Loss on Securities (568) (39) (607)
------------ ------------ ------------ -------------
TOTAL STOCKHOLDERS' EQUITY 21,870 2,061 (16) 23,915
------------ ------------ ------------ -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 279,507 $ 21,375 $ 0 $ 300,882
============ ============ ============ =============
</TABLE>
See notes and assumptions.
47
<PAGE>
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Colony Broxton Adjustments Combined
------ ------- ----------- --------
(in thousands except per share data)
<S> <C> <C> <C> <C>
Interest Income $ 12,094 $ 863 $ $ 12,957
Interest Expense 6,048 393 6,441
------------ ----------- ------------- ------------
Net Interest Income 6,046 470 6,516
Provision for Loan Losses 1,130 15 1,145
------------ ----------- ------------- ------------
Net Interest Income After
Provision for Loan Losses 4,916 455 5,371
Noninterest Income 1,189 122 1,311
Noninterest Expense 4,070 454 25 (b) 4,549
------------ ----------- ------------- ------------
Interest Before Income Taxes 2,035 123 (25) 2,133
Income Taxes 634 30 (9)(c) 655
------------ ----------- ------------- ------------
Net Income $ 1,401 $ 93 $ (16) 1,478
============ =========== ============= ============
Net Income Per Share of
Common Stock $ 1.09 1.84 1.02
============ =========== ============
Weighted Average Shares
Outstanding 1,291 51 1,451
============ =========== ============
</TABLE>
See notes and assumptions
48
<PAGE>
COLONY BANKCORP, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
COLONY BROXTON ADJUSTMENTS COMBINED
------ ------- ----------- --------
(in thousands except per share data)
<S> <C> <C> <C> <C>
Interest Income $ 24,089 $ 1,655 $ $ 25,744
Interest Expense 11,441 699 12,140
---------------- --------------- ---------------- --------------
Net Interest Income 12,648 956
Provision for Loan Losses 3,216 30 3,246
---------------- --------------- ---------------- --------------
Net Interest Income After
Provision for Loan Losses 9,432 926 10,358
Noninterest Income 2,052 277 2,329
Noninterest Expense 8,420 911 9,331
---------------- --------------- ---------------- --------------
Income Before Income Taxes 3,064 292 3,356
Income Taxes 923 60 983
---------------- --------------- ---------------- --------------
Net Income $ 2,141 232 $ 0 $ 2,373
================ =============== ================ ==============
Net Income Per Share of Common Stock 1.75 4.57 1.72
================ =============== ===============
Weighted Average Shares Outstanding 1,221 50 1,381
================ ============== ===============
</TABLE>
See notes and assumptions.
49
<PAGE>
COLONY BANKCORP, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Colony Broxton Adjustments Combined
------ ------- ----------- --------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Interest Income $ 20,933 $ 1,454 $ $ 22,447
Interest Income 8,995 517 9,512
---------- ---------- ----------- ----------
Net Interest Income 11,998 937 12,935
Provision for Loan Losses 2,080 17 2,097
---------- ---------- ----------- ----------
Net Interest Income After Provision
for Loan Losses 9,918 920 10,838
Noninterest Income 1,764 191 1,955
Noninterest Expense 8,441 865 9.306
---------- ---------- ----------- ----------
Income Before Income Taxes 3,241 246 3,487
Income Taxes 1,022 43 1,065
---------- ---------- ----------- ----------
Net Income $ 2,219 $ 203 $ 0 $ 2,422
========== ========== =========== ==========
Net Income Per Share of Common Stock $ 1.82 3.98 1.76
========== ========== ==========
Weighted Average Shares Outstanding 1,216 50 1,376
========== ========== ==========
</TABLE>
See notes and assumptions.
50
<PAGE>
COLONY BANKCORP, INC.
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The accompanying pro forma financial statements have been prepared to give
effect to the acquisition of Broxton State Bank as if such transaction had
occurred as of the beginning of the period presented for income statement
information and as of the balance sheet date for balance sheet information.
(a) Represents the following adjustments to reflect consideration paid for the
acquisition of Broxton State Bank. The acquisition will be recorded as a
pooling of interests:
<TABLE>
<S> <C>
Consideration Paid (159,547 shares of Colony Bankcorp,
Inc. common stock) 2,061
============
Allocation of Consideration Paid:
Assets acquired:
Cash and balances due from depository institutions 1,134
Federal Funds sold 600
Investment securities 6,167
Loans, net 12,327
Premises and equipment, net 603
Other Assets 544
------------
TOTAL ASSETS ACQUIRED 21,375
============
Liabilities assumed:
Deposits 19,189
Other Liabilities 125
------------
TOTAL LIABILITIES ASSUMED 19,314
============
NET AMOUNT ALLOCATED 2,061
============
Colony Bankcorp, Inc. pro forma combined shares of common
stock outstanding 1,450,657
============
</TABLE>
(b) Represents adjustment to reflect estimated expenses associated with the
acquisition.
(c) Represents adjustment to reflect tax effect of above adjustment.
51
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
(UNAUDITED)
BROXTON STATE BANK
- --------------------------------------------------------------------------------
Broxton's following Unaudited Summary of Operations is presented by
Broxton's management for the periods indicated. The financial information
furnished in the Unaudited Summary of Operations reflects all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the periods covered herein. These comments should be read in conjunction
with the other financial statements appearing elsewhere in the Proxy Statement.
52
<PAGE>
SUMMARY OF OPERATIONS (UNAUDITED) OF BROXTON STATE BANK
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $1,286 $1,008 $1,014 $1,157 $1,455
Interest on Investment
Securities 342 398 448 558 583
Interest on Federal Funds
Sold -0- -0- 17 8 21
Other Interest 27 48 -0- -0- -0-
------ ------ ------ ------ ------
Total Interest Income $1,655 $1,454 $1,479 $1,723 $2,059
====== ====== ====== ====== ======
INTEREST EXPENSE
Interest on Deposits $ 699 $ 517 $ 533 $ 753 $1,157
------ ------ ------ ------ ------
Total Interest Expense $ 699 $ 517 $ 533 $ 753 $1,157
====== ====== ====== ====== ======
Net Interest Income $ 956 $ 937 $ 946 $ 970 $ 902
Provisions for Loan Losses $ 30 $ 17 $ 63 $ 45 $ 64
------ ------ ------ ------ ------
Net Interest Income After
Provisions for Loan Losses $ 926 $ 920 $ 883 $ 925 $ 838
====== ====== ====== ====== ======
OTHER INCOME
Service Charge on Deposit
Accounts $ 135 $ 130 $ 130 $ 132 $ 128
Other Noninterest Income $ 142 $ 60 $ 52 $ 88 $ 101
------ ------ ------ ------ ------
Total Other Income $ 277 $ 190 $ 182 $ 220 $ 229
====== ====== ====== ====== ======
OTHER EXPENSES
Salary and Employee Benefits $ 432 $ 466 $ 417 $ 443 $ 441
Occupancy Expenses of
Bank Premises 146 98 120 124 112
Other Operating Expenses 333 301 325 315 322
------ ------ ------ ------ ------
Total Operating Expenses $ 911 $ 865 $ 862 $ 882 $ 875
====== ====== ====== ====== ======
Net Other Income (Loss) $( 634) $( 675) $( 680) $( 662) $( 646)
Income Before Taxes $ 292 $ 245 $ 203 $ 263 $ 192
Federal Income Tax Expense
(Net of Income Tax Benefits) $ 60 $ 43 $ 33 $ 58 $ 24
====== ====== ====== ====== ======
Net Income (Loss) $ 232 $ 202 $ 170 $ 205 $ 168
Earnings Per Share - Net $ 4.57 $ 3.98 $ 3.36 $ 4.04 $ 3.30
</TABLE>
53
<PAGE>
SUMMARY OF OPERATIONS (UNAUDITED) OF BROXTON STATE BANK
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
6 Months Ended June 30
----------------------------------------
1996 1995
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 680 $ 613
Interest on Investment
Securities 183 180
Interest on Federal Funds
Sold -0- -0-
Other Interest -0- 6
----- -----
Total Interest Income $ 863 $ 799
===== =====
INTEREST EXPENSE
Interest on Deposits $ 393 $ 325
----- -----
Total Interest Expense $ 393 $ 325
===== =====
Net Interest Income $ 470 $ 474
Provisions for Loan Losses $ 15 $ 15
----- -----
Net Interest Income After
Provisions for Loan Losses $ 455 $ 459
===== =====
OTHER INCOME
Service Charge on Deposit
Accounts $ 69 $ 57
Other Noninterest Income $ 53 $ 23
----- -----
Total Other Income $ 122 $ 80
===== =====
OTHER EXPENSES
Salary and Employee Benefits $ 196 $ 205
Occupancy Expenses of
Bank Premises 72 66
Other Operating Expenses 186 164
----- -----
Total Operating Expenses $ 454 $ 435
===== =====
Net Other Income (Loss) $(332) $(355)
Income Before Taxes $ 123 $ 104
Federal Income Tax Expense
(Net of Income Tax Benefits) $ 30 $ 16
===== =====
Net Income (Loss) $ 93 $ 88
Earnings Per Share - Net $1.84 $1.73
</TABLE>
54
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(BROXTON STATE BANK)
The following is a discussion of Broxton State Bank's (Bank) financial condition
at December 31, 1995, and the results of operations for the three year period
ended December 31, 1995. The purpose of this discussion is to focus on
information about the Bank's financial condition and results of operations which
is not otherwise apparent from the audited financial statements included in this
Registration Statement. Reference should be made to those statements and the
selected financial data presented elsewhere in this report for an understanding
of the following discussion and analysis.
BALANCE SHEETS
The Bank's assets increased by 5.19% from 19.7 million to $20.7 million during
the year ended December 31, 1995. The Bank anticipates this moderate growth in
future years and will take measures to insure that safe and adequate levels of
capital are maintained. Assets decreased during the same period in 1994 by .1%
or $200,000. Earning assets, which are comprised of investment securities,
Federal funds sold and loans, increased approximately $1.7 million or 10.41% in
1995, as compared to an increase of $600,000 or 3.68% in 1994.
Deposits are used to fund loan growth and any excess funds are invested
consistent with the Bank's investment policy. The primary focus is to maximize
the Bank's earnings through lending activities. Total loans increased 22.99% or
$2.3 million in 1995, as compared to 6.10% to $600,000 in 1994.
Investment securities and Federal funds sold decreased approximately $500,000
during 1995. These same types of investments remained approximately unchanged in
1994. During 1994 the Bank adopted Statement of Financial Accounting Standards
No 115, "Accounting for Certain Investments in Debt and Equity Securities." For
comparability purposes, assuming SFAS 115 was adopted in 1993, these types of
investments decreased by approximately $150,000 in 1994. The decrease in 1993
was attributable to investing all available funds in higher yielding assets, or
loans. The Bank's investment securities and Federal funds sold are managed in
relation to loan demand and deposit growth. Investments securities are purchased
and are held as available for sale and consist primarily of U.S. Government
backed or sponsored securities.
The growth in assets during 1995 comes primarily from deposits, which increased
3.9% or approximately $700,000 in 1995, as compared to an increase of 1.3% or
approximately $200,000 for the same period in 1993. Time deposits increased
15.75% or $1.4 million in 1995, as compared to 1994 when time deposits increased
2.06% or $200,000. Interest-bearing demand and savings deposits decreased by
12.5% or $900,000 in 1995, as compared to 1993 when interest-bearing demand and
savings deposits increased 5.05% or $3000,000. Non-interest-bearing deposits
increased 7.91% or $200,000 in 1995, a compared to a decrease of 9.37% or
$300,000 in 1994.
55
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The liquidity and capital resources of the Bank are monitored on a periodic
basis by State and Federal regulatory authorities. As determined under
guidelines established by those regulatory authorities, the Bank's liquidity
ratios at December 31, 1995, were considered satisfactory. At that date, the
Bank's short-term investments were adequate to cover any reasonably anticipated
immediate need for funds.
At December 31, 1995, the Bank's capital ratios were considered adequate based
on the Federal Reserve Board's and FDIC's minimum capital requirements. During
1995, the Bank increased its capital by retaining net earnings of $232,000 and
paid dividends of $101,460 which gives a net income of $130,000. At December 31,
1995, total capital of the Bank amounted to approximately $2,000,000.
Selected financial information relating to the Bank's minimum capital
requirements for the periods is as follows:
<TABLE>
<CAPTION>
December 31 Regulatory
-----------
1995 1994 Requirements
---- ---- ------------
<S> <C> <C> <C>
Tier 1 Capital (to risk weighted assets) 16.00% 18.00% 4.00%
Tier 1 Capital (to average assets) 10.00% 9.00% 4.00%
Total capital (to risk weighted assets) 18.00% 19.00% 8.00%
</TABLE>
The purpose of liquidity management is to ensure that there are sufficient cash
flows to satisfy demands for credit, deposit withdrawals and other needs of the
company. Traditional sources of liquidity include asset maturities and growth in
core deposits. A company may achieve its desired liquidity objectives from the
management of assets and liabilities, and through funds provided by operations.
Funds invested in short-term marketable instruments and the continuous maturing
of other earning assets are sources of liquidity from the asset perspective. The
liability base provides sources of liquidity through deposit growth, the
maturity structure of liabilities and accessibility to market sources of funds.
Scheduled loan payments are a relatively stable source of funds, but loan
payoffs and deposit flows fluctuate significantly, being influenced by interest
rates and general economic conditions and competition. The Bank attempts to
price its deposits to meet its asset/liability objectives consistent with local
market conditions.
RESULTS OF OPERATIONS
The Bank's results of operations are determined by its ability to effectively
manage interest income and expense, to minimize loan and investment losses, to
generate non-interest income and to control operating expenses. Since interest
rates are determined by market forces and economic conditions beyond the control
of the Bank, the Bank's ability to generate net interest income is dependent
upon its ability to obtain an adequate net interest spread between the rate paid
on interest-bearing liabilities
56
<PAGE>
and the rate earned on interest-earning assets. The net yield on average
interest-earning assets increased in 1995 to 9.19%, as compared to 8.22% in
1994. The Bank's net interest spread was 4.69% in 1995, as compared to 4.8%
in 1994. Net interest income increased to $956,000 in 1995, as compared to
$937,000 in 1994.
The net yield on average interest-earning assets decreased in 1994 to 8.22%, as
compared to 8.63% in 1993. The Bank's net interest spread was 4.8% in 1994, as
compared to 5.03% in 1993. Net interest income decreased to $937,000, in 1994 as
compared to $946,000 in 1993.
Provision for Loan Losses
- -------------------------
The Bank recorded provisions for loan losses in 1995 and 1994 of $30,000 and
$16,862 respectively. Provision for loan losses was $63,000 in 1993. The
allowance for loan loss amounted to $166,426 or 1.34% of total loans outstanding
at December 31, 1995, as compared to $150,061 or 1.48% of total loans
outstanding at December 31, 1994. Nonaccrual loans totaled $16,144 at December
31, 1995. Other non-performing assets totaled $280,000 and consisted of other
real estate. Based on management's evaluation of the loan portfolio, which
includes a continuing review of past due loan loss experience, current
conditions which may affect the borrower's ability to pay and the underlying
collateral value of the loans, the reserve for loan losses is considered
adequate to absorb possible losses on existing loans that may become
uncollectible.
Other Income
- ------------
Other operating income consists, in part, of service charges on deposit
accounts. Service charges on deposits increased in 1995 by 3.3% to $135,000, as
compared to $130,000 in 1994. Service charges remained relatively constant in
1994 when compared to 1993.
Cash Flows
- ----------
Cash flows for the Bank are of three major types. Cash flows from operating
activities consist primarily of interest and fees received on loans, interest
received on investment securities and Federal funds sold, and cash paid for
interest and operating expenses. Investing activities use cash for the purchase
of investment securities and fixed assets, and to fund loans. Investing
activities also generate cash from the proceeds of matured investment securities
and loan repayments. Cash flows from financing activities generate cash from a
net increase in deposit accounts. Financing activities use cash for the payment
of cash dividends.
For the years ended December 31, 1995, cash flows for operating activities were
provided in the amount of $1.6 million by interest received from loans,
securities and Federal funds. Approximately $277,000 was provided by service
charges, commission and fees and other income. Cash flows used in operating
activities consisted of $654,000 of interest paid on deposits, $432,000 paid out
in salaries and other personnel payments, and $570,000 paid for occupancy
expenses, income taxes and other operating payments. Cash flows of $1.9 million
were provided by the proceeds of sold and matured investment securities. Cash
flows of $502,000 were used to purchase investment securities. Additional cash
flows used in investing activities totaled $2.4 million for the net increase in
loans and
57
<PAGE>
purchases of bank furniture and equipment. Cash flows of $692,000 were provided
by the net increase in deposits. Cash flows were used for the payment of cash
dividends of $101,460. The net effect was a $207,000 decrease in cash
equivalents.
The Bank considers its liquidity and capital resources adequate to meet its
foreseeable short and long-term needs. The Bank anticipates that it will have
sufficient funds available to meet current loan commitments and to fund or
refinance, on a timely basis, its other material commitments and liabilities.
Other than the effect of events as described above, the Bank is not aware of any
other known trends, events or uncertainties that will have or that are
reasonably likely to have a material effect on the Bank's liquidity, capital
resources or operations. The Bank is also not aware of any current
recommendations by the regulatory authorities which, if they were implemented,
would have such an effect.
Effects of Inflation
- --------------------
The impact of inflation on banks differs from its impact on non-financial
institutions. Banks, as financial intermediaries, have assets which are
primarily monetary in nature and which tend to fluctuate in concert with
inflation. A bank can reduce the impact of inflation if it can manage its rate
sensitivity gap. This gap represents the difference between rate sensitive
assets and rate sensitive liabilities. The Bank, through its asset-liability
management, attempts to structure the assets and liabilities and manage the rate
sensitivity gap, thereby seeking to minimize the potential effects of inflation.
For information on the management of the Bank's interest rate sensitivity
assets and liabilities, see the "Asset/Liability Management" section.
Other Expense
- -------------
Non-interest expense increased 5.28% or $46,000 in 1995, as compared to an
increase of .52% or $4,000 in 1994. Salaries and employee benefits represented
47.44%, 53.85%, and 48.43% of non-interest expense for the years ended December
31, 1995, 1994, and 1993, respectively, and accounted for $(34,000) and $49,000
of respective changes. Overall non-interest expense remained stable in 1994.
Other non-interest expense increased in 1995 due to additional depreciation and
expenses associated with the bank renovation and equipment purchases.
Consulting fees also contributed to the increase in 1995 non-interest expense.
Income Tax
- ----------
The Bank had income tax expense of $60,000 in 1995 which represented an
effective tax rate of 20.62% as compared to tax expense of $43,000 in 1994, or
an effective tax rate of 17.60%. Tax expense was $32,000 in 1993, which
represented an effective tax rate of 16.1%. At December 31, 1995, the Bank had
net deferred tax assets of $6,000 consisting primarily of timing differences
related to depreciation and loan loss reserves.
58
<PAGE>
The Bank, as required, adopted Financial Accounting Standards Board Statement
No. 109, "Accounting For Income Taxes," in 1993. The impact of adopting this
standard on the Bank's financial statements was minimal.
Net Income
- ----------
The Bank had net income of $232,000 in 1995, as compared to net income $202,000
in 1994. In 1993, the Bank had net income of $170,000.
Average Total Assets
- --------------------
Average total assets increased by 2.08% or $411,000 in 1995 when compared to
1994, when average assets decreased .32% or $62,000. Average earning assets
increased by 3.56% or $619,000 in 1995 when compared to 1994 and increased 1.49%
or $28,000 in 1994 when compared to 1993. The increase in 1995 and 1994 was due
primarily to an increase in loans.
Average Total Deposits
- ----------------------
Average total deposits increased by 2.88% or $403,000 in 1995 when compared to
1994. Average time deposits accounted for the majority of this increase.
Average total deposits increased by .79% or $139,000 in 1994 when compared to
1993.
Asset/Liability Management
- --------------------------
It is the Bank's objective to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the frame work of
established cash, loan, investment, borrowing and capital policies. The chief
executive officer and Board of Directors are charged with the responsibility for
monitoring policies and procedures that are designed to ensure acceptable
composition of the asset/liability mix. It is the overall philosophy of
management to support asset growth primarily through growth of core deposits of
all categories made by local individuals, partnerships and corporations.
The Bank's asset/liability mix is monitored on a regular basis with a report
reflecting the interest rate sensitive assets and interest rate sensitive
liabilities being prepared and presented to the Board of Directors on a monthly
basis. The objective of this policy is to monitor interest rate sensitive
assets and liabilities so as to minimize the impact of substantial movements in
interest rates on earnings.
The most common way to measure a bank's interest rate exposure is through its
one-year cumulative repricing gap. The one-year gap is calculated by taking all
assets that reprice or mature within one year and subtracting all liabilities
that reprice or mature within one year. The difference between these two
amounts is called the "gap," the amount of either liabilities or assets that
will reprice within the next year without a corresponding asset or liability
repricing within such year.
The following tables, sets forth the distribution of the repricing of the Bank's
earning assets and interest-bearing liabilities as of December 31, 1995, the
interest rate sensitivity gap, the cumulative
59
<PAGE>
December 31, 1995, the interest rate sensitivity gap, the cumulative interest
rate sensitivity gap, the interest rate sensitivity gap ratio and the cumulative
sensitivity gap ratio. The table also sets forth the time periods in which
earning assets and liabilities will mature or may reprice in accordance with
their contractual terms. However, the table does not necessarily indicate the
impact of general interest rate movements on the net interest margin since the
repricing of various categories of assets and liabilities is subject to
competitive pressures and the needs of the Bank's customers. In addition,
various assets and liabilities indicated as repricing within the same period may
in fact, reprice at different times within the same period and at different
rates.
60
<PAGE>
BROXTON STATE BANK
INTEREST SENSITIVITY
DECEMBER 31,1995
<TABLE>
<CAPTION>
Dollars in Thousands
Within 3 months to After
3 months 1 Year 1 Year Total
<S> <C> <C> <C> <C>
Earnings Assets:
Federal Funds Sold $ 1,040 $ 0 $ 0 $ 1,040
Investment Securities 721 1,163 3,645 5,529
Loans 6,653 1,483 4,672 12,808
--------- --------- --------- ---------
Total Rate Sensitive Assets $ 8,414 $ 2,646 $ 8,317 $ 19,377
========= ========= ========= =========
Memo: RSA 1-5 years = $6,256; RSA over 5 years = $2,061
Interest-bearing Liabilities
NOW and Savings $ 2,750 $ 0 $ 0 $ 2,750
Insured Money Market 3,022 0 0 3,022
Certificates, less than $100,000 2,190 3,930 1,725 7,845
Certificates, $100,000 and over 409 1,471 200 2,080
--------- --------- --------- ----------
Total Interest-bearing Liabilities $ 8,371 $ 5,401 $ 1,925 $ 15,697
========= ========= ========= ==========
Memo: RSL 1-5 years = $1,343; RSL over 5 years = $582
Interest Rate Sensitive Gap $ 43 $ (2,755) $ 6,392 $ 3,680
========= ========= ========= ==========
Cumulative Rate Sensitivity Gap $ 43 $ (2,712) $ 3,680
========= ========= =========
1.01 0.49 4.32
Interest rate sensitivity gap ratio ========= ========= =========
Cumulative interest rate sensitivity gap ratio 1.01 0.80 1.23
========= ========= =========
</TABLE>
Memos: Gap 1-5 years = $4,913; Gap over 5 years = $1,479
Cumulative Gap 1-5 years = $2,201; Cumulative Gap over 5 years =
$3,680
Gap Ratio 1-5 years = 4.66; Gap Ratio over 5 years = 3.54
Cumulative Gap Ratio 1-5 years = 1.15; Cumulative Gap Ratio over 5
years = 1.23
61
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(BROXTON STATE BANK)
The following is a discussion of Broxton State Bank's (Bank) financial condition
at June 30, 1996, and the results of operations for the two six months ended
June 30, 1996 and 1995. The purpose of this discussion is to focus on
information about the Bank's financial condition and results of operations which
is not otherwise apparent from the compiled financial statements included in
this Registration Statement. Reference should be made to those statements and
the selected financial data presented elsewhere in this report for an
understanding of the following discussion and analysis.
BALANCE SHEETS
The Bank's assets increased by 3.7% from $20.6 million to $21.3 million during
the six months ended June 30, 1996. The Bank anticipates this moderate growth in
future years and will take measures to insure that safe and adequate levels of
capital are maintained. Assets increased during the same period in 1995 by 2.2%
or $425,000. Earning assets, which are comprised of investment securities,
Federal funds sold and loans, increased approximately $870,000 or 3.60% during
the six month period in 1996, as compared to an increase of $330,000 or 2.0%
for the same period in 1995.
Deposits are used to fund loan growth and any excess funds are invested
consistent with the Bank's investment policy. The primary focus is to maximize
the Bank's earnings through lending activities. Total loans increased .38% or
$40,000 during the six month period in 1996, as compared to 11.5% or $1.2
million for the same period in 1995.
Investment securities and Federal funds sold increased approximately $630,000
during the six month period in 1996. These same types of investments decreased
approximately $820,000 for the same period in 1995. The Bank's investment
securities and Federal funds sold are managed in relation to loan demand and
deposit growth; therefore, fluctuations occur between these earning assets
frequently based on loan demand. Investments securities are purchased and are
held as available for sale and consist primarily of U.S Government backed or
sponsored securities.
The growth in assets during the six month period in 1996 comes primarily from
deposits, which increased 4.3% or approximately $790,000, as compared to an
increase of 1.8% or approximately $325,000 for the same six month period in
1995. A majority of the increase in 1996 is attributed to an increase in time
deposits coupled with a decrease in non-interest bearing demand deposits. The
increase for the same period in 1995 is due primarily to an increase in
non-increase bearing deposits.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity and capital resources of the Bank are monitored on a periodic
basis by State and Federal regulatory authorities. As determined under
guidelines established by those regulatory authorities, the Bank's liquidity
ratios at June 30, 1996, were considered satisfactory. At that date, the Bank's
62
<PAGE>
short-term investments were adequate to cover any reasonably anticipated
immediate need for funds.
At June 30, 1996, the Bank's capital ratios were considered adequate based on
the Federal Reserve Board's and FDIC's minimum capital requirements. During the
six month period in 1996, the Bank increased its capital by retaining net
earnings of $93,000. At June 30, 1996, total capital of the Bank amounted to
$2.06 million.
Selected financial information relating to the Bank's minimum capital
requirements for the periods is as follows:
<TABLE>
<CAPTION>
June 30 Regulatory
-----------
1996 1995 Requirements
------ ------ ------------
<S> <C> <C> <C>
Tier 1 Capital (to risk weighted assets) 16.00% 16.00% 4.00%
Tier 1 Capital (to average assets) 10.00% 10.00% 4.00%
Total capital (to risk weighted assets) 18.00% 18.00% 8.00%
</TABLE>
The purpose of liquidity management is to ensure that there are sufficient cash
flows to satisfy demands for credit, deposit withdrawals and other needs of the
company. Traditional sources of liquidity include asset maturities and growth
in core deposits. A company may achieve its desired liquidity objectives from
the management of assets and liabilities, and through funds provided by
operations. Funds invested in short-term marketable instruments and the
continuous maturing of other earning assets are sources of liquidity from the
asset perspective. The liability base provides sources of liquidity through
deposit growth, the maturity structure of liabilities and accessibility to
market sources of funds.
Scheduled loan payments are a relatively stable source of funds, but loan
payoffs and deposit flows fluctuate significantly, being influenced by interest
rates and general economic conditions and competition. The Bank attempts to
price its deposits to meet its asset/liability objectives consistent with local
market conditions.
RESULTS OF OPERATIONS
The Bank's results of operations are determined by its ability to effectively
manage interest income and expense, to minimize loan and investment losses, to
generate non-interest income and to control operating expenses. Since interest
rates are determined by market forces and economic conditions beyond the
control of the Bank, the Bank's ability to generate net interest income is
dependent upon its ability to obtain an adequate net interest spread between the
rate paid on interest-bearing liabilities and the rate earned on
interest-earning assets. The net yield on average interest-earning assets
increased for the six month period ended June 30, 1996, to 9.10%, as compared to
9.38% for the same period in 1995. The Bank's net interest spread was 5.40% for
the six months ended June 30, 1996, as compared to 5.9% for the same period in
1995. Net interest income remained relatively constant for the six months ended
June 30, 1996 and 1995.
63
<PAGE>
Provision for Loan Losses
- -------------------------
The Bank recorded provisions for loan losses for the six months ended June 30,
1996 and 1995, of $15,000 and $15,000, respectively. The allowance for loan loss
amounted to $165,371 or 1.34% of total loans outstanding at June 30, 1996, as
compared to $163,429 or 1.49% of total loans outstanding at June 30,1995.
Nonaccurual loans totaled $139,000 at June 30, 1996. Other non-performing assets
totaled $235,000 and consisted of other real estate. Based on management's
evaluation of the loan portfolio, which includes a continuing review of past due
loan loss experience, current conditions which may affect the borrower's
ability to pay and the underlying collateral value of the loans, the reserve
for loan losses is considered adequate to absorb possible losses on existing
loans that may become uncollectible.
Other Income
- ------------
Other operating income consists,in part, of service charges on deposit accounts.
Service charges on deposits increased for the six months ended June 30, 1996, by
19.3% to 68,000, as compared to $57,000 for the same period in 1995.
Cash Flows
- ----------
Cash flows for the Bank are of three major types.Cash flows from operating
activities consist primarily of interest and fees recieved on loans, interest
recieved on investment securities and Federal funds sold, and cash paid for
interest and operating expenses. Investing activities use cash for the purchase
of investment securities and fixed assets, and to fund loans. Investing
activities also generate cash from the proceeds of matured investment securities
and loan repayments. Cash flows from financing activities generate cash from a
net increase in deposit accounts. Financing activities use cash for the payment
of cash dividends.
For the six months ended June 30, 1996, cash flows for operating activities
provided an increase in net cash flows of $85,000 and a decrease for the same
period in 1995 of $143,305. Cash flows used by investing activities during the
six months ended June 30, 1996, were approximately $965,000 which consisted
primarily of investments and certificate of deposit purchases. The net cash flow
used by investing activities was $110,000 during the same period in 1995 and
consisted primarily of the increase in loans of approximated $1.1 million
coupled by proceeds from redemption of securities available for sale. Net cash
flows provided by financing activities for the six months ended June 30, 1996
and 1995, amounted to $985,000 and 325,000., respectively. These increasese were
due to an increase in overall deposits accounts.
The Bank considers its liquidity and capital resourses adequate to meet its
foreseeable short and long-term needs.The Bank anticipates that it will have
sufficiet funds available to meet current loan commitments and to fund or
fincance, on a timely basis,its other material commitments and liabilities.
64
<PAGE>
Other than the effect of events as described above, the Bank is not aware of any
other known trends, events or uncertainties that will have or that are
reasonably likely to have a material effect on the Bank's liquidity, capital
resources or operations. The Bank is also not aware of any current
recommendations by the regulatory authorities which, if they were implemented,
would have such an effect.
Effects of Inflation
- --------------------
The impact of inflation on banks differs from its impact on non-financial
institutions. Banks, as financial intermediaries, have assets which are
primarily monetary in nature and which tend to fluctuate in concert with
inflation. A bank can reduce the impact of inflation if it can manage its rate
sensitivity gap. This gap represents the difference between rate sensitive
assets and rate sensitive liabilities. The Bank, through its asset-liability
management, attempts to structure the assets and liabilities and manage the rate
sensitivity gap, thereby seeking to minimize the potential effects of inflation.
For information on the management of the Bank's interest rate sensitivity assets
and liabilities, see the "Asset/Liability Management" section.
Other Expense
- -------------
Non-interest expense increased 4.3% or $19,000 for the six months ended June 30,
1996. Overall non-interest expense remained stable for the same period in 1995.
Income Tax
- ----------
The Bank had income tax expense of $30,000 for the six months ended June
30,1996, which represented an effective tax rate of 24.31%, as compared to tax
expense of $16,163 for the same period in 1995, or an effective tax rate of
15.56%. At June 30, 1996, the Bank had net deferred tax assets of $6,000
consisting primarily of timing differences related to depreciation and loss
reserves.
The Bank, as required, adopted Financial Accounting Standards Board Statement
No.109, "Accounting For Income Taxes" in 1993. The impact of adopting this
standard on the Bank's financial statements was minimal.
Net Income
- ----------
The Bank had net income of $93,000 for the six months ended June 30, 1996, as
compared to net income $87,000 for the the same period in 1995.
Average Total Assets
- --------------------
Average total assets increased by 5.90% or $1.2 million for the six months ended
June 30, 1996, when compared to the same period in 1995. The increase was due
primarily to an increase in loans.
65
<PAGE>
Average Total Deposits
- ----------------------
Average total deposits increased by 5.16% or $920,000 for the six months ended
June 30, 1996, when compared to the same period in 1995. The increase was due
primarily to an increase in time deposits.
Asset/Liability Management
- --------------------------
It is the Bank's objective to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the frame work of
established cash, loan, investment, borrowing and capital policies. The chief
executive officer and the Board of Directors are charged with the responsibility
for monitoring policies and procedures that are designed to ensure acceptable
composition of the asset/liability mix. It is the overall philosophy of
management to support asset growth primarily through growth of core deposits of
all categories made by local individuals, partnerships and corporations.
The Bank's asset/liability mix is monitored on a regular basis with a report
reflecting the interest rate sensitive assets and interest rate sensitive
liabilities being prepared and presented to the Board of Directors on a monthly
basis. The objective of this policy is to monitor interest rate sensitive assets
and liabilities so as to minimize the impact of substantial movements in
interest rates on earnings.
The most common way to measure a bank's interest rate exposure is through its
one-year cumulative repricing gap. The one-year gap is calculated by taking all
assets that reprice or mature within one year and subtracting all liabilities
that reprice or mature within one year. The difference between these two amounts
is called the "gap," the amount of either liabilities or assets that will
reprice within the next year without a corresponding asset or liability
repricing within such year.
The following tables, sets forth the distribution of the repricing of the Bank's
earning assets and interest-bearing liabilities as of June 30, 1996, the
interest rate sensitivity gap, the cumulative interest rate sensitivity gap, the
interest rate sensitivity gap ratio and the cumulative sensitivity gap ratio.
The table also sets forth the time periods in which earning assets and
liabilities will mature or any reprice in accordance with their contractual
terms. However, the table does not necessarily indicate the impact of general
interest rate movements on the net interest margin since the repricing of
various categories of assets and liabilities is subject to competitive pressures
and the needs of the Bank's customers. In addition, various assets and
liabilities indicate as repricing within the same period may in fact, reprice at
different times within the same period and at different rates.
66
<PAGE>
BROXTON STATE BANK
INTEREST SENSITIVITY
JUNE 30, 1996
<TABLE>
<CAPTION>
Dollars in Thousands
Within 3 Months to After
3 Months 1 Year 1 Year Total
<S> <C> <C> <C> <C>
Earnings Assets:
Federal Funds Sold $ 1,331 $ 0 $ 0 $ 1,331
Investment Securities 1,626 1,298 3,294 6,218
Loans 6,633 1,340 4,854 12,827
--------- --------- --------- ---------
Total Rate Sensitive Assets $ 9,590 $ 2,638 $ 8,148 $ 20,376
========= ========= ========= =========
Memo: RSA 1-5 years = $6,073; RSA over 5 years = $2,076
Interest-bearing Liabilities
NOW and Savings $ 2,906 $ 0 $ 0 $ 2,906
Insured Money Market 3,024 0 0 3,024
Certificates, less than $100,00 2,014 5,011 1,633 8,658
Certificates, $100,000 and over 908 1,209 300 2,417
--------- --------- --------- ---------
Total Interest-bearing Liabilities $ 8,852 $ 6,220 $ 1,933 $ 17,005
========= ========= ========= =========
Memo: RSL 1-5 years = $1,312; RSL over 5 years = $621
Interest Rate Sensitivity Gap $ 738 $ (3,582) $ 6,215 $ 3,371
========= ========= ========= =========
Cumulative Interest rate sensitivity gap $ 738 $ (2,844) $ 3,371
========= ========= =========
Interest rate sensitivity gap ratio 1.08 0.42 4.22
========= ========= =========
Cumulative Interest rate sensitivity gap ratio 1.08 0.81 1.20
========= ========= =========
</TABLE>
Memos: Gap 1-5 years =$4,761; Gap over 5 years = $1,455 Cumulative Gap 1-5
years = $1,916; Cumulative Gap over 5 years = $3,371 Gap Ratio 1-5
years = 4.63; Gap Ratio over 5 years = 3.34 Cumulative Gap Ratio 1-5
years = 1.12; Cumulative Gap Ratio over 5 years = 1.20
67
<PAGE>
________________________________________________________________________________
BROXTON STATE BANK
SELECTED HISTORICAL FINANCIAL DATA
________________________________________________________________________________
68
<PAGE>
Broxton State Bank
Selected Historical Financial Data
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
----------------------------- -------------------------------------
1996 1995 1995 1994
----------------------------- -------------------------------------
unaudited
<S> <C> <C> <C> <C>
Income Statement Data:
Total interest income $862,826 $799,009 $1,655,044 $1,454,299
Total interest expense 392,991 325,198 698,797 517,202
Net interest income 469,835 473,811 956,247 937,097
Provision for loan losses 15,000 15,000 30,000 16,862
Net interest income after loan
loss provision 454,835 458,811 926,247 920,235
Total noninterest income excluding
security gains (losses) 122,338 72,432 269,269 189,886
Security gains (losses) 0 7,420 7,420 566
Total noninterest expense 453,766 434,764 911,331 865,656
Income tax expense 30,000 16,163 60,000 43,219
Net income 93,407 87,736 231,605 201,812
Per Share Data:
Net income $1.84 $1.73 $4.57 $3.98
Cash dividends 0.00 0.00 2.00 2.00
Book value 40.63 38.31 39.72 33.65
Other Information:
Average number of shares
outstanding 50,730 50,730 50,730 50,730
Statement of Condition Data(Period End):
Total assets $21,434,564 $20,085,198 20,679,814 19,659,129
Securities 6,426,332 6,090,812 5,536,680 6,677,117
Loans, net of unearned income 12,326,871 11,138,304 12,452,003 10,139,317
Total deposits 19,188,899 18,035,325 18,402,955 17,710,606
Long-term borrowings 0 0 0 0
Stockholders' equity 2,061,209 1,943,649 2,015,104 1,707,041
Performance Ratios:
Return on average assets (1) 0.90% 0.86% 1.15% 1.02%
Return on average stockholders'
equity (1) 9.33% 8.87% 12.44% 11.59%
Net interest margin (1) 5.44% 5.93% 4.69% 4.80%
Efficiency (2) 79.34% 85.58% 77.56% 83.11%
Dividend payout 0.00% 0.00% 43.81% 50.27%
Asset Quality Ratios:
Net charge-offs to average loans,
net of unearned income (1) 0.00% 0.00% 0.00% 0.00%
Problem assets to net loans and
other real estate (3) 0.00% 0.00% 0.00% 0.00%
Nonperforming assets to net loans
and other real estate (4) 0.00% 0.00% 0.00% 0.00%
Allowance for loan losses to loans,
net of unearned income 0.00% 0.00% 0.00% 0.00%
Allowance for loan losses to
nonperforming assets (4) 44.17% 35.70% 46.75% 37.14%
Liquidity and Capital Ratios:
Average stockholders' equity to
average assets 9.65% 9.71% 9.23% 8.81%
Average loans to average deposits 63.04% 64.74% 62.56% 55.57%
Total capital(to risk weighted assets 18.00% 17.00% 18.00% 19.00%
Tier 1 capital(to risk weighted assets 16.00% 16.00% 16.00% 18.00%
Tier 1 capital(to average assets) 10.00% 10.00% 10.00% 9.00%
<CAPTION>
------------------------------------------------
1993 1992 1991
------------------------------------------------
<S> <C> <C> <C>
Income Statement Data:
Total interest income $1,478,680 $1,723,276 $2,059,407
Total interest expense 532,939 753,080 1,157,432
Net interest income 945,741 970,196 901,975
Provision for loan losses 63,000 45,000 64,000
Net interest income after loan
loss provision 882,741 925,196 837,975
Total noninterest income excluding
security gains (losses) 159,195 204,597 188,189
Security gains (losses) 22,512 15,114 40,517
Total noninterest expense 861,199 882,360 875,390
Income tax expense 32,771 57,727 23,736
Net income 170,478 204,820 167,555
Per Share Data:
Net income $3.36 $4.04 $3.30
Cash dividends 2.00 2.00 1.50
Book value 35.02 33.65 31.62
Other Information:
Average number of shares outstanding 50,730 50,730 50,730
Statement of Condition Data(Period End):
Total assets $19,857,325 $19,409,939 $21,503,746
Securities 6,853,106 7,556,865 8,003,768
Loans, net of unearned income 9,414,748 8,688,287 10,659,178
Total deposits 17,477,498 17,500,296 19,664,969
Long-term borrowings 0 0 0
Stockholders' equity 1,776,325 1,707,307 1,603,947
Performance Ratios:
Return on average assets (1) 0.87% 1.00 1.56%
Return on average stockholders' equity (1) 9.79% 12.37 20.89%
Net interest margin (1) 5.03% 4.73 3.94%
Efficiency (2) 83.88% 81.54 79.77%
Dividend payout 59.52% 49.54 45.41%
Asset Quality Ratios:
Net charge-offs to average loans,
net of unearned income (1) 0.00% 0.00 0.00%
Problem assets to net loans and
other real estate (3) 0.00% 0.00 0.00%
Nonperforming assets to net loans
and other real estate (4) 0.00% 0.00 0.00%
Allowance for loan losses to loans,
net of unearned income 0.00% 0.00 0.00%
Allowance for loan losses to
nonperforming assets (4) 39.78% 34.00% 24.24%
Liquidity and Capital Ratios:
Average stockholders' equity to
average assets 8.87% 8.09% 7.46%
Average loans to average deposits 51.76% 52.06% 54.20%
Total capital(to risk weighted assets 19.00% 18.00% 15.00%
Tier 1 capital(to risk weighted assets 17.00% 17.00% 14.00%
Tier 1 capital(to average assets) 9.00% 9.00% 8.00%
</TABLE>
(1) Interim period ratios are annualized
(2) Noninterest expenses divided by the sum of net interest income (taxable-
equivalent basis) and noninterest income and noninterest income net of
gains (losses) from security transactions
(3) Problem assets include loans on a nonaccrual basis, restructured loans, and
foreclosed properties
(4) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days of more past due, and foreclosed properties.
(5) The required minimum Tier 1 and total risk-based capital ratios are 4.0%
and 8.0%, respectively. The minimum leverage ratio of Tier 1 capital to
total adjusted assets is 3.0% to 5.0%, depending on the risk profile of the
institution and other factors.
69
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
OF COLONY BANKCORP, INC.
(Unaudited)
- --------------------------------------------------------------------------------
Colony's following Unaudited Summary of Operations is presented for
the periods indicated. The following Unaudited Summary of Operations of Colony
is presented for the periods indicated. These comments should be read in
conjunction with the other financial statements appearing elsewhere in the Proxy
Statement.
70
<PAGE>
SUMMARY OF OPERATIONS (UNAUDITED) OF COLONY BANKCORP, INC.
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $20,763 $18,223 $17,265 $18,107 $17,685
Interest on Investment
Securities 2,617 2,400 2,332 2,422 3,355
Interest on Federal Funds
Sold 581 252 281 265 604
Dividends on Other
Investments 97 75 -0- -0- -0-
Interest on Deposits in Banks 31 43 194 112 136
------- ------- ------- ------- -------
Total Interest Income $24,089 $20,993 $20,072 $20,906 $21,780
======= ======= ======= ======= =======
INTEREST EXPENSE
Interest on Deposits $11,105 $ 8,672 $ 8,917 $10,349 $13,419
Fed Funds Purchased $ 33 $ 88 $ 13 $ 28 $ 28
Other Borrowed Money $ 303 $ 235 $ 227 $ 259 $ 274
------- ------- ------- ------- -------
Total Interest Expense $11,441 $ 8,995 $ 9,157 $10,636 $13,721
======= ======= ======= ======= =======
Net Interest Income $12,648 $11,998 $10,915 $10,270 $ 8,059
Provisions for Loan Losses $ 3,216 $ 2,080 $ 4,089 $ 3,679 $ 1,245
------- ------- ------- ------- -------
Net Interest Income After
Provisions for Loan Losses $ 9,432 $ 9,918 $ 6,826 $ 6,591 $ 6,814
======= ======= ======= ======= =======
OTHER INCOME
Service Charge on Deposit
Accounts $ 1,457 $ 1,427 $ 1,303 $ 1,180 $ 1,140
Other Service Charges,
Commissions and Fees 137 102 160 153 131
Gains on Sale of
Securities (Losses) 42 8 11 566 71
Other Noninterest Income $ 416 $ 227 $ 135 $ 187 $ 200
------- ------- ------- ------- -------
Total Other Income $ 2,052 $ 1,764 $ 1,609 $ 2,086 $ 1,542
======= ======= ======= ======= =======
OTHER EXPENSES
Salary and Employee Benefits $ 4,196 $ 4,065 $ 3,584 $ 3,260 $ 2,960
Occupancy Expenses of
Bank Premises 1,033 1,202 1,031 963 972
Other Operating Expenses 3,191 3,174 3,102 3,059 2,450
------- ------- ------- ------- -------
Total Operating Expenses $ 8,420 $ 8,441 $ 7,717 $ 7,282 $ 6,382
======= ======= ======= ======= =======
Net Other Income (Loss) $(6,368) $(6,677) $(6,108) $(5,196) $(4,840)
======= ======= ======= ======= =======
Income Before Taxes $ 3,064 $ 3,241 $ 718 $ 1,395 $ 1,974
Federal Income Tax Expense
(Net of Income Tax Benefits) $ 923 $ 1,022 $ 121 $ 291 $ 488
======= ======= ======= ======= =======
Net Income (Loss) $ 2,141 $ 2,219 $ 597 $ 1,104 $ 1,486
Earnings Per Share - Net $1.75 $1.82 $.49 $.91 $1.25
</TABLE>
71
<PAGE>
SUMMARY OF OPERATIONS (UNAUDITED) OF COLONY BANKCORP,INC.
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
6 Months Ended June 30
-----------------------
1996 1995
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $10,256 $ 9,988
Interest on Investment
Securities 1,368 1,323
Interest on Federal Funds
Sold 416 229
Dividends on Other Investments 50 48
Interest on Deposits in Banks 4 33
------- -------
Total Interest Income $12,094 $11,621
======= =======
INTEREST EXPENSE
Interest on Deposits $ 5,900 $ 5,021
Federal Funds Purchased 3 29
Other Borrowed Money 145 162
------- -------
Total Interest Expense $ 6,048 $ 5,212
======= =======
Net Interest Income $ 6,046 $ 6,409
Provisions for Loan Losses $ 1,130 $ 1,187
------- -------
Net Interest Income After
Provisions for Loan Losses $ 4,916 $ 5,222
======= =======
OTHER INCOME
Service Charge on Deposit
Accounts $ 801 $ 758
Other Service Charges,
Commissions and Fees 258 203
Gains on Sale of Securities
(Losses) 3 18
Other Noninterest Income $ 160 $ 131
------- -------
Total Other Income $ 1,222 $ 1,110
======= =======
OTHER EXPENSES
Salary and Employee Benefits $ 2,265 $ 2,180
Occupancy Expenses of
Bank Premises 498 524
Other Operating Expenses 1,340 1,550
------- -------
Total Operating Expenses $ 4,103 $ 4,254
======= =======
Net Other Income (Loss) $(2,881) $(3,144)
======= =======
Income Before Taxes $ 2,035 $ 2,078
Federal Income Tax Expense
(Net of Income Tax Benefits) $ 634 $ 681
======= =======
Net Income (Loss) $ 1,401 $ 1,397
Earnings Per Share - Net $1.09 $1.15
</TABLE>
72
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1995 AND 1994 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1995 (COLONY BANKCORP, INC.)
- --------------------------------------------------------------------------------
DECEMBER 31, 1995 AND 1994
--------------------------
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. During
1995, Colony was successful in obtaining deposits as evidenced by the fact that
average deposits increased by 4.91 percent to $236,899,000 in 1995 from average
deposits of $225,807,000 in 1994.
Colony's liquidity position remained acceptable in 1995. Average liquid
assets (cash and amounts due from banks, interest-bearing deposits in other
banks, funds sold and investment securities) represented 26.82 percent of
average deposits in 1995 as compared to 25.83 percent in 1994. Average loans
represented 79.09 percent of average deposits in 1995 as compared to 79.56
percent in 1994. Average interest-bearing deposits were 87.91 percent of
average earning assets in 1995 as compared to 88.74% percent in 1994.
Colony satisfies most of its capital requirements through retained
earnings. During 1995, retained earnings provided $1,770,000 of increase in
equity. Additionally, equity had an increase of $1,035,000 resulting from the
change during the year in unrealized losses on securities available for sale,
net of taxes and an increase of $1,500,000 resulting form proceeds realized form
a stock offering in 1995. Thus, total equity increased by a net amount of
$4,305,000 in 1995. In 1994, growth in equity was provided by retained earnings
of $1,903,000.
As of December 31, 1995, total capital of Colony amounted to approximately
$21,055,000. As of December 31, 1995, there were no outstanding commitments for
any major capital expenditures.
The Federal Reserve Board and the FDIC have issued risk-based capital
guidelines for U.S. banking organizations. The objective of these efforts was
to provide a more uniform capital framework
73
<PAGE>
that is sensitive to differences in risk assets among banking organizations.
The guidelines define a two-tier capital framework. Tier 1 capital consists of
common stock and qualifying preferred stockholders' equity less goodwill. Tier
2 capital consists of certain convertible, subordinated and other qualifying
term debt and the allowance for loan losses up to 1.25 percent of risk-weighted
assets. Colony has no Tier 2 capital other than the allowance for loan losses.
Using the capital requirements in effect at the end of 1995, the Tier 1
ratio as of December 31, 1995 was 9.96 percent and total Tier 1 and 2 risk-based
capital was 11.22 percent. Both of these measures compare favorably with the
regulatory minimums of 4 percent for Tier 1 and 8 percent for total risk-based
capital. Colony's leverage ratio was 7.50 percent as of December 31, 1995 which
exceeds the required leverage ratio standard of 4 percent.
In 1995, Colony paid annual dividends of $ .30 per share. The dividend
payout ratio, defined as dividends per share divided by net income per share,
was 17.14 percent in 1995 as compared with 14.25 percent for 1994.
As of December 31, 1995, management was not aware of any recommendations by
regulatory authorities which, if they were to be implemented, would have a
material effect on Colony'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 Colony's liquidity, capital resources and operations.
Results of Operations
- ---------------------
Colony'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 Colony, 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 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.
Interest Rate Sensitivity
- -------------------------
74
<PAGE>
The net interest margin remained constant at 5.24 percent in 1995 as
compared to 5.24 percent in 1994. Net interest income increase by 5.28 percent
to $12,772,000 in 1995 from $12,131,000 in 1994 on an increase in average
earning assets to $243,648,000 in 1995 from $231,420,000 in 1994 with an
interest spread of 4.69 percent in 1995 as compared to 4.85 percent in 1994.
Average loans increased by $7,711,000 or 4.29 percent, average funds sold
increased by $4,121,000 or 68.24 percent, average investment securities
increased by $769,000 or 1.72 percent and average interest-bearing deposits in
other banks decreased by $373,000 or 39.55 percent, resulting in a net increase
in average earning assets of $12,228,000 or 5.28 percent.
The net increase in average earning assets was funded by a net increase in
average deposits of 4.91 percent to $236,899,000 in 1995 from $225,807,000 in
1994. Average interest-bearing deposits increased by 4.30 percent to
$214,181,000 in 1995 from $205,352,000 in 1994 while average noninterest-bearing
deposits increased by 11.06 percent to $22,718,000 in 1995 from $20,455,000 in
1994. Noninterest-bearing deposits represented 9.59 percent of total deposits
in 1995 as compared to 9.06 percent in 1994.
The net interest margin increased by 42 basis points to 5.24 percent in
1994 as compared to 4.82 percent in 1993. Net interest income increased by 9.80
percent to $12,131,000 in 1994 from $11,048,000 in 1993 on a nominal increase in
average earning assets to $231,420,000 in 1994 from $229,279,000 in 1993 with an
interest spread of 4.85 percent in 1994 as compared to 4.47 percent in 1993.
Average loans increased by $7,649,000 or 4.45 percent, average funds sold
decreased by $3,328,000 or 35.53 percent, average investment securities
increased by $2,073,000 of 4.85 percent and average interest-bearing deposits in
other banks decreased by $4,253,000 or 81.85 percent, resulting in a net
increase in average earning assets of $2,141,000 or 0.93 percent.
The net increase in average earning assets was funded by a net increase in
average deposits of 1.25 percent to $225,807,000 in 1994 from $223,024,000 in
1993. Average interest-bearing deposits decreased by 0.87 percent to
$205,352,000 in 1994 from $207,156,000 in 1993 while average noninterest-bearing
deposits increased by 28.91 percent to $20,455,000 in 1994 from $15,868,000 in
1993. Noninterest-bearing deposits represented 9.06 percent of total deposits
in 1994 as compared to 7.11 percent in 1993.
The allowance for loan losses represents a reserve for potential losses in
the loan portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on nonaccruing, past due and other loans that management believes
require attention.
75
<PAGE>
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 $3,216,050 in
1995 as compared to a provision of $2,080,500 in 1994 representing an increase
in the provision of $1,135,550 or 54.58 percent. Net loan charge-offs
represented 73.38 percent of the provision for loan losses in 1995 as compared
to 81.10 percent in 1994. The increase in loan charge-offs in 1995 resulted
from the deterioration of the quality of the collateral held as security on
loans and the ability of the creditors to service their debt. During 1995, it
became evident that the collateral value of one commercial line and one
agricultural line had deteriorated to the point that management determined it
prudent to charge off a considerable portion of the line. The charge-off on
these two lines represented 47.57 percent of the net charge-offs for 1995. Net
loan charge-offs for 1995 represented 1.26 percent of average loans outstanding
as compared to 0.94 percent for 1994. As of December 31, 1995, the allowance
for loan losses was 2.06 percent of total loans outstanding as compared to an
allowance for loan losses of 1.75 percent of total loans outstanding as of
December 31, 1994. The determination of the reserve rests upon management's
judgment about factors affecting loan quality and assumptions about the economy.
Management considers the year-end allowance for loan losses adequate to cover
potential losses in the loan portfolio.
Noninterest income consists principally of service charges on deposit
accounts. Service charges on deposit accounts amounted to $1,457,000 in 1995 as
compared to $1,427,000 in 1994 or an increase of 2.10 percent. The increase in
1995 is compared to an increase of 9.52 percent in 1994 when service charges
increased to $1,427,000 in 1994 from $1,303,000 in 1993. All other noninterest
income increased by $259,000 to $596,000 in 1995 from $337,000 in 1994 as
compared to an increase of $32,000 to $337,000 in 1994 as compared to $305,000
in 1993. The significant increase in noninterest income of $259,000 in 1995 is
attributable to recovery of embezzled funds by a former employee of $74,000, an
increase in securities gains of $34,000 and an increase in other commissions,
fees and other income of $151,000. There was no significant change in all other
noninterest income for 1994 compared to 1993.
Noninterest expense decreased by 0.24 percent to $8,420,000 in 1995 from
$8,441,000 in 1994. The significant decrease in noninterest expense was a
decreased of $237,000 in FDIC premiums which was offset by an increase in
salaries and employee benefits of $130,000 and an increase in other real estate
expenses of $137,000 resulting from losses and other expenses incurred in the
disposition of other real estate owned. All other expenses in the aggregate
remained virtually unchanged.
Noninterest expense increased by 9.38 percent to $8,441,000 in 1994 from
$7,717,000 in 1993. Salaries and employee benefits
76
<PAGE>
increased by 13.45 percent to $4,066,000 in 1994 from $3,584,000 in 1993, due
primarily to an increase in the number of full-time employees from 104 in 1993
to 124 in 1994. All other noninterest expense increased by 5.86 percent to
$4,375,000 in 1994 from $4,133,000 in 1993. The only significant increase in
noninterest expense other than salaries and employee benefits was an increase of
$215,000 in other real estate expense resulting from losses and other expenses
incurred in the disposition of other real estate owned.
Income before taxes decreased by $177,000 to $3,064,000 in 1995 from
$3,241,000 with significant changes being an increase in provision for loan
losses of $1,135,000 in 1995 as compared to 1994, an increase in net interest
income of $650,000 in 1995 as compared to 1994 and a decrease in noninterest
expenses net of noninterest income of $309,000 in 1995 as compared to 1994.
Income taxes as a percent of income before taxes decreased by 4.44 percent to
30.13 percent in 1995 from 31.53 percent in 1994.
The Bank of Fitzgerald is operating under a Memorandum of Understanding
originated on October 20, 1992 and revised on October 24, 1995, which requires
that the Bank maintain specified minimum capital ratios and minimum reserve for
loan losses. The Bank of Fitzgerald was in substantial compliance with the
provisions of the Memorandum of Understanding as of December 31, 1995.
JUNE 30, 1996 AND 1995
----------------------
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, Colony 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 percent to $8,590,000 at June
30, 1996 from $24,325,000 at December 31, 1995.
Colony'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 percent of average deposits for six months ended June 30, 1996
as compared to 27.10 percent of average deposits for six months ended June 30,
1995 and 26.82 percent for calendar year 1995. Average loans represented 77.65
percent of average deposits for six months ended June 30, 1996 as compared to
77.92 percent for six months ended
77
<PAGE>
June 30, 1995 and 79.09 percent calendar year 1995. Average interest-bearing
deposits were 87.01 percent of average earnings assets for six months ended June
30, 1996 as compared to 87.14 percent for six months ended June 30, 1995 and
87.91 percent for calendar year 1995.
Colony 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 of 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 of 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 the first quarter of 1995 and
$987,000 in second quarter of 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
stockholders' equity less goodwill. Tier 2 capital consists of certain
convertible, subordinated and other qualifying term debt and the allowance for
loan losses up to 1.25 of risk-weighted assets. Colony 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 percent and total Tier 1 and 2 risk-based capital was
11.29 percent. Both of these measures compare favorably with the regulatory
minimums of 4 percent for Tier 1 and 8 percent for total risk-based capital.
Colony's leverage ratio at June 30, 1996 was 7.89 percent which exceeds the
required leverage ratio standard of 4 percent.
In the first and second quarters of 1996, Colony paid dividends of $0.15.
The dividend payout ratio, defined as dividends per share divided by net income
per share, was 13.76 percent as compared to $0.15 for the six-month period ended
June 30, 1995 and a dividend payout ratio of 13.04 percent.
78
<PAGE>
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 Colony'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 Colony's liquidity, capital resources and operations.
Results of Operation
- --------------------
Colony'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 Colony, 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 percent 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 percent. 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 the second quarter of 1996 compared to
$810,000 in the second quarter of 1995. Colony 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 percent in the
second quarter of 1996 as compared to 5.23 percent in the second quarter of 1995
and decreased by 59 basis points to 4.78 percent for the six months ended June
30, 1996 as compared to 5.37 percent for the same period in 1995. Net interest
income decreased by 6.32 percent to $3,069,000 in the second quarter of 1996
from $3,276,000 for the same period in 1995 on an increase in average earning
assets to $258,528,000 in the second quarter of 1996 from $240,818,000 in the
same period in 1995. Net interest income decreased by 5.66 percent to
$6,046,000 for the 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 the
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 percent, average funds sold
increased by $7,865,000 or 102.38%,
79
<PAGE>
average investment securities increased by $2,669,000 or 5.72 percent and
average interest-bearing deposits in other banks decreased by $957,000 or 87.96
percent, resulting in a net increase in average earning assets of $21,152,000 or
8.97 percent.
The net increase in average earning assets was funded by a net increase in
average deposits of 8.22 percent to $247,325,000 for the six months ended June
30, 1996 from $228,538,000 for the same period in 1995. Average interest-
bearing deposits increased by 8.81 percent to $223,668,000 for the six months
ended June 30, 1996, compared to $205,558,000 for the six months ended June 30,
1995, while average noninterest-bearing deposits represented 9.57 percent of
average total deposits for the six months ended June 30, 1996 as compared to
10.15 percent for the same period in 1995 and 9.93 percent 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 the six months ended June 30, 1996
compared to $205,558,000 for the 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 percent.
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 percent. Net loan charge-offs represented 16.70 percent of
the provision for loan losses in the second quarter of 1996 as compared to 91.73
percent in the second quarter of 1995. 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 percent of the provision
80
<PAGE>
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 the six months
ended June 30, 1996 represented 0.45 percent of average loans outstanding as
compared to 0.50 percent for the six months ended June 30, 1995. At June 30,
1996 the allowance for loan losses was 2.06 percent of total loans outstanding
as compared to an allowance for loan losses of 1.70 percent at June 30, 1995 and
2.06 percent 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 the
second quarter of 1996 compared to $377,000 in the second quarter of 1995, or an
increase of 9.02 percent and amounted to $801,000 for the six months ended June
30, 1996 compared to $758,000 for the six months ended June 30, 1995, or an
increase of 5.67 percent. All other non-interest income increased by $44,000 to
$192,000 for the second quarter of 1996 from $148,000 for the second quarter of
1995 and all other non-interest income increased by $69,000 to $421,000 for the
six months ended June 30, 1996 from $352,000 for the 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 percent to $2,158,000 for the three
months ended June 30, 1996 from $2,184,000 in the same period in 1995. Salaries
and benefits increased by 5.30 percent to $1,193,000 in the second quarter of
1996 from $1,133,000 in the second quarter of 1995. All other non-interest
expense decreased by 8.18 percent to $965,000 in the second quarter of 1996 from
$1,051,000 in the second quarter of 1995. Non-interest expense decreased by
3.55 percent to $4,103,000 for the 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 the 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 the second
quarter of 1996 from $807,000 in the second quarter of 1995 and decreased by
$43,000 to $2,035,000 for the 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
81
<PAGE>
net interest margin. Income taxes as a percentage of income before taxes
decreased by 1.79 percent to 31.28 percent in the second quarter of 1996 as
compared to 31.85 percent in the second quarter of 1995 while income taxes as a
percentage of income before taxes decreased by 4.94 percent to 31.15 percent for
the six-month period ended June 30, 1996 as compared to 32.77 percent for the
same period in 1995. Income tax expense decreased 6.90 percent to $634,000 for
the 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
- ---------
Colony'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
Colony's liquidity position, which is maintained on a basis consistent with
established internal guidelines and the tests and reviews of the various
regulatory authorities. Colony's primary liquidity sources at June 30, 1996
included cash due form banks, federal funds and short-term investment
securities. Colony 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 Colony's
overall liquidity position.
82
<PAGE>
- --------------------------------------------------------------------------------
SOLICITATION OF PROXIES
- --------------------------------------------------------------------------------
Proxies are solicited by management of Broxton State Bank, comprised of the
following persons:
L. G. Summerlin - Director and Chairman of the Board
Curtis A. Summerlin - President, Chief Executive Officer and Director
Martha K. Summerlin - Vice President, Secretary and Director
Mary Jarrard - Director
Charles W. Ricketson - Director
D. A. Summerlin - Director
Consummation of the Agreement is contingent upon Curtis A. Summerlin,
President, Chief Executive Officer and director of Broxton, executing a covenant
not to compete which will preclude Mr. Summerlin from competing in the banking
business against Colony and its subsidiaries in Coffee County and in the other
counties in which Colony Bankcorp, Inc. conducts a banking business through its
subsidiaries. Mr. Summerlin will be paid the sum of $100,000.00 as
consideration for the execution of the covenant not to compete.
- --------------------------------------------------------------------------------
MANAGEMENT OF COLONY BANKCORP, INC.
- --------------------------------------------------------------------------------
Directors and Principal Officers
- --------------------------------
The table below sets forth the name of each director of Colony; the year he
was first elected a director; a description of his position and offices with
Colony (other than as a director), if any; a brief description of his principal
occupation and business experience during at least the last five years; and
certain other information including his age, number of shares of Colony's common
stock beneficially owned by him on June 30, 1996 and the percentage of the total
shares of Colony's common stock outstanding on June 30, 1996, which such
beneficial ownership represents. Except as disclosed, there are no family
relationships between any directors or executive officers of Colony, and no
director is a member of the Board of Directors of a publicly held company which
is required to file reports with the Securities and Exchange Commission.
Directors serve until the next Annual Meeting of Shareholders and until their
successors are duly elected and qualified. For information concerning
memberships on committees of the Board of Directors, see: "INFORMATION ABOUT
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS".
83
<PAGE>
Upon consummation of the Reorganization, the present officers and directors
of Colony will continue in those positions.
<TABLE>
<CAPTION>
DIRECTOR INFORMATION ABOUT SHARES OF COLONY COMMON
- -------- ----------------- -----------------------
DIRECTORS STOCK OWNED (PERCENTAGE
--------- -----------------------
OF CLASS)/1/
------------
<S> <C> <C>
Paul Branch, Jr. Age 70; Director since 22,368 (1.73%)
493 Benjamin H. Hill Drive West November 11, 1982;
Fitzgerald, Georgia 31750 Farmer and Businessman;
Director Emeritus, The
Bank of Fitzgerald;
brother-in-law of
Harold Kimball
Terry Coleman Age 52; Director since 26,226 (2.03%)
P.O. Box 157 May, 1990; Owner of
Eastman, Georgia 31032 Eastman Travel Services
& Huddle House in
Eastman; State
Representative;
Director, The Bank of
Dodge County
L. Morris Downing, Jr. Age 53; Director since 41,694 (3.23%)
127 Shady Lane July, 1994; President of
Fitzgerald, Georgia 31750 Lowell Packing Company
Terry L. Hester Age 41; Director since 25,543/2/ (1.98%)
128 Carter's Road March, 1990; Executive
Fitzgerald, Georgia 31750 Vice President and Chief
Financial Officer of
Colony since June, 1994;
Acting President and CEO
from June, 1993 to June,
1994; Treasurer since
1982
Milton N. Hopkins, Jr. Age 69; Director since 19,650 (1.52%)
Route 5, Osierfield November 11, 1982;
Fitzgerald, Georgia 31750 Farmer and Businessman;
Director, The Bank of
Fitzgerald
Harold E. Kimball Age 62; Director since 26,552 (2.06%)
155 Pine Needle Road November 11, 1982; Vice
Fitzgerald, Georgia 31750 President of Dixie
Electron, Inc.; Chairman
of the Board, The Bank
of Fitzgerald;
brother-in-law of
Paul Branch
</TABLE>
___________________________
/1/Includes shares owned by spouses and minor children of officers and
directors, as well as shares owned by trust or businesses in which officers and
directors have a significant interest. The information contained herein shall
not be construed as an admission that any such person is, for purposes of
Section 13(d) or Section 13(g) of the Securities Exchange Act of 1934, the
beneficial owner of any securities not held of record by that person or entity.
/2/Includes shares held by Trustees of Colony Bankcorp, Inc. Profit Sharing
and Stock Bonus Plan, of which, Messrs. Hester, Minix and Hortman participate
and own 11,877, 4,410, and 1,013 allocated shares respectfully on June 30, 1996.
Although shares are held by the Trustees, all plan participants direct the
Trustees in the manner in which they wish their allocated shares to be voted.
Unallocated shares, if any, will not be voted pursuant to the Plan.
84
<PAGE>
<TABLE>
<S> <C> <C>
Marion H. Massee, III Age 66; Director since 46,736 (3.62%)
226 Jeff Davis Highway November 11, 1982;
Fitzgerald, Georgia 31750 Chairman of Board since
February, 1990;
Chairman, Massee
Builders, Inc.; Director
Emeritus, The Bank of
Fitzgerald
Ben B. Mills, Jr. Age 63; Director since 44,118 (3.41%)
Post Office Box 985 November 11, 1982;
Fitzgerald, Georgia 31750 Attorney, Mills &
Chasteen; Secretary of
Colony since June 8,
1993; Director, The Bank
of Fitzgerald; Director,
Ashburn Bank
James D. Minix Age 54; Director since 22,314/2/ (1.73%)
150 Lakeview Drive March, 1994; President
Fitzgerald, Georgia 31750 and Chief Executive
Officer of Colony since
June, 1994; President
and CEO of The Bank of
Fitzgerald January, 1993
to June, 1994; President
and CEO of Ashburn Bank
February, 1990 to
December, 1992
Ralph D. Roberts, M.D. Age 72; Director since 25,339 (1.96%)
948 West Roanoke Drive November 11, 1982;
Fitzgerald, Georgia 31750 Physician; Director
Emeritus, The Bank of
Fitzgerald
W. B. Roberts, Jr. Age 54; Director since 5,000 (0.39%)
Route 1, Box 166 March, 1990; Farmer and
Ashburn, Georgia 31714 Businessman; Chairman of
the Board, Ashburn Bank
R. Sidney Ross Age 54; Director since 160,763 (12.45%)
Post Office Box 666 November 11, 1982;
Ocilla, Georgia 31774 President, Ross of
Georgia, Inc.; Director
and Vice Chairman of the
Board, The Bank of
Fitzgerald
Joe K. Shiver Age 70; Director since 15,310 (1.19%)
407 East Wallace Street June, 1994; President of
Sylvester, Georgia 31791 Shiver Tractor Company;
Director, The Bank of
Worth
All Directors as a Group 481,613 (37.30%)
(Thirteen Persons)
Other Executive Officers 4,251 ( .33%)
(One Person)
All Directors and Executive 485,864 (37.63%)
Officers as a Group
(Fourteen Persons)
</TABLE>
James D. Minix, age 54, serves as President and Chief Executive Officer of
Colony. He previously served as President and Chief Executive Officer of The
Bank of Fitzgerald from January, 1993 to June, 1994, and as President and Chief
Executive Officer of Ashburn Bank from February, 1990 to December, 1992.
Terry L. Hester, age 41, has served as Executive Vice President and Chief
Financial Officer of Colony since June, 1994. He has served as Treasurer of
Colony since 1982, and he served as Acting President and Chief Executive Officer
from June, 1993 to June, 1994.
85
<PAGE>
Edwin W. Hortman, Jr., age 42, has served as Senior Vice President of
Colony since February, 1996. He served as Vice President of Colony from
November, 1992 to February, 1996, and prior to that time he was employed as
Executive Vice President of United Bank of Griffin. He owns 4,251 shares
(0.33%) of the common stock of Colony Bankcorp, Inc.
No director is a director or has been nominated or chosen to become a
director in any company with a class of securities registered pursuant to (S)12
of the Exchange Act or subject to the requirements of (S)15(d) of such Act or
any company registered as an investment company under the Investment Company Act
of 1940, 15 U.S.C. (S)80(a)-1 et seq.
------
No director of Colony has filed a petition under the federal bankruptcy
laws or any state insolvency laws; has been convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses) or is the subject of an order, judgment or
decree of any court of competent jurisdiction enjoining him from, or otherwise
limiting, his activities in any type of business practice; was the subject of an
order, judgment or decree of any federal and state authority limiting the right
of such person to engage in any type of business practice; or was found by a
court of competent jurisdiction or by the Securities and Exchange Commission to
have violated any federal or state securities laws; or was found by a court of
competent jurisdiction to have violated any federal commodities laws.
All executive officers serve at the pleasure of the Board of Directors.
Information About Meetings and Committees of the Board of Directors
- -------------------------------------------------------------------
The Board of Directors of Colony meets monthly, and special meetings are
called as needed. Colony has formed a number of committees to assist it in the
discharge of its duties.
The Audit Committee, consisting of Messrs. Branch, Hopkins and Kimball, is
responsible for reviewing and evaluating Colony's financial controls. It met
four times in 1995.
The Executive Committee is authorized to act on behalf of the Board between
meetings of the Board. It is composed of Messrs. Minix, Massee, Ross, Kimball
and Mills. It met three times in 1995.
The Incentive and Compensation Committee, which presently consists of
Messrs. Minix, Massee, Kimball, Downing and Shiver, is responsible for reviewing
and setting the salaries and bonuses of the executive officers of Colony, and
establishing and reviewing a cash incentive and profit sharing compensation plan
for the
86
<PAGE>
employees of Colony and subsidiary banks. It met three times in 1995.
No director failed to attend at least 75% of all meetings of the Board of
Directors during 1995 and of committees of which he was a member except Terry
Coleman, who, because of conflicts of his capacity as serving as State
Representative, attended eight of the twelve meetings of the Board of Directors.
Transactions with Management
- ----------------------------
Each of the subsidiary banks of Colony has made loans in the ordinary
course of its business to officers and directors of Colony, and also to their
relatives, spouses, and entities in which they may have an interest. Each of
these loans has been made in strict compliance with state and federal statutes
and rules and regulations of the Federal Deposit Insurance Corporation and the
Georgia Department of Banking and Finance. As of June 30, 1996, certain
executive officers and directors and companies in which they are an executive
officer or partner or in which they have a 10% or more beneficial interest, were
indebted to the banks in the aggregate amount of $2,679,085. Each of the loans
was made in the ordinary course of business, on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than the
normal risk of collectibility or present other unfavorable features.
The law firm of Mills & Chasteen, of which director Ben B. Mills, Jr. is a
partner, was paid $83,015.04 in 1995 by Colony Bankcorp, Inc. and its
subsidiaries for services rendered by that firm to those entities in the normal
course of business.
Compensation of Colony's Executive Officers and Directors
- ---------------------------------------------------------
The following Summary Compensation Table sets forth the compensation earned
by James D. Minix, Colony's Chief Executive Officer, and for its other four most
highly-compensated executive officers for 1995:
87
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
----------------------------------------------------------
Name and Other Annual Long Term All Other
Principal Position Year Salary Bonus Compensation Compensation/3/ Compensation/4/
- ------------------ ---- ----------- ----------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James D. Minix, 1995 $116,000.04 $12,000.00 $20,347.22(1) $ -0- $ -0-
President and 1994 $110,000.02 $10,000.00 $24,064.86(1) $ -0- $ -0-
Chief Executive 1993 $110,000.00 $ -0- $ 6,458.18(1) $ -0- $ -0-
Officer of Colony
Stephen C. Wood, 1995 $ 91,000.00 $ -0- $17,124.91(1) $ -0- $ -0-
President and Chief 1994 $ 82,500.00 $ 2,750.00 $18,674.75(1) $ -0- $ -0-
Executive Officer 1993 $ 71,500.00 $ 2,750.00 $18,060.80(1) $ -0- $ -0-
of Ashburn Bank
Walter P. Patten, 1995 $ 93,999.88 $ -0- $13,023.59(1) $ -0- $ -0-
President and Chief 1994 $ 88,810.00 $ 600.00 $13,357.00(1) $ -0- $ -0-
Executive Officer 1993 $ 83,007.28 $ 500.00 $12,648.00(1) $ -0- $ -0-
of The Bank of Worth
Thomas T. Dampier, 1995 $ 88,000.00 $ 8,800.00 $11,008.44(1) $ -0- $ -0-
President and Chief 1994 $ N/A N/A N/A N/A N/A
Executive Officer 1993 N/A N/A N/A N/A N/A
of The Bank of
Fitzgerald
Joe D. Taylor, 1995 $ 90,000.04 $ -0- $14,103.55(1) $ -0- $ -0-
President and Chief 1994 N/A N/A N/A N/A N/A
Executive Officer 1993 N/A N/A N/A N/A N/A
of The Bank of
Dodge County
</TABLE>
(1) Includes dollar value of Group Term Life and Company Vehicle provided to
executive officers as follows:
<TABLE>
<CAPTION>
Name 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C>
James D. Minix $ 1,472.22 $ 1,214.84 $ 1,658.18
Stephen C. Wood $ 2,024.91 $ 1,299.74 $ 1,773.31
Walter P. Patten $ 748.60 $ 228.00 $ 228.00
Thomas T. Dampier $ 1,368.44 N/A N/A
Joe D. Taylor $ 2,453.55 N/A N/A
</TABLE>
Includes contribution to the profit sharing plan of Colony Bankcorp, Inc.
and subsidiary banks as follows:
<TABLE>
<CAPTION>
Name 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C>
James D. Minix $ 9,375.00 $14,400.02 $ -0-
Stephen C. Wood $ 9,100.00 $12,375.01 $11,287.49
</TABLE>
__________________________
/3/There were no long term compensation awards for restricted stock
awards or options/SARs or long term compensation payouts for LTIP payouts
for any executive officers.
/4/There was no additional compensation for any executive officers to
be reported in this column.
88
<PAGE>
<TABLE>
<S> <C> <C> <C>
Walter P. Patten $ 9,399.99 $10,729.00 $10,020.00
Thomas T. Dampier $ 4,840.00 N/A N/A
Joe D. Taylor $ 6,750.00 N/A N/A
</TABLE>
Includes director's fees paid by Colony and its subsidiaries as follows:
<TABLE>
<CAPTION>
Name 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C>
James D. Minix $ 9,500.00 $ 8,450.00 $ 4,800.00
Stephen C. Wood $ 6,000.00 $ 5,000.00 $ 5,000.00
Walter P. Patten $ 2,875.00 $ 2,400.00 $ 2,400.00
Thomas T. Dampier $ 4,800.00 N/A N/A
Joe D. Taylor $ 4,900.00 N/A N/A
</TABLE>
Directors of Colony receive $400.00 for each meeting of the Board of
Directors of Colony Bankcorp, Inc. attended, and $300.00 for each meeting of the
Board of Directors at which they are not in attendance. In addition, each
director of Colony, except Terry L. Hester, W. B. Roberts, Jr., Terry Coleman,
L. Morris Downing, Jr. and Joe K. Shiver, is also a director of The Bank of
Fitzgerald, and in that capacity the directors are compensated for participation
on the Board of Directors of The Bank of Fitzgerald in the same manner as they
are compensated for their services as directors of Colony.
W. B. Roberts, Jr. and Ben B. Mills, Jr. serve as directors of Ashburn Bank
and receive additional compensation for service in that capacity of $300.00 for
each board meeting attended and $50.00 for each loan committee meeting. Terry
Coleman serves as a director of The Bank of Dodge County and receives additional
compensation for service in that capacity of $50.00 for each loan committee
meeting and $200.00 for each board meeting attended. Joe K. Shiver serves as a
director of The Bank of Worth and receives additional compensation for those
services in that capacity of $25.00 for each loan committee meeting and $300.00
for each board meeting attended.
Under a plan, as amended, directors of The Bank of Fitzgerald were able to
defer all or a portion of director's fees in return for a deferred income
agreement under which a director agrees to serve as a director for either five
or ten years without the director's fees compensation in exchange for an
agreement for Colony to pay the director a deferred amount of income at death,
or upon their attaining the age of 65. With the deferred compensation, Colony
has purchased key man insurance on the participating directors to pay to Colony
a death benefit equal in value to the projected cost of the deferred income.
Management believes the program will have no net cost to Colony. Colony charged
$43,865.05 in expenses to the deferred compensation arrangement in 1995,
representing payments made to five directors who had attained the specified age,
together with a difference between premiums paid for the key man insurance by
Colony and accrual for funding payments under the plan at retirement and the
89
<PAGE>
increase in the cash value of the policies. All directors are participating in
the plan, except for new directors elected since 1990. Neither Colony nor the
other subsidiaries of Colony have a similar deferred income arrangement. All
fees covered by that deferred compensation plan have been deferred, and all
directors are now receiving director's fees. The Bank of Fitzgerald continues
to pay premiums on the insurance policy procured, and five directors in 1995
received payments pursuant to that plan.
Director compensation of all directors of Colony, whether as directors of
the company or its subsidiaries, totalled $110,600, consisting of $108,800 for
board meetings and $1,800 for committee meetings.
- --------------------------------------------------------------------------------
PRINCIPAL SHAREHOLDERS OF BROXTON AND COLONY
- --------------------------------------------------------------------------------
As of June 30, 1996, there were 50,730 shares of common stock of Broxton
State Bank issued and outstanding, which is the only class of stock of Broxton
State Bank. Each holder of record of Broxton's common stock at the close of
business on August ______, 1996, the date notice of the shareholder's meeting is
given, will be entitled to vote at the shareholder's meeting. The right to vote
is limited to security holders of record on that date, and each share is
entitled to one vote.
The following table sets forth as of the date of June 30, 1996 the name,
amount beneficially owned, and the percent of the class of Broxton's common
stock held by persons known by the Bank to be beneficial owners of more than 5%
of its common stock and of all directors and executive officers of Broxton.
<TABLE>
<CAPTION>
Amount
Beneficially
Name Owned % of Class
- ---- ------------ -----------
<S> <C> <C>
Curtis A. Summerlin 29,736 58.62%
1320 South Madison Avenue
No. 165
Douglas, GA 31533
L. G. Summerlin 672 1.32%
803 Alabama Street, N.
Broxton, GA 31519
Martha K. Summerlin -0- -0-
401 Alabama Street North
Broxton, Georgia 31519
</TABLE>
90
<PAGE>
<TABLE>
<S> <C> <C>
Mary Jarrard 476 .94%
P.O. Box 271
Broxton, GA 31519
Charles W. Ricketson 388 .76%
6855 Douglas-Broxton Highway
Broxton, GA 31519
D. A. Summerlin 166 .33%
1500 Dunwody Club Drive
Atlanta, GA 30350
Carl C. Atkinson
Route 2, Box 77
Broxton, Georgia 31519 3,025 5.96%
All directors and executive
officers as a group (six
persons) 31,438 61.97%
</TABLE>
As of June 30, 1996 there were 1,291,110 shares of Colony's $10.00 par
value common stock issued and outstanding. The following table sets forth as of
that date the name, amount beneficially owned, and the percent of the class of
Colony's common stock held by persons known by it to be beneficial owners of
more than 5% of its common stock:
<TABLE>
<CAPTION>
Amount
Beneficially
Name Owned % of Class
- ---- ------------------- ----------
<S> <C> <C>
Robert Sidney Ross
P.O. Box 666
Ocilla, GA 31774 160,763 12.45%
</TABLE>
See "MANAGEMENT OF COLONY - Directors and Principal Officers" for
additional information concerning shares owned by directors and principal
officers.
_______________________________________________________________________________
OPERATION OF COLONY AND BROXTON UPON
CONSUMMATION OF THE REORGANIZATION
_______________________________________________________________________________
Colony
- ------
Upon consummation of the Reorganization, Colony will be subject to
regulation by the Securities and Exchange Commission
91
<PAGE>
with respect to its securities and reporting to its shareholders. As long as
Colony is a reporting company, it will be required to file with the Securities
and Exchange Commission certain annual, quarterly, and current reports under
Section 15(d) of the Securities Exchange Act of 1934.
Colony is a registered bank holding company subject to regulation by the
Board of Governors of the Federal Reserve System under the Bank Holding Company
Act of 1956, as amended, (the "Act"). As a bank holding company, Colony will be
required to file with the Board of Governors an annual report of its operations
at the end of each fiscal year and such additional information as the Board of
Governors may require pursuant to the Act. The Board may also make examinations
of Colony and each of its subsidiaries.
The Act requires every bank holding company to obtain the prior approval of
the Board of Governors (i) before it may acquire direct or indirect ownership or
control of more than 5% of the voting shares of any bank which is not controlled
by it; (ii) before it or any of its subsidiaries, other than a bank, may acquire
all or substantially all the assets of a bank; and (iii) before it may merge or
consolidate with any other bank holding company. A bank holding company is,
with certain exceptions, prohibited from engaging, acquiring, or retaining
direct or indirect control of voting shares of any company engaged in non-
banking activities except for those activities found by the Board of Governors
to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto.
The laws of Georgia require annual registration with the Department of
Banking and Finance by all Georgia bank holding companies. Such registration
includes information with respect to the financial condition, operations,
management, and inter-company relationships of the bank holding company and its
subsidiaries in related matters as the Department of Banking and Finance deems
necessary or appropriate to carry out the purposes of the law. The Department
of Banking and Finance may also require such other information as is necessary
to keep itself informed as to whether the provisions of Georgia law and the
regulations and orders issued thereunder by the Department have been complied
with, and the Department may make examinations of each bank holding company and
each subsidiary (other than a national bank) thereof.
Broxton
- -------
Upon consummation of the Reorganization, Broxton will be operated as a
wholly-owned subsidiary of Colony. No significant changes are planned with
respect to the management or operation of Broxton. Broxton will continue to be
regulated as a state chartered bank under the laws of Georgia and subject to the
supervision of and regulation by the Georgia Department of Banking and Finance,
and the Federal Deposit Insurance Corporation. See:
92
<PAGE>
"HISTORY AND BUSINESS OF BROXTON STATE BANK - Supervision and Regulation".
- --------------------------------------------------------------------------------
DESCRIPTION OF SECURITIES
- --------------------------------------------------------------------------------
Common Stock of Colony
- ----------------------
Colony is authorized by its articles of incorporation to issue 5,000,000
shares of $10.00 par value common stock. Assuming no additional shares are
issued prior to consummation of the Reorganization, there will be an estimated
1,450,585 shares of the $10.00 par value common stock of Colony issued and
outstanding upon completion of the Reorganization, based upon the book value of
Broxton common stock and the value of Colony's stock as defined in the Agreement
as of June 30, 1996. All shares of common stock of Colony are entitled to share
equally in dividends from funds legally available therefor, when, as and if
declared by the Board of Directors and upon the liquidation or dissolution of
Colony, whether voluntary or involuntary, to share equally in the assets of
Colony available for distribution to shareholders.
Shareholders of Broxton have pre-emptive rights, which entitle the
shareholders of Broxton to acquire in proportion to their present share
ownership any additional shares of common stock of Broxton which may in the
future be sold or issued for cash by Broxton; the holders of common stock of
Colony will have no such pre-emptive rights. The affirmative vote of a majority
of the issued and outstanding shares of common stock of Colony is required in
the event of any proposed merger, consolidation, or sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
Company. Neither the articles of incorporation of Colony nor its bylaws
includes any provision intended to, or that would have the effect of, delaying,
deferring, preventing or making more difficult a change in control of Colony and
that would operate only with respect to an extraordinary corporate transaction
involving Colony, such as a merger, reorganization, tender offer, sale or
transfer of substantially all of its assets, or liquidation. There has been no
classification of the Board of Directors, each member of which is elected
annually at the annual meeting of shareholders. There are no redemption rights,
sinking fund provisions, or rights of conversion in existence with respect to
Colony common stock. The shares of Colony common stock do not have cumulative
voting rights which means that the holders of more than 50% of the shares voting
for the election of directors can elect all (100%) of the directors if they
choose to do so, and in such event, the remaining minority owners of the voting
shares for the election of directors will not be able to elect any person to the
Board of Directors. All
93
<PAGE>
outstanding shares of Colony common stock are fully paid and non-assessable.
See "THE PROPOSED REORGANIZATION - Effect of Reorganization on Rights of
Shareholders."
Common Stock of Broxton
- -----------------------
Under Broxton's articles of incorporation, it is authorized to issue 50,730
shares of its $10.00 par value common stock, all of which are issued and
outstanding. All shares of common stock are entitled to share equally in
dividends from funds legally available therefor, when, as, and if declared by
the Board of Directors. Dividends paid may not exceed 50% of the net profits of
Broxton after taxes for the previous fiscal year without prior approval of the
Georgia Department of Banking and Finance. Upon liquidation or dissolution of
Broxton, whether voluntary or involuntary, the shareholders of Broxton will be
entitled to share equally in the assets of Broxton available for distribution to
shareholders. Each holder of common stock is entitled to one vote for each
share on all matters submitted to the shareholders. The shareholders of Broxton
have pre-emptive rights, but there are no cumulative voting rights, redemption
rights, sinking fund provisions, or rights of conversion in existence with
respect to Broxton's common stock. All outstanding shares of Broxton's common
stock are fully paid and non-assessable. Any merger or consolidation of Broxton
must be approved by the affirmative vote of the holders of two-thirds of the
issued and outstanding shares of common stock of Broxton.
- --------------------------------------------------------------------------------
MATERIAL CONTRACTS BETWEEN BROXTON AND COLONY
- --------------------------------------------------------------------------------
Colony, Interim and Broxton are parties to the Agreement, a copy of which
is attached as Appendix "B". The Agreement contemplates the execution by Curtis
A. Summerlin, President, Chief Executive Officer and director of Broxton, of a
covenant not to compete with Colony in the banking business in Coffee County and
in the other counties in which Colony conducts a banking business through its
subsidiaries upon consummation of the acquisition in exchange for the payment by
Colony to Mr. Summerlin of the sum of $100,000.00. It is contemplated that Mr.
Summerlin will continue to serve as Chief Executive Officer and President of
Broxton. Otherwise, there are no past, present or proposed material contracts,
arrangements, understandings, relationships, negotiations or transactions
between Colony and Broxton.
94
<PAGE>
- --------------------------------------------------------------------------------
LEGAL OPINION AND ACCOUNTANTS
- --------------------------------------------------------------------------------
The legality of the shares of common stock of Colony to be issued in the
Reorganization will be passed upon by Martin, Snow, Grant & Napier, special
counsel to the Bank, 240 Third Street, Post Office Box 1606, Macon, Georgia
31202-1606. The Martin, Snow, Grant & Napier Keogh Plan and individual members
of that firm own shares of the Company's common stock. However, neither Martin,
Snow, Grant & Napier nor any member of that firm was hired on a contingent
basis, will receive a direct or indirect interest in the Company, or is a
promoter, underwriter, voting trustee, director, officer, or employee of the
Company.
Attached to this proxy statement are financial statements which have been
audited with an opinion expressed by the accounting firms of McNair, McLemore &
Middlebrooks, P.C. and Nichols, Cauley & Associates, P.C. No partner in either
of those firms are the beneficial owners of any shares of Colony or Broxton, nor
is any accountant or employee of those firms to receive in connection with the
offering a substantial direct or indirect interest in Colony or Broxton.
- --------------------------------------------------------------------------------
EXPENSES OF SOLICITATION
- --------------------------------------------------------------------------------
Broxton estimates the cost of soliciting proxies, including attorney's fees
and printing costs, and also including the fees and expenses incurred in
registering the stock to be issued by Colony with the Securities and Exchange
Commission, will be $30,000.00. Under the Agreement, Colony is responsible for
payment of all of these expenses unless the Agreement should be terminated as a
result of any breach by Broxton.
- --------------------------------------------------------------------------------
INDEMNIFICATION OF DIRECTORS, OFFICERS AND CONTROLLING PERSONS
- --------------------------------------------------------------------------------
Article 8, Part 5 of the Georgia Business Corporation Code provides for
indemnification of directors and officers of corporations. Under the provisions
of O.C.G.A. (S)14-2-852, a director of Colony, to the extent successful in the
defense of any proceeding or claim to which he is a party because he is a
director of Colony, is entitled as a matter of right to indemnification
95
<PAGE>
against reasonable expenses, including attorneys' fees, incurred by him in
connection therewith. Colony is further authorized to indemnify any person who
is made a party to a proceeding because he or she is a director against any
liability incurred including the obligation to pay any judgment rendered against
him or her if the director acted in a manner he or she believed in good faith to
be in, or not opposed to, the best interests of the corporation and, in the case
of any criminal proceeding, he or she had no reasonable cause to believe his or
her conduct was unlawful. The authority of Colony to indemnify a director is not
applicable in connection with any proceeding brought by or in the right of the
corporation in which the director was adjudged liable to the corporation, or in
connection with any other proceeding in which he or she is adjudged liable on
the basis that personal benefit was improperly received by him. Indemnification
in any action brought by or in the right of the corporation is limited in any
event to reasonable expenses incurred in connection with the proceeding, and
does not include the obligation to pay any judgment, settlement, penalty or
fine.
A determination that a director is entitled to indemnification must be made
by the board of directors by majority vote of a quorum consisting of directors
not at the time parties to the proceedings; if a quorum cannot be obtained then
by majority vote of a committee duly designated by the board of directors (in
which designation directors who are parties may participate), consisting solely
of two or more directors not at the time parties to the proceedings; by special
legal counsel; or by the shareholders of the corporation, excluding shares owned
by or voted under the control of directors who are at the time parties to the
proceeding. A director of the Company who is a party to a legal proceeding in
that capacity may apply to the court for indemnification or advances for
expenses. The court may order indemnification or advances for expenses if it
determines (1) the director is entitled to mandatory indemnification under
O.C.G.A. (S)14-2-852; or (2) the director is fairly and reasonably entitled in
view of all relevant circumstances to indemnification, even if he or she has not
met the standard conduct set forth in O.C.G.A. (S)14-2-851(a) or was adjudged
liable as described in O.C.G.A. (S)14-2-851(d), in which latter event, however,
his or her indemnification is limited to reasonable expenses incurred. If the
court determines that the director is entitled to indemnification or advance for
expenses under this part, it may also order the corporation to pay the
director's reasonable expenses to obtain court-ordered indemnification or
advance for expenses. The articles of incorporation of Colony also eliminate,
as permitted by law, the personal liability of directors of the company from
monetary damages for breach of duty of care or other duty as a director,
excepting only any liability for misappropriation of any business opportunity of
the corporation, intentional misconduct, and other specified conduct.
An officer of Colony who is not a director is entitled to mandatory
indemnification under O.C.G.A. (S)14-2-852 and is entitled
96
<PAGE>
to apply for court ordered indemnification in each case to the same extent as is
a director of Colony. Colony may also indemnify and advance expenses to an
officer, employee or agent who is not a director to the extent, consistent with
public policy, that may be provided by its articles of incorporation, bylaws,
general or specific action of its Board of Directors, or contract.
Colony's bylaws provides for indemnification of officers and directors
substantially similar to that provided by Article 8, Part 5 of the Georgia
Business Corporations Code.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Colony
pursuant to the foregoing provisions, Colony has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the 1933 Act and is therefore
unenforceable.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The management of Broxton knows of no other matters which may be brought
before the meeting. However, if any matter other than the proposed
Reorganization or matters incident thereto should properly come before the
meeting, the persons named in the enclosed proxy will vote such proxy in
accordance with their judgment on such matters.
L. G. SUMMERLIN
Chairman of the Board
Broxton, Georgia
August _____, 1996
97
<PAGE>
APPENDIX "A"
FINANCIAL STATEMENTS
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Colony Bankcorp, Inc. and Subsidiaries (Audited)
Independent Auditor's Report F-1
Consolidated Balance Sheets -
December 31, 1995 and 1994 F-2
Consolidated Statements of Operations -
Years Ended December 31, 1995 and 1994 F-4
Consolidated Statements of Changes in
Stockholders' Equity -
Years Ended December 31, 1995 and 1994 F-5
Consolidated Statements of Cash Flows -
Years Ended December 31, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
Colony Bankcorp, Inc. and Subsidiaries (Unaudited)
Balance Sheets - June 30, 1996 and
December 31, 1995 F-22
Consolidated Statements of Income -
Three months ended June 30, 1996 and 1995
Six months ended June 30, 1996 and 1995 F-23
Consolidated Statements of Cash Flows -
Six months ended June 30, 1996 and 1995 F-24
Notes to Consolidated Financial Statements F-25
Broxton State Bank (Audited)
Independent Auditor's Report F-34
Balance Sheets - December 31, 1995 and 1994 F-35
Statements of Income for the Years Ended
December 31, 1995 and 1994 F-36
Statements of Changes in Stockholders'
Equity for the Years Ended
December 31, 1995 and 1994 F-37
Statements of Cash Flows for the Years Ended
December 31, 1995 and 1994 F-38
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Notes to Financial Statements - December 31, 1995
and 1994 F-40
Broxton State Bank (Unaudited)
Balance Sheets - June 30, 1996 and 1995 F-58
Statements of Income -
Six months ended June 30, 1996 and 1995 F-59
Statements of Changes in Stockholders'
Equity - Six months ended June 30, 1996
and 1995 F-60
Statement of Cash Flows -
Six months ended June 30, 1996 and 1995 F-61
Notes to Financial Statements
Six months ended June 30, 1996 and 1995 F-63
</TABLE>
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
FITZGERALD, GEORGIA
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994 AND
REPORT OF INDEPENDENT ACCOUNTANTS
F-0
<PAGE>
[LETTERHEAD OF MCNAIR, MCLEMORE, MIDDLEBROOKS & CO. APPEARS HERE]
January 29, 1996
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Colony Bankcorp, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of COLONY BANKCORP,
INC. AND SUBSIDIARIES as of December 31, 1995 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. The financial statements
of COLONY BANKCORP, INC. AND SUBSIDIARIES as of December 31, 1994 and for the
year then ended were audited by other auditors whose report dated February 3,
1995 expressed an unqualified opinion thereon.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of COLONY BANKCORP,
INC. AND SUBSIDIARIES as of December 31, 1995 and the results of operations and
cash flows for the year then ended in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the consolidated financial statements, in 1994 COLONY
BANKCORP, INC. AND SUBSIDIARIES changed its method of accounting for investment
securities.
McNAIR, McLEMORE, MIDDLEBROOKS & CO.
- 1 -
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
<TABLE>
<CAPTION>
ASSETS
1995 1994
------------ ------------
<S> <C> <C>
CASH AND BALANCES DUE FROM DEPOSITORY
INSTITUTIONS (NOTE 2) $ 9,517,260 $ 10,464,830
FEDERAL FUNDS SOLD 24,325,000 6,760,000
INVESTMENT SECURITIES (AGGREGATE FAIR VALUE OF
$45,917,217 AND $46,242,352 AS OF DECEMBER 31,
1995 AND 1994, RESPECTIVELY) (NOTE 3) 46,022,970 46,780,667
LOANS (NOTES 4 AND 5) 188,396,380 173,377,719
Allowance for Loan Losses (3,884,817) (3,028,750)
Unearned Interest and Fees (11,084) (18,500)
---------- ----------
184,500,479 170,330,469
PREMISES AND EQUIPMENT (NOTE 6) 5,623,964 5,821,850
OTHER REAL ESTATE 1,721,221 1,824,183
OTHER ASSETS 6,857,416 6,833,726
--------- ---------
TOTAL ASSETS $278,568,310 $248,815,725
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
- 2 -
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
------------ ------------
DEPOSITS
<S> <C> <C>
Noninterest-Bearing $ 25,151,984 $ 25,742,573
Interest-Bearing (Note 8) 228,091,178 201,299,984
------------ ------------
253,243,162 227,042,557
BORROWED MONEY
Federal Funds Purchased - 760,000
Other Borrowed Money (Note 9) 2,504,468 2,779,334
------------ ------------
2,504,468 3,539,334
OTHER LIABILITIES 1,765,505 1,484,155
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDERS' EQUITY
Common Stock, Par Value $10 a Share; Authorized
5,000,000 Shares, Issued 1,291,110 and 608,055
Shares as of December 31, 1995 and 1994,
Respectively (Note 18) 12,911,100 6,080,550
Paid-In Capital 1,117,248 1,447,798
Retained Earnings 7,202,910 10,432,847
Net Unrealized Loss on Securities Available for Sale,
Net of Tax Benefit of $19,901 in 1995 and $514,479
in 1994 (Note 7) (176,083) (1,211,516)
------------ ------------
21,055,175 16,749,679
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $278,568,310 $248,815,725
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
- 3 -
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
INTEREST INCOME
Loans, Including Fees $20,762,932 $18,222,699
Federal Funds Sold 580,442 252,105
Deposits with Other Banks 31,433 43,236
Investment Securities
U. S. Treasury 88,572 83,759
U. S. Government Agencies 2,286,145 2,057,575
State, County and Municipal 242,150 259,073
Dividends on Other Investments 96,878 74,989
----------- -----------
24,088,552 20,993,436
----------- -----------
INTEREST EXPENSE
Deposits 11,104,853 8,671,610
Federal Funds Purchased 33,012 87,970
Other Borrowed Money 303,021 235,529
----------- -----------
11,440,886 8,995,109
----------- -----------
NET INTEREST INCOME 12,647,666 11,998,327
Provision for Loan Losses (Note 5) 3,216,050 2,080,500
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,431,616 9,917,827
----------- -----------
NONINTEREST INCOME
Service Charges on Deposits 1,456,928 1,427,054
Other Service Charges, Commissions and Fees 137,291 101,807
Security Gains 41,747 8,209
Other 416,532 227,101
----------- -----------
2,052,498 1,764,171
----------- -----------
NONINTEREST EXPENSES
Salaries and Employee Benefits 4,195,964 4,065,570
Occupancy and Equipment 1,032,754 1,201,764
Directors' Fees 269,450 260,700
FDIC Premiums 338,901 576,351
Legal and Professional Fees 333,766 304,766
Other Real Estate Expense 452,579 315,399
Other 1,797,052 1,716,360
----------- -----------
8,420,466 8,440,910
----------- -----------
INCOME BEFORE INCOME TAXES 3,063,648 3,241,088
INCOME TAXES (NOTE 7) 923,128 1,021,998
----------- -----------
NET INCOME $ 2,140,520 $ 2,219,090
=========== ===========
NET INCOME PER SHARE OF COMMON STOCK $1.75 $1.82
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,221,200 1,216,110
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
- 4 -
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
ON SECURITIES
COMMON PAID-IN RETAINED AVAILABLE
STOCK CAPITAL EARNINGS FOR SALE TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $ 6,080,550 $ 1,447,798 $ 8,529,946 $ (101,725) $15,956,569
Net Unrealized Loss on Securities
Available for Sale, Net of Tax (1,109,791) (1,109,791)
Dividends Paid (316,189) (316,189)
Net Income 2,219,090 2,219,090
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1994 6,080,550 1,447,798 10,432,847 (1,211,516) 16,749,679
Equity Transfer 5,000,000 (5,000,000) -
Issuance of Common Stock 750,000 750,000 1,500,000
100 Percent Stock Split 6,080,550 (6,080,550)
Net Unrealized Gain on Securities
Available for Sale, Net of Tax 1,035,433 1,035,433
Dividends Paid (370,457) (370,457)
Net Income 2,140,520 2,140,520
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1995 $12,911,100 $ 1,117,248 $ 7,202,910 $ (176,083) $21,055,175
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
- 5 -
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,140,520 $ 2,219,090
Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities
Depreciation 527,425 551,638
Amortization and Accretion 108,998 172,699
Provision for Loan Losses 3,216,050 2,080,500
Deferred Income Taxes (86,458) (67,626)
Securities Gains (41,747) (8,209)
Loss on Sale of Equipment 50,656 -
Loss on Sale of Other Real Estate 250,314 -
CHANGE IN
Interest Receivable (382,621) (554,789)
Prepaid Expenses (61,726) -
Interest Payable 324,592 39,528
Accrued Expenses and Accounts Payable (91,296) -
Other 14,978 (633,251)
------------ ------------
5,969,685 3,799,580
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Interest-Bearing Deposits in Other Banks 1,783,000 (590,000)
Purchase of Investment Securities
Available for Sale (9,895,162) (11,987,267)
Held to Maturity - (3,772,428)
Proceeds from Sale of Investment Securities
Available for Sale 6,839,403 2,296,491
Proceeds from Maturities, Calls and Paydowns
of Investment Securities
Available for Sale 4,667,539 10,059,246
Held to Maturity 654,291 404,715
Proceeds from Sale of Equipment 50,493 -
Loans to Customers (18,422,128) (10,431,468)
Purchase of Premises and Equipment (430,689) (418,183)
Other Real Estate 888,716 -
------------ ------------
(13,864,537) (14,438,894)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Interest-Bearing Customer Deposits 26,791,194 6,544,152
Noninterest-Bearing Customer Deposits (590,589) 5,990,430
Proceeds from Long-Term Borrowings - 1,445,000
Dividends Paid (370,457) (316,189)
Federal Funds Purchased (760,000) 760,000
Note to Federal Home Loan Bank 200,000 -
Principal Payments on Notes and Debentures (474,866) (1,871,283)
Proceeds from Issuance of Common Stock 1,500,000 -
------------ ------------
26,295,282 12,552,110
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 18,400,430 1,912,796
CASH AND CASH EQUIVALENTS, BEGINNING 15,342,830 13,430,034
------------ ------------
CASH AND CASH EQUIVALENTS, ENDING $ 33,743,260 $ 15,342,830
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
- 6 -
<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 December 31, 1995 and 1994. 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.
- 7 -
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS (CONTINUED)
Other nonaccrual loans are loans for which payments of principal and interest
are considered doubtful of collection under original terms but collateral values
equal or exceed outstanding principal and interest.
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.
- 8 -
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 acquisition 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 at
least 6 percent and a total risk-based capital ratio of at least 10 percent. As
of December 31, 1995, the Company is in compliance with its minimum regulatory
capital requirements and is considered "well capitalized" as defined by FDICIA.
Cash dividends payable to the parent company by subsidiary banks are limited by
various bank regulatory agencies. Dividends available for payment to the parent
during 1996 without prior approval approximated $1,264,187. Standard
limitations may be exceeded by specific approval of regulatory authorities.
(2) CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
Components of cash and balances due from depository institutions are as follows
as of December 31:
<TABLE>
<CAPTION>
1995 1994
------------- -----------
<S> <C> <C>
Cash on Hand and Cash Items $3,299,455 $ 2,307,925
Noninterest-Bearing Deposits with Other Banks 6,118,805 6,274,905
Interest-Bearing Deposits with Other Banks 99,000 1,882,000
------------- -----------
$9,517,260 $10,464,830
============= ===========
</TABLE>
- 9 -
<PAGE>
(3) INVESTMENT SECURITIES
Investment securities as of December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- -------- --------- -----------
SECURITIES AVAILABLE FOR SALE
<S> <C> <C> <C> <C>
U.S. Treasury $ 988,704 $ 3,796 $ 992,500
U.S. Government Agencies
Mortgage-Backed 22,209,705 81,559 $(255,095) 22,036,169
Other 14,449,180 67,655 (29,227) 14,487,608
State, County and Municipal 3,065,563 80,821 (8,042) 3,138,342
The Banker's Bank Stock 50,000 50,000
Federal Home Loan Bank Stock 249,800 249,800
Marketable Equity Securities 1,130,024 (137,452) 992,572
----------- -------- --------- -----------
$42,142,976 $233,831 $(429,816) $41,946,991
=========== ======== ========= ===========
SECURITIES HELD TO MATURITY
U.S. Government Agencies $ 2,149,888 $ (23,434) $ 2,126,454
State, County and Municipal 1,926,091 (82,265) 1,843,826
----------- -------- --------- -----------
$ 4,075,979 $ - $(105,699) $ 3,970,280
=========== ======== ========= ===========
</TABLE>
The amortized cost and fair value of investment securities as of December 31,
1995, 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 $ 6,530,541 $ 6,541,544
Due After One Year Through Five Years 11,434,647 11,539,923 $3,321,442 $3,281,521
Due After Five Years Through Ten Years 330,258 332,795 298,257 286,820
Due After Ten Years 208,001 204,188 456,280 401,939
----------- ----------- ---------- ----------
18,503,447 18,618,450 4,075,979 3,970,280
Federal Home Loan Bank Stock 249,800 249,800
The Banker's Bank Stock 50,000 50,000
Marketable Equity Securities 1,130,024 992,572
Mortgaged-Backed Securities 22,209,705 22,036,169
----------- ----------- ---------- ----------
$42,142,976 $41,946,991 $4,075,979 $3,970,280
=========== =========== ========== ==========
</TABLE>
- 10 -
<PAGE>
(3) INVESTMENT SECURITIES (CONTINUED)
Investment securities as of December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ----------- -----------
SECURITIES AVAILABLE FOR SALE
<S> <C> <C> <C> <C>
U.S. Government and Agencies $ 9,708,445 $ 1,289 $ (231,009) $ 9,478,725
Mortgage-Backed Securities 26,771,180 25,145 (1,331,139) 25,465,186
State, County and Municipal 2,151,208 32,067 (9,525) 2,173,750
Marketable Equity Securities 1,130,022 (212,822) 917,200
----------- --------- ----------- -----------
$39,760,855 $58,501 $(1,784,495) $38,034,861
=========== ========= =========== ===========
SECURITIES HELD TO MATURITY
U.S. Government and Agencies $ 5,906,547 $ (306,047) $ 5,600,500
State, County and Municipal 2,839,259 (232,268) 2,606,991
----------- ---------- ----------- -----------
$ 8,745,806 $ - $ (538,315) $ 8,207,491
=========== ========== =========== ===========
</TABLE>
Proceeds from sales of investments available for sale were $6,839,403 in 1995
and $2,296,491 in 1994. Gross realized gains totaled $41,747 and $8,209 in 1995
and 1994, respectively.
Investment securities having a carrying value approximating $29,163,000 and
$27,753,000 as of December 31, 1995 and 1994, respectively, were pledged to
secure public deposits and for other purposes.
<TABLE>
<CAPTION>
(4) LOANS
<S> <C> <C>
The composition of loans as of December 31 are:
1995 1994
------------ ------------
Loans Secured by Real Estate
Construction and Land Development $ 371,075 $ 438,979
Secured by Farmland (Including Farm Residential and
Other Improvements) 23,441,501 25,284,371
Other 89,796,616 75,550,393
Loans to Finance Agricultural Production and Other
Loans to Farmers 17,243,711 17,187,344
Commercial and Industrial Loans (U.S. Addresses) 13,907,281 18,170,133
Loans to Individuals for Household, Family and Other
Personal Expenditures 36,393,220 32,252,357
All Other Loans 7,242,976 4,494,142
------------ ------------
$188,396,380 $173,377,719
============ ============
</TABLE>
- 11 -
<PAGE>
(4) LOANS (CONTINUED)
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 $5,228,900 and $2,092,500 as of December 31, 1995 and 1994,
respectively. Foregone interest on nonaccrual loans approximated $462,400 in
1995 and $141,400 in 1994.
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 December 31, 1995 and for the year then
ended follows:
<TABLE>
<CAPTION>
<S> <C>
Total Investment in Impaired Loans $517,138
Less Allowance for Impaired Loan Losses (38,696)
----------
Net Investment, December 31, 1995 $478,442
==========
Average Investment during 1995 $517,160
==========
Income Recognized during 1995 $ 3,219
==========
Income Collected during 1995 $ -
==========
</TABLE>
(5) ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses are summarized below for the years
ended December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
BALANCE, BEGINNING $ 3,028,750 $ 2,635,538
Provision Charged to Operating Expenses 3,216,050 2,080,500
Loans Charged Off (2,886,405) (1,812,437)
Loan Recoveries 526,422 125,149
----------- -----------
BALANCE, ENDING $ 3,884,817 $ 3,028,750
=========== ===========
</TABLE>
The 1995 allowance for loan losses presented above includes an allowance for
impaired loan losses which was established as of January 1, 1995. Transactions
in the allowance for impaired loan losses during 1995 were as follows:
<TABLE>
<CAPTION>
<S> <C>
BALANCE, BEGINNING $26,895
Provision Charged to Operating Expenses 11,801
Loans Charged Off -
Loan Recoveries -
----------
BALANCE, ENDING $38,696
==========
</TABLE>
- 12 -
<PAGE>
(6) PREMISES AND EQUIPMENT
Premises and equipment are comprised of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land $ 838,346 $ 775,696
Building 4,790,760 4,772,256
Furniture, Fixtures and Equipment 4,266,973 4,564,471
Leasehold Improvements 17,332 -
----------- -----------
9,913,411 10,112,423
Accumulated Depreciation (4,289,447) (4,290,573)
----------- -----------
$ 5,623,964 $ 5,821,850
=========== ===========
</TABLE>
Depreciation charged to operations totaled $527,425 in 1995 and $551,638 in
1994.
(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.
The components of income tax expense for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Current Expense $1,009,586 $1,089,624
Deferred Tax Benefit (86,458) (67,626)
---------- ----------
$ 923,128 $1,021,998
========== ==========
</TABLE>
- 13 -
<PAGE>
(7) INCOME TAXES (CONTINUED)
The income tax expense of $923,128 in 1995 and $1,021,998 in 1994 is less than
the income taxes computed by applying the federal statutory rate of 34 percent
to income before income taxes. The reasons for the differences are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
FEDERAL STATUTORY INCOME TAXES $1,041,640 $1,101,970
Tax-Exempt Interest (114,060) (119,210)
Interest Expense Disallowance 16,546 12,738
Premiums on Officers' Life Insurance (19,688) (11,329)
Meal and Entertainment Disallowance 2,515 5,140
Other (3,825) 32,689
---------- ----------
ACTUAL INCOME TAXES $ 923,128 $1,021,998
========== ==========
Deferred taxes in the accompanying balance sheets as of December 31 include the following:
1995 1994
-------- ----------
Deferred Tax Assets
Allowance for Loan Losses $297,069 $ 285,455
Deferred Compensation 33,901 105,316
Other Real Estate 148,769 3,400
Other 890 -
-------- ----------
480,629 394,171
Unrealized Loss on Securities Available for Sale 19,901 514,479
-------- ----------
$500,530 $ 908,650
======== ==========
</TABLE>
(8) DEPOSITS
Components of interest-bearing deposits as of December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Interest-Bearing Demand $ 50,440,527 $ 52,274,192
Savings 9,855,540 10,542,733
Time, $100,000 and Over 48,111,114 43,188,835
Other Time 119,683,997 95,294,224
------------ ------------
$228,091,178 $201,299,984
============ ============
</TABLE>
- 14 -
<PAGE>
(9) OTHER BORROWED MONEY
Other borrowed money is comprised of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<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. $ 200,000 $ -
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 8.0% as of December 31, 1995. 1,067,468 1,334,334
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 8.5% as of December 31, 1995. 1,237,000 1,445,000
---------- ----------
$2,504,468 $2,779,334
========== ==========
Maturities of borrowed money for the next five years are as follows:
YEAR AMOUNT
---- ------------
1996 $ 674,010
1997 1,296,724
1998 266,867
1999 266,867
2000 -
Thereafter -
------------
$2,504,468
============
</TABLE>
(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 $209,745 for 1995 and
$296,252 for 1994.
- 15 -
<PAGE>
(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. addressees
approximating $3,581,405 as of December 31, 1995 and $2,907,993 as of December
31, 1994. No losses are anticipated as a result of commitments and
contingencies.
(12) DEFERRED COMPENSATION PLAN
The Banks have deferred compensation plans covering directors choosing to
participate through individual deferred compensation contracts. In accordance
with terms of the contracts, the Banks are committed to pay the directors
deferred compensation over a period of 10 years, beginning at age 65. In the
event of a director's death before age 65, payments are made to the director's
named beneficiary over a period of 10 years, beginning on the first day of the
month following the death of the director.
Liabilities accrued under the plan totaled $350,685 and $309,753 as of December
31, 1995 and 1994, respectively. Benefit payments under the contracts were
$29,991 in 1995 and $23,520 in 1994. Provisions charged to operations totaled
$69,408 in 1995 and $62,688 in 1994.
(13) INTEREST INCOME AND EXPENSE
Interest income of $241,333 and $258,667 from state, county and municipal bonds
was exempt from regular income taxes in 1995 and 1994, respectively.
Interest on deposits includes interest expense on time certificates of $100,000
or more totaling $2,729,989 and $1,805,757 for the years ended December 31, 1995
and 1994, respectively.
(14) SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for the following were made during the years ended December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Interest Expense $11,224,385 $ 8,955,581
=========== ===========
Income Taxes $ 1,111,453 $ 440,242
=========== ===========
Noncash financing and investment activities for the years ended December 31 are as follows:
1995 1994
----------- -----------
Acquisitions of Real Estate Through Loan Foreclosures $ 1,047,224 $ -
=========== ===========
100 Percent Stock Split Effected as Stock Dividend $ 6,080,550 $ -
=========== ===========
Net Unrealized Gains (Losses) on Securities Available for Sale $ 1,568,838 $(1,624,270)
=========== ===========
</TABLE>
- 16 -
<PAGE>
(15) RELATED PARTY TRANSACTIONS
The aggregate balance of direct and indirect loans to directors, executive
officers or principal holders of equity securities of the Bank was $8,987,256 as
of December 31, 1995 and $5,999,531 as of December 31, 1994. All such loans
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and do not involve more than a normal risk of collectibility. A
summary of activity of related party loans is shown below:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
BALANCE, BEGINNING $ 5,999,531 $ 6,199,215
New Loans 8,570,264 3,310,595
Repayments (5,582,539) (2,752,815)
Transactions Due to Changes in Directors - (757,464)
----------- -----------
BALANCE, ENDING $ 8,987,256 $ 5,999,531
=========== ===========
</TABLE>
(16) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires
disclosure of fair value information about financial instruments, whether or not
recognized on the face of the balance sheet, for which it is practicable to
estimate that value. The assumptions used in the estimation of the fair value
of Colony Bankcorp, Inc. and Subsidiaries' financial instruments are detailed
below. Where quoted prices are not available, fair values are based on
estimates using discounted cash flows and other valuation techniques. The use
of discounted cash flows can be significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. The following
disclosures should not be considered a surrogate of the liquidation value of the
Company, but rather a good-faith estimate of the increase or decrease in value
of financial instruments held by the Company since purchase, origination or
issuance.
CASH AND SHORT-TERM INVESTMENTS - For cash, due from banks, bank-owned deposits
and federal funds sold, the carrying amount is a reasonable estimate of fair
value.
INVESTMENT SECURITIES - Fair values for investment securities are based on
quoted market prices.
LOANS - The fair value of fixed rate loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be made
to borrowers with similar credit ratings. For variable rate loans, the
carrying amount is a reasonable estimate of fair value.
DEPOSIT LIABILITIES - The fair value of demand deposits, savings accounts and
certain money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed maturity certificates of deposit is estimated by
discounting the future cash flows using the rates currently offered for
deposits of similar remaining maturities.
STANDBY LETTERS OF CREDIT - Because standby letters of credit are made using
variable rates, the contract value is a reasonable estimate of fair value.
- 17 -
<PAGE>
(16) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amount and estimated fair values of the Company's financial
instruments as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
(IN THOUSANDS)
ASSETS
<S> <C> <C>
Cash and Short-Term Investments $ 33,842 $ 33,842
Investment Securities Available for Sale 41,947 41,947
Investment Securities Held to Maturity 4,076 3,970
Loans 188,396 188,948
LIABILITIES
Deposits 253,243 253,534
Other Borrowed Money 2,504 2,504
UNRECOGNIZED FINANCIAL INSTRUMENTS
Standby Letters of Credit 3,581 3,581
</TABLE>
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on many judgments. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial instruments include deferred income taxes and premises and
equipment. In addition, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
- 18 -
<PAGE>
(17) FINANCIAL INFORMATION OF COLONY BANKCORP, INC. (PARENT ONLY)
The parent company's balance sheets as of December 31, 1995 and 1994 and the
related statements of income and cash flows for the years then ended are as
follows:
<TABLE>
<CAPTION>
COLONY BANKCORP, INC. (PARENT ONLY)
BALANCE SHEETS
DECEMBER 31
ASSETS
1995 1994
----------- -----------
<S> <C> <C>
Cash $ 95,069 $ 70,455
Investment in Subsidiary, at Equity 22,997,252 19,214,815
Other 373,493 397,002
----------- -----------
TOTAL ASSETS $23,465,814 $19,682,272
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Dividends Payable $ 96,833 $ 79,047
Notes and Debentures Payable 2,304,468 2,779,334
Other 9,338 74,212
----------- -----------
2,410,639 2,932,593
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, Par Value $10; 5,000,000 Shares
Authorized, 1,291,110 and 608,055 Shares
Issued and Outstanding as of December 31,
1995 and 1994, Respectively 12,911,100 6,080,550
Paid-In Capital 1,117,248 1,447,798
Retained Earnings 7,202,910 10,432,847
Net Unrealized Loss on Securities Available for
Sale, Net of Tax (176,083) (1,211,516)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 21,055,175 16,749,679
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $23,465,814 $19,682,272
=========== ===========
</TABLE>
- 19 -
<PAGE>
(17) FINANCIAL INFORMATION OF COLONY BANKCORP, INC. (PARENT ONLY) (CONTINUED)
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1995 1994
---------- ----------
INCOME
<S> <C> <C>
Dividends from Subsidiary $1,025,000 $ 875,000
Management Fees from Subsidiaries 600,492 554,074
Other 9,874 15,101
---------- ----------
1,635,366 1,444,175
---------- ----------
EXPENSE
Interest 221,901 235,529
Amortization 17,951 149,897
Other 772,039 631,140
---------- ----------
1,011,891 1,016,566
---------- ----------
INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY 623,475 427,609
Income Tax Benefits 120,040 102,988
---------- ----------
INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 743,515 530,597
Equity in Undistributed Earnings of Subsidiary 1,397,005 1,688,493
---------- ----------
NET INCOME $2,140,520 $2,219,090
========== ==========
</TABLE>
- 20 -
<PAGE>
(17) FINANCIAL INFORMATION OF COLONY BANKCORP, INC. (PARENT ONLY) (CONTINUED)
<TABLE>
<CAPTION>
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,140,520 $ 2,219,090
Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities
Depreciation and Amortization 32,664 156,829
Equity in Undistributed Earnings of Subsidiary (1,397,005) (1,688,493)
Other (49,441) (134,782)
----------- -----------
726,738 552,644
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Infusion in Subsidiary (1,350,000) -
Purchases of Premises and Equipment (6,801) (45,542)
----------- -----------
(1,356,801) (45,542)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends Paid (370,457) (316,189)
Proceeds from Issuance of Common Stock 1,500,000 -
Principal Payments on Notes and Debentures (474,866) (1,871,283)
Proceeds from Notes and Debentures - 1,445,000
----------- -----------
654,677 (742,472)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 24,614 (235,370)
CASH AND CASH EQUIVALENTS, BEGINNING 70,455 305,825
----------- -----------
CASH AND CASH EQUIVALENTS, ENDING $ 95,069 $ 70,455
=========== ===========
</TABLE>
(18) COMMON STOCK SPLIT
On May 16, 1995, the board of directors approved a 100 percent stock split to be
effected on July 1, 1995 in the form of a dividend to stockholders of record on
June 30, 1995. Share 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.
(19) RECLASSIFICATIONS
Certain reclassifications have been made in the 1994 financial statements to
conform to the 1995 presentation.
- 21 -
<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) $ 7,382 $ 9,517
Federal Funds Sold 8,950 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 6,982 6,858
-------- --------
Total Assets $279,507 $278,568
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-Bearing $ 24,216 $ 25,152
Interest-Bearing (Note 8) 227,250 228,091
-------- --------
Total Deposits 251,466 253,243
Borrowed Money:
Federal Funds Purchased 860 -0-
Other Borrowed Money (Note 9) 3,400 2,504
-------- --------
Total Borrowed Money 4,260 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 $279,507 $278,568
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-22
<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
F-23
<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 FLOWS 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 (773) (1,323)
-------- --------
Total Adjustments $ 605 $ 130
-------- --------
Net cash provided by operating activities $ 2,006 $ 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 5,731 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) $11,146
Net increase in short-term borrowings and Federal
Funds Purchased 2,060 1,680
Dividends Paid (194) (170)
Net (decrease) increase in long-term borrowings (304) (104)
-------- --------
Net cash provided by financing activities ($ 215) $12,552
-------- --------
Net increase (decrease) in cash and cash equivalents (17,969) (2,404)
Cash and cash equivalents at beginning of period 33,743 15,343
-------- --------
Cash and cash equivalents at end of period $15,774 $12,939
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-24
<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 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 equal
or exceed outstanding principal and interest.
F-25
<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 part 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.
F-26
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER REAL ESTATE
Other real estate generally represents real estate acquired through foreclosure
and is intially 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 captial 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 4,867 6,119
Interest-Bearing Deposits With Other Banks 198 99
------ ------
$7,382 $9,517
====== ======
</TABLE>
(3) INVESTMENT SECURITIES
- -------------------------
Investment securities as 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>
F-27
<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 approximately $24,801 and $29,163
as of June 30, 1996 and December 31, 1995, respectively, were pledged to secure
public deposits and for other purposes.
F-28
<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) 24,853 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>
<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 three
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 592 296
Balance, Ending ------ ------
$4,157 $3,315
====== ======
</TABLE>
F-29
<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 $ 42,316 $ 50,440
Savings 9,998 9,856
Time, $100,000 and Over 54,163 48,111
Other Time 120,773 119,684
-------- --------
$227,250 $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>
F-30
<PAGE>
(9) OTHER BORROWED MONEY (CONTINUED)
- ------------------------------------
<TABLE>
<CAPTION>
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. 1,333 1,237
------ ------
Advance agreement with Federal Reserve Bank of Atlanta
dated June 28, 1996, payable in full on July 1, 1996. Interest
rate 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.
F-31
<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 number of shares
outstanding.
F-32
<PAGE>
BROXTON STATE BANK
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
F-33
<PAGE>
[LOGO OF NICHOLAS, CAULEY, & ASSOCIATES, P.C.]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Broxton State Bank
Broxton, Georgia 31519
We have audited the accompanying balance sheets of Broxton State Bank as of
December 31, 1995 and 1994, and the related statements of income, changes in
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Broxton State Bank as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
NICHOLS, CAULEY, & ASSOCIATION, P.C.
Warner Robins, Georgia
January 11, 1996
F-34
<PAGE>
BROXTON STATE BANK
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 827,520 $ 1,034,902
Securities available for sale (at market value) 5,536,680 6,677,117
Federal funds sold 800,000 200,000
Loans, less allowance for loan losses of $166,426
and $150,061, respectively 12,285,577 9,989,256
Premises and equipment 640,023 643,062
Accrued interest receivable 276,631 237,182
Cash value of officer's life insurance -- 387,967
Foreclosed real estate 280,000 345,526
Other assets 33,383 144,117
------------ ------------
$ 20,679,814 $ 19,659,129
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Non-interest bearing demand $ 2,706,396 $ 2,508,057
Money market 1,332,048 1,970,421
NOW 3,342,314 3,171,851
Savings 1,097,738 1,485,988
Time, $100,000 and over 2,081,015 1,761,652
Other time 7,843,444 6,812,637
------------ ------------
Total deposits 18,402,955 17,710,606
Other liabilities 261,755 241,482
------------ ------------
Total liabilities 18,664,710 17,952,088
------------ ------------
Stockholders' equity:
Common stock, par value $10; 50,730 shares authorized;
50,730 shares issued and outstanding 507,300 507,300
Surplus 892,700 892,700
Unrealized gain (loss) on securities available for sale,
net of applicable deferred income taxes 8,282 (169,636)
Undivided profits 606,822 476,677
------------ ------------
Total stockholders' equity 2,015,104 1,707,041
------------ ------------
$ 20,679,814 $ 19,659,129
============ ============
</TABLE>
See independent auditor's report and accompanying notes
to financial statements.
F-35
<PAGE>
BROXTON STATE BANK
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Interest Income:
Interest and fees on loans $ 1,285,638 $ 1,007,902
Interest on securities available for sale 342,556 398,499
Other interest 26,850 47,898
------------ ------------
1,655,044 1,454,299
Interest expense -
Interest on deposits 698,797 517,202
------------ ------------
Net interest income 956,247 937,097
Provision for loan losses 30,000 16,862
------------ ------------
Net interest income after provision for loan losses 926,247 920,235
Other income:
Service charges on deposit accounts 134,985 130,227
Other service charges, commissions and fees 17,080 43,562
Other 124,624 16,663
------------ ------------
1,202,936 1,110,687
Other expense:
Salaries and employee benefits 432,321 466,198
Occupancy 146,391 98,121
Other operating 332,619 301,337
------------ ------------
Income before income taxes 291,605 245,031
Income tax provision 60,000 43,219
------------ ------------
Net income $ 231,605 $ 201,812
============ ============
Net income per share of common stock $ 4.57 $ 3.98
============ ============
</TABLE>
See independent auditor's report and accompanying notes
to financial statements.
F-36
<PAGE>
BROXTON STATE BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock Undivided Unrealized
Par Value Surplus Profits Holding Gain (Loss) Total
-------------- ---------- ------------- ----------------------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December
31, 1993 $ 507,300 $ 892,700 $ 376,325 $ -- $ 1,776,325
Net Income -- -- 201,812 -- 201,812
Cash dividends declared,
$2.00 per share -- -- (101,460) -- (101,460)
Unrealized gain (loss) on
securities available for
sale, net of applicable
deferred taxes -- -- -- (169,636) (169,636)
------------ ---------- ------------ ------------- ------------
Balance, December
31, 1994 507,300 892,700 476,677 (169,636) 1,707,041
Net Income -- -- 231,605 -- 231,605
Cash dividends declared,
$2.00 per share -- -- (101,460) -- (101,460)
------------ ---------- ------------ ------------- ------------
Unrealized gain (loss) on
securities available for
sale, net of applicable
deferred taxes -- -- -- 177,918 177,918
------------ ---------- ------------ ------------- ------------
Balance, December
31, 1995 $ 507,300 $ 892,700 $ 606,822 $ 8,282 $ 2,015,104
============ ========== ============ ============= ============
</TABLE>
See independent auditor's report and accompanying notes
to financial statements.
F-37
<PAGE>
BROXTON STATE BANK
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 231,605 $ 201,812
Adjustments to reconcile net income to net
cash from operations:
Depreciation 65,216 30,434
Provision for loan losses 30,000 16,862
Gain on sale of securities, net (7,420) (566)
Loss on sale of premises and equipment 1,078 1,073
Amortization, net of accretion 307 1,364
(Increase ) decrease in accrued interest receivable (39,449) 16,078
Decrease in other assets 19,080 28,400
Increase in other liabilities 20,273 37,980
------------ ------------
Net cash flow provided by operating activities 320,690 333,437
------------ ------------
Cash flow from investing activities:
Increase in loans, net (2,326,321) (591,370)
Decrease (increase) in foreclosed real estate 65,526 (163,526)
Purchases of securities available for sale (502,000) (1,099,041)
Proceeds from redemption of securities available for sale 1,919,122 1,017,208
Purchases of premises and equipment (68,624) (447,341)
Decrease (increase) in cash value of officer's life insurance 387,967 (20,467)
(Increase) decrease in Federal funds sold (600,000) (200,000)
Proceeds from disposal of premises and equipment 5,369 30,973
------------ ------------
Net cash flow used by investing activities (1,118,961) (1,473,564)
------------ ------------
Cash flow from financing activities:
Increase in time deposits 1,350,170 173,405
Cash dividends paid (101,460) (101,460)
(Decrease) in Federal funds purchased -- (400,000)
Increase (decrease) in non-interest bearing demand deposits 198,339 (259,215)
Decrease in money market deposits (638,373) (376,351)
Increase in NOW deposits 170,463 303,740
Increase (decrease) in savings deposits (388,250) 391,529
------------ ------------
Net cash flow provided (used) by financing activities 590,889 (268,352)
------------ ------------
Net decrease in cash, cash items and due from banks (207,382) (1,408,479)
Cash and due from banks, beginning of year 1,034,902 2,443,381
------------ ------------
Cash and due from banks, end of year $ 827,520 $ 1,034,902
============ ============
</TABLE>
See independent auditor's report and accompanying notes
to financial statements.
F-38
<PAGE>
BROXTON STATE BANK
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------------- -----------------
<S> <C> <C>
Non-cash transactions:
- ----------------------
Other asset -
-----------
Increase (decrease) in deferred tax asset $ (91,655) $ 87,388
resulting from the unrealized losses (gains) =============== ================
on investments
Securities -
---------
Increase (decrease) in net unrealized loss (gain) $ 269,572 $ (257,023)
on securities available for sale ============== ==============
</TABLE>
See independent auditor's report and accompanying notes
to financial statements.
F-39
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Broxton State Bank (Bank) is a state bank chartered under the laws of
Georgia. The institution's primary source of revenue is providing loans to
customers within the Bank's geographical area. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The accounting and
reporting policies of the Bank conform to generally accepted accounting
principles and with general practices within the banking industry. The
following is a description of the more significant of these policies.
Cash Equivalents
----------------
For the purpose of presentation in the statements of cash flows, cash and
cash equivalents are defined as those amounts included in the balance-sheet
caption "cash and due from banks." Cash flows from demand deposits, savings
deposits, federal funds purchased and sold, renewals and extensions of
loans and time deposits are reported net.
Securities
----------
Management determines the appropriate classification of securities at the
time of purchase. If management has the intent and the Bank the ability at
the time of purchase to hold securities until maturity or on a long-term
basis, they are classified as investments and carried at amortized
historical cost. Securities to be held for indefinite periods of time and
not intended to be held to maturity or on a long-term basis are classified
as available for sale and carried at fair value. Securities held for
indefinite periods of time include securities that management intends to
use as part of its asset and liability management strategy and that may be
sold in response to changes in interest rates, resultant prepayment risk
and other factors related to interest rate and resultant prepayment risk
changes.
Realized gains and losses on dispositions are based on the net proceeds and
the adjusted book value of the securities sold, using the specific
identification method. Unrealized gains and losses on investment securities
available for sale are based on the difference between book value and fair
value of each security. These gains and losses are credited or charged to
stockholders' equity, whereas realized gains and losses flow through the
Bank's early operation.
F-40
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Loans
-----
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs, the allowance for loan
losses, and any deferred fees or costs on originated loans and unamortized
premiums or discounts on purchased loans.
Interest on commercial and real estate loans is credited to income on a
daily basis based upon the principal amount outstanding. Most interest on
installment loans is credited to income on a daily basis based upon the
principal amount outstanding. The remaining interest on installment loans
is credited to income based on the Rule of 78's (sum-of-the-months'-digits)
method, the results of which are not materially different from generally
accepted accounting principles.
Loan origination fees and certain direct origination costs are capitalized
and recognized as an adjustment of the yield of the related loan.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When interest accrual is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to
the extent cash payments are received.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the estimated
value of any underlying collateral, and current economic conditions.
For impairment recognized in accordance with Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards No. 114,
Accounting by Creditors for Impairment of a Loan, the entire change in
present value of expected cash flows is reported as bad debt expense in the
same manner in which impairment initially was recognized or as a reduction
in the amount of bad debt expense that otherwise would be reported.
F-41
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Foreclosed Real Estate
----------------------
Real estate properties acquired through, or in lieu of, loan foreclosure
are to be sold and are initially recorded at fair value at the date of
foreclosure establishing a new cost basis. After foreclosure, valuations
are periodically performed by management and the real estate is carried at
the lower of carrying amount or fair valuation allowance are included in
loss on foreclosed real estate.
Employee Benefits
-----------------
The Bank has a contributory 401(k) employee savings and profit sharing plan
covering all employees who meet the eligibility requirements. To be
eligible, an employee must be 19 years of age and have one year of
continuous service. The plan provides for the employee to contribute
through salary reduction to the plan and the employer to contribute a fifty
percent match, within prescribed limits, of the employee contributions. The
employer may also contribute additional amounts as directed by the Board of
Directors.
Premises and Equipment
----------------------
Premises and equipment are stated at cost less accumulated depreciation,
computed principally on the straight-line method over the estimated useful
lives of the assets.
Maintenance and repairs that do not extend the useful life of the premises
and equipment are charged to expense. The useful lives of premises and
equipment are as follows:
<TABLE>
<CAPTION>
Asset Type Useful Life
---------- -----------
<S> <C>
Building and improvements 10-35 years
Furniture, fixtures, and equipment 5-10 years
Vehicles 5 years
</TABLE>
Income Taxes
------------
The provision for income taxes is based on amounts reported in the
statements of income (after adjustments for permanent differences) and
include deferred taxes on temporary differences in the recognition of
income and expense for tax and financial statement purposes. Deferred taxes
are computed on the liability method as prescribed in Statement of
Financial Accounting Standards Number 109, "Accounting for Income Taxes"
("SFAS 109").
F-42
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Net Income Per Share
--------------------
Net income per share is calculated on the basis of the weighed average
number of shares outstanding.
Financial Instruments
---------------------
In the ordinary course of business the Bank has entered into off balance
sheet financial instruments consisting of commitments to extend credit,
commercial letters of credit and standby letters of credit. Such financial
instruments are recorded in the financial statements when they are funded
or related fees are incurred or received.
Fair Values of Financial Instruments
------------------------------------
The following methods and assumptions were used by the bank in estimating
fair values of financial instruments as disclosed herein:
Cash and short term instruments. The carrying amounts of cash and
short-term instruments approximate their fair value.
Available-for-sale securities. Fair values for securities, excluding
restricted equity securities, are based on quoted market prices. The
carrying values of restricted equity securities approximate fair values.
Loans receivable. For variable-rate loans that reprice frequently and
have no significant change in credit risk, fair values are based on
carrying values. Fair values for certain mortgage loans (for example, one-
to-four family residential), credit-card loans, and other consumer loans
are based on quoted market prices of similar loans sold in conjunction with
securitization transactions, adjusted for differences in loan
characteristics. Fair values for commercial real estate and commercial
loans are estimated using discounted cash flow analyses, using interest
rates currently being offered for loans with similar terms to borrowers of
similar credit quality. Fair values for impaired loans are estimated using
discounted cash flow analyses or underlying collateral values, where
applicable.
F-43
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Deposit liabilities. The fair values disclosed for demand deposits
are, by definition, equal to the amount payable on demand at the reporting
date (that is, their carrying amounts). The carrying amounts of variable-
rate, fixed-term money-market accounts and certificates of deposit (CDS)
approximate their fair values at the reporting date. Fair values for fixed-
rate CDS are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
Short-term borrowings. The carrying amounts of federal funds
purchased, borrowings under repurchase agreements, and other short-term
borrowings maturing within 90 days approximate their fair values. Fiar
values of other short-term borrowings are estimated using discounted cash
flow analyses based on the Bank's current incremental borrowing rates for
similar types of borrowing arrangements.
Accrued interest. The carrying amounts of accrued interest approximate
their fair values.
Off-balance-sheet instruments. Fair values for off balance-sheet
lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counter parties' credit standings.
Reclassifications
-----------------
Certain reclassifications have been made to the December 31, 1994, financial
statements in order for them to be better compared to the December 31, 1995,
financial statements.
2. SECURITIES:
----------
For the year ended December 31, 1994, the Bank adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." This statement addresses the accounting and
reporting for investments in equity securities that have readily
determinable fiar values and for all investments in debt securities. Those
investments are to be classified in three categories and accounted for as
follows:
. Debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as investment securities
and reported at amortized cost.
F-44
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
2. SECURITIES:
----------
. Debt and equity securities that are bought and held principally for
the purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and
losses included in earnings.
. Debt and equity securities not classified as either investment
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and
losses excluded from earnings and reported in a separate component of
stockholders' equity.
As of December 31, 1995, the company classified investments with a cost of
$5,524,131 and market value of $5,535,680 as available-for-sale securities.
The classification has resulted in the following net changes to the
accounts below:
<TABLE>
<S> <C>
Securities available-for-sale $ 12,549
Deferred income taxes (4,267)
---------
Unrealized holding gain on securities available for
sale, net of applicable deferred income taxes $ 8,282
</TABLE> =========
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Obligations of U.S. Government
corporation and agencies $ 3,393,092 $ 20,224 $ (13,650) $ 3,399,666
Obligations of state and political
subdivisions 1,981,383 15,273 (10,511) 1,986,145
Other securities 149,656 1,213 -- 150,869
----------- ---------- ---------- -----------
$ 5,524,131 $ 36,710 $ (24,161) $ 5,536,680
=========== ========== ========== ===========
</TABLE>
The amortized cost and fair value of securities available for sale at
December 31, 1995, by expected maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
F-45
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
2. SECURITIES:
----------
<TABLE>
<CAPTION>
Cost Estimated
Amortized Market Value
----------- ------------
<S> <C> <C>
Due in one year or less $ 1,540,722 $ 1,519,329
Due after one year through five years 3,316,147 3,339,717
Due after five years through ten years 529,836 539,460
Due after ten years 137,426 138,174
----------- -------------
$ 5,524,131 $ 5,536,680
=========== =============
</TABLE>
The amortized cost and fair value of securities at December 31, 1994 were:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government corporations and
agencies $ 4,257,549 $ 8,172 $ (145,151) $ 4,120,570
Obligations of states and political
subdivisions 2,528,456 4,940 (127,899) 2,405,497
Other securities 148,136 2,914 -- 151,050
----------- --------- ----------- ------------
$ 6,934,141 $ 16,026 $ (273,050) $ 6,677,117
=========== ========= =========== ============
</TABLE>
Proceeds from sales and maturities of securities available for sale during
1995 were $1,919,122. Gross gains and losses on those sales and maturities
were $7,420 and $-0-, respectively.
Proceeds from sales and maturities of securities during 1994 were
$1,017,208. Gross gains and losses on those sales and maturities were $566
and $-0-, respectively.
Securities with an amortized cost of $455,000 and $246,875 at December 31,
1995 and 1994, respectively, were pledged as collateral on public deposits
and for other purposes as required by law. The market values of the pledged
securities were $468,637 and $252,658 at December 31, 1995 and 1994,
respectively.
Taxable interest income on securities was $240,018 and $299,141 for the
years ended December 31, 1995 and 1994, respectively. Interest income
exempt from Federal income taxes was $96,538 and $99,358 for the years
ended December 31, 1995 and 1994, respectively.
F-46
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
3. SALARY CONTINUATION AGREEMENT:
-----------------------------
During December 1993, the bank adopted a salary continuation agreement with
a key employee. The salary continuation agreement was to be funded from two
single premium universal life insurance policies which were purchased in
December 1993. At December 31, 1994, the cash surrender value on these
policies was $387,967. During 1994 the bank accrued and expensed the
deferred compensation liability of $14,028. During 1995 the Board and
employee agreed to discontinue the salary continuation agreement and
redeemed the policies at their cash surrender value. The accrued deferred
compensation liability of $14,028 was recorded as other income in the
December 31, 1995 financial statements.
4. LOANS AND ALLOWANCE FOR LOAN LOSSES:
-----------------------------------
The composition of loans are summarized as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Commercial, financial and agricultural $ 5,529,976 $ 4,374,260
Consumer installment loans 6,920,035 5,766,472
Other 3,080 2,755
------------ ------------
12,453,091 10,143,487
Unearned interest (1,088) (4,170)
Allowance for loan losses (166,426) (150,061)
------------ ------------
Loans, net $ 12,258,577 $ 9,989,256
============ ============
</TABLE>
Loans on which the accrual of interest has been discontinued or reduced amounted
to $16,144 and $110,074 at December 31, 1995, 1994, respectively.
F-47
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
4. LOANS AND ALLOWANCE FOR LOAN LOSSES:
-----------------------------------
Change in allowance for loan losses are as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1993 1994
------------ ------------
<S> <C> <C>
Balance, beginning of year $ 150,061 $ 138, 908
Provision changed to operations 30,000 16, 862
Loans charged off (20,532) (28, 826)
Recoveries 6,897 23, 117
---------- ----------
Balance, end of year $ 166,426 $ 150,061
========== ==========
</TABLE>
During 1995, the Bank had no impaired loans which were recognized in
conformity with FASD Statement No. 114.
5. PREMISES AND EQUIPMENT.
----------------------
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Land $ 70, 400 $ 71,400
Buildings 464, 867 462,936
Furniture, fixtures and equipment 495, 214 433,590
Vehicles 28, 785 47,162
---------- -----------
1,059,266 1,014,088
Accumulated depreciation (419,243) (371,026)
----------- -----------
Premises and equipment, net $ 640,023 $ 643,062
=========== ===========
</TABLE>
Depreciation expense for the Years ended December 31, 1995 and 1994, was
$65,216 and $30, 434, respectively.
F-48
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
6. INCOME TAXES:
------------
The total provision for income taxes in the statements of income is as
follows:
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Currently payable - Federal $ 60,225 $ 51,896
Deferred receivable (225) (8,677)
------------ ------------
$ 60,000 $ 43,219
============ ============
</TABLE>
The deferred tax provisions for the years ended December 31, 1995 and
December 31, 1994, are applicable to the following items:
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Difference between tax allowance for
loan losses in excess of book allowance
for loan losses $ (3,400) $ (2,200)
Deferred compensation -- (4,208)
Other items, net 3,175 (2,269)
---------- ----------
$ (225) $ (8,677)
========== ==========
</TABLE>
The Bank's position for income taxes differs from the amounts computed by
applying the Federal income tax statutory rates to income before income
taxes. A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
-------------------- ---------------------
Amount Percent Amount Percent
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Tax provision at
statutory rate $ 99,146 34.00 % $ 83,311 34.00 %
Difference resulting from:
Surtax exemption (2,170) (0.70) (4,499) (1.80)
Tax exempt interest (39,381) (13.50) (37,320) (15.20)
Other items, net 2,405 0.82 1,727 0.60
--------- -------- -------- --------
Provision for income
taxes $ 60,000 20.62 % $ 43,219 17.60 %
========= ======== ======== ========
</TABLE>
F-49
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
6. INCOME TAXES:
------------
At December 31, 1995 and 1994, the Bank's deferred tax assets and
liabilities consist of the following:
<TABLE>
<CAPTION>
December 31 December 31,
1995 1994
----------- ------------
<S> <C> <C>
Allowance for loan losses in excess of tax
allowance for loan losses $ 28,622 $ 25,222
Net unrealized appreciation (loss on) securities
available for sale (4,267) 87,388
Tax depreciation in excess of book
depreciation (24,200) (8,463)
Other items, net 6,075 (5,941)
---------- -----------
Deferred tax asset, net $ 6,230 $ 98,206
========== ===========
</TABLE>
7. EMPLOYEE BENEFIT PLANS:
----------------------
Effective January 1, 1991, the Bank adopted a qualified 401(k) employee
savings and profit sharing plan for the benefit of substantially all
employees. Under the plan, employees can contribute and defer taxes on
compensation contributed. The Bank matches, within prescribed limits, the
contributions of the employees. The Bank also has the option to make an
additional profit sharing contribution to the plan. Employer contributions
to the plan during 1995 and 1994 were $7,878 and $7,762, respectively.
8. RELATED PARTIES:
---------------
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, principal
officers, their immediate families, and affiliated companies in which they
are principal stockholders (commonly referred to as related parties), on
the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with others. These
persons and firms were indebted to the Bank for loans totaling $167,333 and
$203,237 at December 31, 1995 and 1994, respectively.
F-50
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
9. COMMITMENTS AND CONTINGENCIES:
-----------------------------
In the normal course of business, the Bank makes various commitments and
incurs certain contingent liabilities that are not reflected in the
accompanying financial statements. These commitments and contingent
liabilities include commitments to extend credit and standby letters of
credit.
The Bank's nature of business is such that it ordinarily results in a
certain amount of litigation. In the opinion of management, there is no
litigation in which the outcome will have a material effect on the
financial statements.
The Bank does not anticipate any material losses as a result of the
commitments and contingent liabilities.
10. STATEMENTS OF CASH FLOWS:
-----------------------
For the purpose of reporting cash flows, cash and cash equivalents include
cash on hand and amounts due from banks. Cash flows from demand deposits,
savings accounts, time deposits, Federal Funds purchased and sold, and
renewals and extensions of loans are reported net.
Interest paid on deposits and other borrowings during 1995 and 1994
amounted to $653,782 and $507,252, respectively.
Income taxes paid during 1995 and 1994 amounted to $72,296 and $33,382,
respectively.
11. RISK FACTORS:
------------
The Bank's operations are affected by various risk factors including
interest-rate risk, credit risk, and risk from geographic concentration of
lending activities. Management attempts to manage interest rate risk
through various assets/liability management techniques designed to match
maturities of assets and liabilities. Loan policies and administration are
designed to provide assurance that loans will only be granted to credit-
worthy borrowers; although, credit losses are expected to occur because of
subjective factors and factors beyond the control of the Bank. In addition,
the Bank is a community bank and, as such, is mandated by the Community
Reinvestment Act and other regulation to conduct most of its lending
activities within the geographic area where it is located. As a result, the
Bank and its borrowers may be especially vulnerable to the consequences of
changes in the local economy.
F-51
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
12. FINANCIAL INSTRUMENTS:
---------------------
The Bank is party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and
standby letters of credit. Those instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount
recognized in the balance sheets. The contract amounts of those instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit written is presented by the contractual
notional amount of those instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
<TABLE>
<CAPTION>
Contract Amount
-----------------------------------------------
December 31, 1995 December 31, 1994
---------------------- ---------------------
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk;
Commitments to extend credit $661,466 $822,406
Standby letters of credit 10,000 45,526
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. The Bank evaluates
each customer's credit worthiness on a case-by-case basis. The amount of
collateral obtained if deemed necessary by the Bank upon extension of
credit is based on management's credit evaluation of the counterpart.
Standby letters of credit written are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loan commitments to customers.
F-52
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
12. FINANCIAL INSTRUMENTS:
---------------------
The Bank has cash deposits with a financial institution in excess of the
insured limitation of the Federal Deposit Insurance Corporation. If the
financial institution were not to honor its contractual liability, the
company could incur losses. Management is of the opinion that there is no
material risk because of the financial strength of the institution.
The estimated fair values of the Bank's financial instruments (in
thousands) were as follows:
<TABLE>
<CAPTION>
In Thousands
------------------------------
December 31, 1995
------------------------------
Carrying Fair
Amount Value
------------ ------------
<S> <C> <C>
Financial assets:
Cash and due from banks, interest-bearing deposits
with banks, and federal funds sold $ 1,628 $ 1,628
Securities available for sale 5,537 5,537
Loans receivable 12,285 12,664
Accrued interest receivable 277 277
Financial liabilities:
Deposit liabilities: $ (18,403) $ (18,545)
Accrued interest payable (91) (91)
</TABLE>
The estimated fair values of the Bank's off-balance sheet assets
(liabilities) are considered to be minimal.
13. REGULATORY MATTERS:
------------------
The Bank is subject to various capital requirements administered by the
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
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital adequacy guidelines that involve quantitative measures of
the Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting principles. The Bank's capital
classification is also subject to qualitative judgements by the regulators
about components, risk weighings, and other factors.
F-53
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
13. REGULATORY MATTERS:
------------------
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, as of December 31, 1995,
that the Bank meets all adequacy requirements to which it is subject.
As of December 31, 1995, the most recent notification from the State
Department of Banking and Finance categorized the Bank as well capitalized
under the regulatory framework for prompt correction action. To be
categorized as well as capitalized the Bank must maintain minimum total
risk-based, Tier I risk-based, Tier I leverage ratios as set forth in the
table. There are no conditions or events since that notification that
management believes have changed the institution's category.
The Bank actual capital amounts and ratios are also presented in the
following table:
<TABLE>
<CAPTION>
For Capital
Actual Adequacy Purposes:
------------------ -----------------
Amount Ratio Amount Ratio
------------------ -----------------
<S> <C> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted
Assets) $ % greater than $ % greater than
equal to equal to
Tier I Capital (to Risk Weighted
Assets) % greater than % greater than
equal to equal to
Tier I Capital (to Average
Assets) % greater than % greater than
equal to equal to
As of December 31, 1995:
Total Capital (to Risk Weighted
Assets) $ 2,159,914 18.0% greater than $ 979,732 8.0% greater than
equal to equal to
Tier I Capital (to Risk Weighted
Assets) 2,006,831 16.0% greater than 813,031 4.0% greater than
equal to equal to
Tier I Capital (to Average
Assets) 2,006,831 10.0% greater than 489,866 4.0% greater than
equal to equal to
<CAPTION>
To Be Well Capitalized
Under Prompt Corrective
Action Provisions:
--------------------
Amount Ratio
---------------------
<S> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted
Assets) $ % greater than
equal to
Tier I Capital (to Risk Weighted
Assets) % greater than
equal to
Tier I Capital (to Average
Assets) % greater than
equal to
As of December 31, 1995:
Total Capital (to Risk Weighted
Assets) $1,224,665 10.0% greater than
equal to
Tier I Capital (to Risk Weighted
Assets) 733,999 6.0% greater than
equal to
Tier I Capital (to Average
Assets) 1,016,289 5.0% greater than
equal to
</TABLE>
F-54
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
14. LIMITATION ON DIVIDENDS:
-----------------------
The Board of Directors of any state-chartered bank in Georgia may declare
and pay cash dividends on its outstanding capital stock without any request
for approval of the Bank's regulatory agency if the following conditions
are met:
1) Total classified assets at the most recent examination date do
not exceed eighty (80) percent of equity capital;
2) The aggregate amount of dividends declared in the calendar year
does not exceed fifty (50) percent of the prior year's net
income;
3) The ratio of equity capital to adjusted total assets shall not be
less than six (6) percent.
The dividend paid during 1995 exceeded the fifty (50) percent rule for
which the Bank received regulatory approval. As of January 1, 1996, the
amount available for dividends in 1996 without regulatory consent was
$115,803.
F-55
<PAGE>
BROXTON STATE BANK
FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
F-56
<PAGE>
[LETTERHEAD OF NICHOLS, CAULEY, & ASSOCIATES, P.C. APPEARS HERE]
Board of Directors
Broxton State Bank
Broxton, Georgia 31519
We have compiled the accompanying balance sheets of Broxton State Bank (a
corporation) as of June 30, 1996 and 1995, and the related statements of income,
changes in stockholders' equity, and cash flows for the six months then ended,
in accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
/s/ Nichols, Cauley, & Associates, P.C.
Warner Robins, Georgia
July 5, 1996
F-57
<PAGE>
BROXTON STATE BANK
BALANCE SHEETS
JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1996
------------- -------------
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 934,021 $ 1,106,046
Certificates of deposits 200,000 --
Securities available for sale (at market value) 6,167,212 6,059,352
Federal funds sold 600,000 --
Loans, less allowance for loan losses of $165,371
and $163,429, respectively 12,326,871 11,138,304
Premises and equipment, net 603,169 686,645
Accrued interest receivable 276,656 227,538
Cash value of officer's life insurance -- 387,967
Foreclosed real estate 235,000 280,000
Other assets 32,515 199,346
------------ ------------
$ 21,375,444 $ 20,085,198
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits:
Non-interest bearing demand $ 2,185,980 $ 3,034,245
Money market 1,121,002 1,515,383
NOW 3,712,134 3,125,094
Savings 1,097,324 1,034,573
Time, $100,000 and over 2,417,080 2,061,116
Other time 8,655,379 7,264,914
------------ ------------
Total deposits 19,188,899 18,035,325
Other liabilities 125,336 106,224
------------ ------------
Total liabilities 19,314,235 18,141,549
------------ ------------
Stockholders' equity:
Common stock, par value $10; 50,730 shares authorized;
50,730 shares issued and outstanding 507,300 507,300
Surplus 1,092,700 892,700
Unrealized gain (loss) on securities available for sale,
net of applicable deferred income taxes (39,020) (20,764)
Undivided profits 500,229 564,413
------------ ------------
Total stockholders' equity 2,061,209 1,943,649
------------ ------------
$ 21,375,444 $ 20,085,198
============ ============
</TABLE>
See accountant's compilation report and accompanying notes
to financial statements.
F-58
<PAGE>
BROXTON STATE BANK
STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1996 and 1995
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
--------------- ---------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 680,386 $ 612,865
Interest on securities available for sale 182,440 179,612
Other interest -- 6,532
----------- -----------
862,826 799,009
Interest expense -
Interest on deposits 392,991 325,198
----------- -----------
Net interest income 469,835 473,811
Provision for loan losses 15,000 15,000
----------- -----------
Net interest income after provision for loan losses 454,835 458,811
Other income
Service charges on deposit accounts 68,843 56,603
Other service charges, commissions and fees 53,206 13,480
Other 289 9,769
----------- -----------
577,173 538,663
Other expense:
Salaries and employee benefits 195,448 204,744
Occupancy 72,442 66,363
Other operating 185,876 163,657
----------- -----------
Net income before incomes taxes 123,047 103,899
Income tax provision 30,000 16,163
----------- -----------
Net income $ 93,407 $ 87,736
=========== ===========
Net income per share of common stock $ 1.84 $ 1.73
=========== ===========
</TABLE>
See accountant's complication report and accompanying notes
to financial statements.
F-59
<PAGE>
BROXTON STATE BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Common Stock Undivided Unrealized Holding
Par Value Surplus Profits Gain (Loss) Total
------------ ----------- ------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December
31, 1994 $ 507,300 $ 892,700 $ 476,677 $ (169,636) $ 1,707,041
Net Income -- -- 87,736 -- 87,736
Unrealized gain (loss)
on securities avail-
able for sale, net of
applicable deferred
taxes $ -- -- -- 148,872 148,872
------------ ----------- ------------ ------------- -------------
Balance, June 30, 1995 $ 507,300 $ 892,700 $ 564,413 $ (20,764) $ 1,943,649
============ =========== ============ ============= =============
Balance, December
31, 1995 $ 507,300 $ 892,700 $ 606,822 $ 8,282 $ 2,015,104
Net Income -- -- 93,407 -- 93,407
Transfer from undivided
profit to surplus -- 200,000 (200,000) -- --
Unrealized gain (loss)
on securities avail-
able for sale, net of
applicable deferred
taxes -- -- -- (47,302) (47,302)
------------ ----------- ------------ ------------- -------------
Balance, June 30, 1996 $ 507,300 $ 1,092,700 $ 500,229 $ (39,020) $ 2,061,209
============ =========== ============ ============= =============
</TABLE>
See accountant's compilation report and accompanying notes
to financial statements.
F-60
<PAGE>
BROXTON STATE BANK
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
---------------- ----------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 93,407 $ 87,736
Adjustments to reconcile net income to net
cash from operations:
Depreciation 30,000 18,000
Provision for loan losses 15,000 15,000
Book write-down of fixed assets 10,400 --
Gain on sale of securities, net -- (7,420)
Amortization, net of accretion 1,450 914
(Increase) decrease in accrued interest receivable (25) 9,644
(Increase) decrease in other assets 868 (131,921)
Increase in other liabilities (65,481) (135,258)
-------------- --------------
Net cash flow provided (used) by operating
activities 85,619 (143,305)
-------------- --------------
Cash flow from investing activities:
Increase in loans, net (56,294) (1,164,048)
Decrease (increase) in foreclosed real estate 45,000 65,526
Purchases of securities available for sale (750,222) --
Purchase of certificate of deposit 200,000 --
Proceeds from redemption of securities available for
sale -- 849,835
Purchases of premises and equipment (3,546) (61,583)
(Increase) decrease in Federal funds sold -- 200,000
-------------- --------------
Net cash flow used in investing activities (965,062) (110,270)
-------------- --------------
Cash flow from financing activities:
Increase in time deposits 1,148,000 751,741
Increase in Federal funds purchased 200,000 --
Increase (decrease) in non-interest bearing demand
deposits (520,416) 526,188
Decrease in money market deposits (211,046) (455,038)
Increase (decrease) in NOW deposits 369,820 (46,757)
(Decrease) in savings deposits (414) (451,415)
-------------- --------------
Net cash flow provided by financing activities 985,944 324,719
-------------- --------------
Net increase in cash, cash items and due from banks 106,501 71,144
Cash and due from banks, beginning of period 827,520 1,034,902
-------------- --------------
Cash and due from banks, end of period $ 934,021 $ 1,106,046
============== ==============
</TABLE>
See accountant's compilation report and accompanying notes
to financial statements.
F-61
<PAGE>
BROXTON STATE BANK
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Non-cash transactions:
- ---------------------
Other asset
-----------
Increase in deferred tax asset
resulting from the unrealized losses
(gains) on investments $ 24,368 $ 76,692
============= =============
Securities -
----------
(Decrease) in net unrealized loss (gain)
on securities available for sale $ (71,670) $ (225,564)
============= =============
Surplus -
-------
Transfer of undivided profits to surplus $ 200,000 $ --
============= =============
Undivided profits -
-----------------
Transfer to surplus of undivided profits $ (200,000) $ --
============= =============
</TABLE>
See accountant's compilation report and accompanying notes
to financial statements.
F-62
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTH ENDED JUNE 30, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Broxton State Bank (Bank) is a state bank chartered under the laws of
Georgia. The institution's primary source of revenue is providing loans to
customers within the Bank's geographical area. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The accounting and
reporting policies of the Bank conform to generally accepted accounting
principles and with general practices within the banking industry. The
following is a description of the more significant of these policies.
Cash Equivalents
----------------
For the purpose of presentation in the statements of cash flows, cash and
cash equivalents are defined as those amounts included in the balance-sheet
caption "cash and due from banks." Cash flows from demand deposits, savings
deposits, federal funds purchased and sold, renewals and extensions of
loans and time deposits are reported net.
Securities
----------
Management determines the appropriate classification of securities at a
time of purchase. If management has the intent and the Bank the ability at
the time of purchase to hold securities until maturity or on a long-term
basis, they are classified as investments and carried at amortized
historical cost. Securities to be held for indefinite periods of time and
not intended to be held to maturity or on a long-term basis are classified
as available for sale and carried at fair value. Securities held for
indefinite periods of time include securities that management intends to
use as part of its asset and liability management strategy and that may be
sold in response to changes in interest rates, resultant prepayment risk
and other factors related to interest rate and resultant prepayment risk
changes.
Realized gains and losses on dispositions are based on the net proceeds and
the adjusted book value of the securities sold, using the specific
identification method. Unrealized gains and losses on investment securities
available for sale are based on the difference between book value and fair
value of each security. These gains and losses are credited or charged to
stockholders' equity, whereas realized gains and losses flow through the
Bank's early operation.
F-63
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Loans
-----
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs, the allowance for loan
losses, and any deferred fees or costs on originated loans and unamortized
premiums or discounts on purchased loans.
Interest on commercial and real estate loans is credited to income on a
daily basis based upon the principal amount outstanding. Most interest on
installment loans is credited to income on a daily basis based upon the
principal amount outstanding. The remaining interest on installment loans
is credited to income based on the Rule of 78's (sum-of-the-months'-digits)
method, the results of which are not materially different from generally
accepted accounting principles.
Loan origination fees and certain direct origination costs are capitalized
and recognized as an adjustment of the yield of the related loan.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When interest accrual is discontinued, all unpaid accured
interest is reversed. Interest income is subsequently recognized only to
the extent cash payments are received.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the estimated
value of any underlying collateral, and current economic conditions.
For impairment recognized in accordance with Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards No. 114,
Accounting by Creditors for Impairment of a Loan, the entire change in
present value of expected cash flows is reported as bad debt expense in the
same manner in which impairment initially was recognized or as a reduction
in the amount of bad debt expense that otherwise would be reported.
F-64
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Foreclosed Real Estate
---------------------
Real estate properties acquired through , or in lieu of, loan foreclosure
are to be sold and are initially recorded at fair value at the date of
foreclosure establishing a new cost basis. After foreclosure, valuations
are periodically performed by management and the real estate is carried at
the lower of carrying amount or fiar value less cost to sell. Revenue and
expenses from operations and changes in the valuation allowance are
included in loss on foreclosed real estate.
Employee Benefits
-----------------
The Bank has a contributory 401(k) employee savings and profit sharing plan
covering all employees who meet the eligibility requirements. To be
eligible, an employee must be 19 years of age and have one year of
continuous service. The plan provides for the employee to contribute
through salary reduction to the plan and the employer to contribute a fifty
percent match, within prescribed limits, of the employee contributions. The
employer may also contribute additional amounts as directed by the Board of
Directors.
Premises and Equipment
----------------------
Premises and equipment are stated at cost less accumulated depreciation,
computed principally on the straight-line method over the estimated useful
lives of the assets.
Maintenance and repairs that do not extend the useful life of the premises
and equipment are charged to expense. The useful lives of premises and
equipment are as follows:
<TABLE>
<CAPTION>
Asset Type Useful Life
---------- -----------
<S> <C>
Building and improvements 10-35 years
Furniture, fixtures, and equipment 5-10 years
Vehicles 5 years
</TABLE>
Income Taxes
------------
The provision for income taxes is based on amounts reported in the
statements of income (after adjustments for permanent differences) and
include deferred taxes on temporary differences in the recognition of
income and expense for tax and financial statement purposes. Deferred taxes
are computed on the liability method as prescribed in Statement of
Financial Accounting Standards Number 109, "Accounting for Income Taxes"
("SFAS 109").
F-65
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Net Income Per Share
--------------------
Net income per share is calculated on the basis of the weighted average
number of shares outstanding.
Financial Instruments
---------------------
In the ordinary course of business the Bank has entered into off balance
sheet financial instruments consisting of commitments to extend credit,
commercial letters of credit and standby letters of credit. Such financial
instruments are recorded in the financial statements when they are funded
or related fees are incurred or received.
Fair Values of Financial Instruments
------------------------------------
The following methods and assumptions were used by the bank in estimated
fair values of financial instruments as disclosed herein:
Cash and short term instruments. The carrying amounts of cash and
short-term instruments approximate their fair value.
Available-for-sale securities. Fair values for securities, excluding
restricted equity securities, are based on quoted market prices. The
carrying values of restricted equity securities approximately fair values.
Loans receivable. For variable-rate loans reprice frequently and have
no significant change in credit risk, fair values are based on carrying
values. Fair values for certain mortgage loans (for example, one-to-four
family residential), credit-card loans and other consumer loans are based
on quoted market prices of similar loans sold in conjunction with
securitization transactions, adjusted for differences in loan
characteristics. Fair values for commercial real estate and commercial
loans are estimated using discounted cash flow analyses, using interest
rates currently being offered for loans with similar terms to borrowers of
similar credit quality. Fair values for impaired loans are estimated using
discounted cash flow analyses or underlying collateral values, where
applicable.
F-66
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Deposit liabilities. The fair values disclosed for demand deposits
are, by definition, equal to the amount payable on demand at the reporting
date (that is, their carrying amounts). The carrying amounts of variable-
rate, fixed-term money-market accounts and certificates of deposit (CDS)
approximate their fair values at the reporting date. Fair values for fixed-
rate CDS are estimated using a discounted cash flow calculation that
applies interest rates currently being offered on certificates to a
schedule of aggregated expected monthly maturities on time deposits.
Short-term borrowings. The carrying amounts of federal funds
purchased, borrowings under repurchase agreements, and other short-term
borrowings maturing within 90 days approximate their fair values. Fair
values of other short-term borrowings are estimated using discounted cash
flow analyses based on the Bank's current incremental borrowing rates for
similar types of borrowing arrangements.
Accrued interest. The carrying amounts of accrued interest,
approximate their fair values.
Off-balance-sheet instruments. Fair values for off balance-sheet
lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counter parties' credit standings.
2. SECURITIES:
----------
For the year ended December 31, 1994, the Bank adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." This statement addresses the accounting and
reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. Those
investments are to be classified in three categories and accounted for as
follows:
. Debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as investment securities
and reported at amortized cost.
. Debt and equity securities that are bought and held principally for
the purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and
losses included in earnings.
F-67
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
2. SECURITIES:
----------
. Debt and equity securities not classified as either investment
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and
losses excluded from earnings and reported in a separate component of
stockholders' equity.
As of June 30, 1996, the company classified investments with a cost of
$6,167,212 and market value of $6,226,332 as available-for-sale securities.
The classification has resulted in the following net changes to the
accounts below:
<TABLE>
<S> <C>
Securities available-for-sale $ (59,120)
Deferred income taxes 20,100
----------
Unrealized holding loss on securities available for sale,
net of applicable deferred income taxes $ (39,020)
==========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Obligations of U. S. Government
corporation and agencies $ 4,125,488 $ 7,616 $ (43,767) $ 4,089,337
Obligations of state and political
subdivisions 2,100,844 13,388 (36,307) 2,077,875
----------- ---------- ---------- -----------
$ 6,226,332 $ 20,954 $ (80,074) $ 6,167,212
=========== ========== ========== ===========
</TABLE>
The amortized cost and fair value of securities available for sale at June
30, 1996, by expected maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
F-68
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
2. SECURITIES
----------
<TABLE>
<CAPTION>
Cost Estimated
Amortized Market Value
------------ ------------
<S> <C> <C>
Due in one year or less $ 1,355,123 $ 1,348,887
Due after one year through five years 4,449,664 4,403,389
Due after five years through ten years 185,396 185,007
Due after ten years 236,153 229,929
------------ ------------
$ 6,226,336 $ 6,167,212
============ ============
</TABLE>
As of June 30, the company classified investments with a cost of $6,090,812
and market value of $6,059,352 as available-for-sale securities. The
classification has resulted in the following net changes to the accounts
below:
<TABLE>
<S> <C>
Securities available-for-sale $ (31,460)
Deferred income taxes 10,696
-----------
Unrealized holding loss on securities available for
sale, net of applicable deferred income taxes $ (20,764)
===========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Grains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Obligations of U. S. Government
corporation and agencies $ 3,504,403 $ 22,565 $ (37,547) $ 3,489,421
Obligations of state and political
subdivisions 2,437,513 17,571 (37,867) 2,417,217
Other investments 148,896 3,818 -- 152,714
----------- ---------- ----------- -----------
$ 6,090,812 $ 43,954 $ (75,414) $ 6,059,352
=========== ========== =========== ===========
</TABLE>
Proceeds form sales and maturities of securities during for the six months
ended June 30, 1996 and 1995 were $-0 and $818,375, respectively. Gross
gains and losses on those sales and maturities were $-0 and $7,420,
respectively.
F-69
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
2. SECURITIES:
----------
Securities with an amortized cost of $988,497 and $348,267 at June 30, 1996
and 1995, respectively, were pledged as collateral on public deposits and
for other purposes as required by law. The market values of the pledged
securities were $985,797 and $356,058 at June 30, 1996 and 1995
respectively.
Taxable interest income on securities was $137,524 and $126,733 for the six
months ended June 30, 1996 and 1995, respectively. Interest income exempt
from Federal income taxes was $44,916 and $52,879 for the six months ended
June 30, 1996 and 1995, respectively.
3. LOANS AND ALLOWANCE FOR LOAN LOSSES;
-----------------------------------
The composition of loans are summarized as follows:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Commercial, financial and agricultural $ 6,077,376 $ 5,003,699
Consumer installment loans 6,411,503 6,296,414
Other 3,726 4,041
------------ ------------
12,492,605 11,304,154
Unearned interest (363) (2,421)
Allowance for loan losses (165,371) (163,429)
------------ ------------
Loans, net $ 12,326,871 $ 11,138,304
============ ============
</TABLE>
Loans on which the accrual of interest has been discontinued or reduced
amounted to $139,390 and $17,432 at June 30, 1996 and 1995, respectively.
F-70
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
3. LOANS AND ALLOWANCE FOR LOAN LOSSES:
-----------------------------------
Changes in allowance for loan losses are as follows:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
--------------- ---------------
<S> <C> <C>
Balance, beginning of year $ 166,426 $ 150,061
Provision charged to operations 15,000 15,000
Loans charged off (30,165) (4,393)
Recoveries 14,110 2,761
------------- -------------
Balance, end of period $ 165,371 $ 163,429
============= =============
</TABLE>
For the six months ended June 30, 1996 and 1995, the Bank had no impaired
loans which were recognized in conformity with FASB Statement No. 114.
4. PREMISES AND EQUIPMENT
----------------------
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
--------------- ---------------
<S> <C> <C>
Land $ 65,000 $ 70,400
Buildings 464,867 469,936
Furniture, fixtures and equipment 498,760 488,173
Vehicles 23,785 47,162
-------------- --------------
1,052,412 1,075,671
Accumulated depreciation (449,243) (389,026)
-------------- --------------
Premises and equipment, net $ 603,169 $ 686,645
============== ==============
</TABLE>
Depreciation expense for the six months ended June 30, 1996 and 1995, was
$30,000 and $18,000, respectively.
F-71
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
5. INCOME TAXES:
------------
The total provision for income taxes in the statements of income is as
follows:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Currently payable - Federal $ 30,225 $ 24,840
Deferred receivable (225) (8,677)
----------- -----------
$ 30,000 $ 16,163
========== ==========
</TABLE>
The deferred tax provisions for the six months ended June 30, 1996 and
1995, are applicable to the following items:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Difference between tax allowance for loan
losses in excess of book allowance for
loan losses $ (3,400) $ (2,200)
Deferred compensation -- (4,208)
Other items, net 3,175 (2,269)
----------- -----------
$ (225) $ (8,677)
============ ===========
</TABLE>
The Bank's provision for income taxes differs from the amounts computed by
applying the Federal income tax statutory rates to income before income
taxes. A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------------------- ------------------------
Amount Percent Amount Percent
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Tax provision at
statutory rate $ 41,958 34.00 % $ 35,326 34.00 %
Difference resulting from
tax exempt interest and
other items, net (11,958) (9.69)% (19,163) (18,44)%
--------- ------- --------- ---------
Provision for income taxes $ 30,000 24.31 % $ 16,163 15.56 %
========= ======= ========= ========
</TABLE>
F-72
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
5. INCOME TAXES:
------------
At June 30, 1996 and 1995, the Bank's deferred tax assets and liabilities
consist of the following:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Allowance for loan losses in excess of tax
allowance for loan losses $ 28,622 $ 25,222
Net unrealized appreciation (loss) on securities
available for sale 20,100 10,696
Tax depreciation in excess of book
depreciation (24,200) (8,463)
Other items, net 6,076 (14,475)
---------- -----------
Deferred tax asset, net $ 30,598 $ 12,980
========== ==========
</TABLE>
6. EMPLOYEE BENEFIT PLANS:
----------------------
Effective January 1, 1991, the Bank adopted a qualified 401(k) employee
savings and profit sharing plan for the benefit of substantially all
employees. Under the plan, employees can contribute and defer taxes on
compensation contributed. The Bank matches, within prescribed limits, the
contributions of the employees. The Bank also has the option to make an
additional profit sharing contribution to the plan. Employer contributions
to the plan for the six months ended June 30, 1996 and 1995, were $3,990
and $3,706, respectively.
7. RELATED PARTIES:
---------------
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, principal
officers, their immediate families, and affiliated companies in which they
are principal stockholders (commonly referred to as related parties) on the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with others. These persons and firms
were indebted to the Bank for loans totaling $157,150 and $127,075 at June
30, 1996 and 1995, respectively.
F-73
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
8. COMMITMENTS AND CONTINGENENCIES:
-------------------------------
In the normal course of business, the Bank makes various commitments and
incurs certain contingent liabilities that are not reflected in the
accompanying financial statements. These commitments and contingent
liabilities include commitments to extend credit and standby letters of
credit.
The Bank's nature of business is such that it ordinarily results in a
certain amount of litigation. In the opinion of management, there is no
litigation in which the outcome will have a material effect on the
financial statements.
The Bank holds in other real estate property that may require environmental
clean up. The bank estimates the clean up cost to be $10,000. The Bank
has established reserves to account for these costs.
The Bank does not anticipate any material losses as a results of the
commitments and contingent liabilities.
9. STATEMENTS OF CASH FLOWS:
------------------------
For the purpose of reporting cash flows, cash and cash equivalents include
cash on hand and amounts due from banks. Cash flows from demand deposits,
savings accounts, time deposits, Federal funds purchased and sold, and
renewals and extensions of loans are reported net.
Interest paid on deposits and other borrowings for the six months ended
June 30, 1996 and 1995, amounted to $370,630 and $295,605, respectively.
Income taxes paid for the six months ended June 30, 1996 and 1995, amounted
to $30,000 and $26,000, respectively.
10. RISK FACTORS:
------------
The Bank's operations are affected by various risk factors including
interest-rate risk, credit risk, and risk from geographic concentration of
lending activities. Management attempts to manage interest rate risk
through various asset/liability management techniques designed to match
maturities of assets and liabilities. Loan policies and administration are
designed to provide assurance that loans will only be granted to credit-
worthy borrowers; although, credit
F-74
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
10. RISK FACTORS:
------------
losses are expected to occur because of subjective factors beyond the
control of the Bank. In addition, the Bank is a community bank and, as
such, is mandated by the Community Reinvestment Act and other regulation
to conduct most of its lending activities within the geographic area where
it is located. As a result, the Bank and its borrowers may be especially
vulnerable to the consequences of changes in the local economy.
11. FINANCIAL INSTRUMENTS:
---------------------
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and
standby letters of credit. Those instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount
recognized in the balance sheets. The contract amounts of those
instruments reflect the extent of involvement the Bank has in particular
classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit written is presented by the contractual
notional amount of those instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does
for on-balance-sheet instruments.
<TABLE>
<CAPTION>
Contract Amount Contract Amount
------------------- -------------------
June 30, 1996 June 30, 1995
------------------- -------------------
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $ 345,371 $ 629,911
Standby letters of credit 10,000 10,000
</TABLE>
Commitments to extend credit are agreements to lend a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. The Bank evaluates
each customer's credit worthiness on a case-by-case basis. The amount of
collateral obtained if deemed necessary by the Bank upon extension of
credit is based on management's credit evaluation of the counterpart.
F-75
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
11. FINANCIAL INSTRUMENTS:
---------------------
Standby letters of credit written are conditional commitments issued by the
Bank to guaratee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan commitments to customers.
The Bank has cash deposits with a financial institution in excess of the
insured limitation of the Federal Deposit Insurance Corporation. If the
financial institution were not to honor its contractual liability, the
company could incur losses. Management is of the opinion that there is no
material risk because of the financial strength of the institution.
The estimated fair values of the Bank's financial instruments (in
thousands) were as follows:
<TABLE>
<CAPTION>
In Thousands
------------------------------
June 30, 1996
------------------------------
Carrying Fair
Amount Value
-------------- --------------
<S> <C> <C>
Financial assets:
Cash and due from banks, interest-bearing deposits
with banks, and federal funds sold $ 1,734 $ 1,734
Securities availiable for sale 6,167 6,167
Loans receiveable 12,492 12,723
Accured interest receivable 277 277
Financial liabilities:
Deposit liabilities $ (19,189) $ (19,283)
Accured liabilities (113) (113)
</TABLE>
The estimated fair value of the Bank's off-balance sheet
assets(liabilities) are considered to be minimal.
12. REGULATORY MATTERS:
------------------
The Bank is subject to various capital requirements administered by the
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 meterial effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital
F-76
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
12. REGULATORY MATTERS:
------------------
adequacy guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting principles. The Bank's capital classification
is also subject to qualitative judgements by the regulators about
components, risk weighings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, as of June 30, 1996 and
1995, that the Bank meets all capital adequacy requirements to which it is
subject.
As of June 30, 1996, the most recent notification from the State Department
of Banking and Finance categorized the Bank as well capitalized under the
regulatory framework for prompt correction action. To be categorized as
well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category.
The Bank actual capital amounts and ratios are also presented in the
following table:
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
------------------- ------------------- ---------------------------
Amount Ratio Amount Ratio Amount Ratio
------------------- ------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1996:
Total Capital (to Risk
Weighted Assets) $ 2,219,750 18.0% greater than $ 1,041,661 8.0% greater than $ 1,268,326 10.0% greater than
or equal to or equal to or equal to
Tier I Capital (to Risk
Weighted Assets) 2,061,209 16.0% greater than 813,031 4.0% greater than 760,586 6.0% greater than
or equal to or equal to or equal to
Tier I Capital (to Average
Assets) 2,061,209 10.0% greater than 507,330 4.0% greater than 1,016,289 10% greater than
or equal to or equal to or equal to
As of June 30,1995:
Total Capital ( to Risk
Weighted Assets) $ 2,094,824 18.0% greater than $ 967,519 8.0% greater than 1,209,398 10% greater than
or equal to or equal to or equal to
Tier I Capital (to Risk
Weighted Assets) 1,943,649 16.0% greater than 813,031 4.0% greater than 724,904 6.0% greater than
or equal to or equal to or equal too
Tier I Capital(to average 1,943,649 10.0% greater than 483,759 4.0% greater than 1,016,289 5.0% greater than
Assets) or equal to or equal to or equal to
</TABLE>
F-77
<PAGE>
BROXTON STATE BANK
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
13. LIMITATION ON DIVIDENDS:
-----------------------
The Boards of Directors of any state-chartered bank in Georgia may declare
and pay cash dividends on its outstanding capital stock without any request
for approval of the Bank's regulatory agency if the following conditions
are met:
1) Total classified assets at the most recent examination date do
not exceed eighty (80) percent of equity capital;
2) The aggregate amount of dividends declared in the calendar year
does not exceed fifty (50) percent of the prior year's net
income;
3) The ratio of equity capital to adjusted total assets shall not be
less than six (6) percent.
The Bank did not declare dividends during the six months periods ending
June 30, 1996 and June 30, 1995.
14. SUBSEQUENT EVENTS:
-----------------
The Bank is in the process of negotiating the sale of the Bank's stock to
Colony Bankcorp, Inc. The sale is expected to be completed by year-end
pending stockholder and regulatory approval.
F-78
<PAGE>
APPENDIX "B"
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN COLONY BANKCORP, INC. AND BROXTON STATE BANK
DATED JUNE 4, 1996
<PAGE>
COLONY BANKCORP, INC.
and
BROXTON STATE BANK
AGREEMENT
AND
PLAN OF REORGANIZATION
DATED JUNE 4, 1996
<PAGE>
________________________________________________________________________________
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
INTRODUCTORY RECITALS 1
ARTICLE I MERGER 1
ARTICLE II CLOSING 2
ARTICLE III OTHER AGREEMENTS 3
3.1 Meeting of Shareholders 3
3.2 Absence of Brokers 3
3.3 Access to Properties, Books, Etc. 3
3.4 Confidentiality 3
3.5 Full Cooperation 4
3.6 Expenses 4
3.7 Approvals and Consents 4
3.8 Agreement by Broxton Directors, Executive Officers and
Five Percent or Greater Shareholders 5
3.9 Public Announcements and Disclosures 5
3.10 Preservation of Goodwill 5
3.11 Agreement as to Efforts to Consummate 5
3.12 Articles of Merger 5
3.13 Deliver of Shares and Payment for
Fractional Shares 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BROXTON 6
4.1 Disclosure Memorandum 6
4.2 Corporate and Financial 6
4.2.1 Authority 6
4.2.2 Corporate Status 7
4.2.3 Capital Structure 7
4.2.4 Corporate Records 8
4.2.5 Tax Returns; Taxes 8
4.2.6 Financial Statements 9
4.2.7 Regulatory Reports 10
4.2.8 Accounts 10
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
4.2.9 Notes and Obligations 10
4.2.10 Liabilities 11
4.2.11 Absence of Changes 11
4.2.12 Litigations and Proceedings 13
4.2.13 Interest Rate Risk 13
4.3 Business Operations 13
4.3.1 Customers 13
4.3.2 Permits; Compliance with Law 13
4.3.3 Environmental 14
4.3.4 Insurance 15
4.4 Properties and Assets 16
4.4.1 Contracts and Commitments 16
4.4.2 Licenses; Intellectual Property 16
4.4.3 Personal Property 17
4.4.4 Leases 17
4.4.5 Real Property 17
4.5 Employees and Benefits 18
4.5.1 Compensation Structure 18
4.5.2 Directors of Officers of Other Corporations 19
4.5.3 Employee Benefits 19
4.5.4 Labor-Related Matters 20
4.5.5 Related Party Transactions 21
4.6 Other Matters 21
4.6.1 Regulatory Reports 21
4.6.2 Approvals, Consents and Fillings 21
4.6.3 Default 21
4.6.4 Representations and Warrants 22
Article V CONDUCT OF BUSINESS OF BROXTON
PENDING CLOSING 22
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF COLONY 25
6.1 Good Standing 25
6.2 Authority 25
6.3 Default 25
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
6.4 Applications 25
6.5 Capital Stock 25
6.6 SEC Filings; Financial Statements 26
6.7 Absence of Certain Changes of Events 27
6.8 Tax Matters 27
6.9 Legal Proceedings 27
ARTICLE VII CONDITIONS TO OBLIGATIONS OF COLONY 27
7.1 Representations and Warranties 28
7.2 Performance of Agreements 28
7.3 Certificates, Resolutions, Opinions 28
7.4 Accountants' Letter 29
7.5 Regulatory Approvals 29
7.6 Certificate of Merger 30
7.7 Employment Agreements 30
7.8 Consents to the Merger 30
7.9 Covenant Not to Complete 30
7.10 Absence of Employment Contracts 30
7.11 Adequacy of Loan Loss Reserve 30
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF BROXTON 30
8.1 Representations and Warranties 30
8.2 Performance of Agreements 31
8.3 Certificates, Resolutions, Opinion 31
8.4 Shareholder Approval 32
8.5 Regulatory Approval 32
8.6 Payment to Mr. Summerlin 32
ARTICLE IX ADDITIONAL AGREEMENT 32
9.1 Registration Statement; Proxy Statement;
Shareholder Approval 32
9.2 Applications 33
9.3 Agreement of Affiliate 33
9.4 Covenant Not to Compete with
Curtis A. Summerlin 33
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE X WARRANTIES, NOTICES, ETC. 34
10.1 Warranties 34
10.2 Survival of Representations 34
10.3 Notice 34
10.4 Entire Agreement 35
10.5 Waiver; Amendment 35
ARTICLE XI TERMINATION 36
11.1 Material Adverse Change of Broxton 36
11.2 Noncompliance of Broxton 36
11.3 Noncompliance of Colony 36
11.4 Failure to Disclose 36
11.5 Environmental Liability 37
11.6 Adverse Proceedings 37
11.7 Dissenters 37
11.8 Termination Date 37
11.9 Shareholder Vote 37
11.10 Disclosure Memorandum 38
ARTICLE XII COUNTERPARTS, HEADINGS, ETC. 38
ARTICLE XIII BINDING EFFECT 38
ARTICLE XIV GOVERNING LAW 38
</TABLE>
-iv-
<PAGE>
EXHIBITS
--------
EXHIBIT A Agreement and Plan of Merger between Broxton State Bank and
Broxton Interim Corporation
EXHIBIT B Agreement of Directors, Executive Officers and Five Percent or
Greater Shareholders of Broxton State Bank
EXHIBIT C Opinion of Solomon & Edgar, P.C.
EXHIBIT D Covenant Not to Complete of Curtis A. Summerlin
EXHIBIT E Opinion of Martin, Snow, Grant & Napier
-v-
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION is made and entered into this 4th
day of June, 1996 by and between BROXTON STATE BANK, a Georgia state chartered
bank (hereinafter "BROXTON"), and COLONY BANKCORP, INC., a Georgia corporation
(hereinafter "COLONY" and unless the context otherwise requires, the term
"Colony" shall include COLONY BANKCORP, INC. and its subsidiaries);
W I T N E S S E T H:
--------------------
WHEREAS, the Boards of Directors of each of Broxton and Colony deem it to
be in the best interests of each such corporation and their respective
shareholders that all of the issued and outstanding shares of Common Stock, par
value $10.00 per share, of Broxton (the "BROXTON STOCK") be acquired by Colony;
and
WHEREAS, in order to effect the acquisition of all of the Broxton Stock by
Colony, the Boards of Directors of the parties hereto deem it advisable and in
the best interests of each such entity and their respective shareholders that
Broxton Interim, Inc., a wholly-owned subsidiary of Colony ("INTERIM"), merge
with and into Broxton, and Broxton shall be the surviving bank (the "MERGER"),
with each share of Broxton Stock being converted into shares of the $10.00 par
value common stock of Colony, all upon the terms and conditions hereinafter set
forth and as set forth in the Agreement and Plan of Merger attached hereto as
EXHIBIT A (the "MERGER AGREEMENT");
NOW, THEREFORE, in consideration of the premises and the mutual and
reciprocal representations, warranties, promises and covenants herein contained,
the parties hereto agree as follows:
ARTICLE I
---------
MERGER
------
Pursuant to the terms and conditions provided herein, on the Effective Date
(hereinafter defined), Interim shall be merged with and into Broxton in
accordance with and in the manner set forth in the Merger Agreement. Upon the
terms and conditions of this Agreement and the Merger Agreement, Colony shall
make available on or before the Effective Date of the Merger (as defined in the
Merger Agreement) for delivery to (or to the order of) the holders of Broxton
Stock sufficient shares of its common stock for distribution in accordance with
the exchange ratio provided for hereinafter upon the consummation of the Merger
and conversion of the shares of Broxton Stock, as provided in the Merger
Agreement.
<PAGE>
Upon the Effective Date, the shares of Common Stock of Interim ("INTERIM
STOCK") issued and outstanding immediately prior to the Effective Date, shall be
converted into 50,730 shares of $10.00 par value Common Stock of the Surviving
Bank.
Upon the Effective Date, each of the shares of Broxton Common Stock
outstanding on the Effective Date, other than those shares of Broxton Stock
owned by Colony, shall by virtue of the merger and without any further action on
the part of the holder thereof, be converted into the right to receive a number
of shares of the $10.00 par value Common Stock of Colony which have a value
equal to 1.65 times the per share book value of the Broxton Common Stock as of
the Effective Date (the "EXCHANGE RATIO"). For purposes of determining the
Exchange Ratio, the per share book value of the Broxton Common Stock to be
acquired by Colony shall be the sum of the Bank's Common Stock, surplus,
undivided profits and year-to-date earnings or losses as shown on the general
ledger using generally accepted accounting principles consistently applied as
maintained by Broxton as of the close of business on the Effective Date, without
adjustment for net unrealized gains or losses on securities available for sale
as provided by Statement of Financial Accounting Standards No. 115, divided by
the number of issued and outstanding shares of Broxton as of the Effective Date.
For purposes of determining the Exchange Ratio, the per share value of the
shares of Common Stock of Colony to be issued in connection with the acquisition
shall be equal to 1.25 times the sum of Colony's Common Stock, surplus,
undivided profits and year-to-date earnings or losses as shown on the general
ledger using generally accepted accounting principles consistently applied as
maintained by Colony as of the close of business on the Effective Date, without
any adjustment for net unrealized gains or losses on securities available for
sale as provided by Statement of Financial Accounting Standards No. 115, divided
by the number of issued and outstanding shares of the company as of the
Effective Date. No fractional shares shall be issued; instead, fractional
shares distributable to Broxton Shareholders shall be paid for in cash by Colony
at a price equal to the value of Colony Common Stock as calculated for purposes
of the Exchange Ratio.
ARTICLE II
----------
CLOSING
-------
The transactions contemplated herein shall be consummated (the "CLOSING")
at the offices of Colony in Fitzgerald, Georgia on the Effective Date, or at
such other time and place as may be mutually satisfactory to the parties hereto.
The Effective Date shall be the date the Certificate of Merger reflecting the
Merger shall become effective with the Secretary of State of Georgia. The
parties shall use their reasonable efforts to cause the Effective Date to be on
or before the fifth business day (as designated by Colony), following the last
to occur of (i) the last required consent of any regulatory authority having
authority over and approving or
2
<PAGE>
exempting the Merger (including expiration of any applicable waiting
period) and (ii) the date on which the shareholders of Broxton approve this
Agreement to the extent such approval is required by appli cable law.
ARTICLE III
-----------
OTHER AGREEMENTS
----------------
3.1 MEETING OF SHAREHOLDERS. Broxton shall call a special meeting of
-----------------------
Broxton Shareholders to be held not more than forty-five (45) days after the
registration statement to be filed by Colony with the Securities and Exchange
Commission becomes effective under the Securities Act of 1933 for the purpose of
submitting the Merger Agreement for the approval by Broxton Shareholders. In
connection with such meeting, Broxton shall prepare and submit to its
shareholders the relevant notice of meeting, proxy statement and proxy
(collectively, the "BROXTON PROXY MATERIALS").
3.2 ABSENCE OF BROKERS. Each party to this Agreement represents and
------------------
warrants to the others that no broker, finder, other financial consultant or
similar agent has acted on its behalf in connection with this Agreement or the
transactions contemplated hereby. Each party agrees to indemnify the other and
hold and save it harmless from any claim or demand for commissions or other
compensation by any broker, finder, financial consultant or similar agent
claiming to have been employed by or on behalf of such party and to bear the
costs, including legal expenses, incurred in defending against any such claim.
3.3 ACCESS TO PROPERTIES, BOOKS, ETC. Broxton shall allow Colony and its
--------------------------------
authorized representatives full access during normal business hours from and
after the date of this Agreement and prior to the Closing Date to all of the
properties, books, contracts, commitments and records of Broxton and shall
furnish to Colony or its authorized representatives such information concerning
the affairs of Broxton as Colony may reasonably request. Broxton shall cause
its personnel to assist Colony in making any such investigation and shall cause
the counsel, accountants, employees and other representatives of Broxton to be
available to Colony for such purposes. During such investigation, Colony and
its authorized representatives shall have the right to make copies of such
records, files, tax returns and other materials as they may deem advisable and
shall advise Broxton of those items of which copies are made. No investigation
made heretofore or hereafter by Colony shall affect the representations and
warranties of Broxton hereunder.
3.4 CONFIDENTIALITY. Prior to consummation of the Merger, the parties to
---------------
this Agreement will provide each other with information which may be deemed by
the party
3
<PAGE>
providing the information to be confidential or proprietary. Each party agrees
that it will hold confidential and protect all information provided to it by the
other party to this Agreement, except that the obligations contained in this
SECTION 3.4 shall not in any way restrict the rights of any party or person to
use information that (i) was known to such party prior to the disclosure by the
other party; (ii) is or becomes generally available to the public other than by
breach of this Agreement; or (iii) otherwise becomes lawfully available to a
party to this Agreement on a non-confidential basis from a third party who is
not under an obligation of confidence to the other party to this Agreement. If
this Agreement is terminated prior to consummation of the Merger, each party
agrees to return all documents and other material, and any copies thereof,
whether or not confidential, provided to it by or on behalf of the other party
to this Agreement. Notwithstanding anything to the contrary herein, the
provisions of this SECTION 3.4 shall survive any termination of this Agreement.
3.5 FULL COOPERATION. The parties shall cooperate fully with each other
----------------
and with their respective agents, representatives, counsel and accountants in
connection with any acts or actions required to be taken as part of their
respective obligations under this Agreement, including cooperation in the filing
of all applications and other requests for consents and approvals with respect
to the transactions contemplated hereby and by the Merger Agreement.
3.6 EXPENSES. All of the expenses incurred by Colony in connection with
--------
the authorization, preparation, execution and performance of this Agreement,
including, without limitation, all fees and expenses of their agents,
representatives, counsel and accountants and the fees and expenses related to
filing regulatory applications with state and federal authorities in connection
with the transactions contemplated hereby, shall be paid by Colony; provided,
however, that Broxton agrees to pay all fees and expenses of Colony should this
Agreement be terminated as a result of a breach by Broxton. All expenses
incurred by Broxton in connection with the authorization, preparation, execution
and performance of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants for Broxton shall
be paid by Broxton; provided, however, that Colony agrees to pay all fees and
expenses of Broxton should this Agreement be terminated as a result of a breach
by Colony. Colony shall be responsible for the preparation of the Proxy
Statement, subject to the review and approval by Broxton, and shall pay all
legal fees incurred in connection therewith as well as the cost of reproducing
and mailing the Proxy Materials.
3.7. APPROVALS AND CONSENTS. Each party hereto represents and warrants as
----------------------
to any covenants with the others that it will, and will cause its officers,
directors, employees and agents to, use its and their best efforts to obtain as
soon as is reasonably practicable all approvals and consents of state and
federal departments or agencies required or deemed necessary for consummation of
the transactions contemplated by this Agreement; provided, however, that
4
<PAGE>
Colony shall have primary responsibility for the preparation, filing and
prosecution of all applications associated with such approvals and consents.
3.8 AGREEMENT BY BROXTON DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT OR
----------------------------------------------------------------------
GREATER SHAREHOLDERS. Contemporaneously with the execution of this Agreement,
- --------------------
each of the directors, executive officers and 5% or greater shareholders of
Broxton will execute and deliver to Colony an agreement, the form of which is
attached hereto as EXHIBIT B, pursuant to which each of them agrees (i) to
recommend to the Broxton Shareholders approval of the Merger, and (ii) to vote
the capital stock of Broxton owned or controlled by them in favor of the Merger
(the "VOTING AGREEMENT").
3.9 PUBLIC ANNOUNCEMENTS AND DISCLOSURES. Colony and Broxton agree that,
------------------------------------
from the date hereof until the Closing, neither party to this Agreement shall
make any public announcements or disclosures, other than public announcements
and disclosures required to be made by law, relating to the Agreement or to the
transactions contemplated hereby or by the Merger Agreement without the prior
approval of the other party to this Agreement.
3.10 PRESERVATION OF GOODWILL. Each party to this Agreement shall use its
------------------------
best efforts to preserve its business organization and the business organization
of its subsidiaries, to keep available the services of its present employees and
of the present employees of its subsidiaries, and to preserve the goodwill of
customers and others having business relations with such party or its
subsidiaries.
3.11 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
-------------------------------------
conditions of this Agreement, the parties agree to use all reasonable efforts to
take, or cause to be taken, all actions, and to do or cause to be done all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective on a timely basis the transactions contemplated by
this Agreement and by the Merger Agreement.
3.12 ARTICLES OF MERGER. The parties agree that the Articles of Merger
------------------
reflecting the merger of Interim into Broxton will not be filed with the
Secretary of State of the State of Georgia until each of Broxton and Colony has
executed a certificate acknowledging that all of the conditions precedent to
consummation of the Merger have been satisfied or waived.
3.13 DELIVERY OF SHARES AND PAYMENT FOR FRACTIONAL SHARES. Colony will
----------------------------------------------------
prepare and mail a letter of transmittal to the Broxton Shareholders immediately
after the Effective Date which shall specify the procedures for such
shareholders to exchange their shares of Broxton Stock for shares of Colony
Stock. For each shareholder of Broxton whose
5
<PAGE>
completed letter of transmittal and shares of Broxton Stock, duly endorsed for
transfer as required by the letter of transmittal, is received by Colony, Colony
shall mail or otherwise arrange for the delivery or availability of shares of
its common stock which shareholders of Broxton are entitled to receive in
accordance with the exchange ratio more particularly set forth herein.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BROXTON
-----------------------------------------
As an inducement to Colony to enter into this Agreement and to consummate
the transactions contemplated hereby, Broxton represents, warrants, covenants
and agrees as follows:
4.1 DISCLOSURE MEMORANDUM. Within ten (10) days of the date of this
---------------------
Agreement, Broxton will deliver to Colony a memorandum (the "DISCLOSURE
MEMORANDUM") containing certain information regarding Broxton as indicated at
various places in this Agreement. All information set forth in the Disclosure
Memorandum or in documents incorporated by reference in the Disclosure
Memorandum is and will be true, correct and complete, does not and will not omit
to state any fact necessary in order to make the statements therein not
misleading, and shall be deemed for all purposes of this Agreement to constitute
part of the representations and warranties of Broxton under this ARTICLE IV. The
information contained in the Disclosure Memorandum shall be deemed to be part of
and qualify only those representations and warranties contained in this ARTICLE
IV which make specific reference to the Disclosure Memorandum. All information
in each of the documents and other writings furnished to Colony pursuant to this
Agreement or the Disclosure Memorandum is or will be true, correct and complete
and does not and will not omit to state any fact necessary in order to make the
statements therein not misleading. Broxton shall promptly provide Colony with
written notification of any event, occurrence or other information necessary to
maintain the Disclosure Memorandum and all other documents and writings
furnished to Colony pursuant to this Agreement as true, correct and complete in
all material respects at all times prior to and including the Closing.
4.2 CORPORATE AND FINANCIAL.
-----------------------
4.2.1 AUTHORITY. Subject to the approval of various state and
---------
federal regulators and the Broxton Shareholders, the execution, delivery and
performance of this Agreement and the other transactions contemplated or
required in connection herewith will not, with or without the giving of notice
or the passage of time, or both, (a) violate any
6
<PAGE>
provision of federal or state law applicable to Broxton, the violation of which
could be reasonably expected to have a material adverse effect on the business,
operations, properties, assets, financial condition or prospects of Broxton; (b)
violate any provision of the Articles of Incorporation or Bylaws of Broxton; (c)
conflict with or result in a breach of any provision of, or termination of, or
constitute a default under any instrument, license, agreement, or commitment to
which Broxton is a party, which, singly or in the aggregate, could reasonably be
expected to have a material adverse effect on the business, operations,
properties, assets, financial condition or prospects of Broxton; or (d)
constitute a violation of any order, judgment or decree to which Broxton is a
party, or by which Broxton or any of its assets or properties are bound.
Assuming this Agreement constitutes the valid and binding obligation of Colony,
this Agreement constitutes the valid and binding obligation of Broxton, and is
enforceable in accordance with its terms, except as limited by laws affecting
creditors' rights generally and by the discretion of courts to compel specific
performance.
4.2.2 CORPORATE STATUS. Broxton is a banking corporation duly
----------------
organized, validly existing and in good standing under the laws of the State of
Georgia. Broxton has all of the requisite corporate power and authority and is
entitled to own or lease its properties and assets and to carry on its business
as and in the places where such properties or assets are now owned, leased or
operated and such business is conducted. Broxton is a bank whose deposits are
insured by the Federal Deposit Insurance Corporation.
4.2.3 CAPITAL STRUCTURE. (a) Broxton has an authorized capital stock
-----------------
consisting solely of 50,730 shares, $10.00 par value, of Common Stock, all of
which shares of Common Stock are issued and outstanding as of the date hereof.
Broxton has no other class of equity securities, common or preferred, authorized
or outstanding. All of the outstanding capital stock of Broxton is duly and
validly issued, fully paid and non-assessable and was offered, issued and sold
in compliance with all applicable federal and state securities laws. No person
has any right of rescission or claim for damages under federal or state
securities laws with respect to the issuance of any shares of capital stock of
Broxton previously issued. None of the capital stock of Broxton has been issued
in violation of any preemptive or other rights of its shareholders.
(b) Broxton does not have outstanding any securities which are
either by their terms or by contract convertible or exchangeable into capital
stock of Broxton, or any other securities or debt of Broxton, or any preemptive
or similar rights to subscribe for or to purchase, or any options or warrants or
agreements or understandings for the purchase or the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock or securities convertible into its capital stock. Broxton is
not
7
<PAGE>
subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire, or to register, any shares of its capital stock.
(c) There is no agreement, arrangement or understanding to which
Broxton is a party restricting or otherwise relating to the transfer of any
shares of capital stock of Broxton.
(d) All shares of Broxton Stock or other capital stock, or any
other securities or debt, of Broxton, which have been purchased or redeemed by
Broxton have been purchased or redeemed in accordance with all applicable
federal, state and local laws, rules, and regulations, including, without
limitation, all federal and state securities laws and rules and regulations of
any securities exchange or system on which such stock, securities or debt are,
or at such time were, traded, and no such purchase or redemption has resulted or
will, with the giving of notice or lapse of time, or both, result in a default
or acceleration of the maturity of, or otherwise modify, any agreement, note,
mortgage, bond, security agreement, loan agreement or other contract or
commitment of Broxton.
4.2.4 CORPORATE RECORDS. The stock records and minute books of
-----------------
Broxton, whether heretofore or hereafter furnished or made available to Colony
by Broxton, fully and accurately reflect all issuances, transfers and
redemptions of the Common Stock, correctly show the record addresses and the
number of shares of such stock issued and outstanding on the date hereof held by
the shareholders of Broxton, correctly show all corporate action taken by the
directors and shareholders of Broxton (including actions taken by consent
without a meeting) and contain true and correct copies or originals of the
respective Articles of Incorporation and all amendments thereto, Bylaws, as
amended and currently in force, and the minutes of all meetings or consent
actions of its directors and shareholders. No resolutions, regulations or Bylaws
have been passed, enacted, consented to or adopted by such directors or
shareholders except those contained in the minute books. All corporate records
have been maintained in accordance with all applicable statutory requirements
and are complete and accurate.
4.2.5 TAX RETURNS; TAXES. (a) Broxton has duly filed or will file
------------------
when (i) all required federal and state tax returns and reports, and (ii) all
required returns and reports of other governmental units having jurisdiction
with respect to taxes imposed upon its income, properties, revenues, franchises,
operations or other assets or taxes imposed which might create a lien or
encumbrance on any of such assets or affect adversely its business or
operations. Such returns or reports are, and when filed will be, true, complete
and correct, and Broxton has paid, or will pay with respect to returns or
reports not yet filed because not yet due, to the extent such taxes or other
governmental charges have become due, all taxes and
8
<PAGE>
other governmental charges set forth in such returns or reports. All federal,
state and local taxes and other governmental charges paid or payable by Broxton
have been paid, or have been accrued or reserved on its books in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods. Adequate reserves for the payment of taxes have been established
on the books of Broxton for all periods through the date hereof, whether or not
due and payable and whether or not disputed. Until the Closing Date, Broxton
shall continue to reserve sufficient funds for the payment of expected tax
liabilities in accordance with generally accepted accounting principles applied
on a basis consistent with prior periods. Broxton has not received any notice of
a tax deficiency or assessment of additional taxes of any kind and, to the
knowledge of the officers of Broxton (collectively "MANAGEMENT"), there is no
threatened claim against Broxton, or any basis for any such claim, for payment
of any additional federal, state, local or foreign taxes for any period prior to
the date of this Agreement in excess of the accruals or reserves with respect to
any such claim shown in the Unaudited Financial Statements described in SECTION
4.2.6 below or disclosed in the notes with respect thereto. There are no waivers
or agreements by Broxton for the extension of time for the assessment of any
taxes. There is no audit examination, deficiency, or refund litigation with
respect to any taxes that is reasonably likely to result in a determination that
would have, individually and in the aggregate, a material adverse effect on
Broxton, except as may be reserved against in the Financial Statements of
Broxton delivered prior to the date of this Agreement.
(b) Except as set forth in the Disclosure Memorandum, proper and
accurate amounts have been withheld by Broxton from its employees for all
periods in full and complete compliance with the tax withholding provisions of
applicable federal, state and local tax laws, and proper and accurate federal,
state and local tax returns have been filed by Broxton for all periods for which
returns were due with respect to withholding, social security and unemployment
taxes, and the amounts shown thereon to be due and payable have been paid in
full.
4.2.6 FINANCIAL STATEMENTS. Broxton has delivered to Colony true,
--------------------
correct and complete copies of (i) the audited financial statements of Broxton
for the years ended December 31, 1993, 1994, and 1995, including balance sheets,
statements of income, statements of shareholders' equity, statements of cash
flows and related notes (the audited financial statements for the year ended
December 31, 1995 being referred to as the "1995 FINANCIAL STATEMENTS") and (ii)
unaudited financial statements of Broxton for the period ended March 31, 1996,
including a balance sheet, statement of income and related notes (the "UNAUDITED
FINANCIAL STATEMENTS"). All of such financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied
and present fairly the assets,
9
<PAGE>
liabilities and financial condition of Broxton as of the dates indicated
therein and the results of its operations for the respective periods then
ended.
4.2.7 REGULATORY REPORTS. Broxton has made available to Colony for
------------------
review and inspection the year-end Report of Condition and year-end Report of
Income and Dividends as filed by Broxton with the Federal Deposit Insurance
Corporation (the "FDIC") for each of the three years ended December 31, 1993,
1994 and 1995, together with all such other reports filed for the same three-
year period with the FDIC, and the Department of Banking and Finance of the
State of Georgia (the "DEPARTMENT OF BANKING"), and other applicable regulatory
agencies (collectively, the "REPORTS"). All of such Reports, as amended, have
been prepared in accordance with applicable rules and regulations applied on a
basis consistent with prior periods and contain in all material respects all
information required to be presented therein in accordance with such rules and
regulations.
4.2.8 ACCOUNTS. The Disclosure Memorandum contains a list of each
--------
and every bank and other institution in which Broxton maintains an account or
safety deposit box, the account numbers, and the names of all persons who are
presently authorized to draw thereon, have access thereto or give instructions
regarding the distribution of funds or assets therein.
4.2.9 NOTES AND OBLIGATIONS. (a) Except as set forth in the
---------------------
Disclosure Memorandum or as provided for in the loss reserve described in
subsection (b) below, all notes receivable or other obligations owned by
Broxton or due to it shown in the Unaudited Financial Statements and any such
notes receivable and obligations on the date hereof and on the Closing Date are
and will be genuine, legal, valid and collectible obligations of the respective
makers thereof and are not and will not be subject to any offset or
counterclaim. Except as set forth in subsection (b) below, all such notes and
obligations are evidenced by written agreements, true and correct copies of
which will be made available to Colony for examination prior to the Closing
Date. All such notes and obligations were entered into by Broxton in the
ordinary course of its business and in compliance with all applicable laws and
regulations.
(b) Broxton has established a loss reserve in its Audited and
Unaudited Financial Statements and as of the date of this Agreement, and will
establish a loan loss reserve as of the Effective Date, which is adequate to
cover anticipated losses that might result from such items as the insolvency or
default of borrowers or obligors on such loans or obligations, defects in the
notes or evidences of obligation (including losses of original notes or
instruments), offsets or counterclaims properly chargeable to such reserve, or
the availability of legal or equitable defenses which might preclude or limit
the ability of Broxton to enforce
10
<PAGE>
the note or obligation, and the representations set forth in subsection (a)
above are qualified in their entirety by the aggregate of such loss reserve. As
of the Effective Date, the ratio of the loss reserve, established on such date
in good faith by Broxton, to total loans outstanding at such time shall be not
less than the ratio of the loan loss reserve to the total loans outstanding as
reflected in the Unaudited Financial Statements.
4.2.10 LIABILITIES. Broxton has no debt, liability or obligation of
-----------
any kind required to be shown pursuant to generally accepted accounting
principles on the consolidated balance sheet of Broxton, whether accrued,
absolute, known or unknown, contingent or otherwise, including, but not limited
to (a) liability or obligation on account of any federal, state or local taxes
or penalty, interest or fines with respect to such taxes, (b) liability arising
from or by virtue of the distribution, delivery or other transfer or disposition
of goods, personal property or services of any type, kind or variety, (c)
unfunded liabilities with respect to any pension, profit sharing or employee
stock ownership plan, whether operated by Broxton or any other entity covering
employees of Broxton, or (d) environmental liabilities, except (i) those
reflected in the Unaudited Financial Statements, and (ii) as disclosed in the
Disclosure Memorandum.
4.2.11 ABSENCE OF CHANGES. Except as specifically provided for in
------------------
this Agreement or specifically set forth in the Disclosure Memorandum, between
March 31, 1996, the date of the Unaudited Financial Statements, and the date of
this Agreement and the Effective Date:
(a) there has been no change in the business, assets, liabilities,
results of operations or financial condition of Broxton, or in any of its
relationships with customers, employees, lessors or others, other than changes
in the ordinary course of business, none of which individually or in the
aggregate has had, or which Management believes may have, a material adverse
effect on such businesses or properties;
(b) there has been no material damage, destruction or loss to the
assets, properties or business of Broxton, whether or not covered by insurance,
which has had, or which Management believes may have, an adverse effect thereon;
(c) the business of Broxton has been operated in the ordinary course,
and not otherwise;
(d) the properties and assets of Broxton used in its business have
been maintained in good order, repair and condition, ordinary wear and tear
excepted;
11
<PAGE>
(e) the books, accounts and records of Broxton have been maintained
in the usual, regular and ordinary manner;
(f) there has been no declaration, setting aside or payment of any
dividend or other distribution on or in respect of the capital stock of Broxton;
(g) there has been no increase in the compensation or in the rate of
compensation or commissions payable or to become payable by Broxton to any
director or executive officer, or to any employee earning $25,000.00 or more per
annum, or any general increase in the compensation or in the rate of
compensation payable or to become payable to employees of Broxton earning less
than $25,000.00 per annum ("GENERAL INCREASE" for the purpose hereof meaning any
increase generally applicable to a class or group of employees, but not
including increases granted to individual employees for merit, length of
service, change in position or responsibility or other reasons applicable to
specific employees and not generally to a class or group thereof), or any
director, officer, or employee hired at a salary in excess of $25,000.00 per
annum, or any increase in any payment of or commitment to pay any bonus, profit
sharing or other extraordinary compensation to any employee;
(h) there has been no change in the Articles of Incorporation or
Bylaws of Broxton;
(i) there has been no labor dispute, unfair labor practice charge or
employment discrimination charge, nor, to the knowledge of Broxton, any
organizational effort by any union, or institution or threatened institution, of
any effort, complaint or other proceeding in connection therewith, involving
Broxton, or affecting its operations;
(j) there has been no issuance, sale, repurchase, acquisition, or
redemption by Broxton of any of its capital stock, bonds, notes, debt or other
securities, and there has been no modification or amendment of the rights of the
holders of any outstanding capital stock, bonds, notes, debt or other securities
thereof;
(k) there has been no mortgage, lien or other encumbrance or security
interest (other than liens for current taxes not yet due or purchase money
security interests arising in the ordinary course of business) created on or in
(including without limitation, any deposit for security consisting of) any asset
or assets of Broxton or assumed by it with respect to any asset or assets;
(l) there has been no indebtedness or other liability or obligation
(whether absolute, accrued, contingent or otherwise) incurred by Broxton which
would be required to
12
<PAGE>
be reflected on a balance sheet of Broxton prepared as of the date hereof in
accordance with generally accepted accounting principles applied on a consistent
basis, except as incurred in the ordinary course of business;
(m) no obligation or liability of Broxton has been discharged or
satisfied, other than in the ordinary course of business;
(n) there have been no sales, transfers or other dispositions of any
asset or assets of Broxton, other than sales in the ordinary course of business;
and
(o) there has been no amendment, termination or waiver of any right
of Broxton under any contract or agreement or governmental license, permit or
permission which has had or may have an adverse effect on its business or
properties.
4.2.12 LITIGATION AND PROCEEDINGS. Except as set forth on the
--------------------------
Disclosure there are no actions, decrees, suits, counterclaims, claims,
proceedings or governmental actions or investigations, pending or, to the
knowledge of Broxton, threatened against, by or affecting Broxton, or any
officer, director, employee or agent in such person's capacity as an officer,
director, employee or agent of Broxton or relating to the business or affairs
of Broxton, in any court or before any arbitrator or governmental agency, and
no judgment, award, order or decree of any nature has been rendered against or
with respect thereto by any agency, arbitrator, court, commission or other
authority, not does Broxton have any unasserted contingent liabilities which
might have an adverse effect on its assets or on the operation of its
businesses or which might prevent or impede the consummation of the
transactions contemplated by this Agreement.
4.2.13 INTEREST RATE RISK. The asset liability management of Broxton
------------------
has not exposed Broxton to any material interest rate risk.
4.3 BUSINESS OPERATIONS.
-------------------
4.3.1 CUSTOMERS. Broxton has no knowledge of any presently existing
---------
facts which could reasonably be expected to result in the loss of any material
borrower or depositor or in Broxton's inability to collect amounts due therefrom
or to return funds deposited thereby, except as set forth on the Disclosure
Memorandum.
4.3.2 PERMITS; COMPLIANCE WITH LAW. (a) Broxton has all permits,
----------------------------
licenses, approvals, authorizations and registrations under all federal, state,
local and foreign laws required for Broxton to carry on its business as
presently conducted, and all of such
13
<PAGE>
permits, licenses, approvals, authorizations and registrations are in full force
and effect, and no suspension or cancellation of any of them is pending or, to
the knowledge of Broxton, threatened.
(b) Broxton has complied with all laws, regulations, and orders
applicable to it or its business. The Disclosure Memorandum contains a list of
any known violations of such laws, regulations, ordinances or rules by any
present officer, director, or employee of Broxton which occurred since December
31, 1990, and which resulted in any order, proceeding, judgment or decree which
would be required to be disclosed pursuant to Item 401(f) of Regulation S-K
promulgated by the Securities and Exchange Commission if Broxton had been
subject to the reporting requirements under the Securities Act of 1933 or the
Securities Exchange Act of 1934. No past violation of any such law, regulation,
ordinance or rule has occurred which could impair the right or ability of
Broxton to conduct its business.
(c) Except as set forth in the Disclosure Memorandum, no notice or
warning from any governmental authority with respect to any failure or alleged
failure of Broxton to comply in any respect with any law, regulation or order
has been received, nor is any such notice or warning proposed or, to the
knowledge of Broxton, threatened.
4.3.3. ENVIRONMENTAL. (a) For purposes of this Agreement, "HAZARDOUS
-------------
SUBSTANCE" and HAZARDOUS WASTE" shall mean, without limitation, (i) any
substance or waste containing petroleum products, gasoline, diesel fuel or other
petroleum hydrocarbons, (ii) any substance or waste which displays a toxic,
reactive, radioactive, ignitable, corrosive, nitrogenic or carcinogenic
chemicals symbol, (iii) any substance or waste, the presence of which on the
Realty or Leased Property causes or threatens to cause a nuisance or hazard
affecting human health, the environment, the properties or properties adjacent
thereof, or (iv) any substance or waste which is or becomes regulated under any
local, state or federal Environmental Law (as defined below), as the same may
hereafter be amended. "ENVIRONMENTAL LAW" means the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et seq.; the Clean
Water Act, 33 U.S.C. (S) 1251 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et
seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S) 136
et seq.; the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq.; the
emergency Planning and Community Right-to-Know Act (SARA Title III), 42 U.S.C.
(S) 11001 et seq.; the Georgia Hazardous Waste Management Act, O.C.G.A. (S) 12-
8-60 et seq.; the Georgia Underground Storage Tank Act, O.C.G.A. (S) 12-13-1 et
seq.; and the Georgia Hazardous Site Response Act, O.C.G.A. (S) 12-8-90 et seq.;
and any other local, state or federal law, regulation, rule, ordinance, consent
decree, order, permit or common law doctrine relating to pollution or protection
of human health, welfare or the environment.
14
<PAGE>
(b) Except as set forth in the Disclosure Memorandum, Broxton
(i) has not caused or permitted, and has no knowledge of the
generation, manufacture, use, or handling or the release or presence
of, any Hazardous Substances or Hazardous Wastes on, in, under or from
any properties or facilities currently owned or leased by Broxton or
adjacent to any properties so owned or leased; and
(ii) has complied with, and has kept all records and made all
filings and reports required by, applicable Environmental Law relating
to the generation, storage, disposal, transfer, production,
manufacture, use, handling, release, processing or presence of any
Hazardous Substance or Hazardous Waste on, in, under or from any
properties or facilities currently owned or leased by Broxton.
(c) Except as set forth in the Disclosure Memorandum, neither Broxton
nor any of its officers, directors, employees or agents, in the course of such
individual's employment by Broxton, has given advice with respect to, or
participated in any respect, in, the management or operation of any entity or
concern whose business relates in any way to the manufacture, generation,
storage, handling, disposal, transfer, production, use, release or processing of
Hazardous Substances or Hazardous Wastes, nor has Broxton foreclosed on any
property on which there is a threatened release of any Hazardous Substances or
Hazardous Wastes or on which there has been such a release and full remediation
has not been completed, or any property on which contained (non-released)
Hazardous Substances or Hazardous Wastes are located.
(d) Except as set forth in the Disclosure Memorandum, neither
Broxton, nor any of its officers, directors, employees, or agents, are aware of,
has been told of, or has observed, the presence of any Hazardous Substance or
Hazardous Wastes on, in, under, or around property on which Broxton holds a
legal or security interest, in violation of, or creating liability under,
Environmental Laws.
4.3.4 INSURANCE. The Disclosure Memorandum contains a complete list
---------
and description (including the expiration date, premium amount and coverage
thereunder) of all policies of insurance and bonds presently maintained by, or
providing coverage for, Broxton or any of its officers, directors and employees,
all of which are, and will be maintained through the Closing Date, in full force
and effect, together with a complete list of all pending claims under any of
such policies or bonds. All terms, obligations and provisions of each of such
policies and bonds have been complied with, all premiums due thereon have been
paid, and
15
<PAGE>
notice of cancellation with respect thereto has been received. Except as set
forth in the Disclosure Memorandum, such policies and bonds provide adequate
coverage to insure the properties and businesses of Broxton and the activities
of its officers, directors and employees against such risks and in such amounts
as are prudent and customary. Broxton will not as of the Closing Date have any
liability for premiums or for retrospective premium adjustments for any period
prior to the Closing Date. Broxton has heretofore made, or will hereafter make,
available to Colony a true, correct and complete copy of each insurance policy
and bond in effect since January 1, 1990 with respect to the business and
affairs of Broxton.
4.4 PROPERTIES AND ASSETS.
---------------------
4.4.1 CONTRACTS AND COMMITMENTS. The Disclosure Memorandum
-------------------------
contains a list identifying and briefly describing all written contracts,
purchase orders, agreements, security deeds, guaranties or commitments to which
Broxton is a party or by which it may be bound involving the payment or receipt,
actual or contingent of more than $25,000.00 or having a term or requiring
performance over a period of more than ninety (90) days. Each such contract,
agreement, guaranty and commitment of Broxton is in full force and effect and is
valid and enforceable in accordance with its terms, and constitutes a legal and
binding obligation of the respective parties thereto and is not the subject of
any notice of default, termination, partial termination or of any ongoing,
pending, completed or threatened investigation, inquiry or other proceeding or
action that may give rise to any notice of default, termination or partial
termination. Broxton has complied with the provisions of such contracts,
agreements, guaranties and commitments. A true and complete copy of each such
document has been or will be made available to Colony for examination.
4.4.2 LICENSES; INTELLECTUAL PROPERTY. Broxton has all patents,
-------------------------------
trademarks, trade names, service marks, copyrights, trade secrets and know-how
reasonably necessary to conduct its business as presently conducted and, except
as described in the Disclosure Memorandum, Broxton is not a party, either as
licensor or licensee, to any agreement for any patent, process, trademark,
service mark, trade name, copyright, trade secret or other confidential
information, and there are no rights of third parties with respect to any
trademark, service mark, trade secrets, confidential information, trade name,
patent, patent application, copyright, invention, device or process owned or
used by Broxton or presently expected to be used by it in the future. All
patents, copyrights, trademarks, service marks, trade names, and applications
therefor or registrations thereof, owned or used by Broxton, are listed in the
Disclosure Memorandum. Broxton has complied with all applicable laws relating
to the filing or registration of "fictitious names" or trade names.
16
<PAGE>
4.4.3 PERSONAL PROPERTY. Broxton has good and marketable title to all of
-----------------
its personalty, tangible and intangible, reflected in the Unaudited Financial
Statements (except as since sold or otherwise disposed of by it in the ordinary
course of business), free and clear of all encumbrances, liens or charges of any
kind or character, except (i) those referred to in the notes to the Unaudited
Financial Statements as securing specified liabilities (with respect to which no
default exists or, to the knowledge of Broxton, is claimed to exist), (ii) those
described in the Disclosure Memorandum and (iii) liens for taxes not due and
payable.
4.4.4 LEASES. (a) All leases (the "LEASES") pursuant to which Broxton is
------
lessor or lessee of any real or personal property (such property, the "LEASED
PROPERTY") are valid and enforceable in accordance with their terms; there is
not under any of such Leases any default or, to the knowledge of Broxton, any
claimed default by Broxton, or event of default or event which with notice or
lapse of time, or both, would constitute a default by Broxton and in respect of
which adequate steps have not been taken to prevent a default on its part from
occurring.
(b) The copies of the Leases heretofore or hereafter furnished or made
available by Broxton to Colony are true, correct and complete, and the Leases
have not been modified in any respect other than pursuant to amendments, copies
of which have been concurrently delivered or made available to Colony, and are
in full force and effect in accordance with their terms.
(c) Except as set forth in the Disclosure Memorandum, there are no
contractual obligations, agreements in principle or present plans for Broxton to
enter into new leases of real property or to renew or amend existing Leases
prior to the Closing Date.
4.4.5 REAL PROPERTY. (a) Broxton does not own any interest in any real
-------------
property (other than as lessee), except as set forth in the Disclosure
Memorandum (such properties being referred to herein as "REALTY"). Except as
disclosed in the Disclosure Memorandum, Broxton has good and marketable title to
the Realty and the titles to the Realty are insurable through owner's title
insurance policies to be issued by a title insurance company authorized to issue
titles in the state of Georgia showing good and marketable title to the Realty
in Broxton (ALTA Form B-1970 as amended), subject only to the standard printed
exceptions and such matters as do not materially and adversely affect the
present operations of the business located on the Realty or materially and
adversely affect marketability of title to the Realty. Broxton will deliver to
Colony in advance of closing an attorney's certificate of title, certifying to
those same matters.
17
<PAGE>
(b) Except as set forth in the Disclosure Memorandum, the interests
of Broxton in the Realty and in and under each of the Leases are free and clear
of any and all liens and encumbrances and are subject to no present claim,
contest, dispute, action or, to the knowledge of Broxton, threatened action at
law or in equity.
(c) The present and past use and operations of, and improvements
upon, the Realty and all Leased Property are in compliance with all applicable
building, fire, zoning and other applicable laws, ordinances and regulations and
with all deed restrictions of record, no notice of any violation or alleged
violation thereof has been received, and to the knowledge of Broxton there are
no proposed changes therein that would affect the Realty, the Leased Properties
or their uses.
(d) Except as set forth in the Disclosure Memorandum, no rent has
been paid in advance and no security deposit has been paid by, nor is any
brokerage commission payable, by or to Broxton with respect to any lease
pursuant to which it is lessor or lessee.
(e) Broxton is not aware of any proposed or pending change in the
zoning of, or of any proposed or pending condemnation proceeding with respect
to, any of the Realty or the Leased Properties which may adversely affect the
Realty or the Leased Properties or the current or currently contemplated use
thereof.
(f) The buildings and structures owned, leased or used by Broxton
are, taken as a whole, in good operating order (except for ordinary wear and
tear), usable in the ordinary course of business, and are sufficient and
adequate to carry on the business and affairs of Broxton.
4.5 EMPLOYEES AND BENEFITS.
----------------------
4.5.1 COMPENSATION STRUCTURE. The Disclosure Memorandum contains a
----------------------
true and complete list of the names, titles, responsibilities and compensation
arrangements of each person whose earned compensation (including without
limitation all salary, wages, bonuses and fringe benefits other than those
fringe benefits made available to all employees on an equal basis), regardless
of whether actually payable in such year, from Broxton for the current fiscal
year will equal or exceed $25,000.00. Broxton has heretofore made available or
shall make available to Colony copies of all written agreements, correspondence
(other than outstanding offers of employment to prospective employees whose
compensation levels will not exceed $25,000.00 in cash), memoranda and other
written materials currently in effect which have been provided to such employees
relating to their compensation.
18
<PAGE>
4.5.2 DIRECTORS OR OFFICERS OF OTHER CORPORATIONS. Except as set
-------------------------------------------
forth in the Disclosure Memorandum, no director, officer, or employee of Broxton
serves, or in the past five years has served, as a director or officer of any
other corporation on behalf of, or as a designee of, Broxton.
4.5.3 EMPLOYEE BENEFITS. (a) Except as set forth in the Disclosure
-----------------
Memorandum, Broxton does not have or maintain a pension plan, profit sharing
plan, group insurance plan, employee welfare benefit plan (as such term is
defined in Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), severance plan, bonus plan, stock option plan or deferred
compensation plan for any of its current or former employees.
(b) Each "employee benefit plan" as defined in Section 3(3) of ERISA,
maintained by or on behalf of Broxton (including any plans which are "multi-
employer plans" under Section 3(37)(A) of ERISA ("MULTI-EMPLOYER PLANS")) and
any defined benefit plan (as defined in Section 3(35) of ERISA) terminated by
Broxton within the five plan-years ending immediately before the Closing Date),
which covers or covered any employees of Broxton, of any subsidiary or of any
predecessors ("PLAN"), is listed in the Disclosure Memorandum, and copies of all
the Plans and Plan Trusts (if applicable), Summary Plan Descriptions, Actuarial
Reports and Valuations (if any), and Annual Reports (and attachments thereto) on
Form 5500, 5500-C or 5500-R, as the case may be (if required pursuant to ERISA)
for the most recent three years with respect to the Plans, Internal Revenue
Service determination letters and any other related documents requested by
Colony or its counsel have been, or prior to the Closing Date will be, provided
to Colony.
(c) Except as set forth in the Disclosure Memorandum, with respect to
each Plan, no litigation or administrative or other proceeding is pending or, to
the knowledge of Broxton, threatened; the Plan has been restated or amended so
as to comply with all applicable requirements of law, including all applicable
requirements of ERISA, the Internal Revenue Code of 1986, as amended (the
"CODE"), and the regulations promulgated thereunder by the Internal Revenue
Service and the United States Department of Labor; neither the Plan nor any
trustee, administrator or fiduciary thereof has at any time been involved in any
transaction relating to the Plan which would constitute a breach of fiduciary
duty under ERISA or a "prohibited transaction" within the meaning of Section 406
of ERISA or Section 4975 of the Code, unless such transaction is specifically
permitted under Sections 407 or 408 of ERISA, Section 4975 of the Code or a
class or administrative exemption issued by the Department of Labor.
19
<PAGE>
(d) Except as set forth in the Disclosure Memorandum, each Plan has
been administered in compliance in all material respects with applicable law and
the terms of the Plan.
(e) Except as disclosed in the Disclosure Memorandum and except for
obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), Broxton has no obligation to provide, or material liability
for, health care, life insurance or other benefits after termination of the
active employment of any employee. As of the Closing Date, Broxton will have
provided adequate reserves, or insurance or qualified trust funds, for all
claims incurred through the Closing Date, including adequate reserves to provide
for any post-retirement health care, life insurance or other benefits with
respect to periods of employment prior to the Closing Date, based on an
actuarial valuation satisfactory to the actuaries of Broxton representing a
projection of claims expected to be incurred for such retirees during its period
of coverage under such Plan.
(f) To the knowledge of Broxton, no fact or circumstance exists which
could constitute grounds in the future for the Pension Benefit Guaranty
Corporation ("PBGC") (or any successor to the PBGC) to take any action
whatsoever under Section 4042 of ERISA in connection with any plan which an
Affiliate (as defined below) of Broxton maintains within the meaning of Section
4062 or 4064 of EISA, and, in either case, the PBGC has not previously taken any
such action which has, or reasonably might, result in any liability of an
Affiliate or Broxton to the PBGC, which would have an adverse effect on the
business of Broxton. The term "AFFILIATE" for purposes of this Section means any
trade or business (whether incorporated or unincorporated) which is a member of
a group described in Sections 414(b) or 414(c) of the Code of which Broxton is
also a member.
(g) Only current and former employees of Broxton participate in the Plans.
4.5.4 LABOR-RELATED MATTERS. Broxton is not, and has not been, a party to
---------------------
any collective bargaining agreement or agreement of any kind with any union or
labor organization or to any agreement with any of its employees which is not
terminable at will or upon ninety (90) days notice at the election of, and
without cost or penalty to, Broxton. Broxton has not received at any time in
the past five (5) years, any demand for recognition from any union, and no
attempt has been made, or will have been made as of the Closing Date, to
organize any of its employees. Broxton has complied with all obligations under
the National Labor Relations Act, as amended, the Age Discrimination in
Employment Act, as amended, and all other federal, state and local labor laws
and regulations applicable to employees. There are no unfair labor practice
charges pending or threatened against Broxton, and there are, and in the past
three (3) years there have been, no charges, complaints, claims or proceedings,
or
20
<PAGE>
slowdowns or strikes pending or threatened against, or involving Broxton with
respect to any alleged violation of any legal duty (including but not limited to
any wage and hour claims, employment discrimination claims or claims arising out
of any employment relationship) by Broxton as to any of its employees or as to
any person seeking employment therefrom, and no such violations exist.
4.5.5 RELATED PARTY TRANSACTIONS. Except for (a) loans and
--------------------------
extensions of credit made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions by Broxton with other persons who are not affiliated with Broxton,
and which do not involve more than the normal risk of repayment or present other
unfavorable features, (b) deposits, all of which are on terms and conditions
identical to those made available to all customers of Broxton at the time such
deposits were entered into, and (c) transactions specifically described in the
Disclosure Memorandum, there are no contracts with or commitments to present or
former 5% or greater shareholders, directors, officers, or employees involving
the expenditure after December 31, 1990 of more than $60,000.00 as to any one
individual, including with respect to any business directly or indirectly
controlled by any such person, or $100,000.00 for all such contracts or
commitments in the aggregate for all such individuals (other than contracts or
commitments relating to services to be performed by any officer, director or
employee as a currently-employed employee of Broxton).
4.6 OTHER MATTERS.
-------------
4.6.1 REGULATORY REPORTS. Broxton will make available to Colony for
------------------
review and inspection all applications, reports or other documents filed by it
for each of its past three full fiscal years with any regulatory or governmental
agencies. All of such applications, reports and other documents have been
prepared in accordance with applicable rules and regulations of the regulatory
agencies with which they were filed.
4.6.2 APPROVALS, CONSENTS AND FILINGS. Except for the approval of
-------------------------------
the Department of Banking, the Board of Governors of the Federal Reserve System
(the "FEDERAL RESERVE") and the FDIC, or as set forth in the Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby or thereby will (a) require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, or (b) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Broxton, or any of Broxton's assets.
4.6.3 DEFAULT. (a) Except for those consents described in or set
-------
forth pursuant to SECTION 4.6.2 above, neither the execution of this Agreement
nor consummation
21
<PAGE>
of the transactions contemplated herein (i) constitutes a breach of or default
under any contract or commitment to which Broxton is a party or by which Broxton
or its properties or assets are bound, (ii) does or will result in the creation
or imposition of any security interest, lien, encumbrance, charge, equity or
restriction of any nature whatsoever in favor of any third party upon any assets
of Broxton, or (iii) constitutes an event permitting termination of any
agreement or the acceleration of any indebtedness of Broxton.
(b) Broxton is not in default under its Articles of Incorporation
or Bylaws or under any term or provision of any security deed, mortgage,
indenture or security agreement or of any other contract or instrument to which
Broxton is a party or by which it or any of its property is bound.
4.6.4 REPRESENTATIONS AND WARRANTIES. No representation or warranty
------------------------------
contained in this ARTICLE IV or in any written statement delivered by or at the
direction of Broxton pursuant thereto or in connection with the transactions
contemplated hereby contains or shall contain any untrue statement, nor shall
such representations and warranties taken as a whole omit any statement
necessary in order to make any statement not misleading. Copies of all
documents that have been or will be furnished to Colony in connection with this
Agreement or pursuant hereto are or shall be true, correct and complete.
ARTICLE V
---------
CONDUCT OF BUSINESS OF BROXTON PENDING CLOSING
----------------------------------------------
During the period from the date of this Agreement and continuing until
the Closing Date, or the earlier termination of this Agreement pursuant to
ARTICLE XI hereof, Broxton agrees (except as expressly contemplated by this
Agreement or to the extent that Colony shall otherwise consent to in advance in
writing) that:
(a) ORDINARY COURSE. Broxton shall carry on its businesses in
---------------
the usual, regular and ordinary course in the same manner as heretofore
conducted, without the creation of any indebtedness for borrowed money (other
than deposit and similar accounts and customary credit arrangements between
banks in the ordinary course of business), and, to the extent consistent with
such business, use its best efforts to preserve intact its present business
organization, keep available the services of its present officers and employees
and preserve its relationships with representatives, customers, suppliers,
personnel and others having business dealings with Broxton.
22
<PAGE>
(b) DIVIDENDS: CHANGES IN STOCK. Broxton shall not, and shall not
---------------------------
propose to, (i) split, combine or reclassify any of its capital stock, declare
any dividend payable in its capital stock, or issue, authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of Broxton, or (ii) repurchase or otherwise acquire
any shares of its capital stock.
(c) ISSUANCE OF SECURITIES. Broxton shall not sell, issue,
----------------------
authorize or propose the sale or issuance of, or purchase or propose the
purchase of, any shares of its capital stock or any class of securities
convertible into, or rights, warrants or options to acquire, any such shares or
other convertible securities or enter into any agreement with respect to the
foregoing.
(d) GOVERNING DOCUMENTS. Broxton shall not amend its Articles of
-------------------
Incorporation or Bylaws. Broxton will maintain its corporate existence and
powers and fully comply with all federal, state and local laws with respect to
its operations and the conduct of its business.
(e) NO ACQUISITIONS. Broxton shall not acquire by merging or
---------------
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other entity or division thereof or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to it.
(f) NO DISPOSITIONS. Broxton shall not sell, mortgage, subject to
---------------
any lien, charge or other encumbrances, lease or otherwise dispose of any of its
tangible or intangible assets, except for sales, leases and other dispositions
in the ordinary course of business consistent with prior practice.
(g) MAINTENANCE OF PROPERTIES. Broxton will maintain its properties
-------------------------
and assets in satisfactory condition and repair for the purposes intended,
ordinary wear and tear and damage by fire or other casualty excepted.
(h) BENEFITS PLANS, ETC. Broxton shall not enter into or amend any
--------------------
bonus, incentive compensation, deferred compensation, profit sharing,
retirement, pension, group insurance, stock option, stock purchase or other
benefit plan or any union, employment or consulting agreement except as required
by law or regulations and shall not accelerate the exercisability of any
options, warrants or rights to purchase securities of Broxton pursuant to any
benefit plan.
23
<PAGE>
(i) INCREASE IN COMPENSATION. Broxton shall not grant to any
------------------------
director, officer, employee or agent any increase in compensation (other than
any increase referred to in SECTION 4.2.11(G) hereof) or in severance or
termination pay, or enter into any employment agreement, except as may be
required under employment, termination or other agreements in effect on the date
of this Agreement and which are described in the Disclosure Memorandum.
(j) PAYMENT OF DEBT. Broxton shall not pay any claim or discharge
---------------
or satisfy any lien or encumbrance or pay any obligation or liability other than
in the ordinary course of business or as required by the terms of any written
instrument evidencing or governing the same, a copy of which has been heretofore
provided to Colony.
(k) OTHER ACTIONS. Broxton shall not take any action that would or
-------------
could reasonably be expected to result in any of the representations and
warranties of Broxton set forth in this Agreement becoming untrue at any time on
or prior to the Closing Date.
(l) MAINTENANCE OF INSURANCE. Broxton will maintain and keep or
------------------------
cause to be maintained and kept in full force and effect all of the insurance
referred to in SECTION 4.3.4 hereof or other insurance equivalent thereto.
(m) BANKING RELATIONSHIPS. No change will be made in the banking and
---------------------
safe deposit arrangements referred to in SECTION 4.2.8 hereof.
(n) BOOKS AND RECORDS. The books and records of Broxton shall be
-----------------
maintained in the usual, regular and ordinary course on a basis consistent with
past years. Broxton shall furnish monthly Unaudited Financial Statements to
Colony by the tenth day following the end of the month reflected in such
Unaudited Financial Statements, which statements shall consist of at least a
balance sheet and income statement prepared in accordance with generally
accepted accounting principles, consistently applied, subject to year-end
adjustments.
(o) ADVICE OF CHANGES. Broxton shall promptly advise Colony orally
-----------------
and in writing of any change or event having, or which Management of Broxton
believes could have, a material adverse effect on the assets, liabilities,
business, operations or financial condition of Broxton.
(p) ACQUISITIONS. Except for the purchase of United States Treasury
------------
Securities or United States Government Agency Securities, which in either case
have maturities of three (3) years or less, Broxton shall not purchase any
securities or make any material
24
<PAGE>
investments, either by purchase of stock or securities, contributions to
capital, asset transfers, or purchase of any assets, or otherwise acquire direct
or indirect control over any entity, other than in connection with foreclosures
in the ordinary course of its business.
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES OF COLONY
----------------------------------------
As an inducement to Broxton to enter into this Agreement and to consummate
the transactions contemplated hereby, Colony represents, warrants, covenants and
agrees as follows:
6.1 GOOD STANDING. Colony is a business corporation duly organized,
-------------
validly existing and in good standing under the laws of the State of Georgia and
is entitled to own or lease its properties and to carry on its business as now
conducted.
6.2 AUTHORITY. Subject to approval of the Department of Banking, the
---------
Federal Reserve and the FDIC, Colony has full corporate power and authority to
make, execute and perform this Agreement and the transactions contemplated
hereby, and the execution, delivery and performance of this Agreement by Colony
has been duly authorized by all necessary corporate action of Colony. Interim
has full corporate power and authority to make, execute and perform the Merger
Agreement and the transactions contemplated hereby, and the execution, delivery
and performance of the Merger Agreement by Interim has been duly authorized by
all necessary corporate action of Interim.
6.3 DEFAULT. Neither the execution and delivery of this Agreement and
-------
the Merger Agreement nor performance by Colony and Interim in compliance with
their respective terms will result in a breach of the terms or conditions of, or
constitute a default under, the Articles of Incorporation or Bylaws of Colony or
of any mortgage, note, bond, indenture, agreement, license or other instrument
or obligation to which it is a party or by which it or any of its properties or
assets may be bound or, to the knowledge of Management of Colony, affected.
6.4 APPLICATIONS. Colony shall prepare and file, or shall cause to be
------------
prepared and filed, all regulatory applications as may be required in order to
consummate the transactions contemplated by this Agreement.
6.5 CAPITAL STOCK. The authorized capital stock of Colony consists of
-------------
5,000,000 shares of its $10.00 par value Common Stock, of which 1,291,110 shares
were issued
25
<PAGE>
and outstanding as of April 30, 1996. All of the issued and outstanding shares
of Common Stock of Colony are, and all of the shares of Colony to be issued in
exchange for shares of Broxton Common Stock upon consummation of the Merger,
when issued in accordance with the terms of this Agreement, will be duly and
validly issued and outstanding and fully paid and non-assessable under
applicable Georgia law. All shares of Colony's issued and outstanding common
stock have been issued in compliance with all applicable state and federal
securities laws. None of the outstanding shares of Colony Common Stock have
been, and none of the shares of Colony Common Stock to be issued in exchange for
shares of Broxton Common Stock upon consummation of the Merger will be, issued
in violation of any pre-emptive rights of the current or past Shareholders of
Colony. Colony does not have outstanding any securities which are either by
their terms or by contract convertible or exchangeable into capital stock of
Colony, or any other securities or debt of Colony, or any preemptive or similar
rights to subscribe for or to purchase, or any options or warrants or agreements
or understandings for the purchase or the issuance (contingent or otherwise) of,
or any calls, commitments or claims of any character relating to, its capital
stock or securities convertible into capital stock. Colony is not subject to any
obligations (contingent or otherwise) to repurchase or otherwise acquire or
retire, or to register, any shares of its capital stock.
6.6 SEC FILINGS; FINANCIAL STATEMENTS. (a) Colony has filed and made
---------------------------------
available to Broxton all forms, reports, and documents required to be filed by
Colony with the Securities and Exchange Commission since December 31, 1993,
other than a registration statement on Form SB2 (collectively, the "COLONY SEC
REPORTS"). The Colony SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such Colony SEC
Reports or necessary in order to make the statements in such Colony SEC Reports,
in light of the circumstances under which they were made, not misleading.
(b) Each of the financial statements of Colony (including, in each case,
any related notes) contained in the Colony SEC Reports, including any Colony
Reports filed after the date of this Agreement until the Effective Date,
complied as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved, except as
may be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC, and fairly presented
the consolidated financial position of Colony and its subsidiaries as at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited
26
<PAGE>
interim financial statements were or are subject to normal and recurring year-
end adjustments which were not or are not expected to be material in amount.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
------------------------------------
except as disclosed in Colony financial statements delivered prior to the date
of this Agreement, (i) there have been no events, changes or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate, a
material adverse effect on Colony.
6.8 TAX MATTERS. (a) All tax returns required to be filed by or on
-----------
behalf of Colony and its subsidiaries have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1995, and all tax returns filed are complete and
accurate in all material respects. All taxes shown on filed tax returns have
been paid, and there is no audit examination, deficiency, or refund litigation
with respect to any taxes that is reasonably likely to result in a determination
that would have, individually or in the aggregate, a material adverse effect on
Colony, except as may be reserved against in the Colony financial statements
delivered prior to the date of this Agreement.
(b) Adequate provision for any taxes due and or to be come due for
Colony or any of its subsidiary banks for the period or periods through and
including the date of the respective Colony Financial Statements has been made
and is reflected on such Colony Financial Statements.
6.9 LEGAL PROCEEDINGS. There is no litigation instituted or pending,
-----------------
or, to the knowledge of Colony, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable against Colony or its subsidiaries) that is likely
to have, individually or in the aggregate, a material adverse effect on Colony
or its subsidiaries, nor are there any orders of any regulatory authorities,
other governmental authorities, or arbitrators outstanding against Colony or its
subsidiaries that are reasonably likely to have, individually or in the
aggregate, a material adverse effect on Colony.
ARTICLE VII
-----------
CONDITIONS TO OBLIGATIONS OF COLONY
-----------------------------------
All of the obligations of Colony under this Agreement are subject to the
fulfillment prior to or at the Closing Date of each of the following conditions,
any one or more of which may be waived by Colony:
27
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of Broxton contained herein, or in any certificate, schedule or other document
delivered pursuant to the provisions hereof, or in connection herewith, shall be
true in all material respects as of the date when made and, except where
otherwise expressly provided herein, shall be deemed to be made again at and as
of the Effective Date and shall be true in all material respects at and as of
such time, except (i) for those representations and warranties confined to a
specific date, which shall be true and correct as of such date, or (ii) as a
result of changes or events expressly permitted or contemplated herein.
7.2 PERFORMANCE OF AGREEMENTS. Broxton shall have performed and
-------------------------
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
7.3 CERTIFICATES, RESOLUTIONS, OPINION. Broxton shall have delivered to
----------------------------------
Colony:
(a) a certificate executed by the President of Broxton, dated as of
the Effective Date, and certifying in such detail as Colony may reasonably
request to the fulfilling of the conditions specified in SECTIONS 7.1 AND
7.2 hereof;
(b) duly adopted resolutions of the Board of Directors and
shareholders of Broxton, certified by the Secretary or Assistant Secretary
thereof as of the Effective Date, (i) authorizing and approving the
execution of this Agreement (with respect to the directors of Broxton) and
the Merger Agreement (with respect to the directors and the shareholders of
Broxton), and the consummation of the transactions contemplated herein and
therein in accordance with their respective terms, and (ii) authorizing all
other necessary and proper corporate action to enable Broxton to comply
with the terms hereof and thereof;
(c) certificates executed by the Department of Banking dated not
more than five (5) business days prior to the Closing Date, of the valid
existence of Broxton under the laws of such state;
(d) certificates from the appropriate public officials of the State
of Georgia, dated not more than five (5) business days prior to the Closing
Date, certifying that Broxton has filed all corporate tax returns required
by the laws of such state and has paid all taxes shown thereon to be due;
28
<PAGE>
(e) the Bylaws of Broxton, as amended to date, certified by the
Secretary or Assistant Secretary thereof;
(f) Articles of Incorporation of Broxton, as amended to date,
certified by the Secretary of the State of Georgia and dated not more than
ten (10) days prior to Closing Date; and
(g) an opinion of Solomon & Edgar, P.C., counsel for Broxton, dated
the Effective Date, in the form attached as EXHIBIT C, which opinion may be
issued in accordance with the January 1, 1992 edition of the Interpretive
Standards applicable to Legal Opinions to Third Parties in Corporate
Transactions adopted by the Legal Opinion Committee of the Corporate and
Banking Law Section of the State Bar of Georgia. The opinion letter shall
contain the opinion of counsel as to such other matters as Colony may
reasonably request.
7.4 ACCOUNTANTS' LETTER. Colony shall have received a letter from
-------------------
Nichols, Cauley & Associates, P.C., dated the Effective Date, to the effect
that, at the request of Broxton they have carried out procedures to a specified
date not more than five (5) business days prior to the Effective Date, which
procedures did not constitute an examination in accordance with generally
accepted auditing standards, of the financial statement of Broxton, as follows:
(a) read the unaudited balance sheets and statements of income of Broxton from
December 31, 1995 through the date of the most recent monthly financial
statements available in the ordinary course of business; (b) read the minutes of
the meetings of shareholders and Board of Directors of Broxton from December 31,
1995 to said date not more than five (5) business days prior to the Effective
Date; and (c) consulted with certain officers and employees of Broxton
responsible for financial and accounting matters and, based on such procedures,
nothing has come to their attention which would cause them to believe that such
unaudited interim balance sheets and statements of income are not fairly
presented in conformity with generally accepted accounting principles applied on
a basis consistent with that of the 1995 Financial Statements.
7.5 REGULATORY APPROVALS. Colony shall have received from any and
--------------------
all governmental authorities, bodies or agencies having jurisdiction over the
transactions contemplated by this Agreement, including, but not limited to, the
Federal Reserve, the FDIC and the Department of Banking, all such consents,
authorizations and approvals as are necessary for the consummation thereof and
all applicable waiting or similar periods required by law shall have expired.
7.6 CERTIFICATE OF MERGER. The Secretary of State of Georgia shall have
---------------------
issued a certificate of merger with respect to the merger of Interim with and
into Broxton.
29
<PAGE>
7.7 EMPLOYMENT AGREEMENTS. All written employment, termination,
---------------------
consulting or similar agreements entered into by Broxton shall have been
effectively terminated with no remaining liabilities, duties or obligations on
the part of Broxton under said agreements.
7.8 CONSENTS TO THE MERGER. Broxton shall have delivered to Colony all
----------------------
consents to the Merger that are required to be secured from any party to any
agreement with Broxton.
7.9 COVENANT NOT TO COMPETE. The execution by Curtis A. Summerlin of a
-----------------------
Covenant Not to Compete, the form of which shall be that attached hereto as
EXHIBIT D, on or prior to the Effective Date, the effect of which shall be
conditioned upon the tender by Colony to Mr. Summerlin on the Closing Date of
the consideration set forth in SECTION 9.4 hereof.
7.10 ABSENCE OF EMPLOYMENT CONTRACTS. There shall be in effect no
-------------------------------
written or verbal contracts of employment for any employee of the Bank which
cannot be terminated by Broxton at will.
7.11 ADEQUACY OF LOAN LOSS RESERVE. Colony shall be satisfied that as of
-----------------------------
the Effective Date Broxton has established a loan loss reserve which, in the
good faith opinion of Colony based upon its review of the loan portfolio of
Broxton, is adequate to cover anticipated losses that might result from such
loan portfolio. Colony shall have free access to the books and records of
Broxton through and until the Effective Date for the purpose of making such
determination.
ARTICLE VIII
------------
CONDITIONS TO OBLIGATIONS OF BROXTON
------------------------------------
All of the obligations of Broxton under this Agreement are subject to the
fulfillment prior to or at the Effective Date of each of the following
conditions, any one or more of which may be waived by Broxton:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
------------------------------
Colony contained herein or in any certificate, schedule or other document
delivered pursuant to the provisions hereof, or in connection herewith, shall be
true in all material respects as of the date when made and shall be deemed to be
made against at and as of the Closing Date and shall be true in all material
respects at and as of such time.
30
<PAGE>
8.2 PERFORMANCE OF AGREEMENTS. Colony shall have performed and complied
-------------------------
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
8.3 CERTIFICATES, RESOLUTIONS, OPINION. Colony shall have delivered to
----------------------------------
Broxton:
(a) a certificate executed by the President of Colony, dated the
Effective Date, certifying in such detail as Broxton may reasonably request
to the fulfillment of the conditions specified in SECTIONS 8.1 and 8.2
hereof;
(b) duly adopted resolutions of the Board of Directors of Colony,
certified by the Secretary or an Assistant Secretary thereof as of the
Effective Date, authorizing and approving (i) the execution of this
Agreement and the consummation of the transactions contemplated herein in
accordance with its terms, and (ii) all other necessary and proper
corporate action to enable Colony to comply with the terms hereof;
(c) duly adopted resolutions of the Board of Directors of Interim,
certified by the Secretary or Assistant Secretary thereof as of the
Effective Date, authorizing and approving (i) the execution of Broxton
Merger Agreement and the consummation of the transactions contemplated
therein in accordance with its terms, and (ii) all other necessary and
proper corporate action to enable Interim to comply with the terms thereof;
(d) an opinion of Martin, Snow, Grant & Napier, counsel for Colony,
dated the Effective Date, in the form attached as EXHIBIT E, which opinion
may be issued in accordance with the January 1, 1992 edition of the
Interpretive Standards applicable to Legal Opinions to Third Parties in
Corporate Transactions adopted by the Legal Opinion Committee of the
Corporate and Banking Law Section of the State Bar of Georgia; and
(e) an opinion of Martin, Snow, Grant & Napier, counsel for Colony,
dated the Effective Date, to the effect that the exchange of all the
outstanding shares of Broxton for shares of Colony and the conversion of
Interim shares into Broxton shares will qualify as a reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal
Revenue Code, and that no gain or loss will be recognized by Colony,
Interim or Broxton, or their respective shareholders as a result of the
transactions contemplated under the Agreement and Plan of Reorganization.
31
<PAGE>
8.4 SHAREHOLDER APPROVAL. The Merger Agreement shall have been approved
--------------------
by the vote of the holders of at least two-thirds of the shares of the Broxton
Stock.
8.5 REGULATORY APPROVALS. Any and all governmental authorities, bodies
--------------------
or agencies having jurisdiction over the transactions contemplated by this
Agreement, including, but not limited to the Federal Reserve, the FDIC and the
Department of Banking, shall have granted all such consents, authorizations and
approvals as are necessary for the consummation thereof, and all applicable
waiting or similar periods required by law shall have expired.
8.6 PAYMENT TO MR. SUMMERLIN. The tender to Curtis A. Summerlin in cash
-------------------------
of the sum of $90,000.00 at Closing in exchange for the execution of a Covenant
Not to Compete by Mr. Summerlin.
ARTICLE IX
----------
ADDITIONAL AGREEMENT
--------------------
9.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL. As
-------------------------------------------------------------
soon as practicable after execution of this Agreement, a registration statement
shall be filed by Colony with the Securities and Exchange Commission on Form S-
4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto under the Securities Act of 1933 with respect
to the shares of Colony Common Stock to be issued to the shareholders of Broxton
in connection with the transactions contemplated by this Agreement. Colony
shall use its reasonable efforts to cause the registration statement to become
effective under the Securities Act of 1933 and take any action required to be
taken under applicable state Blue Sky or securities laws in connection with the
issuance of the shares of Colony Common Stock upon consummation of the Merger.
Broxton shall furnish all information concerning it and the holders of its
capital stock as Colony may reasonably request in connection with such action.
Broxton shall call a shareholders meeting, to be held within forty-five (45)
days after the registration statement is declared effective by the Securities
and Exchange Commission, for the purpose of voting upon approval of the
Agreement of Merger and such other related matters as it deems appropriate. In
connection with the shareholders meeting (i) Broxton shall furnish to Colony
such information as is necessary for Colony to prepare and file with the
Securities and Exchange Commission a Proxy Statement, and shall mail such Proxy
Statement to its shareholders, (ii) the parties shall furnish to each other all
information concerning them that they may reasonably request in connection with
such Proxy Statement, (iii) the Board of Directors of Broxton shall recommend
(subject to compliance with their fiduciary duties as advised by counsel) to its
shareholders the approval of the Merger Agreement and (iv) the
32
<PAGE>
Board of Directors and officers of Broxton shall (subject to compliance with
their fiduciary duties as advised by counsel) use their reasonable efforts to
obtain such shareholders approval.
9.2 APPLICATIONS. Colony shall promptly prepare and file, and Broxton
------------
shall cooperate in the preparation and, where appropriate, filing of
applications with all regulatory authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite consents
necessary to consummate the transactions contemplated by this Agreement.
9.3 AGREEMENT OF AFFILIATE. Broxton shall use its best efforts to obtain
----------------------
written acknowledgements from each executive officer, director, 10% shareholder
or other person designated by Colony as, or believed by Colony to be, an
"AFFILIATE" of Broxton at the time the Agreement of Merger is submitted to
Broxton's shareholders for approval, that each such person is receiving shares
of Colony as a result of the Merger which may in the future be subject to the
provisions of Rule 145 as promulgated under the Securities Act of 1933, and the
consent and agreement of each such person that: (i) he or she may be deemed an
"UNDERWRITER" pursuant to Paragraph (c) of such Rule; (ii) he or she will make
no disposition of such shares except in compliance with the provisions of
Paragraph (d) of such Rule, or pursuant to an effective registration statement
under the 1933 Act, unless Colony shall have received an opinion of counsel
reasonably satisfactory to it that such compliance or registration is not
required; (iii) the certificate(s) evidencing the shares of Colony Common Stock
to be received by him or her as a result of the Merger will bear an appropriate
legend reflecting Clauses (i) and (ii) of this paragraph; and (iv) a stop order
will be placed upon the transfer of such shares of Colony Common Stock with the
transfer agent of the company.
9.4 COVENANT NOT TO COMPETE WITH CURTIS A. SUMMERLIN. In exchange for the
------------------------------------------------
execution of a Covenant Not to Compete by Curtis A. Summerlin, President and
chief executive officer of Broxton, the form of which is attached hereto as
EXHIBIT D, Colony shall tender to Mr. Summerlin the sum of $90,000.00 in cash at
Closing, and shall pay to Mr. Summerlin an additional $10,000.00 fifteen (15)
months after the date of Closing, or at such earlier time after Closing as may
be demanded by Mr. Summerlin. The execution of that Covenant Not to Compete by
Mr. Summerlin is a condition to Closing, and in the event Mr. Summerlin fails,
at or prior to the Effective Date, to execute a Covenant Not to Compete which
prohibits him from participating in the banking business in Coffee County,
Georgia through ownership of or affiliation with any financial institution other
than Colony or its subsidiaries for a period of three (3) years following the
Closing Date, Colony shall have the option of terminating this Agreement with no
further liability to Broxton or to Mr. Summerlin.
33
<PAGE>
ARTICLE X
---------
WARRANTIES, NOTICES, ETC.
-------------------------
10.1 WARRANTIES. All statements contained in any certificate or other
----------
instrument delivered by or on behalf of Broxton or Colony pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties hereunder by the delivering party.
10.2 SURVIVAL OF REPRESENTATIONS. All representations, warranties,
---------------------------
covenants, and agreements made by either party hereto in or pursuant to this
Agreement or in any instrument, exhibit or certificate delivered pursuant hereto
shall be deemed to have been material and to have been relied upon by the party
to which made, but, except as set forth hereafter or specifically stated in this
Agreement, such representations, warranties, covenants, and agreements shall
expire and be of no further force and effect upon the consummation of the
Merger; provided, however, that the following shall survive consummation of the
Merger and the transactions contemplated hereby:
(a) the opinions of counsel referred to in SECTIONS 7.3(G) and 8.3(D)
of this Agreement;
(b) the opinion of accountants referred to in SECTION 7.4 of this
Agreement;
(c) any intentional misrepresentation of any material fact made by
any party hereto in or pursuant to this Agreement or in any instrument,
document or certificate delivered pursuant hereto; and
(d) the covenant with respect to the confidentiality of certain
information contained in SECTION 3.4 of this Agreement.
10.3 NOTICE. All notices, requests, demands and other communications
------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered or mailed, first class, certified mail, postage
prepaid to each of the parties hereto at the respective addresses set forth
below (or at such other address either party may have theretofore notified the
other party in writing):
34
<PAGE>
(a) To Broxton: Broxton State Bank
P.O. Box 309
Broxton, Georgia 31519
Attn: Curtis A. Summerlin
With copies to: Solomon & Edgar, P.C.
P.O. Box 467
Alma, Georgia 31510
Attn: Teddy Solomon
(b) To Colony: Colony Bankcorp, Inc.
P.O. Box 989
302 South Main Street
Fitzgerald, Georgia 31750
Attn: James D. Minix
With copies to: Martin, Snow, Grant & Napier
240 Third Street
P.O. Box 1606
Macon, Georgia 31202-1606
Attn: John T. McGoldrick, Jr.
10.4 ENTIRE AGREEMENT. This Agreement and the Merger Agreement supersede
----------------
all prior discussions and agreements by and between Colony and Broxton with
respect to the Merger and the other matters with respect thereto, and this
Agreement and the Merger Agreement contain the sole and entire agreement between
the parties hereto with respect to the transactions contemplated herein.
10.5 WAIVER; AMENDMENT. Prior to or on the Effective Date, Colony, acting
-----------------
through its Board of Directors, Chairman or President, shall have the right to
waive any default in the performance of any term of this Agreement by Broxton,
to waive or extend the time for the fulfillment by Broxton of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Colony under this Agreement, except any
condition which, if not satisfied, would result in the violation of any law or
applicable governmental regulation. Prior to or on the Effective Date, Broxton,
acting through its Board of Directors, Chairman or President, shall have the
right to waive any default in the performance of any term of this Agreement by
Colony, to waive or extend the time for the fulfillment by Colony of any and all
of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of Broxton under this Agreement, except
35
<PAGE>
any condition which, if not satisfied, would result in the violation of any law
or applicable governmental regulation. This Agreement may be amended by a
subsequent writing signed by the parties hereto upon the approval of the Boards
of Directors of each of the parties hereto; provided, however, that the
provisions of SECTIONS 7.5 and 8.5 requiring regulatory approval shall not be
amended by the parties hereto without such approval.
ARTICLE XI
----------
TERMINATION
-----------
This Agreement may be terminated at any time prior to the Effective Date
upon written notice to the other party hereto as follows, and, upon any such
termination of this Agreement no party hereto shall have any liability to the
other party, except that the provisions of SECTIONS 3.4 and 3.6 hereof shall
survive the termination of this Agreement for any reason.
11.1 MATERIAL ADVERSE CHANGE OF BROXTON. By either party, if, after the
----------------------------------
date hereof, a material adverse change in the financial condition or business of
the other party shall have occurred or the other party shall have suffered a
material loss or damage to any of its properties or assets, which change, loss
or damage materially affects or impairs the ability of the other party to
conduct its business.
11.2 NONCOMPLIANCE OF BROXTON. By Colony, if the terms, covenants or
------------------------
conditions of this Agreement to be complied with or performed by Broxton at or
before the Closing shall not have been complied with or performed in all
material respects and such noncompliance or non-performance shall not have been
waived by Colony.
11.3 NONCOMPLIANCE OF COLONY. By Broxton, if the terms, covenants or
-----------------------
conditions of this Agreement to be complied with or performed by Colony at or
before the Closing shall not have been complied with or performed in all
material respects and such noncompliance or non-performance shall not have been
waived by Broxton.
11.4 FAILURE TO DISCLOSE. By Colony, if it learns of any fact or condition
-------------------
not disclosed in this Agreement, the Disclosure Memorandum, the 1995 Financial
Statements or the Unaudited Financial Statements, which was required to be
disclosed by Broxton pursuant to the provisions of this Agreement at or prior to
the date of execution hereof with respect to the business, properties, assets or
earnings of Broxton which materially and adversely affects such business,
properties, assets or earnings or the ownership, value or continuance thereof;
or by Broxton if it learns of any fact or condition not disclosed in this
Agreement which was required to be disclosed by Colony pursuant to the
provisions of this Agreement at or prior to
36
<PAGE>
the date of execution hereof with respect to the business, properties, assets or
earnings of Colony which materially and adversely affect such business,
properties, assets or earnings or the ownership, value or continuance thereof.
11.5 ENVIRONMENTAL LIABILITY. By Colony, if it learns of any potential
-----------------------
liability of Broxton arising from noncompliance with any federal, state or local
environmental law by Broxton, or any potential liability of Broxton arising from
any environmental condition of the properties or assets of Broxton, including
any properties or assets in which Broxton holds a security interest. Broxton
has advised Colony of potential liability related to the leakage or spillage of
hydrocarbons from underground tanks located on the Southside Pump & Pantry site
on Madison Avenue in Douglas, Georgia which has been foreclosed upon and is now
owned by Broxton. Broxton covenants that it has, or will, install monitoring
wells at the facility to determine the extent of environmental contamination, if
any, and to submit a Corrective Action Plan - Part A for the site to the Georgia
Environmental Protection Division, and to take such other and further remedial
measures as may be required under applicable federal, state or local laws, rules
and regulations. In the event Colony determines in good faith the potential
liability of Broxton in connection with that closing, in addition to costs
previously paid or incurred by Broxton and any amount reserved for such
liability by Broxton, exceeds the sum of $20,000.00, it may terminate this
Agreement by written notice to Broxton.
11.6 ADVERSE PROCEEDINGS. By either party, if any action, suit or
-------------------
proceeding shall have been instituted or threatened against either party to this
Agreement to restrain or prohibit, or to obtain substantial damages in respect
of, this Agreement or the consummation of the transactions contemplated herein,
which, in the good faith opinion of such party, makes consummation of the
transactions herein contemplated inadvisable.
11.7 DISSENTERS. By Colony, if the holders of more than ten percent
----------
(10%) of the outstanding Broxton Stock elect to exercise their statutory right
to dissent from the Merger and demand payment in cash for the "fair value" of
their shares.
11.8 TERMINATION DATE. By either party, if all consents, authorizations
----------------
and approvals of any and all governmental authorities, bodies or agencies having
jurisdiction over the transactions contemplated by this Agreement and the Merger
Agreement necessary for the consummation of such transactions have not been
granted on or before January 31, 1997.
11.9 SHAREHOLDER VOTE. By either party, if the Merger Agreement is not
----------------
approved by the vote of the holders of Broxton Stock as required by applicable
law.
37
<PAGE>
11.10 DISCLOSURE MEMORANDUM. By Colony, within fifteen (15) business days
---------------------
after the receipt of the Disclosure Memorandum set forth in ARTICLE 4.1, if any
disclosure contained in such Memorandum causes Colony to believe in its sole
discretion that the consummation of the Merger is inadvisable.
ARTICLE XII
-----------
COUNTERPARTS, HEADINGS, ETC.
----------------------------
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. The headings herein set out are for
convenience of reference only and shall not be deemed a part of this Agreement.
ARTICLE XIII
------------
BINDING EFFECT
--------------
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement may not be assigned by any party without the prior written
consent of the others.
ARTICLE XIV
-----------
GOVERNING LAW
-------------
The validity and effect of this Agreement and the rights and obligations of
the parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State of Georgia.
38
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized corporate officers and their corporate seals to be
affixed hereto all as of the day and year first above written.
BROXTON STATE BANK
(BANK SEAL)
By: /s/ Curtis A. Summerlin
-----------------------------
Attest: Curtis A. Summerlin
President
[SIGNATURE ILLEGIBLE]
- ---------------------
Secretary
COLONY BANKCORP, INC.
By: /s/ James D. Minix
-----------------------------
James D. Minix
President
(CORPORATE SEAL)
Attest:
[SIGNATURE ILLEGIBLE]
- ---------------------
Secretary
39
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (hereinafter referred to as the
"AGREEMENT"), made and entered into as of the 4th day of June, 1996, by and
between BROXTON INTERIM,INC., Broxton, Georgia, a Georgia business corporation
("INTERIM"), and a wholly-owned subsidiary of Colony Bankcorp, Inc., Fitzgerald,
Georgia, a Georgia Corporation ("COLONY"), and BROXTON STATE BANK, Broxton,
Georgia, a bank organized under the laws of the State of Georgia ("BROXTON")
(Interim and Broxton being sometimes referred to collectively as the
"CONSTITUENT COMPANIES");
W I T N E S S E T H:
--------------------
WHEREAS, the Boards of Directors of Interim and Broxton deem it advisable
and for the benefit of each of said entities and their respective shareholders
that Interim merge into and with Broxton, with Broxton being the surviving bank;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises and of the mutual
agreements hereinafter contained, it is agreed by and between the parties to
this Agreement that pursuant to, and with the effects provided in the applicable
provisions of, Part 14 of the Financial Institutions Code of the State of
Georgia, as amended, Interim be merged into and with Broxton (hereinafter
referred to as the "SURVIVING BANK"), the corporate existence of which shall be
continued under the name "Broxton State Bank", and thereafter the individual
existence of Interim shall cease. The terms and conditions of the merger hereby
agreed upon and the mode of carrying the same into effect and the manner and
basis of converting the shares of Common Stock, $10.00 par value, of Broxton
(the "BROXTON COMMON STOCK") into shares of the $10.00 par value of Common Stock
of Colony shall be as follows:
1.
The acts required to be done by the laws of the State of Georgia, in order
to make this Agreement effective, including the submission of this Agreement to
the shareholders of the Constituent Companies, if required, and the filing of
this Agreement in the manner provided in Section 7-1-530, et seq. of the
------
Financial Institutions Code of the State of Georgia, shall be attended to and
done by the proper officers of the Constituent Companies as soon as practicable.
<PAGE>
2.
The merger contemplated by this Agreement shall be effective as of the
close of business on the date of the issuance of the certificate of merger by
the Secretary of State of Georgia (the "EFFECTIVE DATE").
3.
The Articles of Incorporation of Broxton will remain unchanged and
shall on the Effective Date be the Articles of Incorporation of the Surviving
Bank.
4.
Until altered, amended or repealed, as therein provided, the Bylaws of
Broxton as in effect on the Effective Date shall be the Bylaws of the Surviving
Bank.
5.
The Board of Directors of the Surviving Bank shall be composed of the
members of the Board of Directors of Broxton immediately prior to the merger.
6.
The manner and basis of converting the shares of capital stock of each of
the Constituent Companies shall be as follows:
(a) Upon the Effective Date, the shares of Common Stock of Interim
("INTERIM STOCK") issued and outstanding immediately prior to the Effective
Date, shall be converted into 50,730 shares of $10.00 par value Common
Stock of the Surviving Bank, less any shares of Broxton owned by Colony as
of the Effective Date.
(b) Upon the Effective Date, each of the shares of Broxton Common
Stock outstanding on the Effective Date, other than those shares of Broxton
Stock owned by Colony, shall, by virtue of the merger and without any
further action on the part of the holder thereof, be converted into the
right to receive a number of shares of the $10.00 par value Common Stock of
Colony which have a value equal to 1.65 times the per share book value of
the Broxton Common Stock as of the Effective Date (the "EXCHANGE RATIO").
For purposes of determining the Exchange Ratio, the per share book value of
the Broxton Common Stock to be acquired by Colony shall be the sum
2
<PAGE>
of the Bank's Common Stock, surplus, undivided profits and year-to-date
earnings or losses as shown on the general ledger using generally accepted
accounting principles consistently applied as maintained by Broxton as of
the close of business on the Effective Date, without adjustment for net
unrealized gains or losses on securities available for sale as provided by
Statement of Financial Accounting Standards No. 115, divided by the number
of issued and outstanding shares of Broxton as of the Effective Date. For
purposes of determining the Exchange Ratio, the per share value of the
shares of Common Stock of Colony to be issued in connection with the
acquisition shall be equal to 1.25 times the sum of Colony's Common Stock,
surplus, undivided profits and year-to-date earnings or losses as shown on
the general ledger maintained by Colony using generally accepted accounting
principles consistently applied as of the close of business on the
Effective Date, without any adjustment for net unrealized gains or losses
on securities available for sale as provided by Statement of Financial
Accounting Standards No. 115, divided by the number of issued and
outstanding shares of the company as of the Effective Date. No fractional
shares shall be issued; instead, fractional shares shall be paid in cash by
Colony at a price equal to the value of Colony Common Stock as calculated
for purposes of the Exchange Ratio.
(c) If, prior to the Effective Date, the outstanding shares of
Broxton Common Stock shall be increased by any stock dividend, stock split,
subdivision, recapitalization or reclassification of shares or shall be
combined into a lesser number of shares by reclassification,
recapitalization, or reduction of capital, the number of shares of Colony
Common Stock to be received by each Broxton Shareholder hereunder for each
share of Broxton Common Stock shall be proportionately adjusted.
(d) As soon as practicable after the Effective Date, each holder of
any of the shares of Broxton Common Stock to be converted as above provided
shall be entitled, upon presentation and surrender of the certificate or
certificates representing such shares to the transfer agent or agents
designated by Colony, to receive in exchange shares of Common Stock of
Colony according to the Exchange Ratio.
7.
Upon the Effective Date, the shares of Broxton Common Stock which are to be
surrendered in exchange for Colony Common Stock, until surrendered, shall be
deemed for all corporate purposes to evidence the ownership of the respective
number of shares of Colony Common Stock except for the payment of dividends.
Until such certificates nominally representing shares of Broxton Common Stock
shall be surrendered to Colony, no dividends payable on the shares of Colony
Common Stock as of any date subsequent to the Effective
3
<PAGE>
Date shall be paid to the holders thereof; but upon the surrender to Colony of
such Broxton stock certificates, free and clear of any and all liens and
encumbrances, for exchange, there shall be paid to the holders thereof the
amount of dividends to which the shares of Broxton Common Stock being
surrendered are entitled. Fractional shares to be surrendered in exchange for
cash shall bear no interest until surrendered.
8.
On the Effective Date of the merger, the separate existence of Interim
shall cease, and the Surviving Bank shall thereupon and thereafter possess all
the rights, privileges, immunities and franchises, of a public as well as of a
private nature, of each of the Constituent Companies; and all property, real,
personal and mixed, and all debts due on whatever account, and each and every
other interest of or belonging to or due to each of the Constituent companies
shall be taken and deemed to be transferred to and invested in the Surviving
Bank without further act or deed; and the title to any real estate, or any
interest therein, vested in any of the Constituent Companies shall not revert or
be in any way impaired by reason of such merger. The Surviving Bank shall
thenceforth be responsible and liable for all of the liabilities and obligations
of each of the Constituent Companies; and any claim existing or action or
proceeding pending by or against either of the Constituent Companies may be
prosecuted as if such merger had not taken place, or the Surviving Bank may be
substituted in its place. Neither the rights of creditors not any liens upon
the property of either of the Constituent Companies shall be impaired by such
merger.
9.
If, at any time, the Surviving Bank shall consider or be advised that any
further assignments or assurances in law or any other actions are necessary or
desirable to vest in the Surviving Bank, according to the terms hereof, the
title to any property or rights of Broxton, the proper officers and directors of
Broxton shall execute and make all such proper assignments and assurances and do
all things necessary and proper to vest title and such property rights in the
Surviving Bank, and otherwise to carry out the purposes of this Agreement.
10.
This Agreement may be terminated and the merger abandoned in accordance
with the Agreement and Plan of Reorganization, of even date herewith, entered
into by and between Broxton and Colony, at any time before or after adoption of
this Agreement by the Boards of Directors of the Constituent Companies,
notwithstanding favorable action on the merger by
4
<PAGE>
the shareholders of either or both of the Constituent Companies, but not later
than the Effective Date.
11.
Broxton and Interim, by mutual consent, may amend, modify and supplement
this Agreement in the manner provided in SECTION 10.5 of the Agreement and Plan
of Reorganization.
12.
This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Constituent Companies have each caused this
Agreement and Plan of Merger to be executed on their respective behalves and
their respective corporate seals to be affixed hereto on the day and year first
above written.
BROXTON STATE BANK
By: /s/ Curtis A. Summerlin
----------------------------
Curtis A. Summerlin
President
(BANK SEAL)
Attest:
[SIGNATURE ILLEGIBLE]
- --------------------------
Secretary
BROXTON INTERIM, INC.
(CORPORATE SEAL)
Attest: By: /s/ James D Minix
---------------------------
J. Dan Minix
President
[SIGNATURE ILLEGIBLE]
- --------------------------
Secretary
5
<PAGE>
EXHIBIT B
---------
Colony Bankcorp, Inc.
P.O. Box 1029
Fitzgerald, Georgia 31750
Gentlemen:
In connection with the proposed merger (the "Merger") of Broxton Interim,
Inc. ("Interim") with and into Broxton State Bank ("Broxton") pursuant to the
Agreement and Plan of Reorganization of even date herewith between Colony
Bankcorp, Inc. and Broxton (the "Reorganization Agreement"), the undersigned
hereby agrees to recommend to all holders of the capital stock of Broxton
("Broxton Stock") that they vote in favor of the Merger. In addition, the
undersigned agrees to vote any and all shares of Broxton Stock owned or
controlled by him in favor of the Merger.
Sincerely,
[Director or Executive Officer of
Five Percent or Greater Shareholder
of Broxton State Bank]
1
<PAGE>
EXHIBIT C
---------
(1) Broxton was duly organized as a Bank, and is existing and in good
standing, under the laws of the State of Georgia whose deposits are insured by
the Federal Deposit Insurance Corporation.
(2) Broxton has the corporate power to execute and deliver the
Reorganization Agreement and the Merger Agreement, to perform its obligations
thereunder, to own and use its Assets and to conduct its business.
(3) Broxton has duly authorized the execution and deliver of the
Reorganization Agreement and the Merger Agreement and all performance by Broxton
thereunder, and has duly executed and delivered the Reorganization Agreement and
the Merger Agreement.
(4) No consent, approval, authorization or other action filed by, or
filing with, any governmental authority of the United States or the State of
Georgia is required for Broxton's execution and delivery of the Reorganization
Agreement and the Merger Agreement and consummation of the Transaction, which
consent, approval or authorization has not been previously received.
(5) The Reorganization Agreement and the Merger Agreement are enforceable
against Broxton.
(6) The authorized capital stock of Broxton consists of 50,730 shares
of Common Stock, par value $10.00 per share, all of which shares are issued and
outstanding. All of the issued and outstanding capital stock of Broxton has
been duly authorized and validly issued and are fully paid and non-assessable
and, to such counsel's knowledge, there are no outstanding options, warrants,
rights, calls, commitments, conversion rights, plans or other agreements
providing for the purchase or issuance of any authorized but unissued shares of
such capital stock.
1
<PAGE>
EXHIBIT D
---------
COVENANT NOT TO COMPETE
-----------------------
GEORGIA, COFFEE COUNTY
WHEREAS, the undersigned, CURTIS A. SUMMERLIN, is a majority
shareholder of Broxton State Bank, Broxton, Coffee County, Georgia and is
serving as a director and as President and Chief Executive Officer of Broxton
State Bank; and
WHEREAS, Broxton State Bank is a party to an Agreement and Plan of
Reorganization with Colony Bankcorp, Inc., pursuant to which Colony Bankcorp,
Inc. will acquire all (100%) of the issued and outstanding common stock of
Broxton State Bank; and
WHEREAS, as a material inducement to the execution of that Agreement by
Colony Bankcorp, Inc. the undersigned has agreed to execute a covenant not to
compete precluding his participation in the banking business in Coffee County,
Georgia for a period of three (3) years after the Effective Date of the merger
between Broxton Interim, Inc. and Broxton State Bank pursuant to which the
shares of Broxton State Bank were, or are to be, acquired by Colony Bankcorp,
Inc.
NOW, THEREFORE, in consideration of the obligation of Colony Bankcorp,
Inc. to pay to the undersigned the sum of $100,000.00, as more particularly set
forth in the Agreement and Plan of Reorganization between Colony Bankcorp, Inc.
and Broxton State Bank dated June 4, 1996, the undersigned does hereby agree
that for a period of three (3) years from the Effective Date of the merger
between Broxton Interim, Inc. and Broxton State Bank, as that term is more
particularly defined in the Agreement and Plan of Reorganization between Colony
Bankcorp, Inc. and Broxton State Bank dated June 4, 1996, he will not compete in
the banking business in Coffee, Ben Hill, Worth, Dodge, Wilcox or Turner
Counties, Georgia with Colony Bankcorp, Inc. or its subsidiaries, including,
without limitation, Broxton State Bank, directly or indirectly, whether as an
employee, officer or director of any bank, bank holding company, savings and
loan association, loan production office, credit union or other financial
institution maintaining a facility or place of business within Coffee, Ben Hill,
Worth, Dodge, Wilcox or Turner Counties, Georgia, which the undersigned
stipulates to be the relevant banking market of Broxton State Bank as of the
date of execution of this Agreement. For purposes of this Agreement, a financial
institution shall include any business which accepts deposits, makes loans, and
cashes and negotiates instruments constituting commercial paper.
<PAGE>
The undersigned further covenants and agrees that he shall not serve as a
spokesperson or consultant for any such financial institution which conducts a
banking business in Coffee, Ben Hill, Worth, Dodge, Wilcox or Turner Counties
Georgia during such time, and that he will not acquire or own, directly or
indirectly, during such time any shares of voting stock of any such financial
institution which maintains a place of business or conducts business in Coffee,
Ben Hill, Worth, Dodge, Wilcox, or Turner Counties, Georgia which represents
more than 1% of the issued and outstanding voting stock of such institution,
whether directly, or indirectly, or exercise control over such shares. The
covenant of the undersigned shall extend to any direct or indirect participation
in the banking business, whether as principal, agent, partner, trustee,
consultant or through the agency of any corporation, partnership, association,
trust or other entity or person, whether on the undersigned's behalf or for
others, and shall extend to any activity which seeks to promote, facilitate,
consult, bring about, or participate in the organization, development,
management or operation of a commercial banking business.
The undersigned further agrees that during the term of this Covenant Not to
Compete he will not encourage the discontinuance of any banking relationship
between any person or entity with Colony Bankcorp, Inc. or any of its
subsidiaries, including Broxton State Bank; provided, however, that nothing
contained herein shall prohibit the undersigned from maintaining any banking or
deposit account with any other financial institution with an office or doing
business in Coffee, Ben Hill, Worth, Dodge, Wilcox, or Turner Counties, Georgia
or from obtaining an extension of credit from any such financial institution.
The undersigned further agrees that during the term of this covenant not to
compete he will not knowingly solicit, entice, or persuade any other directors,
officers, representatives, employees, consultants or agents of Broxton State
Bank to leave its services for any reason.
The effectiveness of this Covenant Not to Compete is conditioned upon the
payment to the undersigned by Colony Bankcorp, Inc. on the Effective Date of the
acquisition of Broxton State Bank by Colony Bankcorp, Inc., as that term is
defined in the Agreement and Plan of Reorganization between Colony Bankcorp,
Inc. and Broxton State Bank, of the sum of $90,000.00.
The undersigned acknowledges and agrees that the type, period and
territorial restrictions imposed herein are fair and reasonable and are
supported by sufficient consideration, and that such limitations and
restrictions will not prevent the undersigned from earning a livelihood. The
undersigned further acknowledges that in the event of any breach of this
covenant by the undersigned, ascertainment of damages will be difficult or
impossible, and that accordingly Colony Bankcorp, Inc. shall be entitled, in
addition to and not in limitation of any other rights, remedies or damages, to
have a court of competent jurisdiction enjoin the undersigned from committing
any such breach upon compliance with any conditions attached
<PAGE>
thereto, such as the posting of any necessary bond. The undersigned waives any
defense that in such event Colony Bankcorp, Inc. has, or will have, an adequate
remedy at law, and further agrees that the three-year term of the Agreement
shall be tolled during any time in which the undersigned becomes involved in
circumstances that a court of competent jurisdiction finds to violate this
covenant. The undersigned further agrees that in the event it is determined the
restrictions contained herein are too broad to be enforced as written, then such
limitations or restrictions shall be enforced to the maximum extent permitted by
law and the undersigned and Colony Bankcorp, Inc. hereby expressly consent and
agree that such scope may be judicially modified accordingly in any proceeding
brought to enforce such limitations or restrictions.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
affixed their seals, this 4th day of June, 1996.
--- ----
/s/ Curtis A. Summerlin
---------------------------------------
CURTIS A. SUMMERLIN
COLONY BANKCORP, INC. (SEAL)
BY: /s/ James D. Minix,
------------------------------------
James D. Minix, President
3
<PAGE>
EXHIBIT E
---------
(1) Colony was duly organized as a corporation, and is existing and in
good standing, under the laws of the State of Georgia. Interim was duly
organized as a corporation, and is in good standing under the laws of the State
of Georgia.
(2) Colony has the corporate power to execute and deliver the
Reorganization Agreement, to perform its obligations thereunder, to own and use
it Assets and to conduct its business. Interim has the corporate power to
execute and deliver the Merger Agreement, to perform its obligations thereunder,
to own and use its Assets and to conduct its business.
(3) Colony has duly authorized the execution and delivery of the
Reorganization Agreement and all performance by Colony thereunder, and Interim
has duly executed and delivered the Merger Agreement.
(4) No consent, approval, authorization or other action filed by, or
filing with, any governmental authority of the United States or the State of
Georgia is required for Colony's execution and delivery of the Reorganization
Agreement and Interim's execution and delivery of the Merger Agreement and
consummation of the Transaction, which consent, approval or authorization has
not been previously received by Colony and Interim, respectively.
(5) The Reorganization Agreement and the Merger Agreement are
enforceable against Colony, and Interim, respectively.
(6) The shares to be issued by Colony in connection with the Merger
Agreement have been duly registered with the Securities and Exchange Commission
pursuant to an effective registration statement, and have either been registered
in accordance with, or are exempt from, the securities laws of the various
states in which the securities are to be issued.
1
<PAGE>
APPENDIX "C"
GEORGIA BUSINESS CORPORATION CODE
ARTICLE 13 - DISSENTERS' RIGHTS
<PAGE>
ARTICLE 13
DISSENTERS' RIGHTS
Part 1
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporation action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder. (Code 1981, (S)14-2-1301, enacted by Ga. L. 1988, p. 1070, (S)1.)
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
<PAGE>
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is
required for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the sale or
exchange pursuant to Code Section 14-2-1202, but not including a sale pursuant
to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the redemption
or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired for
cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares
of the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation, bylaws, or
a resolution of the board of directors
<PAGE>
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporation action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent or deceptive means, regardless of whether the shareholder
has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or share
exchange to accept for their shares anything except shares of the surviving
corporation or another publicly held corporation which at the effective date of
the merger or share exchange are either listed on a national securities exchange
or held of record by more than 2,000 shareholders, except for scrip or cash
payments in lieu of fractional shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise. (Code 1981, (S)14-2-
1302, enacted by Ga. L. 1988, p. 1070, (S)1.)
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders. (Code 1981,
(S)14-2-1303, enacted by Ga. L. 1988, p. 1070, (S)1.)
<PAGE>
Part 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken. (Code
1981, (S)14-2-1320, enacted by Ga. L. 1988, p. 1070, (S)1.)
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article. (Code 1981, (S)14-2-1321, enacted by Ga. L. 1988, p. 1970,
(S)1.)
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
<PAGE>
(2) Inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the date
the notice required in subsection (a) of this Code section is delivered; and
(4) Be accompanied by a copy of this article. (Code 1981,
(S)14-2-1322, enacted by Ga. L. 1988, p. 1070, (S)1.)
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article. (Code 1981,
(S)14-2-1323, enacted by Ga. L. 1988, p. 1070, (S)1.)
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under Code Section
14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(Code 1981, (S)14-2-1324, enacted by Ga. L. 1988, p. 1070, (S)1.)
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
<PAGE>
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year, and
the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice
to the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later. (Code 1981,
(S)14-2-1325, enacted by Ga. L. 1988, p. 1070, (S)1; Ga. L. 1989, p. 946,
(S)59.)
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure. (Code 1981, (S)14-2-1326, enacted by Ga. L. 1988, p. 1070, (S)1; Ga.
L. 1990, p. 257, (S)20.)
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest due is
incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the
<PAGE>
transfer restrictions imposed on uncertificated shares within 60 days after the
date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
Section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide the
information to the shareholder within ten days after receipt of a written demand
for the information; and
(2) The shareholder may at any time, subject to the limitations
period of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand payment
of his estimate of the fair value of his shares and interest due. (Code 1981,
(S)14-2-1327, enacted by Ga. L. 1988, p. 1070, (S)1; Ga. L. 1989, p. 946, (S)60;
Ga. L. 1990, p. 257, (S)21.)
Part 3
JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand and petition the court to determine the fair value
of the shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a
nonjury equitable valuation proceeding, in the superior court of the county
where a corporation's registered office is located. If the surviving corporation
is a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who
<PAGE>
is a resident of this state in the manner provided by law for the service of a
summons and complaint, and upon each nonresident dissenting shareholder either
by registered or certified mail or by publication, or in any other manner
permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act", applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a part to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment (Code 1981, (S)14-2-1330, enacted by Ga. L.
1988, p. 1070, (S)1).
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expense of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section 14-2-
1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the
<PAGE>
dissenters who were benefitted. (Code 1981, (S)14-2-1331, enacted by Ga. L.
1988, p. 1070, (S)1).
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322. (Code 1981, (S)14-2-1332, enacted by Ga. L. 1988, p.
1070, (S)1.)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
Item 20. Indemnification of Directors and Officers
-----------------------------------------
Article 8, Part 5 of the Georgia Business Corporation Code provides for
indemnification of directors and officers of corporations. Under the provisions
of O.C.G.A. (S)14-2-852, a director of Colony, to the extent successful in the
defense of any proceeding or claim to which the director is a party because he
or she is a director of Colony Bankcorp, Inc., is entitled as a matter of right
to indemnification against reasonable expenses, including attorneys' fees,
incurred by him in connection therewith. Colony Bankcorp, Inc. is further
authorized to indemnify any person who is made a director to a proceeding
because he or she is a director against any liability incurred if that person
acted in a manner he or she believed in good faith to be in, or not opposed to,
the best interest of the corporation and, in the case of any criminal
proceeding, he or she had no reasonable cause to believe his or her conduct was
unlawful. The authority of Colony Bankcorp, Inc. to indemnify a director is not
applicable in connection with any proceeding brought by or in the right of the
corporation in which the director was adjudged liable to the corporation, or in
connection with any other proceeding in which he or she is adjudged liable on
the basis that personal benefit was improperly received by him. Indemnification
in any action brought by or in the right of the corporation is limited in any
event to reasonable expenses incurred in connection with the proceeding, and
does not include the obligation to pay any judgment, settlement, penalty or
fine.
A determination that a director is entitled to indemnification must be made
by the board of directors by majority vote of a quorum consisting of directors
not at the time parties to the proceedings; if a quorum cannot be obtained then
by majority vote of a committee duly designated by the board of directors (in
which designation directors who are parties may participate), consisting solely
of two or more directors not at the time parties to the proceedings; by special
legal counsel; or by the shareholders of the corporation, excluding shares owned
by or voted under the control of directors who are at the time parties to the
proceeding. A director of a corporation who is a party to a legal proceeding may
apply to the court for indemnification or advances or expenses. The court may
order indemnification or advances for expenses if it determines (1) the director
is entitled to mandatory indemnification; or (2) the director is fairly and
reasonably entitled to indemnification, even if he or she has not met the
standard conduct set forth in O.C.G.A. (S)14-2-851(a) or was adjudged liable as
described in O.C.G.A. (S)14-2-851(b), in which latter event, however, his or her
indemnification is limited to reasonable expenses incurred. If the court
determines that the director is entitled to indemnification or advance for
expenses under this part, it may also order the corporation to pay the
director's reasonable expenses to obtain court-ordered indemnification or
<PAGE>
advance for expenses. The articles of incorporation of Colony Bankcorp, Inc.
also eliminate, as permitted by law, the personal liability of directors of the
company from monetary damages for breach of duty of care or other duty as a
director, excepting only any liability for misappropriation of any business
opportunity of the corporation, intentional misconduct, and other specified
conduct.
An officer of Colony Bankcorp, Inc. who is not a director is entitled to
mandatory indemnification and is entitled to apply for court ordered
indemnification in each case to the same extent as is a director of Colony
Bankcorp, Inc. Colony Bankcorp, Inc. may also indemnify and advance expenses to
an officer, employee or agent who is not a director to the extent, consistent
with public policy, that may be provided by its articles of incorporation,
bylaws, general or specific action of its board of directors, or contract.
Colony Bankcorp, Inc. bylaws provide for indemnification of officers and
directors substantially similar to that provided by Article 8, Part 5 of the
Georgia Business Corporation Code.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 21. Exhibits
--------
The following exhibits are filed as a part of this Registration Statement:
2.(a) Agreement and Plan of Reorganization dated June 4, 1996 between
Colony Bankcorp, Inc., Broxton State Bank and Broxton Interim, Inc., which
Agreement is included as Appendix "B" to the proxy statement included in this
Registration Statement.
(b) Form of Proxy.
3.(a) Articles of Incorporation of Registrant (as amended) -- Incorporated
by reference to the Registration Statement filed by Colony Bankcorp, Inc. or
Form SB-2, Commission File No. 33-96360.
<PAGE>
(b) Bylaws of Registrant -- Incorporated by reference to the
Registration Statement filed by Colony Bankcorp, Inc. From SB-2, Commission File
No. 33-96360.
5. Opinion and consent of Martin, Snow, Grant & Napier as to the
legality of the securities registered hereby.
8. Opinion and consent of Martin, Snow, Grant & Napier as to the
federal income tax consequences of the transaction to the shareholders of
Broxton State Bank.
10. Deferred compensation plan for directors of The Bank of Fitzgerald.
15.(a) The acknowledgement of Nichols, Cauley & Associates, P.C. of the
awareness of the use in the registration statement of a report on unaudited
interim financial information is contained in the consent of that firm filed as
Exhibit 23(b).
21. List of subsidiaries of Colony Bankcorp, Inc.
23.(a) Consent of McNair, McLemore, Middlebrooks & Co. to use of financial
statements.
(b) Consent of Nichols, Cauley & Associates, P.C. to use of financial
statements.
(c) The consents of Martin, Snow, Grant & Napier are contained in the
opinions of such firm filed or to be filed as Exhibits "5" and "8".
Item 22. Undertakings. The undersigned Registrant hereby undertakes as
-------------
follows:
(1) That prior to any public reoffering of the securities registered
thereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement, and will not be used until such amendment is effective, and that,
<PAGE>
for purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
(5) To file a post-effective amendment at such time as the number of
shares to be issued in connection with the Reorganization can be determined with
certainty to remove from registration any of the securities that remain unsold
at the end of the offering.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, Colony
Bankcorp, Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the City of Fitzgerald,
State of Georgia, on the 16th day of July, 1996.
COLONY BANKCORP, INC.
BY: /s/ James D. Minix
-------------------------
JAMES D. MINIX, President
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James D. Minix, Terry L. Hester and Ben B. Mills,
Jr., jointly and severally, his or her attorneys-in-fact, with power of
substitution for him or her in any and all capacities, to sign any amendment to
this Registration Statement, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and affirming all that said attorneys-in-fact, or
their substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 16th day of July, 1996.
/s/James D. Minix
- -----------------------------
JAMES D. MINIX President, Chief Executive
Officer, and Director
/s/Ben B. Mills, Jr.
- -----------------------------
BEN B. MILLS, JR. Director and Secretary
/s/Terry L. Hester
- -----------------------------
TERRY L. HESTER Director and Treasurer
(Chief Financial & Accounting
Officer)
/s/Paul Branch, Jr.
- -----------------------------
PAUL BRANCH, JR. Director
/s/Terry Coleman
- -----------------------------
TERRY COLEMAN Director
/s/L. Morris Downing, Jr.
- -----------------------------
L. MORRIS DOWNING, JR. Director
/s/Milton N. Hopkins, Jr.
- -----------------------------
MILTON N. HOPKINS, JR. Director
/s/Harold E. Kimball
- -----------------------------
HAROLD E. KIMBALL Director
/s/Marion H. Massee, III
- -----------------------------
MARION H. MASSEE, III Director
/s/Ralph D. Roberts
- -----------------------------
RALPH D. ROBERTS Director
<PAGE>
/s/W. B. Roberts, Jr.
- -----------------------------
W. B. ROBERTS, JR. Director
/s/R. Sidney Ross
- -----------------------------
R. SIDNEY ROSS Director
/s/Joe K. Shiver
- -----------------------------
JOE K. SHIVER Director
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
2.(a) Agreement and Plan of Reorganization dated
June 4, 1996, by and among Colony Bankcorp,
Inc., Broxton State Bank and Broxton
Interim, Inc., which Agreement is included
as Appendix "B" to the Proxy Statement
included in this Registration Statement.
2.(b) Form of Proxy.
3.(a) Articles of Incorporation and Bylaws of
Registrant - Incorporated by reference to
the Registration Statement filed by Colony
Bankcorp, Inc. on Form SB-2, Commission File
No. 33-96360.
(b) By-Laws of Registrant - Incorporated by reference
to the Registration Statement filed by Colony
Bankcorp, Inc. on forms SB-2, Commission File
No. 33-96360.
5. Opinion and consent of Martin, Snow, Grant
& Napier as to the legality of the
Securities registered hereby.
8. Opinion and consent of Martin, Snow, Grant
& Napier as to the federal income tax
consequences of the transaction to the
Shareholders of Broxton State Bank.
10. Colony Bankcorp Profit Sharing and
Stock Bonus Plan - Incorporated by reference
to the Registration Statement filed by Colony
Bankcorp, Inc. on Form SB-2, Commission File
No. 33-96360.
15.(a) The acknowledgement of Nichols, Cauley
& Associates, P.C. of the awareness of the
use in the registration statement of a report
on unaudited interim financial information
is contained in the consent of that firm
filed as Exhibit 23(b).
21. Subsidiaries of Colony Bankcorp, Inc.
23. (a) Consent of McNair, McLemore,
Middlebrooks & Co. to use of financial
statements.
(b) Consent of Nichols, Cauley & Associates,
P.C. to use of financial statements.
The consents of Martin, Snow, Grant & Napier
are contained in the opinions of such firm
filed or to be filed as Exhibits "5" and "8".
</TABLE>
<PAGE>
EXHIBIT 2.(a)
AGREEMENT AND PLAN OF REORGANIZATION DATED JUNE 4, 1996
BY AND AMONG COLONY BANKCORP, INC., BROXTON STATE BANK
AND BROXTON INTERIM, INC., WHICH AGREEMENT IS INCLUDED
AS APPENDIX "B" TO THE PROXY STATEMENT INCLUDED IN THIS
REGISTRATION STATEMENT
<PAGE>
EXHIBIT 2.(b)
FORM OF PROXY
<PAGE>
BROXTON STATE BANK
BROXTON, GEORGIA
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Curtis A. Summerlin and L. G.
Summerlin, as proxies, each with the power to appoint his substitute, and
hereby authorizes them, or either of them, to represent and vote as
designated below, all the shares of common stock of Broxton State Bank
("Bank") held of record by the undersigned on August _____, 1996 at the
special meeting of shareholders and any adjournments thereof, to be held
on September _____, 1996 at _____ o'clock ___.m., local time, at the main
offices of Broxton State Bank located at 401 Alabama Street, North,
Broxton, Georgia.
1. (FOR _______) (AGAINST ______) (ABSTAIN _____) approval and
adoption of an Agreement and Plan of Reorganization dated June 4, 1996, by
and between the Bank and Colony Bankcorp, Inc., a Georgia corporation
registered as a bank holding company, all as more fully set forth in the
accompanying Proxy Statement and the Agreement and Plan of Reorganization
annexed to the Proxy Statement as Appendix "A".
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
The shares represented by this proxy will be voted in accordance with
your instructions. IF NO CHOICE IS SPECIFIED BY YOU THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
An affirmative vote by the holders of at least two-thirds (2/3) of
the issued and outstanding shares of common stock of the Bank is required
for approval of Proposal 1.
Please sign below, date and return promptly in the enclosed stamped,
self-addressed envelope. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized person.
__________________________________
SIGNATURE
DATE:________________, 1996
__________________________________
SIGNATURE IF HELD JOINTLY
<PAGE>
EXHIBIT 5
OPINION AND CONSENT OF MARTIN, SNOW, GRANT & NAPIER
AS TO THE LEGALITY OF THE SECURITIES REGISTERED HEREBY
<PAGE>
[LETTERHEAD OF MARTIN, SNOW, GRANT & NAPIER APPEARS HERE]
July 16, 1996
Board of Directors
Colony Bankcorp, Inc.
302 South Main Street
Post Office Box 989
Fitzgerald, Georgia 31750
RE: REGISTRATION STATEMENT ON SEC FORM S-4 RELATING
TO THE ISSUANCE OF AN ESTIMATED 159,475 SHARES
OF THE $10.00 PAR VALUE COMMON STOCK OF COLONY
BANKCORP, INC.
Gentlemen:
This opinion is rendered in connection with the SEC Form S-4
Registration Statement (the "Registration Statement") which has been
filed by Colony Bankcorp, Inc. (the "Company") with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, with
respect to the proposed issuance of an estimated 159,475 shares of the
Company's common stock to be issued in connection with the proposed
merger of Broxton Interim, Inc., a wholly-owned subsidiary of the
Company, with and into Broxton State Bank pursuant to an Agreement and
Plan of Reorganization dated June 4, 1996 and filed as Exhibit "A" to
the proxy statement of the Company which is included in the
Registration Statement. The precise number of shares to be issued will
be determined on the effective date of the merger, and an amendment to
the Registration Statement withdrawing the unissued shares from
registration will be filed with the Securities and Exchange Commission.
We are of the opinion that:
(1) The estimated 159,475 shares of $10.00 par value common stock
of the Company, when issued in connection with the acquisition of
Broxton State Bank in accordance with the terms and conditions set
forth in the Agreement, will, when issued, be validly issued, fully
paid and non-assessable; and
(2) No personal liability for the liabilities of the Company
attaches to the ownership of its $10.00 par value common stock under
the laws of the State of Georgia.
<PAGE>
Board of Directors
July 16, 1996
Page 2
CONSENT
-------
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the
caption "Legal Opinion" in the Proxy Statement of Colony Bankcorp,
Inc., included in the Registration Statement.
Yours very truly,
MARTIN, SNOW, GRANT & NAPIER
/s/ John T. McGoldrick, Jr.
BY:---------------------------
JOHN T. McGOLDRICK, JR.
JTMJR:saj
<PAGE>
EXHIBIT 8
OPINION AND CONSENT OF MARTIN, SNOW, GRANT & NAPIER
AS TO THE FEDERAL INCOME TAX CONSEQUENCES OF THE
TRANSACTION TO THE SHAREHOLDERS OF
BROXTON STATE BANK
<PAGE>
July 16, 1996
Board of Directors
BROXTON STATE BANK
P. O. Box 309
Broxton, GA 31519
Gentlemen:
On June 4, 1996, Broxton State Bank ("Broxton"), and Broxton Interim,
Inc. ("Interim") entered into an Agreement and Plan of Merger (the
"Agreement"). Broxton is a state-chartered bank operating under the laws of
Georgia. Interim is a Georgia corporation and wholly-owned subsidiary of
Colony Bankcorp, Inc. ("Colony") formed solely for effecting the transaction
contemplated in the Agreement.
Under the terms of the Agreement, the outstanding shares of the common
stock of Interim will be converted into 50,730 shares of $10.00 par value of
the common stock of Broxton (except as otherwise provided in the Agreement)
and the outstanding shares of Broxton common stock will be converted into the
right of its shareholders to receive a number of shares of the $10.00 par
value common stock of Colony as provided in the Agreement (and, in limited
instances, cash, as provided in the Agreement). As a result, Interim will be
merged with and into Broxton and Colony will own all (100%) of the issued and
outstanding common stock of Broxton, as the surviving corporation to the
merger.
The federal income tax consequences of the transaction, as described
below, are contingent upon and made with the understanding that the
transaction will be consummated as contemplated in the Agreement.
Accordingly, Colony will acquire and hold at least 80% of the outstanding
common stock of Broxton after the transaction. Moreover, Broxton will
receive at least 80% of the total consideration exchanged for its stock in
Colony common stock. Upon consummation of the transaction, Broxton will hold
at least 90% of the fair market value of the net assets and at least 70% of
the fair market value of the gross assets held by Broxton and Interim
immediately prior to the transaction.
All amounts paid by Broxton for any expenses of the transaction,
including payments made to dissenting shareholders, will be considered assets
held by Broxton immediately prior to the transaction. Further, after the
consummation of the
<PAGE>
Board of Directors
July 16, 1996
Page 2
transaction, Broxton will continue its historic business, (i.e., banking).
None of Broxton's present shareholders will own any equity interest in
Broxton, either directly or through attribution, after the transaction.
Subject to the conditions described above, our opinion as to the federal
income tax consequences of the Agreement is as follows:
(a) The merger of Interim with and into Broxton will be a
reorganization as defined by Section 368(a)(1)(A) and Section 368(a)(2)(E) of
the Internal Revenue Code of 1986, as amended, (the "Code").
(b) No gain or loss will be recognized by Broxton, as the surviving
corporation, upon the receipt of the assets of Interim in exchange for all of
the issued and outstanding common stock of Broxton.
(c) No gain or loss will be recognized by Colony upon the receipt of
the common stock of Broxton in exchange for common stock of Colony.
(d) No gain or loss will be recognized to Interim on the transfer of
its assets to Broxton in exchange of Broxton Common stock.
(e) No gain or loss will be recognized by the shareholders of the
Broxton common stock upon the exchange of such stock for Colony common stock
as a result of the merger.
(f) The tax basis of the common stock of Colony received by the
Shareholders of Broxton pursuant to the merger will be the same as the
adjusted tax basis of shares of common stock of Broxton exchanged therefore.
(g) The basis in the hands of Broxton of the assets of Interim will be
the same as the basis of such assets of Interim immediately prior to the
proposed merger.
(h) The holding period of the shares of common stock of Colony received
by the shareholders of the common stock of Broxton will include the holding
period of the shares of the common stock of Broxton exchanged therefore,
provided the common stock of the shareholder of Broxton is held as a capital
asset on the date the consummation of the merger.
<PAGE>
Board of Directors
July 16, 1996
Page 3
(i) The holding period of the assets of Interim in the hands of Broxton
will include the period during which such assets were held by Interim.
(j) Cash received by the holders of Broxton stock exercising their
rights of dissent or cash received in lieu of fractional shares (in
accordance with the Agreement) will be treated as amounts distributed in
redemption of their shares or a distribution not essentially equivalent to a
dividend and will be taxable under the provisions of Section 302 of the Code.
As a result of the applicable rules attributing stock ownership among related
individuals and entities in which they have an interest (e.g., partnerships,
trusts, estates, corporations, etc.), it is possible Section 302 of the Code
may not apply. In such case, the distribution will be treated either as a
dividend or return of capital under Section 301 of the Code. Even if the
distribution is treated as subject to Section 302 of the Code, any gain
exceeding the basis of the redeemed stock may be taxable as either ordinary
income or as capital gain, depending upon the circumstances of the individual
shareholder.
Again, our opinion is subject to the conditions described above. It is
our recommendation that each of the shareholders of Bank consult their own
tax advisors in order to make a personal evaluation of the federal income tax
consequences as well as state or local tax consequences of the transaction.
CONSENT
-------
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Opinion" in the Proxy Statement of Colony Bankcorp, Inc., included in
the Registration Statement.
Yours very truly,
MARTIN, SNOW, GRANT & NAPIER
BY: /s/ C. Brown Edwards, Jr.
-----------------------------
C. BROWN EDWARDS, JR.
<PAGE>
EXHIBIT 15.(a)
THE ACKNOWLEDGEMENT OF NICHOLS, CAULEY & ASSOCIATES, P.C.
OF THE AWARENESS OF THE USE IN THE REGISTRATION STATEMENT
OF A REPORT ON UNAUDITED INTERIM FINANCIAL INFORMATION
IS CONTAINED IN THE CONSENT OF THAT FIRM FILED AS EXHIBIT 23(b)
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF COLONY BANKCORP, INC.
<PAGE>
The following is a list of the subsidiaries of Colony Bancorp, Inc., all of
which are incorporated under the laws of the State of Georgia:
The Bank of Fitzgerald, Fitzgerald, Georgia
Community Bank of Wilcox, Pitts, Georgia
Ashburn Bank, Ashburn, Georgia
The Bank of Dodge County, Eastman, Georgia
The Bank of Worth, Sylvester, Georgia
<PAGE>
EXHIBIT 23. (a)
CONSENT OF McNAIR, McLEMORE, MIDDLEBROOKS & CO.
TO USE OF FINANCIAL STATEMENTS
<PAGE>
CONSENT OF McNAIR, McLEMORE, MIDDLEBROOKS & CO. LLP
McNair, McLemore, Middlebrooks & Co., LLP hereby consents to the inclusion
in the registration statement to be filed by Colony Bankcorp, Inc. in connection
with the issuance of its shares of common stock in the acquisition of Broxton
State Bank of the audited consolidated financial statements of Colony Bankcorp,
Inc. and Subsidiaries as of December 31, 1995 and 1994 and for the years then
ended prepared by McNair, McLemore, Middlebrooks & Co., LLP and to the reference
in the registration statement and prospectus which is a part thereof to McNair,
McLemore, Middlebrooks & Co., LLP as having prepared such financial statements.
/s/ McNair, McLemore, Middlebrooks & Co., LLP
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
Macon, Georgia
July 31, 1996
<PAGE>
EXHIBIT 23. (b)
CONSENT OF NICHOLS, CAULEY & ASSOCIATES, P.C.
TO USE OF FINANCIAL STATEMENTS
<PAGE>
[LETTERHEAD OF NICHOLS, CAULEY, & ASSOCIATES, P.C. APPEARS HERE]
July 26, 1996
Colony Bankcorp, Inc.
Post Office Box 989
Fitzgerald, Georgia 31750
RE: Acquisition of Broxton State Bank
Nichols, Cauley & Associates, P.C. hereby consents to the inclusion in the
registration statement to be filed by Colony Bankcorp, Inc. in connection with
the issuance of its shares of common stock in the acquisition of Broxton State
Bank of the audited financial statements of Broxton State Bank for the years
ended December 31, 1995 and 1994, prepared by Nichols, Cauley & Associates, P.C.
and to the reverence in the registration statement and prospectus which is a
part thereof to Nichols, Cauley & Associates, P.C. as having prepared such
financial statements.
Nichols, Cauley & Associates, P.C. further acknowledges awareness of the use in
the registration statement of a report by it on unaudited financial information
of Broxton State Bank as of June 30, 1995 and 1996.
/s/Nichols, Cauley & Associates, P.C.
NICHOLS, CAULEY & ASSOCIATES, P.C.
<PAGE>
EXHIBIT 24
THE CONSENTS OF MARTIN, SNOW, GRANT & NAPIER
ARE CONTAINED IN THE OPINIONS OF SUCH FIRM
FILED OR TO BE FILED AS EXHIBITS "5" AND "8"
