<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1999 COMMISSION FILE NUMBER 0-12436
COLONY BANKCORP, INC.
--------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-1492391
------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
115 SOUTH GRANT STREET, FITZGERALD, GEORGIA 31750
-------------------------------------------------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES
912/426-6000
------------
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED REPORTS REQUIRED TO
BE FILED BY SECTIONS 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT.
CLASS OUTSTANDING AT MARCH 31, 1999
----- -----------------------------
COMMON STOCK, $1 PAR VALUE 4,435,026
<PAGE>
PART 1--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED FOR COLONY BANKCORP, INC. AND
SUBSIDIARIES: THE BANK OF FITZGERALD, ASHBURN BANK, COMMUNITY BANK OF WILCOX,
THE BANK OF DODGE COUNTY, BANK OF WORTH, COLONY BANK SOUTHEAST AND COLONY
MANAGEMENT SERVICES, INC.
A. CONSOLIDATED BALANCE SHEETS--MARCH 31, 1999 AND DECEMBER 31, 1998.
B. CONSOLIDATED STATEMENTS OF INCOME--FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 1998.
C. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME--FOR THE THREE MONTHS
ENDED MARCH 31, 1999 AND 1998.
D. CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION--FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998.
THE CONSOLIDATED FINANCIAL STATEMENTS FURNISHED HAVE NOT BEEN EXAMINED BY
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, BUT REFLECT, IN THE OPINION OF
MANAGEMENT, ALL ADJUSTMENTS NECESSARY FOR A FAIR PRESENTATION OF THE RESULTS OF
OPERATIONS FOR THE PERIODS PRESENTED.
THE RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999 ARE
NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.
2
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
Cash and Balances Due from Depository
Institutions (Note 2) $ 20,011 $ 12,265
Federal Funds Sold 8,630 27,795
Investment Securities
Available for Sale, at Fair Value 75,508 70,240
Held to Maturity, at Cost (Fair Value of $1,133,
and $1,537, respectively) (Note 3) 1,160 1,558
Loans (Notes 4 and 5) 267,168 252,869
Allowance for Loan Losses (4,911) (4,726)
Unearned Interest and Fees (2) (5)
-------- --------
Total Loans 262,255 248,138
Premises and Equipment (Note 6) 11,908 11,686
Other Real Estate 1,514 907
Other Assets 7,418 8,759
-------- --------
Total Assets $388,404 $381,348
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-Bearing $ 30,126 $ 29,216
Interest-Bearing (Note 8) 308,011 301,530
-------- --------
Total Deposits 338,137 330,746
Borrowed Money:
Federal Funds Purchased 0 0
Other Borrowed Money (Note 9) 13,525 14,521
-------- --------
Total Borrowed Money 13,525 14,521
Other Liabilities 2,989 2,985
Commitments and Contingencies (Note 11)
Stockholders' Equity:
Common Stock, Par Value $1 & $10, respectively
Authorized 5,000,000 shares, Issued 4,435,026 and
2,217,573 shares as of March 31, 1999 and
December 31, 1998, respectively* 4,435 22,175
Paid-In Capital 19,320 1,580
Retained Earnings 10,328 9,425
Accumulated Other Comprehensive Income, Net of Tax (330) (84)
-------- --------
Total Stockholders' Equity 33,753 33,096
-------- --------
Total Liabilities and Stockholders' Equity $388,404 $381,348
======== ========
</TABLE>
* Par Value was reduced from $10 to $1 per share by Board of Director action on
February 16, 1999.
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
3/31/99 3/31/98
---------- ----------
<S> <C> <C>
Interest Income:
Loans, including fees $ 6,405 $ 6,283
Federal Funds Sold 218 295
Deposits with Other Banks 122 28
Investment Securities:
U.S. Treasury & Federal Agencies 863 723
State, County and Municipal 100 82
Other Investments 60 51
---------- ----------
Total Interest Income 7,768 7,462
---------- ----------
Interest Expense:
Deposits 3,820 3,477
Federal Funds Purchased 1 4
Other Borrowed Money 252 190
---------- ----------
Total Interest Expense 4,073 3,671
Net Interest Income 3,695 3,791
Provision for Loan Losses 249 279
---------- ----------
Net Interest Income After Provision 3,446 3,512
---------- ----------
Noninterest Income:
Service Charge on Deposits 481 477
Other Service Charges, Commissions & Fees 144 117
Security Gains, net 0 2
Other Income 112 51
---------- ----------
Total Noninterest Income 737 647
---------- ----------
Noninterest Expense:
Salaries and Employee Benefits 1,425 1,262
Occupancy and Equipment 468 400
Other Operating Expenses 806 781
---------- ----------
Total Noninterest Expense 2,699 2,443
---------- ----------
Income Before Income Taxes 1,484 1,716
Income Taxes 448 549
---------- ----------
Net Income $ 1,036 $ 1,167
========== ==========
Net Income Per Share of Common Stock
Basic $ 0.23 $ 0.26
========== ==========
Diluted $ 0.23 $ 0.26
========== ==========
Weighted Average Shares Outstanding* 4,435,026 4,400,194
========== ==========
</TABLE>
* All per share data has been adjusted to reflect a 2-for-1 stock split effected
as a 100% stock dividend on March 31, 1999.
The accompanying notes are an integral part of these statements.
4
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
3/31/99 3/31/98
-------- --------
<S> <C> <C>
Net Income $ 1,036 $ 1,167
Other Comprehensive Income, Net of Tax
Gains (Losses) on Securities, Arising During Year (246) (17)
Reclassification Adjustment 0 (1)
-------- --------
Unrealized Gains (Losses) on Securities (246) (18)
-------- --------
Comprehensive Income $ 790 $ 1,149
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income (loss) $ 1,036 $ 1,167
Adjustments to reconcile net income to net cash provided
by operating activities:
(Gain) loss on sale of investment securities 0 (2)
Depreciation 275 227
Provision for loan losses 249 279
Amortization of excess costs 12 12
Other prepaids, deferrals and accruals, net 499 2,519
--------- ---------
Total Adjustments $ 1,035 $ 3,035
--------- ---------
Net cash provided by operating activities $ 2,071 $ 4,202
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of securities available for sale ($27,052) ($21,014)
Proceeds from sales of securities available for sale 1,873 100
Proceeds from maturities, calls, and paydowns of
investment securities:
Available for Sale 19,799 18,987
Held to Maturity 404 186
Decrease (Increase) in interest-bearing deposits in banks (9,144) (1,052)
(Increase) in loans (14,302) (3,084)
Purchase of premises and equipment (474) (766)
--------- ---------
Net cash (used in) investing activities ($28,896) ($6,643)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits $ 7,391 $ 2,301
Proceeds from issuance of common stock 0 885
Federal funds purchased 0 0
Dividends paid (133) (109)
Net (decrease) increase in other borrowed money (996) (2,359)
--------- ---------
Net cash provided by financing activities $ 6,262 $ 718
--------- ---------
Net increase (decrease) in cash and cash equivalents (20,563) (1,723)
Cash and cash equivalents at beginning of period 39,003 36,290
--------- ---------
Cash and cash equivalents at end of period $ 18,440 $ 34,567
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(1) Summary of Significant Accounting Policies
- --- ------------------------------------------
Basis of presentation
Colony Bankcorp, Inc. is a multi-bank holding company located in Fitzgerald,
Georgia. The consolidated financial statements include the accounts of Colony
Bankcorp, Inc. and its wholly-owned subsidiaries, The Bank of Fitzgerald,
Fitzgerald, Georgia; Ashburn Bank, Ashburn, Georgia; Bank of Worth, Sylvester,
Georgia; The Bank of Dodge County, Eastman, Georgia; Community Bank of Wilcox,
Pitts, Georgia; Colony Bank Southeast (formerly Broxton State Bank), Broxton,
Georgia; and Colony Management Services, Inc., Fitzgerald, Georgia (the Banks).
All significant intercompany accounts have been eliminated in consolidation.
The accounting and reporting policies of Colony Bankcorp, Inc. conform to
generally accepted accounting principles and practices utilized in the
commercial banking industry.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the balance sheet date and revenues and expenses for the period. Actual results
could differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near-term relate to the
determination of the allowance for loan losses, the valuation of real estate
acquired in connection with foreclosure or in satisfaction of loans and the
valuation of deferred tax assets.
In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings Per Share (SFAS 128). SFAS 128 replaced the
calculation of primary and fully diluted earnings per share (EPS) with basic and
diluted EPS. Unlike primary EPS basic EPS excludes any dilutive effects of
options, warrants and convertible securities. Diluted EPS is very similar to
fully diluted EPS. All EPS amounts presented have been restated as applicable,
to conform with the new requirements.
Investment Securities
The Company records investment securities under Statement of Financial
Accounting Standards (SFAS) No. 115 Accounting for Certain Investments in Debt
and Equity Securities. Under the provisions of SFAS No. 115, the Company must
classify its securities as trading, available for sale or held to maturity.
Trading securities are purchased and held for sale in the near term. Securities
held to maturity are those which the Company has the ability and intent to hold
until maturity. All other securities not classified as trading or held to
maturity are considered available for sale.
Securities available for sale are measured at fair value with unrealized gains
and losses reported net of deferred taxes as a separate component of
stockholders' equity. Fair value represents an approximation of realizable
value as of
March 31, 1999 and December 31, 1998. Realized and unrealized gains and losses
are determined using the specific identification method. Premiums and discounts
are recognized in interest income using the interest method over the period to
maturity.
Loans
Loans are generally reported at principal amount less unearned interest and
fees. Impaired loans are recorded under SFAS 114, Accounting by Creditors for
Impairment of a Loan and SFAS 118, Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures. Impaired loans are loans for which
principal and interest are unlikely to be collected in accordance with the
original loan terms and, generally, represent loans delinquent in excess of 120
days which have been placed on nonaccrual status and for which collateral values
are less than outstanding principal and interest. Small balance, homogeneous
loans are excluded from impaired loans. Generally, interest payments received
on impaired loans are applied to principal. Upon receipt of all loan principal,
additional interest payments are recognized as interest income on the cash
basis.
Other nonaccrual loans are loans for which payments of principal and interest
are considered doubtful of collection under original terms but collateral values
equal or exceed outstanding principal and interest.
7
<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 individual's
and entities located throughout central and south Georgia. Accordingly, the
ultimate collectability of the loans is largely dependent upon economic
conditions in the central and south Georgia area.
Allowance for Loan Losses
The allowance method is used in providing for losses on loans. Accordingly, all
loan losses decrease the allowance and all recoveries increase it. The
provision for loan losses is based on factors which, in management's judgment,
deserve current recognition in estimating possible loan losses. Such factors
considered by management include growth and composition of the loan portfolio,
economic conditions and the relationship of the allowance for loan losses to
outstanding loans.
An allowance for loan losses is maintained for all impaired loans. Provisions
are made for impaired loans upon changes in expected future cash flows or
estimated net realizable value of collateral. When determination is made that
impaired loans are wholly or partially uncollectible, the uncollectible portion
is charged-off.
Management believes the allowance for possible loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's allowance for loan
losses. Such agencies may require the Company to recognize additions to the
allowance based on their judgment about information available to them at the
time of their examination.
Premises and Equipment
Premises and equipment are recorded at acquisition cost net of accumulate
depreciation.
Depreciation is charged to operations over the estimated useful lives of the
assets. The estimated useful lives and methods of depreciation are as follows:
<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.
8
<PAGE>
(1) Summary of Significant Accounting Policies (continued)
- ----------------------------------------------------------
Other Real Estate
Other real estate generally represents real estate acquired through foreclosure
and is initially recorded at the lower of cost or estimated market value at the
date of acquisition. Losses from the acquisitions of property in full or
partial satisfaction of debt are recorded as loan losses. Subsequent declines
in value, routine holding costs and gains or losses upon disposition are
included in other losses.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 130, Reporting Comprehensive Income, with an
effective date for fiscal years beginning after December 15, 1997, and earlier
application encouraged. Upon adoption, comparative statements for prior years
must be reclassified. SFAS 130 has been applied to the financial statements of
all years presented herein.
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Certain changes in assets and
liabilities, such as unrealized gains and losses on securities available for
sale, represent equity changes from economic events of the period other than
transactions with owners and are reported as a separate component of the equity
section of the consolidated balance sheets. Such items are considered
components of other comprehensive income. The purpose of SFAS 130 is to present
in the financial statements net income and all items of other comprehensive
income as total comprehensive income. The adoption of SFAS 130 had no effect on
Colony Bankcorp, Inc. and Subsidiaries' consolidated net income or stockholders'
equity.
(2) Cash and Balances Due from Depository Institutions
- --- --------------------------------------------------
Components of cash and balances due from depository institutions at March 31,
1999 and December 31, 1998 are as follows:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Cash on Hand and Cash Items $ 4,054 $ 2,933
Noninterest-Bearing Deposits with Other Banks 5,756 8,275
Interest-Bearing Deposits with Other Banks 10,201 1,057
------- -------
$20,011 $12,265
======= =======
</TABLE>
(3) Investment Securities
- --- ---------------------
Investment securities as of March 31, 1999 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 $ 0 $ 0 $ 0 $ 0
U.S. Government Agencies:
Mortgage-Backed 6,659 11 (44) 6,626
Other 57,030 20 (231) 56,819
State, County & Municipal 8,910 72 (23) 8,959
The Banker's Bank Stock 50 0 0 50
Federal Home Loan Bank Stock 2,125 0 0 2,125
Marketable Equity Securities 1,130 0 (201) 929
------- ---- ------ -------
$75,904 $103 ($499) $75,508
======= ==== ====== =======
Securities Held to Maturity:
U.S. Government Agencies $ 0 $ 0 $ 0 $ 0
State, County and Municipal 1,160 11 (38) 1,133
------- ---- ------ -------
$ 1,160 $ 11 ($38) $ 1,133
======= ==== ====== =======
</TABLE>
9
<PAGE>
(3) Investment Securities (continued)
- -------------------------------------
The amortized cost and fair value of investment securities as of March 31, 1999
by contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because issures 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 Cost Fair Value Amortized Cost Fair Value
<S> <C> <C> <C> <C>
Due in One Year or Less $ 2,012 $ 2,027 $ 310 $ 311
Due After One Year Through Five Years 43,923 43,851 500 505
Due After Five Years Through Ten Years 19,640 19,544 0 0
Due After Ten Years 365 356 350 317
------- ------- ------ ------
65,940 65,778 1,160 1,133
Federal Home Loan Bank Stock 2,125 2,125 0 0
The Banker's Bank Stock 50 50 0 0
Marketable Equity Securities 1,130 929 0 0
Mortgage-Backed Securities 6,659 6,626 0 0
------- ------- ------ ------
$75,904 $75,508 $1,160 $1,133
======= ======= ====== ======
</TABLE>
Investment securities as of December 31, 1998 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 $ 0 $ 0 $ 0 $ 0
U.S. Government Agencies:
Mortgage-Backed Securities 8,434 40 (26) 8,448
Other 51,186 97 (59) 51,224
State, County & Municipal 7,380 101 (6) 7,475
The Banker's Bank Stock 50 0 0 50
Federal Home Loan Bank Stock 2,094 0 0 2,094
Marketable Equity Securities 1,130 0 (181) 949
------- ---- ------ -------
$70,274 $238 ($272) $70,240
======= ==== ====== =======
Securities Held to Maturity:
U.S. Government Agencies $ 300 $ 0 $ 0 $ 300
State, County and Municipal 1,258 17 (38) 1,237
------- ---- ------ -------
$ 1,558 $ 17 ($38) $ 1,537
======= ==== ====== =======
</TABLE>
Investment securities having a carry value approximating $24,174 and $26,373 as
of March 31, 1999 and December 31, 1998, respectively, were pledged to secure
public deposits and for other purposes.
10
<PAGE>
(4) Loans
- --- -----
The composition of loans as of March 31, 1999 and December 31, 1998 was as
follows:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Commercial, Financial and Agricultural $ 47,968 $ 44,878
Real Estate--Construction 2,510 998
Real Estate--Farmland 16,471 18,980
Real Estate--Other 145,896 133,858
Installment Loans to Individuals 45,513 40,928
All Other Loans 8,810 13,227
-------- --------
$267,168 $252,869
======== ========
</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 $6,148 and $5,822 as of March 31, 1999 and December 31, 1998,
respectively. On March 31, 1999, the Company had 90 day past due loans with
principal balances of $341 and restructured loans with principal balances of
$328.
Colony Bankcorp, Inc. recognizes impaired loans as nonaccrual loans delinquent
in excess of 120 days for which collateral values are insufficient to recover
outstanding principal and interest under original loan terms. Impaired loan
data as of March 31, 1999 and December 31, 1998 was as follows:
Total Investment in Impaired Loans $1,353
Less Allowance for Impaired Loan Losses (375)
-------
Net Investment, March 31, 1999 and December 31, 1998 $ 978
=======
(5) Allowance for Loan Losses
- --- -------------------------
Transactions in the allowance for loan losses are summarized below for three
months ended March 31, 1999 and March 31, 1998 as follows:
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Balance, Beginning $4,726 $4,575
Provision Charged to Operating Expenses 249 279
Loans Charged Off (153) (196)
Loan Recoveries 89 85
------ ------
Balance, Ending $4,911 $4,743
====== ======
</TABLE>
(6) Premises and Equipment
- --- ----------------------
Premises and equipment are comprised of the following as of March 31, 1999 and
December 31, 1998:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Land $ 1,437 $ 1,437
Building 8,834 8,720
Furniture, Fixtures and Equipment 7,603 7,220
Leasehold Improvements 206 206
------- -------
18,080 17,583
Accumulated Depreciation (6,172) (5,897)
------- -------
$11,908 $11,686
======= =======
</TABLE>
11
<PAGE>
(6) Premises and Equipment (continued)
- --- -----------------------------------
Certain Company facilities and equipment are leased under various operating
leases. Future minimum rental payments to be paid are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31 Amount
----------- ------
<S> <C>
1999 84
2000 73
2001 71
2002 70
2003 49
----
$347
====
</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 March 31, 1999 and December 31,
1998 are as follows:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Interest-Bearing Demand $ 61,690 $ 61,840
Savings 13,717 13,795
Time, $100,000 and Over 78,157 70,996
Other Time 154,447 154,899
-------- --------
$308,011 $301,530
======== ========
</TABLE>
The aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of $100,000, was approximately $66,878 and $61,088 as of
March 31, 1999 and December 31, 1998, respectively.
As of March 31, 1999 and December 31, 1998, the scheduled maturities of time
deposits are as follows:
<TABLE>
<CAPTION>
Maturity March 31, 1999 December 31, 1998
-------- -------------- -----------------
<S> <C> <C>
One Year and Under $191,115 $183,027
One to Three Years 26,898 33,437
Three Years and Over 14,591 9,431
-------- --------
$232,604 $225,895
======== ========
</TABLE>
12
<PAGE>
(9) Other Borrowed Money
- --- --------------------
Other borrowed money at March 31, 1999 and December 31, 1998 is summarized as
follows:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Federal Home Loan Bank Advances $11,700 $12,700
Debentures Payable 267 267
The Bank of Fitzgerald 51 0
First Port City Note Payable 771 771
The Bankers Bank Note Payable 736 783
------- -------
$13,525 $14,521
======= =======
</TABLE>
Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from
1999 to 2008 and interest rates ranging from 5.00 percent to 6.98 percent.
Under the Blanket Agreement for Advances and Security Agreement with the FHLB,
residential mortgage loans are pledged as collateral for the FHLB advances
outstanding.
Debentures payable were issued November 28, 1984 for $4,360. The debentures are
due in annual payments of $267 plus variable interest with the unpaid balance
due November 1, 1999. Collateral for the outstanding debt consists of 100
percent of the common stock of Ashburn Bank. Effective interest rate as March
31, 1999 was 8.0 percent.
The Bank of Fitzgerald note is a credit line issued on December 24, 1998 in the
amount of $150 to Colony Management Services, Inc. The note is secured by
assignment of contracts of Colony Managements Services with interest tied to
Wall Street Prime Indicator.
First Port City note payable was renewed on January 30, 1997 with additional
funds added for an amount totaling $963. Annual principal payments of $96 are
due with interest paid quarterly at The Wall Street Prime minus one-half
percent. The debt is secured by commercial real estate in downtown Fitzgerald,
which includes the parent company's facilities. Any unpaid balance is due
January 29, 2000.
The Bankers Bank note payable originated on September 5, 1997 for $1,000 at a
rate of The Wall Street Prime minus one half percent. Payments are due monthly
with the entire unpaid balance due September 5, 2002. The debt is secured by
all furniture, fixtures, machinery, equipment and software of Colony Management
Services, Inc. Colony Bankcorp, Inc. guarantees the debt.
The aggregate stated maturities of other borrowed money at March 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $ 812
2000 1,117
2001 443
2002 2,153
2003 and Thereafter 9,000
-------
$13,525
=======
</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 $264,222 for 1998.
13
<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. addresses
approximating $1,303 as of March 31, 1999 and $1,346 as of December 31, 1998.
Unfulfilled loan commitments as of March 31, 1999 and December 31, 1998
approximated $40,720 and $35,980 respectively. No losses are anticipated as a
result of commitments and contingencies.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitment amounts expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The credit risk involved in issuing these
financial instruments is essentially the same as that involved in extending
loans to customers. The amount of collateral obtained, if deemed necessary by
the Banks upon extension of credit, is based on management's credit evaluation
of the borrower. Collateral held varies, but may include accounts receivable,
inventory, property, plant and equipment and income-producing commercial
properties.
The Banks do not anticipate any material losses as a result of the commitments
and contingent liabilities.
The nature of the business of the Banks is such that it ordinarily results in a
certain amount of litigation. In the opinion of management and counsel for the
company and the Banks, there is no litigation in which the outcome will have a
material effect on the consolidated financial statement.
(12) Regulatory Capital Matters
- ---- --------------------------
The amount of dividends payable to the parent company from the subsidiary banks
is limited by various banking regulatory agencies. The amount of cash dividends
available from subsidiaries for payment in 1999 without prior approval from the
banking regulatory agencies approximates $2,127. Upon approval by regulatory
authorities, the banks may pay cash dividends to the parent company in excess of
regulatory limitations.
The Company is subject to various regulatory capital requirements administered
by federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and, possibly, additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company must meet
specific capital guidelines that involve quantitative measures of the Company's
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. The Company's capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios of total and Tier 1
capital to risk-weighted assets, and of Tier 1 capital to average assets. The
amounts and ratios as defined in regulations are presented hereafter.
Management believes, as of March 31, 1999, the Company meets all capital
adequacy requirements to which it is subject and is classified as well
capitalized under the regulatory framework for prompt corrective action. In the
opinion of management, there are no conditions or events since prior
notification of capital adequacy from the regulators that have changed the
institution's category.
14
<PAGE>
(12) Regulatory Capital Matters (continued)
- ---- --------------------------------------
<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 March 31, 1999
Total Capital
to Risk-Weighted Assets $37,026 12.97% $22,836 8.00% $28,545 10.00%
Tier 1 Capital
to Risk-Weighted Assets 33,441 11.72% 11,418 4.00% 17,127 6.00%
Tier 1 Capital
to Average Assets 33,441 8.70% 15,383 4.00% 14,273 5.00%
As of December 31, 1998
Total Capital
to Risk-Weighted Assets $35,891 13.21% $21,735 8.00% $27,169 10.00%
Tier 1 Capital
to Risk-Weighted Assets 32,478 11.95% 10,871 4.00% 16,307 6.00%
Tier 1 Capital
to Average Assets 32,478 8.51% 15,266 4.00% 19,082 5.00%
</TABLE>
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only)
- ---- ------------------------------------------------------------
The parent company's balance sheets as of March 31, 1999 and December 31, 1998
and the related statements of income are as follows:
COLONY BANKCORP, INC. (PARENT ONLY)
BALANCE SHEETS
FOR PERIOD ENDED MARCH 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Cash $ 215 $ 111
Investments in Subsidiaries at Equity 33,149 32,718
Other 1,536 1,508
------- -------
Totals Assets $34,900 $34,337
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Dividends Payable $ 133 $ 133
Notes and Debentures Payable 1,037 1,037
Other (23) 70
------- -------
Stockholders' Equity 1,147 1,240
Common Stock, Par Value $10; 5,000,000 Shares
Authorized, 2,217,513 and 2,173,263 Shares Issued
and Outstanding as of March 31, 1999 and
December 31, 1998, respectively $ 4,435 $22,175
Paid-In Capital 19,320 1,580
Retained Earnings 10,328 9,425
Accumulated Other Comprehensive Income, Net of Tax (330) (84)
------- -------
Total Stockholders' Equity 33,753 33,096
------- -------
Total Liabilities and Stockholders' Equity $34,900 $34,337
======= =======
</TABLE>
15
<PAGE>
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only) (continued)
- ---- ------------------------------------------------------------------------
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
--------------- --------------
<S> <C> <C>
Income $ 463 $ 375
Dividends from Subsidiaries 0 44
Management Fees from Subsidiaries 26 23
------ ------
Other $ 489 $ 442
Expenses $ 20 $ 37
Interest 84 73
Salaries and Benefits 88 96
------ ------
Other $ 192 $ 206
------ ------
Income Before Taxes and Equity in Undistributed Earnings of Subsidiaries 297 236
Income Tax (Benefits) (62) (38)
------ ------
Income Before Equity in Undistributed Earnings of Subsidiaries 359 274
Equity in Undistributed Earnings of Subsidiaries 677 893
------ ------
Net Income 1,036 1,167
------ ------
Other Comprehensive Income, Net of Tax
Gains (losses) on Securities Arising During Year (246) (17)
Reclassification Adjustment 0 (1)
------ ------
Unrealized Gains (Losses) in Securities (246) (18)
------ ------
Comprehensive Income $ 790 $1,149
====== ======
</TABLE>
16
<PAGE>
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only)(continued)
- ---- -----------------------------------------------------------------------
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $1,036 $1,167
Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities
Depreciation and Amortization 22 17
Equity in Undistributed Earnings of Subsidiary (677) (893)
Other (129) (50)
------ ------
252 241
Cash Flows from Investing Activities
Capital Infusion in Subsidiary 0 0
Purchase of Premises and Equipment (15) (4)
------ ------
(15) (4)
Cash Flows from Financing Activities
Dividends Paid (133) (109)
Proceeds from Issuance of Common Stock 0 885
Principal Payments on Notes and Debentures 0 (918)
Proceeds from Notes and Debentures 0 0
------ ------
(133) (142)
Increase (Decrease) in Cash and Cash Equivalents 104 95
Cash and Cash Equivalents, Beginning 111 9
------ ------
Cash and Cash Equivalents, Ending $ 215 $ 104
====== ======
</TABLE>
(14) Common Stock Split
- ---- ------------------
On February 16, 1999, the board of directors approved a 100 percent stock split
to be effected on March 31, 1999 in the form of a dividend to stockholders of
record on March 31, 1999. Weighted average shares and per share data for all
periods presented in the accompanying consolidated financial statements and
related notes have been retroactively restated to reflect the additional shares
outstanding resulting from the stock split.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
Liquidity represents the ability to provide adequate sources of funds for
funding loan commitments and investment activities, as well as the ability to
provide sufficient funds to cover deposit withdrawals, payment of debt and
financing of operations. These funds are obtained by converting assets to cash
(representing primarily proceeds from collections on loans and maturities of
investment securities) or by attracting and obtaining new deposits. For the
three months ended March 31, 1999, the Company was successful in meeting its
liquidity needs by increasing deposits 2.23% to $338,137,000 from deposits of
$330,746,000 on December 31, 1998 and by reducing Federal Funds 68.95% to
$8,630,000 from $27,795,000 on December 31, 1998. Should the need arise, the
Company also maintains relationships with several correspondent banks that can
provide funds on short notice.
The Company's liquidity position remained acceptable for the three months ended
March 31, 1999. Average liquid assets (cash and amounts due from banks,
interest-bearing deposits in other banks, funds sold and investment securities)
represented 33.27% of average deposits for three months ended March 31, 1999 as
compared to 30.57% of average deposits for three months ended March 31, 1998 and
30.24% of average deposits for calendar year 1998. Average loans represented
76.99% of average deposits for three months ended March 31, 1999 as compared to
79.43% for three months ended March 31, 1998 and 80.60% for calendar year 1998.
Average interest-bearing deposits were 85.41% of average earning assets for
three months ended March 31, 1999 as compared to 85.13% for three months ended
March 31, 1998 and 85.08% for calendar year 1998.
The Company satisfies most of its capital requirements through retained
earnings. During the first three months of 1999, retained earnings provided
$903,000 of increase in equity. Additionally, equity capital decreased by
$246,000 during the first three months of 1999 as a result of changes in
unrealized losses on securities available-for-sale, net of taxes. Thus total
equity increased by a net amount of $657,000 for the three month period ended
March 31, 1999. This compares to growth in equity of $1,045,000 from retained
earnings, $885,000 increase in proceeds from the sale of common stock and
$18,000 decrease resulting from changes in unrealized losses on securities, or
total equity increase of $1,912,000 for the three months ended March 31, 1998.
Total equity increased by a net amount of $4,276,000 for calendar year 1998.
At March 31, 1999, total capital of Colony amounted to approximately
$33,753,000. At March 31, 1999, there was an outstanding commitment for capital
expenditures of approximately $1,000,000 for construction and furnishings for a
new branch office to be located in Cordele, Georgia.
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 convertible,
subordinated and other qualifying term debt and the allowance for loan losses up
to 1.25 percent of risk-weighted assets. The Company has no Tier 2 capital
other than the allowance for loan losses.
Using the capital requirements presently in effect, the Tier 1 ratio at March
31, 1999 was 11.72% and total Tier 1 and 2 risk-based capital was 12.97%. Both
of these measures compare favorably with the regulatory minimums of 4% for Tier
1 and 8% for total risk-based capital. The Company's leverage ratio as of March
31, 1999 was 8.70% which exceeds the required leverage ratio standard of 4%.
For the first quarter of 1999, the Company paid quarterly dividends of $0.03 per
share. The dividend payout ratio, defined as dividends per share divided by net
income per share, was 13.04% for three months ended March 31, 1999 as compared
to $0.0275 quarterly dividends for the three months ended March 31, 1998 and a
dividend payout ratio of 10.38%.
At March 31, 1999, management was not aware of any recommendations by regulatory
authorities which, if they were to be implemented, would have a material effect
on the Company's liquidity, capital resources of operations. However, it is
possible that examinations by regulatory authorities in the future could
precipitate additional loan charge-offs which could materially impact the
Company's liquidity, capital resources and operations.
18
<PAGE>
RESULTS OF OPERATION
The Company's results of operations are determined by its ability to effectively
manage interest income and expenses, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Since interest
rates are determined by market forces and economic conditions beyond the control
of the Company, the ability to generate net interest income is dependent upon
the Bank's ability to obtain an adequate spread between the rate earned on
earning assets and the rate paid on interest-bearing liabilities. Thus, the key
performance measure for net interest income is the interest margin or net yield,
which is taxable-equivalent net interest income divided by average earning
assets.
Net Income
- ----------
Net income for the three months ended March 31, 1999 was $1,036,000 as compared
with $1,167,000 for the three months ended March 31, 1998, or a decrease of
11.23%. This decrease is primarily attributable to the additional overhead
associated with the three new offices opened during the second half of 1998.
Though these offices have temporarily depressed earnings compared to last year,
they are also largely responsible for Colony's excellent growth as they have
provided approximately $33 million of the $44 million asset growth from a year
ago. Additionally, net income was impacted by a decrease of 65 basis points
with the net interest margin.
Net Interest Margin
- -------------------
The net interest margin decreased by 65 basis points to 4.22% in first quarter
1999 as compared to 4.87% in first quarter 1998. This decrease in our net
interest margin was partially offset by an increase in average earning assets
as the net interest income decreased by 2.53% to $3,695,000 in first quarter
1999 from $3,791,000 for the same period in 1998. Average earning assets
increased to $356,892,000 in first quarter 1999 from $316,121,000 in first
quarter 1998. Average loans increased by $21,839,000 or 9.26%, average
investment securities increased by $16,215,000 or 28.42%, average Federal funds
decreased by $5,426,000 or 25.36% and average interest-bearing deposits in other
banks increased by $8,143,000 or 460.32%, resulting in a net increase in average
earning assets of $40,771,000 or 12.90%.
The net increase in average earnings assets was funded by a net increase in
average deposits of 2.23% to $338,137,000 for first quarter 1999 from
$330,746,000 for first quarter 1998. Average interest-bearing deposits
increased by 13.23% to $304,805,000 at March 31, 1999 compared to $269,183,000
at March 31, 1998, while average noninterest-bearing deposits represented 8.95%
of average total deposits at March 31, 1999, compared to 9.49% at March 31, 1998
and 8.55% for calendar year 1998.
Interest expense increased for the three months ended March 31, 1999 by $402,000
compared to the same period in 1998. The increase is primarily attributable to
the increase in average interest-bearing deposits to $304,805,000 at March 31,
1999 compared to $269,183,000 at March 31, 1998. The combination of the
increased average earning assets, increased average interest-bearing deposits
and decreased net interest margin resulted in a decrease of net interest income
of $96,000 for the three months ended March 31, 1999 compared to the same period
in 1998.
Provision for Loan Losses
- -------------------------
The allowance for loan losses represents a reserve for potential losses in the
loan portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans with a particular
emphasis on non-accruing, past due and other loans that management believes
requires attention.
The provision for loan losses is a charge to earnings in the current period to
replenish the allowance for loan losses and maintain it at a level that
management has determined to be adequate. The provision for loan losses was
$249,000 for the three months ended March 31, 1999 as compared to $279,000 for
the three months ended March 31, 1998, representing a decrease of $30,000 or
10.75%. The decrease in the provision for loan losses during the first quarter
of 1999 was attributable to a leveling off of problem loans and an adequate
build-up in the loan loss reserve for any future losses. Net loan charge-offs
represented 25.70% of the provision for loan losses in the first quarter 1999 as
compared to 40.14% in the first quarter of 1998. Net loan charge-offs for the
three months ended March 31, 1999 were 0.02% of average loans, down from 0.05%
for the same period last year, reflecting the continuing emphasis by management
on high credit quality and credit management. At March 31, 1999 the allowance
for loan losses was 1.84% of total loans outstanding as compared to an allowance
for loan losses of 2.00% at March 31, 1998 and 1.87% at December 31, 1998. The
allowance
19
<PAGE>
for loan losses of 1.84% of total loans provided coverage of 75.69% of
nonperforming loans and 61.37% of nonperforming assets, compared to 63.80% and
57.32% in the first quarter of 1998 respectively. The determination of the
reserve rests upon management's judgment about factors affecting loan quality
and assumptions about the economy. Management considers the March 31, 1999
allowance for loan losses adequate to cover potential losses in the loan
portfolio.
Noninterest Income
- ------------------
Noninterest income consists primarily of service charges on deposit accounts.
Service charges on deposit accounts amounted to $481,000 in first quarter 1999
compared to $477,000 in first quarter 1998, or an increase of 0.84%. All other
non-interest income increased by $86,000 to $256,000 for first quarter 1999 from
$170,000 for first quarter 1998. The majority of this increase was recovery of
$43,000 on a previously written down investment security at one of the
subsidiary banks. Thus, total non-interest income for first quarter 1999 was
$737,000 compared to $647,000 for first quarter 1998, or an increase of 13.91%.
Noninterest Expense
- -------------------
Noninterest expense increased by 10.48% to $2,699,000 in three months ended
March 31, 1999 from $2,443,000 for the same period in 1998. Salaries and
benefits had a significant increase due to the three new offices opened during
the second half of 1998 and resulted in an increase to $1,425,000 for first
quarter 1999 compared to $1,262,000 for first quarter 1998, or an increase of
12.92%. The new offices also resulted in an increase in occupancy expense as
first quarter 1999 occupancy expense was $468,000 compared to $400,000 for the
same period last year, or an increase of 17.00%. All other noninterest expense
increased by $25,000 to $806,000 for first quarter 1999 from $781,000 for first
quarter 1998. There were no significant variances in other noninterest expense
for the two periods.
Income Tax Expense
- ------------------
Income before taxes decreased by $232,000 to $1,484,000 in first quarter 1999
from $1,716,000 in first quarter 1998. The decrease for the three months ended
March 31, 1999 is attributable to the decrease in net interest income and the
additional expenses associated with the three new offices opened during the
second half of 1998. Income taxes as a percentage of income before taxes
decreased by 5.63% to 30.19% in first quarter 1999 as compared to 31.99% in
first quarter 1998. Income tax expense decreased 18.40% to $448,000 for first
quarter 1999 as compared to $549,000 in first quarter 1998.
Future Outlook
- --------------
Colony is an emerging company operating in an industry filled with non-regulated
competitors and a rapid pace of consolidation. 1999 brings with it new
opportunities for growth in our existing markets, as well as opportunities to
expand into new markets through branch acquisitions and branching. Colony
completed three new branches in 1998 which are located in Douglas, Tifton and
Leesburg. Colony has targeted new brances in three growth markets in South
Georgia for 1999. These new branches will be located in Cordele and Moultrie.
Colony Management Services, Inc. continues to stay abreast of technology changes
and its back-office consolidation effort will allow for continued reduction in
overhead, while allowing the Company to better serve our customers through
improved customer data resources and state-of-the-art technological services.
Year 2000 Compliance Issue
- --------------------------
Colony has initiated a company-wide program to identify and address issues
associated with the ability of its in-house systems and outside service
providers to properly recognize date-sensitive information as a result of the
century change on January 1, 2000 (Year 2000).
Colony has established a five-phase methodology for use in assessing the Year
2000 project's state of readiness. These phases are awareness, assessment,
renovation, validation and implementation. An appointed Year 2000 steering
committee monitors progress within these phases. These five phases are briefly
defined as follows: (1) awareness--defining the problem and establishing the
resources needed to achieve compliance; (2) assessment--identify all areas of
20
<PAGE>
operations affected by the Year 2000 date change issue: (3) renovation--updating
or replacement of affected systems; (4) validation--testing systems and
evaluating the results of testing; (5) implementation--certification and
acceptance of Year 2000 compliance.
The majority of the Year 2000 issues facing the Company are information
technology ("IT") in nature. All IT systems, which includes mainframe and
midrange computer systems are 95% complete in all phases. Testing of these
systems has produced satisfactory results. Non-IT systems, which include
embedded technology such as micro controllers, are also being considered. In
addition, all third party service providers have provided the Company with
documentation regarding the tested or anticipated compliance of their services.
Although the Company has obtained and continues to obtain these written
verifications, there can be no assurance that the potential impact of a major
interruption of failure in the service provided by these companies would not
have a material adverse effect on the Company's financial condition or results
of operations.
Colony has established contingency plans in the event of a failure caused by the
Year 2000 date change. This plan is designed to address the most likely risks
facing the Company during the rollover period. Some of these risks include
application system failures, power outages, security and environmental systems
failures.
Colony anticipates completion of all phases by early fall of 1999 with minimal
additional costs to be provided by Company earnings. The majority of remaining
costs will be spent on customer assurance related expenditures.
Liquidity
- ---------
The Company's goals with respect to liquidity are to ensure that sufficient
funds are available to meet current operating requirements and to provide
reserves against unforeseen liquidity requirements. Management continuously
reviews the Company's liquidity position, which is maintained on a basis
consistent with established internal guidelines and the tests and reviews of the
various regulatory authorities. The Company's primary liquidity sources at
March 31, 1999 included cash, due from banks, federal funds and short-term
investment securities. The Company also has the ability, on a short-term basis,
to borrow funds from the Federal Reserve System and to invest in Federal Funds
Sold from other financial institutions. The mix of asset maturities contributes
to the company's overall liquidity position.
Certain Transactions
- --------------------
In the normal course of business, officers and directors of the Banks, and
certain business organizations and individuals associated with them, maintain a
variety of banking relationships with the bank. Transactions with senior
officers and directors are made on terms comparable to those available to other
bank customers.
Forward-Looking Statements
- --------------------------
This document contains statements that constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The words
"believe", "estimate", "expect", "intend", "anticipate" and similar expressions
and variations thereof identify certain of such forward-looking statements,
which speaks only as of the dates which they were made. The Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise. Users are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties and that actual results may
differ materially from those indicated in the forward-looking statements as a
result of various factors. Users are therefore cautioned not to place undue
reliance on these forward-looking statements.
BUSINESS
General
The Company was organized in 1983 as a bank holding company through the merger
of The Bank of Fitzgerald with a subsidiary of the Company. Since that time,
The Bank of Fitzgerald, which was formed by principals of Colony Bankcorp, Inc.
in 1976, has operated as wholly-owned subsidiary of the Company. In April 1984,
Colony Bankcorp, Inc.
21
<PAGE>
acquired Community Bank of Wilcox, and in November 1984, Ashburn Bank became a
wholly-owned subsidiary of Colony Bankcorp, Inc. Colony Bankcorp, Inc. continued
its growth with the acquisition of The Bank of Dodge County in September 1985.
In August 1991, Colony Bankcorp, Inc. acquired The Bank of Worth. In November
1996, Colony Bankcorp, Inc. acquired Colony Bank Southeast and in November, 1996
formed a non-bank subsidiary Colony Management Services, Inc.
Through its six subsidiary banks, Colony Bankcorp, Inc. operates a full-service
banking business and offers a broad range of retail and commercial banking
services including checking, savings, NOW accounts, money market and time
deposits of various types; loans for business, agriculture, real estate,
personal uses, home improvement and automobiles; credit card; letters of credit;
trust services investment, and discount brokerage services; IRA's, safe deposit
box rentals, bank money orders, and electronic funds transfer services,
including wire transfers and automated teller machines. Each of the Banks is a
state chartered institution whose customer deposits are insured up to applicable
limits by the Federal Deposit Insurance Corporation.
On April 2, 1998, the Company was listed on Nasdaq National Market. The
Company's common stock trades on the Nasdaq Stock Market under the symbol
"CBAN". The Company presently has 905 shareholders of record as of March 31,
1999. "The Nasdaq Stock Market" or "Nasdaq" is a highly-regulated electronic
securities market comprised of competing Market Makers whose trading is
supported by a communications network linking them to quotation dissemination,
trade reporting and order execution systems. This market also provides
specialized automation services for screen-based negotiations of transactions,
on-line comparison of transactions, and a range of informational services
tailored to the needs of the securities industry, investors and issuers. The
Nasdaq Stock Market is operated by The Nasdaq Stock Market, Inc., a wholly-onwed
subsidiary of the National Association of Securities Dealers, Inc.
PART II--OTHER INFORMATION
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
A. Exhibits--None
B. There have been no reports filed on Form 8-K for the quarter ended March 31,
1999.
22
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLONY BANKCORP, INC.
May 8, 1999 /s/ James D. Minix
- ---------------------------- ---------------------------------------------
Date James D. Minix, President and
Chief Executive Officer
/s/ Terry L. Hester
---------------------------------------------
Terry L. Hester, Executive Vice President and
Chief Financial Officer
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-01-1999
<CASH> 9,810
<INT-BEARING-DEPOSITS> 10,201
<FED-FUNDS-SOLD> 8,630
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 75,508
<INVESTMENTS-CARRYING> 1,160
<INVESTMENTS-MARKET> 1,333
<LOANS> 267,166
<ALLOWANCE> 4,911
<TOTAL-ASSETS> 388,404
<DEPOSITS> 338,137
<SHORT-TERM> 1,288
<LIABILITIES-OTHER> 2,989
<LONG-TERM> 12,237
0
0
<COMMON> 4,435
<OTHER-SE> 29,318
<TOTAL-LIABILITIES-AND-EQUITY> 388,404
<INTEREST-LOAN> 6,405
<INTEREST-INVEST> 1,023
<INTEREST-OTHER> 340
<INTEREST-TOTAL> 7,768
<INTEREST-DEPOSIT> 3,820
<INTEREST-EXPENSE> 4,073
<INTEREST-INCOME-NET> 3,695
<LOAN-LOSSES> 249
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,699
<INCOME-PRETAX> 1,484
<INCOME-PRE-EXTRAORDINARY> 1,484
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,036
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
<YIELD-ACTUAL> 4.22
<LOANS-NON> 6,148
<LOANS-PAST> 341
<LOANS-TROUBLED> 328
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,726
<CHARGE-OFFS> 153
<RECOVERIES> 89
<ALLOWANCE-CLOSE> 4,911
<ALLOWANCE-DOMESTIC> 4,911
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
