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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended December 31, 1999
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Transition Period from to
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Commission File Number 0-12436
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COLONY BANKCORP, INC.
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(Exact Name of Registrant Specified in its Charter)
GEORGIA 58-1492391
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State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
115 SOUTH GRANT STREET, FITZGERALD, GEORGIA 31750
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number Including Area Code (912) 426-6000
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Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
NONE
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Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
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(Title of Class)
Indicate by check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act 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. X Yes No
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Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 3, 2000.
Common Stock, par value $1.00 per share - $51,002,799
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of March 3, 2000.
Common Stock, par value $1.00 per share - 4,435,026 shares
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DOCUMENTS INCORPORATED BY REFERENCE
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<CAPTION>
Location in Form 10-K Incorporated Document
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Part I
Item 3 - Legal Proceedings Page 11 of the Company's Definitive
Proxy Statement dated April 5, 2000,
in connection with its Annual Meeting
to be held on April 25, 2000.
Part III
Item 10 - Directors, Executive Officers, Pages 3 and 4 of the Company's
Promoters and Control Persons; Compliance Definitive Proxy Statement dated April
with Section 16(a) of the Exchange Act 5, 2000, in connection with its Annual
Meeting to be held on April 25, 2000.
Item 11 - Executive Compensation Pages 6, 8, 9, 10, 11, 12 and 13 of
the Company's Definitive Proxy
Statement dated April 5, 2000, in
connection with its Annual Meeting to
be held on April 25, 2000.
Item 12 - Security Ownership of Certain Pages 7 and 8 of the Company's
Beneficial Owners and Management Definitive Proxy Statement dated April
5, 2000, in connection with its Annual
Meeting to be held on April 25, 2000.
Item 13 - Certain Relationships and Page 10 of the Company's Definitive
Related Transactions Proxy Statement dated April 5, 2000 in
connection with its Annual Meeting to
be held on April 25, 2000.
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Part I
Item 1
BUSINESS OF THE COMPANY AND SUBSIDIARY BANKS
COLONY BANKCORP, INC.
Colony Bankcorp, Inc. (the "Company" or "Colony") is a Georgia business
corporation which was incorporated on November 8, 1982. The Company was
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, p. 168, et. seq.). On July 22, 1983,
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the Company, after obtaining the requisite regulatory approvals, acquired 100
percent of the issued and outstanding common stock of The Bank of Fitzgerald,
Fitzgerald, Georgia, through the merger of the Bank with a subsidiary of the
Company which was created for the purpose of organizing the Bank into a one-bank
holding company. Since that time, The Bank of Fitzgerald has operated as a
wholly-owned subsidiary of the Company.
On April 30, 1984, Colony, with the prior approval of the Federal Reserve Bank
of Atlanta and the Georgia Department of Banking and Finance, acquired 100
percent of the issued and outstanding common stock of Community Bank of Wilcox
(formerly Pitts Banking Company), Pitts, Wilcox County, Georgia. As part of that
transaction, Colony issued an additional 17,872 shares of its $10.00 par value
common stock, all of which was exchanged with the holders of shares of common
stock of Pitts Banking Company for 100 percent of the 250 issued and outstanding
shares of common stock of Pitts Banking Company. Since the date of acquisition,
the Bank has operated as a wholly-owned subsidiary of the Company.
On November 1, 1984, after obtaining the requisite regulatory approvals, Colony
acquired 100 percent of the issued and outstanding common stock of Ashburn Bank,
Ashburn, Turner County, Georgia, for a combination of cash and interest-bearing
promissory notes. Since the date of acquisition, Ashburn Bank has operated as a
wholly-owned subsidiary of the Company.
On September 30, 1985, after obtaining the requisite regulatory approvals, the
Company acquired 100 percent of the issued and outstanding common stock of The
Bank of Dodge County, Chester, Dodge County, Georgia. The stock was acquired in
exchange for the issuance of 3,500 shares of common stock of Colony. Since the
date of its acquisition, The Bank of Dodge County has operated as a wholly-owned
subsidiary of the Company.
Effective July 31, 1991, the Company acquired all of the outstanding common
stock of Bank of Worth (formerly Worth Federal Savings and Loan Association) in
exchange for cash and 7,661 of the Company's common stock for an aggregate
purchase price of approximately $718,000. Bank of Worth has operated as a
wholly-owned subsidiary of the Company.
On November 8, 1996, Colony organized Colony Management Services, Inc. to
provide support services to each subsidiary. Services provided include loan and
compliance review, internal audit and data processing.
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On November 30, 1996, the Company acquired Broxton State Bank (name subsequently
changed to Colony Bank Southeast) in a business combination accounted for as a
pooling of interests. Broxton State Bank became a wholly-owned subsidiary of the
Company through the exchange of 157,735 shares of the Company's common stock for
all of the outstanding stock of Broxton State Bank. All financial information
for 1996 presented in this document is based on the assumption that the
companies were combined for the full year, and financial information presented
for prior years has been restated to give effect to the combination.
The Company conducts all of its operations through its bank subsidiaries. A
brief description of each Bank's history and business operations is discussed
below.
THE BANK OF FITZGERALD
History and Business of the Bank
The Bank of Fitzgerald is a state banking institution chartered under the laws
of Georgia on November 10, 1975. Since opening on April 15, 1976, the Bank has
continued a general banking business and presently serves its customers from two
locations, the main office in Fitzgerald, Georgia at 302 South Main Street and a
full-service branch located on Highway 129 South.
The 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 United
States Government and municipal securities. The Bank does not offer trust
services other than acting as custodian of individual retirement accounts.
The data processing work of the Bank is processed by Colony Management Services,
Inc., a wholly-owned subsidiary of Colony Bankcorp, Inc.
The Bank of Fitzgerald acts as an agent for Visa Card and MasterCard through The
Bankers Bank which allows merchants to accept Visa Card and MasterCard and
deposit the charge tickets in their accounts with the Bank.
The Bank also offers its customers a variety of checking and savings accounts.
The installment loan department makes both direct consumer loans and also
purchases retail installment contracts from local automobile dealers and other
sellers of consumer goods.
The Bank serves the residents of Fitzgerald and surrounding areas of Ben Hill
County which has a population of approximately 16,000 people. Manufacturing
facilities located in Ben Hill County employ many people and are the most
significant part of the local economy. Ben Hill County also has a large
agricultural industry producing timber and row crops. Major row crops are
peanuts, tobacco, soybeans and corn.
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A history of the Bank's financial position for fiscal years ended 1999, 1998 and
1997 is as follows:
1999 1998 1997
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Total Assets $110,339,062 $100,903,605 $97,730,544
Total Deposits 92,363,903 87,756,795 87,438,647
Total Stockholders' Equity 9,848,839 9,593,148 9,437,047
Net Income 1,724,382 1,665,050 1,357,070
Number of Issued and Outstanding
Shares 90,000 90,000 90,000
Book Value Per Share $109.43 $106.59 $104.86
Net Income Per Share 19.16 18.50 15.08
The Bank's main offices are housed in a building located in Fitzgerald, Georgia.
The main offices, which are owned by the Bank, consist of approximately 13,000
square feet, three drive-in windows and an adjacent parking lot. Banking
operations also are conducted from the southside branch which is located at
South Dixie Highway, Fitzgerald, Georgia. This branch is owned by the Bank and
has been in continuous operation since it opened in December 1977. The branch is
a single story building with approximately 850 square feet and is operated with
three drive-in windows.
Competition
The banking business in Ben Hill County is highly competitive. The Bank competes
primarily with five other commercial banks operating in Ben Hill County.
Additionally, the Bank competes with one credit union located in the area and,
to a lesser extent, insurance companies and governmental agencies. The banking
industry is also experiencing increasing competition for deposits from less
traditional sources such as money market and mutual funds. The Bank also offers
"NOW" accounts, individual retirement accounts, simplified pension plans, KEOGH
plans and custodial accounts for minors.
Correspondents
As of December 31, 1999, the Bank had correspondent relationships with two other
banks. The Bank's principal correspondent is The Bankers Bank located in
Atlanta, Georgia. These correspondent banks provide certain services to the Bank
such as investing its excess funds, processing checks and other items, buying
and selling federal funds, handling money fund transfers and exchanges, shipping
coins and currency, providing security and safekeeping of funds and other
valuable items, handling loan participations and furnishing management
investment advice on the Bank's securities portfolio.
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ASHBURN BANK
History and Business of the Bank
Ashburn Bank was chartered as a state commercial bank in 1900 and currently
operates under the Financial Institutions Code of Georgia. The Bank's deposits
are insured up to $100,000 per account by the Federal Deposit Insurance
Corporation. The Bank conducts business at the offices located at 515 East
Washington and 416 East Washington in Ashburn, Turner County, Georgia, 1553 U.
S. Highway 19 South in Lee County, Georgia, 137 Robert B. Lee Drive in Leesburg,
Lee County, Georgia and 1031 24th Ave., E., Cordele, Georgia. The offices in
Leesburg and Cordele operate under the name Colony Bank. The Bank's business
largely consists of (1) the acceptance of demand, savings and time deposits; (2)
the making of loans to consumers, business and other institutions; (3)
investment of excess funds and sale of federal funds, U.S. Treasury obligations
and state, county and municipal bonds; (4) investment services through PRIMEVEST
Financial Services; and (5) internet online banking. The Bank does little
mortgage lending and it does not offer trust services. It acts as an agent for
Visa Card and MasterCard through The Bankers Bank.
A history of the Bank's financial position for fiscal years ended 1999, 1998 and
1997 is as follows:
1999 1998 1997
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Total Assets $143,863,554 $114,402,843 $100,172,188
Total Deposits 123,360,686 98,435,652 85,508,000
Total Stockholders' Equity 10,236,521 9,638,318 8,794,312
Net Income 1,427,273 1,403,712 1,308,236
Number of Issued and Outstanding
Shares 50,000 50,000 50,000
Book Value Per Share $204.73 $192.77 $175.89
Net Income Per Share 28.55 28.07 26.16
Banking Facilities
The Bank's main office is located at 515 East Washington Street in Ashburn and
consists of a building of approximately 13,000 square feet of office and banking
space with an adjacent parking lot. A branch facility is located across the
street from the main office and consists of a single story building with
approximately 850 square feet and is operated with three drive-in windows.
During 1996, the Bank entered into a 5-year lease agreement with Winn-Dixie
Stores, Inc. to operate a retail banking facility at Winn Dixie's Lee County
location. The office consists of 350 square feet and includes 3 teller
positions, a new accounts area and a private office. The Bank opened a second
Lee County office in October 1998. This full service facility, located within
the city limits of Leesburg, consists of a two story brick building of
approximately 5,000 square feet and includes three drive-in lanes. A fourth
branch office opened in Cordele, Crisp County, Georgia on October 4, 1999. The
new full-service branch facility consists of approximately 5,500 square feet,
with four drive-in lanes and one automated teller machine. All occupied
premises, with the exception of the Lee County Winn Dixie location, are owned by
the Bank.
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Competition
The banking business is highly competitive. The Bank competes in Turner County
primarily with Community National Bank which operates out of one facility in
Ashburn, Georgia. The Bank also competes with other financial institutions,
including credit unions and finance companies and, to a lesser extent, with
insurance companies and certain governmental agencies. The banking industry is
also experiencing increased competition for deposits from less traditional
sources such as money market and mutual funds.
Correspondents
Ashburn Bank has correspondent relationships with the following banks: The
Bankers Bank in Atlanta, Georgia; SunTrust Bank, N.A. in Atlanta, Georgia; The
Bank of Fitzgerald in Fitzgerald, Georgia; AMSouth Bank of Alabama in
Birmingham, Alabama; and the Federal Home Loan Bank in Atlanta, Georgia. The
correspondent relationships facilitate the transactions of business by means of
loans, letters of credit, acceptances, collections, exchange services and data
processing. As compensation for these services, the Bank maintains balances with
its correspondents in noninterest-bearing accounts.
COMMUNITY BANK OF WILCOX
History and Business of the Bank
The Bank was chartered on June 2, 1906 under the name "Pitts Banking Company."
The name of the Bank subsequently was changed to Community Bank of Wilcox on
June 1, 1991 and currently operates under the Financial Institutions Code of
Georgia. The Bank's deposits are insured up to $100,000 per account by the
Federal Deposit Insurance Corporation. The Bank conducts business at locations
in Pitts and Rochelle in Wilcox County, Georgia. The Bank's business consists
of: (1) the acceptance of demand, savings and time deposits; (2) the making of
loans to consumers, business and other institutions; (3) investment of excess
funds and sale of federal funds, U.S. Treasury obligations and state, county and
municipal bonds; and (4) certain other miscellaneous financial services usually
handled for customers by commercial banks. The Bank does little mortgage lending
and it does not offer trust services.
5
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A history of the Bank's financial position for fiscal years ended 1999, 1998 and
1997 is as follows:
1999 1998 1997
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Total Assets $29,583,143 $28,075,187 $27,540,804
Total Deposits 25,452,369 24,024,259 23,684,818
Total Stockholders' Equity 2,494,864 2,431,843 2,235,004
Net Income 330,504 288,897 293,907
Number of Issued and Outstanding
Shares 250 250 250
Book Value Per Share $9,979.46 $9,727.37 $8,940.02
Net Income Per Share 1,322.02 1,155.59 1,175.63
Banking Facilities
The Bank operates out of two locations at 105 South Eighth Street, Pitts,
Georgia and at Highway 280, Rochelle, Georgia, both of which are in Wilcox
County. The Pitts office consists of a building of approximately 2,200 square
feet of usable office and banking space which it owns. The facility contains one
drive-in window and three teller windows. The Rochelle office, which opened in
August 1989, consists of a building of approximately 5,000 square feet of usable
office and banking space, which is owned by the Company.
Competition
The banking business is highly competitive. The Bank competes in Wilcox County
primarily with five commercial banks and one savings and loan institution. In
addition, the Bank competes with other financial institutions, including credit
unions and finance companies and, to a lesser extent, insurance companies and
certain governmental agencies. The banking industry is also experiencing
increased competition for deposits from less traditional sources such as money
market and mutual funds.
Correspondents
The Bank has correspondent relationships with the following banks: The Bankers
Bank in Atlanta, Georgia; Federal Home Loan Bank, in Atlanta, Georgia; AMSouth
Bank of Alabama in Birmingham, Alabama; and SunTrust Bank, N.A., in Atlanta,
Georgia. The correspondent relationships facilitate the transactions of business
by means of loans, letters of credit, acceptances, collections, exchange
services and data processing. As compensation for these services, the Bank
maintains balances with its correspondents in noninterest-bearing accounts.
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THE BANK OF DODGE COUNTY
History and Business of the Bank
The Bank was chartered on June 14, 1966 under the name "Bank of Chester." The
name of the Bank subsequently was changed to The Bank of Dodge County on April
15, 1983 and currently operates under the Financial Institutions Code of
Georgia. The Bank's deposits are insured up to $100,000 per account by the
Federal Deposit Insurance Corporation. The Bank's business consists of: (1) the
acceptance of demand, savings and time deposits; (2) the making of loans to
consumers, business and other institutions; (3) investment of excess funds in
the sale of federal funds, U.S. Treasury obligations and state, county and
municipal bonds; and (4) certain other miscellaneous financial services usually
handled for customers by commercial banks. The Bank does little mortgage lending
and it does not offer trust services.
A history of the Bank's financial position for fiscal years ended 1999, 1998 and
1997 is as follows:
1999 1998 1997
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Total Assets $45,344,816 $45,353,965 $43,145,436
Total Deposits 41,211,472 41,464,683 37,576,350
Total Stockholders' Equity 3,763,451 3,555,744 3,262,416
Net Income 531,394 382,605 310,178
Number of Issued and Outstanding
Shares 1,750 1,750 1,750
Book Value Per Share $2,150.54 $2,031.85 $1,864.24
Net Income Per Share 303.65 218.63 177.24
Banking Facilities
The Bank's main office is located at 600 Oak Street in Eastman, Dodge County,
Georgia and consists of a building of approximately 11,000 square feet of office
and banking space with an adjacent parking lot and is operated with three drive-
in windows. The branch facility is located in Chester, Dodge County, Georgia and
consists of a building with approximately 2,700 square feet of office and
banking space and an adjacent parking lot. The Bank owns all of the premises
which it occupies.
Competition
The banking business is highly competitive. The Bank competes in the Dodge
County area with two other banks. In addition, the Bank competes with other
financial institutions, including credit unions and finance companies and, to a
lesser extent, insurance companies and certain governmental agencies. The
banking industry is also experiencing increased competition for deposits from
less traditional sources such as money market and mutual funds.
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Correspondents
The Bank has correspondent relationships with the following banks: The Bankers
Bank in Atlanta, Georgia; The Federal Home Loan Bank in Atlanta, Georgia; and
SunTrust Bank, N.A., in Atlanta, Georgia. The correspondent relationships
facilitate the transactions of business by means of loans, letters of credit,
acceptances, collections, exchange services and data processing. As compensation
for these services, the Bank maintains balances with its correspondents in
noninterest-bearing accounts.
BANK OF WORTH
Bank of Worth operated as a savings and loan stock association until it was
acquired by the Company on July 31, 1991 at which time the association changed
its name to Bank of Worth and became a state-chartered commercial bank. The Bank
conducts business at its offices located at 402 West Franklin Street, Sylvester,
Worth County, Georgia and 605 West Second Street, Tifton, Tift County, Georgia.
The Bank's business consists of: (1) the acceptance of demand, savings and time
deposits; (2) the making of loans to consumers, businesses and other
institutions; (3) investment of excess funds and sale of federal funds, U.S.
Treasury obligations and state, county and municipal bonds; and (4) certain
other miscellaneous financial services usually handled for customers by
commercial banks. The Bank's deposits are insured up to $100,000 per account by
the Federal Deposit Insurance Corporation. The Bank's loan portfolio is heavily
concentrated in mortgage loans due to the fact that it was previously a savings
and loan. The Bank does not offer trust services. It acts as an agent for Visa
Card and MasterCard through The Bankers Bank.
A history of the Bank's financial position for fiscal years ended 1999, 1998 and
1997 is as follows:
1999 1998 1997
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Total Assets $57,828,759 $55,396,303 $44,917,783
Total Deposits 53,154,868 51,076,265 40,970,101
Total Stockholders' Equity 4,298,618 3,969,437 3,600,017
Net Income 500,710 454,744 595,329
Number of Issued and Outstanding
Shares 95,790 95,790 95,790
Book Value Per Share $44.88 $41.44 $37.58
Net Income Per Share 5.23 4.75 6.21
Banking Facilities
The Bank's main office is housed in a building located in Sylvester, Georgia.
The building, which is owned by the Bank, consists of approximately 13,000
square feet, a drive-in window and an adjacent parking lot. On June 15, 1998,
the Bank opened a branch office at 605 West Second Street, Tifton, Georgia. The
office is a single story building of approximately 2,300 square feet with one
attached drive-in window. A second branch office scheduled to open in 1999 in
Moultrie, Colquitt County, Georgia has been delayed until 2000.
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Competition
The banking business in Worth County and Tift County is highly competitive. The
Bank competes primarily with two other commercial banks operating in Worth
County and six other commercial banks in Tift County. Additionally, the Bank
competes with credit unions of employers located in the area and, to a lesser
extent, insurance companies and governmental agencies. The banking industry is
also experiencing increasing competition for deposits from less traditional
sources such as money market and mutual funds.
Correspondents
As of December 31, 1999, the Bank had correspondent relationships with five
other banks. The Bank's principal correspondent is The Bankers Bank located in
Atlanta, Georgia. These correspondent banks provide certain services to the Bank
such as investing its excess funds, processing checks and other items, buying
and selling federal funds, handling money fund transfers and exchanges, shipping
coins and currency, providing security and safekeeping of funds and other
valuable items, handling loan participations and furnishing management
investment advice on the Bank's securities portfolio.
COLONY BANK SOUTHEAST
History and Business of the Bank
Colony Bank Southeast, formerly Broxton State Bank, was chartered under the laws
of Georgia on August 4, 1966 and opened for business on September 1, 1966,
having absorbed "Citizens Bank," a private, unincorporated bank.
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, The
Bankers Bank; safe deposit and night depository services; cashier's checks,
money orders, traveler's 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.
The Bank serves the residents of Coffee County, Georgia, which has a population
of approximately 32,000.
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A history of the Bank's financial position for fiscal years ended 1999, 1998 and
1997 is as follows:
1999 1998 1997
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Total Assets $46,012,865 $34,925,063 $26,371,357
Total Deposits 39,249,813 28,405,278 22,763,357
Total Stockholders' Equity 3,434,884 3,308,576 2,265,171
Net Income 210,807 59,204 135,301
Number of Issued and Outstanding
Shares 50,730 50,730 50,730
Book Value Per Share $67.71 $65.22 $44.65
Net Income Per Share 4.16 1.17 2.67
Banking Facilities
The Bank operates one banking office located at 401 North Alabama Street,
Broxton, Georgia which 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. Colony Bank Southeast opened a branch office in Douglas, Georgia on
July 6, 1998. The two story brick building located at 625 West Ward Street
consists of approximately 8,300 square feet and provides four drive-in lanes for
customer convenience. A second Douglas office was opened on September 8, 1999
and consists of approximately 1,200 square feet with three drive-in lanes and
one automated teller machine. All occupied premises are owned by the Bank, with
the exception of the newly opened branch located at 1351 A SE Bowens Mill Road,
Douglas, Georgia.
Competition
The banking business in Coffee County is highly competitive. Colony Bank
Southeast competes with seven other banks and one credit union in Douglas,
Georgia. The banking industry is also experiencing increased competition for
deposits from less traditional sources such as money market and mutual funds.
Correspondents
The Bank has correspondent relationships with the following banks: Bank of
America, Atlanta, Georgia; SunTrust Bank, Atlanta, Georgia; The Bankers Bank,
Atlanta, Georgia; the Federal Home Loan Bank in Atlanta, Georgia and Columbus
Bank & Trust, Columbus, Georgia. The correspondent relationships facilitate the
transactions of business by means of loans, letters-of-credit, acceptances,
collections, exchange services and data processing. As compensation for these
services, the Bank maintains balances with its correspondents in noninterest-
bearing accounts.
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EMPLOYEES
As of December 31, 1999, Colony Bankcorp, Inc. and its subsidiaries employed 163
full-time employees and 44 part-time employees. Colony considers its
relationship with its employees to be excellent.
The subsidiary banks have noncontributory profit-sharing plans covering all
employees subject to certain minimum age and service requirements. All Banks
made contributions for all eligible employees in 1999. In addition, Colony
Bankcorp, Inc. and its subsidiaries maintain a comprehensive employee benefit
program providing, among other benefits, hospitalization, major medical
insurance and life insurance. Management considers these benefits to be
competitive with those offered by other financial institutions in south Georgia.
Colony's employees are not represented by any collective bargaining group.
SUPERVISION AND REGULATION
Bank holding companies and banks are regulated under both federal and state law.
The following is a brief summary of certain statutes and rules and regulations
affecting the Company, the Banks, and to a more limited extent the Company's
subsidiaries.
This summary is qualified in its entirety by reference to the particular statute
and regulatory provision referred to and is not intended to be an exhaustive
description of the statutes or regulations applicable to the business of the
Company and its subsidiaries. The scope of regulation and permissible activities
of the Company and its subsidiaries is subject to change by future federal and
state legislation. Supervision, regulation and examination of the Company and
the Banks by the bank regulatory agencies are intended primarily for the
protection of depositors rather than shareholders of the Company.
REGULATION OF THE COMPANY
Colony is a registered holding company under the Federal Bank Holding Company
Act and the Georgia Bank Holding Company Act and is regulated under such Act by
the Federal Reserve and by the Georgia Department of Banking and Finance (the
"Georgia Department"), respectively. As a bank holding company, the Company is
required to file annual reports with the Federal Reserve and the Georgia
Department and provide such additional information as the applicable regulator
may require pursuant to the Federal and Georgia Bank Holding Company Acts. The
Federal Reserve and the Georgia Department may also conduct examinations of the
Company to determine whether the Company is in compliance with Bank Holding
Company Acts and regulations promulgated thereunder.
In addition, the Federal Bank Holding Company Act requires every bank holding
company to obtain the prior approval of the Federal Reserve before: (1)
acquiring direct or indirect ownership or control of more than 5 percent of the
voting shares of any bank; (2) acquiring all or substantially all of the assets
of a bank; and (3) before merging or consolidating with another bank holding
company.
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The Georgia Department requires similar approval prior to the acquisition of any
additional banks from every Georgia bank holding company. A Georgia bank holding
company is generally prohibited from acquiring ownership or control of 5 percent
or more of the voting shares of a bank unless the bank being acquired is either
a bank for purposes of the Federal Bank Holding Company Act, or a federal or
state savings and loan association or savings bank or federal savings bank whose
deposits are insured by the Federal Savings and Loan Insurance Corporation and
such bank has been in existence and continuously operating as a bank for a
period of five years or more prior to the date of application to the Department
for approval of such acquisition.
The Federal Reserve (pursuant to regulation and published statements) has
maintained that a bank holding company must serve as a source of financial
strength to its subsidiary banks. In adhering to the Federal Reserve policy, the
Company may be required to provide financial support to the Bank at a time when,
absent such Federal Reserve policy, the Company may not deem it advisable to
provide such assistance. Similarly, the Federal Reserve also monitors the
financial performance and prospects of nonbank subsidiaries with an inspection
process to ascertain whether such nonbanking subsidiaries enhance or detract
from the Company's ability to serve as a source of strength for the Banks.
CAPITAL REQUIREMENTS
The holding company is subject to regulatory capital requirements imposed by the
Federal Reserve applied on a consolidated basis with the bank owned by the
holding company. Bank holding companies must have capital (as defined in the
rules) equal to eight (8) percent of risk-weighted assets. The risk weights
assigned to assets are based primarily on credit risk. For example, securities
with an unconditional guarantee by the United States government are assigned the
least risk category. A risk weight of 50 percent is assigned to loans secured by
owner-occupied one-to-four family residential mortgages. The aggregate amount of
assets assigned to each risk category is multiplied by the risk weight assigned
to that category to determine the weighted values, which are added together to
determine total risk-weighted assets.
The Federal Reserve also requires the maintenance of minimum capital leverage
ratios to be used in tandem with the risk-based guidelines in assessing the
overall capital adequacy of bank holding companies. The guidelines define
capital as either Tier 1 (primarily shareholder equity) or Tier 2 (certain debt
instruments and a portion of the allowance for loan losses). Tier 1 capital for
banking organizations includes common equity, minority interest in the equity
accounts of consolidated subsidiaries, qualifying noncumulative perpetual
preferred stock and qualifying cumulative perpetual preferred stock. (Cumulative
perpetual preferred stock is limited to 25 percent of Tier 1 capital.) Tier 1
capital excludes goodwill; amounts of mortgage servicing assets, nonmortgage
servicing assets, and purchased credit card relationships that, in the
aggregate, exceed 100 percent of Tier 1 capital; nonmortgage servicing assets
and purchased credit card relationships that in the aggregate, exceed 25 percent
of Tier 1 capital; all other identifiable intangible assets; and deferred tax
assets that are dependent upon future taxable income, net of their valuation
allowance, in excess of certain limitations.
12
<PAGE>
Effective June 30, 1998, the Board has established a minimum ratio of Tier 1
capital to total assets of 3.0 percent for strong bank holding companies (rated
composite "1" under the BOPEC rating system of bank holding companies), and for
bank holding companies that have implemented the Board's risk-based capital
measure for market risk. For all other bank holding companies, the minimum ratio
of Tier 1 capital to total assets is 4.0 percent. Banking organizations with
supervisory, financial, operational, or managerial weaknesses, as well as
organizations that are anticipating or experiencing significant growth, are
expected to maintain capital ratios well above the minimum levels. Higher
capital ratios may be required for any bank holding company if warranted by its
particular circumstances or risk profile. Bank holding companies are required to
hold capital commensurate with the level and nature of the risks, including the
volume and severity of problem loans, to which they are exposed.
At December 31, 1999, Colony exceeded the minimum Tier 1, risk-based and
leverage ratios. The table which follows sets forth certain capital information
for the Company as of December 31, 1999.
CAPITAL ADEQUACY
($ in Thousands)
December 31, 1999
---------------------------------
Amount Percent
----------- -------
Leverage Ratio
Actual $36,025,666 8.39%
Minimum Required (1) 17,175,526 4.00%
Risked-Based Capital:
Tier 1 Capital
Actual 36,025,666 10.63%
Minimum Required 13,553,929 4.00%
Total Capital
Actual 40,266,776 11.88%
Minimum Required 27,107,916 8.00%
(1) Represents the minimum requirement. Institutions that are contemplating
acquisitions or anticipating or experiencing significant growth may be
required to maintain a substantially higher leverage ratio.
THE RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT
Prior to the enactment of the Interstate Banking and Branching Efficiency Act of
1994 (the "Riegle-Neal Act"), interstate expansion of bank holding companies was
prohibited, unless such acquisition was specifically authorized by a statute of
the state in which the target bank was located. Pursuant to the Riegle-Neal Act,
effective September 29, 1995, an adequately capitalized and adequately managed
holding company may acquire a bank across state lines, without regard to whether
such acquisition is permissible under state law. A bank holding company is
considered to be "adequately capitalized" if it meets all applicable federal
regulatory capital standards.
13
<PAGE>
While the Riegle-Neal Act precludes a state from entirely insulating its banks
from acquisition by an out-of-state holding company, a state may still provide
that a bank may not be acquired by an out-of-state company unless the bank has
been in existence for a specified number of years, not to exceed five years.
Additionally, the Federal Reserve is directed not to approve an application for
the acquisition of a bank across state lines if: (i) the applicant bank holding
company, including all affiliated insured depository institutions, controls or
after the acquisition would control, more than ten (10) percent of the total
amount of deposits of all insured depository institutions in the United States
(the "ten percent concentration limit") or (ii) the acquisition would result in
the holding company controlling thirty (30) percent or more of the total
deposits of insured depository institutions in any state in which the holding
company controlled a bank or branch immediately prior to the acquisition (the
"thirty percent concentration limit"). States may waive the thirty percent
concentration limit, or may make the limits more or less restrictive, so long as
they do no discriminate against out-of-state bank holding companies.
The Riegle-Neal Act also provides that, beginning on June 1, 1997, banks located
in different states may merge and operate the resulting institution as a bank
with interstate branches. However, a state may (i) prevent interstate branching
through mergers by passing a law prior to June 1, 1997 that expressly prohibits
mergers involving out-of-state banks, or (ii) permit such merger transactions
prior to June 1, 1997. Under the Riegle-Neal Act, an interstate merger
transaction may involve the acquisition of a branch of an insured bank without
the acquisition of the bank itself, but only if the law of the state in which
the branch is located permits this type of transaction.
Under the Riegle-Neal Act, a state may impose certain conditions on a branch of
an out-of-state bank resulting from an interstate merger so long as such
conditions do not have the effect of discriminating against out-of-state banks
or bank holding companies, other than on the basis of a requirement of
nationwide reciprocal treatment. The ten (10) percent concentration limit and
the thirty (30) percent concentration limit described above, as well as the
rights of the states to modify or waive the thirty (30) percent concentration
limit, apply to interstate bank mergers in the same manner as they apply to the
acquisition of out-of-state banks.
A bank resulting from an interstate merger transaction may retain and operate
any office that any bank involved in the transaction was operating immediately
before the transaction. After completion of the transaction, the resulting bank
may establish or acquire additional branches at any location where any bank
involved in the transaction could have established or acquired a branch. The
Riegle-Neal Act also provides that the appropriate federal banking agency may
approve an application by a bank to establish and operate an interstate branch
in any state that has in effect a law that expressly permits all out-of-state
banks to establish and operate such a branch.
In response to the Riegle-Neal Act, effective June 1, 1997, Georgia permitted
interstate branching, although only through merger and acquisition. In addition,
Georgia law provides that a bank may not be acquired by an out-of-state company
unless the bank has been in existence for five years. Georgia has also adopted
the thirty percent concentration limit, but permits state regulators to waive it
on a case-by-case basis.
14
<PAGE>
THE GRAMM-LEACH-BLILEY ACT OF 1999
The Gramm-Leach-Bliley Act (the "GLB Act") dramatically increases the ability of
eligible banking organizations to affiliate with insurance, securities and other
financial firms and insured depository institutions. The GLB Act permits
eligible banking organizations to engage in activities and to affiliate with
nonbank firms engaged in activities that are financial in nature or incidental
to such financial activities and also includes some additional activities that
are complementary to such financial activities.
The definition of activities that are financial in nature is handled by the GLB
Act in two ways. First, there is a laundry list of activities that are
designated as financial in nature. Second, the authorization of new activities
as financial in nature or incidental to a financial activity requires a
consultative process between the Federal Reserve Board and the Secretary of the
Treasury with each having the authority to veto proposals of the other. The
Federal Reserve Board has the discretion to determine what activities are
complementary to financial activities.
The precise scope of the authority to engage in these new financial activities,
however, depends on the type of banking organization, whether it is a holding
company, a subsidiary of a national bank, or a national bank's direct conduct.
The GLB Act repealed two sections of the Glass-Stegall Act, Sections 20 and 32,
which restricted affiliations between securities firms and banks. The GLB Act
authorizes two types of banking organizations to engage in expanded securities
activities. The GLB Act authorizes a new type of bank holding company called a
financial holding company to have a subsidiary company that engages in
securities underwriting and dealing without limitation as to the types of
securities involved. The GLB Act also permits a national bank to control a
financial subsidiary that can engage in many of the expanded securities
activities permitted for financial holding companies. However, additional
restrictions apply to national bank financial subsidiaries.
Since the Bank Holding Company Act of 1956, and it subsequent amendments,
federal law has limited the types of activities that are permitted for a bank
holding company, and it has also limited the types of companies that a bank
holding company can control. The GLB Act retains the bank holding company
regulatory framework, but adds a new provision that authorizes enlarged
authority for the new financial holding company form of organization to engage
in any activity of a financial nature or incidental thereto. A new Section 4(k)
of the Bank Holding Company Act provides that a financial holding company may
engage in any activity, and may acquire and retain shares of any company engaged
in any activity, that the Federal Reserve Board, in coordination with the
Secretary of the Treasury, determines by regulation or order to be financial in
nature or incidental to such financial activities, or is complementary to
financial activities.
The GLB Act also amends the Bank Holding Company Act to prescribe eligibility
criteria for financial holding companies, defines the scope of activities
permitted for bank holding companies that do not become financial holding
companies, and establishes consequences for financial holding companies that
cease to maintain the status needed to qualify as a financial holding company.
15
<PAGE>
There are three special criteria to qualify for the enlarged activities and
affiliation. First, all the depository institutions in the bank holding company
organization must be well-capitalized. Second, all of the depository
institutions of the bank holding company must be well managed. Third, the bank
holding company must have filed a declaration of intent with the Federal Reserve
Board stating that it intends to exercise the expanded authority under the GLB
Act and certify to the Federal Reserve Board that the bank holding company's
depository institutions meet the well-capitalized and well managed criteria. The
GLB Act also requires the bank to achieve a rating of satisfactory or better in
meeting community credit needs at the most recent examination of such
institution under the Community Reinvestment Act.
Once a bank holding company has filed a declaration of its intent to be a
financial holding company, as long as there is no action by the Federal Reserve
Board giving notice that it is not eligible, the company may proceed to engage
in the activities and enter into the affiliations under the large authority
conferred by the GLB Act's amendments to the Bank Holding Company Act. The
holding company does not need prior approval from the Federal Reserve Board to
engage in activities that the GLB Act identifies as financial in nature or that
the Federal Reserve Board has determined to be financial in nature or incidental
thereto by order or regulation.
The GLB Act retains the basic structure of the Bank Holding Company Act. Thus, a
bank holding company that is not eligible for the expanded powers of a financial
holding company is now subject to the amended Section 4(c)(8) of the Bank
Holding Company Act which freezes the activities that are authorized and defined
as closely related to banking activities. Under this Section a bank holding
company is not eligible for the expanded activities permitted under new Section
4(k) and is limited to those specific activities previously approved by the
Federal Reserve Board.
The GLB Act also addresses the consequences when a financial holding company
that has exercised the expanded authority fails to maintain its eligibility to
be a financial holding company. The Federal Reserve Board may impose such
limitations on the conduct or activities of a noncompliant financial holding
company or any affiliate of that company as the Board determines to be
appropriate under the circumstances and consistent with the purpose of the Act.
The GLB Act is essentially a dramatic liberalization of the restrictions placed
on banks, especially bank holding companies, regarding the areas of financial
businesses in which they are allowed to compete.
REGULATION OF THE BANKS
As state-chartered banks, the Banks are examined and regulated by the Federal
Deposit Insurance Corporation ("FDIC") and the Georgia Department.
The major functions of the FDIC with respect to insured banks include paying
depositors to the extent provided by law in the event an insured bank is closed
without adequately providing for payment of the claim of depositors, acting as a
receiver of state banks placed in receivership when so appointed by state
authorities, and preventing the continuance or development of unsound and unsafe
banking practices. In addition, the FDIC also approves conversions, mergers,
consolidations, and assumption of deposit liability transactions between insured
banks and noninsured banks or institutions to prevent capital or surplus
diminution in such transactions where the resulting, continued or assumed bank
is an insured nonmember state bank.
16
<PAGE>
Subsidiary banks of a bank holding company are subject to certain restrictions
imposed by the Federal Bank Holding Company Act on any extension of credit to
the bank holding company or any of its subsidiaries, on investment in the stock
or other securities thereof and on the taking of such stock or securities as
collateral for loans to any borrower. In addition, a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in-arrangements in
connection with any extension of credit or provision of any property or
services.
The Georgia Department regulates all areas of the banks' banking operations,
including mergers, establishment of branches, loans, interest rates and
reserves. The Bank must have the approval of the Commissioner to pay cash
dividends, unless at the time of such payment:
(i) the total classified assets at the most recent examination of
such banks do not exceed 80 percent of Tier 1 capital plus
Allowance for Loan Losses as reflected at such examination;
(ii) the aggregate amount of dividends declared or anticipated to be
declared in the calendar year does not exceed 50 percent of the
net profits, after taxes but before dividends, for the previous
calendar year; and
(iii) the ratio of Tier 1 Capital to Adjusted Total Assets shall not
be less than six (6) percent.
The Banks are also subject to State of Georgia banking and usury laws
restricting the amount of interest which it may charge in making loans or other
extensions of credit.
EXPANSION THROUGH BRANCHING, MERGER OR CONSOLIDATION
With respect to expansion, the Banks were previously prohibited from
establishing branch offices or facilities outside of the county in which their
main office was located, except:
(i) in adjacent counties in certain situations, or
(ii) by means of merger or consolidation with a bank which has been
in existence for at least five years.
In addition, in the case of a merger or consolidation, the acquiring bank must
have been in existence for at least 24 months prior to the merger. However,
effective July 1, 1996, Georgia permits the subsidiary bank(s) of any bank
holding company then engaged in the banking business in the State of Georgia to
establish, de novo, upon receipt of required regulatory approval, an aggregate
of up to three additional branch banks in any county within the State of
Georgia. Effective July 1, 1998, this same Georgia law permits, with required
regulatory approval, the establishment of de novo branches in an unlimited
number of counties within the State of Georgia by the subsidiary bank(s) of bank
holding companies then engaged in the banking business in the State of Georgia.
This law may result in increased competition in the Banks' market area.
17
<PAGE>
CAPITAL REQUIREMENTS
The FDIC adopted risk-based capital guidelines that went into effect on December
31, 1990 for all FDIC insured state chartered banks that are not members of the
Federal Reserve System. Beginning December 31, 1992, all banks were required to
maintain a minimum ratio of total capital to risk weighted assets of eight (8)
percent of which at least four (4) percent must consist of Tier 1 capital. Tier
1 capital of state chartered banks (as defined by the regulation) generally
consists of: (i) common stockholders' equity; (ii) qualifying noncumulative
perpetual preferred stock and related surplus; and (iii) minority interests in
the equity accounts of consolidated subsidiaries. In addition, the FDIC adopted
a minimum ratio of Tier 1 capital to total assets of banks, referred to as the
leverage capital ratio of three (3) percent if the FDIC determines that the
institution is not anticipating or experiencing significant growth and has well-
diversified risk, including no undue interest rate exposure, excellent asset
quality, high liquidity, good earnings and, in general, is considered a strong
banking organization, rated Composite "1" under the Uniform Financial
Institutions Rating System (the CAMEL rating system) established by the Federal
Financial Institutions Examination Council. All other financial institutions are
required to maintain a leverage ratio of four (4) percent.
Effective October 1, 1998, the FDIC amended its risk-based and leverage capital
rules as follows: (1) all servicing assets and purchase credit card
relationships ("PCCRs") that are included in capital are each subject to a
ninety (90) percent of fair value limitation (also known as a "ten (10) percent
haircut"); (2) the aggregate amount of all servicing assets and PCCRs included
in capital cannot excess 100 percent of Tier I capital; (3) the aggregate amount
of nonmortgage servicing assets ("NMSAs") and PCCRS included in capital cannot
exceed 25 percent of Tier 1 capital; and (4) all other intangible assets (other
than qualifying PCCRS) must be deducted from Tier 1 capital.
Amounts of servicing assets and PCCRs in excess of the amounts allowable must be
deducted in determining Tier 1 capital. Interest-only Strips receivable, whether
or not in security form, are not subject to any regulatory capital limitation
under the amended rule.
FDIC INSURANCE ASSESSMENTS
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
enacted in December, 1991, provided for a number of reforms relating to the
safety and soundness of the deposit insurance system, supervision of domestic
and foreign depository institutions and improvement of accounting standards. One
aspect of the Act is the requirement that banks will have to meet certain safety
and soundness standards. In order to comply with the Act, the Federal Reserve
and the FDIC implemented regulations defining operational and managerial
standards relating to internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth, director and officer
compensation, fees and benefits, asset quality, earnings and stock valuation.
The regulations provide for a risk-based premium system which requires higher
assessment rates for banks which the FDIC determines pose greater risks to the
Bank Insurance Fund ("BIF"). Under the regulations, banks pay an assessment
depending upon risk classification.
18
<PAGE>
To arrive at risk-based assessments, the FDIC places each bank in one of nine
risk categories using a two-step process based on capital ratios and on other
relevant information. Each bank is assigned to one of three groups: (i) well
capitalized, (ii) adequately capitalized, or (iii) under capitalized, based on
its capital ratios. The FDIC also assigned each bank to one of three subgroups
based upon an evaluation of the risk posed by the bank. The three subgroups
include (i) banks that are financially sound with only a few minor weaknesses,
(ii) banks with weaknesses which, if not corrected, could result in significant
deterioration of the bank and increased risk to the BIF, and (iii) those banks
that pose a substantial probability of loss to the BIF unless corrective action
is taken. FDICIA imposes progressively more restrictive constraints on
operations management and capital distributions depending on the category in
which an institution is classified. As of December 31, 1999, the Banks met the
definition of "well capitalized" institutions and will be assessed accordingly
for 1999.
Under FDICIA, insurance of deposits may be terminated by the FDIC upon a finding
that the institution has engaged in unsafe and unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC.
COMMUNITY REINVESTMENT ACT
The Company and the Banks are subject to the provisions of the Community
Reinvestment Act of 1977, as amended (the "CRA") and the federal banking
agencies regulations issued thereunder. Under the CRA, all banks and thrifts
have a continuing and affirmative obligation, consistent with its safe and sound
operation to help meet the credit needs for their entire communities, including
low-and moderate-income neighborhoods. The CRA does not establish specific
lending requirements or programs for financial institutions, nor does it limit
an institution s discretion to develop the types of products and services that
it believes are best suited to its particular community, consistent with the
CRA.
The CRA requires a depository institution's primary federal regulator, in
connection with its examination of the institution, to assess the institution's
record of assessing and meeting the credit needs of the community served by that
institution, including low-and moderate-income neighborhoods. The regulatory
agency's assessment of the institution's record is made available to the public.
In the case of a bank holding company applying for approval to acquire a bank or
other bank holding company, the Federal Reserve will assess the records of each
subsidiary depository institution of the applicant bank holding company, and
such records may be the basis for denying the application.
The evaluation system used to judge an institution s CRA performance consists of
three tests: (1) a lending test; (2) an investment test; and (3) a service test.
Each of these tests will be applied by the institution s primary federal
regulator taking into account such factors as: (i) demographic data about the
community; (ii) the institution's capacity and constraints; (iii) the
institution's product offerings and business strategy; and (iv) data on the
prior performance of the institution and similarly-situated lenders.
In addition, a financial institution will have the option of having its CRA
performance evaluated based on a strategic plan of up to five years in length
that it had developed in cooperation with local community groups. In order to be
rated under a strategic plan, the institution will be required to obtain the
prior approval of its federal regulator.
19
<PAGE>
The interagency CRA regulations provide that an institution evaluated under a
given test will receive one of five ratings for the test: (1) outstanding; (2)
high satisfactory; (3) low satisfactory; (4) needs to improve; and (5)
substantial noncompliance. An institution will receive a certain number of
points for its rating on each test, and the points are combined to produce an
overall composite rating. Evidence of discriminatory or other illegal credit
practices would adversely affect an institution s overall rating. Each of
Colony's subsidiary banks received a "high satisfactory" CRA rating as a result
of their last CRA examination.
PROPOSED LEGISLATION
Legislation is regularly considered and adopted by both the United States
Congress and the Georgia General Assembly. Such legislation could result in
regulatory changes and changes in competitive relationships for banks and bank
holding companies. The effect of such legislation on the business of the Company
and the Banks cannot be predicted.
MONETARY POLICY
The results of operations of the Company and the Banks are affected by credit
policies of monetary authorities, particularly the Federal Reserve. The
instruments of monetary policy employed by the Federal Reserve include open
market operations in U.S. Government securities, changes in the discount rate on
member bank borrowings, changes in reserve requirements against member bank
deposits and limitations on interest rates which member banks may pay on time
and savings deposits. In view of the changing conditions in the foreign and
national economy, as well as the effect of policies and actions taken by
monetary and fiscal authorities, including the Federal Reserve, no prediction
can be made as to possible future changes in interest rates, deposit levels,
loan demand or the business and earnings of the Company.
YEAR 2000 PROJECT
The Banks rely heavily upon computers for the daily conduct of their business
and committed all resources necessary to achieve a satisfactory and timely
solution to computer based problems related to the Year 2000 and beyond.
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
programs that have time-sensitive software may have recognized a date using "00"
as the year 1900 rather than the year 2000.
In accordance with sound management policy and directives from regulatory
agencies, the Banks began the Year 2000 review of hardware and software in 1997.
The review included not only computer and information systems but heating and
cooling systems, alarms, vaults, elevators and other office equipment, and was
completed in 1998. Items that were found not Year 2000 compliant were slated for
upgrade or replacement.
The Company and its subsidiary banks experienced no Year 2000 related problems.
20
<PAGE>
EXECUTIVE OFFICER
The following table sets forth certain information with respect to the executive
officer of the Registrant.
<TABLE>
<CAPTION>
<S> <C> <C>
Name (Age) Position with the Registrant Officer Since
- -------------------- -------------------------------------------------- -------------
James D. Minix (58) President and Chief Executive Officer and Director 1994
</TABLE>
The officer serves at the discretion of the board of directors.
Prior to 1994, Mr. Minix served as president of The Bank of Fitzgerald from
January 1993 through June 1994 and prior to that time, Mr. Minix served as
president of Ashburn Bank from February 1990 through December 1992.
Item 2
DESCRIPTION OF PROPERTY
The principal properties of the Registrant consist of the properties of the
Banks. For a description of the properties of the Banks, see "Item 1 - Business
of the Company and Subsidiary Banks" included elsewhere in this Annual Report.
Item 3
LEGAL PROCEEDINGS
Incorporated herein by reference to page 11 of the Company's Definitive Proxy
Statement for Annual Meeting of Stockholders to be Held April 25, 2000, filed
with the Securities and Exchange Commission on April 5, 2000 (File No. 0-18486).
Item 4
SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
No matters were submitted to a vote of the Registrant's stockholders during the
fourth quarter of 1999.
Part II
Item 5
MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Effective April 2, 1998, Colony Bankcorp, Inc. common stock is quoted on the
NASDAQ National Market under the symbol "CBAN." Prior to this date, there was no
public market for the common stock of the registrant.
The following table sets forth the high, low and close sale prices per share of
the common stock as reported on the NASDAQ National Market, and the dividends
declared per share for the periods indicated.
21
<PAGE>
Dividend
Year Ended December 31, 1999 High Low Close Per Share
- ---------------------------- ------ ------ ------ ---------
Fourth Quarter $14.75 $11.50 $13.50 $0.040
Third Quarter 13.38 11.94 11.94 0.035
Second Quarter 14.63 12.00 12.00 0.035
First Quarter 15.00 11.25 13.50 0.030
On February 18, 1997, the Company's Board of Directors approved a 50 percent
stock split effected in the form of a stock dividend payable to shareholders of
record on July 1, 1997. On February 16, 1999, a 100 percent stock split effected
in the form of a stock dividend payable to shareholders of record on March 31,
1999 was approved by the Board. All share and per share information in this
report has been restated to give retroactive effect to these splits. The
Registrant paid cash dividends on its common stock of $620,905 or $0.140 per
share and $510,030 or $0.115 per share in 1999 and 1998, respectively. The
Company's Board of Directors approved a reduction in the par value of common
stock on February 16, 1999. Par value was reduced from $10 to $1 per share.
As of December 31, 1999, the Company had approximately 1,100 shareholders of
record.
22
<PAGE>
Item 6
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------------------------
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Selected Balance Sheet Data:
Total Assets..................... $435,272 $381,348 $342,947 $319,540 $299,246
Total Loans...................... 315,435 252,864 234,288 206,863 200,837
Total Deposits................... 374,450 330,746 298,162 285,676 271,646
Investment Securities............ 62,819 71,798 56,915 63,378 51,560
Stockholders' Equity............. 35,011 33,096 28,821 25,591 23,068
Selected Income Statement Data:
Interest Income.................. 33,260 30,653 28,777 26,525 25,739
Interest Expense................. 17,144 15,521 13,992 13,158 12,140
-------- -------- -------- -------- --------
Net Interest Income............ 16,146 15,132 14,785 13,367 13,599
Provision for Loan Losses........ 1,166 1,157 1,489 2,195 3,246
Other Income..................... 3,119 2,659 2,528 2,649 2,334
Other Expense.................... 12,017 11,090 10,601 9,569 9,332
-------- -------- -------- -------- --------
Income Before Tax................ 6,082 5,544 5,223 4,252 3,355
Income Tax Expense............... 1,902 1,692 1,605 1,319 983
-------- -------- -------- -------- --------
Net Income..................... $ 4,180 $ 3,852 $ 3,618 $ 2,933 $ 2,372
======== ========= ========= ========= =========
Per Share Data: (a)
Net Income (Diluted)............. $ 0.94 $ 0.87 $ 0.83 $ 0.68 $ 0.58
Book Value....................... 7.89 7.48 6.63 5.89 5.31
Tangible Book Value.............. 7.85 7.43 6.58 5.83 5.51
Dividends........................ .140 .115 .100 .090 .115
Profitability Ratios:
Net Income to Average Assets..... 1.03% 1.09% 1.11% 0.97% 0.84%
Net Income to Average
Stockholders' Equity.......... 12.22% 12.22% 13.21% 12.04% 11.48%
Net Interest Margin.............. 4.33% 4.66% 4.91% 4.74% 5.20%
Loan Quality Ratios:
Net Charge-Offs to Total Loans... 0.38% 0.40% 0.58% 0.88% 1.18%
Reserve for Loan Losses to
Total Loans and OREO........... 1.48% 1.86% 1.94% 2.12% 2.00%
Nonperforming Assets to Total
Loans and OREO................. 1.82% 2.50% 2.51% 3.85% 2.98%
Reserve for Loan Losses to
Nonperforming Loans............ 81.27% 74.55% 77.23% 54.88% 67.08%
Reserve for Loan Losses to
Total Nonperforming Assets..... 70.47% 65.21% 63.23% 40.75% 50.39%
Liquidity Ratios:
Loans to Total Deposits.......... 84.24% 76.45% 78.58% 72.41% 73.93%
Loans to Average Earning Assets.. 83.37% 78.17% 77.16% 73.34% 76.83%
Noninterest-Bearing Deposits to
Total Deposits................. 9.01% 8.83% 9.16% 10.05% 10.26%
Capital Adequacy Ratios:
Common Stockholders' Equity to
Total Assets................... 8.04% 8.68% 8.40% 8.01% 7.71%
Total Stockholders' Equity
to Total Assets................ 8.04% 8.68% 8.40% 8.01% 7.71%
Dividend Payout Ratio............ 14.86% 13.24% 12.02% 13.60% 19.90%
</TABLE>
(a) Per share data for all periods has been retroactively restated for a 50
percent stock split on July 1, 1997 and a 100 percent stock split on March
1, 1999. All stock splits were effected in the form of dividends.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 7
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 1999,
the Company was successful in obtaining deposits as evidenced by the fact that
average deposits increased by 14.58 percent to $350,794,000 in 1999 from average
deposits of $306,168,000 in 1998. Should the need arise, the Company also
maintains relationships with the Federal Home Loan Bank and several
correspondent banks that can provide funds on short notice.
Liquidity is monitored on a regular basis by management. The Company's liquidity
position remained satisfactory in 1999. Average liquid assets (cash and amounts
due from banks, interest-bearing deposits in other banks, funds due and
investment securities) represented 28.80 percent of average deposits in 1999 as
compared to 30.24 percent in 1998. Average loans represented 82.35 percent of
average deposits in 1999 as compared to 80.60 percent in 1998. Average interest-
bearing deposits were 84.58 percent of average earning assets in 1999 as
compared to 85.08 percent in 1998.
The Company satisfies most of its capital requirements through retained
earnings. During 1999, retained earnings provided $3,559,000 of increase in
equity. Additionally, equity had a decrease of $1,645,000 resulting from the
change during the year in unrealized gains (losses) on securities available for
sale, net of taxes. Thus, total equity increased by a net amount of 1,914,000.
In 1998, growth in equity was provided by retained earnings of $3,342,000, stock
offering proceeds of $885,000 and an increase of $49,000 resulting from the
change during the year in unrealized gains (losses) on securities available for
sale, net of taxes. Thus, total equity increased by a net amount of $4,276,000
in 1998.
As of December 31, 1999, capital of Colony totaled approximately $35,011,000 and
the only outstanding commitment for capital expenditures was by a subsidiary
bank of approximately $1,200,000 for construction of a branch facility in
Moultrie, Georgia.
The Federal Reserve Board and the FDIC have issued risk-based capital guidelines
for U. S. banking organizations. The objective of these efforts was to provide a
more uniform framework that is sensitive to differences in risk assets among
banking organizations. The guidelines define a two-tier capital framework. Tier
1 capital consists of common stock and qualifying preferred stockholders' equity
less goodwill. Tier 2 capital consists of certain convertible, subordinated and
other qualifying term debt and the allowance for loan losses up to 1.25 percent
of risk-weighted assets. The Company has no Tier 2 capital other than the
allowance for loan losses.
Using the capital requirements in effect at the end of 1999, the Tier 1 ratio as
of December 31, 1999 was 10.63 percent and total Tier 1 and 2 risk-based capital
was 11.88 percent. Both of these measures compare favorably with the regulatory
minimum of 4 percent for Tier 1 and 8 percent for total risk-based capital. The
Company's Tier 1 leverage ratio was 8.39 percent as of December 31, 1999 which
exceeds the required ratio standard of 4 percent.
24
<PAGE>
Liquidity and Capital Resources (Continued)
For 1999, average capital was $34,204,000 representing 8.41 percent of average
assets for the year. This percentage is down from the 1998 level of 8.92
percent. In February, 1999, the Company declared a 100 percent stock split
effected on March 31, 1999 in the form of a dividend which resulted in
outstanding shares increasing from 2,217,513 to 4,435,026.
In 1999, the Company paid annual dividends of $0.14 per share. The dividend
payout ratio, defined as dividends per share divided by net income per share,
was 14.89 percent in 1999 as compared to 13.22 percent in 1998.
As of December 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 or results of
operations. However, it is possible that examinations by regulatory authorities
in the future could precipitate additional loss charge-offs which could
materially impact the Company's liquidity, capital resources and result of
operations.
Results of Operations
The Company's results of operations are determined by its ability to effectively
manage interest income and expense, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Since 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 year ended December 31, 1999 increased to $4,180,000 from the
1998 net income of $3,852,000 representing an increase of $328,000, or 8.52
percent. This increase is the result of an increase in net interest income of
$1,014,000 and an increase of $461,000 in noninterest income. These were offset
by an increase in noninterest expense of $928,000 and an increase in income tax
expenses of $210,000. The earnings increase of 8.52 percent was achieved while
the Company experienced additional overhead associated with three new offices
opened during the second half of 1998 and two new offices opened during the
second half of 1999; however, these new offices are largely responsible for the
$54 million asset growth from a year ago and should further enhance shareholder
value as they provide additional growth in the future. On a fully-diluted per
share basis, net income increased to $0.94 from the 1998 per share amount of
$0.87, a $0.07 increase or 8.05 percent.
25
<PAGE>
Net Income (Continued)
Net income for the year ended December 31, 1998 increased to $3,852,000 from the
1997 net income of $3,618,000 representing an increase of $234,000 or 6.47
percent. This increase is the result of an increase in net interest income of
$347,000, a decrease of $332,000 in provision for loan losses and an increase of
$131,000 in noninterest income. These were offset by an increase in noninterest
expense of $488,000 and an increase in income tax expenses of $88,000. The
expansion projects undertaken in 1998 impacted earnings approximately $300,000;
however, the new offices provided $30 million in asset growth during 1998. On a
fully-diluted per share basis, net income increased to $0.87 from the 1997 per
share amount of $0.83, a $0.04 increase or 4.82 percent.
Net Interest Margin
The net interest margin decreased to 4.33 percent in 1999 as compared to 4.66
percent in 1998. Net interest income increased by 6.70 percent to $16,146,000 in
1999 from $15,132,000 in 1998 on an increase in average earning assets to
$378,288,000 in 1999 from $329,109,000 in 1998 with an interest spread of 3.80
percent in 1999 as compared to 4.08 percent in 1998. Average loans increased by
$42,127,000 or 17.07 percent, average funds sold decreased by $8,995,000 or
42.77 percent, average investment securities increased by $7,781,000 or 12.88
percent and average interest-bearing deposits in other banks increased by
$8,266,000 or 915.39 percent, resulting in a net increase in average earning
assets of $49,179,000 or 14.94 percent.
The net increase in average assets was funded by a net increase in average
deposits of 14.58 percent to $350,794,000 in 1999 from $306,168,000 in 1998 and
a net increase in average debt and funds purchased of 42.48 percent to
$18,702,000 in 1999 from $13,126,600 in 1998. Average interest-bearing deposits
increased by 14.28 percent to $319,967,000 in 1999 from $279,992,000 in 1998
while average noninterest-bearing deposits increased 17.77 percent to
$30,827,000 in 1999 from $26,176,000 in 1998. Average noninterest-bearing
deposits represented 8.79 percent of average total deposits in 1999 as compared
to 8.55 percent in 1998.
The net interest margin decreased to 4.66 percent in 1998 as compared to 4.91
percent in 1997. Net interest income increased by 2.35 percent to $15,132,000 in
1999 from $14,785,000 in 1997 on an increase in average earnings assets to
$329,109,000 in 1998 from $303,648,000 in 1997 with an interest spread of 4.08
percent in 1998 as compared to 4.29 percent in 1997. Average loans increased by
$18,924,000 or 8.31 percent, average funds sold increased by $6,493,000 or 44.66
percent, average investment securities decreased by $95,000 or 1.46 percent and
average interest-bearing deposits in other banks increased by $139,000 or 18.19
percent, resulting in a net increase in average earning assets of $25,461,000 or
8.39 percent.
The net increase in average assets was funded by a net increase in average
deposits of 7.50 percent to $306,168,000 in 1998 from $284,800,000 in 1997.
Average interest-bearing deposits increased by 8.58 percent to $279,992,000 in
1998 from $257,871,000 in 1997 while average noninterest-bearing deposits
decreased 2.80 percent to $26,176,000 in 1998 from $26,929,000 in 1997. Average
noninterest-bearing deposits represented 8.55 percent of average total deposits
in 1998 as compared to 9.46 in 1997.
26
<PAGE>
Provision for Loan Losses
The allowance for loan losses represents a reserve for potential losses in the
loan portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on nonaccruing, past due and other loans that management believes
require attention.
The provision for loan losses is a charge to earnings in the current period to
replenish the allowance for loan losses and maintain it at a level management
has determined to be adequate. The provision for loan losses was $1,166,000 in
1999 as compared to $1,157,000 in 1998 representing an increase in the provision
of $9,000 or 0.78 percent. Net loan charge-offs represented 103.78 percent of
the provision for loan losses in 1999 as compared to 86.95 percent in 1998. Net
loan charge-offs for 1999 represented 0.42 percent of average loans outstanding
as compared to 0.41 percent for 1998. The leveling off of loan charge-offs for
1999 and 1998 resulted from management's effort the past several years to
improve credit quality and to eliminate weak and marginal credits. As of
December 31, 1999, the allowance for loan losses was 1.48 percent of total loans
outstanding as compared to an allowance for loan losses of 1.87 percent of total
loans outstanding as of December 31, 1998. The loan loss reserve of 1.48 percent
of totals loans outstanding provided coverage of 81.72 percent of nonperforming
loans and 70.81 percent of nonperforming assets as of December 31, 1999 as
compared to 78.40 percent and 68.14 percent, respectively as of December 31,
1998. 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.
The provision for loan losses was $1,157,000 in 1998 as compared to $1,489,000
in 1997, representing a decrease in the provision of $332,000 or 22.30 percent.
Net loan charge-offs represented 86.95 percent of the provision for loan losses
in 1998 as compared to 90.60 percent in 1997. The decrease in loan charge-offs
in 1998 resulted from management's effort the past several years to improve
credit quality and to eliminate weak and marginal credits. Net loan charge-offs
for 1998 represented 0.41 percent of average loans outstanding as compared to
0.59 percent for 1997. As of December 31, 1998, the allowance for loan losses
was 1.87 percent of total loans outstanding as compared to an allowance for loan
losses of 1.95 percent of total loans outstanding as of December 31, 1997. The
loan loss reserve of 1.87 percent of total loans outstanding provided coverage
of 78.40 percent of nonperforming loans and 68.14 percent of nonperforming
assets as of December 31, 1998 as compared to 77.29 percent and 63.28 percent,
respectively as of December 31, 1997.
Noninterest Income
Noninterest income consists primarily of service charges on deposit accounts.
Service charges on deposit accounts totaled $2,270,000 in 1999 as compared to
$1,932,000 in 1998 or an increase of 17.49 percent. This increase is
attributable to the increase in noninterest-bearing and interest-bearing demand
deposit accounts. All other noninterest income increase by $123,000 to $850,000
in 1999 from $727,000 in 1998. Approximately $95,000 of the increase in
noninterest income is attributable to a recovery on previously written-off
municipal bonds. There was no other significant variance in other noninterest
income accounts in 1999 from 1998.
27
<PAGE>
Noninterest Income (Continued)
Service charges on deposit accounts totaled $1,932,000 in 1998 as compared to
$1,764,000 in 1997 or an increase of 9.52 percent. All other noninterest income
decreased by $37,000 to $727,000 in 1998 from $764,000 in 1997. There was no
significant variance in other noninterest income accounts in 1998 from 1997.
Noninterest Expense
Noninterest expense increased by 8.38 percent to $12,017,000 in 1999 from
$11,088,000 in 1998. Salaries and employee benefits increased 12.76 percent to
$6,451,000 in 1999 from $5,721,000 in 1998 primarily due to increased staffing
with two new branches opened in the second half of 1999 and three new branches
opened in the second half of 1998. Occupancy and equipment expense increased by
9.16 percent to $2,050,000 in 1999 from $1,878,000 in 1998 primarily due to
additional depreciation and occupancy expense with the new branches opened. All
other noninterest expense increased 0.80 percent to $3,517,000 in 1999 from
$3,489,000 in 1998. All other expenses in the aggregate realized normal change.
Noninterest expense increased by 4.60 percent to $11,088,000 in 1998 from
$10,600,000 in 1997. Salaries and employee benefits increased 4.97 percent to
$5,721,000 in 1998 from $5,450,000 in 1997 primarily due to increased staffing
with three new offices opened during 1998. Occupancy and equipment increased by
19.62 percent to $1,878,000 in 1998 from $1,570,000 in 1997 primarily due to
additional depreciation and occupancy expense with the three new offices opened
during 1998. All other noninterest expense decreased by 2.54 percent to
$3,489,000 in 1998 from $3,580,000 in 1997. Noninterest expense for 1998
decreased primarily because of $141,000 non-recurring expense in 1997 resulting
from a subsidiary bank buying out its data processing contract in order to
convert to Colony's data processing system. All other expenses in the aggregate
realized normal change.
Income Tax Expense
Income before taxes increased by $539,000 to $6,083,000 in 1999 from $5,544,000
in 1998 with significant changes being an increase in net interest income of
$1,014,000 in 1999 as compared to 1998 and an increase in noninterest expenses,
net of noninterest income of $467,000 in 1999 as compared to 1998. Income tax
expense increased 12.41 percent to $1,902,000 in 1999 from $1,692,000 in 1998.
Income tax expense as a percentage of income before taxes increased by 2.46
percent to 31.27 percent in 1999 from 30.52 percent in 1998.
Income before taxes increased by $321,000 to $5,544,000 in 1998 from $5,223,000
in 1997 with significant changes being an increase in net interest income of
$347,000 in 1998 as compared to 1997, a decrease in provision for loan losses of
$332,000 in 1998 as compared to 1997 and an increase in noninterest expenses net
of noninterest income of $358,000 in 1998 as compared to 1997. Income tax
expense increased 5.42 percent to $1,692,000 in 1998 from $1,605,000 in 1997.
Income tax expense as a percentage of income before taxes decreased by 0.68
percent to 30.52 percent in 1998 from 30.73 percent in 1997.
28
<PAGE>
Outlook for 2000
Colony is an emerging company operating in an industry filled with nonregulated
competitors and a rapid pace of consolidation. The year brings with it new
opportunities for growth in our existing markets, as well as opportunities to
expand into new markets through branch acquisitions and branching. Colony
completed two new branches in 1999 which are located in Douglas and Cordele. For
2000, Colony has targeted one new branch office to be located in Moultrie,
Georgia and the acquisition of a mortgage company that is located in Albany,
Georgia. Additionally, the Company has targeted another branch for 2000 with the
location to be disclosed at a later time.
Year 2000 Compliance Issue
Colony 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 established a five-phase methodology for use in assessing the Year 2000
project's state of readiness. Those phases were awareness, assessment,
renovation, validation and implementation. An appointed Year 2000 steering
committee monitored the progress within these phases. These five phases are
briefly defined as follows: (1) awareness - defining the problem and
establishing the resources needed to achieve compliance; (2) assessment -
identify all areas of operations affected by the Year 2000 date change issue;
(3) renovation - updating or replacement of affected systems; (4) validation -
testing systems and evaluating the results of testing; and (5) implementation -
certification and acceptance of Year 2000 compliance.
The majority of the Year 2000 issues facing the Company were information
technology ("IT") in nature. All IT systems, which includes mainframe and
midrange computer systems were 100% complete in all phases. Testing of these
systems produced satisfactory results. Non-IT systems, which include embedded
technology such as micro controllers were all considered and tested. In
addition, all third party service providers submitted documentation to the
Company regarding the tested or anticipated compliance of their services.
Colony established contingency plans in the event of a failure caused by the
Year 2000 date change with addressed potential risks such as application system
failures, power outages, and security and environmental systems failures.
We are pleased that Colony experienced no Y2K related problems. All of our
branches, ATM's and processing systems are working normally in the new
millennium. Though the company realized minimal cost in addressing Y2K, we
devoted a significant amount of resources over the last two years to remediation
efforts for Year 2000 which can now be redirected into more productive projects.
29
<PAGE>
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.
30
<PAGE>
AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------------------------------------------------------------------
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
($ in thousands) Balances Expense Rates Balances Expense Rates Balances Expense Rates
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-Earning Assets
Loans, Net of Unearned Income
Taxable (1) $288,885 $28,344 9.81% $246,758 $25,851 10.48% $227,834 $24,227 10.63%
-------- ------- ----- -------- ------- ------ -------- ------- ------
Investment Securities
Taxable 57,828 3,418 5.91% 52,551 3,234 6.15% 53,971 3,301 6.12%
Tax-Exempt (2) 10,368 649 6.26% 7,864 596 7.58% 6,539 492 7.52%
-------- ------- ----- -------- ------- ------ -------- ------ ------
Total Investment
Securities 68,196 4,067 5.96% 60,415 3,830 6.34% 60,510 3,793 6.27%
-------- ------- ----- -------- ------- ------ -------- ------ ------
Interest-Bearing Deposits in
Other Banks 9,169 467 5.09% 903 49 5.43% 764 46 6.02%
-------- ------- ----- -------- ------- ------ -------- ------ ------
Funds Sold 12,038 602 5.00% 21,033 1,125 5.35% 14,540 823 5.66%
-------- ------- ----- -------- ------- ------ -------- ------ ------
Total Interest-Earning
Assets 378,288 33,480 8.85% 329,109 30,855 9.38% 303,648 28,889 9.51%
-------- ------- ----- -------- ------- ------ -------- ------ ------
Noninterest-Earning Assets
Cash 11,615 10,227 8,861
Allowance for Loan Losses (4,823) (4,742) (4,612)
Other Assets 21,714 18,898 17,173
-------- -------- --------
Total Noninterest-Earning
Assets 28,506 24,383 21,422
-------- -------- --------
Total Assets $406,794 $353,492 $325,070
======== ======== ========
Liabilities and Stockholders'
Equity
Interest-Bearing Liabilities
Interest-Bearing Deposits
Interest-Bearing Demand
and Savings $129,291 $ 2,321 1.80% $ 72,284 $ 2,009 2.78% $ 62,436 $ 1,909 3.06%
Other Time 190,676 13,652 7.16% 207,708 12,624 6.08% 195,435 11,381 5.82%
-------- ------- ----- -------- ------- ------ -------- ------- ------
Total Interest-Bearing
Deposits 319,967 15,973 4.99% 279,992 14,633 5.22% 257,871 13,290 5.15%
-------- ------- ----- -------- ------- ------ -------- ------- ------
Other Interest-Bearing
Liabilities
Debt 18,326 1,125 6.14% 11,548 875 7.58% 9,813 664 6.77%
Funds Purchased and
Securities Sold
Under Agreement to
Repurchase 376 16 4.26% 1,578 21 1.33% 558 38 6.81%
-------- ------- ----- -------- ------- ------ -------- ------- ------
Total Other Interest-
Bearing Liabilities 18,702 1,141 6.10% 13,126 896 6.83% 10,371 702 6.77%
-------- ------- ----- -------- ------- ------ -------- ------- ------
Total Interest-Bearing
Liabilities 338,669 17,114 5.05% 293,118 15,521 5.30% 268,242 13,992 5.22%
-------- ------- ----- -------- ------- ------ -------- ------- ------
Noninterest-Bearing Liabilities
and Stockholders' Equity
Demand Deposits 30,827 26,176 26,929
Other Liabilities 3,094 2,674 2,503
Stockholders' Equity 34,204 31,524 27,396
-------- -------- --------
Total Noninterest-Bearing
Liabilities and
Stockholders' Equity 68,125 60,374 56,828
-------- -------- --------
Total Liabilities and
Stockholders' Equity $406,794 $353,492 $325,070
======== ======== ========
Interest Rate Spread 3.80% 4.08% 4.29%
===== ====== ======
Net Interest Income $ 16,366 $ 15,334 $ 14,897
======== ======== ========
Net Interest Margin 4.33% 4.66% 4.91%
===== ===== =====
</TABLE>
(1) The average balance of loans includes the average balance of nonaccrual
loans. Income on such loans is recognized and recorded on the cash basis.
(2) Taxable-equivalent adjustments totaling $220,628, $202,547 and $167,180 for
1999, 1998 and 1997, respectively, are included in tax-exempt interest on
investment securities. The adjustments are based on a federal tax rate of
34 percent with appropriate reductions for the effect of disallowed
interest expense incurred in carrying tax-exempt obligations.
31
<PAGE>
RATE/VOLUME ANALYSIS
The rate/volume analysis presented hereafter illustrates the change from year to
year for each component of the taxable equivalent net interest income separated
into the amount generated through volume changes and the amount generated by
changes in the yields/rates.
<TABLE>
<CAPTION>
Changes From 1998 to 1999(1) Changes From 1997 to 1998(1)
($ in thousands) Volume Rate Total Volume Rate Total
---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans, Net -Taxable $ 4,413 $(1,920) $2,493 $2,012 $(388) $1,624
-------------------------- ---------------------------
Investment Securities
Taxable 325 (141) 184 (87) 20 (67)
Tax-Exempt 190 (137) 53 100 4 104
-------------------------- ---------------------------
Total Investment Securities 515 (278) 237 13 24 37
-------------------------- ---------------------------
Interest-Bearing Deposits in
Other Banks 449 (31) 418 8 (5) 3
-------------------------- ---------------------------
Funds Sold (481) (42) (523) 368 (66) 302
-------------------------- ---------------------------
Total Interest Income 4,896 (2,271) 2,625 2,401 (435) 1,966
-------------------------- ---------------------------
Interest Expense
Interest-Bearing Demand and
Savings Deposits 1,584 (1,272) 312 301 (201) 100
Time Deposits (1,035) 2,063 1,028 715 528 1,243
Other Interest-Bearing Liabilities
Funds Purchased and Securities
Under Agreement
to Repurchase (16) 11 (5) 69 (86) (17)
Other Debt 514 (264) 250 117 94 211
-------------------------- ---------------------------
Total Interest Expense 1,047 538 1,585 1,202 335 1,537
-------------------------- ---------------------------
Net Interest Income $ 3,849 $(2,809) $1,040 $1,199 $(770) $ 429
========================== ===========================
</TABLE>
(1) Changes in net interest income for the periods, based on either changes in
average balances or changes in average rates for Interest-earning assets
and interest-bearing liabilities, are shown on this table. During each
year, there are numerous and simultaneous balance and rate changes;
therefore, it is not possible to precisely allocate the changes between
balances and rates. For the purpose of this table, changes that are not
exclusively due to balance changes or rate changes have been attributed to
rates.
32
<PAGE>
INTEREST RATE SENSITIVITY
The following table represents the Company's interest-sensitivity gap between
interest-earning assets and interest-bearing liabilities as of December 31,
1999.
<TABLE>
<CAPTION>
Assets and Liabilities Repricing Within
---------------------------------------------------------------------------------
3 Months 4 to 12 1 to 5 Over 5
($ in thousands) or Less Months 1 Year Years Years Total
-------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets
Interest-Bearing Deposits $ 6,714 $ 6,714 $ 6,714
Investment Securities 4,387 $ 5,342 9,729 $ 46,801 $ 6,289 62,819
Funds Sold 15,290 15,290 15,290
Loans, Net of Unearned Income 122,720 83,275 205,995 102,488 6,958 315,441
-------- -------- -------- -------- ------- -------
Total Interest-Earning Assets 149,111 88,617 237,728 149,289 13,247 400,264
-------- -------- -------- -------- ------- -------
Interest-Bearing Liabilities
Interest-Bearing Demand
and Savings Deposits (1) 79,960 79,960 79,960
Other Time Deposits 81,592 128,646 210,238 50,532 260,770
Short-Term Borrowings (2) 10,918 10,918 11,049 21,967
-------- -------- -------- -------- ------- -------
Total Interest-Bearing Liabilities 172,470 128,646 301,116 61,581 - 362,697
-------- -------- -------- -------- ------- -------
Interest-Sensitivity Gap (23,359) (40,029) (63,388) 87,708 13,247 37,567
-------- -------- -------- -------- ------- -------
Cumulative Interest-Sensitivity Gap $(23,359) $(63,388) $(63,388) $ 24,320 $37,567 $37,567
======== ======== ======== ======== ======= =======
</TABLE>
33
<PAGE>
INVESTMENT PORTFOLIO
The following table presents carrying values of investment securities held by
the Company as of December 31, 1999, 1998 and 1997.
($ in thousands) 1999 1998 1997
------- ------- -------
U.S. Treasuries and Government Agencies $46,336 $51,525 $36,187
Obligations of States and Political Subdivisions 9,628 8,733 6,996
Other Securities 2,365 3,093 2,868
------- ------- -------
Investment Securities 58,329 63,351 46,051
Mortgage Backed Securities 4,490 8,447 10,864
------- ------- -------
Total Investment Securities and
Mortgage Backed Securities $62,819 $71,798 $56,915
======= ======= =======
The following table represents maturities and weighted-average yields of
investment securities held by the Company as of December 31, 1999.
<TABLE>
<CAPTION>
After 1 Year But After 5 Years But
Within 1 Year Within 5 Years Within 10 Years After 10 Years
-------------- ---------------- ----------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------- ----- ------- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Agencies $5,141 5.37% $40,953 5.91% $ 242 6.77%
Mortgage Backed Securities 705 5.03 $ 992 5.68% 2,793 5.50
Obligations of States and
Political Subdivision 2,221 4.77 5,144 4.64 1,904 4.20 358 14.04
Other Securities 2,366 3.01
------ ---- ------ ---- ----- ---- ------ -----
Total Investment Portfolio $9,728 4.66% $46,802 5.75% $2,896 4.71% $3,393 5.57%
====== ==== ======= ==== ====== ==== ====== =====
</TABLE>
34
<PAGE>
LOANS
The following table presents the composition of the Company's loan portfolio as
of December 31 for the past five years.
<TABLE>
<CAPTION>
($ in thousands) 1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural $ 42,595 $ 44,879 $ 34,883 $ 38,776 $ 34,459
Real Estate
Construction 4,003 998 2,676 881 526
Mortgage, Farmland 24,179 18,980 21,898 25,769 23,680
Mortgage, Other 185,663 133,857 117,268 88,896 95,967
Consumer 48,226 40,928 42,956 44,608 38,865
Other 10,775 13,227 14,618 7,946 7,381
-------- -------- -------- -------- --------
315,441 252,869 234,299 206,876 200,878
Unearned Discount (6) (5) (11) (13) (41)
Allowance for Loan Losses (4,682) (4,726) (4,575) (4,435) (4,051)
-------- -------- -------- -------- --------
Loans, Net $310,753 $248,138 $229,713 $202,428 $196,786
======== ======== ======== ======== ========
</TABLE>
The following table presents total loans less unearned discount as of December
31, 1999 according to maturity distribution.
<TABLE>
<CAPTION>
Maturity ($ in thousands)
----------------
<S> <C>
One Year or Less $205,995
After One Year through Five Years 102,488
After Five Years 6,958
-----------
$315,441
===========
</TABLE>
The following table presents an interest rate sensitivity analysis of the
Company's loan portfolio as of December 31, 1999.
<TABLE>
<CAPTION>
Within 1 to 5 After 5
($ in thousands) 1 Year Years Years Total
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Loans with
Predetermined Interest Rates $108,630 $100,103 $6,951 $215,684
Floating or Adjustable Interest Rates 97,359 2,385 7 99,751
-------- -------- ------ ---------
Loans, Net of Unearned Income $205,989 $102,488 $6,958 $315,435
======== ======== ====== =========
</TABLE>
35
<PAGE>
NONPERFORMING LOANS
A loan is placed on nonaccrual status when, in management's judgment, the
collection of interest income appears doubtful. Interest receivable that has
been accrued in prior years and is subsequently determined to have doubtful
collectibility is charged to the allowance for possible loan losses. Interest on
loans that are classified as nonaccrual is recognized when received. Past due
loans are loans whose principal or interest is past due 90 days or more. In some
cases, where borrowers are experiencing financial difficulties, loans may be
restructured to provide terms significantly different from the original
contractual terms.
The following table presents, at the dates indicated, the aggregate of
nonperforming loans for the categories indicated.
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
($ in thousands)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans Accounted for on a Nonaccrual Basis $5,334 $5,823 $5,744 $7,396 $5,229
Installment Loans and Term Loans
Contractually Past Due 90 Days or
More as to Interest or Principal
Payments and Still Accruing 332 296 145 364 213
Loans, the Terms of Which Have Been
Renegotiated to Provide a Reduction
or Deferral of Interest or Principal
Because of Deterioration in the Financial
Position of the Borrower 32 220 5 321 597
Loans Now Current About Which There are
Serious Doubts as to the Ability of the
Borrower to Comply with Present Loan
Repayment Terms - - - - -
</TABLE>
During the year ended December 31, 1999, approximately $1,640,000 of loans was
charged off and approximately $430,000 was recovered on charged-off loans. All
loans classified by regulatory authorities as loss during regular examinations
in 1999 have been charged off. As of December 31, 1999, the allowance for loan
losses was adequate to cover all loans classified by regulatory authorities as
doubtful or substandard.
36
<PAGE>
COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Banks have entered into off balance
sheet financial instruments which are not reflected in the consolidated
financial statements. These instruments include commitments to extend credit,
standby letters of credit, guarantees and liability for assets held in trust.
Such financial instruments are recorded in the financial statements when funds
are disbursed or the instruments become payable. The Banks use the same credit
policies for these off balance sheet financial instruments as they do for
instruments that are recorded in the consolidated financial statements.
Following is an analysis of the significant off balance sheet financial
instruments as of December 31:
1999 1998
------ ------
($ in thousands)
------------------------
Commitments to Extend Credit $43,197 $35,980
Standby Letters of Credit 1,705 1,346
------- -------
$44,902 $37,326
======= =======
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 Company does not anticipate any material losses as a result of the
commitments and contingent liabilities.
The nature of the business of the Company 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.
37
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
The allowance for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to this allowance. The factors that influence
management's judgment in determining the amount charged to operating expense are
past loan experience, composition of the loan portfolio, evaluation of possible
future losses, current economic conditions and other relevant factors. The
Company's allowance for loan losses was approximately $4,682,000 as of December
31, 1999, representing 1.48 percent of year-end total loans outstanding,
compared with $4,726,000 as of December 31, 1998, which represented 1.87 percent
of year-end total loans outstanding. The allowance for loan losses is reviewed
continuously based on management's evaluation of current risk characteristics of
the loan portfolio as well as the impact of prevailing and expected economic
business conditions. Management considers the allowance for loan losses adequate
to cover possible loan losses on the loans outstanding.
Management has not allocated the Company's allowance for loan losses to specific
categories of loans. Based on management's best estimate, approximately 10
percent of the allowance should be allocated to real estate loans, 50 percent to
commercial, financial and agricultural loans and 40 percent to
consumer/installment loans as of December 31, 1999.
The following table presents an analysis of the Company's loan loss experience
for the periods indicated.
<TABLE>
<CAPTION>
($ in thousands) 1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Allowance for Loan Losses at Beginning of Year $4,726 $4,575 $4,435 $4,051 $3,179
------ ------ ------ ------ ------
Charge-Offs
Commercial, Financial and Agricultural 1,288 617 1,026 2,294 2,042
Real Estate 19 111 160 8 4
Consumer 333 681 670 515 861
------ ------ ------ ------ ------
1,640 1,409 1,856 2,817 2,907
------ ------ ------ ------ ------
Recoveries
Commercial, Financial and Agricultural 237 144 219 816 77
Real Estate 9 36 37 9 3
Consumer 184 223 251 181 453
------ ------ ------ ------ ------
430 403 507 1,006 533
------ ------ ------ ------ ------
Net Charge-Offs 1,210 1,006 1,349 1,811 2,374
------ ------ ------ ------ ------
Provision for Loans Losses 1,166 1,157 1,489 2,195 3,246
------ ------ ------ ------ ------
Allowance for Loan Losses at End of Year $4,682 $4,726 $4,575 $4,435 $4,051
====== ====== ====== ====== ======
Ratio of Net Charge-Offs to Average Loans 0.42% 0.41% 0.59% 0.87% 1.19%
====== ====== ====== ====== ======
</TABLE>
38
<PAGE>
DEPOSITS
The following table presents the average amount outstanding and the average rate
paid on deposits by the Company for the years 1999, 1998 and 1997.
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- -------------------------
Average Average Average Average Average Average
($ in thousands) Amount Rate Amount Rate Amount Rate
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-Bearing Demand Deposits $ 30,827 $ 26,176 $ 26,929
Interest-Bearing Demand and Savings 129,291 1.80% 72,284 2.78% 62,436 3.06%
Time Deposits 190,676 7.16 207,708 6.08 195,435 5.82
-------- ------ -------- -------- -------- -----
$350,794 4.99% $306,168 5.22% $284,800 5.15%
======== ====== ======== ======== ======== =====
</TABLE>
The following table presents the maturities of the Company's other time deposits
as of December 31, 1998.
Other Time Other Time
Deposits Deposits
$100,000 Less Than
($ in thousands) or Greater $100,000 Total
------------ ----------- --------
Months to Maturity
3 or Less $34,351 $ 47,241 $ 81,592
Over 3 through 12 46,789 81,857 128,646
Over 12 Months 9,320 41,212 50,532
--------- ---------- ----------
$90,460 $170,310 $260,770
========= ========== ==========
Return on Assets and Stockholders' Equity
The following table presents selected financial ratios for each of the periods
indicated.
Year Ended December 31,
------------------------------------------
1999 1998 1997
------------------------------------------
Return on Assets 1.03% 1.09% 1.11%
Return on Equity 12.22% 12.22% 13.21%
Dividend Payout 14.86% 13.24% 12.02%
Equity to Assets 8.41% 8.92% 8.43%
39
<PAGE>
Item 8
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The following consolidated financial statements of the Registrant and its
subsidiaries are included on exhibit 99(b) of this Annual Report on Form 10-K:
Consolidated Balance Sheets - December 31, 1999 and 1998
Consolidated Statements of Income - Years Ended December 31, 1999, 1998 and
1997
Consolidated Statements of Comprehensive Income - Years Ended December 31,
1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity - Years Ended December 31,
1999, 1998 and 1997
Consolidated Statements of Cash Flows - Years Ended December 31, 1999, 1998
and 1997
Notes to Consolidated Financial Statements
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations for
the years ended December 31, 1999 and 1998:
Three Months Ended
--------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
--------------------------------------------
($ in thousands, except per share data)
1999
Interest Income $8,858 $8,587 $8,047 $7,768
Interest Expense 4,565 4,402 4,074 4,073
------- ------- ------- -------
Net Interest Income 4,293 4,185 3,973 3,695
Provision for Loan Losses 497 226 194 249
Securities Gains 2 - (2) -
Noninterest Income 764 792 826 737
Noninterest Expense 3,051 3,215 3,052 2,699
------- ------- ------- -------
Income Before Income Taxes 1,511 1,536 1,551 1,484
Provision for Income Taxes 503 473 478 448
------- ------- ------- -------
Net Income $1,008 $1,063 $1,073 $1,036
======= ======= ======= =======
Net Income Per Common Share (1)
Basic $0.23 $0.24 $0.24 $0.23
Diluted $0.23 $0.24 $0.24 $0.23
40
<PAGE>
Three Months Ended
-------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31
-------------------------------------------------
($ in thousands, except per share data)
1998
Interest Income $7,848 $7,824 $7,519 $7,462
Interest Expense 4,057 3,990 3,803 3,671
------ ------ ------ ------
Net Interest Income 3,791 3,834 3,716 3,791
Provision for Loan Losses 377 270 231 279
Securities Gains 10 29 0 2
Noninterest Income 635 693 645 645
Noninterest Expense 2,975 2,947 2,725 2,443
------ ------ ------ ------
Income Before Income Taxes 1,084 1,339 1,405 1,716
Provision for Income Taxes 280 422 441 549
------ ------ ------ ------
Net Income $ 804 $ 917 $ 964 $1,167
====== ====== ====== ======
Net Income Per Common Share (1)
Basic $ 0.18 $ 0.21 $ 0.22 $ 0.27
Diluted $ 0.18 $ 0.21 $ 0.22 $ 0.27
(1) Adjusted for stock dividends and stock splits, as applicable.
Item 9
CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There was no accounting or disclosure disagreement or reportable event with the
former or current auditors that would have required the filing of a report on
Form 8-K.
Part III
Item 10
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference to pages 3 and 4 of the Company's Definitive
Proxy Statement for Annual Meeting of Stockholders to be held on April 25, 2000
filed with the Securities and Exchange Commission on March 17, 2000 (File No.
0-18486).
Item 11
EXECUTIVE COMPENSATION
Incorporated herein by reference to pages 6, 8, 9, 10, 11, 12 and 13 of the
Company's Definitive Proxy Statement for Annual Meeting of Stockholders to be
held on April 25, 2000, filed with the Securities and Exchange Commission on
March 17, 2000 (File No. 0-18486).
41
<PAGE>
Item 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to pages 7 and 8 of the Company's Definitive
Proxy Statement for Annual Meeting of Stockholders to be held on April 25, 2000,
filed with the Securities and Exchange Commission on March 17, 2000 (File No.
0-18486).
Item 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to page 10 of the Company's Definitive Proxy
Statement for Annual Meeting of Stockholders to be held on April 25, 2000, filed
with the Securities and Exchange Commission on March 17, 2000 (File No.
0-18486).
Part IV
Item 14
EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits included herein:
Exhibit No.
3(a) Articles of Incorporation
-filed as Exhibit 3(a) to the Registrant's Registration
Statement on Form 10 (File No. 0-18486), filed with the
Commission on April 25, 1990 and incorporated herein by
reference
3(b) Bylaws, as amended
-filed as Exhibit 3(b) to the Registrant's Registration
Statement on Form 10 (File No. 0-18486), filed with the
Commission on April 25, 1990 and incorporated herein by
reference
4 Instruments Defining the Rights of Security Holders
-incorporated herein by reference to page 1 of the Company's
Definitive Proxy Statement for Annual Meeting of Stockholders
to be held on April 5, 2000, filed with the Securities and
Exchange Commission on March 17, 2000 (File No. 0-18486)
10 Material Contracts
10(a) Deferred Compensation Plan and Sample Director Agreement
-filed as Exhibit 10(a) to the Registrant's Registration
Statement on Form 10 (File No. 0-18486), filed with the
Commission on April 25, 1990 and incorporated herein by
reference
42
<PAGE>
(A) Exhibits included herein:
Exhibit No.
10(b) Profit-Sharing Plan dated January 1, 1979
-filed as Exhibit 10(b) to the Registrant's Registration
Statement on Form 10 (File No. 0-18486), filed with the
Commission on April 25, 1990 and incorporated herein by
reference
11 Statement Re Computation of Per Share Earnings
21 Subsidiaries of the Company
27 Financial Data Schedule
27(a) Restated Financial Data Schedule
99 Additional Exhibits
99(a) Consolidated Financial Statements
-Independent Auditor's Report
-Consolidated Balance Sheets - December 31, 1999 and 1998
-Consolidated Statements of Income - Years Ended December 31,
1999, 1998 and 1997
-Consolidated Statements of Comprehensive Income - Years Ended
December 31, 1999, 1998 and 1997
-Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 1999, 1998 and 1997
-Consolidated Statements of Cash Flows - Years Ended December
31, 1999, 1998 and 1997
-Notes to Consolidated Financial Statements
All schedules are omitted as the required information is
inapplicable or the information is presented in the financial
statements or related notes.
(B) No reports on Form 8-K have been filed by the registrant
during the last quarter of the period covered by this report.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Colony Bankcorp, Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized:
COLONY BANKCORP, INC.
/s/ James D. Minix
- -------------------------------------
James D. Minix
President/Director/Chief Executive Officer
Date: March 21, 2000
--------------------------------
/s/ Terry L. Hester
- -------------------------------------
Terry L. Hester
Executive Vice-President/Controller/Chief
Financial Officer/Director
Date: March 21, 2000
--------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/ Terry Coleman Date: March 21, 2000
- ------------------------------------- --------------------------
Terry Coleman, Director
/s/ L. Morris Downing Date: March 21, 2000
- ------------------------------------- --------------------------
L. Morris Downing, Director
/s/ Milton N. Hopkins, Jr. Date: March 21, 2000
- ------------------------------------- --------------------------
Milton N. Hopkins, Jr., Director
/s/ Harold E. Kimball Date: March 21, 2000
- ------------------------------------- --------------------------
Harold E. Kimball, Director
44
<PAGE>
/s/ Marion H. Massee, III Date: March 21, 2000
- -------------------------------- --------------------------
Marion H. Massee, III, Director
/s/ Ben B. Mills, Jr. Date: March 21, 2000
- -------------------------------- --------------------------
Ben B. Mills, Jr., Director
/s/ Ralph D. Roberts Date: March 21, 2000
- -------------------------------- --------------------------
Ralph D. Roberts, M.D., Director
- -------------------------------- --------------------------
W. B. Roberts, Jr., Director
/s/ R. Sidney Ross Date: March 21, 2000
- -------------------------------- --------------------------
R. Sidney Ross, Director
/s/ Joe K. Shiver Date: March 21, 2000
- -------------------------------- --------------------------
Joe K. Shiver, Director
/s/ Curtis A. Summerlin Date: March 21, 2000
- -------------------------------- --------------------------
Curtis A. Summerlin, Director
45
<PAGE>
EXHIBIT 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
Year Ended
December 31, 1999
-----------------
Earnings
Share Per Share
------- ---------
(In Thousands)
Basic Weighted Average Shares Outstanding 4,435 $0.94
====== =====
Diluted
Average Shares Outstanding 4,435
Common Stock Equivalents 0
------
4,435 $0.94
====== =====
Year Ended
December 31, 1998
-----------------
Basic Weighted Average Shares Outstanding 4,426 $0.87
====== =====
Diluted
Average Shares Outstanding 4,426
Common Stock Equivalents 0
------
4,426 $0.87
====== =====
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Name of Subsidiary State of Incorporation
------------------ ----------------------
The Bank of Fitzgerald Georgia
Ashburn Bank Georgia
The Bank of Dodge County Georgia
Bank of Worth Georgia
Community Bank of Wilcox Georgia
Colony Bank Southeast Georgia
Colony Management Services, Inc. Georgia
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 15,835,662
<INT-BEARING-DEPOSITS> 6,714,257
<FED-FUNDS-SOLD> 15,290,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 61,856,218
<INVESTMENTS-CARRYING> 963,196
<INVESTMENTS-MARKET> 937,449
<LOANS> 315,435,310
<ALLOWANCE> 4,682,024
<TOTAL-ASSETS> 435,271,934
<DEPOSITS> 374,450,263
<SHORT-TERM> 10,917,552
<LIABILITIES-OTHER> 3,844,232
<LONG-TERM> 11,049,249
0
0
<COMMON> 4,435,026
<OTHER-SE> 30,575,612
<TOTAL-LIABILITIES-AND-EQUITY> 435,271,934
<INTEREST-LOAN> 28,344,263
<INTEREST-INVEST> 3,846,720
<INTEREST-OTHER> 1,069,333
<INTEREST-TOTAL> 33,260,316
<INTEREST-DEPOSIT> 15,972,709
<INTEREST-EXPENSE> 17,114,353
<INTEREST-INCOME-NET> 16,145,963
<LOAN-LOSSES> 1,166,000
<SECURITIES-GAINS> 2,115
<EXPENSE-OTHER> 12,016,999
<INCOME-PRETAX> 6,082,681
<INCOME-PRE-EXTRAORDINARY> 4,180,217
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,180,217
<EPS-BASIC> 0.94
<EPS-DILUTED> 0.94
<YIELD-ACTUAL> 4.03
<LOANS-NON> 5,333,917
<LOANS-PAST> 332,000
<LOANS-TROUBLED> 32,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,726,161
<CHARGE-OFFS> 1,639,943
<RECOVERIES> 429,806
<ALLOWANCE-CLOSE> 4,682,024
<ALLOWANCE-DOMESTIC> 4,682,024
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,208,042
<INT-BEARING-DEPOSITS> 1,056,846
<FED-FUNDS-SOLD> 27,795,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 70,239,995
<INVESTMENTS-CARRYING> 1,557,643
<INVESTMENTS-MARKET> 1,537,471
<LOANS> 252,863,664
<ALLOWANCE> 4,726,161
<TOTAL-ASSETS> 381,347,912
<DEPOSITS> 330,745,512
<SHORT-TERM> 1,806,498
<LIABILITIES-OTHER> 2,985,245
<LONG-TERM> 12,714,372
0
0
<COMMON> 22,175,130
<OTHER-SE> 10,921,155
<TOTAL-LIABILITIES-AND-EQUITY> 381,347,912
<INTEREST-LOAN> 25,851,093
<INTEREST-INVEST> 3,626,743
<INTEREST-OTHER> 1,174,850
<INTEREST-TOTAL> 30,652,686
<INTEREST-DEPOSIT> 14,624,765
<INTEREST-EXPENSE> 15,521,065
<INTEREST-INCOME-NET> 15,131,621
<LOAN-LOSSES> 1,157,330
<SECURITIES-GAINS> 40,838
<EXPENSE-OTHER> 11,088,504
<INCOME-PRETAX> 5,544,420
<INCOME-PRE-EXTRAORDINARY> 3,851,948
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,851,948
<EPS-BASIC> 0.87
<EPS-DILUTED> 0.87
<YIELD-ACTUAL> 4.28
<LOANS-NON> 5,822,523
<LOANS-PAST> 296,000
<LOANS-TROUBLED> 220,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,575,265
<CHARGE-OFFS> 1,409,770
<RECOVERIES> 403,336
<ALLOWANCE-CLOSE> 4,726,161
<ALLOWANCE-DOMESTIC> 4,726,161
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
EXHIBIT 99(a)
[LETTERHEAD OF McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP APPEARS HERE]
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Colony Bankcorp, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Colony Bankcorp,
Inc. and Subsidiaries as of December 31, 1999 and 1998 and the related
consolidated statements of income, comprehensive income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1999. 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 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 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 audits provide 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, 1999 and 1998 and the results of
operations and cash flows for each of the years in the three-year period ended
December 31, 1999 in conformity with generally accepted accounting principles.
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
Macon, Georgia
February 4, 2000
F-1
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
ASSETS
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
Cash and Balances Due from Depository Institutions $ 22,549,919 $ 12,264,888
Federal Funds Sold 15,290,000 27,795,000
Investment Securities
Available for Sale, at Fair Value 61,856,218 70,239,995
Held to Maturity, at Cost (Fair Value of $937,449 and
$1,537,471 as of December 31, 1999 and 1998, Respectively) 963,196 1,557,643
------------ -------------
62,819,414 71,797,638
Loans 315,440,689 252,869,139
Allowance for Loan Losses (4,682,024) (4,726,161)
Unearned Interest and Fees (5,379) (5,475)
------------ -------------
310,753,286 248,137,503
Premises and Equipment 12,847,033 11,685,848
Other Real Estate 883,257 907,536
Other Assets 10,129,025 8,759,499
------------ -------------
Total Assets $435,271,934 $381,347,912
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-2
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
Deposits
Noninterest-Bearing $ 33,720,097 $ 29,215,638
Interest-Bearing 340,730,166 301,529,874
------------ -------------
374,450,263 330,745,512
Borrowed Money 21,966,801 14,520,870
Other Liabilities 3,844,232 2,985,245
Stockholders' Equity
Common Stock, Par Value $1 and $10 a Share, Respectively;
Authorized 20,000,000 and 5,000,000 Shares, Respectively,
Issued 4,435,026 and 2,217,513 Shares as of December 31,
1999 and 1998, Respectively 4,435,026 22,175,130
Paid-In Capital 21,537,328 1,579,711
Retained Earnings 10,766,844 9,425,045
Accumulated Other Comprehensive Income, Net of Tax (1,728,560) (83,601)
------------ -------------
35,010,638 33,096,285
------------ -------------
Total Liabilities and Stockholders' Equity $435,271,934 $381,347,912
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Interest Income
Loans, Including Fees $28,344,263 $25,851,093 $24,281,672
Federal Funds Sold 602,017 1,125,395 815,771
Deposits with Other Banks 467,316 49,455 46,563
Investment Securities
U. S. Treasury - 40,461 67,895
U. S. Government Agencies 3,212,869 2,957,590 3,119,552
State, County and Municipal 428,278 393,179 324,525
Other Investments 62,328 93,666 71,959
Dividends on Other Investments 143,245 141,847 49,302
----------- ----------- -----------
33,260,316 30,652,686 28,777,239
----------- ----------- -----------
Interest Expense
Deposits 15,972,709 14,624,765 13,290,972
Federal Funds Purchased 16,198 21,518 37,787
Borrowed Money 1,125,446 874,782 663,603
----------- ----------- -----------
17,114,353 15,521,065 13,992,362
----------- ----------- -----------
Net Interest Income 16,145,963 15,131,621 14,784,877
Provision for Loan Losses 1,166,000 1,157,330 1,489,417
----------- ----------- -----------
Net Interest Income After Provision for Loan Losses 14,979,963 13,974,291 13,295,460
----------- ----------- -----------
Noninterest Income
Service Charges on Deposits 2,269,836 1,931,721 1,763,676
Other Service Charges, Commissions and Fees 673,506 372,918 412,372
Securities Gains - 40,838 10,895
Other 176,375 313,156 341,057
----------- ----------- -----------
3,119,717 2,658,633 2,528,000
----------- ----------- -----------
Noninterest Expenses
Salaries and Employee Benefits 6,450,944 5,721,257 5,450,362
Occupancy and Equipment 2,049,777 1,878,200 1,569,500
Directors' Fees 354,986 350,125 367,530
Securities Losses 2,115 - -
Legal and Professional Fees 255,644 297,282 333,836
Other Real Estate Expense 113,568 252,089 383,241
Other 2,789,965 2,589,551 2,496,074
----------- ----------- -----------
12,016,999 11,088,504 10,600,543
----------- ----------- -----------
Income Before Income Taxes 6,082,681 5,544,420 5,222,917
Income Taxes 1,902,464 1,692,472 1,605,043
----------- ----------- -----------
Net Income $ 4,180,217 $ 3,851,948 $ 3,617,874
=========== =========== ===========
Net Income Per Share of Common Stock
Basic $ 0.94 $ 0.87 $ 0.83
=========== =========== ===========
Diluted $ 0.94 $ 0.87 $ 0.83
=========== =========== ===========
Weighted Average Shares Outstanding 4,435,026 4,426,276 4,346,526
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net Income $ 4,180,217 $ 3,851,948 $ 3,617,874
----------- ----------- -----------
Other Comprehensive Income, Net of Tax
Gains (Losses) on Securities
Arising During the Year (1,646,355) 75,842 53,634
Reclassification Adjustment 1,396 (26,953) (7,191)
----------- ----------- -----------
Unrealized Gains (Losses) on Securities (1,644,959) 48,889 46,443
----------- ----------- -----------
Comprehensive Income $ 2,535,258 $ 3,900,837 $ 3,664,317
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Accumulated
Other
Shares Common Paid-In Retained Comprehensive
Outstanding Stock Capital Earnings Income Total
----------- ----------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 1,448,842 $14,488,420 $ 1,137,424 $10,144,118 $ (178,933) $25,591,029
50 Percent Stock Dividend 724,421 7,244,210 (7,244,210) -
Unrealized Gain on Securities Available
for Sale, Net of Tax of $25,230 46,443 46,443
Dividends Paid (434,654) (434,654)
Net Income 3,617,874 3,617,874
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 2,173,263 21,732,630 1,137,424 6,083,128 (132,490) 28,820,692
Common Stock Issuance 44,250 442,500 442,287 884,787
Unrealized Gain on Securities
Available for Sale, Net of Tax of $50,181 48,889 48,889
Dividends Paid (510,031) (510,031)
Net Income 3,851,948 3,851,948
----------- ----------- ----------- ------------ ----------- -----------
Balance, December 31, 1998 2,217,513 22,175,130 1,579,711 9,425,045 (83,601) 33,096,285
Change in Par Value of Common Stock (19,957,617) 19,957,617 -
100 Percent Stock Dividend 2,217,513 2,217,513 (2,217,513) -
Unrealized Loss on Securities
Available for Sale, Net of Tax of $767,039 (1,644,959) (1,644,959)
Dividends Paid (620,905) (620,905)
Net Income 4,180,217 4,180,217
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 4,435,026 $ 4,435,026 $21,537,328 $10,766,844 $(1,728,560) $35,010,638
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------- -------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Income $ 4,180,217 $ 3,851,948 $ 3,617,874
Adjustments to Reconcile Net Income to Net
Cash Provided from Operating Activities
Depreciation 1,168,173 975,416 791,383
Amortization and Accretion 176,335 (24,522) 4,742
Provision for Loan Losses 1,166,000 1,157,330 1,489,417
Deferred Income Taxes (211,637) (7,175) (8,490)
Securities (Gains) Losses 2,115 (40,838) (10,895)
(Gain) Loss on Sale of Equipment (12,305) (570) (21,308)
(Gain) Loss on Sale of Other Real Estate and Repossessions (19,651) 20,418 9,505
Other Real Estate Writedown 23,000 (3,906) 200,215
Change In
Interest Receivable 13,075 (406,960) (614,121)
Prepaid Expenses 39,808 (22,718) 32,476
Interest Payable 261,657 145,607 114,921
Accrued Expenses and Accounts Payable 198,665 162,348 99,540
Other (55,757) (51,426) (146,051)
------------ ------------ ------------
6,929,695 5,754,952 5,559,208
------------ ------------ ------------
Cash Flows from Investing Activities
Interest-Bearing Deposits in Other Banks (5,657,411) (42,125) (123,721)
Purchase of Investment Securities
Available for Sale (32,344,903) (87,364,577) (25,733,360)
Proceeds from Sale of Investment Securities
Available for Sale 3,044,183 5,118,297 3,941,475
Proceeds from Maturities, Calls and Paydowns
of Investment Securities
Available for Sale 35,081,355 65,800,538 27,882,652
Held to Maturity 604,197 1,750,190 495,832
Proceeds from Sale of Equipment 22,242 135,200 13,917
Loans to Customers, Net (65,211,495) (20,686,240) (30,656,316)
Purchase of Premises and Equipment (2,339,296) (3,661,144) (2,966,106)
Other Real Estate and Repossessions 1,481,408 1,513,034 3,165,121
Cash Surrender Value of Life Insurance (61,481) (34,036) (51,278)
------------ ------------ ------------
(65,381,201) (37,470,863) (24,031,784)
------------ ------------ ------------
Cash Flows from Financing Activities
Interest-Bearing Customer Deposits 39,200,292 30,687,650 13,889,434
Noninterest-Bearing Customer Deposits 4,504,459 1,895,808 (1,403,605)
Proceeds from Borrowed Money 10,700,000 7,500,000 11,338,110
Dividends Paid (576,556) (485,642) (434,654)
Federal Funds Purchased - - (160,000)
Principal Payments on Borrowed Money (3,254,069) (6,053,172) (3,759,938)
Proceeds from Issuance of Common Stock - 884,787 -
------------ ------------ ------------
50,574,126 34,429,431 19,469,347
------------ ------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents (7,877,380) 2,713,520 996,771
Cash and Cash Equivalents, Beginning 39,003,042 36,289,522 35,292,751
------------ ------------ ------------
Cash and Cash Equivalents, Ending $ 31,125,662 $ 39,003,042 $ 36,289,522
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Basis of Presentation
Colony Bankcorp, Inc. is a multi-bank holding company located in Fitzgerald,
Georgia. The consolidated financial statements include the accounts of Colony
Bankcorp, Inc. and its wholly-owned subsidiaries, The Bank of Fitzgerald,
Fitzgerald, Georgia; Ashburn Bank, Ashburn, Georgia; The Bank of Worth,
Sylvester, Georgia; The Bank of Dodge County, Eastman, Georgia; Community Bank
of Wilcox, Pitts, Georgia; Colony Bank Southeast, Broxton, Georgia (the Banks);
and Colony Management Services, Inc., Fitzgerald, Georgia. All significant
intercompany accounts have been eliminated in consolidation. The accounting and
reporting policies of Colony Bankcorp, Inc. conform to generally accepted
accounting principles and practices utilized in the commercial banking industry.
Certain reclassifications have been made in the 1997 and 1998 financial
statements to conform to the 1999 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.
Description of Business
The Banks provide a full range of retail and commercial banking services for
consumers and small to medium size businesses primarily in south Georgia.
Lending and investing activities are funded primarily by deposits gathered
through its retail branch office network. Lending is concentrated in
agricultural, commercial and real estate loans to local borrowers. In
management's opinion, although the Banks have a high concentration of
agricultural and real estate loans, these loans are well collateralized and do
not pose an adverse credit risk. In addition, the balance of the loan portfolio
is sufficiently diversified to avoid significant concentration of credit risk.
Although the Banks have a diversified loan portfolio, a substantial portion of
borrowers' ability to honor their contracts is dependent upon the viability of
the real estate economic sector.
The success of Colony is dependent, to a certain extent, upon the economic
conditions in the geographic markets it serves. No assurance can be given that
the current economic conditions will continue. Adverse changes in the economic
conditions in these geographic markets would likely have a material adverse
effect on the Company's results of operations and financial condition. The
operating results of Colony depend primarily on its net interest income.
Accordingly, operations are subject to risks and uncertainties surrounding the
exposure to changes in the interest rate environment.
F-8
<PAGE>
(1) Summary of Significant Accounting Policies (Continued)
Investment Securities
The Company records investment securities under Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Under the provisions of SFAS 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, 1999 and 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.
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.
F-9
<PAGE>
(1) Summary of Significant Accounting Policies (Continued)
Premises and Equipment
Premises and equipment are recorded at acquisition cost net of accumulated
depreciation.
Depreciation is charged to operations over the estimated useful lives of the
assets. The estimated useful lives and methods of depreciation are as follows:
Description Life in Years Method
- ------------------------ ------------- -----------------------------
Banking Premises 15-40 Straight-Line and Accelerated
Furniture and Equipment 5-10 Straight-Line and Accelerated
Expenditures for major renewals and betterments are capitalized. Maintenance and
repairs are charged to operations as incurred. When property and equipment are
retired or sold, the cost and accumulated depreciation are removed from the
respective accounts and any gain or loss is reflected in other income or
expense.
Cash Flows
For reporting cash flows, cash and cash equivalents include cash on hand,
noninterest-bearing amounts due from banks and federal funds sold. Cash flows
from demand deposits, NOW accounts, savings accounts, loans and certificates of
deposit are reported net.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
consolidated financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes are recognized for differences between the basis
of assets and liabilities for financial statement and income tax purposes. The
differences relate primarily to depreciable assets (use of different
depreciation methods for financial statement and income tax purposes) and
allowance for loan losses (use of the allowance method for financial statement
purposes and the experience method for tax purposes). The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
Other Real Estate
Other real estate generally represents real estate acquired through foreclosure
and is initially recorded at the lower of cost or estimated market value at the
date of acquisition. Losses from the 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.
F-10
<PAGE>
(1) Summary of Significant Accounting Policies (Continued)
Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Certain changes in assets and liabilities,
such as unrealized gains and losses on securities available for sale, represent
equity changes from economic events of the period other than transactions with
owners and are not reported in the consolidated statement of income but as a
separate component of the equity section of the consolidated balance sheets.
Such items are considered components of other comprehensive income. Statement of
Financial Accounting Standards 130 requires the presentation in the financial
statements of net income and all items of other comprehensive income as total
comprehensive income.
(2) Cash and Balances Due from Depository Institutions
Components of cash and balances due from depository institutions are as follows
as of December 31:
1999 1998
----------- -----------
Cash on Hand and Cash Items $ 7,501,891 $ 2,933,319
Noninterest-Bearing Deposits with Other Banks 8,333,771 8,274,723
Interest-Bearing Deposits with Other Banks 6,714,257 1,056,846
----------- -----------
$22,549,919 $12,264,888
=========== ===========
(3) Investment Securities
Investment securities as of December 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. Government Agencies
Mortgage Backed $ 4,628,732 $ (138,957) $ 4,489,775
Other 48,290,906 (1,954,827) 46,336,079
State, County and Municipal 8,826,558 $2,789 (165,002) 8,664,345
The Banker's Bank Stock 50,000 50,000
Federal Home Loan Bank Stock 1,425,600 1,425,600
Marketable Equity Securities 1,130,022 (239,603) 890,419
----------- ------ ----------- -----------
$64,351,818 $2,789 $(2,498,389) $61,856,218
=========== ====== =========== ===========
Securities Held to Maturity
State, County and Municipal $ 963,196 $ 12 $ (25,759) $ 937,449
=========== ====== =========== ===========
</TABLE>
The amortized cost and fair value of investment securities as of December 31,
1999, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because issuers have the right to call or prepay
obligations with or without call or prepayment penalties.
F-11
<PAGE>
(3) Investment Securities (Continued)
<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 $ 8,625,495 $ 8,474,726 $610,350 $608,877
Due After One Year Through Five Years 46,598,788 44,724,940 100,000 99,321
Due After Five Years Through Ten Years 1,893,181 1,800,758 - -
Due After Ten Years - - 252,846 229,251
----------- ----------- -------- --------
57,117,464 55,000,424 963,196 937,449
Federal Home Loan Bank Stock 1,425,600 1,425,600 - -
The Banker's Bank Stock 50,000 50,000 - -
Marketable Equity Securities 1,130,022 890,419 - -
Mortgage Backed Securities 4,628,732 4,489,775 - -
----------- ----------- -------- --------
$64,351,818 $61,856,218 $963,196 $937,449
=========== =========== ======== ========
</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. Government Agencies
Mortgage Backed $ 8,433,734 $ 40,189 $ (26,333) $ 8,447,590
Other 51,186,270 97,080 (58,601) 51,224,749
State, County and Municipal 7,379,788 101,290 (6,031) 7,475,047
The Banker's Bank Stock 50,000 - - 50,000
Federal Home Loan Bank Stock 2,093,600 - - 2,093,600
Marketable Equity Securities 1,130,022 - (181,013) 949,009
----------- -------- --------- -----------
$70,273,414 $238,559 $(271,978) $70,239,995
=========== ======== ========= ===========
Securities Held to Maturity
U.S. Government Agencies $ 299,977 $ - $ (71) $ 299,906
State, County and Municipal 1,257,666 17,002 (37,103) 1,237,565
----------- -------- --------- -----------
$ 1,557,643 $ 17,002 $ (37,174) $ 1,537,471
=========== ======== ========= ===========
</TABLE>
Proceeds from sales of investments available for sale were $3,044,183 in 1999,
$5,118,297 in 1998 and $3,941,475 in 1997. Gross realized gains totaled $2,720,
$40,838 and $10,895 in 1999, 1998 and 1997, respectively. Gross realized losses
totaled $4,835 in 1999 and $0 in 1998 and 1997, respectively.
Investment securities having a carrying value approximating $28,317,614 and
$26,373,000 as of December 31, 1999 and 1998, respectively, were pledged to
secure public deposits and for other purposes.
F-12
<PAGE>
(4) Loans
The composition of loans as of December 31 are:
1999 1998
------------ ------------
Commercial, Financial and Agricultural $ 42,594,703 $ 44,878,612
Real Estate-Construction 4,003,226 998,177
Real Estate-Farmland 24,178,687 18,980,153
Real Estate-Other 185,662,574 133,857,717
Installment Loans to Individuals 48,226,090 40,927,863
All Other Loans 10,775,409 13,226,617
------------ ------------
$315,440,689 $252,869,139
============ ============
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 $5,333,917 and $5,822,523 as of December 31, 1999 and 1998,
respectively. Foregone interest on nonaccrual loans approximated $524,000 in
1999, $611,000 in 1998 and $280,000 in 1997.
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 December 31 and for the years then ended follows:
1999 1998
---------- ----------
Total Investment in Impaired Loans $ 885,036 $1,352,536
Less Allowance for Impaired Loan Losses (106,321) (374,675)
---------- ----------
Net Investment, December 31 $ 778,715 $ 977,861
========== ==========
Average Investment during the Year $2,116,272 $1,640,023
========== ==========
Income Recognized during the Year $ 71,890 $ 126,252
========== ==========
Income Collected during the Year $ 69,404 $ 130,752
========== ==========
F-13
<PAGE>
(5) Allowance for Loan Losses
Transactions in the allowance for loan losses are summarized below for the years
ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Balance, Beginning $ 4,726,161 $ 4,575,265 $ 4,434,867
Provision Charged to Operating Expenses 1,166,000 1,157,330 1,489,417
Loans Charged Off (1,639,943) (1,409,770) (1,857,304)
Loan Recoveries 429,806 403,336 508,285
----------- ----------- -----------
Balance, Ending $ 4,682,024 $ 4,726,161 $ 4,575,265
=========== =========== ===========
</TABLE>
The allowances for loan losses presented above include allowances for impaired
loan losses. Transactions in the allowance for impaired loan losses during 1999,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Balance, Beginning $ 374,675 $ 460,703 $ 419,490
Provision Charged to Operating Expenses (144,862) 14,267 50,652
Loans Charged Off (123,492) (100,295) (9,439)
----------- ----------- -----------
Balance, Ending $ 106,321 $ 374,675 $ 460,703
=========== =========== ===========
</TABLE>
(6) Premises and Equipment
Premises and equipment are comprised of the following as of December 31:
1999 1998
----------- -----------
Land $ 1,571,779 $ 1,436,779
Building 9,841,094 8,719,989
Furniture, Fixtures and Equipment 7,775,341 7,220,220
Leasehold Improvements 326,963 205,698
Construction in Progress 95,746 -
----------- -----------
19,610,923 17,582,686
Accumulated Depreciation (6,763,890) (5,896,838)
----------- -----------
$12,847,033 $11,685,848
=========== ===========
Depreciation charged to operations totaled $1,168,173 in 1999, $975,416 in 1998
and $791,383 in 1997.
Certain Company facilities and equipment are leased under various operating
leases. Rental expense approximated $137,591 for 1999, $147,800 for 1998 and
$109,800 for 1997.
F-14
<PAGE>
(6) Premises and Equipment (Continued)
Future minimum rental payments as of December 31, 1999 are as follows:
Year Ending
December 31 Amount
----------- --------
2000 $121,984
2001 105,645
2002 70,308
2003 48,718
2004 -
--------
$346,655
========
(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>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current Federal Expense $2,090,601 $1,641,502 $1,520,400
Deferred Federal Benefit (211,637) (7,175) (8,490)
---------- ---------- ----------
Federal Income Tax Expense 1,878,964 1,634,327 1,511,910
Current State Income Tax Expense 23,500 58,145 93,133
---------- ---------- ----------
$1,902,464 $1,692,472 $1,605,043
========== ========== ==========
</TABLE>
The federal income tax expense of $1,878,964 in 1999, $1,634,327 in 1998 and
$1,511,910 in 1997 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:
F-15
<PAGE>
(7) Income Taxes (Continued)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Statutory Federal Income Taxes $2,068,112 $1,885,103 $1,775,792
Tax-Exempt Interest (187,304) (179,152) (132,119)
Interest Expense Disallowance 34,023 31,011 21,852
Premiums on Officers' Life Insurance (20,904) (23,828) (17,878)
Meal and Entertainment Disallowance 4,591 5,467 4,113
State Income Taxes (22,311) (17,527) (20,956)
Other 2,757 (66,747) (118,894)
---------- ---------- ----------
Actual Federal Income Taxes $1,878,964 $1,634,327 $1,511,910
========== ========== ==========
</TABLE>
Deferred taxes in the accompanying balance sheets as of December 31 include the
following:
1999 1998
---------- ---------
Deferred Tax Assets
Allowance for Loan Losses $ 935,208 $ 694,560
Deferred Compensation 221,909 207,367
Other Real Estate 7,820 -
Other 2,099 -
---------- ---------
1,167,036 901,927
Deferred Tax Liabilities
Premises and Equipment (274,377) (220,905)
---------- ---------
892,659 681,022
Deferred Tax Liability on
Unrealized Securities Losses 767,039 (50,181)
---------- ---------
Net Deferred Tax Assets $1,659,698 $ 630,841
========== =========
(8) Deposits
Components of interest-bearing deposits as of December 31 are as follows:
1999 1998
------------ ------------
Interest-Bearing Demand $ 66,418,353 $ 61,839,975
Savings 13,541,366 13,794,788
Time, $100,000 and Over 90,459,902 70,996,075
Other Time 170,310,545 154,899,036
------------ ------------
$340,730,166 $301,529,874
============ ============
The aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of $100,000, was approximately $81,129,000 and $61,088,000
as of December 31, 1999 and 1998, respectively.
F-16
<PAGE>
(8) Deposits (Continued)
As of December 31, 1999, the scheduled maturities of certificates of deposit are
as follows:
Year Amount
---------- ------------
2000 $210,238,369
2001 29,013,075
2002 9,662,181
2003 9,587,359
2004 and Thereafter 2,269,463
------------
$260,770,447
============
(9) Borrowed Money
Borrowed money at December 31 is summarized as follows:
1999 1998
----------- -----------
Federal Home Loan Bank Advances $20,700,000 $12,700,000
Debentures Payable - 266,867
First Port City Note Payable 674,240 770,560
The Banker's Bank Note Payable 592,561 783,443
----------- -----------
$21,966,801 $14,520,870
=========== ===========
Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from
2000 to 2008 and interest rates ranging from 4.55 percent to 6.98 percent. Of
the balances outstanding at December 31, 1999, $1,000,000 is callable by the
FHLB during 2000. Under the Blanket Agreement for Advances and Security
Agreement with the FHLB, residential first mortgage loans are pledged as
collateral for the FHLB advances outstanding.
Debentures payable were issued November 28, 1984 for $4,360,000. The debentures
are due in annual payments of $266,867 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 at
December 31, 1998 was 8.0 percent.
First Port City note payable was renewed on January 30, 1997 with additional
funds added for an amount totaling $963,200. Annual principal payments of
$96,320 are due with interest paid quarterly at The Wall Street Prime Rate
Indicator. 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 Banker's Bank note payable originated on September 5, 1997 for $1,000,000 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.
F-17
<PAGE>
(9) Borrowed Money (Continued)
The aggregate stated maturities of borrowed money at December 31, 1999 are as
follows:
Year Amount
---------- -----------
2000 $10,917,552
2001 1,443,312
2002 1,105,937
2003 1,000,000
2004 and Thereafter 7,500,000
-----------
$21,966,801
===========
(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 $328,256 for 1999,
$264,222 for 1998 and $295,452 for 1997.
(11) Commitments and Contingencies
In the normal course of business, certain commitments and contingencies are
incurred which are not reflected in the consolidated financial statements.
Commitments under standby letters of credit to U.S. addressees approximate
$1,705,000 as of December 31, 1999 and $1,346,000 as of December 31, 1998.
Unfulfilled loan commitments as of December 31, 1999 and 1998 approximated
$43,197,000 and $35,980,000, respectively. 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 $653,573 and $609,904 as of December
31, 1999 and 1998, respectively. Benefit payments under the contracts were $0 in
1999 and $111,728 in 1998. Provisions charged to operations totaled $45,268 in
1999, $149,527 in 1998 and $76,830 in 1997.
F-18
<PAGE>
(13) Interest Income and Expense
Interest income of $30,435, $339,632 and $286,300 from state, county and
municipal bonds was exempt from regular income taxes in 1999, 1998 and 1997,
respectively.
Interest on deposits includes interest expense on time certificates of $100,000
or more totaling $4,756,433, $4,140,604 and $3,358,903 for the years ended
December 31, 1999, 1998 and 1997, respectively.
(14) Supplemental Cash Flow Information
Cash payments for the following were made during the years ended December 31:
1999 1998 1997
----------- ----------- -----------
Interest Expense $16,882,943 $15,375,481 $13,874,115
=========== =========== ===========
Income Taxes $ 1,800,000 $ 1,625,000 $ 1,682,000
=========== =========== ===========
Noncash financing and investing activities for the years ended December 31 are
as follows:
1999 1998 1997
----------- ----------- -----------
Acquisitions of Real Estate
Through Loan Foreclosures $ 1,431,704 $995,442 $1,882,418
=========== ======== ==========
Stock Split Effected as
Stock Dividend $ 2,217,513 $ - $7,244,210
=========== ======== ==========
Change in Par Value of
Common Stock $19,957,617 $ - $ -
=========== ======== ==========
(15) Related Party Transactions
The aggregate balance of direct and indirect loans to directors, executive
officers or principal holders of equity securities of the Company was $8,288,667
as of December 31, 1999 and $6,844,196 as of December 31, 1998. 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:
1999 1998
----------- ------------
Balance, Beginning $ 6,844,196 $ 5,856,393
New Loans 8,007,259 12,719,166
Repayments (6,811,597) (11,731,363)
Transactions Due to
Changes in Directors 248,809 -
----------- ------------
Balance, Ending $ 8,288,667 $ 6,844,196
=========== ============
F-19
<PAGE>
(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 and Commitments to Extend Credit - Because
standby letters of credit and commitments to extend credit are made using
variable rates, the contract value is a reasonable estimate of fair value.
The carrying amount and estimated fair values of the Company's financial
instruments as of December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(in Thousands)
<S> <C> <C> <C> <C>
Assets
Cash and Short-Term Investments $ 37,840 $ 37,840 $ 40,060 $ 40,060
Investment Securities Available for Sale 61,856 61,856 70,240 70,240
Investment Securities Held to Maturity 963 937 1,558 1,537
Loans 315,441 310,804 252,869 266,845
Liabilities
Deposits 374,450 374,866 330,746 336,486
Borrowed Money 21,967 21,967 14,521 14,521
Unrecognized Financial Instruments
Standby Letters of Credit - 1,705 - 1,346
Commitments to Extend Credit - 43,197 - 35,980
</TABLE>
F-20
<PAGE>
(16) Fair Value of Financial Instruments (Continued)
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.
(17) 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 2000 without prior approval from the
banking regulatory agencies approximates $2,090,000. 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 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
Company's consolidated financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Company must meet
specific capital guidelines that involve quantitative measures of the Company's
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. The Company's capital amounts and
classification 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 I
capital to risk-weighted assets, and of Tier I capital to average assets. The
amounts and ratios as defined in regulations are presented hereafter. Management
believes, as of December 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.
F-21
<PAGE>
(17) Regulatory Capital Matters (Continued)
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
--------------------- ---------------------- --------------------
Amount Ratio Amount Ratio Amount Ratio
----------- ----- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999
Total Capital
to Risk-Weighted Assets $40,266,776 11.88% $27,107,916 8.00% $33,884,895 10.00%
Tier I Capital
to Risk-Weighted Assets 36,025,666 10.63 13,553,929 4.00 20,330,894 6.00
Tier I Capital
to Average Assets 36,025,666 8.39 17,175,526 4.00 21,469,408 5.00
As of December 31, 1998
Total Capital
to Risk-Weighted Assets $35,890,670 13.21% $21,735,455 8.00% $27,169,319 10.00%
Tier I Capital
to Risk-Weighted Assets 32,477,808 11.95 10,871,233 4.00 16,306,849 6.00
Tier I Capital
to Average Assets 32,477,808 8.51 15,265,715 4.00 19,082,143 5.00
</TABLE>
F-22
<PAGE>
(18) Financial Information of Colony Bankcorp, Inc. (Parent Only)
The parent company's balance sheets as of December 31, 1999 and 1998 and the
related statements of income and comprehensive income and cash flows for each of
the years in the three-year period then ended are as follows:
COLONY BANKCORP, INC. (PARENT ONLY)
BALANCE SHEETS
DECEMBER 31
ASSETS
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash $ 247,022 $ 110,784
Investment in Subsidiaries, at Equity 34,265,641 32,718,218
Other 1,448,468 1,507,644
----------- -----------
Total Assets $35,961,131 $34,336,646
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Dividends Payable $ 177,401 $ 133,051
Notes and Debentures Payable 674,240 1,037,427
Other 98,852 69,883
----------- -----------
950,493 1,240,361
----------- -----------
Stockholders' Equity
Common Stock, Par Value $1 and $10 a Share, Respectively;
Authorized 20,000,000 and 5,000,000 Shares, Respectively
Issued 4,435,026 and 2,217,513 Shares as of December 31,
1999 and 1998, Respectively 4,435,026 22,175,130
Paid-In Capital 21,537,328 1,579,711
Retained Earnings 10,766,844 9,425,045
Accumulated Other Comprehensive Income, Net of Tax (1,728,560) (83,601)
----------- -----------
Total Stockholders' Equity 35,010,638 33,096,285
----------- -----------
Total Liabilities and Stockholders' Equity $35,961,131 $34,336,646
=========== ===========
</TABLE>
F-23
<PAGE>
(18) Financial Information of Colony Bankcorp, Inc. (Parent Only) (Continued)
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Income
Dividends from Subsidiaries $ 1,500,000 $2,400,000 $1,371,000
Management Fees from Subsidiaries - 175,500 269,332
Other 88,501 76,872 47,278
----------- ---------- ----------
1,588,501 2,652,372 1,687,610
----------- ---------- ----------
Expenses
Interest 74,668 117,431 201,212
Amortization 17,951 17,951 17,951
Other 742,622 717,773 734,425
----------- ---------- ----------
835,241 853,155 953,588
----------- ---------- ----------
Income Before Taxes and Equity in
Undistributed Earnings of Subsidiaries 753,260 1,799,217 734,022
Income Tax Benefits 234,576 169,953 220,138
----------- ---------- ----------
Income Before Equity in Undistributed
Earnings of Subsidiaries 987,836 1,969,170 954,160
Equity in Undistributed Earnings
of Subsidiaries 3,192,381 1,882,778 2,663,714
----------- ---------- ----------
Net Income 4,180,217 3,851,948 3,617,874
----------- ---------- ----------
Other Comprehensive Income, Net of Tax
Gains (Losses) on Securities
Arising During the Year (1,646,355) 75,842 53,634
Reclassification Adjustment 1,396 (26,953) (7,191)
----------- ---------- ----------
Unrealized Gains (Losses) in Securities (1,644,959) 48,889 46,443
----------- ---------- ----------
Comprehensive Income $ 2,535,258 $3,900,837 $3,664,317
=========== ========== ==========
</TABLE>
F-24
<PAGE>
(18) Financial Information of Colony Bankcorp, Inc. (Parent Only) (Continued)
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Income $ 4,180,217 $ 3,851,948 $ 3,617,874
Adjustments to Reconcile Net Income to
Net Cash Provided from Operating
Activities Depreciation and
Amortization 87,349 85,771 55,267
Equity in Undistributed Earnings
of Subsidiaries (3,192,381) (1,882,778) (2,663,714)
Other 56,858 37,839 (4,794)
----------- ----------- -----------
1,132,043 2,092,780 1,004,633
----------- ----------- -----------
Cash Flows from Investing Activities
Capital Infusion in Subsidiary - (1,000,000) -
Purchases of Premises and Equipment (56,062) (110,227) (818,366)
----------- ----------- -----------
(56,062) (1,110,227) (818,366)
Cash Flows from Financing Activities
Dividends Paid (576,556) (485,642) (434,654)
Proceeds from Issuance of Common Stock - 884,787 -
Principal Payments on Notes and Debentures (363,187) (1,280,379) (766,136)
Proceeds from Notes and Debentures - - 963,072
----------- ----------- -----------
(939,743) (881,234) (237,718)
----------- ----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents 136,238 101,319 (51,451)
Cash and Cash Equivalents, Beginning 110,784 9,465 60,916
----------- ----------- -----------
Cash and Cash Equivalents, Ending $ 247,022 $ 110,784 $ 9,465
=========== =========== ===========
</TABLE>
(19) Common Stock Split
On February 18, 1997, a 50 percent stock split effected on July 1, 1997 in the
form of a dividend was approved by the board. On February 16, 1999, a 100
percent stock split effected on March 31, 1999 in the form of a dividend was
approved by the board. 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 each of the stock splits.
(20) Legal Contingencies
In the ordinary course of business, there are various legal proceedings pending
against Colony and its subsidiaries. The aggregate liabilities, if any, arising
from such proceedings would not, in the opinion of management, have a material
adverse effect on Colony's consolidated financial position.
F-25
