<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 2000 COMMISSION FILE NUMBER 0-12436
COLONY BANKCORP, INC.
--------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-1492391
------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
115 SOUTH GRANT STREET, FITZGERALD, GEORGIA 31750
-------------------------------------------------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES
229/426-6000
------------
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED REPORTS REQUIRED TO
BE FILED BY SECTIONS 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT.
CLASS OUTSTANDING AT SEPTEMBER 30, 2000
----- ---------------------------------
COMMON STOCK, $1 PAR VALUE 4,440,276
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED FOR COLONY BANKCORP, INC. AND
SUBSIDIARIES: THE BANK OF FITZGERALD, ASHBURN BANK, COMMUNITY BANK OF WILCOX,
COLONY BANK OF DODGE COUNTY, COLONY BANK WORTH, COLONY BANK SOUTHEAST AND COLONY
MANAGEMENT SERVICES, INC.
A. CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 2000 AND DECEMBER 31, 1999.
B. CONSOLIDATED STATEMENTS OF INCOME - FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2000 AND 1999.
C. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2000 AND 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999.
D. CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION - FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2000 AND 1999.
THE CONSOLIDATED FINANCIAL STATEMENTS FURNISHED HAVE NOT BEEN EXAMINED BY
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, BUT REFLECT, IN THE OPINION OF
MANAGEMENT, ALL ADJUSTMENTS NECESSARY FOR A FAIR PRESENTATION OF THE RESULTS OF
OPERATIONS FOR THE PERIODS PRESENTED.
THE RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 ARE
NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.
2
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS Sept 30, 2000 Dec 31, 1999
------------- ------------
<S> <C> <C>
Cash and Balances Due from Depository
Institutions (Note 2) $ 19,034 $ 22,550
Federal Funds Sold 19,830 15,290
Investment Securities
Available for Sale, at Fair Value 62,952 61,857
Held to Maturity, at Cost (Fair Value of $589 and
$934 respectively) (Note 3) 596 963
Loans (Notes 4 and 5) 378,512 315,440
Allowance for Loan Losses (5,434) (4,682)
Unearned Interest and Fees (4) (5)
-------- --------
Total Loans 373,074 310,753
Premises and Equipment (Note 6) 13,946 12,847
Other Real Estate 349 883
Other Assets 10,211 10,129
-------- --------
Total Assets $499,992 $435,272
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-Bearing $ 35,232 $ 33,720
Interest-Bearing (Note 8) 390,166 340,730
-------- --------
Total Deposits 425,398 374,450
Borrowed Money:
Federal Funds Purchased 230 0
Other Borrowed Money (Note 9) 32,219 21,967
-------- --------
Total Borrowed Money 32,449 21,967
Other Liabilities 3,681 3,844
Commitments and Contingencies (Note 11)
Stockholders' Equity:
Common Stock, Par Value $1, Authorized 20,000,000
shares, Issued 4,440,276 and 4,435,026 shares as of
Sept 30, 2000 and December 31, 1999 respectively 4,440 4,435
Paid-In Capital 21,603 21,537
Retained Earnings 13,333 10,767
Accumulated Other Comprehensive Income, Net of Tax (912) (1,728)
-------- --------
Total Stockholders' Equity 38,464 35,011
-------- --------
Total Liabilities and Stockholders' Equity $499,992 $435,272
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
09/30/00 09/30/99 09/30/00 09/30/99
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees $ 9,607 $ 7,459 $ 26,336 $ 20,670
Federal Funds Sold 313 128 711 490
Deposits with Other Banks 115 100 440 329
Investment Securities:
U.S. Treasury & Federal Agencies 726 753 2,273 2,436
State, County and Municipal 83 109 275 325
Other Investments 111 38 201 152
----------- ----------- ----------- -----------
Total Interest Income 10,955 8,587 30,236 24,402
----------- ----------- ----------- -----------
Interest Expense:
Deposits 5,415 4,064 14,483 11,756
Federal Funds Purchased 7 8 16 14
Other Borrowed Money 536 330 1,404 779
----------- ----------- ----------- -----------
Total Interest Expense 5,958 4,402 15,903 12,549
----------- ----------- ----------- -----------
Net Interest Income 4,997 4,185 14,333 11,853
Provision for Loan Losses 752 226 1,834 669
----------- ----------- ----------- -----------
Net Interest Income After Provision 4,245 3,959 12,499 11,184
----------- ----------- ----------- -----------
Noninterest Income:
Service Charge on Deposits 694 587 1,876 1,612
Other Service Charges,
Commissions & Fees 128 102 383 348
Other Income 71 103 316 395
----------- ----------- ----------- -----------
Total Noninterest Income 893 792 2,575 2,355
----------- ----------- ----------- -----------
Noninterest Expense:
Salaries and Employee Benefits 1,904 1,752 5,480 4,835
Occupancy and Equipment 646 487 1,732 1,439
Other Operating Expenses 855 976 2,628 2,692
Security Transactions, Net 494 0 494 2
----------- ----------- ----------- -----------
Total Noninterest Expense 3,899 3,215 10,334 8,968
----------- ----------- ----------- -----------
Income Before Income Taxes 1,239 1,536 4,740 4,571
Income Taxes 400 473 1,543 1,399
----------- ----------- ----------- -----------
Net Income $ 839 $ 1,063 $ 3,197 $ 3,172
=========== =========== =========== ===========
Net Income Per Share of Common Stock
Basic $ 0.19 $ 0.24 $ 0.72 $ 0.72
=========== =========== =========== ===========
Diluted $ 0.19 $ 0.24 $ 0.72 $ 0.72
=========== =========== =========== ===========
Weighted Average Shares Outstanding 4,440,276 4,435,026 4,440,276 4,435,026
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
COLONY BANKCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
09/30/2000 09/30/1999 09/30/2000 09/30/1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income $ 839 $ 1,063 $ 3,197 $ 3,172
Other Comprehensive Income,
Net of Tax
Gains (Losses) on Securities,
Arising During Year 437 (311) 490 (1,190)
Reclassification Adjustment 326 0 326 1
----------- ----------- ----------- -----------
Unrealized Gains (Losses) on Securities 763 (311) 816 (1,189)
----------- ----------- ----------- -----------
Comprehensive Income $ 1,602 $ 752 $ 4,013 $ 1,983
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income (loss) $ 3,197 $ 3,172
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sale of investment securities 494 2
Depreciation 946 842
Provision for loan losses 1,834 669
Amortization of excess costs 40 36
Other prepaids, deferrals and accruals, net (1,253) (209)
--------- ---------
Total Adjustments $ 2,061 $ 1,340
--------- ---------
Net cash provided by operating activities $ 5,258 $ 4,512
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of securities available for sale ($20,879) ($32,193)
Proceeds from sales of securities available for sale 17,475 2,286
Proceeds from maturities, calls, and paydowns of
investment securities:
Available for Sale 2,999 34,926
Held to Maturity 371 480
Decrease (Increase) in interest-bearing deposits in banks (301) (5,653)
(Increase) in loans (63,073) (60,739)
Purchase of premises and equipment (2,002) (1,792)
--------- ---------
Net cash (used in) investing activities ($65,410) ($62,685)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits $ 50,948 $ 30,696
Proceeds from issuance of common stock 0 0
Federal funds purchased 230 750
Dividends paid (555) (421)
Net (decrease) increase in other borrowed money 10,252 9,458
--------- ---------
Net cash provided by financing activities 60,875 40,483
--------- ---------
Net increase (decrease) in cash and cash equivalents 723 (17,690)
Cash and cash equivalents at beginning of period 31,126 39,003
--------- ---------
Cash and cash equivalents at end of period $ 31,849 $ 21,313
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
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; Colony Bank Worth,
Sylvester, Georgia; Colony 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.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the balance sheet date and revenues and expenses for the period. Actual results
could differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near-term relate to the
determination of the allowance for loan losses, the valuation of real estate
acquired in connection with foreclosure or in satisfaction of loans and the
valuation of deferred tax assets.
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 it 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.
Investment Securities
The Company records investment securities under Statement of Financial
Accounting Standards (SFAS) No. 115 Accounting for Certain Investments in Debt
and Equity Securities. Under the provisions of SFAS No. 115, the Company must
classify its securities as trading, available for sale or held to maturity.
Trading securities are purchased and held for sale in the near term. Securities
held to maturity are those which the Company has the ability and intent to hold
until maturity. All other securities not classified as trading or held to
maturity are considered available for sale.
Securities available for sale are measured at fair value with unrealized gains
and losses reported net of deferred taxes as a separate component of
stockholders' equity. Fair value represents an approximation of realizable value
as of September 30, 2000 and December 31, 1999. Realized and unrealized gains
and losses are determined using the specific identification method. Premiums and
discounts are recognized in interest income using the interest method over the
period to maturity.
Loans
Loans are generally reported at principal amount less unearned interest and
fees. Impaired loans are recorded under SFAS 114, Accounting by Creditors for
Impairment of a Loan and SFAS 118, Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures. Impaired loans are loans for which
principal and interest are unlikely to be collected in accordance with the
original loan terms and, generally, represent loans delinquent in excess of 120
days which have been placed on nonaccrual status and for which collateral values
are less than outstanding principal and interest. Small balance, homogeneous
loans are excluded from impaired loans. Generally, interest payments received on
impaired loans are applied to principal. Upon receipt of all loan principal,
additional interest payments are recognized as interest income on the cash
basis.
Other nonaccrual loans are loans for which payments of principal and interest
are considered doubtful of collection under original terms but collateral values
equal or exceed outstanding principal and interest.
7
<PAGE>
(1) Summary of Significant Accounting Policies (continued)
----------------------------------------------------------
Allowance for Loan Losses
The allowance method is used in providing for losses on loans. Accordingly, all
loan losses decrease the allowance and all recoveries increase it. The provision
for loan losses is based on factors which, in management's judgment, deserve
current recognition in estimating possible loan losses. Such factors considered
by management include growth and composition of the loan portfolio, economic
conditions and the relationship of the allowance for loan losses to outstanding
loans.
An allowance for loan losses is maintained for all impaired loans. Provisions
are made for impaired loans upon changes in expected future cash flows or
estimated net realizable value of collateral. When determination is made that
impaired loans are wholly or partially uncollectible, the uncollectible portion
is charged-off.
Management believes the allowance for possible loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's allowance for loan
losses. Such agencies may require the Company to recognize additions to the
allowance based on their judgment about information available to them at the
time of their examination.
Premises and Equipment
Premises and equipment are recorded at acquisition cost net of accumulate
depreciation.
Depreciation is charged to operations over the estimated useful lives of the
assets. The estimated useful lives and methods of depreciation are as follows:
Description Life in Years Method
----------- ------------- ------
Banking Premises 15-40 Straight-Line and Accelerated
Furniture and Equipment 5-10 Straight-Line and Accelerated
Expenditures for major renewals and betterments are capitalized. Maintenance and
repairs are charged to operations as incurred. When property and equipment are
retired or sold, the cost and accumulated depreciation are removed from the
respective accounts and any gain or loss is reflected in other income or
expense.
Cash Flows
For reporting cash flows, cash and cash equivalents include cash on hand,
noninterest-bearing amounts due from banks and federal funds sold. Cash flows
from demand deposits, NOW accounts, savings accounts, loans and certificates of
deposit are reported net.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
consolidated financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes are recognized for differences between the basis
of assets and liabilities for financial statement and income tax purposes. The
differences relate primarily to depreciable assets (use of different
depreciation methods for financial statement and income tax purposes) and
allowance for loan losses (use of the allowance method for financial statement
purposes and the experience method for tax purposes). The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
Other Real Estate
Other real estate generally represents real estate acquired through foreclosure
and is initially recorded at the lower of cost or estimated market value at the
date of acquisition. Losses from the acquisitions of property in full or partial
satisfaction of debt are recorded as loan losses. Subsequent declines in value,
routine holding costs and gains or losses upon disposition are included in other
losses.
Comprehensive Income
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.
8
<PAGE>
(2) Cash and Balances Due from Depository Institutions
------------------------------------------------------
Components of cash and balances due from depository institutions at September
30, 2000 and December 31, 1999 are as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Cash on Hand and Cash Items $ 4,376 $ 7,502
Noninterest-Bearing Deposits with Other Banks 7,643 8,334
Interest-Bearing Deposits with Other Banks 7,015 6,714
------- -------
$19,034 $22,550
======= =======
</TABLE>
(3) Investment Securities
-------------------------
Investment securities as of September 30, 2000 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 $12,828 $ 0 ($146) $12,682
Other 33,542 0 (831) 32,711
State, County & Municipal 6,555 2 (91) 6,466
The Banker's Bank Stock 50 0 0 50
Federal Home Loan Bank Stock 1,610 0 0 1,610
Marketable Equity Securities 1,130 0 (208) 922
Corporate Bonds 8,511 21 (21) 8,511
------- --- ------- -------
$64,226 $23 ($1,297) $62,952
======= === ======= =======
Securities Held to Maturity:
State, County and Municipal $ 596 $ 0 ($7) $ 589
======= === ======= =======
</TABLE>
The amortized cost and fair value of investment securities as of September 30,
2000 by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because issuers have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities
Available for Sale Held to Maturity
Amortized Cost Fair Value Amortized Cost Fair Value
<S> <C> <C> <C> <C>
Due in One Year or Less $ 5,179 $ 5,158 $400 $400
Due After One Year Through Five Years 37,825 37,022 0 0
Due After Five Years Through Ten Years 4,205 4,123 0 0
Due After Ten Years 1,399 1,385 196 189
------- ------- ---- ----
48,608 47,688 596 589
Federal Home Loan Bank Stock 1,610 1,610 0 0
The Banker's Bank Stock 50 50 0 0
Marketable Equity Securities 1,130 922 0 0
Mortgage-Backed Securities 12,828 12,682 0 0
------- ------- ---- ----
$64,226 $62,952 $596 $589
======= ======= ==== ====
</TABLE>
9
<PAGE>
(3) Investment Securities (continued)
-------------------------------------
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 Securities $ 4,629 $0 ($139) $ 4,490
Other 48,291 0 (1,955) 46,336
State, County & Municipal 8,826 3 (165) 8,664
The Banker's Bank Stock 50 0 0 50
Federal Home Loan Bank Stock 1,426 0 0 1,426
Marketable Equity Securities 1,130 0 (240) 890
------- -- ------- -------
$64,352 $3 ($2,499) $61,856
======= == ======= =======
Securities Held to Maturity:
State, County and Municipal $ 963 $0 ($26) $ 937
======= == ======= =======
</TABLE>
Investment securities having a carry value approximating $33,870 and $28,318 as
of September 30, 2000 and December 31, 1999, respectively, were pledged to
secure public deposits and for other purposes.
(4) Loans
---------
The composition of loans as of September 30, 2000 and December 31, 1999 was as
follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Commercial, Financial and Agricultural $ 54,821 $ 42,595
Real Estate - Construction 5,867 4,003
Real Estate - Farmland 18,377 24,179
Real Estate - Other 224,143 185,663
Installment Loans to Individuals 61,868 48,226
All Other Loans 13,436 10,775
-------- --------
$378,512 $315,441
======== ========
</TABLE>
Nonaccrual loans are loans for which principal and interest are doubtful of
collection in accordance with original loan terms and for which accruals of
interest have been discontinued due to payment delinquency. Nonaccrual loans
totaled $4,521 and $5,334 as of September 30, 2000 and December 31, 1999,
respectively. On September 30, 2000, the Company had 90 day past due loans with
principal balances of $505 and restructured loans with principal balances of
$219.
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, 1999 was as follows:
December 31, 1999
-----------------
Total Investment in Impaired Loans $ 885
Less Allowance for Impaired Loan Losses (106)
------
Net Investment, December 31, 1999 $ 779
======
10
<PAGE>
(5) Allowance for Loan Losses
------------------------------
Transactions in the allowance for loan losses are summarized below for nine
months ended September 30, 1999 as follows:
Sept 30, 2000 Sept 30, 1999
------------- -------------
Balance, Beginning $ 4,682 $ 4,726
Provision Charged to Operating Expenses 1,834 669
Loans Charged Off (1,275) (1,107)
Loan Recoveries 193 370
------- -------
Balance, Ending $ 5,434 $ 4,658
======= =======
(6) Premises and Equipment
---------------------------
Premises and equipment are comprised of the following as of September 30, 2000
and December 31, 1999:
Sept 30, 2000 December 31, 1999
------------- -----------------
Land $ 1,867 $ 1,572
Building 10,705 9,841
Furniture, Fixtures and Equipment 8,466 7,775
Leasehold Improvements 259 327
Construction in Progress 317 96
------- -------
21,614 19,611
------- -------
Accumulated Depreciation (7,668) (6,764)
------- -------
$13,946 $12,847
======= =======
Depreciation charged to operations totaled $946 and $842 for September 30, 2000
and September 30, 1999 respectively.
Certain Company facilities and equipment are leased under various operating
leases. Future minimum rental payments to be paid are as follows:
Year Ending
December 31 Amount
----------- ------
2000 $122
2001 106
2002 70
2003 49
2004 0
----
$347
====
(7) Income Taxes
-----------------
The Company records income taxes under SFAS No. 109, Accounting for Income
Taxes, which requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.
11
<PAGE>
(8) Deposits
------------
Components of interest-bearing deposits as of September 30, 2000 and December
31, 1999 are as follows:
Sept 30, 2000 December 31, 1999
------------- -----------------
Interest-Bearing Demand $ 65,658 $ 66,418
Savings 13,572 13,541
Time, $100,000 and Over 109,807 90,460
Other Time 201,129 170,311
-------- --------
$390,166 $340,730
======== ========
The aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of $100,000, was approximately $94,096 and $81,129 as of
September 30, 2000 and December 31, 1999, respectively.
As of September 30, 2000 and December 31, 1999, the scheduled maturities of
certificates of deposits are as follows:
Maturity September 30, 2000 December 31, 1999
-------- ------------------ -----------------
One Year and Under $256,714 $210,238
One to Three Years 43,755 38,676
Three Years and Over 10,467 11,857
-------- --------
$310,936 $260,771
======== ========
(9) Borrowed Money
--------------
Borrowed money at September 30, 2000 and December 31, 1999 is summarized as
follows:
Sept 30, 2000 December 31, 1999
------------- -----------------
Federal Home Loan Bank Advances $31,100 $20,700
First Port City Note Payable 674 674
The Banker's Bank Note Payable 445 593
------- -------
$32,219 $21,967
======= =======
Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from
2000 to 2008 and interest rates ranging from 5.40 percent to 6.98 percent. Of
the balances outstanding at September 30, 2000, $2,000,000 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.
First Port City note payable originated on January 30, 1997 with additional
funds added for an amount totaling $963. Annual principal payments of $96 are
due with interest paid quarterly at The Wall Street Prime Rate Indicator. The
debt is secured by commercial real estate in downtown Fitzgerald, which includes
the parent company's facilities. The note was renewed on January 20, 2000 for
$674. Any unpaid balance is due January 29, 2003.
The Bankers Bank note payable originated on September 5, 1997 for $1,000 at a
rate of The Wall Street Prime minus one half percent. Payments are due monthly
with the entire unpaid balance due September 5, 2002. The debt is secured by all
furniture, fixtures, machinery, equipment and software of Colony Management
Services, Inc. Colony Bankcorp, Inc. guarantees the debt.
The aggregate stated maturities of other borrowed money at September 30, 2000
are as follows:
Year Amount
---- -------
2000 $ 161
2001 15,220
2002 4,856
2003 3,482
2004 and Thereafter 8,500
-------
$32,219
=======
12
<PAGE>
(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 for 1999 and $264 for
1998.
(11) Commitments and Contingencies
----------------------------------
In the normal course of business, certain commitments and contingencies are
incurred which are not reflected in the consolidated financial statements.
Commitments under standby letters of credit to U.S. addresses approximate $1,991
as of September 30, 2000 and $1,705 as of December 31, 1999. Unfulfilled loan
commitments as of September 30, 2000 and December 31, 1999 approximated $37,591
and $43,197 respectively. No losses are anticipated as a result of commitments
and contingencies.
(12) Regulatory Capital Matters
-------------------------------
The amount of dividends payable to the parent company from the subsidiary banks
is limited by various banking regulatory agencies. The amount of cash dividends
available from subsidiaries for payment in 2000 without prior approval from the
banking regulatory agencies approximates $2,090. Upon approval by regulatory
authorities, the banks may pay cash dividends to the parent company in excess of
regulatory limitations.
The Company is subject to various regulatory capital requirements administered
by federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and, possibly, additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Company's 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
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios of total and Tier 1
capital to risk-weighted assets, and of Tier 1 capital to average assets. The
amounts and ratios as defined in regulations are presented hereafter. Management
believes, as of September 30, 2000, 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.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 2000
Total Capital
to Risk-Weighted Assets $43,727 10.91% $32,050 8.00% $40,063 10.00%
Tier 1 Capital
to Risk-Weighted Assets 38,714 9.66% 16,025 4.00% 24,038 6.00%
Tier 1 Capital
to Average Assets 38,714 7.92% 19,551 4.00% 24,439 5.00%
As of December 31, 1999
Total Capital
to Risk-Weighted Assets $40,267 11.88% $27,108 8.00% $33,885 10.00%
Tier 1 Capital
to Risk-Weighted Assets 36,026 10.63% 13,554 4.00% 20,331 6.00%
Tier 1 Capital
to Average Assets 36,026 8.39% 17,176 4.00% 21,469 5.00%
</TABLE>
13
<PAGE>
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only)
-----------------------------------------------------------------
The parent company's balance sheets as of September 30, 2000 and December 31,
1999 and the related statements of income and comprehensive income and cash
flows are as follows:
COLONY BANKCORP, INC. (PARENT ONLY)
BALANCE SHEETS
FOR PERIOD ENDED SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Cash $ 24 $ 247
Investments in Subsidiaries at Equity 38,020 34,266
Other 1,360 1,448
------- -------
Totals Assets $39,404 $35,961
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Dividends Payable $ 200 $ 177
Notes and Debentures Payable 674 674
Other 66 99
------- -------
940 950
Stockholders' Equity
Common Stock, Par Value $1; Authorized 20,000,000
Shares, Issued 4,440,276 and 4,435,026 Shares
as of September 30, 2000 and December 31, 1999
Respectively $ 4,440 $ 4,435
Paid-In Capital 21,603 21,537
Retained Earnings 13,333 10,767
Accumulated Other Comprehensive Income, Net of Tax (912) (1,728)
------- -------
Total Stockholders' Equity 38,464 35,011
------- -------
Total Liabilities and Stockholders' Equity $39,404 $35,961
======= =======
</TABLE>
14
<PAGE>
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only) (continued)
-----------------------------------------------------------------------------
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Sept 30, 2000 Sept 30, 1999
------------- -------------
<S> <C> <C>
Income $1,656 $ 1,213
Dividends from Subsidiaries 1 0
Management Fees from Subsidiaries 53 65
------ -------
Other $1,710 $ 1,278
Expenses 43 58
Interest 14 271
Amortization 584 302
------ -------
Other $ 641 $ 631
------ -------
Income Before Taxes and Equity in Undistributed Earnings
of Subsidiaries 1,069 647
Income Tax (Benefits) (190) (192)
------ -------
Income Before Equity in Undistributed Earnings of Subsidiaries 1,259 839
Equity in Undistributed Earnings of Subsidiaries 1,938 2,333
------ -------
Net Income 3,197 3,172
Other Comprehensive Income, Net of Tax
Gains (losses) on Securities Arising During Year 490 (1,190)
Reclassification Adjustment 326 1
------ -------
Unrealized Gains (Losses) in Securities 816 (1,189)
------ -------
Comprehensive Income $4,013 $ 1,983
====== =======
</TABLE>
15
<PAGE>
(13) Financial Information of Colony Bankcorp, Inc. (Parent Only) (continued)
-----------------------------------------------------------------------------
COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Sept 30, 2000 Sept 30, 1999
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 3,197 $ 3,172
Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities
Depreciation and Amortization 73 64
Equity in Undistributed Earnings of Subsidiary (1,938) (2,333)
Other (1) 8
------- -------
1,331 911
Cash Flows from Investing Activities
Capital Infusion in Subsidiary (1,000) 0
Purchase of Premises and Equipment 0 (25)
------- -------
(1,000) (25)
Cash Flows from Financing Activities
Dividends Paid (554) (421)
Proceeds from Issuance of Common Stock 0 0
Principal Payments on Notes and Debentures 0 0
Proceeds from Notes and Debentures 0 0
------- -------
(554) (421)
Increase (Decrease) in Cash and Cash Equivalents (223) 465
Cash and Cash Equivalents, Beginning 247 111
------- -------
Cash and Cash Equivalents, Ending $ 24 $ 576
======= =======
</TABLE>
(14) Common Stock Split
-----------------------
On February 16, 1999, a 100 percent stock split to be effected on September 30,
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 the stock
split.
(15) 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.
(16) Stock Grant Plan
----------------------
On February 16, 1999, a restricted stock grant plan was approved by the Board.
The plan was adopted for the purpose of establishing incentives designed to
recognize, reward and retain executive employees whose performance, contribution
and skills are critical to the Company. The plan period commences February 16,
1999 and ends February 15, 2009 with the maximum number of shares subject to
restricted stock awards being 22,175 shares (44,350 shares after the two-for-one
stock split effective September 30, 1999). On January 3, 2000, the Company
issued 5,250 shares under the stock grant plan to increase the total outstanding
shares from 4,435,026 at December 31, 1999 to 4,440,276 at September 30, 2000.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
Liquidity represents the ability to provide adequate sources of funds for
funding loan commitments and investment activities, as well as the ability to
provide sufficient funds to cover deposit withdrawals, payment of debt and
financing of operations. These funds are obtained by converting assets to cash
(representing primarily proceeds from collections on loans and maturities of
investment securities) or by attracting new deposits. For the nine months ended
September 30, 2000, the Company was successful in meeting its liquidity needs by
increasing deposits 13.61% to $425,398,000 from deposits of $374,450,000 on
December 31, 1999. Should the need arise, the Company also maintains
relationships with several correspondent banks and the Federal Home Loan Bank
that can provide funds on short notice.
The Company's liquidity position remained acceptable for the nine months ended
September 30, 2000. Average liquid assets (cash and amounts due from banks,
interest-bearing deposits in other banks, funds sold and investment securities)
represented 25.38% of average deposits for nine months ended September 30, 2000
as compared to 29.59% of average deposits for nine months ended September 30,
1999 and 28.80% of average deposits for calendar year 1999. Average loans
represented 88.08% of average deposits for nine months ended September 30, 2000
as compared to 81.20% for nine months ended September 30, 1999 and 82.35% for
calendar year 1999. Average interest-bearing deposits were 82.43% of average
earning assets for nine months ended September 30, 2000 as compared to 84.99%
for nine months ended September 30, 1999 and 84.58% for calendar year 1999.
The Company satisfies most of its capital requirements through retained
earnings. During the first three months of 2000, retained earnings provided
$1,042,000 of increase in equity and the change in unrealized losses on
securities available-for-sale, net of taxes resulted in equity capital
increasing $42,000. Thus, total equity increased by a net amount of $1,084,000
for the three month period ended March 31, 2000. During the second quarter of
2000, retained earnings provided $950,000 of increase in equity and the change
in unrealized losses on securities available-for-sale, net of taxes resulted in
equity capital increasing $11,000. Thus, total equity increased by a net amount
of $961,000 for the second quarter of 2000. During the third quarter of 2000,
retained earnings provided $645,000 of increase in equity and the change in
unrealized losses on securities available-for-sale, net of taxes resulted in
equity increasing $763,000. Thus, total equity increased by a net amount of
$1,408,000 for the third quarter 2000 and by a net amount of $3,453,00 for nine
months ended September 30, 2000. This compares to growth in equity through
retained earnings of $903,000, $918,000, and $908,000, respectively, for the
first three quarters of 1999. Additionally, equity capital decreased by
$246,000, $632,000 and $311,000, respectively, for the first three quarters of
1999 as a result of changes in unrealized losses on securities available-for-
sale, net of taxes. Thus, total equity increased by a net amount of $657,000,
$286,000 and $597,000, respectively, for the first three quarters of 1999, for a
net change of $1,540,000 for the nine month period ended September 30, 1999.
Total equity increased by a net amount of $1,914,000 for calendar year 1999.
At September 30, 2000, total capital of Colony amounted to approximately
$38,464,000. At September 30, 2000 there were no outstanding commitments for
capital expenditures.
The Federal Reserve Bank Board and the FDIC have issued capital guidelines for
U. S. banking organizations. The objective of these efforts was to provide a
more uniform capital framework that is sensitive to differences in risk assets
among banking organizations. The guidelines define a two-tier capital
framework. Tier I capital consists of common stock and qualifying preferred
stockholders' equity less goodwill. Tier 2 capital consists of convertible,
subordinated and other qualifying term debt and the allowance for loan losses up
to 1.25 percent of risk-weighted assets. The Company has no Tier 2 capital
other than the allowance for loan losses.
Using the capital requirements presently in effect, the Tier I capital to risk-
weighted assets at September 30, 2000 was 9.66% and total Tier 1 and 2 capital
to risk-weighted assets was 10.91%. Both of these measures compare favorably
with the regulatory minimums of 4% for Tier 1 and 8% for total risk-based
capital. The Company's leverage ratio as of September 30, 2000 was 7.92% which
exceeds the required leverage ratio standard of 4%.
For the first three quarters of 2000, the Company paid quarterly dividends of
$0.04, $0.045 and $0.045 per share, respectively, or $0.13 for the first three
quarters of 2000. The dividend payout ratio, defined as dividends per share
divided by net income per share, was 18.06% for nine months ended September 30,
2000. This compares to quarterly cash dividends of $0.03, $0.035 and $0.035,
respectively, for the first three quarters of 1999, or $0.10 for the nine month
period ended September 30, 1999. This results in a dividend payout ratio of
14.08% for the nine months ended September 30, 1999.
At September 30, 2000, management was not aware of any recommendations by
regulatory authorities which, if they were to be implemented, would have a
material effect on the Company's liquidity, capital resources or operations.
However, it is possible that examination by regulatory authorities in the future
could precipitate additional loan charge-offs which could materially impact the
Company's liquidity, capital resources and operations.
17
<PAGE>
RESULTS OF OPERATION
The Company's results of operations are determined by its ability to effectively
manage interest income and expenses, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Since interest
rates are determined by market forces and economic conditions beyond the control
of the Company, the ability to generate net interest income is dependent upon
the Bank's ability to obtain an adequate spread between the rate earned on
earning assets and the rate paid on interest-bearing liabilities. Thus, the key
performance measure for net interest income is the interest margin or net yield,
which is taxable-equivalent net interest income divided by average earning
assets.
Net Income
----------
Net income for the three months ended September 30, 2000 was $839,000 as
compared to $1,063,000 for the three months ended September 30, 1999, or a
decrease of 21.07% while net income for the nine months ended September 30, 2000
was $3,197,000 as compared to $3,172,000 for the nine months ended September 30,
1999, or an increase of 0.79%. Third quarter 2000 and year to date 2000 net
income was impacted due to management effecting an $18 million bond swap
transaction during the third quarter that resulted in a loss on the sale of
securities of $494,000 pretax ($326,000 after tax). The bond swap will allow
the Company to reduce cash flow variability present in the existing portfolio,
take advantage of interest rates that are near cyclical highs and extend the
duration of the investment portfolio, thereby earing the higher yields presently
available for an extended period of time into the future. Operating income,
which excludes the loss on sale of securities was $1,165,000 for the quarter
ended September 30, 2000 compared to $1,063,00 for the quarter a year ago, or an
increase of 9.60%. Operating income for the nine month period ended September
30, 2000 was $3,523,000 or $0.79 per share as compared to $3,173,000 or $0.72
per share for the same period in 1999. This operating income increase of
approximately 11.03% was achieved while the Company experienced additional
overhead associated with its denovo branch expansions; however, the new offices
are largely responsible for the $76 million asset growth from a year ago.
Net Interest Margin
-------------------
The net interest margin increased by 1 basis point to 4.39% in third quarter
2000 as compared to 4.38% in third quarter 1999 and increased by 8 basis points
to 4.42% for nine months ended September 30, 2000 as compared to 4.34% for the
same period in 1999. Net interest income increased 19.40% as third quarter 2000
net interest income was $4,997,000 compared to $4,185,000 for the same period in
1999 on an increase in average earning assets to $461,038,000 in third quarter
2000 from $386,529,000 in third quarter 1999. Net interest income increased by
20.92% to $14,333,000 for nine months ended September 30, 2000 from $11,853,000
for the same period in 1999 on an increase in average earning assets to
$438,170,000 for the nine months ended September 30, 2000 from $369,920,000 for
the same period in 1999. For the nine months ended September 30, 2000 compared
to the same period in 1999, average loans increased by $71,122,000 or 25.57%,
average funds sold increased by $2,805,000 or 22.90%, average investment
securities decreased by $6,128,000 or 8.69%, and average interest-bearing
deposits in other banks increased by $451,000 or 5.00%, resulting in a net
increase in average earning assets of $68,250,000 or 18.45%.
The net increase in average earning assets was funded by a net increase in
average deposits of 15.07% to $396,548,000 for nine months ended September 30,
2000 from $344,610,000 for the same period in 1999. Average interest-bearing
deposits increased by 14.89% to $361,194,000 for nine months ended September 30,
2000 compared to $314,391,000 for nine months ended September 30, 1999, while
average noninterest-bearing deposits represented 8.92% of average total deposits
for nine months ended September 30, 2000, compared to 8.77% for the same period
in 1999 and 8.79% for calendar year 1999.
Interest expense increased for the three months ended September 30, 2000 by
$1,556,000 compared to the same period in 1999 and increased by $3,354,000 for
the nine months ended September 30, 2000 compared to the same period in 1999.
The increase in interest expense is primarily attributable to the Federal
Reserve raising interest rates in late 1999 and the first half of 2000 and to
the increase in average interest-bearing deposits to $361,194,000 for the nine
months ended September 30, 2000 compared to $314,391,000 for the nine months
ended September 30, 1999 and an increase in average borrowings to $28,923,000
for nine months ended September 30, 2000 compared to $17,011,000 for the nine
months ended September 30, 1999. The combination of higher interest rates
increasing the net interest margin with an increase in average earning assets
resulted in an increase in net interest income of $812,000 for third quarter
2000 compared to the same period a year ago and an increase in net interest
income of $2,480,000 for nine months ended September 30, 2000 compared to the
same period a year ago.
Provision for Loan Losses
-------------------------
The allowance for loan losses represents a reserve for potential losses in the
loan portfolio, The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans with a particular
emphasis on non-accruing, past due and other loans that management believes
requires attention.
18
<PAGE>
The provision for loan losses is a charge to earnings in the current period to
replenish the allowance for loan losses and maintain it at a level that
management has determined to be adequate. The provision for loan losses was
$752,000 for third quarter 2000 compared to $226,000 for third quarter 1999 and
$1,834,000 for nine months ended September 30, 2000 compared to $669,000 for the
same period in 1999. The increase in the provision for loan losses in both
periods is attributable to maintaining adequate reserve levels given the
significant increase in outstanding loans for the past twelve months. Net loan
charge-offs represented 53.86% of the provision for loan losses in third quarter
2000 compared to (21.68%) in third quarter 1999. Net loan charge-offs
represented 59.00% of the provision for loan losses in the nine month period
ended September 30, 2000 compared to 110.01% of the provision for loan losses in
the nine month period ended September 30, 1999. During the first nine months of
2000 and 1999, a net of $1,082,000 and $736,000, respectively, was charged-off.
Net loan charge-offs for the nine months ended September 30, 2000 represented
0.31% of average loans outstanding compared to 0.26% for the nine months ended
September 30, 1999. At September 30, 2000 the allowance for loan losses was
1.44% of total loans outstanding as compared to an allowance for loan losses of
1.49% at September 30, 1999 and 1.48% at December 31, 1999. The allowance for
loan losses of 1.44% at September 30, 2000 provided coverage of 108.12% of
nonperforming loans and 101.10% of nonperforming assets, compared to 73.89% and
65.41%, respectively, at September 30, 1999. The determination of the reserve
rests upon management's judgment about factors affecting loan quality and
assumptions about the economy. Management considers the September 30, 2000
allowance for loan losses adequate to cover potential losses in the loan
portfolio.
Noninterest Income
------------------
Noninterest income consists primarily of service charges on deposit accounts.
Service charges on deposit accounts amounted to $694,000 in third quarter 2000
compared to $587,000 in third quarter 1999, or an increase of 18.23% and
amounted to $1,876,000 for nine months ended September 30, 2000 compared to
$1,612,000 for the same period a year ago, or an increase of 16.38%. All other
noninterest income decreased by $6,000 to $199,000 for third quarter 2000 from
$205,000 for third quarter 1999 and all other noninterest income decreased by
$44,000 to $699,000 for nine months ended September 30, 2000 from $743,000 for
the same period in 1999. The primary decrease of other noninterest income
results from the recovery of $94,000 in 1999 on a previously written down
investment security at one of the subsidiary banks. There were no other
significant variances in other noninterest income accounts during these time
periods
Noninterest Expense
-------------------
Noninterest expense increased by 21.28% to $3,899,000 in third quarter 2000 from
$3,215,000 for the same period a year ago and increased by 15.23% to $10,334,000
for nine months ended September 30, 2000 from $8,968,000 for the same period in
1999. Salaries and employee benefits along with occupancy expense had
significant increases due to new offices opened the past three years. Salaries
and employee benefits increased 8.68% to $1,904,000 in third quarter 2000
compared to $1,752,000 for the same period in 1999 and increased 13.34% to
$5,480,000 for nine months ended September 30, 2000 compared to $4,835,000 for
the same period a year ago. Occupancy expense increased 32.65% to $646,000 for
third quarter 2000 from $487,000 for the same period in 1999 and increased
20.36% to $1,732,000 for nine months ended September 30, 2000 from $1,439,000
for the same period a year ago. All other noninterest expense decreased 12.40%
to $855,000 for third quarter 2000 from $976,000 for the same period a year ago
and decreased 2.38% to $2,628,000 for nine months ended September 30, 2000 from
$2,692,000 for the same period a year ago. Most significant to the increase in
noninterest expense was the loss on sale of securities, net of $494,000 during
the third quarter of 2000. Excluding this non-recurring expense, noninterest
expense would have increased by 5.91% for third quarter 2000 compared to the
same period in 1999 and increased by 9.75% for the nine month period ended
September 30, 2000 compared to the same period in 1999. The bond swap which
resulted in the $494,000 loss on the sale of securities will allow the Company
to reduce cash flow variability present in the existing portfolio, take
advantage of interest rates that are near cyclical highs and extend the duration
of the investment portfolio, thereby earning the higher yields presently
available for an extended period of time into the future.
Income Tax Expense
------------------
Income before taxes decreased by 19.34% to $1,239,000 in third quarter 2000 from
$1,536,000 in third quarter 1999 and increased by 3.70% to $4,740,000 for nine
months ended September 30, 2000 compared to $4,571,000 for the same period in
1999. Income tax as a percentage of income before taxes increased by 4.84% to
32.28% in third quarter 2000 compared to 30.79% in third quarter 1999 and
increased by 6.34% to 32.55% for nine months ended September 30, 2000 compared
to 30.61% for the same period in 1999. Income tax expense decreased 15.43% to
$400,000 for third quarter 2000 compared to $473,000 for third quarter 1999 and
increased 10.29% to $1,543,000 for nine months ended September 30, 2000 compared
to $1,399,000 for the same period a year ago.
Future Outlook
--------------
Colony is an emerging company operating in an industry filled with non-regulated
competitors and a rapid pace of consolidation. 2000 brings with it new
opportunities for growth in our existing markets, as well as opportunities to
expand into new markets through acquisitions and branching. Colony completed
the acquisition of Georgia First Mortgage Company during first quarter 2000 to
19
<PAGE>
expand its mortgage opportunities. Colony opened its Moultrie office in August,
2000 and will open the Soperton office during the fourth quarter of 2000 and has
targeted a new office to be located in Lee County for 2001. Colony Management
Services, Inc. continues to stay abreast of technology changes and its back-
office consolidation effort will allow for continued reduction in overhead,
while allowing the Company to better serve our customers through improved
customer data resources and state-of-the-art technological services.
Year 2000 Compliance Issue
--------------------------
Colony 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). 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.
Liquidity
---------
The Company's goals with respect to liquidity are to ensure that sufficient
funds are available to meet current operating requirements and to provide
reserves against unforeseen liquidity requirements. Management continuously
reviews the Company's liquidity position, which is maintained on a basis
consistent with established internal guidelines and the tests and reviews of the
various regulatory authorities. The Company's primary liquidity sources at
September 30, 2000 included cash, due from banks, federal funds and short-term
investment securities. The Company also has the ability, on a short-term basis,
to borrow funds from the Federal Reserve System and to invest in Federal Funds
Sold from other financial institutions. The mix of asset maturities contributes
to the company's overall liquidity position.
Certain Transactions
--------------------
In the normal course of business, officers and directors of the Banks, and
certain business organizations and individuals associated with them, maintain a
variety of banking relationships with the bank. Transactions with senior
officers and directors are made on terms comparable to those available to other
bank customers.
Forward-Looking Statements
--------------------------
This document contains statements that constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The words
"believe", "estimate", "expect", "intend", "anticipate" and similar expressions
and variations thereof identify certain of such forward-looking statements,
which speaks only as of the dates which they were made. The Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise. Users are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties and that actual results may
differ materially from those indicated in the forward-looking statements as a
result of various factors. Users are therefore cautioned not to place undue
reliance on these forward-looking statements.
BUSINESS
General
The Company was organized in 1983 as a bank holding company through the merger
of The Bank of Fitzgerald with a subsidiary of the Company. Since that time,
The Bank of Fitzgerald, which was formed by principals of Colony Bankcorp, Inc.
in 1976, has operated as wholly-owned subsidiary of the Company. In April 1984,
Colony Bankcorp, Inc. acquired Community Bank of Wilcox, and in November 1984,
Ashburn Bank became a wholly-owned subsidiary of Colony Bankcorp, Inc. Colony
Bankcorp, Inc. continued its growth with the acquisition of Colony Bank of Dodge
County in September 1985. In August 1991, Colony Bankcorp, Inc. acquired Colony
Bank Worth. In November 1996, Colony Bankcorp, Inc. acquired Colony Bank
Southeast and in November, 1996 formed a non-bank subsidiary Colony Management
Services, Inc.
Through its nine subsidiary banks, Colony Bankcorp, Inc. operates a full-service
banking business and offers a broad range of retail and commercial banking
services including checking, savings, NOW accounts, money market and time
deposits of various types; loans for business, agriculture, real estate,
personal uses, home improvement and automobiles; credit card; letters of credit;
trust services investment, and discount brokerage services; IRA's, safe deposit
box rentals, bank money orders, and electronic funds
20
<PAGE>
transfer services, including wire transfers and automated teller machines. Each
of the Banks is a state chartered institution whose customer deposits are
insured up to applicable limits by the Federal Deposit Insurance Corporation.
On April 2, 1998, the Company was listed on Nasdaq National Market. The
Company's common stock trades on the Nasdaq Stock Market under the symbol
"CBAN". The Company presently has 921 shareholders of record as of September
30, 2000. "The Nasdaq Stock Market" or "Nasdaq" is a highly-regulated
electronic securities market comprised of competing Market Makers whose trading
is supported by a communications network linking them to quotation
dissemination, trade reporting and order execution systems. This market also
provides specialized automation services for screen-based negotiations of
transactions, on-line comparison of transactions, and a range of informational
services tailored to the needs of the securities industry, investors and
issuers. The Nasdaq Stock Market is operated by The Nasdaq Stock Market, Inc.,
a wholly-owned subsidiary of the National Association of Securities Dealers,
Inc.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
A. Exhibits - None
B. There have been no reports filed on Form 8-K for the quarter ended
September 30, 2000.
21
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLONY BANKCORP, INC.
November 6, 2000 /s/ James D. Minix
----------------------- ------------------------------------------------
Date James D. Minix, President and
Chief Executive Officer
/s/ Terry L. Hester
-----------------------------------------------
Terry L. Hester, Executive Vice President and
Chief Financial Officer
22
