-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P3kVunG9bn6OseORT0tg/kBJV5j5IdxPnVfJmtzOKbMvKQtOdJRBmzqoI94XWaUp /vB4PQ4IsJcJkidlyNQg3A== 0000931763-95-000190.txt : 19951121 0000931763-95-000190.hdr.sgml : 19951121 ACCESSION NUMBER: 0000931763-95-000190 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951108 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONY BANKCORP INC CENTRAL INDEX KEY: 0000711669 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 581492391 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12436 FILM NUMBER: 95588172 BUSINESS ADDRESS: STREET 1: 302 S MAIN ST STREET 2: PO BOX 989 CITY: FITZGERALD STATE: GA ZIP: 31750 BUSINESS PHONE: 9124235446 10-Q 1 FORM 10-Q 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, 1995 COMMISSION FILE NUMBER 0-12436 COLONY BANKCORP, INC. --------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) GEORGIA 58-1492391 ------- ---------- (STATE OF OTHER JURISDICTION) (I.R.S. EMPLOYER) OF INCORPORATION OR ORGANIZATION IDENTIFICATION NUMBER 302 SOUTH MAIN STREET, FITZGERALD, GEORGIA 31750 ------------------------------------------------ ADDRESS OF PRINCIPAL EXECUTIVE OFFICES 912/423-5333 ------------ 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 THE CLOSE OF THE PERIOD COVERED BY THIS REPORT. CLASS OUTSTANDING AT SEPTEMBER 30, 1995 ----- --------------------------------- COMMON STOCK, $10 PAR VALUE 1,216,110 PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS -------------------- THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED FOR COLONY BANKCORP, INC. AND SUBSIDIARIES: THE BANK OF FITZGERALD, ASHBURN BANK, COMMUNITY BANK OF WILCOX, THE BANK OF DODGE COUNTY, AND THE BANK OF WORTH. A. CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 1995 AND DECEMBER 31, 1994. B. CONSOLIDATED STATEMENTS OF INCOME - FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994. C. CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994. 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, 1995 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR. 2 COLONY BANKCORP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1995 AND DECEMBER 31, 1994 (UNAUDITED) (DOLLARS IN THOUSANDS)
ASSETS SEPTEMBER 30, 1995 DECEMBER 31, 1994 ------------------- ------------------ Cash and due from banks $ 6,822 $ 8,583 Interest-bearing deposits in banks -0- 1,882 Securities: Securities available for sale, at fair value 37,522 38,035 Securities held for investment at cost (fair value of $8,287 and $8,207) (Note #1) 8,426 8,746 Federal funds sold 8,345 6,760 Loans, less allowance for loan losses of $4,135 and $3,029 respectively (Note #2) 194,468 170,330 Premises and equipment, net (Note #3) 5,807 5,822 Other real estate owned 1,993 1,824 Other assets 7,932 6,834 -------- -------- Total Assets $271,315 $248,816 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand $ 20,963 $ 25,743 Interest-bearing demand 42,756 52,274 Savings 9,553 10,543 Time, $100,000 and over 50,807 43,189 Other time 121,252 95,294 -------- -------- Total Deposits $245,331 $227,043 -------- -------- Federal funds purchased and securities sold under repurchase agreements and other short-term borrowings 70 760 Accrued interest and other liabilities 2,310 1,484 Notes and debentures payable 4,323 2,779 -------- -------- Total Liabilities $252,034 $232,066 -------- -------- Commitments and contingent liabilities (Note #5) Stockholders' equity Common stock, par value $10; 5,000,000 shares authorized; 1,216,110 and 608,055 shares issued, respectively 12,161 6,081 Surplus 367 1,448 Retained earnings (Note #4) 7,063 10,433 Net unrealized holding gains (losses) on available for sale securities (310) (1,212) -------- -------- Total Stockholders' Equity $ 19,281 $ 16,750 -------- -------- Total Liabilities and Stockholders' Equity $271,315 $248,816 ======== ========
3 COLONY BANKCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED) (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED 9/30/95 9/30/94 9/30/95 9/30/94 ---------- ---------- ---------- ---------- Interest Income: Income and fees on loans $ 5,398 $ 4,811 $ 15,374 $ 13,279 Interest on federal funds sold 103 30 332 124 Interest on securities: U.S. Treasury & Federal Agencies 616 541 1,864 1,620 State & Municipal 56 67 179 206 Interest on Bank CD's 38 66 137 149 --------- --------- ---------- ---------- Total Interest Income $ 6,211 $ 5,515 $ 17,886 $ 15,378 --------- --------- ---------- ---------- Interest Expense: Interest on deposits $ 3,042 $ 2,285 $ 8,129 $ 6,465 Interest on long-term debt 56 64 171 179 Interest on Fed Funds 4 13 33 41 Other Interest Expense 26 39 73 70 --------- --------- ---------- ---------- Total Interest Expense $ 3,128 $ 2,401 $ 8,406 $ 6,755 --------- --------- ---------- ---------- Net Interest Income $ 3,083 $ 3,114 $ 9,480 $ 8,623 Provision for loan losses 851 425 2,038 1,522 --------- --------- ---------- ---------- Net interest income after provision for loan losses $ 2,232 $ 2,689 $ 7,442 $ 7,101 Other Operating Income: Service charges on deposit accounts $ 391 $ 350 $ 1,149 $ 1,019 Other income 125 173 471 561 Securities transactions, net -0- -0- 18 12 --------- --------- ---------- ---------- Total Other Operating Income $ 516 $ 523 $ 1,638 $ 1,592 --------- --------- ---------- ---------- Other Operating Expense: Salaries & Other Employee Benefits $ 1,063 $ 962 $ 3,243 $ 2,900 Occupancy & Equip. Expenses 257 270 781 790 Other operating expense 693 899 2,243 2,440 --------- --------- ---------- ---------- Total Other Operating Expense $ 2,013 $ 2,131 $ 6,267 $ 6,130 --------- --------- ---------- ---------- Income before income taxes $ 735 $ 1,081 $ 2,813 $ 2,563 Applicable income taxes 228 353 909 812 --------- --------- ---------- ---------- Net Income (Loss) $ 507 $ 728 $ 1,904 $ 1,751 --------- --------- ---------- ---------- Income (Loss) per share of Common Stock based on average number of shares outstanding during period * $ .42 $ .60 $ 1.56 $ 1.44 --------- --------- ---------- ---------- Average Shares Outstanding * 1,216,110 1,216,110 1,216,110 1,216,110 --------- --------- ---------- ----------
* Average shares in 1994 adjusted to reflect two-for-one stock split effected in the form of 100% stock dividend effective July 1, 1995. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 4 COLONY BANKCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED) (DOLLARS IN THOUSANDS)
1995 1994 ---------- ---------- CASH FLOW FROM OPERATING ACTIVITIES Net income (loss) $ 1,904 $ 1,751 Adjustments to reconcile net income to net cash provided by operating activities: (Gain) loss on sale of investment securities (18) (12) Depreciation 390 410 Provision for loan losses 2,038 1,522 Amortization of excess costs 35 130 Other prepaids, deferrals and accruals, net (1,851) (3,030) --------- --------- Total Adjustments $ 594 $ (980) Net cash provided by operating activities $ 2,498 $ 771 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES (Increase) decrease in federal funds sold $ (1,585) $ 1,095 Purchases of securities available for sale (7,339) (7,396) Proceeds from sales of securities available for sale 2,908 3,300 Proceeds from maturities of securities available for sale 6,275 7,925 Purchase of securities held for investment -0- (2,357) Proceeds from maturities of securities held for investment 335 215 Proceeds from sales of securities held for investment -0- -0- Decrease in interest-bearing deposits in banks 1,882 1,092 (Increase) in loans (25,244) (24,431) Purchase of premises and equipment (372) (302) --------- --------- Net cash (used in) investing activities ($23,140) ($20,859) --------- --------- CASH FLOW FROM FINANCING ACTIVITIES Net increase in deposits $ 18,288 $ 15,632 Net increase in short-term borrowings and Federal Funds Purchased 1,010 3,640 Dividends paid (261) (237) Net (decrease) increase in long-term borrowings (156) (135) --------- --------- Net cash provided by financing activities $ 18,881 $ 18,900 --------- --------- Net increase (decrease) in cash and cash equivalents (1,761) (1,188) Cash and cash equivalents at beginning of period 8,583 7,535 --------- --------- Cash and cash equivalents at end of period $ 6,822 $ 6,347
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 5 COLONY BANKCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - - - ------------------------------------------ Colony Bankcorp, Inc. is a multi-bank holding company whose business is presently conducted by its wholly-owned subsidiaries, The Bank of Fitzgerald, Ashburn Bank, Community Bank of Wilcox, The Bank of Dodge County and The Bank of Worth. The accounting and reporting policies of the Company conform to generally accepted accounting principles and with general practices within the banking industry. BASIS OF PRESENTATION - - - --------------------- The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany transactions and accounts are eliminated in consolidation. Assets held by the banks in a fiduciary or agency capacity are not assets of the banks and are not included in the consolidated financial statements. INVESTMENT SECURITIES (NOTE #1) - - - ------------------------------- Effective January 1, 1994, the company adopted SFAS 115 that requires investments in debt and equity securities be classified as trading securities, securities available for sale or securities held to maturity. Upon adoption, the Company transferred $38,889,370 from securities held for investment to securities available for sale. The adoption of SFAS 115 had the net effect on the company's financial statements of decreasing shareholders' equity $154,000 on September 30, 1995. Investment securities are those securities which the Company has the ability and intent to hold to maturity. These securities are stated at cost adjusted for amortization of premium and accretion of discount, computed by the interest method. Gains and loses on the sale of investment securities are computed on the basis of specific identification of the adjusted cost of each security. Available for sale securities are carried at market value with unrealized gains or losses, net of income tax effect shown as increases or decreases in shareholders' equity. LOANS (NOTE #2) - - - --------------- Loans are stated at the amount of unpaid principal reduced by unearned discount. Interest on commercial and real estate loans is credited to income on a daily basis based upon the principal amount outstanding. Most interest on installment loans is credited to income on a daily basis based upon the principal amount outstanding. The remaining interest on installment loans is credited to income based on the sum-of-the-months-digits method, the results of which are not materially different from general accepted accounting principals. Accrual of interest income is discontinued on loans when, in the opinion of management, collection of such interest income becomes doubtful. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current interest income. Accrual of interest on such loans is resumed when, in management's judgment, the collection of interest and principal becomes probable. Fees on loans and costs incurred in origination of loans are recognized at the time the loan is placed on the books. Because loan fees are not significant and the majority of loans have maturities of one year or less, the results on operations are not materially different than the results which would be obtained by accounting for loan fees and costs in accordance with generally accepted accounting principles. 6 ALLOWANCE FOR LOAN LOSSES (NOTE #3) - - - ----------------------------------- The allowance for loan losses is established through a provision for loan losses charged to expenses. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb possible losses on existing loans that may become uncollectible, based on evaluations of the collectibility of loans and prior loan loss experience. PREMISES AND EQUIPMENT - - - ---------------------- Premises and equipment are stated at cost less accumulated depreciation, computed principally on the straight-line method over the following estimated useful lives: Buildings ........................... 10-40 years Equipment ........................... 5-20 years Leasehold improvements .............. 7-15 years INTANGIBLE ASSETS - - - ----------------- Intangible assets, arising from excess of purchase price over net assets acquired of purchased banks, are being amortized on the straight-line method over various periods not exceeding 20 years. PROFIT-SHARING PLAN - - - ------------------- Profit-sharing plan costs are funded as accrued and are based on a percentage of individual employee's salary, not to exceed the amount that can be deducted for Federal income tax purposes. INCOME TAXES - - - ------------ The Company and its subsidiaries file a consolidated income tax return. Each subsidiary provides for income taxes based on its contribution to income taxes (benefits) of the consolidated group. Provisions for income taxes are based on amounts reported in the consolidated statements of income after exclusion of nontaxable income such as interest on state and municipal securities and include deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Deferred taxes are computed on the liability method as prescribed in SFAS No. 109, "Accounting for Income Taxes". The Company adopted SFAS No. 109, "Accounting for Income Taxes", in 1993. The effect of the change in accounting for income taxes did not have a material effect on the Company's consolidated financial statements. EARNINGS PER SHARE (NOTE #4) - - - ---------------------------- Earnings per share are calculated on the basis of the weighted average number of shares outstanding. COMMITMENTS AND CONTINGENT LIABILITIES (NOTE #5) - - - ------------------------------------------------ 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. 7 Following is an analysis of significant off balance sheet financial instruments:
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 ------------------ ------------------ Commitments to extend credit $16,007 $16,975 Standby letters of credit 3,483 3,246 ------- ------- $19,490 $20,221
Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitment amounts expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The credit risk involved in issuing these financial instruments is essentially the same as that involved in extending loans to customers. The amount of collateral obtained, if deemed necessary by the Banks upon extension of credit, is based on management's credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties. The Banks do not anticipate any material losses as a result of the commitments and contingent liabilities. The nature of the business of the Banks is such that it ordinarily results in a certain amount of litigation. In the opinion of management and counsel for the company and the Banks, there is no litigation in which the outcome will have a material effect on the consolidated financial statements. STATEMENT OF CASH FLOWS - - - ----------------------- For the purposes of reporting cash flows, cash and due from banks includes cash on hand and amounts due from banks (including cash items in process of clearing). Cash flows from loans originated by the Bank, deposits, interest- bearing deposits and Federal funds purchased and sold are reported net. INVESTMENT SECURITIES - - - --------------------- The carrying value and related market value of investment securities at September 30, 1995 and December 31, 1994, were as follows:
SEPTEMBER 30, 1995 ---------------------------------------------- Gross Gross Estimated Carrying Unrealized Unrealized Market Value Gains Losses Value Securities Available for Sale: U.S. Treasury & Federal Agencies $10,761 $ 55 $ (22) $10,794 State & Municipal 2,088 69 (8) 2,149 Mortgage-backed Securities 23,683 53 (381) 23,355 Equity Securities 1,380 -0- (156) 1,224 ------- ----- ------ ------- $37,912 $ 177 $ (567) $37,522 ------- ----- ------ ------- Securities Held for Investment: U.S. Treasury & Federal Agencies $ 5,650 $ 8 $ (71) $ 5,587 State and Municipal 2,776 17 (93) 2,700 ------- ----- ------ ------- $ 8,426 $ 25 $ (164) $ 8,287 ------- ----- ------ -------
8
DECEMBER 31, 1994 -------------------------------------------- Gross Gross Estimated Carrying Unrealized Unrealized Market Value Gains Losses Value Securities Available for Sale: U.S. Treasury & Federal Agencies $ 9,709 $ 1 $ (231) $ 9,479 State & Municipal 2,151 32 (9) 2,174 Mortgage-backed Securities 26,771 25 (1,331) 25,465 Equity Securities 1,130 -0- (213) 917 ------- ----- ------- ------- $39,761 $ 58 $(1,784) $38,035 ------- ----- ------- ------- Securities Held for Investment: U.S. Treasury & Federal Agencies $ 5,907 $ -0- $ (306) $ 5,601 State and Municipal 2,839 -0- (232) 2,607 ------- ----- ------- ------- $ 8,746 $ -0- $ (538) $ 8,208 ------- ----- ------ -------
The carrying value and estimated market value of investment securities at September 30, 1995, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
CARRYING VALUE ESTIMATED MARKET VALUE -------------- ---------------------- Due in one year or less $ 656 $ 660 Due after one year through five years 18,809 18,826 Due after five years through ten years 925 935 Due after ten years 885 809 Mortgage-backed securities 23,683 23,355 Marketable equity securities 1,380 1,224 ------- ------- $46,338 $45,809
Securities with a carry value of $22,360 and $27,753 at September 30, 1995 and December 31, 1994 respectively, were pledged to secure public deposits or for other purposes. LOANS - - - ----- The composition of the Bank's loan portfolio at September 30, 1995 and December 31, 1994 was as follows:
SEPTEMBER 30, 1995 DECEMBER 31, 1994 ------------------- ------------------ Commercial and Financial loans $ 17,610 $ 18,170 Agricultural loans 25,017 17,187 Real Estate-Mortgage, Farmland 26,634 25,284 Real Estate-Mortgage, Other 88,233 75,990 Consumer loans 33,098 32,252 Other 8,024 4,494 -------- -------- $198,616 $173,377 Unearned discount (13) (18) Allowance for loan losses (4,135) (3,029) -------- -------- Net Loans $194,468 $170,330
9 The bank continues to accrue interest on loans until the loans are determined to be uncollectible. Uncollectible loans are charged to the provision for loan losses and any earned but not collected interest on such loans is charged to income. There were non-accruing loans of $4,897 and $2,093 at September 30, 1995 and December 31, 1994, respectively. At September 30, 1995, the Company had 90 day past due loans with principal balances of $1,170,000 and restructured loans with principal balances of $598,000. RESERVE FOR LOAN LOSSES - - - ----------------------- Transactions in the reserve for loan losses for the nine months ended September 30, 1995 and September 30, 1994, are summarized as follows:
1995 1994 -------- -------- Balance at beginning of period $ 3,029 $ 2,635 Additions: Provisions charged to operating expense 2,038 1,522 Deductions: Loan charge-offs (1,291) (1,261) Less recoveries 359 90 ------- ------- Net loan charge-offs (932) (1,171) ------- ------- Balance at end of period $ 4,135 $ 2,986
BANK PREMISES AND EQUIPMENT - - - --------------------------- Bank premises and equipment at September 30, 1995 and December 31, 1994 are summarized as follows:
SEPTEMBER 30, 1995 DECEMBER 31, 1994 EST. USEFUL LIFE (YEARS) ------------------- ------------------ ------------------------ Land $ 796 $ 776 7-40 Building 4,824 4,772 3-20 Furniture & Fixtures 4,231 4,565 Leasehold Improvements -0- -0- Less: accum. depre. (4,044) (4,291) ------- ------- $ 5,807 $ 5,822
SUBSEQUENT EVENT (NOTE #6) The company submitted Form SB-2 Registration Statement Under The Securities Act of 1993 to Securities and Exchange Commission for approval to issue 75,000 shares of common stock at $20.00 per share for the purpose of expanding the shareholder base of the Company. The Company is not committed to a specific use for the proceeds, but it is anticipated that the proceeds will be infused into one or more of the subsidiaries of the Company as additional capital. Approval of the registration statement by Securities and Exchange Commission became effective at 10:00 a.m. on October 23, 1995. The shares will be offered by the Company through the officers, directors and employees of the Company without the assistance of an underwriter or dealer. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION LIQUIDITY AND CAPITAL RESOURCES Liquidity represents the ability to provide adequate sources of funds for funding loan commitments and investment activities, as well as the ability to provide sufficient funds to cover deposit withdrawals, payment of debt and financing of operations. These funds are obtained by converting assets to cash (representing primarily proceeds from collections on loans and maturities of investment securities) or by attracting and obtaining new deposits. For the nine months ended September 30, 1995, the Company was successful in obtaining deposits as evidenced by the fact that deposits increased by 8.05% to $245,331,000 from deposits of $227,043,000 on December 31, 1994. The Company's liquidity position remained acceptable for the nine months ended September 30, 1995. Average liquid assets (cash and amounts due from banks, interest-bearing deposits in other banks, funds sold and investment securities) represented 26.68% of average deposits for nine months ended September 30, 1995 as compared to 25.09% for nine months ended September 30, 1994 and 25.83% for calendar year 1994. Average loans represented 79.36% of average deposits for nine months ended September 30, 1995 as compared to 80.82% for nine months ended September 30, 1994 and 79.56% for calendar year 1994. Average interest-bearing deposits were 87.45% of average earning assets for nine months ended September 30, 1995 as compared to 88.99% for nine months ended September 30, 1994 and 88.74% for calendar year 1994. The Company satisfies most of its capital requirements through retained earnings. During the first nine months of 1995, retained earnings provided $1,630,000 of increase in equity. Additionally, equity capital increased by $901,000 during the first nine months of 1995 resulting from the change during the first three quarters of 1995 in unrealized losses on securities available for sale, net of taxes. Thus, total equity increased by a net amount of $2,531,000 for the nine month period ended September 30, 1995. This compares to growth in equity of $806,000 for the nine month period ended September 30, 1994 and $793,000 for the 1994 calendar year. At September 30, 1995, total capital of Colony amounted to approximately $19,281,000. At September 30, 1995 there were no outstanding commitments for any major expenditures. The Federal Reserve Bank Board and the FDIC have issued capital guidelines for U.S. banking organizations. The objective of these efforts was to provide a more uniform capital framework that is sensitive to differences in risk assets among banking organizations. The guidelines define a two-tier capital framework. Tier 1 capital consists of common stock and qualifying preferred stockholder's equity less goodwill. Tier 2 capital consists of certain convertible, subordinated and other qualifying term debt and the allowance for loan losses up to 1.25 of risk-weighted assets. The Company has no Tier 2 capital other than the allowance for loan losses. Using the capital requirements presently in effect, the Tier 1 ratio at September 30, 1995 was 8.88% and total Tier 1 and 2 risk-based capital was 10.13%. Both of these measures compare favorably with the regulatory minimums of 4% for Tier 1 and 8% for total risk-based capital. The Company's leverage ratio at September 30, 1995 was 7.07% which exceeds the required leverage ratio standard of 4%. For the first three quarters of 1995, the Company paid quarterly dividends of $.075 adjusted for the July 1, 1995 two-for-one stock split. The dividend payout ratio, defined as dividends per share divided by net income per share, was 14.37% for nine month period ended September 30, 1995 as compared to $.065 quarterly dividends for the first three quarters of 1994 and a dividend payout ratio of 13.54%. At September 30, 1995, management was not aware of any recommendations by regulatory authorities which, if they were to be implemented, would have a material effect on the Company's liquidity, capital resources or operations. However, it is possible that examinations by regulatory authorities in the future could precipitate additional loss charge-offs which could materially impact the Company's liquidity, capital resources and operations. 11 RESULTS OF OPERATION The Company's results of operations are determined by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Since interest rates are determined by market forces and economic conditions beyond the control of the Company, the ability to generate net interest income is dependent upon the Bank's ability to obtain an adequate spread between the rate earned on earning assets and the rate paid on interest-bearing liabilities. Thus, the key performance measure for net interest income is the interest margin or net yield, which is taxable - equivalent net interest income divided by average earnings assets. Net income for the three months ended September 30, 1995, was $507,000 as compared with $728,000 for the three months ended September 30, 1994, or a decrease of 31.21% and net income for the nine months ended September 30, 1995 was $1,904,000 as compared with $1,751,000 for the nine months ended September 30, 1994, or an increase of 8.74%. Third quarter 1995 earnings were lower compared to third quarter 1994 due to additional loan loss provisions necessitated by our continued effort to address problem loans and to provide an adequate loan loss reserve for future losses. The increase in net income for nine months ended September 30, 1995 is attributable to an increased net interest margin as compared to the same period in 1994, though the increased net interest margin is offset by additional bad debt provisions in the nine months ended September 30, 1995 compared to the same period in 1994. The net interest margin decreased by 25 basis points to 4.99% in third quarter 1995 as compared to 5.24% in third quarter 1994 and increased by 34 basis points to 5.24% for nine months ended September 30, 1995 as compared to 4.90% for the same period in 1994. Net interest income decreased by 1.00% to $3,083,000 in third quarter 1995 from $3,114,000 for the same period in 1994 on an increase in average earning assets to $250,601,000 in third quarter 1995 from $236,038,000 in the same period in 1994. Net interest income increased by 9.94% to $9,480,000 for nine months ended September 30, 1995 from $8,623,000 for the same period in 1994 on an increase in average earning assets to $240,771,000 for nine months ended September 30, 1995 from $230,403,000 in the same period in 1994. For the nine months ended September 30, 1995 compared to the same period in 1994, average loans increased by $5,978,000 or 3.32%, average Federal funds sold increased by $2,903,000 or 62.44%, average investment securities increased by $965,000 or 2.13% and average interest-bearing deposits in other banks decreased by $522,000 or 262.31%, resulting in a net increase in average earning assets of $10,368,000 or 4.50%. The net increase in earning assets was funded by a net increase in deposits of 8.05% to $245,331,000 at September 30, 1995 from $222,043,000 at December 31, 1994. Average interest bearing deposits increased by 3.12% to $210,543,000 for nine months ended September 30, 1995 compared to $204,175,000 for nine months ended September 30, 1994, while average non-interest bearing deposits represented 9.22% of total deposits at September 30, 1995 as compared to 8.24% at September 30, 1994 and 11.34% at December 31, 1994. Interest expense increased for the three months ended September 30, 1995 by $727,000 compared to the same period in 1994 and increased by $1,651,000 for the nine months ended September 30, 1995 compared to the same period in 1994. The increase in interest expense for both periods is primarily attributable to the increase in interest rates in 1995 as compared to 1994. The combination of higher yields on earnings assets and increased average earning assets along with higher rates on interest bearing liability accounts resulted in a decrease in net interest income of $31,000 for the three months ended September 30, 1995 compared to the same period in 1994 and an increase in net interest income of $857,000 for the nine months ended September 30, 1995 compared to the same period in 1994. 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 particilar emphasis on non-accruing, past due and other loans that management believes requires attention. The provision for loan losses is a charge to earnings in the current period to replenish the allowance for loan losses and maintain it at a level management has determined to be adequate. The provision for loan losses was $851,000 for the three monhts ended September 30, 1995 as compared to $425,000 for the same period in 1994 representing an increase in the provision of $426,000 or 100.24%. The provision for loan losses was $2,038,000 for the nine month period ended September 30, 1995 compared to $1,522,000 for the same period in 1994 representing an increase in the provision of $516,000 or 33.90%. The increase in provision for loan losses during third quarter 1995 and for the nine months 12 ended September 30, 1995 was necessitated by the Company's continued efforts to address problem loans and to provide an adequate loan loss reserve for future losses. Net loan charge-offs represented 3.53% of the provision for loan losses in the third quarter of 1995 as compared to 65.41% in third quarter 1994. Net loan charge-offs represented 45.73% of the provision for loan losses in the nine month period ended September 30, 1995 and 76.94% of the provision for loan losses in the nine month period ended September 30, 1994. Charge-offs in both periods are attributable to weakness in the local markets. During the first nine months of 1995 and 1994, a net of $932,000 and $1,171,000 was charged-off. Net loan charge-offs for nine months ended September 30, 1995 represented 0.50% of average loans outstanding as compared to 0.65% for nine months ended September 30, 1994. At September 30, 1995, the allowance for loan losses was 2.08% of total loans outstanding as compared to an allowance for loan losses of 1.75% at September 30, 1994 and 1.75% at December 31, 1994. The determination of the reserve rests upon management's judgement about factors affecting loan quality and assumptions about the economy. Management considers the September 30, 1995 allowance for loan losses adequate to cover potential losses in the loan portfolio. Non-interest income consists principally of service charges on deposit accounts. Service charges on deposit accounts amounted to $391,000 in third quarter 1995 compared to $350,000 in third quarter 1994, or an increase of 11.71% and amounted to $1,149,000 for nine months ended September 30, 1995 compared to $1,019,000 for nine months ended September 30, 1994, or an increase of 12.76%. All other non-interest income decreased by $48,000 to $125,000 for third quarter 1995 from $173,000 for third quarter 1994 and all other non-interest income decreased by $90,000 to $471,000 for nine months ended September 30, 1995 from $561,000 for nine months ended September 30, 1994. The decrease in non-interest income for the nine months ended September 30, 1995 compared to the same period in 1994 was primarily attributable to a decrease of $246,000 on premiums received on guaranteed loans sold in the secondary market and an increase in other income of $128,000 principally due to a recovery on embezzled funds by a former employee. Non-interest expense decreased by 5.54% to $2,013,000 in three months ended September 30, 1995 from $2,131,000 in the same period in 1994. Salaries and employee benefits increased by 10.50% to $1,063,000 in third quarter 1995 from $962,000 in third quarter 1994. All other non-interest expense decreased by 18.73% to $950,000 in third quarter 1995 from $1,169,000 in third quarter 1994. This decrease was primarily attributable to reduction and rebate of FDIC insurance premiums during third quarter 1995. Non-interest expense increased by 2.23% to $6,267,000 for nine months ended September 30, 1995 compared to $6,130,000 for the same period in 1994. Salaries and employee benefits account for an increase of 11.83% to $3,243,000 for nine months ended September 30, 1995 from $2,900,000 for the same period in 1994 due to an increase in full-time employees primarily. Other non-interest expenses decreased by 6.38% to $3,024,000 in nine months ended September 30, 1995 from $3,230,000 for the same period in 1994 primarily due to rebate of FDIC insurance premiums. Income before taxes decreased by $346,000 to $735,000 in third quarter 1995 from $1,081,000 in third quarter 1994 and increased by $250,000 to $2,813,000 for nine months ended September 30, 1995 from $2,563,000 for the same period in 1994. The decrease for the three months ended September 30, 1995 compared to the same period in 1994 is primarily attributable to the increased provision for loan losses while the increase for the nine months ended September 30, 1995 is primarily attributable to increased net interest margin and FDIC premium rebate with a partial offset created by additional bad debt provisions. Income taxes as a percentage of income before taxes decreased by 4.99% to 31.02% in third quarter 1995 as compared to 32.65% in third quarter 1994. Income taxes as a percentage of income before taxes increased by 1.99% to 32.31% in nine months ended September 30, 1995 as compared to 31.68% for the same period in 1994 due to higher net interest income and less tax-exempt interest. Income tax expense increased 11.95% to $909,000 for nine months ended September 30, 1995 compared to $812,000 for the same period in 1994. The Bank of Fitzgerald is operating under a Memorandum of Understanding dated October 20, 1992, which requires that the Bank maintain specified minimum capital ratios and minimum reserves for loan losses. Under terms of the MOU, The Bank of Fitzgerald is required to maintain a Tier 1 leverage capital ratio of a least 6% and a primary capital ratio of at least 8%. The Bank of Fitzgerald was in substantial compliance with the provisions of the MOU at September 30, 1995. Regulatory authorities have proposed replacing the October 20, 1992 MOU with another Memorandum of Understanding due to portions of the old MOU not being relevant to the bank's current situation, and the new MOU should be effective late October, 1995 or early November, 1995. The significant change will be maintenance of tier 1 captial of not less than 7.25% during the life of the MOU which should be achieved by December 31, 1995 with a capital injection from Colony Bankcorp, Inc. 13 LIQUIDITY - - - --------- The Company's goals with respect to liquidity are to insure that sufficient funds are available to meet current operating requirements, to provide reserves against unforeseen liquidity requirements. Management continuously reviews the Company's liquidity position, which is maintained on a basis consistent with established internal guidelines and the tests and reviews of the various regulatory authorities. The Company's primary liquidity sources at September 30, 1995 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. BUSINESS GENERAL - - - ------- The Company was organized in 1983 as a bank holding company through the merger of The Bank of Fitzgerald with a subsidiary of the Company. Since that time, The Bank of Fitzgerald, which was formed by principals of Colony Bankcorp, Inc. in 1976, has operated as a wholly-owned subsidiary of the Company. In April 1984, Colony Bankcorp, Inc. acquired Community Bank of Wilcox, and in November 1989, Ashburn Bank became a wholly-owned subsidiary of Colony Bankcorp, Inc. Colony Bankcorp, Inc. continued its growth with the acquisition of The Bank of Dodge County in September 1985. In August 1991, Colony Bankcorp, Inc. acquired The Bank of Worth. Through its five subsidiary banks, Colony Bankcorp, Inc. operates a full-service banking business and offers a broad range of retail and commercial banking services including checking, savings, NOW accounts, money market and time deposits of various types; loans for business, agriculture, real estate, personal uses, home improvement and automobiles; credit card; letters of credit; trust services investment, and discount brokerage services; IRA's, safe deposit box rentals, bank money orders, and electronic funds transfer services, including wire transfers and automated teller machines. Each of the Banks is a state chartered institution whose customer deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation. 14 PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K - - - ----------------------------------------- A. Exhibits - None B. Form 8-K for the quarter ended September 30, 1995 was submitted on August 22, 1995 reflecting a change in the independent audit firm from Mauldin & Jenkins, CPA's to McNair, McLemore, Middlebrooks & Co. CPA's. Form 8-K/A for the quarter ended September 30, 1995 was submitted on August 30, 1995 in which a letter acknowledging termination as principal accountants by Mauldin & Jenkins was submitted and a letter confirming the client-auditor relationship between Colony Bankcorp, Inc. and Mauding & Jenkins, CPA's had ceased. 15 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COLONY BANKCORP, INC. November 6, 1995 /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 16 EX-27 2 ARTICLE 9 FDS
9 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 6,822 0 8,345 0 37,522 8,426 8,287 194,468 4,135 271,315 245,331 70 2,310 4,323 12,161 0 0 7,120 271,315 15,374 2,043 469 17,886 8,129 8,406 9,480 2,038 18 6,267 2,813 2,813 0 0 1,904 1.56 1.56 5.24 4,897 1,170 598 0 3,029 1,291 359 4,135 4,135 0 0
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