10-Q 1 0001.txt 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, 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 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 COLONY BANKCORP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (UNAUDITED) (DOLLARS IN THOUSANDS)
ASSETS Sept 30, 2000 Dec 31, 1999 ------------- ------------ 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 ======== ========
The accompanying notes are an integral part of these balance sheets. 3 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)
Three Months Ended Nine Months Ended 09/30/00 09/30/99 09/30/00 09/30/99 ----------- ----------- ----------- ----------- 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 =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 4 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)
Three Months Ended Nine Months Ended 09/30/2000 09/30/1999 09/30/2000 09/30/1999 ----------- ----------- ----------- ----------- 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 =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 5 COLONY BANKCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED) (DOLLARS IN THOUSANDS)
2000 1999 ---- ---- 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 ========= =========
The accompanying notes are an integral part of these statements. 6 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 (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 (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:
September 30, 2000 December 31, 1999 ------------------ ----------------- 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 ======= =======
(3) Investment Securities ------------------------- Investment securities as of September 30, 2000 are summarized as follows:
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value 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 ======= === ======= =======
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.
Securities Available for Sale Held to Maturity Amortized Cost Fair Value Amortized Cost Fair Value 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 ======= ======= ==== ====
9 (3) Investment Securities (continued) ------------------------------------- Investment securities as of December 31, 1999 are summarized as follows:
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value 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 ======= == ======= =======
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:
September 30, 2000 December 31, 1999 ------------------ ----------------- 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 ======== ========
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 (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 (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 (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.
To Be Well Capitalized For Capital Under Prompt Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio 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%
13 (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
ASSETS September 30, 2000 December 31, 1999 ------------------ ----------------- 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 ======= =======
14 (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
Sept 30, 2000 Sept 30, 1999 ------------- ------------- 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 ====== =======
15 (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
Sept 30, 2000 Sept 30, 1999 ------------- ------------- 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 ======= =======
(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 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 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 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 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 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 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