UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1999 ---------------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to --------------------- ------------------------- Commission File Number 0-12436 --------------------------------------------------------- COLONY BANKCORP, INC. - ------------------------------------------------------------------------------- (Exact Name of Registrant Specified in its Charter) GEORGIA 58-1492391 - ------------------------------------------------------------------------------- State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization Identification No.) 115 SOUTH GRANT STREET, FITZGERALD, GEORGIA 31750 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number Including Area Code (912) 426-6000 ------------------------------ Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered NONE - ------------------------------- ------------------------------------------ Securities Registered Pursuant to Section 12(g) of the Act: COMMON STOCK, $1.00 PAR VALUE - ------------------------------------------------------------------------------- (Title of Class) Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No --- --- Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] State the aggregate market value of the voting stock held by non-affiliates of the registrant as of March 3, 2000. Common Stock, par value $1.00 per share - $51,002,799 (APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of March 3, 2000. Common Stock, par value $1.00 per share - 4,435,026 shares
DOCUMENTS INCORPORATED BY REFERENCE <TABLE> <CAPTION> Location in Form 10-K Incorporated Document - ---------------------------------- --------------------------------------- <S> <C> Part I Item 3 - Legal Proceedings Page 11 of the Company's Definitive Proxy Statement dated April 5, 2000, in connection with its Annual Meeting to be held on April 25, 2000. Part III Item 10 - Directors, Executive Officers, Pages 3 and 4 of the Company's Promoters and Control Persons; Compliance Definitive Proxy Statement dated April with Section 16(a) of the Exchange Act 5, 2000, in connection with its Annual Meeting to be held on April 25, 2000. Item 11 - Executive Compensation Pages 6, 8, 9, 10, 11, 12 and 13 of the Company's Definitive Proxy Statement dated April 5, 2000, in connection with its Annual Meeting to be held on April 25, 2000. Item 12 - Security Ownership of Certain Pages 7 and 8 of the Company's Beneficial Owners and Management Definitive Proxy Statement dated April 5, 2000, in connection with its Annual Meeting to be held on April 25, 2000. Item 13 - Certain Relationships and Page 10 of the Company's Definitive Related Transactions Proxy Statement dated April 5, 2000 in connection with its Annual Meeting to be held on April 25, 2000. </TABLE>
Part I Item 1 BUSINESS OF THE COMPANY AND SUBSIDIARY BANKS COLONY BANKCORP, INC. Colony Bankcorp, Inc. (the "Company" or "Colony") is a Georgia business corporation which was incorporated on November 8, 1982. The Company was organized for the purpose of operating as a bank-holding company under the Federal Bank-Holding Company Act of 1956, as amended, and the bank-holding company laws of Georgia (Georgia Laws 1976, p. 168, et. seq.). On July 22, 1983, --- ---- the Company, after obtaining the requisite regulatory approvals, acquired 100 percent of the issued and outstanding common stock of The Bank of Fitzgerald, Fitzgerald, Georgia, through the merger of the Bank with a subsidiary of the Company which was created for the purpose of organizing the Bank into a one-bank holding company. Since that time, The Bank of Fitzgerald has operated as a wholly-owned subsidiary of the Company. On April 30, 1984, Colony, with the prior approval of the Federal Reserve Bank of Atlanta and the Georgia Department of Banking and Finance, acquired 100 percent of the issued and outstanding common stock of Community Bank of Wilcox (formerly Pitts Banking Company), Pitts, Wilcox County, Georgia. As part of that transaction, Colony issued an additional 17,872 shares of its $10.00 par value common stock, all of which was exchanged with the holders of shares of common stock of Pitts Banking Company for 100 percent of the 250 issued and outstanding shares of common stock of Pitts Banking Company. Since the date of acquisition, the Bank has operated as a wholly-owned subsidiary of the Company. On November 1, 1984, after obtaining the requisite regulatory approvals, Colony acquired 100 percent of the issued and outstanding common stock of Ashburn Bank, Ashburn, Turner County, Georgia, for a combination of cash and interest-bearing promissory notes. Since the date of acquisition, Ashburn Bank has operated as a wholly-owned subsidiary of the Company. On September 30, 1985, after obtaining the requisite regulatory approvals, the Company acquired 100 percent of the issued and outstanding common stock of The Bank of Dodge County, Chester, Dodge County, Georgia. The stock was acquired in exchange for the issuance of 3,500 shares of common stock of Colony. Since the date of its acquisition, The Bank of Dodge County has operated as a wholly-owned subsidiary of the Company. Effective July 31, 1991, the Company acquired all of the outstanding common stock of Bank of Worth (formerly Worth Federal Savings and Loan Association) in exchange for cash and 7,661 of the Company's common stock for an aggregate purchase price of approximately $718,000. Bank of Worth has operated as a wholly-owned subsidiary of the Company. On November 8, 1996, Colony organized Colony Management Services, Inc. to provide support services to each subsidiary. Services provided include loan and compliance review, internal audit and data processing. 1
On November 30, 1996, the Company acquired Broxton State Bank (name subsequently changed to Colony Bank Southeast) in a business combination accounted for as a pooling of interests. Broxton State Bank became a wholly-owned subsidiary of the Company through the exchange of 157,735 shares of the Company's common stock for all of the outstanding stock of Broxton State Bank. All financial information for 1996 presented in this document is based on the assumption that the companies were combined for the full year, and financial information presented for prior years has been restated to give effect to the combination. The Company conducts all of its operations through its bank subsidiaries. A brief description of each Bank's history and business operations is discussed below. THE BANK OF FITZGERALD History and Business of the Bank The Bank of Fitzgerald is a state banking institution chartered under the laws of Georgia on November 10, 1975. Since opening on April 15, 1976, the Bank has continued a general banking business and presently serves its customers from two locations, the main office in Fitzgerald, Georgia at 302 South Main Street and a full-service branch located on Highway 129 South. The Bank operates a full-service banking business and engages in a broad range of commercial banking activities, including accepting customary types of demand and time deposits; making individual, consumer, commercial and installment loans; money transfers; safe deposit services; and making investments in United States Government and municipal securities. The Bank does not offer trust services other than acting as custodian of individual retirement accounts. The data processing work of the Bank is processed by Colony Management Services, Inc., a wholly-owned subsidiary of Colony Bankcorp, Inc. The Bank of Fitzgerald acts as an agent for Visa Card and MasterCard through The Bankers Bank which allows merchants to accept Visa Card and MasterCard and deposit the charge tickets in their accounts with the Bank. The Bank also offers its customers a variety of checking and savings accounts. The installment loan department makes both direct consumer loans and also purchases retail installment contracts from local automobile dealers and other sellers of consumer goods. The Bank serves the residents of Fitzgerald and surrounding areas of Ben Hill County which has a population of approximately 16,000 people. Manufacturing facilities located in Ben Hill County employ many people and are the most significant part of the local economy. Ben Hill County also has a large agricultural industry producing timber and row crops. Major row crops are peanuts, tobacco, soybeans and corn. 2
A history of the Bank's financial position for fiscal years ended 1999, 1998 and 1997 is as follows: 1999 1998 1997 ------------ ------------ ----------- Total Assets $110,339,062 $100,903,605 $97,730,544 Total Deposits 92,363,903 87,756,795 87,438,647 Total Stockholders' Equity 9,848,839 9,593,148 9,437,047 Net Income 1,724,382 1,665,050 1,357,070 Number of Issued and Outstanding Shares 90,000 90,000 90,000 Book Value Per Share $109.43 $106.59 $104.86 Net Income Per Share 19.16 18.50 15.08 The Bank's main offices are housed in a building located in Fitzgerald, Georgia. The main offices, which are owned by the Bank, consist of approximately 13,000 square feet, three drive-in windows and an adjacent parking lot. Banking operations also are conducted from the southside branch which is located at South Dixie Highway, Fitzgerald, Georgia. This branch is owned by the Bank and has been in continuous operation since it opened in December 1977. The branch is a single story building with approximately 850 square feet and is operated with three drive-in windows. Competition The banking business in Ben Hill County is highly competitive. The Bank competes primarily with five other commercial banks operating in Ben Hill County. Additionally, the Bank competes with one credit union located in the area and, to a lesser extent, insurance companies and governmental agencies. The banking industry is also experiencing increasing competition for deposits from less traditional sources such as money market and mutual funds. The Bank also offers "NOW" accounts, individual retirement accounts, simplified pension plans, KEOGH plans and custodial accounts for minors. Correspondents As of December 31, 1999, the Bank had correspondent relationships with two other banks. The Bank's principal correspondent is The Bankers Bank located in Atlanta, Georgia. These correspondent banks provide certain services to the Bank such as investing its excess funds, processing checks and other items, buying and selling federal funds, handling money fund transfers and exchanges, shipping coins and currency, providing security and safekeeping of funds and other valuable items, handling loan participations and furnishing management investment advice on the Bank's securities portfolio. 3
ASHBURN BANK History and Business of the Bank Ashburn Bank was chartered as a state commercial bank in 1900 and currently operates under the Financial Institutions Code of Georgia. The Bank's deposits are insured up to $100,000 per account by the Federal Deposit Insurance Corporation. The Bank conducts business at the offices located at 515 East Washington and 416 East Washington in Ashburn, Turner County, Georgia, 1553 U. S. Highway 19 South in Lee County, Georgia, 137 Robert B. Lee Drive in Leesburg, Lee County, Georgia and 1031 24th Ave., E., Cordele, Georgia. The offices in Leesburg and Cordele operate under the name Colony Bank. The Bank's business largely consists of (1) the acceptance of demand, savings and time deposits; (2) the making of loans to consumers, business and other institutions; (3) investment of excess funds and sale of federal funds, U.S. Treasury obligations and state, county and municipal bonds; (4) investment services through PRIMEVEST Financial Services; and (5) internet online banking. The Bank does little mortgage lending and it does not offer trust services. It acts as an agent for Visa Card and MasterCard through The Bankers Bank. A history of the Bank's financial position for fiscal years ended 1999, 1998 and 1997 is as follows: 1999 1998 1997 ------------ ------------ ------------ Total Assets $143,863,554 $114,402,843 $100,172,188 Total Deposits 123,360,686 98,435,652 85,508,000 Total Stockholders' Equity 10,236,521 9,638,318 8,794,312 Net Income 1,427,273 1,403,712 1,308,236 Number of Issued and Outstanding Shares 50,000 50,000 50,000 Book Value Per Share $204.73 $192.77 $175.89 Net Income Per Share 28.55 28.07 26.16 Banking Facilities The Bank's main office is located at 515 East Washington Street in Ashburn and consists of a building of approximately 13,000 square feet of office and banking space with an adjacent parking lot. A branch facility is located across the street from the main office and consists of a single story building with approximately 850 square feet and is operated with three drive-in windows. During 1996, the Bank entered into a 5-year lease agreement with Winn-Dixie Stores, Inc. to operate a retail banking facility at Winn Dixie's Lee County location. The office consists of 350 square feet and includes 3 teller positions, a new accounts area and a private office. The Bank opened a second Lee County office in October 1998. This full service facility, located within the city limits of Leesburg, consists of a two story brick building of approximately 5,000 square feet and includes three drive-in lanes. A fourth branch office opened in Cordele, Crisp County, Georgia on October 4, 1999. The new full-service branch facility consists of approximately 5,500 square feet, with four drive-in lanes and one automated teller machine. All occupied premises, with the exception of the Lee County Winn Dixie location, are owned by the Bank. 4
Competition The banking business is highly competitive. The Bank competes in Turner County primarily with Community National Bank which operates out of one facility in Ashburn, Georgia. The Bank also competes with other financial institutions, including credit unions and finance companies and, to a lesser extent, with insurance companies and certain governmental agencies. The banking industry is also experiencing increased competition for deposits from less traditional sources such as money market and mutual funds. Correspondents Ashburn Bank has correspondent relationships with the following banks: The Bankers Bank in Atlanta, Georgia; SunTrust Bank, N.A. in Atlanta, Georgia; The Bank of Fitzgerald in Fitzgerald, Georgia; AMSouth Bank of Alabama in Birmingham, Alabama; and the Federal Home Loan Bank in Atlanta, Georgia. The correspondent relationships facilitate the transactions of business by means of loans, letters of credit, acceptances, collections, exchange services and data processing. As compensation for these services, the Bank maintains balances with its correspondents in noninterest-bearing accounts. COMMUNITY BANK OF WILCOX History and Business of the Bank The Bank was chartered on June 2, 1906 under the name "Pitts Banking Company." The name of the Bank subsequently was changed to Community Bank of Wilcox on June 1, 1991 and currently operates under the Financial Institutions Code of Georgia. The Bank's deposits are insured up to $100,000 per account by the Federal Deposit Insurance Corporation. The Bank conducts business at locations in Pitts and Rochelle in Wilcox County, Georgia. The Bank's business consists of: (1) the acceptance of demand, savings and time deposits; (2) the making of loans to consumers, business and other institutions; (3) investment of excess funds and sale of federal funds, U.S. Treasury obligations and state, county and municipal bonds; and (4) certain other miscellaneous financial services usually handled for customers by commercial banks. The Bank does little mortgage lending and it does not offer trust services. 5
A history of the Bank's financial position for fiscal years ended 1999, 1998 and 1997 is as follows: 1999 1998 1997 ----------- ----------- ----------- Total Assets $29,583,143 $28,075,187 $27,540,804 Total Deposits 25,452,369 24,024,259 23,684,818 Total Stockholders' Equity 2,494,864 2,431,843 2,235,004 Net Income 330,504 288,897 293,907 Number of Issued and Outstanding Shares 250 250 250 Book Value Per Share $9,979.46 $9,727.37 $8,940.02 Net Income Per Share 1,322.02 1,155.59 1,175.63 Banking Facilities The Bank operates out of two locations at 105 South Eighth Street, Pitts, Georgia and at Highway 280, Rochelle, Georgia, both of which are in Wilcox County. The Pitts office consists of a building of approximately 2,200 square feet of usable office and banking space which it owns. The facility contains one drive-in window and three teller windows. The Rochelle office, which opened in August 1989, consists of a building of approximately 5,000 square feet of usable office and banking space, which is owned by the Company. Competition The banking business is highly competitive. The Bank competes in Wilcox County primarily with five commercial banks and one savings and loan institution. In addition, the Bank competes with other financial institutions, including credit unions and finance companies and, to a lesser extent, insurance companies and certain governmental agencies. The banking industry is also experiencing increased competition for deposits from less traditional sources such as money market and mutual funds. Correspondents The Bank has correspondent relationships with the following banks: The Bankers Bank in Atlanta, Georgia; Federal Home Loan Bank, in Atlanta, Georgia; AMSouth Bank of Alabama in Birmingham, Alabama; and SunTrust Bank, N.A., in Atlanta, Georgia. The correspondent relationships facilitate the transactions of business by means of loans, letters of credit, acceptances, collections, exchange services and data processing. As compensation for these services, the Bank maintains balances with its correspondents in noninterest-bearing accounts. 6
THE BANK OF DODGE COUNTY History and Business of the Bank The Bank was chartered on June 14, 1966 under the name "Bank of Chester." The name of the Bank subsequently was changed to The Bank of Dodge County on April 15, 1983 and currently operates under the Financial Institutions Code of Georgia. The Bank's deposits are insured up to $100,000 per account by the Federal Deposit Insurance Corporation. The Bank's business consists of: (1) the acceptance of demand, savings and time deposits; (2) the making of loans to consumers, business and other institutions; (3) investment of excess funds in the sale of federal funds, U.S. Treasury obligations and state, county and municipal bonds; and (4) certain other miscellaneous financial services usually handled for customers by commercial banks. The Bank does little mortgage lending and it does not offer trust services. A history of the Bank's financial position for fiscal years ended 1999, 1998 and 1997 is as follows: 1999 1998 1997 ----------- ----------- ----------- Total Assets $45,344,816 $45,353,965 $43,145,436 Total Deposits 41,211,472 41,464,683 37,576,350 Total Stockholders' Equity 3,763,451 3,555,744 3,262,416 Net Income 531,394 382,605 310,178 Number of Issued and Outstanding Shares 1,750 1,750 1,750 Book Value Per Share $2,150.54 $2,031.85 $1,864.24 Net Income Per Share 303.65 218.63 177.24 Banking Facilities The Bank's main office is located at 600 Oak Street in Eastman, Dodge County, Georgia and consists of a building of approximately 11,000 square feet of office and banking space with an adjacent parking lot and is operated with three drive- in windows. The branch facility is located in Chester, Dodge County, Georgia and consists of a building with approximately 2,700 square feet of office and banking space and an adjacent parking lot. The Bank owns all of the premises which it occupies. Competition The banking business is highly competitive. The Bank competes in the Dodge County area with two other banks. In addition, the Bank competes with other financial institutions, including credit unions and finance companies and, to a lesser extent, insurance companies and certain governmental agencies. The banking industry is also experiencing increased competition for deposits from less traditional sources such as money market and mutual funds. 7
Correspondents The Bank has correspondent relationships with the following banks: The Bankers Bank in Atlanta, Georgia; The Federal Home Loan Bank in Atlanta, Georgia; and SunTrust Bank, N.A., in Atlanta, Georgia. The correspondent relationships facilitate the transactions of business by means of loans, letters of credit, acceptances, collections, exchange services and data processing. As compensation for these services, the Bank maintains balances with its correspondents in noninterest-bearing accounts. BANK OF WORTH Bank of Worth operated as a savings and loan stock association until it was acquired by the Company on July 31, 1991 at which time the association changed its name to Bank of Worth and became a state-chartered commercial bank. The Bank conducts business at its offices located at 402 West Franklin Street, Sylvester, Worth County, Georgia and 605 West Second Street, Tifton, Tift County, Georgia. The Bank's business consists of: (1) the acceptance of demand, savings and time deposits; (2) the making of loans to consumers, businesses and other institutions; (3) investment of excess funds and sale of federal funds, U.S. Treasury obligations and state, county and municipal bonds; and (4) certain other miscellaneous financial services usually handled for customers by commercial banks. The Bank's deposits are insured up to $100,000 per account by the Federal Deposit Insurance Corporation. The Bank's loan portfolio is heavily concentrated in mortgage loans due to the fact that it was previously a savings and loan. The Bank does not offer trust services. It acts as an agent for Visa Card and MasterCard through The Bankers Bank. A history of the Bank's financial position for fiscal years ended 1999, 1998 and 1997 is as follows: 1999 1998 1997 ----------- ----------- ----------- Total Assets $57,828,759 $55,396,303 $44,917,783 Total Deposits 53,154,868 51,076,265 40,970,101 Total Stockholders' Equity 4,298,618 3,969,437 3,600,017 Net Income 500,710 454,744 595,329 Number of Issued and Outstanding Shares 95,790 95,790 95,790 Book Value Per Share $44.88 $41.44 $37.58 Net Income Per Share 5.23 4.75 6.21 Banking Facilities The Bank's main office is housed in a building located in Sylvester, Georgia. The building, which is owned by the Bank, consists of approximately 13,000 square feet, a drive-in window and an adjacent parking lot. On June 15, 1998, the Bank opened a branch office at 605 West Second Street, Tifton, Georgia. The office is a single story building of approximately 2,300 square feet with one attached drive-in window. A second branch office scheduled to open in 1999 in Moultrie, Colquitt County, Georgia has been delayed until 2000. 8
Competition The banking business in Worth County and Tift County is highly competitive. The Bank competes primarily with two other commercial banks operating in Worth County and six other commercial banks in Tift County. Additionally, the Bank competes with credit unions of employers located in the area and, to a lesser extent, insurance companies and governmental agencies. The banking industry is also experiencing increasing competition for deposits from less traditional sources such as money market and mutual funds. Correspondents As of December 31, 1999, the Bank had correspondent relationships with five other banks. The Bank's principal correspondent is The Bankers Bank located in Atlanta, Georgia. These correspondent banks provide certain services to the Bank such as investing its excess funds, processing checks and other items, buying and selling federal funds, handling money fund transfers and exchanges, shipping coins and currency, providing security and safekeeping of funds and other valuable items, handling loan participations and furnishing management investment advice on the Bank's securities portfolio. COLONY BANK SOUTHEAST History and Business of the Bank Colony Bank Southeast, formerly Broxton State Bank, was chartered under the laws of Georgia on August 4, 1966 and opened for business on September 1, 1966, having absorbed "Citizens Bank," a private, unincorporated bank. The Bank is a full-service bank offering a wide variety of banking services targeted at all sectors of the Bank's primary market area. The Bank offers customary types of demand, savings, time and individual retirement accounts; installment, commercial and real estate loans; home mortgages and personal lines-of-credit; Visa and Master Card services through its correspondent, The Bankers Bank; safe deposit and night depository services; cashier's checks, money orders, traveler's checks, wire transfers and various other services that can be tailored to the customer's needs. The Bank does not offer trust services at this time. The Bank serves the residents of Coffee County, Georgia, which has a population of approximately 32,000. 9
A history of the Bank's financial position for fiscal years ended 1999, 1998 and 1997 is as follows: 1999 1998 1997 ----------- ----------- ----------- Total Assets $46,012,865 $34,925,063 $26,371,357 Total Deposits 39,249,813 28,405,278 22,763,357 Total Stockholders' Equity 3,434,884 3,308,576 2,265,171 Net Income 210,807 59,204 135,301 Number of Issued and Outstanding Shares 50,730 50,730 50,730 Book Value Per Share $67.71 $65.22 $44.65 Net Income Per Share 4.16 1.17 2.67 Banking Facilities The Bank operates one banking office located at 401 North Alabama Street, Broxton, Georgia which consists of approximately 5,000 square feet of space. The building is equipped with four alarm-equipped vaults, one for safe-deposit boxes and cash storage, one for night depository service and two for record storage. The building has two drive-in systems, one commercial drawer and one pneumatic tube system. Colony Bank Southeast opened a branch office in Douglas, Georgia on July 6, 1998. The two story brick building located at 625 West Ward Street consists of approximately 8,300 square feet and provides four drive-in lanes for customer convenience. A second Douglas office was opened on September 8, 1999 and consists of approximately 1,200 square feet with three drive-in lanes and one automated teller machine. All occupied premises are owned by the Bank, with the exception of the newly opened branch located at 1351 A SE Bowens Mill Road, Douglas, Georgia. Competition The banking business in Coffee County is highly competitive. Colony Bank Southeast competes with seven other banks and one credit union in Douglas, Georgia. The banking industry is also experiencing increased competition for deposits from less traditional sources such as money market and mutual funds. Correspondents The Bank has correspondent relationships with the following banks: Bank of America, Atlanta, Georgia; SunTrust Bank, Atlanta, Georgia; The Bankers Bank, Atlanta, Georgia; the Federal Home Loan Bank in Atlanta, Georgia and Columbus Bank & Trust, Columbus, Georgia. The correspondent relationships facilitate the transactions of business by means of loans, letters-of-credit, acceptances, collections, exchange services and data processing. As compensation for these services, the Bank maintains balances with its correspondents in noninterest- bearing accounts. 10
EMPLOYEES As of December 31, 1999, Colony Bankcorp, Inc. and its subsidiaries employed 163 full-time employees and 44 part-time employees. Colony considers its relationship with its employees to be excellent. The subsidiary banks have noncontributory profit-sharing plans covering all employees subject to certain minimum age and service requirements. All Banks made contributions for all eligible employees in 1999. In addition, Colony Bankcorp, Inc. and its subsidiaries maintain a comprehensive employee benefit program providing, among other benefits, hospitalization, major medical insurance and life insurance. Management considers these benefits to be competitive with those offered by other financial institutions in south Georgia. Colony's employees are not represented by any collective bargaining group. SUPERVISION AND REGULATION Bank holding companies and banks are regulated under both federal and state law. The following is a brief summary of certain statutes and rules and regulations affecting the Company, the Banks, and to a more limited extent the Company's subsidiaries. This summary is qualified in its entirety by reference to the particular statute and regulatory provision referred to and is not intended to be an exhaustive description of the statutes or regulations applicable to the business of the Company and its subsidiaries. The scope of regulation and permissible activities of the Company and its subsidiaries is subject to change by future federal and state legislation. Supervision, regulation and examination of the Company and the Banks by the bank regulatory agencies are intended primarily for the protection of depositors rather than shareholders of the Company. REGULATION OF THE COMPANY Colony is a registered holding company under the Federal Bank Holding Company Act and the Georgia Bank Holding Company Act and is regulated under such Act by the Federal Reserve and by the Georgia Department of Banking and Finance (the "Georgia Department"), respectively. As a bank holding company, the Company is required to file annual reports with the Federal Reserve and the Georgia Department and provide such additional information as the applicable regulator may require pursuant to the Federal and Georgia Bank Holding Company Acts. The Federal Reserve and the Georgia Department may also conduct examinations of the Company to determine whether the Company is in compliance with Bank Holding Company Acts and regulations promulgated thereunder. In addition, the Federal Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before: (1) acquiring direct or indirect ownership or control of more than 5 percent of the voting shares of any bank; (2) acquiring all or substantially all of the assets of a bank; and (3) before merging or consolidating with another bank holding company. 11
The Georgia Department requires similar approval prior to the acquisition of any additional banks from every Georgia bank holding company. A Georgia bank holding company is generally prohibited from acquiring ownership or control of 5 percent or more of the voting shares of a bank unless the bank being acquired is either a bank for purposes of the Federal Bank Holding Company Act, or a federal or state savings and loan association or savings bank or federal savings bank whose deposits are insured by the Federal Savings and Loan Insurance Corporation and such bank has been in existence and continuously operating as a bank for a period of five years or more prior to the date of application to the Department for approval of such acquisition. The Federal Reserve (pursuant to regulation and published statements) has maintained that a bank holding company must serve as a source of financial strength to its subsidiary banks. In adhering to the Federal Reserve policy, the Company may be required to provide financial support to the Bank at a time when, absent such Federal Reserve policy, the Company may not deem it advisable to provide such assistance. Similarly, the Federal Reserve also monitors the financial performance and prospects of nonbank subsidiaries with an inspection process to ascertain whether such nonbanking subsidiaries enhance or detract from the Company's ability to serve as a source of strength for the Banks. CAPITAL REQUIREMENTS The holding company is subject to regulatory capital requirements imposed by the Federal Reserve applied on a consolidated basis with the bank owned by the holding company. Bank holding companies must have capital (as defined in the rules) equal to eight (8) percent of risk-weighted assets. The risk weights assigned to assets are based primarily on credit risk. For example, securities with an unconditional guarantee by the United States government are assigned the least risk category. A risk weight of 50 percent is assigned to loans secured by owner-occupied one-to-four family residential mortgages. The aggregate amount of assets assigned to each risk category is multiplied by the risk weight assigned to that category to determine the weighted values, which are added together to determine total risk-weighted assets. The Federal Reserve also requires the maintenance of minimum capital leverage ratios to be used in tandem with the risk-based guidelines in assessing the overall capital adequacy of bank holding companies. The guidelines define capital as either Tier 1 (primarily shareholder equity) or Tier 2 (certain debt instruments and a portion of the allowance for loan losses). Tier 1 capital for banking organizations includes common equity, minority interest in the equity accounts of consolidated subsidiaries, qualifying noncumulative perpetual preferred stock and qualifying cumulative perpetual preferred stock. (Cumulative perpetual preferred stock is limited to 25 percent of Tier 1 capital.) Tier 1 capital excludes goodwill; amounts of mortgage servicing assets, nonmortgage servicing assets, and purchased credit card relationships that, in the aggregate, exceed 100 percent of Tier 1 capital; nonmortgage servicing assets and purchased credit card relationships that in the aggregate, exceed 25 percent of Tier 1 capital; all other identifiable intangible assets; and deferred tax assets that are dependent upon future taxable income, net of their valuation allowance, in excess of certain limitations. 12
Effective June 30, 1998, the Board has established a minimum ratio of Tier 1 capital to total assets of 3.0 percent for strong bank holding companies (rated composite "1" under the BOPEC rating system of bank holding companies), and for bank holding companies that have implemented the Board's risk-based capital measure for market risk. For all other bank holding companies, the minimum ratio of Tier 1 capital to total assets is 4.0 percent. Banking organizations with supervisory, financial, operational, or managerial weaknesses, as well as organizations that are anticipating or experiencing significant growth, are expected to maintain capital ratios well above the minimum levels. Higher capital ratios may be required for any bank holding company if warranted by its particular circumstances or risk profile. Bank holding companies are required to hold capital commensurate with the level and nature of the risks, including the volume and severity of problem loans, to which they are exposed. At December 31, 1999, Colony exceeded the minimum Tier 1, risk-based and leverage ratios. The table which follows sets forth certain capital information for the Company as of December 31, 1999. CAPITAL ADEQUACY ($ in Thousands) December 31, 1999 --------------------------------- Amount Percent ----------- ------- Leverage Ratio Actual $36,025,666 8.39% Minimum Required (1) 17,175,526 4.00% Risked-Based Capital: Tier 1 Capital Actual 36,025,666 10.63% Minimum Required 13,553,929 4.00% Total Capital Actual 40,266,776 11.88% Minimum Required 27,107,916 8.00% (1) Represents the minimum requirement. Institutions that are contemplating acquisitions or anticipating or experiencing significant growth may be required to maintain a substantially higher leverage ratio. THE RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT Prior to the enactment of the Interstate Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act"), interstate expansion of bank holding companies was prohibited, unless such acquisition was specifically authorized by a statute of the state in which the target bank was located. Pursuant to the Riegle-Neal Act, effective September 29, 1995, an adequately capitalized and adequately managed holding company may acquire a bank across state lines, without regard to whether such acquisition is permissible under state law. A bank holding company is considered to be "adequately capitalized" if it meets all applicable federal regulatory capital standards. 13
While the Riegle-Neal Act precludes a state from entirely insulating its banks from acquisition by an out-of-state holding company, a state may still provide that a bank may not be acquired by an out-of-state company unless the bank has been in existence for a specified number of years, not to exceed five years. Additionally, the Federal Reserve is directed not to approve an application for the acquisition of a bank across state lines if: (i) the applicant bank holding company, including all affiliated insured depository institutions, controls or after the acquisition would control, more than ten (10) percent of the total amount of deposits of all insured depository institutions in the United States (the "ten percent concentration limit") or (ii) the acquisition would result in the holding company controlling thirty (30) percent or more of the total deposits of insured depository institutions in any state in which the holding company controlled a bank or branch immediately prior to the acquisition (the "thirty percent concentration limit"). States may waive the thirty percent concentration limit, or may make the limits more or less restrictive, so long as they do no discriminate against out-of-state bank holding companies. The Riegle-Neal Act also provides that, beginning on June 1, 1997, banks located in different states may merge and operate the resulting institution as a bank with interstate branches. However, a state may (i) prevent interstate branching through mergers by passing a law prior to June 1, 1997 that expressly prohibits mergers involving out-of-state banks, or (ii) permit such merger transactions prior to June 1, 1997. Under the Riegle-Neal Act, an interstate merger transaction may involve the acquisition of a branch of an insured bank without the acquisition of the bank itself, but only if the law of the state in which the branch is located permits this type of transaction. Under the Riegle-Neal Act, a state may impose certain conditions on a branch of an out-of-state bank resulting from an interstate merger so long as such conditions do not have the effect of discriminating against out-of-state banks or bank holding companies, other than on the basis of a requirement of nationwide reciprocal treatment. The ten (10) percent concentration limit and the thirty (30) percent concentration limit described above, as well as the rights of the states to modify or waive the thirty (30) percent concentration limit, apply to interstate bank mergers in the same manner as they apply to the acquisition of out-of-state banks. A bank resulting from an interstate merger transaction may retain and operate any office that any bank involved in the transaction was operating immediately before the transaction. After completion of the transaction, the resulting bank may establish or acquire additional branches at any location where any bank involved in the transaction could have established or acquired a branch. The Riegle-Neal Act also provides that the appropriate federal banking agency may approve an application by a bank to establish and operate an interstate branch in any state that has in effect a law that expressly permits all out-of-state banks to establish and operate such a branch. In response to the Riegle-Neal Act, effective June 1, 1997, Georgia permitted interstate branching, although only through merger and acquisition. In addition, Georgia law provides that a bank may not be acquired by an out-of-state company unless the bank has been in existence for five years. Georgia has also adopted the thirty percent concentration limit, but permits state regulators to waive it on a case-by-case basis. 14
THE GRAMM-LEACH-BLILEY ACT OF 1999 The Gramm-Leach-Bliley Act (the "GLB Act") dramatically increases the ability of eligible banking organizations to affiliate with insurance, securities and other financial firms and insured depository institutions. The GLB Act permits eligible banking organizations to engage in activities and to affiliate with nonbank firms engaged in activities that are financial in nature or incidental to such financial activities and also includes some additional activities that are complementary to such financial activities. The definition of activities that are financial in nature is handled by the GLB Act in two ways. First, there is a laundry list of activities that are designated as financial in nature. Second, the authorization of new activities as financial in nature or incidental to a financial activity requires a consultative process between the Federal Reserve Board and the Secretary of the Treasury with each having the authority to veto proposals of the other. The Federal Reserve Board has the discretion to determine what activities are complementary to financial activities. The precise scope of the authority to engage in these new financial activities, however, depends on the type of banking organization, whether it is a holding company, a subsidiary of a national bank, or a national bank's direct conduct. The GLB Act repealed two sections of the Glass-Stegall Act, Sections 20 and 32, which restricted affiliations between securities firms and banks. The GLB Act authorizes two types of banking organizations to engage in expanded securities activities. The GLB Act authorizes a new type of bank holding company called a financial holding company to have a subsidiary company that engages in securities underwriting and dealing without limitation as to the types of securities involved. The GLB Act also permits a national bank to control a financial subsidiary that can engage in many of the expanded securities activities permitted for financial holding companies. However, additional restrictions apply to national bank financial subsidiaries. Since the Bank Holding Company Act of 1956, and it subsequent amendments, federal law has limited the types of activities that are permitted for a bank holding company, and it has also limited the types of companies that a bank holding company can control. The GLB Act retains the bank holding company regulatory framework, but adds a new provision that authorizes enlarged authority for the new financial holding company form of organization to engage in any activity of a financial nature or incidental thereto. A new Section 4(k) of the Bank Holding Company Act provides that a financial holding company may engage in any activity, and may acquire and retain shares of any company engaged in any activity, that the Federal Reserve Board, in coordination with the Secretary of the Treasury, determines by regulation or order to be financial in nature or incidental to such financial activities, or is complementary to financial activities. The GLB Act also amends the Bank Holding Company Act to prescribe eligibility criteria for financial holding companies, defines the scope of activities permitted for bank holding companies that do not become financial holding companies, and establishes consequences for financial holding companies that cease to maintain the status needed to qualify as a financial holding company. 15
There are three special criteria to qualify for the enlarged activities and affiliation. First, all the depository institutions in the bank holding company organization must be well-capitalized. Second, all of the depository institutions of the bank holding company must be well managed. Third, the bank holding company must have filed a declaration of intent with the Federal Reserve Board stating that it intends to exercise the expanded authority under the GLB Act and certify to the Federal Reserve Board that the bank holding company's depository institutions meet the well-capitalized and well managed criteria. The GLB Act also requires the bank to achieve a rating of satisfactory or better in meeting community credit needs at the most recent examination of such institution under the Community Reinvestment Act. Once a bank holding company has filed a declaration of its intent to be a financial holding company, as long as there is no action by the Federal Reserve Board giving notice that it is not eligible, the company may proceed to engage in the activities and enter into the affiliations under the large authority conferred by the GLB Act's amendments to the Bank Holding Company Act. The holding company does not need prior approval from the Federal Reserve Board to engage in activities that the GLB Act identifies as financial in nature or that the Federal Reserve Board has determined to be financial in nature or incidental thereto by order or regulation. The GLB Act retains the basic structure of the Bank Holding Company Act. Thus, a bank holding company that is not eligible for the expanded powers of a financial holding company is now subject to the amended Section 4(c)(8) of the Bank Holding Company Act which freezes the activities that are authorized and defined as closely related to banking activities. Under this Section a bank holding company is not eligible for the expanded activities permitted under new Section 4(k) and is limited to those specific activities previously approved by the Federal Reserve Board. The GLB Act also addresses the consequences when a financial holding company that has exercised the expanded authority fails to maintain its eligibility to be a financial holding company. The Federal Reserve Board may impose such limitations on the conduct or activities of a noncompliant financial holding company or any affiliate of that company as the Board determines to be appropriate under the circumstances and consistent with the purpose of the Act. The GLB Act is essentially a dramatic liberalization of the restrictions placed on banks, especially bank holding companies, regarding the areas of financial businesses in which they are allowed to compete. REGULATION OF THE BANKS As state-chartered banks, the Banks are examined and regulated by the Federal Deposit Insurance Corporation ("FDIC") and the Georgia Department. The major functions of the FDIC with respect to insured banks include paying depositors to the extent provided by law in the event an insured bank is closed without adequately providing for payment of the claim of depositors, acting as a receiver of state banks placed in receivership when so appointed by state authorities, and preventing the continuance or development of unsound and unsafe banking practices. In addition, the FDIC also approves conversions, mergers, consolidations, and assumption of deposit liability transactions between insured banks and noninsured banks or institutions to prevent capital or surplus diminution in such transactions where the resulting, continued or assumed bank is an insured nonmember state bank. 16
Subsidiary banks of a bank holding company are subject to certain restrictions imposed by the Federal Bank Holding Company Act on any extension of credit to the bank holding company or any of its subsidiaries, on investment in the stock or other securities thereof and on the taking of such stock or securities as collateral for loans to any borrower. In addition, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in-arrangements in connection with any extension of credit or provision of any property or services. The Georgia Department regulates all areas of the banks' banking operations, including mergers, establishment of branches, loans, interest rates and reserves. The Bank must have the approval of the Commissioner to pay cash dividends, unless at the time of such payment: (i) the total classified assets at the most recent examination of such banks do not exceed 80 percent of Tier 1 capital plus Allowance for Loan Losses as reflected at such examination; (ii) the aggregate amount of dividends declared or anticipated to be declared in the calendar year does not exceed 50 percent of the net profits, after taxes but before dividends, for the previous calendar year; and (iii) the ratio of Tier 1 Capital to Adjusted Total Assets shall not be less than six (6) percent. The Banks are also subject to State of Georgia banking and usury laws restricting the amount of interest which it may charge in making loans or other extensions of credit. EXPANSION THROUGH BRANCHING, MERGER OR CONSOLIDATION With respect to expansion, the Banks were previously prohibited from establishing branch offices or facilities outside of the county in which their main office was located, except: (i) in adjacent counties in certain situations, or (ii) by means of merger or consolidation with a bank which has been in existence for at least five years. In addition, in the case of a merger or consolidation, the acquiring bank must have been in existence for at least 24 months prior to the merger. However, effective July 1, 1996, Georgia permits the subsidiary bank(s) of any bank holding company then engaged in the banking business in the State of Georgia to establish, de novo, upon receipt of required regulatory approval, an aggregate of up to three additional branch banks in any county within the State of Georgia. Effective July 1, 1998, this same Georgia law permits, with required regulatory approval, the establishment of de novo branches in an unlimited number of counties within the State of Georgia by the subsidiary bank(s) of bank holding companies then engaged in the banking business in the State of Georgia. This law may result in increased competition in the Banks' market area. 17
CAPITAL REQUIREMENTS The FDIC adopted risk-based capital guidelines that went into effect on December 31, 1990 for all FDIC insured state chartered banks that are not members of the Federal Reserve System. Beginning December 31, 1992, all banks were required to maintain a minimum ratio of total capital to risk weighted assets of eight (8) percent of which at least four (4) percent must consist of Tier 1 capital. Tier 1 capital of state chartered banks (as defined by the regulation) generally consists of: (i) common stockholders' equity; (ii) qualifying noncumulative perpetual preferred stock and related surplus; and (iii) minority interests in the equity accounts of consolidated subsidiaries. In addition, the FDIC adopted a minimum ratio of Tier 1 capital to total assets of banks, referred to as the leverage capital ratio of three (3) percent if the FDIC determines that the institution is not anticipating or experiencing significant growth and has well- diversified risk, including no undue interest rate exposure, excellent asset quality, high liquidity, good earnings and, in general, is considered a strong banking organization, rated Composite "1" under the Uniform Financial Institutions Rating System (the CAMEL rating system) established by the Federal Financial Institutions Examination Council. All other financial institutions are required to maintain a leverage ratio of four (4) percent. Effective October 1, 1998, the FDIC amended its risk-based and leverage capital rules as follows: (1) all servicing assets and purchase credit card relationships ("PCCRs") that are included in capital are each subject to a ninety (90) percent of fair value limitation (also known as a "ten (10) percent haircut"); (2) the aggregate amount of all servicing assets and PCCRs included in capital cannot excess 100 percent of Tier I capital; (3) the aggregate amount of nonmortgage servicing assets ("NMSAs") and PCCRS included in capital cannot exceed 25 percent of Tier 1 capital; and (4) all other intangible assets (other than qualifying PCCRS) must be deducted from Tier 1 capital. Amounts of servicing assets and PCCRs in excess of the amounts allowable must be deducted in determining Tier 1 capital. Interest-only Strips receivable, whether or not in security form, are not subject to any regulatory capital limitation under the amended rule. FDIC INSURANCE ASSESSMENTS The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), enacted in December, 1991, provided for a number of reforms relating to the safety and soundness of the deposit insurance system, supervision of domestic and foreign depository institutions and improvement of accounting standards. One aspect of the Act is the requirement that banks will have to meet certain safety and soundness standards. In order to comply with the Act, the Federal Reserve and the FDIC implemented regulations defining operational and managerial standards relating to internal controls, loan documentation, credit underwriting, interest rate exposure, asset growth, director and officer compensation, fees and benefits, asset quality, earnings and stock valuation. The regulations provide for a risk-based premium system which requires higher assessment rates for banks which the FDIC determines pose greater risks to the Bank Insurance Fund ("BIF"). Under the regulations, banks pay an assessment depending upon risk classification. 18
To arrive at risk-based assessments, the FDIC places each bank in one of nine risk categories using a two-step process based on capital ratios and on other relevant information. Each bank is assigned to one of three groups: (i) well capitalized, (ii) adequately capitalized, or (iii) under capitalized, based on its capital ratios. The FDIC also assigned each bank to one of three subgroups based upon an evaluation of the risk posed by the bank. The three subgroups include (i) banks that are financially sound with only a few minor weaknesses, (ii) banks with weaknesses which, if not corrected, could result in significant deterioration of the bank and increased risk to the BIF, and (iii) those banks that pose a substantial probability of loss to the BIF unless corrective action is taken. FDICIA imposes progressively more restrictive constraints on operations management and capital distributions depending on the category in which an institution is classified. As of December 31, 1999, the Banks met the definition of "well capitalized" institutions and will be assessed accordingly for 1999. Under FDICIA, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. COMMUNITY REINVESTMENT ACT The Company and the Banks are subject to the provisions of the Community Reinvestment Act of 1977, as amended (the "CRA") and the federal banking agencies regulations issued thereunder. Under the CRA, all banks and thrifts have a continuing and affirmative obligation, consistent with its safe and sound operation to help meet the credit needs for their entire communities, including low-and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires a depository institution's primary federal regulator, in connection with its examination of the institution, to assess the institution's record of assessing and meeting the credit needs of the community served by that institution, including low-and moderate-income neighborhoods. The regulatory agency's assessment of the institution's record is made available to the public. In the case of a bank holding company applying for approval to acquire a bank or other bank holding company, the Federal Reserve will assess the records of each subsidiary depository institution of the applicant bank holding company, and such records may be the basis for denying the application. The evaluation system used to judge an institution s CRA performance consists of three tests: (1) a lending test; (2) an investment test; and (3) a service test. Each of these tests will be applied by the institution s primary federal regulator taking into account such factors as: (i) demographic data about the community; (ii) the institution's capacity and constraints; (iii) the institution's product offerings and business strategy; and (iv) data on the prior performance of the institution and similarly-situated lenders. In addition, a financial institution will have the option of having its CRA performance evaluated based on a strategic plan of up to five years in length that it had developed in cooperation with local community groups. In order to be rated under a strategic plan, the institution will be required to obtain the prior approval of its federal regulator. 19
The interagency CRA regulations provide that an institution evaluated under a given test will receive one of five ratings for the test: (1) outstanding; (2) high satisfactory; (3) low satisfactory; (4) needs to improve; and (5) substantial noncompliance. An institution will receive a certain number of points for its rating on each test, and the points are combined to produce an overall composite rating. Evidence of discriminatory or other illegal credit practices would adversely affect an institution s overall rating. Each of Colony's subsidiary banks received a "high satisfactory" CRA rating as a result of their last CRA examination. PROPOSED LEGISLATION Legislation is regularly considered and adopted by both the United States Congress and the Georgia General Assembly. Such legislation could result in regulatory changes and changes in competitive relationships for banks and bank holding companies. The effect of such legislation on the business of the Company and the Banks cannot be predicted. MONETARY POLICY The results of operations of the Company and the Banks are affected by credit policies of monetary authorities, particularly the Federal Reserve. The instruments of monetary policy employed by the Federal Reserve include open market operations in U.S. Government securities, changes in the discount rate on member bank borrowings, changes in reserve requirements against member bank deposits and limitations on interest rates which member banks may pay on time and savings deposits. In view of the changing conditions in the foreign and national economy, as well as the effect of policies and actions taken by monetary and fiscal authorities, including the Federal Reserve, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand or the business and earnings of the Company. YEAR 2000 PROJECT The Banks rely heavily upon computers for the daily conduct of their business and committed all resources necessary to achieve a satisfactory and timely solution to computer based problems related to the Year 2000 and beyond. The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's programs that have time-sensitive software may have recognized a date using "00" as the year 1900 rather than the year 2000. In accordance with sound management policy and directives from regulatory agencies, the Banks began the Year 2000 review of hardware and software in 1997. The review included not only computer and information systems but heating and cooling systems, alarms, vaults, elevators and other office equipment, and was completed in 1998. Items that were found not Year 2000 compliant were slated for upgrade or replacement. The Company and its subsidiary banks experienced no Year 2000 related problems. 20
EXECUTIVE OFFICER The following table sets forth certain information with respect to the executive officer of the Registrant. <TABLE> <CAPTION> <S> <C> <C> Name (Age) Position with the Registrant Officer Since - -------------------- -------------------------------------------------- ------------- James D. Minix (58) President and Chief Executive Officer and Director 1994 </TABLE> The officer serves at the discretion of the board of directors. Prior to 1994, Mr. Minix served as president of The Bank of Fitzgerald from January 1993 through June 1994 and prior to that time, Mr. Minix served as president of Ashburn Bank from February 1990 through December 1992. Item 2 DESCRIPTION OF PROPERTY The principal properties of the Registrant consist of the properties of the Banks. For a description of the properties of the Banks, see "Item 1 - Business of the Company and Subsidiary Banks" included elsewhere in this Annual Report. Item 3 LEGAL PROCEEDINGS Incorporated herein by reference to page 11 of the Company's Definitive Proxy Statement for Annual Meeting of Stockholders to be Held April 25, 2000, filed with the Securities and Exchange Commission on April 5, 2000 (File No. 0-18486). Item 4 SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS No matters were submitted to a vote of the Registrant's stockholders during the fourth quarter of 1999. Part II Item 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Effective April 2, 1998, Colony Bankcorp, Inc. common stock is quoted on the NASDAQ National Market under the symbol "CBAN." Prior to this date, there was no public market for the common stock of the registrant. The following table sets forth the high, low and close sale prices per share of the common stock as reported on the NASDAQ National Market, and the dividends declared per share for the periods indicated. 21
Dividend Year Ended December 31, 1999 High Low Close Per Share - ---------------------------- ------ ------ ------ --------- Fourth Quarter $14.75 $11.50 $13.50 $0.040 Third Quarter 13.38 11.94 11.94 0.035 Second Quarter 14.63 12.00 12.00 0.035 First Quarter 15.00 11.25 13.50 0.030 On February 18, 1997, the Company's Board of Directors approved a 50 percent stock split effected in the form of a stock dividend payable to shareholders of record on July 1, 1997. On February 16, 1999, a 100 percent stock split effected in the form of a stock dividend payable to shareholders of record on March 31, 1999 was approved by the Board. All share and per share information in this report has been restated to give retroactive effect to these splits. The Registrant paid cash dividends on its common stock of $620,905 or $0.140 per share and $510,030 or $0.115 per share in 1999 and 1998, respectively. The Company's Board of Directors approved a reduction in the par value of common stock on February 16, 1999. Par value was reduced from $10 to $1 per share. As of December 31, 1999, the Company had approximately 1,100 shareholders of record. 22
Item 6 SELECTED FINANCIAL DATA <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 ------------------------------------------------------------------------------ (Dollars in Thousands, except per share data) <S> <C> <C> <C> <C> <C> Selected Balance Sheet Data: Total Assets..................... $435,272 $381,348 $342,947 $319,540 $299,246 Total Loans...................... 315,435 252,864 234,288 206,863 200,837 Total Deposits................... 374,450 330,746 298,162 285,676 271,646 Investment Securities............ 62,819 71,798 56,915 63,378 51,560 Stockholders' Equity............. 35,011 33,096 28,821 25,591 23,068 Selected Income Statement Data: Interest Income.................. 33,260 30,653 28,777 26,525 25,739 Interest Expense................. 17,144 15,521 13,992 13,158 12,140 -------- -------- -------- -------- -------- Net Interest Income............ 16,146 15,132 14,785 13,367 13,599 Provision for Loan Losses........ 1,166 1,157 1,489 2,195 3,246 Other Income..................... 3,119 2,659 2,528 2,649 2,334 Other Expense.................... 12,017 11,090 10,601 9,569 9,332 -------- -------- -------- -------- -------- Income Before Tax................ 6,082 5,544 5,223 4,252 3,355 Income Tax Expense............... 1,902 1,692 1,605 1,319 983 -------- -------- -------- -------- -------- Net Income..................... $ 4,180 $ 3,852 $ 3,618 $ 2,933 $ 2,372 ======== ========= ========= ========= ========= Per Share Data: (a) Net Income (Diluted)............. $ 0.94 $ 0.87 $ 0.83 $ 0.68 $ 0.58 Book Value....................... 7.89 7.48 6.63 5.89 5.31 Tangible Book Value.............. 7.85 7.43 6.58 5.83 5.51 Dividends........................ .140 .115 .100 .090 .115 Profitability Ratios: Net Income to Average Assets..... 1.03% 1.09% 1.11% 0.97% 0.84% Net Income to Average Stockholders' Equity.......... 12.22% 12.22% 13.21% 12.04% 11.48% Net Interest Margin.............. 4.33% 4.66% 4.91% 4.74% 5.20% Loan Quality Ratios: Net Charge-Offs to Total Loans... 0.38% 0.40% 0.58% 0.88% 1.18% Reserve for Loan Losses to Total Loans and OREO........... 1.48% 1.86% 1.94% 2.12% 2.00% Nonperforming Assets to Total Loans and OREO................. 1.82% 2.50% 2.51% 3.85% 2.98% Reserve for Loan Losses to Nonperforming Loans............ 81.27% 74.55% 77.23% 54.88% 67.08% Reserve for Loan Losses to Total Nonperforming Assets..... 70.47% 65.21% 63.23% 40.75% 50.39% Liquidity Ratios: Loans to Total Deposits.......... 84.24% 76.45% 78.58% 72.41% 73.93% Loans to Average Earning Assets.. 83.37% 78.17% 77.16% 73.34% 76.83% Noninterest-Bearing Deposits to Total Deposits................. 9.01% 8.83% 9.16% 10.05% 10.26% Capital Adequacy Ratios: Common Stockholders' Equity to Total Assets................... 8.04% 8.68% 8.40% 8.01% 7.71% Total Stockholders' Equity to Total Assets................ 8.04% 8.68% 8.40% 8.01% 7.71% Dividend Payout Ratio............ 14.86% 13.24% 12.02% 13.60% 19.90% </TABLE> (a) Per share data for all periods has been retroactively restated for a 50 percent stock split on July 1, 1997 and a 100 percent stock split on March 1, 1999. All stock splits were effected in the form of dividends. 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 7 Liquidity and Capital Resources Liquidity represents the ability to provide adequate sources of funds for funding loan commitments and investment activities, as well as the ability to provide sufficient funds to cover deposit withdrawals, payment of debt and financing of operations. These funds are obtained by converting assets to cash (representing primarily proceeds from collections on loans and maturities of investment securities) or by attracting and obtaining new deposits. During 1999, the Company was successful in obtaining deposits as evidenced by the fact that average deposits increased by 14.58 percent to $350,794,000 in 1999 from average deposits of $306,168,000 in 1998. Should the need arise, the Company also maintains relationships with the Federal Home Loan Bank and several correspondent banks that can provide funds on short notice. Liquidity is monitored on a regular basis by management. The Company's liquidity position remained satisfactory in 1999. Average liquid assets (cash and amounts due from banks, interest-bearing deposits in other banks, funds due and investment securities) represented 28.80 percent of average deposits in 1999 as compared to 30.24 percent in 1998. Average loans represented 82.35 percent of average deposits in 1999 as compared to 80.60 percent in 1998. Average interest- bearing deposits were 84.58 percent of average earning assets in 1999 as compared to 85.08 percent in 1998. The Company satisfies most of its capital requirements through retained earnings. During 1999, retained earnings provided $3,559,000 of increase in equity. Additionally, equity had a decrease of $1,645,000 resulting from the change during the year in unrealized gains (losses) on securities available for sale, net of taxes. Thus, total equity increased by a net amount of 1,914,000. In 1998, growth in equity was provided by retained earnings of $3,342,000, stock offering proceeds of $885,000 and an increase of $49,000 resulting from the change during the year in unrealized gains (losses) on securities available for sale, net of taxes. Thus, total equity increased by a net amount of $4,276,000 in 1998. As of December 31, 1999, capital of Colony totaled approximately $35,011,000 and the only outstanding commitment for capital expenditures was by a subsidiary bank of approximately $1,200,000 for construction of a branch facility in Moultrie, Georgia. The Federal Reserve Board and the FDIC have issued risk-based capital guidelines for U. S. banking organizations. The objective of these efforts was to provide a more uniform framework that is sensitive to differences in risk assets among banking organizations. The guidelines define a two-tier capital framework. Tier 1 capital consists of common stock and qualifying preferred stockholders' equity less goodwill. Tier 2 capital consists of certain convertible, subordinated and other qualifying term debt and the allowance for loan losses up to 1.25 percent of risk-weighted assets. The Company has no Tier 2 capital other than the allowance for loan losses. Using the capital requirements in effect at the end of 1999, the Tier 1 ratio as of December 31, 1999 was 10.63 percent and total Tier 1 and 2 risk-based capital was 11.88 percent. Both of these measures compare favorably with the regulatory minimum of 4 percent for Tier 1 and 8 percent for total risk-based capital. The Company's Tier 1 leverage ratio was 8.39 percent as of December 31, 1999 which exceeds the required ratio standard of 4 percent. 24
Liquidity and Capital Resources (Continued) For 1999, average capital was $34,204,000 representing 8.41 percent of average assets for the year. This percentage is down from the 1998 level of 8.92 percent. In February, 1999, the Company declared a 100 percent stock split effected on March 31, 1999 in the form of a dividend which resulted in outstanding shares increasing from 2,217,513 to 4,435,026. In 1999, the Company paid annual dividends of $0.14 per share. The dividend payout ratio, defined as dividends per share divided by net income per share, was 14.89 percent in 1999 as compared to 13.22 percent in 1998. As of December 31, 1999, management was not aware of any recommendations by regulatory authorities which if they were to be implemented, would have a material effect on the Company's liquidity, capital resources or results of operations. However, it is possible that examinations by regulatory authorities in the future could precipitate additional loss charge-offs which could materially impact the Company's liquidity, capital resources and result of operations. Results of Operations The Company's results of operations are determined by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Since interest rates are determined by market forces and economic conditions beyond the control of the Company, the ability to generate net interest income is dependent upon the Bank's ability to obtain an adequate spread between the rate earned on earning assets and the rate paid on interest-bearing liabilities. Thus, the key performance measure for net interest income is the interest margin or net yield, which is taxable-equivalent net interest income divided by average earning assets. Net Income Net Income for the year ended December 31, 1999 increased to $4,180,000 from the 1998 net income of $3,852,000 representing an increase of $328,000, or 8.52 percent. This increase is the result of an increase in net interest income of $1,014,000 and an increase of $461,000 in noninterest income. These were offset by an increase in noninterest expense of $928,000 and an increase in income tax expenses of $210,000. The earnings increase of 8.52 percent was achieved while the Company experienced additional overhead associated with three new offices opened during the second half of 1998 and two new offices opened during the second half of 1999; however, these new offices are largely responsible for the $54 million asset growth from a year ago and should further enhance shareholder value as they provide additional growth in the future. On a fully-diluted per share basis, net income increased to $0.94 from the 1998 per share amount of $0.87, a $0.07 increase or 8.05 percent. 25
Net Income (Continued) Net income for the year ended December 31, 1998 increased to $3,852,000 from the 1997 net income of $3,618,000 representing an increase of $234,000 or 6.47 percent. This increase is the result of an increase in net interest income of $347,000, a decrease of $332,000 in provision for loan losses and an increase of $131,000 in noninterest income. These were offset by an increase in noninterest expense of $488,000 and an increase in income tax expenses of $88,000. The expansion projects undertaken in 1998 impacted earnings approximately $300,000; however, the new offices provided $30 million in asset growth during 1998. On a fully-diluted per share basis, net income increased to $0.87 from the 1997 per share amount of $0.83, a $0.04 increase or 4.82 percent. Net Interest Margin The net interest margin decreased to 4.33 percent in 1999 as compared to 4.66 percent in 1998. Net interest income increased by 6.70 percent to $16,146,000 in 1999 from $15,132,000 in 1998 on an increase in average earning assets to $378,288,000 in 1999 from $329,109,000 in 1998 with an interest spread of 3.80 percent in 1999 as compared to 4.08 percent in 1998. Average loans increased by $42,127,000 or 17.07 percent, average funds sold decreased by $8,995,000 or 42.77 percent, average investment securities increased by $7,781,000 or 12.88 percent and average interest-bearing deposits in other banks increased by $8,266,000 or 915.39 percent, resulting in a net increase in average earning assets of $49,179,000 or 14.94 percent. The net increase in average assets was funded by a net increase in average deposits of 14.58 percent to $350,794,000 in 1999 from $306,168,000 in 1998 and a net increase in average debt and funds purchased of 42.48 percent to $18,702,000 in 1999 from $13,126,600 in 1998. Average interest-bearing deposits increased by 14.28 percent to $319,967,000 in 1999 from $279,992,000 in 1998 while average noninterest-bearing deposits increased 17.77 percent to $30,827,000 in 1999 from $26,176,000 in 1998. Average noninterest-bearing deposits represented 8.79 percent of average total deposits in 1999 as compared to 8.55 percent in 1998. The net interest margin decreased to 4.66 percent in 1998 as compared to 4.91 percent in 1997. Net interest income increased by 2.35 percent to $15,132,000 in 1999 from $14,785,000 in 1997 on an increase in average earnings assets to $329,109,000 in 1998 from $303,648,000 in 1997 with an interest spread of 4.08 percent in 1998 as compared to 4.29 percent in 1997. Average loans increased by $18,924,000 or 8.31 percent, average funds sold increased by $6,493,000 or 44.66 percent, average investment securities decreased by $95,000 or 1.46 percent and average interest-bearing deposits in other banks increased by $139,000 or 18.19 percent, resulting in a net increase in average earning assets of $25,461,000 or 8.39 percent. The net increase in average assets was funded by a net increase in average deposits of 7.50 percent to $306,168,000 in 1998 from $284,800,000 in 1997. Average interest-bearing deposits increased by 8.58 percent to $279,992,000 in 1998 from $257,871,000 in 1997 while average noninterest-bearing deposits decreased 2.80 percent to $26,176,000 in 1998 from $26,929,000 in 1997. Average noninterest-bearing deposits represented 8.55 percent of average total deposits in 1998 as compared to 9.46 in 1997. 26
Provision for Loan Losses The allowance for loan losses represents a reserve for potential losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on nonaccruing, past due and other loans that management believes require attention. The provision for loan losses is a charge to earnings in the current period to replenish the allowance for loan losses and maintain it at a level management has determined to be adequate. The provision for loan losses was $1,166,000 in 1999 as compared to $1,157,000 in 1998 representing an increase in the provision of $9,000 or 0.78 percent. Net loan charge-offs represented 103.78 percent of the provision for loan losses in 1999 as compared to 86.95 percent in 1998. Net loan charge-offs for 1999 represented 0.42 percent of average loans outstanding as compared to 0.41 percent for 1998. The leveling off of loan charge-offs for 1999 and 1998 resulted from management's effort the past several years to improve credit quality and to eliminate weak and marginal credits. As of December 31, 1999, the allowance for loan losses was 1.48 percent of total loans outstanding as compared to an allowance for loan losses of 1.87 percent of total loans outstanding as of December 31, 1998. The loan loss reserve of 1.48 percent of totals loans outstanding provided coverage of 81.72 percent of nonperforming loans and 70.81 percent of nonperforming assets as of December 31, 1999 as compared to 78.40 percent and 68.14 percent, respectively as of December 31, 1998. The determination of the reserve rests upon management's judgment about factors affecting loan quality and assumptions about the economy. Management considers the year-end allowance for loan losses adequate to cover potential losses in the loan portfolio. The provision for loan losses was $1,157,000 in 1998 as compared to $1,489,000 in 1997, representing a decrease in the provision of $332,000 or 22.30 percent. Net loan charge-offs represented 86.95 percent of the provision for loan losses in 1998 as compared to 90.60 percent in 1997. The decrease in loan charge-offs in 1998 resulted from management's effort the past several years to improve credit quality and to eliminate weak and marginal credits. Net loan charge-offs for 1998 represented 0.41 percent of average loans outstanding as compared to 0.59 percent for 1997. As of December 31, 1998, the allowance for loan losses was 1.87 percent of total loans outstanding as compared to an allowance for loan losses of 1.95 percent of total loans outstanding as of December 31, 1997. The loan loss reserve of 1.87 percent of total loans outstanding provided coverage of 78.40 percent of nonperforming loans and 68.14 percent of nonperforming assets as of December 31, 1998 as compared to 77.29 percent and 63.28 percent, respectively as of December 31, 1997. Noninterest Income Noninterest income consists primarily of service charges on deposit accounts. Service charges on deposit accounts totaled $2,270,000 in 1999 as compared to $1,932,000 in 1998 or an increase of 17.49 percent. This increase is attributable to the increase in noninterest-bearing and interest-bearing demand deposit accounts. All other noninterest income increase by $123,000 to $850,000 in 1999 from $727,000 in 1998. Approximately $95,000 of the increase in noninterest income is attributable to a recovery on previously written-off municipal bonds. There was no other significant variance in other noninterest income accounts in 1999 from 1998. 27
Noninterest Income (Continued) Service charges on deposit accounts totaled $1,932,000 in 1998 as compared to $1,764,000 in 1997 or an increase of 9.52 percent. All other noninterest income decreased by $37,000 to $727,000 in 1998 from $764,000 in 1997. There was no significant variance in other noninterest income accounts in 1998 from 1997. Noninterest Expense Noninterest expense increased by 8.38 percent to $12,017,000 in 1999 from $11,088,000 in 1998. Salaries and employee benefits increased 12.76 percent to $6,451,000 in 1999 from $5,721,000 in 1998 primarily due to increased staffing with two new branches opened in the second half of 1999 and three new branches opened in the second half of 1998. Occupancy and equipment expense increased by 9.16 percent to $2,050,000 in 1999 from $1,878,000 in 1998 primarily due to additional depreciation and occupancy expense with the new branches opened. All other noninterest expense increased 0.80 percent to $3,517,000 in 1999 from $3,489,000 in 1998. All other expenses in the aggregate realized normal change. Noninterest expense increased by 4.60 percent to $11,088,000 in 1998 from $10,600,000 in 1997. Salaries and employee benefits increased 4.97 percent to $5,721,000 in 1998 from $5,450,000 in 1997 primarily due to increased staffing with three new offices opened during 1998. Occupancy and equipment increased by 19.62 percent to $1,878,000 in 1998 from $1,570,000 in 1997 primarily due to additional depreciation and occupancy expense with the three new offices opened during 1998. All other noninterest expense decreased by 2.54 percent to $3,489,000 in 1998 from $3,580,000 in 1997. Noninterest expense for 1998 decreased primarily because of $141,000 non-recurring expense in 1997 resulting from a subsidiary bank buying out its data processing contract in order to convert to Colony's data processing system. All other expenses in the aggregate realized normal change. Income Tax Expense Income before taxes increased by $539,000 to $6,083,000 in 1999 from $5,544,000 in 1998 with significant changes being an increase in net interest income of $1,014,000 in 1999 as compared to 1998 and an increase in noninterest expenses, net of noninterest income of $467,000 in 1999 as compared to 1998. Income tax expense increased 12.41 percent to $1,902,000 in 1999 from $1,692,000 in 1998. Income tax expense as a percentage of income before taxes increased by 2.46 percent to 31.27 percent in 1999 from 30.52 percent in 1998. Income before taxes increased by $321,000 to $5,544,000 in 1998 from $5,223,000 in 1997 with significant changes being an increase in net interest income of $347,000 in 1998 as compared to 1997, a decrease in provision for loan losses of $332,000 in 1998 as compared to 1997 and an increase in noninterest expenses net of noninterest income of $358,000 in 1998 as compared to 1997. Income tax expense increased 5.42 percent to $1,692,000 in 1998 from $1,605,000 in 1997. Income tax expense as a percentage of income before taxes decreased by 0.68 percent to 30.52 percent in 1998 from 30.73 percent in 1997. 28
Outlook for 2000 Colony is an emerging company operating in an industry filled with nonregulated competitors and a rapid pace of consolidation. The year brings with it new opportunities for growth in our existing markets, as well as opportunities to expand into new markets through branch acquisitions and branching. Colony completed two new branches in 1999 which are located in Douglas and Cordele. For 2000, Colony has targeted one new branch office to be located in Moultrie, Georgia and the acquisition of a mortgage company that is located in Albany, Georgia. Additionally, the Company has targeted another branch for 2000 with the location to be disclosed at a later time. Year 2000 Compliance Issue Colony initiated a company-wide program to identify and address issues associated with the ability of its in-house systems and outside service providers to properly recognize date-sensitive information as a result of the century change on January 1, 2000 (Year 2000). Colony established a five-phase methodology for use in assessing the Year 2000 project's state of readiness. Those phases were awareness, assessment, renovation, validation and implementation. An appointed Year 2000 steering committee monitored the progress within these phases. These five phases are briefly defined as follows: (1) awareness - defining the problem and establishing the resources needed to achieve compliance; (2) assessment - identify all areas of operations affected by the Year 2000 date change issue; (3) renovation - updating or replacement of affected systems; (4) validation - testing systems and evaluating the results of testing; and (5) implementation - certification and acceptance of Year 2000 compliance. The majority of the Year 2000 issues facing the Company were information technology ("IT") in nature. All IT systems, which includes mainframe and midrange computer systems were 100% complete in all phases. Testing of these systems produced satisfactory results. Non-IT systems, which include embedded technology such as micro controllers were all considered and tested. In addition, all third party service providers submitted documentation to the Company regarding the tested or anticipated compliance of their services. Colony established contingency plans in the event of a failure caused by the Year 2000 date change with addressed potential risks such as application system failures, power outages, and security and environmental systems failures. We are pleased that Colony experienced no Y2K related problems. All of our branches, ATM's and processing systems are working normally in the new millennium. Though the company realized minimal cost in addressing Y2K, we devoted a significant amount of resources over the last two years to remediation efforts for Year 2000 which can now be redirected into more productive projects. 29
Forward-Looking Statements This document contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe," "estimate," "expect," "intend," "anticipate" and similar expressions and variations thereof identify certain of such forward-looking statements, which speaks only as of the dates which they were made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Users are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Users are therefore cautioned not to place undue reliance on these forward-looking statements. 30
AVERAGE BALANCE SHEETS <TABLE> <CAPTION> 1999 1998 1997 --------------------------------------------------------------------------------------------------- Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/ ($ in thousands) Balances Expense Rates Balances Expense Rates Balances Expense Rates - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Assets Interest-Earning Assets Loans, Net of Unearned Income Taxable (1) $288,885 $28,344 9.81% $246,758 $25,851 10.48% $227,834 $24,227 10.63% -------- ------- ----- -------- ------- ------ -------- ------- ------ Investment Securities Taxable 57,828 3,418 5.91% 52,551 3,234 6.15% 53,971 3,301 6.12% Tax-Exempt (2) 10,368 649 6.26% 7,864 596 7.58% 6,539 492 7.52% -------- ------- ----- -------- ------- ------ -------- ------ ------ Total Investment Securities 68,196 4,067 5.96% 60,415 3,830 6.34% 60,510 3,793 6.27% -------- ------- ----- -------- ------- ------ -------- ------ ------ Interest-Bearing Deposits in Other Banks 9,169 467 5.09% 903 49 5.43% 764 46 6.02% -------- ------- ----- -------- ------- ------ -------- ------ ------ Funds Sold 12,038 602 5.00% 21,033 1,125 5.35% 14,540 823 5.66% -------- ------- ----- -------- ------- ------ -------- ------ ------ Total Interest-Earning Assets 378,288 33,480 8.85% 329,109 30,855 9.38% 303,648 28,889 9.51% -------- ------- ----- -------- ------- ------ -------- ------ ------ Noninterest-Earning Assets Cash 11,615 10,227 8,861 Allowance for Loan Losses (4,823) (4,742) (4,612) Other Assets 21,714 18,898 17,173 -------- -------- -------- Total Noninterest-Earning Assets 28,506 24,383 21,422 -------- -------- -------- Total Assets $406,794 $353,492 $325,070 ======== ======== ======== Liabilities and Stockholders' Equity Interest-Bearing Liabilities Interest-Bearing Deposits Interest-Bearing Demand and Savings $129,291 $ 2,321 1.80% $ 72,284 $ 2,009 2.78% $ 62,436 $ 1,909 3.06% Other Time 190,676 13,652 7.16% 207,708 12,624 6.08% 195,435 11,381 5.82% -------- ------- ----- -------- ------- ------ -------- ------- ------ Total Interest-Bearing Deposits 319,967 15,973 4.99% 279,992 14,633 5.22% 257,871 13,290 5.15% -------- ------- ----- -------- ------- ------ -------- ------- ------ Other Interest-Bearing Liabilities Debt 18,326 1,125 6.14% 11,548 875 7.58% 9,813 664 6.77% Funds Purchased and Securities Sold Under Agreement to Repurchase 376 16 4.26% 1,578 21 1.33% 558 38 6.81% -------- ------- ----- -------- ------- ------ -------- ------- ------ Total Other Interest- Bearing Liabilities 18,702 1,141 6.10% 13,126 896 6.83% 10,371 702 6.77% -------- ------- ----- -------- ------- ------ -------- ------- ------ Total Interest-Bearing Liabilities 338,669 17,114 5.05% 293,118 15,521 5.30% 268,242 13,992 5.22% -------- ------- ----- -------- ------- ------ -------- ------- ------ Noninterest-Bearing Liabilities and Stockholders' Equity Demand Deposits 30,827 26,176 26,929 Other Liabilities 3,094 2,674 2,503 Stockholders' Equity 34,204 31,524 27,396 -------- -------- -------- Total Noninterest-Bearing Liabilities and Stockholders' Equity 68,125 60,374 56,828 -------- -------- -------- Total Liabilities and Stockholders' Equity $406,794 $353,492 $325,070 ======== ======== ======== Interest Rate Spread 3.80% 4.08% 4.29% ===== ====== ====== Net Interest Income $ 16,366 $ 15,334 $ 14,897 ======== ======== ======== Net Interest Margin 4.33% 4.66% 4.91% ===== ===== ===== </TABLE> (1) The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recognized and recorded on the cash basis. (2) Taxable-equivalent adjustments totaling $220,628, $202,547 and $167,180 for 1999, 1998 and 1997, respectively, are included in tax-exempt interest on investment securities. The adjustments are based on a federal tax rate of 34 percent with appropriate reductions for the effect of disallowed interest expense incurred in carrying tax-exempt obligations. 31
RATE/VOLUME ANALYSIS The rate/volume analysis presented hereafter illustrates the change from year to year for each component of the taxable equivalent net interest income separated into the amount generated through volume changes and the amount generated by changes in the yields/rates. <TABLE> <CAPTION> Changes From 1998 to 1999(1) Changes From 1997 to 1998(1) ($ in thousands) Volume Rate Total Volume Rate Total ---------------------------- ---------------------------- <S> <C> <C> <C> <C> <C> <C> Interest Income Loans, Net -Taxable $ 4,413 $(1,920) $2,493 $2,012 $(388) $1,624 -------------------------- --------------------------- Investment Securities Taxable 325 (141) 184 (87) 20 (67) Tax-Exempt 190 (137) 53 100 4 104 -------------------------- --------------------------- Total Investment Securities 515 (278) 237 13 24 37 -------------------------- --------------------------- Interest-Bearing Deposits in Other Banks 449 (31) 418 8 (5) 3 -------------------------- --------------------------- Funds Sold (481) (42) (523) 368 (66) 302 -------------------------- --------------------------- Total Interest Income 4,896 (2,271) 2,625 2,401 (435) 1,966 -------------------------- --------------------------- Interest Expense Interest-Bearing Demand and Savings Deposits 1,584 (1,272) 312 301 (201) 100 Time Deposits (1,035) 2,063 1,028 715 528 1,243 Other Interest-Bearing Liabilities Funds Purchased and Securities Under Agreement to Repurchase (16) 11 (5) 69 (86) (17) Other Debt 514 (264) 250 117 94 211 -------------------------- --------------------------- Total Interest Expense 1,047 538 1,585 1,202 335 1,537 -------------------------- --------------------------- Net Interest Income $ 3,849 $(2,809) $1,040 $1,199 $(770) $ 429 ========================== =========================== </TABLE> (1) Changes in net interest income for the periods, based on either changes in average balances or changes in average rates for Interest-earning assets and interest-bearing liabilities, are shown on this table. During each year, there are numerous and simultaneous balance and rate changes; therefore, it is not possible to precisely allocate the changes between balances and rates. For the purpose of this table, changes that are not exclusively due to balance changes or rate changes have been attributed to rates. 32
INTEREST RATE SENSITIVITY The following table represents the Company's interest-sensitivity gap between interest-earning assets and interest-bearing liabilities as of December 31, 1999. <TABLE> <CAPTION> Assets and Liabilities Repricing Within --------------------------------------------------------------------------------- 3 Months 4 to 12 1 to 5 Over 5 ($ in thousands) or Less Months 1 Year Years Years Total -------- --------- -------- --------- --------- -------- <S> <C> <C> <C> <C> <C> <C> Interest-Earning Assets Interest-Bearing Deposits $ 6,714 $ 6,714 $ 6,714 Investment Securities 4,387 $ 5,342 9,729 $ 46,801 $ 6,289 62,819 Funds Sold 15,290 15,290 15,290 Loans, Net of Unearned Income 122,720 83,275 205,995 102,488 6,958 315,441 -------- -------- -------- -------- ------- ------- Total Interest-Earning Assets 149,111 88,617 237,728 149,289 13,247 400,264 -------- -------- -------- -------- ------- ------- Interest-Bearing Liabilities Interest-Bearing Demand and Savings Deposits (1) 79,960 79,960 79,960 Other Time Deposits 81,592 128,646 210,238 50,532 260,770 Short-Term Borrowings (2) 10,918 10,918 11,049 21,967 -------- -------- -------- -------- ------- ------- Total Interest-Bearing Liabilities 172,470 128,646 301,116 61,581 - 362,697 -------- -------- -------- -------- ------- ------- Interest-Sensitivity Gap (23,359) (40,029) (63,388) 87,708 13,247 37,567 -------- -------- -------- -------- ------- ------- Cumulative Interest-Sensitivity Gap $(23,359) $(63,388) $(63,388) $ 24,320 $37,567 $37,567 ======== ======== ======== ======== ======= ======= </TABLE> 33
INVESTMENT PORTFOLIO The following table presents carrying values of investment securities held by the Company as of December 31, 1999, 1998 and 1997. ($ in thousands) 1999 1998 1997 ------- ------- ------- U.S. Treasuries and Government Agencies $46,336 $51,525 $36,187 Obligations of States and Political Subdivisions 9,628 8,733 6,996 Other Securities 2,365 3,093 2,868 ------- ------- ------- Investment Securities 58,329 63,351 46,051 Mortgage Backed Securities 4,490 8,447 10,864 ------- ------- ------- Total Investment Securities and Mortgage Backed Securities $62,819 $71,798 $56,915 ======= ======= ======= The following table represents maturities and weighted-average yields of investment securities held by the Company as of December 31, 1999. <TABLE> <CAPTION> After 1 Year But After 5 Years But Within 1 Year Within 5 Years Within 10 Years After 10 Years -------------- ---------------- ----------------- --------------- Amount Yield Amount Yield Amount Yield Amount Yield ------ ----- ------- ----- ------- ------ ------- ----- <S> <C> <C> <C> <C> <C> <C> <C> <C> U.S. Government Agencies $5,141 5.37% $40,953 5.91% $ 242 6.77% Mortgage Backed Securities 705 5.03 $ 992 5.68% 2,793 5.50 Obligations of States and Political Subdivision 2,221 4.77 5,144 4.64 1,904 4.20 358 14.04 Other Securities 2,366 3.01 ------ ---- ------ ---- ----- ---- ------ ----- Total Investment Portfolio $9,728 4.66% $46,802 5.75% $2,896 4.71% $3,393 5.57% ====== ==== ======= ==== ====== ==== ====== ===== </TABLE> 34
LOANS The following table presents the composition of the Company's loan portfolio as of December 31 for the past five years. <TABLE> <CAPTION> ($ in thousands) 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> Commercial, Financial and Agricultural $ 42,595 $ 44,879 $ 34,883 $ 38,776 $ 34,459 Real Estate Construction 4,003 998 2,676 881 526 Mortgage, Farmland 24,179 18,980 21,898 25,769 23,680 Mortgage, Other 185,663 133,857 117,268 88,896 95,967 Consumer 48,226 40,928 42,956 44,608 38,865 Other 10,775 13,227 14,618 7,946 7,381 -------- -------- -------- -------- -------- 315,441 252,869 234,299 206,876 200,878 Unearned Discount (6) (5) (11) (13) (41) Allowance for Loan Losses (4,682) (4,726) (4,575) (4,435) (4,051) -------- -------- -------- -------- -------- Loans, Net $310,753 $248,138 $229,713 $202,428 $196,786 ======== ======== ======== ======== ======== </TABLE> The following table presents total loans less unearned discount as of December 31, 1999 according to maturity distribution. <TABLE> <CAPTION> Maturity ($ in thousands) ---------------- <S> <C> One Year or Less $205,995 After One Year through Five Years 102,488 After Five Years 6,958 ----------- $315,441 =========== </TABLE> The following table presents an interest rate sensitivity analysis of the Company's loan portfolio as of December 31, 1999. <TABLE> <CAPTION> Within 1 to 5 After 5 ($ in thousands) 1 Year Years Years Total -------- -------- -------- ------- <S> <C> <C> <C> <C> Loans with Predetermined Interest Rates $108,630 $100,103 $6,951 $215,684 Floating or Adjustable Interest Rates 97,359 2,385 7 99,751 -------- -------- ------ --------- Loans, Net of Unearned Income $205,989 $102,488 $6,958 $315,435 ======== ======== ====== ========= </TABLE> 35
NONPERFORMING LOANS A loan is placed on nonaccrual status when, in management's judgment, the collection of interest income appears doubtful. Interest receivable that has been accrued in prior years and is subsequently determined to have doubtful collectibility is charged to the allowance for possible loan losses. Interest on loans that are classified as nonaccrual is recognized when received. Past due loans are loans whose principal or interest is past due 90 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms. The following table presents, at the dates indicated, the aggregate of nonperforming loans for the categories indicated. <TABLE> <CAPTION> December 31, --------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- ($ in thousands) ---------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Loans Accounted for on a Nonaccrual Basis $5,334 $5,823 $5,744 $7,396 $5,229 Installment Loans and Term Loans Contractually Past Due 90 Days or More as to Interest or Principal Payments and Still Accruing 332 296 145 364 213 Loans, the Terms of Which Have Been Renegotiated to Provide a Reduction or Deferral of Interest or Principal Because of Deterioration in the Financial Position of the Borrower 32 220 5 321 597 Loans Now Current About Which There are Serious Doubts as to the Ability of the Borrower to Comply with Present Loan Repayment Terms - - - - - </TABLE> During the year ended December 31, 1999, approximately $1,640,000 of loans was charged off and approximately $430,000 was recovered on charged-off loans. All loans classified by regulatory authorities as loss during regular examinations in 1999 have been charged off. As of December 31, 1999, the allowance for loan losses was adequate to cover all loans classified by regulatory authorities as doubtful or substandard. 36
COMMITMENTS AND CONTINGENCIES In the ordinary course of business, the Banks have entered into off balance sheet financial instruments which are not reflected in the consolidated financial statements. These instruments include commitments to extend credit, standby letters of credit, guarantees and liability for assets held in trust. Such financial instruments are recorded in the financial statements when funds are disbursed or the instruments become payable. The Banks use the same credit policies for these off balance sheet financial instruments as they do for instruments that are recorded in the consolidated financial statements. Following is an analysis of the significant off balance sheet financial instruments as of December 31: 1999 1998 ------ ------ ($ in thousands) ------------------------ Commitments to Extend Credit $43,197 $35,980 Standby Letters of Credit 1,705 1,346 ------- ------- $44,902 $37,326 ======= ======= Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitment amounts expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The credit risk involved in issuing these financial instruments is essentially the same as that involved in extending loans to customers. The Company does not anticipate any material losses as a result of the commitments and contingent liabilities. The nature of the business of the Company is such that it ordinarily results in a certain amount of litigation. In the opinion of management and counsel for the Company and the Banks, there is no litigation in which the outcome will have a material effect on the consolidated financial statements. 37
SUMMARY OF LOAN LOSS EXPERIENCE The allowance for possible loan losses is created by direct charges to operations. Losses on loans are charged against the allowance in the period in which such loans, in management's opinion, become uncollectible. Recoveries during the period are credited to this allowance. The factors that influence management's judgment in determining the amount charged to operating expense are past loan experience, composition of the loan portfolio, evaluation of possible future losses, current economic conditions and other relevant factors. The Company's allowance for loan losses was approximately $4,682,000 as of December 31, 1999, representing 1.48 percent of year-end total loans outstanding, compared with $4,726,000 as of December 31, 1998, which represented 1.87 percent of year-end total loans outstanding. The allowance for loan losses is reviewed continuously based on management's evaluation of current risk characteristics of the loan portfolio as well as the impact of prevailing and expected economic business conditions. Management considers the allowance for loan losses adequate to cover possible loan losses on the loans outstanding. Management has not allocated the Company's allowance for loan losses to specific categories of loans. Based on management's best estimate, approximately 10 percent of the allowance should be allocated to real estate loans, 50 percent to commercial, financial and agricultural loans and 40 percent to consumer/installment loans as of December 31, 1999. The following table presents an analysis of the Company's loan loss experience for the periods indicated. <TABLE> <CAPTION> ($ in thousands) 1999 1998 1997 1996 1995 ------ ------ ------ ------ ------ <S> <C> <C> <C> <C> <C> Allowance for Loan Losses at Beginning of Year $4,726 $4,575 $4,435 $4,051 $3,179 ------ ------ ------ ------ ------ Charge-Offs Commercial, Financial and Agricultural 1,288 617 1,026 2,294 2,042 Real Estate 19 111 160 8 4 Consumer 333 681 670 515 861 ------ ------ ------ ------ ------ 1,640 1,409 1,856 2,817 2,907 ------ ------ ------ ------ ------ Recoveries Commercial, Financial and Agricultural 237 144 219 816 77 Real Estate 9 36 37 9 3 Consumer 184 223 251 181 453 ------ ------ ------ ------ ------ 430 403 507 1,006 533 ------ ------ ------ ------ ------ Net Charge-Offs 1,210 1,006 1,349 1,811 2,374 ------ ------ ------ ------ ------ Provision for Loans Losses 1,166 1,157 1,489 2,195 3,246 ------ ------ ------ ------ ------ Allowance for Loan Losses at End of Year $4,682 $4,726 $4,575 $4,435 $4,051 ====== ====== ====== ====== ====== Ratio of Net Charge-Offs to Average Loans 0.42% 0.41% 0.59% 0.87% 1.19% ====== ====== ====== ====== ====== </TABLE> 38
DEPOSITS The following table presents the average amount outstanding and the average rate paid on deposits by the Company for the years 1999, 1998 and 1997. <TABLE> <CAPTION> 1999 1998 1997 ------------------------- ------------------------- ------------------------- Average Average Average Average Average Average ($ in thousands) Amount Rate Amount Rate Amount Rate --------- --------- --------- --------- ---------- --------- <S> <C> <C> <C> <C> <C> <C> Noninterest-Bearing Demand Deposits $ 30,827 $ 26,176 $ 26,929 Interest-Bearing Demand and Savings 129,291 1.80% 72,284 2.78% 62,436 3.06% Time Deposits 190,676 7.16 207,708 6.08 195,435 5.82 -------- ------ -------- -------- -------- ----- $350,794 4.99% $306,168 5.22% $284,800 5.15% ======== ====== ======== ======== ======== ===== </TABLE> The following table presents the maturities of the Company's other time deposits as of December 31, 1998. Other Time Other Time Deposits Deposits $100,000 Less Than ($ in thousands) or Greater $100,000 Total ------------ ----------- -------- Months to Maturity 3 or Less $34,351 $ 47,241 $ 81,592 Over 3 through 12 46,789 81,857 128,646 Over 12 Months 9,320 41,212 50,532 --------- ---------- ---------- $90,460 $170,310 $260,770 ========= ========== ========== Return on Assets and Stockholders' Equity The following table presents selected financial ratios for each of the periods indicated. Year Ended December 31, ------------------------------------------ 1999 1998 1997 ------------------------------------------ Return on Assets 1.03% 1.09% 1.11% Return on Equity 12.22% 12.22% 13.21% Dividend Payout 14.86% 13.24% 12.02% Equity to Assets 8.41% 8.92% 8.43% 39
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA The following consolidated financial statements of the Registrant and its subsidiaries are included on exhibit 99(b) of this Annual Report on Form 10-K: Consolidated Balance Sheets - December 31, 1999 and 1998 Consolidated Statements of Income - Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Comprehensive Income - Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Stockholders' Equity - Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Cash Flows - Years Ended December 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 1999 and 1998: Three Months Ended -------------------------------------------- Dec. 31 Sept. 30 June 30 Mar. 31 -------------------------------------------- ($ in thousands, except per share data) 1999 Interest Income $8,858 $8,587 $8,047 $7,768 Interest Expense 4,565 4,402 4,074 4,073 ------- ------- ------- ------- Net Interest Income 4,293 4,185 3,973 3,695 Provision for Loan Losses 497 226 194 249 Securities Gains 2 - (2) - Noninterest Income 764 792 826 737 Noninterest Expense 3,051 3,215 3,052 2,699 ------- ------- ------- ------- Income Before Income Taxes 1,511 1,536 1,551 1,484 Provision for Income Taxes 503 473 478 448 ------- ------- ------- ------- Net Income $1,008 $1,063 $1,073 $1,036 ======= ======= ======= ======= Net Income Per Common Share (1) Basic $0.23 $0.24 $0.24 $0.23 Diluted $0.23 $0.24 $0.24 $0.23 40
Three Months Ended ------------------------------------------------- Dec. 31 Sept. 30 June 30 Mar. 31 ------------------------------------------------- ($ in thousands, except per share data) 1998 Interest Income $7,848 $7,824 $7,519 $7,462 Interest Expense 4,057 3,990 3,803 3,671 ------ ------ ------ ------ Net Interest Income 3,791 3,834 3,716 3,791 Provision for Loan Losses 377 270 231 279 Securities Gains 10 29 0 2 Noninterest Income 635 693 645 645 Noninterest Expense 2,975 2,947 2,725 2,443 ------ ------ ------ ------ Income Before Income Taxes 1,084 1,339 1,405 1,716 Provision for Income Taxes 280 422 441 549 ------ ------ ------ ------ Net Income $ 804 $ 917 $ 964 $1,167 ====== ====== ====== ====== Net Income Per Common Share (1) Basic $ 0.18 $ 0.21 $ 0.22 $ 0.27 Diluted $ 0.18 $ 0.21 $ 0.22 $ 0.27 (1) Adjusted for stock dividends and stock splits, as applicable. Item 9 CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There was no accounting or disclosure disagreement or reportable event with the former or current auditors that would have required the filing of a report on Form 8-K. Part III Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated herein by reference to pages 3 and 4 of the Company's Definitive Proxy Statement for Annual Meeting of Stockholders to be held on April 25, 2000 filed with the Securities and Exchange Commission on March 17, 2000 (File No. 0-18486). Item 11 EXECUTIVE COMPENSATION Incorporated herein by reference to pages 6, 8, 9, 10, 11, 12 and 13 of the Company's Definitive Proxy Statement for Annual Meeting of Stockholders to be held on April 25, 2000, filed with the Securities and Exchange Commission on March 17, 2000 (File No. 0-18486). 41
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated herein by reference to pages 7 and 8 of the Company's Definitive Proxy Statement for Annual Meeting of Stockholders to be held on April 25, 2000, filed with the Securities and Exchange Commission on March 17, 2000 (File No. 0-18486). Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated herein by reference to page 10 of the Company's Definitive Proxy Statement for Annual Meeting of Stockholders to be held on April 25, 2000, filed with the Securities and Exchange Commission on March 17, 2000 (File No. 0-18486). Part IV Item 14 EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits included herein: Exhibit No. 3(a) Articles of Incorporation -filed as Exhibit 3(a) to the Registrant's Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990 and incorporated herein by reference 3(b) Bylaws, as amended -filed as Exhibit 3(b) to the Registrant's Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990 and incorporated herein by reference 4 Instruments Defining the Rights of Security Holders -incorporated herein by reference to page 1 of the Company's Definitive Proxy Statement for Annual Meeting of Stockholders to be held on April 5, 2000, filed with the Securities and Exchange Commission on March 17, 2000 (File No. 0-18486) 10 Material Contracts 10(a) Deferred Compensation Plan and Sample Director Agreement -filed as Exhibit 10(a) to the Registrant's Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990 and incorporated herein by reference 42
(A) Exhibits included herein: Exhibit No. 10(b) Profit-Sharing Plan dated January 1, 1979 -filed as Exhibit 10(b) to the Registrant's Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990 and incorporated herein by reference 11 Statement Re Computation of Per Share Earnings 21 Subsidiaries of the Company 27 Financial Data Schedule 27(a) Restated Financial Data Schedule 99 Additional Exhibits 99(a) Consolidated Financial Statements -Independent Auditor's Report -Consolidated Balance Sheets - December 31, 1999 and 1998 -Consolidated Statements of Income - Years Ended December 31, 1999, 1998 and 1997 -Consolidated Statements of Comprehensive Income - Years Ended December 31, 1999, 1998 and 1997 -Consolidated Statements of Stockholders' Equity - Years Ended December 31, 1999, 1998 and 1997 -Consolidated Statements of Cash Flows - Years Ended December 31, 1999, 1998 and 1997 -Notes to Consolidated Financial Statements All schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes. (B) No reports on Form 8-K have been filed by the registrant during the last quarter of the period covered by this report. 43
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Colony Bankcorp, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized: COLONY BANKCORP, INC. /s/ James D. Minix - ------------------------------------- James D. Minix President/Director/Chief Executive Officer Date: March 21, 2000 -------------------------------- /s/ Terry L. Hester - ------------------------------------- Terry L. Hester Executive Vice-President/Controller/Chief Financial Officer/Director Date: March 21, 2000 -------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: /s/ Terry Coleman Date: March 21, 2000 - ------------------------------------- -------------------------- Terry Coleman, Director /s/ L. Morris Downing Date: March 21, 2000 - ------------------------------------- -------------------------- L. Morris Downing, Director /s/ Milton N. Hopkins, Jr. Date: March 21, 2000 - ------------------------------------- -------------------------- Milton N. Hopkins, Jr., Director /s/ Harold E. Kimball Date: March 21, 2000 - ------------------------------------- -------------------------- Harold E. Kimball, Director 44
/s/ Marion H. Massee, III Date: March 21, 2000 - -------------------------------- -------------------------- Marion H. Massee, III, Director /s/ Ben B. Mills, Jr. Date: March 21, 2000 - -------------------------------- -------------------------- Ben B. Mills, Jr., Director /s/ Ralph D. Roberts Date: March 21, 2000 - -------------------------------- -------------------------- Ralph D. Roberts, M.D., Director - -------------------------------- -------------------------- W. B. Roberts, Jr., Director /s/ R. Sidney Ross Date: March 21, 2000 - -------------------------------- -------------------------- R. Sidney Ross, Director /s/ Joe K. Shiver Date: March 21, 2000 - -------------------------------- -------------------------- Joe K. Shiver, Director /s/ Curtis A. Summerlin Date: March 21, 2000 - -------------------------------- -------------------------- Curtis A. Summerlin, Director 45