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2 0 1 8 A n n u a l R e p o r t t o S h a r e h o l d e r s
CBAN AR18 Design.indd 3
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RIGHT HERE WITH YOU.
THE RAYNOR COMPANIES
FITZGERALD, GA
As a lifelong resident of Fitzgerald, Tim Raynor’s
entrepreneurial spirit has flourished into three
distinct businesses. The Raynor Companies
began as technical sales representatives selling
rubber and plastic goods to original-equipment
manufacturers in the automobile, agricultural
and manufacturing industries across the United
States. Soon, Raynor Companies established a
light manufacturing and distribution warehouse
to sell component parts used to manufacture
cargo trailers. In 2010, as his business thrived,
Tim launched a business-banking relationship at
his branch in Fitzgerald, where he has always
done his personal banking. The Bank also provided
financing to help seed Tim’s new businesses.
With a penchant to help others, Tim started a
third company, TRC Aquaponics, to help address
the food crisis in areas of the world experiencing
water shortages. Aquaponics is a system for
growing fish and vegetables in a more efficient
and effective way, allowing the fish waste to feed
the plants and the plants to clean the water that
flows back to the fish tank. TRC Aquaponics
sets up aquaponic systems around the world
to help orphans and widows enjoy a better and
healthier life and to provide sustainable income
to those in need.
Banker Mike Smith, Market President,
Fitzgerald, has known Tim since childhood.
Raising their families together, Tim not only
counts on Mike’s friendship, but also relies on
his professional and financial advice to cultivate
these growing businesses.
Sharron and Tim Raynor together
with Mike Smith, Market President,
Fitzgerald (front cover, right).
Company Profile
Colony Bankcorp, Inc., with assets of $1.3 billion, is the bank holding company for Colony Bank. Founded in 1975 and
headquartered in Fitzgerald, Georgia, Colony operates 27 full-service branches throughout Central, Southern and Coastal Georgia,
as well as a full-service website at www.colonybank.com. Colony’s common stock is traded on the NASDAQ Global Market under
the symbol CBAN. Follow the Company on Facebook or on Twitter @colony_bank.
CBAN AR18 Design.indd 4
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C o l o n y B a n k C o r p • A n n u a l R e p o r t 2 0 1 8
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share amounts)
2018
2017
Financial position at December 31,
Total assets
Loans (net of unearned income)
Allowance for loan losses
Deposits
Stockholders’ equity
Common book value per share
Tangible common book value per share
Operations for the year ended December 31,
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Noninterest expense
Income before income taxes
Income taxes
Net income*
Preferred stock dividends
Net income available to common shareholders
Basic earnings per share
Diluted earnings per share*
Cash dividends per share
Operating ratios
Net interest margin
Return on average assets
Return on average total equity
Efficiency
$ 1,251,878
781,526
7,277
1,085,125
95,692
11.33
11.24
$ 1,232,755
764,788
7,508
1,067,985
90,323
10.70
10.69
$
$
$
$
$
40,797
201
40,596
9,621
35,300
14,917
3,000
11,917
–
11,917
1.41
1.40
0.20
$
$
$
$
$
39,043
390
38,653
9,735
33,860
14,528
6,777
7,751
211
7,540
0.89
0.87
0.10
3.56 %
0.99 %
13.32 %
70.05 %
3.46 %
0.63 %
8.28 %
69.19 %
* The 2017 amounts referenced included an additional charge of $2.04 million to income tax expense for the remeasure of the Company’s deferred
tax assets caused by the tax reform in December 2017. Excluding this charge, the adjusted net income would have been $9.79 million or $1.11 per
diluted share for the year ended December 31, 2017. See additional information in the Company’s 2017 Annual Report on Form 10-K.
1
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C o l o n y B a n k C o r p • A n n u a l R e p o r t 2 0 1 8
TO OUR SHAREHOLDERS
Our message to you regarding the Company’s
financial performance for 2018 comes from a
newly strengthened leadership team. Heath
Fountain, our new President and Chief Executive
Officer, and I are happy to join in writing our first
combined shareholder letter. Heath has established
an outstanding career in community banking. For
more than 18 years, he has been a part of skillful
senior management teams that helped grow several
community banks. His knowledge and experience to
expand organically, as well as through acquisitions,
will be invaluable as we chart a new growth course we
call Driving High Performance.
Reporting this year’s results to you is made easier by Colony Bankcorp’s proud posting
of a year of record earnings. Net income available to common shareholders increased
58% to $11.92 million and adjusted earnings per diluted share, which mainly equalizes
for the impact of tax reform on 2018 and 2017 results, rose 28% to $1.42. Revenues for
2018 also increased 3% to a record $50.4 million, mostly attributable to a net interest
margin improvement of 10 basis points to 3.56%, due to higher rates on loans. Together,
this progress provided a return on average assets and average total equity of 0.99% and
13.32%, respectively.
On the balance sheet, total assets grew 2% to $1.25 billion, primarily reflecting an
increase in our loan portfolio. Importantly, credit quality remained solid, showing
continued improvement from a year ago. Nonperforming assets decreased slightly in
2018 to $11.32 million or 1.44% of total loans and other real estate owned (“OREO”)
from $11.76 million or 1.53% at December 31, 2017. OREO totaled $1.84 million at
December 31, 2018, reflecting a 57% reduction from $4.26 million at December 31,
2017. Net charge-offs for the year ending December 31, 2018, were $431 thousand or
0.06% of average loans, down from $1.81 million or 0.24% for 2017. The loan loss
2
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Net income available to
common shareholders
for 2018 increased 58%
to a record $11.92 million
from $7.54 million for
2017. On a diluted per share
basis, net income increased
61% to $1.40 for 2018
from $0.87 for 2017.
Heath Fountain, President and Chief Executive Officer, left,
and Mark Massee, Chairman
reserve for the year remained solid at $7.28 million or 0.93% of total loans compared
with $7.51 million or 0.98% at December 31, 2017. Our loan loss provision for 2018 was
$201 thousand, down from $390 thousand for 2017.
Driving High Performance
While our culture is deeply rooted in customer service, and we are committed to
continuing that tradition, we aspire to be the best in class. Driving high performance
begins by initiating new processes and procedures, including talent assessment, proactive
business development, and the implementation of a tracking program for our customer-
calling efforts. These steps are all focused on top- and bottom-line growth, with you,
our shareholders, sharing in the benefits of these plans. Moreover, we intend to realign
our balance sheet to increase the return on assets by capitalizing on investments in
higher-yielding loans, while reducing our focus on investment securities. Driving high
performance begins with our bankers by providing team members with even greater
motivation to assist customers with financial solutions that help them realize their goals
and ambitions.
3
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GRIFFIN LUMBER | CORDELE, GA
Griffin Lumber, a fourth-generation family-owned business located in Cordele, is
run by Will Griffin and his three brothers. Since 1948, its sawmill has produced the
lumber used to build the community and surrounding areas. Over the years, the
Griffins have started several other businesses, from land grading to retail building
supply stores. The Griffins’ strong ties to their employees and the community mirror
the solid relationship that exists between Griffin Lumber and our Bank. Jeffrey Hester,
Vice President and a 10-year veteran of the Bank, and Bob Evans, Regional President,
West Central Region, oversee the account. For 10 years, Will, Jeffrey and Bob have
collaborated on the complexities of running these businesses, the challenges that
lie ahead, and how Colony can deliver the financial solutions to help Griffin Lumber
remain successful in the future.
Will Griffin, left, with Colony
banker Jeffrey Hester.
4
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SIDE BY SIDE FOR NINE YEARS We’re not like
the banks you’re
probably used to.
GRIFFIN LUMBER | CORDELE, GA
5
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SIDE BY SIDE FOR NINE YEARS C o l o n y B a n k C o r p • A n n u a l R e p o r t 2 0 1 8
Capital Management
In 2017, Colony redeemed its Troubled Asset Relief Program (TARP) preferred
securities, which peaked at approximately $34 million in 2014, and in doing so, we
eliminated a significant drag on earnings to the benefit of 2018 results. With these
securities now retired, the Company’s future earnings prospects and its ability to consider
strategic opportunities going forward are greatly enhanced.
Supporting this outlook, Colony continues to maintain a strong capital position, with
ratios that exceed regulatory minimums required to be classified as “well-capitalized.”
At December 31, 2018, the Company’s tier one leverage ratio, tier one ratio, total risk-
based capital ratio and common equity tier one capital ratio were 10.24%, 15.00%,
15.86% and 12.22%, respectively, compared with 9.89%, 14.64%, 15.56% and 11.78%,
respectively, at December 31, 2017. This highlights a solid capital base from which we
plan to grow.
Given that our 2018 results were quite strong and our outlook remains positive, our Board
of Directors voted in January to increase the Company’s quarterly cash dividend 50%
to $0.075 per share, beginning in 2019, marking the second consecutive year of higher
dividend payouts since dividends were reinstated in 2017. At this writing, the Company’s
forward dividend rate reflects a payout ratio of 21% of 2018 earnings per diluted share.
Expansion
With our solid balance sheet, the repayment of our TARP obligation in 2017, and a
strong leadership team in place, our bank is now ready to pursue both organic growth
across our markets as well as selective, prudent acquisitions. Last year, we purchased the
Albany branch of Planters First Bank, representing our third location in that market. The
deal also included land in Albany, a prime market for us, on which we expect to build
another branch in the future.
Whole-bank acquisitions are also part of our growth strategy. With greater size and
capabilities compared with most community banks and greater speed and agility
than regional and national banks, Colony is well situated to consider opportunities to
consolidate smaller community banks in and around its footprint. Such acquisitions
would provide opportunities to increase scale and expand the reach of our business to
new markets and customers.
In December 2018, we announced our planned acquisition of LBC Bancshares, Inc.,
parent company of Calumet Bank, a Georgia state-chartered bank with two branches in
LaGrange and Columbus, as well as a loan production office in Atlanta. As of December 31,
2018, LBC had approximately $207 million in assets, $136 million in loans, $182 million
in deposits and $19.7 million in tangible common equity.
6
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GROWING
PRESENCE
With 27 locations in Central, South and Coastal
Georgia, we are the ninth largest bank in Georgia
and the largest community bank headquartered
outside of the Atlanta market, yet we continue to
aim higher. Offering superior size and capabilities
compared with most community banks and
greater speed and agility than regional and
Atlanta
27Locations
national banks, Colony is well
situated to consider opportunities
to consolidate smaller community
banks in and around its footprint.
Such acquisitions would provide
opportunities to increase scale
and expand the reach of our
business to new markets
and customers.
Savannah
Macon
Columbus
Albany
Fitzgerald
Valdosta
Pending Acquisition of Calumet Bank
Branch location
Loan production office
7
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We’re a community bank
with big resources.
8
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ALIGNEDOBJECTIVES THE MOWRY COMPANIES | SAVANNAH, GA
Having your finger on the pulse of the real estate market is vital to the
Mowry’s businesses. Having a banker who can react swiftly in today’s
competitive real estate industry is equally important. The Mowrys are
builders, developers and sales agents who began their relationship eight
years ago with Colony Bank’s Drew Hulsey, Regional President, Coastal
Region. It’s a special relationship since the Mowrys were one of Drew’s
first customers with the Bank. As the Mowry’s businesses grew, so too did
their reliance on the Bank’s various products. Now, Homes of Integrity and
Simcoe have come to depend on Drew as their lead banker and a “one-stop
shop” for their banking needs, both personally and professionally.
Meagan Mowry, right, with Drew Hulsey,
Colony Bank’s Regional President,
Coastal Region.
9
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ALIGNEDOBJECTIVES C o l o n y B a n k C o r p • A n n u a l R e p o r t 2 0 1 8
WE’RE IN OUR COMMUNITIES
and giving back. Savannah-Chatham public choice school, STEM Academy, has
rigorous admission standards and demanding multi-disciplinary coursework.
Eighth grade students, supported by Colony Bank and its banker, Brent Lowry,
Vice President, Market Branch Manager, the PTSA
co-president, teacher and “Maker” Stephen Routh,
and the Savannah Homeless Association
collaborated to design and build a “Tiny House”
for homeless veterans in Savannah.
The Tiny House Project utilized science, technology,
engineering, art and math. Teamwork among all involved was pivotal to the
successful completion of the project and Colony Bank will continue to sponsor
the project for the 2019-2020 school year.
1 0
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The transaction, already approved by LBC shareholders, is valued at $34.1 million and
is expected to close in the second quarter of 2019. We anticipate the acquisition will
contribute mid-single digit earnings per share on a full-year basis and will be immediately
accretive to our earnings, excluding transaction costs.
When this acquisition is completed, we will welcome the Calumet team and Leonard
“Lenny” H. Bateman, Jr., LBC Bancshares President and Chief Executive Officer, to
Colony Bank. Initially, Lenny will focus on ensuring a smooth transition in customer
relationships and overseeing regional growth strategies, but we fully expect that his role
within the Company’s corporate structure will expand over time. Considering the shared
characteristics of our cultures and core philosophies, Calumet should be an excellent fit
with Colony and its integration should go smoothly.
We are excited about this acquisition, as it is a natural expansion into a contiguous
market in Western Georgia, providing our bank an entry into LaGrange and giving
Colony the third largest deposit market share in the area. We plan to increase Calumet
Bank’s scale and build on its existing operations, while also taking advantage of an
attractive access to the lucrative Atlanta lending market. These prospects portend growth
ahead, across existing and new markets, and emerging capabilities.
Conclusion
We believe we have assembled a performance-driven leadership team, with an aligned
group of market leaders and senior managers that are poised to forge the next exciting
phase for Colony Bankcorp. With 27 locations in Central, South and Coastal Georgia,
we are the ninth largest bank in the state and the largest community bank headquartered
outside of the Atlanta market. We have a clear strategic vision and solid financial
fundamentals to support and guide us. Our entire team is energized and excited about
our growth prospects in 2019 and beyond.
We thank you for your continued investment in our company. As always, we remain
grateful for your ongoing support and confidence in Colony Bankcorp and your
willingness to invest in our future. We look forward to the coming year with great
enthusiasm and are eager to capitalize on the opportunities before us.
Sincerely,
T. Heath Fountain
President and Chief Executive Officer
Mark H. Massee
Chairman of the Board
1 1
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UNDERSTAND ING YOUR GOALS
AND CHALLENGES
DOUBLERUN FARMS
ASHBURN, GA
Being fourth-generation farmers, brothers Stewart
and Steve Whelchel have been personal and business
customers of the bank for more than 30 years. With
over 1,000 acres of land in Crisp, Turner and Wilcox
Counties, the Whelchels rely on modern equipment
and efficient processes to farm their cotton and
peanut acreage. Andy Johnson, who has been
with Colony Bankcorp for a total of 12 years and is
now Market President, Ashburn, provides similar
contemporary thinking when it comes to banking and
has helped the Whelchels successfully navigate all
the financial facets of their lives.
Because of the unique aspects of farming, banking
an agricultural client is vastly different from servicing
other business relationships. When Andy took over
the account, he aligned the Whelchel’s particular
needs with banking products that assist this very
special business. These resources include equipment
financing, working capital, real estate lending and
personal financial services.
Aside from the usual challenges of harvesting a
successful crop, mother nature can be devastating to
farmers from time to time. When Hurricane Michael
struck in the fall of 2018, the Whelchels’ were hit hard,
like most Georgia farmers. The state estimates that
$2.5-$2.8 billion in farming revenues were lost in that
catastrophe. However, with assistance and advice
from Andy, who has invaluable insight and a deep
understanding of the financial aspects of the farming
industry, the Whelchels remain resilient in the field.
Stewart and Steve Whelchel (left and right) with Andy Johnson
(center), Market President, Ashburn, for Colony Bank.
1 2
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UNDERSTAND ING YOUR GOALS
AND CHALLENGES
We know our customers’
businesses.
1 2
1 3
1 0
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C o l o n y B a n k C o r p • A n n u a l R e p o r t 2 0 1 8
Board of Directors and Officers
Board of Directors
Mark H. Massee
Chairman
Colony Bankcorp, Inc.
President
Massee Builders, Inc.
Fitzgerald, Georgia
Scott L. Downing
President
SDI Investments
Fitzgerald, Georgia
T. Heath Fountain
President/CEO
Colony Bankcorp, Inc.
Michael Frederick
(Freddie) Dwozan, Jr.
Vice Chairman
Colony Bankcorp, Inc.
President/CEO/Owner
Medical Center Prescription Shop
Eastman, Georgia
Terry L. Hester
EVP/Chief Financial Officer
Colony Bankcorp, Inc.
Edward Percy Loomis, Jr.
Retired President and Chief
Executive Officer
Colony Bankcorp, Inc.
Meagan M. Mowry
Co-founder and Co-owner
Simcoe Investments
Savanah, Georgia
Matthew D. Reed
Owner and Chief Executive
Officer of Georgia CEO/
South Carolina CEO
Albany, Georgia
Jonathan W.R. Ross
President
Ross Construction Co., Inc.
Tifton, Georgia
1 4
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Executive Officers
T. Heath Fountain
President/CEO
Edward L. Bagwell, III
EVP/Chief Credit Officer
J. Stan Cook
EVP/Chief Operating Officer
M. Edward Hoyle, Jr.
EVP/Regional Executive Officer
Kimberly C. Dockery
EVP/Chief Administrative Officer
Lee A. Northcutt
EVP/Regional Executive Officer
Terry L. Hester
EVP/Chief Financial Officer
Management
Jeffery Alton
Market President, Thomaston
Drew Hulsey
Regional President, Coastal
Johnny Bryan
Market President, Sylvester
Andy Johnson
Market President, Ashburn
Wayne ‘Chip’ Carroll,
Market President, Quitman
Scott Miller
Market President, Douglas
Chris Carter
Market President, Statesboro
John Roberts
Market President, Columbus
Tommy Clark
Market President, Albany
Kirk Scott
Regional President, Mid-State
Mike Davis
Market President, Tifton
Debra Sheffield
Market President, Eastman
Bob Evans
Regional President, Central
Eddie Smith
Regional President, South
Cindy Griffin
Regional President, Southwest
Mike Smith
Market President, Fitzgerald
Mike Harris
Market President, Moultrie
Nic Worthy
Regional President, East
Bagwell
Cook
Dockery
Fountain
Hester
Hoyle
Northcutt
Alton
Bryan
Carroll
Carter
Clark
Davis
Evans
Griffin
Harris
Hulsey
Johnson
Miller
Roberts
Scott
Sheffield
E. Smith
M. Smith
Worthy
1 5
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C o l o n y B a n k C o r p • A n n u a l R e p o r t 2 0 1 8
Locations, as March 31, 2019
Albany
2609 Ledo Rd
Albany, GA 31707
(229) 430-8080
113 North Westover Blvd
Albany, GA 31707
(229) 317-2157
Ashburn
515 E Washington Ave
Ashburn, GA 31714
(229) 567-4383
Broxton
401 Alabama St North
Broxton, GA 31519
(912) 359-2351
Centerville
200 Gunn Rd
Centerville, Georgia 31028
(478) 953-1010
Columbus
1581 Bradley Park Dr
Columbus, GA 31904
(706) 571-6419
Cordele
1031 E 24th Ave
Cordele, GA 31015
(229) 271-2100
Douglas
625 Ward St W
Douglas, GA 31533
(912) 384-3100
Fitzgerald
Corporate Office
115 South Grant St
Fitzgerald, GA 31750
(229) 426-6000
302 S. Main St
Fitzgerald, Georgia 31750
(229) 423-5446
Hwy 129 South
Fitzgerald, Georgia 31750
(229) 426-6073
Leesburg
137 Robert B Lee Dr
Leesburg, GA 31763
(229) 759-2800
Moultrie
621 Veterans Pkwy N
Moultrie, GA 31768
(229) 985-1380
Quitman
602 E Screven St
Quitman, GA 31643
(229) 263-7538
Rochelle
920 1st Ave
Rochelle, GA 31079
(229) 365-7871
Savannah
241 Drayton St
Savannah, GA 31401
(912) 454-2479
1351A SE Bowens Mill Rd
Douglas, GA 31533
(912) 384-3131
7011 Hodgson Memorial Dr
Savannah, GA 31406
(912) 303-9449
Eastman
5510 Oak St
Eastman, GA 31023
(478) 374-4739
Hwy 17 Office
5987 Ogeechee Rd
Savannah, GA 31419
(912) 927-1277
Soperton
4313 West Main St
Soperton, GA 30457
(912) 529-5000
Statesboro - Loan Production Office
17 Courtland St
Statesboro, GA 30458
(912) 421-4421
Sylvester
601 N Main St
Sylvester, GA 31791
(229) 776-7641
Thomaston
206 N Church St
Thomaston, GA 30286
(706) 647-6601
Tifton
104 2nd St W
Tifton, GA 31794
(229) 386-2265
Valdosta
3774 Old US Highway 41 N
Valdosta, GA 31602
(229) 241-9900
2910 N Ashley St, Suite N
Valdosta, GA 31602
(229) 242-2037
Warner Robins
1290 South Houston Lake Rd
Warner Robins, Georgia 31088
(478) 987-1009
1 6
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FINANCIAL SECTION
Colony Bankcorp, Inc.
17
Colony BankCorp • Annual Report 2018 Selected Financial Data
(Dollars in Thousands, except per share data)
Selected Balance Sheet Data
Total Assets
Total Loans, Net of
Unearned Interest and Fees
Total Deposits
Investment Securities
Federal Home Loan Bank Stock
Stockholders’ Equity
Selected Income Statement Data
Interest Income
Interest Expense
Net Interest Income
Provision for Loan Losses
Other Income
Other Expense
Income Before Tax
Income Tax Expense
Net Income
Preferred Stock Dividends
Net Income Available to
Common Stockholders
Weighted Average
2018
Years Ended December 31,
2016
2017
2015
2014
$ 1,251,878 $ 1,232,755
$ 1,210,442
$ 1,174,149
$ 1,146,898
781,526
1,085,125
353,066
2,978
95,692
764,788
1,067,985
354,247
3,043
90,323
753,922
1,044,357
323,658
3,010
93,388
758,279
1,011,554
296,149
2,731
95,457
49,022
8,225
40,797
201
9,621
35,300
14,917
3,000
11,917
–
45,916
6,873
39,043
390
9,735
33,860
14,528
6,777
7,751
211
44,589
6,483
38,106
1,062
9,553
34,073
12,524
3,851
8,673
1,493
44,275
6,569
37,706
866
9,045
33,724
12,161
3,788
8,373
2,375
745,733
979,303
274,624
2,831
99,027
44,762
6,799
37,963
1,308
9,125
34,980
10,800
3,268
7,532
2,689
$
11,917 $
7,540
$
7,180
$
5,998
$
4,843
Common Shares Outstanding, Basic
Common Shares Outstanding, Diluted
Shares Outstanding
Intangible Assets
Dividends Declared
Average Assets
Average Stockholders’ Equity
Net Charge-Offs
Reserve for Loan Losses
OREO
Nonperforming Loans
Nonperforming Assets
Average Interest-Earning Assets
Noninterest-Bearing Deposits
8,439
8,634
8,439
45
844
1,200,631
91,045
1,805
7,508
4,256
7,503
11,759
1,133,700
190,928
$
8,439
8,513
8,439
81
–
1,163,863
100,114
743
8,923
6,439
12,350
18,789
1,090,967
159,059
$
8,439
8,458
8,439
116
–
1,146,984
101,710
1,064
8,604
8,839
14,416
23,255
1,074,556
133,886
$
8,439
8,439
8,439
152
–
1,128,052
94,751
4,312
8,802
10,402
18,341
28,743
1,057,608
128,340
8,439
8,539
8,445
$
759 $
1,688
1,201,874
89,478
431
7,277
1,841
9,482
11,323
1,149,036
192,847
1 8
Colony BankCorp • Annual Report 2018
Selected Financial Data
(Dollars in Thousands, except per share data)
Per Share Data:
Net Income Per Common
Share (Diluted)
$
Common Book Value Per Share
Tangible Common Book Value Per Share
Dividends Per Common Share
Profitability Ratios:
Net Income to Average Assets
Net Income to Average
Stockholders’ Equity
Net Interest Margin
Loan Quality Ratios:
Net Charge-Offs to Total Loans
Reserve for Loan Losses to
Total Loans and OREO
Nonperforming Assets to
Total Loans and OREO
Reserve For Loan Losses to
Nonperforming Loans
Reserve For Loan Losses to
Total Nonperforming Assets
Liquidity Ratios:
Loans to Total Deposits (1)
Loans to Average
Interest-Earning Assets (1)
Noninterest-Bearing Deposits
to Total Deposits
Capital Adequacy Ratios:
Common Stockholders’ Equity
to Total Assets
Total Stockholders’ Equity
to Total Assets
Dividend Payout Ratio
1. Total loans, net of unearned interest and fees.
2018
Years Ended December 31,
2016
2017
2015
2014
$
1.40 $
11.33
11.24
0.20
0.87
10.70
10.69
0.10
0.84
9.96
9.95
0.00
$
0.71
9.18
9.16
0.00
$
0.57
8.42
8.40
0.00
0.99%
0.63%
0.62%
0.52%
0.43%
13.32
3.56
0.06
0.93
1.44
8.28
3.46
0.24
0.98
1.53
7.17
3.51
0.10
1.17
2.47
76.74
100.06
72.25
64.27
63.85
47.49
72.02
68.02
71.61
72.19
67.46
69.11
17.77
17.88
15.23
7.64
7.64
14.18
7.33
7.33
11.24
6.94
7.72
0.00
5.90
3.52
0.14
1.12
3.03
59.68
37.00
74.96
70.57
13.24
6.60
8.13
0.00
5.11
3.60
0.58
1.16
3.80
47.99
30.62
76.15
70.51
13.11
6.20
8.63
0.00
1 9
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements and Factors that Could Affect Future Results
Certain statements contained in this Annual Report that are not statements of historical fact constitute
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the
Act), notwithstanding that such statements are not specifically identified. In addition, certain statements
may be contained in the Company’s future filings with the SEC, in press releases, and in oral and written
statements made by or with the approval of the Company that are not statements of historical fact and
constitute forward-looking statements within the meaning of the Act. Examples of forward-looking
statements include, but are not limited to: (i) projections of revenues, income or loss, earnings or loss per
share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements
of plans and objectives of Colony Bankcorp, Inc. or its management or Board of Directors, including
those relating to products or services; (iii) statements of future economic performance; and (iv) statements
of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,”
“targeted” and similar expressions are intended to identify forward-looking statements but are not the
exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties that may cause actual results to differ
materially from those in such statements. Factors that could cause actual results to differ from those discussed
in the forward-looking statements include, but are not limited to:
• Local and regional economic conditions and the impact they may have on the Company and its
customers and the Company’s assessment of that impact;
• Changes in estimates of future reserve requirements based upon the periodic review thereof under
relevant regulatory and accounting requirements;
• The effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies
of the Federal Reserve Board;
•
•
Inflation, interest rate, market and monetary fluctuations;
Political instability;
• Acts of war or terrorism;
• The timely development and acceptance of new products and services and perceived overall value of
these products and services by users;
• Changes in consumer spending, borrowings and savings habits;
• Technological changes;
• Acquisitions and integration of acquired businesses;
• The ability to increase market share and control expenses;
• The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking,
securities and insurance) with which the Company and its subsidiaries must comply;
2 0
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
• The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies,
as well as the Financial Accounting Standards Board and other accounting standard setters;
• Changes in the Company’s organization, compensation and benefit plans;
• The costs and effects of litigation and of unexpected or adverse outcomes in such litigation;
• Greater than expected costs or difficulties related to the integration of new lines of business; and
• The Company’s success at managing the risks involved in the foregoing items.
Forward-looking statements speak only as of the date on which such statements are made. The Company
undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the
date on which such statement is made, or to reflect the occurrence of unanticipated events.
Future Outlook
During the recent financial crisis, the financial industry experienced tremendous adversities as a result
of the collapse of the real estate markets across the country. Colony, like most banking companies, has been
affected by these economic challenges that started with a rapid stall of real estate sales and developments
throughout the country. We have accomplished a considerable amount of work in bringing our problem
assets to an acceptable level. With these challenges behind us, we are now focusing on increasing our deposits
along with solid loan growth. We continue to explore opportunities to improve core non-interest income.
Revenue enhancement initiatives to accomplish this include new product lines and services.
As we look forward to 2019, we are committed to improving earnings. Given the improved condition of
the company, we are also considering product and market expansion. In January 2017, the Company opened
its third office in Savannah. In February 2018, the Company purchased a property in Statesboro, Georgia
for a new office to open in the second quarter of 2019. In May 2018, the Company closed one branch office
in Albany, Georgia to improve operating efficiencies.
In October 2018, the Bank closed on a transaction to purchase a branch in Albany, Georgia from
Planters First Bank. The transaction resulted in additional $20.7 million in loans and an additional $12.0
million in deposits for the Bank. In addition, the Bank purchased a vacant lot of real estate in Albany,
Georgia with this transaction in which the Bank intends to build a new branch office in the future.
In December 2018, the Company and LBC Bancshares, Inc., a Georgia corporation (“LBC”), entered
into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which LBC will merge into
the Company. Immediately thereafter, Calumet Bank, a Georgia bank wholly owned by LBC, will be
merged into Colony Bank. Calumet Bank operates two full-service banking locations, one each in LaGrange,
Georgia and Columbus, Georgia, as well as a loan production office in Atlanta, Georgia. Under the terms
of the Merger Agreement, each LBC shareholder will have the option to receive either $23.50 in cash or
1.3239 shares of the Company’s Common Stock in exchange for each share of LBC common stock, subject
to customary proration and allocation procedures, such that 55% of LBC shares will receive the stock
consideration and 45% will receive the cash consideration, and at least 50% of the merger consideration
will be paid in the Company stock. The aggregate consideration is valued at approximately $34.1 million,
based upon the $16.10 per share closing price of the Company’s common stock as of December 17, 2018.
The merger is subject to customary closing conditions, including the receipt of regulatory approvals and
the approval of LBC’s shareholders. The transaction is expected to close during the first half of 2019. As of
December 31, 2018, LBC reported assets of $207 million, gross loans of $136 million and deposits of $182
million. The purchase price will be allocated among the net assets of LBC acquired as appropriate, with the
remaining balance being reported as goodwill.
2 1
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Company reinstated dividend payments during the first quarter of 2017 and have continued
throughout 2017 and 2018 on a quarterly basis. In 2017, we had a quarterly dividend of $0.025 per common
stock and in 2018, we paid a quarterly dividend of $0.05 per common stock.
In July 2018, the Company announced the retirement of its President and Chief Executive Officer,
Edward P. Loomis, Jr. and named Mr. T. Heath Fountain as his replacement. Mr. Fountain previously
served as President and Chief Executive Officer of Planters First Bank for three years and Chief Financial
Officer of Heritage Financial Group and Heritage Bank of the South for eight years.
Non-GAAP Financial Measures
Our accounting and reporting policies conform to generally accepted accounting principles (GAAP)
in the United States and prevailing practices in the banking industry. However, certain non-GAAP
measures are used by management to supplement the evaluation of our performance. These include the
fully-taxable equivalent measures: tax-equivalent net interest income, tax-equivalent net interest margin
and tax-equivalent net interest spread, which include the effects of taxable-equivalent adjustments using a
federal income tax rate of 21% in 2018 and 34% in prior years to increase tax-exempt interest income to a
tax-equivalent basis. Tax-equivalent adjustments are reported in Notes 1 and 2 to the Average Balances with
Average Yields and Rates table under Rate/Volume Analysis. Tangible book value per common share is also
a non-GAAP measure used in the selected Financial Data Section.
Tax-equivalent net interest income, net interest margin and net interest spread. Net interest income on a tax-
equivalent basis is a non-GAAP measure that adjusts for the tax-favored status of net interest income from
loans and investments. We believe this measure to be the preferred industry measurement of net interest
income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.
The most directly comparable financial measure calculated in accordance with GAAP is our net interest
income. Net interest margin on a tax-equivalent basis is net interest income on a tax-equivalent basis divided
by average interest-earning assets on a tax-equivalent basis. The most directly comparable financial measure
calculated in accordance with GAAP is our net interest margin. Net interest spread on a tax-equivalent
basis is the difference in the average yield on average interest-earning assets on a tax equivalent basis and
the average rate paid on average interest-bearing liabilities. The most directly comparable financial measure
calculated in accordance with GAAP is our net interest spread.
These non-GAAP financial measures should not be considered alternatives to GAAP-basis financial
statements, and other bank holding companies may define or calculate these non-GAAP measures or similar
measures differently.
A reconciliation of these performance measures to GAAP performance measures is included in the
tables below.
2 2
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Non-GAAP Performance Measures Reconciliation
(Dollars in Thousands, except per share data)
Interest Income Reconciliation
Interest Income – Taxable Equivalent $ 49,109
(87)
Tax Equivalent Adjustment
$ 49,022
Interest Income (GAAP)
2018
Years Ended December 31,
2016
2017
2015
2014
$ 46,079
(163)
$ 45,916
$ 44,762
(173)
$ 44,589
$ 44,407
(132)
$ 44,275
$ 44,879
(117)
$ 44,762
Net Interest Income Reconciliation
Net Interest Income –
Taxable Equivalent
Tax Equivalent Adjustment
Net Interest Income (GAAP)
Net Interest Margin Reconciliation
Net Interest Margin –
Taxable Equivalent
Tax Equivalent Adjustment
Net Interest Margin (GAAP)
Interest Rate Spread Reconciliation
Interest Rate Spread –
Taxable Equivalent
Tax Equivalent Adjustment
Interest Rate Spread (GAAP)
Selected Financial Data
Tangible Book Value
Per Common Share
Effect of Other Intangible Assets
Book Value Per Common
Share (GAAP)
The Company
$ 40,884
(87)
$ 40,797
$ 39,206
(163)
$ 39,043
$ 38,279
(173)
$ 38,106
$ 37,838
(132)
$ 37,706
$ 38,080
(117)
$ 37,963
3.56%
(0.01)
3.55%
3.39%
–
3.39%
3.46%
(0.02)
3.44%
3.34%
(0.02)
3.32%
3.51%
(0.02)
3.49%
3.40%
(0.02)
3.38%
3.52%
(0.01)
3.51%
3.41%
(0.01)
3.40%
3.60%
(0.01)
3.59%
3.49%
(0.01)
3.48%
$
11.24
0.09
$
10.69
0.01
$
9.95
0.01
$
9.16
0.02
$
8.40
0.02
$ 11.33
$
10.70
$
9.96
$
9.18
$
8.42
Colony Bankcorp, Inc. (“Colony” or the “Company”) is a bank holding company headquartered in
Fitzgerald, Georgia that provides, through its wholly-owned subsidiary Colony Bank (collectively referred
to as the Company), a broad array of products and services throughout central, south and coastal Georgia
markets. The Company offers commercial, consumer and mortgage banking services.
Overview
The following discussion and analysis presents the more significant factors affecting the Company’s
financial condition as of December 31, 2018 and 2017, and results of operations for each of the years in the
three-year period ended December 31, 2018. This discussion and analysis should be read in conjunction with
the Company’s consolidated financial statements, notes thereto and other financial information appearing
elsewhere in this report.
2 3
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Taxable-equivalent adjustments are the result of increasing income from tax-free loans and investments
by an amount equal to the taxes that would be paid if the income were fully taxable based on a 21 percent
federal tax rate for 2018 and 34 percent federal tax rate for 2017 and 2016, thus making tax-exempt yields
comparable to taxable asset yields.
Dollar amounts in tables are stated in thousands, except for per share amounts.
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 market forces and economic conditions beyond the control of the Company
determine interest rates, the ability to generate net interest income is dependent upon the Company’s ability
to obtain an adequate spread between the rate earned on interest-earning assets and the rate paid on interest-
bearing liabilities. Thus, the key performance for net interest income is the interest margin or net yield, which
is taxable-equivalent net interest income divided by average interest-earning assets. Net income available to
common shareholders totaled $11.92 million, or $1.40 per diluted shares in 2018, compared to $7.54 million,
or $0.87 per diluted common share in 2017 and compared to $7.18 million, or $0.84 per diluted common
share in 2016.
Selected income statement data, returns on average assets and average equity and dividends per share
for the comparable periods were as follows:
$
%
$
%
2018
87
40,797
201
9,621
35,300
2017
Taxable-equivalent net interest income $ 40,884 $ 39,206
Taxable-equivalent adjustment
163
39,043
Net interest income
390
Provision for loan losses
9,735
Noninterest income
Noninterest expense
33,860
$ 14,917 $ 14,528
Income before income taxes
6,777
Income Taxes
$ 11,917 $ 7,751
Net income
Preferred stock dividends
211
– $
$
Net income available to
common shareholders
Net income available to
common shareholders:
$ 11,917 $ 7,540
3,000
Variance Variance
2016
Variance Variance
$ 1,678
(76)
1,754
(189)
(114)
1,440
$ 389
(3,777)
$ 4,166
(211)
$
2017
927
4.28% $ 39,206 $ 38,279 $
(10)
163
(46.63)
937
39,043
4.49
(672)
390
(48.46)
182
9,735
(1.17)
4.25
(213)
33,860
2.68% $ 14,528 $ 12,524 $ 2,004
2,926
6,777
(55.73)
53.75% $ 7,751 $ 8,673 $
(922)
211 $ 1,493 $ (1,282)
(100.00)% $
173
38,106
1,062
9,553
34,073
3,851
2.42%
(5.78)
2.46
63.28
1.91
(0.63)
16.00%
75.98
(10.63)%
(85.87)%
$ 4,377
58.05% $ 7,540 $ 7,180 $
360
5.01%
Basic
Diluted
Return on average assets (1)
Return on average common equity (1)
(1) Computed using net income available to common shareholders.
$
$
1.41 $
1.40 $
0.99%
13.32%
0.89
0.87
0.63%
8.28%
58.43% $
60.92% $
$ 0.52
$ 0.53
0.36% 57.14%
5.04% 60.87%
0.89 $ 0.85 $ 0.04
4.71%
3.57%
0.03
0.87 $ 0.84 $
0.63% 0.62% 0.01% 1.61%
1.11% 15.48%
8.28%
7.17%
Net Interest Income
Net interest income is the difference between interest income on earning assets, such as loans and securities,
and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net
interest income is the Company’s largest source of revenue, representing 80.92 percent of total revenue during
2018, 80.04 percent of total revenue during 2017, and 79.96 percent of total revenue during 2016.
Net interest margin is the taxable-equivalent net interest income as a percentage of average interest-
earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and
interest-bearing liabilities impact net interest income and net interest margin.
2 4
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Company’s loan portfolio is significantly affected by changes in the prime interest rate. The prime
interest rate, which is the rate offered on loans to borrowers with strong credit, is currently 5.50 percent.
The Federal Reserve Board sets general market rates of interest, including the deposit and loan rates offered
by many financial institutions. The prime interest rate increased 25 basis points during the fourth quarter
of 2016. During 2017, the prime interest rate increased overall by 75 basis points. During 2018, the prime
interest rate increased overall by 100 basis points. Given that the federal funds rate moves in accordance with
the movement of the prime interest rate, we anticipate in 2019 that the federal funds rate will remain the
same from its current 2.4 percent.
The following table presents the changes in taxable-equivalent net interest income and identifies the
changes due to differences in the average volume of interest-earning assets and interest-bearing liabilities
and the changes due to changes in the average interest rate on those assets and liabilities. The changes in
net interest income due to changes in both average volume and average interest rate have been allocated
to the average volume change or the average interest rate change in proportion to the absolute amounts of
the change in each. The Company’s consolidated average balance sheets along with an analysis of taxable-
equivalent net interest earnings are presented in the Rate/Volume Analysis.
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.
Interest Income
Loans, Net-Taxable
Investment Securities
Taxable
Tax-Exempt
Total Investment Securities
Interest-Bearing Deposits in
Other Banks
Federal Funds Sold
Other Interest - Earning Assets
Total Interest Income
Interest Expense
Interest-Bearing Demand and
Savings Deposits
Time Deposits
Total Interest Expense
on Deposits
Other Interest-Bearing Liabilities
Subordinated Debentures
Other Debt
Federal Funds Purchased
Total Interest Expense
Net Interest Income (Loss)
Changes From 2017 to 2018 (a)
Total
Rate
Volume
Changes From 2016 to 2017 (a)
Total
Rate
Volume
$ 496
$ 1,510
$ 2,006
$
72
$ (407)
$
(335)
(8)
(9)
(17)
68
–
5
552
840
(14)
826
110
–
32
2,478
832
(23)
809
178
–
37
3,030
769
(5)
764
(12)
–
12
836
770
(9)
761
120
–
7
481
1,539
(14)
1,525
108
–
19
1,317
63
(221)
810
647
873
426
174
(240)
28
15
202
(225)
(158)
1,457
1,299
(66)
43
(23)
–
(41)
1
(198)
$ 750
241
(149)
1
1,550
$ 928
241
(190)
2
1,352
$ 1,678
–
231
4
169
$ 667
126
54
(2)
221
$ 260
126
285
2
390
927
$
(a) 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.
2 5
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Company maintains about 24.2 percent of its loan portfolio in adjustable rate loans that reprice with
prime rate changes, while the bulk of its other loans mature within 3 years. The liabilities to fund assets are
primarily in non-maturing core deposits and short term certificates of deposit that mature within one year.
The Federal Reserve rates have steadily increased since 2016 with a 25 basis point increase in 2016 followed
by a 75 basis point increase during 2017 and a 100 basis point increase during 2018. We have seen the net
interest margin change to 3.56 percent for 2018, compared to 3.46 percent for 2017 and 3.51 percent for
2016. We have seen our net interest margin reach a low of 3.55 percent in the first and fourth quarter of 2018
to a high of 3.57 percent in the second and third quarters 2018.
Taxable-equivalent net interest income for 2018 increased by $1.68 million, or 4.28 percent, compared
to 2017 while taxable-equivalent net interest income for 2017 increased by $927 thousand, or 2.42 percent
compared to 2016. The average volume of interest-earning assets during 2018 increased $15.34 million
compared to 2017 while over the same period the net interest margin increased to 3.56 percent from 3.46
percent. The average volume of interest-earning assets during 2017 increased $42.73 million compared to
2016 while over the same period the net interest margin dropped to 3.46 percent from 3.51 percent. The
change in the net interest margin in 2018 was primarily driven by a higher level of low yielding assets offset
by an increase in the cost of funds. The change in the net interest margin in 2017 was primarily driven by a
higher level of low yielding assets offset by an increase in the cost of funds. The increase in average interest-
earning assets in 2018 was primarily in loans and interest bearing deposits. The increase in average interest-
earning assets in 2017 was in investments.
The average volume of loans increased $9.77 million in 2018 compared to 2017 and increased $1.41
million in 2017 compared to 2016. The average yield on loans increased 20 basis points in 2018 compared
to 2017 and decreased 5 basis points in 2017 compared to 2016. The average volume of deposits increased
$4.33 million in 2018 compared to 2017. The average volume of deposits increased $36.78 million in 2017
compared to 2016. Demand deposits made up $14.76 million of the increase in average deposits in 2018
compared to $18.59 million of the increase in average deposits in 2017.
Accordingly, the ratio of average interest-bearing deposits to total average deposits was 83.2 percent in
2018, 84.6 percent in 2017 and 85.9 percent in 2016. For 2018, this deposit mix, combined with a general
increase in interest rates, had the effect of (i) increasing the average cost of total deposits by 13 basis points in
2018 compared to 2017 and (ii) offset a portion of the impact of increasing yields on interest-earning assets
on the Company’s net interest income. When comparing 2017 to 2016, the deposit mix had the effect of (i)
decreasing the average cost of total deposits by 2 basis points and (ii) mitigating a portion of the impact of
decreasing yields on interest-earning assets on the Company’s net interest income.
The Company’s net interest spread, which represents the difference between the average rate earned
on interest-earning assets and the average rate paid on interest-bearing liabilities, was 3.39 percent in 2018
compared to 3.34 percent in 2017 and 3.40 percent in 2016. The net interest spread, as well as the net interest
margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the
impact from the competitive environment. A discussion of the effects of changing interest rates on net interest
income is set forth in Market Risk and Interest Rate Sensitivity included elsewhere in this report.
2 6
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Average Balance Sheets
2018
2017
2016
Average
Balances
Income/ Yields/
Expense Rates
Average
Balances
Income/ Yields/
Expense Rates
Average
Balances
Income/ Yields/
Expense Rates
Assets:
Interest-Earning Assets
Loans, Net of Unearned Income (1) $ 772,327
$ 40,755
5.28% $ 762,554 $ 38,749 5.08% $
761,149 $ 39,084 5.13%
344,369
2,046
346,415
27,072
–
3,222
1,149,036
7,699
58
7,757
410
–
187
49,109
344,790
2.24
2,310
2.83
347,100
2.24
20,920
1.51
–
–
5.80
3,126
4.27% 1,133,700
6,867
1.99
81 3.51
6,948 2.00
1.11
–
150 4.80
46,079 4.06%
232
–
14,578
(7,335)
45,595
52,838
$ 1,201,874
20,587
(8,442)
54,786
66,931
$ 1,200,631
5,328 1.77
95 3.89
5,423 1.79
124 0.54
–
131 4.59
44,762 4.10
–
301,357
2,440
303,797
23,167
–
2,854
1,090,967
19,208
(9,372)
63,060
72,896
$ 1,163,863
$ 534,887 $ 2,769
3,288
326,243
0.52% $
1.01
517,974 $
353,587
1,896 0.37% $ 469,740 $
2,862 0.81
383,628
1,694 0.36%
3,087 0.80
861,130
6,057
0.70
871,561
4,758 0.55
853,368
4,781 0.56
49,859
24,229
1,195
968
2.40
4.00
51,388
24,229
1,385 2.70
727 3.00
42,470
24,229
1,100 2.59
601 2.48
261
5
1.92
178
3
1.69
35
1 2.86
74,349
2,168
2.92
75,795
2,115 2.79
66,734
1,702 2.55
935,479
8,225
0.88
947,356
6,873 0.73
920,102
6,483 0.70
Investment Securities
Taxable
Tax-Exempt (2)
Total Investment Securities
Interest-Bearing Deposits
Federal Funds Sold
Other Interest-Earning Assets
Total Interest-Earning Assets
Noninterest-Earning Assets
Cash
Allowance for Loan Losses
Other Assets
Total Noninterest-Earning Assets
Total Assets
Liabilities and Stockholders’ Equity
Interest-Bearing Liabilities
Interest-Bearing Demand
and Savings
Other Time
Total Interest-Bearing
Deposits
Other Interest-Bearing Liabilities
Other Borrowed Money
Subordinated Debentures
Federal Funds Purchased and
Repurchase Agreements
Total Other Interest-Bearing
Liabilities
Total Interest-Bearing
Liabilities
Noninterest-Bearing Liabilities and
Stockholders’ Equity
Demand Deposits
Other Liabilities
Stockholders’ Equity
Total Noninterest-Bearing
Liabilities and
Total Liabilities and
Stockholders’ Equity
Interest Rate Spread
Net Interest Income
Net Interest Margin
173,688
3,229
89,478
Stockholders’ Equity
266,395
158,924
3,306
91,045
253,275
140,338
3,309
100,114
243,761
$ 1,163,863
$ 1,201,874
$ 1,200,631
$ 40,884
3.39%
3.56%
$ 39,206
3.34%
3.46%
$ 38,279
3.40%
3.51%
(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. Taxable equivalent adjustments totaling $73, $135 and $141 for 2018, 2017 and 2016, respectively, are included in interest on loans. The
adjustments are based on a federal tax rate of 21 percent for 2018 and 34 percent for 2017 and 2016.
(2) Taxable-equivalent adjustments totaling $14, $28 and $32 for 2018, 2017 and 2016, respectively, are included in tax-exempt interest on investment
securities. The adjustments are based on a federal tax rate of 21 percent for 2018 and 34 percent for 2017 and 2016 with appropriate reductions for
the effect of disallowed interest expense incurred in carrying tax-exempt obligations.
2 7
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Provision for Loan Losses
The provision for loan losses is determined by management as the amount to be added to the allowance
for loan losses after net charge-offs have been deducted to bring the allowance to a level which, in
management’s best estimate, is necessary to absorb probable losses within the existing loan portfolio. The
provision for loan losses totaled $201 thousand in 2018 compared to $390 thousand in 2017 and $1.06 million
in 2016. See the section captioned “Allowance for Loan Losses” elsewhere in this discussion for further
analysis of the provision for loan losses.
Noninterest Income
The components of noninterest income were as follows:
$
%
$
%
2018
2017
Service Charges on Deposit Accounts $ 4,374 $ 4,467
3,049
Other Charges, Commissions and Fees
859
Mortgage Fee Income
Securities Gains (Losses)
–
1,360
Other
$ 9,621 $ 9,735
Total
3,254
652
116
1,225
Variance Variance
$
(93)
205
(207)
116
(135)
(114)
$
2016
2017
2.08% $ 4,467 $ 4,307 $
3,049
859
–
1,360
6.72
(24.10)
100.00
(9.93)
(1.17)% $ 9,735 $ 9,554 $
2,803
682
385
1,377
Variance Variance
3.71%
8.78
25.95
(100.00)
(1.23)
1.89%
160
246
177
(385)
(17)
181
Other Charges, Commissions and Fees. Significant amounts impacting the comparable periods was primarily
attributed to ATM and debit card interchange fees which increased $219 thousand in 2018 compared to 2017
and $209 thousand in 2017 compared to 2016.
Mortgage Fee Income. The decrease in mortgage fee income in 2018 compared to the same period in 2017 is
due to a decrease in the volume of mortgage loans.
Securities Gains (Losses). The increase in 2018 is attributable to a gain on sale of securities in 2018
compared to no sale of securities in 2017.
Other. The decrease in other income is attributable to a decrease in revenue from cash surrender life
insurance policies which decreased $124 thousand in 2018 compared to 2017 and increased $48 thousand in
2017 compared to 2016. The Bank did not have any significant changes for 2017 compared to 2016.
Noninterest Expense
The components of noninterest expense were as follows:
$
%
$
%
2017
2016
Variance Variance
Salaries and Employee Benefits
Occupancy and Equipment
Directors’ Fees
Legal and Professional Fees
Foreclosed Property
FDIC Assessment
Advertising
Software and Data Processing
Telephone
ATM/Card Processing
Other
Total
2018
2017
$ 20,123 $ 19,223
3,948
298
1,170
363
387
350
1,192
814
1,467
4,648
$ 35,300 $ 33,860
4,180
291
1,321
205
358
338
1,421
738
1,510
4,815
Variance Variance
$ 900
232
(7)
151
(158)
(29)
(12)
229
(76)
43
167
$ 1,440
4.68% $ 19,223
3,948
298
1,170
363
387
350
1,192
814
1,467
4,648
4.25% $ 33,860 $ 34,073 $
$ 18,483 $
3,970
349
1,068
1,143
604
610
1,112
737
1,136
4,861
5.88
(2.35)
12.91
(43.53)
(7.49)
(3.43)
19.21
(9.34)
2.93
3.59
740
(22)
(51)
102
(780)
(217)
(260)
80
77
331
(213)
(213)
4.00%
(0.55)
(14.61)
9.55
(68.24)
(35.93)
(42.62)
7.19
10.45
29.14
(4.38)
(0.63)%
2 8
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Salaries and Employee Benefits. The increase in salary and employee benefits for 2018 and 2017 is due to
merit pay increases and an increase in number of employees.
Occupancy and Equipment. The increase in occupancy and equipment is primarily attributable to an
increase in depreciation expense in 2018 and an increase in maintenance on equipment and building in 2018
when compared to 2017. The Company did not have any significant changes for 2017 compared to 2016.
Foreclosed Property. The decrease in foreclosed property and repossession expense for 2018 and 2017 is
primarily attributable to the decrease in the volume of OREO.
Advertising. The Bank did not have any significant changes for 2018 compared to 2017. The decrease in
advertising expense for 2017 is due to management changing its approach to advertising by decreasing its
television ads.
Software and Data Processing. The increase in software and data processing is primarily attributable to the
Company changing its information technology processes from an in-house approach to outsourcing with
our core processing provider during the first quarter of 2018. With this change, the company has shown a
decrease of $400 thousand in software expense in 2018 that was offset by an increase of $629 thousand in
data processing expense in 2018 compared to 2017. The Company did not have any significant changes for
2017 compared to 2016.
ATM/Card Processing. The increase is proportional to the Bank’s increase in deposits and to ATM and
debit card interchange fees.
Other. The increase in other expenses is primarily attributable to conversion expenses of $225 thousand
for 2018. These expenses stem from our branch acquisition of the Albany, Georgia branch from Planters
First Bank and from our pending acquisition of LBC Bancshares. The Company did not have any significant
changes for 2017 compared to 2016.
Sources and Uses of Funds
The following table illustrates, during the years presented, the mix of the Company’s funding sources
and the assets in which those funds are invested as a percentage of the Company’s average total assets for
the period indicated. Average assets totaled $1.20 billion in 2018 compared to $1.20 billion in 2017 and $1.16
billion in 2016.
2018
2017
2016
Sources of Funds:
Deposits:
Noninterest-Bearing
Interest-Bearing
Federal Funds Purchased
and Repurchase Agreements
Subordinated Debentures
and Other Borrowed Money
Other Noninterest-Bearing Liabilities
Equity Capital
Total
Uses of Funds:
Loans (Net of Allowance)
Investment Securities
Federal Funds Sold
Interest-Bearing Deposits
Other Interest-Earning Assets
Other Noninterest-Earning Assets
Total
$ 173,688
861,130
14.45%
71.65%
$ 158,924
871,561
13.24%
72.59%
$ 140,338
853,368
12.1%
73.3%
261
0.02%
178
0.01%
35
–%
74,088
3,229
89,478
$ 1,201,874
6.17%
0.27%
7.44%
100.00%
75,617
3,306
91,045
$ 1,200,631
6.30%
0.28%
7.58%
100.00%
66,699
3,309
100,114
$ 1,163,863
5.7%
0.3%
8.6%
100.0%
$ 764,992
346,415
–
27,072
3,222
60,173
$ 1,201,874
63.65%
28.82%
–%
2.25%
0.27%
5.01%
100.00%
$ 754,112
347,100
–
20,920
3,126
75,373
$ 1,200,631
62.81%
28.91%
–%
1.74%
0.26%
6.28%
100.00%
$ 751,777
303,797
–
23,167
2,854
82,268
$ 1,163,863
64.6%
26.1%
–%
2.0%
0.2%
7.1%
100.0%
2 9
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Deposits continue to be the Company’s primary source of funding. Over the comparable periods, the
relative mix of deposits continues to be high in interest-bearing deposits. Interest-bearing deposits totaled
83.22 percent of total average deposits in 2018 compared to 84.6 percent in 2017 and 85.9 percent in 2016.
The Company primarily invests funds in loans and securities. Loans continue to be the largest
component of the Company’s mix of invested assets. Loan demand increased in 2018 as total loans were
$782.0 million at December 31, 2018, up 2.19 percent, compared to loans of $765.3 million at December
31, 2017, which increased 1.46 percent, compared to loans of $754.3 million at December 31, 2016. See
additional discussion regarding the Company’s loan portfolio in the section captioned “Loans” on the
following page. The majority of funds provided by deposits have been invested in loans and securities.
Loans
The following table presents the composition of the Company’s loan portfolio as of December 31 for the
past five years.
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
Other
Unearned Interest and Fees
Allowances for Loan Losses
Loans
2018
2017
2016
2015
2014
$ 57,410
16,799
$ 48,122
16,443
$ 47,025
17,080
$ 47,782
19,193
$ 50,960
16,689
47,849
12,500
373,534
187,714
62,709
18,485
5,027
782,027
(501)
(7,277)
$ 774,249
45,214
8,583
351,172
194,049
67,768
18,956
14,977
765,284
(495)
(7,508)
$ 757,281
30,358
11,830
349,090
195,580
66,877
19,695
16,748
754,283
(361)
(8,923)
$ 744,999
40,107
9,413
346,262
197,002
61,780
20,605
16,492
758,636
(357)
(8,604)
$ 749,675
51,259
11,221
332,231
203,753
49,951
22,820
7,210
746,094
(362)
(8,802)
$ 736,930
The following table presents total loans as of December 31, 2018 according to maturity distribution and/
or repricing opportunity on adjustable rate loans.
Maturity and Repricing Opportunity
One Year or Less
$ 292,508
After One Year through Three Years
291,464
After Three Years through Five Years 153,625
44,430
Over Five Years
$ 782,027
Overview. Loans totaled $782.0 million at December 31, 2018 up 2.19 percent from 765.3 million at
December 31, 2017. The majority of the Company’s loan portfolio is comprised of the real estate loans.
Commercial and residential real estate which is primarily 1-4 family residential properties and nonfarm
nonresidential properties, made up 71.77 percent and 71.24 percent of total loans, real estate construction
loans made up 7.72 percent and 7.03 percent while commercial and agricultural loans made up 9.49 percent
and 8.44 percent of total loans at December 31, 2018 and December 31, 2017, respectively.
3 0
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Loan Origination/Risk Management. In accordance with the Company’s decentralized banking model, loan
decisions are made at the local bank level. The Company utilizes both an Executive Loan Committee and
a Director Loan Committee to assist lenders with the decision making and underwriting process of larger
loan requests. Due to the diverse economic markets served by the Company, evaluation and underwriting
criterion may vary slightly by market. Overall, loans are extended after a review of the borrower’s repayment
ability, collateral adequacy, and overall credit worthiness.
Commercial purpose, commercial real estate, and agricultural loans are underwritten similarly to how
other loans are underwritten throughout the Company. The properties securing the Company’s commercial
real estate portfolio are diverse in terms of type and geographic location. In addition, the Company restricts
total loans to $10 million per borrower, subject to exception and approval by the Director Loan Committee.
This diversity helps reduce the company’s exposure to adverse economic events that affect any single market
or industry. Management monitors and evaluates commercial real estate loans monthly based on collateral,
geography, and risk grade criteria. The Company also utilizes information provided by third-party agencies to
provide additional insight and guidance about economic conditions and trends affecting the markets it serves.
The Company extends loans to builders and developers that are secured by non-owner occupied
properties. In such cases, the Company reviews the overall economic conditions and trends for each market
to determine the desirability of loans to be extended for residential construction and development. Sources of
repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders,
sales of developed property or an interim mini-perm loan commitment from the Company until permanent
financing is obtained. In some cases, loans are extended for residential loan construction for speculative
purposes and are based on the perceived present and future demand for housing in a particular market served
by the Company. These loans are monitored by on-site inspections and are considered to have higher risks
than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general
economic conditions and trends, the demand for the properties, and the availability of long-term financing.
The Company originates consumer loans at the bank level. Due to the diverse economic markets served
by the Company, underwriting criterion may vary slightly by market. The Company is committed to serving
the borrowing needs of all markets served and, in some cases, adjusts certain evaluation methods to meet the
overall credit demographics of each market. Consumer loans represent relatively small loan amounts that are
spread across many individual borrowers to help minimize risk. Additionally, consumer trends and outlook
reports are reviewed by management on a regular basis.
The Company utilizes an independent third party company for loan review and validation of the credit
risk program on an ongoing quarterly basis. Results of these reviews are presented to management and the
audit committee. The loan review process complements and reinforces the risk identification and assessment
decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.
Commercial and Agricultural. Commercial and agricultural loans at December 31, 2018 increased 14.94
percent to $74.2 million from December 31, 2017 at $64.6 million. The Company’s commercial and
agricultural loans are a diverse group of loans to small, medium and large businesses. The purpose of these
loans varies from supporting seasonal working capital needs to term financing of equipment. While some
short-term loans may be made on an unsecured basis, most are secured by the assets being financed with
collateral margins that are consistent with the Company’s loan policy guidelines.
Real Estate. Commercial and residential construction loans increased by $6.5 million, or 12.18 percent,
at December 31, 2018 to $60.3 million from $53.8 million at December 31, 2017. This increase is partially
due to new construction loans being financed during the year that were not completed by the end of the year.
Commercial real estate increased $22.3 million or 6.37 percent at December 31, 2018 to $373.5 million from
$351.2 million at December 31, 2017.
Other. Other loans at December 31, 2018 decreased 66.44 percent to $5.0 million from $15.0 million at
December 31, 2017.
31
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Industry Concentrations. As of December 31, 2018 and December 31, 2017, there were no concentrations of
loans within any single industry in excess of 10 percent of total loans, as segregated by Standard Industrial
Classification code (“SIC code”). The SIC code is a federally designed standard industrial numbering system
used by the Company to categorize loans by the borrower’s type of business. The Company has established
industry-specific guidelines with respect to maximum loans permitted for each industry with which the
Company does business.
Collateral Concentrations. Concentrations of credit risk can exist in relation to individual borrowers or
groups of borrowers, certain types of collateral, certain types of industries, or certain geographic regions.
The Company has a concentration in real estate loans as well as a geographic concentration that could
pose an adverse credit risk, particularly with the current economic downturn in the real estate market. At
December 31, 2018, approximately 87.50 percent of the Company’s loan portfolio was concentrated in loans
secured by real estate. A substantial portion of borrowers’ ability to honor their contractual obligations is
dependent upon the viability of the real estate economic sector. In addition, a large portion of the Company’s
foreclosed assets are also located in these same geographic markets, making the recovery of the carrying
amount of foreclosed assets susceptible to changes in market conditions. Management continues to monitor
these concentrations and has considered these concentrations in its allowance for loan loss analysis. In the
recent year, we have seen real estate values stabilizing in our markets. The stabilization of rates has resulted
in a decrease in the number of loans being classified as impaired over the past several years.
Large Credit Relationships. The Company is currently in eighteen counties in central, south and coastal
Georgia and includes metropolitan markets in Dougherty, Lowndes, Houston, Chatham and Muscogee
counties. As a result, the Company originates and maintains large credit relationships with several
commercial customers in the ordinary course of business. The Company considers large credit relationships
to be those with commitments equal to or in excess of $5.0 million prior to any portion being sold. Large
relationships also include loan participations purchased if the credit relationship with the agent is equal to
or in excess of $5.0 million. In addition to the Company’s normal policies and procedures related to the
origination of large credits, the Company’s Executive Loan Committee and Director Loan Committee must
approve all new and renewed credit facilities which are part of large credit relationships. The following table
provides additional information on the Company’s large credit relationships outstanding at December 31,
2018 and December 31, 2017.
December 31, 2018
Number of Period End Balances
December 31, 2017
Number of Period End Balances
Relationships Committed Outstanding Relationships
Committed Outstanding
Large Credit Relationships:
$10 million or greater
$5 million to $9.9 million
3
24
$ 35,394
123,331
$ 32,445
103,124
1
15
$ 11,541
98,718
$
8,718
89,556
Maturities and Sensitivities of Loans to Changes in Interest Rates. The following table presents the maturity
distribution of the Company’s loans at December 31, 2018. The table also presents the portion of loans that
have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with
changes in an interest rate index such as the prime rate.
Loans with fixed interest rates
Loans with floating interest rates
Total
After One, After Three,
but Within
Due in One
but Within
Five Years
Year or Less Three Years
$ 120,338
$ 236,263
33,287
55,201
$ 153,625
$ 291,464
$ 202,593
89,915
$ 292,508
After Five
Years
$ 33,294
11,136
$ 44,430
Total
$ 592,488
189,539
$ 782,027
3 2
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Company may renew loans at maturity when requested by a customer whose financial strength
appears to support such renewal or when such renewal appears to be in the Company’s best interest. In such
instances, the Company generally requires payment of accrued interest and may adjust the rate of interest,
require a principal reduction or modify other terms of the loan at the time of renewal.
Nonperforming Assets and Potential Problem Loans
Year-end nonperforming assets and accruing past due loans were as follows:
Loans Accounted for on Nonaccrual
Loans Accruing Past Due 90 Days or More
Other Real Estate Foreclosed
Securities Accounted for on Nonaccrual
Total Nonperforming Assets
Nonperforming Assets by Segment
Construction and Land Development
1-4 Family Residential
Multifamily Residential
Nonfarm Residential
Farmland
Commercial and Consumer
Total Nonperforming Assets
Nonperforming Assets as a Percentage of:
Total Loans and Foreclosed Assets
Total Assets
Nonperforming Loans as a Percentage of:
Total Loans
Supplemental Data:
Trouble Debt Restructured Loans
2018
$
9,482
–
1,841
–
$ 11,323
$
883
3,299
–
3,821
2,053
1,267
$ 11,323
2017
$
7,503
–
4,256
–
$ 11,759
$
2,630
3,309
–
3,796
839
1,185
$ 11,759
2016
$ 12,350
–
6,439
–
$ 18,789
$
3,376
4,375
–
9,182
800
1,056
$ 18,789
2015
$ 14,408
8
8,839
–
$ 23,255
$
7,106
4,197
–
9,908
1,103
941
$ 23,255
2014
$ 18,334
7
10,402
–
$ 28,743
$
9,655
8,237
173
8,375
1,449
854
$ 28,743
1.44%
0.90%
1.53%
0.95%
1.21%
0.98%
2.47%
1.55%
1.64%
3.03%
1.98%
3.80%
2.51%
1.90%
2.46%
In Compliance with Modified Terms
$ 14,128
$ 18,363
$
17,992
$ 19,375
$ 19,229
Trouble Debt Restructured Loans
Past Due 30-89 Days
Accruing Past Due Loans:
30-89 Days Past Due
90 or More Days Past Due
Total Accruing Past Due Loans
Allowance for Loan Losses
ALLL as a Percentage of:
Total Loans
Nonperforming Loans
864
8,234
–
8,234
7,277
$
$
131
4,558
–
4,558
7,508
$
$
319
4,469
–
4,469
344
10,959
8
$ 10,967
8,923
$
8,604
$
$
757
9,701
7
9,708
8,802
$
$
0.93%
76.74%
0.98%
100.06%
1.18%
72.25%
1.13%
59.68%
1.18%
47.99%
3 3
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Nonperforming assets include nonaccrual loans, loans past due 90 days or more, foreclosed real estate
and nonaccrual securities. Nonperforming assets at December 31, 2018 decreased 3.71 percent from
December 31, 2017.
Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past
due and/or management deems the collectibility of the principal and/or interest to be in question, as well as
when required by regulatory requirements. Loans to a customer whose financial condition has deteriorated
are considered for nonaccrual status whether or not the loan is 90 days or more past due. For consumer
loans, collectibility and loss are generally determined before the loan reaches 90 days past due. Accordingly,
losses on consumer loans are recorded at the time they are determined. Consumer loans that are 90 days
or more past due are generally either in liquidation/payment status or bankruptcy awaiting confirmation of
a plan. Once interest accruals are discontinued, accrued but uncollected interest is charged to current year
operations. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest
income is recorded only after principal recovery is reasonably assured. Classification of a loan as nonaccrual
does not preclude the ultimate collection of loan principal or interest.
Troubled debt restructured loans are loans on which, due to deterioration in the borrower’s financial
condition, the original terms have been modified in favor of the borrower or either principal or interest has
been forgiven.
Foreclosed assets represent property acquired as the result of borrower defaults on loans. Foreclosed
assets are recorded at estimated fair value, less estimated selling costs, at the time of foreclosure. Write-downs
occurring at foreclosure are charged against the allowance for loan losses. On an ongoing basis, properties
are appraised as required by market indications and applicable regulations. Write-downs are provided for
subsequent declines in value and are included in other non-interest expense along with other expenses related
to maintaining the properties.
Allowance for Loan Losses
The allowance for loan losses is a reserve established through a provision for loan losses charged to
expense, which represents management’s best estimate of probable losses that have been incurred within
the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve
for estimated loan losses and risks inherent in the loan portfolio. The allowance for loan losses includes
allowance allocations calculated in accordance with current U.S. accounting standards. The level of the
allowance reflects management’s continuing evaluation of industry concentrations, specific credit risks,
loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions
and unidentified losses inherent in the current loan portfolio. Portions of the allowance may be allocated for
specific credits; however, the entire allowance is available for any credit that, in management’s judgment,
should be charged off. While management utilizes its best judgment and information available, the ultimate
adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including
the performance of the Company’s loan portfolio, the economy, changes in interest rates and the view of the
regulatory authorities toward loan classifications.
The Company’s allowance for loan losses consists of specific valuation allowances established for
probable losses on specific loans and historical valuation allowances for other loans with similar risk
characteristics. The allowances established for probable losses on specific loans are the result of
management’s quarterly review of substandard loans with an outstanding balance of $250,000 or more.
This review process usually involves regional credit officers along with local lending officers reviewing
the loans for impairment. Specific valuation allowances are determined after considering the borrower’s
financial condition, collateral deficiencies, and economic conditions affecting the borrower’s industry,
among other things. In the case of collateral dependent loans, collateral shortfall is most often based upon
local market real estate value estimates. This review process is performed at the subsidiary bank level and
is reviewed at the parent Company level.
3 4
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Once the loan becomes impaired, it is removed from the pool of loans covered by the general reserve
and reviewed individually for exposure as described above. In cases where the individual review reveals no
exposure, no reserve is recorded for that loan, either through an individual reserve or through a general
reserve. If, however, the individual review of the loan does indicate some exposure, management often
charges off this exposure, rather than recording a specific reserve. In these instances, a loan which becomes
nonperforming could actually reduce the allowance for loan losses. Those loans deemed uncollectible are
transferred to our problem loan department for workout, foreclosure and/or liquidation. The problem loan
department obtains a current appraisal on the property in order to record the fair market value (less selling
expenses) when the property is foreclosed on and moved into other real estate.
The allowances established for the remainder of the loan portfolio are based on historical loss factors,
adjusted for certain qualitative factors, which are applied to groups of loans with similar risk characteristics.
Loans are segregated into fifteen separate groups based on call codes. Most of the Company’s charge-offs
during the past two years have been real estate dependent loans. The historical loss ratios applied to these
groups of loans are updated quarterly based on actual charge-off experience. The historical loss ratios are
further adjusted by qualitative factors.
Management evaluates the adequacy of the allowance for each of these components on a quarterly basis.
Peer comparisons, industry comparisons, and regulatory guidelines are also used in the determination of the
general valuation allowance. Loans identified as losses by management, internal loan review, and/or bank
examiners are charged off. Additional information about the Company’s allowance for loan losses is provided
in the Notes to the Consolidated Financial Statements for Allowance for Loan Losses.
The following table sets forth the breakdown of the allowance for loan losses by loan category for the
periods indicated. The allocation of the allowance to each category is subjective and is not necessarily
indicative of future losses and does not restrict the use of the allowance to absorb losses in any other category.
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
Other
2018
2017
2016
2015
2014
Reserve %*
Reserve
%*
Reserve %* Reserve %*
Reserve %*
$ 370
248
7%
2%
$ 447
186
6%
2%
$ 456
168
6% $ 855 6%
3%
2%
203
$ 497 7%
304 2%
6%
115
2%
16
4,549 48%
1,181 24%
8%
702
–
1,216
6%
1%
3,874 46%
968 25%
9%
780
323
13
4%
2%
5,751 46%
1,396 26%
9%
722
5%
691
1%
20
3,851 46%
1,990 26%
912 8%
1,223 7%
138 1%
3,665 45%
2,425 27%
104 7%
2%
86
1%
10
$ 7,277 100%
3%
34
3
2%
$ 7,508 100%
80
14
3%
63
19 2%
$ 8,923 100% $ 8,604 100%
3%
2%
67 3%
379 1%
$ 8,802 100%
* Percentage represents the loan balance in each category expressed as a percentage of total end of period loans.
3 5
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following table presents an analysis of the Company’s loan loss experience for the periods indicated.
Allowance for Loan Losses at Beginning of Year $ 7,508
2018
2017
$ 8,923
2016
$ 8,604
2015
$ 8,802
2014
$ 11,806
Charge-Offs
Commercial
Agricultural
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer
Other
Recoveries
Commercial
Agricultural
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer
Other
Net Charge-Offs
Provision for Loans Losses
Allowance for Loan Losses at End of Year
Ratio of Net Charge-Offs to Average Loans
124
123
–
–
257
162
–
299
–
965
$
139
22
155
–
40
91
12
72
2
533
432
201
$ 7,277
299
159
52
–
966
1,048
61
330
–
$ 2,915
137
4
266
–
527
82
17
75
2
1,110
1,805
390
$ 7,508
305
19
25
–
992
362
120
265
–
$ 2,088
67
4
814
–
206
50
145
53
6
1,345
743
1,062
$ 8,923
455
5
98
–
275
930
40
255
25
$ 2,083
52
3
486
–
270
110
20
62
16
1,019
1,064
866
$ 8,604
625
–
1,543
–
1,327
1,034
233
342
–
5,104
$
76
3
485
–
90
31
20
72
15
792
4,312
1,308
$ 8,802
0.06%
0.24%
0.10%
0.14%
0.58%
The allowance for loan losses decreased from $7.51 million, or 0.98 percent of total loans at December
31, 2017 to $7.28 million, or 0.93 percent of total loans at December 31, 2018. The provision for loan
losses reflects loan quality trends, including the level of net charge-offs or recoveries, among other factors.
Significant changes in the allowance during 2018 was the reduction in the net charge-offs in 2018 to $432
thousand from $1.81 million in 2017, or a decrease of $1.37 million. Significant changes in the allowance
during 2017 was the increase in the net charge-offs in 2017 to $1.81 million from $743 thousand in 2016.
The Company believes that collection efforts have reduced impaired loans and the reduction in net charge-
offs runs parallel with the improvement in the substandard assets. As we have seen stabilization in the
economy and the housing and real estate market, we expect continued improvement in our substandard
assets, including net charge-offs. There were no charge-offs or recoveries related to foreign loans during any
of the periods presented.
3 6
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Investment Portfolio
The following table presents carrying values of investment securities held by the Company as of
December 31, 2018, 2017 and 2016.
State, County and Municipal
Mortgage-Backed Securities
Corporate
Asset-Backed
Total Investment Securities and Mortgage-Backed Securities
2018
3,989
$
346,205
2,872
–
$ 353,066
2017
4,493
$
346,723
2,060
971
$ 354,247
2016
4,561
$
319,097
–
–
$ 323,658
The following table represents expected maturities and weighted-average yields of investment securities
held by the Company as of December 31, 2018. (Mortgage-backed securities are based on the average life at
the projected speed, while State and Political Subdivisions reflect anticipated calls being exercised.)
After 1 Year But After 5 Years But
Mortgage-Backed Securities
Obligations of State and
Political Subdivisions
Corporate
Total Investment Portfolio
Within 1 Year Within 5 Years Within 10 Years After 10 Years
Yield
Yield
3.18%
Amount
3.21% $ 183,040 2.12%
Amount
$ 19,993
Amount
$ 121,252
Amount
$ 21,920
Yield
2.63%
Yield
1,003
–
$ 20,996
2.44
–
2,730 2.39
2,872 3.75
3.17% $ 188,642 2.15%
–
–
$ 121,252
–
–
2.63%
256
–
$ 22,176
4.03
–
3.19%
Securities are classified as held to maturity and carried at amortized cost when management has the
positive intent and ability to hold them to maturity. Securities are classified as available for sale when they
might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding
gains and losses reported in other comprehensive income. The Company has 100 percent of its portfolio
classified as available for sale.
At December 31, 2018, there were no holdings of any one issuer, other than the U.S. government and its
agencies, in an amount greater than 10 percent of the Company’s stockholders’ equity.
The average yield of the securities portfolio was 2.24 percent in 2018 compared to 2.00 percent in 2017
and 1.79 percent in 2016. The increase in the average yield from 2017 to 2018 was primarily attributed to
the purchase of new securities which have a higher yield. The increase in the average yield from 2016 to 2017
was primarily attributed to the purchase of new securities which have a higher yield.
3 7
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Deposits
The following table presents the average amount outstanding and the average rate paid on deposits by
the Company for the years 2018, 2017 and 2016.
2018
Average
Amount
Average
Rate
2017 2016
Average
Rate
Average
Amount
Average
Amount
Average
Rate
Noninterest-Bearing
Demand Deposits
Interest-Bearing
Demand and Savings
Time Deposits
Total Deposits
$ 173,688
$ 158,924
$ 140,338
534,887
326,243
$ 1,034,818
0.52%
1.01%
0.59%
517,974
353,587
$ 1,030,485
0.37%
0.81%
0.46%
469,740
383,628
$ 993,706
0.36%
0.80%
0.48%
The following table presents the maturities of the Company’s time deposits as of December 31, 2018.
Months to Maturity
3 or Less
Over 3 through 6
Over 6 through 12
Over 12 Months
Time
Time
Deposits Deposits
$250,000 Less Than
or Greater $250,000
Total
$
6,779 $ 53,625 $ 60,404
43,084
50,742
7,658
26,667
130,220
103,553
12,777
99,665
86,888
$ 341,031
$ 53,881 $ 287,150
Average deposits increased $4.33 million in 2018 compared to 2017 and increased $36.78 million in 2017
compared to 2016. The increase in 2018 included $16.91 million, or 3.27 percent in interest-bearing demand
and savings deposits while, at the same time noninterest bearing deposits increased $14.76 million, or 9.29
percent and time deposits decreased $27.34 million, or 7.73 percent. The increase in 2017 included $48.23
million, or 10.27 percent in interest-bearing demand and savings deposits while, at the same time noninterest
bearing deposits increased $18.59 million, or 13.24 percent and time deposits decreased $30.04 million, or
7.83 percent. Accordingly, the ratio of average noninterest-bearing deposits to total average deposits was
16.78 percent in 2018, 15.42 percent in 2017 and 14.12 percent in 2016. The general increase in market rates
in 2018 had the effect of (i) increasing the average cost of interest-bearing deposits by 13 basis points in 2018
compared to 2017 and (ii) offset a portion of the impact of increasing yields on interest-earning assets on
the Company’s net interest income in 2018. The general decrease in market rates in 2017 had the effect of
(i) decreasing the average cost of interest-bearing deposits by 2 basis points in 2017 compared to 2016 and
(ii) mitigating a portion of the impact of decreasing yields on interest-earning assets in the Company’s net
interest income in 2017.
Total average interest-bearing deposits decreased $10.43 million, or 1.20 percent in 2018 compared to
2017 and increased $18.19 million, or 2.13 percent in 2017 compared to 2016. The decrease in 2018 was
primarily attributable to the decrease in time deposits, and for 2017, the increase was primarily attributable
to the increase in interest-bearing demand and savings accounts.
The Company supplements deposit sources with brokered deposits. As of December 31, 2018, the
Company had $80.54 million, or 7.42 percent of total deposits, in brokered certificates of deposit attracted by
external third parties. Additional information is provided in the Notes to Consolidated Financial Statements
for Deposits.
3 8
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Off-Balance-Sheet Arrangements, Commitments, Guarantees, and Contractual Obligations
The following table summarizes the Company’s contractual obligations and other commitments to
make future payments as of December 31, 2018. Payments for borrowings do not include interest. Payments
related to leases are based on actual payments specified in the underlying contracts. Loan commitments and
standby letters of credit are presented at contractual amounts; however, since many of these commitments are
expected to expire unused or only partially used, the total amounts of these commitments do not necessarily
reflect future cash requirements. The off-balance-sheet arrangements for loan commitments consist of
approximately $12 million in 1-4 residential home equity and construction loans, $22 million in commercial
real estate construction loans, $22 million in commercial/industrial loans and $43 million in the overdraft
privilege program.
Contractual Obligations:
Subordinated Debentures
Federal Home Loan Bank Advances
Operating Leases
Deposits with Stated Maturity Dates
Other Commitments:
Loan Commitments
Standby Letters of Credit
Total Contractual Obligations and
Other Commitments
Payments Due by Period
Total
Less Than
1 Year
1 – 3 Years 3 – 5 Years
More Than
5 Years
$ 24,229
44,000
186
341,031
409,446
$
–
5,000
63
241,366
246,429
$
–
2,500
84
82,412
84,996
$
–
24,000
39
17,212
41,251
$ 24,229
12,500
–
41
36,770
98,736
1,525
100,261
98,736
1,525
100,261
–
–
–
–
–
–
–
–
–
$ 509,707
$ 346,690
$ 84,996
$ 41,251
$ 36,770
In the ordinary course of business, the Company has 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, performance 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 Company uses the same credit policies for these off-balance sheet financial
instruments as they do for instruments that are recorded in the consolidated financial statements.
Loan Commitments. The Company enters into contractual commitments to extend credit, normally with
fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially
all of the Company’s commitments to extend credit are contingent upon customers maintaining specific
credit standards at the time of loan funding. The Company minimizes its exposure to loss under these
commitments by subjecting them to credit approval and monitoring procedures. Management assesses the
credit risk associated with certain commitments to extend credit in determining the level of the allowance for
loan losses. Loan commitments outstanding at December 31, 2018 are included in the preceding table.
Standby Letters of Credit. Letters of credit are written conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. In the event the customer does not perform in
accordance with the terms of the agreement with the third party, the Company would be required to fund the
commitment. The maximum potential amount of future payments the Company could be required to make is
represented by the contractual amount of the commitment. If the commitment is funded, the Company would
be entitled to seek recovery from the customer. The Company’s policies generally require that standby letters
of credit arrangements contain security and debt covenants similar to those contained in loan agreements.
Standby letters of credit outstanding at December 31, 2018 are included in the preceding table.
3 9
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Capital and Liquidity
At December 31, 2018, shareholders’ equity totaled $95.69 million compared to $90.32 million at
December 31, 2017. In addition to net income of $11.92 million, other significant changes in shareholders’
equity during 2018 included $1.69 million of dividends declared on common stock, $3.17 million for
repurchase of warrants and the issuance of approximately $6 thousand in shares of restricted stock. The
accumulated other comprehensive loss component of stockholders’ equity totaled $(8.19) million at December
31, 2018 compared to $(6.49) million at December 31, 2017. This fluctuation was mostly related to the after-
tax effect of changes in the fair value of securities available for sale. Under regulatory requirements, the
unrealized gain or loss on securities available for sale does not increase or reduce regulatory capital and is
not included in the calculation of risk-based capital and leverage ratios. Regulatory agencies for banks and
bank holding companies utilize capital guidelines designed to measure Tier 1 and total capital and take into
consideration the risk inherent in both on-balance sheet and off-balance sheet items.
Tier 1 capital consists of common stock and qualifying preferred stockholders’ equity less goodwill
and disallowed deferred tax assets. Tier 2 capital consists of certain convertible, subordinated and other
qualifying debt and the allowance for loan losses up to 1.25 percent of risk-weighted assets. The Company
has no Tier 2 capital other than the allowance for loan losses.
Using the capital requirements presently in effect, the Tier 1 ratio as of December 31, 2018 was
15.00 percent and total Tier 1 and 2 risk-based capital was 15.86 percent. Both of these measures compare
favorably with the regulatory minimum of 6 percent for Tier 1 and 8 percent for total risk-based capital.
The Company’s common equity Tier 1 ratio as of December 31, 2018 was 12.22, which exceeds the
regulatory minimum of 4.50 percent. The Company’s Tier 1 leverage ratio as of December 31, 2018 was
10.24 percent, which exceeds the required ratio standard of 4 percent.
For 2018, average capital was $89.48 million, representing 7.44 percent of average assets for the year.
This compares to 7.58 percent for 2017.
For 2018, the Company did not have any material commitments for capital expenditures.
On August 23, 2018, the Company granted 5,650 restricted shares of common stock to T. Heath
Fountain, President and Chief Executive Officer, as part of his employment agreement. The restricted shares
will vest over a three year period.
The Company reinstated payment of common stock dividends in 2017. A cash dividend of $1.69 million
paid in 2018 and a cash dividend of $844 thousand paid in 2017.
The Company declared dividends of $211 thousand on preferred stock during 2017. The Company
redeemed the remaining $9.36 million in preferred stock in 2017. In 2018, the Company repurchased
$3.17 million of warrants. Additional information is provided in the Notes to the Consolidated Financial
Statements for Preferred Stock.
The Company, primarily through the actions of its subsidiary bank, engages in liquidity management to
ensure adequate cash flow for deposit withdrawals, credit commitments and repayments of borrowed funds.
Needs are met through loan repayments, net interest and fee income and the sale or maturity of existing
assets. In addition, liquidity is continuously provided through the acquisition of new deposits, the renewal of
maturing deposits and external borrowings.
Management monitors deposit flow and evaluates alternate pricing structures to retain and grow deposits.
To the extent needed to fund loan demand, traditional local deposit funding sources are supplemented by the
use of FHLB borrowings, brokered deposits and other wholesale deposit sources outside the immediate market
area. Internal policies have been updated to monitor the use of various core and non-core funding sources,
and to balance ready access with risk and cost. Through various asset/liability management strategies,
a balance is maintained among goals of liquidity, safety and earnings potential. Internal policies that are
consistent with regulatory liquidity guidelines are monitored and enforced by the Bank.
The investment portfolio provides a ready means to raise cash if liquidity needs arise. As of December
31, 2018, the available for sale bond portfolio totaled $353.1 million. At December 31, 2017, the available
for sale bond portfolio totaled $354.2 million. Only marketable investment grade bonds are purchased.
4 0
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Although approximately half of the Bank’s bond portfolio is encumbered as pledges to secure various public
funds deposits, repurchase agreements, and for other purposes, management can restructure and free up
investment securities for sale if required to meet liquidity needs.
Management continually monitors the relationship of loans to deposits as it primarily determines the
Company’s liquidity posture. Colony had ratios of loans to deposits of 72.0 percent as of December 31, 2018
and 71.6 percent as of December 31, 2017. Management employs alternative funding sources when deposit
balances will not meet loan demands. The ratios of loans to all funding sources (excluding Subordinated
Debentures) at December 31, 2018 and December 31, 2017 were 69.2 percent and 68.6 percent, respectively.
Management continues to emphasize programs to generate local core deposits as our Company’s primary
funding sources. The stability of the Banks’ core deposit base is an important factor in Colony’s liquidity
position. A heavy percentage of the deposit base is comprised of accounts of individuals and small businesses
with comprehensive banking relationships and limited volatility. At December 31, 2018 and December 31,
2017, the Bank had $53.9 million and $38.9 million, respectively, in certificates of deposit of $250,000 or
more. These larger deposits represented 5.0 percent and 3.6 percent of respective total deposits. Management
seeks to monitor and control the use of these larger certificates, which tend to be more volatile in nature, to
ensure an adequate supply of funds as needed. Relative interest costs to attract local core relationships are
compared to market rates of interest on various external deposit sources to help minimize the Company’s
overall cost of funds.
The Company supplemented deposit sources with brokered deposits. As of December 31, 2018, the
Company had $80.5 million or 7.42 percent of total deposits in CDARS. Additional information is provided
in the Notes to the Consolidated Financial Statements regarding these brokered deposits. Additionally, the
Company uses external deposit listing services to obtain out-of-market certificates of deposit at competitive
interest rates when funding is needed. The deposits obtained from listing services are often referred to as
wholesale or Internet CDs. As of December 31, 2018, the Company had $7.3 million, or 0.7 percent of total
deposits, in internet certificates of deposit obtained through deposit listing services.
To plan for contingent sources of funding not satisfied by both local and out-of-market deposit balances,
Colony and its subsidiary have established multiple borrowing sources to augment their funds management.
The Company has borrowing capacity through membership of the Federal Home Loan Bank program. The
Bank has also established overnight borrowing for federal funds purchased through various correspondent
banks. Management believes the various funding sources discussed above are adequate to meet the
Company’s liquidity needs in the future without any material adverse impact on operating results.
Liquidity measures the ability to meet current and future cash flow needs as they become due. The
liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows
in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution
to meet its current financial obligations is a function of balance sheet structure, the ability to liquidate assets,
and the availability of alternative sources of funds. The Company seeks to ensure its funding needs are met
by maintaining a level of liquid funds through asset/liability management.
Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will
mature in the near future. Liquid assets include cash, interest-bearing deposits in banks, securities available
for sale and federal funds sold and securities purchased under resale agreements.
Liability liquidity is provided by access to funding sources which include core deposits. Should the need
arise, the Company also maintains relationships with the Federal Home Loan Bank, Federal Reserve Bank,
two correspondent banks and repurchase agreement lines that can provide funds on short notice.
Since Colony is a bank holding Company and does not conduct operations, its primary sources of
liquidity are dividends up streamed from the subsidiary bank and borrowings from outside sources.
The liquidity position of the Company is continuously monitored and adjustments are made to the
balance between sources and uses of funds as deemed appropriate. Management is not aware of any events
that are reasonably likely to have a material adverse effect on the Company’s liquidity, capital resources or
operations. In addition, management is not aware of any regulatory recommendations regarding liquidity,
which if implemented, would have a material adverse effect on the Company.
41
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Impact of Inflation and Changing Prices
The Company’s financial statements included herein have been prepared in accordance with accounting
principles generally accepted in the United States (GAAP). GAAP presently requires the Company to
measure financial position and operating results primarily in terms of historic dollars. Changes in the
relative value of money due to inflation or recession are generally not considered. The primary effect of
inflation on the operations of the Company is reflected in increased operating costs, though given recent
economic conditions, the Company has not experienced any material effects of inflation during the last
three fiscal years. In management’s opinion, changes in interest rates affect the financial condition of a
financial institution to a far greater degree than changes in the inflation rate. While interest rates are
greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the
same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond the
control of the Company, including changes in the expected rate of inflation, the influence of general and
local economic conditions and the monetary and fiscal policies of the United States government, its agencies
and various other governmental regulatory authorities, among other things, as further discussed in the next
section.
Regulatory and Economic Policies
The Company’s business and earnings are affected by general and local economic conditions and by the
monetary and fiscal policies of the United States government, its agencies and various other governmental
regulatory authorities, among other things. The Federal Reserve Board regulates the supply of money in
order to influence general economic conditions. Among the instruments of monetary policy available to the
Federal Reserve Board are (i) conducting open market operations in United States government obligations,
(ii) changing the discount rate on financial institution borrowings, (iii) imposing or changing reserve
requirements against financial institution deposits, and (iv) restricting certain borrowings and imposing or
changing reserve requirements against certain borrowings by financial institutions and their affiliates. These
methods are used in varying degrees and combinations to affect directly the availability of bank loans and
deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone, the policies
of the Federal Reserve Board have a material effect on the earnings of the Company.
Governmental policies have had a significant effect on the operating results of commercial banks in the
past and are expected to continue to do so in the future; however, the Company cannot accurately predict
the nature, timing or extent of any effect such policies may have on its future business and earnings.
Recently Issued Accounting Pronouncements
See Note 1 - Summary of Significant Accounting Policies under the section headed Changes in
Accounting Principles and Effects of New Accounting Pronouncements included in the Notes to the
Consolidated Financial Statements.
Market Risk and Interest Rate Sensitivity
Our financial performance is impacted by, among other factors, interest rate risk and credit risk. We do
not utilize derivatives to mitigate our credit risk, relying instead on an extensive loan review process and our
allowance for loan losses.
Interest rate risk is the change in value due to changes in interest rates. The Company is exposed only
to U.S. dollar interest rate changes and, accordingly, the Company manages exposure by considering the
possible changes in the net interest margin. The Company does not have any trading instruments nor does
it classify any portion of its investment portfolio as held for trading. The Company does not engage in any
hedging activity or utilize any derivatives. The Company has no exposure to foreign currency exchange rate
risk, commodity price risk and other market risks. Interest rate risk is addressed by our Risk Management
Committee which includes senior management representatives. The Risk Management Committee monitors
interest rate risk by analyzing the potential impact to the net portfolio of equity value and net interest income
from potential changes to interest rates and considers the impact of alternative strategies or changes in
balance sheet structure.
4 2
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Interest rates play a major part in the net interest income of financial institutions. The repricing of
interest earnings assets and interest-bearing liabilities can influence the changes in net interest income. The
timing of repriced assets and liabilities is Gap management and our Company has established its policy to
maintain a Gap ratio in the one-year time horizon of .80 to 1.20.
Our exposure to interest rate risk is reviewed at least quarterly by our Board of Directors and by our
Risk Management Committee. Interest rate risk exposure is measured using interest rate sensitivity analysis
to determine our change in net portfolio value in the event of assumed changes in interest rates. In order
to reduce the exposure to interest rate fluctuations, we have implemented strategies to more closely match
our balance sheet composition. The Company has engaged FTN Financial to run a quarterly asset/liability
model for interest rate risk analysis. We are generally focusing our investment activities on securities with
terms or average lives in the 3 ½ - 5 ½ year range.
Market risk reflects the risk of economic loss resulting from adverse changes in market prices and interest
rates. This risk of loss can be reflected in either reduced current market values or reduced current and
potential net income. Colony’s most significant market risk is interest rate risk. This risk arises primarily from
Colony’s extension of loans and acceptance of deposits.
Managing interest rate risk is a primary goal of the asset liability management function. Colony
attempts to achieve stability in net interest income while limiting volatility arising from changes in interest
rates. Colony seeks to achieve this goal by balancing the maturity and repricing characteristics of assets and
liabilities. Colony manages its exposure to fluctuations in interest rates through policies established by the
Risk Management Committee and approved by the Board of Directors. The Risk Management Committee
meets at least quarterly and has responsibility for developing asset liability management policies, reviewing
the interest rate sensitivity of Colony, and developing and implementing strategies to improve balance sheet
structure and interest rate risk positioning.
Colony measures the sensitivity of net interest income to changes in market interest rates through the
utilization of Asset/Liability simulation modeling. On at least a quarterly basis, the following twenty-four
month time period is simulated to determine a baseline net interest income forecast and the sensitivity of this
forecast to changes in interest rates. These simulations include all of Colony’s earning assets and liabilities.
Forecasted balance sheet changes, primarily reflecting loan and deposit growth and forecasts, are included
in the periods modeled. Projected rates for loans and deposits are based on management’s outlook and local
market conditions.
The magnitude and velocity of rate changes among the various asset and liability groups exhibit different
characteristics for each possible interest rate scenario; additionally, customer loan and deposit preferences
can vary in response to changing interest rates. Simulation modeling enables Colony to capture the expected
effect of these differences. Assumptions utilized in the model are updated on an ongoing basis and are
reviewed and approved by the Risk Management Committee of the Board of Directors.
Colony has modeled its baseline net interest income forecast assuming a flat interest rate environment
with the federal funds rate at the Federal Reserve’s current targeted range of 2.25% to 2.50% and the
current prime rate of 5.50%. Colony has modeled the impact of a gradual increase in short-term rates of 100
and 200 basis points and a decline of 100 basis points to determine the sensitivity of net interest income for
the next twelve months. As illustrated in the table below, the net interest income sensitivity model indicates
that, compared with a net interest income forecast assuming stable rates, net interest income is projected to
increase by 1.46% and increase by 2.36% if interest rates increased by 100 and 200 basis points, respectively.
Net interest income is projected to decline by 2.86% if interest rates decreased by 100 basis points. These
changes were within Colony’s policy limit of a maximum 15% negative change.
4 3
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Twelve Month Net Interest Income Sensitivity
Change in Short-term Interest Rates (in basis points)
+200
+100
Flat
-100
Estimated Change in Net Interest Income
As of December 31,
2018
2.36%
1.46%
–%
-2.86%
2017
0.27%
0.58%
–%
-2.57%
The measured interest rate sensitivity indicates an asset sensitive position over the next year, which could
serve to improve net interest income in a rising interest rate environment. The actual realized change in net
interest income would depend on several factors, some of which could serve to reduce or eliminate the asset
sensitivity noted above. These factors include a higher than projected level of deposit customer migration
to higher cost deposits, such as certificates of deposit, which would increase total interest expense and serve
to reduce the realized level of asset sensitivity. Another factor which could impact the realized interest rate
sensitivity in a rising rate environment is the repricing behavior of interest bearing non-maturity deposits.
Assumptions for repricing are expressed as a beta relative to the change in the prime rate. For instance, a
25% beta would correspond to a deposit rate that would increase 0.25% for every 1% increase in the prime
rate. Projected betas for interest bearing non-maturity deposit repricing are a key component of determining
the Company’s interest rate risk position. Should realized betas be higher than projected betas, the expected
benefit from higher interest rates would be reduced.
The net interest income simulation model is the primary tool utilized to evaluate potential interest rate
risks over a shorter term time horizon. Colony also evaluates potential longer term interest rate risk through
modeling and evaluation of economic value of equity (EVE). This EVE modeling allows Colony to capture
longer-term repricing risk and options risk embedded in the balance sheet. Simulation modeling is utilized
to measure the economic value of equity and its sensitivity to immediate changes in interest rates. These
simulations value only the current balance sheet and do not incorporate growth assumptions used in the net
interest income simulation. The economic value of equity is the net fair value of assets and liabilities derived
from the present value of future cash flows discounted at current market interest rates. From this baseline
valuation, Colony evaluates changes in the value of each of these items in various interest rate scenarios to
determine the net impact on the economic value of equity. Key assumptions utilized in the model, namely
loan prepayments, deposit pricing betas, and non-maturity deposit durations have a significant impact on the
results of the EVE simulations.
As illustrated in the table below, the economic value of equity model indicates that, compared with a
valuation assuming stable rates, EVE is projected to increase by 7.32% and 12.20%, assuming an immediate
and sustained increase in interest rates of 100 and 200 basis points, respectively. The primary reason for
the increase in asset sensitivity from the prior year is a more aggressive assumption regarding non-maturity
deposit durations. Assuming an immediate 100 basis point decline in rates, EVE is projected to be -10.74%.
These changes were within Colony’s policy except in the -100 basis point change, which limits the maximum
negative change in EVE to 10% of the base EVE. We believe this projection outside of policy is mitigated by
the unlikely reduction in interest rates due to the current rate environment.
Immediate Change in Interest Rates (in basis points)
+200
+100
-100
4 4
Estimated Change in EVE
As of December 31,
2017
2018
13.13%
12.20%
7.93%
7.32%
-11.73%
-10.74%
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Colony is also subject to market risk in certain of its fee income business lines. Mortgage banking income
is subject to market risk. Mortgage loan originations are sensitive to levels of mortgage interest rates and
therefore, mortgage banking income could be negatively impacted during a period of rising interest rates.
The extension of commitments to customers to fund mortgage loans also subjects Colony to market risk. This
risk is primarily created by the time period between making the commitment and closing and delivering
the loan. Colony seeks to minimize this exposure by utilizing various risk management tools, the primary of
which are forward sales commitments and best efforts commitments.
The following table is an analysis of the Company’s interest rate-sensitivity position at December 31,
2018. The interest-bearing rate-sensitivity gap, which is the difference between interest-earning assets and
interest-bearing liabilities by repricing period, is based upon maturity or first repricing opportunity, along
with a cumulative interest rate-sensitivity gap. It is important to note that the table indicates a position at a
specific point in time and may not be reflective of positions at other times during the year or in subsequent
periods. Major changes in the gap position can be, and are, made promptly as market outlooks change.
Assets and Liabilities Repricing Within
3 Months
or Less
4 to 12
Months
$ 49,779
5,348
156,826
2,978
$ 214,931
$
–
3,789
135,181
–
$ 138,970
Interest-Earning Assets:
Interest-Bearing Deposits
Investment Securities
Loans, Net of Unearned Income
Other Interest- Earning Assets
Total Interest-Earning Assets
Interest-Bearing Liabilities:
Interest-Bearing Demand Deposits (1)
Savings (1)
Time Deposits
Other Borrowings
Subordinated Debentures
471,794
79,453
60,404
–
24,229
635,880
(420,949)
Cumulative Interest-Sensitivity Gap $ (420,949)
Total Interest-Bearing Liabilities
Interest Rate-Sensitivity Gap
–
–
180,962
5,000
–
185,962
(46,992)
$ (467,941)
1 Year
$ 49,779
9,137
292,007
2,978
$ 353,901
471,794
79,453
241,366
5,000
24,229
821,842
(467,941)
$ (467,941)
1 to 5
Years
Over 5
Years
Total
$
–
176,889
445,089
–
$ 621,978
$
–
167,040
44,430
–
$ 211,470
$
49,779
353,066
781,526
2,978
$ 1,187,349
–
–
99,624
26,500
–
126,124
495,854
$ 27,913
–
–
41
12,500
–
12,541
198,929
$ 226,842
471,794
79,453
341,031
44,000
24,229
960,507
$ 226,842
Interest Rate-Sensitivity Gap as a
Percentage of
Interest-Earning Assets
Cumulative Interest Rate-Sensitivity
as a Percentage of
Interest-Earning Assets
(35.45)%
(3.96)%
(39.41)%
41.76%
16.75%
(35.45)%
(39.41)%
(39.41)%
2.35%
19.10%
(1) Interest-bearing Demand and Savings Accounts for repricing purposes are considered to reprice within 3 months or less.
4 5
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The foregoing table indicates that we had a one year negative gap of $467.9 million, or 39.41 percent
of total interest-earning assets at December 31, 2018. In theory, this would indicate that at December 31,
2018, $467.9 million more in liabilities than assets would reprice if there were a change in interest rates over
the next 365 days. Thus, if interest rates were to decline, the gap would indicate a resulting increase in net
interest margin. However, changes in the mix of interest-earning assets or supporting liabilities can either
increase or decrease the net interest margin without affecting interest rate sensitivity. In addition, the interest
rate spread between an asset and our supporting liability can vary significantly while the timing of repricing
of both the assets and our supporting liability can remain the same, thus impacting net interest income. This
characteristic is referred to as a basis risk and, generally, relates to the repricing characteristics of short-term
funding sources such as certificates of deposits.
Gap analysis has certain limitations. Measuring the volume of repricing or maturing assets and liabilities
does not always measure the full impact on the portfolio value of equity or net interest income. Gap analysis
does not account for rate caps on products; dynamic changes such as increasing prepay speeds as interest
rates decrease, basis risk, or the benefit of non-rate funding sources. The majority of our loan portfolio
reprices quickly and completely following changes in market rates, while non-term deposit rates in general
move slowly and usually incorporate only a fraction of the change in rates. Products categorized as nonrate
sensitive, such as our noninterest-bearing demand deposits, in the gap analysis behave like long term fixed
rate funding sources. Both of these factors tend to make our actual behavior more asset sensitive than is
indicated in the gap analysis. In fact, we experience higher net interest income when rates rise, opposite
what is indicated by the gap analysis. Therefore, management uses gap analysis, net interest margin analysis
and market value of portfolio equity as our primary interest rate risk management tools. The Company has
established its one year gap to be 80 percent to 120 percent. The most recent analysis as of December 31,
2018 indicates a one year gap of 1.14 percent. The analysis reflects slight net interest margin compression in
both a declining and increasing interest rate environment. Given that interest rates have shown a gradual
increase with the Federal Reserve actions since 2015, the Company is anticipating interest rates to increase
in the future though we believe that interest rates will increase slightly in 2019. The Company is focusing on
areas to minimize margin compression in the future by minimizing longer term fixed rate loans, shortening
on the yield curve with investments, securing longer term FHLB advances, securing certificates of deposit for
longer terms and focusing on reduction of nonperforming assets.
The Company utilizes FTN Financial Asset/Liability Management Analysis for a more dynamic
analysis of balance sheet structure. The Company has established policies for rate shock per basis point (bp)
for earnings at risk for net interest income and for equity at risk. The following table shows the policy limits
with the rate shock for earnings at risk and equity at risk as of December 31, 2018.
Net Interest Income –
Earnings at Risk
Equity at Risk
Rate
Shock
Policy
Limit
Immediate Shock Immediate Shock
(-) decrease bp
(+) increase bp
+/- 100 bp
+/- 200 bp
+/- 300 bp
+/- 400 bp
+/- 100 bp
+/- 200 bp
+/- 300 bp
+/- 400 bp
+/- 10%
+/- 15%
+/- 20%
+/- 25%
+/- 10%
+/- 20%
+/- 30%
+/- 40%
-2.66%
-7.89
-11.31
-13.29
-10.74
-25.58
-37.50
-37.34
1.24%
2.36
2.17
3.39
7.32
12.20
15.02
16.48
4 6
Colony BankCorp • Annual Report 2018
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Return on Assets and Stockholders’ Equity
The following table presents selected financial ratios for each of the periods indicated.
Return on Average Assets (1)
Return on Average Equity (1)
Equity to Assets
Common Stock Dividends Declared
(1) Computed using net income available to common shareholders.
2018
0.99%
13.32%
7.64%
Years Ended December 31
2017
0.63%
8.28%
7.33%
2016
0.62%
7.17%
7.72%
$ 0.20
$ 0.10
$ 0.00
4 7
Colony BankCorp • Annual Report 2018
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Colony Bankcorp, Inc.
Opinions on the Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Colony Bankcorp, Inc. and subsidiary (the
Company) as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive
income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the
related notes (collectively, the financial statements). We also have audited the Company’s internal control over financial
reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 2013.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 2018, in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included under Item
9A, Controls and Procedures, in the Company’s Annual Report or Form 10-K. Our responsibility is to express an opinion
on the Company’s financial statements and an opinion on the company’s internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all
material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement
of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLC
We have served as the Company’s auditor since 1995.
Macon, Georgia
March 15, 2019
4 8
Colony BankCorp • Annual Report 2018
Consolidated Balance Sheets
Cash and Cash Equivalents
Cash and Due from Banks
Interest-Bearing Deposits
Investment Securities
Available for Sale, at Fair Value
Federal Home Loan Bank Stock, at Cost
Loans
Allowance for Loan Losses
Unearned Interest and Fees
Premises and Equipment
Other Real Estate (Net of Allowance of $876,177
and $1,451,492 in 2018 and 2017, Respectively)
Goodwill
Other Intangible Assets
Other Assets
Total Assets
Liabilities and Stockholders’ Equity
Deposits
Noninterest-Bearing
Interest-Bearing
Borrowed Money
Subordinated Debentures
Other Borrowed Money
Other Liabilities
Commitments and Contingencies
December 31,
2018
2017
$
10,376,876
49,778,576
$
23,145,136
34,667,715
353,066,166
2,977,900
782,027,368
(7,276,806)
(501,300)
774,249,262
28,831,272
354,246,904
3,042,900
765,283,855
(7,507,508)
(495,500)
757,280,847
27,639,430
1,840,743
202,244
556,573
29,998,856
$ 1,251,878,468
4,256,469
–
44,766
28,431,150
$ 1,232,755,317
$ 192,847,392
892,278,066
1,085,125,458
$ 190,927,928
877,057,477
1,067,985,405
24,229,000
44,000,000
68,229,000
2,831,615
24,229,000
47,500,000
71,729,000
2,718,249
Stockholders’ Equity
Common Stock, Par Value $1; 20,000,000 Shares Authorized,
8,444,908 and 8,439,258 Shares Issued and Outstanding as of
December 31, 2018 and 2017, respectively
Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Loss, Net of Tax
Total Liabilities and Stockholders’ Equity
See accompanying notes which are an integral part of these financial statements.
8,444,908
25,978,334
69,459,243
(8,190,090)
95,692,395
$ 1,251,878,468
8,439,258
29,145,094
59,230,260
(6,491,949)
90,322,663
$ 1,232,755,317
4 9
Colony BankCorp • Annual Report 2018
Consolidated Statements of Operations
For The Years Ended December 31,
2017
2016
2018
Interest Income
Loans, Including Fees
Federal Funds Sold
Deposits with Other Banks
Investment Securities
U.S. Government Agencies
State, County and Municipal
Corporate
Dividends on Other Investments
Interest Expense
Deposits
Federal Funds Purchased
Borrowed Money
$ 40,681,853
–
409,732
7,528,962
102,719
111,763
187,117
49,022,146
6,057,066
5,305
2,163,148
8,225,519
$ 38,613,540
3
232,397
6,717,827
115,097
87,387
150,172
45,916,423
4,758,073
2,639
2,112,017
6,872,729
Net Interest Income
Provision for Loan Losses
Net Interest Income After Provision for Loan Losses
40,796,627
200,500
40,596,127
39,043,694
390,000
38,653,694
Noninterest Income
Service Charges on Deposits
Other Service Charges, Commissions and Fees
Mortgage Fee Income
Securities Gains (Losses)
Other
Noninterest Expenses
Salaries and Employee Benefits
Occupancy and Equipment
Directors’ Fees
Legal and Professional Fees
Foreclosed Property
FDIC Assessment
Advertising
Software and Data Processing
Telephone
ATM/Card Processing
Other
Income Before Income Taxes
Income Taxes
Net Income
Preferred Stock Dividends
Net Income Available to Common Stockholders
Net Income Per Share of Common Stock
Basic
Diluted
Cash Dividends Declared Per Share of Common Stock
Weighted Average Shares Outstanding, Basic
Weighted Average Shares Outstanding, Diluted
See accompanying notes which are an integral part of these financial statements.
5 0
4,373,854
3,253,922
651,985
115,909
1,225,660
9,621,330
20,122,843
4,180,396
291,400
1,320,653
204,705
358,222
337,527
1,420,482
738,193
1,510,322
4,815,044
35,299,787
14,917,670
3,000,270
11,917,400
–
$ 11,917,400
$
$
$
1.41
1.40
0.20
8,439,454
8,538,608
4,466,997
3,048,601
858,658
–
1,360,309
9,734,565
19,222,594
3,947,941
298,100
1,169,938
363,519
386,823
349,722
1,192,025
813,592
1,467,411
4,648,163
33,859,828
14,528,431
6,777,453
7,750,978
210,600
$ 7,540,378
$
$
$
0.89
0.87
0.10
8,439,258
8,633,581
$ 38,942,503
–
124,459
5,263,741
127,379
-
131,007
44,589,089
4,781,228
581
1,701,522
6,483,331
38,105,758
1,062,000
37,043,758
4,307,214
2,802,651
681,806
385,223
1,376,860
9,553,754
18,482,693
3,970,244
348,755
1,067,563
1,143,518
603,654
609,892
1,112,065
737,063
1,136,122
4,861,400
34,072,969
12,524,543
3,851,333
8,673,210
1,493,310
$ 7,179,900
0.85
$
0.84
$
$
0.00
8,439,258
8,513,295
Colony BankCorp • Annual Report 2018
Consolidated Statements of Comprehensive Income
Net Income
For The Years Ended December 31,
2017
$ 7,750,978
2018
$ 11,917,400
2016
$ 8,673,210
Other Comprehensive Income (Loss)
Gains (Losses) on Securities Arising During the Year
Tax Effect
(2,033,636)
427,063
(608,355)
206,841
Realized (Gains) Losses on Sale of AFS Securities
Tax Effect
(115,909)
24,341
–
–
(505,367)
171,825
(385,223)
130,976
Change in Unrealized Gains (Losses) on Securities
Available for Sale, Net of Reclassification
Adjustment and Tax Effects
(1,698,141)
(401,514)
(587,789)
Comprehensive Income
$ 10,219,259
$ 7,349,464
$ 8,085,421
See accompanying notes which are an integral part of these financial statements.
51
Colony BankCorp • Annual Report 2018
Consolidated Statements of Changes in Stockholders’ Equity
Preferred
Shares
Issued
18,021 $ 18,021,000
Preferred
Stock
Common
Shares
Issued
8,439,258
Accumulated
Other
Common
Stock
$ 8,439,258
Paid-In
Capittal
$ 29,145,094
Retained Comprehensive
Income (Loss)
Earnings
$ (4,434,351) $ 95,456,622
$ 44,285,621
Total
Balance, December 31, 2015
Change in Net Unrealized
Gains (Losses) on
Securities Available for Sale, Net of
Reclassification Adjustment
and Tax Effects
Dividends on Preferred Shares
Redemption of Preferred Stock
Net Income
Balance, December 31, 2016
Change in Net Unrealized
(8,661)
(8,661,000)
(1,493,310)
8,673,210
(587,789)
(587,789)
(1,493,310)
(8,661,000)
8,673,210
9,360 $ 9,360,000
8,439,258
$ 8,439,258
$ 29,145,094
$ 51,465,521
$ (5,022,140) $ 93,387,733
Gains (Losses) on
Securities Available for Sale, Net of
Reclassification Adjustment
and Tax Effects
Dividends on Common Shares
Dividends on Preferred Shares
Redemption of Preferred Stock
TCJ Act Reclassification
Net Income
(9,360)
(9,360,000)
(401,514)
(843,934)
(210,600)
1,068,295
7,750,978
(1,068,295)
(401,514)
(843,934)
(210,600)
(9,360,000)
–
7,750,978
Balance, December 31, 2017
Change in Net Unrealized
Gains (Losses) on
Securities Available for Sale, Net of
Reclassification Adjustment
and Tax Effects
Dividends on Common Shares
Issuance of Restricted Stock
Stock-based Compensation Expense
Repurchase of Warrants
Net Income
– $
–
8,439,258
$ 8,439,258
$ 29,145,094
$ 59,230,260
$ (6,491,949) $ 90,322,663
5,650
5,650
(5,650)
13,890
(3,175,000)
(1,688,417)
(1,698,141)
–
11,917,400
(1,698,141)
(1,688,417)
–
13,890
(3,175,000)
11,917,400
Balance, December 31, 2018
– $
–
8,444,908
$ 8,444,908
$ 25,978,334
$ 69,459,243
$ (8,190,090) $ 95,692,395
See accompanying notes which are an integral part of these financial statements.
5 2
Colony BankCorp • Annual Report 2018
Consolidated Statements of Cash Flows
Cash Flows from Operating Activities
Net Income
Adjustments to Reconcile Net Income to Net
Cash Provided from Operating Activities
Depreciation
Amortization and Accretion
Provision for Loan Losses
Share-based Compensation Expense
Deferred Income Taxes
Securities (Gains) Losses
(Gain) Loss on Sale of Premises and Equipment
(Gain) Loss on Sale of Other Real Estate and Repossessions
Provision for Losses on Other Real Estate
Increase in Cash Surrender Value of Life Insurance
Provision for Losses on Premises & Equipment
Change In
Interest Receivable
Prepaid Expenses
Interest Payable
Accrued Expenses and Accounts Payable
Other
Cash Flows from Investing Activities
Interest-Bearing Deposits in Other Banks
Purchase of Investment Securities
Available for Sale
Proceeds from Sale of Investment Securities
Available for Sale
Proceeds from Maturities, Calls and Paydowns
of Investment Securities
Available for Sale
Proceeds from Sale of Premises and Equipment
Net Loans to Customers
Purchase of Premises and Equipment
Proceeds from Sale of Other Real Estate and Repossessions
Proceeds from Sale of Federal Home Loan Bank Stock
Purchase of Federal Home Loan Bank Stock
Net Cash and Cash Equivalents Paid in Acquisition
Cash Flows from Financing Activities
Interest-Bearing Customer Deposits
Noninterest-Bearing Customer Deposits
Proceeds from Other Borrowed Money
Principal Payments on Other Borrowed Money
Dividends Paid on Preferred Stock
Redemption of Preferred Stock
Repurchase of Warrants
Dividends Paid on Common Stock
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning
Cash and Cash Equivalents, Ending
See accompanying notes which are an integral part of these financial statements.
5 3
For The Years Ended December 31,
2017
2016
2018
$ 11,917,400
$
7,750,978
$ 8,673,210
1,786,652
1,176,224
200,500
13,890
273,176
(115,909)
(305)
(309,077)
262,041
(508,946)
172,143
1,647,813
1,449,111
390,000
–
2,833,958
–
(10,735)
(208,329)
333,767
(1,669,424)
–
(217,491)
266,806
38,573
1,418
(45,858)
14,911,237
(90,204)
139,382
21,188
361,005
(403,375)
12,545,135
1,574,249
1,645,088
1,062,000
–
222,120
(385,223)
80,329
160,682
501,736
(589,408)
–
176,766
(372,380)
(46,284)
(252,617)
938,223
13,388,491
(15,110,861)
11,677,144
(7,729,560)
(63,682,791)
(87,160,178)
(109,634,793)
11,267,642
–
25,209,851
50,422,396
22,581
2,395,928
(2,762,585)
3,002,508
65,000
–
(10,043,452)
(24,423,634)
(445,146)
5,552,700
44,007,500
(47,507,500)
–
–
(3,175,000)
(1,688,417)
(3,255,863)
(12,768,260)
23,145,136
$ 10,376,876
54,587,986
37,650
(14,459,526)
(1,344,898)
3,863,576
–
(32,900)
–
(32,831,146)
(8,240,418)
31,869,295
10,015,500
(8,515,500)
(315,900)
(9,360,000)
–
(843,934)
14,609,043
(5,676,968)
28,822,104
$ 23,145,136
54,868,726
89,551
(2,167,126)
(3,259,859)
7,529,131
–
(279,500)
–
(35,373,579)
7,629,930
25,172,362
10,000,000
(4,000,000)
(1,590,746)
(8,661,000)
–
–
28,550,546
6,565,458
22,256,646
$ 28,822,104
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
Colony Bankcorp, Inc. (the Company) is a bank holding company located in Fitzgerald, Georgia.
The consolidated financial statements include the accounts of Colony Bankcorp, Inc. and its wholly-owned
subsidiary, Colony Bank, Fitzgerald, Georgia. All significant intercompany accounts have been eliminated
in consolidation. The accounting and reporting policies of Colony Bankcorp, Inc. conform to generally
accepted accounting principles and practices utilized in the commercial banking industry.
Nature of Operations
The Company provides a full range of retail and commercial banking services for consumers and
small- to medium-size businesses located primarily in central, south and coastal Georgia. Colony Bank
is headquartered in Fitzgerald, Georgia with banking offices in Albany, Ashburn, Broxton, Centerville,
Columbus, Cordele, Douglas, Eastman, Fitzgerald, Leesburg, Moultrie, Quitman, Rochelle, Savannah,
Soperton, Statesboro, Sylvester, Thomaston, Tifton, Valdosta and Warner Robins. Lending and investing
activities are funded primarily by deposits gathered through its retail banking office network.
Use of Estimates
In preparing the financial statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses
for the period. Actual results could differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near term relate to the determination of the allowance for
loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans.
Reclassifications
In certain instances, amounts reported in prior years’ consolidated financial statements and
note disclosures have been reclassified to conform to statement presentations selected for 2018. Such
reclassifications had no effect on previously reported stockholders’ equity or net income.
Concentrations of Credit Risk
Concentrations of credit risk can exist in relation to individual borrowers or groups of borrowers,
certain types of collateral, certain types of industries or certain geographic regions. The Company has a
concentration in real estate loans as well as a geographic concentration that could pose an adverse credit
risk, particularly if an economic downturn occurred in the real estate market. At December 31, 2018,
approximately 88 percent of the Company’s loan portfolio was concentrated in loans secured by real estate.
A substantial portion of borrowers’ ability to honor their contractual obligations is dependent upon the
viability of the real estate economic sector. Collateral real estate values that secure land development,
construction and speculative real estate loans in the Company’s larger MSA markets have started showing
signs of stabilization in values in recent years. In addition, a large portion of the Company’s foreclosed assets
are also located in these same geographic markets, making the recovery of the carrying amount of foreclosed
assets susceptible to changes in market conditions. Management continues to monitor these concentrations
and has considered these concentrations in its allowance for loan loss analysis.
The success of the Company is dependent, to a certain extent, upon the economic conditions in the
geographic markets it serves. Adverse changes in the economic conditions in these geographic markets
would likely have a material adverse effect on the Company’s results of operations and financial condition.
The operating results of the Company depend primarily on its net interest income. Accordingly, operations
are subject to risks and uncertainties surrounding the exposure to changes in the interest rate environment.
At times, the Company may have cash and cash equivalents at financial institutions in excess of federal
deposit insurance limits. The Company places its cash and cash equivalents with high credit quality financial
institutions whose credit rating is monitored by management to minimize credit risk.
5 4
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Investment Securities
The Company classifies its investment securities as trading, available for sale or held to maturity.
Securities that are held principally for resale in the near term are classified as trading. Trading securities
are carried at fair value, with realized and unrealized gains and losses included in noninterest income.
Currently, no securities are classified as trading. Securities acquired with both the intent and ability to be
held to maturity are classified as held to maturity and reported at amortized cost. All securities not classified
as trading or held to maturity are considered available for sale. Securities available for sale are reported at
estimated fair value. Unrealized gains and losses on securities available for sale are excluded from earnings
and are reported, net of deferred taxes, in accumulated other comprehensive income (loss), a component
of stockholders’ equity. Gains and losses from sales of securities available for sale are computed using the
specific identification method. Securities available for sale includes securities, which may be sold to meet
liquidity needs arising from unanticipated deposit and loan fluctuations, changes in regulatory capital
requirements, or unforeseen changes in market conditions.
The Company evaluates each held to maturity and available for sale security in a loss position for other-
than-temporary impairment (OTTI). In estimating other-than-temporary impairment losses, management
considers such factors as the length of time and the extent to which the market value has been below cost,
the financial condition of the issuer and the Company’s intent to sell and whether it is more likely than not
that the Company will be required to sell the security before anticipated recovery of the amortized cost basis.
If the Company intends to sell or if it is more likely than not that the Company will be required to sell the
security before recovery, the OTTI write-down is recognized in earnings. If the Company does not intend to
sell the security or it is not more likely than not that it will be required to sell the security before recovery, the
OTTI write-down is separated into an amount representing credit loss, which is recognized in earnings, and
an amount related to all other factors, which is recognized in other comprehensive income (loss).
Federal Home Loan Bank Stock
Investment in stock of a Federal Home Loan Bank (FHLB) is required for every federally insured
institution that utilizes its services. FHLB stock is considered restricted, as defined in the accounting
standards. The FHLB stock is reported in the consolidated financial statements at cost. Dividend income is
recognized when earned.
Loans
Loans that the Company has the ability and intent to hold for the foreseeable future or until maturity are
recorded at their principal amount outstanding, net of unearned interest and fees. Loan origination fees, net
of certain direct origination costs, are deferred and amortized over the estimated terms of the loans using the
straight-line method. Interest income on loans is recognized using the effective interest method.
A loan is considered to be delinquent when payments have not been made according to contractual
terms, typically evidenced by nonpayment of a monthly installment by the due date.
When management believes there is sufficient doubt as to the collectibility of principal or interest on any
loan or generally when loans are 90 days or more past due, the accrual of applicable interest is discontinued
and the loan is designated as nonaccrual, unless the loan is well secured and in the process of collection.
Interest payments received on nonaccrual loans are either applied against principal or reported as income,
according to management’s judgment as to the collectibility of principal. Loans are returned to an accrual
status when factors indicating doubtful collectibility on a timely basis no longer exist.
Loans Modified in a Troubled Debt Restructuring (TDR)
Loans are considered to have been modified in a TDR when, due to a borrower’s financial difficulty,
the Company makes certain concessions to the borrower that it would not otherwise consider for new debt
with similar risk characteristics. Modifications may include interest rate reductions, principal or interest
forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or
repossession of the collateral. Generally, a nonaccrual loan that has been modified in a TDR remains on
nonaccrual status for a period of six months to demonstrate that the borrower is able to meet the terms of the
5 5
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
modified loan. However, performance prior to the modification, or significant events that coincide with the
modification, are included in assessing whether the borrower can meet the new terms and may result in the
loan being returned to accrual status at the time of loan modification or after a shorter performance period.
If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains on nonaccrual
status. Once a loan is modified in a troubled debt restructuring, it is accounted for as an impaired loan,
regardless of its accrual status, until the loan is paid in full, sold or charged off.
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for
loan losses charged to earnings. Loan losses are charged against the allowance when management believes the
uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is evaluated on a regular basis by management and is based upon
management’s periodic review of the collectibility of the loans in light of historical experience, the nature and
volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value
of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it
requires estimates that are susceptible to significant revisions as more information becomes available.
The allowance consists of specific, historical and general components. The specific component relates
to loans that are classified as either doubtful, substandard or special mention. For such loans that are also
classified as impaired, an allowance is established when the discounted cash flows (or collateral value or
observable market price) of the impaired loan are lower than the carrying value of that loan. The historical
component covers nonclassified loans and is based on historical loss experience adjusted for qualitative
factors. A general component is maintained to cover uncertainties that could affect management’s estimate of
probable losses. The general component of the allowance reflects the margin of imprecision inherent in the
underlying assumptions used in the methodologies for estimating specific and historical losses in the portfolio.
General valuation allowances are based on internal and external qualitative risk factors such as (1) changes
in lending policies and procedures, including changes in underwriting standards and collections, charge offs,
and recovery practices, (2) changes in international, national, regional, and local conditions, (3) changes in
the nature and volume of the portfolio and terms of loans, (4) changes in the experience, depth, and ability of
lending management, (5) changes in the volume and severity of past due loans and other similar conditions,
(6) changes in the quality of the organization’s loan review system, (7) changes in the value of underlying
collateral for collateral dependent loans, (8) the existence and effect of any concentrations of credit and
changes in the levels of such concentrations, and (9) the effect of other external factors (i.e. competition, legal
and regulatory requirements) on the level of estimated credit losses.
Loans identified as losses by management, internal loan review and/or Bank examiners are charged off.
A loan is considered impaired when, based on current information and events, it is probable that the Company
will be unable to collect the scheduled payments of principal or interest when due according to the contractual
terms of the loan agreement. Factors considered by management in determining impairment include payment
status, collateral value and the probability of collecting scheduled principal and interest payments when due.
Loans that experience insignificant payment delays and payment shortfalls generally are not classified as
impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-
case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including
the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the
shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by
either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s
obtainable market price or the fair value of the collateral if the loan is collateral dependent.
A significant portion of the Company’s impaired loans are deemed to be collateral dependent.
Management therefore measures impairment on these loans based on the fair value of the collateral.
Collateral values are determined based on appraisals performed by qualified licensed appraisers hired by
the Company or by senior members of the Company’s credit administration staff. The decision whether to
obtain an external third-party appraisal usually depends on the type of property being evaluated. External
5 6
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
appraisals are usually obtained on more complex, income producing properties such as hotels, shopping
centers and businesses. Less complex properties such as residential lots, farm land and single family houses
may be evaluated internally by senior credit administration staff. When the Company does obtain appraisals
from external third-parties, the values utilized in the impairment calculation are “as is” or current market
values. The appraisals, whether prepared internally or externally, may utilize a single valuation approach or
a combination of approaches including the comparable sales, income and cost approach. Appraised amounts
used in the impairment calculation are typically discounted 10 percent to account for selling and marketing
costs, if the repayment of the loan is to come from the sale of the collateral. Although appraisals may not
be obtained each year on all impaired loans, the collateral values used in the impairment calculations are
evaluated quarterly by management. Based on management’s knowledge of the collateral and the current
real estate market conditions, appraised values may be further discounted to reflect facts and circumstances
known to management since the initial appraisal was performed.
Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences
between the comparable sales and income data available. Such adjustments are typically significant and
result in a level 3 classification of the inputs for determining fair value. Because of the high degree of
judgment required in estimating the fair value of collateral underlying impaired loans and because of the
relationship between fair value and general economic conditions, we consider the fair value of impaired loans
to be highly sensitive to changes in market conditions.
Premises and Equipment
Premises and equipment are recorded at acquisition cost net of accumulated depreciation.
Depreciation is charged to operations over the estimated useful lives of the assets. The estimated useful
lives and methods of depreciation are as follows:
Description
Banking Premises
Furniture and Equipment
Life in Years
15-40
5-10
Method
Straight-Line and Accelerated
Straight-Line and Accelerated
Expenditures for major renewals and betterments are capitalized. Maintenance and repairs are charged to
operations as incurred. When property and equipment are retired or sold, the cost and accumulated depreciation
are removed from the respective accounts and any gain or loss is reflected in other income or expense.
Goodwill
Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets
acquired. Goodwill is assigned to reporting units and tested for impairment at least annually, or on an
interim basis if an event occurs or circumstances change that would more likely than not reduce the fair
value of the reporting unit below its carrying value.
Other Intangible Assets
Intangible assets consist of core deposit intangibles acquired in connection with a business combination.
The core deposit intangible is initially recognized based on an independent valuation performed as of the
consummation date. The core deposit intangible is amortized by the straight-line method over the average
remaining life of the acquired customer deposits.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the
Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that
right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control
over the transferred assets through an agreement to repurchase them before their maturity.
5 7
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Statement of Cash Flows
For reporting cash flows, cash and cash equivalents include cash on hand, noninterest-bearing amounts
due from banks, federal funds sold and securities purchased under agreement to resell. Cash flows from
demand deposits, interest-bearing checking accounts, savings accounts, loans and certificates of deposit are
reported net.
Advertising Costs
The Company expenses the cost of advertising in the periods in which those costs are incurred.
Income Taxes
The provision for income taxes is based upon income for financial statement purposes, adjusted for
nontaxable income and nondeductible expenses. Deferred income taxes have been provided when different
accounting methods have been used in determining income for income tax purposes and for financial
reporting purposes.
Deferred tax assets and liabilities are recognized based on future tax consequences attributable to
differences arising from the financial statement carrying values of assets and liabilities and their tax basis.
The differences relate primarily to depreciable assets (use of different depreciation methods for financial
statement and income tax purposes) and allowance for loan losses (use of the allowance method for financial
statement purposes and the direct write-off method for tax purposes). In the event of changes in the tax laws,
deferred tax assets and liabilities are adjusted in the period of the enactment of those changes, with effects
included in the income tax provision. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not
be realized. The Company and its subsidiary file a consolidated federal income tax return. The subsidiary
pays its proportional share of federal income taxes to the Company based on its taxable income.
The Company’s federal and state income tax returns for tax years 2018, 2017, 2016 and 2015 are subject
to examination by the Internal Revenue Service (IRS) and the Georgia Department of Revenue, generally
for three years after filing.
Positions taken in the Company’s tax returns may be subject to challenge by the taxing authorities upon
examination. Uncertain tax positions are initially recognized in the consolidated financial statements when
it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax
positions are both initially and subsequently measured as the largest amount of tax benefit that is greater
than 50 percent likely of being realized upon settlement with the tax authority, assuming full knowledge of
the position and all relevant facts. The Company provides for interest and, in some cases, penalties on tax
positions that may be challenged by the taxing authorities. Interest expense is recognized beginning in the
first period that such interest would begin accruing. Penalties are recognized in the period that the Company
claims the position in the tax return. Interest and penalties on income tax uncertainties are classified within
income tax expense in the consolidated statements of operations.
Other Real Estate
Other real estate generally represents real estate acquired through foreclosure and is initially recorded
at estimated fair value at the date of acquisition less the cost of disposal. Losses from the acquisition of
property in full or partial satisfaction of debt are recorded as loan losses. Properties are evaluated regularly
to ensure the recorded amounts are supported by current fair values, and valuation allowances are recorded
as necessary to reduce the carrying amount to fair value less estimated cost of disposal. Routine holding costs
and gains or losses upon disposition are included in foreclosed property expense.
Bank-Owned Life Insurance
The Company has purchased life insurance on the lives of certain key members of management and
directors. The life insurance policies are recorded at the amount that can be realized under the insurance
contract at the balance sheet date, which is the cash surrender value adjusted for other charges or amounts
due that are probable at settlement, if applicable. Increases in the cash surrender value are recorded as other
5 8
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
income in the consolidated statements of income. The cash surrender value of the insurance contracts is
recorded in other assets on the consolidated balance sheets in the amount of $17,597,639 and $17,088,693 as
of December 31, 2018 and 2017, respectively.
Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains and losses be included
in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on securities
available for sale, represent equity changes from economic events of the period other than transactions with
owners. Such items are considered components of other comprehensive income (loss). Accounting standards
codification requires the presentation in the consolidated financial statements of net income and all items of
other comprehensive income (loss) as total comprehensive income (loss).
Off-Balance Sheet Credit Related Financial Instruments
In the ordinary course of business, the Company has entered into commitments to extend credit,
commercial letters of credit and standby letters of credit. Such financial instruments are recorded on the
consolidated balance sheets when they are funded.
Changes in Accounting Principles and Effects of New Accounting Pronouncements
ASU 2014-09, Revenue from Contracts with Customers (Topic 606). On January 1, 2018, the Company
adopted ASU 2014-09 and all subsequent amendments to the ASU and ASC 606 which (1) creates a single
framework for recognizing revenue from contracts with customers that fall within its scope and (2) revises
when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, such as other real
estate owned. The majority of the Company’s revenues came from interest income and other sources,
including loans and investment securities, that are outside the scope of ASC 606. With the exception of
gain/losses on the sale of other real estate owned, the Company’s services that fall within the scope of ASC
606 are presented within noninterest income and are recognized as revenue as the Company satisfies its
obligations to the customer. Services within the scope of ASC 606 reported in noninterest income include
service charges on deposit accounts, debit card interchange fees, and ATM fees. The net of gains and
losses on the sale of other real estate owned are recorded in other noninterest expenses in the Company’s
consolidated statements of income for the year ended December 31, 2017 and 2016. For the year ended
December 31, 2018, the net of gains and losses on the sale of other real estate owned is recorded in other
noninterest income in the Company’s consolidated statements of income. The adoption of ASC 606 did
not change the timing or amount of revenue recognized for the Company. Accordingly, no cumulative
effect adjustment was recorded under the modified retrospective transition method. See Note 26 for further
discussion on the Company’s accounting policies for revenue source within the scope of ASC 606.
ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities. ASU 2016-01, among other things, (i) requires equity investments, with certain
exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the
impairment assessment of equity investments without readily determinable fair values by requiring a qualitative
assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the
methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial
instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the
exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an
entity to present separately in other comprehensive income the portion of the total change in the fair value of
a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure
the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate
presentation of financial assets and financial liabilities by measurement category and form of financial asset on
the balance sheet or the accompanying notes to the financial statements and (viii) clarifies that an entity should
evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. ASU 2016-
01 was effective for the Company on January 1, 2018. The adoption of this standard did not have a material
impact on the Company’s consolidated financial statements.
5 9
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
ASU 2016-02, Leases (Topic 842). This ASU requires lessees to put most leases on their balance sheets
but recognize expenses in the income statement in a manner similar to current accounting treatment. This
ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and,
for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases.
For public business entities, this ASU is effective for annual periods beginning after December 15, 2018, and
interim periods therein. Entities are required to use a modified retrospective approach for leases that exist
or are entered into after the beginning of the earliest comparative period in the financial statements. The
Company is evaluating the impact of this ASU on its financial statements and disclosures.
ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). This ASU sets forth a “current expected
credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial
instruments held at the reporting date based on historical experience, current conditions and reasonable
supported forecasts. This replaces the existing incurred loss model and is applicable to the measurement
of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit
exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim
periods within those fiscal years. The Company is currently assessing the impact of the adoption of this
ASU on its consolidated financial statements.
ASU 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments.
ASU 2016-15 provides guidance related to certain cash flow issues in order to reduce the current and
potential future diversity in practice. ASU 2016-15 became effective for us on January 1, 2018 and did not
have a significant impact on our financial statements.
ASU 2017-04, Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).
ASU 2017-04 eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement
of goodwill. The annual, or interim, goodwill impairment test is performed by comparing the fair value of
a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by
which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not
exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects of
tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring
the goodwill impairment loss, if applicable. ASU 2017-04 also eliminates the requirements for any reporting
unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity
still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative
impairment test is necessary. The standard must be adopted using a prospective basis and the nature and
reason for the change in accounting principle should be disclosed upon transition. ASU 2017-04 is effective
for annual or any interim goodwill impairment tests in reporting periods beginning after December 15, 2019.
Early adoption is permitted on testing dates after January 1, 2017. The Company is currently evaluating the
impact this ASU will have on the Company’s Consolidated Financial Statements, but it is not expected to
have a material impact.
ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities. This ASU shortens the
amortization period for the premium on certain purchased callable debt securities to the earliest call date.
Today, entities generally amortize the premium over the contractual life of the security. The new guidance
does not change the accounting for purchased callable debt securities held at a discount; the discount
continues to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting
periods beginning after December 15, 2018; early adoption is permitted. The guidance calls for a modified
retrospective transition approach under which a cumulative-effect adjustment will be made to retained
earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is
currently evaluating the provisions of ASU No. 2017-08 to determine the potential impact the new standard
will have on the Company’s Consolidated Financial Statements.
ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220). Reclassification of Certain Tax
Effects from Accumulated Other Comprehensive Income. This ASU allows an entity to elect a reclassification from
accumulated other comprehensive income (AOCI) to retained earnings for stranded tax effects resulting
6 0
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
from the Tax Cuts and Jobs Act (TCJ Act). ASU 2018-02 is effective for all entities for fiscal years beginning
after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The
Company elected to early adopt the provisions of ASU 2018-02 in the fourth quarter of 2017 and, as a result,
reclassified $1,068,295 from AOCI to retained earnings as of December 31, 2017.
ASU 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (Topic
820). This ASU modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective
for interim and annual reporting periods after December 15, 2019; early adoption is permitted. The
Company is currently evaluating the provisions of ASU 2018-13 to determine the potential impact the new
standard will have on the Company’s Consolidated Financial Statements.
2. BUSINESS COMBINATION
Planters First Bank Branch Acquisition
On October 22, 2018, the Bank purchased one branch from Planters First Bank (“PFB”) located in
Albany, Georgia. Pursuant to the transaction, the Bank acquired $20.4 million in loans and $12.0 million
in deposits, as well as the branch equipment. In addition, the Bank purchased a vacant lot owned by PFB in
Albany for $725 thousand, on which it plans to build a new branch office. In addition to the premium paid
on deposits, other costs associated with the acquisition totaled $113 thousand. This acquisition provides the
Bank with the opportunity to enhance its footprint in the Albany, Georgia market.
The Company has accounted for the branch purchases under the acquisition method of accounting in
accordance with FASB ASC topic 805, “Business Combinations,” whereby the acquired assets and liabilities
were recorded by the Bank at their estimated fair values as of their acquisition date.
The acquired assets and assumed liabilities of the PFB branch were measured at estimated fair value.
Management made significant estimates and exercised significant judgement in accounting for the acquisition
of the PFB branch. Management evaluated expected cash flows and estimated loss factors to measure fair
values for loans. Deposits were valued based upon interest rates, original and remaining terms and maturities,
as well as current rates for similar funds in the same markets. The vacant lot was based on recent appraised
value, whereas equipment was acquired based on the remaining book value from PFB, which approximated
fair value. Management engaged independent outside experts to provide the fair value estimates.
The following table provides the purchase price as of acquisition date, the identifiable assets acquired
and liabilities assumed at their estimated fair values, and the resulting goodwill of $202 thousand recorded
from the acquisition:
Purchase Price Consideration:
Cash Consideration
Total purchase price for PFB branch acquisition
Assets acquired at fair value:
Cash and cash equivalents
Loans
Premises and equipment, net
Core deposit intangible
Other assets
Total fair value of assets acquired
Liabilities assumed at fair value:
Deposits
Other liabilities
Total fair value of liabilities assumed
Net Assets acquired at fair value:
Amount of goodwill resulting from acquisition
6 1
$ 10,237,789
$ 10,237,789
$
194,337
20,430,271
772,727
560,000
123,363
$ 22,080,698
$ 12,032,500
12,653
$ 12,045,153
$ 10,035,545
202,244
$
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
The total amount of goodwill arising from this transaction of $202 thousand is expected to be deductible
for tax purposes, pursuant to section 197 of the Internal Revenue Code.
Acquired Loans
The following table outlines the contractually required payments receivable, cash flows we expect to
receive and the discounted yield for all PFB loans as of the acquisition date.
Performing loans acquired
Contractually
Required
Payments
Receivable
$ 20,749,515
Cash Flows
Expected To
Be Collected
20,749,515
Discounted
FMV
Adjustments
319,244
Carrying
Value of Loans
Receivable
$ 20,430,271
The Bank recorded all loans acquired at the estimated fair value on the purchase date with no carryover
of the related allowance for loan losses. The Bank only acquired loans which were deemed to be performing
loans with no signs of credit deterioration.
The Bank determined the net discounted value of cash flows on approximately 89 performing loans
totaling $20.4 million. The valuation took into consideration the loans’ underlying characteristics, including
account types, remaining terms, annual interest rates, interest types, current market rates, loss exposure and
remaining balances. These performing loans were segregated into pools based on loan and payment type.
The effect of this fair valuation process was a net discount adjustment of $319 thousand at acquisition.
Pending Acquisition
On December 17, 2018, the Company and LBC Bancshares, Inc., a Georgia corporation (“LBC”),
entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which LBC will
merge into the Company. Immediately thereafter, Calumet Bank, a Georgia bank wholly owned by LBC,
will be merged into Colony Bank. Calumet Bank operates two full-service banking locations, one each in
LaGrange, Georgia and Columbus, Georgia, as well as a loan production office in Atlanta, Georgia. Under
the terms of the Merger Agreement, each LBC shareholder will have the option to receive either $23.50 in
cash or 1.3239 shares of the Company’s Common Stock in exchange for each share of LBC common stock,
subject to customary proration and location procedures, such that 55% of LBC shares will receive the stock
consideration and 45% will receive the cash consideration, and at least 50% of the merger consideration
will be paid in the Company stock. The aggregate consideration is valued at approximately $34.1 million,
based upon the $16.10 per share closing price of the Company’s common stock as of December 17, 2018.
The merger is subject to customary closing conditions, including the receipt of regulatory approvals and
the approval of LBC’s shareholders. The transaction is expected to close during the first half of 2019. As of
December 31, 2018, LBC reported assets of $207 million, gross loans of $136 million and deposits of $182
million. The purchase price will be allocated among the net assets of LBC acquired as appropriate, with the
remaining balance being reported as goodwill.
3. CASH AND BALANCES DUE FROM BANKS
Components of cash and balances due from banks are as follows as of December 31:
Cash on Hand and Cash Items
Noninterest-Bearing Deposits with Other Banks
2018
$ 9,359,924
1,016,952
$ 10,376,876
2017
$ 9,746,132
13,399,004
$ 23,145,136
6 2
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
The Company is required to maintain reserve balances in cash or on deposit with the Federal Reserve
Bank based on a percentage of deposits. Reserve balances totaled approximately $1,979,000 and $1,515,000
at December 31, 2018 and 2017, respectively.
4. INVESTMENT SECURITIES
Investment securities as of December 31, 2018 are summarized as follows:
Securities Available for Sale
U.S. Government Agencies
Mortgage-Backed
State, County and Municipal
Corporate
Gross
Gross
Amortized
Cost
Unrealized Unrealized
Gains
Losses
Fair
Value
$ 356,498,339
4,007,883
2,927,147
$ 363,433,369
$ 303,360
17,858
–
$ 321,218
$ (10,596,527) $ 346,205,172
3,989,109
2,871,885
$ (10,688,421) $ 353,066,166
(36,632)
(55,262)
The amortized cost and fair value of investment securities as of December 31, 2018, by contractual
maturity, are shown hereafter. Expected maturities may differ from contractual maturities for certain
investments because issuers may have the right to call or prepay obligations with or without call or
prepayment penalties. This is often the case with mortgage-backed securities, which are disclosed separately
in the table below.
Due in One Year or Less
Due After One Year Through Five Years
Due After Five Years Through Ten Years
Due After Ten Years
Mortgage-Backed Securities
Securities Available for Sale
$
Amortized
Cost
354,440
4,294,198
1,133,881
1,152,511
$
6,935,030
356,498,339
$ 363,433,369
Fair
Value
$
353,794
4,237,813
1,150,770
1,118,617
$
6,860,994
346,205,172
$ 353,066,166
Investment securities as of December 31, 2017 are summarized as follows:
Securities Available for Sale
U.S. Government Agencies
Mortgage-Backed
State, County and Municipal
Corporate
Asset-Backed
Gross
Gross
Amortized
Cost
Unrealized Unrealized
Gains
Losses
Fair
Value
$ 354,931,318
4,493,085
2,047,517
992,641
$ 362,464,561
$ 258,049
22,835
12,483
–
$ 293,367
$
$
(8,465,948)
(23,094)
–
(21,982)
(8,511,024)
$ 346,723,419
4,492,826
2,060,000
970,659
$ 354,246,904
6 3
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Proceeds from sales of investments available for sale were $11,267,642 in 2018, $0 in 2017 and
$25,209,851 in 2016. Gross realized gains totaled $115,909 in 2018, $0 in 2017 and $391,976 in 2016. Gross
realized losses totaled $0 in 2018, $0 in 2017 and $6,753 in 2016.
Investment securities having a carrying value totaling $178,978,383 and $175,484,021 as of December
31, 2018 and 2017, respectively, were pledged to secure public deposits and for other purposes.
Information pertaining to securities with gross unrealized losses at December 31, 2018 and 2017
aggregated by investment category and length of time that individual securities have been in a continuous
loss position, follows:
Less Than 12 Months
Gross
Unrealized
Losses
Fair
Value
12 Months or Greater
Gross
Unrealized
Losses
Fair
Value
Total
Fair
Value
Gross
Unrealized
Losses
December 31, 2018
U.S. Government
Agencies
Mortgage-Backed
State, County
and Municipal
Corporate
December 31, 2017
U.S. Government
Agencies
Mortgage-Backed
State, County
and Municipal
Asset – Backed
$ 39,082,750
$
(504,496)
$ 255,747,472
$ (10,092,031)
$ 294,830,222
$ (10,596,527)
611,882
2,009,080
$ 41,703,712
(2,668)
(20,847)
(528,011)
$
1,882,249
862,805
$ 258,492,526
(33,964)
(34,415)
$ (10,160,410)
2,494,131
2,871,885
$ 300,196,238
(36,632)
(55,262)
$ (10,688,421)
$ 120,139,340
$ (1,655,223)
$ 190,196,101
$
(6,810,725)
$ 310,335,441
$
(8,465,948)
2,598,344
970,659
$ 123,708,343
(23,094)
(21,982)
$ (1,700,299)
–
–
$ 190,196,101
–
–
(6,810,725)
2,598,344
970,659
$ 313,904,444
$
(23,094)
(21,982)
(8,511,024)
$
Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and
more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1)
the length of time and the extent to which the fair value has been less than cost, (2) the financial condition
and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in
the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
At December 31, 2018, 145 securities have unrealized losses which have depreciated 3.44 percent from
the Company’s amortized cost basis. These securities are guaranteed by either the U.S. Government, other
governments or U.S. corporations. In analyzing an issuer’s financial condition, management considers
whether the securities are issued by the federal government or its agencies, whether downgrades by bond
rating agencies have occurred and the results of reviews of the issuer’s financial condition. The unrealized
losses are largely due to increases in market interest rates over the yields available at the time the underlying
securities were purchased. As management has the ability to hold debt securities until maturity, or for the
foreseeable future if classified as available-for-sale, no declines are deemed to be other than temporary.
However, the Company owns one asset-backed security at December 31, 2018 which was completely written
off during prior years. This investment is comprised of one issuance of a trust preferred security and has no
book value.
6 4
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
5. LOANS
The following table presents the composition of loans, segregated by class of loans, as of December 31:
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
Other
Total Loans
2018
2017
$ 57,410,473
16,798,743
$ 48,122,263
16,442,581
47,848,754
12,499,744
373,533,562
187,714,372
62,708,998
45,213,960
8,583,446
351,171,668
194,048,945
67,767,655
18,485,199
5,027,523
$ 782,027,368
18,956,028
14,977,309
$ 765,283,855
Commercial and agricultural loans are extended to a diverse group of businesses within the Company’s
market area. These loans are often underwritten based on the borrower’s ability to service the debt from
income from the business. Real estate construction loans often require loan funds to be advanced prior to
completion of the project. Due to uncertainties inherent in estimating construction costs, changes in interest
rates and other economic conditions, these loans often pose a higher risk than other types of loans. Consumer
loans are originated at the bank level. These loans are generally smaller loan amounts spread across many
individual borrowers to help minimize risk.
Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the loan portfolio,
management tracks certain credit quality indicators including trends related to (1) the risk grade assigned
to commercial and consumer loans, (2) the level of classified commercial loans, (3) net charge-offs, (4)
nonperforming loans, and (5) the general economic conditions in the Company’s geographic markets.
The Company uses a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on
a scale of 1 to 8. A description of the general characteristics of the grades is as follows:
• Grades 1 and 2 - Borrowers with these assigned grades range in risk from virtual absence of risk to
minimal risk. Such loans may be secured by Company-issued and controlled certificates of deposit
or properly margined equity securities or bonds. Other loans comprising these grades are made
to companies that have been in existence for a long period of time with many years of consecutive
profits and strong equity, good liquidity, excellent debt service ability and unblemished past
performance, or to exceptionally strong individuals with collateral of unquestioned value that fully
secures the loans. Loans in this category fall into the “pass” classification.
• Grades 3 and 4 - Loans assigned these “pass” risk grades are made to borrowers with acceptable
credit quality and risk. The risk ranges from loans with no significant weaknesses in repayment
capacity and collateral protection to acceptable loans with one or more risk factors considered to be
more than average.
6 5
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
• Grade 5 - This grade includes “special mention” loans on management’s watch list and is intended
to be used on a temporary basis for pass grade loans where risk-modifying action is intended in the
short-term.
• Grade 6 - This grade includes “substandard” loans in accordance with regulatory guidelines. This
category includes borrowers with well-defined weaknesses that jeopardize the payment of the debt
in accordance with the agreed terms. Loans considered to be impaired are assigned this grade, and
these loans often have assigned loss allocations as part of the allowance for loan and lease losses.
Generally, loans on which interest accrual has been stopped would be included in this grade.
• Grades 7 and 8 - These grades correspond to regulatory classification definitions of “doubtful” and
“loss,” respectively. In practice, any loan with these grades would be for a very short period of time,
and generally the Company has no loans with these assigned grades. Management manages the
Company’s problem loans in such a way that uncollectible loans or uncollectible portions of loans
are charged off immediately with any residual, collectible amounts assigned a risk grade of 6.
The following tables present the loan portfolio by credit quality indicator (risk grade) as of December 31.
Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes.
Pass
Special Mention Substandard
Total Loans
2018
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
Other
Total Loans
$ 55,808,422
15,664,048
47,087,255
12,499,744
358,139,315
170,050,484
58,712,452
18,103,792
5,018,095
$ 741,083,607
2017
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
Other
Total Loans
$ 46,468,726
15,868,191
41,282,295
8,583,446
338,775,805
177,962,870
66,334,906
18,495,798
14,968,677
$ 728,740,714
$
729,088
636,666
$
872,963
498,029
$ 57,410,473
16,798,743
44,306
–
717,193
–
7,661,667
7,106,793
1,912,338
7,732,580
10,557,095
2,084,208
47,848,754
12,499,744
373,533,562
187,714,372
62,708,998
59,073
5,475
$ 18,155,406
322,334
3,953
$ 22,788,355
18,485,199
5,027,523
$ 782,027,368
$
825,607
174,356
$
827,930
400,034
$ 48,122,263
16,442,581
577,765
–
7,662,637
4,864,893
444,095
3,353,900
–
4,733,226
11,221,182
988,654
45,213,960
8,583,446
351,171,668
194,048,945
67,767,655
52,970
8,632
$ 14,610,955
407,260
–
$ 21,932,186
18,956,028
14,977,309
$ 765,283,855
6 6
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
A loan’s risk grade is assigned at the inception of the loan and is based on the financial strength of the
borrower and the type of collateral. Loan risk grades are subject to reassessment at various times throughout
the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of 6 or
below and an outstanding balance of $250,000 or more are reassessed on a quarterly basis. During this
reassessment process individual reserves may be identified and placed against certain loans which are
not considered impaired. In assessing the overall economic condition of the markets in which it operates,
the Company monitors the unemployment rates for its major service areas. The unemployment rates are
reviewed on a quarterly basis as part of the allowance for loan loss determination.
Loans are considered past due if the required principal and interest payments have not been received as
of the date such payments were due. Generally, loans are placed on nonaccrual status if principal or interest
payments become 90 days past due or when, in management’s opinion, the borrower may be unable to meet
payment obligations as they become due, as well as when required by regulatory provision. Loans may be
placed on nonaccrual status regardless of whether such loans are considered past due.
The following table represents an age analysis of past due loans and nonaccrual loans, segregated by
class of loans, as of December 31:
Accruing Loans
90 Days
or More
Past
Due
30-89
Days Past
Due
Total
Accruing
Loans Past Nonaccrual
Due
Loans
Current
Loans
Total
Loans
282,116
117,087
$
2018
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
Other
Total Loans
88,371
–
679,387
6,881,632
75,548
110,340
–
$ 8,234,481
$ 328,483
110,482
2017
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
Other
Total Loans
27,062
119,443
918,997
2,482,276
318,329
246,175
7,158
$ 4,558,405
$
$
$
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$ 282,116
117,087
$ 637,085
413,254
$ 56,491,272
16,268,402
$ 57,410,473
16,798,743
88,371
–
679,387
6,881,632
75,548
462,841
–
2,965,546
2,734,179
2,052,604
47,297,542
12,499,744
369,888,629
178,098,561
60,580,846
47,848,754
12,499,744
373,533,562
187,714,372
62,708,998
110,340
–
$ 8,234,481
212,524
3,953
$ 9,481,986
18,162,335
5,023,570
$ 764,310,901
18,485,199
5,027,523
$ 782,027,368
$ 328,483
110,482
$ 598,305
398,509
$ 47,195,475
15,933,590
$ 48,122,263
16,442,581
27,062
119,443
918,997
2,482,276
318,329
477,043
–
2,172,229
2,829,966
838,577
44,709,855
8,464,003
348,080,442
188,736,703
66,610,749
45,213,960
8,583,446
351,171,668
194,048,945
67,767,655
246,175
7,158
$ 4,558,405
188,073
–
$ 7,502,702
18,521,780
14,970,151
$ 753,222,748
18,956,028
14,977,309
$ 765,283,855
6 7
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Had nonaccrual loans performed in accordance with their original contractual terms, the Company
would have recognized additional interest income of approximately $226,000, $205,000 and $387,000 for the
years ended December 31, 2018, 2017 and 2016, respectively.
The following table details impaired loan data as of December 31, 2018:
With No Related
Allowance Recorded
Commercial
Agricultural
Commercial Construction
Residential Construction
Commercial Real Estate
Residential Real Estate
Farmland
Consumer
Other
Unpaid
Contractual
Principal
Balance
$
595,323
433,915
132,366
–
12,163,915
4,214,354
2,054,137
212,524
3,953
$ 19,810,487
With An Allowance Recorded
Commercial
$
Agricultural
Commercial Construction
Residential Construction
Commercial Real Estate
Residential Real Estate
Farmland
Consumer
Other
41,762
–
398,930
–
3,691,010
274,198
363,566
–
–
$ 4,769,466
Total
Commercial
Agricultural
Commercial Construction
Residential Construction
Commercial Real Estate
Residential Real Estate
Farmland
Consumer
Other
$
637,085
433,915
531,296
–
15,854,925
4,488,552
2,417,703
212,524
3,953
$ 24,579,953
Impaired
Balance
Related
Allowance
Average
Recorded
Investment
Interest
Income
Interest
Income
Recognized Collected
$
595,323
413,254
132,366
–
12,163,915
4,129,876
2,052,604
212,524
3,953
$ 19,703,815
$
41,762
–
398,930
–
3,691,010
274,198
363,566
–
–
$ 4,769,466
$
637,085
413,254
531,296
–
15,854,925
4,404,074
2,416,170
212,524
3,953
$ 24,473,281
–
–
–
–
–
–
–
–
–
$
$
$
6,264
–
38,930
–
1,275,837
60,716
35,984
–
–
$ 1,417,731
$
6,264
–
38,930
–
1,275,837
60,716
35,984
–
–
$ 1,417,731
$
525,463
382,978
69,396
–
11,039,755
4,067,529
1,361,278
197,225
791
$ 17,644,415
$
8,352
–
465,929
–
5,120,933
97,902
367,425
–
–
$ 6,060,541
$
533,815
382,978
535,325
–
16,160,688
4,165,431
1,728,703
197,225
791
$ 23,704,956
$
21,350
17,949
7,806
–
581,836
208,138
52,974
13,614
204
$ 903,871
$
2,154
–
–
–
135,042
8,187
24,075
–
–
$ 169,458
$
23,504
17,949
7,806
–
716,878
216,325
77,049
13,614
204
$ 1,073,329
$
23,985
24,825
7,966
–
582,893
212,509
81,962
14,373
233
$ 948,746
$
2,247
–
–
–
141,978
8,180
24,415
–
–
$ 176,820
$
26,232
24,825
7,966
–
724,871
220,689
106,377
14,373
233
$ 1,125,566
6 8
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
The following table details impaired loan data as of December 31, 2017:
With No Related
Allowance Recorded
Commercial
Agricultural
Commercial Construction
Residential Construction
Commercial Real Estate
Residential Real Estate
Farmland
Consumer
Unpaid
Contractual
Principal
Balance
$
598,305
485,132
54,306
–
12,637,057
4,977,769
840,110
188,073
$ 19,780,752
With An Allowance Recorded
Commercial
$
Agricultural
Commercial Construction
Residential Construction
Commercial Real Estate
Residential Real Estate
Farmland 371,376
Consumer
–
–
493,067
–
5,729,300
108,859
371,376
–
$ 6,702,602
Total
Commercial
Agricultural
Commercial Construction
Residential Construction
Commercial Real Estate
Residential Real Estate
Farmland
Consumer
$
598,305
485,132
547,373
–
18,366,357
5,086,628
1,211,486
188,073
$ 26,483,354
Impaired
Balance
Related
Allowance
Average
Recorded
Investment
Interest
Income
Interest
Income
Recognized Collected
$
598,305
398,509
54,306
–
12,637,057
4,579,614
838,577
188,073
$ 19,294,441
$
–
–
493,067
–
5,729,300
108,859
21,369
–
$ 6,702,602
$
598,305
398,509
547,373
–
18,366,357
4,688,473
1,209,953
188,073
$ 25,997,043
$
$
–
–
–
–
–
–
–
–
$
–
–
65,635
–
1,712,557
27,123
375,595
–
$ 1,826,684
$
–
–
65,635
–
1,712,557
27,123
21,369
–
$ 1,826,684
$
633,528
296,578
141,396
79,295
12,808,414
4,566,041
790,967
186,348
$ 19,502,567
$
–
–
241,063
–
6,599,144
482,228
22,121
–
$ 7,698,030
$
633,528
296,578
382,459
79,295
19,407,558
5,048,269
1,166,562
186,348
$ 27,200,597
$
$
$
$
33,283
11,046
3,526
–
559,601
211,318
54,367
8,576
881,717
–
–
22,626
–
228,745
4,261
22,021
–
277,753
$
33,283
11,046
26,152
–
788,346
215,579
76,488
8,576
$ 1,159,470
33,868
19,376
3,836
–
549,825
226,684
58,085
9,452
$ 901,126
$
–
–
32,922
–
237,066
7,446
–
$ 299,455
$
33,868
19,376
36,758
–
786,891
234,130
80,106
9,452
$ 1,200,581
6 9
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
The following table details impaired loan data as of December 31, 2016:
With No Related
Allowance Recorded
Commercial
Agricultural
Commercial Construction
Commercial Real Estate
Residential Real Estate
Farmland
Consumer
Unpaid
Contractual
Principal
Balance
$
634,955
229,182
190,494
14,357,601
4,261,558
920,666
212,376
$ 20,806,832
With An Allowance Recorded
$
Commercial
Agricultural
Commercial Construction
Commercial Real Estate
Residential Real Estate
Farmland
Consumer
–
–
72,296
8,557,582
1,475,594
379,851
–
$ 10,485,323
Total
Commercial
Agricultural
Commercial Construction
Commercial Real Estate
Residential Real Estate
Farmland
Consumer
$
634,955
229,182
262,790
22,915,183
5,737,152
1,300,517
212,376
$ 31,292,155
Impaired
Balance
Related
Allowance
Average
Recorded
Investment
Interest
Income
Interest
Income
Recognized Collected
$
634,955
208,522
190,494
14,276,688
3,952,139
799,556
212,026
$ 20,274,380
$
–
–
72,296
8,467,135
1,467,833
379,851
–
$ 10,387,115
$
634,955
208,522
262,790
22,743,823
5,419,972
1,179,407
212,026
$ 30,661,495
$
$
–
–
–
–
–
–
–
–
$
–
–
21,135
3,021,943
362,521
29,173
–
$ 3,434,772
$
–
–
21,135
3,021,943
362,521
29,173
–
$ 3,434,772
$
539,099
210,372
697,893
14,274,719
4,553,322
1,016,395
213,309
$ 21,505,109
$
30,270
–
74,098
8,339,666
1,042,750
384,056
–
$ 9,870,840
$
569,369
210,372
771,991
22,614,385
5,596,072
1,400,451
213,309
$ 31,375,949
$
24,563
8,794
6,630
567,349
73,099
21,526
9,599
$ 711,560
$
–
–
1,532
238,684
27,759
21,098
–
$ 289,073
$
24,563
8,794
8,162
806,033
100,858
42,624
9,599
$ 1,000,633
$
27,142
12,412
7,127
560,354
190,373
26,012
12,036
$ 835,456
$
–
–
1,416
235,749
32,260
21,310
–
$ 290,735
$
27,142
12,412
8,543
796,103
222,633
47,322
12,036
$ 1,126,191
Troubled Debt Restructurings (TDRs) are troubled loans on which the original terms of the loan
have been modified in favor of the borrower due to deterioration in the borrower’s financial condition.
Each potential loan modification is reviewed individually and the terms of the loan are modified to meet
the borrower’s specific circumstances at a point in time. Not all loan modifications are TDRs. Loan
modifications are reviewed and approved by the Company’s senior lending staff, who then determine
whether the loan meets the criteria for a TDR. Generally, the types of concessions granted to borrowers that
are evaluated in determining whether a loan is classified as a TDR include:
•
Interest rate reductions - Occur when the stated interest rate is reduced to a nonmarket rate or a rate the
borrower would not be able to obtain elsewhere under similar circumstances.
• Amortization or maturity date changes - Result when the amortization period of the loan is extended beyond
what is considered a normal amortization period for loans of similar type with similar collateral.
7 0
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
•
Principal reductions - These are often the result of commercial real estate loan workouts where two
new notes are created. The primary note is underwritten based upon the Company’s normal
underwriting standards and is structured so that the projected cash flows are sufficient to repay
the contractual principal and interest of the newly restructured note. The terms of the secondary
note vary by situation and often involve that note being charged off, or the principal and interest
payments being deferred until after the primary note has been repaid. In situations where a portion
of the note is charged off during modification, there is often no specific reserve allocated to those
loans. This is due to the fact that the amount of the charge-off usually represents the excess of
the original loan balance over the collateral value and the Company has determined there is no
additional exposure on those loans.
As discussed in Note 1, Summary of Significant Accounting Policies, once a loan is identified as a
TDR, it is accounted for as an impaired loan. The Company had no unfunded commitments to lend to a
customer that has a troubled debt restructured loan as of December 31, 2018. The following tables present
the number of loan contracts restructured during the 12 months ended December 31, 2018, 2017 and 2016.
It shows the pre- and post-modification recorded investment as well as the number of contracts and the
recorded investment for those TDRs modified during the previous 12 months which subsequently defaulted
during the period. Loans modified in a troubled debt restructuring are considered to be in default once the
loan becomes 90 days past due. A TDR may cease being classified as impaired if the loan is subsequently
modified at market terms, has performed according to the modified terms for at least six months, and has not
had any prior principal forgiveness on a cumulative basis.
Troubled Debt Restructurings
2018
Commercial Real Estate
2017
Commercial Real Estate
Residential Real Estate
Total Loans
2016
Commercial Real Estate
Residential Real Estate
Total Loans
# of
Contracts
Pre-
Post-
Modification Modification
1
–
–
–
1
1
2
402,430
$ 402,430
$
$
–
–
–
–
–
–
$ 91,280
354,784
$ 446,064
$ 91,097
354,784
$ 445,881
Troubled debt restructurings that subsequently defaulted as of December 31 are as follows:
2018
2017
2016
Residential Real Estate
Total Loans
# of
Contracts
1
1
Recorded
Investment Contracts
# of
Recorded
Investment
$ 131,067
$ 131,067
–
–
$
$
–
–
# of
Recorded
Contracts Investment
$ 89,297
$ 89,297
1
1
During 2018, a restructured loan totaling $131,067 failed to continue to perform as agreed and was
moved to non-accrual status. At December 31, 2017, all restructured loans were performing as agreed.
During December 2016, a restructured loan totaling $89,297 failed to continue to perform as agreed and
was charged off in June 2016.
7 1
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
6. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the years ended December 31 are as follows:
Balance, Beginning of Year
Provision for Loan Losses
Loans Charged Off
Recoveries of Loans Previously Charged Off
Balance, End of Year
2018
$ 7,507,508
200,500
(965,447)
534,245
$ 7,276,806
2017
$ 8,923,293
390,000
(2,915,753)
1,109,968
$ 7,507,508
2016
$ 8,603,905
1,062,000
(2,087,850)
1,345,238
$ 8,923,293
The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the
years ended December 31. Allocation of a portion of the allowance to one category of loans does not preclude
its availability to absorb losses in other loan categories and periodically may result in reallocation within the
provision categories.
2018
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
Other
2017
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
Other
Beginning
Balance
Charge-Offs Recoveries
Provision
Ending
Balance
$
446,675
185,904
$
(123,528)
(122,873)
$ 139,466
22,031
$
(93,049)
163,188
$ 369,564
248,250
1,216,015
–
3,873,959
968,101
779,531
33,993
3,330
$ 7,507,508
$
456,197
167,692
322,725
13,491
5,750,998
1,396,099
722,331
–
–
(257,424)
(162,235)
–
155,272
–
40,052
90,703
12,228
(1,256,413)
16,530
892,523
284,483
(90,210)
114,874
16,530
4,549,110
1,181,052
701,549
(299,387)
–
(965,447)
72,386
2,107
$ 534,245
279,121
4,327
$ 200,500
86,113
9,764
$ 7,276,806
(299,079)
(159,500)
$ 136,499
3,963
$ 153,058
173,749
$ 446,675
185,904
$
$
(51,977)
–
(966,014)
(1,048,337)
(60,902)
266,459
–
527,150
82,079
16,750
678,808
(13,491)
(1,438,175)
538,260
101,352
1,216,015
–
3,873,959
968,101
779,531
80,265
13,495
$ 8,923,293
(329,944)
–
$ (2,915,753)
74,933
2,135
$ 1,109,968
208,739
(12,300)
$ 390,000
33,993
3,330
$ 7,507,508
7 2
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
2016
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
Other
Beginning
Balance
Charge-Offs Recoveries
Provision
Ending
Balance
$
855,364
203,091
$
(304,918)
(19,258)
$
66,738
4,150
$ (160,987)
(20,291)
$
456,197
167,692
690,766
19,890
3,850,527
1,990,355
911,692
(25,318)
–
(992,067)
(361,630)
(119,576)
814,586
–
206,154
49,660
145,000
(1,157,309)
(6,399)
2,686,384
(282,286)
(214,785)
322,725
13,491
5,750,998
1,396,099
722,331
63,377
18,843
$ 8,603,905
(265,083)
–
$ (2,087,850)
52,629
6,321
$ 1,345,238
229,342
(11,669)
$ 1,062,000
80,265
13,495
$ 8,923,293
The Company’s allowance for loan losses consists of specific valuation allowances established for
probable losses on specific loans and historical valuation allowances for other loans with similar risk
characteristics.
The Company determines its individual reserves during its quarterly review of substandard loans. This
process involves reviewing all loans with a risk grade of 6 or greater and an outstanding balance of $250,000
or more, regardless of the loans impairment classification.
Since not all loans in the substandard category are considered impaired, this quarterly review process
may result in the identification of specific reserves on nonimpaired loans. Management considers those loans
graded substandard, but not classified as impaired, to be higher risk loans and, therefore, makes specific
allocations to the allowance for those loans if warranted. The total of such loans is $8,875,310 and $9,470,621
as of December 31, 2018 and 2017, respectively. Specific allowance allocations were made for these loans
totaling $1,312,154 and $1,510,868 as of December 31, 2018 and 2017, respectively. Since these loans are not
considered impaired, both the loan balance and related specific allocation are included in the “Collectively
Evaluated for Impairment” column of the following tables.
At December 31, 2018, there were 148 impaired loans totaling $4,257,258 below the $250,000 review
threshold which were not individually reviewed for impairment. Those loans were subject to the Bank’s
general loan loss reserve methodology and are included in the “Collectively Evaluated for Impairment”
column of the following tables. Likewise, at December 31, 2017 and 2016, impaired loans totaling $4,335,524
and $4,204,156, respectively, were below the $250,000 review threshold and were subject to the Bank’s
general loan loss reserve methodology and are included in the “Collectively Evaluated for Impairment”
column of the following tables.
7 3
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Ending Allowance Balance
Individually Collectively
Evaluated for Evaluated for
Impairment
Impairment
Total
Ending Loan Balance
Collectively
Individually
Evaluated for Evaluated for
Impairment
Impairment
Total
$
–
248,250
248,250
83,309
27,031
6,264 $ 363,300 $ 369,564 $
2018
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
Consumer
–
Other
–
Total End of Year Balance $ 1,417,731 $ 5,859,075 $ 7,276,806 $ 20,216,023
467,384
–
15,413,112
2,067,906
2,157,281
114,874
16,530
4,549,110
1,181,052
701,549
75,944
16,530
3,273,273
1,120,336
665,565
38,930
–
1,275,837
60,716
35,984
86,113
9,764
86,113
9,764
–
–
$
–
–
185,904
185,904
77,599
5,121
$ 446,675 $ 446,675 $
2017
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
–
Consumer
Other
–
Total End of Year Balance $ 1,826,684 $ 5,680,824 $ 7,507,508 $ 21,661,519
493,067
–
18,010,035
2,040,125
1,035,572
1,216,015
–
3,873,959
968,101
779,531
65,635
–
1,712,557
27,123
21,369
1,150,380
–
2,161,402
940,978
758,162
33,993
3,330
33,993
3,330
–
–
$
–
–
167,692
167,692
$ 456,197 $ 456,197 $
2016
Commercial and Agricultural
Commercial
Agricultural
Real Estate
Commercial Construction
Residential Construction
Commercial
Residential
Farmland
Consumer and Other
–
Consumer
Other
–
Total End of Year Balance $ 3,434,772 $ 5,488,521 $ 8,923,293 $ 26,457,339
72,296
–
22,422,451
2,911,874
1,044,047
322,725
13,491
5,750,998
1,396,099
722,331
301,590
13,491
2,729,055
1,033,577
693,159
21,135
–
3,021,943
362,522
29,172
80,265
13,495
80,265
13,495
6,671
–
–
–
7 4
$ 57,327,164 $ 57,410,473
16,798,743
16,771,712
47,381,370
12,499,744
358,120,450
185,646,466
60,551,717
47,848,754
12,499,744
373,533,562
187,714,372
62,708,998
18,485,199
5,027,523
18,485,199
5,027,523
$ 761,811,345 $ 782,027,368
$ 48,044,664
16,437,460
$ 48,122,263
16,442,581
44,720,893
8,583,446
333,161,633
192,008,820
66,732,083
45,213,960
8,583,446
351,171,668
194,048,945
67,767,655
18,956,028
14,977,309
$ 743,622,336
18,956,028
14,977,309
$ 765,283,855
$ 47,018,207 $ 47,024,878
17,079,579
17,079,579
30,286,066
11,830,447
326,667,580
192,668,093
65,833,150
30,358,362
11,830,447
349,090,031
195,579,967
66,877,197
19,695,241
16,747,861
19,695,241
16,747,861
$ 727,826,224 $ 754,283,563
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
7. PREMISES AND EQUIPMENT
Premises and equipment are comprised of the following as of December 31:
Land
Building
Furniture, Fixtures and Equipment
Leasehold Improvements
Construction in Progress
Accumulated Depreciation
2018
$ 10,934,885
26,544,689
12,782,042
696,529
581,389
51,539,534
(22,708,262)
$ 28,831,272
2017
$
9,668,722
26,893,354
13,090,366
655,166
68,253
50,375,861
(22,736,431)
$ 27,639,430
Depreciation charged to operations totaled $1,786,652 in 2018, $1,647,813 in 2017 and $1,574,249 in 2016.
Certain Company facilities and equipment are leased under various operating leases. Rental expense
approximated $443,000 for 2018, $427,000 for 2017 and $437,000 for 2016.
Future minimum rental payments as of December 31, 2018 are as follows:
Year Ending December 31
2019
2020
2021
2022
2023 and Thereafter
Amount
$
$
63,480
42,000
42,000
38,500
–
185,980
8. OTHER REAL ESTATE OWNED
The aggregate carrying amount of Other Real Estate Owned (OREO) at December 31, 2018, 2017 and
2016 was $1,840,743, $4,256,469 and $6,439,226, respectively. All of the Company’s other real estate owned
represents properties acquired through foreclosure or deed in lieu of foreclosure. The following table details
the change in OREO during 2018, 2017 and 2016 as of December 31:
Balance, Beginning of Year
Additions
Sales of OREO
Transfer to Bank Premises
Gain/(Loss) on Sale
Provision for Losses
Balance, End of Year
2018
$ 4,256,469
792,459
(2,949,283)
(300,000)
303,139
(262,041)
$ 1,840,743
2017
6,439,226
1,724,936
(3,786,567)
–
212,641
(333,767)
4,256,469
$
$
2016
8,839,103
5,664,554
(7,416,293)
–
(146,402)
(501,736)
6,439,226
$
$
At December 31, 2018, the Company held $564,748 of residential real estate property as foreclosed
property. Also at December 31, 2018, $25,069 of consumer mortgage loans collateralized by residential real
estate property was in the process of foreclosure according to local requirements of the applicable jurisdictions.
7 5
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
9. OTHER INTANGIBLE ASSETS
The following is an analysis of the core deposit intangible activity for the years ended December 31:
Core Deposit
Intangible
Accumulated
Amortization
Net Core
Deposit
Intangible
Core Deposit Intangible
Balance, December 31, 2016
Amortization Expense
Balance, December 31, 2017
Addition
Amortization Expense
Balance, December 31, 2018
$ 1,056,693
–
$ 1,056,693
560,000
–
$ 1,616,693
$
$
(976,178)
(35,749)
(1,011,927)
–
(48,193)
$ (1,060,120)
$
$
80,515
(35,749)
44,766
560,000
(48,193)
$ 556,573
Amortization expense related to the core deposit intangible was $48,193, $35,749 and $35,749 for the
years ended December 31, 2018, 2017 and 2016. The estimated future amortization expense for intangible
assets remaining as of December 31, 2018 is as follows:
Year Ending December 31
2019
2020
2021
2022
2023
Thereafter
Amount
$
83,684
74,667
74,667
74,667
74,667
174,221
$ 556,573
10. INCOME TAXES
The Tax Cuts and Jobs Act (the “TCJ Act”), enacted on December 22, 2017, reduced the U.S. federal
corporate tax rate to 21 percent. As a result of the enactment of the TCJ Act we remeasured our deferred tax
assets and liabilities based upon the new U.S. statutory federal income tax rate of 21 percent, which is the
tax rate at which these assets and liabilities are expected to reverse in the future. Nonetheless, we recognized
additional income tax expense of $2,040,946 in the fourth quarter of 2017 related to the remeasurement of
our deferred tax assets and liabilities.
The components of income tax expense for the years ended December 31 are as follows:
Current Federal Expense
Deferred Federal Expense
Deferred Tax Expense from Tax Rate Changes
Federal Income Tax Expense
Current State Income Tax Expense
Federal and State Income Tax Expense
2018
$ 2,727,094
273,176
–
3,000,270
–
$ 3,000,270
2017
$ 3,943,495
793,012
2,040,946
6,777,453
–
6,777,453
$
2016
$ 3,629,213
222,120
–
3,851,333
–
$ 3,851,333
7 6
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
The federal income tax expense of $3,000,270 in 2018, $6,777,453 in 2017 and $3,851,333 in 2016 is
different than the income taxes computed by applying the federal statutory rates to income before income
taxes. The reasons for the differences are as follows:
Statutory Federal Income Taxes
Tax-Exempt Interest
Income from Cash Value Life Insurance,
Net of Premiums
Meal and Entertainment Disallowance
Other
Tax Expense from Tax Rate Changes
Actual Federal Income Taxes
2018
$ 3,132,711
(57,271)
2017
$ 4,954,199
(102,345)
(96,733)
9,578
11,985
–
$ 3,000,270
(198,730)
14,354
69,029
2,040,946
6,777,453
$
2016
$ 4,283,394
(109,759)
(182,532)
16,813
(156,583)
–
$ 3,851,333
Deferred taxes, which are included in Other Assets, in the accompanying consolidated balance sheets as
of December 31 include the following:
Deferred Tax Assets
Allowance for Loan Losses
Other Real Estate
Deferred Compensation
Core Deposit Intangible
Investments
Goodwill
Restricted Stock
Other
Deferred Tax Liabilities
Premises and Equipment
Other
Deferred Tax Assets (Liabilities) on
Unrealized Securities Gains (Losses)
Net Deferred Tax Assets
11. DEPOSITS
2018
2017
$ 1,528,129
183,997
148,402
1,307
210,000
48,086
2,917
201,574
$ 2,324,412
(1,023,090)
(6,234)
(1,029,324)
$ 1,576,577
304,813
161,000
–
210,000
76,058
–
237,591
$ 2,566,039
(995,190)
(2,585)
(997,775)
2,177,113
$ 3,472,201
1,725,708
$ 3,293,972
The aggregate amount of overdrawn deposit accounts reclassified as loan balances totaled $476,182 and
$475,161 as of December 31, 2018 and 2017, respectively.
Components of interest-bearing deposits as of December 31 are as follows:
Interest-Bearing Demand
Savings
Time, $250,000 and Over
Other Time
2018
$ 471,794,491
79,452,705
53,881,417
287,149,453
$ 892,278,066
2017
$ 458,717,332
78,172,441
38,919,469
301,248,235
$ 877,057,477
7 7
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
At December 31, 2018 and 2017, the Company had brokered deposits of $80,535,032 and $46,328,995
respectively. All of these brokered deposits represent Certificate of Deposit Account Registry Service
(CDARS) reciprocal deposits. The CDARS deposits are ones in which customers placed core deposits
into the CDARS program for FDIC insurance coverage and the Company receives reciprocal brokered
deposits in a like amount. The aggregate amount of jumbo certificates of deposit, each with a minimum
denomination of $250,000 was $53,881,417 and $38,919,469 as of December 31, 2018 and December 31,
2017, respectively.
As of December 31, 2018, the scheduled maturities of certificates of deposit are as follows:
Year
2019
2020
2021
2022
2023
Thereafter
Amount
$ 241,365,987
45,279,800
37,132,339
8,423,379
8,788,583
40,782
$ 341,030,870
12. OTHER BORROWED MONEY
Other borrowed money at December 31 is summarized as follows:
Federal Home Loan Bank Advances
Other Borrowings
2018
$ 44,000,000
–
$ 44,000,000
2017
$ 46,000,000
1,500,000
$ 47,500,000
Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from 2019 to 2028 and
interest rates ranging from 0.98 percent to 3.51 percent. As collateral on the outstanding FHLB advances,
the Company has provided a blanket lien on its portfolio of qualifying residential first mortgage loans
and commercial loans. At December 31, 2018, the book value of those loans pledged is $108,634,687. At
December 31, 2018, the Company had remaining credit availability from the FHLB of $252,071,000. The
Company may be required to pledge additional qualifying collateral in order to utilize the full amount of the
remaining credit line.
The Company borrowed $5,000,000 during the first quarter of 2017 as a short term loan to be paid off
within one year with an interest rate of prime plus 0.75 percent, currently 5.25 percent. The Company paid
down $3,500,000 during November 2017. The remaining amount was paid off during January 2018.
The aggregate stated maturities of other borrowed money at December 31, 2018 are as follows:
Year
2019
2020
2021
2022
2023
2024 and Thereafter
7 8
$
Amount
5,000,000
2,500,000
–
18,000,000
6,000,000
12,500,000
$ 44,000,000
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
At December 31, 2018, $10,500,000 of FHLB advances are subject to fixed rates of interest, while the
remaining $33,500,000 is subject to floating interest rates which will convert to fixed rates of interests in the
next few years.
The Company also has available federal funds lines of credit with various financial institutions totaling
$43,500,000, of which there were none outstanding at December 31, 2018.
The Company has the ability to borrow funds from the Federal Reserve Bank (FRB) of Atlanta
utilizing the discount window. The discount window is an instrument of monetary policy that allows eligible
institutions to borrow money from the FRB on a short-term basis to meet temporary liquidity shortages
caused by internal or external disruptions. At December 31, 2018, the Company had borrowing capacity
available under this arrangement, with no outstanding balances. The Company would be required to pledge
certain available-for-sale investment securities as collateral under this agreement.
13. SUBORDINATED DEBENTURES (TRUST PREFERRED SECURITIES)
Description
Date
3-Month
Added
Amount Libor Rate Points
(In Thousands)
Total
Interest
5-Year
Rate Maturity Call Option
Colony Bankcorp Statutory Trust III 6/17/2004
4/13/2006
Colony Bankcorp Capital Trust I
3/12/2007
Colony Bankcorp Capital Trust II
9/14/2007
Colony Bankcorp Capital Trust III
$ 4,640
5,155
9,279
5,155
2.78819
2.80300
2.80300
2.52038
2.68
1.50
1.65
1.40
5.46819
4.30300
4.45300
3.92038
6/14/2034
4/13/2036
3/12/2037
9/14/2037
6/17/2009
4/13/2011
3/12/2012
9/14/2012
The Trust Preferred Securities are recorded as subordinated debentures on the consolidated balance
sheets, and subject to certain limitations, qualify as Tier 1 Capital for regulatory capital purposes. The
proceeds from these offerings were used to fund certain acquisitions, pay off holding company debt and inject
capital into the Bank subsidiary. The Trust Preferred Securities pay interest quarterly.
14. PREFERRED STOCK AND WARRANT
The Company redeemed 9,360 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A
(the Preferred Stock) outstanding with private investors as of March 31, 2017. The Company redeemed 8,661
shares of Preferred Stock at $1,000 per share in 2016. The Company redeemed 9,979 shares of Preferred
Stock at $1,000 per share during 2015. The Company currently has no outstanding shares of Preferred
Stock. The Company also had a warrant (the Warrant) to purchase up to 500,000 shares of the Company’s
common stock outstanding with private investors. The Warrant was repurchased by the Company on June
5, 2018, for $3,175,000. Both the Preferred Stock and the Warrant originated in 2009 through transactions
with the United States Department of the Treasury and were subsequently sold to the public through an
auction process during 2013. The Company currently has no outstanding warrants as of December 31, 2018.
15. EMPLOYEE BENEFIT PLAN
The Company offers a defined contribution 401(k) Profit Sharing Plan (the Plan) which covers
substantially all employees who meet certain age and service requirements. The Plan allows employees to
make voluntary pre-tax salary deferrals to the Plan. The Company, at its discretion, may elect to make
an annual contribution to the Plan equal to a percentage of each participating employee’s salary. Such
discretionary contributions must be approved by the Company’s board of directors. Employees are fully
vested in the Company contributions after six years of service. In 2018, 2017 and 2016, the Company made
total contributions of $709,723, $686,580 and $408,303 to the Plan, respectively.
7 9
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
16. COMMITMENTS AND CONTINGENCIES
Credit-Related Financial Instruments. The Company is a party to credit-related financial instruments with
off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit, standby letters of credit and commercial letters
of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of
the amount recognized in the consolidated balance sheets.
The Company’s exposure to credit loss is represented by the contractual amount of these commitments.
The Company follows the same credit policies in making commitments as it does for on-balance sheet
instruments.
At December 31, 2018 and 2017, the following financial instruments were outstanding whose contract
amounts represent credit risk:
Commitments to Extend Credit
Standby Letters of Credit
$ 98,736,000
1,525,000
Contract Amount
2018
2017
$ 96,374,000
1,536,000
Commitments to extend credit are agreements to lend to a customer as long as there is no violation
of any condition established in the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire
without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future
cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on
management’s credit evaluation of the customer.
Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection
agreements are commitments for possible future extensions of credit to existing customers. These lines of
credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon
to the total extent to which the Company is committed.
Standby and performance letters of credit are conditional lending commitments issued by the Company
to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to
support public and private borrowing arrangements. Essentially all letters of credit issued have expiration
dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers.
Legal Contingencies. In the ordinary course of business, there are various legal proceedings pending against
Colony and its subsidiary. The aggregate liabilities, if any, arising from such proceedings would not, in the
opinion of management, have a material adverse effect on Colony’s consolidated financial position.
17. DEFERRED COMPENSATION PLAN
Colony Bank, the wholly-owned subsidiary, has deferred compensation plans covering certain former
directors and certain officers choosing to participate through individual deferred compensation contracts.
In accordance with terms of the contracts, the Bank is committed to pay the participant’s deferred
compensation over a specified number of years, beginning at age 65. In the event of a participant’s death
before age 65, payments are made to the participant’s named beneficiary over a specified number of years,
beginning on the first day of the month following the death of the participant.
8 0
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Liabilities accrued under the plans totaled $706,677 and $766,667 as of December 31, 2018 and 2017,
respectively. Benefit payments under the contracts were $107,850 in 2018 and $110,080 in 2017.
Provisions charged to operations totaled $52,285 in 2018, $55,572 in 2017 and $57,125 in 2016.
The Company has purchased life insurance policies on the plans’ participants and uses the cash flow
from these policies to partially fund the plan. Fee income recognized with these plans totaled $135,218 in
2018, $233,064 in 2017 and $165,128 in 2016.
18. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for the following were made during the years ended December 31:
Interest Expense
Income Taxes
2018
$ 8,186,946
$ 2,695,000
2017
$
6,851,541
$ 4,000,000
2016
6,529,615
3,365,000
$
$
Noncash financing and investing activities for the years ended December 31 are as follows:
Acquisitions of Real Estate
Through Loan Foreclosures
Change in Unrealized Gain (Loss) on AFS Investment
Securities
$
792,459
$ (2,149,545)
$
$
1,724,936
(608,355)
$
$
5,664,554
(890,590)
2018
2017
2016
19. RELATED PARTY TRANSACTIONS
The following table reflects the activity and aggregate balance of direct and indirect loans to directors,
executive officers or principal holders of equity securities of the Company. All such loans were made on
substantially the same terms, including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than a normal risk of collectibility. A
summary of activity of related party loans is shown below:
Balance, Beginning
New Loans
Repayments
Transactions Due to Changes in Directors
Balance, Ending
2018
744,637
97,690
(166,997)
–
675,330
$
$
2017
1,025,543
1,050,393
(1,106,606)
(224,693)
744,637
$
$
20. FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Generally accepted accounting standards in the U.S. require disclosure of fair value information about
financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable
to estimate that value. The assumptions used in the estimation of the fair value of Colony Bankcorp, Inc. and
Subsidiary’s financial instruments are detailed hereafter. Where quoted prices are not available, fair values
are based on estimates using discounted cash flows and other valuation techniques. The use of discounted
cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of
future cash flows.
8 1
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Generally accepted accounting principles related to Fair Value Measurements define fair value, establish
a framework for measuring fair value, establish a three-level valuation hierarchy for disclosure of fair value
measurement and enhance disclosure requirements for fair value measurements. The valuation hierarchy is
based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.
The three levels are defined as follows:
• Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or
liabilities in active markets.
• Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in
active markets, and inputs that are observable for the asset or liability, either directly or indirectly,
for substantially the full term of the financial instrument.
• Level 3 inputs to the valuation methodology are unobservable and represent the Company’s own
assumptions about the assumptions that market participants would use in pricing the assets or
liabilities.
The following disclosures should not be considered a surrogate of the liquidation value of the Company,
but rather a good-faith estimate of the increase or decrease in value of financial instruments held by the
Company since purchase, origination or issuance.
Cash and Short-Term Investments - For cash, due from banks, bank-owned deposits and federal funds sold,
the carrying amount is a reasonable estimate of fair value and is classified Level 1.
Investment Securities - Fair values for investment securities are based on quoted market prices where
available and classified as Level 1. If quoted market prices are not available, estimated fair values are based
on quoted market prices of comparable instruments and classified as Level 2. If a comparable is not available,
the investment securities are classified as Level 3.
Federal Home Loan Bank Stock - The fair value of Federal Home Loan Bank stock approximates carrying
value and is classified as Level 1.
Loans - The fair value of fixed rate loans is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate
loans, the carrying amount is a reasonable estimate of fair value. Most loans are classified as Level 2, but
impaired loans with a related allowance are classified as Level 3.
Bank-Owned Life Insurance - The carrying value of bank-owned life insurance policies approximates fair
value and is classified as Level 1.
Deposit Liabilities - The fair value of demand deposits, savings accounts and certain money market
deposits is the amount payable on demand at the reporting date and is classified as Level 1. The fair value
of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates
currently offered for deposits of similar remaining maturities and is classified as Level 2.
Subordinated Debentures - The fair value of subordinated debentures is estimated by discounting the future
cash flows using the current rates at which similar advances would be obtained. Subordinated debentures are
classified as Level 2.
Other Borrowed Money - The fair value of other borrowed money is calculated by discounting contractual
cash flows using an estimated interest rate based on current rates available to the Company for debt of
similar remaining maturities and collateral terms. Other borrowed money is classified as Level 2 due to their
expected maturities.
8 2
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
The carrying amount and estimated fair values of the Company’s financial instruments as of December 31
are as follows:
Carrying Estimated
Fair Value
Amount
1
Level
2
3
(In Thousands)
2018
Assets
Cash and Short-Term Investments
$ 60,155
Investment Securities Available for Sale 353,066
Federal Home Loan Bank Stock
2,978
774,249
Loans, Net
Bank-Owned Life Insurance
17,598
$
60,155
353,066
2,978
769,809
17,598
$ 60,155
–
2,978
–
17,598
$
–
348,788
–
766,457
–
$
–
4,278
–
3,352
–
Liabilities
Deposits
Subordinated Debentures
Other Borrowed Money
1,085,125
24,229
44,000
1,086,503
24,229
44,032
744,094
–
–
342,409
24,229
44,032
–
–
–
2017
Assets
Cash and Short-Term Investments
57,813
Investment Securities Available for Sale 354,247
Federal Home Loan Bank Stock
3,043
757,281
Loans, Net
17,089
Bank-Owned Life Insurance
$
$
57,813
354,247
3,043
757,163
17,089
$ 57,813
–
3,043
–
17,089
$
–
346,950
–
752,287
–
$
–
7,297
–
4,876
–
Liabilities
Deposits
Subordinated Debentures
Other Borrowed Money
1,067,985
24,229
47,500
1,068,392
24,229
47,626
727,818
–
–
340,574
24,229
47,626
–
–
–
Fair value estimates are made at a specific point in time, based on relevant market information and
information about the financial instrument. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Company’s entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company’s financial instruments,
fair value estimates are based on many judgments. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet financial instruments without
attempting to estimate the value of anticipated future business and the value of assets and liabilities that
are not considered financial instruments. Significant assets and liabilities that are not considered financial
instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications
related to the realization of the unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
8 3
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Following is a description of the valuation methodologies used for instruments measured at fair value on
a recurring and nonrecurring basis, as well as the general classification of such instruments pursuant to the
valuation hierarchy:
Assets
Securities - Where quoted prices are available in an active market, securities are classified within Level
1 of the valuation hierarchy. Level 1 inputs include securities that have quoted prices in active markets for
identical assets. If quoted market prices are not available, then fair values are estimated by using pricing
models, quoted prices of securities with similar characteristics, or discounted cash flow. Examples of such
instruments, which would generally be classified within level 2 of the valuation hierarchy, include certain
collateralized mortgage and debt obligations and certain high-yield debt securities. In certain cases where
there is limited activity or less transparency around inputs to the valuation, securities are classified within
level 3 of the valuation hierarchy. When measuring fair value, the valuation techniques available under the
market approach, income approach and/or cost approach are used. The Company’s evaluations are based
on market data and the Company employs combinations of these approaches for its valuation methods
depending on the asset class.
Impaired Loans - Impaired loans are those loans which the Company has measured impairment generally
based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent
third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These
assets are included as level 3 fair values, based upon the lowest level of input that is significant to the fair
value measurements.
Other Real Estate - Other real estate owned assets are adjusted to fair value less estimated selling costs
upon transfer of the loans to other real estate owned. Typically, an external, third-party appraisal is
performed on the collateral upon transfer into the other real estate owned account to determine the asset’s
fair value. Subsequent adjustments to the collateral’s value may be based upon either updated third-party
appraisals or management’s knowledge of the collateral and the current real estate market conditions.
Appraised amounts used in determining the asset’s fair value, whether internally or externally prepared,
are discounted 10 percent to account for selling and marketing costs. Adjustments are routinely made in the
appraisal process by the appraisers to adjust for differences between the comparable sales and income data
available. Such adjustments are typically significant and result in a level 3 classification of the inputs for
determining fair value. Because of the high degree of judgment required in estimating the fair value of other
real estate owned assets and because of the relationship between fair value and general economic conditions,
we consider the fair value of other real estate owned assets to be highly sensitive to changes in market
conditions.
Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis - The following table presents
the recorded amount of the Company’s assets measured at fair value on a recurring and nonrecurring basis
as of December 31, 2018 and 2017, aggregated by the level in the fair value hierarchy within which those
measurements fall. The table below includes only impaired loans with a specific reserve and only other real
estate properties with a valuation allowance at December 31, 2018 and 2017. Those impaired loans and other
real estate properties are shown net of the related specific reserves and valuation allowances.
8 4
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Fair Value Measurements at Reporting Date Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total Fair
Value
$ 346,205,172
3,989,109
2,871,885
$ 353,066,166
$
$
3,351,735
1,182,783
$ 346,723,419
4,492,826
2,060,000
970,659
$ 354,246,904
$
$
4,875,918
2,014,904
$
$
$
$
$
$
$
$
–
–
–
–
–
–
–
–
–
–
–
–
–
$ 342,142,079
3,774,634
2,871,885
$ 348,788,598
$ 4,063,093
214,475
–
$ 4,277,568
$
$
–
–
$ 3,351,735
$ 1,182,783
$ 341,701,288
4,277,460
–
970,659
$ 346,949,407
$ 5,022,131
215,366
2,060,000
–
$ 7,297,497
$
$
–
–
$ 4,875,918
$ 2,014,904
2018
Recurring
Securities Available for Sale
U.S. Government Agencies
Mortgage-Backed
State, County and Municipal
Corporate
Nonrecurring
Impaired Loans
Other Real Estate
2017
Recurring
Securities Available for Sale
U.S. Government Agencies
Mortgage-Backed
State, County and Municipal
Corporate
Asset-Backed
Nonrecurring
Impaired Loans
Other Real Estate
Liabilities
The Company did not identify any liabilities that are required to be presented at fair value.
8 5
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
The following tables present quantitative information about the significant unobservable inputs used in
the fair value measurements for assets in level 3 of the fair value hierarchy measured on a nonrecurring basis
at December 31, 2018 and 2017. These tables are comprised primarily of collateral dependent impaired loans
and other real estate owned:
December 31, 2018
Real Estate
Commercial Construction
$ 360,000
Sales Comparison
Fair
Value
Valuation
Techniques
Unobservable
Inputs
Range
Weighted Avg
Residential Real Estate
213,482
Sales Comparison
Commercial Real Estate
2,415,174
Sales Comparison
Adjustment for Differences
Between the Comparable Sales
(6.60)% - 1,975.00%
984.20%
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
0.00% - 10.00%
5.00%
Adjustment for Differences
Between the Comparable Sales
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
(10.86)% - 6.70%
(2.08)%
0.00% - 25.00%
12.50%
Adjustment for Differences
Between the Comparable Sales
(60.00)% - 80.00%
10%
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
0.00% - 35.00%
17.50%
Income Approach
Capitalization Rate
10.13%
Farmland
327,581
Sales Comparison
Commercial
35,498
Sales Comparison
Other Real Estate Owned
1,182,783
Sales Comparison
Adjustment for Differences
Between the Comparable Sales
(71.00)% - (3.50)%
(37.25)%
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
10.00% - 80.00%
45.00%
Adjustment for Estimated
Costs to Sell
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
0.00% - 0.00%
(0.00)%
0.00% - 15.00%
15.00%
Adjustment for Differences
Between the Comparable Sales
(30.00)% - 25.02%
(2.49)%
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
9.82% - 99.39%
35.26%
Income Approach
Capitalization Rate
10.00%
8 6
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
December 31, 2017
Real Estate
Commercial Construction
$ 427,433
Sales Comparison
Fair
Value
Valuation
Techniques
Unobservable
Inputs
Range
Weighted Avg
Residential Real Estate
81,736
Sales Comparison
Commercial Real Estate
4,016,742
Sales Comparison
Adjustment for Differences
Between the Comparable Sales
(16.00)% - 1,975.00%
979.50%
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
0.00% - 10.00%
5.00%
Adjustment for Differences
Between the Comparable Sales
(43.30)% - 83.30%
(20.00)%
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
0.00% - 25.00%
12.50%
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
0.00% - 10.00%
5.00%
Income Approach
Capitalization Rate
10.75%
Farmland
350,007
Sales Comparison
Other Real Estate Owned
2,014,904
Sales Comparison
Adjustment for Differences
Between the Comparable Sales
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
(71.00)% - 88.70%
8.85%
10.00% - 75.00%
42.50%
Adjustment for Differences
Between the Comparable Sales
(22.74)% - 15.00%
(3.87)%
Management Adjustments for
Age of Appraisals and/or Current
Market Conditions
5.44% - 87.24%
24.44%
Income Approach
Capitalization Rate
10.00%
The following table presents a reconciliation and statement of income classification of gains and losses
for all assets measured at fair value on a recurring basis using significant unobservable inputs (level 3) for the
years ended December 31, 2018, 2017 and 2016:
Balance, Beginning
Transfers out of Level 3
Securities Purchased During the Year
Securities Matured During the Year
Paydowns on Securities
Unrealized Gains(Losses) Included in Other
Comprehensive Income
Balance, Ending
Available for Sale Securities
2018
$ 7,297,497
(2,009,080)
–
–
(885,082)
$
2017
576,384
–
7,069,649
(360,000)
–
$
2016
930,311
–
–
(330,000)
–
(125,767)
$ 4,277,568
11,464
$ 7,297,497
$
(23,927)
576,384
8 7
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
The Company’s policy is to recognize transfers in and transfers out of levels 1, 2 and 3 as of the end of a
reporting period. There was one security totaling $2,009,080 that was transferred from level 3 to level 2 for
the year ended December 31, 2018. There were no transfers of securities between level 1 and level 2 or level 3
for the years ended December 31, 2017 or 2016.
The following table presents quantitative information about recurring level 3 fair value measurements as
of December 31, 2018 and 2017:
December 31, 2018
State, County and Municipal
U. S. Government Agencies
Mortgage - Backed
December 31, 2017
State, County and Municipal
U. S. Government Agencies
Mortgage - Backed
Corporate
Fair
Value
Valuation
Techniques
Unobservable
Inputs
Range
(Weighted Avg)
$ 214,475
Discounted Cash Flow
Discount Rate or Yield
N/A*
4,063,093
Fundamental Analysis
Discount Rate or Yield
N/A*
$ 215,366
Discounted Cash Flow
Discount Rate or Yield
N/A*
5,022,131
2,060,000
Fundamental Analysis
Option Pricing
Discount Rate or Yield
Discount Rate or Yield
N/A*
N/A*
* The Company relies on a third-party pricing service to value its securities. The details of the unobservable inputs and other adjustments
used by the third-party pricing service were not readily available to the Company.
21. REGULATORY CAPITAL MATTERS
The amount of dividends payable to the parent company from the subsidiary bank is limited by various
banking regulatory agencies. Upon approval by regulatory authorities, the Bank may pay cash dividends to
the parent company in excess of regulatory limitations.
The Company is subject to various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly,
additional discretionary actions by regulators that, if undertaken, could have a direct material effect on
the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company must meet specific capital guidelines that involve
quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items as calculated
under regulatory accounting practices. The Company’s capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company to
maintain minimum amounts and ratios of total and Tier I capital to risk-weighted assets, and of Tier I capital
to average assets. As of December 31, 2018, the interim final Basel III rules (Basel III) require the Company
to also maintain minimum amounts and ratios of common equity Tier 1 capital to risk weighted assets. These
amounts and ratios as defined in regulations are presented hereafter. Management believes, as of December
31, 2018, the Company meets all capital adequacy requirements to which it is subject under the regulatory
framework for prompt corrective action. In the opinion of management, there are no conditions or events
since prior notification of capital adequacy from the regulators that have changed the institution’s category.
The Basel III rules also require the implementation of a new capital conservation buffer comprised of
common equity Tier 1 capital. The capital conservation buffer was phased in beginning January 1, 2016 at
0.625 percent of risk-weighted assets, with subsequent increases of 0.625 percent each year until reaching its
final level of 2.5 percent on January 1, 2019.
8 8
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
The following table summarizes regulatory capital information as of December 31, 2018 and December
31, 2017 on a consolidated basis and for the subsidiary, as defined. Regulatory capital ratios for December 31,
2018 and 2017 were calculated in accordance with the Basel III rules.
The following table summarizes regulatory capital information as of December 31, 2018 and 2017 on a
consolidated basis and for its wholly-owned subsidiary, as defined:
Actual
Amount
Ratio
For Capital
Adequacy Purposes
Ratio
Amount
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Ratio
Amount
$ 133,900
131,723
15.86%
15.63
$ 67,527
67,418
8.00%
8.00
N/A
84,272
N/A
10.00%
126,623
124,446
15.00
14.77
50,645
50,563
103,123
124,446
126,623
124,446
12.22
14.77
10.24
10.08
37,984
37,923
49,478
49,396
6.00
6.00
4.50
4.50
4.00
4.00
N/A
67,418
N/A
54,777
N/A
61,745
N/A
8.00
N/A
6.50
N/A
5.00
$ 127,786
127,470
15.56%
15.54
$65,718
65,628
8.00%
8.00
N/A
$82,036
N/A
10.00%
120,279
119,963
14.64
14.62
49,289
49,221
96,779
119,963
120,279
119,963
11.78
14.62
9.89
9.88
36,967
36,916
48,635
48,566
6.00
6.00
4.50
4.50
4.00
4.00
N/A
65,628
N/A
53,323
N/A
60,708
N/A
8.00
N/A
6.50
N/A
5.00
(In Thousands)
As of December 31, 2018
Total Capital to Risk-Weighted Assets
Consolidated
Colony Bank
Tier I Capital to Risk-Weighted Assets
Consolidated
Colony Bank
Common Equity Tier 1 Capital
to Risk-Weighted Assets
Consolidated
Colony Bank
Tier I Capital to Average Assets
Consolidated
Colony Bank
As of December 31, 2017
Total Capital to Risk-Weighted Assets
Consolidated
Colony Bank
Tier I Capital o Risk-Weighted Assets
Consolidated
Colony Bank
Common Equity Tier 1 Capital
to Risk-Weighted Assets
Consolidated
Colony Bank
Tier I Capital to Average Assets
Consolidated
Colony Bank
In 2018, the Bank obtained approval of its regulators and paid a $8,300,000 dividend to the Company.
The dividend was utilized to pay dividends to shareholders and to repurchase the Warrant, which was
for 500,000 shares of the Company’s common stock outstanding with private investors. The Warrant was
repurchased during the second quarter for $3.2 million. In 2017, the Bank obtained approval of its regulators
and paid a $8,725,000 dividend to the Company. The dividend was utilized to pay dividends to shareholders
and to redeem 9,360 shares of Preferred Stock. In 2016, the Bank obtained approval of its regulators and paid
a $9,100,000 dividend to the Company. The dividend was utilized to redeem 8,661 shares of Preferred Stock.
8 9
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
22. STOCK-BASED COMPENSATION
In August 2018, the Company granted an award of 5,650 restricted shares of the Company’s common
stock to T. Heath Fountain, the Company’s Chief Executive Officer (“CEO”), with a market price of $17.73
per share. The restricted shares vest in equal installments on each of July 30, 2019, July 2020 and July
2021, subject to continued service by Mr. Fountain through each applicable vesting date, or earlier upon
the occurrence of a change in control. With the restricted stock, there will be no cash consideration to the
Company for the shares. The CEO will have the right to vote all shares subject to such grant and receive all
dividends with respect to such shares, whether or not the shares have vested.
Compensation expense for restricted stock is based on the market price of the Company stock at the
time of the grant and amortized on a straight-line basis over the vesting period. The balance of unearned
compensation related to these restricted shares as of December 31, 2018 is $86,115 which is expected to be
recognized over a weighted-average of 2.58 years. Total compensation expense recognized for the restricted
shares granted for the year ended December 31, 2018 was $13,890.
23. FINANCIAL INFORMATION OF COLONY BANKCORP, INC. (PARENT ONLY)
The parent company’s balance sheets as of December 31, 2018 and 2017 and the related statements of
operations and comprehensive income (loss) and cash flows for each of the years in the three-year period then
ended are as follows:
Balance Sheets
Assets
Cash
Premises and Equipment, Net
Investment in Subsidiary, at Equity
Other
Total Assets
Liabilities and Stockholders’ Equity
Liabilities
Other Borrowed Money
Other
Subordinated Debt
December 31,
2018
2017
$
936,808
1,198,006
117,743,674
235,878
$ 120,114,366
$
910,239
1,099,626
114,235,955
24,458
$ 116,270,278
$
$
–
192,971
192,971
$
$
1,500,000
218,615
1,718,615
24,229,000
24,229,000
Stockholders’ Equity
Common Stock, Par Value $1; 20,000,000 Shares Authorized,
8,444,908 and 8,439,258 Shares Issued and Outstanding as of
December 31, 2018 and 2017, respectively
Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Loss, Net of Tax
Total Liabilities and Stockholders’ Equity
8,444,908
25,978,334
69,459,243
(8,190,090)
95,692,395
$ 120,114,366
8,439,258
29,145,094
59,230,260
(6,491,949)
90,322,663
$ 116,270,278
9 0
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Statements of Operations
Income
Dividends from Subsidiaries
Management Fees
Other
Expenses
Interest
Salaries and Employee Benefits
Other
Income Before Taxes and Equity in
Undistributed Earnings of Subsidiary
Income Tax Benefits
Income Before Equity in
Undistributed Earnings of Subsidiary
Equity in Undistributed Earnings of Subsidiary
Net Income
Preferred Stock Dividends
For The Years Ended December 31,
2018
2017
2016
$ 8,329,127
601,080
105,968
$ 9,036,175
$ 8,746,882
601,080
97,103
$ 9,445,065
971,847
1,083,960
691,037
2,746,844
6,289,331
422,210
6,711,541
5,205,859
11,917,400
–
900,113
917,259
604,166
2,421,538
7,023,527
568,258
7,591,785
159,193
7,750,978
210,600
$ 9,118,104
601,080
103,612
$ 9,822,796
601,567
840,130
554,434
1,996,131
7,826,665
457,934
8,284,599
388,611
8,673,210
1,493,310
Net Income Available to Common Stockholders
$ 11,917,400
$ 7,540,378
$ 7,179,900
Consolidated Statements of Comprehensive Income
Net Income
Other Comprehensive Income (Loss)
Gains (Losses) on Securities Arising During the Year
Tax Effect
Realized (Gains) Losses on Sale of AFS Securities
Tax Effect
Change in Unrealized Gains (Losses) on Securities
Available for Sale, Net of Reclassification
Adjustment and Tax Effects
For The Years Ended December 31,
2018
$ 11,917,400
2017
7,750,978
$
2016
$ 8,673,210
(2,033,636)
427,063
(115,909)
24,341
(608,355)
206,841
–
–
(505,367)
171,825
(385,223)
130,976
(1,698,141)
(401,514)
(587,789)
Comprehensive Income
$ 10,219,259
$ 7,349,464
$ 8,085,421
9 1
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
Statements of Cash Flows
Cash Flows from Operating Activities
Net Income
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation and Amortization
Share-based Compensation Expense
Equity in Undistributed Earnings of Subsidiary
Change in Interest Payable
Other
Cash Flows from Investing Activities
Purchases of Premises and Equipment
Cash Flows from Financing Activities
Proceeds from Other Borrowed Money
Principal Payments on Other Borrowed Money
Dividends Paid on Common Stock
Dividends Paid on Preferred Stock
Repurchase of Warrants
Redemption of Preferred Stock
Increase (Decrease) in Cash
Cash, Beginning
Cash, Ending
24. EARNINGS PER SHARE
For The Years Ended December 31,
2017
2018
2016
$ 11,917,400
$ 7,750,978
$ 8,673,210
84,848
13,890
(5,205,859)
2,450
(239,515)
6,573,214
70,183
–
(159,193)
17,887
38,135
7,717,990
66,476
–
(388,611)
5,367
108,288
8,464,730
(183,228)
(94,925)
(6,836)
7,500
(1,507,500)
(1,688,417)
–
(3,175,000)
–
(6,363,417)
26,569
910,239
936,808
$
5,000,000
(3,500,000)
(843,934)
(315,900)
-
(9,360,000)
(9,019,834)
(1,396,769)
2,307,008
910,239
$
–
–
–
(1,590,746)
–
(8,661,000)
(10,251,746)
(1,793,852)
4,100,860
$ 2,307,008
Basic earnings per share is computed by dividing net income available to common stockholders by
the weighted average number of common shares outstanding during each period. Diluted earnings per
share reflects the potential dilution of common stock warrants and restricted stock. Net income available
to common stockholders represents net income after preferred stock dividends. The following table presents
earnings per share for the years ended December 31, 2018, 2017 and 2016:
Numerator
Net Income Available to Common Stockholders
Denominator
Weighted Average Number of Common Shares
2018
2017
2016
$ 11,917,400
$ 7,540,378
$ 7,179,900
Outstanding for Basic Earnings Per Common Share
8,439,454
8,439,258
8,439,258
Dilutive Effect of Potential Common Stock
Restricted Stock
Stock Warrants
Weighted-Average Number of Shares Outstanding for
Diluted Earnings Per Common Share
Earnings Per Share - Basic
Earnings Per Share - Diluted
–
99,154
–
194,323
–
74,037
8,538,608
1.41
$
1.40
$
8,633,581
0.89
$
0.87
$
8,513,295
0.85
$
0.84
$
9 2
Colony BankCorp • Annual Report 2018
Notes to Consolidated Financial Statements
25. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Changes in accumulated other comprehensive income (loss) for unrealized gains and losses securities
available for sale for the years ended December 31, 2018, 2017 and 2016 are as follows:
Beginning Balance
Other Comprehensive Income Before Reclassification
Amounts Reclassified from Accumulated
Other Comprehensive Income
TCJ Act
Net Current Period Other Comprehensive Income
Ending Balance
2018
$ (6,491,949)
(1,606,573)
2017
$ (5,022,140)
(401,514)
$
2016
(4,434,351)
(333,542)
(91,568)
–
(1,698,141)
$ (8,190,090)
–
(1,068,295)
(1,469,809)
$ (6,491,949)
(254,247)
–
(587,789)
(5,022,140)
$
26. REVENUE FROM CONTRACTS WITH CUSTOMERS
With the exception of gains and losses on the sale of other real estate owned, revenue from contracts
with customers is recognized in the service charges on deposits category and the other service charges,
commissions and fees category in the Company’s consolidated statements of operations as part of noninterest
income. The following provides information on the Company’s sources of noninterest income within the
scope of ASC 606 for the periods indicated.
Service Charges on Deposits
Service charges on deposits include both account maintenance fees and overdraft fees. The overdraft fees
are recognized at the point in time that the overdraft occurs. For the years ended December 31, 2018, 2017,
and 2016, there was $4.4 million, $4.5 million and $4.3 million, respectively, in service charges on deposits.
Other Service Charges, Commissions and Fees
Other service charges, commissions and fees include debit card interchange fees and ATM fees. Debit
card interchange fees are earned from debit card holder transactions conducted through various payment
networks. Interchange fees from debit card holders transactions represent a percentage of the underlying
transaction amount and are recognized daily, concurrently with the transaction processing services provided
to the debit cardholder. For the years ended December 31, 2018, 2017 and 2016, there was $2.8 million, $2.6
million and $2.4 million, respectively, for debit card interchange fees. ATM fees are transaction-based fees
recognized at the time the transaction is executed as that is the point at which the Company satisfies the
performance obligation. For the years ended December 31, 2018, 2017 and 2016, there was $352 thousand,
$338 thousand and $307 thousand, respectively, for ATM fees.
Gains/Losses on the Sale of Other Real Estate
The net gains and losses on sales of other real estate owned are recorded in other noninterest expenses in
the Company’s consolidated statements of operations for the years ended December 31, 2017 and 2016. For
the year ended December 31, 2018, the net gains and losses on sales of other real estate owned is recorded
in other noninterest income in the Company’s consolidated statements of operations. The Company records
a gain or loss from the sale of other real estate owned when control of the property transfers to the buyer,
which generally occurs at the time of an executed deed. When the Company finances the sale of other real
estate owned to the buyer, the Company assesses whether the buyer is committed to perform their obligations
under the contract and whether collectability of the transaction price is probable. Once these criteria are
met, the other real estate owned asset is derecognized and the gain or loss on sale is recorded upon the
transfer of control of the property to the buyer. The Company does not provide financing for the sale of other
real estate owned property unless these criteria are met and the property can be derecognized. For the years
ended December 31, 2018, 2017 and 2016, there was $41 thousand, $(121) thousand and $(648) thousand,
respectively, for the gains and losses on the sale of other real estate.
9 3
Colony BankCorp • Annual Report 2018
Market and Dividend Information
The common shares of Colony Bankcorp are
listed on the NASDAQ Global Market under
the symbol CBAN. As of March 20, 2019, the
Company estimates that it had approximately
1,900 shareholders, including approximately
925 beneficial owners holding shares in nominee
or “street” name.
regulatory limitations, and general economic
conditions. No assurance can be given that we
will continue to pay dividends or that they will
not be reduced or suspended in the future. For
information regarding restrictions on the payment
of dividends by the Bank to the Company, see Note
21 of Notes to Consolidated Financial Statements.
The following graph shows the cumulative total
return on the common stock of the Company
over the past five years compared with the SNL
Southeast Bank Index and the NASDAQ Composite
Index. Cumulative total return on the stock or
the index equals the total increase in value since
December 31, 2013, assuming reinvestment of
all dividends paid into the stock or the index,
respectively. The graph was prepared assuming
that $100 was invested in the common stock on
December 31, 2013, and also in the indices used
for comparison purposes. The shareholder returns
shown on the performance graph are not necessarily
indicative of the future performance of the common
stock of the Company or particular index.
Total Return Performance
$300
Colony Bankcorp, Inc.
NASDAQ Composite
SNL Southeast Bank
$250
$200
$150
$100
$50
12/31/13 12/31/14
12/31/15
12/31/16 12/31/17
12/31/18
Period Ending
Index
Colony Bankcorp, Inc. 100.00
NASDAQ Composite 100.00
100.00
SNL Southeast Bank
12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18
244.08
168.30
150.42
156.23
122.74
110.87
241.11
173.22
182.06
216.39
133.62
147.18
129.18
114.75
112.63
The following table sets forth the high and low
common stock prices and cash dividends paid to
public stockholders in 2017 and 2018:
2017
First quarter
Second quarter
Third quarter
Fourth quarter
2018
First quarter
Second quarter
Third quarter
Fourth quarter
High
$ 14.55
$ 14.00
$ 14.20
$ 14.75
Dividends
Low Declared
$ 0.025
$ 0.025
$ 0.025
$ 0.025
$ 13.00
$ 13.45
$ 11.10
$ 13.00
$ 19.50
$ 18.00
$ 19.20
$ 18.58
$ 13.50
$ 15.00
$ 16.50
$ 12.29
$ 0.05
$ 0.05
$ 0.05
$ 0.05
Like many banks in the wake of the Great
Recession, Colony suspended dividend payments
in 2009. In 2017, the Company reinstated its cash
dividend at a quarterly rate of $0.025 per share,
or an annual rate of $0.10 per share, and, in 2018,
the Company increased the quarterly rate to $0.05
per share, or an annual rate of $0.20 per share.
In January 2019, Colony raised the quarterly rate
again to $0.075 per share, which represents an
indicated annual rate of $0.30 per share.
The continued payment of dividends will depend
on a number of factors, including our capital
requirements, our financial condition and results
of operations, tax considerations, statutory and
9 4
Colony BankCorp • Annual Report 2018
Corporate Information
Corporate Headquarters
Post Office Box 989
115 South Grant Street
Fitzgerald, Georgia 31750
229-426-6000
Company Website
colonybank.com
Stock Registrar and Transfer Agent
Shareholders should report lost or
destroyed stock certificates or direct
inquiries concerning dividend payments,
change of name, address or ownership,
or consolidation of accounts to the
Company’s transfer agent at:
American Stock Transfer
& Trust Company
Operations Center
6201 15th Avenue
Brooklyn, New York 11219
800-937-5449
www.astfinancial.com
Independent Registered Public
Accounting Firm
McNair, McLemore, Middlebrooks
& Co., LLC
P.O. Box One
Macon, Georgia 31202
Special Counsel
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309-3424
Annual Report on Form 10-K
A copy of the Company’s Annual Report
on Form 10-K for the fiscal year ended
December 31, 2018, as filed with the
Securities and Exchange Commission,
will be furnished without charge to
shareholders as of the record date for
the 2019 Annual Meeting upon written
request to Terry L. Hester, Executive
Vice President and Chief Financial
Officer, Colony Bankcorp, Inc., 115
South Grant Street, Fitzgerald, Georgia
31750. In addition, the Company makes
available free of charge its annual reports
on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form
8-K, and all amendments to those reports
filed with or furnished to the SEC.
The reports are available as soon as
reasonably practical after the Company
electronically files such material with
the SEC, and may be found on the
Internet at www.colonybank.com, under
Shareholder Information. Shareholder
and other investor-oriented inquiries
may be directed to T. Heath Fountain,
President and Chief Executive Officer, at
the Company’s corporate headquarters.
Annual Meeting of Shareholders
The 2019 Annual Meeting of
Shareholders will be held at 11:00 a.m.,
local time, on Tuesday, May 28, 2019, at
the Company’s corporate headquarters
at 115 South Grant Street, Fitzgerald,
Georgia. Shareholders as of March 20,
2019, the record date for the meeting, are
cordially invited to attend.
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Post Office Box 989
115 South Grant Street
Fitzgerald, Georgia 31750
229.426.6000
colonybank.com
CBAN AR18 Design.indd 1
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