2 0 2 0 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
Colony Bankcorp, Inc., with assets of $1.8 billion, is the
bank holding company for Colony Bank. Founded in 1975
and headquartered in Fitzgerald, Georgia, Colony operates
29 locations throughout Georgia. Colony offers personal
and business services, and also has specialty divisions
to meet the needs of its customers. The Homebuilder
Finance Division helps the local construction industry with
building and construction loans, and the Small Business
Specialty Lending Division assists small businesses with
government guaranteed loans. The Bank also helps its
customers achieve their goal of home ownership through
Colony Bank Mortgage. Colony’s common stock is traded
on the NASDAQ Global Market under the symbol “CBAN.”
For more information, please visit www.Colony.Bank and
follow us on social media.
About the cover
Left to right, Chris Hammond and
Jim Curington, co-owners of HBT
Company, meet with Mike Davis,
Market President, Colony Bank.
HBT is South Georgia’s local farm,
plantation, and industrial supply
store for hardware, bolts, tools and
tillage needs.
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 2 0
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share amounts)
2020
2019
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
$ 1,763,974
1,059,503
12,127
1,445,027
144,488
15.21
13.26
$ 1,515,313
968,814
6,863
1,293,742
130,506
13.74
11.68
$
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
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
55,245
6,558
48,687
24,244
58,301
14,630
2,815
11,815
11,815
1.24
1.24
0.40
3.50%
0.70%
8.56%
73.34%
$
$
$
$
$
$
47,845
1,104
46,741
14,004
48,136
12,609
2,398
10,211
10,211
1.12
1.12
0.30
3.61%
0.72%
8.73%
77.93%
1
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 2 0
TO OUR SHAREHOLDERS
We are proud to report that despite the highly
unprecedented and unpredictable nature of
2020, Colony Bankcorp was able to deliver solid
performance for our shareholders. We must first
thank each and every one of our team members for
their unwavering commitment to provide superior,
personalized service despite the challenges presented
by the global pandemic. Community banks are the
backbone of the financial infrastructure of our nation
and, thanks to our team’s hard work and dedication,
we were able to deliver for our customers when they
needed us most.
Despite operating in one of the most difficult economic environments of our
generation, Colony Bankcorp continued to grow organically due to our strategic
efforts to diversify our revenue streams, while also driving operating efficiencies.
Increases in net interest income despite larger provisions due to the economic
environment, as well as non-interest income, led by mortgage fee income growth,
helped offset declining margins due to the low interest rate environment.
We added talented bankers in our markets, whose efforts are showing results.
Our expenditures on technological enhancements to stay connected to our
customers and our efforts to protect our asset quality allowed us to continue to
drive our business forward.
2
COVID-19 Response
Our team quickly met the challenges of the pandemic by serving customers through
enhanced drive-through and drive-up options as well as leveraging our existing
technology to provide increased mobile banking options. Banking centers have now
been reconfigured in a way to protect the safety of team members and customers,
and we are well-prepared to manage any future shutdowns, should they occur.
To assist with the liquidity needs of our community, we originated 1,672 loans
totaling $137.8 million through the Small Business Administration Paycheck
Protection Program (“PPP”). Colony Bank brought on new customers under the
program who did not previously have a relationship with us. Moreover, these
customers executed new non-PPP loans, increased our deposits, and will generate
additional fee income in the future.
Heath Fountain, President and Chief Executive Officer, left, and Mark Massee, Chairman
3
PERRY CHIROPRACTIC HEALTH GROUP
PERRY, GA
When the pandemic struck, in-patient
medical visits stopped, which meant
that revenues for providers like Perry
Chiropractic also stopped. Dr. Brian
Gillis turned to Colony Bank, which
had financed the startup of his second
location in 2019, to help him apply for
a loan under the federal Paycheck
Protection Program to cover salaries
of other doctors and staff until patient
volume began to rebound. Within two
weeks, the funds arrived. Dr. Gillis
credits his local banker, Kent Jordan,
for being “always willing to go above
and beyond.” Kent credits the Colony
team. “It was an all-hands-on-deck
approach,” he says. “Everybody just
came together.”
“ ALWAYS WILLING TO GO
ABOVE AND BEYOND.”
DR. BRIAN GILLIS
4
DR. BRIAN GILLIS, LEFT,
AND KENT JORDAN
VP COMMERCIAL LENDER
COLONY BANK
The Colony Manifesto
Our mission is to build a sustainable, high-
performing independent bank. Core to achieving
this goal are our team members and, as they showed
during the challenging year, they are up to the task.
The framework that guides us towards our mission,
The Colony Manifesto, will be a key focus for our
staff in 2021. The core tenant of The Colony Manifesto is that we all act as BEES –
B: Bank with Passion
E: Engaged Team
E: Exceed Expectations
Bees work in unison in colonies; they work arduously to build something larger than
themselves. Bees represent what we at Colony can achieve together when enterprising,
industrious people are matched with the resources to build their dreams.
Our mantra is simple: We are called to serve. Bank with passion.
Go out and make it happen.
How do we live this out each day? We do this by focusing on our team members.
Senior leadership has been charged to help team members find their passion, to
empower staff to do the right thing, to provide meaningful growth opportunities,
Colony Bank provided
1,672 SBA PPP loans
representing $137.8
million dollars.
5
Leadership Academy Established
The program, which is available in all of Colony’s markets, is designed for high
school juniors during the last half of their junior year through the first half of
their senior year. The curriculum encourages students to become familiar with
all aspects of their community and to develop skills enabling them to take an
active leadership role in their community. Colony Leadership Academy utilizes
professional leadership trainers through UGA’s Fanning Institute while also
utilizing community resources for courses such as Health and Recreation,
Economic Development, Arts and Culture, Public Safety, Social Services,
Education and Government Affairs.
Matt Reed, Owner and Chief
Executive Officer of Georgia CEO/
South Carolina CEO, and Colony
Bankcorp board member meets
with the initial group of Colony
Bank’s Leadership Academy
students and explains the benefits
of the 9 month program.
Anticipated first
year enrollment
6
and to have fun at work. By focusing on our culture and working as a team, we will
be able to deliver solutions that exceed our customers’ expectations and execute
on our strategic initiatives, thereby delivering value to our communities and
shareholders alike.
Strategic Initiatives
Focusing on our mission and the core tenets of The Colony Manifesto will allow
us to continue to build upon the strides we made during 2020. We drove organic
growth in our checking and money market accounts, which were up 12% in 2020,
and will continue to increase market share through several strategies including: a
continued focus on relationship building, improved targeted marketing, providing
educational and consultative advice for our customers, hiring key personnel and
empowering existing team members, and deeply weaving ourselves into the fabric
of the communities we serve by lending our time, talents, and financial resources
where they are needed most.
Industry consolidation is creating opportunities to acquire customers and talent,
and we intend to continue our focus on finding expansion opportunities in logical
and contiguous markets. In 2020, we expanded our Savannah and Augusta
footprint through the acquisition of Cadence Bank’s East Georgia Homebuilder
Our new Albany Northwest Banking Center features a modern, open concept design allowing for
a more personalized customer experience.
7
5
RAWLS DISTRIBUTING COMPANY
SAVANNAH, GA
Rawls Distributing Company, now the
largest vending company in Southeast
Georgia, saw revenues triple over
the past decade. But the Covid
pandemic was unlike any challenge
the company had faced. Amid so much
uncertainty last April, Colony helped
them obtain assistance quickly under
the Paycheck Protection Program.
Owner Robin Rawls sent a note to
express his gratitude. “From personal
experience,” he wrote, “I know you
and your employees at Colony truly
care about your customers.” With the
note came photos of several Rawls
employees. “There are 20 more people
just like these managers,” Rawls
said, “that have jobs and paychecks
because of Colony Bank.”
“ THERE ARE 20 MORE PEOPLE
THAT HAVE JOBS AND PAYCHECKS
BECAUSE OF COLONY BANK.”
ROBIN RAWLS
OWNER,
PRESIDENT
8
LEFT TO RIGHT, TINA BURNS–OFFICE
MANAGER, ROBIN RAWLS–PRESIDENT,
OF RAWLS DISTRIBUTING COMPANY
AND WESLEY OLLIFF MARKET
PRESIDENT, COLONY BANK
Finance Division – adding to our team and our
loan portfolio. We will continue to actively seek
opportunities to increase our scale and leverage
our existing operations.
2020 Financial Results
Despite the challenging operating environment, we
were able to achieve solid financial results for the
year. Net income increased to $11.8 million, or $1.24 per diluted share, compared
to $10.2 million, or $1.12 per diluted share in 2019. We reported operating net
income of $12.1 million, or $1.28 per diluted share, in 2020, compared with $12.8
million, or $1.35 per diluted share, for 2019.
Net interest income grew 15% to $55.2 million from $47.8 million last year. This
growth was partially offset by higher provisions for loan losses due to the global
pandemic as well as increases in non-interest expense mostly related to salaries,
occupancy, and technology expenses. Our efforts to diversify our revenue streams
resulted in noninterest income increasing 73% to $24.2 million in 2020 from
$14.0 million in 2019, primarily driven by gains in mortgage fee income as well as
positive revenue contribution from our Small Business Specialty Lending Division.
Additionally, growing our deposits 12% year over year will lead to increases in
service charges.
Locations
throughout Georgia
Total number of Colony Bank
team members company-wide
9
Delivering solutions that exceed
our customer’s expectations
Tri-County Gin serves small family farmers across a growing swath of
South Georgia. And since 1999 Colony Bank has served Tri-County Gin.
Buying, ginning and marketing cotton is a complicated business, affected by
the ebb and flow of commodity prices, unpredictable weather, the need for
seasonal lines of credit to buy farmers’ crops, and financing for equipment
and warehouses. “Colony can meet the financial needs for whatever we
require,” says Tri-County’s Gene Waldron. “A lot of banks can’t do that.”
For Colony’s Scott Miller, who counts Waldron
as a close friend, the formula is simple.
“You just take care of the people you serve.”
Scott Miller, Regional President/SE
Central and Gene Waldron meet
at the customer’s warehouse to
discuss their operation expansion
1 0
While growing our various income streams is critical, we must also focus on
increasing operating efficiency. The strategic realignment of our branch network
announced in December 2020 will deliver a reduction in operating expenses of
over $1 million per year alone, as well as savings from the sale of our Thomaston
branch announced in September 2020. We also look to utilize technology to lower
operating costs through investment in our popular digital banking channels as well
as align our staffing and procedures to adhere to industry best practices for service
and efficiency.
We saw solid growth in our balance sheet metrics in 2020 including record total
loans, total deposits, and total assets. Asset quality remained strong throughout
the year and we are pleased that most loans for which payments were deferred for
borrowers in response to the global pandemic are back to current status. We ended
the year with total interest earning assets of $1.6 billion, up $258.0 million, or 19%,
propelling total assets to a record $1.8 billion. Total loans, including acquisition
activity and loans from the PPP, increased 9% year-over-year, while legacy loan
growth increased 3%. Nonperforming assets have increased year-over-year
primarily because of increased traditional loan production yet asset quality remains
strong with overall improvement year-over-year.
Capital Management
Colony continues to maintain a strong capital position with ratios that exceed
regulatory minimums required to be classified as “well-capitalized.” Tier one
leverage ratio, tier one capital ratio, total risk-based capital ratio and common
Company-wide hours donated by
employees to community service
1 1
Over their regular weekday breakfast last
March, Joe Waldrep mentioned to five fellow
businesspeople how much difficulty his
mid-sized law firm had encountered, working
through a large regional bank, in obtaining
a loan under the Paycheck Protection
Program. At the table was Colony’s Mike
Welch, who offered to help. One week later,
the loan was approved by the Small Business
Administration. The firm had not been a
Colony Bank customer previously. They are
one now. “Colony guided us through the entire
process, often answering questions before
we knew to ask them,” says attorney David
Rayfield. “When we really needed them, only
one bank actually came through for us.”
WALDREP, MULLIN &
CALLAHAN, LLC
COLUMBUS, GA
“WHEN WE REALLY NEEDED
THEM, ONLY ONE BANK
ACTUALLY CAME THROUGH
FOR US.”
1 2
DAVID RAYFIELD
ATTORNEY AT LAW
MIKE WELCH
MARKET PRESIDENT
COLONY BANK
WALDREP, MULLIN &
CALLAHAN, LLC
COLUMBUS, GA
equity tier one capital ratio were 8.49%, 12.71%, 13.78% and 10.62%,
respectively. This compares to 8.92%, 12.52%, 13.17%, and 10.33%,
respectively, at December 31, 2019.
With solid 2020 results and a positive outlook for the future, our Board of Directors
voted in January 2020 to increase the Company’s quarterly cash dividend to
$0.1025 per share. This marks the fourth consecutive year of higher dividend
payouts since dividends were reinstated in 2017.
In Conclusion
Since our founding in 1975, our mission has been to provide the alternative to
traditional banking that our customers deserve. By focusing on relationships, we
can deliver solutions that exceed our customers’ expectations. We strive to be
trusted advisors and remain nimble and responsive to customer needs. Our ability
to deliver value to both our communities and shareholders during an exceptionally
challenging year speaks volumes about our people and is a testament to the strength
of our business model and operating strategies.
We are unwavering in our focus to drive sustained growth and rewarding our
shareholders in 2021 and beyond. Thank you for your continued investment in
our company.
Mark H. Massee
Chairman of the Board
T. Heath Fountain
President and Chief Executive Officer
1 3
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 2 0
Board of Directors and Officers
Board of Directors
Mark H. Massee
Chairman
Colony Bankcorp, Inc.
Retired President
Massee Builders, Inc.
Fitzgerald, Georgia
Scott L. Downing
President
SDI Investments
Fitzgerald, Georgia
Michael Frederick
(Freddie) Dwozan, Jr.
Vice Chairman
Colony Bankcorp, Inc.
President/Owner
Medical Center Prescription Shop
Eastman, Georgia
T. Heath Fountain
President/Chief Executive
Officer
Colony Bankcorp, Inc.
Terry L. Hester
Retired Executive Vice
President/Chief Financial
Officer
Colony Bankcorp, Inc.
Edward Percy Loomis, Jr.
Retired President/Chief
Executive Officer
Colony Bankcorp, Inc.
Meagan M. Mowry
Co-founder and Co-owner
Simcoe Investments
Savannah, 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
CBAN AR20 Design FINAL.indd 18
4/12/21 6:19 PM
Executive Officers
T. Heath Fountain
President/Chief Executive Officer
Edward L. Bagwell, III
Executive Vice President/General
Counsel/Chief Risk Officer
Leonard H Bateman, Jr.
Executive Vice President/
Chief Credit Officer
Kimberly C. Dockery
Executive Vice President/
Chief Administrative Officer
M. Edward Hoyle, Jr.
Executive Vice President/
Chief Banking Officer
Tracie Youngblood
Executive Vice President/
Chief Financial Officer
Market and Division Leaders
Stephen Browning
Market President/Eastman
Jesse Kight
President/Mortgage Division
Johnny Bryan
Market President/Sylvester
Joe Little
Market President/LaGrange
Chris Carter
Market President/Statesboro
Scott Miller
Regional President/SE Central
Tommy Clark
Regional President/Southwest
Wesley Olliff
Market President/Savannah
John Roberts
Regional President/West Georgia
Kirk Scott
Regional President/Mid-State
Eddie Smith
Regional President/South
Mike Smith
Market President/Fitzgerald
Mike Welch
Market President/Columbus
Nic Worthy
Market President/Rochelle
Darren Davis
President/Small Business
Specialty Lending
Mike Davis
Market President/Tifton
Bob Evans
Regional President/West Central
Cindy Griffin
Director of Commercial Banking
Hugh Hollar
President/Home Builder Finance
Drew Hulsey
Regional President/Coastal
Andy Johnson
Market President/Ashburn
Bagwell
Bateman
Dockery
Fountain
Hoyle
Youngblood
Browning
Bryan
Carter
Clark
D. Davis
M. Davis
Evans
Griffin
Hollar
Hulsey
Johnson
Kight
Little
Miller
Olliff
Roberts
Scott
E. Smith
M. Smith
Welch
Worthy
1 5
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 2 0
Locations, as of March 31, 2021
Albany
2900 Old Dawson Rd
Albany, GA 31721
(229) 430-8080
Ashburn
515 E Washington Ave
Ashburn, GA 31714
(229) 567-4383
Athens
Loan Production Office
1586 Mars Hill Rd
Suite C
Watkinsville, GA 30677
478-273-3199 Ext. 4111
Augusta
Loan Production Office
1201 Town Park Lane
Evans, GA 30809
(706) 294-4682
Broxton
401 Alabama St North
Broxton, GA 31519
(912) 359-2351
Canton
Loan Production Office
341 E Main St
Canton, GA 30114
229-426-6000 ext. 6174
Centerville
200 Gunn Rd
Centerville, GA 31028
(478) 953-1010
Columbus
1581 Bradley Park Dr
Columbus, GA 31904
(706) 571-6419
Conyers
Small Business Specialty Lending -
Loan Production Office
620 Sigman Road, NE
Suite 300
Conyers, GA 30013
(470) 207-3376
Cordele
1031 E 24th Ave
Cordele, GA 31015
(229) 271-2100
Douglas
625 Ward St W
Douglas, GA 31533
(912) 384-3100
Eastman
5510 Oak St
Eastman, GA 31023
(478) 374-4739
Fitzgerald
Corporate Office
115 South Grant St
Fitzgerald, GA 31750
(229) 426-6000
Hwy 129 South
Fitzgerald, GA 31750
(229) 426-6073
302 South Main St
Fitzgerald, GA 31750
(229) 423-5446
LaGrange
101 Calumet Center Rd
LaGrange, GA 30241
(706) 884-6000
Leesburg
137 Robert B Lee Dr
Leesburg, GA 31763
(229) 759-2800
Macon
Loan Production Office
1515 Bass Road Suite E
Macon, GA 31210
(478) 845-4430
Moultrie
621 Veterans Pkwy N
Moultrie, GA 31788
(229) 985-1380
Quitman
602 E Screven St
Quitman, GA 31643
(229) 263-7538
1 6
Rochelle
920 1st Ave
Rochelle, GA 31079
(229) 365-7871
Savannah
Hwy 17 Office
5987 Ogeechee Rd
Savannah, GA 31419
(912) 927-1277
7011 Hodgson Memorial Dr
Savannah, GA 31406
(912) 303-9449
Loan Production Office
241 Drayton Street
Savannah, GA 31401
(912) 454-2479
Soperton
4313 West Main St
Soperton, GA 30457
(912) 529-5000
Statesboro
104 Springhill Drive
Statesboro, GA 30458
(912) 225-1460
Sylvester
601 N Main St
Sylvester, GA 31791
(229) 776-7641
Tifton
104 2nd St W
Tifton, GA 31794
(229) 386-2265
Valdosta
3774 Old US Highway 41 N
Valdosta, GA 31602
(229) 241-9900
Warner Robins
1290 South Houston Lake Rd
Warner Robins, GA 31088
(478) 987-1009
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 2 0
FINANCIAL SECTION
Colony Bankcorp, Inc.
17
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 2 0
Selected Financial Data
The following table sets forth selected historical consolidated financial data of the Company as of and
for each of the years ended December 31, 2020, and 2019, and is derived from our audited consolidated
financial statements. This information should be read in conjunction with “Item 7 – Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8 – Financial
Statements and Supplementary Data” of this report. Our historical results for any prior period are not
necessarily indicative of results to be expected in any future period.
Years Ended
December 31,
(Dollars in thousands, except per share data)
Earnings Summary
Net interest income
Provision for loan losses
Non-interest income
Non-interest expense
Income taxes
Net income
Performance Measures
Per common share:
Common shares outstanding
Weighted average basic shares
Weighted average diluted shares
Earnings per basic share
Earnings per diluted share
Adjusted earnings per diluted share (1)
Cash dividends declared per share
Common book value per share
Tangible common book value per share
Performance ratios:
Net interest margin (2)
Return on average assets
Return on average total equity
Dividend payout ratio
Average equity to average assets
Asset Quality
Nonperforming loans (NPLs)
Other real estate foreclosed assets
Total nonperforming assets (NPAs)
Classified loans
Criticized loans
Net loan charge-offs
Allowance for loan losses to total loans
Allowance for loan losses to total NPLs
Allowance for loan losses to total NPAs
Net charge-offs to average loans
NPLs to total loans
NPAs to total assets
NPAs to total loans and other real estate owned
1 8
2020
55,245
6,558
24,244
58,301
2,815
11,815
$
$
9,498,783
9,498,783
9,498,783
1.24
$
1.24
1.28
0.40
15.21
13.26
$
$
3.50%
0.70
8.56
32.16
8.16
9,128
1,006
10,134
30,404
75,633
1,294
1.14%
132.85
119.31
0.12
0.86
0.58
0.96
2019
47,845
1,104
14,004
48,136
2,398
10,211
$
$
9,498,783
9,129,705
9,129,705
1.12
$
1.12
1.35
0.30
13.74
11.68
$
$
3.61%
0.72
8.73
26.82
8.30
9,827
1,320
11,147
21,084
51,182
1,518
0.71%
69.85
61.57
0.17
1.01
0.74
1.15
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 2 0
Selected Financial Data
Average balances
Total assets
Loans, net
Deposits
Total stockholders’ equity
$ 1,691,235
1,092,009
1,386,412
137,954
$ 1,411,331
896,098
1,209,819
117,118
(1) Non-GAAP measure - see “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for more information
and a reconciliation to GAAP.
(2) Compute using fully taxable-equivalent net income.
1 9
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be
read in conjunction with “Item 6. - Selected Financial Data” and our consolidated financial statements and
related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains
forward-looking statements that involve risk, uncertainties and, assumptions. Certain risks, uncertainties
and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-
Looking Statements,” “Risk Factors,” and elsewhere in this Annual Report on Form 10-K, may cause actual
results to differ materially from those projected in the forward looking statements. We assume no obligation
to update any of these forward-looking statements.
The Company
Colony Bankcorp, Inc. 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.
Recent Developments
On February 26, 2020, the Company acquired the East Georgia Homebuilder Finance loan portfolio
of Cadence. This acquisition expanded our presence in the Savannah and Augusta markets, creating a ‘one-
stop-shop’ for homebuilders coupled with our mortgage business.
On December 10, 2020, the Company announced the strategic realignment of its branch network. As
part of the realignment, select Colony Bank branches will be consolidated, resulting in the closure of five
branches, or a total of 18% of the Bank’s branch network. The branches to be closed consist of one branch
located in each of the Columbus, Douglas, Fitzgerald, Savannah and Valdosta markets, by April 30, 2021.
After the closures, Colony will continue to operate one branch location in each of the aforementioned
markets except for the Savannah market, where Colony will operate two branch locations.
On December 30, 2020, the Company completed the sale of its Thomaston branch to SouthCrest
Financial Group. Inc. The transaction resulted in the transfer of approximately $3 million in fully
performing loans and approximately $40 million in deposits, with a deposit premium of 3%.
The Company paid dividends to its shareholders throughout 2020 and 2019 on a quarterly basis. In
2020, we had a quarterly dividend of $0.10 per common stock and in 2019, we had a quarterly dividend of
$0.075 per common stock.
GAAP Reconciliation and Management Explanation of 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% 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 common book value per common share and adjusted earnings per diluted share
are also non-GAAP measures used in the Selected Financial Data section. Management believes that non-
GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing
performance of the company and provide meaningful comparisons to its peers. Management believes these
non-GAAP financial measures also enhance investors’ ability to compare period-to-period financial results
and allow investors and company management to view our operating results excluding the impact of items
that are not reflective of the underlying operating performance.
2 0
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
Tangible common book value per share, adjusted earning per diluted shares. Tangible common book value per
share is a non-GAAP measure that excludes the effect of goodwill and other intangibles from book value per
common share. The most directly comparable financial measure calculated in accordance with GAAP is our
book value per common share. Adjusted earnings per diluted share excludes acquisition-related expenses,
gain on the sale of the Thomaston branch, a building writedown, and the income tax benefits related to
such items from earnings per diluted share. The most directly comparable financial measure calculated in
accordance with GAAP is our earnings per diluted share.
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.
Non-GAAP Performance Measures Reconciliation
Years Ended December 31,
2020
2019
(Dollars in thousands, except per share data)
Operating noninterest expense reconciliation
Operating net income reconciliation
Net income (GAAP)
Acquisition-related expenses
Gain on sale of Thomaston branch
Writedown of Building
Income tax benefit of expenses
Operating net income
Weighted average diluted shares
Adjusted earnings per diluted share
Tangible book value per common share reconciliation
Book value per common share (GAAP)
Effect of goodwill and other intangibles
Tangible book value per common share
2 1
$
11,815
862
(1,026)
582
(88)
12,145
$
9,498,783
1.28
$
$
10,211
2,733
–
–
(574)
$
12,370
9,129,705
1.35
$
$
15.21
(1.95)
13.26
$
13.74
(2.06)
11.68
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
COVID-19 Pandemic
During March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-
19) a global pandemic in response to the rapidly growing outbreak of the virus. COVID-19 has significantly
impacted local, national and global economies due to stay-at-home orders and social distancing guidelines,
and has caused economic and social disruption on an unprecedented scale. While some industries have been
impacted more severely than others, all businesses have been impacted to some degree. This disruption has
resulted in the shuttering of businesses across the country, significant job loss, and aggressive measures by the
federal government.
Congress, the President, and the Federal Reserve have taken several actions designed to cushion the
economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was
signed into law on March 27, 2020 as a $2 trillion legislative package. The goal of the CARES Act was to
prevent a severe economic downturn through various measures, including direct financial aid to American
families and economic stimulus to significantly impacted industry sectors. The package also included
extensive emergency funding for hospitals and providers. In addition to the general impact of COVID-19,
certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts have had
and continue to have a material impact on our operations.
In response to the COVID-19 pandemic, the Company has prioritized the health and safety of its
employees and customers, and continues to take protective measures during the ongoing COVID-19
pandemic, such as implementing remote work arrangements to the full extent possible and by adjusting
banking center hours and operational measures to promote social distancing, and it will continue to do so
throughout the duration of the pandemic. At the same time, the Company is closely monitoring the effects of
the COVID-19 pandemic on our loan and deposit customers, and is assessing the risks in our loan portfolio
and working with our customers to reduce the pandemic’s impact on them while minimizing losses for the
Company. Meanwhile, the Company remains focused on improving shareholder value, managing credit
exposure, challenging expenses, enhancing the customer experience and supporting the communities it serves.
We have implemented loan programs to allow customers who are experiencing hardships from the
COVID-19 pandemic to defer loan principal and interest payments for up to 90 days. The Small Business
Administration (SBA) has also guaranteed the principal and interest payments of all our SBA loan customers
for six months. As of December 31, 2020, we had one commercial customer with outstanding loan balances
totaling $1.9 million who had active payment deferrals. One loan totaling $1.9 million was in the hotel
industry, which is one of the industries heavily impacted by the COVID-19 pandemic.
In addition, we have been participating in the Paycheck Protection Program created under the
CARES Act and implemented by the SBA to help provide loans to our business customers in need. As
of December 31, 2020, the Company closed or approved with the SBA 1,630 PPP loans for an aggregate
amount of funds in excess of $137.8 million. We have used our current cash balances and available liquidity
from the Paycheck Protection Program Liquidity Facility (“PPPLF”) to fund these PPP loans. Loan fees
collected related to these loans was approximately $2.8 million. In accordance with U.S. generally accepted
accounting principles (GAAP), these fees will be deferred and recognized over the life of the loans. As of
February 28, 2021, the SBA had granted forgiveness for PPP loans totaling $58.5 million.
The Economic Aid Act, signed into law on December 27, 2020, authorized an additional $284.5 billion
in new PPP funding and extends the authority of lenders to make PPP loans through March 31, 2021. We
are participating in this new round of PPP loan funding by offering first and second draw loans. As of
February 28, 2021, the Company had approved and funded 410 PPP loans totaling $30.4 million under this
new round of PPP loan funding.
Despite improvements in certain economic indicators, significant constraints to commerce remain in
place, and significant uncertainty remains over the timing of an effective and widely available coronavirus
vaccine and the timing and scope of additional government stimulus packages. The duration and extent of
the downturn and speed of the related recovery on our business, customers, and the economy as a whole
remains uncertain.
2 2
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The following discussion and analysis present the more significant factors affecting the Company’s
financial condition as of December 31, 2020 and 2019 and results of operations for each of the two year-
periods ended December 31, 2020. 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.
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% federal
tax rate for 2020 and 2019 and, 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 $11.8 million, or $1.24 per diluted shares in 2020, compared to $10.2 million, or
$1.12 per diluted shares in 2019.
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 66.8% of total revenue
during 2020 and 76.4% of total revenue during 2019.
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.
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, was 3.25% and 4.75% as of
December 31, 2020 and 2019, respectively. The Federal Reserve Board sets general market rates of interest,
including the deposit and loan rates offered by many financial institutions. During 2020, the prime interest
rate decreased by 150 basis points. During 2019, the prime interest rate decreased overall by 50 basis points.
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.
2 3
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
(Dollars in thousands)
Interest income
Loans, net of unearned fees
Investment securities, taxable
Investment securities, exempt
Interest-bearing deposits
Total interest income
Interest expense
Interest-bearing demand
and savings deposits
Time deposits
FHLB advances
PPPLF
Other borrowings
Total interest expense
Net interest income
Changes From 2019 to 2020 (a)
Total
Volume
Rate
$ 11,033
(937)
494
1,573
12,163
$ (5,695)
(1,292)
(219)
(2,191)
(9,397)
$ 5,338
(2,229)
275
(618)
2,766
980
(894)
(277)
–
197
6
$ 12,157
(3,384)
(1,152)
(26)
205
(406)
(4,763)
$ (4,634)
(2,404)
(2,046)
(303)
205
(209)
(4,757)
$ 7,523
(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.
The Company maintains about 18.41% 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. During 2020,
Federal Reserve rates decreased 150 basis points. The Federal Reserve rates decreased 50 basis points in 2019.
We have seen the net interest margin decrease to 3.50% for 2020, compared to 3.61% for 2019.
Taxable-equivalent net interest income for 2020 increased by $7.5 million or 15.7%, compared to 2019,
due to an increase in loan fee income generated through PPP loan originations during 2020, which was
approximately $2.8 million. The average volume of interest-earning assets during 2020 increased $257.4 million
compared to 2019 while over the same period the net interest margin decreased 11 basis points to 3.50% from
3.61%. The change in the net interest margin in 2020 and 2019 was primarily driven by a higher level of low
yielding assets offset by a decrease in the cost of funds, as well as downward pressure exerted from lower yielding
PPP loans offset by lowering our borrowing costs during the year as well as lower interest on the level of deposits
on our balance sheet. Growth in average earning assets during 2020 was primarily in loans and interest-bearing
deposits in other banks related to the PPP loans originated and the acquisition of Home Builder Finance.
The average volume of loans increased $195.9 million in 2020 compared to 2019, which reflects both
organic loan growth and growth in PPP loans. The increase in average volume for loans was funded primarily
through an increase in Paycheck Protection Program Liquidity Facility and average customer deposits. The
average yield on loans decreased 52 basis points in 2020 compared to 2019, due to lower yielding PPP loans
originated and the reduction in prime rate of 150 points in 2020. The average volume of interest-bearing
deposits increased $90.9 million in 2020 compared to 2019. Average demand deposits increased $146.9 million
while average time deposits decreased $55.9 million in 2020 compared to 2019.
2 4
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Accordingly, the ratio of average interest-bearing deposits to total average deposits was 78.8% in 2020 and
82.6% in 2019. For 2020, this deposit mix, combined with a general decrease in interest rates, had the effect of
(i) decreasing the average cost of total deposits by 49 basis points in 2020 compared to 2019 and (ii) offsetting 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 stable at 3.37% and 3.39%
in 2020 and 2019, respectively. 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.
Average Balance Sheets
(Dollars in thousands)
Assets
Loans, net of unearned fees (1)
Investment securities, taxable
Investment securities, exempt (2)
Deposits in banks and
Average
Balances
2020
Income/
Expense
Yields/
Rates
Average
Balances
2019
Income/
Expense
Yields/
Rates
$ 1,092,009
336,140
17,070
$ 55,802
6,875
331
short term investments
Total interest-earning assets
Total noninterest-earning assets
Total assets
141,641
1,586,860
104,375
$ 1,691,235
438
63,446
5.11%
2.05
1.94
0.31
4.00
$ 896,098
374,719
1,737
$ 50,464
9,104
56
5.63%
2.43
3.22
1,056
60,680
1.86
4.56
56,891
1,329,445
81,886
$ 1,411,331
Liabilities and stockholders’ equity
Interest-bearing liabilities:
Savings and interest-bearing
demand deposits
Time deposits
Total interest-bearing deposits
FHLB advances
Paycheck protection program
787,030
305,374
$ 1,092,404
33,249
$
liquidity facility
Other borrowings
Total interest-bearing liabilities
Noninterest-bearing demand deposits
Other liabilities
Stockholders’ equity
Total liabilities and
90,768
38,527
1,254,948
294,008
4,325
137,954
stockholders’ equity
$ 1,691,235
1,870
3,729
5,599
743
205
1,333
7,880
0.24%
1.22
0.51
2.23
0.23
3.46
0.63
640,180
361,319
$ 1,001,499
45,233
4,274
5,775
$ 10,049
1,046
–
1,542
12,637
–
34,159
1,080,891
208,320
5,002
117,118
$ 1,411,331
Interest rate spread
Net interest income
Net interest margin
$ 55,566
3.37%
3.50 %
$ 48,043
0.67%
1.60
1.00
2.31
–
4.51
1.17
3.39%
3.61%
(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 $252,000 and $182,000 for the year ended December 31, 2020 and 2019, respectively, are included in
income and fees on loans. Accretion income of $763,000 and $583,000 for the year ended December 31, 2020 and 2019 are also included in income
and fees on loans.
(2) Taxable-equivalent adjustments totaling $69,000 and $11,000 for the year ended December 31, 2020 and 2019, respectively, are included in
tax-exempt interest on investment securities. The adjustments are based on federal tax rate of 21% with appropriate reductions for the effect of
disallowed interest expense incurred in carrying tax-exempt obligations.
2 5
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 2 0
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 $6.6 million in 2020 compared to $1.1 million in 2019. See the section
captioned “Allowance for Loan Losses” elsewhere in this discussion for further analysis of the provision
for loan losses. The increase in provision for loan losses for the year ended December 31, 2020 compared
to the same periods in 2019 is largely due to the unprecedented economic disruptions and uncertainty
surrounding the COVID-19 pandemic. Net charge-offs for the year ended December 31, 2020 were $1.3
million compared to $1.5 million for the same period in 2019. As of December 31, 2020, Colony’s allowance
for loan losses was $12.1 million, or 1.14% of total loans, compared to $6.9 million, or 0.71% of total loans,
at December 31, 2019. At December 31, 2020 and 2019, nonperforming assets were $10.1 million and $11.1
million, or 0.58% and 0.74% of total assets, respectively. While asset quality remains stable period over
period, social and economic disruption in response to the COVID-19 pandemic continued to result in
business closures and job losses during the year ended 2020.
Noninterest Income
The components of noninterest income were as follows:
(Dollars in thousands)
Service charges on deposit accounts
Mortgage fee income
Gain on sale of SBA loans
Gain on sale of securities
Gain on sale of assets
Interchange fees
BOLI income
Other
Total
2020
$
5,293
9,149
1,600
926
1,082
4,988
743
463
$ 24,244
2019
$ 5,593
3,199
–
97
–
3,768
536
811
$ 14,004
$
%
Variance Variance
(5.36)%
$
186.00
100.00
854.64
100.00
32.38
38.62
(42.94)
73.12%
(300)
5,950
1,600
829
1,082
1,220
207
(348)
$ 10,240
Noninterest income increased $10.2 million, or 73.12% from 2019. The Company saw considerable
increases in mortgage fee income, gain on sale of SBA loans, and interchange fees, off-set with a slight
decrease in service charges on deposit accounts. The slight decrease in service charges on deposit accounts
was partially attributable to a decrease in overdraft and service charge income as a result of continued lower
customer spending due to the COVID-19 pandemic. The increase in mortgage fee income is primarily
attributed to the opening of a new mortgage location in LaGrange and the acquisition of the PFB Mortgage
division of Planters First Bank, both of which occurred in the first half of 2019. As such, these divisions were
fully operational in 2020, increasing the volume of mortgage loans. Furthermore, during the year ended
December 31, 2020, there was an increase in the demand for mortgage rate locks and mortgage closings due
to a historically low interest rate environment. The decrease in mortgage rates was partially attributable to
the 150 basis point decrease in the national federal funds rate during the year ended December 31, 2020 in
response to the COVID-19 pandemic. The increase of $1.2 million in interchange fees was a result of the
perks program the Company offered from Discover®. The increase from gain on sale of SBA loans grew as
the Bank was fully operational in this line of business in 2020.
2 6
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Noninterest Expense
The components of noninterest expense were as follows:
(Dollars in thousands)
Salaries and employee benefits
Occupancy and equipment
Acquisition related expenses
Information technology
Professional Fees
Advertising and public relations
Communications
Writedown of building
FHLB prepayment penalty
Other
Total
2020
$ 34,141
5,311
862
5,746
2,250
2,111
835
582
925
5,538
$ 58,301
2019
$ 26,218
4,850
2,733
4,353
2,191
1,991
1,083
–
–
4,717
$ 48,136
$
%
Variance Variance
30.22%
$
9.51
(68.46)
32.00
2.69
6.03
(22.90)
100.00
100.00
17.41
21.12%
7,923
461
(1,871)
1,393
59
120
(248)
582
925
821
$ 10,165
Increases in salaries and employee benefits, information technology expenses, the writedown of the
Thomaston branch and FHLB prepayment penalties accounted for the majority of the increase in noninterest
expense, offset by a decrease in acquisition-related expenses. The increase in salaries and employee benefits
of $7.9 million in 2020 was primarily attributable to merit pay increases and a complete year of salaries from
the two acquisitions completed in May 2019 of LBC Bancshares, Inc and PFB Mortgage. Information
technology expenses increased $1.4 million as the Company continues to invest in the Company’s technology
infrastructures. Other expense increased due to increases in FDIC insurance due to credits used in 2019,
and loan related expenses from PPP loan activity. In order to improve the Company’s cost of funds and net
income, the Company paid off two higher rate FHLB advances in 2020 which was offset by securities gains
recognized in 2020.
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 $1.7 billion in 2020 compared to $1.4 billion in 2019.
(Dollars in thousands)
Sources of Funds:
Noninterest-bearing deposits
Interest-bearing deposits
FHLB advances
PPPLF
Other borrowings
Other noninterest-bearing liabilities
Equity capital
Total
Uses of Funds:
Loans held for sale and loans
Investment securities
Deposits in banks and short term investments
Other noninterest-bearing assets
Total
2020
2019
$ 294,008
1,092,404
33,249
90,768
38,527
4,325
137,954
17.38%
64.59%
1.97%
5.37%
2.28%
0.26%
8.15%
$ 1,691,235 100.00%
$ 208,320
1,001,499
45,233
–
34,159
5,002
117,118
$ 1,411,331
14.76%
70.96
3.20
–
2.42
0.35
8.31
100.00%
$ 1,092,009
353,210
141,641
104,375
64.57%
20.88%
8.38%
6.17%
$ 1,691,235 100.00%
$ 896,098
376,456
56,891
81,886
$ 1,411,331
63.49%
26.67
4.03
5.81
100.00%
2 7
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 2 0
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, interest-
bearing deposits continues to be the largest component of the Company’s mix of deposits. Average interest-
bearing deposits totaled 78.8% in 2020 compared to 82.6% of total average deposits in 2019.
The Company primarily invests funds in loans and securities. Loans continue to be the largest component
of the Company’s mix of invested assets.
Loans
The following table presents the composition of the Company’s loan portfolio as of December 31 for the
past five years.
(Dollars in thousands)
Construction, land and
land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial,
and agricultural
Consumer and other
Total loans, net of unearned fees
Allowance for loan losses
Loans, net
2020
2019
2018
2017
2016
$ 121,093
520,391
641,484
183,021
213,380
21,618
1,059,503
(12,127)
$ 1,047,376
$ 96,097
540,239
636,336
194,796
114,360
23,322
968,814
(6,863)
$ 961,951
$ 60,310
435,961
496,271
187,592
74,166
23,497
781,526
(7,277)
$ 774,249
$ 53,762
418,669
472,431
193,924
$
42,168
415,768
457,936
195,486
64,523
33,911
764,789
(7,508)
$ 757,281
64,074
36,426
753,922
(8,923)
$ 744,999
Maturity and Repricing Opportunity
The following table presents total loans as of December 31, 2020 according to maturity distribution and/
or repricing opportunity on adjustable rate loans.
(Dollars in thousands)
Construction, land and
land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial,
and agricultural
Consumer and other
Total loans, net of unearned fees
After One
Year
Through
Three Years
After Three
Years
Through
Five years
One Year
or Less
Over
Five Years
Total
$
73,097
105,467
178,564
29,779
$ 28,243
122,680
150,923
40,645
$
3,034
76,370
79,404
24,607
$ 16,719
215,874
232,593
87,990
$ 121,093
520,391
641,484
183,021
34,917
4,660
$ 247,920
122,525
8,668
$ 322,761
22,169
6,214
$ 132,394
33,769
2,076
$ 356,428
213,380
21,618
$ 1,059,503
2 8
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview. Loans totaled $1.1 billion at December 31, 2020, up 9.4% from $968.8 million at December 31,
2019. 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, nonfarm nonresidential properties and
real estate construction loans made up 77.8% and 85.8% of total loans at December 31, 2020 and December 31,
2019, respectively. Commercial, financial, & agriculture represents another 20.1% of the population of the loans
at December 31, 2020 up from 11.8% of the population at December 31, 2019. The reason for the increase is
primarily due to the PPP loan production during 2020, which was $101.1 million in gross PPP loans at December
31, 2020. The PPP loans are included in our commercial, financial and agricultural loans.
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.
2 9
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Commercial, financial and agricultural. Commercial and agricultural loans at December 31, 2020 increased
86.6% to $213.4 million from December 31, 2019 at $114.4 million. This increase was primarily attributable to
the PPP loans which was $101.1 million at December 31, 2020. 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.
Construction, land and land development. Construction, land and land development loans increased by $25.0
million, or 26.0%, at December 31, 2020 to $121.1 million from $96.1 million at December 31, 2019. This
increase was primarily attributable from the purchase of Homebuilder Finance and the continued growth of
the business during 2020.
Other commercial real estate. Other commercial real estate loans decreased by $19.8 million, or 3.7%, at
December 31, 2020 to $520.4 million from $540.2 million at December 31, 2019. This decrease was primarily
attributable due to payoffs and amortization of the portfolio.
Residential real estate loans. Residential real estate loans decreased by $11.8 million, or 6.1%, at December
31, 2020 to $183.0 million from $194.8 million at December 31, 2019. This decrease was primarily attributable
to payoffs and amortization of the portfolio. Residential real estate loans consist of revolving, open-end and
closed-end loans as well as those secured by closed-end first and junior liens.
Consumer and other. Consumer and other loans include loans to individuals for personal and household
purposes, including secured and unsecured installment loans and revolving lines of credit. Consumer and
other loans at December 31, 2020 decreased 7.3% to $21.6 million from $23.3 million at December 31, 2019.
This decrease was primarily attributable to payoffs and amortization of the portfolio.
Industry concentrations. As of December 31, 2020 and December 31, 2019, there were no concentrations
of loans within any single industry in excess of 10% 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, 2020, approximately 77.8% 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 recent years, 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.
3 0
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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. At December 31,
2020,our largest 20 relationships consisted of loans and loan commitments, where the committed balance
was $169.5 million with $120.8 million outstanding. At December 31, 2019, our largest 20 relationships had a
committed balance of $174.8 million with $156.2 million outstanding.
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, 2020. 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.
(Dollars in thousands)
Loans with fixed interest rates
Loans with floating interest rates
Total
After One, After Three, After Five,
but Within
but Within
Due in One
Year or Less Three Years Five Years Fifteen Years
$ 188,659
59,098
$ 247,757
$ 305,720
17,040
$ 322,760
$ 230,287
75,659
$ 305,946
$ 124,946
7,448
$ 132,394
but Within After Fifteen
Years
$ 14,885
35,761
$ 50,646
Total
$ 864,497
195,006
$ 1,059,503
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
Asset quality remained somewhat stable during the year December 31, 2020. The continuing effects of
the COVID-19 pandemic will likely have an impact on our asset quality, but it is unknown to what extent at
this point. Nonperforming assets include nonaccrual loans, accruing loans contractually past due 90 days or
more, repossessed personal property and other real estate owned (“OREO”). Pursuant to the provisions of
the CARES Act, loans granted payment deferrals related to the COVID-19 pandemic are not reported as
past due or placed on nonaccrual status (provided the loans were not past due or on nonaccrual status prior
to the deferral), and there were no loans under these terms deemed past due or nonaccrual as of December
31, 2020. Nonaccrual loans totaled $9.1 million at December 31, 2020, a decrease of $699,000, or 7.1%,
from $9.8 million at December 31, 2019. There were no loans contractually past due 90 days or more and
still accruing for either period presented. At December 31, 2020, OREO totaled $1.0 million, a decrease
of $314,000, or 23.8%, compared with $1.3 million at December 31, 2019. The change in OREO is a
combination of sales of assets during 2020 offset by asset additions. At the end of the year ended December
31 2020, total nonperforming assets as a percent of total assets decreased to 0.58% compared with 0.74% at
December 31, 2019.
31
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
At December 31, 2020, 5.2% of the Company’s loan portfolio, or $62.7 million, is in the hotel sector
which we expect to be the most sensitive to the COVID-19 pandemic. While our entire loan portfolio is
being continuously assessed, enhanced monitoring for these sectors is ongoing. We are continuously working
with these customers to evaluate how the current economic conditions are impacting, and will continue to
impact, their business operations.
Year-end nonperforming assets and accruing past due loans were as follows:
(Dollars in thousands)
Loans accounted for on nonaccrual
Loans accruing past due 90 days or more
Other real estate foreclosed
Total nonperforming assets
Nonperforming loans by segment
Construction, land & land development
Commercial real estate
Residential real estate
Commercial, financial & agricultural
Consumer & other
Total nonperforming loans
Nonperforming assets as a percentage of:
Total loans and other
real estate foreclosed assets
Total assets
Nonperforming loans as a percentage of:
Total loans
Supplemental data:
Trouble debt restructured loans
2020
$
9,128
–
1,006
$ 10,134
$
$
197
4,613
2,958
1,065
295
9,128
2019
2018
$
$
$
$
9,827
–
1,320
11,147
128
3,772
3,728
2,061
138
9,827
$
$
$
$
9,482
–
1,841
11,323
883
5,874
3,299
1,267
–
11,323
2017
$
7,503
–
4,256
$ 11,759
2016
$ 12,350
–
6,439
$ 18,789
$
2,630
4,635
3,309
1,185
–
$ 11,759
$
3,376
9,982
4,375
1,056
–
$ 18,789
0.96%
0.58%
0.86%
1.15%
0.74%
1.01%
1.44%
0.90%
1.21%
1.53%
0.95%
0.98%
2.47%
1.55%
1.64%
in compliance with modified terms (1)
$ 12,320
$ 12,337
$
14,128
$ 18,363
$
17,992
Trouble debt restructured loans
Past due 30-89 days (1)
Accruing past due loans:
30-89 days past due (1)
90 or more days past due
Total accruing past due loans
Allowance for loan losses
Allowance for loan losses as a percentage of:
Total loans
Nonperforming loans
273
–
864
131
319
$
$
3,092
–
3,092
$ 12,127
$
$
$
2,615
–
2,615
6,863
$
$
$
8,234
–
8,234
7,277
$
$
$
4,558
–
4,558
7,508
$
$
$
1.14%
132.85%
0.71%
69.84%
0.93%
76.74%
0.98%
100.06%
4,469
–
4,469
8,923
1.18%
72.25%
(1) Loans granted payment deferrals related to the COVID-19 pandemic are not reported as past due or placed on nonaccrual status (provided the
loans were not past due or on nonaccrual status prior to the deferral), there were no loans under these terms deemed past due or nonaccrual as of
December 31, 2020.
Nonperforming assets include nonaccrual loans, loans past due 90 days or more, foreclosed real estate
and nonaccrual securities. Nonperforming assets at December 31, 2020 decreased 9.1% from December 31,
2019, due to the sale of other real estate owned property and decrease in nonaccrual loans.
3 2
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past
due and/or management deems the collectability 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, collectability 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.
The restructuring of a loan is considered a “troubled debt restructuring (“TDR”)” if both (i) the
borrower is experiencing financial difficulties and (ii) the Company has granted the borrower a concession
that we would not consider otherwise. At December 31, 2020, TDRs totaled $12.6 million, a slight
increase from $12.3 million reported December 31, 2019. At December 31, 2020 and 2019, all TDRs were
performing according to their modified terms and were therefore not considered to be nonperforming assets.
In March 2020, regulatory agencies issued an interagency statement on loan modifications and reporting
for financial institutions working with customers affected by the COVID–19 pandemic. The agencies
confirmed with the staff of the FASB that short–term modifications made on a good faith basis in response
to the COVID–19 pandemic to borrowers who were current prior to any relief, are not to be considered
TDRs. As of December 31, 2020, the Company had approximately $1.9 million in loans still under their
modified terms. The Company’s modification program included payment deferrals, interest only, and other
forms of modifications. See Notes 1 and 4 to of our consolidated financial statements included in this Annual
Report for more information regarding accounting treatment of loan modifications as a response to the
COVID-19 pandemic.
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.
3 3
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
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.
(Dollars in thousands)
Construction, land
and land development
Commercial real estate
Residential real estate
Commercial, financial,
and agricultural
Consumer and other
2020
2019
December 31,
2018
2017
Reserve %(1)
Reserve %(1)
Reserve %(1)
Reserve
%(1)
2016
Reserve %(1)
$ 1,013 11.4%
6,880 49.1%
2,278 17.3%
$ 215
9.9%
3,908 55.8%
980 20.1%
$ 131
5,251 55.8%
1,181 24.0%
7.7% $ 1,216
4,654
968
7.0% $
54.7%
25.4%
711
6.5%
4,763 53.8%
1,990 26.0%
1,713
243
$ 12,127
20.1%
%2.1%
100.0%
1,657 11.8%
2.4%
$ 6,863 100.0%
103
618
96
633
9.5%
37
3.0%
$ 7,277 100.0% $ 7,508
8.8%
8.4%
4.4%
4.9%
100.0% $ 8,604 100.0%
1,058
82
(1) Percentage represents the loan balance in each category expressed as a percentage of total end of period loans.
3 4
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 2 0
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.
(Dollars in thousands)
Allowance for loan losses at beginning of year
Charge-offs
Construction, land and land development
Commercial real estate
Residential real estate
Commercial, financial, and agricultural
Consumer and other
Total charge-offs
Recoveries
Construction, land and land development
Commercial real estate
Residential real estate
Commercial, financial, and agricultural
Consumer and other
Total recoveries
Net charge-offs
Provision for loans losses
Allowance for loan losses at end of year
Ratio of net charge-offs to average loans
2020
$ 6,863
2019
$ 7,277
2018
$ 7,508
2017
$ 8,923
2016
$ 8,604
4
226
206
242
1,103
$ 1,781
45
153
142
43
104
487
1,294
6,558
$ 12,127
0.12%
29
119
758
403
784
$ 2,093
82
218
174
36
65
575
1,518
1,104
$ 6,863
–
257
162
247
299
965
$
155
52
91
161
74
533
432
201
$ 7,277
52
1,027
1,048
458
330
$ 2,915
266
544
82
141
77
1,110
1,805
390
$ 7,508
0.11%
0.04%
0.15%
25
1,112
362
324
265
$ 2,088
814
351
50
71
59
1,345
743
1,062
8,923
0.06%
$
The allowance for loan losses increased from $6.9 million, or 0.71% of total loans at December 31, 2019
to $12.1 million, or 1.14% of total loans at December 31, 2020. Excluding outstanding PPP loans of $101.1
million as of December 31, 2020, the allowance for loan losses as a percentage of total loans was 1.27%. The
allowance for loan losses allocated 0.10% of the balance to our PPP loan portfolio at December 31, 2020.
The provision for loan losses reflects loan quality trends, including the level of net charge-offs or recoveries,
among other factors.
Social and economic disruption in response to the COVID-19 pandemic continue to result in businesses
closures and job losses during the year ended 2020. Net charge-off’s improved by $224,000 from $1.5 million
in 2019 to $1.3 million in 2020, but management believes there continues to be a weakness in certain sectors.
As such, additional qualitative measures were incorporated as part of the December 31, 2020 allowance for
loan losses calculation for the economic uncertainties caused by the COVID-19 pandemic, which was the
primary cause for the increase to the provision for loan losses during the year ended December 31, 2020
compared to the same period 2019. Additional reserves were also allocated to the non-owner occupied
commercial real estate pools due to economic impacts in the retail and hospitality sectors. Other changes
to the allowance of loan losses were a result of new internal procedures for impairment analysis which
appropriately reflect loss potential within the individually tested loans. This change resulted in an increase of
$503,000 in required reserves.
Management believes the allowance for loan losses is adequate to provide for losses inherent in the loan
portfolio as of December 31, 2020. The continuing impact of the COVID-19 pandemic during 2020 leading
to significant market changes, high levels of unemployment and increasing degrees of uncertainty in the U.S.
economy, the impact on collectability is not currently known, and it is possible that additional provisions for
credit losses could be needed in future periods.
3 5
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 2 0
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, 2020, 2019 and 2018.
(Dollars in thousands)
U.S. treasury securities
U.S agency
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
2020
$
245
1,004
62,388
4,250
312,927
$ 380,814
2019
$
–
–
5,115
2,806
339,411
$ 347,332
2018
$
–
–
3,989
2,872
346,205
$ 353,066
The following table represents expected maturities and weighted-average yields of investment securities
held by the Company as of December 31, 2020 (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
(Dollars in thousands)
U. S. treasury securities
U.S. agency
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
$
Within 1 Year Within 5 Years Within 10 Years After 10 Years
Amount Yield
–%
–
–
–
45,033 1.88
–
–
213,004 1.59
Amount Yield
–
–
1,968
2,001
7,555
1.85% $ 11,524
Amount
–
–% $
1,004
–
15,246
1.58
2,249
4.04
3.08
92,368
2.99% $ 110,867
0.75
1.49
5.56
2.05
2.03% $ 258,037 1.64%
Yield
1.70% $
–
2.11
–
–
Amount
245
–
141
–
–
386
–% $
Yield
$
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% of its portfolio classified
as available for sale.
At December 31, 2020, there were no holdings of any one issuer, other than the U.S. government and its
agencies, in an amount greater than 10% of the Company’s stockholders’ equity.
The average yield of the securities portfolio was 2.04% in 2020 and 2.43% in 2019. The decrease in the
average yield from 2020 to 2019 was primarily attributed to the purchase of new securities which have a
lower yield.
Deposits
The following table presents the average amount outstanding and the average rate paid on deposits by
the Company for the years 2020, 2019, and 2018.
(Dollars in thousands)
Noninterest-bearing
demand deposits
Interest-bearing demand
and savings deposits
Time deposits
Total deposits
2020
Average
Amount
Average
Rate
2019 2018
Average
Rate
Average
Amount
Average
Amount
Average
Rate
$ 294,008
–
$ 208,320
–
$ 173,442
–
787,030
305,374
$ 1,386,412
0.24%
1.22%
0.40%
640,180
361,319
$ 1,209,819
0.67%
1.60%
0.83%
534,887
326,243
$ 1,034,572
0.52%
1.01%
0.59%
3 6
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following table presents the maturities of the Company’s time deposits as of December 31, 2020.
(Dollars in thousands)
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
$250,000
or Greater
Total
$ 4,886
11,069
8,731
10,219
$ 34,905
$ 43,677
40,642
72,603
69,787
$ 226,709
$ 48,563
51,711
81,334
80,006
$ 261,614
Average deposits increased $176.6 million in 2020 compared to 2019. The increase in 2020 included
$146.9 million or 22.9% in interest-bearing demand and savings deposits while, at the same time noninterest
bearing deposits increased $85.7 million, or 41.1% and time deposits decreased $55.9 million, or 15.5%. The
growth in our deposits is due primarily to the combination of government stimulus programs, the deferral
of the tax payment deadline, PPP loan proceeds retained on deposits by corporate borrowers, and customer
expense and savings habits in response to the COVID-19 pandemic.
The Company supplements deposit sources with brokered deposits. As of December 31, 2020, the Company
had $1.1 million, or 0.1% 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.
Off-Balance-Sheet Arrangements and Contractual Obligations
In the ordinary course of business, our Bank has granted commitments to extend credit to approved
customers. Generally, these commitments to extend credit have been granted on a temporary basis for
seasonal or inventory requirements or for construction period financing and have been approved within
the Bank’s credit guidelines. Our Bank has also granted commitments to approved customers for financial
standby letters of credit. These commitments are recorded in the financial statements when funds are
disbursed or the financial instruments become payable. The Bank uses the same credit policies for these
off-balance-sheet commitments as it does for financial instruments that are recorded in the consolidated
financial statements. Commitments generally have fixed expiration dates or other termination clauses and
may require payment of a fee. Since many of the commitment amounts expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash requirements.
The following table summarizes commitments and contractual obligations outstanding at December 31, 2020.
(Dollars in thousands)
Contractual obligations:
Borrowings
Operating lease liabilities
Time Deposits
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
$ 167,081
517
261,614
429,212
$
5,313
143
181,609
187,065
$ 109,789
202
70,793
180,784
$ 12,750
90
8,650
21,490
$ 39,229
82
562
39,873
198,029
3,634
201,663
148,957
3,351
152,308
21,512
283
21,795
2,415
–
2,415
25,145
–
25,145
$ 630,875
$ 339,373
$ 202,579
$ 23,905
$ 65,018
3 7
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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, 2020 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, 2020 are included in the preceding table.
Capital Requirements
The Bank is required under federal law to maintain certain minimum capital levels based on ratios of
capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the
federal banking agencies may determine that a banking organization, based on its size, complexity or risk
profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such
as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s
exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s
ability to manage those risks are important factors that are to be taken into account by the federal banking
agencies in assessing an institution’s overall capital adequacy. For more information, see “Item 1. Business –
Supervision and Regulation – Regulation of the Company – Capital Requirements.”
At December 31, 2020, shareholders’ equity totaled $144.5 million compared to $130.5 million at
December 31, 2019. In addition to net income of $11.8 million, other significant changes in shareholders’
equity during 2020 included $3.8 million of dividends declared on common stock. The accumulated other
comprehensive loss component of stockholders’ equity totaled $6.8 million at December 31, 2020 compared
to $362,000 at December 31, 2019. 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% of risk-weighted assets. The Company has no
Tier 2 capital other than the allowance for loan losses.
3 8
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Using the capital requirements presently in effect, the Tier 1 ratio as of December 31, 2020 was 12.71%
and total Tier 1 and 2 risk-based capital was 13.78%. Both of these measures compare favorably with the
regulatory minimum of 6% for Tier 1 and 8% for total risk-based capital. The Company’s common equity
Tier 1 ratio as of December 31, 2020 was 10.62%, which exceeds the regulatory minimum of 4.50%. The
Company’s Tier 1 leverage ratio as of December 31, 2020 was 8.49%, which exceeds the required ratio
standard of 4%.
In addition, the Bank is participating in the PPP and the PPPLF to fund PPP Loans. In accordance with
regulatory guidance, PPP loans pledged as collateral for PPPLF, and PPPLF advances, are excluded from
leverage capital ratios. PPP loans will also carry a 0% risk-weight for risk-based capital rules.
For the year ended December 31, 2020, average capital was $138.0 million representing 8.2% of
average assets for the year. This compares to average capital of $117.1 million, representing 8.3% of average
assets for 2019.
For the years ended December 31, 2020 and 2019, 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.
A cash dividend of $3.8 million and $2.7 million was paid for the year ended December 31, 2020 and
2019, respectively.
While the Company believes that it has sufficient capital to withstand an extended economic recession
brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted in
future periods. Additional information is provided in the Notes to the Consolidated Financial Statements for
Preferred Stock and Warrants.
Liquidity
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.
Cash and cash equivalents at December 31, 2020 and 2019 were $183.5 million and $104.1 million,
respectively. The increase in cash and cash equivalents since year-end 2019 was largely attributable to the
significant increase in deposits, influenced by government stimulus payments and pandemic stay-at-home
orders, which reduced spending and increased liquidity of consumers and businesses in these uncertain times,
and PPP loan proceeds retained on deposit by corporate borrowers, as well as our own liquidity actions in
2020. Management believes the various funding sources discussed above are adequate to meet the Company’s
liquidity needs in these unsettled times without any material adverse impact on our operating results.
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.
3 9
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The investment portfolio provides a ready means to raise cash if liquidity needs arise. As of December
31, 2020, the available for sale bond portfolio totaled $380.8 million. At December 31, 2019, the available
for sale bond portfolio totaled $347.3 million. Only marketable investment grade bonds are purchased.
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 73.3% as of December 31, 2020 and
74.9% as of December 31, 2019. 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, 2020 and December 31, 2019 were 66.7% and 71.5%, 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, 2020 and December 31, 2019,
the Bank had $34.9 million and $55.7 million, respectively, in certificates of deposit of $250,000 or more.
These larger deposits represented 2.4% and 4.3% of total deposits as of December 31, 2020 and 2019,
respectively. 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, 2020, the
Company had $1.1 million or 0.1% 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, 2020, the Company had $100,000 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. At
December 31, 2020 and 2019, we had $22.5 million and $47.0 million, respectively, of outstanding advances
from the FHLB. Based on the values of loans pledged as collateral, we had $416.1 million and $321.4 million
of additional borrowing availability with the FHLB at December 31, 2020 and 2019, respectively.
In addition, on April 20, 2020, the Company completed a Paycheck Protection Program Liquidity
Facility credit arrangement with The Federal Reserve Bank. This line of credit is secured by PPP loans
and bears a fixed interest rate of 0.35% with a maturity date equal to the maturity date of the related PPP
loans, with the PPP loans maturing either two or five years from the origination date of the PPP loans.
An advance of $140.7 million obtained through the PPPLF arrangement was used for funding PPP loans
during the second quarter of 2020, subsequently, during the same month during the second quarter 2020, a
repayment of $6.2 million was made upon the determination of a final number of PPP loans to be funded.
As of December 31, 2020, the outstanding balance totaled $106.8 million, and the Company’s PPP loans and
related PPPLF funding had a weighted average life of approximately 1.35 years.
4 0
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
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.
41
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Recently Issued Accounting Pronouncements
See Note 1 - Summary of Significant Accounting Policies 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.
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.
4 2
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 2 0
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 targeted range of 0.25% and the prime rate of 3.25%
at December 31, 2020. 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 6.71% and 12.55% if interest rates increased by 100 and 200 basis points, respectively. Net
interest income is projected to decline by 2.91% if interest rates decreased by 100 basis points. These changes
were within Colony’s policy limit of a maximum 15% negative change.
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,
2020
12.55%
6.71%
–%
-2.91%
2019
3.87%
2.54%
–%
-4.12%
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.
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. In addition to interest rate risk, the
recent COVID-19 pandemic and the related stay-at-home and self-distancing mandates will likely expose us
to additional market value risk. Protracted closures, furloughs and lay-offs have curtailed economic activity,
and will likely continue to curtail economic activity and could result in lower fair values for collateral in our
loan portfolio.
4 3
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 2 0
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 its subsidiaries (the Company)
as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, stockholders’ equity,
and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as
the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the
period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinions
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on
these financial statements 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 the 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits 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. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures
that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matter or on the
accounts or disclosures to which it relates.
Allowance for Loan Losses
As described in Notes 1 and 5 to the Company’s consolidated financial statements, the Company has a gross loan balance of
$1.06 billion and related allowance for loan losses balance of $12.1 million as of December 31, 2020. As described by the Company
in Note 1, the evaluation of the allowance for loan losses is inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available. The allowance for loan losses is evaluated on a regular basis and is
based upon the Company’s review of the collectability 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.
We identified the Company’s estimate of the allowance for loan losses as a critical audit matter. The principal considerations
for our determination of the allowance for loan losses as a critical audit matter related to the high degree of subjectivity in the
Company’s judgments in determining the qualitative factors. Auditing these complex judgments and assumptions by the Company
involves especially challenging auditor judgement due to the nature and extent of audit evidence and effort required to address these
matters, including the extent of specialized skill or knowledge needed.
The primary procedures we performed to address this critical audit matter included the following:
• We evaluated the relevance and the reasonableness of assumptions related to evaluation of the loan portfolio, current economic
conditions, and other risk factors used in development of the qualitative factors for collectively evaluated loans.
• We evaluated the reasonableness of assumptions and data used by the Company in developing the qualitative factors by
comparing these data points to internally developed and third-party sources, and other audit evidence gathered.
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLC
We have served as the Company’s auditor since 1995.
Macon, Georgia
March 23, 2021
4 4
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 2 0
Consolidated Balance Sheets
(Dollars in thousands)
Assets
Cash and due from banks
Fed Funds sold and interest-bearing deposits in banks
Cash and cash equivalents
Investment securities available for sale, at fair value
Other investments, at cost
Loans held for sale
Loans
Allowance for loan losses
Net loans
Premises and equipment
Other real estate owned
Goodwill
Other intangible assets
Bank-owned life insurance
Deferred income taxes, net
Other assets
Total assets
Liabilities and stockholders’ equity
Deposits
Noninterest-bearing
Interest-bearing
Total deposits
Federal Home Loan Bank advances
Paycheck Protection Program Liquidity Facility
Other borrowed money
Other liabilities
Total liabilities
Commitments and contingencies (Note 15)
Stockholders’ equity
Preferred stock, stated value $1,000; 10,000,000 shares authorized,
0 shares issued and outstanding as of December 31, 2020 and 2019
Common stock, par value $1; 20,000,000 shares authorized, 9,498,783
shares issued and outstanding as of December 31, 2020 and 2019
Paid-in capital
Retained earnings
Accumulated other comprehensive income, net of tax
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes which are an integral part of these financial statements.
4 5
December 31,
2020
2019
$
17,218
166,288
183,506
$
15,570
88,522
104,092
380,814
3,296
52,386
1,059,503
(12,127)
1,047,376
32,057
1,006
15,992
2,271
31,547
134
13,589
$ 1,763,974
326,999
$
1,118,028
1,445,027
22,500
106,789
37,792
7,378
1,619,486
347,332
4,288
10,076
968,814
(6,863)
961,951
32,482
1,320
16,477
3,056
21,629
1,505
11,105
$ 1,515,313
$ 232,635
1,061,107
1,293,742
47,000
–
38,792
5,273
1,384,807
–
–
9,499
43,215
84,993
6,781
144,488
$ 1,763,974
9,499
43,667
76,978
362
130,506
$ 1,515,313
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 2 0
Consolidated Statements of Income
(Dollars in thousands, except per share data)
Interest income
Loans, including fees
Deposits with other banks and short term investments
Investment securities
Total interest income
Interest expense
Deposits
Federal Home Loan Bank advances
Paycheck Protection Program Liquidity Facility
Other borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Service charges on deposits
Mortgage fee income
Gain on sale of SBA loans
Gain on sale of securities
Gain on sale of assets
Interchange fees
BOLI income
Other
Total noninterest income
Noninterest expenses
Salaries and employee benefits
Occupancy and equipment
Acquisition related expenses
Information technology expense
Professional fees
Advertising and public relations
Communications
Writedown of building
FHLB prepayment penalty
Other
Total noninterest expense
Income before income taxes
Income taxes
Net income
For The Years Ended
December 31,
2020
55,550
438
7,137
63,125
5,599
743
205
1,333
7,880
55,245
6,558
48,687
5,293
9,149
1,600
926
1,082
4,988
743
463
24,244
34,141
5,311
862
5,746
2,250
2,111
835
582
925
5,538
58,301
14,630
2,815
11,815
$
$
2019
50,278
1,288
8,917
60,483
10,050
1,046
–
1,541
12,637
47,845
1,104
46,741
5,593
3,199
–
97
–
3,768
536
811
14,004
26,218
4,850
2,733
4,353
2,191
1,991
1,083
–
–
4,717
48,136
12,609
2,398
10,211
$
$
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.
4 6
1.24
$
1.24
$
0.40
$
9,498,783
9,498,783
1.12
$
1.12
$
$
0.30
9,129,705
9,129,705
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 2 0
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
Net income
For The Years Ended
December 31,
2020
11,815
$
2019
10,211
$
Other comprehensive income:
Net unrealized gains on investment securities arising during the period
Tax effect
Reclassification adjustment for gain on sale of securities available
for sale included in net income
Tax effect
Change in unrealized gains on securities available for sale,
net of reclassification adjustment and tax effects
Comprehensive income
9,052
(1,901)
(926)
194
10,922
(2,293)
(97)
20
6,419
18,234
$
8,552
18,763
$
See accompanying notes which are an integral part of these financial statements.
4 7
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 2 0
Consolidated Statements of Changes in Stockholders’ Equity
(Dollars in thousands)
Balance, December 31, 2018
Other comprehensive income
Dividends on common shares
Issuance of common stock
Stock-based compensation expense
Net income
Balance, December 31, 2019
Other comprehensive income
Dividends on common shares
Goodwill adjustment
Stock-based compensation expense
Net income
Balance, December 31, 2020
Preferred Stock Common Stock
Amount
–
$
–
–
–
–
–
–
–
–
–
–
–
–
Shares
8,444,908
–
–
1,053,875
–
–
9,498,783
–
–
–
–
–
9,498,783
Share
–
–
–
–
–
–
–
–
–
–
–
–
–
Amount
$ 8,445
–
–
1,054
–
–
$ 9,499
–
–
–
–
–
$ 9,499
$
$
Accumulated
Other
Retained Comprehensive
Income (Loss)
Earnings
$ (8,190)
$ 69,459
8,552
–
–
(2,692)
–
–
–
–
10,211
–
362
$ 76,978
$
6,419
–
–
(3,800)
–
–
–
–
–
11,815
$ 6,781
$ 84,993
Paid-In
Capital
$ 25,978
–
–
17,655
34
–
$ 43,667
–
–
(485)
33
–
$ 43,215
Total
$
95,692
8,552
(2,692)
18,709
34
10,211
$ 130,506
6,419
(3,800)
(485)
33
11,815
$ 144,488
See accompanying notes which are an integral part of these financial statements.
4 8
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 2 0
Consolidated Statements of Cash Flows
For The Years Ended
(Dollars in thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses
Depreciation, amortization and accretion
Stock-based compensation expense
Gains on securities available for sale
Net increase in servicing asset
(Gain) loss on sale of other real estate and repossessions and write-downs
(Gain) loss on sale of premises & equipment
Gain on sale of Thomaston branch
Writedown on building
Increase in bank owned life insurance
Gain on sale of loans held for sale
Gain on sale of SBA loans
Origination of loans held for sale
Proceeds from sale of loans held for sale
Change in other assets
Change in other liabilities
Net cash (used in) provided by operating activities
Cash flows from investing activities
Purchases of investment securities available for sale
Proceeds from maturities, calls, and paydowns of investment securities available for sale
Proceeds from sale of investment securities available for sale
Net change in loans
Purchase of premises and equipment
Proceeds from sale of other real estate and repossessions
Purchase of bank-owned life insurance
Proceeds from bank owned life insurance
Redemption (purchase of) Federal Home Loan Bank stock
Proceeds from sale of premises and equipment
Net cash and cash equivalents paid in acquisition
Net cash (used in) provided by investing activities
Cash flows from financing activities
Change in noninterest-bearing customer deposits
Change in interest-bearing customer deposits
Dividends paid for common stock
Issuance of Paycheck Protection Program Liquidity Fund
Payment of Paycheck Protection Program Liquidity Fund
Proceeds from Federal Home Loan Bank advances
Payments of Federal Home Loan Bank advances
Proceeds from other borrowings
Payments of other borrowings
Net cash (used in) provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information
Cash paid during the period for interest
Cash paid during the period for income taxes
Noncash investing and financing activities
Acquisition of real estate through foreclosure
Change in goodwill
See accompanying notes which are an integral part of these financial statements.
4 9
December 31,
2020
2019
$
11,815
$ 10,211
6,558
5,859
33
(926)
(295)
8
(56)
(1,028)
582
(743)
–
(1,600)
(315,929)
275,219
(696)
2,105
(19,094)
(181,685)
96,999
58,069
(94,623)
(4,241)
2,363
(10,000)
825
992
1,035
–
(130,266)
94,364
56,921
(3,800)
134,500
(27,711)
14,000
(38,500)
–
(1,000)
228,774
79,414
104,092
$ 183,506
$
7,821
2,450
2,057
485
1,104
2,895
34
(97)
–
(780)
168
–
–
(535)
(1,823)
–
(69,576)
61,323
574
379
3,877
(72,482)
73,313
65,513
(58,484)
(3,485)
2,553
–
482
(831)
690
(467)
6,802
8,753
10,633
(2,692)
–
–
10,000
(8,000
14,563
–
33,257
43,936
60,156
$ 104,092
$ 12,245
2,000
1,009
16,275
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 2 0
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Colony Bankcorp, Inc. and subsidiaries (the “Company”) is a financial holding company headquartered
in Fitzgerald, Georgia, whose primary business is presently conducted by Colony Bank, its wholly owned
banking subsidiary (the “Bank”). Through the Bank, the Company offers a broad range of retail and
commercial banking services to its customers concentrated in central, south and coastal Georgia. The Bank
also engages in mortgage banking and SBA lending, and, as such originates, acquires, sells and services one-
to-four family residential mortgage loans and SBA loans in the Southeast. The Company is subject to the
regulations of certain state and federal agencies and are periodically examined by those regulatory agencies.
Basis of Presentation and Accounting Estimates
The consolidated financial statements include the accounts of the Colony Bankcorp, Inc. and its wholly
owned subsidiaries, Colony Bank and Colony Risk Management. All significant intercompany transactions
and balances have been eliminated in consolidation.
In preparing the consolidated financial statements in conformity with generally accepted accounting
principles in the United States, management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
Acquisition Accounting
Acquisitions are accounted for under the acquisition method of accounting. Purchased assets and
assumed liabilities are recorded at their estimated fair values as of the purchase date. Any identifiable
intangible assets are also recorded at fair value. When the consideration given is less than the fair value of the
net assets received, the acquisition results in a “bargain purchase gain”. If the consideration given exceeds
the fair value of the net assets received, goodwill is recognized. Fair values are subject to refinement for up
to one year after the closing date of an acquisition as additional information regarding the closing date fair
values becomes available.
All identifiable intangible assets that are acquired in a business combination are recognized at fair value
on the acquisition date. Identifiable intangible assets are recognized separately if they arise from contractual
or other legal rights or if they are separable (i.e., capable of being sold, transferred, licensed, rented, or
exchanged separately from the entity).
Purchased loans acquired in a business combination are recorded at estimated fair value on their
purchase date and carryover of the seller’s related allowance for loan losses is prohibited. When the loans
have evidence of credit deterioration since origination and it is probable at the date of acquisition that the
Company will not collect all contractually required principal and interest payments, the difference between
contractually required payments at acquisition and the cash flows expected to be collected at acquisition
is referred to as the non-accretable difference. The Company must estimate expected cash flows at each
reporting date. Subsequent decreases to the expected cash flows will generally result in a provision for loan
losses. Subsequent increases in expected cash flows result in a reversal of the provision for loan losses to the
extent of prior provisions and adjust accretable discount if no prior provisions have been made or have been
fully reversed. This increase in accretable discount will have a positive impact on future interest income.
5 0
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 2 0
Notes to Consolidated Financial Statements
Transfer of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been
relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated
from the Company, 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 the Company does not maintain effective
control over the transferred assets through an agreement to repurchase them before their maturity.
Cash and Cash Equivalents
For purposes of reporting cash flow, cash and cash equivalents include cash on hand, cash items in
process of collection, amounts due from banks, interest-bearing deposits in banks and federal funds sold.
The bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank.
The daily average cash reserve requirement was temporarily suspended for the year ended December 31,
2020 due to COVID-19 crisis response and was approximately $2.7 million, at December 31, 2019, and
was met by cash on hand which is reported on the Company’s consolidated balance sheets in cash and
due from banks.
Investment Securities
The Company classifies its investment securities in one of three categories: (i) trading, (ii) held to
maturity or (iii) available for sale. Trading securities are bought and held principally for the purpose of
selling them in the near term. Held to maturity securities are those securities for which the Company has the
ability and intent to hold until maturity. All other investment securities are classified as available for sale. At
December 31, 2020 and 2019, all securities were classified as available for sale.
Trading securities are carried at fair value. Unrealized gains and losses on trading securities are recorded
in earnings as a component of other noninterest income. Held to maturity securities are recorded initially at
cost and subsequently adjusted for paydowns and amortization of purchase premium or accretion of purchase
discount. Available for sale securities are carried at fair value. Unrealized holding gains and losses, net of
the related deferred tax effect, on available for sale securities are excluded from earnings and are reported
in other comprehensive income as a separate component of shareholders’ equity until realized. Transfers
of securities between categories are recorded at fair value at the date of transfer. Unrealized holding gains
or losses associated with transfers of securities from held to maturity to available for sale are recorded as a
separate component of shareholders’ equity. These unrealized holding gains or losses are amortized into
income over the remaining life of the security as an adjustment to the yield in a manner consistent with the
amortization or accretion of the original purchase premium or discount on the associated security.
The amortization of premiums and accretion of discounts are recognized in interest income using
methods approximating the interest method over the expected life of the securities. Realized gains and losses,
determined on the basis of the cost of specific securities sold, are included in earnings on the trade date. A
decline in the market value of any available for sale or held to maturity investment below cost that is deemed
other than temporary establishes a new cost basis for the security. Other than temporary impairment deemed
to be credit related is charged to earnings. Other than temporary impairment attributed to non-credit
related factors is recognized in other comprehensive income.
In determining whether other-than-temporary impairment losses exist, management considers (i) the
length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and
near-term prospects of the issuer or underlying collateral of the security and (iii) the Company’s 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.
51
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 2 0
Notes to Consolidated Financial Statements
Other Investments
Other investments include Federal Home Loan Bank (“FHLB”) and First National Bankers Bank
(“FNBB”) stock. These investments do not have a readily determinable market value due to restrictions
placed on transferability and therefore are carried at cost. These investments are periodically evaluated
for impairment based on ultimate recovery of par value or cost basis. Both cash and stock dividends are
reported as income.
Loans Held for Sale
Mortgage and SBA loans held for sale are carried at the lower of aggregate cost or estimated fair value,
as determined by outstanding commitments from third party investors in the secondary market. Adjustments
to reflect unrealized gains and losses resulting from changes in fair value of mortgage loans held for sale and
realized gains and losses upon ultimate sale of the mortgage loans held for sale are classified as mortgage fee
income in the consolidated statements of income. Adjustments to reflect unrealized gains and losses resulting
from changes in fair value of SBA loans held for sale and realized gains and losses upon ultimate sale of the
SBA loans held for sale are classified as gain on sale of SBA loans in the consolidated statements of income.
Loans
Loans are reported at their outstanding principal balances less unearned income, net of deferred fees and
origination costs. Interest income is accrued on the outstanding principal balance. For all classes of loans,
the accrual of interest on loans is discontinued when, in management’s opinion, the borrower may be unable
to make payments as they become due, unless the loan is well secured and in the process of collection. Non-
accrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans
that are collectively evaluated for impairment and individually classified impaired loans. All interest accrued,
but not collected for loans that are placed on nonaccrual or charged off, is reversed against interest income.
Interest income on nonaccrual loans is applied against principal until the loans are returned to accrual
status. Loans are returned to accrual status when all the principal and interest amounts contractually due
are brought current and future payments are reasonably assured.
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 loan balance to be uncollectable. 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 collectability 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
5 2
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 2 0
Notes to Consolidated Financial Statements
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. The decision whether to obtain an external third-party appraisal usually depends on the type
of property being evaluated. External 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.
5 3
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 2 0
Notes to Consolidated Financial Statements
The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower
is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may
include interest rate reductions to below market interest rates, principal forgiveness, restructuring
amortization schedules and other actions intended to minimize potential losses. The Company’s policy
requires a restructure request to be supported by a current, well-documented credit evaluation of the
borrower’s financial condition and a collateral evaluation that is no older than six months from the date
of the restructure. The Company’s policy states in the event a loan has been identified as a troubled debt
restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time
that the borrower has demonstrated the ability to service the loan payments based on the restructured terms
– generally defined as six months of satisfactory payment history. The Company’s loan policy states that
a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and
unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) it
otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given
loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and
the prospects for full repayment, approved by the Company’s Chief Credit Officer. In the normal course of
business, the Company renews loans with a modification of the interest rate or terms that are not deemed
as troubled debt restructurings because the borrower is not experiencing financial difficulty. 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.
Commitments and Financial Instruments
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans
and standby letters of credit, issued to meet customer financing needs. The face amount for these items
represents the exposure to loss, before considering customer collateral or ability to repay. Such financial
instruments are recorded when they are funded.
Premises and Equipment
Land is carried at cost. Other premises and equipment are carried at cost, less accumulated depreciation
computed on the straight-line method over the estimated useful lives of the assets. In general, estimated lives
for buildings are up to 40 years, furniture and equipment useful lives range from five to 10 years and the
lives of software and computer related equipment range from three to five years. Leasehold improvements
are amortized over the life of the related lease, or the related assets, whichever is shorter. Expenditures for
major improvements of the Company’s premises and equipment are capitalized and depreciated over their
estimated useful lives. Minor repairs, maintenance and improvements are charged to operations as incurred.
When assets are sold or disposed of, their cost and related accumulated depreciation are removed from the
accounts and any gain or loss is reflected in earnings.
Goodwill and Intangible Assets
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.
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
acquisition date. The core deposit intangible is amortized by the straight-line method over the average
remaining life of the acquired customer deposits.
5 4
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 2 0
Notes to Consolidated Financial Statements
Cash Value of Bank Owned Life Insurance
The Company has purchased life insurance policies on certain officers. The life insurance is 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 other amounts due that are probable at settlement.
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.
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 2020, 2019, 2018 and 2017 are subject
to examination by the Internal Revenue Service (IRS) and the Georgia Department of Revenue, generally
for three years after filing.
The Company believes that its income tax filing positions taken or expected to be taken on its tax
returns will more likely than not be sustained upon audit by the taxing authorities and does not anticipate
any adjustments that will result in a material adverse impact on the Company’s financial condition, results of
operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded.
Earnings Per Share
Basic earnings per share are computed by dividing net income allocated to common shareholders by the
weighted-average number of shares of common stock outstanding during the period. Diluted earnings per
common share are computed by dividing net income allocated to common shareholders by the sum of the
weighted-average number of shares of common stock outstanding and the effect of the issuance of potential
common shares that are dilutive. Potential common shares consist of restricted shares for the years ended
December 31, 2020 and 2019, and are determined using the treasury stock method. The Company has
determined that its outstanding non-vested stock awards are participating securities, and all dividends on
these awards are paid similar to other dividends.
5 5
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 2 0
Notes to Consolidated Financial Statements
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).
Fair Value Measures
Fair values of assets and liabilities are estimated using relevant market information and other
assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters
of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in
the absence of broad markets for particular items. Changes in assumptions or in market conditions could
significantly affect these estimates.
Operating Segments
The Company has three reportable segments, the Banking Division, the Retail Mortgage Division
and the Small Business Specialty Lending Division. The Banking Division derives its revenues from the
delivery of full service financial services to include commercial loans, consumer loans and deposit accounts.
The Retail Mortgage Division derives its revenues from the origination, sales and servicing of one-to-four
family residential mortgage loans. The Small Business Specialty Lending Division derives its revenues from
origination, sales and servicing of SBA and USDA government guaranteed loans.
The Banking, Retail Mortgage and Small Business Specialty Lending Divisions are managed as
separate business units because of the different products and services they provide. The Company evaluates
performance and allocates resources based on profit or loss from operations. There are no material
intersegment sales or transfers.
Reclassifications
Certain amounts, previously reported, have been reclassified to state all periods on a comparable basis
and had no effect on stockholders’ equity or net income.
Operating, Accounting and Reporting Considerations Related to COVID-19
The COVID-19 pandemic has negatively impacted the global economy, including the Company’s
market areas. In response to this crisis, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act
was passed by Congress and signed into law on March 27, 2020. The CARES Act provided an estimated
$2.2 trillion to fight the COVID-19 pandemic and stimulate the economy by supporting individuals and
businesses through loans, grants, tax changes, and other types of relief. Some of the provisions applicable to
the Company include, but are not limited to:
a. Accounting for loan modifications - The CARES Act provides that financial institutions may
elect to suspend (1) the requirements under GAAP for certain loan modifications that would
otherwise by categorized as a troubled debt restructure (“TDR”) and (2) any determination
that such loan modifications would be considered a TDR, including the related impairment for
accounting purposes.
b. Paycheck Protection Program - The CARES Act established the Paycheck Protection Program (“PPP”),
an expansion of the Small Business Administration’s 7(a) loan program and the Economic Injury
Disaster Loan Program (“EIDL”), administered directly by the SBA.
5 6
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 2 0
Notes to Consolidated Financial Statements
Also in response to the COVID-19 pandemic, the Board of Governors of the Federal Reserve System
(“FRB”), the Federal Deposit Insurance Corporation (“FDIC”), the National Credit Union Administration
(“NCUA”), the Office of the Comptroller of the Currency (“OCC”), and the Consumer Financial Protection
Bureau (“CFPB”), in consultation with the state financial regulators (collectively, the “agencies”) issued a joint
interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions
applicable to the Company include, but are not limited to:
a. Accounting for loan modifications - Loan modifications that do not meet the conditions of the
CARES Act may still qualify as a modification that does not need to be accounted for as a
TDR. The agencies confirmed with the Financial Accounting Standards Board (“FASB”) staff
that short-term modifications made on a good faith basis in response to COVID-19 to borrowers
who were current prior to any relief are not TDRs. This includes short-term (e.g., three months)
modifications such as payment deferrals, fee waivers, extensions of repayment terms, or
insignificant delays in payment, as long as such modifications are (1) related to COVID-19; (2)
executed on a loan that was not more than 30 days past due at the time of modification; and (3)
executed between March 1, 2020 and the earlier of (a) 60 days after the date of termination of
the national emergency declaration or (b) December 31, 2020.
b. Past due reporting - With regard to loans not otherwise reportable as past due, financial institutions
are not expected to designate loans with deferrals granted due to COVID-19 as past due
because of the deferral. A loan’s payment date is governed by the due date stipulated in the
legal agreement. If a financial institution agrees to a payment deferral, these loans would not be
considered past due reporting during the period of the deferral.
c. Nonaccrual status - During short-term COVID-19 modifications, these loans generally should not
be reported as nonaccrual or as classified.
Beginning in late March 2020, the Company provided relief programs consisting primarily of 90 to 180
day payment deferral relief of principal and interest to borrowers negatively impacted by COVID-19 and has
accounted for these loan modifications in accordance with ASC 310-40.
Accounting Standards Updates Pending Adoption
In March 2020, the FASB issued updated guidance codified within ASU-2020-04, “Reference Rate
Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which
provide optional guidance for a limited period of time to ease the potential burden in accounting for (or
recognizing the effects of) reference rate reform on financial reporting. In response to the risk of cessation
of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have
undertaken reference rate reform initiatives to identify alternative reference rates that are more observable,
or transaction based and less susceptible to manipulation. As of December 31, 2020, the Company had $24.2
million of subordinated debentures with rates tied to LIBOR and is currently evaluating the impact of the
amended guidance and has not yet determined the effect of the standard on its ongoing financial reporting.
In January 2020, the FASB issued ASU No. 2020-01, Investments—Equity Securities (Topic 321),
Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the
Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force). This
update clarifies whether an entity should consider observable transactions that require it to either apply
or discontinue the equity method of accounting for the purposes of applying the measurement alternative
and how to account for certain forward contracts and purchased options to purchase securities. For public
entities, this guidance is effective for fiscal years beginning after December 15, 2020. The Company does
not expect the new guidance to have a material impact on the consolidated financial statements.
5 7
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 2 0
Notes to Consolidated Financial Statements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting
for Income Taxes. This update removes several exceptions related to intraperiod tax allocation when there is a
loss from continuing operations and income from other items, foreign subsidiaries becoming equity method
investments and vice versa, and calculating income taxes in an interim period when a year-to-date loss
exceeds the anticipated loss for the year. The guidance also amends requirements related to franchise tax that
is partially based on income, a step up in the tax basis of goodwill, allocation of consolidated tax expense to
a legal entity not subject to tax in its separate financial statements, the effects of enacted changes in tax laws
and other minor codification improvements regarding employee stock ownership plans and investments in
qualified affordable housing projects. For public entities, this guidance is effective for fiscal years beginning
after December 15, 2020. The Company does not expect the new guidance to have a material impact on the
consolidated financial statements.
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. The Company is currently assessing the impact of the adoption of this ASU on its consolidated
financial statements. In November 2019, the ASU 2019-10 was issued which delayed the effective date
of CECL for smaller reporting companies. The new effective date is for fiscal years beginning after
December 15, 2022.
2. BUSINESS COMBINATIONS
Acquisition of LBC Bancshares, Inc.
On May 1, 2019, the Company completed its acquisition of LBC Bancshares, Inc. (“LBC”), a bank
holding company headquartered in LaGrange, Georgia. Upon consummation of the acquisition, LBC was
merged with and into the Company, with Colony as the surviving entity in the merger. At that time, LBC’s
wholly owned bank subsidiary, Calumet Bank, was also merged with and into the Bank. The acquisition
expanded the Company’s market presence, as Calumet Bank had 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 Agreement and Plan of Merger, each LBC shareholder had 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, such that 55 percent of LBC shares of common stock received the stock consideration and
45 percent received the cash consideration, with at least 50 percent of the merger consideration paid in the
Company’s common stock. As a result, the Company issued 1,053,875 common shares at a fair value of
$18.7 million and paid $15.3 million in cash to the former shareholders of LBC as merger consideration.
The merger was effected by the issuance of shares of the Company’s common stock along with cash
consideration to shareholders to LBC. The assets and liabilities of LBC as of the effective date of the merger
were recorded at their respective estimated fair values and combined with those of the Company. The excess
of the purchase price over the net estimated fair values of the acquired assets and liabilities was allocated to
identifiable intangible assets with the remaining excess allocated to goodwill. Goodwill of $15.7 million was
recorded as part of the LBC acquisition and is not expected to be deductible for income tax purposes.
The following table presents the assets acquired and liabilities assumed of LBC as of May 1, 2019, and
their fair value estimates. The fair value estimates were subject to refinement for up to one year after the
closing date of the acquisition for new information obtained about facts and circumstances that existed at
the acquisition date.
5 8
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 2 0
Notes to Consolidated Financial Statements
(Dollars in thousands, except market price)
Purchase price consideration:
Shares of CBAN common stock issued to
LBC shareholders as of May 1, 2019
Market price of CBAN common stock on May 1, 2019
Estimated fair value of CBAN common stock issued
Cash consideration paid
Total consideration
Assets acquired at fair value:
Cash and cash equivalents
Investments securities available for sale
Investments securities held to maturity
Restricted investments
Loans
Premises and equipment
Core deposit intangible
Other real owned
Prepaid and other assets
Total fair value of assets acquired
Liabilities assumed at fair value:
Deposits
FHLB advances
Payables and other liabilities
Total fair value of liabilities assumed
Net assets acquired at fair value:
Amount of goodwill resulting from acquisition
Initial Fair
Value Adjustments
Subsequent
Adjustments (1)
Final
Balance
1,053,875
17.75
$
18,706
15,315
34,021
$
$
15,678
49,172
1,766
479
130,568
3,009
3,100
243
6,143
$ 210,158
$ (189,896)
(1,000)
(975)
(191,871)
18,287
15,734
$
$
$
1,053,875
(0.46)
$
(485)
–
(485)
$
$
$
$
$
$
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(485)
1,053,875
17.29
$
18,221
15,315
$ 33,536
$ 15,678
49,172
1,766
479
130,568
3,009
3,100
243
6,143
$ 210,158
$ (189,896)
(1,000)
(975)
$ (191,871)
$ 18,287
$ 15,249
(1) Subsequent adjustments were done within the one year period allowed after the acquisition.
In the acquisition, the Company purchased $130.6 million of loans at fair value, net of $2.2 million, or
1.63%, estimated discount to the outstanding principal balance. Of the total loans acquired, management
identified $176,000 that were considered to be credit impaired and are accounted for under ASC Topic
310-30. The table below summarizes the total contractually required principal and interest cash payments,
management’s estimate of expected total cash payments and fair value of the loans as of the acquisition
date for purchased credit impaired loans. Contractually required principal and interest payments have been
adjusted for estimated prepayments.
(Dollars in thousands)
Contractually required principal and interest
Non-accretable difference
Cash flows expected to be collected
Accretable yield
Total purchased credit-impaired loans acquired
$
$
695
(519)
176
–
176
5 9
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 2 0
Notes to Consolidated Financial Statements
The following table presents the acquired loan data for the LBC acquisition.
(Dollars in thousands)
Acquired receivables subject to ASC 310-30
Acquired receivables not subject to ASC 310-30
Fair Value of
Acquired Loans at
Acquisition Date
$
176
$ 130,392
Contractually
Required
Principal and
Interest Payments
$
695
$ 132,381
Nonaccretable
Difference
(519)
$
–
$
Acquisition of PFB Mortgage from Planters First Bank
On May 1, 2019, the Bank completed its asset acquisition of PFB Mortgage, the secondary market
mortgage business of Planters First Bank for a total cash consideration of $833,000. The assets acquired
included premises and equipment as well as all pipeline loans. The assets acquired were recorded at their
respective estimated fair values as of the effective date of the transaction. The excess of the purchase price
over fair value of net assets acquired was allocated to goodwill.
The following table presents the assets acquired as of May 1, 2019, and their fair value estimates. The
fair value estimates were subject to refinement for up to one year after the closing date of the acquisition for
new information obtained about facts and circumstances that existed at the acquisition date.
Dollars in thousands)
Purchase price consideration:
Cash consideration paid
Total consideration
Assets acquired at fair value:
Premises and equipment
Premium on loan commitments
Other assets
Total fair value of assets acquired
Liabilities assumed at fair value:
Total fair value of liabilities assumed
Net assets acquired at fair value:
Amount of goodwill resulting from acquisition
3. INVESTMENT SECURITIES
$
$
$
$
$
$
$
833
833
78
209
5
292
–
292
541
The amortized cost and estimated fair value of securities available for sale along with gross unrealized
gains and losses are summarized as follows:
(Dollars in thousands)
December 31, 2020
U.S. treasury securities
U.S. agency
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$
–
4
1,155
1
7,837
$ 8,997
$
$
–
–
(65)
(1)
(348)
(414)
Fair
Value
$
245
1,004
62,388
4,250
312,927
$ 380,814
Amortized
Cost
$
245
1,000
61,298
4,250
305,438
$ 372,231
6 0
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 2 0
Notes to Consolidated Financial Statements
(Dollars in thousands)
December 31, 2019
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
Amortized
Cost
$
5,133
2,811
338,930
$ 346,874
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$
$
36
11
2,669
2,716
$
$
(54)
(16)
(2,188)
(2,258)
Fair
Value
$
5,115
2,806
339,411
$ 347,332
The gross unrealized losses and estimated fair value of securities aggregated by category and length of
time that securities have been in a continuous unrealized loss position are summarized as follows:
Less Than 12 Months
12 Months or Greater
Total
Estimated
Fair
Value
Unrealized
Losses
Estimated
Fair
Value
Unrealized
Losses
Estimated
Fair
Value
Unrealized
Losses
$ 8,282
999
28,835
$ 38,116
$
3,257
–
60,860
$ 64,117
$
$
$
$
(65)
(1)
(77)
(143)
$
$
–
–
3,949
3,949
(54)
–
(277)
(331)
$
–
784
119,110
$ 119,894
$
$
$
$
–
–
(271)
(271)
$
8,282
999
32,784
$ 42,065
–
(16)
(1,911)
(1,927)
$
3,257
784
179,970
$ 184,011
$
$
$
$
(65)
(1)
(348)
(414)
(54)
(16)
(2,188)
(2,258)
(Dollars in thousands)
December 31, 2020
State, county and
municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
December 31, 2019
State, county and
municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
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, 2020, twenty securities have unrealized losses 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.
6 1
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 2 0
Notes to Consolidated Financial Statements
The amortized cost and fair value of investment securities as of December 31, 2020, 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.
(Dollars in thousands)
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
$
385
3,925
18,246
44,237
$
66,793
305,438
$ 372,231
Fair
Value
$
386
3,969
18,499
45,033
$
67,887
312,927
$ 380,814
Proceeds from sales of investments available for sale were $58.1 million in 2020 and $65.5 million in
2019. Gross realized gains totaled $1,228,000 in 2020 and $418,000 in 2019. Gross realized losses totaled
$302,000 in 2020 and $321,000 in 2019.
Investment securities having a carrying value totaling $126.5 million and $122.3 million as of
December 31, 2020 and 2019, respectively, were pledged to secure public deposits and for other purposes.
4. LOANS
The following table presents the composition of loans segregated by legacy and purchased loans and by
class of loans, as of December 31, 2020 and 2019. Purchased loans are defined as loans that were acquired in
bank acquisitions.
(Dollars in thousands)
Construction, land and land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial, and agricultural*
Consumer and other
Total loans
Legacy
Loans
$ 109,577
477,445
587,022
167,714
200,800
19,037
$ 974,573
December 31, 2020
Purchased
Loans
$
11,516
42,946
54,462
15,307
12,580
2,581
$ 84,930
Total
$ 121,093
520,391
641,484
183,021
213,380
21,618
$ 1,059,503
6 2
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 2 0
Notes to Consolidated Financial Statements
(Dollars in thousands)
Construction, land and land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial, and agricultural
Consumer and other
Total loans
* Includes $101.1 million in PPP loans as of December 31, 2020.
Legacy
Loans
$ 83,036
481,943
564,979
171,341
91,535
19,245
$ 847,100
December 31, 2019
Purchased
Loans
$
13,061
58,296
71,357
23,455
22,825
4,077
$ 121,714
Total
$ 96,097
540,239
636,336
194,796
114,360
23,322
$ 968,814
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.
• 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.
6 3
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 2 0
Notes to Consolidated Financial Statements
• 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, excluding purchased loans, by credit quality indicator (risk
grade) as of December 31, 2020. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass
column for presentation purposes. For the periods ending December 31, 2020, the Company did not have any
loans classified as “doubtful” or a “loss”.
(Dollars in thousands)
Construction, land & land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial, & agricultural
Consumer & other
Total loans
Pass
$ 99,430
430,515
529,945
157,927
196,749
18,734
$ 903,355
Special
Mention
$ 2,940
33,579
36,519
3,855
2,870
124
$ 43,368
Substandard
$ 7,207
13,351
20,558
5,932
1,181
179
$ 27,850
Total
Loans
$ 109,577
477,445
587,022
167,714
200,800
19,037
$ 974,573
The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of
December 31, 2020.
(Dollars in thousands)
Construction, land & land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial, & agricultural
Consumer & other
Total loans
Pass
11,275
40,825
52,100
14,909
10,198
2,364
79,571
$
$
Special
Mention
241
$
53
294
312
1,803
25
$ 2,434
Substandard
$
–
2,068
2,068
86
579
192
$ 2,925
Total
Loans
$
11,516
42,946
54,462
15,307
12,580
2,581
$ 84,930
6 4
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 2 0
Notes to Consolidated Financial Statements
The following tables present the loan portfolio, excluding purchased loans, by credit quality indicator
(risk grade) as of December 31, 2019. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in
the pass column for presentation purposes. For the periods ending December 31, 2019, the Company did not
have any loans classified as “doubtful” or a “loss”.
(Dollars in thousands)
Construction, land and land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial, and agricultural
Consumer and other
Total loans
Pass
$
82,322
459,064
541,386
159,194
86,558
18,883
$ 806,021
Special
Mention
$
445
13,438
13,883
4,632
1,973
148
$ 20,636
Substandard
$
269
9,441
9,710
7,515
3,004
214
$ 20,443
Total
Loans
$ 83,036
481,943
564,979
171,341
91,535
19,245
$ 847,100
The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of
December 31, 2019.
(Dollars in thousands)
Construction, land and land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial, and agricultural
Consumer and other
Total loans
$
Pass
12,996
57,881
70,877
23,097
19,443
4,077
$ 117,494
$
Special
Mention
–
381
381
249
2,949
–
$ 3,579
Substandard
$
65
34
99
109
433
–
641
$
Total
Loans
$
13,061
58,296
71,357
23,455
22,825
4,0775
$ 121,714
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.
6 5
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 2 0
Notes to Consolidated Financial Statements
The following table represents an age analysis of past due loans and nonaccrual loans, segregated by
class of loans, excluding purchased loans, as of December 31, 2020:
Accruing Loans
90 Days
or More
Past
Due
30-89
Days Past
Due
Total
Accruing
Loans Past Nonaccrual
Due
Loans
$ 1,314
229
1,543
667
150
48
$ 2,408
$
$
–
–
–
–
–
–
–
$ 1,314
229
1,543
667
150
48
$ 2,408
$
80
2,545
2,625
2,873
1,010
102
$ 6,610
Current
Loans
Total
Loans
$ 108,183
474,671
582,854
164,174
199,640
18,887
$ 965,555
$ 109,577
477,445
587,022
167,714
200,800
19,037
$ 974,573
(Dollars in thousands)
Construction, land
and land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial,
and agricultural
Consumer and other
Total loans
The following table represents an age analysis of past due loans and nonaccrual loans, segregated by
class of loans, for purchased loans, as of December 31, 2020:
(Dollars in thousands)
Construction, land
and land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial,
and agricultural
Consumer and other
Total loans
Current
Loans
Total
Loans
$ 11,399
40,334
51,733
15,207
12,400
2,388
$ 81,728
$ 11,516
42,946
54,462
15,307
12,580
2,581
$ 84,930
Accruing Loans
90 Days
or More
Past
Due
30-89
Days Past
Due
Total
Accruing
Loans Past Nonaccrual
Due
Loans
$
–
544
544
15
125
–
$ 684
$
$
–
–
–
–
–
–
–
$
–
544
544
15
125
–
$ 684
$ 117
2,068
2,185
85
55
193
$ 2,518
6 6
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 2 0
Notes to Consolidated Financial Statements
The following table represents an age analysis of past due loans and nonaccrual loans, segregated by
class of loans, excluding purchased loans, as of December 31, 2019:
Accruing Loans
90 Days
or More
Past
Due
30-89
Days Past
Due
Total
Accruing
Loans Past Nonaccrual
Due
Loans
$
50
335
385
1,296
212
21
$ 1,914
$
$
–
–
–
–
–
–
–
$
50
335
385
1,296
212
21
$ 1,914
$
32
3,738
3,770
3,643
1,628
138
$ 9,179
Current
Loans
Total
Loans
$ 82,954
477,870
560,824
166,402
89,695
19,086
$ 836,007
$ 83,036
481,943
564,979
171,341
91,535
19,245
$ 847,100
(Dollars in thousands)
Construction, land
and land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial,
and agricultural
Consumer and other
Total loans
The following table represents an age analysis of past due loans and nonaccrual loans, segregated by
class of loans, for purchased loans, as of December 31, 2019:
Accruing Loans
90 Days
or More
Past
Due
30-89
Days Past
Due
Total
Accruing
Loans Past Nonaccrual
Due
Loans
$
–
83
83
57
553
8
$ 701
$
$
–
–
–
–
–
–
–
$
$
–
83
83
57
553
8
701
$
96
34
130
85
433
–
$ 648
Current
Loans
Total
Loans
$ 12,965
58,179
71,144
23,313
21,839
4,069
$ 120,365
$ 13,061
58,296
71,357
23,455
22,825
4,077
$ 121,714
(Dollars in thousands)
Construction, land
and land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial,
and agricultural
Consumer and other
Total loans
6 7
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 2 0
Notes to Consolidated Financial Statements
The following table details impaired loan data, including purchased credit impaired loans, as of
December 31, 2020:
(Dollars in thousands)
With no related allowance recorded
Construction, land and land development
Other commercial real estate
Residential real estate
Commercial, financial and agricultural
Consumer and other
Total impaired loans with no allowance
With an allowance recorded
Construction, land and land development
Other commercial real estate
Residential real estate
Commercial, financial and agricultural
Consumer and other
Total impaired loans with allowance
Purchased credit impaired loans
Construction, land and land development
Other commercial real estate
Residential real estate
Commercial, financial and agricultural
Consumer and other
Total purchased credit impaired loans
Total
Construction, land and land development
Other commercial real estate
Residential real estate
Commercial, financial and agricultural
Consumer and other
Unpaid
Contractual
Principal
Balance
6,969
$
11,978
1,140
42
–
20,129
–
6,292
1,274
310
–
7,876
118
–
14
55
192
379
Recorded
Investment
Related
Allowance
$ 6,982
11,105
1,122
40
–
19,249
–
6,325
1,230
310
–
7,865
94
–
11
46
96
247
$
–
–
–
–
–
–
–
1,436
226
263
–
1,925
–
–
4
–
81
85
Average
Recorded
Investment
$ 2,841
12,190
2,142
203
–
17,376
–
5,945
703
1,118
–
7,766
96
63
13
49
113
334
7,087
18,270
2,428
407
192
$ 28,384
7,076
17,430
2,363
396
96
$ 27,361
–
1,436
230
263
81
$ 2,010
2,937
18,198
2,858
1,370
113
$ 25,476
Interest income recorded on impaired loans during the year ended December 31, 2020 was $761,000,
and reflects interest income recorded on nonaccrual loans prior to them being placed on nonaccrual status
and interest income recorded on TDRs. Had nonaccrual loans performed in accordance with their original
contractual terms, the Company would have recognized additional interest income of approximately
$518,000 for the year ended December 31, 2020.
6 8
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 2 0
Notes to Consolidated Financial Statements
The following table details impaired loan data as of December 31, 2019, including purchased credit
impaired loans.
(Dollars in thousands)
With no related allowance recorded
Construction, land and land development
Other commercial real estate
Residential real estate
Commercial, financial and agricultural
Consumer and other
With an allowance recorded
Construction, land and land development
Other commercial real estate
Residential real estate
Commercial, financial and agricultural
Consumer and other
Purchased credit impaired loans
Construction, land and land development
Other commercial real estate
Residential real estate
Commercial, financial and agricultural
Consumer and other
Total
Construction, land and land development
Other commercial real estate
Residential real estate
Commercial, financial and agricultural
Consumer and other
Unpid
Contractual
Principal
Balance
67
$
12,455
2,706
257
–
15,485
–
6,379
757
2,189
–
9,325
65
34
11
37
–
147
Recorded
Investment
Related
Allowance
67
$
11,639
2,711
257
–
14,674
–
6,385
760
1,989
–
9,134
65
34
11
37
–
147
$
–
–
–
–
–
–
–
1,939
137
1,073
–
3,149
–
–
6
–
–
6
Average
Recorded
Investment
168
$
13,924
3,693
910
123
18,818
80
3,898
367
722
–
5,067
80
35
24
47
–
186
132
18,868
3,474
2,483
–
$ 24,957
132
18,058
3,482
2,283
–
$ 23,955
–
1,939
143
1,073
–
$ 3,155
328
17,857
4,084
1,679
123
$ 24,071
Interest income recorded on impaired loans during the year ended December 31, 2019 was $175,000,
and reflects interest income recorded on nonaccrual loans prior to them being placed on nonaccrual status
and interest income recorded on TDRs. Had nonaccrual loans performed in accordance with their original
contractual terms, the Company would have recognized additional interest income of approximately
$221,000 for the year ended December 31, 2019.
6 9
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 2 0
Notes to Consolidated Financial Statements
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.
•
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, 2020. The Company had four loan contracts
totaling $494,000 restructured during 2020.
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 and, has performed according to the modified terms for at least six months, and there has not
been any prior principal forgiveness on a cumulative basis.
The Company had four loan contracts restructured during the year ended December 31, 2020, all
four modifications were payment deferral modifications. The loans consisted of two commercial real estate
loans totaling $132,000, one commercial loan totaling $89,000 and one residential real estate loan totaling
$273,000. 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 and, has performed according to the modified terms for at least six months, and there has not
been any prior principal forgiveness on a cumulative basis. The Company had no loan contracts restructured
during 2019. During 2019, the Company had one loan totaling $859,000 that subsequently defaulted. This
loan failed to continue to perform as agreed and was moved to non-accrual status.
7 0
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 2 0
Notes to Consolidated Financial Statements
Modifications in Response to COVID-19
Certain borrowers are currently unable to meet their contractual payment obligations because of the
adverse effects of the COVID-19 pandemic. To help mitigate these effects, loan customers may apply for a
deferral of payments, or portions thereof, for up to three months. In the absence of other intervening factors,
such short-term modifications made on a good faith basis are not categorized as troubled debt restructurings,
nor are loans granted payment deferrals related to the COVID-19 pandemic reported as past due or placed
on nonaccrual status (provided the loans were not past due or on nonaccrual status prior to the deferral).
As of December 31, 2020, the Company had approximately $1.9 million in loans still under their
modified terms. The Company’s modification program included payment deferrals, interest only, and other
forms of modifications. See Note 1 - Summary of Significant Accounting Policies for more information.
5. ALLOWANCE FOR LOAN LOSSES
The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the
year ended December 31, 2020. 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.
Construction,
Land and
Land
Other
Commercial
Commercial Residential Financial, and
Real Estate Agricultural
Consumer
and
Other
Development Real Estate
$
$
215
(4)
45
757
1,013
$
$
3,908
(226)
153
3,045
6,880
$
$
980
(206)
142
1,362
2,278
$
$
1,657
(242)
43
255
1,713
$
103 $
(1,103)
104
1,139
$
243 $
Total
6,863
(1,781)
487
6,558
12,127
$
–
$
1,436
$
226
$
263
$
– $
1,925
1,013
–
1,013
$
5,444
–
6,880
2,048
4
2,278
$
$
1,450
–
1,713
$
162
81
243 $
10,117
85
12,127
$
(Dollars in thousands)
Year ended
December 31, 2020
Beginning balance
Charge-offs
Recoveries
Provision
Ending balance
Period-end amount
allocated to:
Individually evaluated
for impairment
Collectively evaluated
for impairment
Purchase credit impaired
Ending balance
Loans:
Loans individually evaluated
for impairment
$ 6,982
$ 17,430
$
2,352
$
350
$
– $
27,114
Loans collectively evaluated
for impairment
Purchased credit impaired
Ending balance
114,017
94
$ 121,093
502,961
–
$ 520,391
180,658
11
$ 183,021
212,984
46
$ 213,380
21,522
96
1,032,142
247
$ 21,618 $ 1,059,503
7 1
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 2 0
Notes to Consolidated Financial Statements
The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the
year ended December 31, 2019. 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.
Construction,
Land and
Land
Development
Other
Commercial
Real Estate
Residential
Real Estate
Commercial
Financial, and
Agricultural
Consumer
and
Other
Total
$
$
131
(29)
82
31
215
$
$
5,251
(119)
218
(1,442)
3,908
$
$
1,181
(758)
174
383
980
$
$
618
(403)
36
1,406
1,657
$
$
96
(784)
65
726
103
$
$
7,277
(2,093)
575
1,104
6,863
$
–
$
1,939
$
137
$
1,073
$
–
$
3,149
215
–
215
1,969
–
3,908
$
837
6
980
$
584
–
1,657
$
103
–
103
3,708
6
6,863
$
$
(Dollars in thousands)
Year ended
December 31, 2019
Beginning balance
Charge-offs
Recoveries
Provision
Ending balance
Period-end amount
allocated to:
Individually evaluated
for impairment
Collectively evaluated
for impairment
Purchase credit impaired
Ending balance
$
Loans:
Loans individually evaluated
for impairment
$
67
$ 18,024
$
3,471
$
2,246
$
–
$ 23,808
Loans collectively evaluated
for impairment
Purchased credit impaired
Ending balance
95,965
65
$ 96,097
522,181
34
$ 540,239
191,314
11
$ 194,796
112,077
37
$ 114,360
23,322
–
$ 23,322
944,859
147
$ 968,814
6. PREMISES AND EQUIPMENT
Premises and equipment are comprised of the following as of December 31:
(Dollars in thousands)
Land
Building
Furniture, fixtures and equipment
Leasehold improvements
Construction in progress
Total cost
Accumulated depreciation
Total premises and equipment
2020
2019
$ 10,576 $ 10,914
30,518
28,671
13,690
14,091
809
797
117
1,860
56,048
55,995
(23,938)
(23,566)
$ 32,057 $ 32,482
Depreciation charged to operations totaled $2.3 million in 2020 and $2.1 million in 2019.
7 2
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 2 0
Notes to Consolidated Financial Statements
7. OTHER REAL ESTATE OWNED
The following is a summary of the activity in other real estate owned during the years ended December 31,
2020 and 2019:
(Dollars in thousands)
Balance, beginning of year
Loans transferred to other real estate
Acquired in acquisitions
Sales proceeds
Net gain/(loss) on sale and writedowns
Ending balance
2020
2019
$ 1,320 $ 1,841
1,009
2,057
243
–
(2,553)
(2,363)
780
(8)
$ 1,006 $ 1,320
8. GOODWILL AND INTANGIBLE ASSETS
The following is an analysis of the core deposit intangible activity for the years ended December 31:
(Dollars in thousands)
Amortizable intangible assets:
Core deposit intangible
Total
Unamortizable intangible assets:
Goodwill
2020
Gross
2019
Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization
Amount Amortization
$ 4,716
4,716
$ 2,445
2,445
$ 4,716 $ 1,660
1,660
4,716
$ 15,992
$ 16,477
Activity related to transactions since January 1, 2019 includes the following:
(1) In connection with the LBC Bancshares, Inc. acquisition on May 1, 2019, the Company recorded
$3.1 million in a core deposit intangible and $15.7 million in goodwill. The company recorded a
subsequent adjustment within the one year period allowed after the acquisition of $485,000 in 2020.
(2) In connection with the May 1, 2019 acquisition of PFB Mortgage from Planters First Bank, the
Company recorded $541,000 in goodwill.
Amortization expense related to the core deposit intangible was $785,000 and $600,000 at December
31, 2020 and 2019, respectively. The estimated future amortization expense for intangible assets remaining as
of December 31, 2020 is as follows:
(Dollars in thousands)
2021
2022
2023
2024
2025
Total
Amount
665
554
444
333
275
$ 2,271
7 3
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 2 0
Notes to Consolidated Financial Statements
9. INCOME TAXES
The income tax expense in the consolidated statements of income for the years ended December 31, 2020
and 2019 are as follows:
(Dollars in thousands)
Current federal expense
Deferred federal expense
Federal income tax expense
Current state income tax expense
Provision for income taxes
2020
2019
$ 3,965 $ 1,881
517
2,398
–
$ 2,815 $ 2,398
(1,150)
2,815
–
The Company’s income tax expense differs from amounts computed by applying the federal statutory
rates to income before income taxes. A reconciliation of the differences for the years ended December 31,
2020 and 2019 is as follows:
(Dollars in thousands)
Tax at federal income tax rate
Change resulting from:
Tax-exempt interest
Income in cash value of bank owned life insurance
Nondeductible merger expenses
Other
Provision for income taxes
2020
2019
$ 3,072 $ 2,648
(253)
(156)
–
152
(130)
(113)
39
(46)
$ 2,815 $ 2,398
The components of deferred income taxes for the years ended December 31, 2020 and 2019 are as follows:
(Dollars in thousands)
Deferred tax assets
Allowance for loan losses
Lease liability
Net operating loss carryforwards
Other real estate
Deferred compensation
Goodwill
Restricted stock
Purchase accounting adjustments
Investment in partnerships
Other
Nonaccrual interest
Gross deferred tax assets
Deferred tax liabilities
Premises and equipment
Right of use lease asset
Unrealized gain on securities available for sale
Core deposit intangible
Other
Gross deferred tax liabilities
Net deferred tax assets
7 4
2020
2019
$ 1,958 $ 1,624
–
–
115
163
33
9
633
–
401
2
2,980
109
272
48
147
72
10
202
191
13
2
3,024
604
107
1,803
376
–
2,890
$
839
–
96
533
7
1,475
134 $ 1,505
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 2 0
Notes to Consolidated Financial Statements
10. DEPOSITS
The aggregate amount of overdrawn deposit accounts reclassified as loan balances totaled $406,000 and
$718,000 as of December 31, 2020 and 2019, respectively.
Components of interest-bearing deposits as of December 31 are as follows:
(Dollars in thousands)
Interest-bearing demand
Savings and money market deposits
Time, $250,000 and over
Other time
Total interest-bearing deposits
2020
2019
$ 433,554 $ 355,628
358,000
55,677
291,802
$ 1,118,028 $ 1,061,107
422,860
34,905
226,709
At December 31, 2020 and 2019, the Company had brokered deposits of $1.1 million and $2.0 million,
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 $34.9 million and $55.7 million as of December 31, 2020 and 2019, respectively.
As of December 31, 2020, the scheduled maturities of certificates of deposit are as follows:
(Dollars in thousands)
Year ending December 31
2021
2022
2023
2024
2025
Thereafter
Total time deposits
11. BORROWINGS
Amount
$ 181,711
54,249
16,454
4,873
3,765
562
$ 261,614
The following table presents information regarding the Company’s outstanding borrowings at
December 31, 2020:
(Dollars in thousands)
Description
FHLB Advances
FHLB Advances
FHLB Advances
FHLB Advances
Paycheck Protection Program Liquidity Facility (1)
Term note
Revolving credit
Subordinated debentures (2)
Total borrowings
Maturity Date
March 23, 2023
March 21, 2028
August 15, 2025
July 30, 2029
May 24, 2025
May 21, 2021
$
Amount
3,000
5,000
4,500
10,000
106,789
8,250
5,313
24,229
$ 167,081
Interest Rate
3.51%
2.67%
2.62%
1.01%
0.35%
4.70%
3.65%
1.40%-2.68%
7 5
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 2 0
Notes to Consolidated Financial Statements
The following table presents information regarding the Company’s outstanding borrowings at
December 31, 2019:
(Dollars in thousands)
Description
FHLB Advances
FHLB Advances
FHLB Advances
FHLB Advances
FHLB Advances
FHLB Advances
FHLB Advances
FHLB Advances
Term note
Revolving credit
Subordinated debentures (2)
Total borrowings
Maturity Date
March 23, 2020
June 1, 2020
August 15, 2022
February 3, 2023
August 15, 2025
August 24, 2026
March 21, 2028
July 30, 2029
May 24, 2025
May 21, 2021
$
Amount
2,500
1,000
18,000
3,000
4,500
3,000
5,000
10,000
9,250
5,313
24,229
$ 85,792
Interest Rate
2.17%
1.65%
2.69%
3.51%
2.62%
1.27%
2.67%
1.01%
4.70%
5.15%
3.34%-4.58%
(1) Maturity date is equal to the maturity date of the related PPP loans.
(2) See maturity dates in table below.
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, 2020 and
2019, the lendable collateral value of those loans pledged was $88.2 million and $111.6 million, respectively.
At December 31, 2020, the Company had remaining credit availability from the FHLB of $416.1 million. At
December 31, 2019, the Company had remaining credit availability from the FHLB of $321.4 million. The
Company may be required to pledge additional qualifying collateral in order to utilize the full amount of the
remaining credit line.
At December 31, 2020 and 2019, the Company also has available federal funds lines of credit with
various financial institutions totaling $41.5 million and $55.0 million, respectively, of which there were none
outstanding at December 31, 2020 and 2019.
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, 2020, 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.
On April 20, 2020, the Company completed a Paycheck Protection Program Liquidity Facility (PPPLF)
credit arrangement with the Federal Reserve Bank. This line of credit is secured by PPP loans and bears a
fixed interest rate of 0.35% with a maturity date equal to the maturity date of the related PPP loans, with the
PPP loans maturing either two or five years from the origination date of the PPP loan. An advance of $140.7
million through the PPPLF was used for the funding of PPP loans. As of December 31, 2020, the outstanding
balance totaled $106.8 million, and the Company’s PPP loans and related PPPLF funding had a weighted
average life of approximately 2 years.
7 6
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 2 0
Notes to Consolidated Financial Statements
On May 1, 2019, the Company completed a borrowing arrangement with a correspondent bank for
$10.0 million. The term note is secured by the Bank’s stock, expires on May 1, 2024, and bears a fixed
interest rate of 4.70%. The proceeds were used for the acquisition of LBC Bancshares, Inc. and its subsidiary,
Calumet Bank. As of December 31, 2020 and 2019, the outstanding balance totaled $8.3 million and $9.3
million, respectively.
On May 1, 2019, the Company completed a revolving credit arrangement with a correspondent bank
with a maximum line amount of $10.0 million. This line of credit is secured by the Bank’s stock, expires
on May 1, 2021, and bears a variable interest rate of Wall Street Journal Prime plus 0.40%. The Company
advanced $5.3 million that was used toward the acquisition of LBC Bancshares, Inc. and its subsidiary,
Calumet Bank. As of December 31, 2020 and 2019, the outstanding balance totaled $5.3 million.
12. SUBORDINATED DEBENTURES (TRUST PREFERRED SECURITIES)
The following table presents the information regarding the Company’s subordinated debentures at
December 31, 2020 and 2019. All subordinated debentures are at three month LIBOR rate plus added points
noted below at December 31, 2020 and 2019.
(Dollars in thousands)
Date
Description
Colony Bankcorp Statutory Trust III
June 16, 2004
Colony Bankcorp Capital Trust I
April 13, 2006
Colony Bankcorp Capital Trust II
March 12, 2007
Colony Bankcorp Capital Trust III September 14, 2007
5-Year
Call
Added
Option
Amount Points
June 17, 2009
2.68%
$ 4,640
April 13, 2011
1.50%
5,155
1.65%
9,279
March 12, 2012
1.40% September 14, 2037 September 14, 2012
5,155
Maturity
June 14, 2034
April 13, 2036
March 12, 2037
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
13. LEASES
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of
identified property, plant or equipment for a period of time in exchange for consideration. On January 1,
2019, the Company adopted ASU No. 2016-2 and all subsequent ASUs that modified this topic (collectively
referred to as “Topic 842”). For the Company, Topic 842 primarily affected the accounting treatment for
operating lease agreements in which the Company is the lessee.
Substantially all of the leases in which the Company is the lessee are comprised of real estate for
branches and office space with terms extending through 2027. All of our leases are classified as operating
leases, and therefore, were previously not recognized on the Company’s consolidated balance sheet. With
the adoption of Topic 842, operating lease arrangements are required to be recognized on the consolidated
balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability.
7 7
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 2 0
Notes to Consolidated Financial Statements
The following table represents the consolidated balance sheet classification of the Company’s ROU assets
and liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve
months or less), or equipment leases (deemed immaterial) on the consolidated balance sheet.
(Dollars in thousands)
Assets
Operating lease right-of-use assets
Liabilities
Operating lease liabilities
Classification
2020
2019
December 31, December 31,
Other assets
Other liabilities
$
$
511
517
$
$
572
547
The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the
length of the lease term and the discount rate used to present value the minimum lease payments. The
Company’s lease agreements often include one or more options to renew at the Company’s discretion. If
at lease inception the Company considers the exercising of a renewal option to be reasonably certain, the
Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding
the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily
determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at
lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to January 1,
2019, the rate for the remaining lease term as of January 1, 2019 was used.
For the year ended December 31, 2020 and 2019, operating lease cost was $243,000 and $152,000,
respectively.
As of December 31, 2020, the weighted average remaining lease term was 4.55 years and the weighted
average discount rate was 1.75%.
The following table represents the future maturities of the Company’s operating lease liabilities and other
lease information.
(Dollars in thousands)
Year
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: interest
Present value of lease liabilities
Lease
Liability
$
$
173
141
61
45
45
82
547
(30)
517
(Dollars in thousands)
Supplemental lease information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (cash payments)
Operating cash flows from operating leases (lease liability reduction)
Operating lease right-of-use assets obtained in exchange for leases
entered into during the period
December 31,
2020
December 31,
2019
$
238
226
196
$
151
138
676
7 8
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 2 0
Notes to Consolidated Financial Statements
14. COMPENSATION PLANS
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 2020 and 2019, the Company made total
contributions of $1.1 million and $674,000 to the Plan, respectively.
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.
Liabilities accrued under the plans totaled $698,000 and $774,000 as of December 31, 2020 and 2019,
respectively. Benefit payments under the contracts were $153,000 in 2020 and $82,000 in 2019. Provisions
charged to operations totaled $75,000 in 2020 and $63,000 in 2019.
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 $212,000 in
2020 and $157,000 in 2019.
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, 2020 and 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, 2020 is $19,000 which is expected to be
recognized over a weighted-average of 0.58 years. Total compensation expense recognized for the restricted
shares granted for the year ended December 31, 2020 and 2019 was $33,000 and $34,000, respectively.
15. 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.
7 9
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 2 0
Notes to Consolidated Financial Statements
At December 31, 2020 and 2019, the following financial instruments were outstanding whose contract
amounts represent credit risk:
(Dollars in thousands)
Commitments to extend credit
Standby letters of credit
Contract Amount
2020
$ 198,029
3,634
2019
$ 102,890
1,576
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 subsidiaries. The aggregate liabilities, if any, arising from such proceedings would not, in the
opinion of management, have a material adverse effect on Colony’s consolidated financial position.
16. 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 collectability.
A summary of activity of related party loans is shown below:
(Dollars in thousands)
Balance, beginning
New loans
Repayments
Transactions due to changes in directors
Balance, ending
2020
6,407 $
4,462
(5,826)
–
5,043
$
2019
692
4,777
(3,855)
4,793
6,407
$
$
8 0
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 2 0
Notes to Consolidated Financial Statements
17. 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 Bancorp, Inc. and
subsidiaries 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.
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.
Other investments at cost - The fair value of other bank stock approximates carrying value and is classified
as Level 1.
Loans held for sale - The fair value of loans held for sale is determined on outstanding commitments from
third party investors in the secondary markets and is classified within Level 2 of the valuation hierarchy.
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.
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.
8 1
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 2 0
Notes to Consolidated Financial Statements
Federal Home Loan Bank advances - The fair value of Federal Home Loan Bank advances is estimated
by discounting the future cash flows using the current rates at which similar advances would be obtained.
Federal Home Loan Bank advances are classified as Level 2.
Paycheck Protection Liquidity Facility - The fair value of Paycheck Protection Liquidity Facility is estimated
by discounting the future cash flows using the current rates at which similar advances would be obtained.
Paycheck Protection Liquidity Facility are classified as Level 2.
Other borrowings - The fair value of other borrowings 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 borrowings is classified as Level 2 due to their expected maturities.
Disclosures of the fair value of financial assets and financial liabilities, including those financial assets
and financial liabilities that are not measured and reported at fair value on a recurring basis or non-
recurring basis, are required in the financial statements.
The carrying amount, estimated fair values, and placement in the fair value hierarchy of the Company’s
financial instruments are as follows:
(Dollars in thousands)
December 31, 2020
Assets
Cash and short-term investments
Investment securities available for sale
Other investments at cost
Loans held for sale
Loans, net
Liabilities
Deposits
Federal Home Loan Bank advances
PPPLF
Other borrowed money
December 31, 2019
Assets
Cash and short-term investments
Investment securities available for sale
Other investments at cost
Loans held for sale
Loans, net
Liabilities
Deposits
Federal Home Loan Bank advances
Other borrowed money
Carrying
Amount
Estimated
Fair Value
1
Level
2
3
$ 183,506 $ 183,506
380,814
380,814
3,296
3,296
52,386
52,386
1,047,376
1,063,785
$ 183,506
245
–
–
–
$
–
380,569
3,296
52,386
–
$
–
–
–
–
1,063,785
1,445,027
22,500
106,789
37,792
1,445,984
20,817
106,789
37,792
–
–
–
–
1,445,984
20,817
106,789
37,792
–
–
–
–
$ 104,092 $ 104,092
347,332
347,332
4,288
4,288
10,076
10,076
938,475
961,951
$ 104,092
–
–
–
–
$
–
345,310
4,288
10,076
–
$
–
2,022
–
–
938,475
1,293,742
47,000
38,792
1,294,506
46,022
38,792
–
–
–
1,294,506
46,022
38,792
–
–
–
8 2
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 2 0
Notes to Consolidated Financial Statements
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.
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:
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 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, 2020 and 2019, 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, 2020 and 2019. Those impaired loans and
other real estate properties are shown net of the related specific reserves and valuation allowances.
8 3
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 2 0
Notes to Consolidated Financial Statements
Fair Value Measurements at
(Dollars in thousands)
December 31, 2020
Nonrecurring
Impaired loans
Other real estate
December 31, 2019
Nonrecurring
Impaired loans
Other real estate
Total Fair
Value
$
$
$
$
5,939
1,006
5,985
1,320
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Reporting Date Using
Significant
Other
Significant
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
$
$
$
$
–
–
–
–
$
$
$
$
–
–
–
–
$
$
5,939
1,006
$
$
5,985
1,320
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, 2020 and 2019. These tables are comprised primarily of collateral dependent impaired loans
and other real estate owned:
(Dollars in thousands)
Impaired loans
Other real estate
(Dollars in thousands)
Impaired loans
Other real estate
December 31,
2020
$
$
5,939
1,006
December 31,
2019
$
$
5,985
1,320
Valuation
Techniques
Appraised value
Appraised value/
Comparable sales
Valuation
Techniques
Appraised value
Appraised value/
Comparable sales
Unobservable
Inputs
Discounts to reflect current market
conditions, ultimate collectability,
and estimated costs to sell
Discounts to reflect current market
conditions and estimated costs to sell
Unobservable
Inputs
Discounts to reflect current market
conditions, ultimate collectability,
and estimated costs to sell
Discounts to reflect current market
conditions and estimated costs to sell
Range
Weighted Avg
25%-100%
0%-20%
Range
Weighted Avg
0%-20%
0%-20%
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, 2020 and 2019:
(Dollars in thousands)
Beginning balance
Accretion (amortization) of discounts and premiums
Unrealized gains (loss) included in other comprehensive income (loss)
Transfer to Level 2
Ending balance
$ 2,022
–
(21)
(2,001)
–
$
2019
$ 2,009
(18)
31
–
$ 2,022
Available for Sale Securities
2020
8 4
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 2 0
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 a transfer of one security from level 3 to level 2 for the year ended December
31, 2020. There were no transfers of securities between level 1 and level 2 or level 3 for the year ended
December 31, 2019.
The following table presents quantitative information about recurring level 3 fair value measurements as
of December 31, 2019:
(Dollars in thousands)
Corporate debt securities
$
December 31, 2019
Valuation
Techniques
Discounted cash flow
Fair
Value
2,022
Unobservable
Inputs
Discount rate or yield
Range
(Weighted Avg)
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
18. 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, 2020, 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, 2020, 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.
The Bank is participating in the PPP and the PPPLF to fund PPP Loans. In accordance with regulatory
guidance, PPP loans pledged as collateral for PPPLF, and PPPLF advances, are excluded from leverage
capital ratios. PPP loans will also carry a 0% risk-weight for risk-based capital rules.
8 5
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 2 0
Notes to Consolidated Financial Statements
The following table summarizes regulatory capital information as of December 31, 2020 and December
31, 2019 on a consolidated basis and for the subsidiary, as defined. Regulatory capital ratios for December 31,
2020 and 2019 were calculated in accordance with the Basel III rules.
Actual
Amount
Ratio
For Capital
Adequacy Purposes
Ratio
Amount
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Ratio
Amount
$ 155,447
164,050
13.78%
14.55
$ 90,245
90,199
8.00 %
8.00
N/A
112,749
N/A
10.00%
143,320
151,923
12.71
13.48
67,657
67,622
6.00
6.00
N/A
90,162
N/A
8.00
119,820
151,923
10.62
13.48
50,771
50,716
143,320
151,923
8.49
9.12
67,524
66,633
4.50
4.50
4.00
4.00
N/A
73,257
N/A
6.50
N/A
83,291
N/A
5.00
$ 140,973
151,444
13.17%
14.19
$ 85,661
85,407
8.00%
8.00
N/A
106,758
N/A
10.00%
134,110
144,581
12.52
13.54
64,246
64,055
6.00
6.00
N/A
85,407
N/A
8.00
110,610
144,581
134,110
144,581
10.33
13.54
8.92
9.77
48,185
48,041
60,141
59,977
4.50
4.50
4.00
4.00
N/A
69,393
N/A
6.50
N/A
74,972
N/A
5.00
(Dollars in thousands)
As of December 31, 2020
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, 2019
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
8 6
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 2 0
Notes to Consolidated Financial Statements
19. FINANCIAL INFORMATION OF COLONY BANKCORP, INC. (PARENT ONLY)
The parent company’s balance sheets as of December 31, 2020 and 2019 and the related statements of
operations and comprehensive income (loss) and cash flows for each of the years in the two-year period then
ended are as follows:
Balance Sheets
(Dollars in thousands)
Assets
Cash
Premises and equipment, net
Investment in subsidiaries
Other
Total assets
Liabilities and stockholders’ equity
Liabilities
Other borrowed money
Other
Subordinated debt
Total liabilities
Stockholders’ equity
Common stock, par value $1.00; 20,000,000 shares authorized,9,498,783
$
$
$
$
shares issued and outstanding as of December 31, 2020 and 2019, respectively
Paid-in capital
Retained earnings
Accumulated other comprehensive income, net of tax
Total stockholder’s equity
Total liabilities and stockholders’ equity
$
December 31,
2020
2,672
–
179,172
570
182,414
13,563
134
24,229
37,926
9,499
43,215
84,993
6,781
144,488
182,414
2019
$
2,049
1,171
165,836
483
$ 169,539
$
$
14,563
241
24,229
39,033
9,499
43,667
76,978
362
130,506
$ 169,539
Statements of Income
(Dollars in thousands)
Income
Dividends from subsidiaries
Management fees
Other
Total income
Expenses
Interest
Salaries and employee benefits
Other
Total expenses
Income before income taxes and equity in
undistributed earnings of subsidiaries
Income tax benefit
Income before equity in undistributed earnings of subsidiaries
Equity in undistributed earnings of subsidiaries
Net income
8 7
For The Years Ended
December 31,
2020
2019
$
$
6,100
–
28
6,128
1,223
284
428
1,935
4,193
(218)
4,411
7,404
11,815
$
$
6,731
750
18
7,499
1,541
1,097
1,262
3,899
3,600
(639)
4,239
5,972
10,211
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 2 0
Notes to Consolidated Financial Statements
Statements of Cash Flows
(Dollars in thousands)
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 subsidiaries
Change in interest payable
Other
Net cash provided by operating activities
Cash flows from investing activities
Purchase of premises and equipment
Proceeds from sale of premises and equipment
Net cash and cash equivalents paid in acquisition
Net cash (used in) provided by investing activities
Cash flows from financing activities
Net increase (decrease) in other borrowed money
Dividends paid for common stock
Net cash (used in) provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
For The Years Ended
December 31,
2020
2019
$
11,815
$
10,211
70
33
(7,404)
(51)
(354)
4,109
–
1,314
–
1,314
(1,000)
(3,800)
(4,800)
623
2,049
2,672
$
81
34
(5,972)
21
1,065
5,440
(54)
–
(16,145)
(16,199)
14,563
(2,692)
11,871
1,112
937
2,049
$
20. EARNINGS PER SHARE
The following table presents earnings per share for the years ended December 31, 2020 and 2019:
(Dollars in thousands, except per share amounts)
Numerator
Net income available to common stockholders
Denominator
Weighted average number of common shares outstanding
for basic earnings per common share
Dilutive effect of potential common stock
Restricted stock
Weighted average number of common shares outstanding
for diluted earnings per common share
Earnings per share - basic
Earnings per share - diluted
2020
2019
$
11,815
$
10,211
9,498,783
9,129,705
–
–
9,498,783
1.24
$
1.24
$
9,129,705
1.12
$
1.12
$
8 8
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 2 0
Notes to Consolidated Financial Statements
21. SEGMENT INFORMATION
The Company’s operating segments include banking, mortgage banking and small business specialty
lending division. The reportable segments are determined by the products and services offered, and internal
reporting. The Bank segment derives its revenues from the delivery of full-service financial services,
including retail and commercial banking services and deposit accounts. The Mortgage Banking segment
derives its revenues from the origination and sales of residential mortgage loans held for sale. The Small
Business Specialty Lending Division segment derives its revenue from the origination, sales and servicing
of Small Business Administration loans and other government guaranteed loans. Segment performance is
evaluated using net interest income and noninterest income. Income taxes are allocated based on income
before income taxes, and indirect expenses (includes management fees) are allocated based on various
internal factors for each segment. Transactions among segments are made at fair value. The following tables
present information reported internally for performance assessment as of December 31, 2020 and 2019:
(Dollars in thousands)
Net interest income
Provision for loan losses
Noninterest income
Noninterest expenses
Income taxes
Net income/(loss)
Total assets
(Dollars in thousands)
Net interest income
Provision for loan losses
Noninterest income
Noninterest expenses
Income taxes
Net income/(loss)
Total assets
December 31, 2020
Bank
$
54,089
6,558
13,288
46,990
2,653
$
11,176
$ 1,709,696
Mortgage
Banking
603
$
–
9,106
8,137
324
$ 1,248
$ 50,266
Small
Business
Specialty
Lending
Division
553
$
–
1,850
3,174
(162)
(609)
$
$ 4,012
Totals
$
55,245
6,558
24,244
58,301
2,815
11,815
$
$ 1,763,974
December 31, 2019
Bank
$
47,681
1,104
10,865
43,666
2,642
$
13,217
$ 1,503,284
Mortgage
Banking
$
164
–
3,139
3,257
10
$
36
$ 11,624
Small
Business
Specialty
Lending
Division
–
$
–
–
1,213
(254)
(959)
405
$
$
Totals
$
47,845
1,104
14,004
48,136
2,398
$
10,211
$ 1,515,313
8 9
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 2 0
and regulatory limitations, and general economic
conditions. No assurance can be given that the
Company 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 18 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, 2015, 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, 2015, 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
$250
$200
$150
$100
$50
Colony Bankcorp, Inc.
NASDAQ Composite
SNL Southeast Bank
12/31/15 12/31/16
12/31/17
12/31/18 12/31/19
12/31/20
Period Ending
Index
Colony Bankcorp, Inc. 100.00
NASDAQ Composite 100.00
100.00
SNL Southeast Bank
12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20
164.94
271.64
172.07
138.51 154.33
108.87
141.13
132.75 164.21
156.23
137.12
135.67
179.85
187.44
191.06
Market and Dividend Information
The common shares of Colony Bankcorp are
listed on the NASDAQ Global Market under
the symbol CBAN. As of March 22, 2021, the
Company estimates that it had approximately
2,145 shareholders, including approximately
1,187 beneficial owners holding shares in
nominee or “street” name.
The following table sets forth the high and low
common stock prices and cash dividends paid to
public stockholders in 2019 and 2020:
2020
First quarter
Second quarter
Third quarter
Fourth quarter
High
$ 16.49
$ 14.39
$ 13.21
$ 15.00
Dividends
Low Declared
$ 0.10
$ 0.10
$ 0.10
$ 0.10
$ 9.55
$ 8.70
$ 9.52
$ 12.41
2019
First quarter
Second quarter
Third quarter
Fourth quarter
$ 17.93
$ 18.95
$ 17.40
$ 16.50
$ 14.53
$ 16.06
$ 15.70
$ 14.95
$ 0.075
$ 0.075
$ 0.075
$ 0.075
Like many banks in the wake of the Great
Recession, Colony suspended dividend payments in
2009. In 2017, the Company reinstated its quarterly
cash dividend at a rate of $0.025 per share, or an
annual rate of $0.10 per share. The Company
increased its dividend rate to $0.05 per share, or
an annual rate of $0.20 per share, in 2018, and to
$0.075, or an annual rate of $0.30 per share, in
2019. In January 2020, Colony raised the quarterly
rate again to $0.10 per share, which represents an
indicated annual rate of $0.40 per share. Colony
has continued to pay the dividend throughout the
COVID pandemic crisis.
The continued payment of dividends will depend
on a number of factors, including the Company’s
capital requirements, its financial condition and
results of operations, tax considerations, statutory
9 0
Corporate Information
Corporate Headquarters
Post Office Box 989
115 South Grant Street
Fitzgerald, Georgia 31750
(229) 426-6000
Company Website
www.Colony.Bank
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
Mauldin & Jenkins, LLC
2303 Dawson Road
Albany, Georgia 31707
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, 2020, as filed with the
Securities and Exchange Commission,
will be furnished without charge to
shareholders as of the record date for
the 2021 Annual Meeting upon written
request to Tracie Youngblood, 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.Colony.Bank, under Shareholder
Information. Shareholder and other
investor-oriented inquiries may be
directed to Tracie Youngblood, Executive
Vice President/Chief Financial Officer at
the Company’s corporate headquarters.
Annual Meeting of Shareholders
The 2021 Annual Meeting of
Shareholders will be held at 11:00 a.m.,
local time, on Thursday, May 20, 2021.
The meeting will be held at our corporate
office, 115 S Grant Street, Fitzgerald, GA.
Shareholders as of March 26, 2021, the
record date for the meeting, are cordially
invited to attend.
Colony Bankcorp, Inc.
Post Office Box 989
115 South Grant Street
Fitzgerald, Georgia 31750
(229) 426.6000
www.Colony.Bank