Colony Bankcorp, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. This is an annual filing; quarterly figures below identify the fourth quarter where relevant. Colony is a Georgia bank holding company operating through Colony Bank, with 29 banking offices in Georgia.
Financial performance and position
| Metric | 2013 | 2012 |
|---|---|---|
| Total assets | $1.149 billion | $1.139 billion |
| Total loans, before allowance | $751.2 million | $747.1 million |
| Total deposits | $987.5 million | $979.7 million |
| Net interest income | $37.7 million | $36.3 million |
| Noninterest income | $8.4 million | $9.7 million |
| Provision for loan losses | $4.5 million | $6.8 million |
| Noninterest expense | $34.6 million | $35.4 million |
| Net income | $4.6 million | $2.6 million |
| Net income available to common shareholders | $3.1 million; $0.37 diluted per share | $1.2 million; $0.14 diluted per share |
| Net interest margin | 3.61% | 3.41% |
| Return on average assets / equity | 0.28% / 3.34% | 0.11% / 1.25% |
| Stockholders’ equity | $90.0 million | $95.8 million |
Fourth-quarter 2013 net income available to common shareholders was $1.24 million, or $0.15 per diluted share, versus $203,000, or $0.02 per diluted share, in fourth-quarter 2012. The 2013 quarter included a $362,000 securities loss.
The filing text provided does not give clear cash-flow totals. Year-end debt included $40.0 million of Federal Home Loan Bank advances and $24.2 million of subordinated debentures. The Bank reported capital ratios of 10.72% Tier 1 leverage and 17.29% total risk-based capital; the Company reported 10.57% and 17.06%, respectively.
Changes versus prior year
- Common-shareholder income rose $1.91 million, or about 159%, primarily reflecting higher net interest income, a $2.30 million lower loan-loss provision, and lower noninterest expense. These benefits were partly offset by lower noninterest income and higher tax expense.
- Net interest margin improved to 3.61% from 3.41%, mainly as funding costs declined. Net interest income increased $1.42 million despite lower interest income.
- Noninterest income fell $1.36 million, chiefly because securities results swung from $2.84 million of gains in 2012 to a $364,000 loss in 2013. The 2013 loss included about $360,000 of other-than-temporary impairment.
- Credit quality improved, but remained a significant concern: nonperforming assets fell to $39.6 million from $46.2 million, and net charge-offs declined to $5.4 million from $9.7 million. The allowance for loan losses declined to $11.8 million, or 1.57% of loans, from $12.7 million, or 1.70%.
- Equity declined by $5.8 million. Accumulated other comprehensive loss widened to $9.1 million from $150,000, largely due to fair-value changes in available-for-sale securities.
Outlook, risks, and unusual items
- Management said 2014 priorities included resolving problem assets, closely monitoring real-estate-dependent lending, and pursuing new products and services to increase core noninterest income. Management expected interest rates to remain broadly flat through most of 2014 and anticipated future increases; no specific earnings guidance was provided.
- Real estate represented about 87% of loans. Nonperforming assets equaled 5.17% of loans and foreclosed assets; the allowance covered about 49% of nonperforming loans. Management reported continued identification of new problem loans and noted collateral-value declines in prior years.
- The Bank’s 2010 Memorandum of Understanding was lifted effective October 1, 2013 and replaced by a Board Resolution. At year-end, the Bank reported compliance with the resolution; regulatory approval requirements for dividends remained.
- No common dividends were paid in 2012 or 2013. The Company had not paid scheduled dividends on its TARP preferred stock since November 2011 and had deferred preferred dividends and interest on junior subordinated debentures to preserve holding-company cash. It planned to seek regulatory approval for payments after first-quarter 2014; approval was not assured. Deferred interest also restricts common and preferred stock dividends.
- Management identified potential sensitivity to economic and real-estate conditions, interest rates, loan-loss estimates, regulation, and funding competition. New Basel III capital requirements were scheduled to phase in beginning in 2015; management believed the Company and Bank would meet them on a fully phased-in basis.
- There were no material pending legal proceedings reported. Management assessed disclosure controls and internal control over financial reporting as effective; the filing did not include an auditor attestation of internal controls.
Important facts for investors to verify
- Whether asset-quality improvement continues, including trends in nonperforming loans, foreclosed real estate, charge-offs, collateral values, and allowance adequacy.
- The basis for the reduced loan-loss provision and the sensitivity of future provisions to management estimates and local real-estate conditions.
- Whether margin gains can persist as rates, deposit mix, loan yields, and funding costs change.
- The status of regulatory restrictions, the Board Resolution, dividend approvals, and deferred preferred-stock and subordinated-debt payments.
- Liquidity and funding risks, including the use of brokered and out-of-market deposits, large certificates of deposit, and FHLB advances; the filing lists $65.7 million of loan commitments and $1.4 million of standby letters of credit.
- Cash-flow performance and detailed cash-flow metrics, which are not clearly stated in the supplied filing text.