Colony Bankcorp, Inc. — 2019 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2019; it is not a standalone fourth-quarter filing. Colony is a Georgia bank holding company operating through Colony Bank, with 33 banking offices and a focus on commercial, consumer and mortgage banking in Georgia.
Financial performance and condition
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Total assets, year-end | $1.515 billion | $1.252 billion | +21.0% |
| Total loans, year-end | $968.8 million | $781.5 million | +24.0% |
| Total deposits, year-end | $1.294 billion | $1.085 billion | +19.2% |
| Net interest income | $47.8 million | $40.8 million | +17.3% |
| Noninterest income | $14.8 million | $9.6 million | +53.4% |
| Noninterest expense | $48.9 million | $35.3 million | +38.5% |
| Net income | $10.2 million | $11.9 million | -14.3% |
| Diluted earnings per share | $1.12 | $1.40 | -20.0% |
Margins and returns. Tax-equivalent net interest margin was 3.59%, compared with 3.56% in 2018 (GAAP margin: 3.58% versus 3.55%). Return on average assets fell to 0.72% from 0.99%; return on average equity declined to 8.73% from 13.32%.
Cash flow. The supplied filing text refers to consolidated cash-flow statements but does not provide their figures, so operating, investing and financing cash flow values are not clear from the text.
Credit, capital and liquidity. The allowance for loan losses was $6.9 million, or 0.71% of loans, versus $7.3 million, or 0.93%, in 2018. Net charge-offs increased to $1.5 million from $0.4 million. Nonperforming loans were reported as $9.8 million; nonperforming assets were $11.1 million, or 0.74% of assets, compared with $11.3 million, or 0.90%, in 2018. The filing reports year-end stockholders’ equity of $130.5 million and regulatory capital ratios above applicable well-capitalized thresholds. Loans-to-deposits rose to 74.9% from 72.0%. Year-end deposits included $2.0 million of brokered CDs and $6.0 million of internet CDs.
Year-end securities totaled $347.3 million, all classified as available for sale. Contractual obligations included $24.2 million of subordinated debentures and $61.6 million of other borrowed money. Loan commitments were $102.9 million and standby letters of credit were $1.6 million.
Material changes versus 2018
- In May 2019, Colony acquired LBC Bancshares and its Calumet Bank subsidiary, issuing 1,053,875 shares valued at $18.7 million and paying $15.3 million in cash. The acquired business contributed materially to growth in assets, loans and deposits.
- Colony also acquired Planters First Bank’s PFB Mortgage division in May 2019 and added mortgage origination locations. Mortgage fee income increased to $3.2 million from $0.7 million.
- Net interest income increased with higher average earning assets, particularly loans; the company attributed much of the balance-sheet expansion to the LBC acquisition. Higher deposit and funding costs partly offset asset-yield gains.
- Noninterest expense rose substantially, including $2.7 million of acquisition-related costs and $0.6 million of deposit-intangible expense. Salaries and benefits increased 30.3%.
- Other income included an approximately $1.0 million gain from selling several foreclosed properties. Provision for loan losses increased to $1.1 million from $0.2 million.
- Dividends paid increased to $2.7 million from $1.7 million; the declared dividend was $0.30 per share versus $0.20.
Outlook, risks and other notable items
The filing gives no quantified earnings or growth guidance. Management said it expected continued improvement in substandard assets, citing stabilization in the economy, housing and real estate markets, but noted that future credit outcomes depend on economic conditions. Its year-end interest-rate model projected net interest income increases of 2.54% and 3.87% under +100 and +200 basis-point scenarios, respectively, and a 4.12% decline under a -100 basis-point scenario; these are model estimates, not guidance.
Key disclosed risks include Georgia market and real-estate concentration, credit quality and allowance adequacy, interest-rate and funding-cost changes, acquisition integration, competition, cybersecurity and third-party service-provider exposure, and regulatory requirements. The company specifically identified the emerging COVID-19 outbreak as a risk; the filing does not quantify its potential financial effect. Management reported no material pending legal proceedings and stated that internal control over financial reporting was effective. CECL adoption was expected to begin January 1, 2023; management did not expect a material effect on the then-current allowance valuation, while noting future effects would depend on portfolio and economic conditions.
Important facts for investors to verify
- Review the audited statements and notes for cash flows, acquisition accounting, purchase-credit marks, debt terms and any other details not included in the supplied text.
- Assess whether acquired LBC and PFB Mortgage operations can sustain revenue growth while controlling integration costs and the higher expense base.
- Examine commercial real-estate exposure, the allowance relative to loans and nonperforming loans, and the increase in net charge-offs. The filing’s nonperforming-asset table reports $11.1 million total assets and $9.8 million nonperforming loans; verify the underlying schedules and definitions.
- Evaluate deposit pricing, funding mix, loan-to-deposit trends and the sensitivity of earnings to rate changes and customer deposit repricing.
- Confirm the effects of COVID-19 and other local economic or weather events on borrowers, collateral values, credit losses, liquidity and the company’s outlook.