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Section 1: S-4/A (AMENDMENT NO. 1 TO FORM S-4)

Amendment No. 1 to Form S-4
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As filed with the Securities and Exchange Commission on February 11, 2019

Registration No. 333-229488

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Colony Bankcorp, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Georgia   6022   58-1492391

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

 

115 South Grant Street

Fitzgerald, Georgia 31750

(229) 426-6000

(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

 

 

Terry L. Hester

Executive Vice President and Chief Financial Officer

Colony Bankcorp, Inc.

115 South Grant Street

Fitzgerald, Georgia 31750

Tel: (229) 426-6000

(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)

 

 

 

With copies to:

Mark C. Kanaly

David S. Park

Alston & Bird, LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, Georgia 30309

(404) 881-7000

 

Michael N. White

John W. Sillay

James-Bates-Brannan-Groover-LLP

231 Riverside Drive

Macon, Georgia 31201

(478) 742-4280

 

 

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the proposed merger described herein have been satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this proxy statement/prospectus is not complete and is subject to change. Colony Bankcorp, Inc. may not sell the securities offered by this proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus shall not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED FEBRUARY 11, 2019

Proxy Statement/Prospectus

 

LOGO    LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

 

 

To the Shareholders of LBC Bancshares, Inc.:

The boards of directors of Colony Bankcorp, Inc., or Colony, and LBC Bancshares, Inc., or LBC, have each unanimously approved the acquisition of LBC by Colony. The acquisition will be accomplished pursuant to the terms of an Agreement and Plan of Merger, dated as of December 17, 2018, which we refer to as the merger agreement, by and between Colony and LBC, whereby LBC will be merged with and into Colony, which we refer to as the merger. Immediately following the merger of LBC with and into Colony, Calumet Bank, a wholly owned bank subsidiary of LBC, will merge with and into Colony’s wholly owned bank subsidiary, Colony Bank, with Colony Bank as the surviving bank, which we refer to as the bank merger.

If the merger is completed, each outstanding share of LBC common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive, at the election of each LBC shareholder, either (i) $23.50 in cash, or (ii) 1.3239 shares of Colony common stock. The election of stock consideration or cash consideration will be subject to proration such that 55% of the issued and outstanding shares of LBC common stock will be exchanged for Colony common stock and 45% will be exchanged for cash, and at least 50% of the merger consideration will be paid in Colony common stock. As a result, if the aggregate number of shares with respect to which a valid stock or cash election has been made exceeds these limits, shareholders who have elected the form of merger consideration that has been over-subscribed will receive a mixture of both stock consideration and cash consideration in accordance with the proration procedures set forth in the merger agreement so that such limits are not exceeded. Each option or warrant to purchase shares of LBC common stock shall be cancelled as of the effective time of the merger and converted into the right to receive a cash payment equal to the product of (i) the total number of shares of LBC common stock subject to such option or warrant, as applicable, times (ii) the excess, if any, of $23.50 over the exercise price per share of LBC common stock subject to such option or warrant, as applicable.

Although the number of shares of Colony common stock that LBC shareholders may choose to receive is fixed, the market value of the merger consideration will fluctuate with the market price of Colony common stock and will not be known at the time LBC shareholders vote on the merger. Colony common stock is currently quoted on the NASDAQ Global Market under the symbol “CBAN.” On December 17, 2018, the last full trading day before the public announcement of the merger agreement, based on the last reported sale price of Colony common stock of $16.10 per share, the 1.3239 exchange ratio represented approximately $21.31 in value for each share of LBC common stock to be converted into Colony common stock. Based on the most recent reported closing sale price of Colony common stock on February 8, 2019 of $15.95 per share, the exchange ratio represented approximately $21.12 in value for each share of LBC common stock to be converted into Colony common stock. Based on the exchange ratio and the number of shares of LBC common stock outstanding (assuming the exercise of all outstanding options and warrants), the maximum number of shares of Colony common stock offered by Colony and issuable in the merger is 1,152,073. We urge you to obtain current market quotations for the price of Colony common stock (trading symbol “CBAN”). There are no current market quotations for LBC common stock because LBC is a privately owned corporation and its common stock is not traded on any established public trading market.

LBC will hold a special meeting of its shareholders, referred to as the LBC special meeting, where LBC shareholders will be asked to consider and vote upon (1) a proposal to approve the merger agreement and the merger, and (2) a proposal to adjourn the LBC special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the merger agreement and the merger.

The LBC special meeting will be held at LBC’s headquarters located at 101 Calumet Center Road LaGrange, Georgia 30241, on March 21, 2019, at 3:30 p.m., Eastern Time, subject to any adjournment or postponement thereof.

Each of Colony and LBC expects that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, with the result that the portion of LBC common stock exchanged for Colony common stock will generally be tax-free and the portion of the LBC common stock exchanged for cash will generally be taxable as capital gain.

Your vote is important. Completion of the merger is subject to the approval of the merger agreement by the shareholders of LBC. Regardless of whether or not you plan to attend the LBC special meeting, please take the time to authorize a proxy to vote your shares in accordance with the instructions contained in this proxy statement/prospectus. Submitting a proxy now will not prevent you from being able to vote in person at the LBC special meeting.

The board of directors of LBC has determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of the shareholders of LBC, has unanimously approved the merger agreement and the merger and unanimously recommends that the shareholders of LBC vote “FOR” the proposal to approve the merger agreement and the merger and “FOR” the proposal to adjourn the LBC special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the merger agreement and the merger.

 

 

This proxy statement/prospectus describes the LBC special meeting, the merger, the merger agreement, other documents related to the merger and other related matters. Please carefully read this entire proxy statement/prospectus, including “Risk Factors,” beginning on page 24, for a discussion of the risks relating to the proposed merger. You also can obtain information about Colony from documents that it has filed with the Securities and Exchange Commission.

If you have any questions concerning the merger, please contact Leonard H. Bateman, Jr., President and Chief Executive Officer, at (706) 884-6000. We look forward to seeing you at the meeting.

 

/s/    Leonard H. Bateman, Jr.

Leonard H. Bateman, Jr.
President and Chief Executive Officer

LBC Bancshares, Inc.

Neither the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, nor any state securities commission or any other bank regulatory agency has approved or disapproved the securities to be issued in the merger or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The securities to be issued in the merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either Colony or LBC, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

The date of this proxy statement/prospectus is             , 2019, and it is first being mailed or otherwise delivered to the LBC shareholders on or about             , 2019.


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LBC BANCSHARES, INC.

101 Calumet Center Road

LaGrange, Georgia 30241

(706) 884-6000

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held on March 21, 2019

To the Shareholders of LBC Bancshares, Inc.:

A special meeting of the shareholders of LBC Bancshares, Inc., or LBC, will be held at LBC’s headquarters located at 101 Calumet Center Road, LaGrange, Georgia 30241, on March 21, 2019, at 3:30 p.m., Eastern Time, subject to any adjournment or postponement thereof, for the following purposes:

 

  1.

To consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of December 17, 2018, which we refer to as the merger agreement, by and between Colony Bankcorp, Inc., or Colony, and LBC, pursuant to which LBC will merge with and into Colony, with Colony as the surviving company, which is referred to herein as the merger, all on and subject to the terms and conditions contained herein; and

 

  2.

To consider and vote upon a proposal to adjourn the special meeting, referred to herein as the LBC special meeting, to a later date or dates if the board of directors of LBC determines such an adjournment is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the LBC special meeting to approve the merger agreement and the merger.

No other business may be conducted at the LBC special meeting. All holders of shares of common stock of LBC of record as of the close of business as of 5:00 p.m. Eastern Time on February 7, 2019 will be entitled to notice of and to vote at the LBC special meeting and any adjournments thereof. The LBC special meeting may be adjourned from time to time upon approval of holders of LBC common stock without any notice other than by announcement at the meeting of the adjournment thereof, and any and all business for which notice is hereby given may be transacted at such adjourned meeting.    

Holders of record of LBC common stock have the right to dissent from the merger agreement and the merger and obtain payment in cash of the appraised fair value of their shares of LBC common stock under applicable provisions of the Georgia Business Corporation Code, or GBCC. In order for a holder of LBC common stock to perfect his, her or its right to dissent, such holder must carefully follow the procedure set forth in the GBCC. A copy of the applicable statutory provisions of the GBCC is included as Annex C to the accompanying proxy statement/prospectus and a summary of these provisions can be found under the caption “The Merger— Dissenters’ Rights,” beginning on page 59 of the proxy statement/prospectus. The merger may not be completed if the holders of more than 10% of the outstanding shares of LBC common stock exercise dissenters’ rights.

If you have any questions concerning the merger agreement, the merger, the LBC special meeting or the proxy statement/prospectus, would like additional copies of the proxy statement/prospectus, need a proxy card or need help voting your shares of LBC common stock, please contact Leonard H. Bateman, Jr., President and Chief Executive Officer, at (706) 884-6000.

By Order of the Board of Directors,

/s/ Jared T. Jones            

Jared T. Jones

Chairman of the Board

LaGrange, Georgia

            , 2019


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The LBC board of directors unanimously recommends that holders of record of LBC common stock entitled to vote at the LBC special meeting vote “FOR” the proposal to approve the merger agreement and the merger and “FOR” the adjournment of the LBC special meeting if such adjournment is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the LBC special meeting to constitute a quorum or to approve the merger agreement and the merger.

Your Vote is Very Important

A proxy card is enclosed. Whether or not you plan to attend the LBC special meeting, if you are a holder of shares of LBC common stock, please vote by completing, signing and dating the proxy card and promptly mailing it in the enclosed envelope. You may also vote via the Internet or telephone by following the instructions on the proxy card. You may revoke your proxy in the manner described in the proxy statement/prospectus at any time before it is exercised. If you are a holder of shares of LBC common stock and attend the LBC special meeting, you may vote in person if you desire, even if you have previously returned your proxy card.


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ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Colony from documents filed with the Securities and Exchange Commission, or SEC, that are not included in or delivered with this proxy statement/prospectus. You can obtain any of the documents filed with or furnished to the SEC by Colony at no cost from the SEC’s website at http://www.sec.gov. You may also request copies of these documents, including documents incorporated by reference in this proxy statement/prospectus, at no cost by contacting Colony at the contact information set forth below:

 

Colony Bankcorp, Inc.
115 South Grant Street
Fitzgerald, Georgia 31750
Attention: Investor Relations
Telephone: (229) 426-6000

You will not be charged for any of these documents that you request. To obtain timely delivery of these documents, you must request them no later than five business days before the date of the special meeting, or March 14, 2019.

If you are a LBC shareholder and have any questions about the merger agreement, the merger, the LBC special meeting or the proxy statement/prospectus, would like additional copies of the proxy statement/prospectus, need a proxy card or need help voting your shares of LBC common stock, please contact Leonard H. Bateman, Jr., President and Chief Executive Officer, at (706) 884-6000.

You should rely only on the information contained in or incorporated by reference into this document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this document. This document is dated             , 2019, and you should assume that the information in this document is accurate only as of such date. You should assume that the information incorporated by reference into this proxy statement/prospectus from another document is accurate as of the date of such other document. Neither the mailing of this document to LBC shareholders nor the issuance by Colony of shares of Colony common stock in connection with the merger will create any implication to the contrary.

This document does not constitute an offer to sell, or a solicitation of an offer to buy any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Except where the context otherwise indicates, information contained in this document regarding LBC has been provided by LBC and information contained in this document regarding Colony has been provided by Colony. See “Where You Can Find More Information” for more details.


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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS

     1  

SUMMARY

     8  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     18  

SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION OF COLONY

     20  

COMPARATIVE MARKET PRICES AND DIVIDENDS

     22  

RISK FACTORS

     24  

Risks Related to the Merger

     24  

Risks Related to the Combined Company Following the Merger

     28  

Risks Related to an Investment in the Combined Company’s Common Stock

     29  

Risks Related to Tax

     30  

Risks Related to Colony’s Business

     30  

THE LBC SPECIAL MEETING

     31  

General

     31  

Date, Time and Place

     31  

Purpose of the LBC Special Meeting

     31  

Proposal One: Merger Proposal

     31  

Proposal Two: Adjournment Proposal

     31  

Recommendation of the LBC Board of Directors

     32  

Record Date; Shareholders Entitled to Vote

     32  

Quorum and Adjournment

     32  

Vote Required for Approval; Abstentions; Failure to Vote

     33  

Voting by LBC Directors and Executive Officers

     33  

LBC Common Stock Subject to Voting Agreements

     33  

Voting on Proxies by Holders of Record; Incomplete Proxies

     33  

Shares Held in “Street Name”

     34  

Revocability of Proxies and Changes to an LBC Shareholder’s Vote

     34  

Solicitation of Proxies

     35  

Attending the LBC Special Meeting; Voting in Person

     35  

Assistance

     35  

THE MERGER

     36  

General

     36  

Purchase Price and Purchase Price Adjustments

     36  

Background of the Merger

     36  

Colony’s Reasons for the Merger

     38  

LBC’s Reasons for the Merger

     39  

Opinion of LBC’s Financial Advisor

     41  

Board Composition and Management of Colony after the Merger

     49  

Interests of LBC’s Directors and Executive Officers in the Merger

     49  

Beneficial Ownership of LBC Common Stock by Management and Principal Shareholders of LBC

     52  

Regulatory Approvals Required for the Merger

     52  

Material U.S. Federal Income Tax Consequences

     54  

Accounting Treatment

     59  

Dissenters’ Rights

     59  

Exchange of Shares in the Merger

     61  

Listing of Colony Common Stock

     62  

 

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THE MERGER AGREEMENT

     63  

Structure of the Merger

     63  

Closing and Effective Time of the Merger

     63  

Organizational Documents of the Surviving Company

     63  

Board Composition and Management of Surviving Company

     64  

Merger Consideration

     64  

Procedures for Converting Shares of LBC Common Stock into Merger Consideration

     64  

Surrender of LBC Stock Certificates

     66  

Representations and Warranties

     67  

Definition of “Material Adverse Effect”

     69  

Covenants and Agreements

     69  

Regulatory Matters

     73  

NASDAQ Listing

     74  

Employee Matters

     74  

Indemnification and Directors’ and Officers’ Insurance

     75  

No Solicitation

     75  

Conditions to Completion of the Merger

     77  

Termination

     78  

Termination Fee

     79  

Effect of Termination

     79  

Amendment; Waiver

     80  

Expenses

     80  

ANCILLARY AGREEMENTS

     81  

Voting Agreements

     81  

Non-Competition and Non-Disclosure Agreements

     82  

Claims Letters

     82  

THE COMPANIES

     83  

Colony Bankcorp, Inc.

     83  

LBC Bancshares, Inc.

     83  

DESCRIPTION OF CAPITAL STOCK

     84  

COMPARISON OF RIGHTS OF COLONY SHAREHOLDERS AND LBC SHAREHOLDERS

     87  

LEGAL MATTERS

     100  

EXPERTS

     100  

WHERE YOU CAN FIND MORE INFORMATION

     100  

Annex A

     A-1  

Annex B

     B-1  

Annex C

     C-1  

 

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QUESTIONS AND ANSWERS

The following are answers to some questions that LBC shareholders may have regarding the proposed transaction between Colony and LBC and the proposals being considered at the LBC special meeting. Colony and LBC urge you to read carefully this entire proxy statement/prospectus, including the annexes, and the documents incorporated by reference into this proxy statement/prospectus, because the information in this section does not provide all the information that might be important to you.

Unless the context otherwise requires, references in this proxy statement/prospectus to: (1) “Colony” refer to Colony Bankcorp, Inc., a Georgia corporation, and its affiliates; (2) “Colony Bank” refer to Colony Bank, a Georgia state-chartered bank and the wholly owned bank subsidiary of Colony; (3) “LBC” refer to LBC Bancshares, Inc., a Georgia corporation, and its affiliates; and (4) “Calumet Bank” refer to Calumet Bank, a Georgia state-chartered bank and the wholly owned bank subsidiary of LBC.

 

Q:

Why am I receiving this proxy statement/prospectus?

 

A:

Colony and LBC have entered into an Agreement and Plan of Merger, dated as of December 17, 2018, which we refer to as the merger agreement. Pursuant to the merger agreement, LBC will merge with and into Colony, with Colony as the surviving company, which we refer to as the merger. Immediately after the merger, Calumet Bank, a wholly owned state-chartered bank subsidiary of LBC, will merge with and into Colony’s wholly owned bank subsidiary, Colony Bank, with Colony Bank as the surviving bank, which we refer to as the bank merger. A copy of the merger agreement is included in this proxy statement/prospectus as Annex A.

The merger cannot be completed unless, among other things, the majority of the outstanding shares of LBC common stock entitled to vote at the LBC special meeting vote in favor of the proposal to approve the merger agreement and the merger, which we refer to as the merger proposal.

In addition, LBC is soliciting proxies from its shareholders with respect to a proposal to approve one or more adjournments of the LBC special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of such adjournment to approve the merger proposal, which we refer to as the adjournment proposal. The completion of the merger is not conditioned upon shareholder approval of the adjournment proposal.

This proxy statement/prospectus contains important information about the merger agreement, the merger and the proposals being voted on at the LBC special meeting, and you should read it carefully. This is a proxy statement/prospectus because (1) LBC is soliciting proxies from the LBC shareholders and the proxy statement provides important information about the LBC special meeting to vote on the merger proposal and the adjournment proposal, and (2) Colony will issue shares of Colony common stock to holders of LBC common stock in connection with the merger, and the prospectus provides important information about such shares. The enclosed materials allow LBC shareholders to authorize a proxy to vote their shares without attending the LBC special meeting.

Your vote is important. We encourage you to authorize your proxy as soon as possible.

 

Q:

What will I receive in the merger?

 

A:

If the merger is completed, each outstanding share of LBC common stock issued and outstanding immediately prior to the effective time of the merger (other than shares of dissenting shareholders) will be converted into the right to receive, at the election of each LBC shareholder, either (i) $23.50 in cash, which we refer to as the cash consideration, or (ii) 1.3239 shares of Colony common stock, which we refer to as the stock consideration. The election of stock consideration or cash consideration will be subject to proration such that 55% of the issued and outstanding shares of LBC common stock will be exchanged for Colony common stock and 45% will be exchanged for cash, and at least 50% of the merger consideration

 

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  will be paid in Colony common stock. As a result, if the aggregate number of shares with respect to which a valid stock or cash election has been made exceeds these limits, shareholders who have elected the form of merger consideration that has been over-subscribed will receive a mixture of both stock consideration and cash consideration in accordance with the proration procedures set forth in the merger agreement so that such limits are not exceeded. The stock consideration and the cash consideration are collectively referred to as the merger consideration. Each option or warrant to purchase shares of LBC common stock shall be cancelled as of the effective time of the merger and converted into the right to receive a cash payment equal to the product of (i) the total number of shares of LBC common stock subject to such option or warrant, as applicable, times (ii) the excess, if any, of $23.50 over the exercise price per share of LBC common stock subject to such option or warrant, as applicable.

LBC may terminate the merger if (i) the average closing price of Colony common stock over the 20 trading days preceding the date that is five days prior to the closing date is less than $14.20, and (ii) the decline in the price of Colony’s common stock (as measured by the average closing price divided by $17.75) is more than 20% greater than the decline of the KBW Regional Banking Index (KRX) (as measured by dividing the average closing price of the KBW Regional Banking Index over the 20 trading days preceding the date that is five days prior to the closing date by $91.81); provided, however, Colony has the option, but not the obligation, to adjust the exchange ratio to prevent the termination of merger agreement.

Colony will not issue any fractional shares of Colony common stock in the merger. LBC shareholders who would otherwise be entitled to a fractional share of Colony common stock upon the completion of the merger will instead receive an amount in cash (without interest and rounded to the nearest whole cent) determined by multiplying the (i) fractional share interest in Colony common stock, rounded to the nearest one hundredth of a share, to which such holder would otherwise be entitled by (ii) $23.50.

 

Q:

How do I make an election to receive Colony common stock or cash for my LBC common stock?

 

A:

Each holder of record of LBC common stock will be mailed a form of election/letter of transmittal and other appropriate and customary transmittal materials not less than 20 business days prior to the election deadline. The deadline for holders of LBC common stock to elect the form of the merger consideration they want to receive is the later of (i) the date of the special meeting of LBC shareholders and (ii) the date which Colony and LBC agree is five business days prior to the anticipated effective time of the merger, which we refer to as the election deadline. The election form will specify the election deadline. Each holder of LBC common stock should specify in the election form (1) the number of shares of LBC common stock which such shareholder elects to have exchanged for the stock consideration, and (2) the number of shares of LBC common stock such shareholder elects to have exchanged for the cash consideration. All such elections are subject to adjustment on a pro rata basis as described elsewhere in this proxy statement/prospectus. Holders of LBC common stock will receive their merger consideration as promptly as practicable following the effective time of the merger, subject to the holders submitting their properly completed letter of transmittal and other transmittal materials. Because of the way the election and proration procedures work, even if you submit a properly completed and signed election form, it is possible that you may not receive exactly the type of merger consideration you have elected. If you do not submit a properly completed and signed election form to the exchange agent by the election deadline, you will have no control over the type of merger consideration you will receive and, as a result, you may receive only the cash consideration, only the stock consideration or a combination of the cash and stock consideration in the merger.

If you hold shares in “street name” through a bank, broker, nominee or other holder of record you must follow the instructions provided by the bank, broker, nominee or other holder of record to make an election.

 

Q:

Am I guaranteed to receive the type of merger consideration that I elect?

 

A:

No. If more LBC shareholders make valid elections to receive either shares of Colony common stock or cash than is available as either stock or cash consideration pursuant to the terms of the merger agreement,

 

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  LBC shareholders electing the over-subscribed form of merger consideration will have the over-subscribed consideration proportionately reduced and substituted with consideration in the other form. Please see “The Merger Agreement—Merger Consideration” and “—Procedures for Converting Shares of LBC Common Stock into Merger Consideration” both beginning on page 64 for additional information about the allocation and proration procedures that will be followed in the event of over-subscriptions.

 

Q:

What happens if I fail to make a valid election as to whether to receive stock or cash?

 

A:

If a LBC shareholder does not return a properly completed form of election by the election deadline, such holder’s shares of LBC common stock will be considered “non-election shares” and will be converted into the right to receive the stock consideration or the cash consideration according to the proration procedures set forth in the merger agreement. Any shareholder who has not submitted their physical stock certificate(s) with a form of election will be sent materials after the merger closes to effect the exchange of their LBC common stock into the merger consideration.

 

Q:

Will the value of the merger consideration change between the date of this proxy statement/prospectus and the time the merger is completed?

 

A:

Yes. The value of the merger consideration may fluctuate based upon the market value for Colony common stock between the date of this proxy statement/prospectus and the completion of the merger. In the merger, LBC shareholders may choose to receive 1.3239 shares of Colony common stock for each share of LBC common stock they hold. Any fluctuation in the market price of Colony common stock after the date of this proxy statement/prospectus will change the value of the shares of Colony common stock that LBC shareholders may receive.

 

Q:

How does LBC’s board of directors recommend that I vote at the special meeting?

 

A:

LBC’s board of directors unanimously recommends that you vote “FOR” the merger proposal and “FOR” the adjournment proposal.

 

Q:

When and where is the LBC special meeting?

 

A:

The LBC special meeting will be held at LBC’s headquarters located at 101 Calumet Center Road, LaGrange, Georgia 30241, on March 21, 2019, at 3:30 p.m., Eastern Time.

 

Q:

What do I need to do now?

 

A:

After you have carefully read this proxy statement/prospectus and have decided how you wish to vote your shares, please authorize a proxy to vote your shares by promptly completing and returning the enclosed proxy card so that your shares are represented and voted at the LBC special meeting. When complete, sign, date and mail your proxy card in the enclosed postage-paid return envelope as soon as possible. If you are a registered shareholder, you may also vote via the Internet or telephone by following the instructions on the proxy card. Submitting your proxy by mail, voting via the Internet or telephone or directing your bank or broker to vote your shares will ensure that your shares are represented and voted at the LBC special meeting. Your proxy card must be received prior to the special meeting on March 21, 2019, in order to be counted.

 

Q:

What constitutes a quorum for the LBC special meeting?

 

A:

Holders representing at least a majority of the issued and outstanding shares of LBC common stock entitled to vote at the LBC special meeting must be present, in person or represented by proxy, to constitute a

 

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  quorum. Abstentions and broker non-votes, if any, will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum. If a quorum is not present, the LBC special meeting will be postponed until the holders of the number of shares of LBC common stock required to constitute a quorum attend. If you submit a properly executed proxy card, even if you abstain from voting, your shares of LBC common stock will be counted for purposes of determining whether a quorum is present at the LBC special meeting. If additional votes must be solicited to approve the merger proposal, it is expected that the LBC special meeting will be adjourned to solicit additional proxies.

 

Q:

What is the vote required to approve each proposal?

 

A:

The merger proposal requires the affirmative vote of a majority of the issued and outstanding shares of LBC common stock entitled to vote at the LBC special meeting.

The adjournment proposal requires the affirmative vote of a majority of the votes cast on the matter.

 

Q:

What would happen if the adjournment proposal does not get approved by LBC shareholders?

 

A:

The completion of the merger is not conditioned upon shareholder approval of the adjournment proposal. If a quorum is present at the LBC special meeting and the adjournment proposal is not approved and there are not sufficient votes at the time of the LBC special meeting to approve the merger proposal, then the LBC board of directors will not have the ability to adjourn to solicit additional votes and the merger proposal will not be approved.

 

Q:

Why is my vote important?

 

A:

If you do not submit a proxy or vote in person, it may be more difficult for LBC to obtain the necessary quorum to hold the special meeting. In addition, your failure to submit a proxy or vote in person, or failure to instruct your bank or broker how to vote, or abstention will have the same effect as a vote against approval of the merger proposal. The merger proposal must be approved by the affirmative vote of the holders of at least a majority of the outstanding shares of LBC common stock. LBC’s board of directors unanimously recommends that you vote “FOR” the merger proposal.

 

Q:

How many votes do I have?

 

A:

LBC shareholders are entitled to one vote on each proposal to be considered at the special meeting for each share of LBC common stock owned as of the close of business on February 7, 2019, which is the record date for the LBC special meeting.

 

Q:

How do I vote?

 

A:

If you are a shareholder of record, you may have your shares of LBC common stock voted on the matters to be presented at the LBC special meeting in any of the following ways:

 

   

You may vote by mail. You may vote by mail by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope.

 

   

You may vote by telephone. If you are a registered shareholder, that is, if you hold your stock in your own name, you may vote by telephone by following the instructions included with the proxy card. If you vote by telephone, you do not have to mail in your proxy card.

 

   

You may vote on the Internet. If you are a registered shareholder, that is, if you hold your stock in your own name, you may vote on the Internet by following the instructions included with the proxy card. If you vote on the Internet, you do not have to mail in your proxy card.

 

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You may vote in person at the meeting. You may vote by attending the special meeting and casting your vote in person.

If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you. Your bank, brokerage firm or other nominee cannot vote your shares without instructions from you. Please note that if you are a beneficial owner and wish to vote in person at the special meeting, you must obtain a legal proxy from your bank, brokerage firm or other nominee.

 

Q:

Do LBC directors and executive officers have interests in the merger that are different from, or in addition to, my interests?

 

A:

Yes. In considering the recommendation of the LBC board of directors with respect to the merger agreement, you should be aware that LBC’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of LBC’s shareholders generally. Interests of officers and directors that may be different from or in addition to the interests of LBC’s shareholders include but are not limited to the receipt of continued indemnification and directors’ and officers’ insurance coverage under the merger agreement, payment of change in control payments and employment agreement payments to certain executives and entry into a new employment agreement with Colony Bank.

 

Q:

What if I abstain from voting, fail to authorize a proxy or fail to vote in person?

 

A:

If you mark “ABSTAIN” on your proxy with respect to the merger proposal, fail to authorize a proxy or fail to vote in person at the LBC special meeting, or fail to instruct your bank or broker how to vote, it will have the same effect as a vote “AGAINST” the merger proposal and no effect on the adjournment proposal. If you sign your proxy but do not indicate your vote, your proxy will be voted “FOR” each proposal.

 

Q:

Can I attend the special meeting and vote my shares in person?

 

A:

Yes. All LBC shareholders as of the record date, including shareholders of record and shareholders who hold their shares through any other holder of record, are invited to attend the LBC special meeting. Holders of record of LBC common stock can vote in person at the LBC special meeting. If you are not a shareholder of record, you must obtain a proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the LBC special meeting. If you plan to attend the LBC special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted. LBC reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the LBC special meeting is prohibited without express written consent. Even if you plan to attend the special meeting, LBC encourages you to vote by proxy through the mail so your vote will be counted if you later decide not to attend the special meeting.

 

Q:

Can I change my vote?

 

A:

Yes. If you are a holder of record of LBC common stock, you may revoke your proxy at any time prior to the LBC special meeting by: (1) delivering written notice of revocation to Leonard H. Bateman, Jr., President and Chief Executive Officer, LBC Bancshares, Inc., 101 Calumet Center Road, LaGrange, Georgia 30241, (2) by returning a duly executed proxy card bearing a later date than the date with which your original proxy card was dated, (3) voting by telephone or on the Internet (your latest telephone or Internet vote will be counted) or (4) by attending the LBC special meeting and voting in person. Your attendance at the LBC special meeting will not constitute automatic revocation of the proxy unless you deliver your ballot in person at the special meeting or deliver a written revocation pursuant to the instructions above prior to the voting of such proxy.

 

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Q:

Will LBC be required to submit the merger proposal to its shareholders even if LBC’s board of directors has withdrawn, modified or qualified its recommendation?

 

A:

Yes. Unless the merger agreement is terminated before the LBC special meeting, LBC is required to submit the merger proposal to its shareholders even if LBC’s board of directors has withdrawn, modified or qualified its recommendation.

 

Q:

What are the material U.S. federal income tax consequences of the merger to U.S. holders of shares of LBC common stock?

 

A:

Each of Colony and LBC expects that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, with the result that the portion of LBC common stock exchanged for Colony shares will generally be tax-free and the portion of the LBC common stock exchanged for cash will generally be taxable as capital gain.

For further information, see “The Merger—Material U.S. Federal Income Tax Consequences.”

The U.S. federal income tax consequences described above may not apply to all holders of LBC common stock. Your particular tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your independent tax advisor for a full understanding of the particular tax consequences of the merger to you.

 

Q:

Are LBC shareholders entitled to exercise dissenters’ rights?

 

A:

Yes. Holders of record of LBC voting common stock are entitled to exercise dissenters’ rights in connection with the merger, provided such holders comply with the proper procedures of Article 13 of the Georgia Business Corporation Code, or GBCC. A copy of Article 13 of the GBCC is attached as Annex C to this proxy statement/prospectus. Holders of LBC voting common stock who desire to exercise dissenters’ rights pursuant to Article 13 of the GBCC are urged to consult a legal advisor before electing or attempting to exercise these rights. The value determined in the appraisal process may be more or less than the value an LBC shareholder would receive in the merger under the terms of the merger agreement. Failure to strictly comply with the applicable Georgia law provisions will result in the loss of the right of appraisal. For further information, see “The Merger—Dissenters’ Rights.”

Pursuant to the merger agreement, the merger may not be completed if dissenters’ rights of appraisal are properly asserted with respect to 10% or more of the outstanding shares of LBC common stock.

 

Q:

Should I send my LBC stock certificates with my proxy card for the LBC special meeting?

 

A:

No. You should NOT send your LBC stock certificates with your proxy card. Colony, through its appointed exchange agent, will send LBC shareholders separate instructions for exchanging LBC stock certificates and LBC common stock held in book-entry form for the merger consideration.

 

Q:

What happens if I sell or transfer ownership of shares of LBC common stock after the record date for the LBC special meeting?

 

A:

The record date for the LBC special meeting is earlier than the expected date of completion of the merger. Therefore, if you sell or transfer ownership of your shares of LBC common stock after the record date for the LBC special meeting, but prior to completion of the merger, you will retain the right to vote at the LBC special meeting, but the right to receive the merger consideration will transfer with the shares of LBC common stock.

 

Q:

Whom may I contact if I cannot locate my LBC stock certificate(s)?

 

A:

If you are unable to locate your original LBC stock certificate(s), you should contact Leonard H. Bateman, Jr., President and Chief Executive Officer, at (706) 884-6000. Generally, merger consideration for lost

 

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  certificates cannot be delivered except upon the making of an affidavit claiming such certificate to be lost, stolen or destroyed and the posting of a bond in such amount as Colony or the exchange agent may determine is reasonably necessary as indemnity against any claim that may be made with respect to such lost certificate.

 

Q:

When do you expect to complete the merger?

 

A:

Colony and LBC expect to complete the merger in the first half of 2019. However, neither Colony nor LBC can assure you when or if the merger will occur. Colony and LBC must first obtain the approval of LBC shareholders for the merger proposal, as well as the necessary regulatory approvals.

 

Q:

What happens if the merger is not completed?

 

A:

If the merger is not completed, holders of LBC common stock will not receive any consideration for their shares of LBC common stock that otherwise would have been received in connection with the merger. Instead, LBC will remain an independent private company. If the merger is completed but, for any reason, the bank merger is not completed, it will have no impact on the consideration to be received by holders of LBC common stock.

 

Q:

Whom should I call with questions?

 

A:

If you have any questions concerning the merger agreement, the merger or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus or need help voting your shares of LBC common stock, please contact Leonard H. Bateman, Jr., President and Chief Executive Officer, at (706) 884-6000.

 

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SUMMARY

This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you. We urge you to read carefully the entire proxy statement/prospectus, including the annexes, and the other documents to which we refer in order to fully understand the merger. See “Where You Can Find More Information.” Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.

The Companies (page 83)

Colony Bankcorp, Inc.

115 South Grant Street

Fitzgerald, Georgia 31750

(229) 426-6000

Colony was incorporated in Georgia on November 8, 1982 and serves as the bank holding company for Colony Bank, headquartered in Fitzgerald, Georgia. As of December 31, 2018, Colony had consolidated assets of approximately $1.25 billion, loans of $781.5 million, deposits of $1.09 billion, and stockholders’ equity of $95.7 million. As of December 31, 2018, Colony operated 27 domestic banking offices and two corporate operations offices in Georgia. Colony Bank’s deposits are insured by the FDIC.

Additional information about Colony and its subsidiaries is included in documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information.”

LBC Bancshares, Inc.

101 Calumet Center Road

LaGrange, Georgia 30241

(706) 884-6000

LBC was incorporated in Georgia in 2008 and owns all of the outstanding shares of common stock of Calumet Bank, a Georgia chartered bank headquartered in LaGrange, Georgia. As of December 31, 2018, LBC had consolidated total assets of $206.6 million, net loans of $135.3 million, deposits of $182.3 million and stockholders’ equity of $19.5 million. LBC operates two full service offices in Georgia. Calumet Bank’s deposits are insured by the FDIC.

Additional information about LBC and its subsidiaries is included below under “The Companies” beginning on page 83.

The Merger

The Merger Agreement (page 63)

Colony and LBC entered into an Agreement and Plan of Merger, dated as of December 17, 2018, which we refer to as the merger agreement. The merger agreement governs the merger. The merger agreement is included in this proxy statement/prospectus as Annex A. All descriptions in this summary and elsewhere in this proxy statement/prospectus of the terms and conditions of the merger are qualified by reference to the merger agreement. Please read the merger agreement carefully for a more complete understanding of the merger.

The Merger (page 36)

Pursuant to the merger agreement, LBC will merge with and into Colony, with Colony as the surviving company, which we refer to as the merger. Immediately after the merger, Calumet Bank, a wholly owned bank subsidiary



 

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of LBC, will merge with and into Colony’s wholly owned bank subsidiary, Colony Bank, with Colony Bank as the surviving bank, which we refer to as the bank merger.

The Merger Consideration (page 64)

If the merger is completed, each outstanding share of LBC common stock issued and outstanding immediately prior to the effective time of the merger (other than shares of dissenting shareholders) will be converted into the right to receive, at the election of each LBC shareholder, either (i) $23.50 in cash, which we refer to as the cash consideration, or (ii) 1.3239 shares of Colony common stock, which we refer to as the stock consideration. The election of stock consideration or cash consideration will be subject to proration such that 55% of the issued and outstanding shares of LBC common stock will be exchanged for Colony common stock and 45% will be exchanged for cash, and at least 50% of the merger consideration will be paid in Colony common stock. As a result, if the aggregate number of shares with respect to which a valid stock or cash election has been made exceeds these limits, shareholders who have elected the form of merger consideration that has been over-subscribed will receive a mixture of both stock consideration and cash consideration in accordance with the proration procedures set forth in the merger agreement so that such limits are not exceeded. The stock consideration and the cash consideration are collectively referred to as the merger consideration. On December 17, 2018, the last full trading day before the public announcement of the merger agreement, based on the last reported sale price of Colony common stock of $16.10 per share, the 1.3239 exchange ratio represented approximately $21.31 in value for each share of LBC common stock to be converted into Colony common stock. Based on the most recent reported closing sale price of Colony common stock on February 8, 2019 of $15.95 per share, the exchange ratio represented approximately $21.12 in value for each share of LBC common stock to be converted into Colony common stock. Based on the exchange ratio and the number of shares of LBC common stock outstanding (assuming the exercise of all outstanding options and warrants), the maximum number of shares of Colony common stock offered by Colony and issuable in the merger is 1,152,073.

LBC may terminate the merger if (i) the average closing price of Colony common stock over the 20 trading days preceding the date that is five days prior to the closing date is less than $14.20, and (ii) the decline in the price of Colony’s common stock (as measured by the average closing price divided by $17.75) is more than 20% greater than the decline of the KBW Regional Banking Index (KRX) (as measured by dividing the average closing price of the KBW Regional Banking Index over the 20 trading days preceding the date that is five days prior to the closing date by $91.81); provided, however, Colony has the option, but not the obligation, to adjust the exchange ratio to prevent the termination of merger agreement.

Each option or warrant to purchase shares of LBC common stock shall be cancelled as of the effective time of the merger and converted into the right to receive a cash payment equal to the product of (i) the total number of shares of LBC common stock subject to such option or warrant, as applicable, times (ii) the excess, if any, of $23.50 over the exercise price per share of LBC common stock subject to such option or warrant, as applicable.

Colony will not issue any fractional shares of Colony common stock in the merger. LBC shareholders who would otherwise be entitled to a fractional share of Colony common stock upon the completion of the merger will instead receive an amount in cash (without interest and rounded to the nearest whole cent) determined by multiplying the (i) fractional share interest in Colony common stock, rounded to the nearest one hundredth of a share, to which such holder would otherwise be entitled by (ii) $23.50.

Election and Exchange Procedures (page 64)

At least 20 business days prior to the later of (1) the date of the LBC shareholders’ meeting or (2) a date agreed upon by LBC and Colony that is as near as practicable to five business days prior to the expected closing date, which date we refer to as the election deadline, Colony will cause the exchange agent to send the LBC



 

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shareholders election forms, which will include the appropriate form of letter of transmittal. LBC shareholders can specify on such election form the number of their shares of LBC common stock for which they desire to receive the cash consideration, the number of shares for which they desire to receive the stock consideration or to indicate that such shareholder has no preference as to the receipt of the cash consideration or stock consideration. The election forms must be returned to the exchange agent, along with certificates representing the shares subject to such election form, or a customary affidavit of loss and indemnity agreement, by the election deadline. Any shares of LBC common stock for which an election has not been properly made by the election deadline will be considered non-election shares. No later than five business days after the effective time of the merger, the exchange agent will allocate the merger consideration, as discussed in further detail below under “The Merger Agreement—Procedures for Converting Shares of LBC Common Stock into Merger Consideration.” However, pursuant to the merger agreement, the total mix of cash consideration and stock consideration to be issued by Colony to holders of LBC common stock will be fixed at 55% stock and 45% cash, and at least 50% of the merger consideration will be paid in Colony common stock.

Exchange Procedures (page 64)

The conversion of LBC common stock into the right to receive the merger consideration will occur automatically at the effective time of the merger. After completion of the merger, the exchange agent will exchange certificates representing shares of LBC common stock for the merger consideration to be received pursuant to the terms of the merger agreement.

Ancillary Agreements

Voting Agreements (page 81)

As a condition to Colony entering into the merger agreement, all directors of LBC and Calumet Bank who have voting power over shares of LBC common stock entered into voting agreements in the form attached as Exhibit A to the merger agreement attached as Annex A to this document, pursuant to which each such person agreed, among other things, to vote the shares of LBC common stock held of record by such person (1) to approve the merger agreement and the merger (or any adjournment or postponement necessary to solicit additional proxies to approve the merger agreement and the merger) and (2) against any acquisition proposals or any actions that would result in a breach of any covenant, representation or warranty of LBC in the merger agreement.

Non-Competition and Non-Disclosure Agreements (page 82)

In addition, as a condition to Colony entering into the merger agreement, each director of LBC and Calumet Bank entered into non-competition and non-disclosure agreements with Colony in the form attached as Exhibit C to the merger agreement attached as Annex A to this document, pursuant to which each such person agreed to, among other things, (1) not disclose or use any confidential information or trade secrets of LBC for any purpose for so long as such information remains confidential information or a trade secret, (2) for a period of two years following the closing of the merger, not engage in certain competitive activities with Colony, including not soliciting employees and customers of LBC, and (3) for a period of two years following the closing of the merger, not serve as a director or management official of another financial institution in the counties in Georgia in which Calumet Bank operates a banking office as of the closing of the merger and each county contiguous to each of such counties.

Claims Letters (page 82)

At the time of the execution of the merger agreement, each director of LBC and Calumet Bank executed a letter agreement with Colony in the form attached as Exhibit D to the merger agreement attached as Annex A to this



 

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document, pursuant to which each such director released and discharged, effective upon the consummation of the merger, LBC and its subsidiaries, their respective directors and officers (in their capacities as such), and their respective successors and assigns (including Colony and Colony Bank), from any and all liabilities or claims that the director has or claims to have as of the effective time of the merger, with certain exceptions.

Risk Factors Related to the Merger (page 24)

Before voting at the LBC special meeting, you should carefully consider all the information contained in or incorporated by reference into this proxy statement/prospectus in deciding how to vote for the proposals presented in the proxy statement/prospectus.

The LBC Special Meeting (page 31)

The special meeting of LBC shareholders will be held on March 21, 2019, at 3:30 p.m. EasternTime, at LBC’s headquarters located at 101 Calumet Center Road, LaGrange, Georgia 30241. At the special meeting, LBC shareholders will be asked to:

 

   

approve the merger proposal; and

 

   

approve the adjournment proposal.

Only holders of record at the close of business on February 7, 2019, the LBC record date, will be entitled to vote at the LBC special meeting. Each outstanding share of LBC common stock is entitled to one vote on each proposal to be considered at the LBC special meeting. As of the LBC record date, there were 1,447,554 shares of LBC common stock entitled to vote at the LBC special meeting. All directors of LBC and Calumet Bank have entered into voting agreements with Colony, pursuant to which they have agreed, solely in their capacity as LBC shareholders, to vote all of their shares of LBC common stock in favor of the proposals to be presented at the LBC special meeting. As of the LBC record date, the directors who are parties to the voting agreements owned and were entitled to vote an aggregate of approximately 572,863 shares of LBC common stock, which represented approximately 39.6% of the shares of LBC common stock outstanding on that date. As of the LBC record date, the directors and executive officers of LBC and their affiliates beneficially owned and were entitled to vote 575,220 shares of LBC common stock, which represented approximately 39.7% of the shares of LBC common stock outstanding on that date. As of the LBC record date, Colony and its subsidiaries did not hold any shares of LBC common stock (other than shares held as fiduciary, custodian or agent), and its directors and executive officers or their affiliates did not hold any shares of LBC common stock.

To approve the merger proposal, the holders of at least a majority of the outstanding shares of LBC common stock entitled to vote on the proposal must vote in favor of the proposal. Your failure to submit a proxy or vote in person at the LBC special meeting, failure to instruct your bank or broker how to vote, or abstention with respect to the merger proposal will have the same effect as a vote against the merger proposal.

The adjournment proposal requires the affirmative vote of a majority of the votes cast on such matter.

If you mark “ABSTAIN” on your proxy with respect to the merger proposal, fail to authorize a proxy and fail to vote in person at the LBC special meeting, or fail to instruct your bank or broker how to vote, it will have the same effect as a vote “AGAINST” the merger proposal and no effect on the adjournment proposal. If you sign your proxy but do not indicate your vote, your proxy will be voted FOR each proposal.

Recommendation of the LBC Board (page 32)

LBC’s board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of LBC and its shareholders and has



 

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unanimously approved the merger, the merger agreement and the transactions contemplated by the merger agreement. LBC’s board of directors unanimously recommends that LBC shareholders vote “FOR” the merger proposal and “FOR” the adjournment proposal. For the factors considered by LBC’s board of directors in reaching its decision to approve the merger, see “The Merger—LBC’s Reasons for the Merger.”

Board Composition and Management of Colony after the Merger (page 49)

Each of the officers and directors of Colony immediately prior to the effective time of the merger will be the officers and directors of the surviving company from and after the effective time of the merger, until their respective successors have been duly elected, appointed or qualified or until their earlier death, resignation or removal in accordance with the articles of incorporation and bylaws of Colony.

Interests of LBC Directors and Executive Officers in the Merger (page 49)

LBC shareholders should be aware that LBC’s directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of LBC shareholders generally. These interests and arrangements may create potential conflicts of interest. LBC’s board of directors was aware of these interests and considered these interests, among other matters, in adopting and approving the merger agreement and the transactions contemplated by the merger agreement, including the merger, and in recommending that LBC shareholders vote in favor of the merger proposal.

These interests include:

 

   

certain executive officers of LBC have change in control agreements and employment agreements with LBC that provide for cash payments in the event of a qualifying termination of employment in connection with a change in control;

 

   

Mr. Bateman has entered into an agreement to terminate his employment agreement with LBC, effective as of the effective date of the merger, pursuant to which Mr. Bateman will receive a lump sum payment equal to $425,000 in exchange for a full release of claims in favor of LBC.

 

   

Mr. Bateman has entered into an employment agreement with Colony Bank, effective as of the effective date of the merger; and

 

   

the right to continued indemnification and directors’ and officers’ liability insurance coverage.

For a more complete description of these interests, see “The Merger—Interests of LBC’s Directors and Executive Officers in the Merger” and “The Merger Agreement—Indemnification and Directors’ and Officers’ Insurance.”

Dissenters’ Rights in the Merger (page 59)

Holders of record of LBC voting common stock are entitled to exercise dissenters’ rights in connection with the merger, provided the proper procedures of Article 13 of the GBCC are followed. A copy of Article 13 of the GBCC is attached as Annex C to this proxy statement/prospectus. LBC shareholders holding LBC voting common stock who desire to exercise dissenters’ rights pursuant to Article 13 of the GBCC are urged to consult a legal advisor before electing or attempting to exercise these rights.

Any holder of record of LBC voting common stock who objects to the merger, and who fully complies with all of the provisions of Article 13 of the GBCC, will be entitled to demand and receive payment for all (but not less than all) of his or her shares of LBC voting common stock if the merger is consummated.

An LBC shareholder who objects to the merger and desires to receive payment of the “fair value” of his or her shares of LBC voting common stock: (i) must deliver to LBC, prior to the time the shareholder vote on the



 

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merger agreement is taken, a written notice of such shareholder’s intent to demand payment for those shares of LBC voting common stock registered in the dissenting shareholder’s name if the merger is completed; and (ii) must not vote his or her shares of LBC voting common stock in favor of the merger agreement.

Within ten days after the later of the effective date, or the date on which LBC receives a payment demand, LBC will send a written offer to each holder of LBC voting common stock who complied with the provisions set forth in the dissenters’ notice to pay each such shareholder an amount that LBC estimates to be the fair value of those shares, plus accrued interest. A dissenting shareholder choosing to accept LBC’s offer of payment must do so by written notice to LBC within 30 days after receipt of LBC’s offer of payment. A dissenting shareholder not responding to that offer within the 30-day period will be deemed to have accepted the offer of payment. LBC must make payment to each shareholder who responds to the offer of payment within 60 days after the making of the offer of payment, or the effective date, whichever is later. If the shareholder believes that the amount offered is less than the fair value of the shareholder’s shares of LBC voting common stock or that the interest is incorrectly calculated, then the shareholder may notify LBC in writing of his or her own estimate of the fair value of his or her shares of LBC voting common stock and the amount of interest due and demand payment of his or her estimate. If a demand for payment remains unsettled, then LBC will commence a court proceeding to determine the fair value of the shares of LBC voting common stock and the accrued interest.

LBC shareholders should be aware that cash paid to dissenting shareholders in satisfaction of the fair value of their shares of LBC voting common stock will result in the recognition of any gain or loss realized for U.S. federal income tax purposes.

For further information, see “The Merger—Dissenters’ Rights.”

Pursuant to the merger agreement, Colony’s board of directors may terminate the merger agreement and abandon the merger if dissenters’ rights of appraisal are properly asserted with respect to more than 10.0% of the outstanding shares of LBC common stock.

Conditions to Completion of the Merger (page 77)

Currently, Colony and LBC expect to complete the merger in the first half of 2019. As more fully described in this proxy statement/prospectus and in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include, among others:

 

   

approval of the merger agreement by the holders of at least a majority of the outstanding shares of LBC common stock entitled to vote at the LBC special meeting;

 

   

the receipt of all required regulatory approvals for the merger, without the imposition of any material on-going conditions or restrictions, and the expiration of all regulatory waiting periods;

 

   

the absence of any legal restraint (such as an injunction or restraining order) that would prevent the consummation of the merger;

 

   

the effectiveness of the registration statement of which this proxy statement/prospectus forms a part;

 

   

each party’s receipt of a U.S. federal income tax opinion from its outside legal counsel, dated the closing date of the merger, confirming that the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code;

 

   

the Plan of Bank Merger in the form attached as Exhibit B to the merger agreement attached as Annex A to this document being executed and delivered;

 

   

the absence of 10% or more of the outstanding shares of LBC’s common stock exercising their dissenters’ rights; and

 

   

the absence of the occurrence of a material adverse effect on LBC or Colony.



 

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Neither Colony nor LBC can be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

Regulatory Approvals Required for the Merger (page 52)

Both Colony and LBC have agreed to use their reasonable best efforts to obtain all regulatory approvals (or waivers) required or advisable to complete the transactions contemplated by the merger agreement. These approvals include, among others, approval from the Board of Governors of the Federal Reserve System, or the Federal Reserve Board, the Federal Deposit Insurance Corporation, or the FDIC, the Georgia Department of Banking and Finance, or the Georgia DBF, and various securities and other regulatory authorities. The U.S. Department of Justice may also review the impact of the merger on competition. Colony and LBC have submitted all applications, waiver requests and notifications to obtain the required regulatory approvals. Although neither Colony nor LBC knows of any reason why these regulatory approvals cannot be obtained, Colony and LBC cannot be certain when or if they will be obtained, as the length of the review process may vary based on, among other things, requests by regulators for additional information or materials.

No Solicitation (page 75)

Under the merger agreement, LBC has agreed that it will not, and will cause its representatives not to, directly or indirectly, (1) initiate, solicit, induce or knowingly encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an acquisition proposal, (2) participate in any discussions or negotiations regarding any acquisition proposal or furnish, or otherwise afford access, to any person (other than Colony) any information or data with respect to LBC or any of its subsidiaries or otherwise relating to an acquisition proposal, (3) release any person from, waive any provisions of, or fail to enforce any confidentiality agreement or standstill agreement to which LBC is a party, or (4) enter into any agreement, confidentiality agreement, agreement in principle or letter of intent with respect to any acquisition proposal or approve or resolve to approve any acquisition proposal or any agreement, agreement in principle or letter of intent relating to an acquisition proposal.

However, prior to obtaining LBC’s required shareholder approval, LBC may, under certain specified circumstances, participate in negotiations or discussions with any third party making an acquisition proposal and provide confidential information to such third party (subject to a confidentiality agreement). LBC must notify Colony promptly (but in no event later than 24 hours) after the receipt of such acquisition proposal.

Additionally, prior to obtaining LBC’s required shareholder approval, LBC may, under certain specified circumstances, withdraw its recommendation to its shareholders with respect to the merger and/or terminate the merger agreement in order to enter into an acquisition agreement with respect to a superior acquisition proposal if it determines in good faith, after consultation with and having considered the advice of outside legal counsel and financial advisors, that such acquisition proposal is a superior proposal and that it is reasonably necessary to take such actions to comply with its fiduciary duties to LBC’s shareholders under applicable law. However, LBC cannot take any of those actions in response to a superior proposal unless it provides Colony with a five business day period to negotiate in good faith to enable Colony to adjust the terms and conditions of the merger agreement such that it would cause the superior proposal to no longer constitute a superior proposal.

Termination of the Merger Agreement (page 78)

The merger agreement can be terminated at any time prior to completion of the merger by mutual consent, or by either party in the following circumstances:

 

   

if the merger is not consummated on or before June 30, 2019, subject to automatic extension to September 30, 2019 if the only outstanding condition to closing is the receipt of regulatory approvals;



 

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if any regulatory approval required for consummation of the transactions contemplated by the merger agreement has been denied by final non-appealable action by the relevant governmental authority or any application for such regulatory approval shall have been permanently withdrawn at the request of a governmental authority;

 

   

in the event that approval by the shareholders of LBC is not obtained at a meeting at which a vote was taken; or

 

   

in the event of a material breach by the other party of any representation, warranty or covenant contained in the merger agreement and such breach is not cured within 30 days.

In addition, Colony may terminate the merger agreement in the following circumstances:

 

   

if LBC fails to comply in all material respects with its obligations pursuant to the non-solicitation covenants;

 

   

if LBC withdraws, qualifies, amends, modifies or withholds its recommendation to its shareholders to approve the merger and the merger agreement, or makes any statement, filing or release, in connection with the shareholder meeting or otherwise, inconsistent with its recommendation (it being understood that taking a neutral position or no position with respect to an acquisition proposal shall be considered an adverse modification of its recommendation);

 

   

if LBC materially breaches its obligation to call, give notice of, and commence a meeting of shareholders to vote on the merger agreement;

 

   

if LBC approves or recommends an acquisition proposal (other than the merger agreement proposal);

 

   

if LBC fails to publicly recommend against a publicly announced acquisition proposal within three business days of being requested to do so by Colony or fails to publicly reconfirm its recommendation to its shareholders within three business days of being requested to do so by Colony; or

 

   

if LBC resolves or otherwise determines to take, or announces an intention to take, any of the foregoing actions.

In addition, LBC may terminate the merger agreement if:

 

   

(i) the average closing price of Colony common stock over the 20 trading days preceding the date that is five days prior to the closing date is less than $14.20, and (ii) the decline in the price of Colony’s common stock (as measured by the average closing price divided by $17.75) is more than 20% greater than the decline of the KBW Regional Banking Index (KRX) (as measured by dividing the average closing price of the KBW Regional Banking Index over the 20 trading days preceding the date that is five days prior to the closing date by $91.81); provided, however, Colony has the option, but not the obligation, to adjust the exchange ratio to prevent the termination of merger agreement; or

 

   

if LBC’s board of directors determines to enter into a definitive agreement with respect to a superior proposal in accordance with the terms of the merger agreement but only if LBC pays to Colony a $1,432,000 termination fee.

Termination Fee (page 79)

If the merger agreement is terminated under certain circumstances, including circumstances involving a change in recommendation by LBC’s board of directors, LBC may be required to pay Colony a termination fee of $1,432,000. The termination fee could discourage other companies from seeking to acquire or merge with LBC.

Expenses (page 80)

Each party will bear all expenses incurred in connection with the merger and the transactions contemplated by the merger agreement.



 

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Material U.S. Federal Income Tax Consequences (page 54)

The merger is expected to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to the respective obligations of Colony and LBC to complete the merger that each of Colony and LBC receives a tax opinion from its respective outside legal counsel, dated the closing date of the merger, to that effect. Based upon the treatment of the merger as a “reorganization” within the meaning of Section 368(a) of the Code, a U.S. holder (as defined below) of LBC common stock will not recognize gain or loss for U.S. federal income tax purposes with respect to the receipt of Colony common stock in the merger, except with respect to cash received in lieu of a fractional share. If a U.S. holder exchanges its shares of LBC common stock solely for cash, the U.S. holder will recognize gain or loss on the exchange measured by the difference between the amount of cash received in the exchange and the U.S. holder’s basis in the shares of LBC common stock surrendered in exchange for such cash. If a U.S. holder exchanges its shares of LBC common stock for a combination of Colony common stock and cash, the U.S. holder will recognize gain, but not loss, on the exchange to the extent of the lesser of cash received or gain realized in the exchange. The amount of gain realized will equal the amount by which the cash plus the fair market value, at the effective time of the merger, of the Colony common stock exceeds the shareholder’s adjusted tax basis in its LBC common stock surrendered in exchange therefor. For further information, see “The Merger—Material U.S. Federal Income Tax Consequences.”

The U.S. federal income tax consequences described above may not apply to all holders of LBC common stock. Your particular tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your independent tax advisor for a full understanding of the particular tax consequences of the merger to you.

Accounting Treatment of the Merger (page 59)

Colony will account for the merger under the acquisition method of accounting for business combinations under U.S. generally accepted accounting principles, or GAAP.

The Rights of Holders of LBC Common Stock Will Change as a Result of the Merger (see page 87)

The rights of holders of LBC common stock are governed by Georgia law, as well as LBC’s Articles of Incorporation (which we refer to as the LBC Articles), and LBC’s Bylaws (which we refer to as the LBC Bylaws). After completion of the merger, the rights of former LBC shareholders will be governed by Georgia law and by Colony’s Articles of Incorporation, as amended (which we refer to as Colony Articles), and Colony’s Bylaws, as amended (which we refer to as Colony Bylaws).

Material differences between the rights of shareholders of LBC and shareholders of Colony include the process for determining the size of the board of directors, the process for removing directors, director qualifications, indemnification of officers, directors and employees, the ability of shareholders to act by written consent, and shareholder proposals and advance notice requirements. The material differences between the organizational documents and the rights of shareholders of LBC and shareholders of Colony are explained in more detail under the section “Comparison of Rights of Colony Shareholders and LBC Shareholders” beginning on page 87.

Opinion of LBC’s Financial Advisor (page 41 and Annex B)

On December 17, 2018, BSP Securities, LLC, referred to as BSP, a wholly owned subsidiary of Banks Street Partners, LLC, rendered an opinion to the LBC board of directors to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by BSP as set forth in such opinion, the merger consideration to be received in the proposed transaction was fair, from a financial point of view, to LBC’s shareholders. The full text of the written opinion of



 

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BSP is attached as Annex B to this document. LBC shareholders should read the entire opinion for a discussion of, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by BSP in rendering its opinion.

The opinion of BSP is addressed to the LBC board of directors, is directed only to the fairness, from a financial point of view, of the merger consideration to be received by the holders of LBC stock and does not constitute a recommendation to any LBC shareholder as to how such shareholder should vote with respect to the merger or any other matter at the LBC special meeting.

For further information, please see the section entitled “The Merger—Opinion of LBC’s Financial Advisor” beginning on page 41.

Closing and Effective Time of the Merger (see page 63)

The closing date is currently expected to occur in the first half of 2019. Simultaneously with the closing of the merger, Colony will file the articles of merger with the Secretary of State of the State of Georgia. The merger will become effective at the later of the time the articles of merger are filed or such other time as may be specified in the articles of merger. Neither Colony nor LBC can predict, however, the actual date on which the merger will be completed because it is subject to factors beyond each company’s control, including whether or when the required regulatory approvals and LBC’s shareholder approval will be received.

Market Prices and Share Information (see page 22)

Colony common stock is listed on the NASDAQ Global Market under the symbol “CBAN.” LBC common stock is not listed on an exchange and is not actively traded. The following table sets forth the closing sale prices of Colony common stock as reported on the NASDAQ Global Market on December 17, 2018, the last full trading day before the public announcement of the merger agreement, and on February 8, 2019, the latest practicable trading date before the date of this proxy statement/prospectus.

 

     Colony
Common Stock
     Implied Value of
One Share of
LBC Common
Stock
to be Converted
into
Colony
Common Stock
 

December 17, 2018

   $ 16.10      $ 21.31  

February 8, 2019

   $ 15.95      $ 21.12  


 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Some of the statements contained or incorporated by reference in this proxy statement/prospectus contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about the financial condition, results of operations, earnings outlook and business plans, goals, expectations and prospects of Colony, LBC and the combined company following the proposed merger and statements for the period after the merger. Words such as “anticipate,” “believe,” “feel,” “expect,” “estimate,” “indicate,” “seek,” “strive,” “plan,” “intend,” “outlook,” “forecast,” “project,” “position,” “target,” “mission,” “contemplate,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “aspiration,” “outcome,” “continue,” “remain,” “maintain,” “trend,” “objective” and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions, as they relate to Colony, LBC, the proposed merger or the combined company following the merger often identify forward-looking statements, although not all forward-looking statements contain such words.

These forward-looking statements are predicated on the beliefs and assumptions of management based on information known to management as of the date of this proxy statement/prospectus and do not purport to speak as of any other date. Forward-looking statements may include descriptions of the expected benefits and costs of the transaction; forecasts of revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries; management plans relating to the merger; the expected timing of the completion of the merger; the ability to complete the merger; the ability to obtain any required regulatory, shareholder or other approvals; any statements of the plans and objectives of management for future or past operations, including the execution of integration plans; any statements of expectation or belief and any statements of assumptions underlying any of the foregoing.

The forward-looking statements contained or incorporated by reference in this proxy statement/prospectus reflect the view of management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, actual results could differ materially from those anticipated by the forward-looking statements or historical results. Such risks and uncertainties include, among others, the following possibilities:

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, including a termination of the merger agreement under circumstances that could require LBC to pay a termination fee to Colony;

 

   

the inability to complete the merger contemplated by the merger agreement due to the failure to satisfy conditions necessary to close the merger, including the receipt of the requisite approvals of LBC shareholders;

 

   

the risk that a regulatory approval that may be required for the merger is not obtained or is obtained subject to conditions that are not anticipated;

 

   

risks associated with the timing of the completion of the merger;

 

   

management time and effort may be diverted to the resolution of merger-related issues;

 

   

the risk that the businesses of Colony and LBC will not be integrated successfully, or such integration may be more difficult, time-consuming or costly than expected;

 

   

Colony’s ability to achieve the synergies and value creation contemplated by the proposed merger with LBC;

 

   

the expected growth opportunities or costs savings from the merger with LBC may not be fully realized or may take longer to realize than expected;

 

   

revenues following the transaction may be lower than expected as a result of losses of customers or other reasons;

 

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potential deposit attrition, higher than expected costs, customer loss and business disruption associated with Colony’s integration of LBC, including, without limitation, potential difficulties in maintaining relationships with key personnel;

 

   

the outcome of any legal proceedings that may be instituted against Colony or LBC or their respective boards of directors;

 

   

general economic conditions, either globally, nationally, in the State of Georgia, or in the specific markets in which Colony or LBC operate;

 

   

limitations placed on the ability of Colony and LBC to operate their respective businesses by the merger agreement;

 

   

the effect of the announcement of the merger on Colony’s and LBC’s business relationships, employees, customers, suppliers, vendors, other partners, standing with regulators, operating results and businesses generally;

 

   

customer acceptance of the combined company’s products and services;

 

   

the amount of any costs, fees, expenses, impairments and charges related to the merger;

 

   

fluctuations in the market price of Colony common stock and the related effect on the market value of the merger consideration that LBC shareholders will receive upon completion of the merger;

 

   

the introduction, withdrawal, success and timing of business initiatives;

 

   

significant increases in competition in the banking and financial services industry;

 

   

legislation, regulatory changes or changes in monetary or fiscal policy that adversely affect the businesses in which Colony or LBC are engaged, including potential changes resulting from currently proposed legislation;

 

   

credit risk of borrowers, including any increase in those risks due to changing economic conditions;

 

   

changes in consumer spending, borrowing, and savings habits;

 

   

competition among depository and other financial institutions;

 

   

liquidity risk affecting Colony’s or LBC’s ability to meet their respective obligations when they become due;

 

   

interest rate risk involving the effect of a change in interest rates;

 

   

compliance risk resulting from violations of, or nonconformance with, laws, rules, regulations, prescribed practices or ethical standards;

 

   

strategic risk resulting from adverse business decisions or improper implementation of business decisions;

 

   

reputational risk that adversely affects earnings or capital arising from negative public opinion;

 

   

terrorist activities risk that results in loss of consumer confidence and economic disruptions; and

 

   

other risks and uncertainties detailed from time to time in Colony’s SEC filings.

Any forward-looking statements made in this proxy statement/prospectus or in any documents incorporated by reference into this proxy statement/prospectus, are subject to the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this proxy statement/prospectus or the date of any document incorporated by reference in this proxy statement/prospectus. Colony and LBC do not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made, unless and only to the extent otherwise required by law. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this proxy statement/prospectus and attributable to Colony, LBC or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this proxy statement/prospectus.

 

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION OF COLONY

The following selected consolidated financial information for the fiscal years ended December 31, 2013 through December 31, 2017 is derived from audited consolidated financial statements of Colony. The consolidated financial information as of and for the nine months ended September 30, 2018 and 2017 is derived from unaudited consolidated financial statements and, in the opinion of Colony’s management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of these data for those dates. The selected consolidated income data for the nine months ended September 30, 2018 is not necessarily indicative of the results that may be expected for the entire year ending December 31, 2018. You should not assume the results of operations for any past periods indicate results for any future period. You should read this information in conjunction with Colony’s consolidated financial statements and related notes thereto included in Colony’s Annual Report on Form 10-K for the year ended December 31, 2017, and in Colony’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2018, each of which are incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information.”

 

    As of and for the
Nine Month
Ended September 30,
    Year Ended December 31,  
    2018     2017     2017     2016     2015     2014     2013  
    (Dollars in Thousands, except per share data)  

Selected Balance Sheet Data

             

Total Assets

  $ 1,186,196     $ 1,195,393     $ 1,232,755     $ 1,210,442     $ 1,174,149     $ 1,146,898     $ 1,148,551  

Total Loans, Net of Unearned Interest and Fees

    778,928       769,616       764,788       753,922       758,279       745,733       750,857  

Total Deposits

    1,011,059       1,020,263       1,067,985       1,044,357       1,011,554       979,303       987,529  

Investment Securities

    318,032       338,249       354,247       323,658       296,149       274,624       263,295  

Federal Home Loan Bank Stock

    3,594       3,255       3,043       3,010       2,731       2,831       3,164  

Stockholders’ Equity

    88,988       91,602       90,323       93,388       95,457       99,027       89,954  

Selected Income Statement Data

             

Interest Income

    36,170       34,237       45,916       44,589       44,275       44,762       45,186  

Interest Expense

    5,771       5,116       6,873       6,483       6,569       6,799       7,497  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income

    30,399       29,121       39,043       38,106       37,706       37,963       37,689  

Provision for Loan Losses

    131       335       390       1,062       866       1,308       4,485  

Other Income

    7,163       7,218       9,735       9,553       9,045       9,125       8,377  

Other Expense

    26,215       25,408       33,860       34,073       33,724       34,980       34,617  

Income Before Tax

    11,216       10,596       14,528       12,524       12,161       10,800       6,964  

Income Tax Expense

    2,264       3,424       6,777       3,851       3,788       3,268       2,335  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

    8,952       7,172       7,751       8,673       8,373       7,532       4,629  

Preferred Stock Dividends

    —         211       211       1,493       2,375       2,689       1,509  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income Available to Common Stockholders

  $ 8,952     $ 6,961     $ 7,540     $ 7,180     $ 5,998     $ 4,843     $ 3,120  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average

             

Common Shares Outstanding, Basic

    8,439       8,439       8,439       8,439       8,439       8,439       8,439  

Common Shares Outstanding, Diluted

    8,572       8,632       8,634       8,513       8,458       8,439       8,439  

Shares Outstanding

    8,445       8,439       8,439       8,439       8,439       8,439       8,439  

Intangible Assets

  $ 18     $ 54     $ 45     $ 81     $ 116     $ 152     $ 188  

Dividends Declared

    1,266       633       844       —         —         —         —    

Average Assets

    1,193,976       1,196,997       1,200,631       1,163,863       1,146,984       1,128,052       1,118,071  

Average Stockholders’ Equity

    89,298       90,762       91,045       100,114       101,710       94,751       93,358  

Net Charge-Offs

    484       1,281       1,805       743       1,064       4,312       5,416  

Reserve for Loan Losses

    7,155       7,977       7,508       8,923       8,604       8,802       11,806  

OREO

    2,173       4,520       4,256       6,439       8,839       10,402       15,502  

Nonperforming Loans

    8,137       8,807       7,503       12,350       14,416       18,341       24,118  

Nonperforming Assets

    10,310       13,327       11,759       18,789       23,255       28,743       39,620  

Average Interest-Earning Assets

    1,139,793       1,130,755       1,133,700       1,090,967       1,074,556       1,057,608       1,048,185  

Noninterest-Bearing Deposits

    177,261       162,706       190,928       159,059       133,886       128,340       115,261  

 

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    As of and for the
Nine Month
Ended September 30,
    Year Ended December 31,  
    2018     2017     2017     2016     2015     2014     2013  
    (Dollars in Thousands, except per share data)  

Per Share Data:

             

Net Income Per Common Share (Diluted)

  $ 1.04     $ .81     $ 0.87     $ 0.84     $ 0.71     $ 0.57     $ 0.37  

Common Book Value Per Share

    10.54       10.85       10.70       9.96       9.18       8.42       7.34  

Tangible Common Book Value Per Share

    10.54       10.85       10.69       9.95       9.16       8.40       7.32  

Dividends Per Common Share

    .15       .075       0.10       0.00       0.00       0.00       0.00  

Profitability Ratios:

             

Net Income to Average Assets

    1.00     0.78     0.63     0.62     0.52     0.43     0.28

Net Income to Average Stockholders’ Equity

    13.37       10.23       8.28       7.17       5.90       5.11       3.34  

Net Interest Margin

    3.56       3.45       3.46       3.51       3.52       3.60       3.61  

Loan Quality Ratios:

             

Net Charge-Offs to Total Loans

    .06       .17       0.24       0.10       0.14       0.58       0.72  

Reserve for Loan Losses to Total Loans and OREO

    .92       1.03       0.98       1.17       1.12       1.16       1.54  

Reserve for Loan Losses to Nonperforming Loans

    87.93       90.58       100.06       72.25       59.68       47.99       48.95  

Reserve for Loan Losses to Total Nonperforming Assets

    69.40       59.86       63.85       47.49       37.00       30.62       29.80  

Liquidity Ratios:

             

Loans to Total Deposits (1)

    77.04       75.43       71.61       72.19       74.96       76.15       76.03  

Loans to Average Interest-Earning Assets (1)

    68.34       68.06       67.46       69.11       70.57       70.51       71.63  

Noninterest-Bearing Deposits to Total Deposits

    17.53       15.95       17.88       15.23       13.24       13.11       11.67  

Capital Adequacy Ratios:

             

Common Stockholders’ Equity to Total Assets

    7.50       7.66       7.33       6.94       6.60       6.20       5.39  

Total Stockholders’ Equity to Total Assets

    7.50       7.66       7.33       7.72       8.13       8.63       7.83  

Dividend Payout Ratio

    14.14       9.09       11.24       0.00       0.00       0.00       0.00  

 

(1)

Total loans, net of unearned interest and fees.

 

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COMPARATIVE MARKET PRICES AND DIVIDENDS

Colony Bankcorp, Inc.

Colony common stock is listed on the NASDAQ Global Market under the symbol “CBAN.” As of February 8, 2019, the latest practicable date prior to this proxy statement/prospectus, there were 8,444,908 shares of Colony common stock outstanding, which were held by approximately 1,826 holders of record. The following table sets forth the high and low reported intra-day sales prices per share of Colony common stock and the cash dividends declared per share for the periods indicated.

 

     Colony Common Stock  
     Sales Price      Dividends
Declared
Per Share
 
     High      Low  

2016

        

First Quarter

   $ 10.04      $ 8.11      $ 0.0000  

Second Quarter

   $ 10.00      $ 9.20      $ 0.0000  

Third Quarter

   $ 10.06      $ 8.80      $ 0.0000  

Fourth Quarter

   $ 13.30      $ 9.45      $ 0.0000  

2017

        

First Quarter

   $ 14.55      $ 13.00      $ 0.0250  

Second Quarter

   $ 14.00      $ 13.45      $ 0.0250  

Third Quarter

   $ 14.20      $ 11.10      $ 0.0250  

Fourth Quarter

   $ 14.75      $ 13.00      $ 0.0250  

2018

        

First Quarter

   $ 19.50      $ 13.51      $ 0.0500  

Second Quarter

   $ 18.00      $ 15.01      $ 0.0500  

Third Quarter

   $ 19.20      $ 16.50      $ 0.0500  

Fourth Quarter

   $ 18.59      $ 12.29      $ 0.0500  

2019

        

First Quarter (through February 8, 2019)

   $ 16.56      $ 14.53      $ 0.0750  

On December 17, 2018, the last full trading day before the public announcement of the merger agreement, the closing sale price per share of Colony common stock was $16.10, and on February 8, 2019, the latest practicable date before the date of this proxy statement/prospectus, the closing sale price per share of Colony common stock was $15.95.

LBC shareholders are advised to obtain current market quotations for Colony common stock. The market price of Colony common stock will fluctuate between the date of this proxy statement/prospectus and the date of completion of the merger. No assurance can be given concerning the market price of Colony common stock before or after the effective date of the merger. Changes in the market price of Colony common stock prior to the completion of the merger may affect the market value of the merger consideration that LBC shareholders will receive.

The principal sources of funds to Colony to pay dividends are the dividends received from Colony Bank. Consequently, dividends are dependent upon Colony Bank’s earnings, capital needs, regulatory policies, as well as statutory and regulatory limitations. Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its parent company. For example, Georgia law requires prior approval for a bank to pay dividends where the aggregate amount of dividends to be declared or anticipated to be declared during the current calendar year exceeds 50 percent of its net after-tax profits before dividends for the previous calendar year. A depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. See “Description of Capital Stock—Common Stock—Dividends.”

 

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LBC Bancshares, Inc.

As of the record date for the LBC special meeting, there were 1,447,554 shares of LBC common stock outstanding, which were held by approximately 222 holders of record. LBC common stock is not listed on any established securities exchange or quotation system. Accordingly, there is no established public trading market for the shares of LBC common stock and as a result, any market in LBC common stock prior to the merger should be characterized as illiquid and irregular. Privately negotiated trades of LBC common stock occur from time to time without pricing information being made known to LBC management. These transactions represent privately negotiated transactions directly between the purchaser and seller and are not subject to any reporting system. Since January 1, 2016, there were no sales of LBC common stock to management’s knowledge or for which pricing information for any such sale was provided to LBC management.

LBC has not paid any dividends since January 1, 2016. LBC’s shareholders are entitled to receive dividends out of legally available funds when, as and if declared by LBC’s board of directors, in its sole discretion. As a Georgia corporation, LBC is subject to certain restrictions on dividends under the GBCC. Generally, a Georgia corporation may pay dividends to its shareholders out of its surplus (the excess of its assets over its liabilities and stated capital) unless the corporation is insolvent or the payment of the dividend would render the corporation insolvent, or the corporation is not able to pay its debts as they become due in the usual course of business.

 

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RISK FACTORS

In addition to general investment risks and the other information contained in or incorporated by reference into this proxy statement/prospectus, including the matters addressed under the section “Cautionary Statement Concerning Forward-Looking Statements,” you should carefully consider the following risk factors in deciding how to vote for the proposals presented in this proxy statement/prospectus. You should also consider the other information in this proxy statement/prospectus and the other documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information.”

Risks Related to the Merger

Because of the fixed exchange ratio and the fluctuation of the market price of Colony common stock, LBC shareholders will not know at the time of the special meeting the market value of the merger consideration they will receive at the effective time of the merger.

Pursuant to the merger agreement, each outstanding share of LBC common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive, at the election of each LBC shareholder, either (i) $23.50 in cash, which we refer to as the cash consideration, or (ii) 1.3239 shares of Colony’s common stock, which we refer to as to the stock consideration, provided that the total mix of merger consideration shall be fixed at 55% stock and 45% cash, and if the stock consideration or the cash consideration is over-subscribed, the exchange agent will make adjustments to the elections of LBC shareholders whose elections were in excess of these limits in order to preserve that mix of merger consideration.

The market value of the stock consideration may vary from the market value on the date LBC and Colony announced the merger, on the date that this proxy statement/prospectus is mailed, on the date of the LBC special meeting and on the date the merger is completed and thereafter due to fluctuations in the market price of Colony common stock. Any fluctuation in the market price of Colony common stock after the date of this proxy statement/prospectus will change the value of the shares of Colony common stock that LBC shareholders may receive. Stock price changes may result from a variety of factors that are beyond the control of Colony and LBC, including but not limited to general market and economic conditions, changes in their respective businesses, operations and prospects and regulatory considerations. Therefore, at the time of the LBC special meeting, LBC shareholders will not know the precise market value of the stock consideration they may receive at the effective time of the merger. LBC shareholders should obtain current sale prices for shares of Colony common stock before voting their shares at the LBC special meeting.

The merger and related transactions are subject to approval by LBC shareholders.

The merger cannot be completed unless the LBC shareholders approve the merger agreement and the merger by the affirmative vote of the holders of at least a majority of the outstanding shares of LBC’s common stock entitled to vote at the LBC special meeting.

Failure to complete the merger could negatively affect the value of the shares and the future business and financial results of LBC.

If the merger is not completed, the ongoing business of LBC could be adversely affected and LBC will be subject to a variety of risks associated with the failure to complete the merger, including the following:

 

   

LBC being required, under certain circumstances, to pay to Colony a termination fee equal to $1,432,000;

 

   

substantial costs incurred by LBC in connection with the proposed merger, such as legal, accounting, financial advisor, printing and mailing fees;

 

   

the loss of key employees and customers;

 

   

the disruption of operations and business;

 

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deposit attrition, customer loss and revenue loss;

 

   

unexpected problems with costs, operations, personnel, technology and credit;

 

   

diversion of management focus and resources from operational matters and other strategic opportunities while working to implement the merger; and

 

   

reputational harm due to the adverse perception of any failure to successfully complete the merger.

If the merger is not completed, these risks could materially affect the business, financial results and the value of LBC common stock.

LBC will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on LBC. These uncertainties may impair LBC’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with LBC to seek to change existing business relationships with LBC. Retention of certain employees by LBC may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with LBC or Colony. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with LBC or Colony, LBC’s business or the business assumed by Colony following the merger could be harmed. In addition, LBC has agreed to certain contractual restrictions on the operation of its business prior to closing. See “The Merger Agreement—Covenants and Agreements” for a description of the restrictive covenants applicable to LBC.

The merger agreement limits LBC’s ability to pursue an alternative acquisition proposal and requires LBC to pay a termination fee of $1,432,000 under limited circumstances relating to alternative acquisition proposals.

Under the merger agreement, LBC has agreed not to initiate, solicit, induce or knowingly encourage, or take any action to facilitate any alternative business combination transaction or, subject to certain exceptions, participate in discussions or negotiations regarding, or furnish any non-public information relating to, any alternative business combination transaction. See “The Merger Agreement—No Solicitation” on page 75. The merger agreement also provides for LBC to pay to Colony a termination fee in the amount of $1,432,000 in the event that the merger agreement is terminated for certain reasons. See “The Merger Agreement—Termination Fee” on page 79. These provisions could discourage a potential competing acquirer that might have an interest in acquiring LBC from considering or making a competing acquisition proposal, even if the potential competing acquirer was prepared to pay consideration with a higher per share cash value than the market value proposed to be received or realized in the merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the merger agreement.

The merger agreement contains provisions granting both LBC and Colony the right to terminate the merger agreement in certain circumstances.

The merger agreement contains certain termination rights, including the right, subject to certain exceptions, of either party to terminate the merger agreement if the merger is not completed on or prior to June 30, 2019 (subject to automatic extension to September 30, 2019 if the only outstanding condition to closing is the receipt of regulatory approvals), and the right of LBC to terminate the merger agreement, subject to certain conditions, if the average closing price of Colony common stock over a specified period prior to completion of the merger decreases below certain specified thresholds, or to accept a business combination transaction deemed to be superior to the merger by the LBC board of directors. If the merger is not completed, the ongoing business of LBC could be adversely affected and LBC will be subject to several risks, including the risks described elsewhere in this “Risk Factors” section.

 

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The merger is subject to a number of conditions which, if not satisfied or waived in a timely manner, would delay the merger or adversely impact the companies’ ability to complete the transactions.

The completion of the merger is subject to certain conditions, including, among others, the (1) approval of the merger agreement by the holders of at least a majority of the outstanding shares of LBC common stock entitled to vote at the LBC special meeting; (2) the receipt of all required regulatory approvals for the merger, without the imposition of any material on-going conditions or restrictions, and the expiration of all regulatory waiting periods; (3) the absence of any legal restraint (such as an injunction or restraining order) that would prevent the consummation of the merger; (4) the effectiveness of the registration statement of which this proxy statement/prospectus forms a part; (5) each party’s receipt of a tax opinion from its respective outside legal counsel, dated the closing date of the merger, confirming the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code; (6) the Plan of Bank Merger in the form attached as Exhibit B to the merger agreement attached as Annex A to this document being executed and delivered; (7) the absence of 10% or more of the outstanding shares of LBC’s common stock exercising their dissenters’ rights; (8) the absence of the occurrence of a material adverse effect on LBC or Colony; and (9) other customary closing conditions set forth in the merger agreement. See “The Merger Agreement—Conditions to Completion of the Merger” on page 77. While it is currently anticipated that the merger will be completed during the first half of 2019, there can be no assurance that such conditions will be satisfied in a timely manner or at all, or that an effect, event, development or change will not transpire that could delay or prevent these conditions from being satisfied. Accordingly, there can be no guarantee with respect to the timing of the closing of the merger, whether the merger will be completed at all and when LBC shareholders will receive the merger consideration, if at all.

Colony and LBC may waive one or more of the conditions to the merger without re-soliciting shareholder approval for the merger.

Each of the conditions to the obligations of Colony and LBC to complete the merger may be waived, in whole or in part, to the extent permitted by applicable law, by agreement of Colony and LBC, if the condition is a condition to both parties’ obligation to complete the merger, or by the party for which such condition is a condition of its obligation to complete the merger. The boards of directors of Colony and LBC may evaluate the materiality of any such waiver to determine whether amendment of this proxy statement/prospectus and re-solicitation of proxies are necessary. Colony and LBC, however, generally do not expect any such waiver to be significant enough to require re-solicitation of shareholders. In the event that any such waiver is not determined to be significant enough to require re-solicitation of shareholders, the companies will have the discretion to complete the merger without seeking further shareholder approval.

Regulatory approvals may not be received, may take longer than expected or impose conditions that are not presently anticipated.

Before the transactions contemplated by the merger agreement may be completed, approvals or waivers must be obtained from various regulatory authorities, which include the Federal Reserve Board, the FDIC, the Georgia DBF, and other securities and regulatory authorities. These governmental entities may request additional information or materials regarding the regulatory applications and notices submitted by Colony and LBC, or may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying the completion of the merger or of imposing additional costs or limitations on the combined company following the merger. The regulatory approvals may not be received at all, may not be received in a timely fashion, and may contain conditions on the completion of the merger that are not anticipated or cannot be met. There can be no assurance as to whether these and other regulatory approvals will be received, the timing of those approvals, or whether any conditions will be imposed. See “The Merger—Regulatory Approvals Required for the Merger” on page 52.

 

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The directors and executive officers of LBC have interests in seeing the merger completed that are different from, or in addition to, those of the other LBC shareholders.

The directors and executive officers of LBC have arrangements that provide them with interests in the merger that are different from, or in addition to, those of the shareholders of LBC generally. These interests and arrangements may create potential conflicts of interest and may influence or may have influenced the directors and executive officers of LBC to support or approve the merger and the merger agreement. See “The Merger—Interests of LBC’s Directors and Executive Officers in the Merger” beginning on page 49.

The opinion of LBC’s financial advisor does not reflect changes in circumstances between the date of the signing of the merger agreement and the completion of the merger.

LBC’s board of directors received an opinion from its financial advisor as to the fairness of the merger consideration from a financial point of view as of the date of such opinion. Subsequent changes in the operation and prospects of LBC or Colony, general market and economic conditions and other factors that may be beyond the control of LBC or Colony, may significantly alter the value of LBC or Colony or the price of the shares of Colony common stock by the time the merger is completed. The opinion does not address the fairness of the merger consideration from a financial point of view at the time the merger is completed, or as of any other date other than the date of such opinion. The opinion of LBC’s financial advisor is attached as Annex B to this proxy statement/prospectus. For a description of the opinion, see “The Merger—Opinion of LBC’s Financial Advisor” on page 41.

The merger may be completed even if Colony or LBC experiences adverse changes in its business.

In general, either Colony or LBC may refuse to complete the merger if the other party suffers a material adverse effect on its business prior to the closing of the merger. However, certain types of changes or occurrences with respect to Colony or LBC would not prevent the merger from going forward, even if the change or occurrence would have adverse effects on Colony or LBC, including the following:

 

   

changes in laws and regulations affecting financial institutions and their holding companies generally, or interpretations thereof by courts or governmental entities, if such changes do not have a disproportionate impact on the affected company;

 

   

changes in GAAP or regulatory accounting requirements generally applicable to financial institutions and their holding companies, if such changes do not have a disproportionate impact on the affected company;

 

   

changes in global, national or regional political conditions including the outbreak of war or acts of terrorism, or in economic or market conditions affecting the financial services industry generally, if such changes do not have a disproportionate impact on the affected company;

 

   

changes or effects from the announcement of the merger agreement and the transactions contemplated thereby, and compliance by the parties with the merger agreement on the business, financial condition or results of operations of the parties;

 

   

any failure by LBC of Colony to meet any internal or published industry analyst projections or forecasts or estimates of revenues or earnings for any period (but not including the underlying causes thereof);

 

   

a decline in the trading price or trading volume of Colony common stock; however, LBC may terminate the merger agreement if  (i) the average closing price of Colony common stock during a specified period prior to closing is less than $14.20 and (ii) Colony’s common stock underperforms the KBW Regional Banking Index by more than 20%, unless Colony elects to make a compensating adjustment to the exchange ratio; and

 

   

the impact of the merger agreement and the transactions contemplated thereby on relationships with customers or employees, including the loss of personnel subsequent to the date of the merger agreement.

 

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Litigation in transactions of this type are sometimes filed against the board of directors of either party that could prevent or delay the completion of the merger or result in the payment of damages following completion of the merger.

In connection with the merger, it is possible that LBC shareholders may file putative class action lawsuits against the boards of directors of Colony and/or LBC. Among other remedies, these shareholders could seek to enjoin the merger. The outcome of any such litigation would be uncertain. If a dismissal is not granted or a settlement is not reached, such potential lawsuits could prevent or delay completion of the merger and result in substantial costs to Colony and LBC. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is consummated may adversely affect the combined company’s business, financial condition, results of operations, cash flows and market price.

Risks Related to the Combined Company Following the Merger

The combined company expects to incur substantial expenses related to the merger.

The combined company expects to incur substantial expenses in connection with completing the merger and integrating the business and operations of LBC and Colony. Although Colony and LBC have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result, the transaction and integration expenses associated with the merger could, particularly in the near term, exceed the savings that the combined company expects to achieve from the integration of the businesses following the completion of the merger.

Following the merger, the combined company may be unable to integrate LBC’s business with Colony successfully and realize the anticipated synergies and other benefits of the merger or do so within the anticipated timeframe.

The merger involves the combination of two companies that currently operate as independent companies, as well as the companies’ subsidiaries. Although the combined company is expected to benefit from certain synergies, including cost savings, the combined company may encounter potential difficulties in the integration process, including:

 

   

the inability to successfully combine LBC’s business with Colony in a manner that permits the combined company to achieve the cost savings anticipated to result from the merger, which would result in the anticipated benefits of the merger not being realized in the timeframe currently anticipated or at all;

 

   

the risk of not realizing all of the anticipated operational efficiencies or other anticipated strategic and financial benefits of the merger within the expected timeframe or at all;

 

   

potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the merger; and

 

   

performance shortfalls as a result of the diversion of management’s attention caused by completing the merger and integrating the companies’ operations.

For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of the combined company’s management, the disruption of the combined company’s ongoing business or inconsistencies in the combined company’s operations, any of which could adversely affect the ability of the combined company to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger, or could otherwise adversely affect the business and financial results of the combined company.

 

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Following the merger, the combined company may be unable to retain key employees.

The success of the combined company after the merger will depend in part upon its ability to retain key employees. Simultaneous with the execution of the merger agreement, Colony entered into employment agreements with certain key employees of LBC, the effectiveness of which is conditioned upon the completion of the merger. However, key employees may depart either before or after the merger because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the merger. Accordingly, no assurance can be given that LBC or Colony or, following the merger, the combined company will be able to retain key employees.

The voting power of LBC shareholders will be diluted by the merger.

The merger will result in LBC shareholders having an ownership stake in the combined company that is smaller than their current stake in LBC. Upon completion of the merger of LBC with Colony, we estimate that LBC shareholders will own approximately 12% of the issued and outstanding shares of common stock of the combined company. Consequently, LBC shareholders, as a general matter, will have less influence over the management and policies of the combined company after the effective time of the merger than they currently exercise over the management and policies of LBC.

Future capital needs could result in dilution of shareholder investment.

Colony’s board of directors may determine from time to time there is a need to obtain additional capital through the issuance of additional shares of its common stock or other securities. These issuances would dilute the ownership interests of its shareholders and may dilute the per share book value of Colony common stock. New investors may also have rights, preferences and privileges senior to Colony’s shareholders which may adversely impact its shareholders.

Risks Related to an Investment in the Combined Company’s Common Stock

The market price of the shares of common stock of the combined company may be affected by factors different from those affecting the price of shares of Colony common stock before the merger.

The results of operations of the combined company, as well as the market price of shares of the common stock of the combined company after the merger, may be affected by factors in addition to those currently affecting Colony’s or LBC’s results of operations and the market prices of shares of Colony common stock. Accordingly, the historical financial results of Colony and LBC and the historical market prices of shares of Colony common stock may not be indicative of these matters for the combined company after the merger. For a discussion of the businesses of Colony and LBC and certain risks to consider in connection with evaluating the proposals to be considered at the LBC special meeting, see the documents incorporated by reference by Colony into this proxy statement/prospectus referred to under “Where You Can Find More Information” beginning on page 100.

The market price of the combined company’s common stock may decline as a result of the merger.

The market price of the combined company’s common stock may decline as a result of the merger if the combined company does not achieve the perceived benefits of the merger or the effect of the merger on the combined company’s financial results is not consistent with the expectations of financial or industry analysts. In addition, upon completion of the merger, Colony and LBC shareholders will own interests in a combined company operating an expanded business with a different mix of assets, risks and liabilities. Current Colony and LBC shareholders may not wish to continue to invest in the combined company, or for other reasons may wish to dispose of some or all of their shares of the combined company.

 

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After the merger is completed, LBC shareholders who receive shares of Colony common stock in the merger will have different rights that may be less favorable than their current rights as LBC shareholders.

After the closing of the merger, LBC shareholders who receive shares of Colony common stock in the merger will have different rights than they currently have as LBC shareholders, which may be less favorable than their current rights as LBC shareholders. For a detailed discussion of the significant differences between the current rights of a shareholder of LBC and the rights of a shareholder of the combined company following the merger, see “Comparison of Rights of Colony Shareholders and LBC Shareholders” beginning on page 87.

Risks Related to Tax

The merger may have adverse tax consequences.

Each of Colony and LBC expects that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to the respective obligations of Colony and LBC to complete the merger that each of Colony and LBC receives a tax opinion from its respective outside legal counsel, dated the closing date of the merger, to that effect. A legal opinion represents the judgment of counsel rendering the opinion and is not binding on the Internal Revenue Service or the courts. See “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 54. If the merger were to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code, then each holder of LBC common stock generally would recognize gain or loss, as applicable, equal to the difference between (1) the sum of the fair market value of the shares of Colony common stock received by such U.S. holder in the merger and the amount of cash received by such U.S. holder in the merger and (2) its adjusted tax basis in the shares of LBC common stock surrendered in exchange therefor. The consequences of the merger to any particular stockholder will depend on that stockholder’s particular situation. We strongly urge you to consult your own tax advisor to determine the particular tax consequences of the merger to you.

Risks Related to Colony’s Business

There are certain risks relating to Colony’s business.

You should read and consider risk factors specific to Colony’s business that will also affect the combined company after the merger. These risks are described in the section entitled “Risk Factors” in Colony’s Annual Report on Form 10-K for the year ended December 31, 2017 and in other documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” on page 100 for the location of information incorporated by reference into this proxy statement/prospectus.

 

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THE LBC SPECIAL MEETING

This proxy statement/prospectus is being provided to the holders of LBC common stock as part of a solicitation of proxies by the LBC board of directors for use at the LBC special meeting to be held at the time and place specified below and at any properly convened meeting following an adjournment thereof. This proxy statement/prospectus provides the holders of LBC common stock with information they need to know to be able to vote or instruct their vote to be cast at the LBC special meeting.

General

LBC is furnishing this proxy statement/prospectus to the holders of LBC common stock as of the record date for use at LBC’s special meeting and any adjournment or postponement of its special meeting.

Date, Time and Place

The LBC special meeting will be held at LBC’s headquarters located at 101 Calumet Center Road, LaGrange, Georgia 30241 on March 21, 2019, at 3:30 p.m., Eastern Time, subject to any adjournment or postponement thereof.

Purpose of the LBC Special Meeting

At the LBC special meeting, LBC shareholders will be asked to consider and vote on the following:

 

   

Proposal One: The Merger Proposal—To approve the merger agreement and the merger, which we refer to as the merger proposal; and

 

   

Proposal Two: The Adjournment Proposal—To approve the adjournment of the LBC special meeting to a later date or dates, if the LBC board of directors determines it is necessary, among other things, to permit solicitation of additional proxies if there are not sufficient votes at the time of the LBC special meeting to approve the merger proposal.

Completion of the merger is conditioned on, among other things, the approval of the merger by the LBC shareholders.

No other matter can be brought up or voted upon at the LBC special meeting.

Proposal One: Merger Proposal

LBC is asking its shareholders to approve the merger proposal. After careful consideration, LBC’s board of directors determined that the merger agreement and the transactions contemplated thereby, including the merger, were advisable and in the best interests of LBC and LBC’s shareholders.

LBC shareholders should carefully read this document in its entirety, including the annexes and the documents incorporated by reference, for more detailed information concerning the merger agreement and the merger. For a detailed discussion of the merger, including the terms and conditions of the merger agreement, see “The Merger Agreement,” beginning on page 63. In addition, LBC shareholders are directed to the merger agreement, a copy of which is attached as Annex A to this document and incorporated in this document by reference.

Proposal Two: Adjournment Proposal

If, at the LBC special meeting, the number of shares of LBC common stock present or represented and voting in favor of the merger proposal is insufficient to approve the merger proposal, LBC may move to adjourn the LBC special meeting in order to enable the LBC board of directors to solicit additional proxies for approval of the merger proposal. In that event, LBC’s shareholders will be asked to vote upon the adjournment proposal and not the merger proposal.

 

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In the adjournment proposal, LBC is asking its shareholders to authorize the holder of any proxy solicited by its board of directors to vote in favor of granting discretionary authority to the LBC board of directors to adjourn the LBC special meeting to another time and place for the purpose of soliciting additional proxies. If LBC’s shareholders approve the adjournment proposal, LBC could adjourn the LBC special meeting and any adjourned session of the LBC special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from LBC shareholders who have previously voted. If a quorum is not present at the meeting, the meeting will not be convened to conduct business and neither the merger proposal nor the adjournment proposal will be considered. In the absence of a quorum, LBC may adjourn the meeting to a later date or time to solicit additional proxies.

Recommendation of the LBC Board of Directors

On December 17, 2018, the LBC board of directors unanimously determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are in the best interests of LBC and its shareholders, and it adopted the merger agreement and approved the merger and the other transactions contemplated by the merger agreement.

Accordingly, the LBC board of directors unanimously recommends that LBC shareholders vote as follows:

 

   

FOR” Proposal One approving the merger agreement and the merger; and

 

   

FOR” Proposal Two approving the adjournment of the LBC special meeting if necessary to permit solicitation of additional proxies.

Holders of LBC common stock should carefully read this proxy statement/prospectus, including any documents incorporated by reference, and the annexes in their entirety for more detailed information concerning the merger agreement, the merger and the other transactions contemplated by the merger agreement.

Record Date; Shareholders Entitled to Vote

The record date for the LBC special meeting is February 7, 2019, which we refer to herein as the LBC record date. Only record holders of shares of LBC common stock as of the close of business (5:00 p.m. Eastern Time), on the LBC record date are entitled to notice of, and to vote at, the LBC special meeting or any adjournment thereof. At the close of business on the LBC record date, the only outstanding securities of LBC with a right to vote on the proposals were LBC common stock, with 1,447,554 shares of LBC common stock issued and outstanding. Each share of LBC common stock outstanding on the LBC record date is entitled to one vote on each proposal.

Quorum and Adjournment

No business may be transacted at the LBC special meeting unless a quorum is present. Holders representing at least a majority of the issued and outstanding shares of LBC common stock entitled to vote at the LBC special meeting must be present, in person or represented by proxy, to constitute a quorum.

Approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast on the matter. No notice of an adjourned LBC special meeting need be given if the new date, time and place are announced at the special meeting before adjournment, and no new record date is required to be set. If, however, after the adjournment, the board of directors fixes a new record date for the adjourned meeting, a notice of the adjoined meeting shall be given to each shareholder of record on the new record date entitled to vote at such meeting. At any adjourned LBC special meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the LBC special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned LBC special meeting.

 

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All shares of LBC common stock represented at the LBC special meeting, including shares that are represented but that vote to abstain, will be treated as present for purposes of determining the presence or absence of a quorum.

Vote Required for Approval; Abstentions; Failure to Vote

The required votes to approve the LBC proposals are as follows:

Proposal One: The Merger Proposal—Approving the merger proposal requires the affirmative vote of at a majority of the issued and outstanding shares of LBC common stock entitled to vote at the LBC special meeting. Failure to vote and abstentions will have the same effect as a vote AGAINST this proposal.

Proposal Two: The Adjournment Proposal—Approving the adjournment proposal requires the affirmative vote of a majority of the votes cast on the matter. Failure to vote and abstentions will have no effect on this proposal.

If you sign your proxy but do not indicate your vote, your proxy will be voted FOR each proposal.

Voting by LBC Directors and Executive Officers

At the close of business on the LBC record date, LBC directors and executive officers and their affiliates were entitled to vote 575,220 shares of LBC common stock, or approximately 39.7% of the shares of LBC common stock outstanding on that date. LBC expects that its directors and executive officers and their affiliates will vote their shares in favor of both of the LBC proposals.

LBC Common Stock Subject to Voting Agreements

All directors of LBC and Calumet Bank, solely in their capacity as shareholders of LBC, have entered into voting agreements with Colony pursuant to which they have agreed to vote their shares of LBC common stock in favor of the approval of the merger agreement and the merger and against the approval or adoption of any proposal made in opposition to the merger. As of the LBC record date, 572,863 shares of LBC common stock, or approximately 39.6% of the outstanding shares of LBC common stock entitled to vote at the LBC special meeting, are bound by the voting agreements.

Voting on Proxies by Holders of Record; Incomplete Proxies

If you were a record holder of LBC common stock at the close of business on the LBC record date, a proxy card is enclosed for your use. LBC requests that you vote your shares as promptly as possible by submitting your LBC proxy card by mail using the enclosed return envelope. If you are a registered shareholder, you may also vote via the Internet or telephone by following the instructions on the proxy card. When the accompanying proxy card is returned properly executed or if you voted via the Internet or telephone, the shares of LBC common stock represented by it will be voted at the LBC special meeting or any adjournment thereof in accordance with the instructions contained in the proxy card.

If a record holder returns an executed proxy card without an indication as to how the shares of LBC common stock represented by it are to be voted with regard to a particular proposal, the shares of LBC common stock represented by the proxy will be voted in accordance with the recommendation of the LBC board of directors and, therefore, such shares will be voted:

 

   

FOR” Proposal One approving the merger agreement and the merger; and

 

   

FOR” Proposal Two approving the adjournment of the LBC special meeting, if necessary to permit solicitation of additional proxies.

 

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At the date hereof, the LBC board of directors has no knowledge of any business that will be presented for consideration at the LBC special meeting and that would be required to be set forth in this proxy statement/prospectus or the related proxy card other than the matters set forth in LBC’s Notice of Special Meeting of Shareholders.

Your vote is important. Accordingly, if you were a record holder of LBC common stock on the LBC record date, please sign, date and return the enclosed proxy card or vote via the Internet or telephone whether or not you plan to attend the LBC special meeting in person.

Shares Held in “Street Name”

If your shares of LBC common stock are held in an account with a bank, broker or other nominee, which are referred to as shares held in “street name,” the bank, broker or other nominee is considered the shareholder of record with respect to these shares and you are the beneficial owner of these “street name” shares. If your shares are held in “street name” through a broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee that you must follow in order to vote your shares. You should refer to the voting form used by that firm to determine whether you may vote by telephone, Internet or mail.

If your shares are held in “street name,” LBC recommends that you mark, date, sign and promptly mail the voting instruction form provided by your bank, broker or other nominee in accordance with the instructions provided by such nominee.

Banks, brokers and other nominees who hold shares of LBC common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine,” without specific instructions from the beneficial owner. The merger proposal and the adjournment proposal are non-routine matters. Accordingly, if your broker, bank or other nominee holds your shares of LBC common stock in “street name,” your broker, bank or other nominee will vote your shares of LBC common stock with respect to the merger proposal and the adjournment proposal only if you provide instructions on how to vote by filling out the voter instruction form sent to you by your broker, bank or other nominee with this proxy statement/prospectus. If you do not provide instructions to your broker, bank or other nominee with respect to either the merger proposal or the adjournment proposal, it will result in a failure to vote your shares on such proposal. Failure to vote has the same effect as a vote against the merger proposal.

Revocability of Proxies and Changes to an LBC Shareholder’s Vote

An LBC shareholder entitled to vote at the LBC special meeting may revoke a proxy at any time before such time that the proxy card for any such holders of LBC common stock must be received at the LBC special meeting by taking any of the following actions:

 

   

delivering written notice of revocation to Leonard H. Bateman, Jr., President and Chief Executive Officer, LBC Bancshares, Inc., 101 Calumet Center Road, LaGrange, Georgia 30241;

 

   

delivering a proxy card bearing a later date than the proxy that such shareholder desires to revoke;

 

   

voting by telephone or on the Internet (your latest telephone or Internet vote will be counted); or

 

   

attending the LBC special meeting and voting in person.

Merely attending the LBC special meeting will not, by itself, revoke your proxy; an LBC shareholder must cast a subsequent vote at the LBC special meeting using forms provided for that purpose. The last valid vote that LBC receives before the polls close at the LBC special meeting is the vote that will be counted.

 

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If you hold your shares in “street name” through a bank, broker or other nominee (referred to in this proxy statement/prospectus as a “beneficial owner”), you must contact such bank, broker or nominee if you desire to revoke your proxy as described above.

Solicitation of Proxies

The LBC board of directors is soliciting proxies for the LBC special meeting from holders of its LBC common stock entitled to vote at the LBC special meeting. In accordance with the merger agreement, LBC will pay its own cost of soliciting proxies from its shareholders, including the cost of mailing this proxy statement/prospectus. In addition to solicitation of proxies by mail, proxies may be solicited by LBC’s officers, directors and regular employees, without additional remuneration, in person, by telephone or other means of communication.

LBC will make arrangements with brokerage houses, custodians, nominees and fiduciaries to forward proxy solicitation materials to beneficial owners of LBC common stock. LBC may reimburse these brokerage houses, custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding the proxy materials.

Attending the LBC Special Meeting; Voting in Person

Only record holders of LBC common stock at the close of business on the record date, their duly appointed proxies, and invited guests may attend the LBC special meeting. However, only holders of LBC common stock will be entitled to vote.

A shareholder who holds shares in “street name” through a broker, bank, trustee or other nominee who desires to attend the LBC special meeting in person must bring proof of beneficial ownership as of the record date, such as a letter from the broker, bank, trustee or other nominee that is the record owner of such beneficial owner’s shares, a brokerage account statement or the voting instruction form provided by the broker.

A person who holds a validly executed proxy entitling such person to vote on behalf of a record owner of LBC common stock who desires to attend the LBC special meeting in person must also bring the validly executed proxy naming such person as the proxy holder, signed by the LBC shareholder of record, and proof of the signing shareholder’s record ownership as of the record date.

No cameras, recording equipment or other electronic devices will be allowed in the meeting room. Failure to provide the requested documents at the door or failure to comply with the procedures for the LBC special meeting may prevent LBC shareholders from being admitted to the LBC special meeting.

Assistance

If you need assistance in completing your proxy card, have questions regarding the LBC special meeting or would like additional copies of this proxy statement/prospectus, please contact Leonard H. Bateman, Jr., President and Chief Executive Officer, at (706) 884-6000.

 

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THE MERGER

The following discussion contains certain information about the merger. The discussion is subject, and qualified in its entirety by reference, to the merger agreement attached as Annex A to this proxy statement/prospectus. We urge you to read carefully this entire proxy statement/prospectus, including the merger agreement attached as Annex A, for a more complete understanding of the merger.

General

Each of Colony’s and LBC’s respective boards of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement. The merger agreement provides for the acquisition of LBC by Colony pursuant to the merger of LBC with and into Colony, with Colony as the surviving company, which we refer to as the merger. Immediately after the merger, Calumet Bank, a wholly owned Georgia-state bank subsidiary of LBC, will be merged with and into Colony Bank, a wholly owned bank subsidiary of Colony, with Colony Bank as the surviving bank, which we refer to as the bank merger.

Purchase Price and Purchase Price Adjustments

At the effective time of the merger, each outstanding share of LBC common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive, at the election of each LBC shareholder, either (i) $23.50 in cash, or (ii) 1.3239 shares of Colony common stock. The election of stock consideration or cash consideration will be subject to proration such that 55% of the issued and outstanding shares of LBC common stock will be exchanged for Colony common stock and 45% will be exchanged for cash, and at least 50% of the merger consideration will be paid in Colony common stock. As a result, if the aggregate number of shares with respect to which a valid stock or cash election has been made exceeds these limits, shareholders who have elected the form of merger consideration that has been over-subscribed will receive a mixture of both stock consideration and cash consideration in accordance with the proration procedures set forth in the merger agreement so that such limits are not exceeded. The stock consideration and the cash consideration are collectively referred to as the merger consideration. Each option or warrant to purchase shares of LBC common stock shall be cancelled as of the effective time of the merger and converted into the right to receive a cash payment equal to the product of (i) the total number of shares of LBC common stock subject to such option or warrant, as applicable, times (ii) the excess, if any, of $23.50 over the exercise price per share of LBC common stock subject to such option or warrant, as applicable.

Colony will not issue any fractional shares of Colony common stock in the merger. LBC shareholders who would otherwise be entitled to a fractional share of Colony common stock upon the completion of the merger will instead receive an amount in cash (without interest and rounded to the nearest whole cent) determined by multiplying the (i) fractional share interest in Colony common stock, rounded to the nearest one hundredth of a share, to which such holder would otherwise be entitled by (ii) $23.50.

LBC shareholders are being asked to approve the merger agreement and the merger. See “The Merger Agreement” for additional and more detailed information regarding the legal documents that govern the merger, including information about the conditions to the completion of the merger and the provisions for terminating or amending the merger agreement.

Background of the Merger

In fulfilling their respective obligations to the shareholders of LBC, the members of the board of directors of LBC (the “LBC Board”) have often considered the path forward for LBC, Calumet Bank, and the greater LaGrange community as a whole. In their consideration, the members of the board of directors of LBC explored options that included continuing LBC’s on-going operations as an independent institution, acquiring other depository institutions or branch offices, and entering into a strategic merger with a similarly sized or larger

 

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institution. The LBC Board also periodically reviewed, often with input from BSP and other advisors, the competitive environment in LBC’s market area and merger and acquisition activity in the financial services industry across the nation and, specifically, in the West Georgia market.

Beginning in late 2017, the LBC Board determined that it was in the best interest of LBC’s shareholders and other constituents to look seriously into the potential for a strategic transaction involving the merger of LBC and/or its wholly owned subsidiary, Calumet Bank, with and into a similarly sized or larger financial institution. The LBC Board’s determination was based, in part, on the relatively limited liquidity of LBC common stock as compared to market valuations for whole bank transactions, which have reached levels similar to pre-recession. This analysis, coupled with the additional capital that would be required to carry out longer-term strategic goals of LBC and Calumet, caused the LBC Board to conclude that it was in the best interest of LBC, Calumet Bank and their respective shareholders, customers, and employees to explore a whole-bank transaction.

The LBC Board reviewed materials from BSP and other investment banking firms with respect to the various strategic options available to LBC. BSP and the other investment banking firms are nationally recognized and have substantial experience with respect to transactions involving community based financial institutions and their holding companies. After considering the qualifications and experience of the firms, including the terms of the draft engagement letters received from each firm and the presentations that each firm made, the LBC Board decided to retain BSP and executed an engagement letter with BSP dated January 22, 2018. Pursuant to the engagement letter, LBC engaged BSP on an exclusive basis to render financial advisory and investment banking services to LBC in connection with its consideration of potential business combination transactions.

During the early part of 2018, BSP and LBC management met with a number of bank management teams to familiarize themselves with potential future acquirers. In mid-July 2018, BSP was contacted by an investment banking firm representing a potential acquirer seeking to preempt a competitive sale process by submitting an offer that it considered to be superior in terms of valuation in exchange for the opportunity to pursue exclusive negotiations. Following mutual due diligence and negotiations, the decision was made to terminate exclusive negotiations in favor of initiating a full auction process to market the sale of LBC.

During the month of September 2018, BSP contacted thirty-eight (38) parties on a no-name basis regarding participation in due diligence and negotiations regarding a strategic transaction with LBC, of which twenty-five (25) elected not to participate and the remaining thirteen (13) institutions (including Colony) signed non-disclosure agreements and received a confidential information memorandum relating to LBC’s operations, financial performance and transaction considerations. The thirteen institutions were provided with access to confidential information regarding LBC in order for such parties to undertake their preliminary due diligence reviews. BSP requested that the parties submit non-binding Letters of Intent (“LOIs”) by October 15, 2018.

BSP received three LOIs with varying terms and transaction structures. One LOI contemplated an all cash transaction and another LOI provided options for pricing for an all-stock, an all-cash, or a combined cash/stock transaction. The third LOI, submitted by Colony, provided an initial per-share price and contemplated a combined cash/stock transaction. After review and consideration of the three LOIs and each potential acquirer, the LBC Board elected to enter into exclusive negotiations with Colony by way of a vote of the LBC Board at a duly called meeting thereof held on October 18, 2018.

On October 22, 2018 Colony and LBC entered into a revised LOI which provided for, among other customary provisions, a per share price equal to $23.50, to be paid in both cash (45%) and stock (55%). The mechanics for setting the stock exchange ratio for the stock consideration portion of the transaction was to be mutually agreed upon by both parties during the stated exclusivity period. From October 22 through November 13, Colony, together with their legal counsel, investment bankers, and advisors conducted due diligence on LBC and both parties continued to negotiate the exchange ratio.

On November 13, 2018 Colony and LBC affirmed the terms of the previously executed LOI and agreed upon a stock exchange ratio in which each share of LBC common stock would be exchanged for 1.3239 shares of

 

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Colony common stock pursuant the stock consideration equates to 55% of the total transaction consideration. Alston & Bird LLP, outside counsel to Colony, provided an initial draft of the proposed merger agreement to LBC’s counsel, James-Bates-Brannan-Groover-LLP. Between November 13 and December 17, LBC, together with their legal counsel, investment bankers, and advisors conducted reverse due diligence on Colony and continued to negotiate the terms of the definitive merger agreement and related documents.

On December 17, 2018, the LBC Board met at its regularly scheduled meeting to review and discuss the proposed merger and the merger agreement. At this meeting, the LBC Board received presentations from its legal counsel, James-Bates-Brannan-Groover-LLP, and its financial advisor, BSP. Following this discussion, the LBC Board unanimously voted to approve the merger agreement and the other transactions contemplated by the merger agreement, including the merger, and authorized LBC’s executives to execute the merger agreement.

On December 17, 2018, Colony’s board of directors held a special meeting to review and discuss the proposed merger and the merger agreement. At this meeting, Colony’s board of directors received presentations from its legal counsel, Alston & Bird LLP, and its financial advisor, Hovde Group LLC. Following this discussion, Colony’s board of directors unanimously voted to approve the merger agreement and the other transactions contemplated by the merger agreement, including the merger, and authorized Colony’s executives to execute the merger agreement.

On December 17, 2018, the merger agreement and related documents were executed and the parties issued a press release announcing the proposed merger the following morning.

Colony’s Reasons for the Merger

In reaching its decision to approve and adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement, including the issuance of Colony common stock as the merger consideration, Colony board of directors considered a number of factors, including the following material factors:

 

   

each of Colony’s and LBC’s business, operations, financial condition, asset quality, earnings and prospects;

 

   

the strategic fit of the businesses of the two companies, including their complementary markets, business lines and loan and deposit profiles;

 

   

the opportunity to strategically expand in the Columbus, LaGrange and Atlanta, Georgia markets;

 

   

the anticipated pro forma impact of the transaction on the combined company, including the expected impact on financial metrics including earnings and tangible book value and regulatory capital levels, as well as the potential efficiencies of scale resulting from the increased size of Colony following the merger;

 

   

its understanding of the current and prospective environment in which Colony and LBC operate, including national, state and local economic conditions, the competitive environment for financial institutions generally, and the likely effect of these factors on Colony both with and without the proposed transaction;

 

   

its review and discussions with Colony’s management concerning the due diligence investigation of LBC, including its review of LBC’s financial condition, results of operation, asset quality, market areas, growth potential (projected potential accretion to earnings per share and the projected payback period of the estimated decrease in tangible book value) and quality of senior management;

 

   

the perceived compatibility of the corporate cultures of the two companies, which management believes should facilitate integration and implementation of the transaction;

 

   

the structure of the transaction as a combination in which the combined company would operate under the Colony brand and Colony’s board of directors and management would have substantial participation in the combined company;

 

   

the regulatory and other approvals required in connection with the merger and the expectation that such regulatory approvals will be received in a timely manner and without the imposition of unacceptable conditions; and

 

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the financial and other terms of the merger agreement, including the merger consideration, expected tax treatment, the deal protection and termination fee provisions, and restrictions on the conduct of LBC’s business between the date of the merger agreement and the date of completion of the merger.

Colony’s board of directors also considered potential risks relating to the merger including the following:

 

   

Colony management’s attention and Colony resources may be diverted from the operation of Colony’s business and towards the completion of the merger;

 

   

Colony may not realize all of the anticipated benefits of the merger, including cost savings, maintenance of existing customer and employee relationships, and minimal disruption in the integration of LBC’s operations with Colony;

 

   

the nature and amount of payments and other benefits to be received by LBC management in connection with the merger pursuant to existing LBC plans and compensation arrangements and the merger agreement;

 

   

the substantial costs that Colony will incur in connection with the merger even if it is not consummated;

 

   

approvals from regulatory authorities could impose conditions that could have the effect of delaying completion of the merger or imposing additional costs; and

 

   

the possibility of litigation in connection with the merger.

The foregoing discussion of the factors considered by Colony board of directors is not intended to be exhaustive, but, rather, includes the material factors considered by Colony board of directors. In reaching its decision to approve and adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement, including the issuance of Colony common stock as the merger consideration, Colony board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. Colony board of directors considered all these factors as a whole and overall considered the factors to be favorable to, and to support, its determination.

LBC’s Reasons for the Merger

After careful consideration, LBC’s board of directors determined that it was advisable and in the best interests of LBC and its shareholders for LBC to enter into the merger agreement with Colony. Accordingly, LBC’s board unanimously recommends that LBC’s shareholders vote “FOR” the approval of the merger agreement and the merger.

The board of directors of LBC has considered the terms and provisions of the merger agreement and concluded that they are fair to the shareholders of LBC and that the merger is in the best interests of LBC and its shareholders.

The board of directors of LBC believes that the merger will help create a stronger regional bank with the tools and resources necessary to enhance long-term value for LBC’s shareholders. In addition, the LBC Board believes that the customers served by LBC and the West Georgia market as a whole will benefit from the resulting institution’s enhanced abilities to meet their banking needs.

In reaching its decision to approve the merger agreement, the LBC Board consulted with management, as well as with LBC’s financial and legal advisors, and considered a variety of factors, including the following:

 

   

the consideration being offered to LBC’s shareholders in relation to the market value, book value per share, earnings per share and projected earnings per share of LBC;

 

   

the potential future value of LBC stock compared to the value of the merger consideration offered by Colony and the potential future trading value of the Colony common stock;

 

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the current and prospective environment in which LBC operates, including national, regional, and local economic conditions, the competitive environment for financial institutions, the increased regulatory burdens on financial institutions, and the uncertainties in the regulatory climate going forward;

 

   

the form of merger consideration offered by Colony, including the opportunity for LBC shareholders to receive shares of Colony common stock on a tax-free basis for their shares of LBC stock;

 

   

LBC’s and Colony’s shared community banking philosophies;

 

   

the scale, scope, strength, and diversity of operations, product lines and delivery systems that could be achieved by combining LBC with Colony;

 

   

the limited impact to available banking services in the LaGrange, Georgia market due to the minimal geographic overlap between Calumet and Colony;

 

   

Colony’s asset size and capital position, which would give the resulting institution over approximately $1.4 billion in assets;

 

   

the earnings prospects of the combined company;

 

   

the additional products offered by Colony to its customers and the ability of the resulting institution to provide comprehensive financial services to its customers;

 

   

the terms and conditions of the merger agreement, including the parties’ respective representations, warranties, covenants, and other agreements, the conditions to closing, a provision which permits the LBC Board, in the exercise of its fiduciary duties, under certain conditions, to furnish information to, or engage in negotiations with, a third party which has submitted an unsolicited proposal to acquire LBC;

 

   

the reports of LBC’s management and discussions with representatives of BSP concerning the operations, financial condition and prospects of Colony and the expected financial impact of the merger on the combined company, including pro forma assets, earnings, deposits, and capital ratios;

 

   

Colony’s financial strength as it relates to Colony’s ability to fund the cash portion of the total consideration;

 

   

the likelihood of successful integration and the successful operation of the combined company;

 

   

the likelihood that the regulatory approvals needed to complete the transaction will be obtained;

 

   

the effects of the merger on LBC’s employees, including the prospects for continued employment and the severance and other benefits agreed to be provided to LBC employees; and

 

   

BSP’s written opinion, dated December 17, 2018, to the effect that, as of such date, the exchange ratio was fair to LBC’s common shareholders from a financial point of view. The opinion is attached as Annex B to this proxy statement/prospectus. For a summary of the presentation of BSP, see “— Opinion of LBC’s Financial Advisor” below.

In the course of its deliberation, the LBC Board also considered a variety of risks and other countervailing factors, including:

 

   

the risks and costs to LBC if the merger does not close, including:

 

   

the diversion of management and employee attention, potential employee attrition, and the effect on customers and business relationships; and

 

   

the potential adverse impact on the value of LBC’s common stock if the merger agreement is terminated;

 

   

the restrictions on the conduct of LBC’s business prior to the completion of the merger, which are customary for merger agreements involving financial institutions, but which, subject to specific

 

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exceptions, could delay or prevent LBC from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of LBC absent the pending completion of the merger;

 

   

the restrictions that the merger agreement imposes on actively soliciting competing bids, and the fact that LBC would be obligated to pay a $1.432 million termination fee to Colony under certain circumstances; and

 

   

the fact that LBC will no longer exist as an independent, stand-alone company.

The foregoing discussion of the information and factors considered by LBC’s board of directors is not exhaustive, but includes all material factors considered by the LBC Board. In view of the wide variety of factors considered by the LBC Board in connection with its evaluation of the merger and the complexity of these matters, the LBC Board did not consider it practical to, and did not attempt to, quantify, rank or otherwise assign relative weights to the specific factors that it considered in reaching its decision. The LBC Board evaluated the factors described above, including asking questions of LBC’s management and LBC’s legal and financial advisors. In considering the factors described above, individual members of the LBC Board may have given different weights to different factors. The LBC Board relied on the experience and expertise of its financial advisors for quantitative analysis of the financial terms of the merger. See “—Opinion of LBC’s Financial Advisor” below. It should also be noted that this explanation of the reasoning of the LBC Board and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Cautionary Statement Regarding Forward-Looking Statements” on page 18.

After evaluating these factors and consulting with its legal counsel and financial advisors, the LBC Board determined that the merger agreement was advisable and in the best interests of LBC’s shareholders. Accordingly, the LBC Board has unanimously adopted the merger agreement and approved the merger.

THE LBC BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE MERGER AGREEMENT.

Opinion of LBC’s Financial Advisor

LBC retained BSP on an exclusive basis to render financial advisory and investment banking services and to render a written opinion to the LBC Board as to the fairness, from a financial point of view, of the merger consideration to be paid under the terms of the merger agreement. BSP is an investment banking firm that specializes in providing financial advisory and investment banking services to financial institutions. BSP has been involved in many bank-related business combinations. No limitations were imposed by LBC upon BSP with respect to rendering its opinion.

At the December 17, 2018, meeting at which the LBC Board considered and approved the merger agreement, BSP delivered its written opinion that, as of such date, the merger consideration to be received was fair from a financial point of view.

The full text of BSP’s opinion is attached as Annex B to this proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by BSP in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the opinion. We urge you to read the entire opinion carefully in connection with your consideration of the proposed merger.

The opinion speaks only as of the date of the opinion. The opinion was directed to the LBC Board and is directed only to the fairness, from a financial point of view, of the merger consideration to be received. It does not address the underlying business decision to engage in the merger or any other aspect of the merger and is not a recommendation to any shareholder as to how such shareholder should vote with respect to the merger or any other matter.

 

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For purposes of the opinion and in connection with its review of the proposed transaction, BSP, among other things, completed the following:

 

  1.

Reviewed the terms of the merger agreement;

 

  2.

Participated in discussions with LBC’s management concerning LBC’s financial condition, asset quality and regulatory standing, capital position, historical and current earnings, management succession and LBC’s and Colony’s future financial performance;

 

  3.

Reviewed LBC’s audited financial statements for the years ended December 31, 2017, 2016 and 2015, and unaudited financial statements for the quarter and nine months ended September 30, 2018;

 

  4.

Reviewed Colony’s audited financial statements for the years ended December 31, 2017, 2016 and 2015, and unaudited financial statements for the quarter and nine months ended September 30, 2018;

 

  5.

Reviewed certain financial forecasts and projections of LBC, prepared by its management, as well as the estimated cost savings and related transaction expenses expected to result from the merger;

 

  6.

Analyzed certain aspects of LBC’s financial performance and condition and compared such financial performance with similar data of companies BSP deemed similar to LBC;

 

  7.

Reviewed historical trading activity of Colony and Colony’s financial advisor’s projections for future financial performance;

 

  8.

Compared the proposed financial terms of the merger with the financial terms of certain other recent merger and acquisition transactions, involving acquired companies that BSP deemed to be relevant to LBC; and

 

  9.

Performed such other analyses and considered such other information, financial studies, and investigations and financial, economic and market criteria as BSP deemed relevant.

BSP assumed and relied, without independent verification, upon the accuracy and completeness of all of the financial and other information provided to it by LBC, Colony, and each company’s respective representatives and of the publicly available information for LBC and Colony that BSP reviewed. BSP is not an expert in the evaluation of allowances for loan losses and has not independently verified such allowances, and relied on and assumed that such allowances of LBC and Colony at September 30, 2018 were adequate to cover such losses and complied fully with applicable law, regulatory policy, and sound banking practices as of the date of such financial statements. BSP was not retained to, and did not, conduct a physical inspection of any of the properties or facilities of LBC. BSP also did not make any independent evaluation or appraisal of the assets, liabilities, or prospects of LBC, was not furnished with any such evaluation or appraisal, and did not review any individual credit files. The opinion of BSP was necessarily based on economic, market, and other conditions as in effect on, and the information made available to it as of, the date thereof. BSP expressed no opinion on matters of a legal, regulatory, tax, or accounting nature or the ability of the merger, as set forth in the merger agreement, to be consummated. No opinion was expressed as to whether any alternative transaction might be more favorable to LBC than the merger.

BSP, as part of its investment banking business, is regularly engaged in the valuation of banks and bank holding companies and various other financial services companies in connection with mergers and acquisitions, private placements of securities, and valuations for other purposes. In rendering its fairness opinion, BSP acted on behalf of the LBC Board.

BSP’s opinion is limited to the fairness, from a financial point of view, of the merger consideration to be received under the terms of the merger agreement and does not address the ability of the merger to be consummated, the satisfaction of the conditions precedent contained in the merger agreement, or the likelihood of the merger receiving regulatory approval. Although BSP was retained on behalf of the LBC Board, BSP’s opinion did not constitute a recommendation to any director of LBC as to how such director or any shareholder should vote with respect to the merger agreement.

 

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Based upon and subject to the foregoing, and based on BSP’s experience as investment bankers, BSP’s activities as described above, and other factors deemed relevant, BSP rendered its opinion that, as of December 17, 2018, the merger consideration received is fair to the holders of LBC common stock, from a financial point of view.

The following is a summary of material analyses performed by BSP in connection with its opinion to the LBC Board on December 17, 2018. The summary does not purport to be a complete description of the analyses performed by BSP but summarizes the material analyses performed and presented in connection with such opinion.

Financial Analysis

In rendering its opinion, BSP performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying BSP’s opinion or the presentation made by BSP to the LBC Board, but is a summary of the material analyses performed and presented by BSP. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. BSP believes that its analysis must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in the comparative analyses described below is identical to LBC or Colony and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of LBC and Colony and the companies to which they are being compared. In arriving at its opinion, BSP did not attribute any particular weight to any analysis or factor that it considered. Rather, BSP made qualitative judgments as to the significance and relevance of each analysis and factor. BSP did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion; rather, BSP made its determination as to the fairness of the merger consideration on the basis of its experience and professional judgment after considering the results of all of the analyses taken as a whole.

In performing its analysis, BSP also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which are beyond the control of LBC, Colony, and BSP. The analyses performed by BSP are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. BSP prepared its analyses solely for purposes of rendering its opinion and presented such analyses to the LBC Board at its December 17, 2018, meeting. Estimates of the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty, and actual values may be materially different. Accordingly, BSP’s analysis does not necessarily reflect the value of LBC or Colony common stock or the prices at which LBC common stock or Colony common stock may be sold at any time. BSP’s analysis was among a number of factors taken into consideration by the LBC Board in making its determination to approve the merger agreement and should not be viewed as determinative of the merger consideration or the decision of the LBC board of directors or management with respect to the fairness of the merger.

 

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Summary of Merger Consideration and Implied Transaction Metrics

Under the terms of the merger agreement, each share of LBC common stock outstanding prior to the merger will be converted into and exchanged for the right to receive the following:

 

  (i)

a cash payment, without interest, in an amount equal to $23.50; or

 

  (ii)

1.3239 shares of Colony common stock

Holders of record of LBC common stock may elect to receive shares of Colony common stock or cash in exchange for their shares of LBC common stock, provided that the aggregate number of shares of LBC common stock to be converted into the per share stock consideration shall be 55% of the total outstanding shares number.

As part of its analysis, BSP reviewed metrics relative to merger and acquisition transactions involving U.S. banks. The criteria for the merger peers consisted of the following: whole-bank transactions announced on or after January 1, 2016 involving Georgia banks with less than $1.0B in total assets; whole-bank transactions announced on or after June 30, 2017 with target non-performing assets/total assets between 0.05% and 0.40% and total assets between $150mm and $400mm; whole-bank transactions announced on or after June 30, 2017 with target tangible common equity/tangible assets less than 9.5% and total assets between $150mm and $400mm; whole-bank transactions announced on or after June 30, 2017 with target last-12-months return on average assets between 0.70% and 0.90% and total assets between $150mm and $400mm; whole-bank transactions announced on or after June 30, 2017 involving banks in the Southeastern United States with total assets between $150mm and $400mm. Each of the peer groups established by BSP excluded transactions involving private investors/investor groups, and transactions involving troubled bank targets.

 

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Using the latest publicly available information prior to the announcement of the relevant transaction, BSP reviewed the following transaction metrics for each selected merger transaction group: transaction price to last-12-months earnings, transaction price to tangible book value, transaction price to total assets and tangible book premium to core deposits. BSP compared the indicated transaction multiples for the merger to the 25th percentile, 75th percentile, and median multiples of each merger transaction group.

 

                      Announcement Price/Target Announcement Financials  

Buyer Name/ Target Name

  Target
State
    Announce
Date
    Fully Diluted
Transaction
Value

($mm)
    LTM
Earnings
(x)
    TBV
(%)
    Assets
(%)
    Premium/
Core
Deposits
(%)
    Total
Assets
($000)
    TCE
 Ratio 
(%)
    LTM
 ROAA 
(%)
    NPAs/
 Assets 
(%)
 

Colony Offer

        34.5       20.1       183.0       15.1       8.3       227,837       8.28       0.83       0.35  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

CoastalSouth Bancshares, Inc./First Citizens Financial Corp.

    GA       05/01/18       11.6       29.3       150.5       12.2       5.4       95,008       7.98       0.67       0.93  

National Commerce Corp./Landmark Bancshares, Inc.

    GA       04/24/18       115.4       16.0       222.3       19.4       17.7       595,439       10.67       1.36       1.11  

Entegra Financial Corp./Chattahoochee Bank of Georgia

    GA       06/27/17       34.9       23.8       154.3       17.8       10.5       196,833       11.50       0.78       0.00  

Charter Financial Corp./Resurgens Bancorp

    GA       06/01/17       26.3       17.5       164.5       15.8       10.6       166,763       10.96       1.44       0.00  

Piedmont Bancorp, Inc./Mountain Valley Bancshares, Inc.

    GA       03/17/17       26.1       18.9       138.4       12.9       4.7       202,470       8.61       0.75       1.53  

National Commerce Corp./Private Bancshares, Inc.

    GA       08/31/16       59.1       19.7       225.9       20.3       14.3       291,234       8.58       1.38       1.66  

Pinnacle Financial Corp./Independence Bank of Georgia

    GA       07/01/16       30.4       17.7       126.1       16.1       5.0       189,003       12.74       0.94       0.36  

Bainbridge Bancshares, Inc./Citizens Bank

    GA       06/21/16       4.4       NM       96.9       13.6       -0.6       32,434       14.00       (0.20     1.88  

State Bank Financial Corp./S Bankshares, Inc.

    GA       05/19/16       11.0       NM       101.7       10.1       0.3       108,813       9.50       0.53       0.90  

State Bank Financial Corp./NBG Bancorp, Inc.

    GA       04/05/16       68.0       14.8       165.4       16.7       10.0       406,463       10.07       1.30       0.81  

GA Group Median

        28.3       18.3       152.4       15.9       7.7       192,918       10.37       0.86       0.92  

GA 25th Percentile

        15.2       17.1       129.2       13.0       4.8       123,301       8.83       0.69       1.43  

GA 75th Percentile

        53.1       20.7       165.2       17.5       10.6       269,043       11.36       1.35       0.47  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Asset Quality Group Median (NPAs/ Assets 0.05% - 0.40%)

        47.9       18.8       160.8       16.6       8.9       304,994       10.56       0.95       0.20  

Asset Quality Group 25th Percentile

        31.3       12.4       152.0       14.8       6.8       187,736       9.50       0.79       0.28  

Asset Quality Group 75th Percentile

        57.2       26.4       194.9       18.5       14.5       331,859       11.48       1.46       0.07  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital Group Median (TCE Ratio < 9.5%)

        40.1       14.4       174.3       13.8       9.2       309,549       9.10       0.84       0.75  

Capital Group 25th Percentile

        31.8       12.3       156.2       13.0       6.8       223,100       8.77       0.49       0.94  

Capital Group 75th Percentile

        51.7       22.7       195.5       16.2       11.9       347,344       9.36       1.23       0.33  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profitability Group Median (LTM ROAA 0.70% - 0.90%)

        49.8       24.8       163.9       18.1       11.5       280,539       11.04       0.79       1.07  

Profitability Group 25th Percentile

        37.4       22.8       154.9       15.5       7.8       228,037       9.68       0.76       1.62  

Profitability Group 75th Percentile

        62.8       26.7       191.7       20.1       14.6       333,390       12.18       0.82       0.06  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Geographic Group Median (SE Mergers)

        34.1       20.9       164.5       15.7       8.9       207,879       10.20       0.73       0.88  

Geographic Group 25th Percentile

        29.3       12.9       152.0       14.9       8.1       183,521       9.58       0.32       1.87  

Geographic Group 75th Percentile

        50.4       25.7       173.8       17.6       18.1       274,869       11.49       0.96       0.40  

Sources: S&P Global Market Intelligence, BSP

BSP also performed an analysis that estimated the net present value per share of LBC common stock on a standalone basis assuming LBC performed in accordance with management guidance for 2019 – 2021. For purposes of this analysis, BSP assumed that LBC would earn $1.96 per share in 2019, $2.27 per share in 2020, and $2.45 per

 

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share in 2021. To approximate the terminal trading value of a share of LBC common stock at December 31, 2021, BSP applied price to 2021 earnings per share multiples ranging from 12.0x to 15.0x and price to December 31, 2021 tangible book value per share multiples ranging from 100% to 130%. The terminal values were then discounted to present values using different discount rates ranging from 12.0% to 16.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of LBC common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of LBC common stock of $18.18 to $25.47 when applying multiples of earnings per share and $12.72 to $18.54 when applying multiples of tangible book value per share.

 

LOGO

Discount Rates

         Terminal Trading Tangible Book Multiples  
         100%      110%      120%      130%  
     12 %    $ 14.26      $ 15.69      $ 17.11      $ 18.54  
     13 %    $ 13.85      $ 15.24      $ 16.63      $ 18.01  
     14 %    $ 13.46      $ 14.81      $ 16.16      $ 17.50  
     15 %    $ 13.09      $ 14.40      $ 15.70      $ 17.01  
     16 %    $ 12.72      $ 14.00      $ 15.27      $ 16.54  

 

LOGO

Discount Rates

         Terminal Trading Earnings Multiples  
         12.0      13.0      14.0      15.0  
     12 %    $ 20.38      $ 22.08      $ 23.77      $ 25.47  
     13 %    $ 19.80      $ 21.45      $ 23.10      $ 24.75  
     14 %    $ 19.24      $ 20.84      $ 22.44      $ 24.05  
     15 %    $ 18.70      $ 20.26      $ 21.82      $ 23.37  
     16 %    $ 18.18      $ 19.70      $ 21.21      $ 22.73  

Sources: LBC, BSP

BSP performed an analysis that estimated the net present value per share of Colony common stock on a standalone basis assuming Colony performed in accordance with BSP’s projected performance through 2021. For purposes of this analysis, BSP assumed that Colony would earn $1.43 per share in 2019, $1.52 per share in 2020 and $1.61 per share in 2021. To approximate the terminal trading value of a share of Colony common stock at December 31, 2021, BSP applied price to 2021 earnings per share multiples ranging from 14.0x to 17.0x and price to December 31, 2021 tangible book value per share multiples ranging from 140% to 170%. The terminal values were then discounted to present values using different discount rates ranging from 11.0% to 15.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Colony common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Colony common stock of $15.30 to $20.55 when applying multiples of earnings per share and $13.60 to $18.24 when applying multiples of tangible book value per share.

 

LOGO

Discount Rates

         Terminal Trading Tangible Book Multiples  
         140%      150%      160%      170%  
     11 %    $ 15.21      $ 16.22      $ 17.23      $ 18.24  
     12 %    $ 14.79      $ 15.77      $ 16.75      $ 17.73  
     13 %    $ 14.38      $ 15.33      $ 16.28      $ 17.23  
     14 %    $ 13.98      $ 14.91      $ 15.83      $ 16.76  
     15 %    $ 13.60      $ 14.50      $ 15.40      $ 16.30  

 

LOGO

Discount Rates

         Terminal Trading Earnings Multiples  
         14.0      15.0      16.0      17.0  
     11 %    $ 17.11      $ 18.26      $ 19.40      $ 20.55  
     12 %    $ 16.63      $ 17.74      $ 18.86      $ 19.97  
     13 %    $ 16.17      $ 17.25      $ 18.33      $ 19.41  
     14 %    $ 15.73      $ 16.78      $ 17.83      $ 18.88  
     15 %    $ 15.30      $ 16.32      $ 17.34      $ 18.36  

Sources: S&P Global Market Intelligence, BSP

 

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At the time the opinion was given it was necessary for BSP to evaluate two pro forma net present value per share analyses of Colony’s common stock as there was uncertainty around what type, if any, of capital Colony would raise to support the cash portion of the transaction. BSP performed the first pro forma net present value analysis assuming Colony borrows $20 million in the form of a holding company line of credit at a rate of 6.0% and the second pro forma net present value analysis assuming Colony issues 1.1 million of common stock at $17.50 per share, with costs associated with the issuance equaling 4.0% of the value of the issuance. In both scenarios BSP assumed that Colony would perform in accordance with BSP’s projected performance through 2021.

BSP first performed an analysis that estimated the net present value per share of Colony common stock on a pro forma basis assuming (i) Colony performs in accordance with BSP’s projected performance through 2021 and (ii) Colony borrows $20 million in the form of a holding company line of credit at a rate of 6.0% in order to fund the cash portion of the total merger consideration. For purposes of this analysis, BSP assumed that Colony would earn $1.53 per share in 2019, $1.72 per share in 2020 and $1.89 per share in 2021. To approximate the terminal trading value of a share of Colony common stock at December 31, 2021, BSP applied price to 2021 earnings per share multiples ranging from 15.0x to 18.0x and price to December 31, 2021 tangible book value per share multiples ranging from 150% to 180%. The terminal values were then discounted to present values using different discount rates ranging from 11.0% to 15.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Colony common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Colony common stock of $18.15 to $24.37 when applying multiples of earnings per share and $13.09 to $17.56 when applying multiples of tangible book value per share.

 

LOGO

Discount Rates

         Terminal Trading Tangible Book Multiples  
         150%      160%      170%      180%  
     11 %    $ 14.67      $ 15.63      $ 16.59      $ 17.56  
     12 %    $ 14.25      $ 15.19      $ 16.12      $ 17.06  
     13 %    $ 13.85      $ 14.76      $ 15.67      $ 16.58  
     14 %    $ 13.46      $ 14.35      $ 15.23      $ 16.12  
     15 %    $ 13.09      $ 13.95      $ 14.81      $ 15.67  

 

LOGO

Discount Rates

         Terminal Trading Earnings Multiples  
         15.0      16.0      17.0      18.0  
     11 %    $ 20.34      $ 21.68      $ 23.02      $ 24.37  
     12 %    $ 19.76      $ 21.06      $ 22.37      $ 23.67  
     13 %    $ 19.20      $ 20.47      $ 21.73      $ 23.00  
     14 %    $ 18.66      $ 19.89      $ 21.13      $ 22.36  
     15 %    $ 18.15      $ 19.34      $ 20.54      $ 21.74  

Sources: S&P Global Market Intelligence, BSP

Additionally BSP performed an analysis that estimated the net present value per share of Colony common stock on a pro forma basis assuming (i) Colony performs in accordance with BSP’s projected performance through 2021 and (ii) Colony issues 1.1 million shares of common stock at $17.50 per share, with costs associated with the issuance equaling 4.0% of the value of the issuance, in order to fund the cash portion of the total merger consideration. For purposes of this analysis, BSP assumed that Colony would earn $1.45 per share in 2019, $1.59 per share in 2020 and $1.72 per share in 2021. To approximate the terminal trading value of a share of Colony common stock at December 31, 2021, BSP applied price to 2021 earnings per share multiples ranging from 15.0x to 18.0x and price to December 31, 2021 tangible book value per share multiples ranging from 150% to 180%. The terminal values were then discounted to present values using different discount rates ranging from 11.0% to 15.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Colony common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Colony common stock of $16.53 to $22.19 when applying multiples of earnings per share and $13.38 to $17.95 when applying multiples of tangible book value per share.

 

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LOGO

Discount Rates

         Terminal Trading Tangible Book Multiples  
         150%      160%      170%      180%  
     11 %    $ 14.99      $ 15.98      $ 16.96      $ 17.95  
     12 %    $ 14.57      $ 15.52      $ 16.48      $ 17.44  
     13 %    $ 14.16      $ 15.09      $ 16.02      $ 16.95  
     14 %    $ 13.76      $ 14.67      $ 15.57      $ 16.47  
     15 %    $ 13.38      $ 14.26      $ 15.14      $ 16.02  

 

LOGO

Discount Rates

         Terminal Trading Earnings Multiples  
         15.0      16.0      17.0      18.0  
     11 %    $ 18.52      $ 19.75      $ 20.97      $ 22.19  
     12 %    $ 18.00      $ 19.18      $ 20.37      $ 21.56  
     13 %    $ 17.49      $ 18.64      $ 19.80      $ 20.95  
     14 %    $ 17.00      $ 18.12      $ 19.24      $ 20.36  
     15 %    $ 16.53      $ 17.62      $ 18.71      $ 19.80  

Sources: S&P Global Market Intelligence, BSP

Conclusion

Based on the results of the various analyses described above, BSP concluded that the merger consideration to be received under the terms of the merger agreement is fair, from a financial point of view.

The opinion expressed by BSP was based upon market, economic, and other relevant considerations as they existed and could be evaluated as of the date of the opinion. Events occurring after the date of issuance of the opinion, including, but not limited to, changes affecting the securities markets, the results of operations or material changes in the assets or liabilities of LBC or Colony, could materially affect the assumptions used in preparing the opinion.

As described above, BSP’s opinion was among the many factors taken into consideration by the LBC Board in making its determination to approve the merger agreement. For purposes of rendering its opinion, BSP assumed that, in all respects material to its analyses:

 

   

the merger will be consummated in accordance with the terms of the merger agreement without waiver, modification or amendment of any term, condition or agreement thereof;

 

   

the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement are true and correct;

 

   

each party to the merger agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents;

 

   

all conditions to the completion of the merger will be satisfied without any waivers; and

 

   

in the course of obtaining the necessary regulatory, contractual or other consents or approvals for the merger, no restrictions, including any divestiture requirements, termination, or other payments or amendments or modifications, will be imposed that will have a material adverse effect on the future results of operations or financial condition of the combined entity or the contemplated benefits of the merger.

BSP cannot provide assurance as to when or if all of the conditions to the merger can or will be satisfied or, if applicable, waived by the appropriate party. As of the date of this proxy statement/prospectus, BSP has no reason to believe that any of these conditions will not be satisfied.

 

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Compensation to BSP

BSP was engaged as financial advisor to LBC in connection with the merger. Pursuant to the terms of the engagement agreement, LBC agreed to pay BSP certain fees in conjunction with this transaction, $20,000 of which was paid upon signing of the engagement letter, $40,000 of which was paid upon the signing of a merger agreement and $25,000 which was paid upon BSP’s delivery of the written opinion to LBC. Upon closing of the transaction, BSP will be paid a fee calculated as one percent (1.00%) of total consideration. In addition, LBC has agreed to indemnify BSP and its directors, officers, and employees from liability in connection with the transaction, and to hold BSP harmless from any losses, actions, claims, damages, expenses, or liabilities related to any of BSP’s acts or decisions made in good faith and in the best interest of LBC. During the year preceding the current engagement associated with the merger, BSP did not provide advisory services to LBC where compensation was received. During the past two years, BSP has not provided advisory services to Colony for which it has received compensation.

Board Composition and Management of Colony after the Merger

Each of the officers and directors of Colony immediately prior to the effective time of the merger will be the officers and directors of the surviving company from and after the effective time of the merger, until their respective successors have been duly elected, appointed or qualified or until their earlier death, resignation or removal in accordance with Colony Articles and Colony Bylaws.

Interests of LBC’s Directors and Executive Officers in the Merger

In considering the recommendation of LBC’s board of directors to vote for the merger proposal, LBC shareholders should be aware that directors and officers of LBC have interests in the merger that are in addition to, or different from, their interests as shareholders of LBC. The LBC board of directors was aware of these interests and considered them in approving the merger agreement and the transactions contemplated by the merger agreement, including the merger, and the decision to recommend that the LBC shareholders approve the merger proposal. These interests are described below.

LBC Stock Options

Under the terms of LBC’s equity compensation plan, outstanding equity awards held by LBC’s employees (including executive officers) and directors generally vest in full upon consummation of a change in control transaction. The merger will constitute a change in control for purposes of the plan.

Upon the completion of the merger, each outstanding LBC stock option (whether vested or unvested) will be cancelled and converted into the right to receive an amount in cash, without interest, equal to (i) the number of shares subject to such option, multiplied by (ii) the excess, if any, of  $23.50 over the exercise price per share of such option. Each outstanding LBC option with a per share exercise price equal to or greater than $23.50 will be cancelled without payment.

The following table sets forth, for each of LBC’s executive officers and non-employee directors, the number of all outstanding stock options held by each such person as of December 31, 2018, and the estimated consideration that each will receive after the effective time of the merger in connection with such awards:

 

Executive Officer

   Total
Outstanding

Stock Options
     Amount Payable in
Connection with
Merger
 

Leonard H. Bateman, Jr.

     50,900.00      $ 694,152.36  

Holly T. Britt

     15,728.00      $ 220,761.12  

Michael Phillips

     17,500.00      $ 223,825.00  

Casey G. Smith

     15,586.00      $ 224,824.94  

 

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For further information regarding the beneficial ownership of LBC common stock by the directors and executive officers of LBC, see “Beneficial Ownership of LBC Common Stock by Management and Principal Shareholders of LBC” beginning on page 52.

LBC Warrants

LBC is party to various warrant agreements with certain non-employee directors. Upon the completion of the merger, each outstanding LBC warrant (whether vested or unvested) will be cancelled and converted into the right to receive an amount in cash, without interest, equal to (i) the number of shares subject to such option, multiplied by (ii) the excess, if any, of $23.50 over the exercise price per share of such option, less applicable taxes required to be withheld with respect to such payment. Each outstanding LBC warrant with a per share exercise price equal to or greater than $23.50 will be cancelled without payment.

The following table sets forth, for each of LBC’s executive officers and non-employee directors, the number of all outstanding warrants held by each such person as of December 31, 2018, and the estimated consideration that each will receive after the effective time of the merger in connection with such awards:

 

Non-Employee Director

   Total
Outstanding
Stock Options
     Amount Payable in
connection with
merger
 

George W. Childress

     10,576.00      $ 135,267.04  

Susan G. Ferguson

     11,115.00      $ 142,160.85  

James R. Williams

     11,115.00      $ 142,160.85  

For further information regarding the beneficial ownership of LBC common stock by the directors and executive officers of LBC, see “Beneficial Ownership of LBC Common Stock by Management and Principal Shareholders of LBC” beginning on page 52.

Employment Agreements with LBC

LBC is party to employment agreements with Messrs. Bateman and Phillips (the “Employment Agreements”). Under the Employment Agreements, if the executive’s employment is terminated within twelve (12) months of a Change in Control (as defined in the Employment Agreements) by LBC other than for Cause (as defined in the Employment Agreements), or if the executive terminates his employment for Good Reason (as defined in the Employment Agreements), then the executive will be entitled to severance equal to one time, in the case of Mr. Phillips, or two times, in the case of Mr. Bateman, his “Annual Base Salary” (as in effect at the time of such termination), payable in a single lump sum payment on the first payroll date that is more than sixty (60) days following the date of termination. The Employment Agreements with Messrs. Bateman and Phillips include an agreement (a) not to compete with Calumet in the delivery of financial services and (b) not to solicit the employees or customers of Calumet, in each case for a period of twelve (12) months following termination of employment.

Termination of Bateman Employment Agreement with LBC

In connection with the execution of the merger agreement, LBC and Mr. Bateman entered into an agreement to terminate Mr. Bateman’s employment agreement with LBC. Pursuant to this agreement, LBC agreed to pay Mr. Bateman a lump sum amount of $425,000 (which is equal to two times his annual base salary) in exchange for a full release of claims in favor of LBC.

Change of Control Agreements with LBC

LBC is a party to change in control agreements with Ms. Holly Britt and Ms. Casey Smith (the “CIC Agreements”). Under the CIC Agreements, if the executive’s employment is terminated within twelve (12) months of a Change in Control (as defined in the CIC Agreements) by LBC other than for Cause (as defined in the CIC Agreements) or if the executive terminates his employment for Good Reason (as defined in the CIC

 

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Agreements, then the executive will be entitled to severance equal to her “Annual Base Salary” (as in effect at the time of such termination). The CIC Agreements provide that such severance amount shall be payable in a single lump sum payment on the first payroll date that is more than sixty (60) days following the date of termination. The CIC Agreements with Ms. Britt and Ms. Smith also include an agreement (a) not to compete with Calumet in the delivery of financial services within a fifty (50) mile radius of the and (b) not to solicit the employees or customers of Calumet, in each case for a period of twelve (12) months following termination of employment.

New Employment Agreement with Colony Bank

In connection with the execution of the merger agreement, Colony and Colony Bank entered into a new employment agreement with Mr. Bateman, which will take effect upon completion of the merger and will have a term of one year. The employment agreement provides that Mr. Bateman will serve as Senior Vice President and Senior Credit Officer of Colony Bank at an annual base salary of $212,504, subject to review annually in connection with an annual review process. Mr. Bateman will also be eligible to participate in Colony Bank’s annual discretionary cash bonus plan and all welfare benefit plans and programs sponsored by Colony Bank. If Mr. Bateman’s employment is terminated during the one-year term by Colony Bank without “cause” or by Mr. Bateman for “good reason” (in either case, a “Qualifying Termination”), Colony Bank will continue to pay Mr. Bateman his base salary for a period of 12 months. If a Qualifying Termination occurs within 12 months of a change in control of Colony, Colony Bank will pay to Mr. Bateman a lump sum amount equal to his then-current base salary, plus the amount of annual bonus paid to Mr. Bateman for the calendar year preceding the date of his termination. Pursuant to the employment agreement, Mr. Bateman agreed not to compete with Colony Bank or to solicit its employees or customers during the term of the agreement and for a period of one year thereafter.

Indemnification of Directors and Officers

Colony has agreed to indemnify LBC’s directors and officers following the effective time of the merger to the same extent as currently provided under LBC’s indemnification agreements, or if not subject to an agreement, to the fullest extent permitted by applicable laws. Colony has also agreed to maintain in effect a directors’ and officers’ liability insurance policy for a period of six years after the effective time of the merger with respect to claims arising from facts, events or actions which occurred prior to the effective time of the merger and covering persons who are currently covered by such insurance. The insurance policy must contain at least the same coverage and amounts, and contain terms and conditions no less advantageous to the directors and officers as currently provided, subject to a cap on the cost of such policy equal to 100% of the last annual premium paid by LBC.

 

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Beneficial Ownership of LBC Common Stock by Management and Principal Shareholders of LBC

The following table sets forth certain information regarding the beneficial ownership of LBC common stock as of February 7, 2019, by (1) each director and executive officer of LBC, (2) each person who is known by LBC to own beneficially 5% or more of the LBC common stock, and (3) all directors and executive officers of LBC as a group. Unless otherwise indicated, based on information furnished by such shareholders, management of LBC believes that each person has sole voting and dispositive power over the shares indicated as owned by such person. An asterisk (*) in the table indicates that an individual beneficially owns less than one percent of the outstanding common stock of LBC. As of February 7, 2019, there were 1,447,554 shares of LBC common stock outstanding.

 

Name of Beneficial Owner    Number of Shares
Beneficially Owned
    Percent
of
Class(1)
 

Directors and Executive Officers

    

Nancy Adam

     55,000       3.6

Leonard Bateman

     47,087 (2)       3.0

Holly Britt

     10,976 (3)       *  

George W. Childress

     26,909 (4)       1.7

Robert B. Copeland

     67,871       4.4

Susan G. Ferguson

     41,115 (5)       2.7

John S. Holt

     1,500       *  

John M. Jackson

     54,309       3.5

Jared T. Jones

     99,477       6.4

Michael Phillips

     9,158 (6)       *  

Mack Reynolds

     72,735       4.7

Casey Smith

     11,858 (7)       *  

Charles W. Smith

     132,288       8.6

James Williams

     41,115 (8)       2.7

All directors and executive officers of LBC as a group (13 persons)

     671,398       43.4

 

(1)

Ownership percentage based on 1,447,554 shares of LBC common stock outstanding as of February 7, 2019, including 98,306 options that will vest on March 31, 2019.

(2)

Includes 6,350 shares held in Calumet Bank’s 401k Retirement Plan and 33,737 shares of vested options.

(3)

Includes 250 shares held in Calumet Bank’s 401k Retirement Plan and 10,726 shares of vested options.

(4)

Includes 1,333 shares held jointly with his spouse and 10,576 shares of vested warrants.

(5)

Includes 11,115 shares of vested warrants.

(6)

Includes 9,158 shares of vested options.

(7)

Includes 107 shares held jointly with his spouse and 9,751 shares of vested options.

(8)

Includes 30,000 shares held jointly with his spouse and 11,115 shares of vested warrants.

Regulatory Approvals Required for the Merger

Completion of the merger is subject to prior receipt of all approvals required to be obtained from applicable governmental and regulatory authorities. Subject to the terms and conditions of the merger agreement, LBC and Colony have agreed to use their reasonable best efforts and cooperate to prepare and file, as promptly as possible, all necessary documentation and to obtain as promptly as practicable all regulatory approvals or waivers required or advisable to complete the transactions contemplated by the merger agreement. These approvals and waivers include, among others, a waiver from the Federal Reserve Board and an approval from the FDIC and the Georgia DBF. Colony and/or LBC have filed applications, waiver requests and notifications to obtain the required regulatory approvals or waivers.

 

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Federal Reserve Board

The merger of LBC with Colony must be approved by the Federal Reserve Board under Section 3 of the Bank Holding Company Act of 1956, or the BHC Act, and its implementing regulations, unless the Federal Reserve Board waives the application requirements of the BHC Act. In considering the approval of a transaction such as the merger, the BHC Act and related laws require the Federal Reserve Board to review, with respect to the parent holding companies and the bank concerned: (1) the competitive impact of the transaction; (2) financial, managerial and other supervisory considerations, including capital positions and managerial resources of the subject entities; (3) the record of the insured depository institution subsidiaries of the bank holding companies under the Community Reinvestment Act and fair lending laws; (4) the extent to which the proposal would result in greater or more concentrated risks to the stability of the U.S. banking or financial system; and (5) additional public benefits of the proposal, such as the benefits to the customers of the subject entities. In connection with its review, the Federal Reserve Board will provide an opportunity for public comment on the application and is authorized to hold a public meeting or other proceeding if it determines that would be appropriate. Colony filed a written request that the Federal Reserve Board waive the application requirements of the BHC Act with regard to its acquisition of LBC on January 18, 2019.

Federal Deposit Insurance Corporation

The merger of Calumet Bank with and into Colony Bank must be approved by the FDIC under the Federal Deposit Insurance Act (12 U.S.C. 1828(c)), commonly known as the Bank Merger Act. An application for approval of the bank merger was filed with the FDIC on January 18, 2019. In evaluating an application filed under the Bank Merger Act, the FDIC generally considers: (1) the competitive impact of the transaction; (2) financial and managerial resources of the banks party to the bank merger or mergers; (3) the convenience and needs of the community to be served and the record of the banks under the Community Reinvestment Act; (4) the banks’ effectiveness in combating money-laundering activities; and (5) the extent to which the bank merger or mergers would result in greater or more concentrated risks to the stability of the U.S. banking or financial system. In connection with its review, the FDIC will provide an opportunity for public comment on the application for the bank merger, and is authorized to hold a public meeting or other proceeding if they determine that would be appropriate.

Georgia Department of Banking and Finance

The merger must be approved by the Georgia DBF under Section 7-1-606 of the Official Code of Georgia. In considering an application under Section 7-1-606, the Georgia DBF reviews certain factors, including: (1) the competitive impact of the transaction, (2) the financial and managerial resources of the bank holding companies and banks involved and the future prospects of the combined organization, and (3) the convenience and needs of the communities to be served.

In addition, the bank merger must be approved by the Georgia DBF under Section 7-1-530 of the Official Code of Georgia. In considering an application under Section 7-1-530, the Georgia DBF may consider a variety of factors including whether: (1) the bank merger adequately protects the interests of depositors, other creditors, and shareholders; (2) the requirements for a merger under all applicable laws have been satisfied and the resulting bank would satisfy the requirements of applicable Georgia law, and (3) the bank merger would be consistent with adequate and sound banking and in the public interest on the basis of the financial history and condition, prospects, character of management of the parties to the bank merger and the convenience and needs of the area primarily to be served by the resulting institution.

Furthermore, the applicable provisions of the Official Code of Georgia require published notice of, and the opportunity for public comment on, the applications for both the merger and bank merger to the Georgia DBF.

Colony filed its applications to the Georgia DBF on January 18, 2019.

 

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Colony and LBC believe that the merger does not raise substantial antitrust or other significant regulatory concerns and that we will be able to obtain all requisite regulatory approvals. However, neither Colony nor LBC can assure you that all of the regulatory approvals described above will be obtained and, if obtained, we cannot assure you as to the timing of any such approvals, our ability to obtain the approvals on satisfactory terms or the absence of any litigation challenging such approvals. The parties have agreed that Colony will not be required, and LBC and its subsidiaries will not be permitted, to take any action or commit to take any action or agree to any condition or restrictions in connection with the regulatory approvals that, individually or in the aggregate, would have or would be reasonably likely to have a material adverse effect on Colony and its subsidiaries or LBC and its subsidiaries as of and following the completion of the merger.

The parties’ obligation to complete the merger is conditioned upon the receipt of all required regulatory approvals. Colony and LBC will use their respective commercially reasonable efforts to resolve any objections that may be asserted by any regulatory authority with respect to the merger agreement or the merger or the other transactions contemplated by the merger agreement.

Neither Colony nor LBC is aware of any material governmental approvals or actions that are required for completion of the merger other than those described above. It is presently contemplated that if any such additional governmental approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.

Material U.S. Federal Income Tax Consequences

The following is a general discussion of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of LBC common stock that exchange their shares of LBC common stock for shares of Colony common stock, cash, or a combination thereof in the merger. This discussion does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or under any U.S. federal laws other than those pertaining to the income tax, nor does it address any considerations in respect of any withholding required pursuant to the Foreign Account Tax Compliance Act of 2010 (including the U.S. Treasury regulations issued thereunder and intergovernmental agreements entered into pursuant thereto). This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations promulgated under the Code, and court and administrative rulings and decisions, all as in effect on the date of this proxy statement/prospectus, and all of which are subject to change, potentially retroactively, which could affect the accuracy of the statements and conclusions set forth in this discussion.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of LBC common stock that is for U.S. federal income tax purposes: (a) an individual citizen or resident of the United States; (b) a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States or any state thereof or the District of Columbia; (c) a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) such trust was in existence on August 20, 1996, and has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes; or (d) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source.

If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds LBC common stock, the tax treatment of a partner in the partnership will generally depend on the status of such partner and the activities of the partnership. Partnerships holding LBC common stock and partners in such partnerships should consult their tax advisors on the tax consequences of the merger in their particular circumstances.

This discussion addresses only those U.S. holders of LBC common stock that hold their shares of LBC common stock as a “capital asset” within the meaning of Section 1221 of the Code. Importantly, this discussion does not

 

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address all aspects of U.S. federal income taxation that may be relevant to a particular U.S. holder in light of that U.S. holder’s individual circumstances or to a U.S. holder that is subject to special treatment under the U.S. federal income tax laws, including, without limitation, a U.S. holder that is:

 

   

a bank or other financial institution;

 

   

a tax-exempt organization;

 

   

a regulated investment company;

 

   

a real estate investment trust;

 

   

an S corporation, partnership or other pass-through entity (or an investor in an S corporation, partnership or other pass-through entity);

 

   

a retirement plan, individual retirement account or other tax-deferred account;

 

   

an insurance company;

 

   

a mutual fund;

 

   

a dealer or broker in stocks and securities, or currencies;

 

   

a trader in securities that elects to use the mark-to-market method of accounting;

 

   

a holder of LBC common stock subject to the alternative minimum tax provisions of the Code;

 

   

a holder of LBC common stock that received LBC common stock through the exercise of an employee stock option, through a tax-qualified retirement plan or otherwise as compensation;

 

   

a holder of LBC common stock that has a functional currency other than the U.S. dollar;

 

   

a holder of LBC common stock that holds LBC common stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction;

 

   

a person that is not a U.S. holder; or

 

   

a U.S. expatriate or former citizen or resident of the United States.

Determining the actual tax consequences of the merger to a U.S. holder is complex and can depend, in part, on the U.S. holder’s specific situation. Each U.S. holder should consult its own independent tax advisor as to the tax consequences of the merger in its particular circumstance, including the applicability and effect of the alternative minimum tax and any state, local, foreign or other tax laws and of changes in those laws.

Tax Consequences of the Merger Generally

In connection with the filing with the SEC of the registration statement of which this proxy statement/prospectus forms a part, Alston & Bird LLP has rendered its tax opinion to Colony and James-Bates-Brannan-Groover-LLP has rendered its tax opinion to LBC that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. A copy of each of these tax opinions is attached as Exhibit 8.1 and Exhibit 8.2, respectively, to the registration statement of which this proxy statement/prospectus forms a part. In addition, the obligations of the parties to complete the merger is conditioned on, among other things, the receipt by Colony and LBC of opinions from Alston & Bird LLP and James-Bates-Brannan-Groover-LLP, respectively, dated the closing date of the merger, to the effect that for U.S. federal income tax purposes the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. The conditions relating to receipt of such closing opinions may be waived by both Colony and LBC. Neither Colony nor LBC currently intends to waive the conditions related to the receipt of the closing opinions. If receipt of the closing opinions were to be waived, the vote of the holders of LBC stock to approve the merger would be resolicited.

 

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The opinions of Alston & Bird LLP and James-Bates-Brannan-Groover-LLP are and will be subject to customary qualifications and assumptions, including assumptions regarding the absence of changes in existing facts and the completion of the merger strictly in accordance with the merger agreement and the registration statement of which this proxy statement/prospectus forms a part. In rendering their legal opinions, Alston & Bird LLP and James-Bates-Brannan-Groover-LLP have relied and will rely upon representations and covenants, including those contained in certificates of officers of Colony and LBC, reasonably satisfactory in form and substance to each such counsel, and will assume that such representations are true, correct and complete without regard to any knowledge limitation, and that such covenants will be complied with. If any of these assumptions or representations are inaccurate in any way, or any of the covenants are not complied with, these opinions could be adversely affected. The opinions represent each counsel’s best legal judgment, but have no binding effect or official status of any kind, and no assurance can be given that contrary positions will not be taken by the Internal Revenue Service or a court considering the issues. In addition, neither LBC nor Colony has requested nor does either of them intend to request a ruling from the Internal Revenue Service as to the U.S. federal income tax consequences of the merger. Accordingly, there can be no assurances that the Internal Revenue Service will not assert, or that a court will not sustain, a position contrary to any of the tax consequences set forth below or any of the tax consequences described in the tax opinions.

The discussion below assumes that the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code.

The U.S. federal income tax consequences of the merger to a U.S. holder of LBC common stock will depend on whether the U.S. holder receives cash, shares of Colony common stock or a combination of cash and shares of Colony common stock in exchange for the U.S. holder’s LBC common stock in the merger. At the time a U.S. holder makes a cash or stock election pursuant to the terms of the merger agreement, the U.S. holder will not know whether, and to what extent, the proration provisions of the merger agreement will alter the mix of consideration the U.S. holder will receive in the merger. As a result, the tax consequences to such U.S. holder will not be ascertainable with certainty until the U.S. holder knows the precise amount of cash and shares of Colony common stock that the U.S. holder will receive in the merger.

U.S. Holders that Exchange LBC Common Stock Solely for Colony Common Stock

Subject to the discussion below relating to the receipt of cash in lieu of a fractional share, a U.S. holder that exchanges all of its LBC common stock solely for shares of Colony common stock generally:

 

   

will not recognize any gain or loss upon the exchange of shares of LBC common stock for shares of Colony common stock in the merger;

 

   

will have a tax basis in the Colony common stock received in the merger (including any fractional share deemed received and redeemed for cash as described below) equal to the tax basis of the LBC common stock surrendered in exchange therefor; and

 

   

will have a holding period for shares of Colony common stock received in the merger that includes its holding period for its shares of LBC common stock surrendered in exchange therefor.

U.S. Holders that Exchange LBC Common Stock Solely for Cash

A U.S. holder that exchanges all of its LBC common stock solely for cash will generally recognize gain or loss measured by the difference between the amount of cash received in the merger and the U.S. holder’s tax basis in the shares of LBC common stock surrendered in exchange therefor. Such gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the merger, the U.S. holder’s holding period for such shares of LBC common stock exceeds one year. Long-term capital gain of certain non-corporate taxpayers, including individuals, is generally taxed at preferential rates. The deductibility of capital losses is subject to limitations.

 

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US. Holders that Exchange LBC Common Stock for a Combination of Colony Common Stock and Cash

Subject to the discussion below relating to the receipt of cash in lieu of a fractional share, a U.S. holder that exchanges its LBC common stock for a combination of shares of Colony common stock and cash:

 

   

will recognize gain (but not loss) equal to the lesser of (i) the excess, if any, of the amount of cash plus the fair market value of any Colony common stock received in the merger over the U.S. holder’s tax basis in the shares of LBC common stock surrendered in exchange therefor and (ii) the amount of cash received by the U.S. holder in the merger (other than cash received in lieu of a fractional share);

 

   

will have a tax basis in the Colony common stock received equal to the tax basis of the LBC common stock surrendered in exchange therefor, increased by the amount of taxable gain, if any, recognized by the U.S. holder in the merger (other than with respect to cash received in lieu of a fractional share), and decreased by the amount of cash received by the U.S. holder in the merger (other than cash received in lieu of a fractional share); and

 

   

will have a holding period for shares of Colony common stock received in the merger that includes its holding period for its shares of LBC common stock surrendered in exchange therefor.

Such gain will generally be capital gain and will be long-term capital gain if, as of the effective date of the merger, the holding period for such shares of LBC common stock exceeds one year. Long-term capital gain of certain non-corporate taxpayers, including individuals, is generally taxed at preferential rates.

In the case of any U.S. holder that acquired different blocks of LBC common stock at different times and at different prices, any realized gain or loss will be determined separately for each identifiable block of shares exchanged in the merger. Such U.S. holder should consult the U.S. holder’s independent tax advisor regarding the manner in which gain or loss should be determined for each identifiable block of LBC shares.

Potential Recharacterization of Gain as a Dividend

Any gain recognized by a U.S. holder of LBC common stock in connection with the merger generally will be capital gain unless such holder’s receipt of cash has the effect of a distribution of a dividend, in which case the gain will generally be treated as a dividend to the extent of such holder’s ratable share of LBC’s accumulated earnings and profits, as calculated for U.S. federal income tax purposes. For purposes of determining whether your receipt of cash has the effect of a distribution of a dividend, you will be treated as if you first exchanged all of your LBC common stock solely in exchange for Colony common stock and then Colony immediately redeemed a portion of that stock for the cash that you actually received in the merger (referred to herein as the “deemed redemption”). Receipt of cash will generally not have the effect of a dividend to you if such receipt is “not essentially equivalent to a dividend” or “substantially disproportionate,” each within the meaning of Section 302(b) of the Code. In order for the deemed redemption to be “not essentially equivalent to a dividend,” the deemed redemption must result in a “meaningful reduction” in your deemed percentage stock ownership of Colony following the merger. The determination generally requires a comparison of the percentage of the outstanding stock of Colony that you are considered to have owned immediately before the deemed redemption to the percentage of the outstanding stock of Colony that you own immediately after the deemed redemption. The IRS has indicated in rulings that any reduction in the interest of a minority shareholder that owns a small number of shares in a publicly and widely held corporation and that exercises no control over corporate affairs would result in capital gain (as opposed to dividend) treatment.

For purposes of applying the foregoing tests, a shareholder will be deemed to own the stock the shareholder actually owns and the stock the shareholder constructively owns under the attribution rules of Section 318 of the Code. Under Section 318 of the Code, a shareholder will be deemed to own the shares of stock owned by certain family members, by certain estates and trusts of which the shareholder is a beneficiary, and by certain affiliated entities, as well as shares of stock subject to an option actually or constructively owned by the shareholder or such other persons. If, after applying these tests, the deemed redemption results in a capital gain, the capital gain

 

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will be long-term if, as of the effective date of the merger, your holding period for your LBC common stock exceeds one year. If, after applying these tests, the deemed redemption results in the gain recognized being classified as a dividend, such dividend will be treated as either ordinary income or qualified dividend income. Any gain treated as qualified dividend income will be taxable to you at the long-term capital gains rate, provided you held the shares giving rise to such income for more than 60 days during the 121-day period beginning 60 days before the effective time of the merger. The determination as to whether you will recognize a capital gain or dividend income as a result of your exchange of LBC common stock for a combination of Colony common stock and cash in the merger is complex and is determined on a shareholder-by-shareholder basis. Accordingly, we urge you to consult your own tax advisor with respect to any such determination that is applicable to your individual situation.

Cash In Lieu of a Fractional Share

If a U.S. holder receives cash in lieu of a fractional share of Colony common stock, the U.S. holder will be treated as having received a fractional share of Colony common stock in the merger and then as having exchanged the fractional share of Colony common stock for cash in a redemption by Colony. As a result, the U.S. holder generally will recognize gain or loss equal to the difference between the amount of cash received and the portion of the U.S. holder’s aggregate tax basis allocable to the fractional share of Colony common stock. This gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if, as of the effective date of the merger, the U.S. holder’s holding period with respect to the fractional share exceeds one year. Long-term capital gain of certain non-corporate taxpayers, including individuals, is generally taxed at preferential rates. The deductibility of capital losses is subject to limitations.

Dissenters

Upon its exercise of dissenters’ rights, a U.S. holder of LBC common stock will exchange all of its LBC common stock for cash. Such a dissenting U.S. holder will generally be treated similarly to U.S. holders that receive sole cash in exchange for their LBC common stock in the merger, as set forth above under “U.S. Holders Exchange LBC Common Stock Solely for Cash”.

Material U.S. Federal Income Tax Consequences if the LBC Merger Fails to Qualify as a Reorganization

If the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, then each U.S. holder of LBC common stock generally will recognize gain or loss equal to the difference between (a) the sum of the fair market value of the shares of Colony common stock received by such U.S. holder in the merger and the amount of any cash received by such U.S. holder in the merger and (b) its adjusted tax basis in the shares of LBC common stock surrendered in exchange therefor.

Net Investment Income Tax

A holder of LBC common stock that is an individual is generally subject to a 3.8% tax on the lesser of: (1) his or her “net investment income” for the relevant taxable year, or (2) the excess of his or her modified adjusted gross income for the taxable year over a certain threshold (between $125,000 and $250,000 depending on the individual’s U.S. federal income tax filing status). Estates and trusts are subject to similar rules. Net investment income generally would include any gain recognized in connection with the merger (including any gain treated as a dividend), as well as, among other items, other interest, dividends, capital gains and rental or royalty income received by such individual. Holders of LBC common stock should consult their tax advisors as to the application of this additional tax to their circumstances.

 

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Backup Withholding

Backup withholding at the applicable rate (currently 24%) may apply with respect to certain cash payments to holders of LBC common stock unless the holder:

 

   

furnishes a correct taxpayer identification number, certifies that it is not subject to backup withholding on IRS Form W-9 or successor form included in the letter of transmittal that the U.S. holder will receive and otherwise complies with all the applicable requirements of the backup withholding rules; or

 

   

provides proof that it is otherwise exempt from backup withholding.

Any amounts withheld under the backup withholding rules are not an additional tax and will generally be allowed as a refund or credit against the U.S. holder’s U.S. federal income tax liability, provided the U.S. holder timely furnishes the required information to the Internal Revenue Service.

Certain Reporting Requirements

If a U.S. holder that receives Colony common stock in the merger is considered a “significant holder,” such U.S. holder will generally be required (a) to file a statement with its U.S. federal income tax return providing certain facts pertinent to the merger, including such U.S. holder’s tax basis in, and the fair market value of, the LBC common stock surrendered by such U.S. holder, and (b) to retain permanent records of these facts relating to the merger. A “significant holder” is any LBC shareholder that, immediately before the merger, (y) owned at least 1% (by vote or value) of the outstanding stock of LBC or (z) owned LBC securities with a tax basis of $1.0 million or more.

This discussion of material U.S. federal income tax consequences does not purport to be a complete analysis or discussion of all the potential tax consequences of the merger. It is for general information only purposes and is not tax advice. Holders of LBC common stock are urged to consult their own independent tax advisors as to the U.S. federal income tax consequences, in light of their particular situations, of the merger (or exercise of dissenters’ rights), as well as the applicability of any other U.S. federal tax laws and any state, local, and foreign tax laws.

Accounting Treatment

The merger will be accounted for under the acquisition method of accounting for business combinations under GAAP. Under this method, LBC’s assets and liabilities as of the date of the merger will be recorded at their respective fair values. Any difference between the purchase price for LBC and the fair value of the identifiable net assets acquired (including core deposit intangibles) will be recorded as goodwill. In accordance with ASC Topic 805, “Business Combinations,” the goodwill resulting from the merger will not be amortized to expense, but instead will be reviewed for impairment at least annually and to the extent goodwill is impaired, its carrying value will be written down to its implied fair value and a charge will be made to earnings. Core deposit and other intangibles with definite useful lives recorded by Colony in connection with the merger will be amortized to expense in accordance with such rules. The consolidated financial statements of Colony issued after the merger will reflect the results attributable to the acquired operations of LBC beginning on the date of completion of the merger.

Dissenters’ Rights

The following discussion is not a complete description of the law relating to dissenters’ rights available under Georgia law and is qualified by the full text of Article 13 of the GBCC. Article 13 of the GBCC is attached as Annex C to this proxy statement/prospectus. Holders of record of LBC voting common stock who desire to exercise dissenters’ rights should review carefully Article 13 and are urged to consult a legal advisor before electing or attempting to exercise these rights.

 

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Any holder of record of LBC voting common stock who objects to the merger, and who fully complies with all of the provisions of Article 13 of the GBCC, will be entitled to demand and receive payment for all (but not less than all) of his or her shares of LBC voting common stock if the merger is consummated.

A holder of LBC voting common stock who objects to the merger and desires to receive payment of the “fair value” of his or her LBC voting common stock: (i) must deliver to LBC, prior to the time the shareholder vote on the merger agreement is taken, a written notice of such shareholder’s intent to demand payment for those shares of LBC voting common stock registered in the dissenting shareholder’s name if the merger is completed; and (ii) must not vote his or her shares of LBC voting common stock in favor of the merger agreement.

A vote against the approval of the merger agreement alone will not constitute the separate written notice and demand for payment referred to immediately above. Dissenting shareholders must separately comply with the above conditions.

Any notice required to be given to LBC must be sent to LBC’s principal executive offices at 101 Calumet Center Road, LaGrange, GA 30241, Attention: Holly T. Britt.

If the merger agreement is approved by LBC shareholders, then LBC will mail, no later than ten days after the effective date of the merger, by certified mail to each record holder of LBC voting common stock who has timely submitted a written notice of intent to dissent, written notice addressed to the shareholder at such address as the shareholder has furnished LBC in writing or, if none, at the shareholder’s address as it appears on the records of LBC. The dissenters notice’ will: (i) state where the dissenting shareholder must send a payment demand, and where and when the certificates for the dissenting shareholder’s shares of LBC voting common stock, if any, are to be deposited; (ii) inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; (iii) set a date by which LBC must receive the shareholder’s payment demand (which date may not be fewer than 30 nor more than 60 days after the date the dissenters’ notice is delivered); and (iv) be accompanied by a copy of Article 13 of the GBCC.

Within ten days after the later of the effective date of the merger, or the date on which LBC receives a payment demand, LBC will send a written offer to each holder of LBC voting common stock who complied with the provisions set forth in the dissenters’ notice to pay each such shareholder an amount that LBC estimates to be the fair value of those shares of LBC voting common stock, plus accrued interest. The offer of payment will be accompanied by: (i) LBC’s balance sheet as of the end of a fiscal year ending not more than 16 months before the date of making the offer, an income statement for that year, a statement of changes in stockholders’ equity for that year and the latest available interim statements, if any; (ii) a statement of LBC’s estimate of the fair value of the shares of LBC voting common stock; (iii) an explanation of how any interest was calculated; (iv) a statement of the dissenting shareholder’s right to demand payment of a different amount under Section 14-2-1327 of the GBCC; and (v) a copy of Article 13 of the GBCC.

A dissenting shareholder choosing to accept LBC’s offer of payment must do so by written notice to LBC within 30 days after receipt of LBC’s offer of payment. A dissenting shareholder not responding to that offer within the 30-day period will be deemed to have accepted the offer of payment. LBC must make payment to each shareholder who responds to the offer of payment within 60 days after the making of the offer of payment, or the effective date of the merger, whichever is later. Upon payment, the dissenting shareholder will cease to have any interest in his or her shares of LBC voting common stock.

If a dissenting shareholder does not accept, within 30 days after LBC’s offer, the estimate of fair value in payment for the shareholder’s shares of LBC voting common stock and interest due thereon and demands payment of some other estimate of the fair value of the shares and interest due thereon, then LBC, within 60 days after receiving the payment demand of a different amount from a dissenting shareholder, must commence a proceeding in superior court of the county where its main office is located to determine the rights of the dissenting shareholder and the fair value of his or her shares of LBC voting common stock. If LBC does not

 

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commence the proceedings within the 60-day period, then it must pay each dissenter whose demand remains unsettled the amount demanded by the dissenting shareholder.

In the event of a court proceeding, the court will determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court, but not including fees and expenses of attorneys and experts for the respective parties. The court will assess these costs against LBC, except that the court may assess these costs against all or some of the dissenters in amounts the court finds equitable to the extent the court finds the dissenters acted arbitrarily or not in good faith in demanding payment under the dissenters’ provisions. The court may also assess the fees and expenses of attorneys and experts for the respective parties in amounts the court finds equitable: (i) against LBC and in favor of any or all dissenters if the court finds LBC did not substantially comply with the dissenters’ provisions; or (ii) against LBC or a dissenter in favor of any other party if the court finds that the party against whom fees and expenses are assessed acted arbitrarily or not in good faith with respect to the rights provided by the dissenters’ provisions. If the court finds that the services of attorneys for any dissenter were of substantial benefit to other dissenters similarly situated and that the fees for those services should not be assessed against LBC, then the court may award these attorneys’ reasonable fees to be paid out of the amounts awarded the dissenters who were benefited.

One of the conditions to Colony Bank’s obligation to complete the merger is that the aggregate number of dissenting shares be less than 10% percent of the total outstanding shares of LBC common stock. If this condition is not satisfied, then Colony Bank will not be required to complete the merger, in which event, the dissenters’ rights described in this section would also terminate.

Record holders of LBC voting common stock should be aware that cash paid to dissenting shareholders in satisfaction of the fair value of their shares of LBC voting common stock will result in the recognition of any gain or loss realized for U.S. federal income tax purposes.

FAILURE BY A RECORD HOLDER OF LBC VOTING COMMON STOCK TO FOLLOW THE STEPS REQUIRED BY THE GBCC FOR PERFECTING DISSENTERS’ RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS AND THE REQUIREMENT THAT THEY BE STRICTLY COMPLIED WITH, IF YOU HOLD LBC VOTING COMMON STOCK AND ARE CONSIDERING DISSENTING FROM THE APPROVAL OF THE MERGER AGREEMENT AND EXERCISING YOUR DISSENTERS’ RIGHTS UNDER THE GBCC, THEN YOU SHOULD CONSULT YOUR LEGAL ADVISORS.

Certain U.S. Federal Income Tax Consequences

See “—Material U.S. Federal Income Tax Considerations—Dissenters” beginning on page 58 for a discussion on how the material federal income tax consequences of the merger will change if you elect to exercise dissenters’ rights in the merger.

The above description is a summary of the material provisions of Article 13 of the GBCC. For complete information, you should review the text of those sections, which appear as Annex C to this proxy statement/prospectus.

Exchange of Shares in the Merger

The conversion of LBC common stock into the right to receive the merger consideration will occur automatically at the effective time of the merger. After completion of the merger, the exchange agent will exchange certificates representing shares of LBC common stock for the merger consideration to be received pursuant to the terms of the merger agreement. For more information regarding the procedures for exchanging your shares of LBC common stock for the merger consideration, including election and allocation procedures, see “The Merger Agreement—Procedures for Converting Shares of LBC Common Stock into Merger Consideration” below.

 

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Listing of Colony Common Stock

Colony has agreed to use its commercially reasonable efforts to cause the shares of Colony common stock issuable in connection with the merger be approved for listing on the NASDAQ Global Market, subject to official notice of issuance, prior to the effective time of the merger.

 

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THE MERGER AGREEMENT

The following describes certain aspects of the merger, including certain material provisions of the merger agreement. The following description of the merger agreement is subject to, and qualified in its entirety by reference to, the merger agreement, which is attached to this proxy statement/prospectus as Annex A and is incorporated by reference into this proxy statement/prospectus. We urge you to read the merger agreement carefully and in its entirety, as it is the legal document governing the merger.

Structure of the Merger

The boards of directors of Colony and LBC have each unanimously approved the merger agreement, which provides for the merger of LBC with and into Colony, with Colony as the surviving company in the merger.

The merger agreement also provides that immediately after the effective time of the merger but in effect simultaneously on the date the merger closes, Calumet Bank, which is a Georgia state-chartered bank and a direct wholly owned subsidiary of LBC, will merge with and into Colony Bank, a Georgia state-chartered bank and a direct wholly owned subsidiary of Colony, with Colony Bank as the surviving bank of such merger. The terms and conditions of the merger of Colony Bank and Calumet Bank are set forth in a separate merger agreement and plan of merger, referred to as the bank merger agreement, the form of which is attached as Exhibit B to the merger agreement. As provided in the bank merger agreement, the merger of Colony Bank and Calumet Bank may be abandoned at the election of Colony Bank at any time, whether before or after filings are made for regulatory approval of such merger. We refer to the merger of Colony Bank and Calumet Bank as the bank merger.

The merger agreement allows Colony to change the structure of the merger at any time and without the approval of LBC if and to the extent that Colony reasonably deems such a change to be necessary; provided, however, that no such change shall (i) alter or change the amount or kind of merger consideration to be provided under the merger agreement, (ii) reasonably be expected to materially impede or delay consummation of the merger, (iii) adversely affect the federal income tax treatment of LBC shareholders in connection with the merger, or (iv)  require submission to or the approval of LBC shareholders after the merger proposal has already been approved by LBC’s shareholders.

Closing and Effective Time of the Merger

The closing will take place immediately prior to the effective time of the merger. The effective time of the merger will be the later of (i) the date and time of filing of the articles of merger with the Secretary of State of the State of Georgia by Colony or (ii) the date and time when the merger becomes effective as set forth in such articles of merger, which will be no later than three business days after all of the conditions to the closing of the merger have been satisfied or waived in accordance with their terms.

We currently expect that the merger will be completed in the first half of 2019, subject to obtaining the requisite approvals from the shareholders of LBC, the receipt of all necessary regulatory approvals and the expiration of all regulatory waiting periods and other conditions. However, completion of the merger could be delayed if there is a delay in obtaining the required regulatory approvals or in satisfying any other conditions to the merger. No assurance is made as to whether, or when, Colony and LBC will obtain the required approvals or complete the merger. See “The Merger Agreement—Conditions to Completion of the Merger.”

Organizational Documents of the Surviving Company

At the effective time of the merger, Colony Articles and Colony Bylaws in effect immediately prior to the effective time of the merger will be the articles of incorporation and bylaws of the surviving company until thereafter amended in accordance with their respective terms and applicable laws.

 

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Board Composition and Management of Surviving Company

Each of the officers and directors of Colony immediately prior to the effective time of the merger will be the officers and directors of the surviving company from and after the effective time of the merger, until their respective successors have been duly elected, appointed or qualified or until their earlier death, resignation or removal in accordance with Colony Articles and Colony Bylaws.

Merger Consideration

Under the terms of the merger agreement, each outstanding share of LBC common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive, at the election of each LBC shareholder, either (i) $23.50 in cash, which we refer to as the per share cash consideration, or (ii) 1.3239 shares of Colony’s common stock, which we refer to as the per share stock consideration, provided that the total mix of merger consideration shall be fixed at 55% stock and 45% cash, and the exchange agent will apply the merger consideration allocation described below, in “—Merger Consideration Allocation,” to each LBC shareholder’s elections in order to preserve that mix of merger consideration. Each option or warrant to purchase shares of LBC common stock shall be cancelled as of the effective time of the merger and converted into the right to receive a cash payment equal to the product of (i) the total number of shares of LBC common stock subject to such option or warrant, as applicable, times (ii) the excess, if any, of $23.50 over the exercise price per share of LBC common stock subject to such option or warrant, as applicable.

Colony will not issue any fractional shares of Colony common stock in the merger. LBC shareholders who would otherwise be entitled to a fractional share of Colony common stock upon the completion of the merger will instead receive an amount in cash (without interest and rounded to the nearest whole cent) determined by multiplying the (i) fractional share interest in Colony common stock, rounded to the nearest one hundredth of a share, to which such holder would otherwise be entitled by (ii) $23.50.

If Colony or LBC change the number of shares of Colony common stock or LBC common stock outstanding prior to the effective time of the merger as a result of a stock split, reverse stock split, stock combination, stock dividend, recapitalization, reclassification, reorganization or similar transaction with respect to Colony common stock or LBC common stock and the record date for such corporate action is prior to the effective time of the merger, then the merger consideration shall be appropriately and proportionately adjusted to give LBC shareholders the same economic effect as contemplated by the merger agreement prior to any such event, provided that, in call cases, at least 50% of the merger consideration shall be in the form of Colony common stock.

LBC may terminate the merger agreement if the average closing price of Colony common stock over a specified period prior to completion of the merger decreases below certain specified thresholds unless Colony elects to increase the merger consideration through an adjustment to the merger consideration, as discussed in further detail on page 79.

The value of the shares of Colony common stock to be issued to LBC shareholders in the merger will fluctuate between now and the closing date of the merger. We make no assurances as to whether or when the merger will be completed, and you are advised to obtain current sale prices for Colony common stock.

Procedures for Converting Shares of LBC Common Stock into Merger Consideration

Exchange Agent

Colony will designate a third party to act as the exchange agent in connection with the merger. The exchange agent shall also act as the agent for LBC shareholders for the purpose of receiving their LBC stock certificates and shall obtain no rights or interests in the shares represented thereby. Prior to the effective time of the merger, Colony will deposit, or cause to be deposited, with the exchange agent the aggregate merger consideration and, to the extent then determinable, any cash payable in lieu of fractional shares, necessary to satisfy the aggregate merger consideration payable.

 

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Election Forms and Procedures

At least 20 business days prior to the later of (1) the date of the LBC shareholders’ meeting or (2) a date agreed upon by LBC and Colony that is as near as practicable to five business days prior to the expected closing date, which date we refer to as the election deadline, Colony will cause the exchange agent to send the LBC shareholders election forms, which will include the appropriate form of letter of transmittal. LBC shareholders can specify on such election form the number of their shares of LBC common stock for which they desire to receive the cash consideration, the number of shares for which they desire to receive the stock consideration or to indicate that such shareholder has no preference as to the receipt of the cash consideration or stock consideration. The election forms must be returned to the exchange agent, along with certificates representing the shares subject to such election form, or a customary affidavit of loss and indemnity agreement, by the election deadline. If you are a LBC shareholder and you do not return your election form by the election deadline or improperly complete or do not sign your election form, your shares will be considered non-election shares and you will have no control over the type of consideration you receive and you may receive only the cash consideration, only the stock consideration or a mixture of the cash consideration and stock consideration based on what is available after giving effect to the valid elections made by other shareholders pursuant to the merger consideration allocation procedures described below.

A LBC shareholder may specify different elections with respect to different shares held by him or her. For example, if the shareholder has 100 shares, the shareholder could make a cash election with respect to 50 shares and a stock election with respect to the other 50 shares.

Merger Consideration Allocation

Pursuant to the merger agreement, the total mix of cash consideration and stock consideration to be issued by Colony to holders of LBC common stock will be fixed at 55% stock and 45% cash. To achieve that mix, the exchange agent will set a number equal to 55% of the outstanding shares of LBC common stock, which we refer to as the stock conversion number. The exchange agent will collect the election forms that are received prior to the election deadline, and determine:

 

   

the number of shares of LBC common stock with respect to which the holder has elected to receive stock consideration, which we refer to as the stock election shares, and such number of shares, as the stock election number;

 

   

the number of shares of LBC common stock with respect to which the holder has elected to receive cash consideration, which we refer to as the cash election shares, and such number of shares, as the cash election number; and

 

   

the number of shares of LBC common stock with respect to which the holder thereof has not made an effective election by the election deadline, which we refer to as the non-election shares.

No later than five business days after the effective time of the merger, the exchange agent will allocate the merger consideration as follows:

 

   

if the stock election number is greater than the stock conversion number, then the cash election shares and all non-election shares of each holder thereof shall be converted into the right to receive the per share cash consideration and the stock election shares of each holder thereof will be converted into the right to receive (a) the per share stock consideration in respect of that number of stock election shares equal to the product obtained by multiplying (x) the number of stock election shares held by such holder by (y) a fraction, the numerator of which is the stock conversion number and the denominator of which is the stock election number, and (b) the right to receive the per share cash consideration in respect of the remainder of such holder’s stock election shares that were not converted into the right to receive the per share stock consideration pursuant to clause (a) above.

 

   

if the stock election number is less than the stock conversion number (the amount by which the stock conversion number exceeds the stock election number being referred to herein as the shortfall number),

 

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then all stock election shares shall be converted into the right to receive the per share stock consideration and the non-election shares and cash election shares shall be treated in the following manner:

 

   

if the shortfall number is less than or equal to the number of non-election shares, then all cash election shares shall be converted into the right to receive the per share cash consideration and the non-election shares of each holder thereof shall be converted into the right to receive (a) the per share stock consideration in respect of that number of non-election shares equal to the product obtained by multiplying (x) the number of non-election shares held by such holder by (y) a fraction, the numerator of which is the shortfall number and the denominator of which is the total number of non-election shares, and (b) the right to receive the per share cash consideration in respect of the remainder of such holder’s non-election shares that were not converted into the right to receive the per share stock consideration pursuant to clause (a) above; and

 

   

if the shortfall number exceeds the number of non-election shares, then all non-election shares shall be converted into the right to receive the per share stock consideration and the cash election shares of each holder thereof shall be converted into the right to receive (a) the per share stock consideration in respect of that number of cash election shares equal to the product obtained by multiplying (x) the number of cash election shares held by such holder by (y) a fraction, the numerator of which is the amount by which the shortfall number exceeds the total number of non-election shares and the denominator of which is the total number of cash election shares, and (b) the right to receive the per share cash consideration in respect of the remainder of such holder’s cash election shares that were not converted into the right to receive the per share stock consideration pursuant to clause (a) above.

Surrender of LBC Stock Certificates

The exchange agent will also send letters of transmittal to holders of LBC common stock who did not submit election forms by the election deadline no later than five business days following the closing date, along with instructions for completing the letter of transmittal and delivering to the exchange agent the completed letter of transmittal along with the stock certificates or book-entry shares representing the shares of LBC common stock held by the shareholder.

Following the effective time of the merger, the allocation of the merger consideration and the surrender to the exchange agent of the certificate(s) or book-entry shares representing his or her shares of LBC common stock, accompanied by a properly completed letter of transmittal, a LBC shareholder will be entitled to receive the merger consideration promptly after the effective time of the merger (including any cash in lieu of fractional shares). Until surrendered, each such certificate or book-entry share will represent after the effective time of the merger, for all purposes, only the right to receive the merger consideration, without interest (including any cash in lieu of fractional shares), and any dividends to which such holder is entitled pursuant to the merger agreement.

No dividends or other distributions with respect to Colony common stock after completion of the merger will be paid to the holder of any unsurrendered LBC stock certificates or book-entry shares with respect to the shares of LBC common stock represented by those certificates until those certificates or book-entry shares have been properly surrendered. Subject to applicable abandoned property, escheat or similar laws, following the proper surrender of any such previously unsurrendered LBC stock certificate or book-entry shares, the holder of the certificate or book-entry shares will be entitled to receive, without interest: (i) the amount of unpaid dividends or other distributions with a record date after the effective time of the merger payable with respect to the whole shares of Colony common stock represented by that certificate or the book-entry shares; and (ii) at the appropriate payment date, the amount of dividends or other distributions payable with respect to shares of Colony common stock represented by that certificate or the book-entry shares with a record date after the effective time of the merger (but before the date on which the certificate or book-entry shares are surrendered) and with a payment date subsequent to the issuance of the shares of Colony common stock issuable in exchange for that certificate or book-entry shares.

 

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None of Colony, the exchange agent or any other person will be liable to any former LBC shareholder for any amount delivered in good faith to a public official pursuant to applicable abandoned property, escheat or similar law.

In the event any LBC stock certificate is lost, stolen or destroyed, in order to receive the merger consideration (including cash in lieu of any fractional shares), the holder of that certificate must provide an affidavit of that fact and, if reasonably required by Colony or the exchange agent, post a bond in such amount as Colony or the exchange agent determines is reasonably necessary to indemnify it against any claim that may be made against it with respect to that certificate.

Colony and the exchange agent will be entitled to deduct and withhold from the consideration otherwise payable to any LBC shareholder the amounts they are required to deduct and withhold under any applicable federal, state, local or foreign tax law. If any such amounts are withheld, these amounts will be treated for all purposes of the merger agreement as having been paid to the shareholders from whom they were withheld.

After completion of the merger, there will be no further transfers on the stock transfer books of LBC other than to settle transfers of LBC common stock that occurred prior to the effective time of the merger.

No interest will be paid or accrued on any amount payable upon cancellation of shares of LBC common stock. The shares of Colony common stock issued and cash amount paid in accordance with the merger agreement upon conversion of the shares of LBC common stock (including any cash paid in lieu of fractional shares) will be deemed to have been issued and paid in full satisfaction of all rights pertaining to the shares of LBC common stock.

If any portion of the merger consideration is to be delivered to a person or entity other than the holder in whose name any surrendered certificate is registered, it will be a condition of such exchange that (i) the certificate surrendered must be properly endorsed or must be otherwise in proper form for transfer and (ii) the person or entity requesting such payment pays any transfer or other similar taxes required by reason of the payment of the merger consideration to a person or entity other than the registered holder of the certificate surrendered or will establish to the satisfaction of Colony that such tax has been paid or is not required to be paid. Payment of the applicable merger consideration with respect to book-entry shares will only be made to the person or entity in whose name such book-entry shares are registered. The shares of Colony common stock may be in uncertificated book-entry form, unless a physical certificate is otherwise required by any applicable law.

Representations and Warranties

The merger agreement contains customary representations and warranties of Colony and LBC relating to their respective businesses that are made as of the date of the merger agreement and as of the closing date of the merger. The representations and warranties of each of Colony and LBC have been made solely for the benefit of the other party, and these representations and warranties should not be relied on by any other person. In addition, these representations and warranties:

 

   

have been qualified by information set forth in confidential disclosure schedules in connection with signing the merger agreement—the information contained in these schedules modifies, qualifies and creates exceptions to the representations and warranties in the merger agreement;

 

   

will not survive consummation of the merger;

 

   

may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties to the merger agreement if those statements turn out to be inaccurate;

 

   

are in some cases subject to a materiality standard described in the merger agreement which may differ from what may be viewed as material by you; and

 

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were made only as of the date of the merger agreement or such other date as is specified in the merger agreement.

The representations and warranties made by Colony and LBC to each other primarily relate to:

 

   

corporate organization, existence, power and authority;

 

   

capitalization;

 

   

corporate authorization to enter into the merger agreement and to consummate the merger;

 

   

regulatory approvals and consents required in connection with the merger and the bank merger;

 

   

the accuracy of financial statements and effectiveness of internal controls;

 

   

absence of material adverse effect on each party since December 31, 2017;

 

   

litigation and legal proceedings;

 

   

compliance with laws and the absence of regulatory agreements;

 

   

fees paid to financial advisors;

 

   

tax matters; and

 

   

accuracy of the information supplied by each party for inclusion or incorporation by reference in this proxy statement/prospectus.

LBC has also made representations and warranties to Colony with respect to:

 

   

material contracts;

 

   

receipt of fairness opinion;

 

   

employee benefit plans;

 

   

labor and employee relations;

 

   

environmental matters;

 

   

investment portfolio;

 

   

derivative transactions;

 

   

loan portfolio;

 

   

adequacy of allowances for loan losses;

 

   

trust business and the administration of fiduciary accounts;

 

   

investment management and related activities;

 

   

repurchase agreements;

 

   

deposit insurance;

 

   

regulatory compliance and information security;

 

   

transactions with affiliates;

 

   

real and personal property matters;

 

   

intellectual properties;

 

   

insurance policies;

 

   

absence of state takeover laws applicability; and

 

   

transaction costs.

 

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Definition of “Material Adverse Effect”

Certain representations and warranties of Colony and LBC are qualified as to “materiality” or “material adverse effect.” For purposes of the merger agreement, a “material adverse effect,” when used in reference to either Colony or LBC, means (i) any change, development or effect that individually or in the aggregate is, or is reasonably likely to be, material and adverse to the condition (financial or otherwise), results of operations, liquidity, assets or deposit liabilities, properties, or business of such party and its subsidiaries, taken as a whole, or (ii) any change, development or effect that individually or in the aggregate would, or would be reasonably likely to, materially impair the ability of such party to perform its obligations under the merger agreement or otherwise materially impairs, or is reasonably likely to materially impair, the ability of such party to consummate the merger and the transactions contemplated by the merger agreement. For purposes of clause (i) only, the definition of “material adverse effect” excludes the following:

 

   

changes in banking and similar laws of general applicability or interpretations thereof by any governmental authority;

 

   

changes in GAAP or regulatory accounting requirements applicable to banks or bank holding companies generally;

 

   

changes in global, national or regional political conditions (including the outbreak of war or acts of terrorism) or in economic or market (including equity, credit and debt markets, as well as changes in interest rates) conditions affecting the financial services industry generally;

 

   

public disclosure of the transactions contemplated or actions expressly required by the merger agreement or actions or omissions that are taken with the prior written consent of the other party, or as otherwise expressly permitted or contemplated by the merger agreement;

 

   

any failure by LBC or Colony to meet any internal or published industry analyst projections or forecasts or estimates of revenues or earnings for any period (it being understood and agreed that the facts and circumstances giving rise to such failure that are not otherwise excluded from the definition of material adverse effect may be taken into account in determining whether there has been a material adverse effect);

 

   

changes in the trading price or trading volume of Colony common stock; and

 

   

the impact of this merger agreement and the transactions contemplated by the merger agreement on relationships with customers or employees, including the loss of personnel;

except, with respect to the first three bullets, if the effects of such change disproportionately affect such party and its subsidiaries, taken as a whole, as compared to other companies in the industry in which such party and its subsidiaries operate.

Covenants and Agreements

Pursuant to the merger agreement, Colony and LBC have agreed to certain restrictions on their activities until the effective time of the merger. Colony has agreed that it will carry on its business consistent with prudent banking practices and in compliance in all material respects with applicable laws. LBC has agreed to carry on its business, including the business of each of its subsidiaries, in the ordinary course of business and consistent with prudent banking practice. In addition, LBC has agreed that it will use commercially reasonable efforts to:

 

   

preserve its business organization and assets intact;

 

   

keep available to itself and Colony the present services of the current officers and employees of LBC and its subsidiaries;

 

   

preserve for itself and Colony the goodwill of its customers, employees, lessors and others with whom business relationships exists; and

 

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continue diligent collection efforts with respect to any delinquent loans and, to the extent within its control, not allow any material increase in delinquent loans.

Colony has also agreed that until the effective time of the merger, it and its subsidiaries will not take any or knowingly fail to take any action that is intended or is reasonably likely to:

 

   

prevent, delay or impair Colony’s ability to consummate the merger or the transactions contemplated by the merger agreement;

 

   

agree to take, commit to take, or adopt any resolution of its board of directors in support of, any of the actions prohibited by the merger agreement;

 

   

result in the merger or the bank merger failing to qualify as a “reorganization” under Section 368(a) of the Code;

 

   

take any action that is likely to materially impair Colony’s ability to perform any of its obligations under the merger agreement or Colony Bank to perform any of its obligations under the bank plan of merger; or

 

   

agree or commit to do any of the foregoing.

LBC has also agreed that it will not, and will not permit its subsidiaries to do any of the following without the prior written consent of Colony, except as previously agreed to by the parties:

 

   

(i) issue, sell, grant, pledge, dispose of, encumber, or otherwise permit to become outstanding, or authorize the creation of, any additional shares of its stock, any rights, any new award or grant under the LBC stock plans or otherwise, or any other securities (including units of beneficial ownership interest in any partnership or limited liability company), or enter into any agreement with respect to the foregoing, (ii) except as permitted in the merger agreement, accelerate the vesting of any existing warrants, options or other rights, or (iii) except as permitted in the merger agreement, directly or indirectly change (or establish a record date for changing), adjust, split, combine, redeem, reclassify, exchange, purchase or otherwise acquire any shares of its capital stock, or any other securities (including units of beneficial ownership interest in any partnership or limited liability company) convertible into or exchangeable for any additional shares of stock, any rights issued and outstanding prior to the effective time;

 

   

make, declare, pay or set aside for payment of dividends payable in cash, stock or property on or in respect of, or declare or make any distribution on, any shares of its capital stock, except for dividends from wholly owned subsidiaries to LBC;

 

   

enter into or amend or renew any employment, consulting, compensatory, severance, retention or similar agreements or arrangements with any director, officer or employee of LBC or its subsidiaries, or grant any salary, wage or fee increase or increase any employee benefit or pay any incentive or bonus payments, except (i) normal increases in base salary to employees in the ordinary course of business and pursuant to policies currently in effect, provided that, such increases shall not result in an annual adjustment in base compensation (which includes base salary and any other compensation other than bonus payments) of more than 5% for any individual or 3% in the aggregate for all employees of LBC or its subsidiaries other than annual increases in base compensation and year-end bonuses previously disclosed to Colony, (ii) as specifically provided for by the merger agreement, (iii) as may be required by law, (iv) to satisfy contractual obligations, or (v) as previously disclosed to Colony;

 

   

hire any person as an employee of LBC or any of its subsidiaries, except for at-will employees at an annual rate of salary not to exceed $80,000;

 

   

enter into, establish, adopt, amend, modify or terminate (except (i) as may be required by or to make consistent with applicable law, subject to the provision of prior written notice to and consultation with Colony, (ii) to satisfy contractual obligations existing as of the date of the merger agreement and as

 

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previously disclosed to Colony, (iii) as previously disclosed to Colony, or (iv) as may be required pursuant to the terms of the merger agreement) any LBC benefit plan or other pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any current or former director, officer or employee of LBC or any of its subsidiaries;

 

   

except pursuant to agreements or arrangements in effect on the date of the merger agreement and previously disclosed to Colony, pay, loan or advance any amount to, or sell, transfer or lease any properties or assets (real, personal or mixed, tangible or intangible) to, or enter into any agreement or arrangement with, any of its officers or directors or any of their immediate family members or any affiliates or associates of any of its officers or directors other than compensation or business expense advancements or reimbursements in the ordinary course of business;

 

   

except in the ordinary course of business, sell, license, lease, transfer, mortgage, pledge, encumber or otherwise dispose of or discontinue any of its rights, assets, deposits, business or properties or cancel or release any indebtedness owed to LBC or any of its subsidiaries;

 

   

acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary course of business) all or any portion of the assets, debt, business, deposits or properties of any other entity or person, except for purchases specifically approved by Colony;

 

   

make any capital expenditures in amounts exceeding $50,000 individually, or $250,000 in the aggregate, provided that Colony shall grant or deny its consent to emergency repairs or replacements necessary to prevent substantial deterioration of the condition of a property within two (2) business days of its receipt of a written request from LBC;

 

   

amend the LBC Articles or the LBC Bylaws or any equivalent documents of LBC’s subsidiaries;

 

   

implement or adopt any change in its accounting principles, practices or methods, other than as may be required by applicable laws, GAAP or applicable accounting requirements of any governmental authority, in each case, including changes in the interpretation or enforcement thereof;

 

   

except as previously disclosed to Colony, enter into, amend, modify, terminate, extend, or waive any material provision of, any LBC material contract, lease or insurance policy, or make any change in any instrument or agreement governing the terms of any of its securities, or material lease, license or contract, other than normal renewals of contracts, licenses and leases without material adverse changes of terms with respect to LBC or any of its subsidiaries, or enter into any contract that would constitute a LBC material contract if it were in effect on the date of the merger agreement, except for any amendments, modifications or terminations reasonably requested by Colony;

 

   

other than settlement of foreclosure actions in the ordinary course of business, (i) enter into any settlement or similar agreement with respect to any action, suit, proceeding, order or investigation to which LBC or any of its subsidiaries is or becomes a party after the date of the merger agreement, which settlement or agreement involves payment by LBC or any of its subsidiaries of an amount which exceeds $75,000 individually or $150,000 in the aggregate and/or would impose any material restriction on the business of LBC or any of its subsidiaries or (ii) waive or release any material rights or claims, or agree or consent to the issuance of any injunction, decree, order or judgment restricting or otherwise affecting its business or operations;

 

   

(i) enter into any material new line of business, introduce any material new products or services, any material marketing campaigns or any material new sales compensation or incentive programs or arrangements; (ii) change in any material respect its lending, investment, underwriting, risk and asset liability management and other banking and operating policies, except as required by applicable law, regulation or policies imposed by any governmental authority; (iii) make any material changes in its

 

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policies and practices with respect to underwriting, pricing, originating, acquiring, selling, servicing, or buying or selling rights to service loans, its hedging practices and policies, and (iv) incur any material liability or obligation relating to retail banking and branch merchandising, marketing and advertising activities and initiatives except in the ordinary course of business;

 

   

enter into any derivative transaction;

 

   

incur any indebtedness for borrowed money other than in the ordinary course of business consistent with past practice with a term not in excess of 12 months (other than creation of deposit liabilities or sales of certificates of deposit in the ordinary course of business), or incur, assume or become subject to, whether directly or by way of any guarantee or otherwise, any obligations or liabilities (whether absolute, accrued, contingent or otherwise) of any other person, other than the issuance of letters of credit in the ordinary course of business and in accordance with restrictions on making or extending loans as set forth in the merger agreement;

 

   

(i) other than in accordance with LBC’s investment guidelines, acquire, sell or otherwise dispose of any debt security or equity investment or any certificates of deposits issued by other banks, or (ii) change the classification method for any of the LBC investment securities from “held to maturity” to “available for sale” or from “available for sale” to “held to maturity,” as those terms are used in specified accounting literature;

 

   

make any changes to deposit pricing other than such changes made in the ordinary course of business;

 

   

except for loans or extensions of credit approved and/or committed as of the date of the merger agreement and disclosed to Colony, (i) make, renew, renegotiate, increase, extend or modify any (A) unsecured loan, if the amount of such unsecured loan, together with any other outstanding unsecured loans made by LBC or any of its subsidiaries to such borrower or its affiliates, would be in excess of $100,000, in the aggregate, (B) loan secured by other than a first lien in excess of $500,000, (C) loan in excess of the Federal Financial Institutions Examination Council’s regulatory guidelines relating to loan to value ratios, (D) loan secured by a first lien residential mortgage and with no loan policy exceptions in excess of $750,000, (E) secured loan over $2,000,000, (F) any loan that is not made in conformity with LBC’s ordinary course lending policies and guidelines in effect as of the date of the merger agreement, or (G) loan, whether secured or unsecured, if the amount of such loan, together with any other outstanding loans (without regard to whether such other loans have been advanced or remain to be advanced), would result in the aggregate outstanding loans to any borrower of LBC or any of its subsidiaries (without regard to whether such other loans have been advanced or remain to be advanced) to exceed $2,000,000, (ii) sell any loan or loan pools in excess of $1,000,000 in principal amount or sale price (other than residential mortgage loan pools sold in the ordinary course of business), or (iii) acquire any servicing rights, or sell or otherwise transfer any loan where LBC or any of its subsidiaries retains any servicing rights. Any loan in excess of the foregoing limits shall require the prior written approval of the Chief Executive Officer or Chief Credit Officer of Colony Bank, which approval or rejection shall be given in writing within one (1) Business Day after the loan package is delivered to such individual;

 

   

make any investment or commitment to invest in real estate or in any real estate development project other than by way of foreclosure or deed in lieu thereof or make any investment or commitment to develop, or otherwise take any actions to develop any real estate owned by LBC or its subsidiaries;

 

   

except as required by applicable law, make or change any material tax election, file any material amended tax return, enter into any material closing agreement with respect to taxes, settle or compromise any material liability with respect to taxes, agree to any material adjustment of any tax attribute, file any claim for a material refund of taxes, or consent to any extension or waiver of the limitation period applicable to any material tax claim or assessment, provided that, for purposes of the foregoing, “material” means affecting or relating to $75,000 or more in taxes or $150,000 or more of taxable income;

 

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commit any act or omission which constitutes a material breach or default by LBC or any of its subsidiaries under any agreement with any governmental authority or under any LBC material contract, material lease or other material agreement or material license to which LBC or any of its subsidiaries is a party or by which any of them or their respective properties are bound or under which any of them or their respective assets, business, or operations receives benefits;

 

   

foreclose on or take a deed or title to any real estate other than single-family residential properties without first conducting a Phase I environmental site assessment of the property in accordance with specified standards, or foreclose on or take a deed or title to any real estate other than single-family residential properties if such environmental assessment indicates the presence or likely presence of any hazardous substances under conditions that indicate an existing release, a past release, or a material threat of a release of any hazardous substances into structures on the property or into the ground, ground water, or surface water of the property;

 

   

take any action or knowingly fail to take any action not contemplated by the merger agreement that is intended or is reasonably likely to (i) prevent, delay or impair LBC’s ability to consummate the merger or the transactions contemplated by the merger agreement, or (ii) agree to take, make any commitment to take, or adopt any resolutions of its board of directors in support of any actions prohibited by the merger agreement;

 

   

directly or indirectly repurchase, redeem or otherwise acquire any shares of LBC capital stock or any securities convertible into or exercisable for any shares of LBC capital stock;

 

   

except as required by law, file any application or make any contract or commitment for the opening, relocation or closing of any, or open, relocate or close any, branch office, loan production or servicing facility or automated banking facility, except for any change that may be requested by Colony;

 

   

merge or consolidate itself or any of its subsidiaries with any other person, or restructure, reorganize or completely or partially liquidate or dissolve it or any of its subsidiaries; or

 

   

(i) enter into any contract with respect to, or otherwise agree or commit to do, or adopt any resolutions of its board of directors or similar governing body in support of, any of the foregoing or (ii) take any action that is intended or expected to result in any of its representations and warranties set forth in the merger agreement being or becoming untrue in any material respect at any time prior to the effective time, or in any of the conditions to the merger not being satisfied or in a violation of any provision of the merger agreement, except, in every case, as may be required by applicable law.

LBC has also agreed to cause to be delivered to Colony resignations of all the directors of LBC and its subsidiaries to be effective as of the effective time of the merger.

Regulatory Matters

Colony and LBC agreed to use their respective commercially reasonable efforts to cause the registration statement to be declared effective by the SEC as promptly as reasonably practicable after filing. Colony has also agreed to use its commercially reasonable efforts to obtain all necessary state securities law or “blue sky” permits and approvals required to carry out the transactions contemplated by the merger agreement.

Colony and LBC and their respective subsidiaries have agreed to cooperate with each other and use their reasonable best efforts to prepare and file all necessary documentation, to effect all filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and regulatory and governmental entities that are necessary to consummate the transactions contemplated by the merger agreement, and to comply with the terms and conditions of all such permits, consents, approvals and authorizations; provided, however, that nothing contained in the merger agreement will require Colony or any of its subsidiaries or LBC or any of its subsidiaries to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the foregoing permits, consents, approvals and authorizations of any

 

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governmental authority that would reasonably be likely to have a material and adverse effect (measured on a scale relative to LBC) on the condition (financial or otherwise), results of operations, liquidity, assets or deposit liabilities, properties or business of Colony, LBC, the surviving entity or the surviving bank, after giving effect to the merger (a “burdensome condition”).

Colony and LBC will furnish each other and each other’s counsel with all information as may be necessary or advisable in connection with any application, petition or any other statement or application made by or on behalf of Colony or LBC to any governmental authority in connection with the transactions contemplated by the merger agreement. Each party has the right to review and approve in advance all characterizations of the information relating to such party and any of its subsidiaries that appear in any filing with a governmental authority made in connection with the transactions contemplated by the merger agreement. In addition, Colony and LBC agreed to provide to the other party for review a copy of each filing with a governmental authority made in connection with the transactions contemplated by the merger agreement prior to its filing.

NASDAQ Listing

Colony has agreed to use its commercially reasonable efforts to cause the shares of its common stock to be issued in connection with the merger to be approved for listing on NASDAQ, subject to official notice of issuance, prior to the effective time of the merger.

Employee Matters

General

Following the effective time of the merger, for a period of six (6) months, Colony must maintain employee benefit plans and compensation opportunities for those persons who are full-time employees of LBC and its subsidiaries on the closing date of the merger (referred to below as “covered employees”) that provide employee benefits which, in the aggregate, are substantially comparable to the employee benefits and cash-based compensation opportunities that are made available on a uniform and non-discriminatory basis to similarly situated employees of Colony or its subsidiaries (except that no covered employee may participate in any closed or frozen plan of Colony or its subsidiaries). Colony shall give the covered employees credit for their prior service with LBC and its subsidiaries for purposes of eligibility and vesting under any employee benefit plan maintained by Colony in which covered employees may be eligible to participate.

With respect to any Colony health, dental, vision or other welfare plan in which any covered employee is eligible to participate, for the plan year that includes the closing, if the covered employee is eligible to participate in such plans, Colony or its applicable subsidiary must use its commercially reasonable efforts to cause any pre-existing condition limitations or eligibility waiting periods under such plan to be waived with respect to the covered employee and his or her covered dependents to the extent the condition was, or would have been, covered under the LBC benefit plan in which the covered employee participated immediately prior to the effective time of the merger.

Employees of LBC (other than those who will enter into termination agreements with Colony and/or Colony Bank in connection with the transaction) who (i) become employees of Colony or Colony Bank at the effective time of the merger and (ii) is terminated within one year following the effective time of the merger (other than for cause, death, disability, normal retirement or voluntarily resignation) will be entitled to receive severance compensation based on the number of years of service with LBC, with a minimum of two (2) weeks and a maximum of fifty-two (52) weeks paid to any such employee.

Prior to the effective time of the merger, LBC will effectuate the termination or discontinuation of certain benefits plans maintained by LBC, as requested by Colony.

 

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Indemnification and Directors’ and Officers’ Insurance

The merger agreement provide that, for a period of six years after the effective time of the merger, Colony shall indemnify and hold harmless the present and former directors and officers of LBC and its subsidiaries against all costs or expenses, judgments, fines, losses, claims, damages or other liabilities incurred in connection with any claim, action, suit, proceeding or investigation arising out of actions or omissions of such persons in the course of performing their duties for LBC or its subsidiaries occurring at or before the effective time of the merger (including the transactions contemplated by the merger agreement), to the same extent as such persons have the right to be indemnified pursuant to the organizational documents of LBC in effect as of the date of the merger agreement to the extent permitted by applicable law. Colony will also advance expenses in connection with such indemnification.

For a period of six years after the effective time of the merger, Colony will provide directors’ and officers’ liability insurance that serves to reimburse the present and former officers and directors of LBC or its subsidiaries with respect to claims against them arising from facts or events occurring before the effective time of the merger (including the transactions contemplated by the merger agreement). The directors’ and officers’ liability insurance will contain at least the same coverage and amounts, and contain terms and conditions no less advantageous to the indemnified person as the coverage currently provided by LBC; provided, however, that: (i) if Colony is unable to obtain or maintain the directors’ and officers’ liability insurance, then Colony will provide as much comparable insurance as is reasonably available, and (ii) officers and directors of LBC or its subsidiaries may be required to make application and provide customary representations and warranties to the carrier of the insurance. Colony will not be required to expend for such tail insurance a premium amount in excess of an amount equal to 100% of the annual premiums paid by LBC for director and officer insurance in effect as of the date of this Agreement.

Colony has agreed that if it, or any of its successors and assigns, consolidates with or merges with any other corporation or entity where it is not the continuing or surviving corporation, or transfers all or substantially all of its property or assets, it will make proper provision so that the successors and assigns of Colony and its subsidiaries will assume the obligations of indemnification under the merger agreement.

No Solicitation

LBC has agreed that, from the date of the merger agreement it will not, and will cause its subsidiaries and each of their respective officers, directors and employees not to, and will not authorize or permit its investment bankers, financial advisors, attorneys, accountants, consultants, affiliates or other agents of LBC or any of its subsidiaries to, directly or indirectly, (i) initiate, solicit, induce or knowingly encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an acquisition proposal; (ii) participate in any discussions or negotiations regarding any acquisition proposal or furnish, or otherwise afford access, to any person (other than Colony) any information or data with respect to LBC or any of its subsidiaries or otherwise relating to an acquisition proposal; (iii) release any person from, waive any provisions of, or fail to enforce any confidentiality agreement or standstill agreement to which LBC is a party; or (iv) enter into any agreement, confidentiality agreement, agreement in principle or letter of intent with respect to any acquisition proposal or approve or resolve to approve any acquisition proposal or any agreement, agreement in principle or letter of intent relating to an acquisition proposal.

For purposes of the merger agreement, an “acquisition proposal” means (A) any transaction or series of transactions involving any merger, consolidation, recapitalization, share exchange, liquidation, dissolution or similar transaction involving LBC or any of its subsidiaries; (B) any transaction pursuant to which any third party or group acquires or would acquire (whether through sale, lease or other disposition), directly or indirectly, a significant portion of the assets of LBC or any of its subsidiaries; (C) any issuance, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase or securities convertible into, such securities) representing 20% or more of the

 

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votes attached to the outstanding securities of LBC or any of its subsidiaries; (D) any tender offer or exchange offer that, if consummated, would result in any third party or group beneficially owning 20% or more of any class of equity securities of LBC or any of its subsidiaries; or (E) any transaction which is similar in form, substance or purpose to any of the foregoing transactions, or any combination of the foregoing.

However, at any time prior to LBC special meeting, LBC may take any of the actions described in Colony Bank paragraph of this “—No Solicitation” section if, but only if (i) LBC receives a bona fide unsolicited acquisition proposal that did not result from a breach of the first paragraph of this section, and (ii) the LBC board of directors reasonably determines in good faith, after consultation with and having considered the advice of its outside financial advisor and outside legal counsel, that (A) such acquisition proposal constitutes or is reasonably likely to lead to a superior proposal and (B) it is reasonably necessary to take such actions to comply with its fiduciary duties to LBC’s shareholders under applicable law, (iii) LBC has provided Colony with at least three (3) business days prior notice of such determination, and (iv) prior to furnishing or affording access to any information or data with respect to LBC or any of its subsidiaries or otherwise relating to an acquisition proposal, LBC receives from such person a confidentiality agreement with terms no less favorable to LBC than those contained in the confidentiality agreement with Colony. LBC must promptly provide to Colony any non-public information regarding LBC or any of its subsidiaries provided to any other person which was not previously provided to Colony, and such additional information must be provided no later than the date of provision of such information to such other party.

A “superior proposal” means a bona fide, unsolicited acquisition proposal (i) that if consummated would result in a third party (or in the case of a direct merger between such third party and LBC or any of its subsidiaries, the shareholders of such third party) acquiring, directly or indirectly, more than 50% of the outstanding LBC common stock or more than 50% of the assets of LBC and its subsidiaries, taken as a whole, for consideration consisting of cash and/or securities and (ii) that the board of directors of LBC reasonably determines in good faith, after consultation with its outside financial advisor and outside legal counsel, (a) is reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such proposal, including all conditions contained therein and the person making such acquisition proposal, and (b) taking into account any changes to the merger agreement proposed by Colony in response to such acquisition proposal, and all financial, legal, regulatory and other aspects of such proposal, including all conditions contained therein and the person making such acquisition proposal, such proposal is more favorable to the shareholders of LBC from a financial point of view than the merger.

LBC must promptly (and in any event within 24 hours) notify Colony in writing if any proposals or offers are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with, LBC or its representatives, in each case in connection with any acquisition proposal, and such notice must indicate the name of the person initiating such discussions or negotiations or making such proposal, offer or information request and the material terms and conditions of any proposals or offers (and, in the case of written materials relating to such proposal, offer, information request, negotiations or discussion, providing copies of such materials (including e-mails or other electronic communications), except to the extent that such materials constitute confidential information of the party making such offer or proposal under an effective confidentiality agreement). LBC has agreed that it will keep Colony informed, on a reasonably current basis, of the status and terms of any such proposal, offer, information request, negotiations or discussions (including any amendments or modifications to such proposal, offer or request).

Except as provided below, neither the board of directors of LBC nor any committee thereof shall (i) withdraw, qualify, amend or modify, or propose to withdraw, qualify, amend or modify, in a manner adverse to Colony in connection with the transactions contemplated by the merger agreement (including the merger), the LBC recommendation, fail to reaffirm the LBC recommendation within three business days following a request by Colony, or make any statement, filing or release, in connection with the LBC special meeting or otherwise, inconsistent with the LBC recommendation (it being understood that taking a neutral position or no position with respect to an acquisition proposal will be considered an adverse modification of the LBC recommendation); (ii)

 

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approve or recommend, or propose to approve or recommend, any acquisition proposal; or (iii) enter into (or cause LBC or any of its subsidiaries to enter into) any letter of intent, agreement in principle, acquisition agreement or other agreement (a) related to any acquisition transaction (other than a confidentiality agreement entered into in accordance with the foregoing) or (b) requiring LBC to abandon, terminate or fail to consummate the merger or any other transaction contemplated by the merger agreement.

Notwithstanding the foregoing, prior to the date of the LBC special meeting, the board of directors of LBC may withdraw, qualify, amend or modify the LBC recommendation (“LBC subsequent determination”) after the fifth (5th) business day following Colony’s receipt of a notice (the “notice of superior proposal”) from LBC advising Colony that the board of directors of LBC has decided that a bona fide unsolicited written acquisition proposal that it received (that did not result from a breach of the merger agreement) constitutes a superior proposal if, but only if, (i) the board of directors of LBC has determined in good faith, after consultation with and having considered the advice of outside legal counsel and its financial advisor, that it is reasonably necessary to take such actions to comply with its fiduciary duties to LBC’s shareholders under applicable law, (ii) during the five (5) business day period after receipt of the notice of superior proposal by Colony (the “notice period”), LBC and the board of directors of LBC shall have cooperated and negotiated in good faith with Colony to make such adjustments, modifications or amendments to the terms and conditions of the merger agreement as would enable LBC to proceed with the LBC recommendation in favor of the merger with Colony without a LBC subsequent determination; provided, however, that Colony does not have any obligation to propose any adjustments, modifications or amendments to the terms and conditions of the merger agreement and (iii) at the end of the notice period, after taking into account any such adjusted, modified or amended terms as may have been proposed by Colony since its receipt of such notice of superior proposal, the board of directors of LBC has again in good faith made the determination that such acquisition proposal constitutes a superior proposal. In the event of any material revisions to the superior proposal, LBC is required to deliver a new notice of superior proposal to Colony and again comply with the foregoing requirements, except that the notice period will be reduced to three (3) business days.

Notwithstanding any LBC subsequent determination, the merger agreement will be submitted to LBC’s shareholders at the LBC special meeting for the purpose of voting on the approval of the merger proposal and nothing contained in the merger agreement will be deemed to relieve LBC of such obligation; provided, however, that if the board of directors of LBC makes a LBC subsequent determination with respect to a superior proposal, then the board of directors of LBC may recommend approval of such superior proposal by the shareholders of LBC and may submit the merger proposal to LBC’s shareholders without recommendation, in which event the board of directors of LBC will communicate the basis for its recommendation of such superior proposal and the basis for its lack of a recommendation with respect to the merger proposal to LBC’s shareholders in an appropriate amendment or supplement to this proxy statement/prospectus.

Conditions to Completion of the Merger

The completion of the merger depends on a number of conditions being satisfied or, where permitted, waived, including:

 

   

the required approval by the shareholders of LBC;

 

   

the receipt of all regulatory approvals, or expiration or termination of all statutory waiting periods in respect thereof, required to consummate the transactions contemplated by the merger agreement, without any burdensome conditions (as such term is defined in the merger agreement);

 

   

the absence of any judgment, order, injunction or decree issued by any court or agency of competent jurisdiction or other law preventing or making illegal the consummation of the merger, the bank merger or the other transactions contemplated by the merger agreement;

 

   

the effectiveness of the registration statement on Form S-4, of which this proxy statement/prospectus is a part, under the Securities Act;

 

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the receipt by Colony and LBC from their respective tax counsel of a U.S. federal income tax opinion, dated the closing date of the merger, that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code;

 

   

the accuracy, subject to varying degrees of materiality, of Colony’s and LBC’s respective representations and warranties in the merger agreement on the date of the merger agreement and as of the effective time of the merger (or such other date specified in the merger agreement);

 

   

performance in all material respects by Colony and LBC of their respective obligations under the merger agreement;

 

   

the Plan of Bank Merger is executed and delivered;

 

   

less than 10% of the outstanding shares of LBC common stock validly exercise, or remain entitled to exercise, their dissenters’ rights;

 

   

LBC shall have complied with its obligations with respect to employee benefit plans as required by the merger agreement, including the termination of certain plans and agreements; and

 

   

the absence of any event which has resulted in a material adverse effect on the other party, and the absence of any condition, event, fact, circumstance or other occurrence that is reasonably expected to have a material adverse effect on the other party.

No assurance is given as to when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

Termination

The merger agreement may be terminated at any time prior to the effective time of the merger:

 

   

by mutual written consent of Colony and LBC;

 

   

by Colony or LBC if any regulatory approval required for consummation of the transactions contemplated by the merger agreement has been denied by final non-appealable action by the relevant governmental authority or any application for such regulatory approval shall have been permanently withdrawn at the request of a governmental authority;

 

   

by Colony or LBC if the approval of the shareholders of LBC is not obtained;

 

   

by Colony or LBC in the event of a material breach by the other party of any representation, warranty or covenant contained in the merger agreement and such breach is not cured prior to the earlier of thirty days of notice of the breach or two business days prior to the expiration date of the merger agreement and the terminating party is not itself in material breach;

 

   

by Colony or LBC if the merger is not consummated on or before June 30, 2019, subject to automatic extension to September 30, 2019 if the only outstanding condition to closing is the receipt of regulatory approvals, which we refer to as the expiration date;

 

   

by Colony if LBC materially breaches its covenant not to solicit other offers;

 

   

by Colony if LBC withdraws, qualifies, amends, modifies or withholds its recommendation to its shareholders to approve the merger and the merger agreement, or makes any statement, filing or release, in connection with the shareholder meeting or otherwise, inconsistent with its recommendation (it being understood that taking a neutral position or no position with respect to an acquisition proposal shall be considered an adverse modification of its recommendation);

 

   

by Colony if LBC fails to properly call, give notice of, and commence a meeting of shareholders to vote on the merger;

 

   

by Colony if LBC approves or recommends an acquisition proposal;

 

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by Colony if LBC fails to publicly recommend against a publicly announced acquisition proposal within three business days of being requested to do so by Colony or fails to publicly reconfirm its recommendation to its shareholders within three business days of being requested to do so by Colony;

 

   

by LBC if  (i) the average closing price of Colony common stock over the 20 trading days preceding the date that is five days prior to the closing date is less than $14.20, and (ii) the decline in the price of Colony’s common stock (as measured by the average closing price divided by $17.75) is less than the number obtained by dividing the average closing price of the KBW Regional Banking Index (KRX) over the 20 trading days preceding the date that is five days prior to the closing date by $91.81; provided, however, if LBC wishes to exercise its termination right pursuant to this provision, it shall give prompt written notice to Colony, and within the five-day period after its receipt of the termination notice from LBC, Colony will have the option, but not the obligation, to adjust the exchange ratio such that the total merger consideration would be worth at least $32,085,848.75, which will nullify and void LBC’s termination, and the merger agreement will remain in full force and effect; or

 

   

by LBC if LBC’s board of directors determines to enter into a definitive agreement with respect to a superior proposal in accordance with the terms of the merger agreement, but only if LBC pays to Colony the $1,432,000 termination fee.

Termination Fee

LBC will pay Colony a termination fee equal to $1,432,000 in the event of any of the following:

 

   

Colony terminates the merger agreement because: (i) LBC materially breached its covenant not to solicit other offers; (ii) LBC withdrew, qualified, amended, modified or withheld its recommendation to its shareholders to approve the merger and the merger agreement to its shareholders, or made any statement, filing or release, in connection with the shareholder meeting or otherwise, inconsistent with its recommendation (it being understood that taking a neutral position or no position with respect to an acquisition proposal shall be considered an adverse modification of its recommendation); (iii) LBC failed to properly call, give notice of, and commence a meeting of shareholders to vote on the merger; (iv) LBC approved or recommended an acquisition proposal; (v) LBC failed to publicly recommend against a publicly announced acquisition proposal within three (3) business days of being requested to do so by Colony or failed to publicly reconfirm its recommendation to its shareholders within (3) business days of being requested to do so by Colony; or (vi) LBC resolved or otherwise determined to take, or announced an intention to take, any of the foregoing actions;

 

   

in the event that after the date of the merger agreement and prior to the termination of the merger agreement, an acquisition proposal was made known to senior management of LBC or has been made directly to LBC’s shareholders generally or an acquisition proposal shall have been publicly announced (and not withdrawn), and (i) the merger agreement is terminated by (A) Colony or LBC because the requisite LBC shareholder approval was not obtained or (B) Colony because of LBC’s material breach of its representations and warranties or covenants in the merger agreement, and (ii) prior to the date within 12 months of such termination, LBC enters into any agreement or consummates a transaction with respect to an acquisition proposal (whether or not it’s the same acquisition proposal as that referred to above); or

 

   

LBC terminates the merger agreement at any time before the receipt of LBC shareholder approval for the purpose of entering into an acquisition agreement with respect to a superior proposal in compliance with the terms of the merger agreement.

Effect of Termination

A termination of the merger agreement will not relieve a breaching party from liability for any breach of any covenant, agreement, representation or warranty of the merger agreement giving rise to such termination or

 

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resulting from fraud or any willful and material breach. Notwithstanding the foregoing, the parties have agreed that if LBC pays or causes to be paid to Colony the termination fee in accordance with the merger agreement, LBC (or any successor in interest of LBC) will not have any further obligations or liabilities to Colony with respect to the merger agreement or the transactions contemplated by it.

Amendment; Waiver

Prior to the effective time of the merger and to the extent permitted by applicable law, any provision of the merger agreement may be (a) waived by the party benefitted by the provision, provided the waiver is in writing and signed by such party, or (b) amended or modified at any time, by an agreement in writing between the parties, except that after the LBC special meeting no amendment may be made which by law requires further approval by the shareholders of Colony or LBC without obtaining such approval.

Expenses

All expenses incurred in connection with the merger, the bank merger, the merger agreement and other transactions contemplated thereby, including fees and expenses of financial consultants, accountants and counsel, will be paid by the party incurring the expenses. Nothing in the merger agreement limits either party’s rights to recover any liabilities or damages arising out of the other party’s willful breach of any provision of the merger agreement.

 

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ANCILLARY AGREEMENTS

Voting Agreements

In connection with, and as a condition to, entering into the merger agreement, each of the directors of LBC and Calumet Bank who has voting control over shares of LBC common stock entered into a voting agreement with Colony. The following summary of the voting agreements is subject to, and qualified in its entirety by reference to, the form voting agreement attached as Exhibit A to the merger agreement attached as Annex A to this document.

Pursuant to the voting agreements, each party to a voting agreement has agreed to appear at the LBC special meeting (in person or by proxy) and to vote his or her shares of LBC common stock:

 

   

in favor of adoption and approval of the merger agreement and the approval of the merger and the other transactions contemplated by the merger agreement;

 

   

in favor of any proposal to adjourn or postpone such meeting, if necessary, to solicit additional proxies to approve the merger agreement and the merger;

 

   

against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of LBC contained in the merger agreement;

 

   

against any acquisition proposal other than the merger; and

 

   

against any other action, agreement or transaction that is intended, or could reasonably be expected, to impede, interfere or be inconsistent with, delay, postpone, discourage or materially and adversely affect consummation of the transactions contemplated by the merger agreement.

In addition, the voting agreements provide that each shareholder party to a voting agreement will not:

 

   

directly or indirectly sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option, commitment or other arrangement or understanding with respect to the sale, transfer, pledge, assignment or other disposition of, any of such shareholder’s shares of LBC common stock; and

 

   

(i) initiate, solicit, induce or knowingly encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an acquisition proposal, (ii) participate in any discussions or negotiations regarding any acquisition proposal or furnish, or otherwise afford access, to any person (other than Colony) any information or data with respect to LBC or any of its subsidiaries or otherwise relating to an acquisition proposal, (iii) enter into any agreement, agreement in principle or letter of intent with respect to any acquisition proposal or approve or resolve to approve any acquisition proposal or any agreement, agreement in principle or letter of intent relating to an acquisition proposal, (iv) solicit proxies with respect to an acquisition proposal or otherwise encourage or assist any party in taking or planning any action that would compete with, restrain or otherwise serve to interfere with or inhibit the timely consummation of the merger in accordance with the terms of the merger agreement, or (v) initiate a shareholders’ vote or action by consent of LBC’s shareholders with respect to an acquisition proposal.

The voting agreements will automatically terminate upon the earlier of (i) the effective date of the merger, (ii) the amendment of the merger agreement in any manner that materially and adversely affects any of the shareholder’s rights set forth in the merger agreement, (iii) termination of the merger agreement, or (iv) three (3) years from the date the voting agreements are executed.

As of the record date, shareholders who are party to the voting agreements beneficially owned and were entitled to vote an aggregate of approximately 572,863 shares of LBC common stock, which represented approximately 39.6% of the shares of LBC common stock outstanding on that date.

 

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Non-Competition and Non-Disclosure Agreements

In addition to the voting agreements, as a condition to Colony entering into the merger agreement, each of the directors of LBC and Calumet Bank entered into a non-competition and non-disclosure agreements with Colony. The following summary of the non-competition and non-disclosure agreements is subject to, and qualified in its entirety by reference to, the form of non-competition and non-disclosure agreement attached as Exhibit C to the merger agreement attached as Annex A to this document.

Each party to a non-competition and non-disclosure agreement has agreed to, among other things:

 

   

from and after the effective time of the merger, not disclose or use any confidential information or trade secrets of LBC for any purpose for so long as such information remains confidential information or a trade secret, except as required by law; and

 

   

for a period of two years following the closing the merger:

 

   

not solicit or attempt to solicit any customers of Colony, Colony Bank, LBC or Calumet Bank, including actively sought prospective customers of Calumet Bank as of the effective time of the merger;

 

   

on such director’s own behalf or on behalf of others, not solicit or recruit or attempt to solicit or recruit any employee (full-time or temporary) of Colony, Colony Bank, LBC or Calumet Bank; and

 

   

directly on the director’s own behalf or on behalf any other person, not act as a director, manager, officer, or employee of any banking business that is the same or essentially the same as the banking business conducted by Colony, Colony Bank or LBC or Calumet Bank and that has a banking office located within any county in Georgia where Calumet Bank operates a banking office as of the closing of the merger and each county contiguous to each of such counties.

The restrictions in the non-competition and non-disclosure agreements will automatically terminate upon the earlier of (i) the termination of the merger agreement, (ii) two years after the effective date of the merger, or (iii) upon a change in control of Colony.

Claims Letters

At the time of the execution of the merger agreement, and effective upon the closing of the merger, each director of LBC and Calumet Bank executed a claims letter with Colony. The following summary of the claims letters is subject to, and qualified in its entirety by reference to, the claims letter attached as Exhibit D to the merger agreement attached as Annex A to this document.

Pursuant to the claims letter, each director of LBC and Calumet Bank released and discharged, effective upon the consummation of the merger, LBC and its subsidiaries, their respective directors and officers (in their capacities as such), and their respective successors and assigns (including Colony and Colony Bank), of and from any and all liabilities or claims that such director has or claims to have, or previously had or claimed to have, solely in his or her capacity as an officer, director or employee of LBC or any of its subsidiaries, as of the effective time of the merger. The release does not apply to (i) compensation for services that has accrued but not yet been paid in the ordinary course of business consistent with past practice; (ii) claims that the director may have in any capacity other than as an officer, director or employee of LBC or any of its subsidiaries, such as claims as a borrower under loan commitments and agreements, claims as a depositor under any deposit account with or as the holder of any certificate of deposit issued by Calumet Bank, claims on account of any services rendered by the director in a capacity other than as an officer, director or employee of LBC or any of its subsidiaries, claims in his or her capacity of a shareholder of LBC and claims as a holder of any check issued by any other depositor of Calumet Bank; (iii) any claims that the director may have under the merger agreement; or (iv) any right to indemnification that the director may have under the LBC Articles of LBC Bylaws or similar documents or any of its subsidiaries, Georgia law or the merger agreement.

 

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THE COMPANIES

Colony Bankcorp, Inc.

Colony was incorporated in Georgia on November 8, 1982 and serves as the bank holding company for Colony Bank, headquartered in Fitzgerald, Georgia. As of December 31, 2018, Colony had consolidated assets of approximately $1.25 billion, loans of $781.5 million, deposits of $1.09 billion, and stockholders’ equity of $95.7 million. As of December 31, 2018, Colony operated 27 domestic banking offices and two corporate operations offices in Georgia. Colony Bank’s deposits are insured by the FDIC.

Colony is a community-focused financial institution that offers a full range of financial services to individuals, businesses, municipal entities, and nonprofit organizations in the communities that it serves. These services include consumer and commercial loans, deposit accounts, trust services, safe deposit services and brokerage services.

Colony and its subsidiaries are subject to comprehensive regulation, examination and supervision by the Federal Reserve Board, the FDIC and the Georgia Department of Banking and Finance, and are subject to numerous laws and regulations relating to their operations, including, among other things, permissible activities, capital adequacy, reserve requirements, standards for safety and soundness, internal controls, consumer protection, anti-money laundering, and privacy and data security.

Colony’s headquarters are located at 115 South Grant Street, Fitzgerald, Georgia 31750, and its telephone number is (229) 426-6000. Colony’s website can be found at http://www.colonybank.com. The contents of Colony’s website are not incorporated into this proxy statement/prospectus.

For more information about Colony’s business, see “Where You Can Find More Information” below.

LBC Bancshares, Inc.

LBC is a Georgia corporation which was incorporated in 2014 to be the parent holding company of Calumet Bank, a state-chartered, non-member bank. LBC’s results of operations are primarily dependent on the results of Calumet Bank. As of December 31, 2018, LBC had consolidated total assets of $206.6 million, net loans of  $135.3 million, deposits of  $182.3 million and stockholders’ equity of $19.5 million. Both LBC and Calumet Bank maintain their headquarters in LaGrange, Georgia.

Calumet Bank began in 2008, under the name LaGrange Banking Company. In 2015, it changed its name to Calumet Bank following the expansion into Columbus, Georgia. Calumet Bank is a community bank with a focus on serving customers in the LaGrange, Georgia and Columbus, Georgia markets through the provision of a full range of financial services, including accepting time, demand, and savings deposits and providing loans for one-to four-family residential mortgages, commercial real estate loans, consumer loans, loans to small to medium sized businesses and other loans. It operates two full service banking offices, one at its headquarters located in LaGrange, Georgia and the other in Columbus, Georgia.

Calumet Bank is subject to examination and comprehensive regulation by the FDIC, its primary banking regulator, which insures customer deposits held by Calumet Bank to the full extent provided by law. Calumet Bank also is subject to certain reserve requirements established by the Board of Governors of the Federal Reserve System.

 

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DESCRIPTION OF CAPITAL STOCK

As a result of the merger, LBC shareholders who receive shares of Colony common stock in the merger will become shareholders of Colony. Your rights as shareholders of Colony will be governed by Georgia law and the Colony Articles and Colony Bylaws. The following briefly summarizes the material terms of Colony common stock. We urge you to read the applicable provisions of the GBCC, the Colony Articles and the Colony Bylaws and federal laws governing bank holding companies carefully and in their entirety. Copies of Colony’s governing documents have been filed with the SEC. To obtain copies of these documents, see “Where You Can Find More Information.” Colony common stock is listed on the NASDAQ Global Market under the symbol “CBAN.”

Common Stock

Authorized. Colony has 20,000,000 shares of authorized common stock, $1.00 par value, of which 8,444,908 were outstanding as of February 8, 2019.

Voting Rights; Cumulative Voting. Pursuant to the Colony Bylaws, each outstanding share of Colony common stock is entitled to one vote on each matter submitted to a vote. Holders of Colony common stock do not have cumulative voting rights.

Board of Directors. Under Article 3.2 of the Colony Bylaws, the board of directors shall consists of not less than three (3), nor more than twenty-five (25) persons, with the exact number of directors to be determined from time to time by resolution of the board, or by resolution of the shareholders at any annual or special meeting of shareholders. The directors shall be elected by the affirmative vote of a majority of the shares represented at the annual meeting of shareholders. Currently, there are seven directors.

Dividends. Holders of Colony common stock are entitled to receive dividends if, as and when declared by the board of directors out of any funds legally available for dividends. Holders of Colony common stock are also entitled, upon our liquidation, and after claims of creditors and the preferences of any class or series of preferred stock outstanding at the time of liquidation, to receive pro rata net assets, if any. Colony pays dividends on its common stock only if it has paid or provided for all dividends on its outstanding series of preferred stock, for the then current period and, in the case of any cumulative preferred stock, all prior periods.

Colony is a legal entity separate and distinct from Colony Bank. There are various restrictions that limit the ability of Colony Bank to finance, pay dividends or otherwise supply funds to Colony or other affiliates. In addition, subsidiary banks of holding companies are subject to certain restrictions under Sections 23A and 23B of the Federal Reserve Act on any extension of credit to the bank holding company or any of its subsidiaries, on investments in the stock or other securities thereof and on the taking of such stock or securities as collateral for loans to any borrower. Further, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with extensions of credit, leases or sales of property, or furnishing of services.

The principal source of funds from which Colony pays cash dividends are the dividends received from its bank subsidiary, Colony Bank. Consequently, dividends are dependent upon Colony Bank’s earnings, capital needs, and regulatory policies, as well as statutory and regulatory limitations. Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its parent company. Georgia law requires prior approval for a bank to pay dividends where the aggregate amount of dividends to be declared or anticipated to be declared during the current calendar year exceeds 50 percent of its net after-tax profits before dividends for the previous calendar year. A depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized.

Preemptive Rights; Liquidation. Colony common stock does not carry any preemptive rights enabling a holder to subscribe for or receive shares of Colony common stock. In the event of liquidation, holders of Colony common

 

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stock are entitled to share in the distribution of assets remaining after payment of debts and expenses and after required payments to holders of Colony preferred stock, if any such shares are outstanding. There are no redemption or sinking fund provisions applicable to Colony common stock.

Preferred Stock

Under the terms of the Colony Articles, Colony has authorized the issuance of up to 10,000,000 shares of preferred stock, no par value, any part or all of which shares may be established and designated from time to time by the board of directors by filing an amendment to the Articles, which is effective without shareholder action, in accordance with the appropriate provisions of the GBCC. If Colony offers preferred stock, it will file the terms of the preferred stock with the SEC, and the prospectus supplement relating to that offering will include a description of the specific terms of the offerings. The Colony Articles authorize the board of directors to establish one or more series of preferred stock, and to establish such preferences, limitations and relative rights as may be applicable to each series of preferred stock. The issuance of preferred stock and the determination of the terms of preferred stock by the board, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of our common stock.

Anti-Takeover Provisions

Voting Requirements; Business Combinations or Control Share Acquisition. The GBCC states that in the absence of a greater requirement in the articles of incorporation, a sale, lease, exchange, or other disposition of all, or substantially all, of a corporation’s property requires approval by a majority of the shares entitled to vote on the transaction. The Colony Articles do not provide for a greater than majority vote on such a transaction.

Removal of Directors. Under Article 3.4 of the Colony Bylaws, the entire board of directors or any individual director may be removed from office with or without cause by the affirmative vote of the holders of a majority of the shares entitled to vote at an election of directors. In addition, the board of directors may remove a director from office if such director is adjudicated an incompetent by a court, if such director is convicted of a felony, or if such director fails to attend regular meetings of the board of directors for three (3) consecutive meetings without having been excused by the board.

Vacancies in the Board of Directors. The Colony Bylaws do not address vacancies on the board of directors, however, Section 14-2-810 of the GBCC provides that unless the articles of incorporation or a bylaws approved by the shareholders provides otherwise, if a vacancy occurs on a board of directors, including a vacancy resulting from an increase in the number of directors: (i) the shareholders may fill the vacancy; (ii) the board of directors may fill the vacancy; or (iii) if the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. The GBCC also provides that if the vacant office was held by a director elected by a voting group of shareholders, only the holders of shares of that voting group or the remaining directors elected by that voting group are entitled to vote to fill the vacancy.

Amendment of the Articles of Incorporation or Bylaws. The Colony Articles may be amended in accordance with the GBCC, which generally requires the approval of the Colony board of directors and the holders of a majority of the votes entitled to be cast on the amendment. Colony’s Bylaws may be amended, altered, or repealed by the board of directors. Notice of any change in the bylaws during the year must be given to the shareholders at the annual meeting and proposed for ratification by a majority vote of the shareholders represented at the meeting in person or by proxy. If the ratification fails, such change will not be effective after the shareholders’ meeting. Any bylaws adopted by the board of directors may be altered, amended or repealed, and new bylaws adopted by the shareholders. The shareholders may prescribe that any bylaw adopted by them cannot be altered, amended or repealed by the board of directors. Action taken by shareholders with respect to bylaws shall be taken by an affirmative vote of a majority of all shares entitled to elect directors, and action taken by the board of directors with respect to bylaws shall be taken by an affirmative vote of a majority of all directors then holding office.

 

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Special Meetings of Shareholders. Under the Colony Bylaws, special meetings of shareholders or a special meeting in lieu of the annual meeting of shareholders shall be called by Colony upon the written request of the holders of twenty-five percent (25%) or more of all the shares of capital stock entitled to vote in an election of directors. Special meetings of the shareholders may be called at any time by the President, Chairman of the Board, or the Board of Directors. Colony must give written or printed notice of the place, day and hour of each special shareholders’ meeting no fewer than 20 days nor more than 50 days before the meeting date to each shareholder of record entitled to vote at the meeting. The notice of a special meeting must state the general nature of the business to be transacted.

Shareholder Proposals and Nominations. The Colony Articles and Bylaws do not provide for shareholder proposals or required procedure. However, under Rule 14a-8 applies, a shareholder proposal must be received by the subject company at least 120 days before the anniversary of the date on which the company first mailed the previous year’s proxy statement to shareholders. If, however, the annual meeting date has been changed by more than 30 days from the date of the prior year’s meeting, or for special meetings, the proposal must be submitted within a reasonable time before the subject company begins to print and mail its proxy materials.

Limitations on Directors’ and Officers’ Liability. The Colony Bylaws provide that any person, his heirs, executors, or administrators, may be indemnified or reimbursed by Colony for reasonable expense actually incurred in connection with any action, suit or proceeding, civil or criminal, to which such person shall be made a party by reason of the fact that such person is or was a director, trustee, officer, employee, or agent of Colony, or that such person is or was serving, at the request of Colony, trust or other organization or enterprise; provided, however, that no person shall be so indemnified or reimbursed in relation to any matter in such action, suit or proceeding as to which such person shall finally be adjudged to have been guilty of or liable for gross negligence, willful misconduct or criminal acts in the performance of his duties to Colony, or to such other firm, corporation, trust, organization, or enterprise; and provided further, that no person shall be so indemnified or reimbursed in relation to any matter in such action, suit, or proceeding which has been in the subject of a compromise settlement, except with the approval of (i) a court of competent jurisdiction, (ii) the holders of record of a majority of the outstanding shares of capital stock of Colony, or (iii) a majority of the members of the board of directors then holding office, excluding the votes of any directors who are parties to the same or substantially the same action, suit or proceeding.

The Colony Bylaws also provide that expenses incurred in defending any action, suit or proceeding referred to above may be paid by Colony in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director, trustee, officer, employee or agent to repay such amount unless it shall ultimately be determined that such director, trustee, officer, employee or agent is entitled to be indemnified by Colony as provided above.

The Colony Bylaws further provide that Colony may purchase and maintain on behalf of a director, officer, employee or agent of Colony insurance against liability asserted against or incurred by that person serving in such capacity for Colony or arising from his status with Colony whether or not Colony would have the power to indemnify that person under the Bylaws.

 

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COMPARISON OF RIGHTS OF

COLONY SHAREHOLDERS AND LBC SHAREHOLDERS

If the merger is completed, shareholders of LBC will become shareholders of Colony. The rights of LBC shareholders are currently governed by GBCC, the LBC Articles and LBC Bylaws. Upon completion of the merger, the rights of the former LBC shareholders who receive shares of Colony common stock will be governed by the GBCC and the Colony Articles and Colony Bylaws, rather than the LBC Articles and LBC Bylaws.

The following is a summary of the material differences between the rights of holders of Colony common stock and holders of LBC common stock, but it does not purport to be a complete description of those differences, the specific rights of such holders or the terms of the Colony common stock subject to issuance in connection with the merger. The following summary is qualified in its entirety by reference to the relevant provisions of: (1) Georgia law; (2) the Colony Articles; (3) the LBC Articles; (4) the Colony Bylaws; and (5) the LBC Bylaws.

The identification of some of the differences in the rights of such holders as material is not intended to indicate that other differences that may be equally important do not exist. You are urged to read carefully the relevant provisions of Georgia law, as well as the governing corporate instruments of each of Colony and LBC, copies of which are available, without charge, to any person, including any beneficial owner to whom this proxy statement/prospectus is delivered, by following the instructions listed under “Where You Can Find More Information.”

 

    

Rights of Colony Shareholders
(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

Corporate Governance   

Colony is a Georgia corporation.

 

The rights of Colony shareholders are governed by Georgia law, the Colony Articles and the Colony Bylaws.

 

  

LBC is a Georgia corporation.

 

The rights of LBC shareholders are governed by Georgia law, the LBC Articles and the LBC Bylaws.

 

Authorized Capital Stock   

Colony’s authorized capital stock consists of 20,000,000 shares of common stock, par value $1.00 per share, and 10,000,000 shares of preferred stock, no par value.

 

The Colony Articles authorize Colony’s board of directors to issue shares of preferred stock in one or more series and to fix the designations, preferences, rights, qualifications, limitations or restrictions of the shares of Colony preferred stock in each series.

 

As of February 8, 2019, there were 8,444,908 shares of Colony common stock outstanding and no shares of Colony preferred stock outstanding.

 

  

LBC is authorized to issue up to 10,000,000 shares of common stock, par value $5.00 per share, and 10,000,000 shares of preferred stock, par value $1.00 per share.

 

The LBC Articles authorize LBC’s board of directors to issue shares of preferred stock in one or more series and to fix the designations, preferences, rights, qualifications, limitations or restrictions of the shares of LBC preferred stock in each series.

 

As of February 7, 2019, there were 1,447,554 shares of LBC common stock issued and outstanding and no shares of preferred stock issued and outstanding.

 

 

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Rights of Colony Shareholders
(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

Preemptive Rights   

The Colony Articles provide that shareholders do not have preemptive rights.

 

  

The LBC Articles do not provide shareholders with preemptive rights.

 

Voting Rights   

Each holder of shares of Colony common stock is entitled to one vote for each share held on all questions submitted to holders of shares of Colony common stock.

 

Election of Colony directors requires the approval by a majority of the votes cast by the holders of shares entitled to vote in the election of directors at a shareholder meeting at which a quorum is present.

 

Other matters (other than a matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by Georgia law or the Colony Articles) require a majority of the shares represented at the meeting and entitled to vote on the subject matter, where the vote on the matter occurred at a shareholder meeting at which a quorum is present.

 

  

Each share of LBC common stock has one vote for each matter properly brought before the shareholders.

 

LBC directors are elected by a majority of the votes cast by the shares entitled to vote in the election of directors at a meeting of the shareholders at which a quorum is present.

 

Other matters (other than a matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by the GBCC or the LBC Articles) are determined by a majority of the votes cast on the matter, provided that a quorum exists.

 

Under the LBC Bylaws, any action to be taken at a meeting of the shareholders of the corporation, or any action that may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by each of the shareholders entitled to vote with respect to the subject matter thereof.

 

Cumulative Voting   

Holders of shares of Colony common stock do not have cumulative voting rights at elections of directors.

 

  

Holders of shares of LBC common stock do not have cumulative voting rights at elections of directors.

 

Size of the board of directors    The Colony Bylaws provide for a board of directors consisting of not less than three and not more than 25 directors as fixed from time to time by Colony’s board or by resolution of the shareholders    The LBC Bylaws provide that the number of directors may be determined by the LBC board from time to time by an affirmative vote of 2/3 of the directors then in office, or by the

 

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(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

  

at any special or annual meeting of shareholders. Currently, there are seven directors on Colony’s board of directors.

 

  

shareholders from time to time by an affirmative vote of 2/3 of the issued and outstanding shares of the corporation entitled to vote in an election of directors, but no increase or decrease of the number of directors may exceed two in any one year, and the number of directors shall not be less than five nor more than 25. Currently, there are eleven directors on LBC’s board of directors.

 

Independent Directors   

A majority of the Colony board of directors must be comprised of independent directors as defined in the listing rules of NASDAQ.

 

  

LBC is not subject to any requirement with respect to independent directors.

 

Term of Directors and Classified Board

  

Colony Bylaws provide that directors are elected annually and each director shall hold office until his or her successor is elected and qualified or until his or her earlier death, resignation or removal in the manner provided by the Colony Bylaws.

 

  

The LBC Articles provide that the directors shall be divided into three classes, as nearly equal in number as possible, with one class to be elected annually. At each annual meeting of shareholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office of three years, with each director to hold office until his or her successor shall have been elected and qualified or until their earlier resignation, death, or removal from office in the manner provided by the LBC Bylaws.

 

Election of Directors

  

Colony directors are elected by a majority of the shares represented at the annual meeting of shareholders.

 

  

LBC directors are elected by a majority of the votes cast by the shares entitled to vote in the election of directors.

 

Removal of Directors

   The Colony Bylaws provide that a director may be removed from office with or without cause by the affirmative vote of the holders of a majority of the shares entitled to vote at an election of directors. In addition, the board of directors may remove a director from office if such director is adjudicated an    The LBC Articles provide that at any shareholders’ meeting with respect to which notice of such purpose has been given, the entire board of directors or any director may be removed without cause by the affirmative vote of at least 2/3 of the issued and outstanding shares of LBC entitled to vote in

 

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(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

  

incompetent by court, if he or she is convicted of a felony, or if he or she fails to attend regular meetings of the board of directors for three consecutive meetings without having been excused by the board of directors.

 

  

an election of directors, and the entire board of directors or any director may be removed with cause upon the vote of the holders of at least a majority of the issued and outstanding shares of LBC entitled to vote in an election of directors.

 

Filling Vacancies of Directors

  

Under the GBCC, if during the year a vacancy in the board of directors should occur, the vacancy may be filled by the shareholders, the board of directors, or, if the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.

 

  

The LBC Bylaws provide that the directors, even though less than a quorum, may fill any vacancy on the board of directors, including a vacancy created by an increase in the number of directors. Such appointment will continue until the expiration of the term of the director whose place has become vacant, or, in the case of an increase in the number of directors, until the next meeting of shareholders.

 

Director Qualifications

  

Colony Bylaws provide that directors must be a natural person of the age of 18 years or more, and any director who reaches the age of 70 his or her term of office is not permitted to be appointed or reappointed as a director for any term following the term during which said director has reached the age of 70.

 

  

LBC Articles and Bylaws do not provide for director qualifications.

 

Amendments to Articles

  

Colony Articles may be amended in accordance with the GBCC, which generally requires the approval of the Colony board of directors and the holders of a majority of the votes entitled to be cast on the amendment.

 

  

The provisions of the GBCC are also applicable to LBC and its shareholders.

 

The LBC Articles provide that unless 2/3 of the directors then in office approve a proposed change of Article 5 (Initial Board of Directors), Article 6 (Bylaws, Number of directors), Article 8 (Indemnification of Officers and Directors), or Article 10 (Business Transactions) of the LBC Articles, the Articles may be amended or

 

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(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

     

rescinded only by the affirmative vote of the holders of at least 2/3 of the issued and outstanding shares of LBC entitled to vote.

 

Bylaw Amendments

  

Colony Bylaws may be amended, altered, or repealed by the board of directors. Notice of any change in the bylaws during the year must be given to the shareholders at the annual meeting and proposed for ratification by a majority vote of the shareholders represented at the meeting in person or by proxy. If the ratification fails, such change will not be effective after the shareholders’ meeting. Any bylaws adopted by the board of directors may be altered, amended or repealed, and new bylaws adopted by the shareholders. The shareholders may prescribe that any bylaw adopted by them cannot be altered, amended or repealed by the board of directors. Action taken by shareholders with respect to bylaws shall be taken by an affirmative vote of a majority of all shares entitled to elect directors, and action taken by the board of directors with respect to bylaws shall be taken by an affirmative vote of a majority of all directors then holding office.

 

  

The LBC Bylaws may be amended and new bylaws may be adopted by a majority of the board of directors then holding office or by the affirmative vote of a majority of the total shares entitled to vote in an election of directors. Such amendments and alterations of the LBC Bylaws may occur at any annual or special meeting of the shareholders, or by the board of directors at any regular or special meeting of the board of directors, provided that if such action is to be taken at a meeting of the shareholders, notice of the general nature of the proposed change in the bylaws will be given in the notice of meeting.

 

Merger, Consolidations or Sales of Substantially All Assets; Anti-Takeover Provisions

   Under the GBCC, subject to certain exceptions, a merger, share exchange or sale, lease, exchange or transfer of all or substantially all of the corporation’s assets generally must be approved at a meeting of a corporation’s shareholders by the: (i) affirmative vote of a majority of all the votes entitled to be cast on the matter; and (ii) in addition, with respect to a merger or share exchange, affirmative vote of a majority of   

The provisions of the GBCC are also applicable to LBC and its shareholders.

 

The LBC Articles provide that in any case in which the GBCC or other applicable law requires shareholder approval of any merger or share exchange of LBC with or into any corporation, or any sale, lease, exchange or other disposition of all or substantially all of the assets of LBC to any

 

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Rights of Colony Shareholders
(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

  

all the votes entitled to be cast by holders of the shares of each voting group entitled to vote separately on the transaction as a group by the articles of incorporation.

 

Colony Articles and Bylaws do not contain any provisions regarding approval of fundamental business transactions by the holders of Colony common stock.

 

  

other corporation, person or other entity, approval of such actions require either, (i) the affirmative vote of 2/3 of the board of directors and the affirmative vote of a majority of the issued and outstanding shares of LBC entitled to vote, or (ii) the affirmative vote of a majority of the board of directors and the affirmative vote of the holders of at least 2/3 of the issued and outstanding shares of LBC entitled to vote.

 

Annual Meetings of the Shareholders

  

Colony Bylaws provide that the annual meeting of the shareholders is to be held on the fourth Tuesday in May each year, unless that day is a legal holiday, in which case the meeting will be held on the next succeeding business day, for the purpose of electing directors and to transact any business that properly may come before the meeting. If the annual meeting is not held on the day designated above, any business, including the election of directors, which might have been acted upon at the annual meeting may be transacted at any subsequent shareholders’ meeting held pursuant to the Colony Bylaws or pursuant to a court order requiring a substitute meeting.

 

  

The LBC Bylaws provide that the annual meeting of shareholders of LBC will be held within six months after the end of each fiscal year of LBC, to be determined by the board of directors from time to time. The board of directors may postpone any annual meeting, for not more than seven days, for cause upon not less than ten days’ written notice to all the shareholders.

 

Special Meetings of the Shareholders

  

Under the Colony Bylaws, special meetings of the shareholders or a special meeting in lieu of the annual meeting of shareholders may be called by the Chairman of the Board, the President, or the Board of Directors, or upon written request of the holders of 25% or more of all the shares of capital stock entitled to vote in an election of directors.

 

  

The LBC Bylaws provide that special meetings of shareholders can be called by the President, the Board of Directors, the Chairman of the Board, or by the corporation upon written request of any one or more shareholders owning an aggregate of not less than 25% of the outstanding capital stock of LBC.

 

 

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Rights of Colony Shareholders
(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

Advance Notice Provisions for Shareholder Nominations and Shareholder Business Proposals at Annual Meetings

  

Rule 14a-8 promulgated by the SEC under the Exchange Act establishes the rules for shareholder proposals intended to be included in a public company’s proxy statement. Rule 14a-8 applies to Colony. Under the rule, a shareholder proposal must be received by the subject company at least 120 days before the anniversary of the date on which the company first mailed the previous year’s proxy statement to shareholders. If, however, the annual meeting date has been changed by more than 30 days from the date of the prior year’s meeting, or for special meetings, the proposal must be submitted within a reasonable time before the subject company begins to print and mail its proxy materials.

 

Colony Articles and Bylaws do not provide for any advance notice requirements for shareholder nomination and other proposals.

 

  

Rule 14a-8 of the Exchange Act does not apply to LBC.

 

The LBC Bylaws provide that only persons who are nominated in accordance with the procedures set forth in the bylaws will be eligible for election as director. Nominations of persons for election to the board of directors may be made at any meeting of the shareholders at which directors are to be elected only (i) by or at the direction of the board of directors or (ii) by any shareholder of LBC entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in the LBC Bylaws. For a nomination, other than those management nominees made by or at the direction of the board of directors, to be properly brought before an annual meeting, the shareholder must have given timely notice thereof in writing to the Secretary of LBC. To be timely, a shareholder’s notice must be delivered to or mailed and received at LBC’s principal executive offices not less than fourteen days nor more than 50 days prior to any meeting of shareholders called for the election of directors. In the event less than 21 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder must be received not later than the close of business on the seventh day following the day on which such notice of the date of the meeting is mailed or such public disclosure was made. The LBC Bylaws also require that the notice must contain certain information in order to be

 

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(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

     

considered. The presiding officer at the meeting shall, if the facts warrant, determine and declare to the meeting that the nomination was not properly brought before the meeting in accordance with the LBC Bylaws and the defective nomination will be disregarded.

 

Notice of Shareholder Meetings

  

Colony must give written or printed notice of the place, day and hour of each annual and special shareholders’ meeting no fewer than 20 days nor more than 50 days before the meeting date to each shareholder of record entitled to vote at the meeting. The notice of an annual meeting need not state the purpose of the meeting unless otherwise required by the bylaws. The notice of a special meeting, however, must state the general nature of the business to be transacted.

 

  

LBC must give written notice of the place, day and hour of each annual and special shareholders’ meeting no fewer than 10 days nor more than 50 days before the meeting date to each shareholder. The notice of any special meeting of shareholders will state the purpose or purposes for which the meeting is called. The notice of any meeting at which amendments to or restatements of the articles of incorporation, merger or share exchange of LBC, or the disposition of corporate assets requiring shareholder approval are to be considered shall state such purpose, and will comply with all requirements of law.

 

Liability and Indemnification of Directors and Officers

   The Colony Bylaws allows Colony to indemnify any person, his or her heirs, executors, or administrators for reasonable expenses actually incurred in connection with any action, suit or proceeding, civil or criminal, to which he or she will be made a party by reason of the fact that he or she is or was a director, trustee, officer, employee, or agent of the corporation, or that he or she was serving, at the request of the corporation, trust or other organization or enterprise. No person will be indemnified or reimbursed if he or she is finally adjudged to have been guilty of or liable for gross negligence, willful misconduct or criminal acts in the    The LBC Articles provide that LBC will, to the fullest extent permitted by the GBCC, indemnify each director and officer of LBC from and against any and all of the expenses, liabilities, or other matters referred to in or covered by the GBCC, but such indemnification will not apply to (i) any appropriation, in violation of his or her duties, of any business opportunity of LBC, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) the types of liability set forth in Section 14-2-832 of the GBCC dealing with unlawful

 

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(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

  

performance of his or her duties. No person will be indemnified or reimbursed in any action, suit, or proceeding which has been in the subject of a compromise settlement, except with the approval of (i) a court of competent jurisdiction, (ii) the holders of record of a majority of the outstanding shares of capital stock of the corporation, or (iii) a majority of the members of the board of directors then holding office (excluding the votes of any directors who are parties to the same or substantially same action, suit or proceeding).

 

The Colony Bylaws allow for expenses incurred in defending any action to be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director, trustee, officer, employee or agent to repay such amount unless it will ultimately be determined that he or she is entitled to be indemnified by the corporation as provided in the Colony Bylaws.

 

The GBCC requires a corporation to indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he or she was a party because he or she was a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding.

  

distributions of corporate assets to shareholders, or (iv) any transaction from which the director derived an improper material tangible personal benefit.

 

The LBC Bylaws provide that LBC shall indemnify or obligate itself to indemnify an individual made a party to a proceeding because he or she is or was a director or officer of LBC (or was serving at the request of LBC as a director, officer or employee or agent of another corporation, partnership, joint venture, trust or other enterprise) for reasonable expenses, judgements, fines, penalties and amounts paid in settlement (including attorneys’ fees), incurred in connection with the proceeding if the individual acted in a manner he or she believed in good faith to be in or not opposed to the best interests of LBC and, in the case of any criminal proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director, officer, employee or agent did not meet the standard set forth in the LBC Bylaws. The indemnification provisions also permit LBC to pay reasonable expenses in advance of the final disposition of any proceeding if (a) he or she furnishes LBC written affirmation of his or her good faith belief that he or she has met the standard of conduct set forth in the LBC Bylaws, and (b) he or she furnishes LBC a written undertaking to repay any advances if it is ultimately

 

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(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

     

determined that he or she is not entitled to indemnification. A director, officer, employee or agent of LBC who is a party to a proceeding may apply for indemnification or advances for expenses to the court conducting the proceeding or another court of competent jurisdiction.

 

No other rights, in respect to indemnification or otherwise, may be provided or granted to a director, trustee, officer, employee, or agent pursuant to the indemnification provision of the LBC Bylaws for liability for (a) any appropriation, in violation of his or her duties, of any business opportunity of LBC, (b) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (c) the types of liability set forth in Section 14-2-832 of the GBCC dealing with unlawful distributions of corporate assets to shareholders, whether as dividends or in liquidation of LBC or otherwise, or (d) any transaction from which the director derived an improper material tangible personal benefit.

 

The LBC Bylaws provides for mandatory indemnification against reasonable expenses incurred to the extent that a director, officer, employee or agent of LBC has been successful, on the merits or otherwise, in defense of any proceeding to which he or she was a party, or in defense of any claim, issue, or matter therein, because he or she is or was a director, officer, employee or agent of LBC.

 

 

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Rights of Colony Shareholders
(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

Limitation of Director Liability

  

The GBCC provides that a corporation’s articles of incorporation may set forth a provision eliminating or limiting the liability of a director to the corporation or its shareholders for monetary damages for any action taken, or any failure to take any action, as a director, except liability: (i) for any appropriation, in violation of his or her duties, of any business opportunity of the corporation; (ii) for acts or omissions which involve intentional misconduct or a knowing violation of law; (iii) for unlawful distributions; or (iv) for any transaction from which the director received an improper personal benefit; provided, in each case, that no such provision shall eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision becomes effective.

 

Colony Articles do not provide for limitation of director liability.

  

The provisions of the GBCC are also applicable to LBC and its shareholders.

 

LBC Articles do not provide for limitation of director liability.

Dividends   

The GBCC prohibits a Georgia corporation from making any distributions to its shareholders if, after giving it effect, (1) the corporation would not be able to pay its debts as they become due in the usual course of business, or (2) the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving distribution.

 

The Colony Bylaws provide that dividends may be declared by the

   The provisions of the GBCC are also applicable to LBC and its shareholders.

 

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shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

   board of directors at any regular or special meeting and paid in cash or property only out of the unreserved and unrestricted earned surplus of the corporation or out of the unreserved and unrestricted net earnings of the current fiscal year. Dividends can be declared by the board of directors and paid in the shares of the corporation out of any treasury shares that have been reacquired out of the capital funds of the corporation, and paid in the authorized but unissued shares of the corporation out of any retained earnings of the corporation (provided that such shares shall be issued at not less than the par value thereof).   

Appraisal/Dissenters’ Rights

  

Under the GBCC, a shareholder is entitled to dissent from, and obtain the fair value in cash of his or her shares in connection with, certain corporate actions, including some mergers, share exchanges, sales or exchanges of all or substantially all of the corporation’s property other than in the usual and regular course of business and certain amendments to the corporation’s articles of incorporation.

 

A shareholder of a corporation is not entitled to dissent in connection with a merger under the GBCC if:

 

•  the corporation is a parent corporation merging into its 90% owned subsidiary;

 

•  each shareholder of the corporation whose shares were outstanding immediately prior to the merger will receive a like number of shares of the surviving corporation, with designations, preferences,

  

The provisions of the GBCC are also applicable to LBC and its shareholders.

 

LBC shareholders are entitled to dissenters’ rights.

 

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(which will be the rights of
shareholders of the combined
company
following the merger)

  

Rights of LBC Shareholders

  

limitations and relative rights identical to those previously held by each such shareholder; and

 

•  the number and kind of shares of the surviving corporation outstanding immediately following the merger, plus the number and kind of shares issuable as a result of the merger and by conversion of securities issued pursuant to the merger, will not exceed the total number and kind of shares of the corporation authorized by its articles of incorporation immediately prior to the merger.

 

Additionally, except in limited circumstances, dissenters’ rights are not available to holders of shares: (i) listed on a national securities exchange; or (ii) held of record by more than 2,000 shareholders.

  

 

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LEGAL MATTERS

The validity of Colony common stock to be issued in connection with the merger will be passed upon for Colony by Alston & Bird LLP (Atlanta, Georgia). Certain U.S. federal income tax consequences relating to the merger will also be passed upon for Colony and LBC by Alston & Bird LLP (Atlanta, Georgia) and James-Bates-Brannan-Groover-LLP (Macon, Georgia), respectively.

EXPERTS

The consolidated financial statements of Colony Bankcorp, Inc. and its subsidiary as of December 31, 2017 and 2016, and for each of the years in the three-year period ended December 31, 2017, and the effectiveness of internal control over financial reporting as of December 31, 2017, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, incorporated by reference herein, have been incorporated by reference herein in reliance upon the report of McNair, McLemore, Middlebrooks & Co., LLC, an independent registered public accounting firm, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

Colony has filed a registration statement on Form S-4 under the Securities Act of 1933 with the SEC with respect to Colony common stock to be issued to shareholders of LBC in the merger. This proxy statement/prospectus constitutes the prospectus of Colony filed as part of the registration statement. This proxy statement/prospectus does not contain all of the information set forth in the registration statement because certain parts of the registration statement are omitted in accordance with the rules and regulations of the SEC. The registration statement and its exhibits are available for inspection and copying as set forth below.

In addition, Colony (File No. 000-12436) files annual, quarterly and special reports, proxy statements and other business and financial information with the SEC. You may read and copy any materials that Colony files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Please call the SEC at (800) SEC-0330 for further information on the public reference room. In addition, Colony files reports and other business and financial information with the SEC electronically, and the SEC maintains a website that contains Colony’s SEC filings as well as reports, proxy and information statements, and other information issuers file electronically with the SEC at www.sec.gov. You will also be able to obtain these documents, free of charge, from Colony’s website at http://www.colonybank.com under the “Shareholder Information” link and then under the “SEC Filings” heading. The website addresses for the SEC and Colony are inactive textual references and except as specifically incorporated by reference into this proxy statement/prospectus, information on those websites is not part of this proxy statement/prospectus.

The SEC allows Colony to “incorporate by reference” information in this proxy statement/prospectus. This means that Colony can disclose important business and financial information to you by referring you to another document filed separately with the SEC. The information that Colony incorporates by reference is considered to be part of this proxy statement/prospectus, and later information that Colony files with the SEC will automatically update and supersede the information Colony included in this proxy statement/prospectus. This document incorporates by reference the documents that are listed below that Colony has previously filed with the SEC, except to the extent that any information contained in such filings is deemed “furnished” in connection with SEC rules.

 

   

Annual Report on Form 10-K for the year ended December 31, 2017, filed on March 15, 2018;

 

   

Definitive Proxy Statement on Schedule 14A for the 2018 Annual Meeting, filed on April 20, 2018;

 

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Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, filed on May 4, 2018, August 3, 2018 and November 2, 2018, respectively;

 

   

Current Reports on Form 8-K or Form 8-K/A, as applicable, filed on February 21, 2018, May 11, 2018, May 23, 2018, July 30, 2018, August 15, 2018, August 22, 2018, August 23, 2018, and December 18, 2018; and

 

   

The description of our common stock contained in our Registration Statement filed with the SEC pursuant to Section 12 of the Securities Exchange Act of 1934, or the Exchange Act, including any amendment or report filed for purposes of updating such description.

Colony also incorporates by reference any future filings they make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement/prospectus and the date of the LBC special meeting. Any statement contained in this proxy statement/prospectus or in a document incorporated or deemed to be incorporated by reference in this proxy statement/prospectus is deemed to be modified or superseded to the extent that a statement contained herein or in any subsequently filed document that also is, or is deemed to be, incorporated by reference herein modified or superseded such statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this proxy statement/prospectus.

Documents incorporated by reference are available from Colony without charge (except for exhibits to the documents unless the exhibits are specifically incorporated in the document by reference). You may obtain documents incorporated by reference in this document by requesting them in writing or by telephone from Colony at the following address:

Colony Bankcorp, Inc.

115 South Grant Street

Fitzgerald, Georgia 31750

Attention: Investor Relations

Telephone: (229) 426-6000

To obtain timely delivery, you must make a written or oral request for a copy of such information by March 14, 2019. You will not be charged for any of these documents that you request. If you request any incorporated documents from Colony, Colony will mail them to you by first class mail, or another equally prompt means, within one business day after receiving your request.

You should rely only on the information contained in this proxy statement/prospectus. Neither Colony nor LBC has authorized anyone to provide you with different information. Therefore, if anyone gives you different or additional information, you should not rely on it. The information contained in this proxy statement/prospectus is correct as of its date. It may not continue to be correct after this date. LBC has supplied all of the information about LBC and its subsidiaries contained in this proxy statement/prospectus and Colony has supplied all of the information contained in this proxy statement/prospectus about Colony and its subsidiaries. Each of us is relying on the correctness of the information supplied by the other.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this proxy statement/prospectus, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction.

 

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Table of Contents

Annex A

AGREEMENT AND PLAN OF MERGER

by and between

COLONY BANKCORP, INC.

and

LBC BANCSHARES, INC.

Dated as of December 17, 2018

 

A-1


Table of Contents
TABLE OF CONTENTS

 

ARTICLE I

 

THE MERGER

 

Section 1.01

   The Merger.      A-5  

Section 1.02

   Articles of Incorporation and Bylaws.      A-5  

Section 1.03

   Bank Merger.      A-6  

Section 1.04

   Effective Time; Closing.      A-6  

Section 1.05

   Additional Actions.      A-6  

Section 1.06

   Reservation of Right to Revise Structure.      A-7  
ARTICLE II

 

MERGER CONSIDERATION; EXCHANGE PROCEDURES

 

Section 2.01

   Merger Consideration.      A-7  

Section 2.02

   Election Procedures.      A-8  

Section 2.03

   LBC Stock-Based Awards.      A-10  

Section 2.04

   Rights as Shareholders; Stock Transfers.      A-11  

Section 2.05

   Fractional Shares.      A-11  

Section 2.06

   Plan of Reorganization.      A-11  

Section 2.07

   Exchange Procedures.      A-11  

Section 2.08

   Deposit and Delivery of Merger Consideration.      A-11  

Section 2.09

   Rights of Certificate Holders after the Effective Time.      A-12  

Section 2.10

   Anti-Dilution Provisions.      A-13  
ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF LBC

 

Section 3.01

   Organization and Standing.      A-13  

Section 3.02

   Capital Stock.      A-13  

Section 3.03

   Subsidiaries.      A-14  

Section 3.04

   Corporate Power; Minute Books.      A-15  

Section 3.05

   Corporate Authority.      A-15  

Section 3.06

   Regulatory Approvals; No Defaults.      A-15  

Section 3.07

   Financial Statements; Internal Controls.      A-16  

Section 3.08

   Regulatory Reports.      A-17  

Section 3.09

   Absence of Certain Changes or Events.      A-17  

Section 3.10

   Legal Proceedings.      A-17  

Section 3.11

   Compliance With Laws.      A-18  

Section 3.12

   LBC Material Contracts; Defaults.      A-18  

Section 3.13

   Agreements with Regulatory Agencies.      A-19  

Section 3.14

   Brokers; Fairness Opinion.      A-20  

Section 3.15

   Employee Benefit Plans.      A-20  

Section 3.16

   Labor Matters.      A-22  

Section 3.17

   Environmental Matters.      A-22  

Section 3.18

   Tax Matters.      A-23  

Section 3.19

   Investment Securities.      A-24  

Section 3.20

   Derivative Transactions.      A-25  

Section 3.21

   Regulatory Capitalization.      A-25  

 

A-ii


Table of Contents

Section 3.22

   Loans; Nonperforming and Classified Assets.      A-25  

Section 3.23

   Allowance for Loan and Lease Losses.      A-26  

Section 3.24

   Trust Business; Administration of Fiduciary Accounts.      A-26  

Section 3.25

   Investment Management and Related Activities.      A-26  

Section 3.26

   Repurchase Agreements.      A-27  

Section 3.27

   Deposit Insurance.      A-27  

Section 3.28

   Community Reinvestment Act, Anti-money Laundering and Customer Information Security.      A-27  

Section 3.29

   Transactions with Affiliates.      A-27  

Section 3.30

   Tangible Properties and Assets.      A-28  

Section 3.31

   Intellectual Property.      A-28  

Section 3.32

   Insurance.      A-29  

Section 3.33

   Antitakeover Provisions.      A-29  

Section 3.34

   LBC Information.      A-29  

Section 3.35

   Transaction Costs.