UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-12436

COLONY BANKCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)


Georgia			58-1492391
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

115 South Grant Street, Fitzgerald, Georgia 31750

(Address of principal executive offices) (Zip Code)

(229) 426-6000

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $1.00 per share	CBAN	The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 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.

Large Accelerate 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 the new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of ~~August 7, 2020,~~May 14, 2021, the registrant had 9,498,783 shares of common stock, $1.00 par value per share, issued and outstanding.

TABLE OF CONTENTS


			Page
PART I – Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheets –~~June 30~~March 31 , ~~2020~~202 1 (unaudited) and December 31, ~~2019~~20 20 (audited)	3

	Consolidated Statements of Income – For the Three ~~and S~~i x Months Ended ~~June 30~~Ma ~~, 2020~~rch 31 ,2 02 1 and ~~2019~~20 20 (unaudited)	4

	Consolidated Statements of Comprehensive Income – For the Three ~~and Six~~ Months Ended ~~June~~ 30March 31 , ~~2020~~202 1 and ~~2019~~20 20 (unaudited)	5

	Consolidated Statements of Changes in Shareholders’ Equity – For the Three ~~and Six~~ Months Ended JM ~~une 30~~arch ~~, 2020~~31, 202 1 and ~~2019~~20 20 (unaudited)	6

	Consolidated Statements of Cash Flows – For the ~~Six~~Three Months Ended ~~June 30~~March 31, 2021 ~~, 2020~~ and ~~2019~~2 020 (unaudited)	87

	Notes to Consolidated Financial Statements (unaudited)	119

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4437

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6557

Item 4.	Controls and Procedures	6557


PART II – Other Information

Item 1.	Legal Proceedings	6658

Item 1A.	Risk Factors	6658

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	6858

Item 3.	Defaults Upon Senior Securities	6858

Item 4.	Mine Safety Disclosures	6858

Item 5.	Other Information	6858

Item 6.	Exhibits	6859

Signatures			6960

COLONY BANKCORP, INC. AND SUBSIDIARIES

~~CONSOLIDATED BALANCE SHEETS~~

~~JUNE 30, 2020 AND DECEMBER 31, 2019~~

~~(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)~~

June 30, 2020 December 31, 2019
(Unaudited) (Audited)
ASSETS
Cash and due from banks $ 17,313 $ 15,570
Interest-bearing deposits in banks 173,733 88,522
Cash and cash equivalents 191,046 104,092
Investment securities available for sale, at fair value 373,610 347,332
Other investments, at cost 3,954 4,288
Loans held for sale 16,537 10,076
Loans 1,113,977 968,814
Allowance for loan losses (10,289) (6,863)
Loans, net 1,103,688 961,951
Premises and equipment 33,276 32,482
Other real estate 1,769 1,320
Goodwill 15,992 16,477
Other intangible assets 2,678 3,056
Bank-owned life insurance 21,963 21,629
Other assets 13,055 12,610
Total assets $ 1,777,568 $ 1,515,313
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing $ 328,850 $ 232,635
Interest-bearing 1,092,908 1,061,107
Total deposits 1,421,758 1,293,742
Federal Home Loan Bank advances 36,500 47,000
Paycheck Protection Program Liquidity Facility 134,500 —
Other borrowings 38,292 38,792
Other liabilities 7,924 5,273
Total liabilities 1,638,974 1,384,807
Stockholders' equity:
Preferred stock, 0 par value; 10,000,000 shares authorized, NaN issued or outstanding as of June 30, 2020 and December 31, 2019, respectively — —
Common stock, par value $1.00 per share; 20,000,000 shares authorized, 9,498,783 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively 9,499 9,499
Paid in capital 43,199 43,667
Retained earnings 78,895 76,978
Accumulated other comprehensive income, net of tax 7,001 362
Total stockholders' equity 138,594 130,506
Total liabilities and stockholders' equity $ 1,777,568 $ 1,515,313
Consolidated Balance Sheets


	March 31, 2021		December 31, 2020
(in thousands, except per share data)	(Unaudited)		(Audited)
ASSETS
Cash and due from banks	$	16,150	$	17,218
Federal funds sold	2,253		2,227
Interest-bearing deposits in banks	163,185		164,061
Cash and cash equivalents	181,588		183,506
Investment securities available for sale, at fair value	433,729		380,814
Other investments, at cost	2,703		3,296
Loans held for sale	28,429		52,386
Loans	1,062,775		1,059,503
Allowance for loan losses	(12,693)		(12,127)
Loans, net	1,050,082		1,047,376
Premises and equipment	32,790		32,057
Other real estate owned	518		1,006
Goodwill	15,992		15,992
Other intangible assets	2,096		2,271
Bank-owned life insurance	31,581		31,547

Other assets	19,538		13,723
Total assets	$	1,799,046	$	1,763,974

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing	$	384,830	$	326,999
Interest-bearing	1,141,054		1,118,028
Total deposits	1,525,884		1,445,027

Federal Home Loan Bank advances	22,500		22,500
Paycheck Protection Program Liquidity Facility	60,602		106,789
Other borrowings	37,542		37,792
Other liabilities	9,031		7,378
Total liabilities	1,655,559		1,619,486

Stockholders' equity:
Preferred stock, 0 par value; 10,000,000 shares authorized, NaN issued or outstanding as of March 31, 2021 and December 31, 2020, respectively	0		0
Common stock, par value $1.00 per share; 20,000,000 shares authorized, 9,498,783 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	9,499		9,499
Paid in capital	43,224		43,215
Retained earnings	88,939		84,993
Accumulated other comprehensive income, net of tax	1,825		6,781
Total stockholders' equity	143,487		144,488
Total liabilities and stockholders' equity	$	1,799,046	$	1,763,974

See accompanying notes to consolidated financial statements (unaudited).

COLONY BANKCORP, INC. AND SUBSIDIARIES

~~CONSOLIDATED STATEMENTS OF INCOME~~

~~THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~

~~(UNAUDITED)~~

~~(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)~~

Three Months Ended Six Months Ended
June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
Interest Income
Loans, including fees $ 13,699 $ 12,313 $ 26,989 $ 22,783
Investment securities 1,794 2,416 3,788 4,624
Deposits with other banks and short term investments 48 369 332 704
Total interest income 15,541 15,098 31,109 28,111
Interest expense
Deposits 1,403 2,632 3,621 4,754
Federal Home Loan Bank Advances 211 246 468 506
Paycheck Protection Program Liquidity Facility 87 — 87 —
Other borrowings 299 395 688 669
Total interest expense 2,000 3,273 4,864 5,929
Net interest income 13,541 11,825 26,245 22,182
Provision for loan losses 2,200 179 4,156 310
Net interest income after provision for loan losses 11,341 11,646 22,089 21,872
Noninterest income
Service charges on deposits 886 1,070 2,190 2,034
Other service charges, commissions and fees 1,522 1,110 2,785 2,010
Mortgage fee income 1,827 544 3,089 687
Gain on sale of SBA loans 46 — 256 —
Gain on sale of securities — 65 293 65
Other 562 1,211 791 1,538
Total noninterest income 4,843 4,000 9,404 6,334
Noninterest Expenses
Salaries and employee benefits 7,729 6,292 15,227 11,663
Occupancy and equipment 1,316 1,144 2,634 2,169
Acquisition related expenses 220 1,928 507 1,961
Other 4,110 3,650 8,385 6,247
Total noninterest expense 13,375 13,014 26,753 22,040
Income before income taxes 2,809 2,632 4,740 6,166
Income taxes 595 531 923 1,230
Net income $ 2,214 $ 2,101 $ 3,817 $ 4,936
Net income per share of common stock
Basic $ 0.23 $ 0.23 $ 0.40 $ 0.56
Diluted $ 0.23 $ 0.23 $ 0.40 $ 0.56
Cash dividends paid per share of common stock $ 0.10 $ 0.075 $ 0.20 $ 0.15
Weighted average basic shares outstanding 9,498,783 9,089,461 9,498,783 8,764,909
Weighted average diluted shares outstanding 9,498,783 9,089,461 9,498,783 8,764,909
Consolidated Statements of Income (unaudited)


	Three Months Ended
(dollars in thousands, except per share data)	March 31, 2021		March 31, 2020
Interest income
Loans, including fees	$	13,573	$	13,290
Investment securities	1,750		1,994
Federal funds sold, deposits with other banks and short term investments	53		284
Total interest income	15,376		15,568

Interest expense
Deposits	654		2,218
Federal Home Loan Bank Advances	114		257
Paycheck Protection Program Liquidity Facility	68		0
Other borrowings	257		389
Total interest expense	1,093		2,864
Net interest income	14,283		12,704
Provision for loan losses	500		1,956
Net interest income after provision for loan losses	13,783		10,748

Noninterest income
Service charges on deposits	1,222		1,499
Mortgage fee income	3,995		1,262
Gain on sale of SBA loans	1,471		210
(Loss) gain on sale of securities	(4)		293
Interchange fees	1,530		1,033
BOLI Income	208		151

Other	154		78
Total noninterest income	8,576		4,526

Noninterest expense
Salaries and employee benefits	9,955		7,498
Occupancy and equipment	1,326		1,318
Acquisition related expenses	176		287
Information technology expenses	1,592		1,316

Professional fees	486		347
Advertising and public relations	580		634
Communications	218		191

FHLB prepayment penalty	0		276
Other	1,449		1,476
Total noninterest expense	15,782		13,343
Income before income taxes	6,577		1,931
Income taxes	1,658		328
Net income	$	4,919	$	1,603
Earnings per common share:
Basic	$	0.52	$	0.17
Diluted	0.52		0.17
Dividends declared per share	0.10		0.10
Weighted average common shares outstanding:
Basic	9,498,783		9,498,783
Diluted	9,498,783		9,498,783

See accompanying notes to consolidated financial statements (unaudited).

COLONY BANKCORP, INC. AND SUBSIDIARIES

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~Consolidated Statements of Comprehensive Income (unaudited)

~~THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~

~~(UNAUDITED)~~

~~(DOLLARS IN THOUSANDS)~~


		Three Months Ended						Six Months Ended							Three Months Ended
		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
(in thousands)										(in thousands)	March 31, 2021		March 31, 2020
Net income	Net income	$	2,214	$	2,101	$	3,817	$	4,936	Net income	$	4,919	$	1,603
Other comprehensive income:	Other comprehensive income:									Other comprehensive income:
Unrealized gains on securities arising during the period		2,195		6,720		8,697		10,724
Unrealized (losses) gains on securities arising during the period										Unrealized (losses) gains on securities arising during the period	(6,701)		6,501
Tax effect	Tax effect	(461)		(1,411)		(1,827)		(2,252)		Tax effect	1,742		(1,365)
Realized (gains) on sale of available for sale securities		—		(65)		(293)		(65)
Realized losses (gains) on sale of available for sale securities										Realized losses (gains) on sale of available for sale securities	4		(293)
Tax effect	Tax effect	—		14		62		14		Tax effect	(1)		62
Change in unrealized gains on securities available for sale, net of reclassification adjustment and tax effects		1,734		5,258		6,639		8,421
Comprehensive income		$	3,948	$	7,359	$	10,456	$	13,357
Change in unrealized (losses) gains on securities available for sale, net of reclassification adjustment and tax effects										Change in unrealized (losses) gains on securities available for sale, net of reclassification adjustment and tax effects	(4,956)		4,905
Comprehensive (loss) income										Comprehensive (loss) income	$	(37)	$	6,508

See accompanying notes to consolidated financial statements (unaudited).

COLONY BANKCORP, INC. AND SUBSIDIARIES

~~CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY~~Consolidated Statements of Changes in Shareholders' Equity (unaudited)

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~

~~(UNAUDITED)~~

~~(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)~~


(in thousands, except per share data)														(in thousands, except per share data)	Common Stock
Three Months Ended														Three Months Ended	Shares	Amount		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance, December 31, 2020														Balance, December 31, 2020	9,499	$	9,499	$	43,215	$	84,993	$	6,781	$	144,488
Change in net unrealized (losses) gains on securities available for sale, net of reclassification adjustment and tax effects														Change in net unrealized (losses) gains on securities available for sale, net of reclassification adjustment and tax effects	—	—		—		—		(4,956)		(4,956)
Dividends on common shares ($0.1025 per share)														Dividends on common shares ($0.1025 per share)	—	—		—		(973)		—		(973)
		Common Stock
Three Months Ended		Shares		Amount		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance, March 31, 2020		$	9,499	$	9,499	$	43,675	$	77,631	$	5,267	$	136,072
Stock-based compensation expense														Stock-based compensation expense	—	—		9		—		—		9
Net income														Net income		—		—		4,919		—		4,919
Balance, March 31, 2021														Balance, March 31, 2021	9,499	$	9,499	$	43,224	$	88,939	$	1,825	$	143,487

Balance, December 31, 2019														Balance, December 31, 2019	9,499	$	9,499	$	43,667	$	76,978	$	362	$	130,506
Change in net unrealized gains on securities available for sale, net of reclassification adjustment and tax effects	Change in net unrealized gains on securities available for sale, net of reclassification adjustment and tax effects	—		—		—		—		1,734		1,734		Change in net unrealized gains on securities available for sale, net of reclassification adjustment and tax effects	—	—		—		—		4,905		4,905
Dividends on common shares ($0.10 per share)	Dividends on common shares ($0.10 per share)	—		—		—		(950)		—		(950)		Dividends on common shares ($0.10 per share)	—	—		—		(950)		—		(950)
Goodwill adjustment		—		—		(485)		—		—		(485)

Stock-based compensation expense	Stock-based compensation expense	—		—		9		—		—		9		Stock-based compensation expense	—	—		8		—		—		8
Net income	Net income			—		—		2,214		—		2,214		Net income	—	—		—		1,603		—		1,603
Balance, June 30, 2020		$	9,499	$	9,499	$	43,199	$	78,895	$	7,001	$	138,594

Balance, March 31, 2019		$	8,445	$	8,445	$	25,987	$	71,661	$	(5,027)	$	101,066
Change in net unrealized gains on securities available for sale, net of reclassification adjustment and tax effects		—		—		—		—		5,258		5,258
Dividends on common shares ($0.075 per share)		—		—		—		(633)		—		(633)
Issuance of common stock		1,054		1,054		17,655		—		—		18,709
Stock-based compensation expense		—		—		8		—		—		8
Net income		—		—		—		2,101		—		2,101
Balance, June 30, 2019		$	9,499	$	9,499	$	43,650	$	73,129	$	231	$	126,509
Balance, March 31, 2020														Balance, March 31, 2020	9,499	$	9,499	$	43,675	$	77,631	$	5,267	$	136,072

See accompanying notes to consolidated financial statements (unaudited).

COLONY BANKCORP, INC. AND SUBSIDIARIES

~~CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY~~Consolidated Statements of Cash Flows (unaudited)

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~

~~(UNAUDITED)~~

~~(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)~~


	Three Months Ended
(in thousands)	March 31, 2021		March 31, 2020
Operating Activities
Net income	$	4,919	$	1,603
Adjustments reconciling net income to net cash provided by operating activities:
Provision for loan losses	500		1,956
Depreciation, amortization, and accretion	1,762		140
Share-based compensation expense	9		8
Net change in servicing asset	(290)		40
(Loss) Gain on sale of securities	4		(293)
Gain on sale of SBA loans	(1,471)		(210)
Loss on sale of other real estate owned	(25)		0
Writedown on other real estate owned	16		125
Loss on sale of premises & equipment	0		18

Originations of loans held for sale	(105,919)		(30,093)
Proceeds from sales of loans held for sale	131,347		29,357
Change in bank-owned life insurance	(34)		(156)
Deferred tax benefit	(589)		(292)
Change in other assets	(3,619)		525
Change in other liabilities	1,653		587
Net cash provided by operating activities	28,263		3,315
Investing Activities
Purchases of investment securities available for sale	(86,465)		(14,454)
Proceeds from maturities, calls, and paydowns of investment securities available for sale	24,819		20,022
Proceeds from sale of investment securities available for sale	1,643		15,314

Net loans	(3,525)		(20,932)
Purchase of premises and equipment	(1,300)		(649)
Proceeds from sale of other real estate owned	607		813

Redemption of Federal Home Loan Bank Stock	593		397
Proceeds from sale of premises and equipment	0		25

Net cash (used in) investing activities	(63,628)		536
Financing Activities
Change in noninterest-bearing customer deposits	57,831		2,634
Change in interest-bearing customer deposits	23,026		(3,300)
Dividends paid for common stock	(973)		(950)

Payment on Paycheck Protection Program Liquidity Fund	(46,187)		0
Payments on Federal Home Loan Bank Advances	0		(24,500)
Proceeds from Federal Home Loan Bank Advances	0		14,000
Payments on Other borrowings	(250)		0

Net cash provided by (used in) financing activities	33,447		(12,116)
Net decrease in cash and cash equivalents	(1,918)		(8,265)
Cash and cash equivalents at beginning of period	183,506		104,092
Cash and cash equivalents at end of period	$	181,588	$	95,827

Common Stock
Six Months Ended Shares Amount Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Balance, December 31, 2019 9,499 $ 9,499 $ 43,667 $ 76,978 $ 362 $ 130,506
Change in net unrealized gains on securities available for sale, net of reclassification adjustment and tax effects — — — — 6,639 6,639
Dividends on common shares ($0.20 per share) — — — (1,900) — (1,900)
Goodwill adjustment — — (485) — — (485)
Stock-based compensation expense — — 17 — — 17
Net income — — — 3,817 — 3,817
Balance, June 30, 2020 9,499 $ 9,499 $ 43,199 $ 78,895 $ 7,001 $ 138,594
Balance, December 31, 2018 $ 8,445 $ 8,445 $ 25,978 $ 69,459 $ (8,190) $ 95,692
Change in net unrealized gains on securities available for sale, net of reclassification adjustment and tax effect — — — — 8,421 8,421
Dividends on common shares ($0.15 per share) — — — (1,266) — (1,266)
Issuance of common stock 1,054 1,054 17,655 — — 18,709
Stock-based compensation expense — — 17 — — 17
Net income — — — 4,936 — 4,936
Balance, June 30, 2019 9,499 $ 9,499 $ 43,650 $ 73,129 $ 231 $ 126,509

~~See accompanying notes to consolidated financial statements (unaudited).~~

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

~~SIX~~THREE MONTHS ENDED ~~JUNE 30,~~MARCH 31, 2021 AND 2020 ~~AND 2019~~

(UNAUDITED)

(DOLLARS IN THOUSANDS)

Six Months Ended
June 30, 2020 June 30, 2019
Operating Activities
Net income $ 3,817 $ 4,936
Adjustments reconciling net income to net cash provided by operating activities:
Provision for loan losses 4,156 310
Depreciation, amortization, and accretion 2,042 1,386
Share-based compensation expense 17 17
Gain on sale of securities (293) (65)
Gain on sale of SBA loans (256) —
Loss on sale of other real estate (98) (833)
Loss on sale of premises & equipment 104 149
Originations of loans held for sale (83,007) (13,404)
Proceeds from sales of loans held for sale 76,802 9,591
Change in bank-owned life insurance (334) 219
Change in other assets (2,210) 1,031
Change in other liabilities 2,651 616
Net cash provided by operating activities 3,391 3,953
Investing Activities
Purchases of investment securities available for sale (79,988) (82,057)
Proceeds from maturities, calls, and paydowns of investment securities available for sale 46,302 27,373
Proceeds from sale of investment securities available for sale 15,314 56,821
Proceeds from sale of investment securities held to maturity — 1,766
Net loans (147,129) (23,474)
Purchase of premises and equipment (2,011) (2,576)
Proceeds from sale of other real estate 1,125 2,143
Redemption of Federal Home Loan Bank Stock 334 195
Proceeds from sale of premises and equipment — 37
Net cash and cash equivalents paid in acquisition — (467)
Net cash (used in) investing activities (166,053) (20,239)
Financing Activities
Increase in noninterest-bearing customer deposits 96,215 8,017
Increase in interest-bearing customer deposits 31,801 14,728
Dividends paid for common stock (1,900) (1,266)
Issuance of Paycheck Protection Program Liquidity Fund 134,500 —
Payments on Federal Home Loan Bank Advances (24,500) (5,000)
Proceeds from Federal Home Loan Bank Advances 14,000 —
Payments on Other borrowings (500) (250)
Proceeds from Other borrowings — 15,313
Net cash provided by financing activities 249,616 31,542
Net increase in cash and cash equivalents 86,954 15,256
Cash and cash equivalents at beginning of period 104,092 60,156
Cash and cash equivalents at end of period $ 191,046 $ 75,412

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~

~~(UNAUDITED)~~

~~(DOLLARS IN THOUSANDS)~~


		Six Months Ended							Three Months Ended
		June 30, 2020		June 30, 2019			March 31, 2021		March 31, 2020
Supplemental Disclosure of Cash Flow Information	Supplemental Disclosure of Cash Flow Information					Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	Cash paid during the period for interest	$	5,179	$	5,459	Cash paid during the period for interest	$	994	$	2,867
Cash paid during the period for income taxes		—		—

Goodwill adjustment		$	485	—

Acquisition of real estate through foreclosure	Acquisition of real estate through foreclosure	1,476		245		Acquisition of real estate through foreclosure	110		465

See accompanying notes to consolidated financial statements (unaudited).

108

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(1) Summary of Significant Accounting Policies

Presentation

Colony Bankcorp, Inc. (the “Company”) is a bank holding company located in Fitzgerald, Georgia. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Colony Bank, Fitzgerald, Georgia (the “Bank”). The “Company” or “our,” as used herein, includes Colony ~~Bank.~~Bank, except where the content requires otherwise.

In July 2019, a new subsidiary of the Company was incorporated under the name Colony Risk Management, Inc. Colony Risk Management, Inc. is a subsidiary of the Company and is located in Las Vegas, Nevada. It is a captive insurance subsidiary which insures various liability and property damage policies for the Company and its related subsidiaries. Colony Risk Management is regulated by the State of Nevada Division of Insurance.

All adjustments consisting of normal recurring accruals which are, in the opinion of management, necessary for fair presentation of the interim consolidated financial statements, have been included and fairly and accurately present the financial position, results of operations and cash flows of the Company. All significant intercompany accounts have been eliminated in consolidation.

The accounting and reporting policies of the Company conform to generally accepted accounting principles and practices utilized in the commercial banking industry for interim financial information and Regulation S-X. Accordingly, the accompanying unaudited interim consolidated financial statements do not include all of the information or notes required for complete financial statements.

The results of operations for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 are not necessarily indicative of the results which may be expected for the year ending December 31, ~~2020.~~2021. These statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (“~~2019~~2020 10-K”).

Nature of Operations

The Bank provides a full range of retail, commercial and mortgage banking services for consumers and small- to medium-size businesses located primarily in central, south and coastal Georgia. The Bank is headquartered in Fitzgerald, Georgia with banking and mortgage offices in Albany, Ashburn, Athens, Broxton, Centerville, Columbus, Cordele, Douglas, Eastman, Fitzgerald, LaGrange, Leesburg, Macon, Moultrie, Quitman, Rochelle, Savannah, Soperton, Sylvester, Statesboro, ~~Thomaston,~~ Tifton, Valdosta and Warner Robins. Lending and investing activities are funded primarily by deposits gathered through its retail banking office network.

Use of Estimates

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and fair value of assets acquired and liabilities assumed in a business combination, including goodwill impairment.

Reclassifications

In certain instances, amounts reported in prior years’ consolidated financial statements have been reclassified to conform to statement presentations selected for ~~2020.~~2021. Such reclassifications have not materially affected previously reported stockholders’ equity or net income.

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COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Concentrations of Credit Risk

Concentrations of credit risk can exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries, or certain geographic regions. The Company has a concentration in real estate loans as well as a geographic concentration that could pose an adverse credit risk. At ~~June 30, 2020,~~March 31, 2021, approximately ~~86%~~78% of the Company’s loan portfolio was concentrated in loans secured by real estate. A substantial portion of borrowers’ ability to honor their contractual obligations is dependent upon the viability of the real estate economic sector. Management continues to monitor these concentrations and has considered these concentrations in its allowance for loan loss analysis.

The success of the Company is dependent, to a certain extent, upon the economic conditions in the geographic markets it serves. Adverse changes in the economic conditions in these geographic markets would likely have a material adverse effect on the Company’s results of operations and financial condition. The operating results of the Company depend primarily on its net interest income. Accordingly, operations are subject to risks and uncertainties surrounding the exposure to changes in the interest rate environment.

At times, the Company may have cash and cash equivalents at financial institutions in excess of federal deposit insurance limits. The Company places its cash and cash equivalents with high credit quality financial institutions whose credit ratings are monitored by management to minimize credit risk.

Changes in Accounting Principles and Effects of New Accounting Pronouncements

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). This ASU sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supported forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. On October 16, 2019, ~~FASB~~the Financial Accounting Standards Board ("FASB") voted to extend the delay of the effective date of this ASU for smaller reporting companies, such as the Company, until fiscal years beginning after December 15, 2022. The Company is currently assessing the impact of the adoption of this ASU on its consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This update removes several exceptions related to intraperiod tax allocation when there is a loss from continuing operations and income from other items, foreign subsidiaries becoming equity method investments and vice versa, and calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The guidance also amends requirements related to franchise tax that is partially based on income, a step up in the tax basis of goodwill, allocation of consolidated tax expense to a legal entity not subject to tax in its separate financial statements, the effects of enacted changes in tax laws and other minor codification improvements regarding employee stock ownership plans and investments in qualified affordable housing projects. For public entities, this guidance is effective for fiscal years beginning after December 15, 2020. The ~~Company does~~adoption of this standard did not ~~expect the new guidance to~~ have a material impact on the consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, ~~"Investments—~~Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force)". This update clarifies whether an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative and how to account for certain forward contracts and purchased options to purchase securities. For public entities, this guidance is effective for fiscal years beginning after December 15, 2020. The ~~Company does~~adoption of this standard did not ~~expect the new guidance to~~ have a material impact on the consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, ~~"Reference~~Reference Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial ~~Reporting"~~Reporting ("ASU 2020-04"). ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects ~~of )~~of) reference rate reform on financial reporting. The amendments are effective for the Company as of March 12, 2020 through December 31, 2022. The ~~Company does not believe~~adoption of this standard ~~will~~did not have a material impact on ~~its~~the consolidated financial statements.

1210

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Operating, Accounting and Reporting Considerations Related to COVID-19

The COVID-19 pandemic has negatively impacted the global economy, including the Company’s primary metropolitan markets. In response to this crisis, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by Congress and signed into law on March 27, 2020. The CARES Act provides an estimated $2.2 trillion to fight the COVID-19 pandemic and stimulate the economy by supporting individuals and businesses through loans, grants, tax changes, and other types of relief. Some of the provisions applicable to the Company include, but are not limited to:

•Accounting for Loan Modifications - The CARES Act provides that financial institutions may elect to suspend (1) the requirements under GAAP for certain loan modifications that would otherwise by categorized as a troubled debt restructure (“TDR”) and (2) any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes.

•Paycheck Protection Program - The CARES Act established the Paycheck Protection Program ~~“PPP”~~(“PPP”), an expansion of the Small Business Administration’s 7(a) loan program and the Economic Injury Disaster Loan Program (“EIDL”), administered directly by the SBA.

Also in response to the COVID-19 pandemic, the Board of Governors of the Federal Reserve System (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”), the National Credit Union Administration (“NCUA”), the Office of the Comptroller of the Currency (“OCC”), and the Consumer Financial Protection Bureau (“CFPB”), in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to:

•Accounting for Loan Modifications - Loan modifications that do not meet the conditions of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. The agencies confirmed with FASB staff that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., three months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment, as long as such modifications are (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (a) 60 days after the date of termination of the national emergency declaration or (b) December 31, 2020.

•Past Due Reporting - With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due reporting during the period of the deferral.

•Nonaccrual Status and Charge-offs - During short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or as classified.

As such, beginning in late March 2020, the Company provided relief programs consisting primarily of 90-day payment deferral relief of principal and interest to borrowers negatively impacted by COVID-19 and has accounted for these loan modifications in accordance with ASC 310-40. In addition, the Company also provided principal only payment deferral relief to borrowers of which interest income has been recognized during the deferment period on these interest-only loans.

1311

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(2) ~~Business Acquisitions~~

~~Acquisition of LBC Bancshares, Inc.~~

On May 1, 2019, the Company completed its acquisition of LBC Bancshares, Inc. (“LBC”), a bank holding company headquartered in LaGrange, Georgia. Upon consummation of the acquisition, LBC was merged with and into the Company, with Colony as the surviving entity in the merger. At that time, LBC’s wholly owned bank subsidiary, Calumet Bank, was also merged with and into the Bank. The acquisition expanded the Company’s market presence, as Calumet Bank had 2 full-service banking locations, 1 each in LaGrange, Georgia and Columbus, Georgia, as well as a loan production office in Atlanta, Georgia. Under the terms of the Agreement and Plan of Merger, each LBC shareholder had the option to receive either $23.50 in cash or 1.3239 shares of the Company’s common stock in exchange for each share of LBC common stock, subject to customary proration and allocation procedures such that 55% of LBC shares received the stock consideration and 45% received the cash consideration, with at least 50% of the merger consideration paid in the Company's common stock. As a result, the Company issued 1,053,875 common shares at a fair value of $18.2 million and paid $15.3 million in cash to the former shareholders of LBC as merger consideration.

The merger was effected by the issuance of shares of the Company’s common stock along with cash consideration to shareholders to LBC. The assets and liabilities of LBC as of the effective date of the merger were recorded at their respective estimated fair values and combined with those of the Company. The excess of the purchase price over the net estimated fair values of the acquired assets and liabilities was allocated to identifiable intangible assets with the remaining excess allocated to goodwill. Goodwill of $15.2 million was recorded as part of the LBC acquisition and is not expected to be deductible for income tax purposes.

The following table presents the assets acquired and liabilities assumed of LBC as of May 1, 2019, and their fair value estimates. The fair value estimates were subject to refinement for up to one year after the closing date of the acquisition for new information obtained about facts and circumstances that existed at the acquisition date. The Company continues its evaluation of the facts and circumstances available as of May 1, 2019, to assign fair values to assets acquired and liabilities assumed, which could result in further adjustments to the fair values presented below.

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

(dollars in thousands, except market price) Initial Fair Value Adjustments
Subsequent Adjustments ⁽¹⁾
Final Balance
Purchase price consideration:
Shares of CBAN common stock issued to LBC shareholders as of May 1, 2019 1,053,875 1,053,875 1,053,875
Market price of CBAN common stock on May 1, 2019 $ 17.75 $ (0.46) $ 17.29
Estimated fair value of CBAN common stock issued 18,706 (485) 18,221
Cash consideration paid 15,315 — 15,315
Total consideration $ 34,021 $ (485) $ 33,536
Assets acquired at fair value:
Cash and cash equivalents $ 15,678 $ — $ 15,678
Investments securities available for sale 49,172 — 49,172
Investments securities held to maturity 1,766 — 1,766
Restricted investments 479 — 479
Loans 130,568 — 130,568
Premises and equipment 3,009 — 3,009
Core deposit intangible 3,100 — 3,100
Other real estate 243 — 243
Prepaid and other assets 6,143 — 6,143
Total fair value of assets acquired $ 210,158 $ — $ 210,158
Liabilities assumed at fair value:
Deposits $ (189,896) $ — $ (189,896)
FHLB advances (1,000) — (1,000)
Payables and other liabilities (975) — (975)
Total fair value of liabilities assumed $ (191,871) $ — $ (191,871)
Net assets acquired at fair value: $ 18,287 $ — $ 18,287
Amount of goodwill resulting from acquisition $ 15,734 $ (485) $ 15,249

⁽¹⁾ ~~Subsequent adjustments were done within the one year period allowed after the acquisition.~~

In the acquisition, the Company purchased $130.6 million of loans at fair value, net of $2.2 million, or 1.63%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $176,000 that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of the acquisition date for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.


~~(dollars in thousands)~~
~~Contractually required principal and interest~~	$	~~695~~
~~Non-accretable difference~~	~~(519)~~
~~Cash Flows expected to be collected~~	~~176~~
~~Accretable yield~~	—
~~Total purchased credit-impaired loans acquired~~	$	~~176~~

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~The following table presents the acquired loan data for the LBC acquisition.~~

(dollars in thousands) Fair Value of
Acquired Loans at
Acquisition Date Gross Contractual
Amounts Receivable
at Acquisition Date Estimate at
Acquisition Date of
Contractual Cash
Flows Not Expected
to be Collected
Acquired receivables subject to ASC 310-30 $ 176 $ 695 $ 519
Acquired receivables not subject to ASC 310-30 130,392 132,381 —

~~Acquisition of PFB Mortgage from Planters First Bank~~

On May 1, 2019, the Bank completed its acquisition of PFB Mortgage, the secondary market mortgage business of Planters First Bank for a total cash consideration of $833,000.The assets acquired included premises and equipment as well as all pipeline loans. The assets acquired were recorded at their respective estimated fair values as of the effective date of the transaction. The excess of the purchase price over fair value of net assets acquired was allocated to goodwill.

The following table presents the assets acquired as of May 1, 2019, and their fair value estimates. The fair value estimates were subject to refinement for up to one year after the closing date of the acquisition for new information obtained about facts and circumstances that existed at the acquisition date. The Company continues its evaluation of the facts and circumstances available as of May 1, 2019, to assign fair values to assets acquired and liabilities assumed, which could result in further adjustments to the fair values presented below.


~~(dollars in thousands)~~
~~Purchase price consideration:~~
~~Cash consideration paid~~	$	~~833~~
~~Total consideration~~	$	~~833~~

~~Assets acquired at fair value:~~
~~Premises and equipment~~	$	78
~~Premium on loan commitments~~	~~209~~
~~Other assets~~	5
~~Total fair value of assets acquired~~	$	~~292~~

~~Liabilities assumed at fair value:~~
~~Total fair value of liabilities assumed~~	$	—

~~Net assets acquired at fair value:~~	$	~~292~~

~~Amount of goodwill resulting from acquisition~~	$	~~541~~

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~(3)~~ Investment Securities

The amortized cost and estimated fair value of securities available for sale along with gross unrealized gains and losses are summarized as follows:


(dollars in thousands)
March 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available for Sale:
U.S. treasury securities	$	245	$	0	$	0	$	245
U.S. agency	9,863		11		(70)		9,804
Mutual fund	3,998		0		0		3,998
State, county & municipal securities	73,041		356		(1,073)		72,324
Corporate debt securities	5,250		1		(22)		5,229
Mortgage-backed securities	338,990		5,514		(2,375)		342,129
	$	431,387	$	5,882	$	(3,540)	$	433,729

December 31, 2020
Securities Available for Sale:
U.S. treasury securities	$	245	$	0	$	0	$	245
U.S. agency	1,000		4		0		1,004
State, county & municipal securities	61,298		1,155		(65)		62,388
Corporate debt securities	4,250		1		(1)		4,250
Mortgage-backed securities	305,438		7,837		(348)		312,927
	$	372,231	$	8,997	$	(414)	$	380,814

(dollars in thousands)
June 30, 2020 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value
Securities Available for Sale:
U.S. treasury securities $ 245 $ — $ — $ 245
State, county & municipal securities 29,293 459 (52) 29,700
Corporate debt securities 3,002 4 — 3,006
Mortgage-backed securities 332,208 9,085 (634) 340,659
$ 364,748 $ 9,548 $ (686) $ 373,610
December 31, 2019
Securities Available for Sale:
State, county & municipal securities $ 5,133 $ 36 $ (54) $ 5,115
Corporate debt securities 2,811 11 (16) 2,806
Mortgage-backed securities 338,930 2,669 (2,188) 339,411
$ 346,874 $ 2,716 $ (2,258) $ 347,332

The amortized cost and fair value of investment securities as of ~~June 30, 2020,~~March 31, 2021, by contractual maturity, are shown hereafter. Expected maturities may differ from contractual maturities for certain investments because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. This is often the case with mortgage-backed securities, which are disclosed separately in the table below.

Securities Available for Sale
(dollars in thousands) Amortized Cost Fair Value
Due in one year or less $ 894 $ 897
Due after one year through five years 3,956 3,989
Due after five years through ten years 4,346 4,421
Due after ten years 23,344 23,644
$ 32,540 $ 32,951
Mortgage-backed securities 332,208 340,659
$ 364,748 $ 373,610

Proceeds from the sale of investment securities totaled $15.3 million and $56.8 million for the six months ended June 30, 2020 and 2019, respectively. The sale of investment securities for the six months ended June 30, 2020 and 2019 resulted in gross realized gains of $355,000 and $117,000 and losses of $62,000 and $52,000, respectively.

~~Proceeds from the sale of investment securities held to maturity totaled $1.8 million for the first six months of 2019, and was sold at par.~~

Investment securities having a carrying value approximating $109.3 million and $122.3 million were pledged to secure public deposits and for other purposes as of June 30, 2020 and December 31, 2019, respectively.


	Securities Available for Sale
(dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	6,243	$	6,244
Due after one year through five years	1,910		1,948
Due after five years through ten years	33,362		33,152
Due after ten years	50,882		50,256
	$	92,397	$	91,600

Mortgage-backed securities	338,990		342,129
	$	431,387	$	433,729

1712

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Proceeds from the sale of investment securities totaled $1.6 million and $15.3 million for the three months ended March 31, 2021 and 2020, respectively. The sale of investment securities for the three months ended March 31, 2021 and 2020 resulted in gross realized gains of $1,000 and $314,000 and losses of $5,000 and $215,000, respectively.

Investment securities having a carrying value approximating $117.7 million and $126.5 million were pledged to secure public deposits and for other purposes as of March 31, 2021 and December 31, 2020, respectively.

Information pertaining to securities with gross unrealized losses at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

Less Than 12 Months 12 Months or Greater Total
(dollars in thousands) Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses
June 30, 2020
State, county & municipal securities $ 7,840 $ (52) $ — $ — $ 7,840 $ (52)
Mortgage-backed securities 17,262 (116) 5,748 (518) 23,010 (634)
$ 25,102 $ (168) $ 5,748 $ (518) $ 30,850 $ (686)
December 31, 2019
State, county & municipal securities $ 3,257 $ (54) $ — $ — $ 3,257 $ (54)
Corporate debt securities — — 784 (16) 784 (16)
Mortgage-backed securities 60,860 (277) 119,110 (1,911) 179,970 (2,188)
$ 64,117 $ (331) $ 119,894 $ (1,927) $ 184,011 $ (2,258)


	Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2021
U.S. agency	$	8,662	$	(70)	$	0	$	0	$	8,662	$	(70)
State, county & municipal securities	47,942		(1,073)		0		0		47,942		(1,073)
Corporate debt securities	1,728		(22)		0		0		1,728		(22)
Mortgage-backed securities	120,777		(2,159)		4,005		(216)		124,782		(2,375)
	$	170,447	$	(3,254)	$	4,005	$	(216)	$	174,452	$	(3,470)

December 31, 2020
State, county & municipal securities	$	8,282	$	(65)	$	0	$	0	$	8,282	$	(65)
Corporate debt securities	999		(1)		0		0		999		(1)
Mortgage-backed securities	28,835		(77)		3,949		(271)		32,784		(348)
	$	38,116	$	(143)	$	3,949	$	(271)	$	42,065	$	(414)

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At ~~June 30, 2020, 23~~March 31, 2021, 96 securities have unrealized losses. These securities are guaranteed by either the U.S. Government, other governments or U.S. corporations. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, 0 declines are deemed to be other than temporary.

~~(4)~~13

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(3) Loans

The following table presents the composition of loans segregated by legacy and purchased loans and by class of loans, as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. Purchased loans are defined as loans that were acquired in bank acquisitions.


	March 31, 2021
(dollars in thousands)	Legacy Loans		Purchased Loans		Total
Construction, land and land development	$	109,585	$	6,383	$	115,967
Other commercial real estate	499,604		38,477		538,080
Total commercial real estate	609,189		44,860		654,047
Residential real estate	165,887		12,324		178,211
Commercial, financial, & agricultural (*)	199,862		10,452		210,315
Consumer and other	18,055		2,147		20,202
Total Loans	$	992,993	$	69,783	$	1,062,775


		June 30, 2020											December 31, 2020
(dollars in thousands)	(dollars in thousands)	Legacy Loans		Purchased Loans		Total		(dollars in thousands)	Legacy Loans		Purchased Loans		Total
Construction, land and land development	Construction, land and land development	$	104,153	$	27,644	$	131,797	Construction, land and land development	$	109,577	$	11,516	$	121,093
Other commercial real estate	Other commercial real estate	466,773		51,368		518,141		Other commercial real estate	477,445		42,946		520,391
Total commercial real estate	Total commercial real estate	570,926		79,012		649,938		Total commercial real estate	587,022		54,462		641,484
Residential real estate	Residential real estate	160,418		27,921		188,339		Residential real estate	167,714		15,307		183,021
Commercial, financial, & agricultural		235,862		15,053		250,915
Commercial, financial, & agricultural (*)								Commercial, financial, & agricultural (*)	200,800		12,580		213,380
Consumer and other	Consumer and other	21,508		3,277		24,785		Consumer and other	19,037		2,581		21,618
Total Loans	Total Loans	$	988,714	$	125,263	$	1,113,977	Total Loans	$	974,573	$	84,930	$	1,059,503

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

December 31, 2019
(dollars in thousands) Legacy Loans Purchased Loans Total
Construction, land and land development $ 83,036 $ 13,061 $ 96,097
Other commercial real estate 481,943 58,296 540,239
Total commercial real estate 564,979 71,357 636,336
Residential real estate 171,341 23,455 194,796
Commercial, financial, & agricultural 91,535 22,825 114,360
Consumer and other 19,245 4,077 23,322
Total Loans $ 847,100 $ 121,714 $ 968,814
(*) Includes $102.6 million and $101.1 million in PPP loans at March 31, 2021 and December 31, 2020

Commercial and industrial loans are extended to a diverse group of businesses within the Company’s market area. These loans are often underwritten based on the borrower’s ability to service the debt from income from the business. Real estate construction loans often require loan funds to be advanced prior to completion of the project. Due to uncertainties inherent in estimating construction costs, changes in interest rates and other economic conditions, these loans often pose a higher risk than other types of loans. Consumer loans are originated at the Bank level. These loans are generally smaller loan amounts spread across many individual borrowers to help minimize risk. The change in total legacy loans was primarily a result of commercial and industrial PPP loan originations during the second quarter of 2020, totaling $137.8 million at June 30, 2020.

Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (1) the risk grade assigned to commercial and consumer loans, (2) the level of classified commercial loans, (3) net charge-offs, (4) nonperforming loans, and (5) the general economic conditions in the Company’s geographic markets.

The Company uses an eight category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades:

•Grades 1 and 2 – Borrowers with these assigned grades range in risk from virtual absence of risk to minimal risk. Such loans may be secured by Company-issued and controlled certificates of deposit or properly margined equity securities or bonds. Other loans comprising these grades are made to companies that have been in existence for a long period of time with many years of consecutive profits and strong equity, good liquidity, excellent debt service ability and unblemished past performance, or to exceptionally strong individuals with collateral of unquestioned value that fully secures the loans. Loans in this category fall into the “pass” classification.

•Grades 3 and 4 – Loans assigned these “pass” risk grades are made to borrowers with acceptable credit quality and risk. The risk ranges from loans with no significant weaknesses in repayment capacity and collateral protection to acceptable loans with one or more risk factors considered to be more than average.

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

•Grade 5 – This grade includes “special mention” loans on management’s watch list and is intended to be used on a temporary basis for pass grade loans where risk-modifying action is intended in the short-term.

•Grade 6 – This grade includes “substandard” loans in accordance with regulatory guidelines. This category includes borrowers with well-defined weaknesses that jeopardize the payment of the debt in accordance with the agreed terms. Loans considered to be impaired are assigned this grade, and these loans often have assigned loss allocations as part of the allowance for loan and lease losses. Generally, loans on which interest accrual has been stopped would be included in this grade.

•Grades 7 and 8 – These grades correspond to regulatory classification definitions of “doubtful” and “loss,” respectively. In practice, any loan with these grades would be for a very short period of time, of which the Company has no loans with these assigned grades at ~~June 30, 2020.~~March 31, 2021. Management manages the Company’s problem loans in such a way that uncollectible loans or uncollectible portions of loans are charged off immediately with any residual, collectible amounts assigned a risk grade of 6.

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The following table presents the loan portfolio, excluding purchased loans, by credit quality indicator (risk grade) as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes.

(dollars in thousands) Pass Special Mention Substandard Total Loans
June 30, 2020
Construction, land and land development $ 94,837 $ 9,054 $ 262 $ 104,153
Other commercial real estate 443,380 11,986 11,407 466,773
Total commercial real estate 538,217 21,040 11,669 570,926
Residential real estate 149,085 4,463 6,870 160,418
Commercial, financial, & agricultural 231,187 2,649 2,026 235,862
Consumer and other 21,169 166 173 21,508
Total Loans $ 939,658 $ 28,318 $ 20,738 $ 988,714
(dollars in thousands)
December 31, 2019
Construction, land and land development $ 82,322 $ 445 $ 269 $ 83,036
Other commercial real estate 459,064 13,438 9,441 481,943
Total commercial real estate 541,386 13,883 9,710 564,979
Residential real estate 159,194 4,632 7,515 171,341
Commercial, financial, & agricultural 86,558 1,973 3,004 91,535
Consumer and other 18,883 148 214 19,245
Total Loans $ 806,021 $ 20,636 $ 20,443 $ 847,100


(dollars in thousands)	Pass		Special Mention		Substandard		Total Loans
March 31, 2021
Construction, land and land development	$	98,634	$	3,244	$	7,707	$	109,585
Other commercial real estate	452,356		30,301		16,946		499,604
Total commercial real estate	550,990		33,545		24,653		609,189
Residential real estate	156,665		3,090		6,132		165,887
Commercial, financial, & agricultural	196,052		2,795		1,015		199,862
Consumer and other	17,762		129		164		18,055
Total Loans	$	921,469	$	39,559	$	31,964	$	992,993

(dollars in thousands)
December 31, 2020
Construction, land and land development	$	99,430	$	2,940	$	7,207	$	109,577
Other commercial real estate	430,515		33,579		13,351		477,445
Total commercial real estate	529,945		36,519		20,558		587,022
Residential real estate	157,927		3,855		5,932		167,714
Commercial, financial, & agricultural	196,749		2,870		1,181		200,800
Consumer and other	18,734		124		179		19,037
Total Loans	$	903,355	$	43,368	$	27,850	$	974,573

December 31, 2020

The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation ~~purposes. For the period ending June 30, 2020, the Company did not have any loans classified as “doubtful” or a “loss”.~~

(dollars in thousands) Pass Special Mention Substandard Total Loans
June 30, 2020
Construction, land and land development $ 26,951 $ 611 $ 82 $ 27,644
Other commercial real estate 50,956 376 36 51,368
Total commercial real estate 77,907 987 118 79,012
Residential real estate 27,563 267 91 27,921
Commercial, financial, & agricultural 12,136 2,875 42 15,053
Consumer and other 3,189 — 88 3,277
Total Loans $ 120,795 $ 4,129 $ 339 $ 125,263
December 31, 2019
Construction, land and land development $ 12,996 $ — $ 65 $ 13,061
Other commercial real estate 57,881 381 34 58,296
Total commercial real estate 70,877 381 99 71,357
Residential real estate 23,097 249 109 23,455
Commercial, financial, & agricultural 19,443 2,949 433 22,825
Consumer and other 4,077 — — 4,077
Total Loans $ 117,494 $ 3,579 $ 641 $ 121,714

2015

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

purposes. For the period ending March 31, 2021, the Company did not have any loans classified as “doubtful” or a “loss”.


(dollars in thousands)	Pass		Special Mention		Substandard		Total Loans
March 31, 2021
Construction, land and land development	$	6,263	$	120	$	0	$	6,383
Other commercial real estate	32,391		3,423		2,663		38,477
Total commercial real estate	38,654		3,543		2,663		44,860
Residential real estate	11,944		301		78		12,324
Commercial, financial, & agricultural	8,283		1,690		480		10,452
Consumer and other	2,143		4		0		2,147
Total Loans	$	61,024	$	5,538	$	3,221	$	69,783

December 31, 2020
Construction, land and land development	$	11,275	$	241	$	0	$	11,516
Other commercial real estate	40,825		53		2,068		42,946
Total commercial real estate	52,100		294		2,068		54,462
Residential real estate	14,909		312		86		15,307
Commercial, financial, & agricultural	10,198		1,803		579		12,580
Consumer and other	2,364		25		192		2,581
Total Loans	$	79,571	$	2,434	$	2,925	$	84,930

A loan’s risk grade is assigned at loan origination and is based on the financial strength of the borrower and the type of collateral. Loan risk grades are subject to review at various times throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of six or below and an outstanding balance of $250,000 or more are reassessed on a quarterly basis. During this reassessment process individual reserves may be identified and placed against certain loans which are not considered impaired.

In assessing the overall economic condition of the markets in which it operates, the Company monitors the unemployment rates for its major service areas. The unemployment rates are reviewed on a quarterly basis as part of the allowance for loan loss determination.

Loans are placed on nonaccrual status if principal or interest payments become 90 days past due or when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory guidelines. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the aging of the amortized cost basis in legacy loans by aging category and accrual status as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

(dollars in thousands) 30-89 Days
Past Due 90 Days
or More
Past Due Total Accruing
Loans Past Due Nonaccrual
Loans Current Loans Total Loans
June 30, 2020
Construction, land and land development $ 27 $ — $ 27 $ 27 $ 104,099 $ 104,153
Other commercial real estate 1,392 — 1,392 5,645 459,736 466,773
Total commercial real estate 1,419 — 1,419 5,672 563,835 570,926
Residential real estate 1,117 — 1,117 3,446 155,855 160,418
Commercial, financial, & agricultural 471 — 471 1,841 233,550 235,862
Consumer and other 85 — 85 115 21,308 21,508
Total Loans $ 3,092 $ — $ 3,092 $ 11,074 $ 974,548 $ 988,714
December 31, 2019
Construction, land and land development $ 50 $ — $ 50 $ 32 $ 82,954 $ 83,036
Other commercial real estate 335 — 335 3,738 477,870 481,943
Total commercial real estate 385 — 385 3,770 560,824 564,979
Residential real estate 1,296 — 1,296 3,643 166,402 171,341
Commercial, financial, & agricultural 212 — 212 1,628 89,695 91,535
Consumer and other 21 — 21 138 19,086 19,245
Total Loans $ 1,914 $ — $ 1,914 $ 9,179 $ 836,007 $ 847,100
2020:


(dollars in thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
March 31, 2021
Construction, land and land development	$	24	$	0	$	24	$	74	$	109,487	$	109,585
Other commercial real estate	108		0		108		5,154		494,342		499,604
Total commercial real estate	132		0		132		5,228		603,829		609,189
Residential real estate	471		0		471		2,572		162,844		165,887
Commercial, financial, & agricultural	149		0		149		810		198,903		199,862
Consumer and other	37		0		37		88		17,930		18,055
Total Loans	$	789	$	0	$	789	$	8,698	$	983,506	$	992,993

December 31, 2020
Construction, land and land development	$	1,314	$	0	$	1,314	$	80	$	108,183	$	109,577
Other commercial real estate	229		0		229		2,545		474,671		477,445
Total commercial real estate	1,543		0		1,543		2,625		582,854		587,022
Residential real estate	667		0		667		2,873		164,174		167,714
Commercial, financial, & agricultural	150		0		150		1,010		199,640		200,800
Consumer and other	48		0		48		102		18,887		19,037
Total Loans	$	2,408	$	0	$	2,408	$	6,610	$	965,555	$	974,573

2117

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the aging of the amortized cost basis in purchased loans by aging category and accrual status as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

(dollars in thousands) 30-89 Days
Past Due 90 Days
or More
Past Due Total Accruing
Loans Past Due Nonaccrual
Loans Current Loans Total Loans
June 30, 2020
Construction, land and land development $ 121 $ — $ 121 $ 160 $ 27,363 $ 27,644
Other commercial real estate — — — 51,368 51,368
Total commercial real estate 121 — 121 160 78,731 79,012
Residential real estate 102 — 102 103 27,716 27,921
Commercial, financial, & agricultural — — — 34 15,019 15,053
Consumer and other 7 — 7 88 3,182 3,277
Total Loans $ 230 $ — $ 230 $ 385 $ 124,648 $ 125,263
December 31, 2019
Construction, land and land development $ — $ — $ — $ — $ 13,061 $ 13,061
Other commercial real estate 83 — 83 — 58,213 58,296
Total commercial real estate 83 — 83 — 71,274 71,357
Residential real estate 57 — 57 — 23,398 23,455
Commercial, financial, & agricultural 553 — 553 — 22,272 22,825
Consumer and other 8 — 8 — 4,069 4,077
Total Loans $ 701 $ — $ 701 $ — $ 121,013 $ 121,714
2020:


(dollars in thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
March 31, 2021
Construction, land and land development	$	0	$	0	$	0	$	0	$	6,383	$	6,383
Other commercial real estate	0		0		0		1,883		36,594		38,477
Total commercial real estate	0		0		0		1,883		42,977		44,860
Residential real estate	17		0		17		69		12,238		12,324
Commercial, financial, & agricultural	27		0		27		27		10,398		10,452
Consumer and other	0		0		0		0		2,147		2,147
Total Loans	$	44	$	0	$	44	$	1,979	$	67,760	$	69,783

December 31, 2020
Construction, land and land development	$	0	$	0	$	0	$	117	$	11,399	$	11,516
Other commercial real estate	544		0		544		2,068		40,334		42,946
Total commercial real estate	544		0		544		2,185		51,733		54,462
Residential real estate	15		0		15		85		15,207		15,307
Commercial, financial, & agricultural	125		0		125		55		12,400		12,580
Consumer and other	0		0		0		193		2,388		2,581
Total Loans	$	684	$	0	$	684	$	2,518	$	81,728	$	84,930

2218

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table details impaired loan data, including purchased credit impaired loans, as of ~~June 30, 2020.~~

June 30, 2020
(dollars in thousands) Unpaid
Contractual
Principal
Balance Impaired
Balance Related
Allowance Average
Recorded
Investment
With No Related Allowance Recorded
Construction, land and land development $ 66 $ 66 $ — $ 66
Commercial real estate 12,777 12,012 — 11,826
Residential real estate 2,466 2,461 2,586
Commercial, financial & agriculture 289 289 — 273
Consumer & other — — — —
15,598 14,828 — 14,751
With An Allowance Recorded
Construction, land and land development — — — —
Commercial real estate 8,379 8,285 2,022 7,335
Residential real estate 519 520 115 640
Commercial, financial & agriculture 752 749 702 1,369
Consumer & other — — — —
9,650 9,554 2,839 9,344
Purchased Credit Impaired Loans
Construction, land and land development 118 82 — 74
Commercial real estate 123 36 — 35
Residential real estate 18 11 10 8
Commercial, financial & agriculture 61 42 — 39
Consumer & other 188 86 85 85
508 257 95 241
Total
Construction, land and land development 184 148 — 140
Commercial real estate 21,279 20,333 2,022 19,196
Residential real estate 3,003 2,992 125 3,234
Commercial, financial & agriculture 1,102 1,080 702 1,681
Consumer & other 188 86 85 85
$ 25,756 $ 24,639 $ 2,934 $ 24,336
March 31, 2021.


	March 31, 2021
(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment
With No Related Allowance Recorded
Construction, land and land development	$	7,480	$	7,480	$	—	$	7,231
Commercial real estate	10,979		10,121		—		11,042
Residential real estate	1,047		1,067		—		1,084
Commercial, financial & agriculture	3		3		—		21
Consumer & other	0		0		—		0
	19,509		18,671		—		19,378

With An Allowance Recorded
Construction, land and land development	0		0		0		0
Commercial real estate	5,242		5,247		1,315		5,783
Residential real estate	1,177		1,233		229		1,203
Commercial, financial & agriculture	86		86		38		198
Consumer & other	6		6		6		3
	6,511		6,572		1,588		7,187

Purchased Credit Impaired Loans
Construction, land and land development	116		48		38		71
Commercial real estate	780		764		42		382
Residential real estate	13		1		10		6
Commercial, financial & agriculture	247		27		100		37
Consumer & other	0		0		0		48
	1,156		840		190		544
Total
Construction, land and land development	7,596		7,528		38		7,302
Commercial real estate	17,001		16,132		1,357		17,207
Residential real estate	2,237		2,301		239		2,293
Commercial, financial & agriculture	336		116		138		256
Consumer & other	6		6		6		51
	$	27,176	$	26,083	$	1,778	$	27,109

2319

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table details impaired loan data as of December 31, ~~2019.~~

December 31, 2019
(dollars in thousands) Unpaid
Contractual
Principal
Balance Impaired
Balance Related
Allowance Average
Recorded
Investment
With No Related Allowance Recorded
Construction, land and land development $ 67 $ 67 $ — $ 168
Commercial real estate 12,455 11,639 — 13,924
Residential real estate 2,706 2,711 — 3,693
Commercial, financial & agriculture 257 257 910
Consumer & other — — — 123
15,485 14,674 — 18,818
With An Allowance Recorded
Construction, land and land development — — — 80
Commercial real estate 6,379 6,385 1,939 3,898
Residential real estate 757 760 137 367
Commercial, financial & agriculture 2,189 1,989 1,073 722
Consumer & other — — — —
9,325 9,134 3,149 5,067
Purchased Credit Impaired Loans
Construction, land and land development 65 65 — 80
Commercial real estate 34 34 — 35
Residential real estate 11 11 6 24
Commercial, financial & agriculture 37 37 — 47
Consumer & other — — — —
147 147 6 186
Total
Construction, land and land development 132 132 — 328
Commercial real estate 18,868 18,058 1,939 17,857
Residential real estate 3,474 3,482 143 4,084
Commercial, financial & agriculture 2,483 2,283 1,073 1,679
Consumer & other — — — 123
$ 24,957 $ 23,955 $ 3,155 $ 24,071
2020.


	December 31, 2020
(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment
With No Related Allowance Recorded
Construction, land and land development	$	6,969	$	6,982	$	—	$	2,841
Commercial real estate	11,978		11,105		—		12,190
Residential real estate	1,140		1,122		—		2,142
Commercial, financial & agriculture	42		40		—		203
Consumer & other	0		0		—		123
	20,129		19,249		—		17,499

With An Allowance Recorded
Construction, land and land development	0		0		0		0
Commercial real estate	6,292		6,325		1,436		5,945
Residential real estate	1,274		1,230		226		703
Commercial, financial & agriculture	310		310		263		1,118
Consumer & other	0		0		0		0
	7,876		7,865		1,925		7,766
Purchased Credit Impaired Loans
Construction, land and land development	118		94		0		96
Commercial real estate	0		0		0		63
Residential real estate	14		11		4		13
Commercial, financial & agriculture	55		46		0		49
Consumer & other	192		96		81		113
	379		247		85		334
Total
Construction, land and land development	7,087		7,076		0		2,937
Commercial real estate	18,270		17,430		1,436		18,198
Residential real estate	2,428		2,363		230		2,858
Commercial, financial & agriculture	407		396		263		1,370
Consumer & other	192		96		81		236
	$	28,384	$	27,361	$	2,010	$	25,599

Interest income recorded on impaired loans during the three months ended ~~June 30,~~March 31, 2021 and 2020 were $238,000 and ~~2019 were $104,000 and $274,000, respectively and during the six months ended June 30, 2020 and 2019 were $154,000 and $477,000,~~$50,000, respectively.

2420

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Troubled Debt ~~Restructings~~Restructurings

The restructuring of a loan is considered a troubled debt restructuring ("TDRs") if both the borrower is experiencing financial difficulties and the Company has granted a concession to the terms of the loan. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

As discussed in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, ~~2019,~~2020, which are included in the Company’s ~~2019~~2020 Form 10-K, once a loan is identified as a TDR, it is accounted for as an impaired loan. The Company had 0 unfunded commitments to lend to a customer that has a troubled debt restructured loan as of ~~June 30, 2020.~~March 31, 2021. The Company had 01 construction, land and land development loan ~~contracts~~ restructured during the three ~~or six~~ month periods ended ~~June 30, 2020 and 2019.~~March 31, 2021 for $511,000. Loans modified in a troubled debt restructuring are considered to be in default once the loan becomes 90 days past due. A TDR may cease being classified as impaired if the loan is subsequently modified at market terms and, has performed according to the modified terms for at least six months, and there has not been any prior principal forgiveness on a cumulative basis.

The Company had 0 loans that subsequently defaulted during the three ~~or six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.

Modifications in Response to COVID-19

Certain borrowers are currently unable to meet their contractual payment obligations because of the adverse effects of the COVID-19 pandemic. To help mitigate these effects, loan customers may apply for a deferral of payments, or portions thereof, for up to three months. In the absence of other intervening factors, such short-term modifications made on a good faith basis are not categorized as troubled debt restructurings, nor are loans granted payment deferrals related to the COVID-19 pandemic reported as past due or placed on nonaccrual status (provided the loans were not past due or on nonaccrual status prior to the deferral).

As of ~~June 30, 2020,~~March 31, 2021, the Company had approximately ~~$113.2~~$12.7 million in loans still under their modified terms. The Company’s modification program included payment deferrals, interest only, and other forms of modifications. See Note 1 - Summary of Significant Accounting Policies for more information.

2521

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

~~(5)~~(4) Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the three ~~and six~~ months periods ended ~~June 30, 2020~~March 31, 2021 and ~~June 30, 2019.~~March 31, 2020. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

(dollars in thousands) Construction, land and land development Other commercial real estate Residential real estate Commercial, financial & agricultural Consumer and other Total
Three months ended June 30, 2020
Beginning Balance $ 354 $ 4,821 $ 1,203 $ 1,780 $ 226 $ 8,384
Charge-offs (4) — (16) — (364) (384)
Recoveries 12 21 6 19 31 89
Provision 397 869 438 114 382 2,200
Ending balance 759 5,711 1,631 1,913 275 10,289
Six months ended June 30, 2020
Beginning Balance $ 215 $ 3,908 $ 980 $ 1,657 $ 103 $ 6,863
Charge-offs (4) (30) (80) (68) (715) (897)
Recoveries 25 26 10 20 86 167
Provision 523 1,807 721 304 801 4,156
Ending balance 759 5,711 1,631 1,913 275 10,289
Period end amount allocated to
Individually evaluated for impairment — 2,022 115 702 — 2,839
Collectively evaluated for impairment 759 3,689 1,506 1,211 190 7,355
Purchase credit impaired — — 10 — 85 95
Ending Balance 759 5,711 1,631 1,913 275 10,289
Loans
Individually evaluated for impairment 66 20,297 2,981 1,038 — 24,382
Collectively evaluated for impairment 131,649 497,808 185,347 249,835 24,699 1,089,338
Purchase credit impaired 82 36 11 42 86 257
Ending balance $ 131,797 $ 518,141 $ 188,339 $ 250,915 $ 24,785 $ 1,113,977


(dollars in thousands)	Construction, land and land development		Other commercial real estate		Residential real estate		Commercial, financial & agricultural		Consumer and other		Total
Three months ended March 31, 2021
Beginning Balance	$	1,013	$	6,880	$	2,278	$	1,713	$	243	$	12,127
Charge-offs	0		0		0		(15)		(11)		(26)
Recoveries	15		0		66		3		8		92
Provision	25		248		67		(35)		195		500
Ending balance	1,053		7,128		2,411		1,666		435		12,693









Period end amount allocated to
Individually evaluated for impairment	0		1,315		229		38		6		1,588
Collectively evaluated for impairment	1,015		5,771		2,172		1,528		429		10,915
Purchase credit impaired	38		42		10		100		0		190
Ending Balance	1,053		7,128		2,411		1,666		435		12,693

Loans
Individually evaluated for impairment	7,480		15,368		2,300		89		6		25,243
Collectively evaluated for impairment	108,439		521,948		175,910		210,199		20,196		1,036,692
Purchase credit impaired	48		764		1		27		0		840
Ending balance	$	115,967	$	538,080	$	178,211	$	210,315	$	20,202	$	1,062,775

2622

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)


(dollars in thousands)	(dollars in thousands)	Construction, land and land development		Other commercial real estate		Residential real estate		Commercial, financial & agricultural		Consumer and other		Total		(dollars in thousands)	Construction, land and land development		Other commercial real estate		Residential real estate		Commercial, financial & agricultural		Consumer and other		Total
Three months ended June 30, 2019
Beginning Balance		$	20	$	5,062	$	949	$	466	$	92	$	6,589
Charge-offs		—		—		(18)		(28)		(109)		(155)
Recoveries		37		7		110		11		11		176
Provision		(45)		(639)		(196)		972		87		179
Ending balance		12		4,430		845		1,421		81		6,789
Six months ended June 30, 2019
Three months ended March 31, 2020														Three months ended March 31, 2020
Beginning Balance	Beginning Balance	$	131	$	5,251	$	1,181	$	618	$	96	$	7,277	Beginning Balance	$	215	$	3,908	$	980	$	1,657	$	103	$	6,863
Charge-offs	Charge-offs	(29)		(119)		(647)		(125)		(179)		(1,099)		Charge-offs	0		(30)		(64)		(68)		(351)		(513)
Recoveries	Recoveries	54		41		159		17		30		301		Recoveries	13		5		4		1		55		78
Provision	Provision	(144)		(743)		152		911		134		310		Provision	126		938		283		190		419		1,956
Ending balance	Ending balance	12		4,430		845		1,421		81		6,789		Ending balance	354		4,821		1,203		1,780		226		8,384

December 31, 2019

December 31, 2020														December 31, 2020
Period end amount allocated to	Period end amount allocated to													Period end amount allocated to
Individually evaluated for impairment	Individually evaluated for impairment	—		1,939		137		1,073		—		3,149		Individually evaluated for impairment	0		1,436		226		263		0		1,925
Collectively evaluated for impairment	Collectively evaluated for impairment	215		1,969		837		584		103		3,708		Collectively evaluated for impairment	1,013		5,444		2,048		1,450		162		10,117
Purchase credit impaired	Purchase credit impaired	—		—		6		—		—		6		Purchase credit impaired	0		0		4		0		81		85
Ending Balance	Ending Balance	215		3,908		980		1,657		103		6,863		Ending Balance	1,013		6,880		2,278		1,713		243		12,127

Loans	Loans													Loans
Individually evaluated for impairment	Individually evaluated for impairment	67		18,024		3,471		2,246		—		23,808		Individually evaluated for impairment	6,982		17,430		2,352		350		0		27,114
Collectively evaluated for impairment	Collectively evaluated for impairment	95,965		522,181		191,314		112,077		23,322		944,859		Collectively evaluated for impairment	114,017		502,961		180,658		212,984		21,522		1,032,142
Purchase credit impaired	Purchase credit impaired	65		34		11		37		—		147		Purchase credit impaired	94		0		11		46		96		247
Ending Balance	Ending Balance	$	96,097	$	540,239	$	194,796	$	114,360	$	23,322	$	968,814	Ending Balance	$	121,093	$	520,391	$	183,021	$	213,380	$	21,618	$	1,059,503

Management continually evaluates the allowance for loan losses methodology seeking to refine and enhance this process as appropriate, and it is likely that the methodology will continue to evolve over time.

The Company determines its individual reserves during its quarterly review of substandard loans. This process involves reviewing all loans with a risk grade of 6 or greater and an outstanding balance of $250,000 or more, regardless of the loans impairment classification.

2723

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

~~(6)~~(5) Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016-02 and all subsequent ASUs that modified this topic (collectively referred to as “Topic 842”). For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

Substantially all of the leases in which the Company is the lessee are comprised of real estate for branches and office space with terms extending through 2027. All ~~of our~~ leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheet. With the adoption of Topic 842, operating lease arrangements are required to be recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability.

The following table represents the consolidated balance sheet classification of the Company’s ROU assets and liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated balance sheet.

(dollars in thousands) Classification June 30, 2020 December 31, 2019
Assets
Operating lease right-of-use assets Other assets $ 633 $ 572
Liabilities
Operating lease liabilities Other liabilities 633 547

(dollars in thousands)

Classification

March 31, 2021

December 31, 2020

Assets

Operating lease right-of-use assets

Other assets

193

511

Liabilities

Operating lease liabilities

Other liabilities

196

517

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to January 1, 2020, the rate for the remaining lease term as of January 1, 2020 was used.

Operating lease cost was ~~$64,000~~$59,000 and $31,000 for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $116,000 and $61,000 for the six months ended June 30, 2020 and 2019~~ respectively.

As of ~~June 30, 2020,~~March 31, 2021, the weighted average remaining lease term was ~~4.59~~1.74 years and the weighted average discount rate was ~~1.78%~~1.34%.

2824

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table represents the future maturities of the operating lease liabilities and other lease information as of ~~June 30, 2020.~~

(dollars in thousands) Lease Liability
2021 $ 222
2022 152
2023 101
2024 45
2025 45
After June 30, 2025 104
Total lease payments $ 669
Less: interest (36)
Present value of lease liabilities $ 633
Supplemental lease information:
Cash paid for amounts included in the measurement of lease liabilities: June 30, 2020
Operating cash flows from operating leases (cash payments) $ 116
Operating cash flows from operating leases (lease liability reduction) 110
Operating lease right-of-use assets obtained in exchange for leases entered into during the period 196
March 31, 2021.


(dollars in thousands)			Lease Liability
2021			$	115
2022			83




Total lease payments			$	198
Less: interest			(2)
Present value of lease liabilities			$	196

Supplemental lease information:
Cash paid for amounts included in the measurement of lease liabilities:	March 31, 2021		March 31, 2020
Operating cash flows from operating leases (cash payments)	$	58	$	50
Operating cash flows from operating leases (lease liability addition)	0		42
Operating lease right-of-use assets obtained in exchange for leases entered into during the period	0		195

~~(7)~~(6) Borrowings

The following table presents information regarding the Company’s outstanding borrowings at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

(dollars in thousands) June 30, 2020 December 31, 2019
Federal Home Loan Bank advances $ 36,500 $ 47,000
Paycheck Protection Program (PPP) Liquidity Facility 134,500 —
Other borrowings 38,292 38,792
$ 209,292 $ 85,792
2020:


(dollars in thousands)	March 31, 2021		December 31, 2020
Federal Home Loan Bank advances	$	22,500	$	22,500
Paycheck Protection Program (PPP) Liquidity Facility	60,602		106,789
Other borrowings	37,542		37,792
	$	120,644	$	167,081

Advances from the Federal Home Loan Bank (“FHLB”) have maturities ranging from 2021 to 2029 and interest rates ranging from 1.05% to 3.51%. As collateral on the outstanding FHLB advances, the Company has provided a blanket lien on its portfolio of qualifying residential first mortgage loans, commercial loans, multifamily loans and HELOC loans. At ~~June 30, 2020,~~March 31, 2021, the lendable collateral of those loans pledged is ~~$103.6~~$88.6 million. At ~~June 30, 2020,~~March 31, 2021, the Company had remaining credit availability from the FHLB of ~~$340.1~~$417.7 million. The Company may be required to pledge additional qualifying collateral in order to utilize the full amount of the remaining credit line.

On May 1, 2019, the Company ~~completed a~~entered into 2 borrowing ~~arrangement~~arrangements with a correspondent bank for $10.0 ~~million.~~million each. The term note is secured by the Bank’s stock, expires on May 1, 2024, and bears a fixed interest rate of 4.70%. The line of credit is secured by the Bank’s stock, expires on July 30, 2021, and bears a variable interest rate of Wall Street Journal Prime minus 0.40%.The proceeds were used for the acquisition of LBC Bancshares, Inc. and its subsidiary, Calumet Bank. As of ~~June 30, 2020,~~March 31, 2021, the outstanding balance totaled ~~$8.8 million.~~

On May 1, 2019, the Company completed a revolving credit arrangement with a correspondent bank with a maximum line amount of $10.0 million. This line of credit is secured by the Bank’s stock, expires on May 1, 2021,$8.0 million and bears a variable interest rate of Wall Street Journal Prime minus 0.40%. The Company advanced $5.3 million that was used toward the acquisition of LBC Bancshares, Inc. and its subsidiary, Calumet Bank. As of June 30, 2020, the outstanding balance totaled $5.3 million.

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

On April 20, 2020 the Company completed a Paycheck Protection Program Liquidity Facility (PPPLF) credit arrangement with The Federal Reserve Bank. This line of credit is secured by PPP loans and bears a fixed interest rate of 0.35% with a maturity date equal to the maturity date of the related PPP loans, with the PPP loans maturing either two or five years from the origination date of the PPP loan. ~~The Company advanced~~An advance of $140.7 million ~~that~~through the PPPLF was used ~~toward~~for the funding of PPP loans. As of ~~June 30, 2020,~~March 31, 2021, the outstanding balance totaled ~~$134.5~~$60.6 million, and the Company's PPP loans and related PPPLF funding had a weighted average life of approximately 2 years.

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The aggregate stated maturities of other borrowed money at ~~June 30, 2020~~March 31, 2021 are as follows:

(dollars in thousands)
Year Amount
2021 $ 5,313
2022 14,000
2023 3,000
2024 8,750
2025 and After 43,729
PPPLF 134,500
$ 209,292


(dollars in thousands)
Year	Amount

2021	$	5,313
2022	0
2023	3,000
2024	8,000
2025	4,500
2026 and After	39,229
PPPLF	60,602
	$	120,644

The Company also has available federal funds lines of credit with various financial institutions totaling ~~$55.0~~$41.5 million, NaN of which were outstanding at ~~June 30, 2020.~~March 31, 2021.

The Company has the ability to borrow funds from the Federal Reserve Bank (“FRB”) of Atlanta utilizing the discount window. The discount window is an instrument of monetary policy that allows eligible institutions to borrow money from the

FRB on a short-term basis to meet temporary liquidity shortages caused by internal or external disruptions. At ~~June 30, 2020,~~March 31, 2021, the Company had borrowing capacity available under this arrangement, with 0 outstanding balances. The Company would be required to pledge certain available-for-sale investment securities as collateral under this agreement.

The Company's Trust Preferred Securities are recorded as subordinated debentures on the consolidated balance sheets, but subject to certain limitations, qualify as Tier 1 Capital for regulatory capital purposes. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, Trust Preferred Securities was $24.2 million. The proceeds from the offerings were used to fund certain acquisitions, pay off holding company debt and inject capital into the bank subsidiary. The Trust preferred securities pay interest quarterly.

(8) Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted earnings per share reflects the potential dilution of restricted ~~stock~~stock.

The following table presents earnings per share for the three months ended March 31, 2021 and ~~common stock warrants. Net income available to common stockholders represents net income after~~2020.


(dollars in thousands, except per share data)	Three Months Ended March 31,
	2021		2020
Numerator
Net income available to common stockholders	$	4,919	$	1,603

Denominator
Weighted average number of common shares
Outstanding for basic earnings per common share	9,499		9,499




Weighted-average number of shares outstanding for diluted earnings per common share	9,499		9,499

Earnings per share - basic	$	0.52	$	0.17

Earnings per share - diluted	$	0.52	$	0.17

3026

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

~~preferred stock dividends. The following table presents earnings per share for the three and six months ended June 30, 2020 and 2019.~~

(dollars in thousands, except per share data) Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Numerator
Net income available to common stockholders $ 2,214 $ 2,101 $ 3,817 $ 4,936
Denominator
Weighted average number of common shares
Outstanding for basic earnings per common share 9,499 9,089 9,499 8,765
Weighted-average number of shares outstanding for diluted earnings per common share 9,499 9,089 9,499 8,765
Earnings per share - basic $ 0.23 $ 0.23 $ 0.40 $ 0.56
Earnings per share - diluted $ 0.23 $ 0.23 $ 0.40 $ 0.56

~~(9)~~(8) Commitments and Contingencies

Credit-Related Financial Instruments. The Company is a party to credit related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include cash or cash equivalents, negotiable instruments, real estate, accounts receivable, inventory, oil, gas and mineral interests, property, plant, and equipment.

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 the following financial instruments were outstanding whose contract amounts represent credit risk:

Contract Amount
(dollars in thousands) June 30, 2020 December 31, 2019
Loan commitments $ 145,209 $ 102,890
Letters of credit 2,491 1,576


	Contract Amount
(dollars in thousands)	March 31, 2021		December 31, 2020
Loan commitments	$	235,074	$	198,029
Letters of credit	4,342		3,634

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

Standby and performance letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Legal Contingencies. In the ordinary course of business, there are various legal proceedings pending against the Company and the Bank. As of ~~June 30, 2020,~~March 31, 2021, the aggregate liabilities, if any, arising from such proceedings would not, in the opinion of management, have a material adverse effect on the Company’s consolidated financial position.

~~(10)~~(9) Fair Value of Financial Instruments and Fair Value Measurements

Generally accepted accounting standards in the U.S. require disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company and the Bank’s financial instruments are detailed hereafter. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.

Generally accepted accounting principles related to Fair Value Measurements define fair value, establish a framework for measuring fair value, establish a three-level valuation hierarchy for disclosure of fair value measurement and enhance

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•Level 3 inputs to the valuation methodology are unobservable and represent the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.

Cash and short-term investments – For cash, due from banks, bank-owned deposits and federal funds sold, the carrying amount is a reasonable estimate of fair value and is classified as Level 1.

Investment securities – Fair values for investment securities are based on quoted market prices where available and classified as Level 1. If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable instruments and classified as Level 2. If a comparable is not available, the investment securities are classified as Level 3.

Other investments, at cost– The fair value of Federal Home Loan Bank stock approximates carrying value and is classified as Level 1. If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable instruments and classified as Level 2.

Loans held for sale – The fair value of loans held for sale is determined on outstanding commitments from third party investors in the secondary markets and is classified within Level 2 of the valuation hierarchy.

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Loans – The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value. Most loans are classified as Level 3.

Deposit liabilities – The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date and is classified as Level 2. The fair value of deposits is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities and is classified as Level 2.

Federal Home Loan Bank advances– The fair value of Federal Home Loan Bank advances is estimated by discounting the future cash flows using the current rates at which similar advances would be obtained. Federal Home Loan Bank advances are classified as Level 2.

Paycheck Protection Liquidity Facility– The fair value of Paycheck Protection Liquidity Facility is estimated by discounting the future cash flows using the current rates at which similar advances would be obtained. Paycheck Protection Liquidity Facility are classified as Level 2.

Other borrowings – The fair value of other borrowings is calculated by discounting contractual cash flows using an estimated interest rate based on current rates available to the Company for debt of similar remaining maturities and collateral terms. Other borrowings is classified as Level 2 due to their expected maturities.

Disclosures of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis, are required in the financial statements.

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The carrying amount, estimated fair values, and placement in the fair value hierarchy of the Company’s financial instruments as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are as follows:


	Fair Value Measurements
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
March 31, 2021
Assets
Cash and short-term investments	$	181,588	$	181,588	$	181,588	$	0	$	0
Investment securities available for sale	433,729		433,729		0		433,729		0
Other investments, at cost	2,703		2,703		0		2,703		0
Loans held for sale	28,429		28,429		0		28,429		0
Loans, net	1,050,082		1,061,554		0		0		1,061,554

Liabilities
Deposits	1,525,884		1,526,740		0		1,526,740		0��
Paycheck Protection Program Liquidity Facility	60,602		60,602		0		60,602		0
Federal Home Loan Bank advances	22,500		21,312		0		21,312		0
Other borrowings	37,542		37,767		0		37,767		0

Fair Value Measurements
(dollars in thousands) Carrying
Value Estimated
Fair Value Level
1 Level
2 Level
3
June 30, 2020
Assets
Cash and short-term investments $ 191,046 $ 191,046 $ 191,046 $ — $ —
Investment securities available for sale 373,610 373,610 — 371,604 2,006
Other investments, at cost 3,954 3,954 3,225 729 —
Loans held for sale 16,537 16,537 — 16,537 —
Loans, net 1,103,688 1,125,455 — — 1,125,455
Liabilities
Deposits 1,421,758 1,421,287 — 1,421,287 —
Paycheck Protection Program Liquidity Facility 134,500 134,500 — 134,500 —
Federal Home Loan Bank advances 36,500 33,820 — 33,820 —
Other borrowings 38,292 38,292 — 38,292 —

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~


		Fair Value Measurements																			Fair Value Measurements
(dollars in thousands)	(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3		(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2019
December 31, 2020												December 31, 2020
Assets	Assets											Assets
Cash and short-term investments	Cash and short-term investments	$	104,092	$	104,092	$	104,192	$	—	$	—	Cash and short-term investments	$	183,506	$	183,506	$	183,506	$	0	$	0
Investment securities available for sale	Investment securities available for sale	347,332		347,332		—		345,310		2,022		Investment securities available for sale	380,814		380,814		245		380,569		0
Other investments, at cost	Other investments, at cost	4,288		4,288		3,559		729		—		Other investments, at cost	3,296		3,296		0		3,296		0
Loans held for sale	Loans held for sale	10,076		10,076		—		10,076		—		Loans held for sale	52,386		52,386		0		52,386		0
Loans, net	Loans, net	961,951		938,475		—		—		938,475		Loans, net	1,047,376		1,063,785		0		0		1,063,785

Liabilities	Liabilities											Liabilities
Deposits	Deposits	1,293,742		1,294,506		—		1,294,506		—		Deposits	1,445,027		1,445,984		0		1,445,984		0
Paycheck Protection Program Liquidity Facility												Paycheck Protection Program Liquidity Facility	106,789		106,789		0		106,789		0
Federal Home Loan Bank advances	Federal Home Loan Bank advances	47,000		44,402		—		44,402		—		Federal Home Loan Bank advances	22,500		20,817		0		20,817		0
Other borrowings	Other borrowings	38,792		38,792		—		38,792		—		Other borrowings	37,792		37,792		0		37,792		0

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring and nonrecurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Securities – Where quoted prices are available in an active market, securities are classified within level 1 of the valuation hierarchy. Level 1 inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Examples of such instruments, which would generally be classified within level 2 of the valuation hierarchy, include certain collateralized mortgage and debt obligations and certain high-yield debt securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within level 3 of the valuation hierarchy. When measuring fair value, the valuation techniques available under the market approach, income approach and/or cost approach are used. The Company’s evaluations are based on market data and the Company employs combinations of these approaches for its valuation methods depending on the asset class.

Impaired Loans – Impaired loans are those loans which the Company has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Other Real Estate Owned – Other real estate owned assets are adjusted to fair value less estimated selling costs upon transfer of the loans to other real ~~estate.~~estate owned. Typically, an external, third-party appraisal is performed on the collateral upon transfer into the other real estate owned account to determine the asset’s fair value. Subsequent adjustments to the collateral’s value may be based upon either updated third-party appraisals or management’s knowledge of the collateral and the current real estate market conditions. Appraised amounts used in determining the asset’s fair value, whether internally or externally prepared, are

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

discounted 10% to account for selling and marketing costs. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a level 3 classification of the inputs for determining fair value. Because of the high degree of judgment required in estimating the fair value of other real estate owned assets and because of the relationship between fair value and general economic conditions, we consider the fair value of other real estate owned assets to be highly sensitive to changes in market conditions.

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Assets Measured at Fair Value on a Recurring and Nonrecurring Basis – The following table presents the recorded amount of the Company’s assets measured at fair value on a recurring and nonrecurring basis as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, aggregated by the level in the fair value hierarchy within which those measurements fall. The table below includes only impaired loans with a specific reserve and only other real estate properties with a valuation allowance at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. Those impaired loans and other real estate properties are shown net of the related specific reserves and valuation allowances.


			Fair Value Measurements at Reporting Date Using
(dollars in thousands)	Total Fair Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2021
Nonrecurring
Collateral dependent impaired loans	$	4,984	$	0	$	0	$	4,984
Other real estate owned	518		0		0		518
Total nonrecurring assets	$	5,502	$	0	$	0	$	5,502

Fair Value Measurements at Reporting Date Using
(dollars in thousands) Total Fair Value Quoted Prices in
Active Markets for
Identical Assets (Level 1) Significant Other
Observable Inputs (Level 2) Significant
Unobservable
Inputs (Level 3)
June 30, 2020
Recurring Securities Available for Sale
U.S. treasury securities $ 245 $ — $ 245 $ —
State, county & municipal securities 29,700 — 29,700 —
Corporate Debt securities 3,006 — 1,000 2,006
Mortgage-backed securities 340,659 — 340,659 —
Total available for sale securities $ 373,610 $ — $ 371,604 $ 2,006
Nonrecurring
Collateral Dependent Impaired Loans $ 4,820 $ — $ — $ 4,820
Other Real Estate 1,769 — — 1,769
Total nonrecurring assets $ 6,589 $ — $ — $ 6,589

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Fair Value Measurements at Reporting Date Using
(dollars in thousands) Total Fair
Value Quoted Prices in
Active Markets for
Identical Assets (Level 1) Significant Other
Observable Inputs (Level 2) Significant
Unobservable
Inputs (Level 3)
December 31, 2019
Recurring Securities Available for Sale
State, county & municipal securities $ 5,115 $ — $ 5,115 $ —
Corporate Debt securities 2,806 — 784 2,022
Mortgage-backed securities 339,411 — 339,411 —
Total available for sale securities $ 347,332 $ — $ 345,310 $ 2,022
Nonrecurring
Collateral Dependent Impaired Loans $ 5,985 $ — $ — 5,985
Other Real Estate 1,320 — — 1,320
Total nonrecurring assets $ 7,305 $ — $ — $ 7,305


			Fair Value Measurements at Reporting Date Using
(dollars in thousands)	Total Fair Value		(Level 1)		(Level 2)		(Level 3)
December 31, 2020
Nonrecurring
Collateral dependent impaired loans	$	5,939	$	0	$	0	5,939
Other real estate owned	1,006		0		0		1,006
Total nonrecurring assets	$	6,945	$	0	$	0	$	6,945

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

The following table presents quantitative information about the significant unobservable inputs used in the fair value measurements for assets in level 3 of the fair value hierarchy measured on a nonrecurring basis at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. This table is comprised primarily of collateral dependent impaired loans and other real ~~estate:~~estate owned:


(dollars in thousands)	March 31, 2021		Valuation Techniques	Unobservable Inputs	Range Weighted Avg
Collateral dependent impaired loans	$	4,984	Appraised Value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	25	%	100	%
Other real estate owned	518		Appraised Value/Comparable Sales	Discounts to reflect current market conditions and estimated costs to sell	0	%	20	%

(dollars in thousands) June 30, 2020 Valuation
Techniques Unobservable
Inputs Range
Weighted Avg
Collateral Dependent Impaired Loans $ 4,820 Appraised Value Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell 10 % 80 %
Other Real Estate 1,769 Appraised Value/Comparable Sales Discounts to reflect current market conditions and estimated costs to sell — % 20 %

(dollars in thousands) December 31, 2019 Valuation
Techniques Unobservable
Inputs Range
Weighted Avg
Collateral Dependent Impaired Loans $ 5,985 Appraised Value Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell — % 20 %
Other Real Estate 1,320 Appraised Value/Comparable Sales Discounts to reflect current market conditions and estimated costs to sell — % 20 %


(dollars in thousands)	December 31, 2020		Valuation Techniques	Unobservable Inputs	Range Weighted Avg
Collateral dependent impaired loans	$	5,939	Appraised Value	Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell	25	%	100	%
Other real estate owned	1,006		Appraised Value/Comparable Sales	Discounts to reflect current market conditions and estimated costs to sell	0	%	20	%

3631

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The table below presents a reconciliation and statement of income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (level 3) for the ~~six~~three months ended ~~June 30, 2020 and 2019.~~

Available for Sale Securities
(dollars in thousands) June 30, 2020 June 30, 2019
Balance, Beginning $ 2,022 $ 4,277
Transfers out of Level 3 — —
Sales — —
Paydowns (16) (883)
Realized Loss on Sale of Security — —
Unrealized gains included in Other Comprehensive Income — 40
Balance, Ending $ 2,006 $ 3,434

March 31, 2020.

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~


	Available for Sale Securities
(dollars in thousands)	March 31, 2020
Balance, Beginning	$	2,022
Transfers out of Level 3	0
Sales	0
Paydowns	(5)
Realized Loss on Sale of Security	0
Unrealized gains (losses) included in Other Comprehensive Income	0
Balance, Ending	$	2,017

The Company’s policy is to recognize transfers in and transfers out of levels 1, 2 and 3 as of the end of a reporting period. There were 0no transfers of securities between levels for the three ~~and six~~ months ended ~~June 30, 2020 and 2019.~~March 31, 2020.

~~The following table presents quantitative information about recurring level 3 fair value measurements as of June 30, 2020 and December 31, 2019.~~

~~(dollars in thousands)~~

~~June 30, 2020~~

~~Fair Value~~

~~Valuation Techniques~~

Unobservable
Inputs

Range
(Weighted Avg)

~~Corporate debt securities~~

~~2,006~~

~~Discounted Cash Flow~~

~~Discount Rate or Yield~~

N/A*

~~December 31, 2019~~

~~Corporate debt securities~~

~~2,022~~

~~Discounted Cash Flow~~

~~Discount Rate or Yield~~

N/A*

* The Company relies on a third-party pricing service to value its securities. The details of the unobservable inputs and other adjustments used by the third-party pricing service were not readily available to the Company.

3832

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

~~(11)~~(10) Segment Information

The Company’s operating segments include banking, mortgage banking and small business specialty lending division. The reportable segments are determined by the products and services offered, and internal reporting. The Bank segment derives its revenues from the delivery of full-service financial services, including retail and commercial banking services and deposit accounts. The Mortgage Banking segment derives its revenues from the origination and sales of residential mortgage loans held for sale. The Small Business Specialty Lending Division segment derives its revenue from the origination, sales and servicing of Small Business Administration loans and other government guaranteed loans. Segment performance is evaluated using net interest income and noninterest income. Income taxes are allocated based on income before income taxes, and indirect expenses (includes management fees) are allocated based on various internal factors for each segment. Transactions among segments are made at fair value. Information reported internally for performance assessment follows. The following tables present information reported internally for performance assessment for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


(dollars in thousands)	Bank		Mortgage Banking		Small Business Specialty Lending Division		Totals
Three months ended March 31, 2021
Net Interest Income	$	13,985	$	168	$	130	$	14,283
Provision for Loan Losses	500		0		0		500
Noninterest Income	3,005		3,986		1,585		8,576
Noninterest Expenses	11,960		2,793		1,029		15,782
Income Taxes	1,160		354		144		1,658
Segment Profit (Loss)	$	3,370	$	1,007	$	542	$	4,919

Segments Assets at March 31, 2021	$	1,755,667	$	27,478	$	15,901	$	1,799,046

Full time employees at March 31, 2021	291		51		23		365


(dollars in thousands)	(dollars in thousands)	Bank		Mortgage Banking		Small Business Specialty Lending Division		Totals		(dollars in thousands)	Bank		Mortgage Banking		Small Business Specialty Lending Division		Totals
Three months ended June 30, 2020
Three months ended March 31, 2020										Three months ended March 31, 2020
Net Interest Income	Net Interest Income	$	12,730	$	82	$	729	$	13,541	Net Interest Income	$	12,656	$	34	$	14	$	12,704
Provision for Loan Losses	Provision for Loan Losses	2,200		—		—		2,200		Provision for Loan Losses	1,956		0		0		1,956
Noninterest Income	Noninterest Income	2,901		1,821		121		4,843		Noninterest Income	3,014		1,253		259		4,526
Noninterest Expenses	Noninterest Expenses	11,045		1,697		633		13,375		Noninterest Expenses	11,632		1,195		516		13,343
Income Taxes	Income Taxes	320		43		232		595		Income Taxes	368		11		(51)		328
Segment Profit (Loss)		$	2,066	$	163	$	(15)	$	2,214
Segment Profit										Segment Profit	$	1,714	$	81	$	(465)	$	1,603

Segments Assets at June 30, 2020		$	1,622,608	$	17,578	$	137,382	$	1,777,568
Segments Assets at December 31, 2020										Segments Assets at December 31, 2020	$	1,709,696	$	50,266	$	4,012	$	1,763,974

Full time employees at March 31, 2020										Full time employees at March 31, 2020	319		34		12		365

(dollars in thousands) Bank Mortgage
Banking Small
Business
Specialty
Lending
Division Totals
Three months ended June 30, 2019
Net Interest Income $ 11,806 $ 19 $ — $ 11,825
Provision for Loan Losses 179 — — 179
Noninterest Income 3,148 852 — 4,000
Noninterest Expenses 12,168 846 — 13,014
Income Taxes 526 5 — 531
Segment Profit $ 2,081 $ 20 $ — $ 2,101
Segments Assets at June 30, 2019 $ 1,502,974 $ 3,998 $ — $ 1,506,972

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

(dollars in thousands) Bank Mortgage
Banking Small
Business
Specialty
Lending
Division Totals
Six months ended June 30, 2020
Net Interest Income $ 25,386 $ 116 $ 743 $ 26,245
Provision for Loan Losses 4,156 — — 4,156
Noninterest Income 5,950 3,074 380 9,404
Noninterest Expenses 22,712 2,892 1,149 26,753
Income Taxes 688 54 181 923
Segment Profit (Loss) $ 3,780 $ 244 $ (207) $ 3,817

(dollars in thousands) Bank Mortgage
Banking Small
Business
Specialty
Lending
Division Totals
Six months ended June 30, 2019
Net Interest Income $ 22,163 $ 19 $ — $ 22,182
Provision for Loan Losses 310 — — 310
Noninterest Income 5,482 852 — 6,334
Noninterest Expenses 21,194 846 — 22,040
Income Taxes 1,225 5 — 1,230
Segment Profit $ 4,916 $ 20 $ — $ 4,936

4033

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

~~(12)~~(11) Regulatory Capital Matters

The amount of dividends payable to the parent company from the subsidiary bank is limited by various banking regulatory agencies. Upon approval by regulatory authorities, the Bank may pay cash dividends to the parent company in excess of regulatory limitations.

The Company is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. As of ~~June 30, 2020,~~March 31, 2021, the interim final Basel III rules (“Basel III”) require the Company to also maintain minimum amounts and ratios of common equity Tier 1 capital to risk-weighted assets. These amounts and ratios as defined in regulations are presented hereafter. Management believes, as of ~~June 30, 2020,~~March 31, 2021, the Company meets all capital adequacy requirements to which it is subject under the regulatory framework for prompt corrective action. In the opinion of management, there are no events or conditions since prior notification of capital adequacy from the regulators that have changed the institution’s category.

The Basel III rules also require the implementation of a new capital conservation buffer comprised of common equity Tier 1 capital. The capital conservation buffer was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increase each subsequent year by 0.625% until reaching its final level of 2.5% on January 1, 2019.

The Bank is participating in the PPP and the PPPLF to fund PPP Loans. In accordance with regulatory guidance, PPP loans pledged as collateral for PPPLF, and PPPLF advances, are excluded from leverage capital ratios. PPP loans will also carry a 0% risk-weight for risk-based capital rules.

The Board of Governors of the Federal Reserve raised the threshold for determining applicable of the Small Bank Holding Company and Savings and Loan Company Policy Statement in August 2018 from $1 billion to $3 billion in consolidated total assets to provide regulatory burden relief, therefore, the Company is no longer subject to the minimum capital requirements.

~~COLONY BANKCORP, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The following table summarizes regulatory capital information as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 on a consolidated basis and for the subsidiary, as defined. Regulatory capital ratios for ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019 were calculated in accordance with the Basel III rules.~~

(dollars in thousands) Actual For Capital
Adequacy Purposes To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of June 30, 2020
Total Capital to Risk-Weighted Assets
Consolidated $ 146,711 13.32 % $ 88,115 8.00 % N/A N/A
Colony Bank 153,745 13.92 88,359 8.00 $ 110,449 10.00 %
Tier I Capital to Risk-Weighted Assets
Consolidated 136,423 12.39 66,064 6.00 N/A N/A
Colony Bank 143,456 12.99 66,261 6.00 88,349 8.00
Common Equity Tier I Capital to Risk-Weighted Assets
Consolidated 112,923 10.26 49,528 4.50 N/A N/A
Colony Bank 143,456 12.99 49,696 4.50 71,783 6.50
Tier I Capital to Average Assets
Consolidated 136,423 9.23 59,122 4.00 N/A N/A
Colony Bank 143,456 9.70 59,157 4.00 73,946 5.00

(dollars in thousands) Actual For Capital
Adequacy Purposes To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 2019
Total Capital to Risk-Weighted Assets
Consolidated $ 140,973 13.17 % $ 85,661 8.00 % N/A N/A
Colony Bank 151,444 14.19 85,407 8.00 $ 106,758 10.00 %
Tier I Capital to Risk-Weighted Assets
Consolidated 134,110 12.52 64,246 6.00 N/A N/A
Colony Bank 144,581 13.54 64,055 6.00 8,547 8.00
Common Equity Tier I Capital to Risk-Weighted Assets
Consolidated 110,610 10.33 48,185 4.50 N/A N/A
Colony Bank 144,581 13.54 48,041 4.50 69,393 6.50
Tier I Capital to Average Assets
Consolidated 134,110 8.92 60,141 4.00 N/A N/A
Colony Bank 144,581 9.77 59,977 4.00 74,972 5.00
2020

4234

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

were calculated in accordance with the Basel III rules.


(dollars in thousands)	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 2021
Total Capital to Risk-Weighted Assets
Consolidated	$	159,767	13.76	%	$	92,888	8.00	%	N/A		N/A
Colony Bank	163,639		13.81		94,794		8.00		$	118,493	10.00	%

Tier I Capital to Risk-Weighted Assets
Consolidated	147,074		12.49		70,652		6.00		N/A		N/A
Colony Bank	150,946		12.74		71,089		6.00		94,786		8.00

Common Equity Tier I Capital to Risk-Weighted Assets
Consolidated	123,574		10.49		53,011		4.50		N/A		N/A
Colony Bank	150,946		12.74		53,317		4.50		77,013		6.50

Tier I Capital to Average Assets
Consolidated	147,074		8.70		67,620		4.00		N/A		N/A
Colony Bank	150,946		9.05		66,716		4.00		83,396		5.00


(dollars in thousands)	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2020
Total Capital to Risk-Weighted Assets
Consolidated	$	155,447	13.78	%	$	90,245	8.00	%	N/A		N/A
Colony Bank	164,050		14.55		90,199		8.00		$	112,749	10.00	%

Tier I Capital to Risk-Weighted Assets
Consolidated	143,320		12.71		67,657		6.00		N/A		N/A
Colony Bank	151,923		13.48		67,622		6.00		90,162		8.00

Common Equity Tier I Capital to Risk-Weighted Assets
Consolidated	119,820		10.62		50,771		4.50		N/A		N/A
Colony Bank	151,923		13.48		50,716		4.50		73,257		6.50

Tier I Capital to Average Assets
Consolidated	143,320		8.49		67,524		4.00		N/A		N/A
Colony Bank	151,923		9.12		66,633		4.00		83,291		5.00

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(13) Subsequent Events

Merger Announcement

Colony Bankcorp, Inc, and SouthCrest Financial Group, Inc. (PK: SCSG) ("SouthCrest"), the holding company for SouthCrest Bank, N.A., on April 22, 2021 jointly announced the signing of an Agreement and Plan of Merger under which Colony has agreed to acquire 100% of the common stock of SouthCrest in a combined stock-and-cash transaction valued at approximately $84.0 million. Upon completion of the transaction, Colony is expected to have approximately $2.4 billion in assets, $1.4 billion in loans, $2.0 billion in deposits, and $165.8 million in tangible common equity. The transaction is expected to be meaningfully accretive to Colony's fully diluted earnings per share in year one, excluding transaction costs.

The Agreement and Plan of Merger has been approved by the Boards of Directors of Colony and SouthCrest. The closing of the transaction, which is expected to occur no later than the fourth quarter of 2021, is subject to customary conditions, including regulatory approval and approval by the shareholders of Colony and SouthCrest.

Under the terms of the Agreement and Plan of Merger, each SouthCrest shareholder will have the right to elect to receive either $10.45 in cash or 0.7318 shares of Colony's common stock in exchange for each share of SouthCrest common or preferred stock, subject to customary proration and allocation procedures such that approximately 27.5% of SouthCrest shares will be converted to cash consideration and the remaining 72.5% of SouthCrest shares will be converted to Colony common stock. Based on Colony’s closing stock price of $15.00 per share as of April 21, 2021, the value of the per share merger consideration is estimated to be $10.83.

Dividend

On ~~July 16, 2020,~~April 22, 2021, the Board of Directors declared a quarterly cash dividend of ~~$0.10~~$0.1025 per share, to be paid on its common stock on ~~August 21, 2020,~~May 17, 2021, to shareholders of record as of the close of business on ~~August 7, 2020.~~May 3, 2021.

~~COVID-19~~

The COVID-19 pandemic is having, and will likely continue to have, significant effects on global markets, supply chains, businesses and communities. COVID-19 is likely to impact the Company’s future financial condition and results of operations, including, but not limited to, additional credit loss reserves, additional collateral and/or modifications to debt obligations, liquidity, limited dividend payouts or potential shortages of personnel.

Management continues to take appropriate actions to mitigate the negative impact the virus has on the Company, including restricting employee travel, directing employees to work remotely, cancelling in-person meetings and implementing our business continuity plans and protocols to the extent necessary. However, the full impact of COVID-19 is unknown and cannot be reasonably estimated as these events are still developing.

4336

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of Colony Bankcorp, Inc. and our wholly owned subsidiary, Colony Bank, from December 31, ~~2019~~2020 through ~~June 30, 2020~~March 31, 2021 and on our results of operations for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto in the Company's ~~2019~~2020 Form 10-K, and information presented elsewhere in this Quarterly Report on Form 10-Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.

Forward-looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control, particularly with regard to developments related to the COVID-19 pandemic. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors discussed elsewhere in this quarterly report and the following:

•business and economic conditions, particularly those affecting the financial services industry and our primary market areas;

•the economic impact of the COVID-19 pandemic on our business, including the impact of the actions taken by governmental authorities to try and contain the virus (including variants) or address the impact of the virus on the United States economy (including, without limitations, the CARES Act), and the resulting effect of all of such items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers;

•adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions related to the COVID-19 pandemic, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic, including, but not limited to, the PPP;

•factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our borrowers and the success of various projects that we finance;

•concentration of our loan portfolio in real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate;

•credit and lending risks associated with our construction and development, commercial real estate, commercial and industrial and residential real estate loan portfolios;

•our ability to attract sufficient loans that meet prudent credit standards, including in our construction and development, commercial and industrial and owner-occupied commercial real estate loan categories;

•our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas;

•changes in interest rate environment, including changes to the federal funds rate, and competition in our markets may result in increased funding costs or reduced earning assets yields, thus reducing our margins and net interest income;

•our ability to successfully manage our credit risk and the sufficiency of our allowance for loan losses (“ALL”);

4437

•the adequacy of our reserves (including ALL) and the appropriateness of our methodology for calculating such reserves;

•our ability to successfully execute our business strategy to achieve profitable growth;

•the concentration of our business within our geographic areas of operation in Georgia and neighboring markets;

•our focus on small and mid-sized businesses;

•our ability to manage our growth;

•risks that our expected revenue synergies and cost savings from our recently proposed acquisition of SouthCrest Financial Group, Inc. (“SouthCrest”) are not fully realized or may take longer than anticipated to be realized;

• failure to successfully integrate SouthCrest’s business with our business;

• the risk of lower than expected revenue following the acquisition of SouthCrest;

• our ability to manage the combined company’s growth following the acquisition of SouthCrest;

• the dilution caused by the Company’s issuance of additional shares of its common stock in connection with the acquisition of SouthCrest;

•our ability to increase our operating efficiency;

•liquidity issues, including fluctuations in the fair value and liquidity of the securities we hold for sale and our ability to raise additional capital, if necessary;

•failure to maintain adequate liquidity and regulatory capital and comply with evolving federal and state banking regulations;

•risks that our cost of funding could increase, in the event we are unable to continue to attract stable, low-cost deposits and reduce our cost of deposits;

•inability of our risk management framework to effectively mitigate credit risk, interest rate risk, liquidity risk, price risk, compliance risk, operational risk, strategic risk and reputational risk;

•the makeup of our asset mix and investments;

•external economic, political and/or market factors, such as changes in monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve, inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition;

•continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are;

•challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services;

•restraints on the ability of the Bank to pay dividends to us, which could limit our liquidity;

•increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;

•a failure in the internal controls we have implemented to address the risks inherent to the business of banking;

•inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance;

•changes in our management personnel or our inability to retain motivate and hire qualified management personnel;

•the dependence of our operating model on our ability to attract and retain experienced and talented bankers in each of our markets;

•our ability to identify and address cyber-security risks, fraud and systems errors;

•disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems;

•disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions;

•an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies;

•fraudulent and negligent acts by our clients, employees or vendors and our ability to identify and address such acts;

•risks related to potential acquisitions;

•the impact of any claims or legal actions to which we may be subject, including any effect on our reputation;

•compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with commercial mortgage origination, sale and servicing operations;

•changes in the scope and cost of FDIC insurance and other coverage;

•changes in our accounting standards;

•changes in tariffs and trade barriers;

•changes in federal tax law or policy; and

•other risks and factors identified in our ~~2019~~2020 Form 10-K, and this Quarterly Report on Form 10-Q for the period ended March 31, ~~2020 ("1Q 2020 Form 10-Q"), including those identified under~~2021, and in any of the ~~heading “Risk Factors”.~~Company's subsequent reports filed with the SEC and available on its website at www.sec.gov.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

COVID-19 Pandemic

During March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic in response to the rapidly growing outbreak of the virus. COVID-19 has significantly impacted local, national and global economies due to stay-at-home orders and social distancing guidelines, and has caused economic and social disruption on an unprecedented scale. While some industries have been impacted more severely than others, all businesses have been impacted to some degree. This disruption has resulted in the shuttering of businesses across the country, significant job loss, and aggressive measures by the federal government.

Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law on March 27, 2020 as a $2 trillion legislative package. The goal of the CARES Act iswas to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The legislative package also includes extensive emergency funding for hospitals and providers. In addition to the

general impact of COVID-19, certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts have had and continue to have a material impact on our operations.

On December 27, 2020, the Economic Aid to Hard-Hit Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) was signed into law, and authorized the SBA to reopen the PPP for first draw loans, as well as guarantee second draw PPP loans of up to $2 million for certain eligible borrowers that previously received a PPP loan. These loans carry a fixed rate of 1.00% and a term of five years, if not forgiven, in whole or in part. The loans are guaranteed by the SBA. The SBA pays the originating bank a processing fee based on the size of the loan.

On March 11, 2021, the American Rescue Plan Act of 2021 was enacted which primarily expanded and clarified eligibility for first and second draw PPP loans and revised the exclusions from payroll costs for purposes of loan forgiveness.

In response to the COVID-19 pandemic, the Company has prioritized the health and safety of its teammates and customers, and has taken protective measures such as implementing remote work arrangements to the full extent possible and by adjusting banking center hours and operational measures to promote social distancing, and it will continue to do so throughout the duration of the pandemic. At the same time, the Company is closely monitoring the effects of the COVID-19 pandemic on our loan and deposit customers, and is assessing the risks in our loan portfolio and working with our customers to reduce the pandemic’s impact on them while minimizing losses for the Company. In addition, the Company remains focused on improving shareholder value, managing credit exposure, challenging expenses, enhancing the customer experience and supporting the communities it serves.

We ~~have~~ implemented loan programs to allow customers who are experiencing hardships from the COVID-19 pandemic to defer loan principal and interest payments for up to 90 days. The Small Business Administration ~~(SBA)~~("SBA") has also guaranteed the principal and interest payments of all our SBA loan customers for six months. As of ~~June 30, 2020,~~March 31, 2021, we had ~~170 commercial customers with outstanding loan balances totaling $113.3 million who have been approved for payment deferrals. Of these non-SBA payment deferrals, 19~~one hotel loans totaling ~~$47.3~~$2.9 million were in the hotel industry, 18 loans totaling $17.0 million were in the retail industry, and 60 loans in the 1-4 family investment properties, which are some of the industries heavily impacted by the COVID-19 pandemic.with a modification related to COVID-19.

In addition, we have been participating in the SBA Paycheck Protection Program (“PPP”) under CARES Act to help provide loans to our business customers in need. As of ~~June 30, 2020,~~March 31, 2021, the Company has closed with the SBA ~~approximately 1,630~~$46.9 million of PPP loans ~~for an aggregate amount of funds~~related to Economic Aid Act. During the quarter ended March 31, 2021, $45.4 million in ~~excess of $137.8 million. We have used our current cash balances and available liquidity from the Paycheck Protection Program Liquidity Facility~~PPP loans related to ~~fund these PPP loans.~~CARES Act were forgiven. Loan fees collected related to these loans is approximately ~~$5.5~~$3.6 million. In accordance with U.S. generally accepted accounting principles ~~(GAAP)~~("GAAP"), these fees will be deferred and recognized over the life of the loans.

Despite recent improvements in certain economic indicators, significant constraints to commerce remain in place, and significant uncertainty remains over the timing and scope of additional government stimulus packages, and the full economic impact resulting from the outcome of the November 2020 elections. The duration and extent of the downturn and speed of the related recovery on our business, customers and the economy as a whole remains uncertain.

Overview

The following discussion and analysis presents the more significant factors affecting the Company’s financial condition as ~~June 30, 2020~~of March 31, 2021 and December 31, ~~2019,~~2020, and results of operations for each of the three ~~and six~~ months periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements, notes thereto and other financial information appearing elsewhere in this ~~report..~~report.

At ~~June 30, 2020,~~March 31, 2021, the Company had total consolidated assets of $1.8 billion, total loans of $1.1 billion, total deposits of ~~$1.4~~$1.5 billion, and shareholders’ equity of ~~$138.6~~$143.5 million. The Company reported net income of ~~$2.2~~$4.9 million, or ~~$0.23~~$0.52 per diluted share, for the ~~second~~first quarter of ~~2020,~~2021, compared to net income of ~~$2.1~~$1.6 million, or ~~$0.23~~$0.17 per diluted share, for the ~~second~~first quarter of ~~2019.~~2020. The ~~Company reported~~increase in net income ~~of $3.8 million, or $0.40 per diluted share,~~ for the ~~six~~three months ended ~~June 30, 2020 compared to net income of $4.9 million, or $0.56 per diluted share, for the six months ended June 30, 2019. The decline in net income~~March 31, 2021 was driven by a ~~significant increase~~decrease in provision for loan ~~losses~~loss and ~~a reduction~~an increase in ~~the federal funds rate due to the impact~~mortgage fee income, interchange fees and gain on sale of ~~COVID-19.~~SBA loans.

Net interest income increased to ~~$13.5~~$14.3 million for the ~~second~~first quarter of 2021, compared to $12.7 million for the first quarter of 2020, ~~compared to$11.8 million for the second quarter of 2019,~~ due to ~~higher loan volume during the second quarter from PPP loans and loan fees generated through PPP loan originations.~~an decrease in interest expense on deposits. The net interest margin decreased to ~~3.41%~~3.50% for the three months ended ~~June 30, 2020~~March 31, 2021 from ~~3.61%~~3.68% for the same period in ~~2019.~~2020. The reason for the decrease in net interest margin is primarily due to an ~~increase~~decrease in ~~volume of loan production at lower rates from the PPP loans,~~yield on investments, which was ~~partially~~ offset by lower borrowing and deposit rates.

Net interest income increased to $26.2 million for the six months ended June 30, 2020, compared to $22.2 million for the same period in 2019, due to higher loan volume during the second quarter from PPP loans and loan fees generated through PPP loan originations. The net interest margin remained stable at 3.51% for the six months ended June 30, 2020 and 2019.

The provision for loan losses was ~~$2.2 million~~$500,000 for the ~~second~~first quarter of ~~2020,~~2021, compared ~~to$179,000~~to $1,956,000 for the ~~second~~first quarter of ~~2019.~~2020. Net ~~charge-offs~~recoveries for the ~~second~~first quarter of ~~2020~~2021 were ~~$295,000~~$66,000 compared to net ~~recoveries~~charge-offs of ~~$21,000~~$435,000 for the same period in 2019. The provision for loan losses was $4.2 million for the six months ended June 30, 2020, compared to$310,000 for the six months ended June 30, 2019. Net charge-offs for the six months ended June 30, 2020 were $730,000 compared to $798,000 for the same period in 2019.2020. As of ~~June 30, 2020,~~March 31, 2021, Colony’s allowance for loan losses was ~~$10.3~~$12.7 million, or ~~0.92%~~1.19% of total loans, compared to ~~$6.9~~$12.1 million, or ~~0.71%~~1.14% of total loans, at December 31, ~~2019.~~2020. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, nonperforming assets were ~~$13.2~~$11.2 million and ~~$10.5~~$10.2 million, or ~~0.75%~~0.62% and ~~0.69%~~0.58% of total assets, respectively. While asset quality remains

stable period over period, social and economic disruption in response to the COVID-19 pandemic continued to result in business closures and job losses during the ~~second~~first quarter of ~~2020.~~2021. As such, additional qualitative measures were incorporated as part of the ~~June 30, 2020~~March 31, 2021 allowance for loan losses ~~calculation which was the primary cause for the increase to the provision for loan losses during the second quarter of 2020 compared to the same period in 2019.~~calculation.

Noninterest income of ~~$4.8~~$8.6 million for the ~~second~~first quarter of ~~2020~~2021 was up ~~$843,000,~~$4.1 million or ~~21.1%~~89.5%, from the ~~second~~first quarter of ~~2019. Noninterest income of $9.4 million for the six months ended June 30, 2020 was up $3.1 million, or 48.5%, from the six months ended June 30, 2019.~~2020. The increase ~~in both periods~~ was primarily due to increases in mortgage ~~loan~~fee income, gain on sale of SBA loans, and interchange fees.

For the ~~second~~first quarter of ~~2020,~~2021, noninterest ~~expenses~~expense of ~~$13.4~~$15.8 million increased ~~$361,000~~$2.4 million, or 18.28% from the same period in ~~2019. Noninterest expense for the six months ended June 30, 2020 of $26.8 million, increased $4.7 million, or 21.4% from $22.0 million during the same period in 2019.~~2020. Increases in noninterest expense are in part due to the growth experienced by Colony and changes to organizational structure that are associated with that ~~growth offset by the decrease in acquisitions expenses in~~

~~the second quarter.~~growth. Those expenses that were the primary contributors to the increase year over year include salaries and employee ~~benefits and other noninterest expenses.~~benefits. See "Table 6 - Noninterest expense" for more detail and discussion on the two primary drivers to the increase in noninterest expense.

Critical Accounting Policies

Our accounting and reporting policies are in accordance with ~~accounting principles generally accepted in the United States (“GAAP”)~~GAAP and conform to general practices within the banking industry. There have been no significant changes to the Significant Accounting Policies as described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, ~~2019,~~2020, which are included in the Company’s ~~2019~~2020 Annual Report on Form 10-K.

4841

Non-GAAP Reconciliation and Explanation

Management uses non-GAAP financial measures in its analysis of the Company's performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company's performance, and if not provided would be requested by the investor community. The Company believes the non-GAAP measures enhance investors' understanding of the Company's business and performance. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions. The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently.

The measures entitled operating net income, adjusted earnings per diluted share and tangible common book value per share are not measures recognized under ~~U.S. generally accepted accounting principles (GAAP)~~GAAP and therefore are considered non-GAAP financial measures. The most comparable GAAP measures are net income, earnings per diluted share, and common book value per share, respectively. These ~~disclosures~~measures should be considered supplemental and should not be considered an alternative to the Company’s results reported in accordance with GAAP for the periods presented. These non-GAAP financial measures should not be considered in isolation and do not purport to be an alternative to the most directly comparable measures as reported in accordance with GAAP. To the extent applicable, reconciliation of these non-GAAP measures ~~are~~to the most directly comparable measures as reported in accordance with GAAP are included in the table below.


Table 1 - Non-GAAP Performance Measures Reconciliation	Table 1 - Non-GAAP Performance Measures Reconciliation						Table 1 - Non-GAAP Performance Measures Reconciliation
(dollars in thousands, except per share data)	(dollars in thousands, except per share data)						(dollars in thousands, except per share data)
		2020			2019						2021	2020
		Second Quarter	First Quarter	Fourth Quarter	Third Quarter	Second Quarter		First Quarter	Fourth Quarter	Third Quarter	Second Quarter	First Quarter
Non-GAAP Measures	Non-GAAP Measures						Non-GAAP Measures

Operating net income reconciliation	Operating net income reconciliation						Operating net income reconciliation
Net income (GAAP)	Net income (GAAP)	$2,214	$1,603	$2,756	$2,518	$2,101	Net income (GAAP)	$4,919	$4,900	$3,098	$2,214	$1,603
Acquisition-related expenses	Acquisition-related expenses	220	287	335	861	1,928	Acquisition-related expenses	176	148	207	220	287
Thomaston building writedown							Thomaston building writedown	—	—	582	—	—
Gain on sale of Thomaston Branch							Gain on sale of Thomaston Branch	—	(1,026)	—	—	—
Income tax benefit of acquisition-related expenses	Income tax benefit of acquisition-related expenses	(46)	(60)	(70)	(181)	(404)	Income tax benefit of acquisition-related expenses	(46)	184	(166)	(46)	(60)
Operating net income	Operating net income	$2,388	$1,830	$3,021	$3,198	$3,625	Operating net income	$5,049	$4,206	$3,721	$2,388	$1,830
Weighted average diluted shares	Weighted average diluted shares	9,498,783	9,498,783	9,494,859	9,494,771	9,089,461	Weighted average diluted shares	9,498,783	9,498,783	9,498,783	9,498,783	9,498,783
Adjusted earnings per diluted share	Adjusted earnings per diluted share	$0.25	$0.19	$0.32	$0.34	$0.40	Adjusted earnings per diluted share	$0.53	$0.44	$0.39	$0.25	$0.19

Tangible common book value per share reconciliation	Tangible common book value per share reconciliation						Tangible common book value per share reconciliation
Common book value per share (GAAP)	Common book value per share (GAAP)	$14.59	$14.35	$13.74	$13.65	$13.32	Common book value per share (GAAP)	$15.11	$15.21	$14.78	$14.59	$14.35
Effect of goodwill and other intangibles	Effect of goodwill and other intangibles	(1.96)	(2.06)	(2.06)	(2.04)	(2.07)	Effect of goodwill and other intangibles	(1.90)	(1.92)	(1.94)	(1.96)	(2.04)
Tangible common book value per share	Tangible common book value per share	12.63	12.29	11.68	11.61	11.25	Tangible common book value per share	13.21	13.29	12.84	12.63	12.31

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Results of Operations

We reported net income and diluted earnings per share of ~~$2.2~~$4.9 million and ~~$0.23,~~$0.52, respectively, for the ~~second~~first quarter of ~~2020.~~2021. This compared to net income and diluted earnings per share of ~~$2.1~~$1.6 million and ~~$0.23,~~$0.17, respectively, for the same period in ~~2019.~~2020.

We reported operating net income of ~~$2.4~~$5.0 million for the ~~second~~first quarter ~~2020,~~2021, compared to ~~$3.6~~$1.8 million for the same period in ~~2019.~~2020. For the ~~second~~first quarter 2021, operating net income excludes acquisition-related expenses, which net of tax, totaled $130,000. For the first quarter of 2020, operating net income excludes acquisition-related expenses, which net of tax, totaled ~~$174,000. For the second quarter~~$227,000. See reconciliation of ~~2019, operating net income excludes acquisition-related expenses, which net of tax, totaled $1.6 million.~~

Table 2 - Selected Financial Information
(dollars in thousands, except per share data)
2020 2019
Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter
EARNINGS SUMMARY

Net interest income $13,541 $12,704 $12,992 $12,648 $11,825
Provision for loan losses 2,200 1,956 581 214 179
Non-interest income 4,843 4,434 4,412 4,039 4,000
Non-interest expense 13,375 13,251 13,496 13,358 13,014
Income taxes 595 328 571 597 531
Net income $2,214 $1,603 $2,756 $2,518 $2,101
PERFORMANCE MEASURES
Per common share:
Common shares outstanding 9,498,783 9,498,783 9,498,783 9,498,783 9,498,937
Weighted average basic shares 9,498,783 9,498,783 9,494,859 9,494,771 9,089,461
Weighted average diluted shares 9,498,783 9,498,783 9,494,859 9,494,771 9,089,461
Earnings per basic share $0.23 $0.17 $0.29 $0.27 $0.23
Earnings per diluted share 0.23 0.17 0.29 0.27 0.23
Adjusted earnings per diluted share^(b)
0.25 0.19 0.32 0.34 0.40
Cash dividends declared per share 0.10 0.10 0.08 0.08 0.08
Book value per common share 14.59 14.35 13.74 13.65 13.32
Tangible book value per common share^(b)
12.63 12.29 11.68 11.61 11.25

Performance ratios:
Net interest margin^(a)
3.41% 3.63% 3.72% 3.64% 3.61%
Return on average assets 0.52 0.42 0.73 0.67 0.60
Return on average total equity 6.47 4.79 8.47 7.86 7.43
Average total equity to average assets 8.06 8.86 8.66 8.59 8.03
ASSET QUALITY
Nonperforming loans (NPLs) $11,459 $10,130 $9,179 $9,572 $10,383
Other real estate 1,769 847 1,320 775 987
Repossessions 17 19 13 8 58
Total nonperforming assets (NPAs) 13,245 10,996 10,512 10,355 11,428
Classified loans 20,619 23,093 21,084 20,103 23,656
Criticized loans 52,200 46,600 51,182 42,765 42,336
Net loan charge-offs 295 435 317 403 (21)
Allowance for loan losses to total loans 0.92% 0.85% 0.71% 0.69% 0.73%
non-GAAP financial measures provided above.


Table 2 - Selected Financial Information
	2021		2020
(dollars in thousands, except per share data)	First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
EARNINGS SUMMARY
Net interest income	$14,283		$15,151		$13,848		$13,541		$12,704
Provision for loan losses	500		1,296		1,106		2,200		1,956
Non-interest income	8,576		8,039		6,930		4,843		4,526
Non-interest expense	15,782		15,986		15,690		13,375		13,343
Income taxes	1,658		1,008		884		595		328
Net income	$4,919		$4,900		$3,098		$2,214		$1,603
PERFORMANCE MEASURES
Per common share:
Common shares outstanding	9,498,783		9,498,783		9,498,783		9,498,783		9,498,783
Weighted average basic shares	9,498,783		9,498,783		9,498,783		9,498,783		9,498,783
Weighted average diluted shares	9,498,783		9,498,783		9,498,783		9,498,783		9,498,783
Earnings per basic share	$0.52		$0.52		$0.33		$0.23		$0.17
Earnings per diluted share	0.52		0.52		0.33		0.23		0.17
Adjusted earnings per diluted share(a)	0.53		0.44		0.39		0.25		0.19
Cash dividends declared per share	0.10		0.10		0.10		0.10		0.10
Book value per common share	15.11		15.21		14.78		14.59		14.35
Tangible book value per common share (a)	13.21		13.29		12.84		12.63		12.31

Performance ratios:
Net interest margin	3.50%		3.58%		3.34%		3.41%		3.68%
Return on average assets	1.12		1.08		0.70		0.52		0.42
Return on average total equity	13.71		13.73		8.80		6.47		4.79
Average total equity to average assets	8.20		7.87		7.91		8.06		8.86


ASSET QUALITY
Nonperforming loans (NPLs)	$	10,677	$	9,128	$	9,926	$	11,459	$	10,130
Other real estate owned	518		1,006		1,875		1,769		847
Repossessions	29		30		11		17		19
Total nonperforming assets (NPAs)	11,224		10,164		11,812		13,245		10,996
Classified loans	35,182		30,404		21,388		20,619		23,093
Criticized loans	80,288		75,633		72,076		52,200		46,600
Net loan (recoveries)/charge-offs	(66)		189		375		295		435
Allowance for loan losses to total loans	1.19%		1.14%		1.00%		0.92%		0.85%
Allowance for loan losses to total NPLs	118.89		132.85		111.02		89.79		64.81
Allowance for loan losses to total NPAs	113.10		119.31		93.29		77.68		60.83

5043


Allowance for loan losses to total NPLs		89.79	64.81	74.77	68.95	65.38
Allowance for loan losses to total NPAs		77.68	60.83	65.29	63.73	59.41
Net charge-offs to average loans (annualized)		0.12	0.18	0.13	0.17	(0.01)
Net (recoveries)/charge-offs to average loans (annualized)							Net (recoveries)/charge-offs to average loans (annualized)	(0.02)	0.07	0.13	0.12	0.18
NPLs to total loans	NPLs to total loans	1.03	1.13	0.95	1.00	1.11							NPLs to total loans	1.00	0.86	0.90	1.03	1.13
NPAs to total assets	NPAs to total assets	0.75	0.91	0.69	0.70	0.76							NPAs to total assets	0.62	0.58	0.67	0.75	0.91
NPAs to total loans and other real estate		1.19	1.39	1.08	1.08	1.18
NPAs to total loans and other real estate owned							NPAs to total loans and other real estate owned	1.06	0.96	1.07	1.19	1.39

AVERAGE BALANCES	AVERAGE BALANCES												AVERAGE BALANCES
Total assets	Total assets	$1,702,902	$1,516,191	$1,503,521	$1,492,852	$1,409,265							Total assets	$1,774,123	$1,797,749	$1,766,717	$1,702,902	$1,516,191
Loans, net	Loans, net	1,094,299	974,614	961,756	942,356	866,841							Loans, net	1,079,007	1,151,872	1,130,231	1,094,299	974,614
Deposits	Deposits	1,384,739	1,293,784	1,278,987	1,272,561	1,219,274							Deposits	1,475,944	1,456,287	1,140,487	1,384,739	1,293,784
Total stockholders’ equity	Total stockholders’ equity	137,213	134,304	130,217	128,172	113,161							Total stockholders’ equity	145,515	141,570	139,721	137,213	134,304

(a) Computed using fully taxable-equivalent net income.
(b) Non-GAAP measure - see “Non-GAAP Reconciliation and Explanation” for more information and reconciliation to GAAP

(a) Non-GAAP measure - see “Non-GAAP Reconciliation and Explanation” for more information and reconciliation to GAAP							(a) Non-GAAP measure - see “Non-GAAP Reconciliation and Explanation” for more information and reconciliation to GAAP

Net Interest Income

Net interest income, which is the difference between interest earned on assets and the interest paid on deposits and borrowed funds, is the single largest component of total revenue. Management strives to optimize this income while balancing interest rate, credit and liquidity risks.

The banking industry uses two key ratios to measure relative profitability of net interest income. The net interest spread measures the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities. The interest rate spread eliminates the effect of noninterest-bearing deposits and gives a direct perspective on the effect of market interest rate movements. The net interest margin is an indication of the profitability of a company's balance sheet and is defined as net interest income as a percent of average total interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and shareholders' equity.

Fully taxable equivalent net interest income for the ~~second~~first quarter of 2021 and 2020 ~~and 2019~~ was ~~$13.5~~$15.5 million and 11.8 million, respectively. The net interest spread and net interest margin for the second quarter of 2020 of 3.27% and 3.41%, respectively, decreased eleven and 20 basis points, respectively from the second quarter of 2019. For the first six months of 2020 and 2019, fully taxable equivalent net interest income was $26.2 million and $22.2$15.6 million, respectively. The net interest spread and net interest margin for the first ~~six~~quarter of 2021 was 3.42% and 3.50% respectively, decreases of 8 and 18 basis points, respectively, from the first quarter of 2020. The net interest spread and net interest margin for the first three months of 2020 ~~were 3.34%~~was 3.50% and ~~3.51%~~3.68% , respectively. ~~While the net interest margin remained stable year over year, the net interest spread decreased six basis points during the first six months of 2020 compared to the same period in 2019.~~ Despite the growth in our interest earnings assets, our net interest margin and net interest spread are impacted by the downward pressure exerted from lower yielding PPP loans offset by lowering our borrowing costs during the quarter as well as lower interest on the level of deposits on our balance sheets.

The following tables indicate the relationship between interest income and interest expense and the average amounts of assets and liabilities for the periods indicated. As shown in the tables, both average assets and average liabilities for the three months ended ~~June 30, 2020~~March 31, 2021 increased compared to the same period in ~~2019.~~2020. The increase in average assets was primarily driven by the increase in average loans of ~~$227.5~~$98.8 million, or ~~26.2%,~~10.1% and the increase in investment securities of $63.4 million, or 18.7% from the ~~second~~first quarter ~~in 2019,~~of 2020, which reflects both organic loan growth, and growth in PPP loans. The increase in average ~~loans was offset by a decrease in average taxable securities of $54.0 million. The increase in average assets~~liabilities for the three months ended ~~June 30, 2020~~March 31, 2021 was funded primarily through an increase in Paycheck Protection Program Liquidity Facility of $60.2 million and average customer deposits since the ~~second~~first quarter of ~~2019~~2020 of ~~$147.9~~$186.7 million.

On a tax equivalent basis, net interest income for the second quarters of 2020 and 2019 was $13.5 million and $11.8 million, respectively, which represents an increase of $1.7 million, or 14.5% from the same period in 2019. On a tax equivalent basis, net interest income for the six months ended June 30, 2020 and 2019 was $26.2 million and $22.2 million, respectively, which represents an increase of $4.1 million, or 18.3% from the same period in 2019. The higher net interest income is a result of growth in average interest earning assets, which increased $280.2 million, or 21.3%, from $1.3 billion in the second quarter 2019 to $1.5 billion for the second quarter of 2020. The growth in interest earning assets was primarily a result of growth in the loan portfolio through lower-yielding PPP loans which also generated higher balances in our interest-bearing deposits with other banks, of which both offset the intentional shrinking of the investment portfolio.

The yield on total interest-bearing liabilities decreased from ~~1.23%~~1.01% in the ~~second~~first quarter ~~2019~~2020 to ~~0.64%~~0.35% in the ~~second~~first quarter of ~~2020.~~2021. Deposit costs decreased from ~~1.06%~~0.84% in the ~~second~~first quarter ~~2019~~2020 to ~~0.52%~~0.24% in the ~~second~~first quarter ~~2020.~~of 2021. The decrease in deposit costs year over year is partially associated to market driven changes impacting our cost of funds attributable to falling interest rates throughout ~~2020~~2021 and ~~2019.~~2020. In March of 2020, the Federal Reserve's Federal Open Market Committee ("FOMC") lowered interest rates twice for a total reduction of 150 basis points in response to the COVID-19 pandemic, which was the most aggressive action taken by the FOMC since the financial crisis in 2008.

Table 3 - Average Balance Sheet and Net Interest Analysis
Three Months Ended June 30,
2020 2019
(dollars in thousands) Average
Balances Income/
Expense Yields/
Rates Average
Balances Income/
Expense Yields/
Rates
Assets
Interest-earning assets:
Loans, net of unearned income⁽¹⁾
$ 1,094,299 $ 13,699 5.02 % $ 866,841 $ 12,313 5.70 %
Investment securities, taxable 331,378 1,757 2.13 385,374 2,399 2.50
Investment securities, tax-exempt⁽²⁾
8,959 37 1.66 2,228 17 3.06
Deposits in banks and short term investments 159,902 48 0.12 59,894 369 2.47
Total interest-earning assets 1,594,538 15,541 3.91 1,314,337 15,098 4.61
Noninterest-earning assets $ 108,364 94,928
Total assets $ 1,702,902 $ 1,409,265
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-earning demand and savings $ 766,692 $ 407 0.21 % $ 624,196 $ 1,136 0.73 %
Other time 311,334 996 1.28 368,116 1,496 1.63
Total interest-bearing deposits 1,078,026 1,403 0.52 992,312 2,632 1.06
Federal Home Loan Bank advances 36,500 211 2.32 49,070 374 3.06
Paycheck Protection Program Liquidity Facility 99,124 87 0.35 — — —
Other borrowings 38,694 299 3.10 24,229 267 4.42
Total other interest-bearing liabilities 174,318 597 1.37 73,299 641 3.51
Total interest-bearing liabilities 1,252,344 2,000 0.64 1,065,611 3,273 1.23
Noninterest-bearing liabilities:
Demand deposits $ 306,713 $ 226,862
Other liabilities 6,632 3,631
Stockholders' equity 137,213 113,161
Total noninterest-bearing liabilities and stockholders' equity $ 450,558 $ 343,654
Total liabilities and stockholders' equity $ 1,702,902 $ 1,409,265
Interest rate spread 3.27 % 3.38 %
Net interest income $ 13,541 $ 11,825
Net interest margin 3.41 % 3.61 %

~~(1)The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recorded and recognized on the cash basis. Includes loans held for sale.~~

~~(2)~~Taxable-equivalent adjustments totaling $6,000 and $9,000 for the three month periods ended June 30, 2020 and 2019, respectively, are included in tax-exempt interest on investment securities. The adjustments are based on a federal tax rate of 21% with appropriate reductions for the effect of disallowed interest expense incurred in carrying tax-exempt obligations.

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Table 3 - Average Balance Sheet and Net Interest Analysis	Table 3 - Average Balance Sheet and Net Interest Analysis																									Table 3 - Average Balance Sheet and Net Interest Analysis
		Six Months Ended June 30,																							Three Months Ended March 31,
		2020										2019											2021					2020
(dollars in thousands)	(dollars in thousands)	Average Balances		Income/ Expense		Yields/ Rates		Average Balances		Income/ Expense		Yields/ Rates		(dollars in thousands)	Average Balances		Income/ Expense		Yields/ Rates		Average Balances		Income/ Expense		Yields/ Rates
Assets	Assets													Assets
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Loans, net of unearned income ⁽¹⁾	Loans, net of unearned income ⁽¹⁾	$	1,037,242	$	26,989	5.22	%	$	828,234	$	22,783	5.52	%	Loans, net of unearned income (1)	$	1,079,007	$	13,638	5.13	%	$	980,185	$	13,352	5.52		%
Investment securities, taxable	Investment securities, taxable	335,836		3,746		2.24		376,161		4,596		2.45		Investment securities, taxable	371,265		1,628		1.78		339,565		1,988		2.37
Investment securities, tax-exempt⁽²⁾	Investment securities, tax-exempt⁽²⁾	4,941		42		1.70		2,103		28		2.67		Investment securities, tax-exempt(2)	32,616		155		1.93		923		7		3.08
Deposits in banks and short term investments	Deposits in banks and short term investments	122,885		332		0.54		61,429		704		2.30		Deposits in banks and short term investments	183,376		53		0.12		85,869		284		1.34
Total interest-earning assets	Total interest-earning assets	1,500,904		31,109		4.16		1,267,927		28,111		4.45		Total interest-earning assets	1,666,264		15,474		3.77		1,406,542		15,631		4.51
Noninterest-earning assets	Noninterest-earning assets	$	106,932					66,888						Noninterest-earning assets	107,859						99,612
Total assets	Total assets	$	1,607,836					$	1,334,815					Total assets	$	1,774,123					$	1,506,154
Liabilities and stockholders' equity	Liabilities and stockholders' equity													Liabilities and stockholders' equity
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Interest-earning demand and savings	Interest-earning demand and savings	$	747,273	$	1,342	0.36	%	$	596,212	$	1,974	0.66	%	Interest-earning demand and savings	$	859,462	$	165	0.08	%	$	734,102	$	936	0.52		%
Other time	Other time	323,073		2,279		1.41		355,731		2,780		1.57		Other time	260,438		488		0.76		334,811		1,282		1.55
Total interest-bearing deposits	Total interest-bearing deposits	1,070,346		3,621		0.68		951,943		4,754		1.00		Total interest-bearing deposits	1,119,900		653		0.24		1,068,913		2,218		0.84

Federal Home Loan Bank advances	Federal Home Loan Bank advances	41,038		468		2.29		46,218		506		2.20		Federal Home Loan Bank advances	22,500		114		2.05		45,577		257		2.29
Paycheck Protection Program Liquidity Facility	Paycheck Protection Program Liquidity Facility	49,561		87		0.35		—		—		—		Paycheck Protection Program Liquidity Facility	60,602		68		0.46		—		—		—
Other borrowings	Other borrowings	38,745		688		3.56		24,229		669		5.54		Other borrowings	61,654		256		1.68		38,792		389		4.07
Total other interest-bearing liabilities	Total other interest-bearing liabilities	129,344		1,243		1.93		70,447		1,175		3.35		Total other interest-bearing liabilities	144,756		438		1.23		84,369		646		3.11
Total interest-bearing liabilities	Total interest-bearing liabilities	1,199,690		4,864		0.81		1,022,390		5,929		1.16		Total interest-bearing liabilities	1,264,656		1,091		0.35		1,153,282		2,864		1.01
Noninterest-bearing liabilities:	Noninterest-bearing liabilities:													Noninterest-bearing liabilities:
Demand deposits	Demand deposits	266,163						204,012						Demand deposits	356,044						220,356
Other liabilities	Other liabilities	6,223						3,571						Other liabilities	7,908						6,068
Stockholders' equity	Stockholders' equity	135,760						104,842						Stockholders' equity	145,515						130,217
Total noninterest-bearing liabilities and stockholders' equity	Total noninterest-bearing liabilities and stockholders' equity	$	408,146					$	312,425					Total noninterest-bearing liabilities and stockholders' equity	$	509,467					$	356,641
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,607,836					$	1,334,815					Total liabilities and stockholders' equity	$	1,774,123					$	1,509,923
Interest rate spread	Interest rate spread					3.34	%					3.28	%	Interest rate spread					3.42	%					3.50		%
Net interest income	Net interest income			$	26,245					$	22,182			Net interest income			$	14,383					$	12,767
Net interest margin	Net interest margin					3.51	%					3.51	%	Net interest margin					3.50	%					3.68		%

(1)The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recognized and recorded on the cash basis. Taxable equivalent adjustments totaling $66,000 and $55,000 for the quarter ended March 31, 2021 and 2020, respectively are included in loans, net of unearned income. Accretion income of $209,000 and $182,000 for the quarter ended March 31, 2021 and 2020, respectively are also included in income and fees on loans.

(2)Taxable-equivalent adjustments totaling ~~$37,000~~$33,000 and ~~$43,000~~$2,000 for ~~six month periods~~quarter ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, are included in tax-exempt interest on investment securities. The adjustments are based on a federal tax rate of 21% and a Georgia state tax rate of 5.75% with appropriate reductions for the effect of disallowed interest expense incurred in carrying tax-exempt obligations.

The following table presents the effect of net interest income for changes in the average outstanding volume amounts of interest-earning assets and interest-bearing liabilities and the rates earned and paid on these assets and liabilities from ~~June 30, 2019~~March 31, 2020 to ~~June 30, 2020.~~March 31, 2021.

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Table 4 - Change in Interest Revenue and Expense on a Taxable Equivalent Basis	Table 4 - Change in Interest Revenue and Expense on a Taxable Equivalent Basis													Table 4 - Change in Interest Revenue and Expense on a Taxable Equivalent Basis
		Six Months Ended June 30, 2020											Three Months Ended March 31, 2021
		Compared to Six Months Ended June 30, 2019 Increase (Decrease) Due to Changes in											Compared to Three Months Ended March 31, 2020 Increase (Decrease) Due to Changes in
(dollars in thousands)	(dollars in thousands)	Volume		Rate		Total		(dollars in thousands)	Volume		Rate		Total
Interest-earning assets:	Interest-earning assets:							Interest-earning assets:
Loans, net of unearned fees	Loans, net of unearned fees	$	11,530	$	(7,324)	$	4,206	Loans, net of unearned fees	$	5,459	$	(5,172)	$	287
Investment securities, taxable	Investment securities, taxable	(988)		138		(850)		Investment securities, taxable	753		(1,113)		(360)
Investment securities, tax-exempt	Investment securities, tax-exempt	76		(62)		14		Investment securities, tax-exempt	975		(827)		148
Deposits in banks and short term investments	Deposits in banks and short term investments	1,412		(1,784)		(372)		Deposits in banks and short term investments	1,308		(1,539)		(231)
Total interest-earning assets (FTE)	Total interest-earning assets (FTE)	12,030		(9,032)		2,998		Total interest-earning assets (FTE)	8,495		(8,651)		(156)
Interest-bearing liabilities:	Interest-bearing liabilities:							Interest-bearing liabilities:
Interest-Bearing Demand and Savings Deposits	Interest-Bearing Demand and Savings Deposits	1,003		(1,635)		(632)		Interest-Bearing Demand and Savings Deposits	648		(1,419)		(771)
Time Deposits	Time Deposits	(512)		11		(501)		Time Deposits	(1,155)		361		(794)
Federal Home Loan Bank Advances	Federal Home Loan Bank Advances	(114)		76		(38)		Federal Home Loan Bank Advances	(528)		385		(143)
Paycheck Protection Program Liquidity Facility	Paycheck Protection Program Liquidity Facility	—		87		87		Paycheck Protection Program Liquidity Facility	—		68		68
Other Borrowed Money	Other Borrowed Money	804		(785)		19		Other Borrowed Money	930		(1,063)		(133)
Total interest-bearing liabilities	Total interest-bearing liabilities	1,181		(2,246)		(1,065)		Total interest-bearing liabilities	(105)		(1,668)		(1,773)
Increase in net interest income (FTE)	Increase in net interest income (FTE)	$	10,849	$	(6,786)	$	4,063	Increase in net interest income (FTE)	$	8,600	$	(6,983)	$	1,617

Provision for Loan Losses

The provision for loan losses is based on management's evaluation of probable, inherent losses in the loan portfolio and unfunded commitments and the corresponding analysis of the allowance for loan losses at quarter-end. Provision for loan losses for the three ~~and six~~ months ended ~~June 30, 2020 were $2.2 million and $4.2 million,~~March 31, 2021 was $500,000, respectively, compared to $179,000 and $310,000 for the same periods in 2019, respectively. For the three months ended June 30, 2020, net loan charge-offs as an annualized percentage of outstanding loans were 0.12% compared to (0.01)%$1,956,000 for the same period in ~~2019.~~2020. The amount of provision expense recorded in each period was the amount required such that the total allowance for loan losses reflected the appropriate balance, in the estimation of management, sufficient to cover probable, inherent loan losses in the loan portfolio. The ~~increase~~decrease in provision for loan losses in the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 compared to the same ~~periods~~period in ~~2019~~2020 is largely due to the reserve levels that have already been established as a result of unprecedented economic disruptions and uncertainty surrounding the COVID-19 pandemic. See the section captioned “Loans and Allowance for Loan Losses” elsewhere in this discussion for further analysis of the provision for loan losses.

Noninterest Income

The following table represents the major components of noninterest income for the periods indicated.

Table 5 - Noninterest Income
(dollars in thousands)
Three months ended June 30, Change Six months ended June 30, Change
2020 2019 Amount Percent 2020 2019 Amount Percent
Service charges on deposits 886 $ 1,070 $ (184) (17.2) % $ 2,190 $ 2,034 $ 156 7.7 %
Other service charges, commissions and fees 1,522 1,110 412 37.1 2,785 2,010 775 38.6
Mortgage fee income 1,827 544 1,283 235.8 3,089 687 2,402 349.6
Gain on sale of SBA loans 46 — 46 100.0 256 — 256 100.0
Securities gains — 65 (65) (100.0) 293 65 228 350.8
Other noninterest income 562 1,211 (649) (53.6) 791 1,538 (747) (48.6)
Total noninterest income $ 4,843 $ 4,000 $ 843 21.08 % $ 9,404 $ 6,334 $ 3,070 48.47 %


Table 5 - Noninterest Income
	Three Months Ended March 31,				Change
(dollars in thousands)	2021		2020		Amount		Percent
Service charges on deposits	1,222		$	1,499	$	(277)	(18.5)	%
Mortgage fee income	3,995		1,262		2,733		216.6
Gain on sale of SBA loans	1,471		210		1,261		600.5
(Loss)/gain on sale of securities	(4)		293		(297)		(101.4)
Interchange fee	1,530		1,033		497		48.1
BOLI income	208		151		57		37.7
Other noninterest income	154		78		76		97.4
Total noninterest income	$	8,576	$	4,526	$	4,050	89.48	%

During the ~~second~~first quarter of ~~2020,~~2021, noninterest income increased ~~$843,000~~$4.1 million compared to the same period in ~~2019, and for the six months ended June 30, 2020, non-interest income increased $3.1 million when compared to the same period in 2019.~~2020. The reason for this increase is primarily due to increases in mortgage loan fee income and gains on the sale of SBA ~~loans, both of which are new and fully operational lines of business when compared to the same periods in 2019.~~loans.

Service charges on deposit accounts. For the three months ended ~~June 30, 2020,~~March 31, 2021, service charges decreased ~~$184,000,~~$277,000, or ~~17.2%~~18.5%, compared to the same period in ~~2019.~~2020. The decrease in service charges on deposits is primarily attributed to a ~~$225,000~~

$287,000 decrease in overdraft and service charge income during the quarter as a result of continued lower customer spending due to the COVID-19 ~~pandemic, partially offset by an increase in wire transfer fees.~~ For the six months ended June 30, 2020 compared to the same period in 2019, service charges on deposits increased $156,000 or 7.7%. The increase is primarily attributable to an increase of $381,000 in overdraft and wire transfer fees, offset by a decrease in service charge income.

~~Other service charges, commissions and fees.~~ Other service charges, commissions and fees are comprised of various consumer deposit and other product services fees. Other service charges, commissions and fees increased $412,000, or 37.1%, for the three months ended June 30, 2020, and $775,000, or 38.6%, for the six months ended June 30, 2020 compared to the same periods in 2019. The increase in these fees was driven by increases in interchange fees and SBA loan fees year over year.pandemic.

Mortgage Fee Income. For the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, mortgage fee income was ~~$1.8~~$4.0 million, an increase of ~~$1.3~~$2.7 million, or ~~235.8%, and $3.1 million, an increase of $2.4 million, or 349.6%~~216.6%, compared to the same periods in 2019, respectively. The increase in mortgage fee income is primarily attributed to the opening of a new mortgage location in LaGrange and the acquisition of the PFB Mortgage division of Planters First Bank, both of which occurred in the first half of 2019. As such, these divisions were fully operationalperiod in 2020, ~~increasing the volume of mortgage loans. Furthermore, during~~respectively. During the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, there was an continued increase in the demand for mortgage rate locks and mortgage closings due to a historically low interest rate environment. The decrease in mortgage rates was partially attributable to the 150 basis point decrease in the national federal funds rate ~~during the during the six months ended June 30,~~in 2020 in response to the COVID-19 pandemic.

Gain on Sale of SBA loans. For the three months ended March 31, 2021 and 2020 net realized gains on the sale of the guaranteed portion of SBA loans totaled $1,471,000 and $210,000, respectively. The increase in 2021 is primarily attributable to the growth in the Small Business Specialty Lending compared to the same period in 2020.

5547

Noninterest Expense

The following table represents the major components of noninterest expense for the periods indicated.

Table 6 - Noninterest Expense
(dollars in thousands)
Three months ended June 30, Change Six months ended June 30, Change
2020 2019 Amount Percent 2020 2019 Amount Percent
Salaries and employee benefits $ 7,729 $ 6,292 $ 1,437 22.8 % $ 15,227 $ 11,663 $ 3,564 30.6 %
Occupancy and equipment 1,316 1,144 172 15.0 2,634 2,169 465 21.4
Acquisition-related expenses 220 1,928 (1,708) (88.6) 287 1,961 (1,674) (85.4)
Other noninterest expense 4,110 3,650 460 12.6 8,605 6,247 2,358 37.7
Total noninterest expense $ 13,375 $ 13,014 $ 361 2.8 % $ 26,753 $ 22,040 $ 4,713 21.4 %


Table 6 - Noninterest Expense
	Three months ended March 31,				Change
(dollars in thousands)			2020		Amount		Percent
Salaries and employee benefits	$	9,955	$	7,498	$	2,457	32.8	%
Occupancy and equipment	1,326		1,318		8		0.6
Acquisition-related expenses	176		287		(111)		(38.7)
Information technology expenses	1,592		1,316		276		21.0
Professional fees	486		347		139		40.1
Advertising and public relations	580		634		(54)		(8.5)
Communications	218		191		27		14.1
Writedown of building	—		—		—		100.0
FHLB prepayment penalty	—		276		(276)		100.0
Other noninterest expense	1,449		1,476		(27)		(1.8)
Total noninterest expense	$	15,782	$	13,343	$	2,439	18.3	%

Noninterest expense for the ~~second~~third quarter of 2020 totaled ~~$13.4~~$15.8 million, up ~~$361,000,~~$2.4 million, or ~~2.8%~~18.3%, from the same period in ~~2019. Noninterest expense for the six months ended June 30, 2020 was $26.8 million, up $4.7 million, or 21.4% from the same period in 2019.~~2020. Increases in salaries and employee benefits, and ~~other noninterest expense account~~information technology expenses, accounted for the majority of ~~the increase in noninterest expense,~~increases which was offset by a ~~decrease in acquisition-related expenses.~~FHLB prepayment penalty.

Salaries and Employee Benefits. Salaries and employee benefits for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 increased ~~$1.4~~$2.5 million, or ~~22.8%~~32.8%, ~~and $3.6 million, or 30.6%, respectively,~~ compared to the same ~~periods~~period in ~~2019.~~2020. The increase in ~~2020~~2021 is primarily attributable to ~~a full six months of salaries~~the growth in the Small Business Specialty Lending and ~~benefits related~~mortgage divisions compared to the ~~addition of several key employees during the second half of 2019 as part of the strategic changes that are being made to enhance the Company's profitability~~same period in ~~the future.~~2020.

Other. Other noninterest expense for the three ~~and six~~ months ended ~~June 30, 2020 increased $460,000,~~March 31, 2021 remained stable and only decreased $27,000, or ~~12.6%~~1.8%, ~~and $2.4 million, or 37.7%, respectively,~~ compared to the same ~~periods~~period in 2019. At June 30, 2020, insurance expense increased $438,000 and $874,000 for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019. The increase in insurance costs is directly related to increased premiums paid by the Company associated with a new commercial captive insurance policy. The company also saw increases in ATM network expenses and amortization expense of intangibles for the three and six months ended June 30, 2020 compared to the same periods in 2019.2020.

Income Tax Expense

Income tax expense for the three months ended ~~June 30,~~March 31, 2021 and 2020 was $1.7 million and ~~2019 was $595,000 and $531,000, respectively. Income tax expense for the six months ended June 30, 2020 and 2019 was $923,000 and $1.2 million,~~$328,000, respectively. The Company’s effective tax rates were a federal tax rate of 21% and a Georgia state tax rate of 5.75% for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.

Balance Sheet Review

Total assets at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were $1.8 ~~billion and $1.5 billion, respectively.~~billion.

5648

Loans and Allowance for Loan Losses

At ~~June 30, 2020,~~March 31, 2021, gross loans outstanding (excluding loans held for sale) were $1.1 billion, an increase of ~~$145.2~~$3.3 million, or ~~15.0%~~0.3%, compared with ~~$968.8 million~~$1.1 billion at December 31, ~~2019. The reason for~~2020. During the ~~increase is primarily due~~quarter ended March 31, 2021, PPP loans totaling approximately $45.4 million were forgiven through the SBA, with an additional $46.9 million of PPP loans closed related to the ~~growth in PPP loan production during the second quarter 2020, which totaled $137.8 million in gross PPP loans at June 30, 2020. The PPP loans are included in our commercial and industrial loans.~~Economic Aid Act.

At ~~June 30, 2020,~~March 31, 2021, approximately ~~58.3%~~61.5% of our loans are secured by commercial real estate. The following table presents a summary of the loan ~~portfolio.~~

Table 7 - Loans Outstanding
(dollars in thousands)
June 30, 2020 December 31, 2019
Construction, land and land development $ 131,797 $ 96,097
Other commercial real estate 518,141 540,239
Total commercial real estate 649,938 636,336
Residential real estate 188,339 194,796
Commercial, financial, & agricultural 250,915 114,360
Consumer and other 24,785 23,322
Total loans $ 1,113,977 $ 968,814
As a percentage of total loans:
Construction, land and land development 11.8 % 9.9 %
Other commercial real estate 46.5 % 55.8 %
Total commercial real estate 58.3 % 65.7 %
Residential real estate 16.9 % 20.1 %
Commercial, financial & agricultural 22.6 % 11.8 %
Consumer and other 2.2 % 2.4 %
Total loans 100 % 100 %
portfolio as of March 31, 2021 and December 31, 2020.


Table 7 - Loans Outstanding
(dollars in thousands)	March 31, 2021			December 31, 2020
Construction, land and land development	$	115,967		$	121,093
Other commercial real estate	538,080			520,391
Total commercial real estate	654,047			641,484
Residential real estate	178,211			183,021
Commercial, financial, & agricultural	210,315			213,380
Consumer and other	20,202			21,618
Total loans	$	1,062,775		$	1,059,503

As a percentage of total loans:
Construction, land and land development	10.9		%	11.4		%
Other commercial real estate	50.6		%	49.1		%
Total commercial real estate	61.5		%	60.5		%
Residential real estate	16.8		%	17.3		%
Commercial, financial & agricultural	19.8		%	20.1		%
Consumer and other	1.9		%	2.0		%
Total loans	100		%	100		%

The Company's risk mitigation processes include an independent loan review designed to evaluate the credit risk in the loan portfolio and to ensure credit grade accuracy. The analysis serves as a tool to assist management in assessing the overall credit quality of the loan portfolio and the adequacy of the allowance for loan losses. Loans classified as "substandard" are loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower and/or the collateral pledged. These assets exhibit well-defined weaknesses or are showing signs there is a distinct possibility the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as "doubtful" are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as "loss" are those loans which are considered uncollectable and are in the process of being charged off.

The Company regularly monitors the composition of the loan portfolio as part of its evaluation over the adequacy of the allowance for loan losses. The Company focuses on the following loan categories: (1) construction, land and land development; (2) commercial, financial and agricultural; (3) commercial and farmland real estate; (4) residential real estate; and (5) consumer.

The allowance for loan losses is a reserve established through charges to earnings in the form of a provision for loan losses. The provision for loan losses is based on management’s evaluation of the size and composition of the loan portfolio, the level of non-performing and past-due loans, historical trends of charged off loans and recoveries, prevailing economic conditions and other factors management deems appropriate. The Company’s management has established an allowance for loan losses which it believes is adequate for the probable incurred losses in the loan portfolio. Based on a credit evaluation of the loan portfolio, management presents a quarterly review of the allowance for loan losses to the Company’s Board of Directors, which primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner the Company’s

5749

management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for loan losses.

The allowance for loan losses is established by examining (1) the large classified loans, nonaccrual loans and loans considered impaired and evaluating them individually to determine the specific reserve allocation and (2) the remainder of the loan portfolio to allocate a portion of the allowance based on past loss experience and the economic conditions for the particular loan category. The Company also considers other factors such as changes in lending policies and procedures; changes in national, regional and/or local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of either the market president or lending staff; changes in the volume and severity of past-due and classified loans; changes in the quality of the loan review system; and other factors management deems appropriate.

The allowance for loan losses was ~~$10.3~~$12.7 million at ~~June 30, 2020~~March 31, 2021 compared to ~~$6.8~~$8.4 million at ~~December~~March 31, ~~2019,~~2020, an increase of ~~$3.4~~$4.3 million, or ~~50.0%~~51.4%. While asset quality remains stable period over period, social and economic disruption in response to the COVID-19 pandemic continue to result in businesses closures and job losses during ~~the second quarter of 2020.~~2020 and into 2021. As such, additional qualitative measures were incorporated as part of the ~~June 30, 2020~~March 31, 2021 allowance for loan losses calculation which was the primary cause for the increase to the provision for loan losses during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 compared to the same period ~~2019.~~in 2020.

Additional information about the Company’s allowance for loan losses is provided in Note 54 to our consolidated financial statements as of ~~June 30, 2020,~~March 31, 2021, included elsewhere in this Form 10-Q.

The following table presents an analysis of the allowance for loan losses as of and for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~

Table 8 - Analysis of Allowance for Loan Loss
(dollars in thousands)
June 30, 2020 June 30, 2019
Reserve %* Reserve %*
Construction, land and land development $ 759 11.8 % $ 12 9.9 %
Other commercial real estate 5,711 46.5 % 4,430 55.8 %
Residential real estate 1,631 16.9 % 845 20.1 %
Commercial, financial, & agricultural 1,913 22.6 % 1,421 11.8 %
Consumer and other 275 2.2 % 81 2.4 %
$ 10,289 100 % $ 6,789 100 %
2020:


Table 8 - Analysis of Allowance for Loan Loss
	March 31, 2021				March 31, 2020
(dollars in thousands)	Reserve		%*		Reserve		%*
Construction, land and land development	$	1,053	10.9	%	$	354	13.6	%
Other commercial real estate	7,128		50.6	%	4,821		53.0	%
Residential real estate	2,411		16.8	%	1,202		19.3	%
Commercial, financial, & agricultural	1,666		19.9	%	1,780		11.8	%
Consumer and other	435		1.9	%	226		2.3	%
	$	12,693	100	%	$	8,383	100	%

*Percentage represents the loan balance in each category expressed as a percentage of total end of period loans.

5850

The following table presents a summary of allowance for loan loss for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.


Table 9 - Summary of Allowance for Loan Loss	Table 9 - Summary of Allowance for Loan Loss														Table 9 - Summary of Allowance for Loan Loss
																Three Months Ended
(dollars in thousands)	(dollars in thousands)														(dollars in thousands)		March 31, 2021			March 31, 2020
		Three Months Ended													Six Months Ended
			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Allowance for loan loss - beginning balance	Allowance for loan loss - beginning balance		$	8,384		$	6,589		$	6,863		$	7,277		Allowance for loan loss - beginning balance		$	12,127		$	6,863
Charge-offs:	Charge-offs:														Charge-offs:
Construction, land and land development	Construction, land and land development		4			—			4			29			Construction, land and land development		—			—
Other commercial real estate	Other commercial real estate		—			—			30			119			Other commercial real estate		—			30
Residential real estate	Residential real estate		16			18			80			647			Residential real estate		—			64
Commercial, financial, & agricultural	Commercial, financial, & agricultural		—			28			68			125			Commercial, financial, & agricultural		15			68
Consumer and other	Consumer and other		364			109			715			179			Consumer and other		11			351
Total loans charged-off	Total loans charged-off		384			155			897			1,099			Total loans charged-off		26			513
Recoveries:	Recoveries:														Recoveries:
Construction, land and land development	Construction, land and land development		12			37			25			54			Construction, land and land development		15			14
Other commercial real estate	Other commercial real estate		21			7			26			41			Other commercial real estate		—			5
Residential real estate	Residential real estate		6			110			10			159			Residential real estate		66			4
Commercial, financial, & agricultural	Commercial, financial, & agricultural		19			11			20			17			Commercial, financial, & agricultural		3			1
Consumer and other	Consumer and other		31			11			86			30			Consumer and other		8			55
Total recoveries	Total recoveries		89			176			167			301			Total recoveries		92			79
Net charge-offs			295			(21)			730			798
Net (recoveries)/charge-offs															Net (recoveries)/charge-offs		(66)			434
Provision for loan loss	Provision for loan loss		2,200			179			4,156			310			Provision for loan loss		500			1,956
Allowance for loan loss - ending balance	Allowance for loan loss - ending balance		$	10,289		$	6,789		$	10,289		$	6,789		Allowance for loan loss - ending balance		$	12,693		$	8,385

Net charge-offs to average loans (annualized)			0.14		%	0.30		%	0.17		%	0.19		%
Net (recoveries)/charge-offs to average loans (annualized)															Net (recoveries)/charge-offs to average loans (annualized)		(0.02)		%	0.18		%
Allowance for loan losses to total loans	Allowance for loan losses to total loans		0.92		%	0.84		%	0.92		%	0.84		%	Allowance for loan losses to total loans		1.19			0.84
Allowance to nonperforming loans	Allowance to nonperforming loans		89.79		%	67.06		%	89.79		%	67.06		%	Allowance to nonperforming loans		118.88			67.06

Management believes the allowance for loan losses is adequate to provide for losses inherent in the loan portfolio as of ~~June 30, 2020;~~March 31, 2021; provided, however, that with the continuing economic impact of the COVID-19 pandemic during 2020 and through the first ~~half~~three months of ~~2020~~2021 leading to significant market changes, high levels of unemployment and increasing degrees of uncertainty in the U.S. economy, the impact on collectability is not currently known, and it is possible that additional provisions for credit losses could be needed in future periods.

5951

Nonperforming Assets

Asset quality remained stable during the first ~~six~~three months of ~~2020.~~2021. The continuing effects of the COVID-19 pandemic will likely have an impact on our asset quality, but itthe full extent is unknown ~~to what extent~~ at this point. Nonperforming assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property and other real estate owned ("OREO"). ~~Loans~~Pursuant to the provisions of the CARES Act, loans granted payment deferrals related to the COVID-19 pandemic are not reported as past due or placed on nonaccrual status (provided the loans were not past due or on nonaccrual status prior to the deferral), and there were no loans under these terms deemed past due or nonaccrual as of ~~June 30, 2020.~~March 31, 2021. Nonaccrual loans totaled ~~$11.5~~$10.7 million at ~~June 30, 2020,~~March 31, 2021, an increase of ~~$2.3 million,~~$1,498,000, or ~~24.8%~~16.3%, from $9.2 million at December 31, ~~2019.~~2020. There were no loans contractually past due 90 days or more and still accruing for either period presented. At ~~June 30, 2020,~~March 31, 2021, OREO totaled ~~$1.8 million, an increase~~$518,000, a decrease of ~~$449,000,~~$802,000, or ~~34.0%~~60.8%, compared with $1.3 million at December 31, ~~2019.~~2020. The ~~increase~~change in OREO ~~was due to the addition~~is a combination of ~~several additional~~sales of assets during first quarter of 2021 offset by a small OREO ~~properties during the second quarter 2020.~~property addition. At the end of the ~~second~~first quarter ~~2020,~~2021, total nonperforming assets as a percent of total assets ~~increased~~decreased to ~~0.75%~~0.62% compared with 0.69% at December 31, ~~2019. The increase in nonperforming assets was primarily a result of increases in our loan portfolio and the current impaired economic operating environment.~~2020.

At ~~June 30, 2020, 6.1%~~March 31, 2021, 5.8% of the Company’s loan portfolio, or ~~$67.7~~$61.8 million, is in the hotel sector which ~~we expect to be~~was one of the most sensitive sectors to the COVID-19 pandemic. While our entire loan portfolio is being continuously assessed, enhanced monitoring for these sectors is ongoing. We are continuously working with these customers to evaluate how the current economic conditions are impacting, and will continue to impact, their business operations.

Generally, loans are placed on non-accrual status if principal or interest payments become 90 days past due and/or management deems the collectability of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to a customer whose financial condition has deteriorated are considered for non-accrual status whether or not the loan is 90 days or more past due. Once interest accruals are discontinued, accrued but uncollected interest is charged to current year operations. Subsequent loan payments made on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Classification of a loan as nonaccrual does not preclude the ultimate collection of loan principal or interest.

Foreclosed property is initially recorded at fair value, less estimated costs to sell. If the fair value, less estimated costs to sell, at the time of foreclosure is less than the loan balance, the deficiency is charged against the allowance for loan losses. If the lesser of the fair value, less estimated costs to sell, or the listed selling price, less the costs to sell, of the foreclosed property decreases during the holding period, a valuation allowance is established with a charge ~~with a charge~~ to foreclosed property expense. When the foreclosed property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property.

Nonperforming assets at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:


Table 10 - Nonperforming Assets(1)
(dollars in thousands)	March 31, 2021			December 31, 2020
Nonaccrual loans	$	10,677		$	9,179
Loans past due 90 days and accruing	—			—
Other real estate owned	518			1,320
Repossessed assets	29			13
Total nonperforming assets	$	11,224		$	10,512
Nonaccrual loans by loan segment
Construction, land and land development	$	74		$	32
Commercial real estate	7,037			3,738
Residential real estate	2,641			3,643
Commercial, financial & agriculture	837			1,628
Consumer & other	88			138
Total nonaccrual loans	$	10,677		$	9,179

NPAs as a percentage of total loans and OREO	1.06		%	1.08		%
NPAs as a percentages of total assets	0.62		%	0.69		%
Nonaccrual loans as a percentage of total loans	1.00		%	0.95		%

6052

Table 10 - Nonperforming Assets⁽¹⁾
(dollars in thousands)
June 30, 2020 December 31, 2019
Nonaccrual loans $ 11,459 $ 9,179
Loans past due 90 days and accruing — —
Other real estate owned 1,769 1,320
Repossessed assets 17 13
Total nonperforming assets $ 13,245 $ 10,512
Nonaccrual loans by loan segment
Construction, land and land development $ 187 $ 32
Commercial real estate 5,645 3,738
Residential real estate 3,549 3,643
Commercial, financial & agriculture 1,875 1,628
Consumer & other 203 138
Total nonaccrual loans $ 11,459 $ 9,179
NPAs as a percentage of total loans and OREO 1.19 % 1.08 %
NPAs as a percentages of total assets 0.75 % 0.69 %
Nonaccrual loans as a percentage of total loans 1.03 % 0.95 %

⁽¹⁾ Loans granted payment deferrals related to the COVID-19 pandemic are not reported as past due or placed on nonaccrual status (provided the loans were not past due or on nonaccrual status prior to the deferral), there were no loans under these terms deemed past due or nonaccrual as of ~~June 30, 2020.~~March 31, 2021.

The restructuring of a loan is considered a ~~"troubled debt restructuring ("TDR")"~~TDR if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted the borrower a concession that we would not consider otherwise. At ~~June 30, 2020,~~March 31, 2021, TDRs totaled ~~$12.2~~$12.7 million, essentially unchanged from ~~$12.3~~$12.6 million reported at December 31, ~~2019.~~2020. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, all TDRs were performing according to their modified terms and were therefore not considered to be nonperforming assets.

In March 2020, regulatory agencies issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by the COVID–19 pandemic. The agencies confirmed with the staff of the FASB that short–term modifications made on a good faith basis in response to the COVID–19 pandemic to borrowers who were current prior to any relief, are not to be considered TDRs. As of ~~June 30, 2020,~~March 31, 2021, the Company had approximately ~~$113.2~~$2.9 million in loans still under their modified terms. The Company's modification program included payment deferrals, interest only, and other forms of ~~modifications.~~ modifications. See Notes 1 and 43 to of our consolidated financial statements as of ~~June 30, 2020,~~March 31, 2021, included elsewhere in this Form 10-Q, for more information regarding accounting treatment of loan modifications as a response to the COVID-19 ~~pandemic~~pandemic.

6153

Deposits

Deposits at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:

Table 11 - Deposits
(dollars in thousands)
June 30, 2020 December 31, 2019
Noninterest-bearing deposits $ 328,850 $ 232,635
Interest-bearing deposits 685,669 624,658
Savings 105,593 88,970
Time, $250,000 and over 41,214 55,677
Other time 260,432 291,802
Total deposits 1,421,758 $ 1,293,742


Table 11 - Deposits
(dollars in thousands)	March 31, 2021		December 31, 2020
Noninterest-bearing deposits	$	384,830	$	326,999
Interest-bearing deposits	485,801		433,554
Savings	395,092		422,860
Time, $250,000 and over	38,765		34,653
Other time	221,396		226,961
Total deposits	1,525,884		$	1,445,027

Total deposits were $1.5 billion and $1.4 billion ~~and $1.3 billion~~ at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. As of ~~June 30, 2020, 23.1%~~March 31, 2021, 25.2% of total deposits were comprised of noninterest-bearing accounts and ~~76.9%~~74.8% comprised of interest-bearing deposit accounts, compared to ~~18.0%~~22.6% and ~~82.0%~~77.4% as of December 31, ~~2019,~~2020, respectively. The growth in our deposits is due primarily to the combination of government stimulus programs, the deferral of the tax payment deadline, PPP loan proceeds retained on deposits by corporate borrowers, and customer expense and savings habits in response to the COVID-19 pandemic.

We had ~~$2.0~~$1.1 million and $1.4 million in brokered deposits at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020, respectively. We use brokered deposits, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network, which are our principal source of funding. Our level of brokered deposits varies from time to time depending on competitive interest rate conditions and other factors, and tends to increase as a percentage of total deposits when the brokered deposits are less costly than issuing internet certificates of deposit or borrowing from the ~~Federal Home Loan Bank.~~FHLB.

Off-Balance Sheet Arrangements

The Company is a party to credit related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, upon extension of credit, is based on management’s credit evaluation of the borrower. The type of collateral held varies, but may include cash or cash equivalents, unimproved or improved real estate, personal property or other acceptable collateral.

See Note 98 to our consolidated financial statements as of ~~June 30, 2020,~~March 31, 2021, included elsewhere in this Form 10-Q, for a table setting forth the financial instruments that were outstanding whose contract amounts represent credit risk and more information regarding our off-balance sheet arrangements as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

6254

Liquidity

An important part of the Bank's liquidity resides in the asset portion of the balance sheet, which provides liquidity primarily through loan interest and principal repayments and the maturities and sales of securities, as well as the ability to use these assets as collateral for borrowings on a secured basis.

The Bank's main source of liquidity is customer interest-bearing and noninterest-bearing deposit accounts. Liquidity is also available from wholesale funding sources consisting primarily of Federal funds purchased, FHLB advances and brokered deposits. These sources of liquidity are generally short-term in nature and are used as necessary to fund asset growth and meet other short-term liquidity needs.

To plan for contingent sources of funding not satisfied by both local and out-of-market deposit balances, the Company and the Bank have established multiple borrowing sources to augment their funds management. The Company has borrowing capacity through membership of the Federal Home Loan Bank program. The Bank has also established overnight borrowing for Federal Funds purchased through various correspondent banks.

Cash and cash equivalents at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were ~~$191.0~~$181.6 million and ~~$104.1~~$183.5 million, respectively. ~~The increase in cash~~Cash and cash equivalents has remained stable since year-end ~~2019 was largely attributable~~2020 due to ~~the significant increase~~continued increases in deposits, influenced by government stimulus payments and pandemic stay-at-home orders, which reduced spending and increased liquidity of consumers and businesses in these uncertain times, and PPP loan proceeds retained on deposit by corporate borrowers, as well as our own liquidity actions in the first ~~half~~quarter of ~~2020.~~2021. Management believes the various funding sources discussed above are adequate to meet the Company’s liquidity needs ~~in these unsettled times~~ without any material adverse impact on our operating results.

Liquidity management involves the matching of cash flow requirements of customers and the ability of the Company to manage those requirements. These requirements of customers include, but are not limited to, deposits being withdrawn or providing assurance to borrowers that sufficient funds are available to meet their credit needs. We strive to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance we have in short-term assets at any given time will adequately cover any reasonably anticipated need for funds. Additionally, we maintain relationships with correspondent banks, which could provide funds on short notice, if needed. We have also invested in FHLB stock for the purpose of establishing credit lines with the FHLB. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had ~~$36.5~~$22.5 million ~~and $47.0 million, respectively,~~ of outstanding advances from the FHLB. Based on the values of loans pledged as collateral, we had ~~$340.1~~$417.7 million and ~~$321.4~~$416.1 million of additional borrowing availability with the FHLB at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. In addition, on April 20, 2020, the Company completed a Paycheck Protection Program Liquidity Facility ~~(PPPLF)~~("PPPLF") credit arrangement with The Federal Reserve Bank. This line of credit is secured by PPP loans and bears a fixed interest rate of 0.35% with a maturity date equal to the maturity date of the related PPP loans, with the PPP loans maturing either two or five years from the origination date of the PPP loans. ~~The Company advanced $140.7 million that was used toward the funding of PPP loans.~~ As of ~~June 30, 2020,~~March 31, 2021, the outstanding balance totaled ~~$134.5~~$60.6 million, and the Company’s PPP loans and related PPPLF funding had a weighted average life of approximately 2 years.

The Company is a separate entity from the Bank, and as such it must provide for its own liquidity. The Company is responsible for the payment of dividends declared for its common shareholders and payment of interest and principal on any outstanding debt or trust preferred securities. These obligations are met through internal capital resources such as service fees and dividends from the Bank, which are limited by applicable laws and regulations.

6355

Capital Resources

The Bank is required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution’s overall capital adequacy.

In addition, the Bank is participating in the PPP and the PPPLF to fund PPP Loans. In accordance with regulatory guidance, PPP loans pledged as collateral for PPPLF, and PPPLF advances, are excluded from leverage capital ratios. PPP loans will also carry a 0% risk-weight for risk-based capital rules.

The table below summarizes the capital requirements applicable to the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Bank’s capital ratios as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. There have been no conditions or events since December 31, ~~2019~~2020 that management believes would change this classification. While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted in future periods.


Table 12 - Capital Ratio Requirements
	Minimum Requirement		Well-capitalized¹
Risk-based ratios:
Common equity tier 1 capital (CET1)	4.5	%	6.5	%
Tier 1 capital	6.0		8.0
Total capital	8.0		10.0
Leverage ratio	4.0		5.0
(1) The prompt corrective action provisions are only applicable at the bank level.


Table 13 - Capital Ratios	Table 13 - Capital Ratios					Table 13 - Capital Ratios
Company	Company	June 30, 2020		December 31, 2019		Company	March 31, 2021		December 31, 2020
CET1 risk-based capital ratio	CET1 risk-based capital ratio	10.26	%	10.33	%	CET1 risk-based capital ratio	10.49	%	10.62	%
Tier 1 risk-based capital ratio	Tier 1 risk-based capital ratio	12.39		12.52		Tier 1 risk-based capital ratio	12.49		12.71
Total risk-based capital ratio	Total risk-based capital ratio	13.32		13.17		Total risk-based capital ratio	13.76		13.78
Leverage ratio	Leverage ratio	9.23		8.92		Leverage ratio	8.70		8.49

Colony Bank	Colony Bank					Colony Bank
CET1 risk-based capital ratio	CET1 risk-based capital ratio	12.99	%	13.54	%	CET1 risk-based capital ratio	12.74	%	13.48	%
Tier 1 risk-based capital ratio	Tier 1 risk-based capital ratio	12.99		13.52		Tier 1 risk-based capital ratio	12.74		13.48
Total risk-based capital ratio	Total risk-based capital ratio	13.92		14.19		Total risk-based capital ratio	13.81		14.55
Leverage ratio	Leverage ratio	9.70		9.77		Leverage ratio	9.05		9.12

6456

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's primary market risk exposures are credit risk, interest rate risk, and to a lesser degree, liquidity risk. The Bank operates under an Asset Liability Management Policy which is approved by the ALCO, which is a Board committee that meets regularly. The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the net market values of assets and liabilities over certain changes in interest rate environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on the Bank's assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk and the process for the approval, implementation and monitoring of interest rate risk strategies to achieve the Bank's interest rate risk objectives.

In addition to interest rate risk, the ~~recent~~ongoing COVID-19 pandemic and the related stay-at-home and ~~self-distancing~~social-distancing mandates will likely expose us to additional market value risk. Protracted closures, furloughs and lay-offs have curtailed economic activity, and will likely continue to curtail economic activity and could result in lower fair values for collateral in our loan portfolio.

The following table presents our interest sensitivity position at the dates indicated.

Table 14 - Interest Sensitivity
Increase (Decrease) in Net Interest Income from Base Scenario at
June 30, 2020 December 31, 2019
Changes in rates
200 basis point increase 13.83% 3.87%
100 basis point increase 7.57 2.54
100 basis point decrease 0.68 (4.12)


Table 14 - Interest Sensitivity
	Increase (Decrease) in Net Interest Income from Base Scenario at
	March 31, 2021	December 31, 2020
Changes in rates
200 basis point increase	11.82%	12.55%
100 basis point increase	6.14	6.71
100 basis point decrease	(3.32)	(2.91)

See Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of the Company’s Annual Report on Form 10-K as of and for the year ended December 31, ~~2019~~2020 for additional disclosures related to market and interest rate risk.

ITEM 4 – CONTROLS AND PROCEDURES

~~The~~Under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, ~~have~~the Company has evaluated ~~the Company’s~~its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act. Based on such evaluation, ~~such officers~~the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for ensuring that information the Company is required to disclose in reports that it files or submits under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to the Company's senior management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended ~~June 30, 2020,~~March 31, 2021, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

6557

Part II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

In the ordinary course of business, there are various legal proceedings pending against the Company and the Bank. The aggregate liabilities, if any, arising from such proceedings would not, in the opinion of management, have a material adverse effect on the Company’s consolidated financial position.

ITEM 1A – RISK FACTORS

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in "Part I - Item IA - Risk Factors” of the Company’s ~~2019~~2020 Form 10-K, ~~and "Item 1A. - Risk Factors" of the Company's 1Q 2020 Form 10Q,~~ which could materially affect its business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. In addition, these risks may be heightened by the disruption and uncertainty resulting from COVID-19. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.

~~Other than the risk factor set forth below, there~~There are no material changes during the period covered by this Report to the risk factors previously disclosed in the ~~Company’s 2019 Form 10-K and 1Q~~Company's 2020 Form ~~10-Q.~~

The COVID-19 pandemic and resulting adverse economic conditions have already adversely impacted the Company’s business and results, and could have a more material adverse impact on its business, financial condition, and results of operations.

The ongoing COVID-19 global and national health emergency has caused significant disruption in the United States and international economies and financial markets. The spread of COVID-19 in the United States has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in commercial activity and financial transactions, supply chain interruptions, increased unemployment, and overall economic and financial market instability. In March 2020, almost all states, including Georgia, where the Company is headquartered and conducts its operations, issued “stay-at-home orders” and declared states of emergency. Recently, state and local governments have implemented phased regulations and guidelines for reopening communities and economies, often with reduced capacity and social distancing restrictions.

Although banks have generally been permitted to continue operating, the COVID-19 pandemic has caused disruptions to the Company’s business and could cause material disruptions to its business and operations in the future. Impacts to the business have included increases in costs and reductions in operating effectiveness due to additional health and safety precautions implemented at the Company’s branches and the transition of a portion of its workforce to home locations, decreases in customer traffic in its branches, and increases in requests for and the making of loan modifications. The Company anticipates that additional future impacts to its business will include increases in the Company’s customers’ inability to make scheduled loan payments and increases in requests for forbearance. Further, loan payment deferment programs implemented by the Company or under government stimulus programs, like the PPP, may mask credit deterioration in its loan portfolio by making less applicable standard measures of identifying developing financial weakness in a client or portfolio, such as past due monitoring and non-accrual assessments. To the extent that commercial and social restrictions remain in place or increase, the Company’s expenses, delinquencies, charge-offs, foreclosures, and credit losses may materially increase, and the Company could experience reductions in fee income. In addition, any declines in credit quality could significantly affect the adequacy of the Company’s allowance for loan losses, which would lead to increases in the provision for loan losses and related declines in its net income.

Unfavorable economic conditions and increasing unemployment figures may also make it more difficult for the Company to maintain deposit levels and loan origination volume and to obtain additional financing. Furthermore, such conditions have and may continue to cause the value of the Company’s investment portfolio and of collateral associated with its existing loans to decline. In addition, in March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0 to 0.25 percent in part as a result of the pandemic. A prolonged period of very low interest rates could reduce the Company’s net interest income and have a material adverse impact on its cash flows.10-K.

While the Company has taken and is continuing to take precautions to protect the safety and well-being of its employees and customers, no assurance can be given that the steps being taken will be deemed to be adequate or appropriate, nor can the Company predict the continued level of disruption which will occur to its employee's ability to provide customer support and service. The continued or renewed spread of COVID-19 could negatively impact the availability of key personnel necessary to conduct the Company’s business, the business and operations of its third-party service providers who perform critical services for the business, or the businesses of many of ~~the Company’s~~ customers and borrowers. Despite phased regulations and guidelines for reopening communities and economies, health advisors warn that a “second wave” of the pandemic is possible if reopening is pursued too soon or in the wrong manner. If COVID-19 is not successfully contained, the Company could experience a material adverse effect on its business, financial condition, results of operations, and cash flow.

~~Among the factors outside the Company’s control that are likely to affect the impact the COVID-19 pandemic will ultimately have on its business are, without limitation:~~

•~~the pandemic’s duration, nature, and severity;~~

•the direct and indirect results of the pandemic, such as recessionary economic trends, including with respect to employment, wages and benefits, commercial activity, the residential housing market, consumer spending and real estate and investment securities market values;

•political, legal, and regulatory actions and policies in response to the pandemic, including the effects of restrictions on commerce and banking, such as current temporary or required continuing moratoria and other suspensions of collections, foreclosures, and related obligations;

•the timing, magnitude, and effect of public spending, directly or through subsidies, its direct and indirect effects on commercial activity and incentives of employers and individuals to resume or increase employment, wages and benefits, and commercial activity;

•~~effects on the Company’s liquidity position due to changes in customers’ deposit and loan activity in response to the pandemic and its economic effects;~~

•~~the timing and availability of direct and indirect governmental support for various financial assets, including mortgage loans;~~

•~~the long-term effect of the economic downturn on the Company’s intangible assets such as its goodwill;~~

•~~potential longer-term effects of increased government spending on the interest rate environment and borrowing costs for non-governmental parties;~~

•~~the ability of~~ ~~the Company’s~~ ~~employees to work effectively during the course of the pandemic;~~

•~~the ability of~~ ~~the Company’s~~ ~~third-party vendors to maintain a high-quality and effective level of service;~~

•the possibility of increased fraud, cybercrime, and similar incidents, due to vulnerabilities posed by the significant increase in Company employees and customers handling their banking interactions remotely from home, the quick roll-out of various government-sponsored lending programs, like the PPP, or otherwise;

•~~required changes to~~ ~~the Company’s~~ ~~internal controls over financial reporting to reflect a rapidly changing work environment;~~

•~~potential longer-term shifts toward mobile banking, telecommuting, and telecommerce;~~

•~~short- and long-term health impacts;~~

•~~unforeseen effects of the pandemic; and~~

•~~geographic variation in the severity and duration of the COVID-19 pandemic, including in states in which the Company operates physically such as Georgia.~~

The ongoing COVID-19 pandemic has contributed to severe volatility in the financial markets and meaningfully lower stock prices for many companies, including the Company’s common stock. Depending on the extent and duration of the COVID-19 pandemic and perceptions regarding national and global recovery from the pandemic, the price of the Company’s common stock may continue to experience volatility and declines.

The Company is continuing to monitor the COVID-19 pandemic and related risks, including phased reopenings, although the rapid development and fluidity of the situation precludes any specific prediction as to its ultimate impact on the Company. However, if the pandemic continues to spread or otherwise result in a continuation or worsening of the current economic and commercial environments, the Company’s business, financial condition, results of operations, and cash flows could be materially adversely affected.

ITEM 2 – UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered shares of the Company’s common stock sold during the three-month period ended ~~June 30, 2020.~~March 31, 2021.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

~~None~~None.

ITEM 4 – MINE SAFETY DISCLOSURES

Not ~~applicable~~applicable.

ITEM 5 – OTHER INFORMATION

~~None~~None.

ITEM 6 – EXHIBITS


2.1 Agreement and Plan of Merger, dated April 22, 2021, by and between Colony Bankcorp, Inc. and SouthCrest Financial Group, Inc. – filed as Exhibit 2.1 to Registrant’s Current Report on Form 8-K (File No. 000-12436), filed with the Commission on April 22, 2021 and incorporated herein by reference.

3.1 Articles of Incorporation, As Amended -filed as Exhibit 99.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 0-12436), filed with the Commission on August 4, 2014 and incorporated herein by reference.

3.2 Amended and Restated Bylaws -filed as Exhibit ~~3.2~~3.1 to the Registrant’s ~~Annual~~Current Report on Form ~~10-K~~8-K (File No. ~~0-12436)~~000-12436), filed with the Commission on ~~March 30,~~September 18, 2020 and incorporated herein by reference.

10.1 Employment Agreement, dated as of January 19, 2021, between Colony Bankcorp, Inc. and Max Edward Hoyle – filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K (File No. 000-12436), filed with the Commission on January 26, 2021 and incorporated herein by reference.

31.1 Certificate of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

~~31.2 Certificate of Chief Financial Officer Pursuant to Section 302 of Sarbanes – Oxley Act of~~ 31.2 Certificate of Chief Financial Officer Pursuant to Section 302 of Sarbanes – Oxley Act of 2002

32.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019;~~2020; (ii) Condensed Consolidated Statements of Income for the Three ~~and Six~~ Months Ended ~~June 30, 2020~~March 31, 2021 and ~~2019;~~2020; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Six~~ Months Ended ~~June 30, 2020~~March 31, 2021 and ~~2019;~~2020; (iv) Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three ~~and Six~~ Months Ended ~~June 30, 2020~~March 31, 2021 and ~~2019;~~2020; (v) Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30, 2020~~March 31, 2021 and ~~2019;~~2020; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements*

104 The cover page from Colony Bankcorp’s Quarterly Report on Form 10-Q for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 (formatted in Inline XBRL and included in Exhibit 101)

6859

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Colony Bankcorp, Inc.


			/s/ T. Heath Fountain
Date: ~~August 10, 2020~~May 17, 2021			T. Heath Fountain
			President and Chief Executive Officer
			(Principal Executive Officer)

			/s/ Tracie Youngblood
Date: ~~August 10, 2020~~May 17, 2021			Tracie Youngblood
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)

6960


(dollars in thousands, except market price)	Initial Fair Value Adjustments		Subsequent Adjustments ⁽¹⁾		Final Balance
Purchase price consideration:
Shares of CBAN common stock issued to LBC shareholders as of May 1, 2019	1,053,875		1,053,875		1,053,875
Market price of CBAN common stock on May 1, 2019	$	17.75	$	(0.46)	$	17.29
Estimated fair value of CBAN common stock issued	18,706		(485)		18,221
Cash consideration paid	15,315		—		15,315
Total consideration	$	34,021	$	(485)	$	33,536

Assets acquired at fair value:
Cash and cash equivalents	$	15,678	$	—	$	15,678
Investments securities available for sale	49,172		—		49,172
Investments securities held to maturity	1,766		—		1,766
Restricted investments	479		—		479
Loans	130,568		—		130,568
Premises and equipment	3,009		—		3,009
Core deposit intangible	3,100		—		3,100
Other real estate	243		—		243
Prepaid and other assets	6,143		—		6,143
Total fair value of assets acquired	$	210,158	$	—	$	210,158

Liabilities assumed at fair value:
Deposits	$	(189,896)	$	—	$	(189,896)
FHLB advances	(1,000)		—		(1,000)
Payables and other liabilities	(975)		—		(975)
Total fair value of liabilities assumed	$	(191,871)	$	—	$	(191,871)

Net assets acquired at fair value:	$	18,287	$	—	$	18,287

Amount of goodwill resulting from acquisition	$	15,734	$	(485)	$	15,249


(dollars in thousands)	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
Acquired receivables subject to ASC 310-30	$	176	$	695	$	519
Acquired receivables not subject to ASC 310-30	130,392		132,381		—


(dollars in thousands, except per share data)	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Numerator
Net income available to common stockholders	$	2,214	$	2,101	$	3,817	$	4,936

Denominator
Weighted average number of common shares
Outstanding for basic earnings per common share	9,499		9,089		9,499		8,765




Weighted-average number of shares outstanding for diluted earnings per common share	9,499		9,089		9,499		8,765

Earnings per share - basic	$	0.23	$	0.23	$	0.40	$	0.56

Earnings per share - diluted	$	0.23	$	0.23	$	0.40	$	0.56


Table 3 - Average Balance Sheet and Net Interest Analysis
	Three Months Ended June 30,
	2020										2019
(dollars in thousands)	Average Balances		Income/ Expense		Yields/ Rates		Average Balances		Income/ Expense		Yields/ Rates
Assets
Interest-earning assets:
Loans, net of unearned income⁽¹⁾	$	1,094,299	$	13,699	5.02	%	$	866,841	$	12,313	5.70	%
Investment securities, taxable	331,378		1,757		2.13		385,374		2,399		2.50
Investment securities, tax-exempt⁽²⁾	8,959		37		1.66		2,228		17		3.06
Deposits in banks and short term investments	159,902		48		0.12		59,894		369		2.47
Total interest-earning assets	1,594,538		15,541		3.91		1,314,337		15,098		4.61
Noninterest-earning assets	$	108,364					94,928
Total assets	$	1,702,902					$	1,409,265
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-earning demand and savings	$	766,692	$	407	0.21	%	$	624,196	$	1,136	0.73	%
Other time	311,334		996		1.28		368,116		1,496		1.63
Total interest-bearing deposits	1,078,026		1,403		0.52		992,312		2,632		1.06
Federal Home Loan Bank advances	36,500		211		2.32		49,070		374		3.06
Paycheck Protection Program Liquidity Facility	99,124		87		0.35		—		—		—
Other borrowings	38,694		299		3.10		24,229		267		4.42
Total other interest-bearing liabilities	174,318		597		1.37		73,299		641		3.51
Total interest-bearing liabilities	1,252,344		2,000		0.64		1,065,611		3,273		1.23
Noninterest-bearing liabilities:
Demand deposits	$	306,713					$	226,862
Other liabilities	6,632						3,631
Stockholders' equity	137,213						113,161
Total noninterest-bearing liabilities and stockholders' equity	$	450,558					$	343,654
Total liabilities and stockholders' equity	$	1,702,902					$	1,409,265
Interest rate spread					3.27	%					3.38	%
Net interest income			$	13,541					$	11,825
Net interest margin					3.41	%					3.61	%


Table 10 - Nonperforming Assets⁽¹⁾
(dollars in thousands)
	June 30, 2020			December 31, 2019
Nonaccrual loans	$	11,459		$	9,179
Loans past due 90 days and accruing	—			—
Other real estate owned	1,769			1,320
Repossessed assets	17			13
Total nonperforming assets	$	13,245		$	10,512
Nonaccrual loans by loan segment
Construction, land and land development	$	187		$	32
Commercial real estate	5,645			3,738
Residential real estate	3,549			3,643
Commercial, financial & agriculture	1,875			1,628
Consumer & other	203			138
Total nonaccrual loans	$	11,459		$	9,179

NPAs as a percentage of total loans and OREO	1.19		%	1.08		%
NPAs as a percentages of total assets	0.75		%	0.69		%
Nonaccrual loans as a percentage of total loans	1.03		%	0.95		%