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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 March 31, 2022
OR
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 000-12436
COLONY BANKCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Georgia58-1492391
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, Par Value $1.00 per shareCBANThe 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 May 13, 2022, the registrant had 17,586,333 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 

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COLONY BANKCORP, INC. AND SUBSIDIARIES


Consolidated Balance Sheets
 March 31, 2022December 31, 2021
(dollars in thousands, except per share data)(Unaudited)(Audited)
ASSETS
  
Cash and due from banks$23,594 $18,975 
Federal funds sold and interest-bearing deposits in banks132,823 178,257 
Cash and cash equivalents156,417 197,232 
Investment securities available for sale, at fair value653,292 938,164 
Investment securities held to maturity, at amortized cost307,009 — 
Other investments, at cost13,827 14,012 
Loans held for sale24,228 38,150 
Loans1,354,032 1,337,977 
Allowance for loan losses(12,919)(12,910)
      Loans, net1,341,113 1,325,067 
Premises and equipment43,010 43,033 
Other real estate owned246 281 
Goodwill52,902 52,906 
Other intangible assets6,924 7,389 
Bank-owned life insurance55,488 55,159 
Deferred income taxes, net14,546 3,644 
Other assets17,786 16,678 
Total assets$2,686,788 $2,691,715 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing
$557,985 $552,576 
Interest-bearing
1,792,801 1,822,032 
Total deposits
2,350,786 2,374,608 
Federal Home Loan Bank advances
51,712 51,656 
Other borrowings
24,229 36,792 
Other liabilities
9,784 10,952 
Total liabilities
$2,436,511 $2,474,008 
Stockholders' equity:
Preferred stock, no par value; 10,000,000 shares authorized, none issued or outstanding as of March 31, 2022 and December 31, 2021, respectively
— — 
Common stock, par value $1.00 per share; 20,000,000 shares authorized, 17,586,333 and 13,673,898 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
17,586 13,674 
Paid in capital166,859 111,021 
Retained earnings
103,036 99,189 
Accumulated other comprehensive loss, net of tax(37,204)(6,177)
Total stockholders' equity
250,277 217,707 
Total liabilities and stockholders' equity
$2,686,788 $2,691,715 
See accompanying notes to consolidated financial statements (unaudited).

3

COLONY BANKCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
 Three Months Ended
(dollars in thousands, except per share data)March 31, 2022March 31, 2021
Interest income  
Loans, including fees$16,010 $13,573 
Investment securities4,171 1,750 
Federal funds sold, interest bearing deposits in banks and short term investments56 53 
Total interest income20,237 15,376 
Interest expense
Deposits599 654 
Federal Home Loan Bank Advances249 114 
Paycheck Protection Program Liquidity Facility— 68 
Other borrowings201 257 
Total interest expense1,049 1,093 
Net interest income19,188 14,283 
Provision for loan losses50 500 
Net interest income after provision for loan losses19,138 13,783 
Noninterest income
Service charges on deposits1,825 1,222 
Mortgage fee income2,912 3,995 
Gain on sales of SBA loans1,726 1,471 
Gain (loss) on sales of securities24 (4)
Interchange fees2,000 1,530 
BOLI Income312 208 
Other353 154 
Total noninterest income9,152 8,576 
Noninterest expense
Salaries and employee benefits13,272 9,955 
Occupancy and equipment1,619 1,326 
Acquisition related expenses624 176 
Information technology expenses2,354 1,592 
Professional fees869 486 
Advertising and public relations766 580 
Communications437 218 
Other1,864 1,449 
Total noninterest expense21,805 15,782 
Income before income taxes6,485 6,577 
Income taxes1,161 1,658 
Net income$5,324 $4,919 
Earnings per common share:
Basic$0.34 $0.52 
Diluted0.34 0.52 
Dividends declared per share0.1075 0.1000 
Weighted average common shares outstanding:
Basic15,877,695 9,498,783 
Diluted15,877,695 9,498,783 
 See accompanying notes to consolidated financial statements (unaudited).

4

COLONY BANKCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive (Loss) Income (unaudited)
 Three Months Ended
(dollars in thousands)March 31, 2022March 31, 2021
Net income$5,324 $4,919 
Other comprehensive (loss) income:
Unrealized (losses) gains on securities arising during the period(38,281)(6,701)
Tax effect7,273 1,742 
Realized (gains) losses on sales of available for sale securities(24)4 
Tax effect5 (1)
Change in unrealized (losses) gains on securities available for sale, net of reclassification adjustment and tax effects(31,027)(4,956)
Comprehensive (loss) income$(25,703)$(37)

 See accompanying notes to consolidated financial statements (unaudited).

5

COLONY BANKCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (unaudited)
(dollars in thousands, except per share data)Common Stock
Three Months Ended
SharesAmountPaid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
Balance, December 31, 202113,674 $13,674 $111,021 $99,189 $(6,177)$217,707 
Change in net unrealized losses on securities available for sale, net of reclassification adjustment and tax effects— — — — (31,027)(31,027)
Dividends on common shares ($0.1075 per share)
— — — (1,477)— (1,477)
    Issuance of common stock3,848 3,848 55,620 — — 59,468 
    Issuance of restricted stock64 64 (64)— — — 
Stock-based compensation expense
— — 282 — — 282 
Net income
— — — 5,324 — 5,324 
Balance, March 31, 202217,586 $17,586 $166,859 $103,036 $(37,204)$250,277 
Balance, December 31, 20209,499 $9,499 $43,215 $84,993 $6,781 $144,488 
Change in net unrealized losses on securities available for sale, net of reclassification adjustment and tax effects— — — — (4,956)(4,956)
Dividends on common shares ($0.1000 per share)
— — — (973)— (973)
Stock-based compensation expense— — 9 — — 9 
Net income— — — 4,919 — 4,919 
Balance, March 31, 20219,499 $9,499 $43,224 $88,939 $1,825 $143,487 

 See accompanying notes to consolidated financial statements (unaudited).







6

COLONY BANKCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
 Three Months Ended
(dollars in thousands)March 31, 2022March 31, 2021
Operating Activities  
Net income$5,324 $4,919 
Adjustments reconciling net income to net cash provided by (used in) operating activities:
Provision for loan losses50 500 
Depreciation, amortization, and accretion3,115 1,762 
Equity method investment income292 — 
Share-based compensation expense282 9 
Net change in servicing asset(359)(290)
(Gain) loss on sales of securities, available-for-sale(24)4 
Gain on sales of SBA loans(1,726)(1,471)
Gain on sales of other real estate owned— (25)
Donation of other real estate owned35 — 
Writedown on other real estate owned— 16 
Gain on sales of premises & equipment(31)— 
Originations of loans held for sale(89,078)(105,919)
Proceeds from sales of loans held for sale104,726 131,347 
Change in bank-owned life insurance(329)(34)
Deferred tax benefit(230)(589)
Change in other assets1,063 (3,619)
Change in other liabilities(1,168)1,653 
Net cash provided by operating activities21,942 28,263 
Investing Activities
Purchases of investment securities, available-for-sale(90,258)(86,465)
Proceeds from maturities, calls, and paydowns of investment securities, available-for-sale17,618 24,819 
Proceeds from sales of investment securities, available-for-sale3,061 1,643 
Proceeds from maturities, calls and paydowns of securities, held-to-maturity2,340 — 
Change in loans, net(16,365)(3,525)
Purchase of premises and equipment(692)(1,300)
Proceeds from sales of premises and equipment40 — 
Proceeds from sales of other real estate owned— 607 
Redemption (purchase) of Federal Home Loan Bank Stock(107)593 
Net cash used in investing activities(84,363)(63,628)
Financing Activities
Change in noninterest-bearing customer deposits5,409 57,831 
Change in interest-bearing customer deposits(29,231)23,026 
Issuance of common stock, net of stock issuance cost59,468 — 
Dividends paid for common stock(1,477)(973)
Repayment on Paycheck Protection Program Liquidity Fund— (46,187)
   Repayments on Other borrowings(12,563)(250)
Net cash provided by financing activities21,606 33,447 
Net decrease in cash and cash equivalents(40,815)(1,918)
Cash and cash equivalents at beginning of period197,232 183,506 
Cash and cash equivalents at end of period$156,417 $181,588 



7

COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(UNAUDITED)
(DOLLARS IN THOUSANDS)
 Three Months Ended
 March 31, 2022March 31, 2021
Supplemental Disclosure of Cash Flow Information  
Cash paid during the period for interest$1,109 $994 
Cash paid during the period for income taxes7 — 
Noncash Investing and Financing Activities
Acquisition of real estate through foreclosure— 110 
Carrying amount of Securities AFS transferred to HTM, net of $13,107 unrealized loss
320,116 — 
 See accompanying notes to consolidated financial statements (unaudited).

8
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, except where the context 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 months ended March 31, 2022 are not necessarily indicative of the results which may be expected for the year ending December 31, 2022. 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, 2021 (“2021 Form 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, Statesboro, Sylvester, 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 2022. Such reclassifications have not materially affected previously reported stockholders’ equity or net income.
Adjustments
A goodwill adjustment was made within the one year period allowed after the acquisition for $4,000 related to deferred taxes.

9
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 March 31, 2022, approximately 87% 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, 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 in the process of working with a third party vendor using their software solution to assist with adoption. The Company is also currently gathering necessary data to implement this change and is continuing to assess the impact of the adoption of this ASU on its consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial 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) reference rate reform on financial reporting. The amendments are effective for the Company as of March 12, 2020 through December 31, 2022. The provisions of ASU 2020-04 did not have a material impact on the consolidated financial statements.


10
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(2) Investment Securities
The amortized cost and estimated fair value of securities available-for-sale and held-to-maturity along with gross unrealized gains and losses are summarized as follows:
(dollars in thousands)
March 31, 2022Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
Securities Available for Sale:
U.S. treasury securities$95,447 $3 $(4,449)$91,001 
U.S. agency7,143 3 (251)6,895 
Asset backed securities28,887 — (531)28,356 
State, county & municipal securities174,561 15 (15,695)158,881 
Corporate debt securities48,113 200 (1,719)46,594 
Mortgage-backed securities339,028 104 (17,567)321,565 
Total$693,179 $325 $(40,212)$653,292 
March 31, 2022Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
Securities Held to Maturity:
U.S. treasury securities$21,511 $— $(776)$20,735 
U.S. agency15,507 — (743)14,764 
State, county & municipal securities88,781 — (6,323)82,458 
Mortgage-backed securities181,210 — (10,357)170,853 
Total$307,009 $— $(18,199)$288,810 
December 31, 2021
Securities Available for Sale:
U.S. treasury securities$88,638 $— $(1,087)$87,551 
U.S. agency17,916 5 (140)17,781 
State, county & municipal securities252,632 877 (3,356)250,153 
Corporate debt securities48,153 520 (265)48,408 
Mortgage-backed securities539,172 2,160 (7,061)534,271 
Total$946,511 $3,562 $(11,909)$938,164 
The Company transferred certain agency-issued securities from the available-for-sale to held-to-maturity portfolio on January 1, 2022 having a book value of approximately $320.1 million and a market value of approximately $309.7 million. As of the date of transfer, the related pre-tax net unrecognized losses of approximately $10.4 million within the accumulated other comprehensive loss balance are being amortized over the remaining term of the securities using the effective interest method. This transfer was completed after careful consideration of the Company’s intent and ability to hold these securities to maturity. Factors used in assessing the ability to hold these securities to maturity were future liquidity needs and sources of funding.
The amortized cost and fair value of investment securities as of March 31, 2022, 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,
11
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
which are disclosed separately in the table below.
Available for SaleHeld to Maturity
(dollars in thousands)Amortized CostFair ValueAmortized CostFair Value
Due in one year or less$454 $454 $— $— 
Due after one year through five years71,981 69,718 6,678 6,505 
Due after five years through ten years121,335 113,599 45,654 43,466 
Due after ten years160,381 147,956 73,467 67,986 
$354,151 $331,727 $125,799 $117,957 
Mortgage-backed securities339,028 321,565 181,210 170,853 
$693,179 $653,292 $307,009 $288,810 
Proceeds from the sale of investment securities totaled $3.1 million and $1.6 million for the three months ended March 31, 2022 and 2021, respectively. The sale of investment securities for the three months ended March 31, 2022 and 2021 resulted in gross realized gains of $24,000 and $1,000 and losses of $0 and $5,000, respectively.
Investment securities having a carrying value approximating $268.9 million and $126.5 million were pledged to secure public deposits and for other purposes as of March 31, 2022 and December 31, 2021, respectively.
Information pertaining to available-for-sale securities with gross unrealized losses at March 31, 2022 and December 31, 2021 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
Less Than 12 Months12 Months or GreaterTotal
(dollars in thousands)Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
March 31, 2022
U.S. Treasury$85,998 $(4,449)$—$— $85,998 $(4,449)
U.S. agency6,893 (251)— — 6,893 (251)
Asset backed securities21,734 (356)4,052 (175)25,786 (531)
State, county & municipal securities142,665 (13,806)14,430 (1,889)157,095 (15,695)
Corporate debt securities43,103 (1,719)— — 43,103 (1,719)
Mortgage-backed securities260,863 (13,274)39,420 (4,293)300,283 (17,567)
$561,256 $(33,855)$57,902 $(6,357)$619,158 $(40,212)
December 31, 2021
U.S. Treasury$87,302 $(1,087)$— $— $87,302 $(1,087)
U.S. agency10,969 (140)— — 10,969 (140)
State, county & municipal securities180,551 (3,131)5,970 (225)186,521 (3,356)
Corporate debt securities31,977 (265)— — 31,977 (265)
Mortgage-backed securities377,413 (6,421)21,129 (640)398,542 (7,061)
$688,212 $(11,044)$27,099 $(865)$715,311 $(11,909)

12
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Information pertaining to held-to-maturity securities with gross unrealized losses at March 31, 2022 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
Less Than 12 Months12 Months or GreaterTotal
(dollars in thousands)Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
March 31, 2022
U.S. Treasury$— $— $—$— $— $— 
U.S. agency20,735 (776)— — 20,735 (776)
State, county & municipal securities14,764 (743)— — 14,764 (743)
Corporate debt securities81,674 (6,308)783 (15)82,457 (6,323)
Mortgage-backed securities153,938 (9,879)16,915 (478)170,853 (10,357)
$271,111 $(17,706)$17,698 $(493)$288,809 $(18,199)
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 March 31, 2022, there were 343 available-for-sale securities and 77 held-to-maturity securities that had 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, no declines are deemed to be other than temporary.


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 March 31, 2022 and December 31, 2021. Purchased loans are defined as loans that were acquired in bank acquisitions.
March 31, 2022
(dollars in thousands)Legacy LoansPurchased LoansTotal
Construction, land and land development$147,306 $23,605 $170,911 
Other commercial real estate653,831 149,164 802,995 
Total commercial real estate801,137 172,769 973,906 
Residential real estate149,215 58,471 207,686 
Commercial, financial, & agricultural (*)126,373 27,865 154,238 
Consumer and other16,788 1,414 18,202 
Total Loans$1,093,513 $260,519 $1,354,032 
December 31, 2021
(dollars in thousands)Legacy LoansPurchased LoansTotal
Construction, land and land development$119,953 $45,493 $165,446 
Other commercial real estate595,739 191,653 787,392 
Total commercial real estate715,692 237,146 952,838 
Residential real estate159,469 53,058 212,527 
Commercial, financial, & agricultural (*)113,040 41,008 154,048 
Consumer and other16,003 2,561 18,564 
Total Loans$1,004,204 $333,773 $1,337,977 
(*) Includes $387,000 and $9.0 million in PPP loans at March 31, 2022 and December 31, 2021, respectively.
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.
Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (1) the risk grade assigned to commercial and consumer loans, (2) the level of classified commercial loans, (3) net charge-offs, (4) nonperforming loans, and (5) the general economic conditions in the Company’s geographic markets.
The Company uses a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 10. A description of the general characteristics of the grades is as follows:
•Grades 1, 2 and 3 - Borrowers with these assigned risk grades range 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 4 and 5 - 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. These loans are also included in into the “pass” classification.

14
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
•Grade 6 - 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.
•Grades 7 and 8 - These grades 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 grade 8, 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 9 and 10 - These grades correspond to regulatory classification definitions of “doubtful” and “loss,” respectively. In practice, any loan with these grades would be for a very short period of time, and generally the Company has no loans with these assigned grades. Management manages the Company’s problem loans in such a way that uncollectible loans or uncollectible portions of loans are charged off immediately with any residual, collectible amounts assigned a risk grade of 7 or 8. 
The following table presents the loan portfolio, excluding purchased loans, by credit quality indicator (risk grade) as of March 31, 2022 and December 31, 2021. Those loans with a risk grade of 1, 2, 3, 4 and 5 have been combined in the pass column for presentation purposes.
(dollars in thousands)PassSpecial MentionSubstandardTotal Loans
March 31, 2022
Construction, land and land development$144,522 $2,529 $255 $147,306 
Other commercial real estate622,237 23,734 7,860 653,831 
Total commercial real estate766,759 26,263 8,115 801,137 
Residential real estate138,027 5,803 5,385 149,215 
Commercial, financial, & agricultural124,178 1,174 1,021 126,373 
Consumer and other16,670 70 48 16,788 
Total Loans$1,045,634 $33,310 $14,569 $1,093,513 
(dollars in thousands)
December 31, 2021
Construction, land and land development$117,044 $2,634 $275 $119,953 
Other commercial real estate562,228 25,718 7,793 595,739 
Total commercial real estate679,272 28,352 8,068 715,692 
Residential real estate148,507 5,733 5,229 159,469 
Commercial, financial, & agricultural110,267 1,488 1,285 113,040 
Consumer and other15,787 78 $138 16,003 
Total Loans$953,833 $35,651 $14,720 $1,004,204 

15
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of March 31, 2022 and December 31, 2021. Those loans with a risk grade of 1, 2, 3, 4 or 5 have been combined in the pass column for presentation purposes. For the period ending March 31, 2022, the Company did not have any loans classified as “doubtful” or a “loss”.
(dollars in thousands)PassSpecial MentionSubstandardTotal Loans
March 31, 2022
Construction, land and land development$23,577 $— $28 $23,605 
Other commercial real estate147,899 184 1,081 149,164 
Total commercial real estate171,476 184 1,109 172,769 
Residential real estate55,412 686 2,373 58,471 
Commercial, financial, & agricultural27,241 373 251 27,865 
Consumer and other1,410 — 4 1,414 
Total Loans$255,539 $1,243 $3,737 $260,519 
December 31, 2021
Construction, land and land development$45,432 $— $61 $45,493 
Other commercial real estate186,905 3,518 1,230 191,653 
Total commercial real estate232,337 3,518 1,291 237,146 
Residential real estate49,875 563 2,620 53,058 
Commercial, financial, & agricultural40,711 — 297 41,008 
Consumer and other2,558 3 — 2,561 
Total Loans$325,481 $4,084 $4,208 $333,773 
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.

16
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 March 31, 2022 and December 31, 2021:
(dollars in thousands)30-89 Days
Past Due		90 Days
or More
Past Due		Total Accruing
Loans Past Due		Nonaccrual
Loans		Current LoansTotal Loans
March 31, 2022
Construction, land and land development$109 $— $109 $67 $147,130 $147,306 
Other commercial real estate759 — 759 1,336 651,736 653,831 
Total commercial real estate868 — 868 1,403 798,866 801,137 
Residential real estate278 — 278 2,978 145,959 149,215 
Commercial, financial, & agricultural437 — 437 578 125,358 126,373 
Consumer and other18 — 18 22 16,748 16,788 
Total Loans$1,601 $— $1,601 $4,981 $1,086,931 $1,093,513 
December 31, 2021
Construction, land and land development$6 $— $6 $— $119,947 $119,953 
Other commercial real estate349 — 349 577 594,813 595,739 
Total commercial real estate355 — 355 577 714,760 715,692 
Residential real estate421 — 421 2,641 156,407 159,469 
Commercial, financial, & agricultural69 — 69 708 112,263 113,040 
Consumer and other93 — 93 26 15,884 16,003 
Total Loans$938 $— $938 $3,952 $999,314 $1,004,204 


17
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 March 31, 2022 and December 31, 2021:
(dollars in thousands)30-89 Days
Past Due		90 Days
or More
Past Due		Total Accruing
Loans Past Due		Nonaccrual
Loans		Current LoansTotal Loans
March 31, 2022
Construction, land and land development$— $— $— $— $23,605 $23,605 
Other commercial real estate— — — 125 149,039 149,164 
Total commercial real estate— — — 125 172,644 172,769 
Residential real estate598 — 598 1,061 56,812 58,471 
Commercial, financial, & agricultural226 — 226 — 27,639 27,865 
Consumer and other3 — 3 4 1,407 1,414 
Total Loans$827 $— $827 $1,190 $258,502 $260,519 
December 31, 2021
Construction, land and land development$2,680 $— $2,680 $31 $42,782 $45,493 
Other commercial real estate— — — 260 191,393 191,653 
Total commercial real estate2,680 — 2,680 291 234,175 237,146 
Residential real estate560 — 560 1,198 51,300 53,058 
Commercial, financial, & agricultural389 — 389 — 40,619 41,008 
Consumer and other— — — 8 2,553 2,561 
Total Loans$3,629 $— $3,629 $1,497 $328,647 $333,773 

18
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 March 31, 2022.
March 31, 2022
(dollars in thousands)Unpaid
Contractual
Principal
Balance		Recorded InvestmentRelated
Allowance		Average
Recorded
Investment
With No Related Allowance Recorded
Construction, land and land development$— $— $— $1,773 
Commercial real estate5,982 5,281 — 6,155 
Residential real estate1,022 1,058 — 1,071 
Commercial, financial & agriculture99 99 — 85 
Consumer & other2 2 — 1 
7,105 6,440 — 9,085 
With An Allowance Recorded
Construction, land and land development— — — — 
Commercial real estate1,168 1,183 141 2,938 
Residential real estate1,297 1,406 123 1,022 
Commercial, financial & agriculture180 198 163 50 
Consumer & other— — — — 
2,645 2,787 427 4,010 
Purchased Credit Impaired Loans
Construction, land and land development— — — 30 
Commercial real estate— — — 1,239 
Residential real estate3 — 1 6 
Commercial, financial & agriculture— — — 31 
Consumer & other192 — 96 144 
195 — 97 1,450 
Total
Construction, land and land development— — — 1,803 
Commercial real estate7,150 6,464 141 10,332 
Residential real estate2,322 2,464 124 2,099 
Commercial, financial & agriculture279 297 163 166 
Consumer & other194 2 96 145 
$9,945 $9,227 $524 $14,545 

19
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following table details impaired loan data as of December 31, 2021.
December 31, 2021
(dollars in thousands)Unpaid
Contractual
Principal
Balance		Recorded InvestmentRelated
Allowance		Average
Recorded
Investment
With No Related Allowance Recorded
Construction, land and land development$62 $62 $— $4,311 
Commercial real estate7,203 6,369 — 8,113 
Residential real estate958 997 — 1,083 
Commercial, financial & agriculture75 75 — 56 
Consumer & other— — — — 
8,298 7,503 — 13,563 
With An Allowance Recorded
Construction, land and land development— — — — 
Commercial real estate430 483 148 4,429 
Residential real estate685 773 108 1,029 
Commercial, financial & agriculture— — — 79 
Consumer & other— — — 1 
1,115 1,256 256 5,538 
Purchased Credit Impaired Loans
Construction, land and land development— — — 51 
Commercial real estate2,003 1,916 18 802 
Residential real estate4 — 6 7 
Commercial, financial & agriculture— — — 35 
Consumer & other192 73 96 72 
2,199 1,989 120 967 
Total
Construction, land and land development62 62 — 4,362 
Commercial real estate9,636 8,768 166 13,344 
Residential real estate1,647 1,770 114 2,119 
Commercial, financial & agriculture75 75 — 170 
Consumer & other192 73 96 73 
$11,612 $10,748 $376 $20,068 
Interest income recorded on impaired loans during the three months ended March 31, 2022 and 2021 was $215,000 and $238,000, respectively.

20
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Troubled Debt Restructurings
The restructuring of a loan is considered a troubled debt restructuring ("TDR") 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, 2021, which are included in the Company’s 2021 Form 10-K, once a loan is identified as a TDR, it is accounted for as an impaired loan. The Company had no unfunded commitments to lend to a customer that has a troubled debt restructured loan as of March 31, 2022. The Company had no loans restructured during the three month period ended March 31, 2022. Loans modified in a TDR are considered to be in default once the loan becomes 90 days past due. A TDR may cease being classified as impaired if the loan is subsequently modified at market terms and, has performed according to the modified terms for at least six months, and there has not been any prior principal forgiveness on a cumulative basis.
The Company had no loans that subsequently defaulted during the three months ended March 31, 2022 and 2021.


21
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(4) Allowance for Loan Losses
The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the three month periods ended March 31, 2022 and March 31, 2021. 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 developmentOther commercial real estateResidential real estateCommercial, financial & agriculturalConsumer and otherTotal
Three Months Ended March 31, 2022
Beginning Balance$1,127 $7,691 $1,805 $1,083 $1,204 $12,910 
Charge-offs— (58)(18)(16)(16)(108)
Recoveries6 7 4 44 6 67 
Provision206 (285)20 976 (867)$50 
Ending balance$1,339 $7,355 $1,811 $2,087 $327 $12,919 
Period end amount allocated to
Individually evaluated for impairment$— $141 $123 $163 $— $427 
Collectively evaluated for impairment1,339 7,214 1,687 1,924 231 12,395 
Purchase credit impaired— — 1 — 96 97 
Ending Balance$1,339 $7,355 $1,811 $2,087 $327 $12,919 
Loans
Individually evaluated for impairment$— $6,463 $2,465 $297 $2 $9,227 
Collectively evaluated for impairment170,911 796,532 205,221 153,941 18,200 1,344,805 
Purchase credit impaired— — — — — — 
Ending balance$170,911 $802,995 $207,686 $154,238 $18,202 $1,354,032 
22
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(dollars in thousands)Construction, land and land developmentOther commercial real estateResidential real estateCommercial, financial & agriculturalConsumer and otherTotal
Three Months Ended March 31, 2021
Beginning Balance$1,013 $6,880 $2,278 $1,713 $243 $12,127 
Charge-offs— — — (15)(11)(26)
Recoveries15 — 66 3 8 92 
Provision25 248 67 (35)195 500 
Ending balance$1,053 $7,128 $2,411 $1,666 $435 $12,693 
Year ended December 31, 2021
Period end amount allocated to
Individually evaluated for impairment$— $148 $108 $— $— $256 
Collectively evaluated for impairment1,127 7,525 1,691 1,083 1,108 12,534 
Purchase credit impaired— 18 6 — 96 120 
Ending Balance$1,127 $7,691 $1,805 $1,083 $1,204 $12,910 
Loans
Individually evaluated for impairment$62 $6,852 $1,770 $75 $— $8,759 
Collectively evaluated for impairment165,384 778,624 210,757 153,973 18,491 1,327,229 
Purchase credit impaired— 1,916 — — 73 1,989 
Ending Balance$165,446 $787,392 $212,527 $154,048 $18,564 $1,337,977 
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.

(5) Borrowings
The following table presents information regarding the Company’s outstanding borrowings at March 31, 2022 and December 31, 2021:
(dollars in thousands)March 31, 2022December 31, 2021
Federal Home Loan Bank advances$51,712 $51,656 
Other borrowings24,229 36,792 
$75,941 $88,448 
Advances from the Federal Home Loan Bank (“FHLB”) have maturities ranging from 2023 to 2029 and interest rates ranging from 1.01% 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 March 31,

23
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
2022, the lendable collateral of those loans pledged is $93.2 million. At March 31, 2022, the Company had remaining credit availability from the FHLB of $619.3 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 entered into two borrowing arrangements with a correspondent bank for $10.0 million each. The term note is secured by the Bank’s stock, expiring on May 1, 2024, and bears a fixed interest rate of 4.70%. The line of credit is also secured by the Bank’s stock, expiring on July 30, 2022, 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 March 31, 2022, the term note and the line of credit were closed and had zero balances, as both were paid off with the proceeds from the Company's public offering of its common stock completed on February 10, 2022. At December 31, 2021 the outstanding balances of the term note and the line of credit totaled $7.3 million and $5.3 million, respectively.
The Company's debentures issued in connection with 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 March 31, 2022 and December 31, 2021, $24.2 million of debentures underlying trust preferred securities were outstanding. The proceeds from the offerings were used to fund certain acquisitions, pay off holding company debt and inject capital into the bank subsidiary. The debentures underlying the trust preferred securities require quarterly interest payments.
The aggregate stated maturities of other borrowed money at March 31, 2022 are as follows:
(dollars in thousands)
YearAmount
20233,000 
20254,500 
2027 and After69,229 
Fair Value adjustment for FHLB borrowings acquired from SouthCrest(788)
$75,941 
The Company also has available federal funds lines of credit with various financial institutions totaling $53.0 million, none of which were outstanding at March 31, 2022.
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 March 31, 2022, the Company had borrowing capacity available under this arrangement, with no outstanding balances. The Company would be required to pledge certain available-for-sale investment securities as collateral under this agreement.


24
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

(6) 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.
The following table presents earnings per share for the three months ended March 31, 2022 and 2021.
(dollars in thousands, except per share data)Three Months Ended
March 31,
20222021
Numerator
Net income available to common stockholders
$5,324 $4,919 
Denominator
Weighted average number of common shares
Outstanding for basic earnings per common share
15,878 9,499 
Weighted-average number of shares outstanding for diluted earnings per common share
15,878 9,499 
Earnings per share - basic
$0.34 $0.52 
Earnings per share - diluted
$0.34 $0.52 

(7) 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 March 31, 2022 and December 31, 2021 the following financial instruments were outstanding whose contract amounts represent credit risk:  
Contract Amount
(dollars in thousands)March 31, 2022December 31, 2021
Loan commitments$374,598 $318,853 
Letters of credit5,040 4,869 
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.

25
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.
Standby and performance letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
Legal Contingencies. In the ordinary course of business, there are various legal proceedings pending against the Company and the Bank. As of March 31, 2022, 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.

(8) 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 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 other bank stock approximates carrying value and is classified as Level 2. Fair values for investment funds 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.

26
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Loans held for sale – The fair value of loans held for sale is determined on outstanding commitments from third party investors in the secondary markets and is classified within Level 2 of the valuation hierarchy.
Loans – The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value. Most loans are classified as Level 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.
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.

27
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 March 31, 2022 and December 31, 2021 are as follows:
Fair Value Measurements
(dollars in thousands)Carrying
Value		Estimated
Fair Value		Level
1		Level
2		Level
3
March 31, 2022
Assets
Cash and short-term investments$156,417 $156,417 $156,417 $— $— 
Investment securities available for sale653,292 653,292 — 653,292 — 
Investment securities held to maturity307,009 288,810 — 288,810 
Other investments, at cost13,827 13,827 — 9,744 4,083 
Loans held for sale24,228 24,228 — 24,228 — 
Loans, net1,341,113 1,328,231 — — 1,328,231 
Liabilities
Deposits2,350,786 2,351,458 — 2,351,458 — 
Federal Home Loan Bank advances51,712 51,656 — 51,656 — 
 Other borrowings24,229 24,229 — 24,229 — 
Fair Value Measurements
(dollars in thousands)Carrying
Value		Estimated
Fair Value		Level
1		Level
2		Level
3
December 31, 2021
Assets
Cash and short-term investments$197,232 $197,232 $197,232 $— $— 
Investment securities available for sale938,164 938,164 87,551 850,613 — 
Other investments, at cost14,012 14,012 5,574 4,183 4,255 
Loans held for sale38,150 38,150 — 38,150 — 
Loans, net1,325,067 1,328,853 — — 1,328,853 
Liabilities
Deposits2,374,608 2,375,385 — 2,375,385 — 
Federal Home Loan Bank advances51,656 51,162 — 51,162 — 
Other borrowings36,792 36,796 — 36,796 — 

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

28
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
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 owned. Typically, an external, third-party appraisal is performed on the collateral upon transfer into the other real estate owned account to determine the asset’s fair value. Subsequent adjustments to the collateral’s value may be based upon either updated third-party appraisals or management’s knowledge of the collateral and the current real estate market conditions. Appraised amounts used in determining the asset’s fair value, whether internally or externally prepared, are discounted 10% to account for selling and marketing costs. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a level 3 classification of the inputs for determining fair value. Because of the high degree of judgment required in estimating the fair value of other real estate owned assets and because of the relationship between fair value and general economic conditions, we consider the fair value of other real estate owned assets to be highly sensitive to changes in market conditions.
Assets Measured at Fair Value on a Recurring and Nonrecurring Basis – The following table presents the recorded amount of the Company’s assets measured at fair value on a recurring and nonrecurring basis as of March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021. 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, 2022
Nonrecurring
Collateral dependent impaired loans$426 $— $— $426 
Other real estate owned246 — — 246 
Total nonrecurring assets$672 $— $— $672 
Fair Value Measurements at Reporting Date Using
(dollars in thousands)Total Fair
Value		 (Level 1) (Level 2) (Level 3)
December 31, 2021
Nonrecurring
Collateral dependent impaired loans$1,837 $— $— $1,837 
Other real estate owned281 — — 281 
Total nonrecurring assets$2,118 $— $— $2,118 

29
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

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 March 31, 2022 and December 31, 2021. This table is comprised primarily of collateral dependent impaired loans and other real estate owned:
(dollars in thousands)March 31, 2022Valuation
Techniques		Unobservable
Inputs		Range
Weighted Avg
Collateral dependent impaired loans$426 Appraised ValueDiscounts to reflect current market conditions, ultimate collectability, and estimated costs to sell25 %100 %
Other real estate owned246 Appraised Value/Comparable SalesDiscounts to reflect current market conditions and estimated costs to sell— %20 %
(dollars in thousands)December 31, 2021Valuation
Techniques		Unobservable
Inputs		Range
Weighted Avg
Collateral dependent impaired loans$1,837 Appraised ValueDiscounts to reflect current market conditions, ultimate collectability, and estimated costs to sell25 %100 %
Other real estate owned281 Appraised Value/Comparable SalesDiscounts to reflect current market conditions and estimated costs to sell— %20 %


30
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following table presents quantitative information about recurring level 3 fair value measurements as of March 31, 2022 and December 31, 2021.
As of March 31, 2022
(dollars in thousands)Fair ValueValuation
Techniques		Unobservable
Inputs		Range
(Weighted Avg)
Other investments$4,083 Discounted Cash FlowDiscount Rate or YieldN/A*
 As of December 31, 2021
(dollars in thousands)Fair ValueValuation
Techniques		Unobservable
Inputs		Range
(Weighted Avg)
Other investments$4,255 Discounted Cash FlowDiscount Rate or YieldN/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.
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 three months ended March 31, 2022.
Available for Sale Securities
(dollars in thousands)
March 31, 2022
Balance, Beginning$4,255 
Unrealized/realized losses included in earnings(172)
Balance, Ending$4,083 
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 no transfers of securities between levels for the three months ended March 31, 2022 and March 31, 2021.


31
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(9) 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 months ended March 31, 2022 and 2021:
(dollars in thousands)BankMortgage
Banking		Small
Business
Specialty
Lending
Division		Totals
Three months ended March 31, 2022
Net Interest Income$18,824 $71 $293 $19,188 
Provision for Loan Losses$50 $— $— $50 
Noninterest Income$4,300 $2,912 $1,940 $9,152 
Noninterest Expenses$17,701 $2,711 $1,393 $21,805 
Income Taxes$900 $101 $160 $1,161 
Segment Profit$4,473 $171 $680 $5,324 
Segments Assets at March 31, 2022$2,627,450 $19,417 $39,921 $2,686,788 
Full time employees at March 31, 20224046228494
(dollars in thousands)BankMortgage
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 Losses500 — — 500 
Noninterest Income3,005 3,986 1,585 8,576 
Noninterest Expenses11,960 2,793 1,029 15,782 
Income Taxes1,160 354 144 1,658 
Segment Profit$3,370 $1,007 $542 $4,919 
Segments Assets at March 31, 2021$2,620,501 $25,149 $46,065 $2,691,715 
Full time employees at March 31, 20212915123365



32
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(10) 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 March 31, 2022, 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 March 31, 2022, 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 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 on a consolidated basis.
The following table summarizes regulatory capital information as of March 31, 2022 and December 31, 2021 on a consolidated basis and for the subsidiary, as defined.  Regulatory capital ratios for March 31, 2022 and December 31, 2021
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COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
were calculated in accordance with the Basel III rules.
(dollars in thousands)ActualFor Capital
Adequacy Purposes		To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
AmountRatioAmountRatioAmountRatio
As of March 31, 2022
Total Capital to Risk-Weighted Assets
Consolidated$265,390 15.40 %$137,865 8.00 %N/AN/A
Colony Bank227,722 13.23 137,695 8.00 $172,119 10.00 %
Tier 1 Capital to Risk-Weighted Assets
Consolidated252,471 14.65 103,401 6.00 N/AN/A
Colony Bank214,803 12.48 103,272 6.00 137,695 8.00 
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated228,971 13.29 77,530 4.50 N/AN/A
Colony Bank214,803 12.48 77,454 4.50 111,877 6.50 
Tier 1 Capital to Average Assets
Consolidated252,471 9.47 106,640 4.00 N/AN/A
Colony Bank214,803 8.16 105,245 4.00 131,557 5.00 
(dollars in thousands)ActualFor Capital
Adequacy Purposes		To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
AmountRatioAmountRatioAmountRatio
As of December 31, 2021
Total Capital to Risk-Weighted Assets
Consolidated$207,366 12.05 %$137,670 8.00 %N/AN/A
Colony Bank203,265 12.18 133,507 8.00 $166,884 10.00 %
Tier 1 Capital to Risk-Weighted Assets
Consolidated194,456 11.28 103,434 6.00 N/AN/A
Colony Bank190,355 11.41 100,099 6.00 133,465 8.00 
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated170,956 9.87 77,943 4.50 N/AN/A
Colony Bank190,355 11.41 75,074 4.50 108,441 6.50 
Tier 1 Capital to Average Assets
Consolidated194,456 7.25 107,286 4.00 N/AN/A
Colony Bank190,355 7.53 101,118 4.00 126,398 5.00 




34
COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(11) Subsequent Events
Dividend
On April 21, 2022, the Board of Directors declared a quarterly cash dividend of $0.1075 per share, to be paid on its common stock on May 20, 2022, to shareholders of record as of the close of business on May 6, 2022.


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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, 2021 through March 31, 2022 and on our results of operations for the three months ended March 31, 2022 and 2021. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto in the Company's 2021 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 (and the variants thereof) 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 Annual Report and the following: 
•business and economic conditions, particularly those affecting the financial services industry and our primary market areas;
•the impact of the continuing COVID-19 pandemic on our business;
•the risk that a future economic downturn and contraction could have a material adverse effect on our capital, financial condition, credit quality, results of operations and future growth, including the risk that the strength of the current economic recovery could be weakened by the continued impact of COVID-19 and by current supply chain challenges;
•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 Paycheck Protection Program ("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;
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•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;
•the adequacy of our reserves (including allowance for loan losses) 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;
•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;
•inflation, interest rate, securities market and monetary fluctuations and the respective impact on our financial condition and results of operation;
•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;
•the risks relating to the recently completed acquisition including, without limitation: unexpected transaction costs, including the costs of integrating operations; the risks that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues being lower than expected;

•uncertainty related to the transition away from the London Inter-bank Offered Rate (“LIBOR”);
•continued or increasing competition from other financial institutions (including fintech companies), 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;

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•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, which may be impacted as a result of labor shortages;
•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;
•the effects of war or other conflicts (including the military conflict between Russia and Ukraine), acts of terrorism, natural disasters, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions; and
•other risks and factors identified in our 2021 Form 10-K, and this Quarterly Report on Form 10-Q for the period ended March 31, 2022, and in any of the Company's other reports filed with the U.S. Securities and Exchange Commission 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.

Overview
The following discussion and analysis presents the more significant factors affecting the Company’s financial condition as of March 31, 2022 and December 31, 2021, and results of operations for each of the three month periods ended March 31, 2022

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and 2021. 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.
At March 31, 2022, the Company had total consolidated assets of $2.7 billion, total loans of $1.3 billion, total deposits of $2.4 billion, and stockholders’ equity of $250.3 million. The Company reported net income of $5.3 million, or $0.34 per diluted share, for the first three months of 2022, compared to net income of $4.9 million, or $0.52 per diluted share, for the first three months of 2021. The increase in net income for the three months ended March 31, 2022 was primarily driven by the increase in volume of taxable and tax-exempt investment securities and loans, acquisition of SouthCrest Financial Group, Inc. ("SouthCrest"), a decrease in provision for loan loss and an increase in interchange fees and gain on sale of SBA loans.
Net interest income on a tax equivalent basis increased to $19.3 million for the first three months of 2022, compared to $14.4 million for the first three months of 2021, primarily due to an increase in investment securities and loan volume. The net interest margin decreased to 3.13% for the three months ended March 31, 2022 from 3.50% for the same period in 2021. The reason for the decrease in net interest margin is primarily due to a decrease in yield on loans offset by slight decrease in deposit and borrowing rates.
The provision for loan losses was $50,000 for the first three months of 2022, compared to $500,000 for the first three months of 2021. Net charge-offs for the first three months of 2022 were $41,000 compared to net recoveries of $66,000 for the same period in 2021. As of March 31, 2022, Colony’s allowance for loan losses was $12.9 million, or 0.95% of total loans, compared to $12.9 million, or 0.96% of total loans, at December 31, 2021. At March 31, 2022 and December 31, 2021, nonperforming assets were $6.5 million and $5.8 million, or 0.24% and 0.21% of total assets, respectively.
Noninterest income of $9.2 million for the first quarter of 2022 was up $576,000 or 6.7%, from the first quarter of 2021. The increase was primarily due to increases in service charges, interchange fees and gain on sale of SBA loans, offset by a decrease in mortgage fee income. See "Table 3 - Noninterest income" for more detail and discussion on the primary drivers to the increase in noninterest income.
For the first quarter of 2022, noninterest expense was $21.8 million, an increase of $6.0 million, or 38.16%, from the same period in 2021. Increases in noninterest expense are in part due to changes to the Company's organizational structure, along with acquisition expenses related to the SouthCrest merger. Those expenses that were the primary contributors to the increase year over year include salaries and employee benefits. See "Table 4 - Noninterest expense" for more detail and discussion on the primary drivers to the increase in noninterest expense.
On February 10, 2022, the Company completed a public offering of approximately 3.85 million shares of its common stock with aggregate proceeds totaling $63.5 million. The offering generated net proceeds of approximately $59.3 million, which were used to fund the repayment of the Company's existing term note and the line of credit and for other general corporate purposes.
Critical Accounting Policies
Our accounting and reporting policies are in accordance with GAAP and conform to general practices within the banking industry. We have identified certain of its accounting policies as “critical accounting policies,” consisting of those related to business combinations, allowance for loan losses and income taxes. In determining which accounting policies are critical in nature, we have identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee on a periodic basis, including the development, selection, implementation and disclosure of the critical accounting policies. The application of these policies has a significant impact on the Company’s unaudited interim consolidated financial statements. Our financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in Note 1 of our consolidated financial statements as of December 31, 2021, which are included in the Company’s 2021 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. 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, 2021, which are included in the Company’s 2021 Form 10-K.

Results of Operations
We reported net income and diluted earnings per share of $5.3 million and $0.34, respectively, for the first three months of 2022. This compared to net income and diluted earnings per share of $4.9 million and $0.52, respectively, for the same period in 2021.


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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 stockholders' equity.
Fully taxable equivalent net interest income for the first quarter of 2022 and 2021 was $19.3 million and $14.4 million, respectively. The increase is primarily due to an increase in volume of securities and loans. The net interest margin for the first quarter of 2022 and 2021 was 3.13% and 3.50% respectively. The decrease in net interest margin for the first three months of 2022 compared to 2021 is a result of the decrease in loan yields and higher borrowing yields, offset by lower yields paid on deposits.
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 March 31, 2022 increased compared to the same period in 2021. The increase in average assets was primarily driven by the increase in the purchasing of investment securities of $573.6 million as well as an increase in loans of $283.4 million for the three months ended March 31, 2022 compared to the same period in 2021. The loan increase is primarily due to the SouthCrest acquisition. The increase in average liabilities for the three months ended March 31, 2022 was funded primarily through an increase in deposits from the SouthCrest merger during the last half of 2021.The net interest spread, as well as the net interest margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment.
The yield on total interest-bearing liabilities decreased from 0.35% in the first quarter of 2021 to 0.23% in the first quarter of 2022. The main driver for the decrease is the deposit rates decreases over 2021 and run-off of higher yielding time deposits throughout 2021 into the first quarter of 2022. 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. In March 2022, the FOMC raised the rate 25 basis points.

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Table 1 - Average Balance Sheet and Net Interest Analysis
Three Months Ended March 31,
20222021
(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)
$1,362,434 $16,060 4.78 %$1,079,006 $13,638 5.13 %
Investment securities, taxable866,445 3,753 1.76 371,265 1,628 1.78 
Investment securities, tax-exempt(2)
111,007 516 1.89 32,616 155 1.93 
Deposits in banks and short term investments161,653 56 0.14 183,376 53 0.12 
Total interest-earning assets2,501,539 20,385 3.30 1,666,263 15,474 3.77 
Noninterest-earning assets177,703 108,712 
Total assets$2,679,242 $1,774,975 
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-earning demand and savings$1,445,408 $261 0.07 %$859,462 $165 0.08 %
Other time343,215 338 0.40 260,438 488 0.76 
Total interest-bearing deposits1,788,623 599 0.14 1,119,900 653 0.24 
Federal Home Loan Bank advances51,678 249 1.95 22,500 114 2.05 
Paycheck Protection Program Liquidity Facility— — — 60,602 68 0.46 
Other borrowings32,181 201 2.53 61,654 256 1.68 
Total other interest-bearing liabilities83,859 450 2.18 144,756 438 1.23 
Total interest-bearing liabilities1,872,482 1,049 0.23 1,264,656 1,091 0.35 
Noninterest-bearing liabilities:
Demand deposits552,734 356,044 
Other liabilities10,906 7,908 
Stockholders' equity243,120 145,515 
Total noninterest-bearing liabilities and stockholders' equity806,760 509,467 
Total liabilities and stockholders' equity$2,679,242 $1,774,123 
Interest rate spread3.08 %3.42 %
Net interest income$19,336 $14,383 
Net interest margin3.13 %3.50 %
(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 $50,000 and $66,000 for the quarters ended March 31, 2022 and 2021, respectively, are included in loans, net of unearned income. Accretion income of $269,000 and $209,000 for the quarter ended March 31, 2022 and 2021, respectively are also included in income and fees on loans.
(2)Taxable-equivalent adjustments totaling $98,000 and $33,000 for quarter ended March 31, 2022 and 2021, respectively, are included in tax-exempt interest on investment securities. The adjustments are based on a federal tax rate of 19% and 21% with appropriate reductions for the effect of disallowed interest expense incurred in carrying tax-exempt obligations.

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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 March 31, 2021 to March 31, 2022.
Table 2 - Change in Interest Revenue and Expense on a Taxable Equivalent Basis
Three Months Ended March 31, 2022
Compared to Three Months Ended March 31, 2021 Increase (Decrease) Due to Changes in
(dollars in thousands)VolumeRateTotal
Interest-earning assets:
Loans, net of unearned fees$14,530 $(12,108)$2,422 
Investment securities, taxable8,806 (6,681)2,125 
Investment securities, tax-exempt1,511 (1,150)361 
Deposits in banks and short term investments(25)28 3 
Total interest-earning assets (FTE)24,822(19,911)4,911 
Interest-bearing liabilities:
Interest-Bearing Demand and Savings Deposits456 (360)96 
Time Deposits629 (779)(150)
Federal Home Loan Bank Advances600 (465)135 
Paycheck Protection Program Liquidity Facility(276)208 (68)
Other Borrowed Money(496)441 (55)
Total interest-bearing liabilities913 (955)(42)
Increase in net interest income (FTE)$23,909 $(18,956)$4,953 
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 months ended March 31, 2022 was $50,000 compared to $500,000 for the same period in 2021, respectively. 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 decrease in provision for loan losses in the three months ended March 31, 2022 compared to the same periods in 2021 is largely due to the reserve levels that have already been established in response to 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.


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Noninterest Income
The following table represents the major components of noninterest income for the periods indicated.
Table 3 - Noninterest Income
Three Months Ended March 31,Change
(dollars in thousands)20222021AmountPercent
Service charges on deposits$1,825 $1,222 $603 49.3 %
Mortgage fee income2,912 3,995 (1,083)(27.1)
Gain on sales of SBA loans1,726 1,471 255 17.3 
(Loss)/gain on sales of securities24 (4)28 100.0 
Interchange fee2,000 1,530 470 30.7 
BOLI income312 208 104 50.0 
Other noninterest income353 154 199 129.2 
Total noninterest income$9,152 $8,576 $576 6.72 %
For the three months ended March 31, 2022, noninterest income increased $576,000, compared to the same periods in 2021. The primary reason for this increase was due to increases in almost all noninterest income accounts offset by the decrease in mortgage fee income.
Service charges on deposit accounts. For the three months ended March 31, 2022, services charges on deposits increased $603,000, or 49.3%, compared to the same period in 2021. This increase in service charges on deposits was primarily attributable to the additional deposits acquired from SouthCrest acquisition.
Mortgage Fee Income. For the three months ended March 31, 2022, mortgage fee income was $2.9 million, a decrease of $1.1 million, or 27.1%, compared to the same period in 2021. During the three months ended March 31, 2021, there was a continued increase in the demand for mortgage rate locks and mortgage closings due to a historically low interest rate environment. As the rates started to increase in first quarter of 2022, the demand slowed down.
Gain on Sale of SBA loans. For the three months ended March 31, 2022 and 2021, net realized gains on the sale of the guaranteed portion of SBA loans totaled $1.7 million and $1.5 million, respectively. The small increase in 2022 was a result of continued growth in the Small Business Specialty Lending division compared to the same period in 2021.
Interchange Fees. For the three months ended March 31, 2022, interchange fee income was $2.0 million, an increase of $470,000, or 30.7%, compared to the same period in 2021. The increase in interchange fees was primarily attributable growth of customers from the SouthCrest acquisition and the continued success with the Discover® Card program.

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Noninterest Expense
The following table represents the major components of noninterest expense for the periods indicated.
Table 4 - Noninterest Expense
Three months ended March 31,Change
(dollars in thousands)20222021AmountPercent
Salaries and employee benefits$13,272 $9,955 $3,317 33.3 %
Occupancy and equipment1,619 1,326 293 22.1 
Acquisition-related expenses624 176 448 254.5 
Information technology expenses2,354 1,592 762 47.9 
Professional fees869 486 383 78.8 
Advertising and public relations766 580 186 32.1 
Communications437 218 219 100.3 
Other noninterest expense1,864 1,449 415 28.6 
Total noninterest expense$21,805 $15,782 $6,023 38.2 %
Noninterest expense for the three months ended March 31, 2022 totaled $21.8 million, up $6.0 million, or 38.2%, from the same period in 2021. Increases in salaries and employee benefits, information technology expenses, and acquisition expenses accounted for the majority of these increases.
Salaries and Employee Benefits. Salaries and employee benefits for the three months ended March 31, 2022 increased $3.3 million, or 33.3%, compared to the same period in 2021. The increase in 2022 is primarily attributable to the salary and employee benefits from the additional employees from the SouthCrest acquisition compared to the same period in 2021.
Acquisition-related Expenses. Acquisition-related expense for the three months ended March 31, 2022 increased $448,000, or 254.5%, compared to the same period in 2021. Increases are primarily attributed to amortization of intangibles related to the SouthCrest and insurance acquisitions that occurred in 2021.
Information technology Expenses. Information technology expense for the three months ended March 31, 2022 increased $762,000, or 47.9%, compared to the same period in 2021. These increases relate to increases in data processing costs from SouthCrest merger and software costs due to the implementation of new software platforms used in various areas of the bank.
Income Tax Expense
Income tax expense for the three months ended March 31, 2022 and 2021 was $1.2 million and $1.7 million, respectively. The Company’s effective tax rates were a federal tax rate of 17.0% and a Georgia state tax rate of 1.0% for the three months ended March 31, 2022 and federal tax rate of 21% and a Georgia tax rate of 5.75% for the three months ended March 31, 2021. The largest driver of the federal rate difference is tax exempt income primarily from BOLI and tax exempt interest. The largest driver of the state difference is the benefit of Georgia state tax credits as well as filing in other states with lower tax rates.
Balance Sheet Review
Total assets remained stable at $2.7 billion at March 31, 2022 and December 31, 2021.


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Loans and Allowance for Loan Losses
At March 31, 2022, gross loans outstanding (excluding loans held for sale) were $1.4 billion, an increase of $16.1 million, or 1.2%, compared to $1.3 billion at December 31, 2021. During the three months ended March 31, 2022, PPP loans totaling approximately $8.3 million were forgiven through the SBA.
At March 31, 2022, approximately 71.9% of our loans are secured by commercial real estate. The following table presents a summary of the loan portfolio as of March 31, 2022 and December 31, 2021.
Table 5 - Loans Outstanding
(dollars in thousands)
March 31, 2022
December 31, 2021
Construction, land and land development$170,911 $165,446 
Other commercial real estate802,995 787,392 
Total commercial real estate973,906 952,838 
Residential real estate207,686 212,527 
Commercial, financial, & agricultural (*)154,238 154,048 
Consumer and other18,202 18,564 
Total loans$1,354,032 $1,337,977 
As a percentage of total loans:
Construction, land and land development12.6 %12.4 %
Other commercial real estate59.3 %58.8 %
Total commercial real estate71.9 %71.2 %
Residential real estate15.4 %15.9 %
Commercial, financial & agricultural11.4 %11.5 %
Consumer and other1.3 %1.4 %
Total loans100 %100 %
(*) Includes $387,000 and $9.0 million in PPP loans at March 31, 2022 and December 31, 2021, respectively.
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

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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 $12.9 million at March 31, 2022 compared to $12.7 million at March 31, 2021, an increase of $226,000, or 1.8%. The allowance for loan losses as a percentage of loans was 0.96% and 1.19% at March 31, 2022 and 2021, respectively. The quarterly provision was $50,000 compared to $500,000 at March 31, 2022 and March 31, 2021, respectively. 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 losses in the loan portfolio. The primary reason for the decrease in allowance to loans as a percentage for loans is primarily due to the SouthCrest acquisition and additional loans that came with that acquisition without corresponding reserves. The decrease in the provision over the same period in 2021 is due to the additional reserve levels calculated in the prior period in response to the social and economic disruption of the COVID-19 pandemic in 2020 and 2021.
Additional information about the Company’s allowance for loan losses is provided in Note 4 to our consolidated financial statements as of March 31, 2022, included elsewhere in this Form 10-Q.
The following table presents an analysis of the allowance for loan losses as of and for the three months ended March 31, 2022 and 2021:
Table 6 - Analysis of Allowance for Loan Loss
March 31, 2022March 31, 2021
(dollars in thousands)Reserve%*Reserve%*
Construction, land and land development$1,339 12.6 %$1,053 12.4 %
Other commercial real estate7,355 59.3 %7,128 58.8 %
Residential real estate1,811 15.4 %2,411 15.9 %
Commercial, financial, & agricultural2,087 11.5 %1,666 11.5 %
Consumer and other327 1.3 %435 1.4 %
$12,919 100 %$12,693 100 %
*Percentage represents the loan balance in each category expressed as a percentage of total end of period loans.


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The following table presents a summary of allowance for loan loss for the three months ended March 31, 2022 and 2021.
Table 7 - Summary of Allowance for Loan Loss
Three Months Ended
(dollars in thousands)March 31, 2022March 31, 2021
Allowance for loan loss - beginning balance$12,910 $12,127 
Charge-offs:
Construction, land and land development— — 
Other commercial real estate58 — 
Residential real estate18 — 
Commercial, financial, & agricultural16 15 
Consumer and other16 11 
Total loans charged-off108 26 
Recoveries:
Construction, land and land development6 15 
Other commercial real estate7 — 
Residential real estate4 66 
Commercial, financial, & agricultural44 3 
Consumer and other6 8 
Total recoveries67 92 
Net (recoveries)/charge-offs41 (66)
Provision for loan loss50 500 
Allowance for loan loss - ending balance$12,919 $12,693 
Net (recoveries)/charge-offs to average loans (annualized)0.01 %(0.02)%
Allowance for loan losses to total loans0.95 1.19 
Allowance to nonperforming loans209.35 118.88 
Management believes the allowance for loan losses is adequate to provide for losses inherent in the loan portfolio as of March 31, 2022.

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Nonperforming Assets
Asset quality experienced some decline during the first three months of 2022. Nonperforming assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property and other real estate owned ("OREO"). Nonaccrual loans totaled $6.2 million at March 31, 2022, an increase of $722,000, or 13.3%, from $5.4 million at December 31, 2021. There were no loans contractually past due 90 days or more and still accruing for either period presented. At March 31, 2022, OREO totaled $246,000, a decrease of $35,000, or 12.5%, compared with $281,000 at December 31, 2021. The decrease in OREO was due to a donation of assets during the first three months of 2022. At the end of the first quarter 2022, total nonperforming assets as a percent of total assets increased to 0.24% compared with 0.21% at December 31, 2021.
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 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 March 31, 2022 and December 31, 2021 were as follows:
Table 8 - Nonperforming Assets
(dollars in thousands)March 31, 2022December 31, 2021
Nonaccrual loans$6,171 $5,449 
Loans past due 90 days and accruing— — 
Other real estate owned246 281 
Repossessed assets48 49 
Total nonperforming assets$6,465 $5,779 
Nonaccrual loans by loan segment
Construction, land and land development$67 $31 
Commercial real estate1,461 837 
Residential real estate4,039 3,839 
Commercial, financial & agriculture578 708 
Consumer & other26 34 
Total nonaccrual loans$6,171 $5,449 
NPAs as a percentage of total loans and OREO0.48 %0.43 %
NPAs as a percentages of total assets0.24 %0.21 %
Nonaccrual loans as a percentage of total loans0.46 %0.41 %
The restructuring of a loan is considered a troubled debt restructuring (" TDR") if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted the borrower a concession that we would not consider otherwise. At March 31, 2022, TDRs decreased slightly to $7.2 million from $7.3 million reported at December 31, 2021. At March 31, 2022, $870,000 in TDRs were considered nonperforming and at December 31, 2021, all TDRs were performing according to their modified terms and were therefore not considered to be nonperforming assets.




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Deposits
Deposits at March 31, 2022 and December 31, 2021 were as follows:
Table 9 - Deposits
(dollars in thousands)March 31, 2022December 31, 2021
Noninterest-bearing deposits$557,985 $552,576 
Interest-bearing deposits883,159 930,811 
Savings570,639 541,993 
Time, $250,000 and over69,341 73,407 
Other time269,662 275,821 
Total deposits$2,350,786 $2,374,608 
Total deposits decreased $23.8 million to $2.35 billion at March 31, 2022 from $2.37 billion at December 31, 2021. As of March 31, 2022, 23.7% of total deposits were comprised of noninterest-bearing accounts and 76.3% comprised of interest-bearing deposit accounts, compared to 23.3% and 76.7% as of December 31, 2021, respectively. The decline in our deposits is due the combination of spending of government stimulus programs, PPP loan proceeds previously retained on deposits by corporate borrowers, and customer expense and savings habits in response to the winding down of the COVID-19 pandemic.
We had $884,000 and $883,000 in brokered deposits at March 31, 2022 and December 31, 2021, 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 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 7 to our consolidated financial statements as of March 31, 2022, 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 March 31, 2022 and December 31, 2021.
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.

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Cash and cash equivalents at March 31, 2022 and December 31, 2021 were $156.4 million and $197.2 million, respectively. This decrease is primarily attributable to the deployment of funds that came from PPP loans and the repayment of Paycheck Protection Program Liquidity Facility (“PPPLF”). Management believes the various funding sources discussed above are adequate to meet the Company’s liquidity needs without any material adverse impact on our operating results.
On February 10, 2022, the Company completed a public offering of approximately $63.5 million of its common stock. The offering generated net proceeds of approximately $59.3 million, which were used to fund the repayment of the Company's existing term note and the line of credit and for other general corporate purposes.
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 March 31, 2022 and December 31, 2021, we had $51.7 million of outstanding advances from the FHLB. Based on the values of loans pledged as collateral, we had $619.3 million and $574.7 million of additional borrowing availability with the FHLB at March 31, 2022 and December 31, 2021, respectively.
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.

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.
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 March 31, 2022 and December 31, 2021. The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of March 31, 2022 and December 31, 2021. There have been no conditions or events since December 31, 2021 that management believes would change this classification.
Table 10 - Capital Ratio Requirements
Minimum RequirementWell-capitalized¹
Risk-based ratios:
Common equity tier 1 capital (CET1)4.5 %6.5 %
Tier 1 capital6.0 8.0 
Total capital8.0 10.0 
Leverage ratio4.0 5.0 
(1) The prompt corrective action provisions are only applicable at the bank level.

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Table 11 - Capital Ratios
CompanyMarch 31, 2022December 31, 2021
CET1 risk-based capital ratio13.29 %9.87 %
Tier 1 risk-based capital ratio14.65 11.28 
Total risk-based capital ratio15.40 12.05 
Leverage ratio9.47 7.25 
Colony Bank
CET1 risk-based capital ratio12.48 %11.41 %
Tier 1 risk-based capital ratio12.48 11.41 
Total risk-based capital ratio13.23 12.18 
Leverage ratio8.16 7.53 



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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.
The following table presents our interest sensitivity position at the dates indicated.
Table 12 - Interest Sensitivity
Increase (Decrease) in Net Interest Income from Base Scenario at
March 31, 2022December 31, 2021
Changes in rates
200 basis point increase12.00%13.80%
100 basis point increase6.056.83
100 basis point decrease(3.40)(3.18)
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, 2021 for additional disclosures related to market and interest rate risk.

ITEM 4 – CONTROLS AND PROCEDURES
Under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated 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, 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 March 31, 2022, 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.

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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 2021 Form 10-K, 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. 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.
There are no material changes during the period covered by this Report to the risk factors previously disclosed in the Company's 2021 Form 10-K.

ITEM 2 – UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) There were no unregistered shares of the Company’s common stock sold during the three-month period ended March 31, 2022.
(b) Not applicable.
(c) There were no purchases of the Company's equity securities by the Company or its affiliates during the three-month period ended March 31, 2022.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5 – OTHER INFORMATION
None.

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ITEM 6 – EXHIBITS
3.1
3.2
31.1 
31.2
32.1
101
Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021; (ii) Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2022 and 2021; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021; (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021; (v) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021; 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 months ended March 31, 2022 (formatted in Inline XBRL and included in Exhibit 101)


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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:     May 13, 2022T. Heath Fountain
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Andrew Borrmann
Date:     May 13, 2022Andrew Borrmann
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)


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