SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR QUARTER ENDED MARCH 31, 2003	COMMISSION FILE NUMBER 0-12436
COLONY BANKCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA	58-1492391
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
115 SOUTH GRANT STREET, FITZGERALD, GEORGIA 31750
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES
229/426-6000
REGISTRANT’S TELEPHONE NUMBER INCLUDING AREA CODE

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED REPORTS REQUIRED TO BE FILED BY SECTIONS 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 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   x NO   o

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN RULE 12b-2 OF THE ACT)

YES   o NO   x

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES OF COMMON STOCK, AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT.

CLASS	OUTSTANDING AT MARCH 31, 2003
COMMON STOCK, $1 PAR VALUE	4,583,382

PART 1 – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED FOR COLONY BANKCORP, INC. AND SUBSIDIARIES: COLONY BANK OF FITZGERALD, COLONY BANK ASHBURN, COLONY BANK WILCOX, COLONY BANK OF DODGE COUNTY, COLONY BANK WORTH, COLONY BANK SOUTHEAST, COLONY MANAGEMENT SERVICES, INC.,  COLONY BANK QUITMAN, FSB, COLONY BANKCORP STATUTORY TRUST I AND COLONY BANKCORP STATUTORY TRUST II.

A.	CONSOLIDATED BALANCE SHEETS – MARCH 31, 2003 AND DECEMBER 31, 2002.
B.	CONSOLIDATED STATEMENTS OF INCOME – FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002.
C.	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002.
D.	CONSOLIDATED STATEMENTS OF CASH FLOWS – FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002.

THE CONSOLIDATED FINANCIAL STATEMENTS FURNISHED HAVE NOT BEEN AUDITED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, BUT REFLECT, IN THE OPINION OF MANAGEMENT, ALL ADJUSTMENTS NECESSARY FOR A FAIR PRESENTATION OF THE RESULTS OF OPERATIONS FOR THE PERIODS PRESENTED.

THE RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2003 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.

COLONY BANKCORP, INC. AND QUITMAN BANCORP, INC. ENTERED INTO AN AGREEMENT AND PLAN OF MERGER DATED AS OF OCTOBER 22, 2001, PURSUANT TO WHICH QUITMAN WAS MERGED WITH AND INTO COLONY WITH COLONY BANKCORP, INC. SURVIVING THE MERGER AND QUITMAN’S WHOLLY-OWNED SUBSIDIARY, QUITMAN FEDERAL SAVINGS BANK, BECOMING A WHOLLY-OWNED SUBSIDIARY OF COLONY CONTEMPORANEOUS WITH THE CONSUMMATION OF THE MERGER.  THE MERGER WAS CONSUMMATED AND BECAME EFFECTIVE AS OF MARCH 29, 2002.  THE BUSINESS COMBINATION WAS ACCOUNTED FOR BY THE PURCHASE METHOD OF ACCOUNTING AND THE RESULTS OF OPERATIONS OF QUITMAN FEDERAL SAVINGS BANK SINCE THE DATE OF ACQUISTION ARE INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS.

2

COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(DOLLARS IN THOUSANDS)

	March 31, 2003			Dec 31, 2002
	(Unaudited )
ASSETS
Cash and Balances Due from Depository Institutions	$	35,839		$	35,883
Federal Funds Sold		39,283			47,993
Investment Securities
Available for Sale, at Fair Value		88,800			90,289
Held to Maturity, at Cost (Fair Value of $98 and $118, Respectively)		98			118
		88,898			90,407
Federal Home Loan Bank Stock, at Cost		3,054			2,837
Loans Held for Sale		5,855			6,910
Loans		602,767			571,817
Allowance for Loan Losses		(7,820	)		(7,364	)
Unearned Interest and Fees		(50	)		(1	)
		594,897			564,452
Premises and Equipment		17,539			17,329
Other Real Estate		1,517			1,357
Goodwill		448			448
Intangible Assets		360			399
Other Assets		13,719			13,086
Total Assets	$	801,409		$	781,101
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Noninterest-Bearing	$	55,243		$	51,534
Interest-Bearing		620,428			613,060
		675,671			664,594
Borrowed Money
Federal Funds Purchased		0			0
Borrowed Money		54,351			46,427
		54,351			46,427
Other Liabilities		4,903			4,652
Guaranteed Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trusts		14,000			14,000
Stockholders’ Equity
Common Stock, Par Value $1, Authorized 20,000,000 Shares, Issued 4,583,382 and 4,573,232 Shares as of March 31, 2003 and December 31, 2002, Respectively		4,583			4,573
Paid-In Capital		23,511			23,358
Retained Earnings		24,043			22,742
Restricted Stock - Unearned Compensation		(215	)		(78	)
Accumulated Other Comprehensive Income, Net of Tax		562			833
		52,484			51,428
Total Liabilities and Stockholders’ Equity	$	801,409		$	781,101

The accompanying notes are an integral part of these statements.

3

COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
(DOLLARS IN THOUSANDS)

	Three Months Ended
	3/31/2003		3/31/2002
Interest Income
Loans, including fees	$	10,621	$	9,208
Federal Funds Sold		123		119
Deposits with Other Banks		34		38
Investment Securities
U.S. Treasury & Federal Agencies		575		771
State, County and Municipal		83		74
Other Investments		117		305
Dividends on Other Investments		36		36
Other Interest Income		9		0
		11,598		10,551
Interest Expense
Deposits		4,279		4,781
Federal Funds Purchased		0		0
Borrowed Money		510		597
Trust Preferred Securities		171		8
		4,960		5,386
Net Interest Income		6,638		5,165
Provision for Loan Losses		649		286
Net Interest Income After Provisions for loan losses		5,989		4,879
Noninterest Income
Service Changes on Deposits		856		745
Other Service Changes, Commissions & Fees		277		237
Security Gains, net		0		0
Other Income		243		113
		1,376		1,095
Noninterest Expense
Salaries and Employee Benefits		2,745		2,215
Occupancy and Equipment		762		698
Other Operating Expenses		1,377		1,041
		4,884		3,954
Income Before Income Taxes		2,481		2,020
Income Taxes		836		660
Net Income	$	1,645	$	1,360
Net Income Per Share of Common Stock
Basic	$	0.36	$	0.32
Diluted	$	0.36	$	0.32
Weighted Average Shares Outstanding		4,583,382		4,210,442

The accompanying notes are an integral part of these statements.

4

COLONY BANKCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
(DOLLARS IN THOUSANDS)

	Three Months Ended
	03/31/03			03/31/02
Net Income	$	1,645		$	1,360
Other Comprehensive Income, Net of Tax
Gains (Losses) on Securities Arising During Year		(271	)		(273	)
Reclassification Adjustment		0			0
Unrealized Gains (Losses) on Securities		(271	)		(273	)
Comprehensive Income	$	1,374		$	1,087

The accompanying notes are an integral part of these statements.

5

COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
(DOLLARS IN THOUSANDS)

	2003			2002
CASH FLOW FROM OPERATING ACTIVITIES
Net Income	$	1,645		$	1,360
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain) loss on sale of investment securities		0			0
Depreciation		385			334
Provision for loan losses		649			286
Amortization of excess costs		39			0
Other prepaids, deferrals and accruals, net		(239	)		473
Total Adjustments		834			1,093
Net cash provided by operating activities		2,479			2,453
CASH FLOW FROM INVESTING ACTIVITIES
Cash used in business acquistion, net		0			(1,021	)
Purchase of other assets (FHLB stock)		(217	)		(100	)
Purchases of securities available for sale		(20,056	)		(23,306	)
Proceeds from sales of securities available for sale		0			0
Proceeds from maturities, calls, and paydowns of investment securities:
Available for Sale		20,801			7,176
Held to Maturity		21			17
Decrease (Increase) in interest-bearing deposits in banks		(3,878	)		761
(Increase) in loans		(29,846	)		(10,845	)
Purchase of premises and equipment		(594	)		(755	)
Investment in other		0			0
Net cash provided by investing activities		(33,769	)		(28,073	)
CASH FLOW FROM FINANCING ACTIVITIES
Net increase in deposits		11,077			15,344
Federal funds purchased		0			(251	)
Dividends paid		(343	)		(254	)
Net (decrease) increase in other borrowed money		7,924			3,649
Purchase of Treasury Stock, at cost		0			(537	)
Net cash provided by financing activities		18,658			17,951
Net increase (decrease) in cash and cash equivalents		(12,632	)		(7,669	)
Cash and cash equivalents at beginning of period		69,831			50,317
Cash and cash equivalents at end of period	$	57,199		$	42,648

The accompanying notes are an integral part of these statements.

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Summary of Significant Accounting Policies

Basis of presentation
Colony Bankcorp, Inc. is a multi-bank holding company located in Fitzgerald, Georgia.  The consolidated financial statements include the accounts of Colony Bankcorp, Inc. and its wholly-owned subsidiaries, Colony Bank of Fitzgerald, Fitzgerald, Georgia; Colony Bank Ashburn, Ashburn, Georgia; Colony Bank Worth, Sylvester, Georgia; Colony Bank of Dodge County, Eastman, Georgia; Colony Bank  Wilcox, Rochelle, Georgia; Colony Bank Southeast, Broxton, Georgia; Colony Bank Quitman, FSB, Quitman, Georgia (the Banks); Colony Management Services, Inc., Fitzgerald, Georgia; and Colony Bankcorp Statutory Trusts I and II.  All significant intercompany accounts have been eliminated in consolidation.  The accounting and reporting policies of Colony Bankcorp, Inc. conform to generally accepted accounting principles and practices utilized in the commercial banking industry. 

In preparing the 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 foreclosure or in satisfaction of loans and the valuation of deferred tax assets.

In certain instances, amounts reported in prior years’ consolidated financial statements have been reclassified to conform to statement presentations selected for 2003.  Such reclassifications had no effect on previously reported stockholders’ equity or net income.

All dollars in notes to consolidated financial statements are rounded to the nearest thousand.

Description of Business
The Banks provide a full range of retail and commercial banking services for consumers and small to medium size businesses primarily in South Georgia.  Lending and investing activities are funded primarily by deposits gathered through its retail branch office network.  Lending is concentrated in agricultural, commercial and real estate loans to local borrowers.  The Banks have a high concentration of agricultural and real estate loans; however, these loans are well collateralized and in management’s opinion, do not pose an adverse credit risk.  In addition, the balance of the loan portfolio is sufficiently diversified to avoid significant concentration of credit risk.  Although the Banks have a diversified loan portfolio, a substantial portion of borrowers’ ability to honor their contracts is dependent upon the viability of the real estate economic sector.

The success of Colony is dependent, to a certain extent, upon the economic conditions in the geographic markets it serves.  No assurance can be given that the current economic conditions will continue.  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 Colony 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.

Accounting Policies
The accounting and reporting policies of Colony Bankcorp, Inc. and its subsidiaries are in accordance with accounting principles generally accepted and conform to general practices within the banking industry.  The significant accounting policies followed by Colony and the methods of applying those policies are summarized hereafter.

Investment Securities
Investment securities are recorded under Statement of Financial Accounting Standards (SFAS) No. 115, whereby the Banks classify their securities as trading, available for sale or held to maturity.    Securities that are held principally for resale in the near term are classified as trading.  Trading securities are carried at fair value, with realized and unrealized gains and losses included in noninterest income.  Securities acquired with both the intent and ability to be held to maturity are classified as held to maturity and reported at amortized cost.  All other securities not classified as trading or held to maturity are considered available for sale.

Securities available for sale are reported at estimated fair value.  Unrealized gains and losses on securities available for sale are excluded from earnings and reported, net of deferred taxes, in accumulated other comprehensive income, a component of stockholders’ equity.  Gains and losses from sales of securities available for sale and computed using the specific identification  method.  This caption includes securities, which may be sold to meet liquidity needs arising from unanticipated deposit and loan fluctuations, changes in regulatory capital requirements, or unforeseen changes in market conditions.

7

(1)  Summary of Significant Accounting Policies (Continued)

Federal Home Loan Bank Stock
Investment in stock of a Federal Home Loan Bank (FHLB) is required for every federally insured institution that utilizes its services.  FHLB  stock is  considered restricted, as  defined  in  Statement of Financial  Accounting  Standards (SFAS) No. 115; accordingly, the provisions of SFAS No. 115 are not applicable to this investment.  The FHLB stock is reported in the financial statements at cost.  Dividend income is recognized when earned.

Loans Held for Sale
Loans held for sale consist primarily of mortgage loans in the process of being sold to a third party investor and are carried at the lower of cost or fair value.  Gains or losses realized on the sale of loans are recognized at the time of sale and are determined by the difference between the net sales proceeds and the carrying value of the loans sold.  Gains and losses on sales of loans are included in noninterest income.

Loans
Loans that the Company has the ability and intent to hold for the foreseeable future or until maturity are recorded at their principal amount outstanding, net of unearned interest and fees.  Interest income on loans is recognized using the effective interest method.

When management believes there is sufficient doubt as to the collectibility of principal or interest on any loan or generally when loans are 90 days or more past due, the accrual of applicable interest is discontinued and the loan is designated as nonaccrual, unless the loan is well  secured and in the process of collection.  Interest payments received on nonaccrual loans are either applied against principal or reported as income, according to management’s judgment as to the collectibility of principal.  Loans are returned to an accrual status when factors indicating doubtful collectibility on a timely basis no longer exist.

Impaired loans are recorded under Statement of Financial Accounting Standards (SFAS) No. 114.  Accounting by Creditors for Impairment of a Loan and SFAS No. 118, Accounting by Creditors for Impairment of a Loan – Income Recognition and Disclosures.  Impaired loans are loans for which principal and interest are unlikely to be collected in accordance with the original terms and, generally, represent loans delinquent in excess of 90 days which have been placed on nonaccrual status and for which collateral values are less than outstanding principal and interest.  Small balance, homogenous loans are excluded from impaired loans.

Allowance for Loan Losses
The allowance method is used in providing for losses on loans.  Accordingly, all loan losses decrease the allowance and all recoveries increase it.  The provision for loan losses is based on factors which, in management’s judgment, deserve current recognition in estimating possible loan losses.  Such factors considered by management include growth and composition of the loan portfolio, economic conditions and the relationship of the allowance for loan losses to outstanding loans.

An allowance for loan losses is maintained for all impaired loans.  Provisions are made for impaired loans upon changes in expected future cash flows or estimated net realizable value of collateral.  When determination is made that impaired loans are wholly or partially uncollectible, the uncollectible portion is charged-off.

Management believes the allowance for possible loan losses is adequate.  While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions.  In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses.  Such agencies may require the Company to recognize additions to the allowance based on their judgment about information available to them at the time of their examination.

Premises and Equipment
Premises and equipment are recorded at acquisition cost net of accumulated depreciation.

Depreciation is charged to operations over the estimated useful lives of the assets.  The estimated useful lives and methods of depreciation are as follows:

Description	Life in Years	Method
Banking Premises	15-40	Straight-Line and Accelerated
Furniture and Equipment	5-10	Straight-Line and Accelerated

Expenditures for major renewals and betterments are capitalized.  Maintenance and repairs are charged to operations as incurred.  When property and equipment are retired or sold, the cost and accumulated depreciation are removed from the respective accounts and any gain or loss is reflected in other income or expense.

8

(1)  Summary of Significant Accounting Policies (Continued)

Statement of Cash Flows
For reporting cash flows, cash and cash equivalents include cash on hand, noninterest-bearing amounts due from banks and federal funds sold.  Cash flows from demand deposits, NOW accounts, savings accounts, loans and certificates of deposit are reported net.

Income Taxes
The provision for income taxes is based upon income for financial statement purposes, adjusted for nontaxable income and nondeductible expenses.  Deferred income taxes have been provided when different accounting methods have been used in determining income for income tax purposes and for financial purposes.  Deferred tax assets and liabilities are recognized based on future tax consequences attributable to differences arising from the financial statement carrying values of assets and liabilities and their tax bases.  The differences relate primarily to depreciable assets (use of different depreciation methods for financial statement and income tax purposes) and allowance for loan losses (use of the allowance method for financial statement purposes and the direct write-off method for tax purposes).  In the event of changes in the tax laws, deferred tax assets and liabilities are adjusted in the period of the enactment of those changes, with effects included in the income tax provision.  The Company and its subsidiaries file a consolidated federal income tax return.  Each subsidiary pays its proportional share of federal income taxes to the Company based on its taxable income.

Other Real Estate
Other real estate generally represents real estate acquired through foreclosure and is initially recorded at the lower of cost or estimated market value at the date of acquisition.  Losses from the acquisitions of property in full or partial satisfaction of debt are recorded as loan losses.  Subsequent declines in value, routine holding costs and gains or losses upon disposition are included in other losses.

Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income.  Certain changes in assets and liabilities, such as unrealized gains and losses on securities available for sale, represent equity changes from economic events of the period other than transactions with owners and are not reported in the consolidated statement of income but as a separate component of the equity section of the consolidated balance sheets.  Such items are considered components of other comprehensive income.  Statement of Financial Accounting Standards No. 130 requires the presentation in the financial statements of net income and all items of other comprehensive income as total comprehensive income.

Changes in Accounting Principles and Effects of New Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 141, Business Combinations, which supersedes Accounting Principles Board (“APB”) Opinion No. 16, Business Combinations and SFAS No. 38, Accounting for Reacquisition Contingencies of Purchased Enterprises.  The provisions of the Statement apply to all business combinations initiated after June 30, 2001.  SFAS No. 141 requires that all business combinations be accounted for by the purchase method of accounting.  This method requires the accounts of an acquired business to be included with the acquirer’s accounts as of the date of acquisition with any excess of purchase price over the fair value of the net assets acquired to be capitalized as goodwill or other tangibles.  The Statement requires that the assets of an acquired company be recognized as assets apart from goodwill if they meet specific criteria presented in the Statement.  The Statement ends the use of the pooling-of-interests method of accounting for business combinations, which required the restatement of all prior period information for the accounts of the acquired institution.  As a result of the adoption of this statement, Colony will account for all mergers and acquisitions initiated after June 30, 2001, using the purchase method.

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which supercedes APB Opinion No. 17, Intangible Assets.  SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition, and addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements.  The Statement eliminates the requirement to amortize goodwill and other intangible assets that have indefinite useful lives, instead requiring that the assets be tested annually for impairment based on the specific guidance in the Statement.  Colony adopted the provisions of the Statement effective January 1, 2002, as required, and applied the provisions of the Statement to all goodwill and other intangible assets recognized in the financial statements.  SFAS No. 142 requires a transitional impairment test of all goodwill and other indefinite-lived intangible assets in conjunction with its initial application.  The Statement required this test to be performed with any resulting impairment loss to be reported as a change in accounting principle.  No impairment was recorded based on the results of these tests.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  The Statement is effective beginning January 1, 2003.  Management does not expect the implementation of the Statement to have a material impact on Colony’s financial position or results of operations.

9

(1)  Summary of Significant Accounting Policies (Continued)

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supercedes SFAS No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.  The Statement establishes a single accounting model for long-lived assets to be disposed of by sale, and resolves significant implementation issues related to SFAS No. 121.  The provisions of the Statement were adopted by Colony on January 1, 2002.  The implementation did not have a material impact on Colony’s financial position or results of operations.

In May 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002.  This Statement rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of the Statement, SFAS No. 64, Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements.   This Statement also rescinds SFAS No. 44, Accounting for Intangible Assets of Motor Carriers, and amends SFAS No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions.  This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions.  Colony will adopt the provisions of this Statement effective January 1, 2003.  Management does not anticipate that the implementation of this Statement will have a material impact on Colony’s financial position or results of operations.

In August 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, SFAS No. 146 requires that a liability for a cost that is associated with an exit or disposal activity be recognized when the liability for a cost that is associated with an exit or disposal activity be recognized when the liability is incurred.  This Statement nullifies the guidance of the Emerging Issues Task Force (“EITF”) in EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).  Under EITF Issue No. 94-3, an entity recognized a liability for an exit cost on the date that the entity committed itself to an exit plan.  In SFAS No. 146, the Board acknowledges that an entity’s commitment to a plan does not, by itself, create a present obligation to other parties that meets the definition of a liability.  SFAS No. 146 also establishes that fair value is the objective for the initial measurement of the liability.  SFAS No. 146 will be effective for exit or disposal activities that are initiated after December 31, 2002.  Colony will adopt the provisions of this Statement effective January 1, 2003.  Management does not anticipate that the implementation of this Statement will have a materially adverse impact on Colony’s financial position or results of operations.

In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions, an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9, which addresses the financial accounting and reporting for the acquisitions of all or part of a financial institution.  SFAS No. 147 removes acquisitions of financial institutions, except for transactions between two or more mutual enterprises, from the scope of both SFAS No. 72 and Interpretation No. 9 and requires that those transactions be accounted for in accordance with SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.  SFAS No. 147 also amends SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, to include in its scope long-term customer-relationship and credit cardholder intangible assets, and requires companies to cease amortization of unidentifiable assets associated with certain branch acquisitions.  The provisions of this Statement were effective beginning October 1, 2002.  The implementation of this Statement did not have an impact on Colony’s financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. This Statement amends FASB No. 123, Accounting for Stock-Based Compensation. The purpose of this Statement is to provide alternative methods of transition for companies that voluntarily change to the fair value-based method of accounting for stock-based employees compensation. The disclosure requirements of FASB 123 are also amended to include disclosure in quarterly financial statements of compensation expense calculated in accordance with FASB No. 123. The implementation of this statement did not have an impact on the Company’s financial position or results of operations.

Restricted Stock – Unearned Compensation
In 1999, the board of directors of Colony Bankcorp, Inc. adopted a restricted stock grant plan which awards certain executive officers common shares of the Company.  The maximum number of shares which may be subject to restricted stock awards is 44,350.  During 2000, 2001, 2002 and 2003, 5,250, 5,250, 7,500 and 10,150 shares were issued under this plan, respectively.   Of the shares issued, 500 were forfeited due to non-vesting.  The shares are recorded at fair market value (on the date granted) as a separate component of stockholder’s equity.  The cost of these shares is being amortized against earnings using the straight-line method over 3 years (the restriction period).

(2)  Cash and Balances Due from Depository Institutions

Components of cash and balances due from depository institutions at March 31, 2003 and December 31, 2002 are as follows:

	March 31, 2003		December 31, 2002
Cash on Hand and Cash Items	$	6,377	$	7,745
Noninterest-Bearing Deposits with Other Banks		11,539		14,093
Interest-Bearing Deposits with Other Banks		17,923		14,045
	$	35,839	$	35,883

10

(3)  Investment Securities

Investment securities as of March 31, 2003 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
U.S. Government Agencies
Mortgage-Backed	$	56,733	$	398	$	(311	)	$	56,820
Other		14,333		351		(3	)		14,681
State, County & Municipal		7,976		287		(11	)		8,252
Corporate Obligations		7,689		397		0			8,086
Marketable Equity Securities		1,130		0		(169	)		961
	$	87,861	$	1,433	$	(494	)	$	88,800
Securities Held to Maturity:
State, County and Municipal	$	98	$	0	$	0		$	98

The amortized cost and fair value of investment securities as of March 31, 2003, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or prepayment penalties.

	Securities
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized  Cost		Fair Value
Due in One Year or Less	$	3,830	$	3,893	$	0	$	0
Due After One Year Through Five Years		19,810		20,583		0		0
Due After Five Years Through Ten Years		5,846		6,000		0		0
Due After Ten Years		512		543		98		98
		29,998		31,019		98		98
Marketable Equity Securities		1,130		961		0		0
Mortgage-Backed Securities		56,733		56,820		0		0
	$	87,861	$	88,800	$	98	$	98

Investment securities as of December 31, 2002 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale:
U.S. Government Agencies
Mortgage-Backed Securities	$	51,684	$	521	$	(88	)	$	52,117
Other		20,429		491		(63	)		20,857
State, County & Municipal		7,991		268		(19	)		8,240
Marketable Equity Securities		1,130		0		(159	)		971
Corporate Obligations		7,711		393		0			8,104
	$	88,945	$	1,673	$	(329	)	$	90,289
Securities Held to Maturity:
State, County and Municipal	$	118	$	0	$	0		$	118

11

(3)  Investment Securities (Continued)

There were no proceeds from sales of investments available for sale during first quarter 2003 or first quarter 2002.

Investment securities having a carry value approximating $49,939 and $48,488 as of March 31, 2003 and December 31, 2002, respectively, were pledged to secure public deposits and for other purposes.

(4)  Loans

The composition of loans as of March 31, 2003 and December 31, 2002 was as follows:

	March 31, 2003		December 31, 2002
Commercial, Financial and Agricultural	$	42,949	$	46,598
Real Estate – Construction		9,047		21,341
Real Estate – Farmland		28,709		29,503
Real Estate – Other		427,723		392,332
Installment Loans to Individuals		78,380		73,462
All Other Loans		15,959		8,581
	$	602,767	$	571,817

Nonaccrual loans are loans for which principal and interest are doubtful of collection in accordance with original loan terms and for which accruals of interest have been discontinued due to payment delinquency.  Nonaccrual loans totaled $7,950 and $6,890 as of March 31, 2003 and December 31, 2002, respectively.  On March 31, 2003, the Company had 90 day past due loans with principal balances of $1,050 compared to 90 day past due loans with principal balances of $935 on December 31, 2002.

(5)  Allowance for Loan Losses

Transactions in the allowance for loan losses are summarized below for three months ended March 31, 2003 and March 31, 2002 as follows:

	March 31, 2003			March 31, 2002
Balance, Beginning	$	7,364		$	6,159
Provision Charged to Operating Expenses		649			286
Loans Charged Off		(227	)		(468	)
Loan Recoveries		34			52
Business combination, Quitman Federal		0			452
Balance, Ending	$	7,820		$	6,481

(6)  Premises and Equipment

Premises and equipment are comprised of the following as of March 31, 2003 and December 31, 2002:

	March 31, 2003			December 31, 2002
Land	$	2,837		$	2,802
Building		13,681			13,681
Furniture, Fixtures and Equipment		11,160			10,565
Leasehold Improvements		461			629
Construction in Progress		177			78
		28,316			27,755
Accumulated Depreciation		(10,777	)		(10,426	)
	$	17,539		$	17,329

Depreciation charged to operations totaled $385 and $334 for March 31, 2003 and March 31, 2002 respectively.

12

(6)  Premises and Equipment (Continued)

Certain Company facilities and equipment are leased under various operating leases.  Rental expense approximated $31 and $30 for three months ended March 31, 2003 and 2002.

(7)  Income Taxes

The Company records income taxes under SFAS No. 109, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes.  Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

(8)  Deposits

Components of interest-bearing deposits as of March 31, 2003 and December 31, 2002 are as follows:

	March 31, 2003		December 31, 2002
Interest-Bearing Demand	$	144,129	$	138,526
Savings		33,148		30,103
Time, $100,000 and Over		149,718		152,394
Other Time		293,433		292,037
	$	620,428	$	613,060

The aggregate amount of short-term jumbo certificates of deposit, each with a minimum denomination of one hundred thousand, was approximately $139,224 and $142,828 as of  March 31, 2003 and December 31, 2002, respectively.

As of March 31, 2003 and December 31, 2002, the scheduled maturities of certificates of deposits are as follows:

Maturity	March 31, 2003		December 31, 2002
One Year and Under	$	392,027	$	402,326
One to Three Years		45,094		36,875
Three Years and Over		6,030		5,230
	$	443,151	$	444,431

(9)  Borrowed Money

Borrowed money at March 31, 2003 and December 31, 2002 is summarized as follows:

	March 31, 2003		December 31, 2002
Federal Home Loan Bank Advances	$	53,500	$	45,500
The Banker’s Bank Note Payable		851		927
	$	54,351	$	46,427

Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from 2003 to 2012 and interest rates ranging from 1.41 percent to 5.93 percent.  Under the Blanket Agreement for Advances and Security Agreement  with the FHLB, residential first mortgage loans and cash balances held by the FHLB are pledged as collateral for the FHLB advances outstanding.  At March 31, 2003, the Company had available line of credit commitments totaling $67,576, of which $14,076 was available.

The Banker’s Bank note payable was renewed on January 23, 2002 into a credit line up to $1,110 at a rate of the Wall Street Prime minus one half percent.  Payments are due monthly in the amount of $21 with final maturity of January 7, 2007.  The debt is secured by all non-rolling fixed assets of Colony Management Services, Inc. and the guaranty of Colony Bankcorp, Inc.  At March 31, 2003, no draws are available on the line of credit.

13

(9)  Borrowed Money (Continued)

The aggregate stated maturities of borrowed money at March 31, 2003 are as follows:

Year	Amount
2003	$	1,184
2004		9,246
2005		246
2006		3,175
2007 and Thereafter		40,500
	$	54,351

(10)  Issuance of Trust Preferred Securities

During the first quarter of 2002, the Company formed a subsidiary whose sole purpose was to issue $9,000 in Trust Preferred Securities through a pool sponsored by FTN Financial Capital Market.  The Trust Preferred Securities have a maturity of 30 years and are redeemable after five years with certain exceptions.  At March 31, 2003, the floating-rate  securities had a 4.89 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 3.60 percent.

During the fourth quarter of 2002, the Company formed a second subsidiary whose sole purpose was to issue $5,000 in Trust Preferred Securities through a pool sponsored by FTN Financial Capital Market.  The Trust Preferred Securities have a maturity of 30 years and are redeemable after five years with certain exceptions.  At March 31, 2003, the floating-rate securities had a 4.54 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 3.25 percent.

The Trust Preferred Securities are recorded as a liability on the balance sheet, but subject to certain limitations qualify as Tier 1 Capital for regulatory capital purposes.  The proceeds from the offering were used to fund the cash portion of the Quitman acquisition, payoff holding company debt, and inject capital into bank subsidiaries.

(11)  Profit Sharing Plan

The Company has a profit sharing plan that covers substantially all employees who meet certain age and service requirements.  It is the Company’s policy to make contributions to the plan as approved annually by the board of directors.  The total provision for contributions to the plan was $431 for 2002, $384 for 2001 and $369 for 2000.

(12)  Commitments and Contingencies

In the normal course of business, certain commitments and contingencies are incurred which are not reflected in the consolidated financial statements.  Commitments under standby letters of credit to U.S. addresses approximate $1,159 as of  March 31, 2003 and $1,884 as of December 31, 2002.  Unfulfilled loan commitments as of March 31, 2003 and December 31, 2002 approximated $64,328 and $51,833 respectively.  No losses are anticipated as a result of commitments and contingencies.

(13)  Deferred Compensation Plan

Two of the Bank subsidiaries have deferred compensation plans covering directors choosing to participate through individual deferred compensation contracts.  In accordance with terms of the contracts, the Banks are committed to pay the directors deferred compensation over a specified number of years, beginning at age 65.  In the event of a director’s death before age 65, payments are made to the director’s named beneficiary over a specified number of years, beginning on the first day of the month following the death of the director.

Liabilities accrued under the plans totaled $908 and $838 as of March 31, 2003 and December 31, 2002, respectively.  Benefit payments under the contracts were $15 and $15 for three month period ended March 31, 2003 and March 31, 2002, respectively.  Provisions charged to operations totaled $36 and $26 for three month period ended March 31, 2003 and March 31, 2002.

(14)  Regulatory Capital Matters

The amount of dividends payable to the parent company from the subsidiary banks is limited by various banking regulatory agencies.  The amount of cash dividends available from subsidiaries for payment in 2003 without prior approval from the banking regulatory agencies approximates $3,440.  Upon approval by regulatory authorities, the banks may pay cash dividends to the parent company in excess of regulatory limitations.

14

(14)  Regulatory Capital Matters (Continued)

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.  The amounts and ratios as defined in regulations are presented hereafter.  Management believes, as of March 31, 2003, the Company meets all capital adequacy requirements to which it is subject and is classified as well capitalized under the regulatory framework for prompt corrective action.  In the opinion of management, there are no conditions or events since prior notification of capital adequacy from the regulators that have changed the institution’s category.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2003
Total Capital to Risk-Weighted Assets	$	72,381		12.27	%	$	47,190		8.00	%	$	58,988		10.00	%
Tier 1 Capital to Risk-Weighted Assets		65,002		11.02	%		23,595		4.00	%		35,393		6.00	%
Tier 1 Capital to Average Assets		65,002		8.34	%		31,176		4.00	%		38,970		5.00	%
As of December 31, 2002
Total Capital to Risk-Weighted Assets	$	70,675		12.56	%	$	45,016		8.00	%	$	56,270		10.00	%
Tier 1 Capital to Risk-Weighted Assets		63,642		11.31	%		22,508		4.00	%		33,762		6.00	%
Tier 1 Capital to Average Assets		63,642		8.31	%		30,633		4.00	%		38,291		5.00	%

15

(15)  Financial Information of Colony Bankcorp, Inc. (Parent Only)

The parent company’s balance sheets as of March 31, 2003 and December 31, 2002 and the related statements of income and comprehensive income and cash flows are as follows:

COLONY BANKCORP, INC. (PARENT ONLY)
BALANCE SHEETS
FOR PERIOD ENDED MARCH 31, 2003 AND DECEMBER 31, 2002

	March 31, 2003			Dec 31, 2002
	(Unaudited)
ASSETS
Cash	$	305		$	745
Investments in Subsidiaries at Equity		65,197			63,984
Other		1,690			1,612
Totals Assets	$	67,192		$	66,341
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Dividends Payable	$	344		$	343
Other		(70	)		136
		274			479
Subordinated Debt		14,434			14,434
Stockholders’ Equity
Common Stock, Par Value $1 a Share; Authorized 20,000,000 Shares, Issued 4,583,382 and 4,573,232 Shares as of March 31, 2003 and December 31, 2002
Respectively		4,583			4,573
Paid-In Capital		23,511			23,358
Retained Earnings		24,043			22,742
Restricted Stock - Unearned Compensation		(215	)		(78	)
Accumulated Other Comprehensive Income, Net of Tax		562			833
Total Stockholders’ Equity		52,484			51,428
Total Liabilities and Stockholders’ Equity	$	67,192		$	66,341

16

(15)  Financial Information of Colony Bankcorp, Inc. (Parent Only) (continued)

COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND MARCH 31, 2002
(UNAUDITED)

		March 31, 2003			March 31, 2002
Income
	Dividends from Subsidiaries	$	605		$	1,000
	Other		18			17
	Securities gains		0			0
			623			1,017
Expenses
	Interest		176			65
	Other		316			237
			492			302
Income Before Taxes and Equity in Undistributed Earnings of Subsidiaries			131			715
	Income Tax (Benefits)		(156	)		(91	)
Income Before Taxes and Equity in Undistributed Earnings of Subsidiaries			287			806
	Equity in Undistributed Earnings of Subsidiaries		1,358			554
Net Income			1,645			1,360
Other Comprehensive Income, Net of Tax
	Gains (losses) on Securities Arising During Year		(271	)		(273	)
	Reclassification Adjustment		0			0
	Unrealized Gains (Losses) in Securities		(271	)		(273	)
Comprehensive Income		$	1,374		$	1,087

17

(15)  Financial Information of Colony Bankcorp, Inc. (Parent Only) (continued)

COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND MARCH 31, 2002
(UNAUDITED)

			March 31, 2003			March 31, 2002
Cash Flows from Operating Activities
	Net Income		$	1,645		$	1,360
	Adjustments to Reconcile Net Income to Net Cash
	Provided from Operating Activities
		Depreciation and Amortization		19			17
		Equity in Undistributed Earnings of Subsidiary		(1,358	)		(554	)
		Other		(217	)		(544	)
				89			279
Cash Flows from Investing Activities
	Sales and maturities of securities			0			0
	Cash used in business acquistion, net			0			(2,502	)
	Capital Infusion in Subsidiary			(125	)		(650	)
	Purchase of Premises and Equipment			(61	)		(6	)
	Investment in Statutory Trust			0			(279	)
				(186	)		(3,437	)
Cash Flows from Financing Activities
	Dividends Paid			(343	)		(254	)
	Purchase of Treasury Stock			0			(537	)
	Principal Payments on Notes and Debentures			0			(5,896	)
	Proceeds from Notes and Debentures			0			10,415
				(343	)		3,728
Increase (Decrease) in Cash and Cash Equivalents				(440	)		570
Cash and Cash Equivalents, Beginning				745			63
Cash and Cash Equivalents, Ending			$	305		$	633

(16)  Legal Contingencies

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

(17)  Stock Grant Plan

On February 16, 1999, a restricted stock grant plan was approved by the Board.  The plan was adopted for the purpose of establishing incentives designed to recognize, reward and retain executive employees whose performance, contribution and skills are critical to the Company.  The plan period commences February 16, 1999 and ends February 15, 2009 with the maximum number of shares subject to restricted stock awards being 22,175 shares (44,350 shares after the two-for-one stock split effective March 31, 1999).  During 2000 – 2003,  the Company has issued an aggregate total of 28,150 shares pursuant to the stock grant plan, of which, 500 shares have been forfeited, which leaves 16,700 available shares that can be issued over the remaining life of the plan.

18

(18)  Proforma Financial Statement – Business Combination

Colony Bankcorp, Inc, and Quitman Bancorp, Inc. entered into an agreement and plan of merger dated as of October 22, 2001, pursuant to which Quitman was merged with and into Colony with Colony Bankcorp, Inc. surviving the merger and Quitman’s wholly-owned subsidiary, Quitman Federal Savings Bank, becoming a wholly-owned subsidiary of Colony contemporaneous with the consummation of the merger.  The merger was consummated and became effective as of March 29, 2002.  The business combination was accounted for by the purchase method of accounting and the results of operations of Quitman Federal Savings Bank since the date of acquisition are included in the Consolidated Financial Statements.

The proforma information below discloses results of operations for the current period and the corresponding period in the preceeding year as though the companies had combined at the beginning of the period being reported on:

	Three Months Ended
	March 31, 2003		March 31, 2002
Interest Income	$	11,598	$	11,836
Interest Expense		4,960		6,072
Net Income		1,645		1,260
Earnings Per Share	$	0.36	$	0.28
Weighted Avg Shares Outstanding		4,583,382		4,577,535

19

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

Liquidity represents the ability to provide adequate sources of funds for funding loan commitments and investment activities, as well as the ability to provide sufficient funds to cover deposit withdrawals, payment of debt and financing of operations.  Converting assets to cash for these funds is primarily with proceeds from collections on loans and maturities of investment securities or by attracting and obtaining new deposits.  During the three months ended March 31, 2003, the Company was successful in meeting its liquidity needs by increasing deposits 1.67 percent to $675,671,000 from deposits of $664,594,000 on December 31, 2002.  Also, the Company met its liquidity needs by increasing other borrowed money and trust-preferred securities 13.11 percent to $68,351,000 from $60,427,000 on December 31, 2002.  Should the need arise; the Company also maintains relationships with the Federal Home Loan Bank and several correspondent banks that can provide funds on short notice.

Liquidity is monitored on a regular basis by management.  The Company’s liquidity position remained satisfactory for the three months ended March 31, 2003.  Average liquid assets (cash and amounts due from banks, interest-bearing deposits in other banks, funds due and securities) represented 24.42 percent of average deposits for the three months ended March 31, 2003 as compared to 26.14 percent of average deposits for the same period in 2002 and 24.25 percent for calendar year 2002.  Average loans represented 88.79 percent of average deposits for the three months ended March 31, 2003 as compared to 87.12 percent of average deposits for the same period in 2002 and 88.64 percent for calendar year 2002.  Average interest-bearing deposits were 83.21 percent of average earning assets for three months ended March 31, 2003 as compared to 82.55 percent of average earning assets for the same period in 2002 and 83.36 percent for calendar year 2002.

The Company satisfies most of its capital requirements through retained earnings.  During the first three months of 2003, retained earnings provided $1,301,000 of increase in equity.  Additionally, equity had a decrease of $271,000 resulting from the change during the quarter in unrealized gains on securities available for sale, net of taxes and an increase of $26,000 resulting from the stock grant plan. Thus, total equity increased by a net amount of $1,056,000.  During the first three months of 2002, retained earnings provided $1,086,000 of increase in equity.  Additionally, equity had a decrease of $273,000 resulting from the change during the year in unrealized gains on securities available for sale, net of taxes, an increase of $18,000 resulting from the stock grant plan, a decrease of $537,000 resulting from treasury shares acquired through the company’s stock repurchase plan and an increase of $4,944,000 as a result of the acquisition of Quitman Federal Savings Bank.  Thus, total equity increased by a net amount of $5,238,000 for the three months period ended March 31, 2002.  Total equity increased by a net amount of $9,457,000 for calendar year 2002.

As of March 31, 2003, the Company’s capital totaled approximately $52,484,000 and there was not any outstanding commitment for any material capital expenditures.   The company has purchased land for a third location in Dougherty/Lee County, however no contracts have been signed for construction of the facility at this time.  It is anticipated that the project will approximate $1,200,000 with anticipated opening during the fourth quarter of 2003.   The company has purchased land for a location in Thomasville, Georgia; however, it is not anticipated for any construction until 2004.

The Federal Reserve Board and the FDIC have issued risk-based capital guidelines for U. S. banking organizations.  The objective of these efforts was to provide a more uniform framework that is sensitive to differences in risk assets among banking organizations.  The guidelines define a two-tier capital framework.  Tier 1 capital consists of common stock and qualifying preferred stockholders’ equity less goodwill.  Tier 2 capital consists of certain convertible, subordinated and other qualifying term debt and the allowance for loan losses up to 1.25 percent of risk-weighted assets.  The Company has no Tier 2 capital other than the allowance for loan losses.

Using the capital requirements presently in effect, the Tier 1 ratio as of March 31, 2003 was 11.02 percent and total Tier 1 and 2 risk-based capital was 12.27 percent.  Both of these measures compare favorably with the regulatory minimum of 4 percent for Tier 1 and 8 percent for total risk-based capital.  The Company’s Tier 1 leverage ratio was 8.34 percent as of March 31, 2003 which exceeds the required ratio standard of 4 percent.

For the three months ended March 31, 2003, average capital was $52,075,000 representing 6.67 percent of average assets for the year.  This compares to 6.75 percent of average assets for the same period in 2002 and to 6.77 percent for calendar year 2002.

For the first quarter of 2003, the Company paid annual dividends of $0.075 per share compared to $0.06 per share in the first quarter of 2002.  The dividend payout ratio, defined as dividends per share divided by net income per share, was 20.83% for three months ended March 31, 2003 as compared to 18.75 percent for the same period in 2002.  The dividend payout for calendar year 2002 was 21.48 percent.

20

As of March 31, 2003, management was not aware of any recommendations by regulatory authorities which if they were to be implemented, would have a material effect on the Company’s liquidity, capital resources or results of operations.  However, it is possible that examinations by regulatory authorities in the future could precipitate additional loss charge-offs that could materially impact the Company’s liquidity, capital resources and results of operations.

Results of Operations

The Company’s results of operations are determined by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense.  Since market forces and economic conditions beyond the control of the Company determine interest rates, the ability to generate net interest income is dependent upon the Company’s ability to obtain an adequate spread between the rate earned on earning assets and the rate paid on interest-bearing liabilities.  Thus, the key performance for net interest income is the interest margin or net yield, which is taxable-equivalent net interest income divided by average earning assets.

Net Income

Net income for the three months ended March 31, 2003 was $1,645,000 as compared to $1,360,000 for the three months ended March 31, 2002, or an increase of 20.96 percent.  Of this increase $251,000 or 88.07 percent is attributable to Quitman Federal acquisition since their income was not included in first quarter 2002 due to their acquisition being consummated on March 29, 2002.  The increase is the result of an increase in net interest income of $1,473,000 and an increase in other noninterest income of $281,000.  These increases were offset by an increase in noninterest expense of $930,000, an increase in income tax expense of $176,000 and an increase in provision for loan losses of $363,000.    On a fully diluted share basis, net income increased to $0.36 per share for the three months ended March 31, 2003 from $0.32 per the same period in 2002, or an increase of 12.50 percent.

Net Interest Margin

A primary focus of our 2003 business plan is net interest margin improvement, which improved to 3.63 percent for first quarter 2003 compared to 3.54 percent for first quarter 2002, or an increase of 2.54 percent.  In 2001 and 2002, net interest margin compression was primarily attributable to U. S. Federal Reserve lowering interest rates an unprecedented 475 basis points during 2001 and another 50 basis points during 2002.  Net interest income increased 28.52 percent to $6,638,000 in first quarter 2003 from $5,165,000 in first quarter 2002 on an increase in average earning assets to $738,874,000 in first quarter 2003 from $590,719,000 in first quarter 2002.  Average loans increased by $125,514,000 or 27.04 percent, average funds sold increased by $13,026,000 or 44.95 percent, average investment securities increased by $5,371,000 or 6.24 percent, average interest-bearing deposits in other banks increased by $2,668,000 or 29.43 percent and average interest-bearing other assets increased $1,576,000 or 68.61 percent resulting in a net increase in average earning assets of $148,155,000 or 25.08 percent.  Of the average earning asset increase, Quitman Federal is attributable for $73,061,000 or 49.31 percent. 

The net increase in average assets was funded by a net increase in average deposits of 24.65 percent to $664,245,000 in first quarter 2003 from $532,892,000 in first quarter 2002 and a net increase in average debt and funds purchased of 25.31 percent to $59,512,000 in first quarter 2003 from $47,492,000 in first quarter 2002. Of the average deposit increase, Quitman Federal is attributable for $61,629,000 or 46.92 percent.  Average interest-bearing deposits increased by 26.07 percent to $614,791,000 in first quarter 2003 from $487,660,000 in first quarter 2002 while average noninterest-bearing deposits increased 9.33 percent to $49,454,000 in first quarter 2003 from $45,232,000 in first quarter 2002.  Average noninterest-bearing deposits represented 7.45 percent of average total deposits in first quarter 2003 as compared to 8.49 percent in first quarter 2002.

Interest expense decreased for the three months ended March 31, 2003 by $426,000 to $4,960,000 for three months ended March 31, 2003 from $5,386,000 for the same period a year ago.  The decrease is primarily attributable to the U. S. Federal Reserve lowering interest rates an unprecedented 475 basis points during 2001 and another 50 basis points in 2002.  The combination of the increase in average earning assets with the improved net interest margin resulted in an increase of net interest income of $1,473,000 for the three months ended March 31, 2003 compared to the same period a year ago.

Provision for Loan Losses

The allowance for loan losses represents a reserve for potential losses in the loan portfolio.  The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on nonaccruing, past due and other loans that management believes require attention.

The provision for loan losses is a charge to earnings in the current period to replenish the allowance for loan losses and maintain it at a level management has determined to be adequate.  The provision for loan losses was $649,000 in first quarter 2003 as compared to $286,000 in first quarter 2002 representing an increase of $363,000 or 126.92 percent.  The increase in provision for loan losses allowed the company’s reserve for loan losses to keep pace with the rapid loan growth that the company has experienced the past

21

several years.  Net loan charge-offs represented 29.74 percent of the provision for loan losses in first quarter 2003 as compared to 145.10 percent in first quarter 2002.  Net loan charge-offs for the three months ended March 31, 2003 represent 0.03 percent of average loans as compared to 0.09 percent in first quarter 2002.  The leveling off of loan charge-offs the past several years resulted from management’s effort to improve credit quality and to eliminate weak and marginal credits.  As of March 31, 2003, the allowance for loan losses was 1.30 percent of total loans outstanding as compared to an allowance for loan losses of 1.24 percent of total loans outstanding as of March 31, 2002.  The loan loss reserve of 1.30 percent of total loans outstanding provided coverage of 86.89 percent of nonperforming loans and 74.36 percent of nonperforming assets as of March 31, 2003 compared to 72.11 percent and 61.56 percent, respectively as of March 31, 2002.  The determination of the reserve rests upon management’s judgment about factors affecting loan quality and assumptions about the economy.  Management considers the March 31, 2003 allowance for loan losses adequate to cover potential losses in the loan portfolio.

Noninterest Income

Noninterest income consists primarily of service charges on deposit accounts.  Service charges on deposit accounts totaled $856,000 in first quarter 2003 as compared to $745,000 in first quarter 2002 or an increase of 14.90 percent.  This increase is attributable to additional fees resulting from the increase in noninterest-bearing and interest-bearing deposit accounts and the acquisition of Quitman Federal in March 2002.  All other noninterest income increased to $520,000 in first quarter 2003 from $350,000 in first quarter 2002, or an increase of 48.57 percent.  Most of the increase is attributable to additional fee income generated by the mortgage company and the Quitman Federal acquisition during 2002.  Thus, total noninterest income for first quarter 2003 was $1,376,000 compared to $1,095,000 in first quarter 2002, or an increase of 25.66 percent. 

Noninterest Expense

Noninterest expense increased 23.52 percent to $4,884,000 in first quarter 2003 from $3,954,000 in first quarter 2002.   Salaries and employee benefits increased 23.93 percent to $2,745,000 in first quarter 2003 from $2,215,000 in first quarter 2002 primarily due to increased staffing with one new branch opened during 2002 and the acquisition of Quitman Federal.  Occupancy and equipment expense increased 9.17 percent to $762,000 in first quarter 2003 from $698,000 in first quarter 2002 primarily due to additional depreciation and occupancy expense with the new office opened during 2002 and the Quitman Federal acquisition during 2002.  All other noninterest expense increased 32.28 percent to $1,377,000 in first quarter 2003 from $1,041,000 in the same period a year ago.  Other increases in noninterest expense are primarily attributable to expenses incurred in opening one new office during 2002 and the acquisition of Quitman Federal.

Income Tax Expense

Income before taxes increased $461,000 to $2,481,000 in first quarter 2003 from $2,020,000 in first quarter 2002 with significant changes being an increase in net interest income of $1,473,000 in first quarter 2003 as compared to first quarter 2002, an increase in noninterest expense, net of noninterest income of $649,000 in first quarter 2003 as compared to first quarter 2002 and an increase in provision for loan losses of $363,000 in first quarter 2003 as compared to first quarter 2002.  Income tax expense increased 26.67 percent to $836,000 in first quarter 2003 from $660,000 in first quarter 2002.  Income tax expense as a percentage of income before taxes was 33.70 percent in first quarter 2003 compared to 32.67 percent in first quarter 2002 or an increase of 3.15 percent.

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Quantitative  and Qualitative Disclosures About Market Risk

AVERAGE BALANCE SHEETS

	Three Months Ended March 31, 2003								Three Months Ended March 31, 2002
($ in thousands)	Average Balances			Income/ Expense		Yields/ Rates			Average Balances			Income/ Expense		Yields/ Rates
Assets
Interest-Earning Assets
Loans, Net of Unearned Income
Taxable (1)		589,762			10,650		7.22	%		464,248			9,238		7.96	%
Investment Securities
Taxable		83,932			700		3.34	%		79,113			1,076		5.44	%
Tax-Exempt (2)		7,565			114		6.03	%		7,013			112		6.39	%
Total Investment Securities		91,497			814		3.56	%		86,126			1,188		5.52	%
Interest-Bearing Deposits in Other Banks		11,735			34		1.16	%		9,067			38		1.68	%
Funds Sold		42,007			123		1.17	%		28,981			119		1.64	%
Interest-Bearing Other Assets		3,873			45		4.65	%		2,297			36		6.27	%
Total Interest-Earning Assets		738,874			11,666		6.32	%		590,719			10,619		7.19	%
Non-interest-Earning Assets
Cash		16,961								15,140
Allowance for Loan Losses		(7,623	)							(6,055	)
Other Assets		31,996								26,053
Total Noninterest-Earning Assets		41,334								35,138
Total Assets		780,208								625,857
Liabilities and Stockholders’ Equity
Interest-Bearing Liabilities
Interest-Bearing Deposits
Interest-Bearing Demand and Savings		174,002			659		1.51	%		134,563			769		2.29	%
Other Time		440,789			3,620		3.29	%		353,097			4,012		4.54	%
Total Interest-Bearing Deposits		614,791			4,279		2.78	%		487,660			4,781		3.92	%
Other Interest-Bearing Liabilities
Debt		45,454			511		4.50	%		46,953			598		5.09	%
Trust Preferred Securities		14,000			170		4.86	%		500			7		5.60	%
Funds Purchased and Securities
Sold Under Agreement to Repurchase		58			0		0.00	%		39			0		0.00	%
Total Other Interest-Bearing Liabilities		59,512			681		4.58	%		47,492			605		5.10	%
Total Interest-Bearing Liabilities		674,303			4,960		2.94	%		535,152			5,386		4.03	%
Noninterest-Bearing Liabilities and
Stockholders’ Equity
Demand Deposits		49,454								45,232
Other Liabilities		4,376								3,257
Stockholder’s Equity		52,075								42,216
Total Noninterest-Bearing Liabilities and Stockholders’ Equity		105,905								90,705
Total Liabilities and Stockholders’ Equity		780,208								625,857
Interest Rate Spread							3.38	%							3.16	%
Net Interest Income					6,706								5,233
Net Interest Margin							3.63	%							3.54	%

(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 $29 and $30 for three month period ended March 31, 2003 and 2002, respectively, are included in tax-exempt interest on loans.
(2)	Taxable-equivalent adjustments totaling $39 and $38 for three month period ended March 31, 2003 and 2002, respectively, are included in tax-exempt interest on investment securities.  The adjustments are based on a federal tax rate of 34 percent with appropriate reductions for the effect of disallowed interest expense incurred in carrying tax-exempt obligations.

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RATE/VOLUME ANALYSIS

The rate/volume analysis presented hereafter illustrates the change from period to period for each component of the taxable equivalent net interest income separated into the amount generated through volume changes and the amount generated by changes in the yields/rates.

	Changes from March 31, 2002 to March 31, 2003 (1)
($ in thousands)	Volume			Rate			Total
Interest Income
Loans, Net-taxable	$	2,498		$	(1,086	)	$	1,412
Investment Securities
Taxable		66			(442	)		(376	)
Tax-exempt		9			(7	)		2
Total Investment Securities		75			(449	)		(374	)
Interest-Bearing Deposits in other banks		11			(15	)		(4	)
Funds Sold		53			(49	)		4
Other Earning Assets		25			(16	)		9
Total Interest Income		2,662			(1,615	)		1,047
Interest Expense
Interest-Bearing Demand and Savings Deposits		225			(335	)		(110	)
Time Deposits		996			(1,388	)		(392	)
Other Interest-Bearing Liabilities
Funds Purchased and Securities Under Agreement to Repurchase		0			0			0
Other Debt		(19	)		(68	)		(87	)
Trust Preferred Securities		189			(26	)		163
Total Interest Expense (Benefit)		1,391			(1,817	)		(426	)
Net Interest Income	$	1,271		$	202		$	1,473

(1)  Changes in net interest income for the periods, based on either changes in average balances or changes in average rates for interest-earning assets and interest-bearing liabilities, are shown on this table.  During each year, there are numerous and simultaneous balance and rate changes; therefore, it is not possible to precisely allocate the changes between balances and rates.  For the purpose of this table, changes that are not exclusively due to balance changes or rate changes have been attributed to rates.

Our financial performance is impacted by, among other factors, interest rate risk and credit risk.  We do not utilize derivatives to mitigate our credit risk, relying instead on an extensive loan review process and our allowance for loan losses.

Interest rate risk is the change in value due to changes in interest rates.  The Company is exposed only to U. S. dollar interest rate changes and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin.  The Company does not have any trading instruments nor does it classify any portion of its investment portfolio as held for trading.  The Company does not engage in any hedging activity or utilize any derivatives.  The Company has no exposure to foreign currency exchange rate risk, commodity price risk and other market risks.  This risk is addressed by our Asset & Liability Management Committee (“ALCO”) which includes senior management representatives.  The ALCO monitors interest rate risk by analyzing the potential impact to the net portfolio of equity value and net interest income from potential changes to interest rates and considers the impact of alternative strategies or changes in balance sheet structure.

Interest rates play a major part in the net interest income of financial institutions.  The repricing of interest earning assets and interest-bearing liabilities can influence the changes in net interest income.  The timing of repriced assets and liabilities is Gap management and our Company has established its policy to maintain a Gap ratio in the one-year time horizon of .80 to 1.20.

Our exposure to interest rate risk is reviewed on at least a quarterly basis by our Board of Directors and the ALCO.  Interest rate risk exposure is measured using interest risk sensitivity analysis to determine our change in net portfolio value in the event of assumed changes in interest rates.  In order to reduce the exposure to interest rate fluctuations, we have implemented strategies to more closely match our balance sheet composition.  We are generally focusing our investment activities on securities with terms or average lives in the 2 –5 year range.

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The Company maintains about one-third of its loan portfolio in adjustable rate loans that reprice with prime rate changes, while the bulk of its other loans mature within 3 years.  The liabilities to fund assets are primarily in short term certificate of deposits that mature within one year.  This balance sheet composition has allowed the Company to be relatively constant with its net interest margin the past several years, though the unprecedented 475 basis point decrease by U. S. Federal Reserve in 2001 and another 50 basis point decrease in 2002 resulted in significant net interest margin pressure.  Net interest margin increased to 3.63% for first quarter 2003 compared to 3.54% net interest margin for fourth quarter 2002 and first quarter 2002 respectively.  We anticipate continued improvement or stability in the net interest margin the balance of the year given the Federal Reserve’s present neutral interest rates forecast for the balance of 2003.

Colony Bankcorp, Inc. and Subsidiaries Interest Rate Sensitivity

The following table is an analysis of the Company’s interest rate-sensitivity position at March 31, 2003.  The interest rate-sensitivity gap, which is the difference between interest-earning assets and interest-bearing liabilities by repricing period, is based upon maturity or first repricing opportunity, along with a cumulative interest rate-sensitivity gap.  It is important to note that the table indicates a position at a specific point in time and may not be reflective of positions at other times during the year or in subsequent periods.  Major changes in the gap position can be, and are, made promptly as market outlooks change.

Assets and Liabilities Repricing Within

($ in Thousands)	3 Months or Less			4 to 12 Months			1 Year			1 to 5 Years			Over 5 Years			Total
EARNING ASSETS:
Interest-bearing deposits		17,923			0			17,923			0			0			17,923
Federal Funds Sold		39,283			0			39,283			0			0			39,283
Investment Securities		17,914			2,364			20,278			59,817			8,803			88,898
Loans, net of unearned income		232,288			137,960			370,248			221,869			16,455			608,572
Other earning assets		0			0			0			0			4,108			4,108
Total Interest-earning assets		307,408			140,324			447,732			281,686			29,366			758,784
INTEREST-BEARING LIABILITIES:
Interest-bearing Demand deposits (1)		144,129			0			144,129			0			0			144,129
Savings (1)		33,148			0			33,148			0			0			33,148
Time Deposits		128,241			263,786			392,027			51,098			26			443,151
Other Borrowings (2)		7,851			2,000			9,851			16,000			28,500			54,351
Trust Preferred Securities		14,000			0			14,000			0			0			14,000
Total Interest-bearing liabilities		327,369			265,786			593,155			67,098			28,526			688,779
Interest rate-sensitivity gap		(19,961	)		(125,462	)		(145,423	)		214,588			840			70,005
Cumulative interest-sensitivity gap		(19,961	)		(145,423	)		(145,423	)		69,165			70,005
Interest rate-sensivitiy gap as a percentage of interest-earning assets		(2.63	)%		(16.53	)%		(19.17	)%		28.28	%		0.11	%
Cumulative interest rate-sensitivity as as a percentage of interest-earning assets		(2.63	)%		(19.17	)%		(19.17	)%		9.12	%		9.23	%

(1)  Interest-bearing Demand and Savings accounts for repricing purposes are considered to reprice within 3 months or less.
(2)  Short-term borrowings for repricing purposes are considered to reprice within 3 months or less.

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The foregoing table indicates that we had a one year negative gap of $(145) million, or (19.17)% of total assets at March 31, 2003.  In theory, this would indicate that at March 31, 2003, $145 million more in liabilities than assets would reprice if there were a change in interest rates over the next 365 days.  Thus, if interest rates were to decline, the gap would indicate a resulting increase in net interest margin.  However, changes in the mix of earning assets or supporting liabilities can either increase or decrease the net interest margin without affecting interest rate sensitivity.  In addition, the interest rate spread between an asset and our supporting liability can vary significantly while the timing of repricing of both the assets and our supporting liability can remain the same, thus impacting net interest income.  This characteristic is referred to as a basis risk and, generally, relates to the repricing characteristics of short-term funding sources such as certificates of deposits.

Gap analysis has certain limitations.  Measuring the volume of repricing or maturing assets and liabilities does not always measure the full impact on the portfolio value of equity or net interest income.  Gap analysis does not account for rate caps on products; dynamic changes such as increasing prepay speeds as interest rates decrease, basis risk, or the benefit of non-rate funding sources. The majority of our loan portfolio reprices quickly and completely following changes in market rates, while non-term deposit rates in general move slowly and usually incorporate only a fraction of the change in rates.  Products categorized as non-rate sensitive, such as our noninterest-bearing demand deposits, in the gap analysis behave like long term fixed rate funding sources.  Both of these factors tend to make our actual behavior more asset sensitive than is indicated in the gap analysis.  In fact, we experience higher net interest income when rates rise, opposite what is indicated by the gap analysis.  In fact, during the recent period of declines in interest rates, our net interest margin has declined.  Therefore, management uses gap analysis, net interest margin analysis and market value of portfolio equity as our primary interest rate risk management tools.

Future Outlook

Colony is an emerging company in an industry filled with nonregulated competitors and a rapid pace of consolidation.  The year brings with it new opportunities for growth in our existing markets, as well as opportunities to expand into new markets through acquisitions and denovo branching.  Colony completed the acquisition of Quitman Federal during 2002 and with the Quitman acquisition opened a branch in the Valdosta/Lowndes County market during the first quarter of 2003.  The company anticipates purchasing real estate for a second location in Lowndes County that would open during 2004.The company purchased real estate in the Dougherty/Lee Counties market during 2002 and will construct its third office in this market during 2003.  Additionally, real estate was purchased in the Thomas County market for a future office, probably in 2004.  Other areas of interest in South and Central Georgia include Glynn and Ware Counties, both with annual retail sales greater than $650 million and a population greater than 35,000.

Liquidity

The company’s goals with respect to liquidity are to ensure that sufficient funds are available to meet current operating requirements and to provide reserves against unforeseen liquidity requirements.  Management continuously reviews the Company’s liquidity position, which is maintained on a basis consistent with established internal guidelines and the tests and reviews of the various regulator authorities.  The Company’s primary sources at March 31, 2003 included cash, due from banks, federal funds and short-term investment securities.  The Company also has the ability, on a short-term basis, to borrow funds from Federal Home Loan Bank and correspondent banks.  The mix of asset maturities contributes to the company’s overall liquidity position.

Off Balance Sheet Items

In the normal course of business, certain commitments and contingencies are incurred which are not reflected in the consolidated financial statements.  Commitments under standby letters of credit to U.S. addresses approximated $1,159,000 as of March 31, 2003.  Unfulfilled loan commitments as of March 31, 2003 approximated $64,328,000.  No losses are anticipated as a result of commitments or contingencies.

Certain Transactions

In the normal course of business, officers and directors of the Banks, and certain business organizations and individuals associated with them, maintain a variety of banking relationships with the bank.  Transactions with senior officers and directors are made on terms comparable to those available to other bank customers.

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Forward-Looking Statements

This document contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  The words “believe,” “estimate,” “expect,” “intend,” “anticipate” and similar expressions and variations thereof identify certain of such forward-looking statements, which speaks only as of the dates which they were made.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.  Users are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors.  Users are therefore cautioned not to place undue reliance on these forward-looking statements. 

Critical Accounting Policies

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. The Company’s financial position and results of operations are affected by management’s application of accounting policies, including judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different assumptions in the application of these policies could result in material changes in the Company’s financial position and/or results of operations. The more critical accounting and reporting policies include the Company’s accounting for securities, loans, the allowance for loan losses and income taxes. Colony’s accounting policies are fundamental to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. Accordingly, the Company’s significant accounting policies are discussed in detail in the Colony’s 2003 financial statements.

BUSINESS

General

The Company was organized in 1983 as a bank holding company through the merger of Colony Bank of Fitzgerald with a subsidiary of the Company.  Since that time, Colony Bank of Fitzgerald, which was formed by principals of Colony Bankcorp, Inc. in 1976, has operated as a wholly-owned subsidiary of the Company.  In April 1984, Colony Bankcorp, Inc. acquired Colony Bank Wilcox, and in November 1984, Colony Bank Ashburn became a wholly-owned subsidiary of Colony Bankcorp, Inc.  Colony Bankcorp, Inc. continued its growth with the acquisition of Colony Bank of Dodge County in September 1985.  In August 1991, Colony Bankcorp, Inc. acquired Colony Bank Worth.  In November 1996, Colony Bankcorp, Inc. acquired Colony Bank Southeast and in November 1996 formed a non-bank subsidiary Colony Management Services, Inc.  In March 2002, Colony Bankcorp, Inc. acquired Colony Bank Quitman, FSB and also formed Colony Bankcorp Statutory Trust I.  In December 2002, Colony formed its second trust, Colony Bankcorp Statutory Trust II.

Through its seven subsidiary banks, Colony Bankcorp, Inc. operates a full-service banking business and offers a broad range of retail and commercial banking services including checking, savings, NOW accounts, money market and time deposits of various types; loans for business, agriculture, real estate, personal uses, home improvement and automobiles; credit card; letters of credit; investment and discount brokerage services; IRA’s; safe deposit box rentals, bank money orders; electronic funds transfer services, including wire transfers and automated teller machines and internet accounts.  Each of the Banks is a state chartered institution whose customer deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation.

On April 2, 1998, the Company was listed on Nasdaq National Market.  The Company’s common stock trades on the NASDAQ Stock Market under the symbol “CBAN”.  The Company presently has approximately 1,400 shareholders as of March 31, 2003.  “The NASDAQ Stock Market” or “NASDAQ” is a highly-regulated electronic securities market comprised of competing Market Makers whose trading is supported by a communications network linking them to quotation dissemination, trade reporting and order execution systems.  This market also provides specialized automation services for screen-based negotiations of transactions, on-line comparison of transactions, and a range of informational services tailored to the needs of the securities industry, investors and issuers.  The NASDAQ Stock Market is operated by The NASDAQ Stock Market, Inc., a wholly-owned subsidiary of the National Association of Securities Dealers, Inc.

ITEM 4 – CONTROLS AND PROCEDURES

We maintain a system of internal controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report.  Within the 90-day period prior to the date of this report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.  Based upon that evaluation, our Chief Executive Officer and our Principal Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to Colony Bankcorp, Inc. (including its consolidated subsidiaries) required to be included in this quarterly report on Form 10-Q.

There have been no significant changes in our internal controls or in other factors which could significantly affect internal controls subsequent to the date that we carried out our evaluation.

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PART II- OTHER INFORMATION

ITEM 6 – EXHIBITS AND REPORTS ON FORM 8-K

A.             Exhibits – None

B.             There have been no reports filed on Form 8-K for the quarter ended March 31, 2003.

SIGNATURE

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.

		/s/ JAMES D. MINIX
Date:	May 5, 2003	James D. Minix, President and Chief Executive Officer
		/s/ TERRY L. HESTER
Date:	May 5, 2003	Terry L. Hester, Executive Vice President and Chief Financial Officer

I, James D. Minix, President/CEO, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Colony Bankcorp, Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flow of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a.	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b.	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

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	a.	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date:	May 5, 2003		/s/ JAMES D. MINIX
			James D. Minix, President and CEO

I, Terry L. Hester, Executive Vice President and CFO certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Colony Bankcorp, Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flow of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a.	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b.	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	c.	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a.	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

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6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date:	May 5, 2003	/s/ TERRY L. HESTER
		Terry L. Hester Executive Vice President and CFO

The undersigned is the Chief Executive Officer of Colony Bankcorp, Inc. (the “Registrant”).  This Certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  This Certification accompanies the Quarterly report on Form 10-Q of the Registrant for the quarterly period ended September 30, 2002.

I certify that such Quarterly Report on Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such 10-Q Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

This certification is executed as of May 5, 2003	/s/ JAMES D. MINIX
	James D. Minix President and Chief Executive Officer

The undersigned is the Chief Financial Officer of Colony Bankcorp, Inc. (the “Registrant”).  This Certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  This Certification accompanies the Quarterly report on Form 10-Q of the Registrant for the quarterly period ended September 30, 2002.

I certify that such Quarterly Report on Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such 10-Q Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

This certification is executed as of May 5, 2003	/s/ TERRY L. HESTER
	Terry L. Hester Executive Vice President and Chief Financial Officer

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