10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-K

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Fee Required)

For the Fiscal Year Ended December 31, 2011

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(No Fee Required)

For the Transition Period from _____________to ______________

Commission File Number 000-12436

COLONY BANKCORP, INC.

(Exact Name of Registrant 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)	(Zip Code)

(229) 426-6000

Issuer’s Telephone Number, Including Area Code

Securities Registered Pursuant to Section 12(b) of the Act:  None.

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, Par Value $1.00	The NASDAQ Stock Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  o  No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 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 has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x  No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer   o	Accelerated Filer    o
Nonaccelerated Filer   o (Do not check if a smaller reporting company)	Smaller Reporting Company    x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):   Yeso   No  x

State the aggregate market value of the voting and non-voting common equity held by nonaffiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of June 30, 2011:  $16,330,731 based on stock price of $2.87.

Indicate the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date:  8,439,258 shares of $1.00 par value common stock as of March 15, 2012.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the information required by Part III of this Annual Report are incorporated by reference from the Registrant’s definitive Proxy Statement for the 2011 annual meeting of shareholders to be filed with Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report.

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TABLE OF CONTENTS

			Page
PART I
	Forward Looking Statement Disclosure		3
	Item 1.	Business	5
	Item 1A.	Not Applicable	26
	Item 1B.	Not Applicable	26
	Item 2.	Properties	26
	Item 3.	Legal Proceedings	26
	Item 4.	Not Applicable	26
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
	Item 6.	Selected Financial Data	28
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	62
	Item 8.	Financial Statements and Supplementary Data	62
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	63
	Item 9A.	Controls and Procedures	64
	Item 9B.	Other Information	65
PART III
	Item 10.	Directors and Executive Officers and Corporate Governance	65
	Item 11.	Executive Compensation	65
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	66
	Item 13.	Certain Relationships and Related Transactions and Director Independence	66
	Item 14.	Principal Accounting Fees and Services	66
PART IV
	Item 15.	Exhibits, Financial Statement Schedules	67
	Signatures		70

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Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this Annual Report that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the Act), notwithstanding that such statements are not specifically identified. In addition, certain statements may be contained in the Company’s future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Company that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans and objectives of Colony Bankcorp, Inc. or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

· Local and regional economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact.

· Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.

· The effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board.

· Inflation, interest rate, market and monetary fluctuations.

· Political instability.

· Acts of war or terrorism.

· The timely development and acceptance of new products and services and perceived overall value of these products and services by users.

· Changes in consumer spending, borrowings and savings habits.

· Technological changes.

· Acquisitions and integration of acquired businesses.

· The ability to increase market share and control expenses.

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Forward-Looking Statements and Factors that Could Affect Future Results (Continued)

· The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiary must comply.

· The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters.

· Changes in the Company’s organization, compensation and benefit plans.

· The costs and effects of litigation and of unexpected or adverse outcomes in such litigation.

· Greater than expected costs or difficulties related to the integration of new lines of business.

· The Company’s success at managing the risks involved in the foregoing items.

· Restrictions or conditions imposed by our regulators on our operations, including the terms of our memorandum of understanding.

Forward-looking statements speak only as of the date on which such statements are made.  The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

Readers should carefully review all disclosures we file from time to time with the Securities and Exchange Commission (SEC).

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Part I

Item 1

Business

COLONY BANKCORP, INC.

General

Colony Bankcorp, Inc. (the “Company” or “Colony”) is a Georgia business corporation which was incorporated on November 8, 1982.   The Company was organized for the purpose of operating as a bank holding company under the Federal Bank Holding Company Act of 1956, as amended, and the bank holding company laws of Georgia (Georgia Laws 1976, p. 168, et. seq.). On July 22, 1983, the Company, after obtaining the requisite regulatory approvals, acquired 100 percent of the issued and outstanding common stock of Colony Bank (formerly Colony Bank of Fitzgerald and The Bank of Fitzgerald), Fitzgerald, Georgia, through the merger of the Bank with a subsidiary of the Company which was created for the purpose of organizing the Bank into a one-bank holding company.  Since that time, Colony Bank has operated as a wholly-owned subsidiary of the Company.  Our business is conducted primarily through our wholly-owned subsidiary, which provides a broad range of banking services to its retail and commercial customers.  The company headquarters are located at 115 South Grant Street, Fitzgerald, Georgia 31750, its telephone number is 229-426-6000 and its Internet address is http://www.colonybank.com.  We operate twenty-eight domestic banking offices, one mortgage company office and one corporate operations office and, at December 31, 2011, we had approximately $1.20 billion in total assets, $700.61 million in total loans, $999.99 million in total deposits and $96.61 million in stockholder’s equity.  Deposits are insured, up to applicable limits, by the Federal Deposit Insurance Corporation.

The Parent Company

Because Colony Bankcorp, Inc. is a bank holding company, its principal operations are conducted through its subsidiary bank, Colony Bank (the “Bank”).  It has 100 percent ownership of its subsidiary and maintains systems of financial, operational and administrative controls that permit centralized evaluation of the operations of the subsidiary bank in selected functional areas including operations, accounting, marketing, investment management, purchasing, human resources, computer services, auditing, compliance and credit review.  As a bank holding company, we perform certain stockholder and investor relations functions.

Colony Bank - Banking Services

Our principal subsidiary is the Bank.  The Bank, headquartered in Fitzgerald, Georgia, offers traditional banking products and services to commercial and consumer customers in our markets.  Our product line includes, among other things, loans to small and medium-sized businesses, residential and commercial construction and land development loans, commercial real estate loans, commercial loans, agri-business and production loans, residential mortgage loans, home equity loans, consumer loans and a variety of demand, savings and time deposit products.  We also offer internet banking services, electronic bill payment services, safe deposit box rentals, telephone banking, credit and debit card services, remote depository products and access to a network of ATMs to our customers.  Colony Bank conducts a general full service commercial, consumer and mortgage banking business through thirty offices located in the middle and south Georgia cities of Fitzgerald, Warner Robins, Centerville, Ashburn, Leesburg, Cordele, Albany, Thomaston, Columbus, Sylvester, Tifton, Moultrie, Douglas, Broxton, Savannah, Eastman, Chester, Soperton, Rochelle, Pitts, Quitman and Valdosta, Georgia.

For additional discussion of our loan portfolio and deposit accounts, see “Management’s Discussion of Financial Condition and Results of Operations - Loans and Deposits.”

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Part I (Continued)

Item 1 (Continued)

Subordinated Debentures (Trust Preferred Securities)

During the second quarter of 2004, the Company formed Colony Bankcorp Statutory Trust III for the sole purpose of issuing $4,500,000 in Trust Preferred Securities through a pool sponsored by FTN Financial Capital Market.  The securities have a maturity of thirty years and are redeemable after five years with certain exceptions.

During the second quarter of 2006, the Company formed Colony Bankcorp Capital Trust I for the sole purpose of issuing $5,000,000 in Trust Preferred Securities through a pool sponsored by SunTrust Bank Capital Markets.  The securities have a maturity of thirty years and are redeemable after five years with certain exceptions.

During the first quarter of 2007, the Company formed Colony Bankcorp Capital Trust II for the sole purpose of issuing $9,000,000 in Trust Preferred Securities through a pool sponsored by Trapeza Capital Management, LLC.  The securities have a maturity of thirty years and are redeemable after five years with certain exceptions.  Proceeds from this issuance were used to pay off trust preferred securities issued on March 26, 2002 through Colony Bankcorp Statutory Trust I.

During the third quarter of 2007, the Company formed Colony Bankcorp Capital Trust III for the sole purpose of issuing $5,000,000 in Trust Preferred Securities through a pool sponsored by Trapeza Capital Management, LLC.  The securities have a maturity of thirty years and are redeemable after five years with certain exceptions.  Proceeds from this issuance were used to pay off trust preferred securities issued on December 19, 2002 through Colony Bankcorp Statutory Trust II.

Corporate Restructuring and Business Combinations

On April 30, 1984, after acquiring the requisite regulatory approvals, the Company acquired 100 percent of the issued and outstanding stock of Colony Bank Wilcox (formerly Community Bank of Wilcox and Pitts Banking Company), Pitts, Wilcox County, Georgia.  As part of the transaction, Colony issued an additional 17,872 shares of its $10.00 par value common stock, all of which was exchanged with the holders of shares of common stock of Pitts Banking Company for 100 percent of the 250 issued and outstanding shares of common stock of Pitts Banking Company.  Since the date of acquisition, Colony Bank Wilcox operated as a wholly-owned subsidiary of the Company until it was merged into Colony Bank effective August 1, 2008.

On November 1, 1984, after obtaining the requisite regulatory approvals, the Company acquired 100 percent of the issued and outstanding common stock of Colony Bank Ashburn (formerly Ashburn Bank), Ashburn, Turner County, Georgia, for a combination of cash and interest-bearing promissory notes.  Since the date of acquisition, Colony Bank Ashburn operated as a wholly-owned subsidiary of the Company until it was merged into Colony Bank effective August 1, 2008.

On September 30, 1985, after obtaining the requisite regulatory approvals, the Company acquired 100 percent of the issued and outstanding common stock of Colony Bank of Dodge County, (formerly The Bank of Dodge County), Chester, Dodge County, Georgia.  The stock was acquired in exchange for the issuance of 3,500 shares of common stock of Colony.  Since the date of acquisition, Colony Bank of Dodge County operated as a wholly-owned subsidiary of the Company until it was merged into Colony Bank effective August 1, 2008.

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Part I (Continued)

Item 1 (Continued)

On July 31, 1991, after obtaining the requisite regulatory approvals, the Company acquired 100 percent of the issued and outstanding common stock of Colony Bank Worth, (formerly Worth Federal Savings and Loan Association and Bank of Worth), Sylvester, Worth County, Georgia.  The stock was acquired in exchange for cash and the issuance of 7,661 shares of common stock of Colony for an aggregate purchase price of approximately $718,000.  Since the date of acquisition, Colony Bank Worth operated as a wholly-owned subsidiary of the Company until it was merged into Colony Bank effective August 1, 2008.

On November 8, 1996, Colony organized Colony Management Services, Inc. to provide support services to each subsidiary.  Services provided include loan and compliance review, internal audit and data processing. Colony Management Services, Inc. operated as a wholly-owned subsidiary of the Company until it was merged into Colony Bank effective August 1, 2008.

On November 30, 1996, after obtaining the requisite regulatory approvals, the Company acquired 100 percent of the issued and outstanding common stock of Colony Bank Southeast (formerly Broxton State Bank), Broxton, Coffee County, Georgia in a business combination accounted for as a pooling of interests.  Broxton State Bank became a wholly-owned subsidiary of the Company through the exchange of 157,735 shares of the Company’s common stock for all of the outstanding stock of Broxton State Bank.  Since the date of acquisition, Colony Bank Southeast operated as a wholly-owned subsidiary of the Company until it was merged into Colony Bank effective August 1, 2008.

On March 2, 2000, Colony Bank Ashburn purchased the capital stock of Colony Mortgage Corp (formerly Georgia First Mortgage Company) in a business combination accounted for as a purchase.  The purchase price of $346,725 was the fair value of the net assets of Georgia First Mortgage Company at the date of purchase.  Colony Mortgage Corp is primarily engaged in residential real estate mortgage lending in the state of Georgia. Colony Mortgage Corp operates as a subsidiary of Colony Bank effective with the August 1, 2008 merger.

On March 29, 2002, after obtaining the requisite regulatory approvals, the Company acquired 100 percent of the issued and outstanding stock of Colony Bank Quitman, FSB, (formerly Quitman Federal Saving Bank), Quitman, Brooks County, Georgia.  Quitman Federal Savings Bank became a wholly-owned subsidiary of the Company through the exchange of 367,093 shares of the Company’s common stock and cash for an aggregate acquisition price of $7,446,163.  Since the date of acquisition, Colony Bank Quitman, FSB operated as a wholly-owned subsidiary of the Company until it was merged into Colony Bank effective August 1, 2008.

On March 19, 2004, Colony Bank Ashburn purchased Flag Bank - Thomaston office in a business combination accounted for as a purchase.  Since the date of acquisition, the Thomaston office operated as an office of Colony Bank Ashburn until August 1, 2008 when it became an office of Colony Bank.

On August 1, 2008, the Company effected a merger of its seven banking subsidiaries and its one nonbank subsidiary into one surviving bank subsidiary, Colony Bank (formerly Colony Bank of Fitzgerald).

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Part I (Continued)

Item 1 (Continued)

Markets and Competition

The banking industry in general is highly competitive.  Our market areas of middle and south Georgia have experienced good economic and population growth the past several years, however the current downturn in the housing and real estate market that began in late 2007 along with recessionary fears has proven to be quite challenging - not only for Colony but the entire banking industry.  In our markets, we face competitive pressures in attracting deposits and making loans from larger regional banks and smaller community banks, thrift institutions, credit unions, consumer finance companies, mortgage bankers, brokerage firms and insurance companies.  The principal factors in competing for deposits and loans include interest rates, fee structures, range of products and services offered and convenience of office and ATM locations.  The banking industry is also experiencing increased competition for deposits from less traditional sources such as money market and mutual funds.  In addition, intense market demands, economic concerns, volatile interest rates and customer awareness of product and services have forced banks to be more competitive - often resulting in margin compression and a decrease in operating efficiency.

In response to competitive issues, the Company merged all of its operations into one operating subsidiary, Colony Bank, effective August 1, 2008.  This consolidation effort enabled the Company to align products, pricing and marketing efforts while re-allocating resources to support management’s future growth strategies.

Correspondents

Colony Bank has correspondent relationships with the following banks: Federal Reserve Bank in Atlanta, Georgia; SunTrust Bank in Atlanta, Georgia; FTN Financial in Memphis, Tennessee, CenterState Bank in Lake Wales, Florida and Federal Home Loan Bank in Atlanta, Georgia.  The correspondent relationships facilitate the transactions of business by means of loans, collections, investment services, lines of credit and exchange services.  As compensation for these services, the Bank maintains balances with its correspondents in noninterest-bearing accounts and pays some service charges.

Employees

On December 31, 2011, the Company had a total of 284 full-time and 29 part-time employees.  We consider our relationship with our employees to be satisfactory.

The Company has a noncontributory profit-sharing plan covering all employees subject to certain minimum age and service requirements.  No Company contributions were made in 2011 due to performance.  In addition, the Company maintains a comprehensive employee benefit program providing, among other benefits, hospitalization, major medical, life insurance and disability insurance.  Management considers these benefits to be competitive with those offered by other financial institutions in our market area.  Colony’s employees are not represented by any collective bargaining group.

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Part I (Continued)

Item 1 (Continued)

SUPERVISION AND REGULATION

BANK HOLDING COMPANY REGULATION

General

Colony is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (BHCA).  We are extensively regulated under federal and state law.  Generally, these laws and regulations are intended to protect our depositors, not necessarily our shareholders or our creditors.  As a bank holding company registered with the Federal Reserve under the BHCA and the Georgia Department of Banking and Finance (“the Georgia Department”) under the Financial Institutions Code of Georgia, we are subject to supervision, examination and reporting by the Federal Reserve and the Georgia Department.  Our activities are limited to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries, or engaging in any other activity that the Federal Reserve determines to be so closely related to banking, or managing or controlling banks, as to be a proper incident to these activities.

Colony is required to file with the Federal Reserve and the Georgia Department periodic reports and any additional information as they may require.  The Federal Reserve and Georgia Department will also regularly examine the Company.  The Federal Deposit Insurance Corporation (“FDIC”) and Georgia Department also examine the Bank.

The following is a summary of certain provisions of certain laws that affect the regulation of bank holding companies and banks.  The discussion is qualified in its entirety by reference to applicable laws and regulations.  Changes in such laws and regulations may have a material effect on our business and prospects.

Activity Limitations

The BHCA requires prior Federal Reserve approval for, among other things:

· the acquisition by a bank holding company of direct or indirect ownership or control of more than 5 percent of the voting shares or substantially all of the assets of any bank, or

· a merger or consolidation of a bank holding company with another bank holding company.

Similar requirements are imposed by the Georgia Department.

A bank holding company may acquire direct or indirect ownership or control of voting shares of any company that is engaged directly or indirectly in banking, or managing or controlling banks, or performing services for its authorized subsidiaries.  A bank holding company may also engage in or acquire an interest in a company that engages in activities that the Federal Reserve has determined by regulation or order to be so closely related to banking as to be a proper incident to these activities.  The Federal Reserve normally requires some form of notice or application to engage in or acquire companies engaged in such activities.  Under the BHCA, Colony will generally be prohibited from engaging in or acquiring direct or indirect control of more than 5 percent of the voting shares of any company engaged in activities other than those referred to above.

The BHCA permits a bank holding company located in one state to lawfully acquire a bank located in any other state, subject to deposit percentage, aging requirements and other restrictions.  The Riegle-Neal Interstate Banking and Branching Efficiency Act also generally provides that national and state chartered banks may, subject to applicable state law, branch interstate through acquisitions of banks in other states.

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Part I (Continued)

Item 1 (Continued)

In November 1999, Congress enacted the Gramm-Leach-Bliley Act, which made substantial revisions to the statutory restrictions separating banking activities from other financial activities.  Under the Gramm-Leach-Bliley Act, bank holding companies that are well capitalized, well managed and meet other conditions can elect to become “financial holding companies.”  As financial holding companies, they and their subsidiaries are permitted to acquire or engage in activities that were not previously allowed bank holding companies, such as insurance underwriting, securities underwriting and distribution, travel agency activities, broad insurance agency activities, merchant banking and other activities that the Federal Reserve determines to be financial in nature or complementary to these activities.  Financial holding companies continue to be subject to the overall oversight and supervision of the Federal Reserve, but the Gramm-Leach-Bliley Act applies the concept of functional regulation to the activities conducted by subsidiaries.  For example, insurance activities would be subject to supervision and regulation by state insurance authorities.  While Colony has not elected to become a financial holding company in order to exercise the broader activity powers provided by the Gramm-Leach-Bliley Act, it may elect to do so in the future.

Limitations on Acquisitions of Bank Holding Companies

As a general proposition, other companies seeking to acquire control of a bank holding company would require the approval of the Federal Reserve under the BHCA.  In addition, individuals or groups of individuals seeking to acquire control of a bank holding company would need to file a prior notice with the Federal Reserve (which the Federal Reserve may disapprove under certain circumstances) under the Change in Bank Control Act.  Control is conclusively presumed to exist if an individual or company acquires 25 percent or more of any class of voting securities of the bank holding company.  Control may exist under the Change in Bank Control Act if the individual or company acquires 10 percent or more of any class of voting securities of the bank holding company.

Source of Strength Doctrine

In accordance with Federal Reserve Board policy, the holding company is expected to act as a source of financial and managerial strength to the Bank. Under this policy, the holding company is expected to commit resources to support its bank subsidiary, including at times when the holding company may not be in a financial position to provide it. As discussed below, the holding company could be required to guarantee the capital plan of the Bank if it becomes undercapitalized for purposes of banking regulations. Any capital loans by a bank holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. The BHC Act provides that, in the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to priority of payment.

The Dodd-Frank Act has added additional guidance regarding the source of strength doctrine and has directed the regulatory agencies to promulgate new regulations to increase the capital requirements for bank holding companies to a level that matches those of banking institutions.

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Part I (Continued)

Item 1 (Continued)

Recent Legislation

On October 3, 2008, the Emergency Economic Stabilization Act of 2008 was enacted (“EESA”) to restore confidence and stabilize the volatility in the U.S. banking system and to encourage financial institutions to increase their lending to customers and to each other. Initially introduced as the Troubled Asset Relief Program (“TARP”), the EESA authorized the United States Department of the Treasury (“U.S. Treasury”) to purchase from financial institutions and their holding companies up to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities issued by financial institutions and their holding companies in a troubled asset relief program. Initially, $350 billion or half of the $700 billion was made immediately available to the U.S. Treasury. On    January 15, 2009, the remaining $350 billion was released to the U.S. Treasury.

On October 14, 2008, the U.S. Treasury announced its intention to inject capital into nine large U.S. financial institutions under the TARP Capital Purchase Program (the “TARP CPP”), and since has injected capital into many other financial institutions, including the Company. The U.S. Treasury initially allocated $250 billion towards the TARP CPP. On January 9, 2009, the Company entered into a Securities Purchase Agreement - Standard Terms with the U.S. Treasury (“Stock Purchase Agreement”), pursuant to which, among other things, the Company sold to the U.S. Treasury for an aggregate purchase price of $28 million, preferred stock and warrants. Under the terms of the TARP CPP, the Company is prohibited from increasing dividends on its common stock, and from making certain repurchases of equity securities, including its common stock, without the U.S. Treasury’s consent. Furthermore, as long as the preferred stock issued to the U.S. Treasury is outstanding, dividend payments and repurchases or redemptions relating to certain equity securities, including the Company’s common stock, are prohibited until all accrued and unpaid dividends are paid on such preferred stock, subject to certain limited exceptions.

In order to participate in the TARP CPP, financial institutions were required to adopt certain standards for executive compensation and corporate governance. These standards generally apply to the Chief Executive Officer, Chief Financial Officer and the three next most highly compensated senior executive officers. The standards include (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate;  (3) prohibition on making golden parachute payments to senior executives; and (4) agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive. The Company has complied with these requirements.

The bank regulatory agencies, U.S. Treasury and the Office of Special Inspector General, also created by the EESA, have issued guidance and requests to the financial institutions that participate in the TARP CPP to document their plans and use of TARP CPP funds and their plans for addressing the executive compensation requirements associated with the TARP CPP.

On February 10, 2009, the U.S. Treasury and the federal bank regulatory agencies announced in a Joint Statement a new Financial Stability Plan which would include additional capital support for banks under a Capital Assistance Program, a public-private investment fund to address existing bank loan portfolios and expanded funding for the FRB’s pending Term Asset-Backed Securities Loan Facility to restart lending and the securitization markets.

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Part I (Continued)

Item 1 (Continued)

On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (“ARRA”) was signed into law by President Obama. The ARRA includes a wide variety of programs intended to stimulate the economy and provide for extensive infrastructure, energy, health, and education needs. In addition, the ARRA imposes certain new executive compensation and corporate expenditure limits on all current and future TARP recipients, including the Company, until the institution has repaid the U.S. Treasury, which is now permitted under the ARRA without penalty and without the need to raise new capital, subject to the U.S. Treasury’s consultation with the recipient’s appropriate regulatory agency.

The executive compensation standards are more stringent than those currently in effect under the TARP CPP or those previously proposed by the U.S. Treasury. The new standards include (but are not limited to) (i) prohibitions on bonuses, retention awards and other incentive compensation, other than restricted stock grants which do not fully vest during the TARP period up to one-third of an employee’s total annual compensation, (ii) prohibitions on golden parachute payments for departure from a company, (iii) an expanded clawback of bonuses, retention awards, and incentive compensation if payment is based on materially inaccurate statements of earnings, revenues, gains or other criteria, (iv) prohibitions on compensation plans that encourage manipulation of reported earnings, (v) retroactive review of bonuses, retention awards and other compensation previously provided by TARP recipients if found by the U.S. Treasury to be inconsistent with the purposes of TARP or otherwise contrary to public interest, (vi) required establishment of a company-wide policy regarding “excessive or luxury expenditures,” and (vii) inclusion in a participant’s proxy statements for annual shareholder meetings of a nonbinding “Say on Pay” shareholder vote on the compensation of executives.

On January 9, 2009, the Company, pursuant to the TARP CPP, issued and sold to the Treasury, for an aggregate cash purchase price of $28 million, (i) 28,000 shares (the “Preferred Shares”) of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share, and (ii) a ten-year warrant (the “Warrant”) to purchase up to 500,000 shares of our common stock, par value $1.00 per share, at an exercise price of $8.40 per share. Proceeds from the issuance of the Preferred Shares and the Warrant have been allocated based on the relative market values of each. As a result of the Company’s participation in the TARP CPP, the Company is subject to the rules and regulations promulgated under the EESA. These rules and regulations include certain limitations on compensation for senior executives, dividend payments and payments to senior executives upon termination of employment, as well as certain obligations of the Company to increase its efforts to reduce the number of foreclosures of primary residences.

The limitations on executive compensation imposed by the EESA are substantially those that management had accepted as practical prior to the Company’s participation in the TARP CPP. These limitations include the reduction of case incentives, limitations on excessive severance payments and the implementation of a system allowing for the “claw back” of bonuses received while relying on financial performance later determined to be erroneous.

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Part I (Continued)

Item 1 (Continued)

On February 23, 2009, the U.S. Treasury and the federal bank regulatory agencies issued a Joint Statement providing further guidance with respect to the Capital Assistance Program (“CAP”) announced February 10, 2009, including: (i) that the CAP will be initiated on February 25, 2009 and will include “stress test” assessments of major banks and that should the “stress test” indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital; otherwise the temporary capital buffer will be made available from the government; (ii) such additional government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory; and (iii) previous capital injections under the TARP CPP will also be eligible to be exchanged for the mandatory convertible preferred shares. The conversion of preferred shares to common equity shares would enable institutions to maintain or enhance the quality of their capital by increasing their tangible common equity capital ratios; however, such conversions would necessarily dilute the interests of existing shareholders.

On February 25, 2009, the first day the CAP program was initiated, the U.S. Treasury released the actual terms of the program, stating that the purpose of the CAP is to restore confidence throughout the financial system that the nation’s largest banking institutions have a sufficient capital cushion against larger than expected future losses, should they occur due to a more severe economic environment, and to support lending to creditworthy borrowers. Under the CAP terms, eligible U.S. banking institutions with assets in excess of $100 billion on a consolidated basis are required to participate in coordinated supervisory assessments, which are forward-looking “stress test” assessments to evaluate the capital needs of the institution under a more challenging economic environment. Should this assessment indicate the need for the bank to establish an additional capital buffer to withstand more stressful conditions, these institutions may access the CAP immediately as a means to establish any necessary additional buffer or they may delay the CAP funding for six months to raise the capital privately.  Eligible U.S. banking institutions with assets below $100 billion may also obtain capital from the CAP. The CAP program is an additional program from the TARP CCP and is open to eligible institutions regardless of whether they participated in the TARP CCP. The deadline to apply to the CAP was May 25, 2009.  The Company did not participate in the CAP program.

The EESA also increased Federal Deposit Insurance Corporation (“FDIC”) deposit insurance on most accounts from $100,000 to $250,000. This increase is currently in place until the end of 2013 and is not covered by deposit insurance premiums paid by the banking industry.  In addition, the FDIC implemented two temporary programs under the Temporary Liquidity Guaranty Program (“TLGP”) to provide deposit insurance for the full amount of most noninterest bearing transaction accounts through December 31, 2010 and to guarantee certain unsecured debt of financial institutions and their holding companies through June 2012. Financial institutions had until December 5, 2008 to opt out of these two programs. The Company and the Bank opted to remain in the unlimited insurance coverage for non-interest bearing accounts, but opted out of the debt guarantee portion of the program. The FDIC charges “systemic risk special assessments” to depository institutions that participate in the TLGP. The FDIC has recently proposed that Congress give the FDIC expanded authority to charge fees to the holding companies which benefit directly and indirectly from the FDIC guarantees.

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Part I (Continued)

Item 1 (Continued)

The Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted in July 2010, has had a broad impact on the financial services industry, including significant regulatory and compliance changes previously discussed and including, among other things, (i) enhanced resolution authority of troubled and failing banks and their holding companies; (ii) increased regulatory examination fees; and (iii) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector. Additionally, the Dodd-Frank Act establishes a new framework for systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Federal Reserve Board, the Office of the Comptroller of the Currency and the FDIC.

Some of the Dodd-Frank Act’s most far-reaching provisions, such as those regulating derivatives and proprietary trading activity and hedge funds, providing for enhanced supervision of “systemically significant” institutions, and phasing out Tier 1 capital treatment for trust preferred securities, apply only to institutions with over $10 billion in assets or to business lines in which the Company and GB&T do not engage. Certain provisions do, however, apply to or affect us, including provisions that:

· Change the assessment base for federal deposit insurance from a deposit-based to an asset-based calculation as described in “FDIC Insurance Assessments” below;

· Make permanent the $250,000 limit for federal deposit insurance and provide unlimited federal deposit insurance until December 31, 2012 for non-interest-bearing demand transaction accounts;

· Repeal the federal prohibition on payment of interest on demand deposits;

· Impose new mortgage lending requirements, including minimum underwriting standards, originator compensation restrictions, consumer protections for certain types of loans, and disclosure to borrowers;

· Apply to bank holding companies the same leverage and risk-based capital requirements that apply to insured depository institutions;

· Permit de novo and interstate branching as described in “Activity Limitations” above; and

· Impose new limits on affiliate transactions as described in “Transactions with Affiliates and Insiders” below.

Many of the requirements called for in the Dodd-Frank Act will be implemented over time and most will be subject to implementing regulations over the course of several years. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies and through regulations, the full extent of the impact such requirements will have on financial institutions’ operations is unclear. The changes resulting from the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage ratio requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.

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Part I (Continued)

Item 1 (Continued)

Enhanced Lending Limitations. The Dodd-Frank Act strengthens the existing limits on a depository institution’s credit exposure to include credit exposure arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions.

Charter Conversions. Effective one year after enactment of the Dodd-Frank Act, depository institutions that are subject to a cease and desist order or certain other enforcement actions issued with respect to a significant supervisory matter are prohibited from changing their federal or state charters, except in accordance with certain notice, application and other procedures involving the applicable regulatory agencies.

Corporate Governance. The Dodd-Frank Act will enhance corporate governance requirements to include (i) requiring publicly traded companies to give shareholders a non-binding vote on executive compensation at their first annual meeting taking place six months after the date of enactment and at least ever three years thereafter and on so-called “golden parachute” payments in connection with approvals of mergers and acquisitions unless previously voted on by shareholders (ii) authorizing the SEC to promulgate rules that would allow shareholders to nominate their own candidates for election as directors using a company’s proxy materials; (iii) directing the federal banking regulators to promulgate rules prohibiting excessive compensation paid to executives of depository institutions and their holding companies with assets in excess of $1.0 billion, regardless of whether or not the company is publicly traded; and (iv) authorizing the SEC to prohibit broker discretionary voting on the election of directors and on executive compensation matters.

Limitations on Senior Executive Compensation

In June of 2010, federal banking regulators issued guidance designed to help ensure that incentive compensation policies at banking organizations do not encourage excessive risk-taking or undermined the safety and soundness of the organization. In connection with this guidance, the regulatory agencies announced that they will review incentive compensation arrangements as part of the regular, risk-focused supervisory process. Regulatory authorities may also take enforcement action against a banking organization if its incentive compensation arrangement or related risk management, control, or governance processes pose a risk to the safety and soundness of the organization and the organization is not taking prompt and effective measures to correct the deficiencies. To ensure that incentive compensation arrangements do not undermine safety and soundness at insured depository institutions, the incentive compensation guidance sets forth the following key principles:

· Incentive compensation arrangements should provide employees incentives that appropriately balance risk and financial results in a manner that does not encourage employees to expose the organization to imprudent risk;

· Incentive compensation arrangements should be compatible with effective controls and risk management; and

· Incentive compensation arrangements should be supported by strong corporate governance, including active and effective oversight by the board of directors.

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Part I (Continued)

Item 1 (Continued)

Tying

Bank holding companies and their affiliates are prohibited from tying the provision of certain services, such as extending credit, to other services or products offered by the holding company or its affiliates, such as deposit products.

Capital; Dividends; Source of Strength

The Federal Reserve imposes certain capital requirements on bank holding companies under the Bank Holding Company Act, including a minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets. These requirements are described below under “Capital Regulations.” Subject to its capital requirements and certain other restrictions, we are able to borrow money to make a capital contribution to Colony Bank, and such loans may be repaid from dividends paid from Colony Bank to us.

The ability of Colony Bank to pay dividends, however, will be subject to regulatory restrictions that are described below under “Dividends.” We are also able to raise capital for contributions to Colony Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws.

In accordance with Federal Reserve policy, which has been codified by the Dodd-Frank Act, we are expected to act as a source of financial strength to Colony Bank and to commit resources to support Colony Bank in circumstances in which we might not otherwise do so. In furtherance of this policy, the Federal Reserve may require a financial holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve's determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a financial holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution's financial condition.

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Part I (Continued)

Item 1 (Continued)

BANK REGULATION

General

The Bank is a commercial bank chartered under the laws of the State of Georgia, and as such is subject to supervision, regulation and examination by the Georgia Department.  The Bank is a member of the FDIC, and their deposits are insured by the FDIC’s Deposit Insurance Fund up to the amount permitted by law.  The FDIC and the Georgia Department routinely examine the Bank and monitor and regulate all of the Bank’s operations, including such things as adequacy of reserves, quality and documentation of loans, payments of dividends, capital adequacy, adequacy of systems and controls, credit underwriting and asset liability management, compliance with laws and establishment of branches.  Interest and other charges collected or contracted for by the Bank is subject to state usury laws and certain federal laws concerning interest rates.  The Bank files periodic reports with the FDIC and the Georgia Department.

BUSINESS

Recent Developments

On October 21, 2010, the Board of Directors of the Company’s subsidiary bank, Colony Bank (the “Bank”), received notification from its primary regulators, the Georgia Department of Banking and Finance (“the Georgia Department”) and the FDIC that the Bank’s latest examination results require a program of corrective action as outlined in a proposed Memorandum of Understanding (“MOU”).  An MOU is characterized by the supervising authorities as an informal action that is neither published nor made publically available by the supervising authorities and is used when circumstances do not warrant formal supervisory action.  An MOU is not a “written agreement” for purposes of Section 8 of the Federal Deposit Insurance Act.  The Board of Directors entered into the MOU at its regularly scheduled monthly meeting on November 16, 2010 with the effective date of the MOU being November 23, 2010.  At December 31, 2011, the Bank is in compliance with terms of the MOU.

The MOU requires the Bank to develop, implement and maintain various processes to improve the Bank’s risk management of its loan portfolio, reduce adversely classified loans subject to certain exceptions, adopt a written plan to properly monitor and reduce the Bank’s commercial real estate concentration, continue to maintain the Bank’s loan loss provision and review its adequacy at least quarterly, and formulate and implement a written plan to improve and maintain earnings to be forwarded for review by the Georgia Department and FDIC.  The Bank is also required to obtain approval before any cash dividends can be paid.

The Bank has also agreed to have and maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows:  Tier 1 capital to total average assets of 8% and total risk-based capital to total risk-weighted assets of 10%.  At December 31, 2011, the Bank’s capital ratios were 9.38% and 16.29%, respectively.

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Part I (Continued)

Item 1 (Continued)

Transactions with Affiliates and Insiders

The Company is a legal entity separate and distinct from the Bank.  Various legal limitations restrict the Bank from lending or otherwise supplying funds to the Company and other nonbank subsidiaries of the Company, all of which are deemed to be “affiliates” of the Bank for the purposes of these restrictions.  The Company and the Bank are subject to Section 23A of the Federal Reserve Act.  Section 23A defines “covered transactions,” which include extensions of credit, and limits a bank’s covered transactions with any affiliate to 10 percent of such bank’s capital and surplus and with all affiliates to 20 percent of such bank’s capital and surplus.  All covered and exempt transactions between a bank and its affiliates must be on terms and conditions consistent with safe and sound banking practices, and banks and their subsidiaries are prohibited from purchasing low-quality assets from the bank’s affiliates.  Finally,   Section 23 A requires that all of a bank’s extensions of credit to an affiliate be appropriately secured by acceptable collateral, generally United States government or agency securities.  The Company and the Bank are also subject to Section 23B of the Federal Reserve Act, which generally limits covered and other transactions between a bank and its affiliates to terms and under circumstances, including credit standards, that are substantially the same or at least as favorable to the bank as prevailing at the time for transactions with unaffiliated companies.  The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) enhances the requirements for certain transactions with affiliates under Section 23A and 23B, including an expansion of the definition of “covered transactions” and increasing the amount of time for which collateral requirements regarding covered transactions must be maintained.  The Bank is also subject to restrictions on extensions of credit to its executive officers, directors, principal shareholders and their related interests. These extensions of credit (1) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (2) must not involve more than the normal risk of repayment or present other unfavorable features. Effective July 21, 2011, an insured depository institution is prohibited from engaging in asset purchases or sales transactions with its officers, directors or principal shareholders unless on market terms and, if the transaction represents greater than 10 percent of the capital and surplus of the bank, it has been approved by a majority of the disinterested directors.

Dividends

The Company is a legal entity separate and distinct from the Bank.  The principal source of the Company’s cash flow, including cash flow to pay dividends to its stockholders, is dividends that the Bank pays to it.  Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company as well as to the Company’s payment of dividends to its stockholders.  Pursuant to MOU entered into with the Georgia Department and the FDIC, the Bank is required to obtain approval from these regulators before any cash dividends can be paid.  The Company is also a participant in the U.S. Treasury Capital Program and certain restrictions on the payment of dividends to stockholders apply.

Under the terms of the TARP CPP, for so long as any preferred stock issued under the TARP CPP remains outstanding, the Company is prohibited from increasing dividends on its common stock, and from making certain repurchases of equity securities, including its common stock, without the U.S. Treasury’s consent until the third anniversary of the U.S. Treasury’s investment or until the U.S. Treasury has transferred all of the preferred stock it purchased under the TARP CPP to third parties. As long as the preferred stock issued to the U.S. Treasury is outstanding, as well as the Company’s Series A Preferred Stock, dividend payments and repurchases or redemptions relating to certain equity securities, including the Company’s common stock, are also prohibited until all accrued and unpaid dividends are paid on such preferred stock, subject to certain limited exceptions.

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Part I (Continued)

Item 1 (Continued)

A variety of federal and state laws and regulations affect the ability of the Bank and the Company to pay dividends.  A depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized.  The federal banking agencies may prevent the payment of a dividend if they determine that the payment would be unsafe and unsound banking practice.  Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.  In addition, regulations promulgated by the Georgia Department limit the Bank’s payment of dividends.

Mortgage Banking Regulation

Colony Mortgage Corp is licensed and regulated as a “mortgage banker” by the Georgia Department.  It is also qualified as a Fannie Mae and Freddie Mac seller/servicer and must meet the requirements of such corporations and of the various private parties with which it conducts business, including warehouse lenders and those private entities to which it sells mortgage loans.

Enforcement Policies and Actions

Federal law gives the Federal Reserve and FDIC substantial powers to enforce compliance with laws, rules and regulations.  Bank or individuals may be ordered to cease and desist from violations of law or other unsafe or unsound practices.  The agencies have the power to impose civil money penalties against individuals or institutions of up to $1,000,000 per day for certain egregious violations.  Persons who are affiliated with depository institutions can be removed from any office held in that institution and banned from participating in the affairs of any financial institution.  The banking regulators have not hesitated to use the enforcement authorities provided in federal law.

Capital Regulations

The federal bank regulatory authorities have adopted capital guidelines for banks and bank holding companies.  In general, the authorities measure the amount of capital an institution holds against its assets.  There are three major capital tests: (i) the Total Capital ratio (the total of Tier 1 Capital and Tier 2 Capital measured against risk-adjusted assets), (ii) the Tier 1 Capital ratio (Tier 1 Capital measured against risk-adjusted assets) and (iii) the leverage ratio (Tier 1 Capital measured against average (i.e., nonrisk-weighted) assets).

Tier 1 Capital consists of common equity, retained earnings and a limited amount of qualifying preferred stock, less disallowed deferred tax assets, goodwill and core deposit intangibles.  Tier 2 Capital consists of nonqualifying preferred stock, qualifying subordinated, perpetual and/or mandatory convertible debt, term subordinated debt and intermediate term preferred stock and up to 45 percent of the pretax unrealized holding gains on available-for-sale equity securities with readily determinable market values that are prudently valued, and a limited amount of any loan loss allowance.

In measuring the adequacy of capital, assets are generally weighted for risk.  Certain assets, such as cash and U.S. government securities, have a zero risk weighting.  Others, such as commercial and consumer loans, have a 100 percent risk weighting.  Risk weightings are also assigned for off-balance sheet items such as loan commitments.  The various assets are multiplied by the appropriate risk-weighting to determine risk-adjusted assets for the capital calculations.  For the leverage ratio mentioned above, average assets are not risk-weighted.

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Part I (Continued)

Item 1 (Continued)

The federal banking agencies must take “prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements.  There are five tiers for financial institutions: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.”  Under these regulations, a bank will be:

· “well capitalized” if it has a Total Capital ratio of 10 percent or greater, a Tier 1 Capital ratio of 6 percent or greater, a leverage ratio of 5 percent or better - or 4 percent in certain circumstances - and is not subject to any written agreement, order, capital directive, or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure;

· “adequately capitalized” if it has a Total Capital ratio of 8 percent or greater, a Tier 1 Capital ratio of 4 percent or greater, and a leverage ratio of 4 percent or greater - or 3 percent in certain circumstances - and is not well capitalized;

· “undercapitalized” if it has a Total Capital ratio of less that 8 percent, a Tier 1 Capital ratio of less that 4 percent - or 3 percent in certain circumstances;

· “significantly undercapitalized” if it has a Total Capital ratio of less than 6 percent or a Tier 1 Capital ratio of less than 3 percent, or a leverage ratio of less than 3 percent; or

· “critically undercapitalized” if its tangible equity is equal to or less than 2 percent of average quarterly assets.

Federal law generally prohibits a depository institution from making any capital distribution, including the payment of a dividend or paying any management fee to its holding company if the depository institution would be undercapitalized as a result.  Undercapitalized depository institutions may not accept brokered deposits absent a waiver from the FDIC, are subject to growth limitations and are required to submit a capital restoration plan for approval.  For a capital restoration plan to be acceptable, the depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan.  The aggregate liability of the parent holding company is limited to the lesser of 5 percent of the depository institution’s total assets at the time it became undercapitalized, and the amount necessary to bring the institution into compliance with applicable capital standards.  If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.  If the controlling holding company fails to fulfill its obligations under this law and files, or has filed against it, a petition under the federal Bankruptcy Code, the FDIC claim related to the holding company’s obligations would be entitled to a priority in such bankruptcy proceeding over third party creditors of the bank holding company.

Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks.  Critically undercapitalized institutions are subject to the appointment of a receiver or conservator.

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Part I (Continued)

Item 1 (Continued)

At December 31, 2011, the Company exceeded the minimum Tier 1, risk-based and leverage ratios and qualified as “well capitalized” under current Federal Reserve Board criteria.  The following table sets forth certain capital information for the Company as of December 31, 2011.  As of December 31, 2011, Colony had Tier 1 Capital and Total Capital of approximately 15.24 percent and 16.50 percent, respectively, of risk-weighted assets. As of December 31, 2011, Colony had a leverage ratio of Tier 1 Capital to total average assets of approximately 9.51 percent.

	December 31, 2011
	Amount		Percent
Leverage Ratio
Actual	$	109,822		9.51	%
Well-Capitalized Requirement		57,731		5.00
Minimum Required (1)		46,185		4.00
Risk Based Capital:
Tier 1 Capital
Actual		109,822		15.24
Well-Capitalized Requirement		43,244		6.00
Minimum Required (1)		28,829		4.00
Total Capital
Actual		118,913		16.50
Well-Capitalized Requirement		72,073		10.00
Minimum Required (1)		57,658		8.00

(1) Represents the minimum requirement.  Institutions that are contemplating acquisitions or anticipating or experiencing significant growth may be required to maintain a substantially higher leverage ratio.

The guidelines also provide that institutions experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets.  Higher capital may be required in individual cases, depending upon a bank or bank holding company’s risk profile.  All bank holding companies and banks are expected to hold capital commensurate with the level and nature of their risks, including the volume and severity of their problem loans.  Lastly, the Federal Reserve’s guidelines indicate that the Federal Reserve will continue to consider a “Tangible Tier 1 Leverage Ratio,” calculated by deducting all intangibles, in evaluating proposals for expansion or new activity.

FDIC Insurance Assessments

The Bank’s deposits are insured by the Deposit Insurance Fund (the “DIF”) of the FDIC up to the maximum amount permitted by law, which was permanently increased to $250,000 by the Dodd-Frank Act. The FDIC uses the DIF to protect against the loss of insured deposits if an FDIC-insured bank or savings association fails. Pursuant to the Dodd-Frank Act, the FDIC must take steps, as necessary, for the DIF reserve ratio to reach 1.35 percent of estimated insured deposits by September 30, 2020.  The Bank is thus subject to FDIC deposit premium assessments.

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Part I (Continued)

Item 1 (Continued)

Recent depository institutional failures have resulted in a decline in the targeted amount of funds in the DIF mandated by law. In 2009, the FDIC undertook several measures in an effort to replenish the DIF. It imposed a 5 basis point emergency assessment on insured depository institutions that was paid on September 30, 2009.  In the fourth quarter of 2009 the FDIC adopted a rule that, in lieu of any further special assessment in 2009, required all insured depository institutions, with limited exceptions, to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012.  The prepaid assessments were to be applied against future quarterly assessments until the prepaid assessment is exhausted or the balance is returned, whichever occurs first.  This assessment totaled $6.3 million for the Bank.  At December 31, 2011, the remainder of the prepaid assessment available to be applied toward future assessments totaled $2.81 million and is included in Other Assets on the Company’s consolidated balance sheet.

On April 1, 2011, new regulations became effective which redefined the assessment base used for calculating deposit insurance assessments.  Rather than the previous system, whereby the deposit insurance assessment was calculated using an institution’s total domestic deposits, less a few allowable exclusions, the new assessment base is calculated using average total assets of the institution minus average tangible equity (Tier 1 Capital).  The FDIC continues to utilize a risk-based assessment system in which institutions will be subject to assessment rates ranging from 2.5 to 45 basis points, subject to adjustments for unsecured debt and, in certain cases, brokered deposits.

In October 2010, the FDIC adopted a new DIF restoration plan to ensure that the fund reserve ratio reaches 1.35 percent by September 30, 2020, as required by the Dodd-Frank Act. At least semi-annually, the FDIC will update its loss and income projections for the fund and, if needed, will increase or decrease assessment rates, following notice-and-comment rulemaking if required.

The FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

Community Reinvestment Act

The Bank is subject to the provisions of the Community Reinvestment Act of 1977, as amended (the CRA), and the federal banking agencies’ related regulations.  Under the CRA, all banks and thrifts have a continuing and affirmative obligation, consistent with safe and sound operation, to help meet the credit needs for their entire communities, including low- and moderate-income neighborhoods.  The CRA requires a depository institution’s primary federal regulator, in connection with its examination of the institution or its evaluation of certain regulatory applications, to assess the institution’s record in assessing and meeting the credit needs of the community served by that institution, including low- and moderate-income neighborhoods.  The regulatory agency’s assessment of the institution’s record is made available to the public.

Current CRA regulations rate institutions based on their actual performance in meeting community credit needs. The Bank received a “satisfactory” rating on its most recent examination in 2011.

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Part I (Continued)

Item 1 (Continued)

Consumer Regulations

Interest and other charges collected or contracted for by the Bank is subject to state usury laws and certain federal laws concerning interest rates.  The Bank’s loan operations are also subject to federal laws and regulations applicable to credit transactions, such as those:

· Governing disclosures of credit terms to consumer borrowers;

· Requiring financial institutions provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

· Prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

· Governing the use and provision of information to credit reporting agencies; and

· Governing the manner in which consumer debts may be collected by collection agencies.

The deposit operations of the Bank is also subject to laws and regulations that:

· Impose a duty to maintain the confidentiality of consumer financial records and prescribe procedures for complying with administrative subpoenas of financial records; and

· Govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

The Consumer Financial Protection Bureau

The Dodd-Frank Act creates the Consumer Financial Protection Bureau (the “Bureau”) within the Federal Reserve Board. The Bureau is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The Bureau has rulemaking authority over many of the statutes governing products and services offered to bank consumers. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are more stringent than those regulations promulgated by the Bureau and state attorneys general are permitted to enforce consumer protection rules adopted by the Bureau against state-chartered institutions.

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Part I (Continued)

Item 1 (Continued)

Fiscal and Monetary Policy

Banking is a business that depends on interest rate differentials.  In general, the difference between the interest paid by a bank on its deposits and its other borrowings, and the interest received by a bank on its loans and securities holdings, constitutes the major portion of a bank’s earnings.  Thus, Colony’s earnings and growth and that of the Bank will be subject to the influence of economic conditions, generally both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve.  The Federal Reserve regulates the supply of money through various means, including open market dealings in United States government securities, the discount rate at which banks may borrow from the Federal Reserve and the reserve requirements on deposits.

The monetary policies of the Federal Reserve historically have had a significant effect on the operating results of commercial banks and mortgage banking operations and will continue to do so in the future.  The Company cannot predict the conditions in the national and international economies and money markets, the actions and changes in policy by monetary and fiscal authorities or their effect on the Bank.

Financial Privacy

The federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

Anti-Money Laundering and the USA Patriot Act

A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The USA PATRIOT Act of 2001 (the “USA Patriot Act”) substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The United States Treasury Department has issued and, in some cases, proposed a number of regulations that apply various requirements of the USA Patriot Act to financial institutions such as the Bank. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Certain of those regulations impose specific due diligence requirements on financial institutions that maintain correspondent or private banking relationships with non-U.S. financial institutions or persons. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the Company.

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Part I (Continued)

Item 1 (Continued)

Office of Foreign Assets Control Regulation

The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. These are typically known as the “OFAC” rules based on their administration by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”). The OFAC-administered sanctions targeting countries take many different forms. Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.

Legislative and Regulatory Initiatives

From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation could change banking statutes and the operating environment of the Company in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. The Company cannot predict whether any such legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on the financial condition or results of operations of the Company. A change in statutes, regulations or regulatory policies applicable to the Company or any of its subsidiaries could have a material effect on the business of the Company.

- 25 -

Part I (Continued)

Item 1A

Risk Factors

Not Applicable.

Item 1B

Unresolved Staff Comments

Not Applicable.

Item 2

Properties

The principal properties of the Registrant consist of the properties of the Bank.  The Bank owns all of the offices occupied except two offices in Tifton, one office in Valdosta, one office in Douglas and one office in Albany that are leased.

Item 3

Legal Proceedings

The Company and its subsidiary may become parties to various legal proceedings arising from the normal course of business.  As of December 31, 2011, there are no material pending legal proceedings to which Colony or its subsidiary are a party or of which any of its property is the subject.

Item 4

Mine Safety Disclosures

Not Applicable.

- 26 -

Part II

Item 5

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

Effective April 2, 1998, Colony Bankcorp, Inc. common stock is quoted on the NASDAQ Global Market under the symbol “CBAN.”  Prior to this date, there was no public market for the common stock of the registrant.

The following table sets forth the high, low and close sale prices per share of the common stock as reported on the NASDAQ Global Market, and the dividends declared per share for the periods indicated.

Year Ended December 31, 2011	High		Low		Close
Fourth Quarter	$	2.79	$	1.99	$	2.24
Third Quarter		3.48		2.40		2.63
Second Quarter		4.24		2.72		2.87
First Quarter		4.50		4.01		4.15
Year Ended December 31, 2010
Fourth Quarter		4.97		3.76		4.03
Third Quarter		7.00		4.50		4.50
Second Quarter		9.25		5.90		7.00
First Quarter		6.06		3.50		5.84

No cash dividends were paid on its common stock in 2010 or 2011.  The Company’s board of directors suspended the payment of dividends in the third quarter of 2009.  For a description of the restrictions and limitations on the Company’s ability to pay dividends, please see “Dividends” on Page 17.

As of December 31, 2011, the Company had approximately 2,137 stockholders of record.

On March 30, 2010, Colony Bankcorp, Inc. accepted the subscriptions of several investors in a private placement offering to accredited investors under an exemption from registration contained in Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D under the Securities Act.  The Company offered a maximum of 1,216,545 shares of its common stock at a price of $4.11-$4.50 per share.  The price for non-affiliates was determined using a twenty day average trading price as quoted on NASDAQ Stock Market immediately prior to the beginning of the offering.  All of the shares were purchased for a total of $5.08 million, less offering expenses of approximately $20,000.  The offering was closed March 30, 2010.

Issuer Purchase of Equity Securities

The Company purchased no shares of the Company’s common stock during the quarter ended December 31, 2011.

- 27 -

Part II (Continued)

Item 6

Selected Financial Data

	Year Ended December 31
	2011		2010			2009			2008		2007
	(Dollars in Thousands, except per share data)
Selected Balance Sheet Data
Total Assets	$	1,195,376	$	1,275,658		$	1,307,089		$	1,252,782	$	1,208,777
Total Loans, Net of Unearned Interest and Fees		716,264		813,189			931,252			960,857		944,978
Total Deposits		999,985		1,059,124			1,057,586			1,006,991		1,018,602
Investment Securities		303,937		303,886			267,300			207,704		167,191
Federal Home Loan Bank Stock		5,398		6,064			6,345			6,272		5,533
Stockholders’ Equity		96,613		92,959			89,275			83,215		83,743
Selected Income Statement Data
Interest Income		51,793		58,738			65,847			75,297		90,159
Interest Expense		16,806		21,523			26,281			37,922		47,701
Net Interest Income		34,987		37,215			39,566			37,375		42,458
Provision for Loan Losses		8,250		13,350			43,445			12,938		5,931
Other Income		9,951		10,006			9,544			9,005		7,817
Other Expense		33,051		33,856			34,844			30,856		31,579
Income (Loss) Before Tax		3,637		15			(29,179	)		2,586		12,765
Income Tax Expense (Benefit)		1,104		(459	)		(9,995	)		557		4,218
Net Income (Loss)		2,533		474			(19,184	)		2,029		8,547
Preferred Stock Dividends		1,400		1,400			1,365			-		-
Net Income (Loss) Available to Common Stockholders	$	1,133	$	(926	)	$	(20,549	)	$	2,029	$	8,547
Weighted Average Common Shares Outstanding		8,439		8,149			7,213			7,199		7,189
Shares Outstanding		8,439		8,443			7,229			7,212		7,201
Intangible Assets	$	259	$	295		$	331		$	2,779	$	2,815
Dividends Declared		-		-			1,057			2,814		2,629
Average Assets		1,205,891		1,269,607			1,286,418			1,204,846		1,204,165
Average Stockholders’ Equity		94,737		94,452			105,655			84,372		80,595
Net Charge-Offs		20,880		16,471			29,060			11,435		2,407
Reserve for Loan Losses		15,650		28,280			31,401			17,016		15,513
OREO		20,445		20,208			19,705			12,812		1,332
Nonperforming Loans		38,837		28,921			33,566			35,374		15,016
Nonperforming Assets		59,708		49,262			53,403			48,186		16,348
Average Interest-Earning Assets		1,132,523		1,199,216			1,218,153			1,144,927		1,141,652
Noninterest-Bearing Deposits		94,269		102,959			84,239			77,497		86,112

- 28 -

Part II (Continued)

Item 6 (Continued)

	Year Ended December 31,
	2011			2010			2009			2008			2007
	(Dollars in Thousands, except per share data)
Per Share Data:
Net Income (Loss) Per Common Share (Diluted)	$	0.13		$	(0.11	)	$	(2.85	)	$	0.28		$	1.19
Common Book Value Per Share		8.17			7.75			8.57			11.54			11.63
Tangible Common Book Value Per Share		8.14			7.72			8.52			11.15			11.24
Dividends Per Common Share		0.00			0.00			0.15			0.39			0.365
Profitability Ratios:
Net Income (Loss) to Average Assets		0.09	%		(0.07	)%		(1.60	)%		0.17	%		0.71	%
Net Income (Loss) to Average Stockholders’ Equity		1.20			(0.98	)		(19.45	)		2.40			10.60
Net Interest Margin		3.11			3.12			3.27			3.30			3.75
Loan Quality Ratios:
Net Charge-Offs to Total Loans		2.92			2.03			3.12			1.19			0.25
Reserve for Loan Losses to Total Loans and OREO		2.12			3.39			3.30			1.75			1.64
Nonperforming Assets to Total Loans and OREO		8.10			5.91			5.62			4.95			1.73
Reserve for Loan Losses to Nonperforming Loans		40.30			97.78			93.55			48.10			103.31
Reserve for Loan Losses to Total Nonperforming Assets		26.21			57.41			58.80			35.31			94.89
Liquidity Ratios:
Loans to Total Deposits		71.63			76.78			88.06			95.42			92.77
Loans to Average Earning Assets		63.24			67.81			76.45			83.92			82.77
Noninterest-Bearing Deposits to Total Deposits		9.43			9.72			7.97			7.70			8.45
Capital Adequacy Ratios:
Common Stockholders’ Equity to Total Assets		5.77			5.13			4.74			6.64			6.93
Total Stockholders’ Equity to Total Assets		8.08			7.29			6.83			6.64			6.93
Dividend Payout Ratio		0.00		NM(1)			NM(1)				139.29			30.67

(1)  Not meaningful due to net loss recorded.

- 29 -

Part II (Continued)

Item 7

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements and Factors that Could Affect Future Results

Certain statements contained in this Annual Report that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the Act), notwithstanding that such statements are not specifically identified.  In addition, certain statements may be contained in the Company’s future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Company that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act.  Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans and objectives of Colony Bankcorp, Inc. or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements.  Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

· Local and regional economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact.

· Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.

· The effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board.

· Inflation, interest rate, market and monetary fluctuations.

· Political instability.

· Acts of war or terrorism.

· The timely development and acceptance of new products and services and perceived overall value of these products and services by users.

· Changes in consumer spending, borrowings and savings habits.

· Technological changes.

· Acquisitions and integration of acquired businesses.

· The ability to increase market share and control expenses.

- 30 -

Part II (Continued)

Item 7 (Continued)

· The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiaries must comply.

· The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters.

· Changes in the Company’s organization, compensation and benefit plans.

· The costs and effects of litigation and of unexpected or adverse outcomes in such litigation.

· Greater than expected costs or difficulties related to the integration of new lines of business.

· The Company’s success at managing the risks involved in the foregoing items.

· Restrictions or conditions imposed by our regulators on our operations, including the terms of our Memorandum of Understanding.

Forward-looking statements speak only as of the date on which such statements are made.  The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

The Company

Colony Bankcorp, Inc. (Colony) is a bank holding company headquartered in Fitzgerald, Georgia that provides, through its wholly-owned subsidiary (collectively referred to as the Company), a broad array of products and services throughout 18 Georgia markets. The Company offers commercial, consumer and mortgage banking services.

Application of Critical Accounting Policies and Accounting Estimates

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.  Critical accounting policies are those policies that management believes are the most important to the portrayal of the Company’s financial condition and results of operations, and they require management to make estimates that are difficult and subjective or complete.

Allowance for Loan Losses – The allowance for loan losses provides coverage for probable losses inherent in the Company’s loan portfolio.  Management evaluates the adequacy of the allowance for loan losses quarterly based on changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), trends in loan performance, regulatory guidance and economic factors.  This evaluation is inherently subjective, as it requires the use of significant management estimates.  Many factors can affect management’s estimates of specific and expected losses, including volatility of default probabilities, collateral values, rating migrations, loss severity and economic and political conditions.  The allowance is increased through provisions charged to operating earnings and reduced by net charge-offs.

- 31 -

Part II (Continued)

Item 7 (Continued)

The Company determines the amount of the allowance based on relative risk characteristics of the loan portfolio.  The allowance recorded for loans is based on reviews of individual credit relationships and historical loss experience.  The allowance for losses relating to impaired loans is based on the loan’s observable market price, the discounted cash flows using the loan’s effective interest rate, or the value of collateral for collateral dependent loans.

Regardless of the extent of the Company’s analysis of customer performance, portfolio trends or risk management processes, certain inherent but undetected losses are probable within the loan portfolio.  This is due to several factors, including inherent delays in obtaining information regarding a customer’s financial condition or changes in their unique business conditions, the judgmental nature of individual loan evaluations, collateral assessments and the interpretation of economic trends.  Volatility of economic or customer-specific conditions affecting the identification and estimation of losses for larger nonhomogeneous credits and the sensitivity of assumptions utilized to establish allowances for homogeneous groups of loans are among other factors.  The Company estimates a range of inherent losses related to the existence of these exposures.  The estimates are based upon the Company’s evaluation of risk associated with the commercial and consumer levels and the estimated impact of the current economic environment.

Other Real Estate Owned and Foreclosed Assets

Other real estate owned or other foreclosed assets acquired through loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  The adjustment at the time of foreclosure is recorded through the allowance for loan losses.  Due to the subjective nature of establishing the fair value when the asset is acquired, the actual fair value of the other real estate owned or foreclosed asset could differ from the original estimate.  If it is determined that fair value declines subsequent to foreclosure, the valuation allowance is adjusted through a charge to noninterest expense.  Operating costs associated with the assets after acquisition are also recorded as noninterest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and recognized in noninterest expense.  Management obtains appraisals performed by certified, third-parties within one year of placing a property into OREO.  The fair value of the property is then evaluated by management annually going forward, or more often if necessary.  Annual evaluations may be performed by certified third parties, or internally by management comparing recent sales of similar properties within the Company’s OREO portfolio.

Overview

The following discussion and analysis presents the more significant factors affecting the Company’s financial condition as of December 31, 2011 and 2010, and results of operations for each of the years in the three-year period ended December 31, 2011. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements, notes thereto and other financial information appearing elsewhere in this report.

Taxable-equivalent adjustments are the result of increasing income from tax-free loans and investments by an amount equal to the taxes that would be paid if the income were fully taxable based on a 34 percent  federal tax rate, thus making tax-exempt yields comparable to taxable asset yields.

Dollar amounts in tables are stated in thousands, except for per share amounts.

- 32 -

Part II (Continued)

Item 7 (Continued)

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 (loss) available to common shareholders totaled $1.13 million, or $0.13 per diluted common share in 2011 compared to $(0.93) million, or $(0.11) diluted per common share in 2010 compared to $(20.55) million, or $(2.85) diluted per common share in 2009.

Selected income statement data, returns on average assets and average equity and dividends per share for the comparable periods were as follows:

	2011			2010			2009
Taxable-Equivalent Net Interest Income	$	35,178		$	37,393		$	39,848
Taxable-Equivalent Adjustment		191			178			282
Net Interest Income		34,987			37,215			39,566
Provision for Loan Losses		8,250			13,350			43,445
Noninterest Income		9,951			10,007			9,544
Noninterest Expense		33,051			33,857			34,844
Income (Loss) Before Income Taxes		3,637			15			(29,179	)
Income Taxes (Benefits)		1,104			( 459	)		(9,995	)
Net Income (Loss)	$	2,533		$	474		$	(19,184	)
Preferred Stock Dividends		1,400			1,400			1,365
Net Income (Loss) Available to Common Stockholders	$	1,133		$	( 926	)	$	(20,549	)
Basic per Common Share:
Net Income (Loss)	$	0.13		$	(0.11	)	$	(2.85	)
Diluted per Common Share:
Net Income (Loss)	$	0.13		$	(0.11	)	$	(2.85	)
Return on Average Assets:
Net Income (Loss)		0.09	%		(0.07	)%		(1.60	)%
Return on Average Equity:
Net Income (Loss)		1.20	%		(0.98	)%		(19.45	)%

- 33 -

Part II (Continued)

Item 7 (Continued)

Net income available to common shareholders for 2011 increased $2.06 million, or 222.35 percent, compared to 2010.  The increase was primarily the result of a $5.1 million decrease in provision for loan losses and a decrease of $805 thousand in noninterest expense.  The impact of these items was partly offset by a $2.23 million decrease in net interest income, a decrease of $55 thousand in noninterest income and an increase of $1.56 million in income tax expense.

Net loss available to common shareholders for 2010 decreased $19.62 million, or 95.49 percent, compared to 2009.  The decrease was primarily the result of a $30.10 million decrease in provision for loan losses, an increase of $462 thousand in noninterest income and a decrease of $988 thousand in noninterest expense.  The impact of these items was partly offset by a $2.35 million decrease in net interest income, a $35 thousand increase in preferred stock dividends, and an increase of $9.54 million in income tax expense.  The increase in income tax expense resulted in an income tax benefit of $459 thousand.

Details of the changes in the various components of net income are further discussed below.

Net Interest Income

Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is the Company’s largest source of revenue, representing 77.86 percent of total revenue during 2011 and 78.81 percent during 2010.

Net interest margin is the taxable-equivalent net interest income as a percentage of average earning assets for the period.  The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net interest income and net interest margin.

The Federal Reserve Board influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. The Company’s loan portfolio is significantly affected by changes in the prime interest rate. The prime interest rate, which is the rate offered on loans to borrowers with strong credit is currently 3.25 percent and has been for the past three years.  The federal funds rate moved similar to prime rate with interest rates currently at 0.25 percent and has been for the past three years.  We anticipate the Federal Reserve maintaining its current interest rate policy in 2012, which should benefit Colony’s net interest margin.

The following table presents the changes in taxable-equivalent net interest income and identifies the changes due to differences in the average volume of earning assets and interest-bearing liabilities and the changes due to changes in the average interest rate on those assets and liabilities. The changes in net interest income due to changes in both average volume and average interest rate have been allocated to the average volume change or the average interest rate change in proportion to the absolute amounts of the change in each. The Company’s consolidated average balance sheets along with an analysis of taxable-equivalent net interest earnings are presented in the Quantitative and Qualitative Disclosures About Market Risk included elsewhere in this report.

- 34 -

Part II (Continued)

Item 7 (Continued)

Rate/Volume Analysis

The rate/volume analysis presented hereafter illustrates the change from year to year 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 2010 to 2011 (a)									Changes From 2009 to 2010 (a)
	Volume			Rate			Total			Volume			Rate			Total
Interest Income
Loans, Net-taxable	$	(6,117	)	$	(1,149	)	$	(7,266	)	$	(5,850	)	$	(67	)	$	(5,917	)
Investment Securities
Taxable		831			(581	)		250			1,088			(2,260	)		(1,172	)
Tax-exempt		46			(15	)		31			(226	)		(8	)		(234	)
Total Investment Securities		877			(596	)		281			862			(2,268	)		(1,406	)
Interest-Bearing Deposits in Other banks		(3	)		28			25			27			(6	)		21
Federal Funds Sold		15			5			20			76			(5	)		71
Other Interest - Earning Assets		(3	)		11			8			---			18			18
Total Interest Income		(5,231	)		(1,701	)		(6,932	)		(4,885	)		(2,328	)		(7,213	)
Interest Expense
Interest-Bearing Demand and Savings Deposits		145			(549	)		(404	)		106			(206	)		(100	)
Time Deposits		(1,499	)		(2,359	)		(3,858	)		(218	)		(4,113	)		(4,331	)
Total Interest Expense On Deposits		(1,354	)		(2,908	)		(4,262	)		(112	)		(4,319	)		(4,431	)
Other Interest-Bearing Liabilities
Federal Funds Purchased and
Repurchase Agreements		(449	)		385			(64	)		(337	)		308			(29	)
Subordinated Debentures		---			(8	)		(8	)		---			(143	)		(143	)
Other Debt		(508	)		125			(383	)		(173	)		18			(155	)
Total Interest Expense		(2,311	)		(2,406	)		(4,717	)		(622	)		(4,136	)		(4,758	)
Net Interest Income (Loss)	$	(2,920	)	$	705		$	(2,215	)	$	(4,263	)	$	1,808		$	(2,455	)

(a) 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.

- 35 -

Part II (Continued)

Item 7 (Continued)

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. Interest rate 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 earnings 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 at least quarterly by our Board of Directors and the ALCO.  Interest rate risk exposure is measured using interest rate 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. The Company has engaged FTN Financial to run a quarterly asset/liability model for interest rate risk analysis.  We are generally focusing our investment activities on securities with terms or average lives in the 2-5 year range.

The Company maintains about 26.1 percent 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 certificates of deposit that mature within one year.  This balance sheet composition allowed the Company to be relatively constant with its net interest margin until 2008.  During 2007 interest rates decreased 100 basis points and this decrease by the Federal Reserve in 2007 followed by 400 basis point decrease in 2008 resulted in significant pressure in net interest margins.  While the Federal Reserve rates have remained unchanged since 2008, we have seen the net interest margin decrease to 3.11 percent for 2011 compared to 3.12 percent for 2010 and to 3.27 percent for 2009.  Given the Federal Reserve’s aggressive posture during 2008 that ended the year with a range of 0 – 0.25 percent federal funds target rate and remained the same for all of 2011, we have seen our net interest margin reach a low of 2.98 percent for first and second quarter of 2011 to a high of 3.28 percent for fourth quarter 2011.

- 36 -

Part II (Continued)

Item 7 (Continued)

Taxable-equivalent net interest income for 2011 decreased by $2.21 million, or 5.92 percent, compared to 2010, while taxable-equivalent net interest income for 2010 decreased $2.45 million, or 6.16 percent, compared to 2009.  The fluctuation between the comparable periods resulted from the negative impact of the significant decrease in interest rates.  The average volume of earning assets during 2011 decreased $66.69 million compared to 2010 while over the same period the net interest margin decreased to 3.11 from 3.12 percent.  Similarly, the average volume of earning assets during 2010 decreased $18.94 million compared to 2009 while over the same period the net interest margin decreased to 3.12 percent from 3.27 percent.  Growth in average earning assets during 2011 and 2010 was primarily in fed funds sold and investment securities, while average loans outstanding decreased significantly.  The slight reduction in the net interest margin in 2011 was primarily the result of the decrease in average earning assets and maintenance of a higher liquidity level.

The average volume of loans decreased $102.12 million in 2011 compared to 2010 and decreased $97.49 million in 2010 compared to 2009.  The average yield on loans decreased 15 basis points in 2011 compared to 2010 and decreased 1 basis point in 2010 compared to 2009. The average volume of deposits decreased $33.54 million while other borrowings decreased $30.42 million in 2011 compared to 2010.  The average volume of other borrowings decreased $21.5 million in 2010 compared to 2009 while average deposits increased $17.3 million in 2010 compared to 2009.  Interest-bearing deposits made up 135.02 percent of the decrease in average deposits in 2011 and 38.9 percent of the increase in average deposits in 2010. Accordingly, the ratio of average interest-bearing deposits to total average deposits was 90.6 percent in 2011, 92.1 percent in 2010 and 93.0 percent in 2009. This deposit mix, combined with a general decrease in interest rates, had the effect of (i) decreasing the average cost of total deposits by 37 basis points in 2011 compared to 2010 and decreasing the average cost of total deposits by 47 basis points in 2010 compared to 2009, and (ii) mitigating a portion of the impact of decreasing yields on earning assets on the Company’s net interest income.

The Company’s net interest spread, which represents the difference between the average rate earned on earning assets and the average rate paid on interest-bearing liabilities, was 2.93 percent in 2011 compared to 2.94 percent in 2010 and 3.05 percent in 2009. The net interest spread, as well as the net interest margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment. A discussion of the effects of changing interest rates on net interest income is set forth in Quantitative and Qualitative Disclosures About Interest Rate Sensitivity included elsewhere in this report.

Provision for Loan Losses

The provision for loan losses is determined by management as the amount to be added to the allowance for loan losses after net charge-offs have been deducted to bring the allowance to a level which, in management’s best estimate, is necessary to absorb probable losses within the existing loan portfolio. The provision for loan losses totaled $8.25 million in 2011 compared to $13.35 million in 2010 and $43.45 million in 2009.  See the section captioned “Allowance for Loan Losses” elsewhere in this discussion for further analysis of the provision for loan losses.

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Part II (Continued)

Item 7 (Continued)

Noninterest Income

The components of noninterest income were as follows:

	2011		2010		2009
Service Charges on Deposit Accounts	$	3,244	$	3,597	$	4,198
Other Charges, Commissions and Fees		1,312		1,140		986
Other		1,259		1,335		1,146
Mortgage Fee Income		265		313		448
Securities Gains		2,924		2,617		2,626
SBA Premiums		947		1,005		140
	$	9,951	$	10,007	$	9,544

Total noninterest income for 2011 decreased $56 thousand, or 0.56 percent, compared to 2010 while total noninterest income for 2010 increased $463 thousand, or 4.85 percent, compared to 2009.  The decrease in 2011 noninterest income compared to 2010 was primarily in mortgage fee income, SBA premiums, and service charges on deposit accounts while the increase in 2010 noninterest income compared to 2009 was primarily in SBA premiums and other charges, commissions and fees.  Changes in these items and the other components of noninterest income are discussed in more detail below.

Service Charges on Deposit Accounts.  Service charges on deposit accounts for 2011 decreased $353 thousand, or 9.81 percent, compared to 2010.  Service charges on deposit accounts for 2010 decreased $601 thousand, or 14.32 percent, compared to 2009.  The decrease in both periods was primarily due to a decrease in volume of consumer and business account overdraft fees.

Mortgage Fee Income.  Mortgage fee income for 2011 decreased $48 thousand, or 15.34 percent, compared to 2010 while mortgage fee income for 2010 decreased $135 thousand, or 30.13 percent, compared to 2009.  The decrease in both periods was primarily due to decreased mortgage loan activity with the housing and real estate downturn.

Security Gains.  The Company realized gains from the sale of securities of $2.92 million for 2011 compared to $2.62 million for 2010 and $2.63 million in 2009.

All Other Noninterest Income.  Other charges, commissions and fees, other income and SBA premiums for 2011 increased $38 thousand, or 1.09 percent, compared to 2010.  The slight increase was primarily attributable to increased ATM and bank debit card interchange fees.  In 2010 other charges, commissions and fees, other income, and SBA premiums increased $1.21 million, or 53.17 percent compared to 2009.  The increase was primarily due to the premiums realized on SBA guaranteed loans of $1.01 million for 2010 compared to $140 thousand for 2009 and from a death benefit on BOLI insurance plan in the amount of $212 thousand for 2010.

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Part II (Continued)

Item 7 (Continued)

Noninterest Expense

The components of noninterest expense were as follows:

	2011		2010		2009
Salaries and Employee Benefits	$	14,633	$	14,098	$	14,483
Occupancy and Equipment		3,998		4,422		4,287
Other		14,420		15,337		16,074
	$	33,051	$	33,857	$	34,844

Total noninterest expense for 2011 decreased $806 thousand, or 2.38 percent compared to 2010 while total noninterest expense decreased $987 thousand, or 2.83 percent, compared to 2009.  Reduction in noninterest expense in 2011 was primarily in occupancy and equipment and other noninterest expense while the Company had a slight increase in salaries and employee benefits.  Reduction in noninterest expense in 2010 was primarily in salaries and employee benefits and other noninterest expense while the Company had an increase in occupancy and equipment.

Salaries and Employee Benefits.  Salaries and employee benefits expense for 2011 increased $536 thousand,  or 3.80 percent, compared to 2010.  This increase is primarily attributable to an increase in headcount related to increased regulatory compliance demands.  Salaries and employee benefits expense for 2010 decreased $385 thousand, or 2.66 percent, compared to 2009.  The slowing economy and lack of growth resulted in decreases in headcount as a result of normal attrition and restructuring due to consolidation efforts initiated in 2008.  In addition the Company did not payout any bonuses or profit sharing based on Company performance being significantly below targeted goals in 2010.

Occupancy and Equipment.  Net occupancy expense for 2011 decreased $424 thousand compared to 2010, or a decrease of 9.59 percent.  The decrease in occupancy expense in 2011 is primarily due to a reduction in depreciation expense of $351 thousand from 2010.  Net occupancy expense for 2010 increased $135 thousand compared to 2009, or an increase of 3.15 percent.  The purchase of new data processing software and equipment resulted in additional depreciation expense of $48 thousand for 2010 compared to 2009.

All Other Noninterest Expense.  All other noninterest expense for 2011 decreased $917 thousand, or 5.98 percent.  Significant changes in noninterest expense were:  FDIC insurance assessment fees decreased to $1.83 million for 2011 compared to $1.87 million for 2010, or a decrease of $38 thousand, legal and professional fees decreased to $1.2 million for 2011 in comparison to $1.4 million for 2010, or a decrease of $183 thousand, foreclosed property and repossession expense decreased to $4.0 million in 2011 compared to $4.9 million in 2010, or a decrease of $898 thousand, and advertising decreased to $508 thousand in 2011 compared to $743 thousand in 2010, or a decrease of $235 thousand.  All other noninterest expense for 2010 decreased $737 thousand, or 4.59 percent.  Significant changes in noninterest expense were:  FDIC insurance assessment fees decreased to $1.87 million for 2010 compared to $2.66 million for 2009, or a decrease of $795 thousand; foreclosed property and repossession expense increased to $4.94 million for 2010 compared to $2.27 million for 2009, or an increase of $2.67 million and goodwill impairment expense was $0 for 2010 compared to $2.41 million for 2009.

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Part II (Continued)

Item 7 (Continued)

Sources and Uses of Funds

The following table illustrates, during the years presented, the mix of the Company’s funding sources and the assets in which those funds are invested as a percentage of the Company’s average total assets for the period indicated. Average assets totaled $1.21 billion in 2011 compared to $1.27 billion in 2010 and $1.29 billion in 2009.

	2011				2010				2009
Sources of Funds:
Deposits:
Noninterest-Bearing	$	93,903	7.8	%	$	82,160	6.5	%	$	71,561	5.5	%
Interest-Bearing		906,816	75.2			952,095	75.0			945,360	73.5
Federal Funds Purchased and Repurchase Agreements		9,851	0.8			26,070	2.0			42,452	3.3
Subordinated Debentures and Other Borrowed Money		95,949	8.0			110,149	8.7			115,229	9.0
Other Noninterest-Bearing Liabilities		4,635	0.4			4,681	0.4			6,161	0.5
Equity Capital		94,737	7.8			94,452	7.4			105,655	8.2
Total	$	1,205,891	100.0	%	$	1,269,607	100.0	%	$	1,286,418	100.0	%
Uses of Funds:
Loans	$	742,482	61.6	%	$	834,739	65.8	%	$	943,164	73.3	%
Investment Securities		300,293	24.9			267,015	2.10			238,968	18.6
Federal Funds Sold		44,667	3.7			38,809	3.1			9,392	0.7
Interest-Bearing Deposits		18,715	1.5			21,911	1.7			788	0.1
Other Interest-Earning Assets		5,781	0.5			6,297	0.5			6,328	0.5
Other Noninterest-Earning Assets		93,953	7.8			100,836	7.9			87,778	6.8
Total	$	1,205,891	100.0	%	$	1,269,607	100.0	%	$	1,286,418	100.0	%

Deposits continue to be the Company’s primary source of funding.  Over the comparable periods, the relative mix of deposits continues to be high in interest-bearing deposits.  Interest-bearing deposits totaled 90.62 percent of total average deposits in 2011 compared to 92.06 percent in 2010 and 92.96 percent in 2009.

The Company primarily invests funds in loans and securities.  Loans continue to be the largest component of the Company’s mix of invested assets.  Loan demand was sluggish in 2011 as total loans were $716.3 million at December 31, 2011, down 11.9 percent, compared to loans of $813.3 million at December 31, 2010, while total loans at December 31, 2010 were down 12.7 percent, compared to loans of $931.4 million at December 31, 2009.  See additional discussion regarding the Company’s loan portfolio in the section captioned “Loans” included below.  The majority of funds provided by deposits have been invested in loans.

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Part II (Continued)

Item 7 (Continued)

Loans

The following table presents the composition of the Company’s loan portfolio as of December 31 for the past five years.

	2011			2010			2009			2008			2007
Commercial, Financial and Agricultural	$	57,408		$	63,772		$	80,984		$	86,379		$	52,323
Real Estate
Construction		62,076			76,682			113,117			160,374			211,484
Mortgage, Farmland		48,225			52,778			54,965			54,159			42,439
Mortgage, Other		508,919			570,350			626,993			600,653			544,655
Consumer		30,449			33,564			38,383			44,163			72,350
Other		9,244			16,104			16,950			15,308			22,028
		716,321			813,250			931,392			961,036			945,279
Unearned Interest and Fees		(57	)		(61	)		(140	)		(179	)		(301	)
Allowance for Loan Losses		(15,650	)		(28,280	)		(31,401	)		(17,016	)		(15,513	)
Loans	$	700,614		$	784,909		$	899,851		$	943,841		$	929,465

The following table presents total loans as of December 31, 2011 according to maturity distribution and/or repricing opportunity on adjustable rate loans.

Maturity and Repricing Opportunity

One Year or Less	$	435,505
After One Year through Three Years		237,463
After Three Years through Five Years		28,972
Over Five Years		14,381
	$	716,321

Overview. Loans totaled $716.3 million at December 31, 2011, down 11.9 percent from December 31, 2010 loans of $813.3 million.  The majority of the Company’s loan portfolio is comprised of the real estate loans-other, real estate construction and commercial financial and agricultural loans.  Real estate-other, which is primarily 1-4 family residential properties and nonfarm nonresidential properties, made up 71.01 percent and 70.13 percent of total loans, real estate construction made up 8.67 percent and 9.43 percent while commercial financial and agricultural loans made up 8.01 percent and 7.84 percent of total loans at December 31, 2011 and December 31, 2010, respectively.  Real estate loans-other include both commercial and consumer balances.

Loan Origination/Risk Management.  In accordance with the Company’s decentralized banking model, loan decisions are made at the local bank level.  The Company utilizes an Executive Loan Committee to assist lenders with the decision making and underwriting process of larger loan requests.  Due to the diverse economic markets served by the Company, evaluation and underwriting criterion may vary slightly by market.  Overall, loans are extended after a review of the borrower’s repayment ability, collateral adequacy, and overall credit worthiness.

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Part II (Continued)

Item 7 (Continued)

Commercial purpose, commercial real estate, and industrial loans are underwritten similar to other loans throughout the company.  The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location.  This diversity helps reduce the company’s exposure to adverse economic events that affect any single market or industry.  Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria.  The Company also utilizes information provided by third-party agencies to provide additional insight and guidance about economic conditions and trends affecting the markets it serves.

The Company extends loans to builders and developers that are secured by non-owner occupied properties.  In such cases, the Company reviews the overall economic conditions and trends for each market to determine the desirability of loans to be extended for residential construction and development.  Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim mini-perm loan commitment from the Company until permanent financing is obtained.  In some cases, loans are extended for residential loan construction for speculative purposes and are based on the perceived present and future demand for housing in a particular market served by the Company.  These loans are monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and trends, the demand for the properties, and the availability of long-term financing.

The Company originates consumer loans at the bank level.  Due to the diverse economic markets served by the Company, underwriting criterion may vary slightly by market.  The Company is committed to serving the borrowing needs of all markets served and, in some cases, adjusts certain evaluation methods to meet the overall credit demographics of each market.  Consumer loans represent relatively small loan amounts that are spread across many individual borrowers to help minimize risk.  Additionally, consumer trends and outlook reports are reviewed by management on a regular basis.

The Company began utilizing an independent third party company for loan review during fourth quarter 2009.  This third party engagement will be on-going.  The Loan Review Company reviews and validates the credit risk program on a periodic basis.  Results of these reviews are presented to management and the audit committee.  The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Commercial, Financial and Agricultural.  Commercial, financial and agricultural loans at December 31, 2011 decreased 9.98 percent from December 31, 2010 to $57.41 million. The Company’s commercial and industrial loans are a diverse group of loans to small, medium and large businesses. The purpose of these loans varies from supporting seasonal working capital needs to term financing of equipment. While some short-term loans may be made on an unsecured basis, most are secured by the assets being financed with collateral margins that are consistent with the Company’s loan policy guidelines.

Industry Concentrations. As of December 31, 2011 and December 31, 2010, there were no concentrations of loans within any single industry in excess of 10 percent of total loans, as segregated by Standard Industrial Classification code (“SIC code”). The SIC code is a federally designed standard industrial numbering system used by the Company to categorize loans by the borrower’s type of business.

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Part II (Continued)

Item 7 (Continued)

Collateral Concentrations.  Concentrations of credit risk can exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries, or certain geographic regions.  The Company has a concentration in real estate loans as well as a geographic concentration that could pose an adverse credit risk, particularly with the current economic downturn in the real estate market.  At December 31, 2011, approximately 86.41 percent of the Company’s loan portfolio was concentrated in loans secured by real estate.  A substantial portion of borrowers’ ability to honor their contractual obligations is dependent upon the viability of the real estate economic sector.  The continued downturn of the housing and real estate market that began in 2007 has resulted in an increase of problem loans secured by real estate.  These loans are centered primarily in the Company’s larger MSA markets.  Declining collateral real estate values that secure land development, construction and speculative real estate loans in the Company’s larger MSA markets have resulted in high loan loss provisions in 2011.  In addition, a large portion of the Company’s foreclosed assets are also located in these same geographic markets, making the recovery of the carrying amount of foreclosed assets susceptible to changes in market conditions.  Management continues to monitor these concentrations and has considered these concentrations in its allowance for loan loss analysis.

Large Credit Relationships.   The Company is currently in eighteen counties in south and central Georgia and include metropolitan markets in Dougherty, Lowndes, Houston, Chatham and Muscogee counties.  As a result, the Company originates and maintains large credit relationships with several commercial customers in the ordinary course of business.  The Company considers large credit relationships to be those with commitments equal to or in excess of $5.0 million prior to any portion being sold.  Large relationships also include loan participations purchased if the credit relationship with the agent is equal to or in excess of $5.0 million.  In addition to the Company’s normal policies and procedures related to the origination of large credits, the Company’s Executive Loan Committee and Director Loan Committee must approve all new and renewed credit facilities which are part of large credit relationships.  The following table provides additional information on the Company’s large credit relationships outstanding at December 31, 2011 and December 31, 2010.

	December 31, 2011						December 31, 2010
	Number of		Period End Balances				Number of		Period End Balances
	Relationships		Committed		Outstanding		Relationships		Committed		Outstanding
Large Credit Relationships:
$10 million and greater		1	$	11,811	$	11,811		1	$	15,025	$	15,025
$5 million to $9.9 million		5		31,363		31,363		7		46,794		45,588

Maturities and Sensitivities of Loans to Changes in Interest Rates.  The following table presents the maturity distribution of the Company’s loans at December 31, 2011. The table also presents the portion of loans that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index such as the prime rate.

	Due in One Year or Less		After One, but Within Three Years		After Three, but Within Five Years		After Five Years		Total
Loans with fixed interest rates	$	254,768	$	235,718	$	24,975	$	14,213	$	529,674
Loans with floating interest rates		180,737		1,745		3,997		168		186,647
Total	$	435,505	$	237,463	$	28,972	$	14,381	$	716,321

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Part II (Continued)

Item 7 (Continued)

The Company may renew loans at maturity when requested by a customer whose financial strength appears to support such renewal or when such renewal appears to be in the Company’s best interest. In such instances, the Company generally requires payment of accrued interest and may adjust the rate of interest, require a principal reduction or modify other terms of the loan at the time of renewal.

Nonperforming Assets and Potential Problem Loans

Year-end nonperforming assets and accruing past due loans were as follows:

	2011			2010			2009			2008			2007
Loans Accounted for on Nonaccrual	$	38,822		$	28,902		$	33,535		$	35,124		$	14,956
Loans Past Due 90 Days or More		15			19			31			250			60
Other Real Estate Foreclosed		20,445			20,208			19,705			12,812			1,332
Securities Accounted for on Nonaccrual		426			132			132			---			---
Total Nonperforming Assets	$	59,708		$	49,261		$	53,403		$	48,186		$	16,348
Nonperforming Assets as a Percentage of:
Total Loans and Foreclosed Assets		8.10	%		5.91	%		5.62	%		4.95	%		1.73	%
Total Assets		4.99	%		3.86	%		4.09	%		3.85	%		1.35	%
Supplemental Data:
Trouble Debt Restructured Loans
In Compliance with Modified Terms		29,839			26,556			9,269			---			---
Trouble Debt Restructured Loans
Past Due 30-89 Days		611			1,048			459			---			---
Accruing Past Due Loans:
30-89 Days Past Due		7,161			19,740			25,547			18,675			15,681
90 or More Days Past Due		15			19			31			250			60
Total Accruing Past Due Loans	$	7,176		$	19,759		$	25,578		$	18,925		$	15,741

Nonperforming assets include nonaccrual loans, loans past due 90 days or more, foreclosed real estate and nonaccrual securities.  Nonperforming assets at December 31, 2011 increased 21.21 percent from December 31, 2010.

Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past due and/or management deems the collectibility of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to a customer whose financial condition has deteriorated are considered for nonaccrual status whether or not the loan is 90 days or more past due. For consumer loans, collectibility and loss are generally determined before the loan reaches 90 days past due. Accordingly, losses on consumer loans are recorded at the time they are determined. Consumer loans that are 90 days or more past due are generally either in liquidation/payment status or bankruptcy awaiting confirmation of a plan. Once interest accruals are discontinued, accrued but uncollected interest is charged to current year operations. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Classification of a loan as non-accrual does not preclude the ultimate collection of loan principal or interest.

Troubled debt restructured loans are loans on which, due to deterioration in the borrower’s financial condition, the original terms have been modified in favor of the borrower or either principal or interest has been forgiven.

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Part II (Continued)

Item 7 (Continued)

Foreclosed assets represent property acquired as the result of borrower defaults on loans. Foreclosed assets are recorded at estimated fair value, less estimated selling costs, at the time of foreclosure. Write-downs occurring at foreclosure are charged against the allowance for possible loan losses. On an ongoing basis, properties are appraised as required by market indications and applicable regulations. Write-downs are provided for subsequent declines in value and are included in other non-interest expense along with other expenses related to maintaining the properties.

Allowance for Loan Losses

The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The allowance for loan losses includes allowance allocations calculated in accordance with current U.S. accounting standards.  The level of the allowance reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management’s judgment, should be charged off. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including the performance of the Company’s loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.

The Company’s allowance for loan losses consists of specific valuation allowances established for probable losses on specific loans and historical valuation allowances for other loans with similar risk characteristics.

The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of classified loans.  Loans are classified based on an internal credit risk grading process that evaluates, among other things: (i) the obligor’s ability to repay; (ii) the underlying collateral, if any; and (iii) the economic environment and industry in which the borrower operates.  This analysis is performed at the subsidiary bank level and is reviewed at the parent Company level.  Once a loan is classified, it is reviewed to determine whether the loan is impaired and, if impaired, a portion of the allowance for possible loan losses is specifically allocated to the loan.  Specific valuation allowances are determined after considering the borrower’s financial condition, collateral deficiencies, and economic conditions affecting the borrower’s industry, among other things.

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Part II (Continued)

Item 7 (Continued)

Historical valuation allowances are calculated from loss factors applied to loans with similar risk characteristics.  The loss factors are based on loss ratios for groups of loans with similar risk characteristics.  The loss ratios are derived from the proportional relationship between actual loan losses and the total population of loans in the risk category.  The historical loss ratios are periodically updated based on actual charge-off experience.  The Company’s groups of similar loans include similarly risk-graded groups of loans not reviewed for individual impairment.  In addition, the Company has also segmented its’ real estate portfolio into thirteen separate categories and captured loan loss experience for each category.  Most of the Company’s charge-offs the past two years have been real estate dependent loans and we believe this segmentation provides more accuracy in determining allowance for loan loss adequacy.  During fourth quarter 2009, the Company changed the methodology in calculating its loan loss reserve.  Previously the look back period for charge-off experience was the average of the charge-offs for the prior five years, however due to the current housing and real estate downturn, management deemed prudent to lower the look back period for charge-off experience to a one year look back.  This change resulted in an approximate $12 million dollar addition to the loan loss reserve during fourth quarter 2009.  The Company maintained the same methodology in 2011.

Management evaluates the adequacy of the allowance for each of these components on a quarterly basis.  Peer comparisons, industry comparisons, and regulatory guidelines are also used in the determination of the general valuation allowance.

Loans identified as losses by management, internal loan review, and/or bank examiners are charged-off.

An allocation for loan losses has been made according to the respective amounts deemed necessary to provide for the possibility of incurred losses within the various loan categories.  The allocation is based primarily on previous charge-off experience adjusted for changes in experience among each category.  Additional amounts are allocated by evaluating the loss potential of individual loans that management has considered impaired.  The reserve for loan loss allocation is subjective since it is based on judgment and estimates, and therefore is not necessarily indicative of the specific amounts or loan categories in which the charge-offs may ultimately occur.  The following table shows a comparison of the allocation of the reserve for loan losses for the periods indicated.

	2011				2010				2009				2008				2007
	Reserve		%	*	Reserve		%	*	Reserve		%	*	Reserve		%	*	Reserve		%	*
Commercial, Financial and Agricultural	$	1,368	8	%	$	5,113	8	%	$	4,710	9	%	$	4,254	9	%	$	3,645	6	%
Real Estate - Construction		3,261	9			4,646	9			7,850	12			2,808	17			2,560	22
Real Estate - Farmland		365	7			944	7			942	6			681	6			621	4
Real Estate - Other		10,143	71			13,972	70			13,816	67			5,955	62			5,430	58
Loans to Individuals		205	4			3,074	4			2,826	4			2,467	4			2,404	8
All other loans		308	1			531	2			1,257	2			851	2			853	2
Total	$	15,650	100	%	$	28,280	100	%	$	31,401	100	%	$	17,016	100	%	$	15,513	100	%

* Loan balance in each category expressed as a percentage of total end of period loans.

Activity in the allowance for loan losses is presented in the following table. There were no charge-offs or recoveries related to foreign loans during any of the periods presented.

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Part II (Continued)

Item 7 (Continued)

The following table presents an analysis of the Company’s loan loss experience for the periods indicated.

	2011			2010			2009			2008			2007
Allowance for Loan Losses at Beginning of Year	$	28,280		$	31,401		$	17,016		$	15,513		$	11,989
Charge-Offs
Commercial, Financial and Agricultural		1,297			725			768			1,680			957
Real Estate		21,215			15,309			27,545			9,190			1,862
Consumer		223			549			908			994			793
All Other		115			1,040			272			103			296
		22,850			17,623			29,493			11,967			3,908
Recoveries
Commercial, Financial and Agricultural		582			82			73			73			109
Real Estate		1,235			774			156			285			992
Consumer		145			246			191			155			312
All Other		8			50			13			19			88
		1,970			1,152			433			532			1,501
Net Charge-Offs		20,880			16,471			29,060			11,435			2,407
Provision for Loans Losses		8,250			13,350			43,445			12,938			5,931
Allowance for Loan Losses at End of Year	$	15,650		$	28,280		$	31,401		$	17,016		$	15,513
Ratio of Net Charge-Offs to Average Loans		2.74	%		1.90	%		3.02	%		1.19	%		0.25	%

The allowance for loan losses is maintained at a level considered appropriate by management, based on estimated probable losses within the existing loan portfolio.  The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio.  The provision for loan losses reflects loan quality trends, including the level of net charge-offs or recoveries, among other factors.  The provision for loan losses decreased $5.1 million from $13.35 million in 2010 to $8.25 million in 2011.  The provision for loan losses charged to earnings was based upon management’s judgment of the amount necessary to maintain the allowance at an adequate level to absorb losses inherent in the loan portfolio at year end.  The amount each period is dependent upon many factors, including changes in the risk ratings of the loan portfolio, net charge-offs, past due ratios, the value of collateral, and other environmental factors that include portfolio loan quality indicators; portfolio growth and composition of commercial real estate and concentrations; portfolio policies, procedures, underwriting standards, loss recognition, collection and recovery practices; local economic business conditions; and the experience, ability, and depth of lending management and staff.  Of significance to changes in the allowance during 2011 was the provision of $8.25 million.  Charge-offs largely consisted of seven construction and land development loans totaling $6.26 million in 2011 compared to seven construction and land development loans totaling $3.29 million in 2010, zero 1-4 family residence property loans of $0 thousand in 2011 compared to two 1-4 family residence property loans of $777 thousand in 2010; one multifamily residential property loan totaling $595 thousand in 2011 compared to two multifamily residential property loans totaling $477 thousand in 2010; and eleven nonfarm residential loans totaling $9.5 million in 2011 compared to eight nonfarm residential loans totaling $5.11 million in 2010.

The remainder of the charge-offs were made up of several small loans, most of which were real estate dependent loans and commercial loans.

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Part II (Continued)

Item 7 (Continued)

Provisions continue to be higher than normal primarily due to the elevated risk of residential real estate and land development loans that began during 2007 with the housing and real estate downturn.  Nonperforming assets as a percentage of total loans and foreclosed assets increased to 8.10 percent at December 31, 2011 compared to 5.91 percent at December 31, 2010.  Total nonperforming assets at December 31, 2011 were $59.7 million, of which $35.5 million were construction, land development and other land loans; $0.7 million were farmland properties; $4.6 million were 1-4 family residential properties; $0.7 million were multifamily properties; $15.3 million were nonfarm nonresidential properties; and the remainder of nonperforming assets totaling $2.9 million were commercial and consumer loans.  Total nonperforming assets at December 31, 2010 were $49.3 million, of which $22.0 million were construction, land development and other land loans; $5.0 million were 1-4 family residential properties; $0.3 million were multifamily properties; $18.9 million were nonfarm nonresidential properties; $2.0 million were farmland properties; and the remainder of nonperforming assets totaling $1.1 million were commercial and consumer loans.  All of the classified loans greater than $50 thousand, including the nonperforming loans, are reviewed throughout the quarter for impairment.  The allowance for loan losses of $15.6 million at December 31, 2011 was 2.18 percent of total loans which compares to $28.3 million at December 31, 2010, or 3.48 percent of total loans and to $31.4 million at December 31, 2009, or 3.37 percent.  Unusually high levels of loan loss provision have been required as Company management addresses asset quality deterioration.  While the nonperforming loans as a percentage of total loans was 5.42 percent, 3.56 percent, and 3.60 percent, respectively as of December 31, 2011, December 31, 2010 and December 31, 2009, the Company’s allowance for loan losses as a percentage of nonperforming loans was 40.29 percent, 97.78 percent, and 93.55 percent, respectively as of December 31, 2011, December 31, 2010 and December 31, 2009.  We continue to identify new problem loans, though at a slower pace than the previous year.

While the allowance for loan losses decreased from $28.28 million, or 3.48 percent of total loans at December 31, 2010 to $15.65 million, or 2.18 percent of total loans at December 31, 2011, the Company also reflected an increase in nonperforming loans from $28.92 million at December 31, 2010 to $38.84 million at December 31, 2011.  When a loan is performing, it is accounted for under the Company’s general loan loss reserve methodology.  Once the loan becomes impaired, it is removed from the pool of loans covered by the general reserve and reviewed individually for exposure.  In cases where the individual review reveals no exposure, no reserve is recorded for that loan.  If, however, the individual review of the loan does indicate some exposure, management often charges off this exposure, rather than recording a specific reserve.  In these instances, a loan which becomes nonperforming could actually reduce the allowance for loan losses.  The allowance for loan losses is inherently judgmental, nevertheless the Company’s methodology is consistently applied based on standards for current accounting by creditors for impairment of a loan and allowance allocations determined in accordance with accounting for contingencies.  Loans individually selected for impairment review consist of all loans classified substandard that are $50 thousand and over.  The remaining portfolio is analyzed based on historical loss data.  Loans selected for individual review where no individual impairment amount is identified do not receive a contribution to the allowance for loan losses based on historical data.  Historical loss rates are updated annually to provide the annual loss rate which is applied to the appropriate portfolio grades.  In addition, the Company has also segmented its’ real estate portfolio into thirteen separate categories and captured loan loss experience for each category.  Most of the Company’s charge-offs the past two years have been real estate dependent loans and we believe this segmentation provides more accuracy in determining allowance for loan loss adequacy.  During fourth quarter 2009, the Company changed its methodology for the look back period for determination of charge-off experience.

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Part II (Continued)

Item 7 (Continued)

Previously, the Company utilized the average of the charge-off experience for the preceding five years, but changed to a one year look back.  The current methodology has resulted in significant loan loss provisions for 2011 and 2010, but was considered prudent by management to adhere to guidance by regulatory authorities to lower the look back period in light of current economic condition.  In addition, environmental factors as discussed earlier are evaluated for any adjustments needed to the allowance for loan losses determination produced by individual loan impairment analysis and remaining portfolio segmentation analysis.  The allowance for loan losses determination is based on reviews throughout the year and an environmental analysis at year end.

As part of our monitoring and evaluation of collateral values for nonperforming and problem loans in determining adequate allowance for loan losses, regional credit officers along with lending officers submit monthly problem loan reports for loans greater than $50 thousand in which impairment is identified.  This process typically determines collateral shortfall based upon local market real estate value estimates should the collateral be liquidated.  Once the loan is deemed uncollectible, it is transferred to our problem loan department for workout, foreclosure and/or liquidation.  The problem loan department gets a current appraisal on the property in order to record a fair market value (less selling expenses) when the property is foreclosed on and moved into other real estate.  Trends the past several quarters reflect a decrease in collateral values from two to three years ago on improved properties of fifteen to twenty five percent and on land development and land loans of thirty to fifty percent.  The significant reduction in collateral values on nonperforming assets has resulted in charge-offs particularly during 2011.

Net charge-offs in 2011 increased $4.41 million compared to the same period a year ago.  Net charge-offs were fairly consistent during 2007, 2006 and 2005; however, the net charge-offs increased significantly beginning in 2008 primarily from the write-down of nonperforming credits to appraised values.  The increase the past three years has primarily been with real estate dependent loans as problem credits went through the collection process to resolution.

The allowance for loan losses is $12.63 million less than the prior year end, after factoring in net-charge offs, additional provisions, and the normal determination for an adequate funding level.  Restructuring of some substandard and non-performing loans during 2011 has resulted in significant charge-offs, but a strategy deemed prudent in bringing resolution with these credits and a return to performing status in the future.  Management believes the level of the allowance for loan losses was adequate as of December 31, 2011.  Should any of the factors considered by management in evaluating the adequacy of the allowance for loan losses change, the Company’s estimate of probable loan losses could also change, which could affect the level of future provisions for loan losses.

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Part II (Continued)

Item 7 (Continued)

Investment Portfolio

The following table presents carrying values of investment securities held by the Company as of December 31, 2011, 2010 and 2009.

	2011		2010		2009
Obligations of States and Political Subdivisions	$	7,630	$	3,305	$	4,121
Corporate Obligations		2,114		1,986		4,138
Asset-Backed Securities		132		132		132
Investment Securities		9,876		5,423		8,391
Mortgage-Backed Securities		294,061		298,463		258,909
Total Investment Securities and Mortgage-Backed Securities	$	303,937	$	303,886	$	267,300

The following table represents expected maturities and weighted-average yields of investment securities held by the Company as of December 31, 2011.  (Mortgage-backed securities are based on the average life at the projected speed, while Agencies, State and Political Subdivisions and Corporate Obligations reflect anticipated calls being exercised.)

	Within 1 Year					After 1 Year But Within 5 Years					After 5 Years But Within 10 Years					After 10 Years
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Mortgage-Backed Securities	$	13,286		1.44	%	$	211,393		2.06	%	$	34,513		2.80	%	$	34,869		2.98	%
Obligations of State and Political Subdivisions		1,573		4.16			1,870		2.89			4,187		3.11			--		--
Corporate Obligations		--		--			1,124		5.67			--		--			990		3.50
Asset-Backed Securities		--		--			--		--			--		--			132		--
Total Investment Portfolio	$	14,859		1.73	%	$	214,387		2.07	%	$	38,700		2.91	%	$	35,991		2.96	%

Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income. The Company has 99.9 percent of its portfolio classified as available for sale.

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Part II (Continued)

Item 7 (Continued)

At December 31, 2011, there were no holdings of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10 percent of the Company’s shareholders’ equity.

The average yield of the securities portfolio was 2.39 percent in 2011 compared to 2.59 percent in 2010 and 3.48 percent in 2009. The decrease in the average yield from 2010 to 2011 primarily resulted from the turnover of the securities portfolio resulting in the investment of new funds at lower rates.  The decrease in the average yield from 2009 to 2010 primarily resulted from the turnover of the securities portfolio resulting in the investment of new funds at lower rates.  The Company has increased its securities portfolio the past two years as the sluggish economy has resulted in lower loan demand, thus more funding available for investment in the securities portfolio.

Deposits

The following table presents the average amount outstanding and the average rate paid on deposits by the Company for the years 2011, 2010 and 2009.

	2011					2010					2009
	Average Amount		Average Rate			Average Amount		Average Rate			Average Amount		Average Rate
Noninterest-Bearing Demand Deposits	$	93,903				$	82,160				$	71,561
Interest-Bearing Demand and Savings		273,783		0.45	%		251,537		0.65	%		237,045		0.73	%
Time Deposits		633,033		1.85	%		700,558		2.22	%		708,315		2.81	%
Total Deposits	$	1,000,719		1.29	%	$	1,034,255		1.66	%	$	1,016,921		2.13	%

The following table presents the maturities of the Company's other time deposits as of December 31, 2011.

	Other Time Deposits $100,000or Greater		Other Time Deposits Less Than $100,000		Total
Months to Maturity
3 or Less	$	54,215	$	71,819	$	126,034056
Over 3 through 12		136,661		165,908		302,569
Over 12 Months		56,713		94,299		151,012
	$	247,589	$	332,026	$	579,615

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Part II (Continued)

Item 7 (Continued)

Average deposits decreased $33.54 million in 2011 compared to 2010 and increased $17.33 million in 2010 compared to 2009.  The decrease in 2011 included $67.53 million, or 9.6 percent in time deposits while, at the same time, noninterest bearing deposits increased $11.74 million, or 14.29 percent and interest-bearing demand and savings deposits increased $22.25 million, or 8.84 percent.  The increase in 2010 included $10.60 million or 14.8 percent in noninterest bearing deposits and $14.49 million or 6.1 percent in interest-bearing demand and savings while, at the same time, time deposits decreased $7.76 million or 1.1 percent.  Accordingly the ratio of average noninterest-bearing deposits to total average deposits was 9.4 percent in 2011, 7.9 percent in 2010 and 7.0 percent in 2009.  The general decrease in market rates in 2011 had the effect of (i) decreasing the average cost of interest-bearing deposits by 38 basis points in 2011 compared to 2010 and (ii) mitigating a portion of the impact of decreasing yields on earning assets in the Company’s net interest income in 2011.  The general decrease in market rates in 2010 had the effect of (i) decreasing the average cost of interest bearing deposits by 48 basis points in 2010 compared to 2009 and (ii) mitigating a portion of the impact of decreasing yields on earning assets on the Company’s net interest income in 2010.

Total average interest-bearing deposits decreased $45.3 million, or 4.8 percent in 2011 compared to 2010 and increased $6.74 million, or 0.71 percent in 2010 compared to 2009.  The decrease in average deposits in 2011 compared to 2010 was time deposit accounts.

The Company supplements deposit sources with brokered deposits.  As of December 31, 2011, the Company had $28.2 million, or 2.82 percent of total deposits, in brokered certificates of deposit attracted by external third parties.

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Part II (Continued)

Item 7 (Continued)

Off-Balance-Sheet Arrangements, Commitments, Guarantees, and Contractual Obligations

The following table summarizes the Company’s contractual obligations and other commitments to make future payments as of December 31, 2011. Payments for borrowings do not include interest. Payments related to leases are based on actual payments specified in the underlying contracts. Loan commitments and standby letters of credit are presented at contractual amounts; however, since many of these commitments are expected to expire unused or only partially used, the total amounts of these commitments do not necessarily reflect future cash requirements.

	Payments Due by Period
	1 Year or Less		More than 1 Year but Less Than 3 Years		3 Years or More but Less Than 5 Years		5 Years or More		Total
Contractual Obligations:
Subordinated Debentures	$	----	$	----	$	----	$	24,229	$	24,229
Federal Home Loan Bank Advances		41,000		----		----		30,000		71,000
Operating Leases		126		99		----		----		225
Deposits with Stated Maturity Dates		428,603		137,619		13,364		29		579,615
		469,729		137,718		13,364		54,258		675,069
Other Commitments:
Loan Commitments		39,666		----		----		----		39,666
Standby Letters of Credit		1,327		----		----		----		1,327
		40,993		----		----		----		40,993
Total Contractual Obligations and Other Commitments	$	510,722	$	137,718	$	13,364	$	54,258	$	716,062

In the ordinary course of business, the Banks have entered into off-balance sheet financial instruments which are not reflected in the consolidated financial statements.  These instruments include commitments to extend credit, standby letters of credit, performance letters of credit, guarantees and liability for assets held in trust.

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Part II (Continued)

Item 7 (Continued)

Such financial instruments are recorded in the financial statements when funds are disbursed or the instruments become payable.  The Company uses the same credit policies for these off-balance sheet financial instruments as they do for instruments that are recorded in the consolidated financial statements.

Loan Commitments. The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of the Company’s commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding. The Company minimizes its exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures. Management assesses the credit risk associated with certain commitments to extend credit in determining the level of the allowance for possible loan losses.

Loan commitments outstanding at December 31, 2011 are included in the preceding table.

Standby Letters of Credit.  Letters of credit are written conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, the Company would be entitled to seek recovery from the customer. The Company’s policies generally require that standby letters of credit arrangements contain security and debt covenants similar to those contained in loan agreements. Standby letters of credit outstanding at December 31, 2011 are included in the preceding table.

Capital and Liquidity

At December 31, 2011, shareholders’ equity totaled $96.6 million compared to $93.0 million at December 31, 2010. In addition to net income of $2.5 million, other significant changes in shareholders’ equity during 2011 included $1.4 million of dividends declared and an increase of $11 thousand resulting from the stock grant plan. The accumulated other comprehensive income component of shareholders’ equity totaled $1.9 million at December 31, 2011 compared to $(600) thousand at December 31, 2010. This fluctuation was mostly related to the after-tax effect of changes in the fair value of securities available for sale. Under regulatory requirements, the unrealized gain or loss on securities available for sale does not increase or reduce regulatory capital and is not included in the calculation of risk-based capital and leverage ratios. Regulatory agencies for banks and bank holding companies utilize capital guidelines designed to measure Tier 1 and total capital and take into consideration the risk inherent in both on-balance sheet and off-balance sheet items. Tier 1 capital consists of common stock and qualifying preferred stockholders’ equity less goodwill and disallowed deferred tax assets.  Tier 2 capital consists of certain convertible, subordinated and other qualifying 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 December 31, 2011 was 15.24 percent and total Tier 1 and 2 risk-based capital was 16.50 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 as of December 31, 2011 was 9.51 percent, which exceeds the required ratio standard of 4 percent.

For 2011, average capital was $94.7 million, representing 7.86 percent of average assets for the year.  This compares to 7.44 percent for 2010.

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Part II (Continued)

Item 7 (Continued)

The Company did not pay any common stock dividends in 2011 or 2010.  The Company paid a quarterly dividend of $0.10, $0.05 per common share during the first and second quarter of 2009, respectively, and suspended dividend payments beginning in the third quarter of 2009.

The Company declared a quarterly dividend of $350 thousand on preferred stock each quarter during 2011 and 2010, respectively.  The Company had no preferred stock until January 2009 when shares were issued to U.S. Treasury.

The Company, primarily through the actions of its subsidiary banks, engages in liquidity management to ensure adequate cash flow for deposit withdrawals, credit commitments and repayments of borrowed funds.  Needs are met through loan repayments, net interest and fee income and the sale or maturity of existing assets.  In addition, liquidity is continuously provided through the acquisition of new deposits, the renewal of maturing deposits and external borrowings.

Management monitors deposit flow and evaluates alternate pricing structures to retain and grow deposits.   To the extent needed to fund loan demand, traditional local deposit funding sources are supplemented by the use of FHLB borrowings, brokered deposits and other wholesale deposit sources outside the immediate market area.  Internal policies have been updated to monitor the use of various core and non-core funding sources, and to balance ready access with risk and cost.  Through various asset/liability management strategies, a balance is maintained among goals of liquidity, safety and earnings potential.  Internal policies that are consistent with regulatory liquidity guidelines are monitored and enforced by the Banks.

The investment portfolio provides a ready means to raise cash if liquidity needs arise.  As of December 31, 2011, the available for sale bond portfolio totaled $303.9 million.  At December 31, 2010, the Company held $303.8 million in bonds (excluding FHLB stock), at current market value in the available for sale portfolio.  Only marketable investment grade bonds are purchased.  Although most of the Banks’ bond portfolios are encumbered as pledges to secure various public funds deposits, repurchase agreements, and for other purposes, management can restructure and free up investment securities for a sale if required to meet liquidity needs.

Management continually monitors the relationship of loans to deposits as it primarily determines the Company’s liquidity posture.  Colony had ratios of loans to deposits of 71.6 percent as of December 31, 2011 and 76.8 percent at December 31, 2010.  Management employs alternative funding sources when deposit balances will not meet loan demands.  The ratios of loans to all funding sources (excluding Subordinated Debentures) at December 31, 2011 and December 31, 2010 were 66.9 percent and 70.5 percent, respectively.  Management continues to emphasize programs to generate local core deposits as our Company’s primary funding sources.  The stability of the Banks’ core deposit base is an important factor in Colony’s liquidity position.  A heavy percentage of the deposit base is comprised of accounts of individuals and small businesses with comprehensive banking relationships and limited volatility.  At December 31, 2011 and December 31, 2010, the Banks had $248 million and $298 million, respectively, in certificates of deposit of $100,000 or more.  These larger deposits represented 24.8 percent and 28.1 percent of respective total deposits.  Management seeks to monitor and control the use of these larger certificates, which tend to be more volatile in nature, to ensure an adequate supply of funds as needed.  Relative interest costs to attract local core relationships are compared to market rates of interest on various external deposit sources to help minimize the Company’s overall cost of funds.

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Part II (Continued)

Item 7 (Continued)

The Company supplemented deposit sources with brokered deposits.  As of December 31, 2011, the Company had $28.2 million, or 2.82 percent of total deposits, in brokered certificates of deposit attracted by external third parties.  Additionally, the banks use external wholesale or Internet services to obtain out-of-market certificates of deposit at competitive interest rates when funding is needed.  As of December 31, 2011, the Company had $48.81 million, or 4.88 percent of total deposits, in external wholesale or internet network deposits.

To plan for contingent sources of funding not satisfied by both local and out-of-market deposit balances, Colony and its subsidiaries have established multiple borrowing sources to augment their funds management.  The Company has borrowing capacity through membership of the Federal Home Loan Bank program.  The banks have also established overnight borrowing for Federal Funds Purchased through various correspondent banks.  Management believes the various funding sources discussed above are adequate to meet the Company’s liquidity needs in the future without any material adverse impact on operating results.

Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of balance sheet structure, the ability to liquidate assets, and the availability of alternative sources of funds. The Company seeks to ensure its funding needs are met by maintaining a level of liquid funds through asset/liability management.

Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets include cash, interest-bearing deposits in banks, securities available for sale, maturities and cash flow from securities held to maturity, and federal funds sold and securities purchased under resale agreements.

Liability liquidity is provided by access to funding sources which include core deposits.  Should the need arise, the Company also maintains relationships with the Federal Home Loan Bank, Federal Reserve Bank,   two correspondent banks and repurchase agreement lines that can provide funds on short notice.

Since Colony is a bank holding Company and does not conduct operations, its primary sources of liquidity are dividends up streamed from the subsidiary bank and borrowings from outside sources.

The liquidity position of the Company is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Management is not aware of any events that are reasonably likely to have a material adverse effect on the Company’s liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity, which if implemented, would have a material adverse effect on the Company.

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Part II (Continued)

Item 7 (Continued)

Impact of Inflation and Changing Prices

The Company’s financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). GAAP presently requires the Company to measure financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession are generally not considered. The primary effect of inflation on the operations of the Company is reflected in increased operating costs. In management’s opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the inflation rate. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond the control of the Company, including changes in the expected rate of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities, among other things, as further discussed in the next section.

Regulatory and Economic Policies

The Company’s business and earnings are affected by general and local economic conditions and by the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities, among other things. The Federal Reserve Board regulates the supply of money in order to influence general economic conditions. Among the instruments of monetary policy available to the Federal Reserve Board are (i) conducting open market operations in United States government obligations, (ii) changing the discount rate on financial institution borrowings, (iii) imposing or changing reserve requirements against financial institution deposits, and (iv) restricting certain borrowings and imposing or changing reserve requirements against certain borrowing by financial institutions and their affiliates. These methods are used in varying degrees and combinations to affect directly the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone, the policies of the Federal Reserve Board have a material effect on the earnings of the Company.

Governmental policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future; however, the Company cannot accurately predict the nature, timing or extent of any effect such policies may have on its future business and earnings.

Recently Issued Accounting Pronouncements

See Note 1 – Summary of Significant Accounting Policies under the section headed Changes in Accounting Principles and Effects of New Accounting Pronouncements included in the Notes to Consolidated Financial Statements.

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Part II (Continued)

Item 7 (Continued)

Quantitative and Qualitative Disclosures About Market Risk

AVERAGE BALANCE SHEETS

				2011								2010								2009
	Average			Income/		Yields/			Average			Income/		Yields/			Average			Income/		Yields/
	Balances			Expense		Rates			Balances			Expense		Rates			Balances			Expense		Rates
Assets
Interest-Earning Assets
Loans, Net of Unearned Income (1)	$	763,067		$	44,593		5.84	%	$	865,184		$	51,859		5.99	%	$	962,677		$	57,776		6.00	%
Investment Securities
Taxable		296,948			7,012		2.36			264,494			6,762		2.56			232,590			7,934		3.41
Tax-Exempt (2)		3,345			171		5.11			2,521			140		5.55			6,378			374		5.86
Total Investment Securities		300,293			7,183		2.39			267,015			6,902		2.59			238,968			8,308		3.48
Interest-Bearing Deposits		18,715			47		0.25			21,911			22		0.10			788			1		0.13
Federal Funds Sold		44,667			115		0.26			38,809			95		0.25			9,392			24		0.26
Other Interest-Earning Assets		5,781			46		0.80			6,297			38		0.60			6,328			20		0.32
Total Interest-Earning Assets		1,132,523			51,984		4.59			1,199,216			58,916		4.92			1,218,153			66,129		5.43
Noninterest-Earning Assets
Cash		19,057								19,347								21,011
Allowance for Loan Losses		(20,585	)							(30,445	)							(19,513	)
Other Assets		74,896								81,489								66,767
Total Noninterest-Earning Assets		73,368								70,391								68,265
Total Assets	$	1,205,891							$	1,269,607							$	1,286,418
Liabilities and Stockholders' Equity
Interest-Bearing Liabilities
Interest-Bearing Demand and Savings	$	273,783		$	1,232		0.45	%	$	251,537		$	1,636		0.65	%	$	237,045		$	1,736		0.73	%
Other Time		633,033			11,718		1.85			700,558			15,576		2.22			708,315			19,907		2.81
Total Interest-Bearing Deposits		906,816			12,950		1.43			952,095			17,212		1.81			945,360			21,643		2.29
Other Interest-Bearing Liabilities
Other Borrowed Money		71,720			3,010		4.20			85,920			3,074		3.58			91,000			3,103		3.41
Subordinated Debentures		24,229			508		2.10			24,229			516		2.13			24,229			659		2.72
Federal Funds Purchased and
Repurchase Agreements		9,851			338		3.43			26,070			721		2.77			42,452			876		2.06
Total Other Interest-Bearing
Liabilities		105,800			3,856		3.64			136,219			4,311		3.17			157,681			4,638		2.94
Total Interest-Bearing Liabilities		1,012,616			16,806		1.66			1,088,314			21,523		1.98			1,103,041			26,281		2.38
Noninterest-Bearing Liabilities and
Stockholders' Equity
Demand Deposits		93,903								82,160								71,561
Other Liabilities		4,635								4,681								6,161
Stockholders' Equity		94,737								94,452								105,655
Total Noninterest-Bearing
Liabilities and Stockholders' Equity		193,275								181,293								183,377
Total Liabilities and
Stockholders' Equity	$	1,205,891							$	1,269,607							$	1,286,418
Interest Rate Spread							2.93	%							2.94	%							3.05	%
Net Interest Income				$	35,178							$	37,393							$	39,848
Net Interest Margin							3.11	%							3.12	%							3.27	%

(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 $133, $130 and $155 for 2011, 2010 and 2009 respectively, are included in interest on loans.  The adjustments are based on a federal tax rate of 34 percent.

(2) Taxable-equivalent adjustments totaling $58, $48 and $127 for 2011, 2010, and 2009 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.

- 58 -

Part II (Continued)

Item 7 (Continued)

Colony Bankcorp, Inc. and Subsidiaries

Interest Rate Sensitivity

The following table is an analysis of the Company’s interest rate-sensitivity position at December 31, 2011.  The interest-bearing 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
	3 Months			4 to 12						1 to 5			Over 5
	or Less			Months			1 Year			Years			Years			Total
EARNING ASSETS:
Interest-bearing Deposits	$	28,957		$	---		$	28,957		$	---		$	---		$	28,957
Federal Funds Sold		54,991			---			54,991			---			---			54,991
Investment Securities		2,225			10,710			12,935			211,470			79,532			303,937
Loans, Net of Unearned Income		295,902			139,575			435,477			266,406			14,381			716,264
Other Interest-bearing Assets		5,398			---			5,398			---			---			5,398
Total Interest-earning Assets		387,473			150,285			537,758			477,876			93,913			1,109,547
INTEREST-BEARING LIABILITIES:
Interest-bearing Demand Deposits (1)		284,871			---			284,871			---			---			284,871
Savings (1)		41,231			---			41,231			---			---			41,231
Time Deposits		126,035			302,568			428,603			150,983			29			579,615
Other Borrowings (2)		13,500			27,500			41,000			----			30,000			71,000
Subordinated Debentures		24,229			----			24,229			---			---			24,229
Total Interest-bearing Liabilities		489,866			330,068			819,934			150,983			30,029			1,000,946
Interest Rate-Sensitivity Gap		(102,393	)		(179,783	)		(282,176	)		326,893			63,884			108,601
Cumulative Interest-Sensitivity Gap	$	(102,393	)	$	(282,176	)	$	(282,176	)	$	44,717		$	108,601
Interest Rate-Sensitivity Gap as a Percentage of Interest-Earning Assets		(9.23	)%		(16.20	)%		(25.43	)%		29.46	%		5.76	%
Cumulative Interest Rate-Sensitivity as a Percentage of Interest-Earning Assets		(9.23	)%		(25.43	)%		(25.43	)%		4.03	%		9.79	%

(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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Part II (Continued)

Item 7 (Continued)

The foregoing table indicates that we had a one year negative gap of $282 million, or 25.43 percent of total assets at December 31, 2011.  In theory, this would indicate that at December 31, 2011, $282 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 nonrate 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.  Also, 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.

The Company is now utilizing FTN Financial Asset/Liability Management Analysis for a more dynamic analysis of balance sheet structure.  The Company has established earnings at risk for net interest income in a +/- 200 basis point rate shock to be no more than a fifteen percent percentage change.  The most recent analysis as of December 31, 2011 indicates that net interest income would deteriorate 21.33 percent with a 200 basis point decrease and would improve 10.00 percent with a 200 basis point increase.  Though slightly outside policy, the increased exposure to declining rates is mitigated by the low likelihood of a further decline of 200 basis points from the current rate levels.  The Company has established equity at risk in a +/- 200 basis point rate shock to be no more than a twenty percent percentage change.  The most recent analysis as of December 31, 2011 indicates that net economic value of equity percentage change would increase 1.54 percent with a 200 basis point increase and would decrease 17.52 percent with a 200 basis point decrease.  The Company has established its one year gap to be 0.80 percent to 1.20 percent.  The most recent analysis as of December 31, 2011 indicates a one year gap of 0.78 percent.  The analysis reflects net interest margin compression in a declining interest rate environment.  Given that interest rates have basically “bottomed-out” with the recent Federal Reserve action, the Company is anticipating interest rates to increase in the future though we believe that interest rates will remain flat most of 2012.  The Company is focusing on areas to minimize margin compression in the future by minimizing longer term fixed rate loans, shortening on the yield curve with investments, securing longer term FHLB advances, securing certificates of deposit for longer terms and focusing on reduction of nonperforming assets.

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Part II (Continued)

Item 7 (Continued)

Return on Assets and Stockholder’s Equity

The following table presents selected financial ratios for each of the periods indicated.

	Years Ended December 31
	2011			2010			2009
Return on Average Assets(1)		0.09	%		(0.07	)%		(0.60	)%
Return on Average Equity(1)		1.20	%		(0.98	)%		(19.45	)%
Equity to Assets		8.08	%		7.29	%		6.83	%
Dividends Declared	$	0.00		$	0.00		$	0.146

(1) Computed using net income available to common shareholders.

Future Outlook

During the past three years, the financial services industry experienced tremendous adversities as a result of the collapse of the real estate markets across the country.  Colony, like most banking companies, has been affected by these economic challenges that started with a rapid stall of real estate sales and development throughout the country.  Focus during 2011 and again in 2012 will be directed toward addressing and bringing resolution to problem assets.

During 2009, Colony made significant strides to reduce our operating leverage by seeking a more efficient structure and more consistent products and services throughout the Company.  We successfully completed the consolidation of our seven banking subsidiaries into the single banking company – Colony Bank.  The momentum created by this strategic move will allow Colony to improve future profitability while better positioning the Company to take advantage of future growth opportunities.  In response to the elevated risk of residential real estate and land development loans, management has extensively reviewed our loan portfolio with a particular emphasis on our residential and land development real estate exposure.  Senior management with experience in problem loan workouts have been identified and assigned responsibility to oversee the workout and resolution of problem loans.  The Company will continue to closely monitor our real estate dependent loans throughout the Company and focus on asset quality during this economic downturn.

Business

Regulatory Action

On October 21, 2010, the Board of Directors of the Company’s subsidiary bank, Colony Bank (the “Bank”), received notification from its primary regulators, the Georgia Department of Banking and Finance (“the Georgia Department”) and the FDIC that the Bank’s latest examination results require a program of corrective action as outlined in a proposed Memorandum of Understanding (“MOU”).  An MOU is characterized by the supervising authorities as an informal action that is neither published nor made publically available by the supervising authorities and is used when circumstances do not warrant formal supervisory action.  An MOU is not a “written agreement” for purposes of Section 8 of the Federal Deposit Insurance Act.  The Board of Directors entered into the MOU at its regularly scheduled monthly meeting on November 16, 2010 with the effective date of the MOU being November 23, 2010.

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Part II (Continued)

Item 7 (Continued)

The MOU requires the Bank to develop, implement, and maintain various processes to improve the Bank’s risk management of its loan portfolio, reduce adversely classified assets in accordance with certain timeframes, limit the extension of additional credit to borrowers with adversely classified loans subject to certain exceptions, adopt a written plan to properly monitor and reduce the Bank’s commercial real estate concentration, continue to maintain the Bank’s loan loss provision and review its adequacy at least quarterly, and formulate and implement a written plan to improve and maintain earnings to be forwarded for review by the Georgia Department and FDIC.  The Bank is also required to obtain approval before any cash dividends can be paid.

The Bank has also agreed to have and maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows:  Tier 1 leverage capital to total assets of 8% and total risk-based capital to total risk-weighted assets of 10%.  At December 31, 2011, the Bank’s capital ratios were 9.38% and 16.29%, respectively.

Item 7A

Quantitative and Qualitative Disclosures about Market Risk

The information required by this item is located in Item 7 under the heading Interest Rate Sensitivity.

Item 8

Financial Statements and Supplemental Data

The following consolidated financial statements of the Registrant and its subsidiaries are included on exhibit 13 of this Annual Report on Form 10-K:

Consolidated Balance Sheets – December 31, 2011 and 2010

Consolidated Statements of Income – Years Ended December 31, 2011, 2010 and 2009

Consolidated Statements of Comprehensive Income – Years Ended December 31, 2011, 2010 and 2009

Consolidated Statements of Stockholders’ Equity – Years Ended December 31, 2011, 2010 and 2009

Consolidated Statements of Cash Flows – Years Ended December 31, 2011, 2010 and 2009

Notes to Consolidated Financial Statements

- 62 -

Part II (Continued)

Item 8 (Continued)

Quarterly Results of Operations (Unaudited)

The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2011 and 2010:

	Three Months Ended
	December 31			September 30			June 30			March 31
2011	($ in Thousands, Except Per Share Data)
Interest Income	$	12,439		$	12,732		$	13,095		$	13,527
Interest Expense		3,594			3,989			4,514			4,709
Net Interest Income		8,845			8,743			8,581			8,818
Provision for Loan Losses		2,250			2,250			2,250			1,500
Securities Gains		979			813			736			396
Noninterest Income		1,774			1,610			1,935			1,708
Noninterest Expense		8,804			8,090			8,218			7,939
Income (Loss) Before Income Taxes		544			826			784			1,483
Provision for Income Taxes		164			268			245			427
Net Income (Loss)		380			558			539			1,056
Preferred Stock Dividends		350			350			350			350
Net Income (Loss) Available to Common Stockholders	$	30		$	208		$	189		$	706
Net Income (Loss) Per Common Share
Basic	$	0.00		$	0.02		$	0.02		$	0.08
Diluted	$	0.00		$	0.02		$	0.02		$	0.08
2010
Interest Income	$	13,952		$	14,441		$	15,123		$	15,222
Interest Expense		5,073			5,379			5,527			5,544
Net Interest Income		8,879			9,062			9,596			9,678
Provision for Loan Losses		2,500			4,200			3,400			3,250
Securities Gains		817			922			97			781
Noninterest Income		1,966			1,742			1,922			1,759
Noninterest Expense		8,732			9,115			7,696			8,313
Income (Loss) Before Income Taxes		430			(1,589	)		519			655
Provision for Income Taxes		127			(555	)		(2	)		(29	)
Net Income (Loss)		303			(1,034	)		521			684
Preferred Stock Dividends		350			350			350			350
Net Income (Loss) Available to Common Stockholders	$	(47	)	$	(1,384	)	$	171		$	334
Net Income (Loss) Per Common Share
Basic	$	(0.01	)	$	(0.16	)	$	0.02		$	0.05
Diluted	$	(0.01	)	$	(0.16	)	$	0.02		$	0.05

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There was no accounting or disclosure disagreement or reportable event with the current auditors that would have required the filing of a report on Form 8-K.

- 63 -

Part II (Continued)

Item 9A

Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act.  Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective.

During the year ended December 31, 2011, there was not any change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Colony’s management is responsible for establishing and maintaining adequate internal control over financial reporting.  Colony’s internal control over financial reporting is a process designed under the supervision of the Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Colony’s financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Colony’s management assessed the effectiveness of Colony’s internal control over financial reporting as of December 31, 2011 based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on the assessment, management determined that Colony maintained effective internal control over financial reporting as of December 31, 2011.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.  The Company’s registered public accounting firm was not required to issue an attestation on its internal controls over financial reporting pursuant to the rules of the SEC that permit the Company to provide only management’s report in this Annual Report on Form 10-K.

Colony Bankcorp, Inc.

March 15, 2012

Changes in Internal Controls

There were no changes made in our internal controls during the period covered by this report or, to our knowledge, in other factors that have materially affected, or are reasonably likely to materially affect these controls.

See the Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

- 64 -

Part II (Continued)

Item 9B

Other Information

None.

Part III

Item 10

Directors and Executive Officers and Corporate Governance

Code of Ethics

Colony Bankcorp, Inc. has adopted a Code of Ethics that applies to the Company’s principal executive officer and principal accounting and financial officer.  A copy of the Code of Ethics will be provided to any person without charge, upon written request mailed to Terry Hester, Colony Bankcorp, Inc., 115 S. Grant Street, Fitzgerald, Georgia 31750.

The remaining information required by this item is incorporated by reference to the Company’s definitive Proxy Statements to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report.

Item 11

Executive Compensation

The information required by this item is incorporated by reference to the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report.

- 65 -

Part III (Continued)

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

EQUITY COMPENSATION PLAN INFORMATION

Plan Category	Number of Securities to be Issued Upon Stock Grant, Exercise of Outstanding Options, Warrants and Rights (a)	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity Compensation Plans Approved By Security Holders
2004 Restricted Stock Grant Plan			$	108,042
			$	108,042

The remaining information required by this item is incorporated by reference to the Company’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report.

Item 13

Certain Relationships and Related Transactions and Director Independence

The information required by this item is incorporated by reference to the Company’s definitive Proxy Statements to be filed with Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the fiscal year covered by this Annual Report.

Item 14

Principal Accounting Fees and Services

The information required by this item is incorporated by reference to the Company’s definitive Proxy Statements to be filed with Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the fiscal year covered by this Annual Report.

- 66 -

Part IV

Item 15

Exhibits, Financial Statement Schedules

(a)	The following documents are filed as part of this report:
	(1)	Financial Statements
	(2)	Financial Statements Schedules:
			All schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or the related notes.
	(3)	A list of the exhibits required by Item 601 of Regulation S-K to be filed as a part of this report is shown on the “Exhibit Index” filed herewith.
Exhibit Index
3.1	Articles of Incorporation
		-filed as Exhibit 3(a) to the Registrant’s Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990 and incorporated herein by reference.
3.2	Bylaws, as Amended
		-filed as Exhibit 3(b) to the Registrant’s Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990 and incorporated herein by reference.
3.3	Articles of Amendment to the Company’s Articles of Incorporation Authorizing Additional Capital Stock in the Form of Ten Million Shares of Preferred Stock
		-filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 000-12436) filed with the Commission on January 13, 2009 and incorporated herein by reference.
3.4	Articles of Amendment to the Company’s Articles of Incorporation Establishing the Terms of the Series A Preferred Stock
		-filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 000-12436) filed with the Commission on January 13, 2009 and incorporated herein by reference.
4.1	Instruments Defining the Rights of Security Holders
		-incorporated herein by reference to page 1 of the Company’s Definitive Proxy Statement for Annual Meeting of Stockholders to be held on April 26, 2005, filed with the Securities and Exchange Commission on March 2, 2005 (File No. 000-12436).
4.2	Warrant to Purchase up to 500,000 shares of Common Stock
		-filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 000-12436), filed with the Commission on January 13, 2009 and incorporated herein by reference.

- 67 -

Part IV (Continued)

Item 15 (Continued)

4.3	Form of Series A Preferred Stock Certificate
		-filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 000-12436), filed with the Commission on January 13, 2009 and incorporated herein by reference.
10.1	Deferred Compensation Plan and Sample Director Agreement
		-filed as Exhibit 10(a) to the Registrant’s Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990 and incorporated herein by reference.
10.2	Profit-Sharing Plan Dated January 1, 1979
		-filed as Exhibit 10(b) to the Registrant’s Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990 and incorporated herein by reference.
10.3	1999 Restricted Stock Grant Plan and Restricted Stock Grant Agreement
		-filed as Exhibit 10© the Registrant’s Annual Report on Form 10-K (File 000-12436), filed with the Commission on March 30, 2001 and incorporated herein by reference.
10.4	2004 Restricted Stock Grant Plan and Restricted Stock Grant Agreement
		-filed as Exhibit C to the Registrant’s Definitive Proxy Statement for Annual Meeting of Stockholders held on April 27, 2004, filed with the Securities and Exchange Commission on March 3, 2004 (File No. 000-12436) and incorporated herein by reference.
10.5	Lease Agreement – Mobile Home Tracks, LLC c/o Stafford Properties, Inc. and Colony Bank Worth
		-filed as Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10Q (File No. 000-12436), filed with Securities and Exchange Commission on November 5, 2004 and incorporated herein by reference.
10.6	Letter Agreement, Dated January 9, 2009, Including Securities Purchase Agreement – Standard Terms Incorporated by Reference Therein, Between the Company and the United States Department of the Treasury
		-filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 000-12436), filed with the Commission on January 13, 2009 and incorporated herein by reference.
10.7	Form of Waiver, Executed by Each of Messrs Al D. Ross, Terry L. Hester, Henry F. Brown, Jr., Walter P. Patten and Larry E. Stevenson
		-filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 000-12436), filed with the Commission on January 13, 2009 and incorporated herein by reference.

- 68 -

Part IV (Continued)

Item 15 (Continued)

13	Consolidated Financial Statements of Colony Bankcorp, Inc. as of December 31, 2011 and 2010
21	Subsidiaries of the Company
31.1	Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certificate of Chief Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certificate of the Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Certificate of the Chief Executive Officer and Chief Financial Officer Pursuant to Section 30.15 of 31 CFR Part 30
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document

- 69 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Colony Bankcorp, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:

COLONY BANKCORP, INC.

/s/ James D. Minix

James D. Minix

Interim President/Director/Chief Executive Officer

March 15, 2012

Date

/s/ Terry L. Hester

Terry L. Hester

Executive Vice-President/Chief Financial Officer/Director

March 15, 2012

Date

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

/s/ B. Gene Waldron	March 15, 2012
B. Gene Waldron, Director	Date
/s/ Edward J. Harrell	March 15, 2012
Edward J. Harrell, Director	Date
/s/ Mark H. Massee	March 15, 2012
Mark H. Massee, Director	Date

- 70 -

/s/ Charles E. Myler	March 15, 2012
Charles E. Myler, Director	Date
/s/ W. B. Roberts, Jr.	March 15, 2012
W. B. Roberts, Jr., Director	Date
/s/ Jonathan W. R. Ross	March 15, 2012
Jonathan W. R. Ross, Director	Date
/s/ M. Frederick Dwozan	March 15, 2012
M. Frederick Dwozan, Director	Date
/s/ Davis W. King, Sr.	March 15, 2012
Davis W. King, Sr., Director	Date
/s/ Scott Lowell Downing	March 15, 2012
Scott Lowell Downing, Director	Date

- 71 -

EX-13

EXHIBIT NO. 13

McNair, McLemore, Middlebrooks & Co., LLC

CERTIFIED PUBLIC ACCOUNTANTS

389 Mulberry Street • Post Office Box One • Macon, GA 31202

Telephone (478) 746-6277 • Facsimile (478) 743-6858

www.mmmcpa.com

March 15, 2012

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Colony Bankcorp, Inc.

We have audited the accompanying consolidated balance sheets of Colony Bankcorp, Inc. and Subsidiary as of December 31, 2011 and 2010 and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2011.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Colony Bankcorp, Inc. and Subsidiary as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to examine management’s assessment of the effectiveness of Colony Bankcorp, Inc.’s internal control over financial reporting as of December 31, 2011 included under Item 9A, Controls and Procedures, in Colony Bankcorp, Inc.’s Annual Report on Form 10-K and, accordingly, we do not express an opinion thereon.

McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLC

- 1 -

COLONY BANKCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31

ASSETS
	2011			2010
Cash and Cash Equivalents
Cash and Due from Banks	$	28,380,368		$	16,613,187
Federal Funds Sold		54,991,474			32,536,482
Securities Purchased Under Agreements to Resell		-			5,000,000
		83,371,842			54,149,669
Interest-Bearing Deposits		28,957,310			50,726,734
Investment Securities
Available for Sale, at Fair Value		303,890,847			303,837,606
Held to Maturity, at Cost (Fair Value of $45,635 and $52,941 as of December 31, 2011 and 2010, Respectively)		46,111			48,412
		303,936,958			303,886,018
Federal Home Loan Bank Stock, at Cost		5,398,200			6,063,500
Loans		716,321,321			813,250,673
Allowance for Loan Losses		(15,649,594	)		(28,280,077	)
Unearned Interest and Fees		(57,646	)		(61,311	)
		700,614,081			784,909,285
Premises and Equipment		25,750,235			27,147,725
Other Real Estate (Net of Allowance of $1,411,061 and $1,293,174 in 2011 and 2010, Respectively)		20,445,085			20,207,806
Other Intangible Assets		259,258			295,007
Other Assets		26,643,467			28,272,629
Total Assets	$	1,195,376,436		$	1,275,658,373

See accompanying notes which are an integral part of these financial statements.

- 2 -

COLONY BANKCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31

LIABILITIES AND STOCKHOLDERS’ EQUITY
	2011		2010
Deposits
Noninterest-Bearing	$	94,268,911	$	102,959,423
Interest-Bearing		905,716,361		956,164,581
		999,985,272		1,059,124,004
Borrowed Money
Securities Sold Under Agreements to Repurchase		-		20,000,000
Subordinated Debentures		24,229,000		24,229,000
Other Borrowed Money		71,000,000		75,076,010
		95,229,000		119,305,010
Other Liabilities		3,549,354		4,270,776
Commitments and Contingencies
Stockholders’ Equity
Preferred Stock, Stated Value $1,000; Authorized 10,000,000 Shares, Issued 28,000 Shares		27,662,476		27,505,910
Common Stock, Par Value $1; Authorized 20,000,000 Shares, Issued 8,439,258 and 8,442,958 Shares as of December 31, 2011 and 2010, Respectively		8,439,258		8,442,958
Paid-In Capital		29,145,094		29,171,087
Retained Earnings		29,456,240		28,479,211
Restricted Stock - Unearned Compensation		-		(40,794	)
Accumulated Other Comprehensive Income (Loss), Net of Tax		1,909,742		(599,789	)
		96,612,810		92,958,583
Total Liabilities and Stockholders’ Equity	$	1,195,376,436	$	1,275,658,373

See accompanying notes which are an integral part of these financial statements.

- 3 -

COLONY BANKCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31

	2011		2010			2009
Interest Income
Loans, Including Fees	$	44,460,149	$	51,728,665		$	57,620,911
Federal Funds Sold and Securities Purchased Under Agreements to Resell		114,794		95,428			24,438
Deposits with Other Banks		45,646		38,085			553
Investment Securities
U. S. Government Agencies		6,873,296		6,613,030			7,626,856
State, County and Municipal		160,892		103,133			258,545
Corporate Obligations		91,034		137,831			296,273
Dividends on Other Investments		47,001		21,547			19,846
		51,792,812		58,737,719			65,847,422
Interest Expense
Deposits		12,950,229		17,212,312			21,642,734
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase		337,711		721,044			876,484
Borrowed Money		3,517,633		3,589,847			3,761,924
		16,805,573		21,523,203			26,281,142
Net Interest Income		34,987,239		37,214,516			39,566,280
Provision for Loan Losses		8,250,000		13,350,000			43,445,000
Net Interest Income (Loss) After Provision for Loan Losses		26,737,239		23,864,516			(3,878,720	)
Noninterest Income
Service Charges on Deposits		3,244,536		3,597,416			4,198,019
Other Service Charges, Commissions and Fees		1,311,758		1,139,935			986,392
Mortgage Fee Income		265,636		313,005			447,989
Securities Gains		2,923,601		2,617,062			2,625,867
Gain on Sale of SBA Loans		946,732		1,004,585			140,122
Other		1,258,813		1,334,846			1,145,798
		9,951,076		10,006,849			9,544,187
Noninterest Expenses
Salaries and Employee Benefits		14,632,693		14,096,698			14,483,306
Occupancy and Equipment		3,997,667		4,422,152			4,287,006
Directors’ Fees		466,075		495,950			502,575
Legal and Professional Fees		1,186,884		1,369,864			1,362,536
Foreclosed Property		4,045,245		4,943,530			2,270,792
FDIC Assessment		1,828,799		1,866,956			2,662,042
Goodwill Impairment		-		-			2,412,338
Advertising		508,329		743,278			758,458
Software		660,120		630,543			498,657
Telephone		735,758		703,786			764,373
Other		4,989,267		4,583,606			4,842,139
		33,050,837		33,856,363			34,844,222
Income (Loss) Before Income Taxes (Benefits)		3,637,478		15,002			(29,178,755	)
Income Taxes (Benefits)		1,103,883		(459,214	)		(9,994,881	)
Net Income (Loss)		2,533,595		474,216			(19,183,874	)
Preferred Stock Dividends		1,400,000		1,400,000			1,365,000
Net Income (Loss) Available to Common Stockholders	$	1,133,595	$	(925,784	)	$	(20,548,874	)
Net Income (Loss) Per Share of Common Stock
Basic	$	0.13	$	(0.11	)	$	(2.85	)
Diluted	$	0.13	$	(0.11	)	$	(2.85	)
Cash Dividends Declared Per Share of Common Stock	$	0.00	$	0.00		$	0.146
Weighted Average Shares Outstanding	$	8,439,258		8,149,217			7,213,430

See accompanying notes which are an integral part of these financial statements.

- 4 -

COLONY BANKCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31

	2011			2010			2009
Net Income (Loss)	$	2,533,595		$	474,216		$	(19,183,874	)
Other Comprehensive Income, Net of Tax
Gains on Securities Arising During the Year		4,439,108			1,227,281			1,257,136
Reclassification Adjustment		(1,929,577	)		(1,727,261	)		(1,733,072	)
Change in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of Reclassification Adjustment and Tax Effects		2,509,531			(499,980	)		(475,936	)
Comprehensive Income (Loss)	$	5,043,126		$	(25,764	)	$	(19,659,810	)

See accompanying notes which are an integral part of these financial statements.

- 5 -

COLONY BANKCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

	Preferred Stock		Shares Issued			Common Stock			Paid-In Capital			Retained Earnings			Restricted Stock - Unearned Compensation			Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2008	$	-		7,212,313		$	7,212,313		$	24,535,683			51,302,025		$	(210,993	)	$	376,127		$	83,215,155
Issuance of Preferred Stock		27,215,218								784,782												28,000,000
Issuance of Restricted Stock				18,850			18,850			132,421						(151,271	)					-
Forfeiture of Restricted Stock				(2,000	)		(2,000	)		(14,050	)					16,050						-
Tax Loss on Restricted Stock										(45,923	)											(45,923	)
Amortization of Unearned Compensation																187,666						187,666
Change in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of Reclassification Adjustment and Tax Effects																			(475,936	)		(475,936	)
Accretion of Fair Value of Warrant		141,746											(141,746	)								-
Dividends on Preferred Shares													(1,365,000	)								(1,365,000	)
Dividends on Common Stock													(1,057,464	)								(1,057,464	)
Net Loss													(19,183,874	)								(19,183,874	)
Balance, December 31, 2009		27,356,964		7,229,163			7,229,163			25,392,913			29,553,941			(158,548	)		(99,809	)		89,274,624
Issuance of Common Stock				1,216,545			1,216,545			3,861,710												5,078,255
Forfeiture of Restricted Stock				(2,750	)		(2,750	)		(27,570	)					30,320						-
Tax Loss on Restricted Stock										(55,966	)											(55,966	)
Amortization of Unearned Compensation																87,434						87,434
Change in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of Reclassification Adjustment and Tax Effects																			(499,980	)		(499,980	)
Accretion of Fair Value of Warrant		148,946											(148,946	)								-
Dividends on Preferred Shares													(1,400,000	)								(1,400,000	)
Net Income													474,216									474,216
Balance, December 31, 2010		27,505,910		8,442,958			8,442,958			29,171,087			28,479,211			(40,794	)		(599,789	)		92,958,583
Forfeiture of Restricted Stock				(3,700	)		(3,700	)		(25,993	)					29,693						-
Amortization of Unearned Compensation																11,101						11,101
Change in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of Reclassification Adjustment and Tax Effects																			2,509,531			2,509,531
Accretion of Fair Value of Warrant		156,566											(156,566	)								-
Dividends on Preferred Shares													(1,400,000	)								(1,400,000	)
Net Income													2,533,595									2,533,595
Balance, December 31, 2011	$	27,662,476		8,439,258		$	8,439,258		$	29,145,094		$	29,456,240		$	-		$	1,909,742		$	96,612,810

See accompanying notes which are an integral part of these financial statements.

- 6 -

COLONY BANKCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

	2011			2010			2009
Cash Flows from Operating Activities
Net Income (Loss)	$	2,533,595		$	474,216		$	(19,183,874	)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided from Operating Activities
Depreciation		1,790,041			2,140,735			2,092,845
Amortization and Accretion		3,487,124			4,043,795			3,807,011
Goodwill Impairment		-			-			2,412,338
Provision for Loan Losses		8,250,000			13,350,000			43,445,000
Deferred Income Taxes		867,006			639,607			(5,869,055	)
Securities Gains		(2,923,601	)		(2,617,062	)		(2,625,867	)
(Gain) Loss on Sale of Premises and Equipment		3,668			28,146			(82,503	)
Loss on Sale of Other Real Estate and Repossessions		1,106,479			1,827,704			163,642
Provision for Losses on Other Real Estate		1,411,061			1,293,174			467,408
Increase in Cash Surrender Value of Life Insurance		(174,289	)		(56,024	)		(184,905	)
Change In
Interest Receivable		739,423			1,325,068			699,018
Prepaid Expenses		1,861,810			2,006,032			(5,785,826	)
Interest Payable		(398,903	)		(452,764	)		(1,256,460	)
Accrued Expenses and Accounts Payable		(405,612	)		(148,591	)		315,879
Other		(2,987,906	)		3,500,575			(3,360,614	)
		15,159,896			27,354,611			15,054,037
Cash Flows from Investing Activities
Interest-Bearing Deposits in Other Banks		21,769,424			(44,247,933	)		(6,331,814	)
Purchase of Investment Securities Available for Sale		(381,284,748	)		(380,490,982	)		(488,257,181	)
Proceeds from Sale of Investment Securities Available for Sale		342,672,937			286,387,727			368,575,701
Proceeds from Maturities, Calls and Paydowns of Investment Securities Available for Sale		41,978,769			55,648,274			58,599,391
Held to Maturity		12,565			14,001			12,688
Proceeds from Sale of Premises and Equipment		1,605			-			125,512
Net Loans to Customers		63,267,200			88,105,734			(18,973,081	)
Purchase of Premises and Equipment		(397,825	)		(490,256	)		(1,290,324	)
Proceeds from Sale of Other Real Estate and Repossessions		9,991,792			9,866,063			12,158,095
Federal Home Loan Bank Stock		665,300			281,900			(73,000	)
		98,677,019			15,074,528			(75,454,013	)
Cash Flows from Financing Activities
Interest-Bearing Customer Deposits		(50,448,220	)		(17,183,061	)		43,853,063
Noninterest-Bearing Customer Deposits		(8,690,512	)		18,720,584			6,741,949
Proceeds from Other Borrowed Money		-			23,076,010			19,000,000
Principal Payments on Other Borrowed Money		(4,076,010	)		(39,000,000	)		(19,000,000	)
Dividends Paid on Preferred Stock		(1,400,000	)		(1,400,000	)		(1,190,000	)
Dividends Paid on Common Stock		-			-			(1,760,665	)
Issuance of Common Stock		-			5,078,255			-
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase		(20,000,000	)		(20,000,000	)		(2,274,000	)
Proceeds Allocated to Issuance of Preferred Stock		-			-			27,215,218
Proceeds Allocated to Warrants Issued		-			-			784,782
		(84,614,742	)		(30,708,212	)		73,370,347
Net Increase in Cash and Cash Equivalents		29,222,173			11,720,927			12,970,371
Cash and Cash Equivalents, Beginning		54,149,669			42,428,742			29,458,371
Cash and Cash Equivalents, Ending	$	83,371,842		$	54,149,669		$	42,428,742

See accompanying notes which are an integral part of these financial statements.

- 7 -

COLONY BANKCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Summary of Significant Accounting Policies

Principles of Consolidation

Colony Bankcorp, Inc. (the Company) is a bank holding company located in Fitzgerald, Georgia. The consolidated financial statements include the accounts of Colony Bankcorp, Inc. and its wholly-owned subsidiary, Colony Bank (which includes its wholly-owned subsidiary, Colony Mortgage Corp.), Fitzgerald, Georgia.  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.

Nature of Operations

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

Use of Estimates

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

Reclassifications

In certain instances, amounts reported in prior years’ consolidated financial statements and note disclosures have been reclassified to conform to statement presentations selected for 2011.  Such reclassifications had no effect on previously reported stockholders’ equity or net income.

- 8 -

(1)  Summary of Significant Accounting Policies (Continued)

Concentrations of Credit Risk

Concentrations of credit risk can exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries or certain geographic regions.  The Company has a concentration in real estate loans as well as a geographic concentration that could pose an adverse credit risk, particularly with the current economic downturn in the real estate market.  At December 31, 2011, approximately 86 percent of the Company’s loan portfolio was concentrated in loans secured by real estate.  A substantial portion of borrowers’ ability to honor their contractual obligations is dependent upon the viability of the real estate economic sector.  The continued downturn of the housing and real estate market that began in 2007 has resulted in an increase of problem loans secured by real estate.  These loans are centered primarily in the Company’s larger MSA markets.  Declining collateral real estate values that secure land development, construction and speculative real estate loans in the Company’s larger MSA markets have resulted in high loan loss provisions in recent years.  In addition, a large portion of the Company’s foreclosed assets are also located in these same geographic markets, making the recovery of the carrying amount of foreclosed assets susceptible to changes in market conditions.  Management continues to monitor these concentrations and has considered these concentrations in its allowance for loan loss analysis.

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

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

Investment Securities

The Company classifies its investment 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.  Currently, no securities are classified as trading.  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 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 are reported, net of deferred taxes, in accumulated other comprehensive income (loss), a component of stockholders’ equity.  Gains and losses from sales of securities available for sale are computed using the specific identification method.  Securities available for sale 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.

- 9 -

(1)  Summary of Significant Accounting Policies (Continued)

Investment Securities (Continued)

The Company evaluates each held to maturity and available for sale security in a loss position for other-than-temporary impairment (OTTI).  In estimating other-than-temporary impairment losses, management considers such factors as the length of time and the extent to which the market value has been below cost, the financial condition of the issuer and the Company’s intent to sell and whether it is more likely than not that the Company will be required to sell the security before anticipated recovery of the amortized cost basis.  If the Company intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery, the OTTI write-down is recognized in earnings.  If the Company does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the OTTI write-down is separated into an amount representing credit loss, which is recognized in earnings, and an amount related to all other factors, which is recognized in other comprehensive income (loss).

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 the accounting standards.  The FHLB stock is reported in the consolidated financial statements at cost.  Dividend income is recognized when earned.

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.  Loan origination fees, net of certain direct origination costs, are deferred and amortized over the estimated terms of the loans using the straight-line method.  Interest income on loans is recognized using the effective interest method.

A loan is considered to be delinquent when payments have not been made according to contractual terms, typically evidenced by nonpayment of a monthly installment by the due date.

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.

Loans Modified in a Troubled Debt Restructuring (TDR)

Loans are considered to have been modified in a TDR when, due to a borrower’s financial difficulty, the Company makes certain concessions to the borrower that it would not otherwise consider for new debt with similar risk characteristics.  Modifications may include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of the collateral.  Generally, a nonaccrual loan that has been modified in a TDR remains on nonaccrual status for a period of six months to demonstrate that the borrower is able to meet the terms of the modified loan.  However, performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of loan modification or after a shorter performance period.  If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains on nonaccrual status. Once a loan is modified in a troubled debt restructuring, it is accounted for as an impaired loan, regardless of its accrual status, until the loan is paid in full, sold or charged off.

- 10 -

(1)  Summary of Significant Accounting Policies (Continued)

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available.

The allowance consists of specific, historical and general components.  The specific component relates to loans that are classified as either doubtful, substandard or special mention.  For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The historical component covers nonclassified loans and is based on historical loss experience adjusted for qualitative factors.  A general component is maintained to cover uncertainties that could affect management’s estimate of probable losses.  The general component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and historical losses in the portfolio.  General valuation allowances are based on internal and external qualitative risk factors such as (1) changes in the composition of the loan portfolio, (2) the extent of loan concentrations within the portfolio, (3) the effectiveness of the Company’s lending policies, procedures and internal controls, (4) the experience, ability and effectiveness of the Company’s lending management and staff, and (5) national and local economics and business conditions.

Loans identified as losses by management, internal loan review and/or Bank examiners are charged off.

During 2011, the Company continues its methodology regarding the look-back period for charge-off experience to one year.  The current methodology has resulted in significant loan loss provisions for the past three years.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

- 11 -

(1)  Summary of Significant Accounting Policies (Continued)

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.

Intangible Assets

Intangible assets consist of core deposit intangibles acquired in connection with a business combination.  The core deposit intangible is initially recognized based on an independent valuation performed as of the consummation date.  The core deposit intangible is amortized by the straight-line method over the average remaining life of the acquired customer deposits.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Statement of Cash Flows

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

Securities Purchased Under Agreement to Resell and Securities Sold Under Agreements to Repurchase

The Company purchases certain securities under agreements to resell.  The amounts advanced under these agreements represent short-term loans and are reflected as assets in the consolidated balance sheets.

The Company sells securities under agreements to repurchase.  These repurchase agreements are treated as borrowings.  The obligations to repurchase securities sold are reflected as a liability and the securities underlying the agreements are reflected as assets in the consolidated balance sheets.

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(1)  Summary of Significant Accounting Policies (Continued)

Advertising Costs

The Company expenses the cost of advertising in the periods in which those costs are incurred.

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 reporting 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.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The Company and its subsidiary file a consolidated federal income tax return.  The subsidiary pays its proportional share of federal income taxes to the Company based on its taxable income.

Positions taken in the Company’s tax returns may be subject to challenge by the taxing authorities upon examination.  Uncertain tax positions are initially recognized in the consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.  Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts.  The Company provides for interest and, in some cases, penalties on tax positions that may be challenged by the taxing authorities. Interest expense is recognized beginning in the first period that such interest would begin accruing.  Penalties are recognized in the period that the Company claims the position in the tax return.  Interest and penalties on income tax uncertainties are classified within income tax expense in the consolidated statements of income.

Other Real Estate

Other real estate generally represents real estate acquired through foreclosure and is initially recorded at estimated fair value at the date of acquisition less the cost of disposal.  Losses from the acquisition of property in full or partial satisfaction of debt are recorded as loan losses.  Properties are evaluated regularly to ensure the recorded amounts are supported by current fair values, and valuation allowances are recorded as necessary to reduce the carrying amount to fair value less estimated cost of disposal.  Routine holding costs and gains or losses upon disposition are included in foreclosed property expense.

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(1)  Summary of Significant Accounting Policies (Continued)

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 statements of operations but as a separate component of the equity section of the consolidated balance sheets.  Such items are considered components of other comprehensive income (loss).  Accounting standards codification requires the presentation in the consolidated financial statements of net income and all items of other comprehensive income (loss) as total comprehensive income (loss).

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Company has entered into commitments to extend credit, commercial letters of credit and standby letters of credit.  Such financial instruments are recorded when they are funded.

Changes in Accounting Principles and Effects of New Accounting Pronouncements

Adoption of New Accounting Standards

ASU No. 2010-20, “Receivables (Topic 310) - Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses.”  ASU 2010-20 requires entities to provide disclosures designed to facilitate financial statement users’ evaluation of (1) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (2) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (3) the changes and reasons for those changes in the allowance for credit losses.  Disclosures must be disaggregated by portfolio segment, the level at which an entity develops and documents a systematic method for determining its allowance for credit losses, and class of financing receivable, which is generally a disaggregation of portfolio segment.  The required disclosures include, among other things, a rollforward of the allowance for credit losses as well as information about modified, impaired, nonaccrual and past due loans and credit quality indicators.  ASU 2010-20 became effective for the Company’s financial statements as of December 31, 2010, as it relates to disclosures required as of the end of a reporting period.  Disclosures that relate to activity during a reporting period became effective for the Company’s financial statements on January 1, 2011.  Certain disclosures related to troubled debt restructurings were temporarily deferred by ASU 2011-01, “Receivables (Topic 310) - Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20,” and became effective on July 1, 2011 as required by ASU No. 2011-02, “Receivables (Topic 310) - A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring,” as further discussed below.

ASU No. 2011-02, “Receivables (Topic 310) - A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.”  ASU 2011-02 clarifies which loan modifications constitute troubled debt restructurings and is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings.  In evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude, under the guidance clarified by ASU 2011-02, that both of the following exist: (1) the restructuring constitutes a concession; and (2) the debtor is experiencing financial difficulties.  ASU 2011-02 became effective for the Company on July 1, 2011, and applies retrospectively to restructurings occurring on or after     January 1, 2011.

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(1)  Summary of Significant Accounting Policies (Continued)

Changes in Accounting Principles and Effects of New Accounting Pronouncements (Continued)

Recently Issued But Not Yet Effective Accounting Standards

ASU No. 2011-03, “Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreements.”  ASU 2011-03 is intended to improve financial reporting of repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity.  ASU 2011-03 removes from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance guidance related to that criterion.  ASU 2011-03 will be effective for the Company on January 1, 2012 and is not expected to have a significant impact on the Company’s consolidated financial statements.

ASU 2011-04, “Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.”  ASU 2011-04 amends Topic 820, “Fair Value Measurements and Disclosures,” to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards.  ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 2011-04 is effective for annual periods beginning after December 15, 2011, and is not expected to have a significant impact on the Company’s consolidated financial statements.

ASU 2011-05, “Comprehensive Income (Topic 220) - Presentation of Comprehensive Income.” ASU 2011-05 amends Topic 220, “Comprehensive Income,” to require that all nonowner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements.  Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented.  The option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. ASU 2011-05 is effective for annual and interim periods beginning after December 15, 2011; however, certain provisions related to the presentation of reclassification adjustments have been deferred by ASU 2011-12 “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” as further discussed below. ASU 2011-05 is not expected to have a significant impact on the Company’s consolidated financial statements.

ASU 2011-11, “Balance Sheet (Topic 210) - “Disclosures about Offsetting Assets and Liabilities.”  ASU 2011-11 amends Topic 210, “Balance Sheet,” to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements and reverse sale and repurchase agreements and securities borrowing/lending arrangements, and derivative instruments that are eligible for offset in the statement of financial position and/or subject to a master netting arrangement or similar agreement. ASU 2011-11 is effective for annual and interim periods beginning on January 1, 2013, and is not expected to have a significant impact on the Company’s consolidated financial statements.

- 15 -

(1)  Summary of Significant Accounting Policies (Continued)

Changes in Accounting Principles and Effects of New Accounting Pronouncements (Continued)

Recently Issued But Not Yet Effective Accounting Standards (Continued)

ASU 2011-12 “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.”  ASU 2011-12 defers changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments to allow the FASB time to redeliberate whether to require presentation of such adjustments on the face of the financial statements to show the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. ASU 2011-12 allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU No. 2011-05.  All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12.  ASU 2011-12 is effective for annual and interim periods beginning after December 15, 2011 and is not expected to have a significant impact on the Company’s consolidated financial statements.

(2)  Cash and Balances Due from Banks

Components of cash and balances due from banks are as follows as of December 31:

	2011		2010
Cash on Hand and Cash Items	$	9,271,705	$	8,897,618
Noninterest-Bearing Deposits with Other Banks		19,108,663		7,715,569
	$	28,380,368	$	16,613,187

The Company is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank based on a percentage of deposits.  Reserve balances totaled approximately $4,183,000 and $916,000 at December 31, 2011 and 2010, respectively.

(3)  Investment Securities

Investment securities as of December 31, 2011 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
U.S. Government Agencies  Mortgage-Backed	$	291,096,606	$	3,152,095	$	(187,902	)	$	294,060,799
State, County and Municipal		7,474,500		132,226		(23,035	)		7,583,691
Corporate Obligations		2,000,000		123,930		(10,000	)		2,113,930
Asset-Backed Securities		426,191		-		(293,764	)		132,427
	$	300,997,297	$	3,408,251	$	(514,701	)	$	303,890,847
Securities Held to Maturity
State, County and Municipal	$	46,111	$	-	$	(476	)	$	45,635

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(3)  Investment Securities (Continued)

The amortized cost and fair value of investment securities as of December 31, 2011, by contractual maturity, are shown hereafter.  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 After One Year Through Five Years	$	2,684,705	$	2,830,842	$	46,111	$	45,635
Due After Five Years Through Ten Years		4,473,468		4,550,705		-		-
Due After Ten Years		2,742,518		2,448,501		-		-
		9,900,691		9,830,048		46,111		45,635
Mortgage-Backed Securities		291,096,606		294,060,799		-		-
	$	300,997,297	$	303,890,847	$	46,111	$	45,635

Investment securities as of December 31, 2010 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
U.S. Government Agencies  Mortgage-Backed	$	299,018,595	$	1,763,198	$	(2,319,337	)	$	298,462,456
State, County and Municipal		3,248,533		34,391		(26,691	)		3,256,233
Corporate Obligations		2,000,000		101,920		(115,430	)		1,986,490
Asset-Backed Securities		479,249		-		(346,822	)		132,427
	$	304,746,377	$	1,899,509	$	(2,808,280	)	$	303,837,606
Securities Held to Maturity
State, County and Municipal	$	48,412	$	4,529	$	-		$	52,941

Proceeds from sales of investments available for sale were $342,672,937 in 2011, $286,387,727 in 2010 and $368,575,701 in 2009.  Gross realized gains totaled $2,978,193 in 2011, $2,617,062 in 2010 and $3,204,669 in 2009.  Gross realized losses totaled $54,592 in 2011, $0 in 2010 and $578,802 in 2009.

Nonaccrual securities are securities for which principal and interest are doubtful of collection in accordance with original terms and for which accruals of interest have been discontinued due to payment delinquency.  Fair value of securities on nonaccrual status totaled $132,000 as of December 31, 2011 and 2010.

Investment securities having a carrying value totaling $136,838,456 and $123,789,118 as of             December 31, 2011 and 2010, respectively, were pledged to secure public deposits and for other purposes.

- 17 -

(3)  Investment Securities (Continued)

Information pertaining to securities with gross unrealized losses at December 31, 2011 and 2010 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
December 31, 2011
U.S. Government Agencies Mortgage-Backed	$	26,439,317	$	(187,902	)	$	-	$	-		$	26,439,317	$	(187,902	)
State, County and Municipal		1,224,119		(21,704	)		73,193		(1,807	)		1,297,312		(23,511	)
Corporate Obligations		-		-			990,000		(10,000	)		990,000		(10,000	)
Asset-Backed Securities		-		-			132,427		(293,764	)		132,427		(293,764	)
	$	27,663,436	$	(209,606	)	$	1,195,620	$	(305,571	)	$	28,859,056	$	(515,177	)
December 31, 2010
U.S. Government Agencies Mortgage-Backed	$	152,286,738	$	(2,319,337	)	$	-	$	-		$	152,286,738	$	(2,319,337	)
State, County and Municipal		1,776,763		(26,691	)		-		-			1,776,763		(26,691	)
Corporate Obligations		-		-			884,570		(115,430	)		884,570		(115,430	)
Asset-Backed Securities		-		-			132,427		(346,822	)		132,427		(346,822	)
	$	154,063,501	$	(2,346,028	)	$	1,016,997	$	(462,252	)	$	155,080,498	$	(2,808,280	)

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

At December 31, 2011, the debt securities with unrealized losses have depreciated 1.75 percent from the Company’s amortized cost basis. These securities are guaranteed by either the U.S. Government, other governments or U.S. corporations, except for asset-backed securities.  In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition.  The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased.  As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other than temporary.  However, the Company did own one asset-backed security at December 31, 2011 which has been in a continuous unrealized loss position for more than 12 months.  This investment is comprised of one issuance of a trust preferred security, has a book value of $426,191 and an unrealized loss of $293,764.  Management evaluates this investment on a quarterly basis utilizing a third-party valuation model.  The results of this model revealed other-than-temporary impairment and as a result, $53,058 and $520,751 were written off during the years ended December 31, 2011 and 2009, respectively.  The Company does not intend to sell this investment, nor does the Company consider it likely that it will be required to sell the investment prior to recovery of the remaining fair value.

- 18 -

(4)  Loans

The following table presents the composition of loans, segregated by class of loans, as of December 31:

	2011		2010
Commercial and Industrial
Commercial	$	48,986,102	$	53,220,341
Industrial		8,421,884		10,551,791
Real Estate
Commercial Construction		58,545,820		72,309,231
Residential Construction		3,530,502		4,373,011
Commercial		315,280,748		362,878,565
Residential		193,637,817		207,471,813
Farmland		48,225,406		52,778,389
Consumer and Other
Consumer		30,449,303		33,563,863
Other		9,243,739		16,103,669
Total Loans	$	716,321,321	$	813,250,673

Commercial and industrial loans are extended to a diverse group of businesses within the Company’s market area.  These loans are often underwritten based on the borrower’s ability to service the debt from income from the business.  Real estate construction loans often require loan funds to be advanced prior to completion of the project.  Due to uncertainties inherent in estimating construction costs, changes in interest rates and other economic conditions, these loans often pose a higher risk than other types of loans.  Consumer loans are originated at the bank level.  These loans are generally smaller loan amounts spread across many individual borrowers to help minimize risk.

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

The Company uses a risk grading matrix to assign a risk grade to each of its loans.  Loans are graded on a scale of 1 to 8.  A description of the general characteristics of the grades is as follows:

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

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

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(4)  Loans (Continued)

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

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

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

The following table presents the loan portfolio by credit quality indicator (risk grade) as of December 31. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes.

December 31, 2011	Pass		Special Mention		Substandard		Total Loans
Commercial and Industrial
Commercial	$	42,586,230	$	1,480,726	$	4,919,146	$	48,986,102
Industrial		8,153,224		-		268,660		8,421,884
Real Estate
Commercial Construction		28,745,596		2,814,113		26,986,111		58,545,820
Residential Construction		3,227,392		303,110		-		3,530,502
Commercial		272,062,206		14,789,290		28,429,252		315,280,748
Residential		175,099,480		8,343,336		10,195,001		193,637,817
Farmland		43,664,126		1,413,476		3,147,804		48,225,406
Consumer and Other
Consumer		29,372,493		361,714		715,096		30,449,303
Other		9,028,428		99,418		115,893		9,243,739
Total Loans	$	611,939,175	$	29,605,183	$	74,776,963	$	716,321,321

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(4)  Loans (Continued)

December 31, 2010	Pass		Special Mention		Substandard		Total Loans
Commercial and Industrial
Commercial	$	48,731,982	$	2,498,305	$	1,990,054	$	53,220,341
Industrial		10,059,081		169,381		323,329		10,551,791
Real Estate
Commercial Construction		33,522,709		10,064,271		28,722,251		72,309,231
Residential Construction		3,974,130		204,000		194,881		4,373,011
Commercial		294,186,347		11,847,051		56,845,167		362,878,565
Residential		183,518,173		9,195,410		14,758,230		207,471,813
Farmland		49,499,619		1,838,814		1,439,956		52,778,389
Consumer and Other
Consumer		32,046,108		726,933		790,822		33,563,863
Other		14,553,167		1,185,260		365,242		16,103,669
Total Loans	$	670,091,316	$	37,729,425	$	105,429,932	$	813,250,673

A loan’s risk grade is assigned at the inception of the loan and is based on the financial strength of the borrower and the type of collateral.  Loan risk grades are subject to reassessment at various times throughout the year as part of the Company’s ongoing loan review process.  Loans with an assigned risk grade of 6 or below and an outstanding balance of $50,000 or more are reassessed on a quarterly basis.  During this reassessment process individual reserves may be identified and placed against certain loans which are not considered impaired.

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

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.  Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past due or when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provision.  Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.  Nonaccrual loans totaled $38,821,632 and $28,901,974 as of December 31, 2011 and 2010, respectively, and total recorded investment in loans past due 90 days or more and still accruing interest totaled $15,160 and $19,188, respectively.  During its review of impaired loans, the Company determined the majority of its exposures on these loans were known losses.  As a result, the exposures were charged off, reducing the specific allowances on impaired loans.

- 21 -

(4)  Loans (Continued)

The following table represents an age analysis of past due loans and nonaccrual loans, segregated by class of loans, as of December 31:

	Accruing Loans
2011	30-89 Days Past Due		90 Days  or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
Commercial and Industrial
Commercial	$	644,899	$	-	$	644,899	$	2,102,522	$	46,238,681	$	48,986,102
Industrial		-		-		-		85,670		8,336,214		8,421,884
Real Estate
Commercial Construction		513,905		-		513,905		23,578,263		34,453,652		58,545,820
Residential Construction		33,541		-		33,541		-		3,496,961		3,530,502
Commercial		2,930,743		-		2,930,743		9,193,650		303,156,355		315,280,748
Residential		2,251,009		15,160		2,266,169		3,110,032		188,261,616		193,637,817
Farmland		376,426		-		376,426		486,683		47,362,297		48,225,406
Consumer and Other
Consumer		410,041		-		410,041		221,360		29,817,902		30,449,303
Other		-		-		-		43,452		9,200,287		9,243,739
Total Loans	$	7,160,564	$	15,160	$	7,175,724	$	38,821,632	$	670,323,965	$	716,321,321
2010
Commercial and Industrial
Commercial	$	382,728	$	-	$	382,728	$	393,823	$	52,443,790	$	53,220,341
Industrial		100,810		-		100,810		175,062		10,275,919		10,551,791
Real Estate
Commercial Construction		1,514,127		-		1,514,127		10,181,795		60,613,309		72,309,231
Residential Construction		194,881		-		194,881		-		4,178,130		4,373,011
Commercial		11,790,383		-		11,790,383		13,567,530		337,520,652		362,878,565
Residential		4,268,098		15,876		4,283,974		3,057,049		200,130,790		207,471,813
Farmland		566,868		-		566,868		1,157,528		51,053,993		52,778,389
Consumer and Other
Consumer		702,795		3,312		706,107		290,115		32,567,641		33,563,863
Other		218,887		-		218,887		79,072		15,805,710		16,103,669
Total Loans	$	19,739,577	$	19,188	$	19,758,765	$	28,901,974	$	764,589,934	$	813,250,673

- 22 -

(4)  Loans (Continued)

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $1,639,800, $1,621,700 and $2,318,100 for the years ended December 31, 2011, 2010 and 2009, respectively.

During the first quarter, as a result of recently issued guidance regarding troubled debt restructurings, the Company reviewed its policy for designating loans as impaired.  As a result of this review, the Company identified additional loans which are now included in the impaired loan disclosures that were not previously reported as impaired.  The loans identified were those troubled debt restructurings which were on accrual status.  The inclusion of these accruing troubled debt restructurings in the impaired loan disclosures for December 31, 2011 did not have an impact on the allowance for loan losses.

The following table details impaired loan data as of December 31, 2011:

	Unpaid Contractual Principal Balance		Impaired Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized			Interest Income Collected
With No Related Allowance Recorded
Commercial	$	1,742,961	$	1,580,140	$	-	$	946,466	$	60,078		$	65,346
Agricultural		85,670		85,670		-		208,162		(4,024	)		-
Commercial Construction		17,699,542		12,799,454		-		13,309,517		116,077			143,443
Commercial Real Estate		34,686,574		29,384,623		-		27,027,403		832,590			834,161
Residential Real Estate		2,600,919		1,933,669		-		3,176,244		88,419			80,334
Farmland		277,656		227,233		-		342,280		66,273			66,273
Consumer		228,688		215,956		-		184,372		10,732			12,203
Other		51,666		43,452		-		39,621		1,107			1,606
		57,373,676		46,270,197		-		45,234,065		1,171,252			1,203,366
With An Allowance Recorded
Commercial		775,506		775,506		308,211		213,898		15,086			19,171
Agricultural		-		-		-		-		-			-
Commercial Construction		14,035,742		11,489,233		2,693,571		10,470,491		13,759			61,012
Commercial Real Estate		6,429,874		6,429,874		2,060,815		6,556,769		181,799			197,132
Residential Real Estate		4,771,867		4,041,950		674,998		3,858,609		97,383			96,534
Farmland		298,893		259,450		11,878		64,862		(17,958	)		-
Consumer		5,404		5,404		1,632		3,987		607			724
Other		-		-		-		19,566		-			-
		26,317,286		23,001,417		5,751,105		21,188,182		290,676			374,573
Total
Commercial		2,518,467		2,355,646		308,211		1,160,364		75,164			84,517
Agricultural		85,670		85,670		-		208,162		(4,024	)		-
Commercial Construction		31,735,284		24,288,687		2,693,571		23,780,008		129,836			204,455
Commercial Real Estate		41,116,448		35,814,497		2,060,815		33,584,172		1,014,389			1,031,293
Residential Real Estate		7,372,786		5,975,619		674,998		7,034,853		185,802			176,868
Farmland		576,549		486,683		11,878		407,142		48,315			66,273
Consumer		234,092		221,360		1,632		188,359		11,339			12,927
Other		51,666		43,452		-		59,187		1,107			1,606
	$	83,690,962	$	69,271,614	$	5,751,105	$	66,422,247	$	1,461,928		$	1,577,939

- 23 -

(4)  Loans (Continued)

The following table details impaired loan data as of December 31, 2010:

	Impaired Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized			Interest Income Collected
With No Related Allowance Recorded
Commercial	$	258,676	$	-	$	308,508	$	(987	)	$	5,465
Agricultural		175,062		-		220,716		689			689
Commercial Construction		10,181,795		-		11,760,840		7,320			31,963
Residential Construction		-		-		8,248		-			-
Commercial Real Estate		4,270,905		-		9,041,753		80,585			85,448
Residential Real Estate		3,057,049		-		3,931,449		41,420			53,813
Farmland		1,157,528		-		645,619		(6,571	)		10,969
Consumer		290,115		-		296,301		17,166			19,342
Other		79,072		-		129,249		4,550			7,760
		19,470,202		-		26,342,683		144,172			215,449
With An Allowance Recorded
Commercial		135,146		116,159		33,787		(1,125	)		3,316
Commercial Real Estate		9,296,626		539,671		2,324,156		341,937			475,999
		9,431,772		655,830		2,357,943		340,812			479,315
Total
Commercial		393,822		116,159		342,295		(2,112	)		8,781
Agricultural		175,062		-		220,716		689			689
Commercial Construction		10,181,795		-		11,760,840		7,320			31,963
Residential Construction		-		-		8,248		-			-
Commercial Real Estate		13,567,531		539,671		11,365,909		422,522			561,447
Residential Real Estate		3,057,049		-		3,931,449		41,420			53,813
Farmland		1,157,528		-		645,619		(6,571	)		10,969
Consumer		290,115		-		296,301		17,166			19,342
Other		79,072		-		129,249		4,550			7,760
	$	28,901,974	$	655,830	$	28,700,626	$	484,984		$	694,764

- 24 -

(4)  Loans (Continued)

Troubled Debt Restructurings (TDRs) are troubled loans on which the original terms of the loan have been modified in favor of the borrower due to deterioration in the borrower’s financial condition.  Each potential loan modification is reviewed individually and the terms of the loan are modified to meet the borrower’s specific circumstances at a point in time.  Not all loan modifications are TDRs.  Loan modifications are reviewed and approved by the Company’s senior lending staff, who then determine whether the loan meets the criteria for a TDR.  Generally, the types of concessions granted to borrowers that are evaluated in determining whether a loan is classified as a TDR include:

· Interest rate reductions - Occur when the stated interest rate is reduced to a nonmarket rate or a rate the borrower would not be able to obtain elsewhere under similar circumstances.

· Amortization or maturity date changes - Result when the amortization period of the loan is extended beyond what is considered a normal amortization period for loans of similar type with similar collateral.

· Principal reductions - These are often the result of commercial real estate loan workouts where two new notes are created.  The primary note is underwritten based upon our normal underwriting standards and is structured so that the projected cash flows are sufficient to repay the contractual principal and interest of the newly restructured note.  The terms of the secondary note vary by situation and often involve that note being charged-off, or the principal and interest payments being deferred until after the primary note has been repaid.  In situations where a portion of the note is charged-off during modification there is often no specific reserve allocated to those loans.  This is due to the fact that the amount of the charge-off usually represents the excess of the original loan balance over the collateral value and the Company has determined there is no additional exposure on those loans.

As discussed in Note 1, Summary of Significant Accounting Policies, once a loan is identified as a TDR, it is accounted for as an impaired loan.  The Company had no unfunded commitments to lend to a customer that has a troubled debt restructured loan as of December 31, 2011.  The following tables present the number of loan contracts restructured during the 12 months ended December 31, 2011 and the pre- and post-modification recorded investment as well as the number of contracts and the recorded investment for those TDRs modified during the previous 12 months which subsequently defaulted during the period.  Loans modified in a troubled debt restructuring are considered to be in default once the loan becomes 90 days past due.

Troubled Debt Restructurings	# of Contracts		Pre-Modification		Post-Modification
Commercial		3	$	3,240,469	$	1,541,882
Commercial Construction		3		1,430,147		1,430,101
Commercial RE		9		20,827,349		15,906,547
Residential RE		8		1,505,356		1,456,878
Total Loans		23	$	27,003,321	$	20,335,408

Troubled Debt Restructurings That Subsequently Defaulted	# of Contracts		Recorded Investment
Commercial		1	$	1,175,922
Commercial Construction		3		4,475,473
Commercial RE		3		2,322,361
Total Loans		7	$	7,973,756

- 25 -

(5)  Allowance for Loan Losses

Changes in the allowance for loan losses for the years ended December 31 are as follows:

	December 31
	2011			2010			2009
Balance, Beginning of Year	$	28,280,077		$	31,400,641		$	17,015,883
Provision for Loan Losses		8,250,000			13,350,000			43,445,000
Loans Charged Off		(22,850,673	)		(17,622,454	)		(29,493,324	)
Recoveries of Loans Previously Charged Off		1,970,190			1,151,890			433,082
Balance, End of Year	$	15,649,594		$	28,280,077		$	31,400,641

The following table details activity in the allowance for loan losses, segregated by class of loan, for the year ended December 31, 2011.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

2011	Beginning Balance		Charge-Offs			Recoveries		Provision			Ending Balance
Commercial and Industrial
Commercial	$	4,414,817	$	(841,887	)	$	127,490	$	(2,629,860	)	$	1,070,560
Industrial		698,637		(455,165	)		454,453		(400,757	)		297,168
Real Estate
Commercial Construction		4,126,043		(6,957,181	)		557,168		5,396,564			3,122,594
Residential Construction		519,766		(481	)		-		(381,193	)		138,092
Commercial		8,029,525		(12,492,097	)		527,996		10,382,640			6,448,064
Residential		5,941,696		(1,704,887	)		149,173		(690,625	)		3,695,357
Farmland		944,323		(60,447	)		411		(519,624	)		364,663
Consumer and Other
Consumer		3,074,220		(222,878	)		145,279		(2,791,467	)		205,154
Other		531,050		(115,650	)		8,220		(115,678	)		307,942
	$	28,280,077	$	(22,850,673	)	$	1,970,190	$	8,250,000		$	15,649,594

- 26 -

(5)  Allowance for Loan Losses (Continued)

The following table details activity in the allowance for loan losses, segregated by class of loan, for the year ended December 31, 2010.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

2010	Beginning Balance		Charge-Offs			Recoveries		Provision		Ending Balance
Commercial and Industrial
Commercial	$	3,930,760	$	(469,214	)	$	80,181	$	873,090	$	4,414,817
Industrial		779,337		(255,627	)		1,377		173,550		698,637
Real Estate
Commercial Construction		7,402,484		(4,648,124	)		184,868		1,186,815		4,126,043
Residential Construction		447,676		-			-		72,090		519,766
Commercial		8,790,443		(7,459,619	)		141,931		6,556,770		8,029,525
Residential		5,025,839		(2,929,668	)		439,940		3,405,585		5,941,696
Farmland		942,019		(271,750	)		7,639		266,415		944,323
Consumer and Other
Consumer		2,826,058		(548,834	)		245,641		551,355		3,074,220
Other		1,256,025		(1,039,618	)		50,313		264,330		531,050
	$	31,400,641	$	(17,622,454	)	$	1,151,890	$	13,350,000	$	28,280,077

The Company determines its individual loan reserves during its quarterly review of substandard loans.  This process involves reviewing all loans with a risk grade of 6 or below and an outstanding balance of $50,000 or more.  At December 31, 2011 and 2010, impaired loans totaling $995,168 and $976,971 were below the $50,000 review threshold and were not individually reviewed for impairment.  Those loans were subject to the bank’s general loan loss reserve methodology and are included in the “Collectively Evaluated for Impairment” column of the following tables.  Since not all loans in the substandard category are considered impaired, this quarterly assessment often results in the identification of individual reserves which are placed against certain loans as part of management’s allowance for loan loss calculation.  The total of these loans and the related reserves are presented in the column titled “Substandard Loans Individually Reviewed for Impairment” in the following tables.  The following tables present breakdowns of the allowance for loan losses, segregated by impairment methodology for December 31, 2011 and 2010:

- 27 -

(5)  Allowance for Loan Losses (Continued)

					Ending Allowance Balance
2011	Nonaccrual/TDR Individually Evaluated for Impairment		Substandard Individually Evaluated for Impairment		Total Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial and Industrial
Commercial	$	308,211	$	590,543	$	898,754	$	171,806	$	1,070,560
Industrial		-		-		-		297,168		297,168
Real Estate
Commercial Construction		2,693,571		190,800		2,884,371		238,223		3,122,594
Residential Construction		-		-		-		138,092		138,092
Commercial		2,060,815		347,260		2,408,075		4,039,989		6,448,064
Residential		674,998		764,835		1,439,833		2,255,524		3,695,357
Farmland		11,878		-		11,878		352,785		364,663
Consumer and Other
Consumer		1,632		33,000		34,632		170,522		205,154
Other		-		-		-		307,942		307,942
Total End of Period Allowance Balance	$	5,751,105	$	1,926,438	$	7,677,543	$	7,972,051	$	15,649,594

					Ending Loan Balance
2011	Nonaccrual/TDR Individually Evaluated for Impairment		Substandard Individually Evaluated for Impairment		Total Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial and Industrial
Commercial	$	2,237,878	$	2,300,231	$	4,538,109	$	44,447,993	$	48,986,102
Industrial		-		164,090		164,090		8,257,794		8,421,884
Real Estate
Commercial Construction		24,212,519		2,560,484		26,773,003		31,772,817		58,545,820
Residential Construction		-		-		-		3,530,502		3,530,502
Commercial		35,715,026		4,629,461		40,344,487		274,936,261		315,280,748
Residential		5,614,744		4,441,958		10,056,702		183,581,115		193,637,817
Farmland		486,683		2,589,640		3,076,323		45,149,083		48,225,406
Consumer and Other
Consumer		9,596		38,354		47,950		30,401,353		30,449,303
Other		-		22,166		22,166		9,221,573		9,243,739
Total End of Period Loan Balance	$	68,276,446	$	16,746,384	$	85,022,830	$	631,298,491	$	716,321,321

- 28 -

(5)  Allowance for Loan Losses (Continued)

The presentation of loans individually reviewed for impairment is consolidated into one column for the year ended December 31, 2010.

	Ending Allowance Balance
2010	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial and Industrial
Commercial	$	336,011	$	4,078,806	$	4,414,817
Industrial		-		698,637		698,637
Real Estate
Commercial Construction		3,501,117		624,926		4,126,043
Residential Construction		-		519,766		519,766
Commercial		7,539,533		489,992		8,029,525
Residential		1,561,952		4,379,744		5,941,696
Farmland		-		944,323		944,323
Consumer and Other
Consumer		3,033		3,071,187		3,074,220
Other		-		531,050		531,050
Total End of Period Allowance Balance	$	12,941,646	$	15,338,431	$	28,280,077

	Ending Loan Balance
2010	Individually Reviewed for Impairment		Collectively Reviewed for Impairment		Total
Commercial and Industrial
Commercial	$	2,131,375	$	51,088,966	$	53,220,341
Industrial		274,679		10,277,112		10,551,791
Real Estate
Commercial Construction		28,392,107		43,917,124		72,309,231
Residential Construction		194,881		4,178,130		4,373,011
Commercial		58,562,946		304,315,619		362,878,565
Residential		13,645,907		193,825,906		207,471,813
Farmland		1,416,538		51,361,851		52,778,389
Consumer and Other
Consumer		76,420		33,487,443		33,563,863
Other		113,002		15,990,667		16,103,669
	$	104,807,855	$	708,442,818	$	813,250,673

- 29 -

(6)  Premises and Equipment

Premises and equipment are comprised of the following as of December 31:

	2011			2010
Land	$	7,780,167		$	7,787,667
Building		23,662,849			23,790,525
Furniture, Fixtures and Equipment		12,982,160			13,737,177
Leasehold Improvements		994,637			993,086
Construction in Progress		77,366			-
		45,497,179			46,308,455
Accumulated Depreciation		(19,746,944	)		(19,160,730	)
	$	25,750,235		$	27,147,725

Depreciation charged to operations totaled $1,790,041 in 2011, $2,140,735 in 2010 and $2,092,845 in 2009.

Certain Company facilities and equipment are leased under various operating leases.  Rental expense approximated $376,000 for 2011, $377,000 for 2010 and $365,000 for 2009.

Future minimum rental payments as of December 31, 2011 are as follows:

Year Ending December 31	Amount
2012	$	126,033
2013		88,658
2014		10,139
	$	224,830

(7)  Other Real Estate Owned

The aggregate carrying amount of Other Real Estate Owned (OREO) at December 31, 2011 and 2010 was $20,445,805 and $20,207,806, respectively.  All of the Company’s other real estate owned represents properties acquired through foreclosure or deed in lieu of foreclosure.  The following table details the change in OREO during 2011 and 2010.

	December 31
	2011			2010
Balance, Beginning of Year	$	20,207,806		$	19,705,044
Additions		12,555,622			13,159,402
Sales of OREO		(9,804,669	)		(9,531,210	)
Loss on Sale		(1,102,613	)		(1,832,256	)
Provision for Losses		(1,411,061	)		(1,293,174	)
Balance, End of Year	$	20,445,085		$	20,207,806

- 30 -

(8)  Intangible Assets

The following is an analysis of the core deposit intangible activity for the years ended December 31:

	Core Deposit Intangible		Accumulated Amortization			Net Core Deposit Intangible
Core Deposit Intangible
Balance, December 31, 2009	$	1,056,693	$	(725,937	)	$	330,756
Amortization Expense		-		(35,749	)		(35,749	)
Balance, December 31, 2010		1,056,693		(761,686	)	$	295,007
Amortization Expense		-		(35,749	)		(35,749	)
Balance, December 31, 2011	$	1,056,693	$	(797,435	)	$	259,258

Amortization expense related to the core deposit intangible was $35,749 for the years ended       December 31, 2011, 2010 and 2009.  Amortizations expense will continue at an annual rate of approximately $35,750 through the first quarter of 2019, at which point the core deposit will be fully amortized.

(9)  Income Taxes

The components of income tax expense for the years ended December 31 are as follows:

	2011			2010			2009
Current Federal (Benefit) Expense	$	311,174		$	(1,037,717	)	$	(4,075,442	)
Deferred Federal (Benefit) Expense		867,006			639,607			(5,869,055	)
Federal Income Tax (Benefit) Expense		1,178,180			(398,110	)		(9,944,497	)
Current State Income Tax (Benefit) Expense		(74,297	)		(61,104	)		(50,384	)
	$	1,103,883		$	(459,214	)	$	(9,994,881	)

The federal income tax (benefit) expense of $1,178,180 in 2011, $(398,110) in 2010 and $(9,944,497) in 2009 is different than the income taxes computed by applying the federal statutory rates to income before income taxes.  The reasons for the differences are as follows:

	2011			2010			2009
Statutory Federal Income Taxes	$	1,228,538		$	5,101		$	(9,920,776	)
Tax-Exempt Interest		(126,468	)		(117,586	)		(185,775	)
Interest Expense Disallowance		8,751			8,400			16,729
Premiums on Officers’ Life Insurance		(52,431	)		(134,106	)		(58,906	)
Meal and Entertainment Disallowance		20,693			24,972			32,068
Goodwill		-			-			58,507
Other		99,097			(184,891	)		113,656
Actual Federal Income Taxes	$	1,178,180		$	(398,110	)	$	(9,944,497	)

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(9)  Income Taxes (Continued)

Deferred taxes in the accompanying consolidated balance sheets as of December 31 include the following:

	2011			2010
Deferred Tax Assets
Allowance for Loan Losses	$	5,320,862		$	9,615,226
Other Real Estate		1,012,326			511,839
Deferred Compensation		386,225			423,233
Restricted Stock		508,547			504,772
Goodwill		392,124			439,100
Net Operating Loss Carryforward		2,992,777
Other		559,836			470,435
		11,172,697			11,964,605
Deferred Tax Liabilities
Premises and Equipment		(1,195,334	)		(1,184,064	)
Vested Restricted Stock		(476,540	)		(412,715	)
Other		(4,185	)		(4,185	)
		(1,676,059	)		(1,600,964	)
Deferred Tax Assets (Liabilities) on Unrealized Securities Gains (Losses)		(983,807	)		308,982
Net Deferred Tax Assets	$	8,512,831		$	10,672,623

As discussed in Note 1, certain positions taken in the Company’s tax returns may be subject to challenge by the taxing authorities.  An analysis of activity related to unrecognized taxes follows as of        December 31, 2011 and 2010.

	2011			2010
Balance, Beginning	$	78,121		$	221,584
Positions Taken During the Current Year		14,275			17,259
Reductions Resulting from Lapse of Statutes of Limitation		(59,028	)		(160,722	)
Balance, Ending	$	33,368		$	78,121

The net reduction of $44,753 and $143,463 is included in income tax benefits for the years ended December 31, 2011 and 2010, respectively.

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(10) Fair Value Measurements

Generally accepted accounting principles related to Fair Value Measurements define fair value, establish a framework for measuring fair value, establish a three-level valuation hierarchy for disclosure of fair value measurement and enhance disclosure requirements for fair value measurements.  The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.  The three levels are defined as follows:

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

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

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

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

Assets

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

Impaired loans -Fair value accounting principles also apply to loans measured for impairment, including impaired loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent).  Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation which is then adjusted for the cost related to liquidation of the collateral.  When the fair value of collateral is based on an observable market price or a current appraisal value, the Company records the impaired loan as nonrecurring level 2.  When a current appraisal value is not available or management determines the value, the Company records the impaired loan as nonrecurring level 3.

Other Real Estate - Certain foreclosed assets, upon initial recognition, are remeasured and reported at fair value less cost to sale through a charge-off to the allowance for loan losses based on the fair value of the foreclosed asset.  The fair value of a foreclosed asset is estimated using level 2 inputs based on observable market price or current appraised value.  When appraised value is not available and management determines the fair value, the fair value of the foreclosed assets is considered level 3.

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(10) Fair Value Measurements (Continued)

Assets (Continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis -The following table presents the recorded amount of the Company’s assets measured at fair value on a recurring and nonrecurring basis as of December 31, 2011 and 2010, aggregated by the level in the fair value hierarchy within which those measurements fall.

			Fair Value Measurements at Reporting Date Using
2011	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring
Securities Available for Sale
U.S. Government Agencies Mortgage-Backed	$	294,060,799	$	-	$	294,060,799	$	-
State, County and Municipal		7,583,691		-		7,583,691		-
Corporate Obligations		2,113,930		-		1,123,930		990,000
Asset-Backed Securities		132,427		-		-		132,427
	$	303,890,847	$	-	$	302,768,420	$	1,122,427
Nonrecurring
Impaired Loans	$	63,520,509	$	-	$	34,935,324	$	28,585,185
Other Real Estate	$	20,445,085	$	-	$	6,170,534	$	14,274,551
2010
Recurring
Securities Available for Sale
U.S. Government Agencies Mortgage-Backed	$	298,462,456	$	-	$	298,462,456	$	-
State, County and Municipal		3,256,233		-		3,256,233		-
Corporate Obligations		1,986,490		-		1,101,920		884,570
Asset-Backed Securities		132,427		-		-		132,427
	$	303,837,606	$	-	$	302,820,609	$	1,016,997
Nonrecurring
Impaired Loans	$	28,246,144	$	-	$	-	$	28,246,144
Other Real Estate	$	20,207,806	$	-	$	20,207,806	$	-

Liabilities

The Company did not identify any liabilities that are required to be presented at fair value.

The following table presents a reconciliation and statement of income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (level 3) for the years ended December 31, 2011 and 2010.

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(10) Fair Value Measurements (Continued)

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

	Available for Sale Securities
	2011			2010		2009
Balance, Beginning	$	1,016,997		$	982,427	$	1,426,220
Total Realized/Unrealized Gains (Losses) Included In Loss on OTTI Impairment		(53,058	)		-		(520,751	)
Other Comprehensive Income		158,488			34,570		76,958
Balance, Ending	$	1,122,427		$	1,016,997	$	982,427

(11) Deposits

The aggregate amount of overdrawn deposit accounts reclassified as loan balances totaled $147,398 and $250,200 as of December 31, 2011 and 2010, respectively.

Components of interest-bearing deposits as of December 31 are as follows:

	2011		2010
Interest-Bearing Demand	$	284,870,972	$	235,855,037
Savings		41,230,662		36,629,698
Time, $100,000 and Over		247,589,188		298,009,596
Other Time		332,025,539		385,670,250
	$	905,716,361	$	956,164,581

At December 31, 2011 and 2010, the Company had brokered deposits of $28,157,961 and $36,328,659, respectively.  Of the brokered deposits at December 31, 2011 and 2010, $28,157,961 and $31,128,659 represented Certificate of Deposits Account Registry Service (CDARS) reciprocal deposits in which customers placed core deposits into the CDARS program for FDIC insurance coverage and the Company received reciprocal brokered deposits in a like amount.  Thus, brokered deposits less the reciprocal deposits totaled $0 and $5,200,000 at December 31, 2011 and 2010, respectively.  The aggregate amount of short-term jumbo certificates of deposit, each with a minimum denomination of $100,000, was approximately $190,876,500 and $216,656,200 as of   December 31, 2011 and 2010, respectively.

As of December 31, 2011, the scheduled maturities of certificates of deposit are as follows:

Year	Amount
2012	$	428,602,577
2013		117,066,000
2014		20,552,850
2015		8,382,521
2016 and Thereafter		5,010,779
	$	579,614,727

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(12) Securities Sold Under Agreements to Repurchase

On December 31, 2010, the Company had $20,000,000 outstanding in securities sold under an agreement to repurchase.  Interest payments were due quarterly at a fixed rate of 3.34 percent.  The repurchase agreement was secured with U.S. Government mortgage-backed securities.  The repurchase agreement matured on June 30, 2011.  At December 31, 2011, the Company had an available repurchase agreement line of credit with a third party totaling $50,000,000.  Use of this credit facility is subject to the underwriting and risk management policies of the third-party in effect at the time of the request.  Such policies may take into consideration current market conditions, the current financial condition of the Company and the ability of the Company to provide adequate securities as collateral for the transaction, among other factors.

(13) Other Borrowed Money

Other borrowed money at December 31 is summarized as follows:

	2011		2010
Federal Home Loan Bank Advances	$	71,000,000	$	71,000,000
Other Secured Borrowing		-		4,076,010
	$	71,000,000	$	75,076,010

Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from 2012 to 2019 and interest rates ranging from 3.17 percent to 4.75 percent.  As collateral on the outstanding FHLB advances, the Company has provided a blanket lien on its portfolio of qualifying residential first mortgage loans and commercial loans.  In addition, the Company has pledged certain available-for-sale investment securities with carrying values at December 31, 2011 of approximately $36,047,000 as additional collateral, as well as cash balances held on deposit with the FHLB.  At December 31, 2011 the Company had remaining credit availability from the FHLB of approximately $100,440,000.  The Company may be required to pledge additional qualifying collateral in order to utilize the full amount of the remaining credit line.

Secured borrowings represent the transfer of the guaranteed portion of SBA loans at a premium in which the Company was obligated by the SBA to refund the premium to the “purchaser” if the loan was repaid within 90 days of the transfer.  Under current accounting standards, this premium refund obligation was a form of recourse, which means that the transferred guaranteed portion of the loan does not meet the definition of a “participating interest” for the 90-day period that the premium refund obligation existed.  As a result, the transfer was accounted for as a secured borrowing during this period.  Effective     February 15, 2011, all loans submitted for secondary market sales eliminated the warranty or the 90-day recourse period and the premium began to be recognized at the time of the sale.

The aggregate stated maturities of other borrowed money at December 31, 2011 are as follows:

Year	Amount
2012	$	41,000,000
2013		-
2014		-
2015		-
2016 and Thereafter		30,000,000
	$	71,000,000

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(13) Other Borrowed Money (Continued)

The Company also has available federal funds lines of credit with various financial institutions totaling $43,000,000, of which there were none outstanding at December 31, 2011.

In addition, the Company has the ability to borrow funds from the Federal Reserve Bank (FRB) of Atlanta utilizing the discount window.  The discount window is an instrument of monetary policy that allows eligible institutions to borrow money from the FRB on a short-term basis to meet temporary liquidity shortages caused by internal or external disruptions.  At December 31, 2011, the Company had approximately $6.4 million of borrowing capacity available under this arrangement, with no outstanding balances.  Certain available-for-sale investment securities totaling approximately $6.5 million were pledged as collateral under this agreement.

(14) Subordinated Debentures (Trust Preferred Securities)

During the second quarter of 2004, the Company formed a third subsidiary whose sole purpose was to issue $4,500,000 in Trust Preferred Securities through a pool sponsored by FTN Financial Capital Markets.  The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions.  At December 31, 2011, the floating rate securities had a 3.24 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 2.68 percent.

During the second quarter of 2006, the Company formed a fourth subsidiary whose sole purpose was to issue $5,000,000 in Trust Preferred Securities in a private placement by SunTrust Bank Capital Markets.  The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions.  At December 31, 2011, the floating rate securities had a 2.08 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 1.50 percent.

During the first quarter of 2007, the Company formed a fifth subsidiary whose sole purpose was to issue $9,000,000 in Trust Preferred Securities through a pool sponsored by Trapeza Capital Management, LLC.  The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions.  At December 31, 2011, the floating rate securities had a 2.23 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 1.65 percent.  Proceeds from this issuance were used to pay off the Trust Preferred Securities with the first subsidiary formed in March 2002 as the Company exercised its option to call.

During the third quarter of 2007, the Company formed a sixth subsidiary whose sole purpose was to issue $5,000,000 in Trust Preferred Securities through a pool sponsored by Trapeza Capital Management, LLC.  The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions.  At December 31, 2011, the floating rate securities had a 1.83 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 1.40 percent.  Proceeds from this issuance were used to pay off the Trust Preferred Securities with the second subsidiary formed in December 2002 as the Company exercised its option to call.

The Trust Preferred Securities are recorded as a liability on the consolidated balance sheets, but, subject to certain limitations, qualify as Tier 1 capital for regulatory capital purposes.  The proceeds from the offerings were used to fund the cash portion of the Quitman acquisition, pay off holding Company debt, and inject capital into the bank subsidiary.

The total aggregate principal amount of trust preferred certificates outstanding at December 31, 2011 was $23,500,000.  The total aggregate principal amount of subordinated debentures outstanding at     December 31, 2011 was $24,229,000.

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(15) Preferred Stock

On January 9, 2009, the Company issued to the United States Department of the Treasury (Treasury), in exchange for aggregate consideration of $28.0 million, (1) 28,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, (the Preferred Stock), and (2) a warrant (the Warrant) to purchase up to 500,000 shares (the Warrant Common Stock) of the Company’s common stock.

The Preferred Stock qualifies as Tier 1 capital and pays cumulative cash dividends quarterly at a rate of 5 percent per annum for the first five years, and 9 percent per annum thereafter.  The Preferred Stock is nonvoting, other than class voting rights on certain matters that could adversely affect the Preferred Stock. The Preferred Stock may be redeemed by the Company on or after February 15, 2012 at the liquidation preference of $1,000 per share plus any accrued and unpaid dividends.  Prior to this date, the Preferred Stock may not be redeemed unless the Company has received aggregate gross proceeds from one or more qualified equity offerings of any Tier 1 perpetual preferred or common stock of the Company equal to $7.0 million.  Subject to certain limited exceptions, until January 9, 2012, or such earlier time as all Preferred Stock has been redeemed, the Company will not, without the Treasury’s consent, be able to increase its dividend rate per share of common stock or repurchase its common stock.

The Warrant may be exercised on or before January 9, 2019 at an exercise price of $8.40 per share.  The Treasury may not exercise voting power with respect to any shares of Warrant Common Stock until the Warrant has been exercised.

Upon receipt of the aggregate consideration from the Treasury on January 9, 2009, the Company allocated the $28,000,000 proceeds on a pro rata basis to the Preferred Stock and the Warrant based on relative fair values.  As a result, the Company allocated $27,220,000 of the aggregate proceeds to the Preferred Stock, and $780,000 was allocated to the Warrant.  The discount recorded on the Preferred Stock that resulted from allocating a portion of the proceeds to the Warrant is being accreted directly to retained earnings over a 5-year period applying a level yield.

(16) Restricted Stock - Unearned Compensation

In April 2004, the stockholders 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 (split-adjusted) is 143,500.  To date, 53,256 shares have been issued under this plan and 17,798 shares have been forfeited; thus, remaining shares which may be issued are 108,042 at December 31, 2011.   The shares are recorded at fair market value (on the date granted) as a separate component of stockholders’ equity. The cost of these shares is being amortized against earnings using the straight-line method over three years (the restriction period).

(17) 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 $0 for 2011 and 2010 and $(19,411) for 2009.

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(18) Commitments and Contingencies

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

The Company’s exposure to credit loss is represented by the contractual amount of these commitments.  The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.

At December 31, 2011 and 2010, the following financial instruments were outstanding whose contract amounts represent credit risk:

	Contract Amount
	2011		2010
Commitments to Extend Credit	$	39,966,000	$	39,457,000
Standby Letters of Credit		1,327,000		1,540,000

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

Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers.  These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

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

Legal Contingencies.  In the ordinary course of business, there are various legal proceedings pending against Colony and its Subsidiary.  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.

IRS Exam.  The Company’s federal and state income tax returns for tax years 2011, 2010, 2009 and 2008 are subject to examination by the Internal Revenue Service (IRS) and the Georgia Department of Revenue, generally for three years after filing.  During 2011, the IRS completed its review of the Company’s 2009 federal income tax return.  As a result of this exam, $390,152 of additional tax was paid during the year.

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(19) Deferred Compensation Plan

Colony Bank, the wholly-owned subsidiary, has deferred compensation plans covering certain former directors and certain officers choosing to participate through individual deferred compensation contracts.  In accordance with terms of the contracts, the Bank is committed to pay the participant’s deferred compensation over a specified number of years, beginning at age 65.  In the event of a participant’s death before age 65, payments are made to the participant’s named beneficiary over a specified number of years, beginning on the first day of the month following the death of the participant.

Liabilities accrued under the plans totaled $1,135,956 and $1,244,803 as of December 31, 2011 and 2010, respectively.  Benefit payments under the contracts were $196,501 in 2011 and $206,955 in 2010.  Provisions charged to operations totaled $98,901 in 2011, $154,553 in 2010 and $361,171 in 2009.

Fee income recognized with deferred compensation plans totaled $154,210 in 2011, $182,685 in 2010 and $173,253 in 2009.

(20) Supplemental Cash Flow Information

Cash payments for the following were made during the years ended December 31:

	2011		2010		2009
Interest Expense	$	17,204,476	$	21,975,968	$	27,537,602
Income Taxes	$	390,152	$	275,000	$	-

Noncash financing and investing activities for the years ended December 31 are as follows:

	2011			2010		2009
Acquisitions of Real Estate Through Loan Foreclosures	$	12,555,622		$	13,159,402	$	19,258,910
Unrealized (Gain) Loss on Investment Securities	$	(3,802,320	)	$	757,545	$	721,116

(21) Related Party Transactions

The aggregate balance of direct and indirect loans to directors, executive officers or principal holders of equity securities of the Company was $5,504,230 as of December 31, 2011 and $9,797,492 as of December 31, 2010. All such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than a normal risk of collectibility.  A summary of activity of related party loans is shown below:

	2011			2010
Balance, Beginning	$	9,797,492		$	6,473,238
New Loans		15,455,299			12,533,229
Repayments		(17,871,362	)		(9,208,975	)
Transactions Due to Changes in Directors		(1,877,199	)		-
Balance, Ending	$	5,504,230		$	9,797,492

- 40 -

(22) Fair Value of Financial Instruments

Generally accepted accounting standards in the U.S. require disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value.  The assumptions used in the estimation of the fair value of Colony Bankcorp, Inc. and Subsidiary’s financial instruments are detailed hereafter.  Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques.  The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.  The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.

Cash and Short-Term Investments - For cash, due from banks, bank-owned deposits and federal funds sold, the carrying amount is a reasonable estimate of fair value.

Investment Securities - Fair values for investment securities are based on quoted market prices where available.  If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable instruments.

Federal Home Loan Bank Stock - The fair value of Federal Home Loan Bank stock approximates carrying value.

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

Deposit Liabilities - The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

Federal Funds Purchased - The carrying value of federal funds purchased approximates fair value.

Subordinated Debentures - Fair value approximates carrying value due to the variable interest rates of the subordinated debentures.

Securities Sold Under Agreements to Repurchase and Other Borrowed Money - The fair value of other borrowed money is calculated by discounting contractual cash flows using an estimated interest rate based on current rates available to the Company for debt of similar remaining maturities and collateral terms.

Unrecognized Financial Instruments - Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.  The fees associated with these instruments are not material.

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

- 41 -

(22) Fair Value of Financial Instruments (Continued)

The carrying amount and estimated fair values of the Company’s financial instruments as of December 31 are as follows:

	2011				2010
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
	(in Thousands)
Assets
Cash and Short-Term Investments	$	112,329	$	112,329	$	104,876	$	104,876
Investment Securities Available for Sale		303,891		303,891		303,838		303,838
Investment Securities Held to Maturity		46		46		48		53
Federal Home Loan Bank Stock		5,398		5,398		6,064		6,064
Loans, Net		700,614		702,438		784,909		788,455
Liabilities
Deposits		999,985		1,003,648		1,059,124		1,064,695
Subordinated Debentures		24,229		24,229		24,229		24,229
Securities Sold Under Agreements to Repurchase		-		-		20,000		20,308
Other Borrowed Money		71,000		74,720		75,076		77,119

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

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

- 42 -

(23) Regulatory Capital Matters

The amount of dividends payable to the parent company from the subsidiary bank is limited by various banking regulatory agencies.  Upon approval by regulatory authorities, the Bank may pay cash dividends to the parent company in excess of regulatory limitations.  Additionally, the Company suspended the payment of dividends to its stockholders in the third quarter of 2009.  At December 31, 2011, the Company is subject to certain regulatory restrictions that preclude the declaration of or payment of any dividends to its common stockholders, without prior approval from the Federal Reserve Bank.

The Company is subject to various regulatory capital requirements administered by the 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 classification 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 I capital to risk-weighted assets, and of Tier I capital to average assets.  The amounts and ratios as defined in regulations are presented hereafter.  Management believes, as of December 31, 2011, the Company meets all capital adequacy requirements to which it is subject under the regulatory framework for prompt corrective action.  In the opinion of management, there are no conditions or events since prior notification of capital adequacy from the regulators that have changed the institution’s category.

- 43 -

(23) Regulatory Capital Matters (Continued)

The following table summarizes regulatory capital information as of December 31, 2011 and 2010 on a consolidated basis and for its wholly-owned subsidiary, as defined.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2011	(In Thousands)
Total Capital to Risk-Weighted Assets
Consolidated	$	118,913		16.50	%	$	57,658		8.00	%		N/A		N/A
Colony Bank		117,243		16.29			57,584		8.00		$	71,980		10.00	%
Tier I Capital to Risk-Weighted Assets
Consolidated		109,822		15.24			28,829		4.00			N/A		N/A
Colony Bank		108,163		15.03			28,792		4.00			43,188		6.00
Tier I Capital to Average Assets
Consolidated		109,822		9.51			46,185		4.00			N/A		N/A
Colony Bank		108,163		9.38			46,117		4.00			57,646		5.00
As of December 31, 2010
Total Capital to Risk-Weighted Assets
Consolidated		116,914		14.85			62,981		8.00			N/A		N/A
Colony Bank		113,119		14.39			62,905		8.00			78,631		10.00
Tier I Capital to Risk-Weighted Assets
Consolidated		106,845		13.57			31,491		4.00			N/A		N/A
Colony Bank		103,062		13.11			31,452		4.00			47,179		6.00
Tier I Capital to Average Assets
Consolidated		106,845		8.59			49,748		4.00			N/A		N/A
Colony Bank		103,062		8.30			49,697		4.00			62,122		5.00

The Bank is currently subject to a memorandum of understanding (MOU) which requires, among other things, that the Bank maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets of 8% and total risk-based capital to total risk-weighted assets of 10 percent during the life of the MOU.  The MOU also requires that, prior to declaring or paying any cash dividend to the Company, the Bank must obtain written consent of its regulators.  Additional requirements of the MOU are discussed in Part 1, Item 1 of the Company’s December 31, 2011 Form 10-K filed with the Securities Exchange Commission on March 15, 2012.  Failure to comply with the terms of the MOU could have an adverse impact on the Company’s consolidated financial condition.

- 44 -

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

The parent company’s balance sheets as of December 31, 2011 and 2010 and the related statements of operations and comprehensive income (loss) and cash flows for each of the years in the three-year period then ended are as follows:

COLONY BANKCORP, INC. (PARENT ONLY)

BALANCE SHEETS

DECEMBER 31

ASSETS
	2011		2010
Cash	$	1,051,904	$	3,173,061
Premises and Equipment, Net		1,378,395		1,478,045
Investment in Subsidiary, at Equity		118,289,024		112,389,013
Other		437,414		484,008
Total Assets	$	121,156,737	$	117,524,127
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Dividends Payable	$	175,000	$	175,000
Other		139,927		161,544
		314,927		336,544
Subordinated Debt		24,229,000		24,229,000
Stockholders’ Equity
Preferred Stock, Stated Value $1,000; Authorized 10,000,000 Shares, Issued 28,000 Shares		27,662,476		27,505,910
Common Stock, Par Value $1; Authorized 20,000,000 Shares, Issued 8,439,258 and 8,442,958Shares as of December 31, 2011 and 2010, Respectively		8,439,258		8,442,958
Paid-In Capital		29,145,094		29,171,087
Retained Earnings		29,456,240		28,479,211
Restricted Stock - Unearned Compensation		-		(40,794	)
Accumulated Other Comprehensive Income, Net of Tax		1,909,742		(599,789	)
		96,612,810		92,958,583
Total Liabilities and Stockholders’ Equity	$	121,156,737	$	117,524,127

- 45 -

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

COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31

	2011			2010			2009
Income
Dividends from Subsidiary	$	15,265		$	15,536		$	2,170,827
Management Fees		505,414			455,241			227,620
Other		98,180			119,776			100,157
		618,859			590,553			2,498,604
Expenses
Interest		508,081			516,170			659,456
Amortization		2,250			2,250			2,250
Salaries and Employee Benefits		734,104			761,873			848,076
Goodwill Impairment		-			-			172,029
Other		656,914			807,209			799,924
		1,901,349			2,087,502			2,481,735
Income (Loss) Before Taxes and Equity in Undistributed Earnings of Subsidiary		(1,282,490	)		(1,496,949	)		16,869
Income Tax Benefits		425,605			532,823			608,062
Income (Loss) Before Equity in Undistributed Earnings of Subsidiary		(856,885	)		(964,126	)		624,931
Equity in Undistributed Earnings (Losses) of Subsidiary		3,390,480			1,438,342			(19,808,805	)
Net Income (Loss)		2,533,595			474,216			(19,183,874	)
Preferred Stock Dividends		1,400,000			1,400,000			1,365,000
Net Income (Loss) Available to Common Stockholders	$	1,133,595		$	(925,784	)	$	(20,548,874	)

- 46 -

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

COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31

	2011			2010			2009
Net Income (Loss)	$	2,533,595		$	474,216		$	(19,183,874	)
Other Comprehensive Income, Net of Tax
Gains on Securities Arising During the Year		4,439,108			1,227,281			1,257,136
Reclassification Adjustment		(1,929,577	)		(1,727,261	)		(1,733,072	)
Change in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of Reclassification Adjustment and Tax Effects		2,509,531			(499,980	)		(475,936	)
Comprehensive Income (Loss)	$	5,043,126		$	(25,764	)	$	(19,659,810	)

- 47 -

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

COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

	2011			2010			2009
Cash Flows from Operating Activities
Net Income (Loss)	$	2,533,595		$	474,216		$	(19,183,874	)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided (Used) by Operating Activities
Depreciation and Amortization		112,651			194,918			295,209
Goodwill Impairment		-			-			172,029
Equity in Undistributed (Earnings) Losses of Subsidiary		(3,390,480	)		(1,438,342	)		19,808,805
Other		24,977			(260,318	)		31,634
		(719,257	)		(1,029,526	)		1,123,803
Cash Flows from Investing Activities
Capital Infusion in Subsidiary		-			-			(25,500,000	)
Purchases of Premises and Equipment		(1,900	)		(31,877	)		(119,156	)
		(1,900	)		(31,877	)		(25,619,156	)
Cash Flows from Financing Activities
Dividends Paid on Preferred Stock		(1,400,000	)		(1,400,000	)		(1,190,000	)
Dividends Paid on Common Stock		-			-			(1,760,665	)
Proceeds from Issuance of Common Stock		-			5,078,255			-
Proceeds Allocated to Issuance of Preferred Stock		-			-			27,215,218
Proceeds Allocated to Warrants Issued		-			-			784,782
		(1,400,000	)		3,678,255			25,049,335
Increase (Decrease) in Cash		(2,121,157	)		2,616,852			553,982
Cash, Beginning		3,173,061			556,209			2,227
Cash, Ending	$	1,051,904		$	3,173,061		$	556,209

- 48 -

(25) Earnings Per Share

Basic earnings per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during each period.  Diluted earnings per share reflects the potential dilution of restricted stock and common stock warrants.  Net income available to common stockholders represents net income (loss) after preferred stock dividends.  The following table presents earnings per share for the years ended December 31, 2011, 2010 and 2009:

	2011		2010			2009
Numerator
Net Income (Loss) Available to Common Stockholders	$	1,135,595	$	(925,784	)	$	(20,548,874	)
Denominator
Weighted Average Number of Common Shares Outstanding for Basic Earnings Per Common Share		8,439,258		8,149,217			7,213,430
Dilutive Effect of Potential Common Stock
Restricted Stock		-		-			-
Stock Warrants		-		-			-
Weighted-Average Number of Shares Outstanding for Diluted Earnings Per Common Share		8,439,258		8,149,217			7,213,430
Earnings (Loss) Per Share - Basic	$	0.13	$	(0.11	)	$	(2.85	)
Earnings (Loss) Per Share - Diluted	$	0.13	$	(0.11	)	$	(2.85	)

For the years ended December 31, 2011, 2010 and 2009, 501,855, 505,283 and 504,774 shares of common stock equivalents, respectively, were excluded from the calculation of diluted earnings per share because they would have an anti-dilutive effect.

(26) Subsequent Event

On February 13, 2012, the Company announced that it would exercise its right to suspend its regularly scheduled interest payments on its trust preferred securities.  The Company may defer interest payments for consecutive periods of up to five years (20 consecutive quarters) without default or penalty under the terms of the trust preferred agreements.  Interest payments on the trust preferred securities will continue to be accrued for payment at a future date and reported as an expense in the financial statements.  The Company also announced that it would exercise its right to suspend the $350,000 quarterly dividend payment on its $28 million of Cumulative Perpetual Preferred Stock, Series A that was issued to the U.S. Treasury under its Capital Purchase Program.  The Company may defer dividend payments for up to six consecutive quarters without default or penalty under the terms of the investment documents.  The quarterly dividend payments on the Company’s Series A preferred stock will also continue to be accrued for payment at a future date.  The accrued dividends will be reported for the duration of the deferral period as a preferred dividend requirement that is deducted from income available to common stockholders for financial statement purposes.  Both deferral decisions were made in consultation with the Georgia Department of Banking and Finance and the Federal Reserve Bank of Atlanta.

 - 49 -

EX-21

EXHIBIT NO. 21

SUBSIDIARIES OF THE COMPANY

Name of Subsidiary	State of Incorporation
Colony Bank	Georgia
Colony Bankcorp Statutory Trust III	Delaware
Colony Bankcorp Capital Trust I	Delaware
Colony Bankcorp Capital Trust II	Delaware
Colony Bankcorp Capital Trust III	Delaware

EX-31.1

EXHIBIT NO. 31.1

CERTIFICATIONS PURSUANT TO RULE 13a-14(a)/15d-14(a) UNDER THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, James D. Minix, certify that:

1.     I have reviewed this Form 10-K of Colony Bankcorp, Inc.

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial; and

b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

March 15, 2012	/s/ James D. Minix
	JAMES D. MINIX
	Interim President and Chief Executive Officer

EX-31.2

EXHIBIT NO. 31.2

CERTIFICATIONS PURSUANT TO RULE 13a-14(a)/15d-14(a) UNDER THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Terry L. Hester, certify that:

1.     I have reviewed this Form 10-K of Colony Bankcorp, Inc.

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a)   all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial; and

b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

March 15, 2012	/s/ Terry L. Hester
	TERRY L. HESTER
	Executive Vice President and
	Chief Financial Officer

EX-32

EXHIBIT NO. 32

CERTIFICATION OF CEO AND CFO PURSUANT TO

18 U.S.C. §1350

AS ADOPTED PURSUANT TO

§906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-K of Colony Bankcorp, Inc. (the Company) for the year ended    December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, James D. Minix, Interim President and Chief Executive Officer of the Company, and Terry L. Hester, Chief Financial and Accounting Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of our knowledge and belief that:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James D. Minix

James D. Minix

Interim President and Chief Executive Officer

March 15, 2012

/s/ Terry L. Hester

Terry L. Hester

Chief Financial and Accounting Officer

March 15, 2012

This certification accompanies this Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

EX-99.1

EXHIBIT NO. 99.1

COLONY BANKCORP, INC.

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 30.15 OF 31 CFR PART 30

The undersigned, James D. Minix and Terry L. Hester, Interim Chief Executive Officer and Chief Financial Officer of Colony Bankcorp, Inc. (the “Company”) respectively, do hereby certify, based on our knowledge, that:

i.   The Compensation Committee of the Company has discussed, reviewed, and evaluated with senior risk officers at least every six months during any part of the most recently completed fiscal year that was a TARP period, senior executive officer (“SEO”) compensation plans and employee compensation plans and the risks these plans pose to the Company;

ii.   The Compensation Committee of the Company has identified and limited during any part of the most recently completed fiscal year that was a TARP period any features of the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the Company and has identified any features of the employee compensation plans that pose risks to the Company and has limited those features to ensure that the Company is not unnecessarily exposed to risks;

iii.   The Compensation Committee has reviewed, at least every six months during any part of the most recently completed fiscal year that was a TARP period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of the Company to enhance the compensation of an employee, and has limited any such features;

iv.   The Compensation Committee of the Company will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

v.   The Compensation Committee of the Company will provide a narrative description of how it limited during any part of the most recently completed fiscal year that was a TARP period the features in:

a.   SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of the Company;

b.   Employee compensation plans that unnecessarily expose the Company to risks; and

c.   Employee compensation plans that could encourage the manipulation of reported earnings of the Company to enhance the compensation of an employee;

vi.   The Company has required that bonus payments to SEOs or any of the next twenty most highly compensated employees, as defined in the regulations and guidance established under Section 111 of EESA (bonus payments), be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

vii.   The Company has prohibited any golden parachute payment, as defined in the regulations and guidance established under Section 111 of EESA, to a SEO or any of the next five most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

viii.   The Company has limited bonus payments to its applicable employees in accordance with Section 111 of EESA and the regulations and guidance established thereunder during any part of the most recently completed fiscal year that was a TARP period;

ix.   The Company and its employees have complied with the excessive or luxury expenditures policy, as defined in the regulations and guidance established under Section 111 of EESA, during any part of the most recently completed fiscal year that was a TARP period; and any expenses that, pursuant to the policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

x.   The Company will permit a non-binding shareholder resolution in compliance with any applicable federal securities rules and regulations on the disclosures provided under the federal securities laws related to SEO compensation paid or accrued during any part of the most recently completed fiscal year that was a TARP period;

xi.   The Company will disclose the amount, nature, and justification for the offering, during any part of the most recently completed fiscal year that was a TARP period, of any perquisites, as defined in the regulations and guidance established under Section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

xii.   The Company will disclose whether the Company, the board of directors of the Company, or the Compensation Committee of the Company has engaged during any part of the most recently completed fiscal year that was a TARP period a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

xiii.   The Company has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under Section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

xiv.   The Company has substantially complied with all other requirements related to employee compensation that are provided in the agreement between the Company and Treasury, including any amendments;

xv.   The Company has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

xvi.   I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 USC 1001).

	COLONY BANKCORP, INC.
March 15, 2012	/s/ James D. Minix
	JAMES D. MINIX
	Interim President and Chief Executive Officer

March 15, 2012	/s/ Terry L. Hester
	TERRY L. HESTER
	Executive Vice President and
	Chief Financial Officer

XML

Subsequent Event

12 Months Ended

Dec. 31, 2011

Subsequent Event [Abstract]

Subsequent Event

(26) Subsequent Event

On February 13, 2012, the Company announced that it would exercise its right to suspend its regularly scheduled interest payments on its trust preferred securities.  The Company may defer interest payments for consecutive periods of up to five years (20 consecutive quarters) without default or penalty under the terms of the trust preferred agreements.  Interest payments on the trust preferred securities will continue to be accrued for payment at a future date and reported as an expense in the financial statements.  The Company also announced that it would exercise its right to suspend the $350,000 quarterly dividend payment on its $28 million of Cumulative Perpetual Preferred Stock, Series A that was issued to the U.S. Treasury under its Capital Purchase Program.  The Company may defer dividend payments for up to six consecutive quarters without default or penalty under the terms of the investment documents.  The quarterly dividend payments on the Company's Series A preferred stock will also continue to be accrued for payment at a future date.  The accrued dividends will be reported for the duration of the deferral period as a preferred dividend requirement that is deducted from income available to common stockholders for financial statement purposes.  Both deferral decisions were made in consultation with the Georgia Department of Banking and Finance and the Federal Reserve Bank of Atlanta.

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(18) Commitments and Contingencies

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

The Company's exposure to credit loss is represented by the contractual amount of these commitments.  The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.

At December 31, 2011 and 2010, the following financial instruments were outstanding whose contract amounts represent credit risk:

	Contract Amount
	2011		2010
Commitments to Extend Credit	$	39,966,000	$	39,457,000
Standby Letters of Credit		1,327,000		1,540,000

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

Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers.  These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

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

Legal Contingencies.  In the ordinary course of business, there are various legal proceedings pending against Colony and its Subsidiary.  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.

IRS Exam.  The Company's federal and state income tax returns for tax years 2011, 2010, 2009 and 2008 are subject to examination by the Internal Revenue Service (IRS) and the Georgia Department of Revenue, generally for three years after filing.  During 2011, the IRS completed its review of the Company's 2009 federal income tax return.  As a result of this exam, $390,152 of additional tax was paid during the year.

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Cash and Balances Due from Banks

12 Months Ended

Dec. 31, 2011

Cash and Balances Due from Banks [Abstract]

Cash and Balances Due from Banks

(2)  Cash and Balances Due from Banks

Components of cash and balances due from banks are as follows as of December 31:

	2011		2010
Cash on Hand and Cash Items	$	9,271,705	$	8,897,618
Noninterest-Bearing Deposits with Other Banks		19,108,663		7,715,569
	$	28,380,368	$	16,613,187

The Company is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank based on a percentage of deposits.  Reserve balances totaled approximately $4,183,000 and $916,000 at December 31, 2011 and 2010, respectively.

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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2011

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

(22) Fair Value of Financial Instruments

Generally accepted accounting standards in the U.S. require disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value.  The assumptions used in the estimation of the fair value of Colony Bankcorp, Inc. and Subsidiary's financial instruments are detailed hereafter.  Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques.  The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.  The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.

Cash and Short-Term Investments - For cash, due from banks, bank-owned deposits and federal funds sold, the carrying amount is a reasonable estimate of fair value.

Investment Securities - Fair values for investment securities are based on quoted market prices where available.  If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable instruments.

Federal Home Loan Bank Stock - The fair value of Federal Home Loan Bank stock approximates carrying value.

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

Deposit Liabilities - The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

Federal Funds Purchased - The carrying value of federal funds purchased approximates fair value.

Subordinated Debentures - Fair value approximates carrying value due to the variable interest rates of the subordinated debentures.

Securities Sold Under Agreements to Repurchase and Other Borrowed Money - The fair value of other borrowed money is calculated by discounting contractual cash flows using an estimated interest rate based on current rates available to the Company for debt of similar remaining maturities and collateral terms.

Unrecognized Financial Instruments - Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing.  The fees associated with these instruments are not material.

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

The carrying amount and estimated fair values of the Company's financial instruments as of December 31 are as follows:

	2011				2010
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
	(in Thousands)
Assets
Cash and Short-Term Investments	$	112,329	$	112,329	$	104,876	$	104,876
Investment Securities Available for Sale		303,891		303,891		303,838		303,838
Investment Securities Held to Maturity		46		46		48		53
Federal Home Loan Bank Stock		5,398		5,398		6,064		6,064
Loans, Net		700,614		702,438		784,909		788,455
Liabilities
Deposits		999,985		1,003,648		1,059,124		1,064,695
Subordinated Debentures		24,229		24,229		24,229		24,229
Securities Sold Under Agreements to Repurchase		-		-		20,000		20,308
Other Borrowed Money		71,000		74,720		75,076		77,119

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

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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Related Party Transactions

12 Months Ended

Dec. 31, 2011

Related Party Transactions [Abstract]

Related Party Transactions

(21) Related Party Transactions

The aggregate balance of direct and indirect loans to directors, executive officers or principal holders of equity securities of the Company was $5,504,230 as of December 31, 2011 and $9,797,492 as of December 31, 2010. All such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than a normal risk of collectibility.  A summary of activity of related party loans is shown below:

	2011			2010
Balance, Beginning	$	9,797,492		$	6,473,238
New Loans		15,455,299			12,533,229
Repayments		(17,871,362	)		(9,208,975	)
Transactions Due to Changes in Directors		(1,877,199	)		-
Balance, Ending	$	5,504,230		$	9,797,492

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Regulatory Capital Matters

12 Months Ended

Dec. 31, 2011

Regulatory Capital Matters [Abstract]

Regulatory Capital Matters

(23) Regulatory Capital Matters

The amount of dividends payable to the parent company from the subsidiary bank is limited by various banking regulatory agencies.  Upon approval by regulatory authorities, the Bank may pay cash dividends to the parent company in excess of regulatory limitations.  Additionally, the Company suspended the payment of dividends to its stockholders in the third quarter of 2009.  At December 31, 2011, the Company is subject to certain regulatory restrictions that preclude the declaration of or payment of any dividends to its common stockholders, without prior approval from the Federal Reserve Bank.

The Company is subject to various regulatory capital requirements administered by the 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 classification 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 I capital to risk-weighted assets, and of Tier I capital to average assets.  The amounts and ratios as defined in regulations are presented hereafter.  Management believes, as of December 31, 2011, the Company meets all capital adequacy requirements to which it is subject under the regulatory framework for prompt corrective action.  In the opinion of management, there are no conditions or events since prior notification of capital adequacy from the regulators that have changed the institution's category.

The following table summarizes regulatory capital information as of December 31, 2011 and 2010 on a consolidated basis and for its wholly-owned subsidiary, as defined.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2011	(In Thousands)
Total Capital to Risk-Weighted Assets
Consolidated	$	118,913		16.50	%	$	57,658		8.00	%		N/A		N/A
Colony Bank		117,243		16.29			57,584		8.00		$	71,980		10.00	%
Tier I Capital to Risk-Weighted Assets
Consolidated		109,822		15.24			28,829		4.00			N/A		N/A
Colony Bank		108,163		15.03			28,792		4.00			43,188		6.00
Tier I Capital to Average Assets
Consolidated		109,822		9.51			46,185		4.00			N/A		N/A
Colony Bank		108,163		9.38			46,117		4.00			57,646		5.00
As of December 31, 2010
Total Capital to Risk-Weighted Assets
Consolidated		116,914		14.85			62,981		8.00			N/A		N/A
Colony Bank		113,119		14.39			62,905		8.00			78,631		10.00
Tier I Capital to Risk-Weighted Assets
Consolidated		106,845		13.57			31,491		4.00			N/A		N/A
Colony Bank		103,062		13.11			31,452		4.00			47,179		6.00
Tier I Capital to Average Assets
Consolidated		106,845		8.59			49,748		4.00			N/A		N/A
Colony Bank		103,062		8.30			49,697		4.00			62,122		5.00

The Bank is currently subject to a memorandum of understanding (MOU) which requires, among other things, that the Bank maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets of 8% and total risk-based capital to total risk-weighted assets of 10 percent during the life of the MOU.  The MOU also requires that, prior to declaring or paying any cash dividend to the Company, the Bank must obtain written consent of its regulators.  Additional requirements of the MOU are discussed in Part 1, Item 1 of the Company's December 31, 2011 Form 10-K filed with the Securities Exchange Commission on March 15, 2012.  Failure to comply with the terms of the MOU could have an adverse impact on the Company's consolidated financial condition.

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

12 Months Ended

Dec. 31, 2011

Financial Information of Colony Bankcorp, Inc. (Parent Only) [Abstract]

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

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

The parent company's balance sheets as of December 31, 2011 and 2010 and the related statements of operations and comprehensive income (loss) and cash flows for each of the years in the three-year period then ended are as follows:

COLONY BANKCORP, INC. (PARENT ONLY)

BALANCE SHEETS

DECEMBER 31

ASSETS
	2011		2010
Cash	$	1,051,904	$	3,173,061
Premises and Equipment, Net		1,378,395		1,478,045
Investment in Subsidiary, at Equity		118,289,024		112,389,013
Other		437,414		484,008
Total Assets	$	121,156,737	$	117,524,127
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Dividends Payable	$	175,000	$	175,000
Other		139,927		161,544
		314,927		336,544
Subordinated Debt		24,229,000		24,229,000
Stockholders' Equity
Preferred Stock, Stated Value $1,000; Authorized 10,000,000 Shares, Issued 28,000 Shares		27,662,476		27,505,910
Common Stock, Par Value $1; Authorized 20,000,000 Shares, Issued 8,439,258 and 8,442,958Shares as of December 31, 2011 and 2010, Respectively		8,439,258		8,442,958
Paid-In Capital		29,145,094		29,171,087
Retained Earnings		29,456,240		28,479,211
Restricted Stock - Unearned Compensation		-		(40,794	)
Accumulated Other Comprehensive Income, Net of Tax		1,909,742		(599,789	)
		96,612,810		92,958,583
Total Liabilities and Stockholders' Equity	$	121,156,737	$	117,524,127

COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31

	2011			2010			2009
Income
Dividends from Subsidiary	$	15,265		$	15,536		$	2,170,827
Management Fees		505,414			455,241			227,620
Other		98,180			119,776			100,157
		618,859			590,553			2,498,604
Expenses
Interest		508,081			516,170			659,456
Amortization		2,250			2,250			2,250
Salaries and Employee Benefits		734,104			761,873			848,076
Goodwill Impairment		-			-			172,029
Other		656,914			807,209			799,924
		1,901,349			2,087,502			2,481,735
Income (Loss) Before Taxes and Equity in Undistributed Earnings of Subsidiary		(1,282,490	)		(1,496,949	)		16,869
Income Tax Benefits		425,605			532,823			608,062
Income (Loss) Before Equity in Undistributed Earnings of Subsidiary		(856,885	)		(964,126	)		624,931
Equity in Undistributed Earnings (Losses) of Subsidiary		3,390,480			1,438,342			(19,808,805	)
Net Income (Loss)		2,533,595			474,216			(19,183,874	)
Preferred Stock Dividends		1,400,000			1,400,000			1,365,000
Net Income (Loss) Available to Common Stockholders	$	1,133,595		$	(925,784	)	$	(20,548,874	)

COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31

	2011			2010			2009
Net Income (Loss)	$	2,533,595		$	474,216		$	(19,183,874	)
Other Comprehensive Income, Net of Tax
Gains on Securities Arising During the Year		4,439,108			1,227,281			1,257,136
Reclassification Adjustment		(1,929,577	)		(1,727,261	)		(1,733,072	)
Change in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of Reclassification Adjustment and Tax Effects		2,509,531			(499,980	)		(475,936	)
Comprehensive Income (Loss)	$	5,043,126		$	(25,764	)	$	(19,659,810	)

COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

	2011			2010			2009
Cash Flows from Operating Activities
Net Income (Loss)	$	2,533,595		$	474,216		$	(19,183,874	)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided (Used) by Operating Activities
Depreciation and Amortization		112,651			194,918			295,209
Goodwill Impairment		-			-			172,029
Equity in Undistributed (Earnings) Losses of Subsidiary		(3,390,480	)		(1,438,342	)		19,808,805
Other		24,977			(260,318	)		31,634
		(719,257	)		(1,029,526	)		1,123,803
Cash Flows from Investing Activities
Capital Infusion in Subsidiary		-			-			(25,500,000	)
Purchases of Premises and Equipment		(1,900	)		(31,877	)		(119,156	)
		(1,900	)		(31,877	)		(25,619,156	)
Cash Flows from Financing Activities
Dividends Paid on Preferred Stock		(1,400,000	)		(1,400,000	)		(1,190,000	)
Dividends Paid on Common Stock		-			-			(1,760,665	)
Proceeds from Issuance of Common Stock		-			5,078,255			-
Proceeds Allocated to Issuance of Preferred Stock		-			-			27,215,218
Proceeds Allocated to Warrants Issued		-			-			784,782
		(1,400,000	)		3,678,255			25,049,335
Increase (Decrease) in Cash		(2,121,157	)		2,616,852			553,982
Cash, Beginning		3,173,061			556,209			2,227
Cash, Ending	$	1,051,904		$	3,173,061		$	556,209

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(1)  Summary of Significant Accounting Policies

Principles of Consolidation

Colony Bankcorp, Inc. (the Company) is a bank holding company located in Fitzgerald, Georgia. The consolidated financial statements include the accounts of Colony Bankcorp, Inc. and its wholly-owned subsidiary, Colony Bank (which includes its wholly-owned subsidiary, Colony Mortgage Corp.), Fitzgerald, Georgia.  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.

Nature of Operations

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

Use of Estimates

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

Reclassifications

In certain instances, amounts reported in prior years' consolidated financial statements and note disclosures have been reclassified to conform to statement presentations selected for 2011.  Such reclassifications had no effect on previously reported stockholders' equity or net income.

Concentrations of Credit Risk

Concentrations of credit risk can exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries or certain geographic regions.  The Company has a concentration in real estate loans as well as a geographic concentration that could pose an adverse credit risk, particularly with the current economic downturn in the real estate market.  At December 31, 2011, approximately 86 percent of the Company's loan portfolio was concentrated in loans secured by real estate.  A substantial portion of borrowers' ability to honor their contractual obligations is dependent upon the viability of the real estate economic sector.  The continued downturn of the housing and real estate market that began in 2007 has resulted in an increase of problem loans secured by real estate.  These loans are centered primarily in the Company's larger MSA markets.  Declining collateral real estate values that secure land development, construction and speculative real estate loans in the Company's larger MSA markets have resulted in high loan loss provisions in recent years.  In addition, a large portion of the Company's foreclosed assets are also located in these same geographic markets, making the recovery of the carrying amount of foreclosed assets susceptible to changes in market conditions.  Management continues to monitor these concentrations and has considered these concentrations in its allowance for loan loss analysis.

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

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

Investment Securities

The Company classifies its investment 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.  Currently, no securities are classified as trading.  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 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 are reported, net of deferred taxes, in accumulated other comprehensive income (loss), a component of stockholders' equity.  Gains and losses from sales of securities available for sale are computed using the specific identification method.  Securities available for sale 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.

The Company evaluates each held to maturity and available for sale security in a loss position for other-than-temporary impairment (OTTI).  In estimating other-than-temporary impairment losses, management considers such factors as the length of time and the extent to which the market value has been below cost, the financial condition of the issuer and the Company's intent to sell and whether it is more likely than not that the Company will be required to sell the security before anticipated recovery of the amortized cost basis.  If the Company intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery, the OTTI write-down is recognized in earnings.  If the Company does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the OTTI write-down is separated into an amount representing credit loss, which is recognized in earnings, and an amount related to all other factors, which is recognized in other comprehensive income (loss).

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 the accounting standards.  The FHLB stock is reported in the consolidated financial statements at cost.  Dividend income is recognized when earned.

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.  Loan origination fees, net of certain direct origination costs, are deferred and amortized over the estimated terms of the loans using the straight-line method.  Interest income on loans is recognized using the effective interest method.

A loan is considered to be delinquent when payments have not been made according to contractual terms, typically evidenced by nonpayment of a monthly installment by the due date.

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.

Loans Modified in a Troubled Debt Restructuring (TDR)

Loans are considered to have been modified in a TDR when, due to a borrower's financial difficulty, the Company makes certain concessions to the borrower that it would not otherwise consider for new debt with similar risk characteristics.  Modifications may include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of the collateral.  Generally, a nonaccrual loan that has been modified in a TDR remains on nonaccrual status for a period of six months to demonstrate that the borrower is able to meet the terms of the modified loan.  However, performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of loan modification or after a shorter performance period.  If the borrower's ability to meet the revised payment schedule is uncertain, the loan remains on nonaccrual status. Once a loan is modified in a troubled debt restructuring, it is accounted for as an impaired loan, regardless of its accrual status, until the loan is paid in full, sold or charged off.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available.

The allowance consists of specific, historical and general components.  The specific component relates to loans that are classified as either doubtful, substandard or special mention.  For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The historical component covers nonclassified loans and is based on historical loss experience adjusted for qualitative factors.  A general component is maintained to cover uncertainties that could affect management's estimate of probable losses.  The general component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and historical losses in the portfolio.  General valuation allowances are based on internal and external qualitative risk factors such as (1) changes in the composition of the loan portfolio, (2) the extent of loan concentrations within the portfolio, (3) the effectiveness of the Company's lending policies, procedures and internal controls, (4) the experience, ability and effectiveness of the Company's lending management and staff, and (5) national and local economics and business conditions.

Loans identified as losses by management, internal loan review and/or Bank examiners are charged off.

During 2011, the Company continues its methodology regarding the look-back period for charge-off experience to one year.  The current methodology has resulted in significant loan loss provisions for the past three years.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price or the fair value of the collateral if the loan is collateral dependent.

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.

Intangible Assets

Intangible assets consist of core deposit intangibles acquired in connection with a business combination.  The core deposit intangible is initially recognized based on an independent valuation performed as of the consummation date.  The core deposit intangible is amortized by the straight-line method over the average remaining life of the acquired customer deposits.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Statement of Cash Flows

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

Securities Purchased Under Agreement to Resell and Securities Sold Under Agreements to Repurchase

The Company purchases certain securities under agreements to resell.  The amounts advanced under these agreements represent short-term loans and are reflected as assets in the consolidated balance sheets.

The Company sells securities under agreements to repurchase.  These repurchase agreements are treated as borrowings.  The obligations to repurchase securities sold are reflected as a liability and the securities underlying the agreements are reflected as assets in the consolidated balance sheets.

Advertising Costs

The Company expenses the cost of advertising in the periods in which those costs are incurred.

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 reporting 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.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The Company and its subsidiary file a consolidated federal income tax return.  The subsidiary pays its proportional share of federal income taxes to the Company based on its taxable income.

Positions taken in the Company's tax returns may be subject to challenge by the taxing authorities upon examination.  Uncertain tax positions are initially recognized in the consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.  Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts.  The Company provides for interest and, in some cases, penalties on tax positions that may be challenged by the taxing authorities. Interest expense is recognized beginning in the first period that such interest would begin accruing.  Penalties are recognized in the period that the Company claims the position in the tax return.  Interest and penalties on income tax uncertainties are classified within income tax expense in the consolidated statements of income.

Other Real Estate

Other real estate generally represents real estate acquired through foreclosure and is initially recorded at estimated fair value at the date of acquisition less the cost of disposal.  Losses from the acquisition of property in full or partial satisfaction of debt are recorded as loan losses.  Properties are evaluated regularly to ensure the recorded amounts are supported by current fair values, and valuation allowances are recorded as necessary to reduce the carrying amount to fair value less estimated cost of disposal.  Routine holding costs and gains or losses upon disposition are included in foreclosed property expense.

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 statements of operations but as a separate component of the equity section of the consolidated balance sheets.  Such items are considered components of other comprehensive income (loss).  Accounting standards codification requires the presentation in the consolidated financial statements of net income and all items of other comprehensive income (loss) as total comprehensive income (loss).

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Company has entered into commitments to extend credit, commercial letters of credit and standby letters of credit.  Such financial instruments are recorded when they are funded.

Changes in Accounting Principles and Effects of New Accounting Pronouncements

Adoption of New Accounting Standards

ASU No. 2010-20, “Receivables (Topic 310) - Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses.”  ASU 2010-20 requires entities to provide disclosures designed to facilitate financial statement users' evaluation of (1) the nature of credit risk inherent in the entity's portfolio of financing receivables, (2) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (3) the changes and reasons for those changes in the allowance for credit losses.  Disclosures must be disaggregated by portfolio segment, the level at which an entity develops and documents a systematic method for determining its allowance for credit losses, and class of financing receivable, which is generally a disaggregation of portfolio segment.  The required disclosures include, among other things, a rollforward of the allowance for credit losses as well as information about modified, impaired, nonaccrual and past due loans and credit quality indicators.  ASU 2010-20 became effective for the Company's financial statements as of December 31, 2010, as it relates to disclosures required as of the end of a reporting period.  Disclosures that relate to activity during a reporting period became effective for the Company's financial statements on January 1, 2011.  Certain disclosures related to troubled debt restructurings were temporarily deferred by ASU 2011-01, “Receivables (Topic 310) - Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20,” and became effective on July 1, 2011 as required by ASU No. 2011-02, “Receivables (Topic 310) - A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring,” as further discussed below.

ASU No. 2011-02, “Receivables (Topic 310) - A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring.”  ASU 2011-02 clarifies which loan modifications constitute troubled debt restructurings and is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings.  In evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude, under the guidance clarified by ASU 2011-02, that both of the following exist: (1) the restructuring constitutes a concession; and (2) the debtor is experiencing financial difficulties.  ASU 2011-02 became effective for the Company on July 1, 2011, and applies retrospectively to restructurings occurring on or after     January 1, 2011.

Recently Issued But Not Yet Effective Accounting Standards

ASU No. 2011-03, “Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreements.”  ASU 2011-03 is intended to improve financial reporting of repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity.  ASU 2011-03 removes from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance guidance related to that criterion.  ASU 2011-03 will be effective for the Company on January 1, 2012 and is not expected to have a significant impact on the Company's consolidated financial statements.

ASU 2011-04, “Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.”  ASU 2011-04 amends Topic 820, “Fair Value Measurements and Disclosures,” to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards.  ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 2011-04 is effective for annual periods beginning after December 15, 2011, and is not expected to have a significant impact on the Company's consolidated financial statements.

ASU 2011-05, “Comprehensive Income (Topic 220) - Presentation of Comprehensive Income.” ASU 2011-05 amends Topic 220, “Comprehensive Income,” to require that all nonowner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements.  Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented.  The option to present components of other comprehensive income as part of the statement of changes in stockholders' equity was eliminated. ASU 2011-05 is effective for annual and interim periods beginning after December 15, 2011; however, certain provisions related to the presentation of reclassification adjustments have been deferred by ASU 2011-12 “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” as further discussed below. ASU 2011-05 is not expected to have a significant impact on the Company's consolidated financial statements.

ASU 2011-11, “Balance Sheet (Topic 210) - “Disclosures about Offsetting Assets and Liabilities.”  ASU 2011-11 amends Topic 210, “Balance Sheet,” to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements and reverse sale and repurchase agreements and securities borrowing/lending arrangements, and derivative instruments that are eligible for offset in the statement of financial position and/or subject to a master netting arrangement or similar agreement. ASU 2011-11 is effective for annual and interim periods beginning on January 1, 2013, and is not expected to have a significant impact on the Company's consolidated financial statements.

ASU 2011-12 “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.”  ASU 2011-12 defers changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments to allow the FASB time to redeliberate whether to require presentation of such adjustments on the face of the financial statements to show the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. ASU 2011-12 allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU No. 2011-05.  All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12.  ASU 2011-12 is effective for annual and interim periods beginning after December 15, 2011 and is not expected to have a significant impact on the Company's consolidated financial statements.

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Earnings Per Share

12 Months Ended

Dec. 31, 2011

Earnings Per Share [Abstract]

Earnings Per Share

(25) Earnings Per Share

Basic earnings per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during each period.  Diluted earnings per share reflects the potential dilution of restricted stock and common stock warrants.  Net income available to common stockholders represents net income (loss) after preferred stock dividends.  The following table presents earnings per share for the years ended December 31, 2011, 2010 and 2009:

	2011		2010			2009
Numerator
Net Income (Loss) Available to Common Stockholders	$	1,135,595	$	(925,784	)	$	(20,548,874	)
Denominator
Weighted Average Number of Common Shares Outstanding for Basic Earnings Per Common Share		8,439,258		8,149,217			7,213,430
Dilutive Effect of Potential Common Stock
Restricted Stock		-		-			-
Stock Warrants		-		-			-
Weighted-Average Number of Shares Outstanding for Diluted Earnings Per Common Share		8,439,258		8,149,217			7,213,430
Earnings (Loss) Per Share - Basic	$	0.13	$	(0.11	)	$	(2.85	)
Earnings (Loss) Per Share - Diluted	$	0.13	$	(0.11	)	$	(2.85	)

For the years ended December 31, 2011, 2010 and 2009, 501,855, 505,283 and 504,774 shares of common stock equivalents, respectively, were excluded from the calculation of diluted earnings per share because they would have an anti-dilutive effect.

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CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2011	Dec. 31, 2010
Cash and Cash Equivalents
Cash and Due from Banks	$ 28,380,368	$ 16,613,187
Federal Funds Sold	54,991,474	32,536,482
Securities Purchased Under Agreements to Resell	0	5,000,000
Cash and Cash Equivalents	83,371,842	54,149,669
Interest-Bearing Deposits	28,957,310	50,726,734
Investment Securities
Available for Sale, at Fair Value	303,890,847	303,837,606
Held to Maturity, at Cost (Fair Value of $45,635 and $52,941 as of December 31, 2011 and 2010, Respectively)	46,111	48,412
Investment Securities	303,936,958	303,886,018
Federal Home Loan Bank Stock, at Cost	5,398,200	6,063,500
Loans	716,321,321	813,250,673
Allowance for Loan Losses	(15,649,594)	(28,280,077)
Unearned Interest and Fees	(57,646)	(61,311)
Loans, net	700,614,081	784,909,285
Premises and Equipment	25,750,235	27,147,725
Other Real Estate (Net of Allowance of $1,411,061 and $1,293,174 in 2011 and 2010, Respectively)	20,445,085	20,207,806
Other Intangible Assets	259,258	295,007
Other Assets	26,643,467	28,272,629
Total Assets	1,195,376,436	1,275,658,373
Deposits
Noninterest-Bearing	94,268,911	102,959,423
Interest-Bearing	905,716,361	956,164,581
Deposits	999,985,272	1,059,124,004
Borrowed Money
Securities Sold Under Agreements to Repurchase	0	20,000,000
Subordinated Debentures	24,229,000	24,229,000
Other Borrowed Money	71,000,000	75,076,010
Borrowed Money	95,229,000	119,305,010
Other Liabilities	3,549,354	4,270,776
Commitments and Contingencies
Stockholders' Equity
Preferred Stock, Stated Value $1,000; Authorized 10,000,000 Shares, Issued 28,000 Shares	27,662,476	27,505,910
Common Stock, Par Value $1; Authorized 20,000,000 Shares, Issued 8,439,258 and 8,442,958 Shares as of December 31, 2011 and 2010, Respectively	8,439,258	8,442,958
Paid-In Capital	29,145,094	29,171,087
Retained Earnings	29,456,240	28,479,211
Restricted Stock - Unearned Compensation	0	(40,794)
Accumulated Other Comprehensive Income (Loss), Net of Tax	1,909,742	(599,789)
Stockholders' Equity	96,612,810	92,958,583
Total Liabilities and Stockholders' Equity	$ 1,195,376,436	$ 1,275,658,373

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $)	Preferred Stock [Member]	Common Stock [Member]	Paid-in Capital [Member]	Retained Earnings [Member]	Restricted Stock - Unearned Compensation [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balance at Dec. 31, 2008	$ 0	$ 7,212,313	$ 24,535,683	$ 51,302,025	$ (210,993)	$ 376,127	$ 83,215,155
Balance (in shares) at Dec. 31, 2008		7,212,313
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of Preferred Stock	27,215,218		784,782				28,000,000
Issuance of Restricted Stock		18,850	132,421		(151,271)		0
Issuance of Restricted Stock (in shares)		18,850
Forfeiture of Restricted Stock		(2,000)	(14,050)		16,050		0
Forfeiture of Restricted Stock (in shares)		(2,000)
Tax Loss on Restricted Stock			(45,923)				(45,923)
Amortization of Unearned Compensation					187,666		187,666
Change in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of Reclassification Adjustment and Tax Effects						(475,936)	(475,936)
Accretion of Fair Value of Warrant	141,746			(141,746)			0
Dividends on Preferred Shares				(1,365,000)			(1,365,000)
Dividends on Common Stock				(1,057,464)			(1,057,464)
Net Income (Loss)				(19,183,874)			(19,183,874)
Balance at Dec. 31, 2009	27,356,964	7,229,163	25,392,913	29,553,941	(158,548)	(99,809)	89,274,624
Balance (in shares) at Dec. 31, 2009		7,229,163
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of Common Stock		1,216,545	3,861,710				5,078,255
Issuance of Common Stock (in shares)		1,216,545
Forfeiture of Restricted Stock		(2,750)	(27,570)		30,320		0
Forfeiture of Restricted Stock (in shares)		(2,750)
Tax Loss on Restricted Stock			(55,966)				(55,966)
Amortization of Unearned Compensation					87,434		87,434
Change in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of Reclassification Adjustment and Tax Effects						(499,980)	(499,980)
Accretion of Fair Value of Warrant	148,946			(148,946)			0
Dividends on Preferred Shares				(1,400,000)			(1,400,000)
Net Income (Loss)				474,216			474,216
Balance at Dec. 31, 2010	27,505,910	8,442,958	29,171,087	28,479,211	(40,794)	(599,789)	92,958,583
Balance (in shares) at Dec. 31, 2010		8,442,958
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Forfeiture of Restricted Stock		(3,700)	(25,993)		29,693		0
Forfeiture of Restricted Stock (in shares)		(3,700)
Amortization of Unearned Compensation					11,101		11,101
Change in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of Reclassification Adjustment and Tax Effects						2,509,531	2,509,531
Accretion of Fair Value of Warrant	156,566			(156,566)			0
Dividends on Preferred Shares				(1,400,000)			(1,400,000)
Net Income (Loss)				2,533,595			2,533,595
Balance at Dec. 31, 2011	$ 27,662,476	$ 8,439,258	$ 29,145,094	$ 29,456,240	$ 0	$ 1,909,742	$ 96,612,810
Balance (in shares) at Dec. 31, 2011		8,439,258

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Preferred Stock

12 Months Ended

Dec. 31, 2011

Preferred Stock [Abstract]

Preferred Stock

(15) Preferred Stock

On January 9, 2009, the Company issued to the United States Department of the Treasury (Treasury), in exchange for aggregate consideration of $28.0 million, (1) 28,000 shares of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series A, (the Preferred Stock), and (2) a warrant (the Warrant) to purchase up to 500,000 shares (the Warrant Common Stock) of the Company's common stock.

The Preferred Stock qualifies as Tier 1 capital and pays cumulative cash dividends quarterly at a rate of 5 percent per annum for the first five years, and 9 percent per annum thereafter.  The Preferred Stock is nonvoting, other than class voting rights on certain matters that could adversely affect the Preferred Stock. The Preferred Stock may be redeemed by the Company on or after February 15, 2012 at the liquidation preference of $1,000 per share plus any accrued and unpaid dividends.  Prior to this date, the Preferred Stock may not be redeemed unless the Company has received aggregate gross proceeds from one or more qualified equity offerings of any Tier 1 perpetual preferred or common stock of the Company equal to $7.0 million.  Subject to certain limited exceptions, until January 9, 2012, or such earlier time as all Preferred Stock has been redeemed, the Company will not, without the Treasury's consent, be able to increase its dividend rate per share of common stock or repurchase its common stock.

The Warrant may be exercised on or before January 9, 2019 at an exercise price of $8.40 per share.  The Treasury may not exercise voting power with respect to any shares of Warrant Common Stock until the Warrant has been exercised.

Upon receipt of the aggregate consideration from the Treasury on January 9, 2009, the Company allocated the $28,000,000 proceeds on a pro rata basis to the Preferred Stock and the Warrant based on relative fair values.  As a result, the Company allocated $27,220,000 of the aggregate proceeds to the Preferred Stock, and $780,000 was allocated to the Warrant.  The discount recorded on the Preferred Stock that resulted from allocating a portion of the proceeds to the Warrant is being accreted directly to retained earnings over a 5-year period applying a level yield.

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Profit Sharing Plan

12 Months Ended

Dec. 31, 2011

Profit Sharing Plan [Abstract]

Profit Sharing Plan

(17) 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 $0 for 2011 and 2010 and $(19,411) for 2009.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash Flows from Operating Activities
Net Income (Loss)	$ 2,533,595	$ 474,216	$ (19,183,874)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided from Operating Activities
Depreciation	1,790,041	2,140,735	2,092,845
Amortization and Accretion	3,487,124	4,043,795	3,807,011
Goodwill Impairment	0	0	2,412,338
Provision for Loan Losses	8,250,000	13,350,000	43,445,000
Deferred Income Taxes	867,006	639,607	(5,869,055)
Securities Gains	(2,923,601)	(2,617,062)	(2,625,867)
(Gain) Loss on Sale of Premises and Equipment	3,668	28,146	(82,503)
Loss on Sale of Other Real Estate and Repossessions	1,106,479	1,827,704	163,642
Provision for Losses on Other Real Estate	1,411,061	1,293,174	467,408
Increase in Cash Surrender Value of Life Insurance	(174,289)	(56,024)	(184,905)
Change In
Interest Receivable	739,423	1,325,068	699,018
Prepaid Expenses	1,861,810	2,006,032	(5,785,826)
Interest Payable	(398,903)	(452,764)	(1,256,460)
Accrued Expenses and Accounts Payable	(405,612)	(148,591)	315,879
Other	(2,987,906)	3,500,575	(3,360,614)
Cash Flow from Operating Activities	15,159,896	27,354,611	15,054,037
Cash Flows from Investing Activities
Interest-Bearing Deposits in Other Banks	21,769,424	(44,247,933)	(6,331,814)
Purchase of Investment Securities Available for Sale	(381,284,748)	(380,490,982)	(488,257,181)
Proceeds from Sale of Investment Securities Available for Sale	342,672,937	286,387,727	368,575,701
Proceeds from Maturities, Calls and Paydowns of Investment Securities Available for Sale	41,978,769	55,648,274	58,599,391
Held to Maturity	12,565	14,001	12,688
Proceeds from Sale of Premises and Equipment	1,605	0	125,512
Net Loans to Customers	63,267,200	88,105,734	(18,973,081)
Purchase of Premises and Equipment	(397,825)	(490,256)	(1,290,324)
Proceeds from Sale of Other Real Estate and Repossessions	9,991,792	9,866,063	12,158,095
Federal Home Loan Bank Stock	665,300	281,900	(73,000)
Cash Flow from Investing Activities	98,677,019	15,074,528	(75,454,013)
Cash Flows from Financing Activities
Interest-Bearing Customer Deposits	(50,448,220)	(17,183,061)	43,853,063
Noninterest-Bearing Customer Deposits	(8,690,512)	18,720,584	6,741,949
Proceeds from Other Borrowed Money	0	23,076,010	19,000,000
Principal Payments on Other Borrowed Money	(4,076,010)	(39,000,000)	(19,000,000)
Dividends Paid on Preferred Stock	(1,400,000)	(1,400,000)	(1,190,000)
Dividends Paid on Common Stock	0	0	(1,760,665)
Issuance of Common Stock	0	5,078,255	0
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	(20,000,000)	(20,000,000)	(2,274,000)
Proceeds Allocated to Issuance of Preferred Stock	0	0	27,215,218
Proceeds Allocated to Warrants Issued	0	0	784,782
Cash Flows from Financing Activities	(84,614,742)	(30,708,212)	73,370,347
Net Increase in Cash and Cash Equivalents	29,222,173	11,720,927	12,970,371
Cash and Cash Equivalents, Beginning	54,149,669	42,428,742	29,458,371
Cash and Cash Equivalents, Ending	$ 83,371,842	$ 54,149,669	$ 42,428,742

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2011	Dec. 31, 2010
Investment Securities
Held to Maturity, Fair Value	$ 45,635	$ 52,941
Other Real Estate, Allowance	$ 1,411,061	$ 1,293,174
Stockholders' Equity
Preferred Stock, par value (in dollars per share)	$ 1,000	$ 1,000
Preferred Stock, authorized (in shares)	10,000,000	10,000,000
Preferred Stock, issued (in shares)	28,000	28,000
Common Stock, par value (in dollars per share)	$ 1	$ 1
Common Stock, authorized (in shares)	20,000,000	20,000,000
Common Stock, issued (in shares)	8,439,258	8,442,958

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Fair Value Measurements

12 Months Ended

Dec. 31, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

(10) Fair Value Measurements

Generally accepted accounting principles related to Fair Value Measurements define fair value, establish a framework for measuring fair value, establish a three-level valuation hierarchy for disclosure of fair value measurement and enhance disclosure requirements for fair value measurements.  The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.  The three levels are defined as follows:

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

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

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

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

Assets

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

Impaired loans -Fair value accounting principles also apply to loans measured for impairment, including impaired loans measured at an observable market price (if available), or at the fair value of the loan's collateral (if the loan is collateral dependent).  Fair value of the loan's collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation which is then adjusted for the cost related to liquidation of the collateral.  When the fair value of collateral is based on an observable market price or a current appraisal value, the Company records the impaired loan as nonrecurring level 2.  When a current appraisal value is not available or management determines the value, the Company records the impaired loan as nonrecurring level 3.

Other Real Estate - Certain foreclosed assets, upon initial recognition, are remeasured and reported at fair value less cost to sale through a charge-off to the allowance for loan losses based on the fair value of the foreclosed asset.  The fair value of a foreclosed asset is estimated using level 2 inputs based on observable market price or current appraised value.  When appraised value is not available and management determines the fair value, the fair value of the foreclosed assets is considered level 3.

Assets and Liabilities Measured at Fair Value on a Recurring Basis -The following table presents the recorded amount of the Company's assets measured at fair value on a recurring and nonrecurring basis as of December 31, 2011 and 2010, aggregated by the level in the fair value hierarchy within which those measurements fall.

			Fair Value Measurements at Reporting Date Using
2011	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring
Securities Available for Sale
U.S. Government Agencies Mortgage-Backed	$	294,060,799	$	-	$	294,060,799	$	-
State, County and Municipal		7,583,691		-		7,583,691		-
Corporate Obligations		2,113,930		-		1,123,930		990,000
Asset-Backed Securities		132,427		-		-		132,427
	$	303,890,847	$	-	$	302,768,420	$	1,122,427
Nonrecurring
Impaired Loans	$	63,520,509	$	-	$	34,935,324	$	28,585,185
Other Real Estate	$	20,445,085	$	-	$	6,170,534	$	14,274,551
2010
Recurring
Securities Available for Sale
U.S. Government Agencies Mortgage-Backed	$	298,462,456	$	-	$	298,462,456	$	-
State, County and Municipal		3,256,233		-		3,256,233		-
Corporate Obligations		1,986,490		-		1,101,920		884,570
Asset-Backed Securities		132,427		-		-		132,427
	$	303,837,606	$	-	$	302,820,609	$	1,016,997
Nonrecurring
Impaired Loans	$	28,246,144	$	-	$	-	$	28,246,144
Other Real Estate	$	20,207,806	$	-	$	20,207,806	$	-

Liabilities

The Company did not identify any liabilities that are required to be presented at fair value.

The following table presents a reconciliation and statement of income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (level 3) for the years ended December 31, 2011 and 2010.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

	Available for Sale Securities
	2011			2010		2009
Balance, Beginning	$	1,016,997		$	982,427	$	1,426,220
Total Realized/Unrealized Gains (Losses) Included In Loss on OTTI Impairment		(53,058	)		-		(520,751	)
Other Comprehensive Income		158,488			34,570		76,958
Balance, Ending	$	1,122,427		$	1,016,997	$	982,427

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Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2011	Mar. 15, 2012	Jun. 30, 2011
Entity Registrant Name	COLONY BANKCORP INC
Entity Central Index Key	0000711669
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 16,330,731
Entity Common Stock, Shares Outstanding		8,439,258
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2011

XML

Deposits

12 Months Ended

Dec. 31, 2011

Deposits [Abstract]

Deposits

(11) Deposits

The aggregate amount of overdrawn deposit accounts reclassified as loan balances totaled $147,398 and $250,200 as of December 31, 2011 and 2010, respectively.

Components of interest-bearing deposits as of December 31 are as follows:

	2011		2010
Interest-Bearing Demand	$	284,870,972	$	235,855,037
Savings		41,230,662		36,629,698
Time, $100,000 and Over		247,589,188		298,009,596
Other Time		332,025,539		385,670,250
	$	905,716,361	$	956,164,581

At December 31, 2011 and 2010, the Company had brokered deposits of $28,157,961 and $36,328,659, respectively.  Of the brokered deposits at December 31, 2011 and 2010, $28,157,961 and $31,128,659 represented Certificate of Deposits Account Registry Service (CDARS) reciprocal deposits in which customers placed core deposits into the CDARS program for FDIC insurance coverage and the Company received reciprocal brokered deposits in a like amount.  Thus, brokered deposits less the reciprocal deposits totaled $0 and $5,200,000 at December 31, 2011 and 2010, respectively.  The aggregate amount of short-term jumbo certificates of deposit, each with a minimum denomination of $100,000, was approximately $190,876,500 and $216,656,200 as of   December 31, 2011 and 2010, respectively.

As of December 31, 2011, the scheduled maturities of certificates of deposit are as follows:

Year	Amount
2012	$	428,602,577
2013		117,066,000
2014		20,552,850
2015		8,382,521
2016 and Thereafter		5,010,779
	$	579,614,727

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Interest Income
Loans, Including Fees	$ 44,460,149	$ 51,728,665	$ 57,620,911
Federal Funds Sold and Securities Purchased Under Agreements to Resell	114,794	95,428	24,438
Deposits with Other Banks	45,646	38,085	553
Investment Securities
U. S. Government Agencies	6,873,296	6,613,030	7,626,856
State, County and Municipal	160,892	103,133	258,545
Corporate Obligations	91,034	137,831	296,273
Dividends on Other Investments	47,001	21,547	19,846
Interest Income	51,792,812	58,737,719	65,847,422
Interest Expense
Deposits	12,950,229	17,212,312	21,642,734
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase	337,711	721,044	876,484
Borrowed Money	3,517,633	3,589,847	3,761,924
Interest Expense	16,805,573	21,523,203	26,281,142
Net Interest Income	34,987,239	37,214,516	39,566,280
Provision for Loan Losses	8,250,000	13,350,000	43,445,000
Net Interest Income (Loss) After Provision for Loan Losses	26,737,239	23,864,516	(3,878,720)
Noninterest Income
Service Charges on Deposits	3,244,536	3,597,416	4,198,019
Other Service Charges, Commissions and Fees	1,311,758	1,139,935	986,392
Mortgage Fee Income	265,636	313,005	447,989
Securities Gains	2,923,601	2,617,062	2,625,867
Gain on Sale of SBA Loans	946,732	1,004,585	140,122
Other	1,258,813	1,334,846	1,145,798
Noninterest Income	9,951,076	10,006,849	9,544,187
Noninterest Expenses
Salaries and Employee Benefits	14,632,693	14,096,698	14,483,306
Occupancy and Equipment	3,997,667	4,422,152	4,287,006
Directors' Fees	466,075	495,950	502,575
Legal and Professional Fees	1,186,884	1,369,864	1,362,536
Foreclosed Property	4,045,245	4,943,530	2,270,792
FDIC Assessment	1,828,799	1,866,956	2,662,042
Goodwill Impairment	0	0	2,412,338
Advertising	508,329	743,278	758,458
Software	660,120	630,543	498,657
Telephone	735,758	703,786	764,373
Other	4,989,267	4,583,606	4,842,139
Noninterest Expense	33,050,837	33,856,363	34,844,222
Income (Loss) Before Income Taxes (Benefits)	3,637,478	15,002	(29,178,755)
Income Taxes (Benefits)	1,103,883	(459,214)	(9,994,881)
Net Income (Loss)	2,533,595	474,216	(19,183,874)
Preferred Stock Dividends	1,400,000	1,400,000	1,365,000
Net Income (Loss) Available to Common Stockholders	$ 1,133,595	$ (925,784)	$ (20,548,874)
Net Income (Loss) Per Share of Common Stock
Basic (in dollars per share)	$ 0.13	$ (0.11)	$ (2.85)
Diluted (in dollars per share)	$ 0.13	$ (0.11)	$ (2.85)
Cash Dividends Declared Per Share of Common Stock (in dollars per share)	$ 0.00	$ 0.00	$ 0.146
Weighted Average Shares Outstanding (in shares)	8,439,258	8,149,217	7,213,430

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Allowance for Loan Losses

12 Months Ended

Dec. 31, 2011

Allowance for Loan Losses [Abstract]

Allowance for Loan Losses

(5)  Allowance for Loan Losses

Changes in the allowance for loan losses for the years ended December 31 are as follows:

	December 31
	2011			2010			2009
Balance, Beginning of Year	$	28,280,077		$	31,400,641		$	17,015,883
Provision for Loan Losses		8,250,000			13,350,000			43,445,000
Loans Charged Off		(22,850,673	)		(17,622,454	)		(29,493,324	)
Recoveries of Loans Previously Charged Off		1,970,190			1,151,890			433,082
Balance, End of Year	$	15,649,594		$	28,280,077		$	31,400,641

The following table details activity in the allowance for loan losses, segregated by class of loan, for the year ended December 31, 2011.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

2011	Beginning Balance		Charge-Offs			Recoveries		Provision			Ending Balance
Commercial and Industrial
Commercial	$	4,414,817	$	(841,887	)	$	127,490	$	(2,629,860	)	$	1,070,560
Industrial		698,637		(455,165	)		454,453		(400,757	)		297,168
Real Estate
Commercial Construction		4,126,043		(6,957,181	)		557,168		5,396,564			3,122,594
Residential Construction		519,766		(481	)		-		(381,193	)		138,092
Commercial		8,029,525		(12,492,097	)		527,996		10,382,640			6,448,064
Residential		5,941,696		(1,704,887	)		149,173		(690,625	)		3,695,357
Farmland		944,323		(60,447	)		411		(519,624	)		364,663
Consumer and Other
Consumer		3,074,220		(222,878	)		145,279		(2,791,467	)		205,154
Other		531,050		(115,650	)		8,220		(115,678	)		307,942
	$	28,280,077	$	(22,850,673	)	$	1,970,190	$	8,250,000		$	15,649,594

The following table details activity in the allowance for loan losses, segregated by class of loan, for the year ended December 31, 2010.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

2010	Beginning Balance		Charge-Offs			Recoveries		Provision		Ending Balance
Commercial and Industrial
Commercial	$	3,930,760	$	(469,214	)	$	80,181	$	873,090	$	4,414,817
Industrial		779,337		(255,627	)		1,377		173,550		698,637
Real Estate
Commercial Construction		7,402,484		(4,648,124	)		184,868		1,186,815		4,126,043
Residential Construction		447,676		-			-		72,090		519,766
Commercial		8,790,443		(7,459,619	)		141,931		6,556,770		8,029,525
Residential		5,025,839		(2,929,668	)		439,940		3,405,585		5,941,696
Farmland		942,019		(271,750	)		7,639		266,415		944,323
Consumer and Other
Consumer		2,826,058		(548,834	)		245,641		551,355		3,074,220
Other		1,256,025		(1,039,618	)		50,313		264,330		531,050
	$	31,400,641	$	(17,622,454	)	$	1,151,890	$	13,350,000	$	28,280,077

The Company determines its individual loan reserves during its quarterly review of substandard loans.  This process involves reviewing all loans with a risk grade of 6 or below and an outstanding balance of $50,000 or more.  At December 31, 2011 and 2010, impaired loans totaling $995,168 and $976,971 were below the $50,000 review threshold and were not individually reviewed for impairment.  Those loans were subject to the bank's general loan loss reserve methodology and are included in the “Collectively Evaluated for Impairment” column of the following tables.  Since not all loans in the substandard category are considered impaired, this quarterly assessment often results in the identification of individual reserves which are placed against certain loans as part of management's allowance for loan loss calculation.  The total of these loans and the related reserves are presented in the column titled “Substandard Loans Individually Reviewed for Impairment” in the following tables.  The following tables present breakdowns of the allowance for loan losses, segregated by impairment methodology for December 31, 2011 and 2010:

					Ending Allowance Balance
2011	Nonaccrual/TDR Individually Evaluated for Impairment		Substandard Individually Evaluated for Impairment		Total Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial and Industrial
Commercial	$	308,211	$	590,543	$	898,754	$	171,806	$	1,070,560
Industrial		-		-		-		297,168		297,168
Real Estate
Commercial Construction		2,693,571		190,800		2,884,371		238,223		3,122,594
Residential Construction		-		-		-		138,092		138,092
Commercial		2,060,815		347,260		2,408,075		4,039,989		6,448,064
Residential		674,998		764,835		1,439,833		2,255,524		3,695,357
Farmland		11,878		-		11,878		352,785		364,663
Consumer and Other
Consumer		1,632		33,000		34,632		170,522		205,154
Other		-		-		-		307,942		307,942
Total End of Period Allowance Balance	$	5,751,105	$	1,926,438	$	7,677,543	$	7,972,051	$	15,649,594

					Ending Loan Balance
2011	Nonaccrual/TDR Individually Evaluated for Impairment		Substandard Individually Evaluated for Impairment		Total Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial and Industrial
Commercial	$	2,237,878	$	2,300,231	$	4,538,109	$	44,447,993	$	48,986,102
Industrial		-		164,090		164,090		8,257,794		8,421,884
Real Estate
Commercial Construction		24,212,519		2,560,484		26,773,003		31,772,817		58,545,820
Residential Construction		-		-		-		3,530,502		3,530,502
Commercial		35,715,026		4,629,461		40,344,487		274,936,261		315,280,748
Residential		5,614,744		4,441,958		10,056,702		183,581,115		193,637,817
Farmland		486,683		2,589,640		3,076,323		45,149,083		48,225,406
Consumer and Other
Consumer		9,596		38,354		47,950		30,401,353		30,449,303
Other		-		22,166		22,166		9,221,573		9,243,739
Total End of Period Loan Balance	$	68,276,446	$	16,746,384	$	85,022,830	$	631,298,491	$	716,321,321

The presentation of loans individually reviewed for impairment is consolidated into one column for the year ended December 31, 2010.

	Ending Allowance Balance
2010	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial and Industrial
Commercial	$	336,011	$	4,078,806	$	4,414,817
Industrial		-		698,637		698,637
Real Estate
Commercial Construction		3,501,117		624,926		4,126,043
Residential Construction		-		519,766		519,766
Commercial		7,539,533		489,992		8,029,525
Residential		1,561,952		4,379,744		5,941,696
Farmland		-		944,323		944,323
Consumer and Other
Consumer		3,033		3,071,187		3,074,220
Other		-		531,050		531,050
Total End of Period Allowance Balance	$	12,941,646	$	15,338,431	$	28,280,077

	Ending Loan Balance
2010	Individually Reviewed for Impairment		Collectively Reviewed for Impairment		Total
Commercial and Industrial
Commercial	$	2,131,375	$	51,088,966	$	53,220,341
Industrial		274,679		10,277,112		10,551,791
Real Estate
Commercial Construction		28,392,107		43,917,124		72,309,231
Residential Construction		194,881		4,178,130		4,373,011
Commercial		58,562,946		304,315,619		362,878,565
Residential		13,645,907		193,825,906		207,471,813
Farmland		1,416,538		51,361,851		52,778,389
Consumer and Other
Consumer		76,420		33,487,443		33,563,863
Other		113,002		15,990,667		16,103,669
	$	104,807,855	$	708,442,818	$	813,250,673

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Loans

12 Months Ended

Dec. 31, 2011

Loans [Abstract]

Loans

(4)  Loans

The following table presents the composition of loans, segregated by class of loans, as of December 31:

	2011		2010
Commercial and Industrial
Commercial	$	48,986,102	$	53,220,341
Industrial		8,421,884		10,551,791
Real Estate
Commercial Construction		58,545,820		72,309,231
Residential Construction		3,530,502		4,373,011
Commercial		315,280,748		362,878,565
Residential		193,637,817		207,471,813
Farmland		48,225,406		52,778,389
Consumer and Other
Consumer		30,449,303		33,563,863
Other		9,243,739		16,103,669
Total Loans	$	716,321,321	$	813,250,673

Commercial and industrial loans are extended to a diverse group of businesses within the Company's market area.  These loans are often underwritten based on the borrower's ability to service the debt from income from the business.  Real estate construction loans often require loan funds to be advanced prior to completion of the project.  Due to uncertainties inherent in estimating construction costs, changes in interest rates and other economic conditions, these loans often pose a higher risk than other types of loans.  Consumer loans are originated at the bank level.  These loans are generally smaller loan amounts spread across many individual borrowers to help minimize risk.

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

The Company uses a risk grading matrix to assign a risk grade to each of its loans.  Loans are graded on a scale of 1 to 8.  A description of the general characteristics of the grades is as follows:

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

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

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

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

· Grades 7 and 8 - These grades correspond to regulatory classification definitions of “doubtful” and “loss,” respectively.  In practice, any loan with these grades would be for a very short period of time, and generally the Company has no loans with these assigned grades.  Management manages the Company's problem loans in such a way that uncollectible loans or uncollectible portions of loans are charged off immediately with any residual, collectible amounts assigned a risk grade     of 6.

The following table presents the loan portfolio by credit quality indicator (risk grade) as of December 31. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes.

December 31, 2011	Pass		Special Mention		Substandard		Total Loans
Commercial and Industrial
Commercial	$	42,586,230	$	1,480,726	$	4,919,146	$	48,986,102
Industrial		8,153,224		-		268,660		8,421,884
Real Estate
Commercial Construction		28,745,596		2,814,113		26,986,111		58,545,820
Residential Construction		3,227,392		303,110		-		3,530,502
Commercial		272,062,206		14,789,290		28,429,252		315,280,748
Residential		175,099,480		8,343,336		10,195,001		193,637,817
Farmland		43,664,126		1,413,476		3,147,804		48,225,406
Consumer and Other
Consumer		29,372,493		361,714		715,096		30,449,303
Other		9,028,428		99,418		115,893		9,243,739
Total Loans	$	611,939,175	$	29,605,183	$	74,776,963	$	716,321,321

December 31, 2010	Pass		Special Mention		Substandard		Total Loans
Commercial and Industrial
Commercial	$	48,731,982	$	2,498,305	$	1,990,054	$	53,220,341
Industrial		10,059,081		169,381		323,329		10,551,791
Real Estate
Commercial Construction		33,522,709		10,064,271		28,722,251		72,309,231
Residential Construction		3,974,130		204,000		194,881		4,373,011
Commercial		294,186,347		11,847,051		56,845,167		362,878,565
Residential		183,518,173		9,195,410		14,758,230		207,471,813
Farmland		49,499,619		1,838,814		1,439,956		52,778,389
Consumer and Other
Consumer		32,046,108		726,933		790,822		33,563,863
Other		14,553,167		1,185,260		365,242		16,103,669
Total Loans	$	670,091,316	$	37,729,425	$	105,429,932	$	813,250,673

A loan's risk grade is assigned at the inception of the loan and is based on the financial strength of the borrower and the type of collateral.  Loan risk grades are subject to reassessment at various times throughout the year as part of the Company's ongoing loan review process.  Loans with an assigned risk grade of 6 or below and an outstanding balance of $50,000 or more are reassessed on a quarterly basis.  During this reassessment process individual reserves may be identified and placed against certain loans which are not considered impaired.

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

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.  Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past due or when, in management's opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provision.  Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.  Nonaccrual loans totaled $38,821,632 and $28,901,974 as of December 31, 2011 and 2010, respectively, and total recorded investment in loans past due 90 days or more and still accruing interest totaled $15,160 and $19,188, respectively.  During its review of impaired loans, the Company determined the majority of its exposures on these loans were known losses.  As a result, the exposures were charged off, reducing the specific allowances on impaired loans.

The following table represents an age analysis of past due loans and nonaccrual loans, segregated by class of loans, as of December 31:

	Accruing Loans
2011	30-89 Days Past Due		90 Days  or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
Commercial and Industrial
Commercial	$	644,899	$	-	$	644,899	$	2,102,522	$	46,238,681	$	48,986,102
Industrial		-		-		-		85,670		8,336,214		8,421,884
Real Estate
Commercial Construction		513,905		-		513,905		23,578,263		34,453,652		58,545,820
Residential Construction		33,541		-		33,541		-		3,496,961		3,530,502
Commercial		2,930,743		-		2,930,743		9,193,650		303,156,355		315,280,748
Residential		2,251,009		15,160		2,266,169		3,110,032		188,261,616		193,637,817
Farmland		376,426		-		376,426		486,683		47,362,297		48,225,406
Consumer and Other
Consumer		410,041		-		410,041		221,360		29,817,902		30,449,303
Other		-		-		-		43,452		9,200,287		9,243,739
Total Loans	$	7,160,564	$	15,160	$	7,175,724	$	38,821,632	$	670,323,965	$	716,321,321
2010
Commercial and Industrial
Commercial	$	382,728	$	-	$	382,728	$	393,823	$	52,443,790	$	53,220,341
Industrial		100,810		-		100,810		175,062		10,275,919		10,551,791
Real Estate
Commercial Construction		1,514,127		-		1,514,127		10,181,795		60,613,309		72,309,231
Residential Construction		194,881		-		194,881		-		4,178,130		4,373,011
Commercial		11,790,383		-		11,790,383		13,567,530		337,520,652		362,878,565
Residential		4,268,098		15,876		4,283,974		3,057,049		200,130,790		207,471,813
Farmland		566,868		-		566,868		1,157,528		51,053,993		52,778,389
Consumer and Other
Consumer		702,795		3,312		706,107		290,115		32,567,641		33,563,863
Other		218,887		-		218,887		79,072		15,805,710		16,103,669
Total Loans	$	19,739,577	$	19,188	$	19,758,765	$	28,901,974	$	764,589,934	$	813,250,673

Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $1,639,800, $1,621,700 and $2,318,100 for the years ended December 31, 2011, 2010 and 2009, respectively.

During the first quarter, as a result of recently issued guidance regarding troubled debt restructurings, the Company reviewed its policy for designating loans as impaired.  As a result of this review, the Company identified additional loans which are now included in the impaired loan disclosures that were not previously reported as impaired.  The loans identified were those troubled debt restructurings which were on accrual status.  The inclusion of these accruing troubled debt restructurings in the impaired loan disclosures for December 31, 2011 did not have an impact on the allowance for loan losses.

The following table details impaired loan data as of December 31, 2011:

	Unpaid Contractual Principal Balance		Impaired Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized			Interest Income Collected
With No Related Allowance Recorded
Commercial	$	1,742,961	$	1,580,140	$	-	$	946,466	$	60,078		$	65,346
Agricultural		85,670		85,670		-		208,162		(4,024	)		-
Commercial Construction		17,699,542		12,799,454		-		13,309,517		116,077			143,443
Commercial Real Estate		34,686,574		29,384,623		-		27,027,403		832,590			834,161
Residential Real Estate		2,600,919		1,933,669		-		3,176,244		88,419			80,334
Farmland		277,656		227,233		-		342,280		66,273			66,273
Consumer		228,688		215,956		-		184,372		10,732			12,203
Other		51,666		43,452		-		39,621		1,107			1,606
		57,373,676		46,270,197		-		45,234,065		1,171,252			1,203,366
With An Allowance Recorded
Commercial		775,506		775,506		308,211		213,898		15,086			19,171
Agricultural		-		-		-		-		-			-
Commercial Construction		14,035,742		11,489,233		2,693,571		10,470,491		13,759			61,012
Commercial Real Estate		6,429,874		6,429,874		2,060,815		6,556,769		181,799			197,132
Residential Real Estate		4,771,867		4,041,950		674,998		3,858,609		97,383			96,534
Farmland		298,893		259,450		11,878		64,862		(17,958	)		-
Consumer		5,404		5,404		1,632		3,987		607			724
Other		-		-		-		19,566		-			-
		26,317,286		23,001,417		5,751,105		21,188,182		290,676			374,573
Total
Commercial		2,518,467		2,355,646		308,211		1,160,364		75,164			84,517
Agricultural		85,670		85,670		-		208,162		(4,024	)		-
Commercial Construction		31,735,284		24,288,687		2,693,571		23,780,008		129,836			204,455
Commercial Real Estate		41,116,448		35,814,497		2,060,815		33,584,172		1,014,389			1,031,293
Residential Real Estate		7,372,786		5,975,619		674,998		7,034,853		185,802			176,868
Farmland		576,549		486,683		11,878		407,142		48,315			66,273
Consumer		234,092		221,360		1,632		188,359		11,339			12,927
Other		51,666		43,452		-		59,187		1,107			1,606
	$	83,690,962	$	69,271,614	$	5,751,105	$	66,422,247	$	1,461,928		$	1,577,939

The following table details impaired loan data as of December 31, 2010:

	Impaired Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized			Interest Income Collected
With No Related Allowance Recorded
Commercial	$	258,676	$	-	$	308,508	$	(987	)	$	5,465
Agricultural		175,062		-		220,716		689			689
Commercial Construction		10,181,795		-		11,760,840		7,320			31,963
Residential Construction		-		-		8,248		-			-
Commercial Real Estate		4,270,905		-		9,041,753		80,585			85,448
Residential Real Estate		3,057,049		-		3,931,449		41,420			53,813
Farmland		1,157,528		-		645,619		(6,571	)		10,969
Consumer		290,115		-		296,301		17,166			19,342
Other		79,072		-		129,249		4,550			7,760
		19,470,202		-		26,342,683		144,172			215,449
With An Allowance Recorded
Commercial		135,146		116,159		33,787		(1,125	)		3,316
Commercial Real Estate		9,296,626		539,671		2,324,156		341,937			475,999
		9,431,772		655,830		2,357,943		340,812			479,315
Total
Commercial		393,822		116,159		342,295		(2,112	)		8,781
Agricultural		175,062		-		220,716		689			689
Commercial Construction		10,181,795		-		11,760,840		7,320			31,963
Residential Construction		-		-		8,248		-			-
Commercial Real Estate		13,567,531		539,671		11,365,909		422,522			561,447
Residential Real Estate		3,057,049		-		3,931,449		41,420			53,813
Farmland		1,157,528		-		645,619		(6,571	)		10,969
Consumer		290,115		-		296,301		17,166			19,342
Other		79,072		-		129,249		4,550			7,760
	$	28,901,974	$	655,830	$	28,700,626	$	484,984		$	694,764

Troubled Debt Restructurings (TDRs) are troubled loans on which the original terms of the loan have been modified in favor of the borrower due to deterioration in the borrower's financial condition.  Each potential loan modification is reviewed individually and the terms of the loan are modified to meet the borrower's specific circumstances at a point in time.  Not all loan modifications are TDRs.  Loan modifications are reviewed and approved by the Company's senior lending staff, who then determine whether the loan meets the criteria for a TDR.  Generally, the types of concessions granted to borrowers that are evaluated in determining whether a loan is classified as a TDR include:

· Interest rate reductions - Occur when the stated interest rate is reduced to a nonmarket rate or a rate the borrower would not be able to obtain elsewhere under similar circumstances.

· Amortization or maturity date changes - Result when the amortization period of the loan is extended beyond what is considered a normal amortization period for loans of similar type with similar collateral.

· Principal reductions - These are often the result of commercial real estate loan workouts where two new notes are created.  The primary note is underwritten based upon our normal underwriting standards and is structured so that the projected cash flows are sufficient to repay the contractual principal and interest of the newly restructured note.  The terms of the secondary note vary by situation and often involve that note being charged-off, or the principal and interest payments being deferred until after the primary note has been repaid.  In situations where a portion of the note is charged-off during modification there is often no specific reserve allocated to those loans.  This is due to the fact that the amount of the charge-off usually represents the excess of the original loan balance over the collateral value and the Company has determined there is no additional exposure on those loans.

As discussed in Note 1, Summary of Significant Accounting Policies, once a loan is identified as a TDR, it is accounted for as an impaired loan.  The Company had no unfunded commitments to lend to a customer that has a troubled debt restructured loan as of December 31, 2011.  The following tables present the number of loan contracts restructured during the 12 months ended December 31, 2011 and the pre- and post-modification recorded investment as well as the number of contracts and the recorded investment for those TDRs modified during the previous 12 months which subsequently defaulted during the period.  Loans modified in a troubled debt restructuring are considered to be in default once the loan becomes 90 days past due.

Troubled Debt Restructurings	# of Contracts		Pre-Modification		Post-Modification
Commercial		3	$	3,240,469	$	1,541,882
Commercial Construction		3		1,430,147		1,430,101
Commercial RE		9		20,827,349		15,906,547
Residential RE		8		1,505,356		1,456,878
Total Loans		23	$	27,003,321	$	20,335,408

Troubled Debt Restructurings That Subsequently Defaulted	# of Contracts		Recorded Investment
Commercial		1	$	1,175,922
Commercial Construction		3		4,475,473
Commercial RE		3		2,322,361
Total Loans		7	$	7,973,756

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Restricted Stock Unearned Compensation

12 Months Ended

Dec. 31, 2011

Restricted Stock Unearned Compensation [Abstract]

Restricted Stock - Unearned Compensation

(16) Restricted Stock - Unearned Compensation

In April 2004, the stockholders 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 (split-adjusted) is 143,500.  To date, 53,256 shares have been issued under this plan and 17,798 shares have been forfeited; thus, remaining shares which may be issued are 108,042 at December 31, 2011.   The shares are recorded at fair market value (on the date granted) as a separate component of stockholders' equity. The cost of these shares is being amortized against earnings using the straight-line method over three years (the restriction period).

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Securities Sold Under to Repurchase Agreements

12 Months Ended

Dec. 31, 2011

Securities Sold Under Repurchase Agreements [Abstract]

Securities Sold Under to Repurchase Agreements

(12) Securities Sold Under Agreements to Repurchase

On December 31, 2010, the Company had $20,000,000 outstanding in securities sold under an agreement to repurchase.  Interest payments were due quarterly at a fixed rate of 3.34 percent.  The repurchase agreement was secured with U.S. Government mortgage-backed securities.  The repurchase agreement matured on June 30, 2011.  At December 31, 2011, the Company had an available repurchase agreement line of credit with a third party totaling $50,000,000.  Use of this credit facility is subject to the underwriting and risk management policies of the third-party in effect at the time of the request.  Such policies may take into consideration current market conditions, the current financial condition of the Company and the ability of the Company to provide adequate securities as collateral for the transaction, among other factors.

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Intangible Assets

12 Months Ended

Dec. 31, 2011

Intangible Assets [Abstract]

Intangible Assets

(8)  Intangible Assets

The following is an analysis of the core deposit intangible activity for the years ended December 31:

	Core Deposit Intangible		Accumulated Amortization			Net Core Deposit Intangible
Core Deposit Intangible
Balance, December 31, 2009	$	1,056,693	$	(725,937	)	$	330,756
Amortization Expense		-		(35,749	)		(35,749	)
Balance, December 31, 2010		1,056,693		(761,686	)	$	295,007
Amortization Expense		-		(35,749	)		(35,749	)
Balance, December 31, 2011	$	1,056,693	$	(797,435	)	$	259,258

Amortization expense related to the core deposit intangible was $35,749 for the years ended December 31, 2011, 2010 and 2009.  Amortizations expense will continue at an annual rate of approximately $35,750 through the first quarter of 2019, at which point the core deposit will be fully amortized.

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Premises and Equipment

12 Months Ended

Dec. 31, 2011

Premises and Equipment [Abstract]

Premises and Equipment

(6)  Premises and Equipment

Premises and equipment are comprised of the following as of December 31:

	2011			2010
Land	$	7,780,167		$	7,787,667
Building		23,662,849			23,790,525
Furniture, Fixtures and Equipment		12,982,160			13,737,177
Leasehold Improvements		994,637			993,086
Construction in Progress		77,366			-
		45,497,179			46,308,455
Accumulated Depreciation		(19,746,944	)		(19,160,730	)
	$	25,750,235		$	27,147,725

Depreciation charged to operations totaled $1,790,041 in 2011, $2,140,735 in 2010 and $2,092,845 in 2009.

Certain Company facilities and equipment are leased under various operating leases.  Rental expense approximated $376,000 for 2011, $377,000 for 2010 and $365,000 for 2009.

Future minimum rental payments as of December 31, 2011 are as follows:

Year Ending December 31	Amount
2012	$	126,033
2013		88,658
2014		10,139
	$	224,830

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Other Real Estate Owned

12 Months Ended

Dec. 31, 2011

Other Real Estate Owned [Abstract]

Other Real Estate Owned

(7)  Other Real Estate Owned

The aggregate carrying amount of Other Real Estate Owned (OREO) at December 31, 2011 and 2010 was $20,445,805 and $20,207,806, respectively.  All of the Company's other real estate owned represents properties acquired through foreclosure or deed in lieu of foreclosure.  The following table details the change in OREO during 2011 and 2010.

	December 31
	2011			2010
Balance, Beginning of Year	$	20,207,806		$	19,705,044
Additions		12,555,622			13,159,402
Sales of OREO		(9,804,669	)		(9,531,210	)
Loss on Sale		(1,102,613	)		(1,832,256	)
Provision for Losses		(1,411,061	)		(1,293,174	)
Balance, End of Year	$	20,445,085		$	20,207,806

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Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

(9)  Income Taxes

The components of income tax expense for the years ended December 31 are as follows:

	2011			2010			2009
Current Federal (Benefit) Expense	$	311,174		$	(1,037,717	)	$	(4,075,442	)
Deferred Federal (Benefit) Expense		867,006			639,607			(5,869,055	)
Federal Income Tax (Benefit) Expense		1,178,180			(398,110	)		(9,944,497	)
Current State Income Tax (Benefit) Expense		(74,297	)		(61,104	)		(50,384	)
	$	1,103,883		$	(459,214	)	$	(9,994,881	)

The federal income tax (benefit) expense of $1,178,180 in 2011, $(398,110) in 2010 and $(9,944,497) in 2009 is different than the income taxes computed by applying the federal statutory rates to income before income taxes.  The reasons for the differences are as follows:

	2011			2010			2009
Statutory Federal Income Taxes	$	1,228,538		$	5,101		$	(9,920,776	)
Tax-Exempt Interest		(126,468	)		(117,586	)		(185,775	)
Interest Expense Disallowance		8,751			8,400			16,729
Premiums on Officers' Life Insurance		(52,431	)		(134,106	)		(58,906	)
Meal and Entertainment Disallowance		20,693			24,972			32,068
Goodwill		-			-			58,507
Other		99,097			(184,891	)		113,656
Actual Federal Income Taxes	$	1,178,180		$	(398,110	)	$	(9,944,497	)

Deferred taxes in the accompanying consolidated balance sheets as of December 31 include the following:

	2011			2010
Deferred Tax Assets
Allowance for Loan Losses	$	5,320,862		$	9,615,226
Other Real Estate		1,012,326			511,839
Deferred Compensation		386,225			423,233
Restricted Stock		508,547			504,772
Goodwill		392,124			439,100
Net Operating Loss Carryforward		2,992,777
Other		559,836			470,435
		11,172,697			11,964,605
Deferred Tax Liabilities
Premises and Equipment		(1,195,334	)		(1,184,064	)
Vested Restricted Stock		(476,540	)		(412,715	)
Other		(4,185	)		(4,185	)
		(1,676,059	)		(1,600,964	)
Deferred Tax Assets (Liabilities) on Unrealized Securities Gains (Losses)		(983,807	)		308,982
Net Deferred Tax Assets	$	8,512,831		$	10,672,623

As discussed in Note 1, certain positions taken in the Company's tax returns may be subject to challenge by the taxing authorities.  An analysis of activity related to unrecognized taxes follows as of        December 31, 2011 and 2010.

	2011			2010
Balance, Beginning	$	78,121		$	221,584
Positions Taken During the Current Year		14,275			17,259
Reductions Resulting from Lapse of Statutes of Limitation		(59,028	)		(160,722	)
Balance, Ending	$	33,368		$	78,121

The net reduction of $44,753 and $143,463 is included in income tax benefits for the years ended December 31, 2011 and 2010, respectively.

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Subordinated Debentures (Trust Preferred Securities)

12 Months Ended

Dec. 31, 2011

Subordinated Debentures (Trust Preferred Securities) [Abstract]

Subordinated Debentures (Trust Preferred Securities)

(14) Subordinated Debentures (Trust Preferred Securities)

During the second quarter of 2004, the Company formed a third subsidiary whose sole purpose was to issue $4,500,000 in Trust Preferred Securities through a pool sponsored by FTN Financial Capital Markets.  The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions.  At December 31, 2011, the floating rate securities had a 3.24 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 2.68 percent.

During the second quarter of 2006, the Company formed a fourth subsidiary whose sole purpose was to issue $5,000,000 in Trust Preferred Securities in a private placement by SunTrust Bank Capital Markets.  The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions.  At December 31, 2011, the floating rate securities had a 2.08 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 1.50 percent.

During the first quarter of 2007, the Company formed a fifth subsidiary whose sole purpose was to issue $9,000,000 in Trust Preferred Securities through a pool sponsored by Trapeza Capital Management, LLC.  The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions.  At December 31, 2011, the floating rate securities had a 2.23 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 1.65 percent.  Proceeds from this issuance were used to pay off the Trust Preferred Securities with the first subsidiary formed in March 2002 as the Company exercised its option to call.

During the third quarter of 2007, the Company formed a sixth subsidiary whose sole purpose was to issue $5,000,000 in Trust Preferred Securities through a pool sponsored by Trapeza Capital Management, LLC.  The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions.  At December 31, 2011, the floating rate securities had a 1.83 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 1.40 percent.  Proceeds from this issuance were used to pay off the Trust Preferred Securities with the second subsidiary formed in December 2002 as the Company exercised its option to call.

The Trust Preferred Securities are recorded as a liability on the consolidated balance sheets, but, subject to certain limitations, qualify as Tier 1 capital for regulatory capital purposes.  The proceeds from the offerings were used to fund the cash portion of the Quitman acquisition, pay off holding Company debt, and inject capital into the bank subsidiary.

The total aggregate principal amount of trust preferred certificates outstanding at December 31, 2011 was $23,500,000.  The total aggregate principal amount of subordinated debentures outstanding at     December 31, 2011 was $24,229,000.

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Deferred Compensation Plan

12 Months Ended

Dec. 31, 2011

Deferred Compensation Plan [Abstract]

Deferred Compensation Plan

(19) Deferred Compensation Plan

Colony Bank, the wholly-owned subsidiary, has deferred compensation plans covering certain former directors and certain officers choosing to participate through individual deferred compensation contracts.  In accordance with terms of the contracts, the Bank is committed to pay the participant's deferred compensation over a specified number of years, beginning at age 65.  In the event of a participant's death before age 65, payments are made to the participant's named beneficiary over a specified number of years, beginning on the first day of the month following the death of the participant.

Liabilities accrued under the plans totaled $1,135,956 and $1,244,803 as of December 31, 2011 and 2010, respectively.  Benefit payments under the contracts were $196,501 in 2011 and $206,955 in 2010.  Provisions charged to operations totaled $98,901 in 2011, $154,553 in 2010 and $361,171 in 2009.

Fee income recognized with deferred compensation plans totaled $154,210 in 2011, $182,685 in 2010 and $173,253 in 2009.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) [Abstract]
Net Income (Loss)	$ 2,533,595	$ 474,216	$ (19,183,874)
Other Comprehensive Income, Net of Tax
Gains on Securities Arising During the Year	4,439,108	1,227,281	1,257,136
Reclassification Adjustment	(1,929,577)	(1,727,261)	(1,733,072)
Change in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of Reclassification Adjustment and Tax Effects	2,509,531	(499,980)	(475,936)
Comprehensive Income (Loss)	$ 5,043,126	$ (25,764)	$ (19,659,810)

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Investment Securities

12 Months Ended

Dec. 31, 2011

Investment Securities [Abstract]

Investment Securities

(3)  Investment Securities

Investment securities as of December 31, 2011 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
U.S. Government Agencies  Mortgage-Backed	$	291,096,606	$	3,152,095	$	(187,902	)	$	294,060,799
State, County and Municipal		7,474,500		132,226		(23,035	)		7,583,691
Corporate Obligations		2,000,000		123,930		(10,000	)		2,113,930
Asset-Backed Securities		426,191		-		(293,764	)		132,427
	$	300,997,297	$	3,408,251	$	(514,701	)	$	303,890,847
Securities Held to Maturity
State, County and Municipal	$	46,111	$	-	$	(476	)	$	45,635

The amortized cost and fair value of investment securities as of December 31, 2011, by contractual maturity, are shown hereafter.  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 After One Year Through Five Years	$	2,684,705	$	2,830,842	$	46,111	$	45,635
Due After Five Years Through Ten Years		4,473,468		4,550,705		-		-
Due After Ten Years		2,742,518		2,448,501		-		-
		9,900,691		9,830,048		46,111		45,635
Mortgage-Backed Securities		291,096,606		294,060,799		-		-
	$	300,997,297	$	303,890,847	$	46,111	$	45,635

Investment securities as of December 31, 2010 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
U.S. Government Agencies  Mortgage-Backed	$	299,018,595	$	1,763,198	$	(2,319,337	)	$	298,462,456
State, County and Municipal		3,248,533		34,391		(26,691	)		3,256,233
Corporate Obligations		2,000,000		101,920		(115,430	)		1,986,490
Asset-Backed Securities		479,249		-		(346,822	)		132,427
	$	304,746,377	$	1,899,509	$	(2,808,280	)	$	303,837,606
Securities Held to Maturity
State, County and Municipal	$	48,412	$	4,529	$	-		$	52,941

Proceeds from sales of investments available for sale were $342,672,937 in 2011, $286,387,727 in 2010 and $368,575,701 in 2009.  Gross realized gains totaled $2,978,193 in 2011, $2,617,062 in 2010 and $3,204,669 in 2009.  Gross realized losses totaled $54,592 in 2011, $0 in 2010 and $578,802 in 2009.

Nonaccrual securities are securities for which principal and interest are doubtful of collection in accordance with original terms and for which accruals of interest have been discontinued due to payment delinquency.  Fair value of securities on nonaccrual status totaled $132,000 as of December 31, 2011 and 2010.

Investment securities having a carrying value totaling $136,838,456 and $123,789,118 as of             December 31, 2011 and 2010, respectively, were pledged to secure public deposits and for other purposes.

Information pertaining to securities with gross unrealized losses at December 31, 2011 and 2010 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
December 31, 2011
U.S. Government Agencies Mortgage-Backed	$	26,439,317	$	(187,902	)	$	-	$	-		$	26,439,317	$	(187,902	)
State, County and Municipal		1,224,119		(21,704	)		73,193		(1,807	)		1,297,312		(23,511	)
Corporate Obligations		-		-			990,000		(10,000	)		990,000		(10,000	)
Asset-Backed Securities		-		-			132,427		(293,764	)		132,427		(293,764	)
	$	27,663,436	$	(209,606	)	$	1,195,620	$	(305,571	)	$	28,859,056	$	(515,177	)
December 31, 2010
U.S. Government Agencies Mortgage-Backed	$	152,286,738	$	(2,319,337	)	$	-	$	-		$	152,286,738	$	(2,319,337	)
State, County and Municipal		1,776,763		(26,691	)		-		-			1,776,763		(26,691	)
Corporate Obligations		-		-			884,570		(115,430	)		884,570		(115,430	)
Asset-Backed Securities		-		-			132,427		(346,822	)		132,427		(346,822	)
	$	154,063,501	$	(2,346,028	)	$	1,016,997	$	(462,252	)	$	155,080,498	$	(2,808,280	)

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

At December 31, 2011, the debt securities with unrealized losses have depreciated 1.75 percent from the Company's amortized cost basis. These securities are guaranteed by either the U.S. Government, other governments or U.S. corporations, except for asset-backed securities.  In analyzing an issuer's financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer's financial condition.  The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased.  As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other than temporary.  However, the Company did own one asset-backed security at December 31, 2011 which has been in a continuous unrealized loss position for more than 12 months.  This investment is comprised of one issuance of a trust preferred security, has a book value of $426,191 and an unrealized loss of $293,764.  Management evaluates this investment on a quarterly basis utilizing a third-party valuation model.  The results of this model revealed other-than-temporary impairment and as a result, $53,058 and $520,751 were written off during the years ended December 31, 2011 and 2009, respectively.  The Company does not intend to sell this investment, nor does the Company consider it likely that it will be required to sell the investment prior to recovery of the remaining fair value.

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Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2011

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

(20) Supplemental Cash Flow Information

Cash payments for the following were made during the years ended December 31:

	2011		2010		2009
Interest Expense	$	17,204,476	$	21,975,968	$	27,537,602
Income Taxes	$	390,152	$	275,000	$	-

Noncash financing and investing activities for the years ended December 31 are as follows:

	2011			2010		2009
Acquisitions of Real Estate Through Loan Foreclosures	$	12,555,622		$	13,159,402	$	19,258,910
Unrealized (Gain) Loss on Investment Securities	$	(3,802,320	)	$	757,545	$	721,116

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Other Borrowed Money

12 Months Ended

Dec. 31, 2011

Other Borrowed Money [Abstract]

Other Borrowed Money

(13) Other Borrowed Money

Other borrowed money at December 31 is summarized as follows:

	2011		2010
Federal Home Loan Bank Advances	$	71,000,000	$	71,000,000
Other Secured Borrowing		-		4,076,010
	$	71,000,000	$	75,076,010

Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from 2012 to 2019 and interest rates ranging from 3.17 percent to 4.75 percent.  As collateral on the outstanding FHLB advances, the Company has provided a blanket lien on its portfolio of qualifying residential first mortgage loans and commercial loans.  In addition, the Company has pledged certain available-for-sale investment securities with carrying values at December 31, 2011 of approximately $36,047,000 as additional collateral, as well as cash balances held on deposit with the FHLB.  At December 31, 2011 the Company had remaining credit availability from the FHLB of approximately $100,440,000.  The Company may be required to pledge additional qualifying collateral in order to utilize the full amount of the remaining credit line.

Secured borrowings represent the transfer of the guaranteed portion of SBA loans at a premium in which the Company was obligated by the SBA to refund the premium to the “purchaser” if the loan was repaid within 90 days of the transfer.  Under current accounting standards, this premium refund obligation was a form of recourse, which means that the transferred guaranteed portion of the loan does not meet the definition of a “participating interest” for the 90-day period that the premium refund obligation existed.  As a result, the transfer was accounted for as a secured borrowing during this period.  Effective     February 15, 2011, all loans submitted for secondary market sales eliminated the warranty or the 90-day recourse period and the premium began to be recognized at the time of the sale.

The aggregate stated maturities of other borrowed money at December 31, 2011 are as follows:

Year	Amount
2012	$	41,000,000
2013		-
2014		-
2015		-
2016 and Thereafter		30,000,000
	$	71,000,000

The Company also has available federal funds lines of credit with various financial institutions totaling $43,000,000, of which there were none outstanding at December 31, 2011.

In addition, the Company has the ability to borrow funds from the Federal Reserve Bank (FRB) of Atlanta utilizing the discount window.  The discount window is an instrument of monetary policy that allows eligible institutions to borrow money from the FRB on a short-term basis to meet temporary liquidity shortages caused by internal or external disruptions.  At December 31, 2011, the Company had approximately $6.4 million of borrowing capacity available under this arrangement, with no outstanding balances.  Certain available-for-sale investment securities totaling approximately $6.5 million were pledged as collateral under this agreement.