SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

EXCHANGE ACT OF 1934

FOR QUARTER ENDED SEPTEMBER 30, 2003

COMMISSION FILE NUMBER 0-12436

COLONY BANKCORP, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

GEORGIA	58-1492391
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(I.R.S. EMPLOYER IDENTIFICATION NUMBER)

115 SOUTH GRANT STREET, FITZGERALD, GEORGIA 31750

ADDRESS OF PRINCIPAL EXECUTIVE OFFICES

229/426-6000

REGISTRANT’S TELEPHONE NUMBER INCLUDING AREA CODE

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED REPORTS REQUIRED TO BE FILED BY SECTIONS 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.  YES  x  NO  ¨

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN RULE 12b-2 OF THE ACT)  YES  ¨  NO  x

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

CLASS	OUTSTANDING AT SEPTEMBER 30, 2003
COMMON STOCK, $1 PAR VALUE	5,727,968

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

A. CONSOLIDATED BALANCE SHEETS – SEPTEMBER 30, 2003 AND DECEMBER 31, 2002.

B. CONSOLIDATED STATEMENTS OF INCOME – FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002.

C. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002.

D. CONSOLIDATED STATEMENTS OF CASH FLOWS – FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002.

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

THE RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2003 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.

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

2

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2003 AND DECEMBER 31, 2002

(DOLLARS IN THOUSANDS)

	Sept 30, 2003			Dec 31, 2002
	(Unaudited)
ASSETS
Cash and Balances Due from Depository Institutions	$	33,328		$	35,883
Federal Funds Sold		21,408			47,993
Investment Securities
Available for Sale, at Fair Value		92,175			90,289
Held to Maturity, at Cost (Fair Value of $88 and $118, Respectively)		88			118
		92,263			90,407
Federal Home Loan Bank Stock, at Cost		2,975			2,837
Loans Held for Sale		3,315			6,910
Loans		650,585			571,817
Allowance for Loan Losses		(7,748	)		(7,364	)
Unearned Interest and Fees		(38	)		(1	)
		642,799			564,452
Premises and Equipment		17,600			17,329
Other Real Estate		2,600			1,357
Goodwill		448			448
Intangible Assets		282			399
Other Assets		13,762			13,086
Total Assets	$	830,780		$	781,101
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Noninterest-Bearing	$	52,695		$	51,534
Interest-Bearing		645,110			613,060
		697,805			664,594
Borrowed Money
Federal Funds Purchased		0			0
Borrowed Money		60,243			46,427
		60,243			46,427
Guaranteed Mandatorily Redeemable Trust Preferred Securities of Subsidiary Trusts		14,000			14,000
Other Liabilities		4,283			4,652
Stockholders’ Equity
Common Stock, Par Value $1, Authorized 20,000,000 Shares, Issued 5,727,968 and 4,573,232 Shares as of September 30, 2003 and December 31, 2002, Respectively		5,728			4,573
Paid-In Capital		23,499			23,358
Retained Earnings		25,486			22,742
Restricted Stock – Unearned Compensation		(154	)		(78	)
Accumulated Other Comprehensive Income, Net of Tax		(110	)		833
		54,449			51,428
Total Liabilities and Stockholders’ Equity	$	830,780		$	781,101

The accompanying notes are an integral part of these statements.

3

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(UNAUDITED)

(DOLLARS IN THOUSANDS)

	Three Months Ended				Nine Months Ended
	9/30/2003		9/30/2002		9/30/2003		9/30/2002
Interest Income
Loans, including fees	$	11,037	$	10,669	$	32,665	$	30,358
Federal Funds Sold		53		102		274		311
Deposits with Other Banks		40		37		120		117
Investment Securities
U.S. Treasury & Federal Agencies		536		792		1,543		2,470
State, County and Municipal		77		104		240		263
Other Investments		104		187		340		796
Dividends on Other Investments		31		35		98		107
Other Interest Income		7		10		25		25
		11,885		11,936		35,305		34,447
Interest Expense
Deposits		3,673		4,867		11,995		14,760
Federal Funds Purchased		0		1		1		3
Borrowed Money		589		446		1,677		1,505
Trust Preferred Securities		160		131		499		268
		4,422		5,445		14,172		16,536
Net Interest Income		7,463		6,491		21,133		17,911
Provision for Loan Losses		1,455		990		2,927		2,139
Net Interest Income After Provisions for loan losses		6,008		5,501		18,206		15,772
Noninterest Income
Service Changes on Deposits		1,011		890		2,778		2,497
Other Service Changes, Commissions & Fees		294		218		800		591
Security Gains, net		369		488		369		995
Other Income		173		183		796		480
		1,847		1,779		4,743		4,563
Noninterest Expense
Salaries and Employee Benefits		2,839		2,697		8,414		7,442
Occupancy and Equipment		848		690		2,401		2,172
Other Operating Expenses		1,606		1,585		4,562		3,998
		5,293		4,972		15,377		13,612
Income Before Income Taxes		2,562		2,308		7,572		6,723
Income Taxes		843		788		2,543		2,261
Net Income	$	1,719	$	1,520	$	5,029	$	4,462
Net Income Per Share of Common Stock
Basic	$	0.30	$	0.27	$	0.88	$	0.80
Diluted	$	0.30	$	0.27	$	0.88	$	0.80
Weighted Average Basic Shares Outstanding		5,694,978		5,694,978		5,694,978		5,548,031
Weighted Average Diluted Shares Outstanding		5,720,374		5,709,117		5,720,481		5,562,055

All per share data has been adjusted to reflect a 5-for-4 stock split effected as a 25% stock dividend on September 1, 2003.

The accompanying notes are an integral part of these statements.

4

COLONY BANKCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(UNAUDITED)

(DOLLARS IN THOUSANDS)

	Three Months Ended				Nine Months Ended
	09/30/03		09/30/02		09/30/03		09/30/02
Net Income	$1,719		$1,520		$5,029		$4,462
Other Comprehensive Income, Net of Tax
Gains (Losses) on Securities Arising During Year	(698	)	11		(699	)	1,073
Reclassification Adjustment	(244	)	(322	)	(244	)	(657	)
Unrealized Gains (Losses) on Securities	(942	)	(311	)	(943	)	416
Comprehensive Income	$   777		$1,209		$4,086		$4,878

The accompanying notes are an integral part of these statements.

5

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(UNAUDITED)

(DOLLARS IN THOUSANDS)

	2003			2002
CASH FLOW FROM OPERATING ACTIVITIES
Net Income	$	5,029		$	4,462
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain) loss on sale of investment securities		(369	)		(995	)
Depreciation		1,201			1,114
Provision for loan losses		2,927			2,139
Amortization of excess costs		117			81
Other prepaids, deferrals and accruals, net		(3,923	)		(418	)
Total Adjustments		(47	)		1,921
Net cash provided by operating activities		4,982			6,383
CASH FLOW FROM INVESTING ACTIVITIES
Cash used in business acquistion, net		0			(1,021	)
Purchase of other assets (FHLB stock)		(138	)		(251	)
Purchases of securities available for sale		(63,394	)		(47,088	)
Proceeds from sales of securities available for sale		11,141			23,635
Proceeds from maturities, calls, and paydowns of investment securities:
Available for Sale		48,374			25,812
Held to Maturity		34			44
Decrease (Increase) in interest-bearing deposits in banks		130			3,644
(Increase) in loans		(75,136	)		(61,994	)
Purchase of premises and equipment		(1,473	)		(2,170	)
Investment in other		420			(215	)
Net cash provided by investing activities		(80,042	)		(59,604	)
CASH FLOW FROM FINANCING ACTIVITIES
Net increase in deposits		33,211			48,450
Federal funds purchased		0			(251	)
Dividends paid		(1,077	)		(849	)
Net (decrease) increase in other borrowed money		13,816			6,242
Purchase of Treasury Stock, at cost		0			(537	)
Net cash provided by financing activities		45,950			53,055
Net increase (decrease) in cash and cash equivalents		(29,110	)		(166	)
Cash and cash equivalents at beginning of period		69,831			50,317
Cash and cash equivalents at end of period	$	40,721		$	50,151

The accompanying notes are an integral part of these statements.

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

Basis of presentation

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

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

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

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

Description of Business

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

The success of Colony is dependent, to a certain extent, upon the economic conditions in the geographic markets it serves. No assurance can be given that the current economic conditions will continue. Adverse changes in the economic conditions in these geographic markets would likely have a material adverse effect on the Company’s results of operations and financial condition The operating results of Colony depend primarily on its net interest income. Accordingly, operations are subject to risks and uncertainties surrounding the exposure to changes in the interest rate environment.

Accounting Policies

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

Investment Securities

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

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

7

(1) Summary of Significant Accounting Policies (Continued)

Federal Home Loan Bank Stock

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

Loans Held for Sale

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

Loans

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

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

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

Allowance for Loan Losses

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

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

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

Premises and Equipment

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

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

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

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

8

(1) Summary of Significant Accounting Policies (Continued)

Statement of Cash Flows

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

Income Taxes

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

Other Real Estate

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

Comprehensive Income

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

Changes in Accounting Principles and Effects of New Accounting Pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). This interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities that posses certain characteristics. FIN 46 requires that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities, and results of the activities of the variable interest entity must be included in the consolidated financial statements with those of the business enterprise. FIN 46 applies immediately to variable interest entities in which an enterprise obtains an interest after that date. FIN 46 also applies in the first fiscal year or interim period beginning after December 15, 2003 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. As of September 30, 2003 and December 31, 2002, the Company had a variable interest in a securitization trust. This securitization trust is a qualifying special purpose entity which is exempt from the consolidation requirements of FIN 46.

In its current form, FIN 46 may require the Company to de-consolidate its investment in Colony Bankcorp, Inc. Statutory Trusts I and II (the Trusts) in future financial statements. The potential de-consolidation of subsidiary trusts of bank holding companies formed in connection with the issuance of trust preferred securities, like the Trust, appears to be an unintended consequence of FIN 46. It is currently unknown if, or when, the FASB will address this issue. In July 2003, the Board of Governors of the Federal Reserve Systems issued a supervisory letter instructing bank holding companies to continue to include the trust preferred securities in their Tier I capital for regulatory capital purposes until notice is given to the contrary. The Federal Reserve intends to review the regulatory implications of any accounting treatment changes and, if necessary or warranted, provide further appropriate guidance. There can be no assurance that the Federal Reserve will continue to allow institutions to include trust preferred securities in Tier I capital for regulatory capital purposes.

In May 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 149 is effective for contracts entered into or modified after September 30, 2003, and for hedging relationships designated after September 30, 2003. Colony does not believe that the adoption of SFAS No. 149 will have a material impact on our financial position or results of operations.

9

(1) Summary of Significant Accounting Policies (Continued)

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. The Statement requires that an issue classify financial instruments that are within its scope as a liability. Many of those instruments were classified as equity under previous guidance. SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003. Otherwise, it is effective on July 1, 2003. Colony does not believe that the adoption of SFAS No. 150 will have a material effect on our financial position or results of operations.

Restricted Stock – Unearned Compensation

In 1999, the board of directors of Colony Bankcorp, Inc. adopted a restricted stock grant plan which awards certain executive officers common shares of the Company. The maximum number of shares which may be subject to restricted stock awards is 48,787, split adjusted. During 2000, 2001, 2002 and 2003, 5,250, 5,250, 7,500 and 10,150 shares were issued under this plan, respectively. Of the shares issued, 1,550 were forfeited due to non-vesting. The shares are recorded at fair market value (on the date granted) as a separate component of stockholder’s equity. The cost of these shares is being amortized against earnings using the straight-line method over 3 years (the restriction period).

(2) Cash and Balances Due from Depository Institutions

Components of cash and balances due from depository institutions at September 30, 2003 and December 31, 2002 are as follows:

	September 30, 2003		December 31, 2002
Cash on Hand and Cash Items	$	7,799	$	7,745
Noninterest-Bearing Deposits with Other Banks		11,614		14,093
Interest-Bearing Deposits with Other Banks		13,915		14,045
	$	33,328	$	35,883

(3) Investment Securities

Investment securities as of September 30, 2003 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale:
U.S. Government Agencies
Mortgage-Backed	$	68,155	$	251	$	(706	)	$	67,700
Other		9,029		165		0			9,194
State, County & Municipal		7,532		250		(6	)		7,776
Corporate Obligations		6,399		173		(10	)		6,562
Marketable Equity Securities		1,130		0		(187	)		943
	$	92,245	$	839	$	(909	)	$	92,175
Securities Held to Maturity:
State, County and Municipal	$	88	$	0	$	0		$	88

The amortized cost and fair value of investment securities as of September 30, 2003, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or prepayment penalties.

	Securities
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in One Year or Less	$	1,080	$	1,089	$	0	$	0
Due After One Year Through Five Years		15,953		16,403		0		0
Due After Five Years Through Ten Years		5,213		5,279		0		0
Due After Ten Years		714		761		88		88
		22,960		23,532		88		88
Marketable Equity Securities		1,130		943		0		0
Mortgage-Backed Securities		68,155		67,700		0		0
	$	92,245	$	92,175	$	88	$	88

10

(3) Investment Securities (Continued)

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

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

Proceeds from sales of investments available for sale during nine months ended September 30, 2003 was $11,141 and during nine months ended September 30, 2002 was $23,635.

Investment securities having a carry value approximating $52,123 and $48,488 as of September 30, 2003 and December 31, 2002, respectively, were pledged to secure public deposits and for other purposes.

(4) Loans

The composition of loans as of September 30, 2003 and December 31, 2002 was as follows:

	September 30, 2003		December 31, 2002
Commercial, Financial and Agricultural	$	46,992	$	46,598
Real Estate – Construction		27,127		21,341
Real Estate – Farmland		31,222		29,503
Real Estate – Other		448,950		392,332
Installment Loans to Individuals		77,138		73,462
All Other Loans		19,156		8,581
	$	650,585	$	571,817

Nonaccrual loans are loans for which principal and interest are doubtful of collection in accordance with original loan terms and for which accruals of interest have been discontinued due to payment delinquency. Nonaccrual loans totaled $7,611 and $6,899 as of September 30, 2003 and December 31, 2002, respectively. On September 30, 2003, the Company had 90 day past due loans still accruing interest with principal balances of $450 compared to 90 day past due loans with principal balances of $935 on December 31, 2002.

(5) Allowance for Loan Losses

Transactions in the allowance for loan losses are summarized below for nine months ended September 30, 2003 and September 30, 2002 as follows:

	Sept 30, 2003			Sept 30, 2002
Balance, Beginning	$	7,364		$	6,159
Provision Charged to Operating Expenses		2,927			2,139
Loans Charged Off		(2,672	)		(1,655	)
Loan Recoveries		129			181
Business combination, Quitman Federal		0			452
Balance, Ending	$	7,748		$	7,276

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(6) Premises and Equipment

Premises and equipment are comprised of the following as of September 30, 2003 and December 31, 2002:

	September 30 2003			December 31, 2002
Land	$	2,837		$	2,802
Building		13,683			13,681
Furniture, Fixtures and Equipment		11,613			10,565
Leasehold Improvements		601			629
Construction in Progress		439			78
		29,173			27,755
Accumulated Depreciation		(11,573	)		(10,426	)
	$	17,600		$	17,329

Depreciation charged to operations totaled $1,201 and $1,114 for nine months ended September 30, 2003 and September 30, 2002 respectively.

Certain Company facilities and equipment are leased under various operating leases. Rental expense approximated $87 and $114 for nine months ended September 30, 2003 and 2002.

(7) Income Taxes

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

(8) Deposits

Components of interest-bearing deposits as of September 30, 2003 and December 31, 2002 are as follows:

	September 30, 2003		December 31, 2002
Interest-Bearing Demand	$	132,304	$	138,526
Savings		33,328		30,103
Time, $100,000 and Over		158,457		152,394
Other Time		321,021		292,037
	$	645,110	$	613,060

The aggregate amount of short-term jumbo certificates of deposit, each with a minimum denomination of one hundred thousand, was approximately $142,587 and $142,828 as of September 30, 2003 and December 31, 2002, respectively.

As of September 30, 2003 and December 31, 2002, the scheduled maturities of certificates of deposits are as follows:

Maturity	September 30, 2003		December 31, 2002
One Year and Under	$	410,070	$	402,326
One to Three Years		57,872		36,875
Three Years and Over		11,536		5,230
	$	479,478	$	444,431

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(9) Borrowed Money

Borrowed money at September 30, 2003 and December 31, 2002 is summarized as follows:

	September 30, 2003		December 31, 2002
Federal Home Loan Bank Advances	$	59,500	$	45,500
The Banker’s Bank Note Payable		743		927
	$	60,243	$	46,427

Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from 2003 to 2013 and interest rates ranging from 2.46 percent to 5.93 percent. Under the Blanket Agreement for Advances and Security Agreement with the FHLB, residential first mortgage loans, commercial real estate loans and cash balances held by the FHLB are pledged as collateral for the FHLB advances outstanding. At September 30, 2003, the Company had available line of credit commitments totaling $68,164, of which $8,664 was available.

The Banker’s Bank note payable was renewed on January 23, 2002 into a credit line up to $1,110 at a rate of the Wall Street Prime minus one half percent. Payments are due monthly in the amount of $21 with final maturity of January 7, 2007. The debt is secured by all non-rolling fixed assets of Colony Management Services, Inc. and the guaranty of Colony Bankcorp, Inc. At September 30, 2003, no draws are available on the line of credit.

The aggregate stated maturities of borrowed money at September 30, 2003 are as follows:

Year	Amount
2003	$	62
2004		3,246
2005		246
2006		3,189
2007 and Thereafter		53,500
	$	60,243

(10) Issuance of Trust Preferred Securities

During the first quarter of 2002, the Company formed a subsidiary whose sole purpose was to issue $9,000 in Trust Preferred Securities through a pool sponsored by FTN Financial Capital Market. The Trust Preferred Securities have a maturity of 30 years and are redeemable after five years with certain exceptions. At September 30, 2003, the floating-rate securities had a 4.74 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 3.60 percent.

During the fourth quarter of 2002, the Company formed a second subsidiary whose sole purpose was to issue $5,000 in Trust Preferred Securities through a pool sponsored by FTN Financial Capital Market. The Trust Preferred Securities have a maturity of 30 years and are redeemable after five years with certain exceptions. At September 30, 2003, the floating-rate securities had a 4.39 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 3.25 percent.

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

(11) Profit Sharing Plan

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

(12) Commitments and Contingencies

In the normal course of business, certain commitments and contingencies are incurred which are not reflected in the consolidated financial statements. Commitments under standby letters of credit to U.S. addresses approximate $1,885 as of September 30, 2003 and $1,884 as of December 31, 2002. Unfulfilled loan commitments as of September 30, 2003 and December 31, 2002 approximated $75,468 and $51,833 respectively. No losses are anticipated as a result of commitments and contingencies.

13

(13) Deferred Compensation Plan

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

Liabilities accrued under the plans totaled $922 and $838 as of September 30, 2003 and December 31, 2002, respectively. Benefit payments under the contracts were $50 and $45 for nine month period ended September 30, 2003 and September 30, 2002, respectively. Provisions charged to operations totaled $106 and $100 for nine month period ended September 30, 2003 and September 30 , 2002.

(14) Regulatory Capital Matters

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

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

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. The amounts and ratios as defined in regulations are presented hereafter. Management believes, as of September 30, 2003, the Company meets all capital adequacy requirements to which it is subject and is classified as well capitalized under the regulatory framework for prompt corrective action. In the opinion of management, there are no conditions or events since prior notification of capital adequacy from the regulators that have changed the institution’s category.

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2003
Total Capital to Risk-Weighted Assets	$	75,454	11.92	%	$	50,667	8.00	%	$	63,334	10.00	%
Tier 1 Capital to Risk-Weighted Assets		67,706	10.69	%		25,334	4.00	%		38,001	6.00	%
Tier 1 Capital to Average Assets		67,706	8.20	%		33,041	4.00	%		41,302	5.00	%
As of December 31, 2002
Total Capital to Risk-Weighted Assets	$	70,675	12.56	%	$	45,016	8.00	%	$	56,270	10.00	%
Tier 1 Capital to Risk-Weighted Assets		63,642	11.31	%		22,508	4.00	%		33,762	6.00	%
Tier 1 Capital to Average Assets		63,642	8.31	%		30,633	4.00	%		38,291	5.00	%

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

The parent company’s balance sheets as of September 30, 2003 and December 31, 2002 and the related statements of income and comprehensive income and cash flows are as follows:

COLONY BANKCORP, INC. (PARENT ONLY)

BALANCE SHEETS

FOR PERIOD ENDED SEPTEMBER 30, 2003 AND DECEMBER 31, 2002

	Sept 30, 2003			Dec 31, 2002
	(Unaudited)
ASSETS
Cash	$	49		$	745
Investments in Subsidiaries at Equity		67,351			63,984
Other		1,811			1,612
Totals Assets	$	69,211		$	66,341
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Dividends Payable	$	401		$	343
Other		(73	)		136
		328			479
Subordinated Debt		14,434			14,434
Stockholders’ Equity
Common Stock, Par Value $1 a Share; Authorized 20,000,000
Shares, Issued 5,727,968 and 4,573,232 Shares as of September 30, 2003 and December 31, 2002
Respectively		5,728			4,573
Paid-In Capital		23,499			23,358
Retained Earnings		25,486			22,742
Restricted Stock – Unearned Compensation		(154	)		(78	)
Accumulated Other Comprehensive Income, Net of Tax		(110	)		833
Total Stockholders’ Equity		54,449			51,428
Total Liabilities and Stockholders’ Equity	$	69,211		$	66,341

15

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

COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENT OF INCOME AND COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2002

(UNAUDITED)

	Sept 30, 2003			Sept 30, 2002
Income
Dividends from Subsidiaries	$	1,816		$	1,250
Other		48			56
Securities gains		0			251
		1,864			1,557
Expenses
Interest		515			336
Other		980			852
		1,495			1,188
Income Before Taxes and Equity in Undistributed Earnings of Subsidiaries		369			369
Income Tax (Benefits)		(477	)		(282	)
Income Before Taxes and Equity in Undistributed Earnings of Subsidiaries		846			651
Equity in Undistributed Earnings of Subsidiaries		4,183			3,811
Net Income		5,029			4,462
Other Comprehensive Income, Net of Tax
Gains (losses) on Securities Arising During Year		(699	)		1,073
Reclassification Adjustment		(244	)		(657	)
Unrealized Gains (Losses) in Securities		(943	)		416
Comprehensive Income	$	4,086		$	4,878

16

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

COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2002

(UNAUDITED)

	Sept 30, 2003			Sept 30, 2002
Cash Flows from Operating Activities
Net Income	$	5,029		$	4,462
Adjustments to Reconcile Net Income to Net Cash Provided from Operating Activities
Depreciation and Amortization		62			52
Equity in Undistributed Earnings of Subsidiary		(4,183	)		(3,811	)
Other		(166	)		(300	)
		742			403
Cash Flows from Investing Activities
Sales and maturities of securities		0			301
Cash used in business acquisition, net		0			(2,371	)
Capital Infusion in Subsidiary		(125	)		(650	)
Purchase of Premises and Equipment		(236	)		(8	)
Investment in Statutory Trust		0			(279	)
		(361	)		(3,007	)
Cash Flows from Financing Activities
Dividends Paid		(1,077	)		(849	)
Purchase of Treasury Stock		0			(537	)
Principal Payments on Notes and Debentures		0			(5,896	)
Proceeds from Notes and Debentures		0			10,136
		(1,077	)		2,854
Increase (Decrease) in Cash and Cash Equivalents		(696	)		250
Cash and Cash Equivalents, Beginning		745			63
Cash and Cash Equivalents, Ending	$	49		$	313

(16) Legal Contingencies

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

(17) Stock Grant Plan

On February 16, 1999, a restricted stock grant plan was approved by the Board. The plan was adopted for the purpose of establishing incentives designed to recognize, reward and retain executive employees whose performance, contribution and skills are critical to the Company. The plan period commences February 16, 1999 and ends February 15, 2009 with the maximum number of shares subject to restricted stock awards being 22,175 shares (48,787 shares after the two-for-one stock split effective March 31, 1999 and the five-for-four stock split effective September 1, 2003). During 2000 – 2003, the Company has issued an aggregate total of 28,150 shares pursuant to the stock grant plan, of which 1,550 shares have been forfeited, which leaves 22,187 available shares that can be issued over the remaining life of the plan.

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(18) Proforma Financial Statement – Business Combination

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

The proforma information below discloses results of operations for the current period and the corresponding period in the preceding year as though the companies had combined at January 1, 2002:

	Three Months Ended				Nine Months Ended
	Sept 30, 2003		Sept 30, 2002		Sept 30, 2003		Sept 30, 2002
Interest Income	$	11,885	$	11,936	$	35,305	$	35,732
Interest Expense		4,422		5,445		14,172		17,222
Net Income		1,719		1,520		5,029		4,362
Earnings Per Share	$	0.30	$	0.27	$	0.88	$	0.79
Weighted Avg Shares Outstanding		5,694,978		5,694,978		5,694,978		5,548,031

(19) Common Stock – Stock Splits

On August 19, 2003, the Board of Directors authorized a five-for-four stock split of the Company’s common stock, in the form of a stock dividend, effective September 15, 2003, payable to shareholders of record as of September 1, 2003. The Company transferred $1,145 to common stock from undivided profits, representing the aggregate par value of the shares issued under the stock split.

All references to the number of common shares and the per common share amounts have been restated to give retroactive effect to the above stock splits for all periods presented.

18

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

Liquidity represents the ability to provide adequate sources of funds for funding loan commitments and investment activities, as well as the ability to provide sufficient funds to cover deposit withdrawals, payment of debt and financing of operations. Converting assets to cash for these funds is primarily with proceeds from collections on loans and maturities of investment securities or by attracting and obtaining new deposits. During the nine months ended September 30, 2003, the Company was successful in meeting its liquidity needs by increasing deposits 5.00 percent to $697,805,000 from deposits of $664,594,000 on December 31, 2002. Also, the Company met its liquidity needs by increasing other borrowed money and trust-preferred securities 22.86 percent to $74,243,000 from $60,427,000 on December 31, 2002. Should the need arise; the Company also maintains relationships with the Federal Home Loan Bank and several correspondent banks that can provide funds on short notice.

Liquidity is monitored on a regular basis by management. The Company’s liquidity position remained satisfactory for the nine months ended September 30, 2003. Average liquid assets (cash and amounts due from banks, interest-bearing deposits in other banks, funds due and securities) represented 22.71 percent of average deposits in the nine months ended September 30, 2003 as compared to 24.19 percent in the same period a year ago and 24.25 percent for calendar year 2002. Average loans represented 91.62 percent of average deposits in the nine months ended September 30, 2003 as compared to 88.91 percent in the same period a year ago and 88.64 percent for calendar year 2002. Average interest-bearing deposits were 82.22 percent of average earning assets in the nine months ended September 30, 2003 as compared to 83.19 percent in the same period a year ago and 83.36 percent for calendar year 2002.

The Company satisfies most of its capital requirements through retained earnings. During the first three months of 2003, retained earnings provided $1,301,000 of increase in equity. Additionally, equity had a decrease of $270,000 resulting from the change during the quarter in unrealized gains on securities available for sale, net of taxes and an increase of $25,000 resulting from the stock grant plan. Thus, total equity increased by a net amount of $1,056,000. During the second quarter of 2003, retained earnings provided $1,276,000 of increase in equity. Additionally, equity had an increase of $270,000 resulting from the change during the quarter in unrealized gains on securities available for sale, net of taxes, and an increase of $25,000 resulting from the stock grant plan. Thus, total equity increased by a net amount of $1,571,000 in the three months ended June 30, 2003. During the third quarter of 2003, retained earnings provided $1,318,000 of increase in equity. Additionally, equity had a decrease of $942,000 resulting from the change during the quarter in unrealized gains on securities available for sale, net of taxes, an increase of $23,000 resulting from the stock grant plan and a decrease of $5,000 for cash paid for fractional shares with the five-for-four stock split. Thus, total equity increased by a net amount of $394,000 in the three months ended September 30, 2003 and increased by a net amount of $3,021,000 in the nine months ended September 30, 2003.

During the first three months of 2002, retained earnings provided $1,086,000 of increase in equity. Additionally, equity had a decrease of $273,000 resulting from the change during the quarter in unrealized gains on securities available for sale, net of taxes, an increase of $18,000 resulting from the stock grant plan, a decrease of $537,000 resulting from treasury shares acquired through the company’s stock repurchase plan and an increase of $4,944,000 as a result of the acquisition of Quitman Federal Savings Bank. Thus, total equity increased by a net amount of $5,238,000. During the second quarter of 2002, retained earnings provided $1,263,000 of increase in equity. Additionally, equity had an increase of $1,000,000 resulting from the change during the quarter in unrealized gains on securities available for sale, net of taxes and an increase of $18,000 resulting from the stock grant plan. Thus, total equity increased by a net amount of $2,281,000 in the three months ended June 30, 2002. During the third quarter of 2002, retained earnings provided $1,199,000 of increase in equity. Additionally, equity had a decrease of $311,000 resulting from the change during the quarter in unrealized gains on securities available for sale, net of taxes and an increase of $19,000 resulting from the stock grant plan. Thus, total equity increased by a net amount of $907,000 in the three months ended September 30, 2002 and increased by a net amount of $8,426,000 in the nine months ended September 30, 2002.

As of September 30, 2003, the Company’s capital totaled approximately $54,499,000 and the only outstanding commitment for capital expenditures was by a subsidiary bank for construction of its third office in the Dougherty/Lee County market. It is anticipated that the project will approximate $1,200,000 with anticipated opening during the first quarter of 2004. As of September 30, 2003, approximately $251,000 had been paid for construction billings. The

19

company has purchased land for a location in Thomasville, Georgia; however, it is not anticipated that construction will occur until 2004.

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

Using the capital requirements presently in effect, the Tier 1 ratio as of September 30, 2003 was 10.69 percent and total Tier 1 and 2 risk-based capital was 11.91 percent. Both of these measures compare favorably with the regulatory minimum of 4 percent for Tier 1 and 8 percent for total risk-based capital. The Company’s Tier 1 leverage ratio was 8.20 percent as of September 30, 2003 which exceeds the required ratio standard of 4 percent.

For the nine months ended September 30, 2003, average capital was $53,316,000 representing 6.63 percent of average assets for the year. This compares to 6.82 percent of average assets for the same period in 2002 and to 6.77 percent for calendar year 2002.

The company paid split-adjusted quarterly dividends of $0.060, $0.068 and $0.070, for the first three quarters of 2003, respectively, or $0.198 per share in the first three quarters of 2003 compared to quarterly dividends of $0.048, $0.056 and $0.056, for the first three quarters of 2002, respectively, or $0.16 per share in the first three quarters of 2002. The dividend payout ratio, defined as dividends per share divided by net income per share, was 22.50% for the nine months ended September 30, 2003 as compared to 20.00 percent for the same period in 2002. The dividend payout for calendar year 2002 was 21.48 percent.

As of September 30, 2003, management was not aware of any recommendations by regulatory authorities which if they were to be implemented, would have a material effect on the Company’s liquidity, capital resources or results of operations. However, it is possible that examinations by regulatory authorities in the future could precipitate additional loss charge-offs that could materially impact the Company’s liquidity, capital resources and results of operations.

Results of Operations

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

Net Income

Net income for the three months ended September 30, 2003 was $1,719,000 as compared to $1,520,000 for the three months ended September 30, 2002, or an increase of 13.09 percent. Of this $199,000 increase from the same period a year ago, net interest income increased $972,000, provision for loan losses increased $465,000, noninterest expense increased $321,000, income tax expense increased $55,000 and noninterest income increased $68,000. On a fully diluted share basis, net income increased to $0.30 per share for the three months ended September 30, 2003 from $0.27 for the same period in 2002, or an increase of 11.11 percent.

Net income for the nine months ended September 30, 2003 was $5,029,000 as compared to $4,462,000 for the nine months ended September 30, 2002, or an increase of 12.71%. Of this increase $251,000 or 44.27 percent is attributable to Quitman Federal acquisition since their income was not included in first quarter 2002 due to their acquisition being consummated on March 29, 2002. Of the $567,000 increase from the same period a year ago, net interest income increased $3,222,000, provision for loan losses increased $788,000, noninterest income increased $180,000, noninterest expense increased $1,765,000 and income tax expense increased $282,000. On a fully diluted share basis, net income

20

increased to $0.88 per share for the nine months ended September 30, 2003 from $0.80 for the same period in 2002, or an increase of 10.00 percent.

Net Interest Margin

A primary focus of our 2003 business plan is net interest margin improvement, which improved to 3.83 percent for third quarter 2003 compared to 3.71 percent for second quarter 2003, 3.63 percent for first quarter 2003 and 3.54 percent for fourth quarter 2002. Though improvement is noted for the past couple of quarters, third quarter 2003 net margin of 3.83 percent reflects an increase of only two basis points from third quarter 2002 net interest margin of 3.81 percent; while, net interest margin for the nine months ended September 30, 2003 of 3.72 percent is unchanged from 3.72 percent for the same period a year ago. Net interest margin compression has been primarily attributable to U. S. Federal Reserve lowering interest rates an unprecedented 475 basis points during 2001, another 50 basis points during 2002 and an additional 25 basis points during 2003. Net interest income increased 14.97 percent to $7,463,000 in the three months ended September 30, 2003 from $6,491,000 in the same period a year ago on an increase in average earning assets to $785,308,000 in the three months ended September 30, 2003 from $689,197,000 in the same period a year ago. Average loans increased by $87,494,000 or 15.58 percent, average funds sold decreased by $1,696,000 or 7.08 percent, average investment securities increased by $2,648,000 or 2.91 percent, average interest-bearing deposits in other banks increased by $7,261,000 or 81.97 percent and average interest-bearing other assets increased $404,000 or 11.02 percent resulting in a net increase in average earning assets of $96,111,000 or 13.95 percent.

The net increase in average assets was funded by a net increase in average deposits of 11.62 percent to $693,493,000 in the three months ended September 30, 2003 from $621,294,000 in the same period a year ago and a net increase in average debt and funds purchased of 39.90 percent to $60,520,000 in the three months ended September 30, 2003 from $43,261,000 in the same period a year ago. Average interest-bearing deposits increased by 11.15 percent to $641,241,000 in the three months ended September 30, 2003 from $576,927,000 in the same period a year ago while average noninterest-bearing deposits increased 17.68 percent to $52,212,000 in the three months ended September 30, 2003 from $44,367,000 in the same period a year ago. Average noninterest-bearing deposits represented 7.53 percent of average total deposits in the three months ended September 30, 2003 as compared to 7.14 percent in the same period a year ago.

Net interest income increased 17.99 percent to $21,133,000 in the nine months ended September 30, 2003 from $17,911,000 in the same period a year ago. Average earning assets increased to $763,589,000 in the nine months ended September 30, 2003 from $650,597,000 in the same period a year ago. Average loans increased by $100,572,000 or 19.29 percent, average funds sold increased by $8,183,000 or 33.68 percent, average investment securities decreased by $1,968,000 or 2.13 percent, average interest-bearing deposits in other banks increased $5,376,000 or 57.44 percent and average interest-bearing other assets increased $829,000 or 25.91 percent resulting in a net increase in average earning assets of $112,992,000 or 17.37 percent.

The net increase in average assets was funded by a net increase in average deposits of 15.77 percent to $678,733,000 in the nine months ended September 30, 2003 from $586,292,000 in the same period a year ago and a net increase in average debt and funds purchased of 21.68 percent to $54,415,000 in the nine months ended September 30, 2003 from $44,721,000 in the same period a year ago. Average interest-bearing deposits increased by 16.00 percent to $627,843,000 in the nine months ended September 30, 2003 from $541,243,000 in the same period a year ago while average noninterest-bearing deposits increased 12.97 percent to $50,890,000 in the nine months ended September 30, 2003 from $45,049,000 in the same period a year ago. Average noninterest-bearing deposits represented 7.50 percent of average total deposits in the nine months ended September 30, 2003 as compared to 7.68 percent in the same period a year ago.

Interest expense decreased in the three months ended September 30, 2003 by $1,023,000 to $4,422,000 in the three months ended September 30, 2003 from $5,445,000 in the same period a year ago and decreased by $2,364,000 to $14,172,000 in the nine months ended September 30, 2003 from $16,536,000 in the same period a year ago. The decrease is primarily attributable to the U. S. Federal Reserve lowering interest rates an unprecedented 475 basis points during 2001, 50 basis points in 2002, and another 25 basis points in 2003. The combination of the increase in average earning assets with maintenance of a relatively flat net interest margin resulted in an increase of net interest income of $972,000 in the three months ended September 30, 2003 compared to the same period a year ago and an increase in net interest income of $3,222,000 in the nine months ended September 30, 2003 compared to the same period a year ago.

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Provision for Loan Losses

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

The provision for loan losses is a charge to earnings in the current period to replenish the allowance for loan losses and maintain it at a level management has determined to be adequate. The provision for loan losses was $1,455,000 in three months ended September 30, 2003 as compared to $990,000 in the same period a year ago, representing an increase of $465,000 or 46.97 percent. The provision for loan losses was $2,927,000 in the nine months ended September 30, 2003 as compared to $2,139,000 in the same period a year ago, representing an increase of $788,000 or 36.84 percent. The increase in provision for loan losses allowed the company’s reserve for loan losses to keep pace with the rapid loan growth that the company has experienced the past several years. Net loan charge-offs represented 114.78 percent of the provision for loan losses in the three months ended September 30, 2003 as compared to 82.32 percent in the same period a year ago. Net loan charge-offs represented 86.88 percent of the provision for loan losses in the nine months ended September 30, 2003 as compared to 68.91 percent in the same period a year ago. Net loan charge-offs in the three months ended September 30, 2003 represented 0.26 percent of average loans outstanding as compared to 0.15 percent in the same period a year ago while net loan charge-offs in the nine months ended September 30, 2003 represented 0.41 percent of average loans outstanding as compared to 0.28 percent in the same period a year ago. Net charge-offs increased significantly during third quarter 2003 due to one commercial line being charged-off that accounted for approximately 48 percent of the total third quarter 2003 charge-offs. As of September 30, 2003, the allowance for loan losses was 1.19 percent of total loans outstanding as compared to an allowance for loan losses of 1.27 percent of total loans outstanding as of September 30, 2002. The loan loss reserve of 1.19 percent of total loans outstanding provided coverage of 96.12 percent of nonperforming loans and 72.68 percent of nonperforming assets as of September 30, 2003 compared to 92.10 percent and 79.81 percent, respectively as of September 30, 2002. The determination of the reserve rests upon management’s judgment about factors affecting loan quality and assumptions about the economy. Management considers the September 30, 2003 allowance for loan losses adequate to cover potential losses in the loan portfolio.

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The following table represents the Company’s loan loss experience on all loans for the three months ended September 30:

	($ in Thousands)
	2003		2002
Allowance for Loan Losses, July 1	7,963		7,101
Charge-Offs
Commercial, Financial and Agricultural	1,108		374
Real Estate – Mortgage	227		279
Consumer	335		94
All Other	42		129
	1,712		876
Recoveries
Commercial, Financial and Agricultural	7		15
Real Estate – Mortgage	14		10
Consumer	14		25
All Other	7		11
	42		61
Net Charge-Offs	1,670		815
Business Combination, Quitman Federal	0		0
Provision for Loan Losses	1,455		990
Allowance for Loan Losses, September 30	7,748		7,276
Ratio of Net Charge-Offs to Average Loans	0.26	%	0.15	%

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The following table presents the Company’s loan loss experience on all loans for the nine months ended September 30:

	($ in Thousands)
	2003		2002
Allowance for Loan Losses, Jan 1	7,364		6,159
Charge-Offs
Commercial, Financial and Agricultural	1,589		657
Real Estate – Mortgage	501		410
Consumer	449		293
All Other	133		295
	2,672		1,655
Recoveries
Commercial, Financial and Agricultural	18		27
Real Estate – Mortgage	36		30
Consumer	47		102
All Other	28		22
	129		181
Net Charge-Offs	2,543		1,474
Business Combination, Quitman Federal	0		452
Provision for Loan Losses	2,927		2,139
Allowance for Loan Losses, September 30	7,748		7,276
Ratio of Net Charge-Offs to Average Loans	0.41	%	0.28	%

Noninterest Income

Noninterest income consists primarily of service charges on deposit accounts. Service charges on deposit accounts totaled $1,011,000 in the three months ended September 30, 2003 as compared to $890,000 in the same period a year ago, or an increase of 13.60 percent. This increase is attributable to additional fees resulting from the increase in noninterest-bearing and interest-bearing deposit accounts. All other noninterest income decreased to $836,000 in the three months ended September 30, 2003 from $889,000 in the same period a year ago, or a decrease of 5.96 percent. Most of the decrease is attributable to gain on the sale of securities amounting to $369,000 in third quarter 2003 compared to $488,000 in third quarter 2002. Excluding the security gains in both periods, all other noninterest income increased 16.46 percent to $467,000 in the three months ended September 30, 2003 from $401,000 in the same period a year ago and is primarily attributable to additional fee income generated by the mortgage company. Thus, total noninterest income in the three months ended September 30, 2003 was $1,847,000 compared to $1,779,000 in the same period a year ago, or an increase of 3.82 percent. Excluding the gain on sale of securities, total noninterest income in the three months ended September 30, 2003 was $1,478,000 compared to $1,291,000 in the same period a year ago, or an increase of 14.48 percent. Total noninterest income in the nine months ended September 30, 2003 was $4,743,000 compared to $4,563,000 in the same period a year ago, or an increase of 3.94 percent. Excluding the gain on sale of securities in both periods, total noninterest income in the nine months ended September 30, 2003 was $4,374,000 compared to $3,568,000 in the same period a year ago, or an increase of 22.59 percent.

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Noninterest Expense

Noninterest expense increased 6.46 percent to $5,293,000 in the three months ended September 30, 2003 from $4,972,000 in the same period a year ago and increased 12.97 percent to $15,377,000 in the nine months ended September 30, 2003 from $13,612,000 in the same period a year ago. Salaries and employee benefits increased 5.27 percent to $2,839,000 in the three months ended September 30, 2003 from $2,697,000 in the same period a year ago and increased 13.06 percent to $8,414,000 in the nine months ended September 30, 2003 from $7,442,000 in the same period a year ago primarily due to increased staffing with one new branch opened during 2003 and increased commissions at the mortgage company due to increased volume. Occupancy and equipment expense increased 22.90 percent to $848,000 in the three months ended September 30,2003 from $690,000 in the same period a year ago and increased 10.54 percent to $2,401,000 in the nine months ended September 30, 2003 from $2,172,000 in the same period a year ago. All other noninterest expense increased 1.32 percent to $1,606,000 in the three months ended September 30, 2003 from $1,585,000 in the same period a year ago and increased 14.11% to $4,562,000 in the nine months ended September 30, 2003 from $3,998,000 in the same period a year ago. Other increases in noninterest expense are primarily attributable to expenses incurred in opening one new office during 2003, acquiring Quitman Federal in March 2002 and losses on disposition of foreclosed property.

Income Tax Expense

Income before taxes increased $254,000 to $2,562,000 in the three months ended September 30, 2003 from $2,308,000 in the same period a year ago with significant changes being an increase in net interest income of $972,000 in the three months ended September 30, 2003 as compared to the same period a year ago, an increase in noninterest expense, net of noninterest income of $253,000 in the three months ended September 30, 2003 as compared to the same period a year ago and an increase in provision for loan losses of $465,000 in the three months ended September 30, 2003 as compared to the same period a year ago. Income tax expense increased 6.98 percent to $843,000 in the three months ended September 30, 2003 from $788,000 in the same period a year ago. Income before taxes increased $849,000 to $7,572,000 in the nine months ended September 30, 2003 from $6,723,000 in the same period a year ago. Income tax expense increased 12.47 percent to $2,543,000 in the nine months ended September 30, 2003 from $2,261,000 in the same period a year ago. Income tax expense as a percentage of income before taxes was 32.90 percent in the three months ended September 30, 2003 compared to 34.14 percent in the same period a year ago, or a decrease of 3.63 percent while income tax expense as a percentage of income before taxes was 33.58 percent in the nine months ended September 30, 2003 compared to 33.63 percent in the same period a year ago, or a decrease of 0.15 percent.

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Quantitative and Qualitative Disclosures About Market Risk

AVERAGE BALANCE SHEETS

	Nine Months Ended Sept 30, 2003					Nine Months Ended Sept 30, 2002
($ in thousands)	Average Balances		Income/ Expense	Yields/ Rates		Average Balances		Income/ Expense	Yields/ Rates
Assets
Interest-Earning Assets
Loans, Net of Unearned Income Taxable (1)	621,842		32,753	7.02	%	521,270		30,450	7.79	%
Investment Securities Taxable	82,577		1,907	3.08	%	84,344		3,282	5.19	%
Tax-Exempt (2)	7,929		327	5.50	%	8,130		374	6.13	%
Total Investment Securities	90,506		2,234	3.29	%	92,474		3,656	5.27	%
Interest-Bearing Deposits in Other Banks	14,736		120	1.09	%	9,360		117	1.67	%
Funds Sold	32,476		274	1.12	%	24,293		311	1.71	%
Interest-Bearing Other Assets	4,029		123	4.07	%	3,200		132	5.50	%
Total Interest-Earning Assets	763,589		35,504	6.20	%	650,597		34,666	7.10	%
Non-interest-Earning Assets
Cash	16,435					15,726
Allowance for Loan Losses	(7,852	)				(6,636	)
Other Assets	32,529					28,263
Total Noninterest-Earning Assets	41,112					37,353
Total Assets	804,701					687,950
Liabilities and Stockholders’ Equity
Interest-Bearing Liabilities
Interest-Bearing Deposits
Interest-Bearing Demand and Savings	170,817		1,730	1.35	%	139,776		2,399	2.29	%
Other Time	457,026		10,265	2.99	%	401,467		12,361	4.11	%
Total Interest-Bearing Deposits	627,843		11,995	2.55	%	541,243		14,760	3.64	%
Other Interest-Bearing Liabilities
Debt	54,338		1,677	4.11	%	44,568		1,505	4.50	%
Trust Preferred Securities	14,000		499	4.75	%	6,182		268	5.78	%
Funds Purchased and Securities
Sold Under Agreement to Repurchase	77		1	1.73	%	153		3	2.61	%
Total Other Interest-Bearing Liabilities	68,415		2,177	4.24	%	50,903		1,776	4.65	%
Total Interest-Bearing Liabilities	696,258		14,172	2.71	%	592,146		16,536	3.72	%
Noninterest-Bearing Liabilities and
Stockholders’ Equity
Demand Deposits	50,890					45,049
Other Liabilities	4,237					3,803
Stockholder’s Equity	53,316					46,952
Total Noninterest-Bearing Liabilities and Stockholders’ Equity	108,443					95,804
Total Liabilities and Stockholders’ Equity	804,701					687,950
Interest Rate Spread				3.49	%				3.38	%
Net Interest Income			21,332					18,130
Net Interest Margin				3.72	%				3.72	%

⁽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 $88 and $92 for nine month period ended September 30, 2003 and 2002, respectively, are included in tax-exempt interest on loans.

⁽²⁾ Taxable-equivalent adjustments totaling $111 and $127 for nine month period ended September 30, 2003 and 2002, respectively, are included in tax-exempt interest on investment securites. The adjustments are based on a federal tax rate of 34 percent with appropriate reductions for the effect of disallowed interest expense incurred in carrying tax-exempt obligations.

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RATE/VOLUME ANALYSIS

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

	Changes from Sept 30, 2002 to Sept 30, 2003 (1)
($ in thousands)	Volume			Rate			Total
Interest Income
Loans, Net-taxable	$	5,876		($	3,573	)	$	2,303
Investment Securities
Taxable		(69	)		(1,306	)		(1,375	)
Tax-exempt		(9	)		(38	)		(47	)
Total Investment Securities		(78	)		(1,344	)		(1,422	)
Interest-Bearing Deposits in other banks		67			(64	)		3
Funds Sold		105			(142	)		(37	)
Other Earning Assets		34			(43	)		(9	)
Total Interest Income		6,004			(5,166	)		838
Interest Expense
Interest-Bearing Demand and Savings Deposits		533			(1,202	)		(669	)
Time Deposits		1,713			(3,809	)		(2,096	)
Other Interest-Bearing Liabilities
Funds Purchased and Securities
Under Agreement to Repurchase		(1	)		(1	)		(2	)
Other Debt		330			(158	)		172
Trust Preferred Securities		339			(108	)		231
Total Interest Expense (Benefit)		2,914			(5,278	)		(2,364	)
Net Interest Income	$	3,090		$	112		$	3,202

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

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

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

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

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

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The Company maintains about one-third of its loan portfolio in adjustable rate loans that reprice with prime rate changes, while the bulk of its other loans mature within 3 years. The liabilities to fund assets are primarily in short term certificate of deposits that mature within one year. This balance sheet composition has allowed the Company to be relatively constant with its net interest margin the past several years, though the unprecedented 475 basis point decrease by U. S. Federal Reserve in 2001, 50 basis point decrease in 2002 and 25 basis point decrease in 2003 resulted in significant net interest margin pressure. Net interest margin increased to 3.83% for third quarter 2003 compared to 3.71% net interest margin for second quarter 2003 and to 3.72% for year-to-date 2003 compared to 3.72% year-to-date 2002. We anticipate continued improvement or stability in the net interest margin the balance of the year given the Federal Reserve’s present neutral interest rates forecast for the balance of 2003.

Colony Bankcorp, Inc. and Subsidiaries Interest Rate Sensitivity

The following table is an analysis of the Company’s interest rate-sensitivity position at September 30, 2003. The interest rate-sensitivity gap, which is the difference between interest-earning assets and interest-bearing liabilities by repricing period, is based upon maturity or first repricing opportunity, along with a cumulative interest rate-sensitivity gap. It is important to note that the table indicates a position at a specific point in time and may not be reflective of positions at other times during the year or in subsequent periods. Major changes in the gap position can be, and are, made promptly as market outlooks change.

Assets and Liabilities Repricing Within

	3 Months or Less		4 to 12 Months		1 Year		1 to 5 Years		Over 5 Years		Total
($ in Thousands)
EARNING ASSETS:
Interest-bearing deposits	13,915		0		13,915		0		0		13,915
Federal Funds Sold	21,408		0		21,408		0		0		21,408
Investment Securities	15,438		2,354		17,792		64,407		10,064		92,263
Loans, net of unearned income	255,075		145,716		400,791		234,716		18,393		653,900
Other earning assets	0		0		0		0		4,090		4,090
Total Interest-earning assets	305,836		148,070		453,906		299,123		32,547		785,576
INTEREST-BEARING LIABILITIES:
Interest-bearing Demand deposits (1)	132,304		0		132,304		0		0		132,304
Savings (1)	33,328		0		33,328		0		0		33,328
Time Deposits	121,971		288,099		410,070		69,408		0		479,478
Other Borrowings (2)	743		3,000		3,743		18,500		38,000		60,243
Trust Preferred Securities	14,000		0		14,000		0		0		14,000
Total Interest-bearing liabilities	302,346		291,099		593,445		87,908		38,000		719,353
Interest rate-sensitivity gap	3,490		(143,029	)	(139,539	)	211,215		(5,453	)
Cumulative interest-sensitivity gap	3,490		(139,539	)	(139,539	)	71,676		66,223
Interest rate-sensivitiy gap as a percentage of interest-earning assets	0.44	%	(18.20	%)	(17.76	)%	26.88	%	(0.69	)%
Cumulative interest rate-sensitivity as as a percentage of interest-earning assets	0.44	%	(17.76	)%	(17.76	)%	9.12	%	8.43	%

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

⁽²⁾ Short-term borrowings for repricing purposes are considered to reprice within 3 months or less.

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The foregoing table indicates that we had a one year negative gap of $(140) million, or (17.76)% of total assets at September 30, 2003. In theory, this would indicate that at September 30, 2003, $140 million more in liabilities than assets would reprice if there were a change in interest rates over the next 365 days. Thus, if interest rates were to decline, the gap would indicate a resulting increase in net interest margin. However, changes in the mix of earning assets or supporting liabilities can either increase or decrease the net interest margin without affecting interest rate sensitivity. In addition, the interest rate spread between an asset and our supporting liability can vary significantly while the timing of repricing of both the assets and our supporting liability can remain the same, thus impacting net interest income. This characteristic is referred to as a basis risk and, generally, relates to the repricing characteristics of short-term funding sources such as certificates of deposits.

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

Future Outlook

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

Liquidity

The company’s goals with respect to liquidity are to ensure that sufficient funds are available to meet current operating requirements and to provide reserves against unforeseen liquidity requirements. Management continuously reviews the Company’s liquidity position, which is maintained on a basis consistent with established internal guidelines and the tests and reviews of the various regulator authorities. The Company’s primary sources at September 30, 2003 included cash, due from banks, federal funds and short-term investment securities. The Company also has the ability, on a short-term basis, to borrow funds from Federal Home Loan Bank and correspondent banks. The mix of asset maturities contributes to the company’s overall liquidity position.

Off Balance Sheet Items

In the normal course of business, certain commitments and contingencies are incurred which are not reflected in the consolidated financial statements. Commitments under standby letters of credit to U.S. addresses approximated $1,885,000 as of September 30, 2003. Unfulfilled loan commitments as of September 30, 2003 approximated $75,468,000. No losses are anticipated as a result of commitments or contingencies.

Certain Transactions

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

Forward-Looking Statements

This document contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe,” “estimate,” “expect,” “intend,” “anticipate” and similar expressions and variations thereof identify certain of such forward-looking statements, which speaks only as of the dates which they were made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Users are cautioned that any such

29

forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Users are therefore cautioned not to place undue reliance on these forward-looking statements.

Critical Accounting Policies

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. The Company’s financial position and results of operations are affected by management’s application of accounting policies, including judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different assumptions in the application of these policies could result in material changes in the Company’s financial position and/or results of operations. Critical accounting policies are those policies that management believes are the most important to the portrayal of the Company’s financial condition and results, and they require management to make estimates that are difficult, 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.

The Company determines the amount of the allowance based on relative risk characteristics of the loan portfolio. The allowance recorded for commercial loans in based on reviews of individual credit relationships and historical loss experience. The allowance recorded for homogeneous consumer loans is based on an analysis of loan mix, risk characteristics of the portfolio, and historical losses, adjusted for current trends, for each homogeneous category or group of loans. The allowance for loan losses relating to impaired loans is based on the loan’s observable market price, the collateral for certain collateral-dependent loans, or the discounted cash flows using the loan’s effective interest rate.

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.

Goodwill and Other Intangibles – The Company records all assets and liabilities acquired in purchase acquisitions, including goodwill and other intangibles, at fair value as required by SFAS 141. Goodwill is subject, at a minimum, to annual tests for impairment. Other intangible assets are amortized over their estimated useful lives using straight-line and accelerated methods, and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying amount. The initial goodwill and other intangibles recorded and subsequent impairment analysis require management to make subjective judgments concerning estimates of how the acquired asset will perform in the future. Events and factors that may significantly affect the estimates include, among others, customer attrition, changes in revenue growth trends, specific industry conditions and changes in competition.

BUSINESS

General

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

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Quitman, FSB and also formed Colony Bankcorp Statutory Trust I. In December 2002, Colony formed its second trust, Colony Bankcorp Statutory Trust II.

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

On April 2, 1998, the Company was listed on Nasdaq National Market. The Company’s common stock trades on the Nasdaq Stock Market under the symbol “CBAN”. The Company presently has approximately 1,370 shareholders as of September 30, 2003. “The Nasdaq Stock Market” or “Nasdaq” is a highly-regulated electronic securities market comprised of competing Market Makers whose trading is supported by a communications network linking them to quotation dissemination, trade reporting and order execution systems. This market also provides specialized automation services for screen-based negotiations of transactions, on-line comparison of transactions, and a range of informational services tailored to the needs of the securities industry, investors and issuers. The Nasdaq Stock Market is operated by The Nasdaq Stock Market, Inc., a wholly-owned subsidiary of the National Association of Securities Dealers, Inc.

ITEM  4 – CONTROLS AND PROCEDURES

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

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

ITEM  6 – EXHIBITS AND REPORTS ON FORM 8-K

A.	Exhibits –	Exhibit No. 11 –	Statement of Computation of Earnings Per Share
		Exhibit No. 31.1–	Certificate of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
		Exhibit No. 31.2 –	Certificate of Chief Financial Officer Pursuant to Section 302 of Sarbanes – Oxley Act of 2002
		Exhibit No. 32.1–	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

B. The company filed Form 8-K on July 11, 2003 reporting that a press release had been issued on July 11, 2003 in which financial results for the quarter ended June 30, 2003 was reported.

The company filed Form 8-K on August 21, 2003 reporting that a press release had been issued on August 21, 2003 in which a five–for–four stock split effective September 1, 2003 was reported.

The company filed Form 8-K on September 17, 2003 reporting that a press release had been issued on September 17, 2003 announcing the declaration of a third quarter 2003 dividend payment.

The company filed Form 8-K on October 10, 2003 reporting that a press release had been issued on October 10, 2003 in which financial results for the quarter ended September 30, 2003 was reported.

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SIGNATURE

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

Date: October 31, 2003	/s/    James D. Minix
	James D. Minix, President and Chief Executive Officer

Date: October 31, 2003	/s/    Terry L. Hester
	Terry L. Hester, Executive Vice President and Chief Financial Officer

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Exhibit Index

Exhibit No.	Description
Exhibit No. 11 -	Statement of Computation of Earnings Per Share
Exhibit No. 31.1 -	Certificate of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
Exhibit No. 31.2 -	Certificate of Chief Financial Officer Pursuant to Section 302 of Sarbanes – Oxley Act of 2002
Exhibit No. 32.1 -	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002