EX-13 4 ex_175787.htm EXHIBIT 13

Exhibit 13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Colony Bankcorp, Inc.

Opinions on the Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Colony Bankcorp, Inc. and its subsidiaries (the Company) as of December 31, 2019 and 2018, and the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the two years ended December 31, 2019, and the related notes (collectively, the financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Basis for Opinions

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's financial statements and an opinion on the company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLC

We have served as the Company’s auditor since 1995.

Macon, Georgia

March 30, 2020

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31

(DOLLARS IN THOUSANDS)

|  | 2019 |  |  | 2018 |
Assets |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 15,570 |  |  | $ | 10,377 |
Fed Funds sold and interest-bearing deposits in banks |  |  | 88,522 |  |  |  | 49,779 |
Cash and cash equivalents |  |  | 104,092 |  |  |  | 60,156 |
Investment securities available for sale, at fair value |  |  | 347,332 |  |  |  | 353,066 |
Other investments, at cost |  |  | 4,288 |  |  |  | 2,978 |
Loans held for sale |  |  | 10,076 |  |  |  | - |
Loans |  |  | 968,814 |  |  |  | 781,526 |
Allowance for loan losses |  |  | (6,863) |  |  |  | (7,277) |
Net loans |  |  | 961,951 |  |  |  | 774,249 |
Premises and equipment |  |  | 32,482 |  |  |  | 28,831 |
Other real estate owned |  |  | 1,320 |  |  |  | 1,841 |
Goodwill |  |  | 16,477 |  |  |  | 202 |
Other intangible assets |  |  | 3,056 |  |  |  | 556 |
Bank-owned life insurance |  |  | 21,629 |  |  |  | 17,598 |
Deferred income taxes, net |  |  | 1,505 |  |  |  | 3,472 |
Other assets |  |  | 11,105 |  |  |  | 8,929 |
Total a ssets |  | $ | 1,515,313 |  |  | $ | 1,251,878 |
Liabilities and s tockholders’ e quity |  |  |  |  |  |  |  |
Deposits |  |  |  |  |  |  |  |
Noninterest-bearing |  | $ | 232,635 |  |  | $ | 192,847 |
Interest-bearing |  |  | 1,061,107 |  |  |  | 892,278 |
Total deposits |  |  | 1,293,742 |  |  |  | 1,085,125 |
Subordinated debentures |  |  | 24,229 |  |  |  | 24,229 |
Other borrowed money |  |  | 61,563 |  |  |  | 44,000 |
Other liabilities |  |  | 5,273 |  |  |  | 2,832 |
Total l iabilities |  |  | 1,384,807 |  |  |  | 1,156,186 |
Commitments and Cont ingencies (Note 16) |  |  |  |  |  |  |  |
Stockholders’ e quity |  |  |  |  |  |  |  |
Preferred stock, stated value $1,000; 10,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2019 and 2018 |  |  | - |  |  |  | - |
Common stock, par value $1; 20,000,000 shares authorized, 9,498,783 and 8,444,908 shares issued and outstanding as of December 31, 2019 and 2018, respectively |  |  | 9,499 |  |  |  | 8,445 |
Paid-in capital |  |  | 43,667 |  |  |  | 25,978 |
Retained earnings |  |  | 76,978 |  |  |  | 69,459 |
Accumulated other comprehensive income/(loss), net of tax |  |  | 362 |  |  |  | (8,190) |
Total stockholders’ e quity |  |  | 130,506 |  |  |  | 95,692 |
Total liabilities and stockholders’ e quity |  | $ | 1,515,313 |  |  | $ | 1,251,878 |

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

F-1

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

|  | 2019 |  |  | 2018 |
Interest i ncome |  |  |  |  |  |  |  |
Loans, including fees |  | $ | 50,278 |  |  | $ | 40,682 |
Deposits with other banks |  |  | 992 |  |  |  | 410 |
Investment securities |  |  | 8,917 |  |  |  | 7,743 |
Federal funds sold |  |  | 64 |  |  |  | - |
Dividends on other investments |  |  | 232 |  |  |  | 187 |
Total interest income |  |  | 60,483 |  |  |  | 49,022 |
Interest expense |  |  |  |  |  |  |  |
Deposits |  |  | 10,050 |  |  |  | 6,057 |
Federal funds purchased |  |  | 1 |  |  |  | 5 |
Borrowed money |  |  | 2,587 |  |  |  | 2,163 |
Total interest expense |  |  | 12,638 |  |  |  | 8,225 |
Net interest income |  |  | 47,845 |  |  |  | 40,797 |
Provision for loan losses |  |  | 1,104 |  |  |  | 201 |
Net interest income after provision for loan losses |  |  | 46,741 |  |  |  | 40,596 |
Noninterest i ncome |  |  |  |  |  |  |  |
Service charges on deposits |  |  | 4,783 |  |  |  | 4,374 |
Other service charges, commissions and fees |  |  | 4,263 |  |  |  | 3,254 |
Mortgage fee income |  |  | 3,199 |  |  |  | 652 |
Securities gains |  |  | 97 |  |  |  | 116 |
Other |  |  | 2,420 |  |  |  | 1,225 |
Total noninterest income |  |  | 14,762 |  |  |  | 9,621 |
Noninterest e xpenses |  |  |  |  |  |  |  |
Salaries and employee benefits |  |  | 26,218 |  |  |  | 20,123 |
Occupancy and equipment |  |  | 4,850 |  |  |  | 4,180 |
Acquisition related expenses |  |  | 2,733 |  |  |  | 224 |
Deposit intangible expenses |  |  | 600 |  |  |  | 48 |
Other |  |  | 14,493 |  |  |  | 10,725 |
Total noninterest expense |  |  | 48,894 |  |  |  | 35,300 |
In come before income t axes |  |  | 12,609 |  |  |  | 14,917 |
Income taxes |  |  | 2,398 |  |  |  | 3,000 |
Net income |  |  | 10,211 |  |  |  | 11,917 |
Net income per share of common s tock |  |  |  |  |  |  |  |
Basic |  | $ | 1.12 |  |  | $ | 1.41 |
Diluted |  | $ | 1.12 |  |  | $ | 1.40 |
Cash d ividends d eclared p er s hare of c ommon s tock |  | $ | 0.30 |  |  | $ | 0.20 |
Weighted average shares o utstanding, b asic |  |  | 9,129,705 |  |  |  | 8,439,454 |
Weighted average shares o utstanding, d iluted |  |  | 9,129,705 |  |  |  | 8,538,608 |

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

F-2

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31

(DOLLARS IN THOUSANDS)

|  | 2019 |  |  | 2018 |
Net i ncome |  | $ | 10,211 |  |  | $ | 11,917 |
Other comprehensive i ncome: |  |  |  |  |  |  |  |
Gains (losses) on securities arising during the year |  |  | 10,922 |  |  |  | (2,033) |
Tax effect |  |  | (2,293) |  |  |  | 427 |
Realized (gains) losses on sale of securities available for sale |  |  | (97) |  |  |  | (116) |
Tax effect |  |  | 20 |  |  |  | 24 |
Change in unrealized gains (losses) on securities available for sale, net of reclassification adjustment and tax effects |  |  | 8.552 |  |  |  | (1,698) |
Comprehensive i ncome |  | $ | 18,763 |  |  | $ | 10,219 |

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

F-3

COLONY BANKCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 and 201 8
(DOLLARS IN THOUSANDS)

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | other |  |  |  |  |
|  | Preferred Stock |  |  | Common Stock |  |  | Paid-in |  |  | Retained |  |  | comprehensive |  |  |  |  |
|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | capital |  |  | earnings |  |  | income (loss) |  |  | Total |
Balance, December 31, 2017 |  |  | - |  |  | $ | - |  |  |  | 8,439,258 |  |  | $ | 8,439 |  |  | $ | 29,145 |  |  | $ | 59,230 |  |  | $ | (6,492 | ) |  | $ | 90,322 |
Other comprehensive income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,698 | ) |  |  | (1,698 | )
Dividends on common shares |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,688 | ) |  |  | - |  |  |  | (1,688 | )
Issuance of restricted stock |  |  | - |  |  |  | - |  |  |  | 5,650 |  |  |  | 6 |  |  |  | (6 | ) |  |  | - |  |  |  | - |  |  |  | - |
Stock-based compensation expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 14 |  |  |  | - |  |  |  | - |  |  |  | 14 |
Repurchase of warrants |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,175 | ) |  |  | - |  |  |  | - |  |  |  | (3,175 | )
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | 11,917 |  |  |  | - |  |  |  | 11,917 |
Balance, December 31, 2018 |  |  | - |  |  | $ | - |  |  |  | 8,444,908 |  |  | $ | 8,445 |  |  | $ | 25,978 |  |  | $ | 69,459 |  |  | $ | (8,190 | ) |  | $ | 95,692 |
Other comprehensive income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,552 |  |  |  | 8,552 |
Dividends on common shares |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,692 | ) |  |  | - |  |  |  | (2,692 | )
Issuance of common stock |  |  | - |  |  |  | - |  |  |  | 1,053,875 |  |  |  | 1,054 |  |  |  | 17,655 |  |  |  | - |  |  |  | - |  |  |  | 18,709 |
Stock-based compensation expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 34 |  |  |  | - |  |  |  | - |  |  |  | 34 |
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10,211 |  |  |  | - |  |  |  | 10,211 |
Balance, December 31, 2019 |  |  | - |  |  | $ | - |  |  |  | 9,498,783 |  |  | $ | 9,499 |  |  | $ | 43,667 |  |  | $ | 76,978 |  |  | $ | 362 |  |  | $ | 130,506 |

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

F-4

COLONY BANKCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 (DOLLARS IN THOUSANDS)

|  | 2019 |  |  | 2018 |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |  |  |
Net income |  | $ | 10,211 |  |  | $ | 11,917 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Provision for loan losses |  |  | 1,104 |  |  |  | 201 |
Loan discount accretion |  |  | (763 | ) |  |  | 27 |
Other purchase accounting accretion and amortization, net |  |  | (254 | ) |  |  | - |
Accretion and amortization of securities discounts and premiums, net |  |  | 1,250 |  |  |  | 1,149 |
Depreciation |  |  | 2,063 |  |  |  | 1,787 |
Amortization of intangible assets |  |  | 600 |  |  |  | 48 |
(Gains) losses on securities available for sale |  |  | (97 | ) |  |  | (116 | )
Share-based compensation expense |  |  | 34 |  |  |  | 14 |
Increase (decrease) in unearned loan fees |  |  | 109 |  |  |  | 6 |
(Gain) on sale of other real estate and repossessions and write-downs |  |  | (780 | ) |  |  | (42 | )
(Gain) loss on sale of premises & equipment |  |  | 168 |  |  |  | 173 |
(Increase) in bank-owned life insurance |  |  | (588 | ) |  |  | (509 | )
Gain on sale of loans held for sale |  |  | (1,823 | ) |  |  | - |
Origination of loans held for sale |  |  | (69,576 | ) |  |  | - |
Proceeds from sale of loans held for sale |  |  | 61,323 |  |  |  | - |
(Increase) decrease in other assets |  |  | 573 |  |  |  | 271 |
Increase (decrease) in other liabilities |  |  | 379 |  |  |  | (9 | )
Net cash provided by operating activities |  |  | 3,933 |  |  |  | 14,917 |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |  |  |
Purchases of investment securities available for sale |  |  | (72,482 | ) |  |  | (63,683 | )
Proceeds from maturities, calls, and paydowns of investment securities available for sale |  |  | 73,313 |  |  |  | 50,422 |
Proceeds from sale of investment securities available for sale |  |  | 65,513 |  |  |  | 11,268 |
Net loans to customers |  |  | (58,593 | ) |  |  | 2,390 |
Purchase of premises and equipment |  |  | (3,485 | ) |  |  | (2,763 | )
Proceeds from sale of other real estate and repossessions |  |  | 2,553 |  |  |  | 3,002 |
Proceeds from bank-owned life insurance |  |  | 535 |  |  |  | - |
Redemption (purchase of) Federal Home Loan Bank stock |  |  | (831 | ) |  |  | 65 |
Proceeds from sale of premises and equipment |  |  | 690 |  |  |  | 23 |
Net cash and cash equivalents paid in acquisition |  |  | (467 | ) |  |  | (10,043 | )
Net cash (used in) provided by investing activities |  |  | 6,746 |  |  |  | (9,319 | )
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |  |  |
Noninterest-bearing customer deposits |  |  | 8,753 |  |  |  | 5,553 |
Interest-bearing customer deposits |  |  | 10,633 |  |  |  | (445 | )
Dividends paid for common stock |  |  | (2,692 | ) |  |  | (1,688 | )
Repurchase of warrants |  |  | - |  |  |  | (3,175 | )
Net increase (decrease) in Federal Home Loan Bank advances |  |  | 2,000 |  |  |  | (3,500 | )
Net increase (decrease) in other borrowed money |  |  | 14,563 |  |  |  | - |
Net cash (used in) provided by financing activities |  |  | 33,257 |  |  |  | (3,255 | )
Net increase in cash and cash equivalents |  |  | 43,936 |  |  |  | 2,343 |
Cash and cash equivalents at beginning of period |  |  | 60,156 |  |  |  | 57,813 |
Cash and cash equivalents at end of period |  | $ | 104,092 |  |  | $ | 60,156 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |  |  |  |  |  |  |  |
Cash paid during the period for interest |  | $ | 12,245 |  |  | $ | 8,197 |
Cash paid during the period for income taxes |  |  | 2,000 |  |  |  | 2,695 |
NONCASH INVESTING AND FINANCING ACTIVITIES |  |  |  |  |  |  |  |
Change in unrealized (gains) losses on securities available for sale |  | $ | 10,825 |  |  | $ | (2,149 | )
Acquisition of real estate through foreclosure |  |  | 1,009 |  |  |  | 792 |
Change in goodwill due to acquisition |  |  | 16,275 |  |  |  | 202 |
Initial recognition of operating lease right-of-use assets and lease liability |  |  | 676 |  |  |  | - |

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

F-5

COLONY BANKCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Summary of Significant Accounting Policies

Nature of Business

Colony Bankcorp, Inc. and subsidiaries (the “Company”) is a financial holding company headquartered in Fitzgerald, Georgia, whose primary business is presently conducted by Colony Bank, its wholly owned banking subsidiary (the “Bank”). Through the Bank, the Company offers a broad range of retail and commercial banking services to its customers concentrated in central, south and coastal Georgia. The Bank also engages in mortgage banking and SBA lending, and, as such originates, acquires, sells and services one-to-four family residential mortgage loans and SBA loans in the Southeast. The Company is subject to the regulations of certain state and federal agencies and are periodically examined by those regulatory agencies.

Basis of Presentation and Accounting Estimates

The consolidated financial statements include the accounts of the Company and Colony Bank. All significant intercompany transactions and balances have been eliminated in consolidation.

In preparing the consolidated financial statements in conformity with generally accepted accounting principles in the United States, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Acquisition Accounting

Acquisitions are accounted for under the acquisition method of accounting. Purchased assets and assumed liabilities are recorded at their estimated fair values as of the purchase date. Any identifiable intangible assets are also recorded at fair value. When the consideration given is less than the fair value of the net assets received, the acquisition results in a “bargain purchase gain”. If the consideration given exceeds the fair value of the net assets received, goodwill is recognized. Fair values are subject to refinement for up to one year after the closing date of an acquisition as additional information regarding the closing date fair values becomes available.

All identifiable intangible assets that are acquired in a business combination are recognized at fair value on the acquisition date. Identifiable intangible assets are recognized separately if they arise from contractual or other legal rights or if they are separable (i.e., capable of being sold, transferred, licensed, rented, or exchanged separately from the entity).

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date and carryover of the seller's related allowance for loan losses is prohibited. When the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments, the difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. The Company must estimate expected cash flows at each reporting date. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in expected cash flows result in a reversal of the provision for loan losses to the extent of prior provisions and adjust accretable discount if no prior provisions have been made or have been fully reversed. This increase in accretable discount will have a positive impact on future interest income.

Transfer of Financial Assets

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

F-6

Cash and Cash Equivalents

For purposes of reporting cash flow, cash and cash equivalents include cash on hand, cash items in process of collection, amounts due from banks, interest-bearing deposits in banks and federal funds sold.

The bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank. The reserve requirement as of December 31, 2019 and 2018 was $2.7 million and $1.9 million, respectively, and was met by cash on hand which is reported on the Company’s consolidated balance sheets in cash and due from banks.

In vestment Securities

The Company classifies its investment securities in one of three categories: (i) trading, (ii) held to maturity or (iii) available for sale. Trading securities are bought and held principally for the purpose of selling them in the near term. Held to maturity securities are those securities for which the Company has the ability and intent to hold until maturity. All other investment securities are classified as available for sale. At December 31, 2019 and 2018, all securities were classified as available for sale.

Trading securities are carried at fair value. Unrealized gains and losses on trading securities are recorded in earnings as a component of other noninterest income. Held to maturity securities are recorded initially at cost and subsequently adjusted for paydowns and amortization of purchase premium or accretion of purchase discount. Available for sale securities are carried at fair value. Unrealized holding gains and losses, net of the related deferred tax effect, on available for sale securities are excluded from earnings and are reported in other comprehensive income as a separate component of shareholders’ equity until realized. Transfers of securities between categories are recorded at fair value at the date of transfer. Unrealized holding gains or losses associated with transfers of securities from held to maturity to available for sale are recorded as a separate component of shareholders’ equity. These unrealized holding gains or losses are amortized into income over the remaining life of the security as an adjustment to the yield in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security.

The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the expected life of the securities. Realized gains and losses, determined on the basis of the cost of specific securities sold, are included in earnings on the trade date. A decline in the market value of any available for sale or held to maturity investment below cost that is deemed other than temporary establishes a new cost basis for the security. Other than temporary impairment deemed to be credit related is charged to earnings. Other than temporary impairment attributed to non-credit related factors is recognized in other comprehensive income.

In determining whether other-than-temporary impairment losses exist, management considers (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer or underlying collateral of the security and (iii) the Company’s intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

F-7

Other Investments

Other investments include Federal Home Loan Bank (“FHLB”) stock. These investments do not have a readily determinable market value due to restrictions placed on transferability and therefore are carried at cost. These investments are periodically evaluated for impairment based on ultimate recovery of par value or cost basis. Both cash and stock dividends are reported as income.

Loans

Loans are reported at their outstanding principal balances less unearned income, net of deferred fees and origination costs. Interest income is accrued on the outstanding principal balance. For all classes of loans, the accrual of interest on loans is discontinued when, in management’s opinion, the borrower may be unable to make payments as they become due, unless the loan is well secured and in the process of collection. Non-accrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. All interest accrued, but not collected for loans that are placed on nonaccrual or charged off, is reversed against interest income. Interest income on nonaccrual loans is applied against principal until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

F-8

Loans Modified in a Troubled Debt Restructuring (TDR)

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

Allowance for Loan Losses

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

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

The allowance consists of specific, historical and general components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan are lower than the carrying value of that loan. The historical component covers nonclassified loans and is based on historical loss experience adjusted for qualitative factors. A general component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The general component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and historical losses in the portfolio. General valuation allowances are based on internal and external qualitative risk factors such as (1) changes in lending policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices, (2) changes in international, national, regional, and local conditions, (3) changes in the nature and volume of the portfolio and terms of loans, (4) changes in the experience, depth, and ability of lending management, (5) changes in the volume and severity of past due loans and other similar conditions, (6) changes in the quality of the organization's loan review system, (7) changes in the value of underlying collateral for collateral dependent loans, (8) the existence and effect of any concentrations of credit and changes in the levels of such concentrations, and (9) the effect of other external factors (i.e. competition, legal and regulatory requirements) on the level of estimated credit losses.

F-9

Allowance for Loan Losses (Continued)

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

A significant portion of the Company’s impaired loans are deemed to be collateral dependent. Management therefore measures impairment on these loans based on the fair value of the collateral. Collateral values are determined based on appraisals performed by qualified licensed appraisers hired by the Company . The decision whether to obtain an external third-party appraisal usually depends on the type of property being evaluated. External appraisals are usually obtained on more complex, income producing properties such as hotels, shopping centers and businesses. Less complex properties such as residential lots, farm land and single family houses may be evaluated internally by senior credit administration staff. When the Company does obtain appraisals from external third-parties, the values utilized in the impairment calculation are “as is” or current market values. The appraisals, whether prepared internally or externally, may utilize a single valuation approach or a combination of approaches including the comparable sales, income and cost approach. Appraised amounts used in the impairment calculation are typically discounted 10 percent to account for selling and marketing costs, if the repayment of the loan is to come from the sale of the collateral. Although appraisals may not be obtained each year on all impaired loans, the collateral values used in the impairment calculations are evaluated quarterly by management. Based on management’s knowledge of the collateral and the current real estate market conditions, appraised values may be further discounted to reflect facts and circumstances known to management since the initial appraisal was performed.

Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a level 3 classification of the inputs for determining fair value. Because of the high degree of judgment required in estimating the fair value of collateral underlying impaired loans and because of the relationship between fair value and general economic conditions, we consider the fair value of impaired loans to be highly sensitive to changes in market conditions.

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. The Company’s policy states in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time that the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment, approved by the Company’s Chief Credit Officer. In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty.

Loan Commitments and Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and standby letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

F-10

Premises and Equipment

Land is carried at cost. Other premises and equipment are carried at cost, less accumulated depreciation computed on the straight-line method over the estimated useful lives of the assets. In general, estimated lives for buildings are up to 40 years, furniture and equipment useful lives range from five to 10 years and the lives of software and computer related equipment range from three to five years. Leasehold improvements are amortized over the life of the related lease, or the related assets, whichever is shorter. Expenditures for major improvements of the Company’s premises and equipment are capitalized and depreciated over their estimated useful lives. Minor repairs, maintenance and improvements are charged to operations as incurred. When assets are sold or disposed of, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in earnings.

Goodwill and Intangible Assets

Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired. Goodwill is assigned to reporting units and tested for impairment at least annually, or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value.

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

Cash Value of Bank Owned Life Insurance

The Company has purchased life insurance policies on certain officers. The life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Other Real Estate

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

Income Taxes

The provision for income taxes is based upon income for financial statement purposes, adjusted for nontaxable income and nondeductible expenses. Deferred income taxes have been provided when different accounting methods have been used in determining income for income tax purposes and for financial reporting purposes.

Deferred tax assets and liabilities are recognized based on future tax consequences attributable to differences arising from the financial statement carrying values of assets and liabilities and their tax basis. The differences relate primarily to depreciable assets (use of different depreciation methods for financial statement and income tax purposes) and allowance for loan losses (use of the allowance method for financial statement purposes and the direct write-off method for tax purposes). In the event of changes in the tax laws, deferred tax assets and liabilities are adjusted in the period of the enactment of those changes, with effects included in the income tax provision. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company and its subsidiary file a consolidated federal income tax return. The subsidiary pays its proportional share of federal income taxes to the Company based on its taxable income.

The Company’s federal and state income tax returns for tax years 2019, 2018, 2017 and 2016 are subject to examination by the Internal Revenue Service (IRS) and the Georgia Department of Revenue, generally for three years after filing.

The Company believes that its income tax filing positions taken or expected to be taken on its tax returns will more likely than not be sustained upon audit by the taxing authorities and does not anticipate any adjustments that will result in a material adverse impact on the Company’s financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded.

F-11

Earnings per Share

Basic earnings per share are computed by dividing net income allocated to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share are computed by dividing net income allocated to common shareholders by the sum of the weighted-average number of shares of common stock outstanding and the effect of the issuance of potential common shares that are dilutive. Potential common shares consist of stock warrants and restricted shares for the years ended December 31, 2019 and 2018, and are determined using the treasury stock method. The Company has determined that its outstanding non-vested stock awards are participating securities, and all dividends on these awards are paid similar to other dividends.

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. Such items are considered components of other comprehensive income (loss). Accounting standards codification requires the presentation in the consolidated financial statements of net income and all items of other comprehensive income (loss) as total comprehensive income (loss).

Fair Value Measures

Fair values of assets and liabilities are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

Operating Segments

The Company has three reportable segments, the Banking Division, the Retail Mortgage Division and the Small Business Specialty Lending Division. The Banking Division derives its revenues from the delivery of full service financial services to include commercial loans, consumer loans and deposit accounts. The Retail Mortgage Division derives its revenues from the origination, sales and servicing of one-to-four family residential mortgage loans. The Small Business Specialty Lending Division derives its revenues from origination, sales and servicing of SBA and USDA government guaranteed loans.

The Banking, Retail Mortgage and Small Business Specialty Lending Divisions are managed as separate business units because of the different products and services they provide. The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material intersegment sales or transfers.

Reclassifications

Certain amounts, previously reported, have been reclassified to state all periods on a comparable basis and had no effect on stockholders’ equity or net income.

F-12

Accounting Standards Adopted in 2019

ASU 2016-02, Leases (Topic 842). This ASU amends the existing standards for lease accounting effectively requiring that most leases be carried on the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability. This includes qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of the Company’s leasing activities. This ASU may be adopted using a modified retrospective transition method with a cumulative effect adjustment to equity as of the beginning of the period in which it is adopted. Alternatively, this ASU may be adopted using an optional transition method where initial application of the provisions of this standard are applied as of the date of adoption, resulting in no adjustment to amounts reported in prior periods. For public business entities, this ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein. ASU 2016-02 was effective for the Company on January 1, 2019 with the optional transition method elected. The Company also elected the package of practical expedients provided in the guidance which permits the Company to not reassess under the new standard the prior conclusions about lease identification, lease classification and initial direct costs. The adoption of this standard resulted in the recognition of a right-of-use asset of $483 thousand and a lease liability of $483 thousand in 2019. The right-of-use asset and lease liability are recorded in the consolidated balance sheets in other assets and other liabilities, respectively.

ASU 2019-07, Codification Updates to SEC Sections – Amendments to SEC Paragraphs Pursuant to SEC final rule releases No. 33-10532, disclosure update and simplification, and nos. 33-10231 and 33-10442, investment company reporting modernization, and miscellaneous updates. This standard updates various SEC financial statement disclosure requirements, including disclosures related to bank holding companies. The standard was effective immediately, and did not have a material impact on disclosures.

ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities. This update shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. For securities held at a discount, the discount will continue to be amortized to maturity. For public entities, this update is effective for fiscal years beginning after December 15, 2018, with modified retrospective application. The adoption of this update on January 1, 2019 did not have a material impact on the consolidated financial statements.

Accounting Standards Updates Pending Adoption

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). This ASU sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supported forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. The Company is currently assessing the impact of the adoption of this ASU on its consolidated financial statements. In November 2019, the ASU 2019-10 was issued which delayed the effective date of CECL for smaller reporting companies. The new effective date is for fiscal years beginning after December 15, 2022.

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

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

F-13

NOTE 2. BUSINESS COMBINATIONS

Acquisition of Albany, Georgia Branch from Planters First Bank

On October 22, 2018, the Bank completed its acquisition of one branch office and a vacant lot from Planters First Bank (“PFB”) located in Albany, Georgia for a total cash consideration of $10.2 million. The assets and liabilities as of the effective date of the transaction were recorded at their respective estimated fair values. The excess of the purchase price over the net estimated fair values of the acquired assets and liabilities was allocated to identifiable intangible assets with the remaining excess allocated to goodwill. In the periods following the acquisition, the financial statements will include the results attributable to the Albany branch purchase beginning on the date of purchase.

The following table presents assets acquired and liabilities assumed of PFB as of October 22, 2018 and their fair value estimates. The fair value estimates were subject to refinement for up to one year after the closing date of the acquisition for new information obtained about the facts and circumstances that existed at the acquisition date. The Company finalized its fair value adjustments during the third quarter of 2019.

(dollars in thousands) |  |  |  |
Purchase Price Consideration: |  |  |  |
Cash Consideration |  | $ | 10,238 |
Total purchase price for PFB branch acquisition |  | $ | 10,238 |
Assets acquired at fair value: |  |  |  |
Cash and cash equivalents |  | $ | 195 |
Loans |  |  | 20,430 |
Premises and equipment, net |  |  | 773 |
Core deposit intangible |  |  | 560 |
Other assets |  |  | 123 |
Total fair value of assets acquired |  | $ | 22,081 |
Liabilities assumed at fair value: |  |  |  |
Deposits |  | $ | 12,032 |
Other liabilities |  |  | 13 |
Total fair value of liabilities assumed |  | $ | 12,045 |
Net Assets acquired at fair value: |  | $ | 10,036 |
Amount of goodwill resulting from acquisition |  | $ | 202 |

F-14

Goodwill of $202,000, which is the excess of the purchase price over the fair value of the net assets acquired, was recorded in the PFB acquisition and is expected to be deductible for tax purposes.

Acquired Loans

The table below summarizes the total contractually required principal and interest cash payments, management's estimate of expected total cash payments and the fair value of the loans. Of the total loans acquired, there were no loans acquired considered to be credit impaired and accounted for under ASC 310-30.

|  | Contractually required principal and interest |  |  | Cash flows expected to be collected |  |  | Nonaccretable difference |  |  | Fair value of acquired loans at acquisition date |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing loans acquired |  | $ | 20,749 |  |  |  | 20,749 |  |  |  | 319 |  |  | $ | 20,430 |

Acquisition of LBC Bancshares, Inc.

On May 1, 2019, the Company completed its acquisition of LBC Bancshares, Inc. (“LBC”), a bank holding company headquartered in LaGrange, Georgia. Upon consummation of the acquisition, LBC was merged with and into the Company, with Colony as the surviving entity in the merger. At that time, LBC’s wholly owned bank subsidiary, Calumet Bank, was also merged with and into the Bank. The acquisition expanded the Company’s market presence, as Calumet Bank had two full-service banking locations, one each in LaGrange, Georgia and Columbus, Georgia, as well as a loan production office in Atlanta, Georgia. Under the terms of the Agreement and Plan of Merger, each LBC shareholder had the option to receive either $23.50 in cash or 1.3239 shares of the Company’s common stock in exchange for each share of LBC common stock, such that 55 percent of LBC shares of common stock received the stock consideration and 45 percent received the cash consideration, with at least 50 percent of the merger consideration paid in the Company's common stock. As a result, the Company issued 1,053,875 common shares at a fair value of $18.7 million and paid $15.3 million in cash to the former shareholders of LBC as merger consideration.

The merger was effected by the issuance of shares of the Company’s common stock along with cash consideration to shareholders to LBC. The assets and liabilities of LBC as of the effective date of the merger were recorded at their respective estimated fair values and combined with those of the Company. The excess of the purchase price over the net estimated fair values of the acquired assets and liabilities was allocated to identifiable intangible assets with the remaining excess allocated to goodwill. Goodwill of $15.7 million was recorded as part of the LBC acquisition and is not expected to be deductible for income tax purposes.

F-15

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

Purchase Price Consideration (in thousands): |  |  |  |
Shares of CBAN Common Stock Issued to LBC Shareholders as of May 1, 2019 |  |  | 1,053,875 |
Market Price of CBAN Common Stock on May 1, 2019 |  | $ | 17.75 |
Estimated Fair Value of CBAN Common Stock Issued |  |  | 18,706 |
Cash Consideration Paid |  |  | 15,315 |
Total Consideration |  | $ | 34,021 |
Assets acquired at fair value: |  |  |  |
Cash and Cash Equivalents |  | $ | 15,678 |
Investments Securities Available for Sale |  |  | 49,172 |
Investments Securities Held to Maturity |  |  | 1,766 |
Restricted Investments |  |  | 479 |
Loans |  |  | 130,568 |
Premises and Equipment |  |  | 3,009 |
Core Deposit Intangible |  |  | 3,100 |
Other Real Owned |  |  | 243 |
Prepaid and Other Assets |  |  | 6,143 |
Total Fair Value of Assets Acquired |  | $ | 210,158 |
Liabilities Assumed at Fair Value: |  |  |  |
Deposits |  | $ | (189,896) |
FHLB Advances |  |  | (1,000) |
Payables and Other Liabilities |  |  | (975) |
Total Fair Value of Liabilities Assumed |  | $ | (191,871) |
Net Assets Acquired at Fair Value: |  | $ | 18,287 |
Amount of Goodwill Resulting from Acquisition |  | $ | 15,734 |

F-16

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

(dollars in thousands) |  |  |  |
Contractually Required Principal and Interest |  | $ | 695 |
Non-accretable Difference |  |  | (519) |
Cash Flows Expected to be Collected |  |  | 176 |
Accretable Yield |  |  | - |
Total Purchased Credit-Impaired Loans Acquired |  | $ | 176 |

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

|  | Fair value of acquired loans at acquisition date |  |  | Contractually required principal and interest payments |  |  | Nonaccretable difference |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Acquired receivables subject to ASC 310-30 |  | $ | 176 |  |  | $ | 695 |  |  | $ | (519) |
Acquired receivables not subject to ASC 310-30 |  | $ | 130,392 |  |  | $ | 132,381 |  |  | $ | - |

F-17

Acquisition of PFB Mortgage from Planters First Bank

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

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

(dollars in thousands) |  |  |  |
Purchase Price Consideration: |  |  |  |
Cash Consideration Paid |  | $ | 833 |
Total Consideration |  | $ | 833 |
Assets acquired at fair value: |  |  |  |
Premises and Equipment |  | $ | 78 |
Premium on Loan Commitments |  |  | 209 |
Other Assets |  |  | 5 |
Total Fair Value of Assets Acquired |  | $ | 292 |
Liabilities Assumed at Fair Value: |  |  |  |
Total Fair Value of Liabilities Assumed |  | $ | - |
Net Assets Acquired at Fair Value: |  | $ | 292 |
Amount of Goodwill Resulting from Acquisition |  | $ | 541 |

F-18

NOTE 3. INVESTMENT SECURITIES

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

(dollars in thousands) |  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Fair Value |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State, county and municipal securities |  | $ | 5,133 |  |  | $ | 36 |  |  | $ | (54) |  |  | $ | 5,115 |
Corporate debt securities |  |  | 2,811 |  |  |  | 11 |  |  |  | (16) |  |  |  | 2,806 |
Mortgage-backed securities |  |  | 338,930 |  |  |  | 2,669 |  |  |  | (2,188) |  |  |  | 339,411 |
Total debt securities |  | $ | 346,874 |  |  | $ | 2,716 |  |  | $ | (2,258) |  |  | $ | 347,332 |

(dollars in thousands) |  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Fair Value |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State, county and municipal securities |  | $ | 4,008 |  |  | $ | 18 |  |  | $ | (37) |  |  | $ | 3,989 |
Corporate debt securities |  |  | 2,927 |  |  |  | - |  |  |  | (55) |  |  |  | 2,872 |
Mortgage-backed securities |  |  | 356,498 |  |  |  | 303 |  |  |  | (10,596) |  |  |  | 346,205 |
Total debt securities |  | $ | 363,433 |  |  | $ | 321 |  |  | $ | (10,688) |  |  | $ | 353,066 |

The gross unrealized losses and estimated fair value of securities aggregated by category and length of time that securities have been in a continuous unrealized loss position are summarized as follows:

|  | Less Than 12 Months |  |  | 12 Months or More |  |  | Total |
(dollars in thousands) |  | Estimated Fair Value |  |  | Unrealized Losses |  |  | Estimated Fair Value |  |  | Unrealized Losses |  |  | Estimated Fair Value |  |  | Unrealized Losses |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State, county and municipal securities |  |  | 3,257 |  |  |  | (54) |  |  |  | - |  |  |  | - |  |  |  | 3,257 |  |  |  | (54) |
Corporate debt securities |  |  | - |  |  |  | - |  |  |  | 784 |  |  |  | (16) |  |  |  | 784 |  |  |  | (16) |
Mortgage-backed securities |  |  | 60,860 |  |  |  | (277) |  |  |  | 119,110 |  |  |  | (1,911) |  |  |  | 179,970 |  |  |  | (2,188) |
Total debt securities |  | $ | 64,117 |  |  | $ | (331) |  |  | $ | 119,894 |  |  | $ | (1,927) |  |  | $ | 184,011 |  |  | $ | (2,258) |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State, county and municipal securities |  |  | 612 |  |  |  | (3) |  |  |  | 1,882 |  |  |  | (34) |  |  |  | 2,494 |  |  |  | (37) |
Corporate debt securities |  |  | 2,009 |  |  |  | (21) |  |  |  | 863 |  |  |  | (34) |  |  |  | 2,872 |  |  |  | (55) |
Mortgage-backed securities |  |  | 39,083 |  |  |  | (504) |  |  |  | 255,747 |  |  |  | (10,092) |  |  |  | 294,830 |  |  |  | (10,596) |
Total debt securities |  | $ | 41,704 |  |  | $ | (528) |  |  | $ | 258,492 |  |  | $ | (10,160) |  |  | $ | 300,196 |  |  | $ | (10,688) |

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

At December 31, 2019, ninety-eight securities have unrealized losses which have depreciated 1.2 percent from the Company’s amortized cost basis. These securities are guaranteed by either the U.S. Government, other governments or U.S. corporations. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other than temporary. However, the Company owns one asset-backed security at December 31, 2019 which was completely written off during prior years. This investment is comprised of one issuance of a trust preferred security and has no book value.

F-19

The amortized cost and fair value of investment securities as of December 31, 2019, by contractual maturity, are shown hereafter. Expected maturities may differ from contractual maturities for certain investments because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. This is often the case with mortgage-backed securities, which are disclosed separately in the table below.

|  | Securities |
|  | Available for Sale |
(dollars in thousands) |  | Amortized Cost |  |  | Fair Value |
Due in one year or less |  | $ | 150 |  |  | $ | 150 |
Due after one year through five years |  |  | 3,195 |  |  |  | 3,215 |
Due after five years through ten years |  |  | 723 |  |  |  | 744 |
Due after ten years |  |  | 3,876 |  |  |  | 3,812 |
|  | $ | 7,944 |  |  | $ | 7,921 |
Mortgage-backed securities |  |  | 338,930 |  |  |  | 339,411 |
|  | $ | 346,874 |  |  | $ | 347,332 |

Proceeds from sales of investments available for sale were $65.5 million in 2019 and $11.3 million in 2018. Gross realized gains totaled $416,000 in 2019 and $116,000 in 2018. Gross realized losses totaled $322,000 in 2019 and $0 in 2018.

Investment securities having a carrying value totaling $122.3 million and $179.0 million as of December 31, 2019 and 2018, respectively, were pledged to secure public deposits and for other purposes.

F-20

NOTE 4. LOANS

The following table presents the composition of loans segregated by legacy and purchased loans and by class of loans, as of December 31, 2019 and 2018. Purchased loans are defined as loans that were acquired in bank acquisitions.

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

|  | December 31, 2018 |
(dollars in thousands) |  | Legacy Loans |  |  | Purchased Loans |  |  | Total |
Construction, land & land development |  | $ | 58,812 |  |  | $ | 1,498 |  |  | $ | 60,310 |
Other commercial real estate |  |  | 429,184 |  |  |  | 6,777 |  |  |  | 435,961 |
Total commercial real estate |  |  | 487,996 |  |  |  | 8,275 |  |  |  | 496,271 |
Residential real estate |  |  | 185,577 |  |  |  | 2,015 |  |  |  | 187,592 |
Commercial , financial, & agricultural |  |  | 66,131 |  |  |  | 8,035 |  |  |  | 74,166 |
Consumer & other |  |  | 23,435 |  |  |  | 62 |  |  |  | 23,497 |
Total loans |  | $ | 763,139 |  |  | $ | 18,387 |  |  | $ | 781,526 |

F-21

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

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

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

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

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

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

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

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

F-22

The following tables present the loan portfolio, excluding purchased loans, by credit quality indicator (risk grade) as of December 31, 2019. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes. For the periods ending December 31, 2019, the Company did not have any loans classified as “doubtful” or a “loss”.

|  | Pass |  |  | Special Mention |  |  | Substandard |  |  | Total Loans |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  | $ | 82,322 |  |  | $ | 445 |  |  | $ | 269 |  |  | $ | 83,036 |
Other commercial real estate |  |  | 459,064 |  |  |  | 13,438 |  |  |  | 9,441 |  |  |  | 481,943 |
Total commercial real estate |  |  | 541,386 |  |  |  | 13,883 |  |  |  | 9,710 |  |  |  | 564,979 |
Residential real estate |  |  | 159,194 |  |  |  | 4,632 |  |  |  | 7,515 |  |  |  | 171,341 |
Commercial , financial, & agricultural |  |  | 86,558 |  |  |  | 1,973 |  |  |  | 3,004 |  |  |  | 91,535 |
Consumer & other |  |  | 18,883 |  |  |  | 148 |  |  |  | 214 |  |  |  | 19,245 |
Total loans |  | $ | 806,021 |  |  | $ | 20,636 |  |  | $ | 20,443 |  |  | $ | 847,100 |

The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of December 31, 2019.

|  | Pass |  |  | Special Mention |  |  | Substandard |  |  | Total Loans |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  | $ | 12,996 |  |  | $ | - |  |  | $ | 65 |  |  | $ | 13,061 |
Other commercial real estate |  |  | 57,881 |  |  |  | 381 |  |  |  | 34 |  |  |  | 58,296 |
Total commercial real estate |  |  | 70,877 |  |  |  | 381 |  |  |  | 99 |  |  |  | 71,357 |
Residential real estate |  |  | 23,097 |  |  |  | 249 |  |  |  | 109 |  |  |  | 23,455 |
Commercial , financial, & agricultural |  |  | 19,443 |  |  |  | 2,949 |  |  |  | 433 |  |  |  | 22,825 |
Consumer & other |  |  | 4,077 |  |  |  | - |  |  |  | - |  |  |  | 4,077 |
Total loans |  |  | 117,494 |  |  |  | 3,579 |  |  |  | 641 |  |  |  | 121,714 |

The following tables present the loan portfolio, excluding purchased loans, by credit quality indicator (risk grade) as of December 31, 2018. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes. For the periods ending December 31, 2018, the Company did not have any loans classified as “doubtful” or a “loss”.

|  | Pass |  |  | Special Mention |  |  | Substandard |  |  | Total Loans |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  | $ | 58,050 |  |  | $ | 45 |  |  | $ | 717 |  |  | $ | 58,812 |
Other commercial real estate |  |  | 409,793 |  |  |  | 9,574 |  |  |  | 9,817 |  |  |  | 429,184 |
Total commercial real estate |  |  | 467,843 |  |  |  | 9,619 |  |  |  | 10,534 |  |  |  | 487,996 |
Residential real estate |  |  | 167,913 |  |  |  | 7,107 |  |  |  | 10,557 |  |  |  | 185,577 |
Commercial , financial, & agricultural |  |  | 63,394 |  |  |  | 1,366 |  |  |  | 1,371 |  |  |  | 66,131 |
Consumer & other |  |  | 23,045 |  |  |  | 64 |  |  |  | 326 |  |  |  | 23,435 |
Total loans |  | $ | 722,195 |  |  | $ | 18,156 |  |  | $ | 22,788 |  |  | $ | 763,139 |

F-23

The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of December 31, 2018.

|  | Pass |  |  | Special |  |  | Substandard |  |  | Total Loans |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  | $ | 1,498 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,498 |
Other commercial real estate |  |  | 6,777 |  |  |  | - |  |  |  | - |  |  |  | 6,777 |
Total commercial real estate |  |  | 8,275 |  |  |  | - |  |  |  | - |  |  |  | 8,275 |
Residential real estate |  |  | 2,015 |  |  |  | - |  |  |  | - |  |  |  | 2,015 |
Commercial , financial, & agricultural |  |  | 8,035 |  |  |  | - |  |  |  | - |  |  |  | 8,035 |
Consumer & other |  |  | 62 |  |  |  | - |  |  |  | - |  |  |  | 62 |
Total loans |  |  | 18,387 |  |  |  | - |  |  |  | - |  |  |  | 18,387 |

A loan’s risk grade is assigned at the inception of the loan and is based on the financial strength of the borrower and the type of collateral. Loan risk grades are subject to reassessment at various times throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of 6 or below and an outstanding balance of $250,000 or more are reassessed on a quarterly basis. During this reassessment process individual reserves may be identified and placed against certain loans which are not considered impaired. In assessing the overall economic condition of the markets in which it operates, the Company monitors the unemployment rates for its major service areas. The unemployment rates are reviewed on a quarterly basis as part of the allowance for loan loss determination.

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

The following table represents an age analysis of past due loans and nonaccrual loans, segregated by class of loans, excluding purchased loans, as of December 31, 2019:

|  | Accruing Loans |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | 90 Days |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 30-89 Days |  |  | or More |  |  | Total Accruing |  |  | Nonaccrual |  |  |  |  |  |  |  |  |
|  | Past Due |  |  | Past Due |  |  | Loans Past Due |  |  | Loans |  |  | Current Loans |  |  | Total Loans |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  | $ | 50 |  |  | $ | - |  |  | $ | 50 |  |  | $ | 32 |  |  | $ | 82,954 |  |  | $ | 83,036 |
Other commercial real estate |  |  | 335 |  |  |  | - |  |  |  | 335 |  |  |  | 3,738 |  |  |  | 477,870 |  |  |  | 481,943 |
Total commercial real estate |  |  | 385 |  |  |  | - |  |  |  | 385 |  |  |  | 3,770 |  |  |  | 560,824 |  |  |  | 564,979 |
Residential real estate |  |  | 1,296 |  |  |  | - |  |  |  | 1,296 |  |  |  | 3,643 |  |  |  | 166,402 |  |  |  | 171,341 |
Commercial , financial, & agricultural |  |  | 212 |  |  |  | - |  |  |  | 212 |  |  |  | 1,628 |  |  |  | 89,695 |  |  |  | 91,535 |
Consumer & other |  |  | 21 |  |  |  | - |  |  |  | 21 |  |  |  | 138 |  |  |  | 19,086 |  |  |  | 19,245 |
Total loans |  | $ | 1,914 |  |  | $ | - |  |  | $ | 1,914 |  |  | $ | 9,179 |  |  | $ | 836,007 |  |  | $ | 847,100 |

F-24

The following table represents an age analysis of past due loans and nonaccrual loans, segregated by class of loans, for purchased loans, as of December 31, 2019:

|  | Accruing Loans |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | 90 Days |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 30-89 Days |  |  | or More |  |  | Total Accruing |  |  | Nonaccrual |  |  |  |  |  |  |  |  |
|  | Past Due |  |  | Past Due |  |  | Loans Past Due |  |  | Loans |  |  | Current Loans |  |  | Total Loans |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 96 |  |  | $ | 12,965 |  |  | $ | 13,061 |
Other commercial real estate |  |  | 83 |  |  |  | - |  |  |  | 83 |  |  |  | 34 |  |  |  | 58,179 |  |  |  | 58,296 |
Total commercial real estate |  |  | 83 |  |  |  | - |  |  |  | 83 |  |  |  | 130 |  |  |  | 71,144 |  |  |  | 71,357 |
Residential real estate |  |  | 57 |  |  |  | - |  |  |  | 57 |  |  |  | 85 |  |  |  | 23,313 |  |  |  | 23,455 |
Commercial , financial, & agricultural |  |  | 553 |  |  |  | - |  |  |  | 553 |  |  |  | 433 |  |  |  | 21,839 |  |  |  | 22,825 |
Consumer & other |  |  | 8 |  |  |  | - |  |  |  | 8 |  |  |  | - |  |  |  | 4,069 |  |  |  | 4,077 |
Total loans |  | $ | 701 |  |  | $ | - |  |  | $ | 701 |  |  | $ | 648 |  |  | $ | 120,365 |  |  | $ | 121,714 |

The following table represents an age analysis of past due loans and nonaccrual loans, segregated by class of loans, excluding purchased loans, as of December 31, 2018:

|  | Accruing Loans |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | 90 Days |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 30-89 Days |  |  | or More |  |  | Total Accruing |  |  | Nonaccrual |  |  |  |  |  |  |  |  |
|  | Past Due |  |  | Past Due |  |  | Loans Past Due |  |  | Loans |  |  | Current Loans |  |  | Total Loans |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  | $ | 88 |  |  | $ | - |  |  | $ | 88 |  |  | $ | 463 |  |  | $ | 58,349 |  |  | $ | 58,812 |
Other commercial real estate |  |  | 755 |  |  |  | - |  |  |  | 755 |  |  |  | 5,018 |  |  |  | 424,166 |  |  |  | 429,184 |
Total commercial real estate |  |  | 843 |  |  |  | - |  |  |  | 843 |  |  |  | 5,481 |  |  |  | 482,515 |  |  |  | 487,996 |
Residential real estate |  |  | 6,882 |  |  |  | - |  |  |  | 6,882 |  |  |  | 2,734 |  |  |  | 182,843 |  |  |  | 185,577 |
Commercial , financial, & agricultural |  |  | 399 |  |  |  | - |  |  |  | 399 |  |  |  | 1,050 |  |  |  | 65,081 |  |  |  | 66,131 |
Consumer & other |  |  | 110 |  |  |  | - |  |  |  | 110 |  |  |  | 217 |  |  |  | 23,218 |  |  |  | 23,435 |
Total loans |  | $ | 8,234 |  |  | $ | - |  |  | $ | 8,234 |  |  | $ | 9,482 |  |  | $ | 753,657 |  |  | $ | 763,139 |

The following table represents an age analysis of past due loans and nonaccrual loans, segregated by class of loans, for purchased loans, as of December 31, 2018:

|  | Accruing Loans |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | 90 Days |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 30-89 Days |  |  | or More |  |  | Total Accruing |  |  | Nonaccrual |  |  |  |  |  |  |  |  |
|  | Past Due |  |  | Past Due |  |  | Loans Past Due |  |  | Loans |  |  | Current Loans |  |  | Total Loans |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 1,498 |  |  | $ | 1,498 |
Other commercial real estate |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,777 |  |  |  | 6,777 |
Total commercial real estate |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,275 |  |  |  | 8,275 |
Residential real estate |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,015 |  |  |  | 2,015 |
Commercial , financial, & agricultural |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,035 |  |  |  | 8,035 |
Consumer & other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 62 |  |  |  | 62 |
Total loans |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 18,387 |  |  | $ | 18,387 |

F-25

The following table details impaired loan data, including purchased credit impaired loans, as of December 31, 2019:

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

Interest income recorded on impaired loans during the year ended December 31, 2019 was $175,000, and reflects interest income recorded on nonaccrual loans prior to them being placed on nonaccrual status and interest income recorded on TDRs. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $221,000 for the year ended December 31, 2019.

F-26

The following table details impaired loan data as of December 31, 2018. There were no purchased credit impaired loans and related allowance for loan losses as of December 31, 2018.

|  | Unpaid |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Contractual |  |  |  |  |  |  |  |  |  |  | Average |
|  | Principal |  |  | Recorded |  |  | Related |  |  | Recorded |
(dollars in thousands) |  | Balance |  |  | Investment |  |  | Allowance |  |  | Investment |
With No Related |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance Recorded |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  | $ | 132 |  |  | $ | 132 |  |  | $ | - |  |  | $ | 69 |
Commercial real estate |  |  | 14,218 |  |  |  | 14,216 |  |  |  | - |  |  |  | 12,401 |
Residential real estate |  |  | 4,214 |  |  |  | 4,130 |  |  |  | - |  |  |  | 4,067 |
Commercial, financial & agricultural |  |  | 1,029 |  |  |  | 1,008 |  |  |  | - |  |  |  | 909 |
Consumer & other |  |  | 217 |  |  |  | 217 |  |  |  | - |  |  |  | 198 |
|  |  | 19,810 |  |  |  | 19,703 |  |  |  | - |  |  |  | 17,644 |
With An Allowance Recorded |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  |  | 399 |  |  |  | 399 |  |  |  | 39 |  |  |  | 466 |
Commercial real estate |  |  | 4,055 |  |  |  | 4,055 |  |  |  | 1,312 |  |  |  | 5,489 |
Residential real estate |  |  | 274 |  |  |  | 274 |  |  |  | 61 |  |  |  | 98 |
Commercial, financial & agricultural |  |  | 42 |  |  |  | 42 |  |  |  | 6 |  |  |  | 8 |
Consumer & other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
|  |  | 4,770 |  |  |  | 4,770 |  |  |  | 1,418 |  |  |  | 6,061 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land & land development |  |  | 531 |  |  |  | 531 |  |  |  | 39 |  |  |  | 535 |
Commercial real estate |  |  | 18,273 |  |  |  | 18,271 |  |  |  | 1,312 |  |  |  | 17,890 |
Residential real estate |  |  | 4,488 |  |  |  | 4,404 |  |  |  | 61 |  |  |  | 4,165 |
Commercial, financial & agricultural |  |  | 1,071 |  |  |  | 1,050 |  |  |  | 6 |  |  |  | 917 |
Consumer & other |  |  | 217 |  |  |  | 217 |  |  |  | - |  |  |  | 198 |
|  | $ | 24,580 |  |  | $ | 24,473 |  |  | $ | 1,418 |  |  | $ | 23,705 |

Interest income recorded on impaired loans during the year ended December 31, 2018 was $320,000, and reflects interest income recorded on nonaccrual loans prior to them being placed on nonaccrual status and interest income recorded on TDRs. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of approximately $226,000 for the year ended December 31, 2018.

F-27

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

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

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

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

As discussed in Note 1, Summary of Significant Accounting Policies, once a loan is identified as a TDR, it is accounted for as an impaired loan. The Company had no unfunded commitments to lend to a customer that has a troubled debt restructured loan as of December 31, 2019. The Company had no loan contracts restructured during 2019. The Company had one loan contract in the amount of $402,000 restructured during 2018.

Loans modified in a troubled debt restructuring are considered to be in default once the loan becomes 90 days past due. A TDR may cease being classified as impaired if the loan is subsequently modified at market terms and, has performed according to the modified terms for at least six months, and there has not been any prior principal forgiveness on a cumulative basis.

During 2019, the Company had one loan totaling $859,000 that subsequently defaulted. This loan failed to continue to perform as agreed and was moved to non-accrual status. During 2018, the Company had one loan $131,000 that subsequently defaulted. This loan failed to continue to perform as agreed and was moved to non-accrual status.

F-28

NOTE 5. ALLOWANCE FOR LOAN LOSSES

The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the year ended December 31, 2019. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

(dollars in thousands) |  | Construction, land and land development |  |  | Other commercial real estate |  |  | Residential real estate |  |  | Commercial, financial, & agricultural |  |  | Consumer and other |  |  | Total |
Twelve months ended December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 131 |  |  | $ | 5,251 |  |  | $ | 1,181 |  |  | $ | 618 |  |  | $ | 96 |  |  | $ | 7,277 |
Charge-offs |  |  | (29) |  |  |  | (119) |  |  |  | (758) |  |  |  | (403) |  |  |  | (784) |  |  |  | (2,093) |
Recoveries |  |  | 82 |  |  |  | 218 |  |  |  | 174 |  |  |  | 36 |  |  |  | 65 |  |  |  | 575 |
Provision |  |  | 31 |  |  |  | (1,442) |  |  |  | 383 |  |  |  | 1,406 |  |  |  | 726 |  |  |  | 1,104 |
Ending balance |  | $ | 215 |  |  | $ | 3,908 |  |  | $ | 980 |  |  | $ | 1,657 |  |  | $ | 103 |  |  | $ | 6,863 |
Period-end amount allocated to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  |  | - |  |  |  | 1,939 |  |  |  | 137 |  |  |  | 1,073 |  |  |  | - |  |  |  | 3,149 |
Collectively evaluated for impairment |  |  | 215 |  |  |  | 1,969 |  |  |  | 837 |  |  |  | 584 |  |  |  | 103 |  |  |  | 3,708 |
Purchase credit impaired |  |  | - |  |  |  | - |  |  |  | 6 |  |  |  | - |  |  |  | - |  |  |  | 6 |
Ending balance |  | $ | 215 |  |  | $ | 3,908 |  |  | $ | 980 |  |  | $ | 1,657 |  |  | $ | 103 |  |  | $ | 6,863 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  |  | 67 |  |  |  | 18,024 |  |  |  | 3,471 |  |  |  | 2,246 |  |  |  | - |  |  |  | 23,808 |
Loans collectively evaluated for impairment |  |  | 95,965 |  |  |  | 522,181 |  |  |  | 191,314 |  |  |  | 112,077 |  |  |  | 23,322 |  |  |  | 944,859 |
Purchased credit impaired |  |  | 65 |  |  |  | 34 |  |  |  | 11 |  |  |  | 37 |  |  |  | - |  |  |  | 147 |
Ending balance |  | $ | 96,097 |  |  | $ | 540,239 |  |  | $ | 194,796 |  |  | $ | 114,360 |  |  | $ | 23,322 |  |  | $ | 968,814 |

The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the year ended December 31, 2018. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

(dollars in thousands) |  | Construction, land and land development |  |  | Other commercial real estate |  |  | Residential real estate |  |  | Commercial, financial, & agricultural |  |  | Consumer and other |  |  | Total |
Twelve months ended December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,216 |  |  | $ | 4,653 |  |  | $ | 968 |  |  | $ | 633 |  |  | $ | 37 |  |  | $ | 7,507 |
Charge-offs |  |  | - |  |  |  | (257) |  |  |  | (162) |  |  |  | (246) |  |  |  | (300) |  |  |  | (965) |
Recoveries |  |  | 155 |  |  |  | 52 |  |  |  | 91 |  |  |  | 161 |  |  |  | 75 |  |  |  | 534 |
Provision |  |  | (1,240) |  |  |  | 803 |  |  |  | 284 |  |  |  | 70 |  |  |  | 284 |  |  |  | 201 |
Ending balance |  | $ | 131 |  |  | $ | 5,251 |  |  | $ | 1,181 |  |  | $ | 618 |  |  | $ | 96 |  |  | $ | 7,277 |
Period-end amount allocated to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  |  | 39 |  |  |  | 1,312 |  |  |  | 61 |  |  |  | 6 |  |  |  | - |  |  |  | 1,418 |
Collectively evaluated for impairment |  |  | 92 |  |  |  | 3,939 |  |  |  | 1,120 |  |  |  | 612 |  |  |  | 96 |  |  |  | 5,859 |
Ending balance |  | $ | 131 |  |  | $ | 5,251 |  |  | $ | 1,181 |  |  | $ | 618 |  |  | $ | 96 |  |  | $ | 7,277 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  |  | 531 |  |  |  | 18,271 |  |  |  | 4,404 |  |  |  | 1,050 |  |  |  | 217 |  |  |  | 24,473 |
Loans collectively evaluated for impairment |  |  | 59,779 |  |  |  | 417,690 |  |  |  | 183,188 |  |  |  | 73,116 |  |  |  | 23,280 |  |  |  | 757,053 |
Ending balance |  | $ | 60,310 |  |  | $ | 435,961 |  |  | $ | 187,592 |  |  | $ | 74,166 |  |  | $ | 23,497 |  |  | $ | 781,526 |

F-29

NOTE 6. Premises and Equipment

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

(dollars in thousands) |  | 2019 |  |  | 2018 |
Land |  | $ | 10,914 |  |  | $ | 10,935 |
Building |  |  | 30,518 |  |  |  | 26,545 |
Furniture, fixtures and equipment |  |  | 13,690 |  |  |  | 12,782 |
Leasehold improvements |  |  | 809 |  |  |  | 697 |
Construction in progress |  |  | 117 |  |  |  | 581 |
Total cost |  |  | 56,048 |  |  |  | 51,540 |
Accumulated depreciation |  |  | (23,566) |  |  |  | (22,709) |
Total premises and equipment |  | $ | 32,482 |  |  | $ | 28,831 |

Depreciation charged to operations totaled $2.1 million in 2019 and $1.8 million in 2018.

NOTE 7. Other Real Estate Owned

The following is a summary of the activity in other real estate owned during the years ended December 31, 2019 and 2018:

(dollars in thousands) |  | 2019 |  |  | 2018 |
Balance, Beginning of Year |  | $ | 1,841 |  |  | $ | 4,256 |
Loans transferred to other real estate |  |  | 1,009 |  |  |  | 792 |
Acquired in acquisitions |  |  | 243 |  |  |  | - |
Sales proceeds |  |  | (2,553) |  |  |  | (2,949) |
Transfer to premises and equipment |  |  | - |  |  |  | (300) |
Net gain/(loss) on sale and writedowns |  |  | 780 |  |  |  | 42 |
Ending balance |  | $ | 1,320 |  |  | $ | 1,841 |

F-30

NOTE 8. GOODWILL AND Intangible Assets

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

|  | 2019 |  |  | 2018 |
(dollars in thousands) |  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Gross Carrying Amount |  |  | Accumulated Amortization |
Amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Core deposit intangible |  | $ | 4,716 |  |  | $ | 1,660 |  |  | $ | 1,616 |  |  | $ | 1,060 |
Total |  |  | 4,716 |  |  |  | 1,660 |  |  |  | 1,616 |  |  |  | 1,060 |
Unamortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  | $ | 16,477 |  |  |  |  |  |  | $ | 202 |  |  |  |  |

Activity related to transactions since January 1, 2018 includes the following:

| (1) | In connection with the October 22, 2018 acquisition of Albany, Georgia branch from Planters First Bank, the Company recorded $560,000 in a core deposit intangible and $202,000 in goodwill.

| (2) | In connection with the LBC Bancshares, Inc. acquisition on May 1, 2019, the Company recorded $3.1 million in a core deposit intangible and $15.7 million in goodwill.

| (3) | In connection with the May 1, 2019 acquisition of PFB Mortgage from Planters First Bank, the Company recorded $541,000 in goodwill.

Amortization expense related to the core deposit intangible was $600,000 and $48,000 at December 31, 2019 and 2018, respectively. The estimated future amortization expense for intangible assets remaining as of December 31, 2019 is as follows:

|  | Amount |
(dollars in thousands) |  |  |  |
2020 |  | $ | 776 |
2021 |  |  | 665 |
2022 |  |  | 554 |
2023 |  |  | 444 |
2024 |  |  | 333 |
Thereafter |  |  | 284 |
Total |  | $ | 3,056 |

F-31

NOTE 9. Income Taxes

The income tax expense in the consolidated statements of income for the years ended December 31, 2019 and 2018 are as follows:

(dollars in thousands) |  | 2019 |  |  | 2018 |
Current federal expense |  | $ | 1,881 |  |  | $ | 2,727 |
Deferred federal expense |  |  | 517 |  |  |  | 273 |
Federal income tax expense |  |  | 2,398 |  |  |  | 3,000 |
Current state income tax expense |  |  | - |  |  |  | - |
Federal and state income tax expense |  | $ | 2,398 |  |  | $ | 3,000 |

The Company's income tax expense differs from amounts computed by applying the federal statutory rates to income before income taxes. A reconciliation of the differences for the years ended December 31, 2019 and 2018 is as follows:

(dollars in thousands) |  | 2019 |  |  | 2018 |
Tax at federal income tax rate |  | $ | 2,648 |  |  | $ | 3,133 |
Change resulting from: |  |  |  |  |  |  |  |
Tax-exempt interest |  |  | (130) |  |  |  | (57) |
Income in cash value of bank owned life insurance |  |  | (113) |  |  |  | (97) |
Nondeductible merger expenses |  |  | 39 |  |  |  | 9 |
Other |  |  | (46) |  |  |  | 12 |
Provision for income taxes |  | $ | 2,398 |  |  | $ | 3,000 |

F-32

The components of deferred income taxes for the years ended December 31, 2019 and 2018 are as follows:

|  | 2019 |  |  | 2018 |
(dollars in thousands) |  |  |  |  |  |  |  |
Deferred Tax Assets |  |  |  |  |  |  |  |
Allowance for loan losses |  | $ | 1,624 |  |  | $ | 1,528 |
Other real estate |  |  | 115 |  |  |  | 184 |
Deferred compensation |  |  | 163 |  |  |  | 148 |
Core deposit intangible |  |  | - |  |  |  | 1 |
Unrealized loss on securities available for sale |  |  | - |  |  |  | 2,177 |
Goodwill |  |  | 33 |  |  |  | 48 |
Restricted stock |  |  | 9 |  |  |  | 2 |
Purchase accounting adjustments |  |  | 633 |  |  |  | - |
Other |  |  | 401 |  |  |  | 411 |
Nonaccrual interest |  |  | 2 |  |  |  | 2 |
Gross deferred tax assets |  |  | 2,980 |  |  |  | 4,501 |
Deferred Tax Liabilities |  |  |  |  |  |  |  |
Premises and equipment |  |  | 839 |  |  |  | 1,023 |
Unrealized gain on securities available for sale |  |  | 96 |  |  |  | - |
Core deposit intangible |  |  | 533 |  |  |  | - |
Other |  |  | 7 |  |  |  | 6 |
Gross deferred tax liabilities |  |  | 1,475 |  |  |  | 1,029 |
Net deferred tax assets |  | $ | 1,505 |  |  | $ | 3,472 |

NOTE 10. DEPOSITS

The aggregate amount of overdrawn deposit accounts reclassified as loan balances totaled $718,000 and $476,000 as of December 31, 2019 and 2018, respectively.

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

|  | 2019 |  |  | 2018 |
(dollars in thousands) |  |  |  |  |  |  |  |
Interest-bearing demand |  | $ | 624,658 |  |  | $ | 471,795 |
Savings |  |  | 88,970 |  |  |  | 79,453 |
Time, $250,000 and over |  |  | 55,677 |  |  |  | 53,881 |
Other time |  |  | 291,802 |  |  |  | 287,149 |
Total interest-bearing deposits |  | $ | 1,061,107 |  |  | $ | 892,278 |

At December 31, 2019 and 2018, the Company had brokered deposits of $2.0 million and $5.0 million, respectively. All of these brokered deposits represent Certificate of Deposit Account Registry Service (CDARS) reciprocal deposits. The CDARS deposits are ones in which customers placed core deposits into the CDARS program for FDIC insurance coverage and the Company receives reciprocal brokered deposits in a like amount. The aggregate amount of jumbo certificates of deposit, each with a minimum denomination of $250,000 was $55.7 million and $53.9 million as of December 31, 2019 and 2018, respectively.

F-33

As of December 31, 2019, the scheduled maturities of certificates of deposit are as follows:

(dollars in thousands) |  |  |
Year Ending December 31 |  | Amount |
2020 |  | $ | 246,342 |
2021 |  |  | 52,165 |
2022 |  |  | 34,903 |
2023 |  |  | 9,555 |
2024 |  |  | 4,147 |
Thereafter |  |  | 367 |
Total time deposits |  | $ | 347,479 |

NOTE 11. OTHER BORROWED MONEY

The following table presents information regarding the Company’s outstanding borrowings at December 31, 2019:

(dollars in thousands) |  |  |  |  |  |  |  |  |
Description | Maturity Date |  | Amount |  |  | Interest Rate |
FHLB Advances | March 23, 2020 |  | $ | 2,500 |  |  |  | 2.17 | %
FHLB Advances | June 1, 2020 |  |  | 1,000 |  |  |  | 1.65 | %
FHLB Advances | August 15, 2022 |  |  | 18,000 |  |  |  | 2.69 | %
FHLB Advances | February 3, 2023 |  |  | 3,000 |  |  |  | 3.51 | %
FHLB Advances | August 15, 2025 |  |  | 4,500 |  |  |  | 2.62 | %
FHLB Advances | August 24, 2026 |  |  | 3,000 |  |  |  | 1.27 | %
FHLB Advances | March 21, 2028 |  |  | 5,000 |  |  |  | 2.67 | %
FHLB Advances | July 30, 2029 |  |  | 10,000 |  |  |  | 1.01 | %
Term Note | May 24, 2025 |  |  | 9,250 |  |  |  | 4.70 | %
Revolving Credit | May 21, 2021 |  |  | 5,313 |  |  |  | 5.15 | %
Total other borrowings |  | $ | 61,563 |  |  |  |  |
Weighted average rate |  |  |  |  |  |  | 2.86 | %

The following table presents information regarding the Company’s outstanding borrowings at December 31, 2018:

(dollars in thousands) |  |  |  |  |  |  |  |  |
Description | Maturity Date |  | Amount |  |  | Interest Rate |
FHLB Advances | November 19, 2019 |  | $ | 5,000 |  |  |  | 1.77 | %
FHLB Advances | March 23, 2020 |  |  | 2,500 |  |  |  | 2.17 | %
FHLB Advances | August 15, 2022 |  |  | 18,000 |  |  |  | 2.69 | %
FHLB Advances | February 3, 2023 |  |  | 3,000 |  |  |  | 3.51 | %
FHLB Advances | August 23, 2023 |  |  | 3,000 |  |  |  | 0.98 | %
FHLB Advances | August 15, 2025 |  |  | 4,500 |  |  |  | 2.62 | %
FHLB Advances | August 24, 2026 |  |  | 3,000 |  |  |  | 1.27 | %
FHLB Advances | March 21, 2028 |  |  | 5,000 |  |  |  | 2.67 | %
Total other borrowings |  | $ | 44,000 |  |  |  |  |
Weighted average rate |  |  |  |  |  |  | 2.39 | %

F-34

As collateral on the outstanding FHLB advances, the Company has provided a blanket lien on its portfolio of qualifying residential first mortgage loans and commercial loans. At December 31, 2019 and 2018, the lendable collateral value of those loans pledged was $111.6 million and $108.6 million, respectively. At December 31, 2019, the Company had remaining credit availability from the FHLB of $321.4 million. At December 31, 2018, the Company had remaining credit availability from the FHLB of $252.1 million. The Company may be required to pledge additional qualifying collateral in order to utilize the full amount of the remaining credit line.

At December 31, 2019 and 2018, the Company also has available federal funds lines of credit with various financial institutions totaling $55.0 million and $43.5 million, respectively, of which there were none outstanding at December 31, 2019 and 2018.

The Company has the ability to borrow funds from the Federal Reserve Bank (FRB) of Atlanta utilizing the discount window. The discount window is an instrument of monetary policy that allows eligible institutions to borrow money from the FRB on a short-term basis to meet temporary liquidity shortages caused by internal or external disruptions. At December 31, 2019, the Company had borrowing capacity available under this arrangement, with no outstanding balances. The Company would be required to pledge certain available-for-sale investment securities as collateral under this agreement.

On May 1, 2019, the Company completed a borrowing arrangement with a correspondent bank for $10.0 million. The term note is secured by the Bank’s stock, expires on May 1, 2024, and bears a fixed interest rate of 4.70 percent. The proceeds were used for the acquisition of LBC Bancshares, Inc. and its subsidiary, Calumet Bank. As of December 31, 2019, the outstanding balance totaled $9.3 million.

On May 1, 2019, the Company completed a revolving credit arrangement with a correspondent bank with a maximum line amount of $10.0 million. This line of credit is secured by the Bank’s stock, expires on May 1, 2021, and bears a variable interest rate of Wall Street Journal Prime minus 0.40 percent. The Company advanced $5.3 million that was used toward the acquisition of LBC Bancshares, Inc. and its subsidiary, Calumet Bank. As of December 31, 2019, the outstanding balance totaled $5.3 million.

NOTE 12. Subordinated Debentures (Trust Preferred Securities)

The following table presents the information regarding the Company's subordinated debentures at December 31, 2019:

|  |  |  |  |  |  | 3-Month |  |  |  |  |  |  | Total |  |  |
|  |  |  |  |  |  | Libor |  |  | Added |  |  | Interest |  |  | 5-Year
Description | Date |  | Amount |  |  | Rate |  |  | Points |  |  | Rate |  | Maturity | Call Option
(dollars in thousands)
Colony Bankcorp Statutory Trust III | 6/17/2004 |  | $ | 4,640 |  |  |  | 1.89963% |  |  |  | 2.68% |  |  |  | 4.57963% |  | 6/14/2034 | 6/17/2009
Colony Bankcorp Capital Trust I | 4/13/2006 |  |  | 5,155 |  |  |  | 1.94463% |  |  |  | 1.50% |  |  |  | 3.44463% |  | 4/13/2036 | 4/13/2011
Colony Bankcorp Capital Trust II | 3/12/2007 |  |  | 9,279 |  |  |  | 1.96050% |  |  |  | 1.65% |  |  |  | 3.61050% |  | 3/12/2037 | 3/12/2012
Colony Bankcorp Capital Trust III | 9/14/2007 |  |  | 5,155 |  |  |  | 1.93550% |  |  |  | 1.40% |  |  |  | 3.33550% |  | 9/14/2037 | 9/14/2012

The Trust Preferred Securities are recorded as subordinated debentures on the consolidated balance sheets, and subject to certain limitations, qualify as Tier 1 Capital for regulatory capital purposes. The proceeds from these offerings were used to fund certain acquisitions, pay off holding company debt and inject capital into the Bank subsidiary. The Trust Preferred Securities pay interest quarterly.

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NOTE 13. LEASES

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

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

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

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

The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was used.

For 2019, operating lease cost was $152,000. Rental expense measured under ASC Topic 840, Leases, was $443,000 for 2018.

As of December 31, 2019, the weighted average remaining lease term was 5.35 years and the weighted average discount rate was 2.06%.

The following table represents the future maturities of the Company’s operating lease liabilities and other lease information.

(dollars in thousands) |  |  |
Year |  | Lease Liability |
2020 |  | $ | 186 |
2021 |  |  | 110 |
2022 |  |  | 73 |
2023 |  |  | 45 |
2024 |  |  | 45 |
Thereafter |  |  | 128 |
Total Lease Payments |  |  | 587 |
Less: Interest |  |  | (40) |
Present Value of Lease Liabilities |  | $ | 547 |

Supplemental Lease Information: (dollars in thousands) |  | December 31, 2019 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from operating leases (cash payments) |  | $ | 151 |
Operating cash flows from operating leases (lease liability reduction) |  | $ | 138 |
Operating lease right-of-use assets obtained in exchange for leases entered into during the period |  | $ | 676 |

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NOTE 14. Preferred Stock and WarrantS

The Company redeemed 9,360 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the Preferred Stock) outstanding with private investors as of March 31, 2017. The Company redeemed 8,661 shares of Preferred Stock at $1,000 per share in 2016. The Company redeemed 9,979 shares of Preferred Stock at $1,000 per share during 2015. The Company currently has no outstanding shares of Preferred Stock. The Company also had a warrant (the Warrant) to purchase up to 500,000 shares of the Company’s common stock outstanding with private investors. The Warrant was repurchased by the Company on June 5, 2018, for $3,175,000. Both the Preferred Stock and the Warrant originated in 2009 through transactions with the United States Department of the Treasury and were subsequently sold to the public through an auction process during 2013. The Company had no outstanding warrants as of December 31, 2019 and 2018.

NOTE 15. Employee Benefit Plan

The Company offers a defined contribution 401(k) Profit Sharing Plan (the Plan) which covers substantially all employees who meet certain age and service requirements. The Plan allows employees to make voluntary pre-tax salary deferrals to the Plan. The Company, at its discretion, may elect to make an annual contribution to the Plan equal to a percentage of each participating employee’s salary. Such discretionary contributions must be approved by the Company’s board of directors. Employees are fully vested in the Company contributions after six years of service. In 2019 and 2018, the Company made total contributions of $674,000 and $710,000 to the Plan, respectively.

NOTE 16. Commitments and Contingencies

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

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

At December 31, 2019 and 2018, the following financial instruments were outstanding whose contract amounts represent credit risk:

|  | Contract Amount |
|  | 2019 |  |  | 2018 |
(dollars in thousands) |  |  |  |  |  |  |  |
Commitments to extend credit |  | $ | 102,890 |  |  | $ | 98,736 |
Standby letters of credit |  |  | 1,576 |  |  |  | 1,525 |

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

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

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

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

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NOTE 17. Deferred Compensation Plan

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

Liabilities accrued under the plans totaled $774,000 and $707,000 as of December 31, 2019 and 2018, respectively. Benefit payments under the contracts were $82,000 in 2019 and $108,000 in 2018.

Provisions charged to operations totaled $63,000 in 2019 and $52,000 in 2018.

The Company has purchased life insurance policies on the plans’ participants and uses the cash flow from these policies to partially fund the plan. Fee income recognized with these plans totaled $190,525 in 2019 and $135,000 in 2018.

NOTE 18. RELATED PARTY TRANSACTIONS

The following table reflects the activity and aggregate balance of direct and indirect loans to directors, executive officers or principal holders of equity securities of the Company. All such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than a normal risk of collectability. A summary of activity of related party loans is shown below:

(dollars in thousands) |  | 2019 |  |  | 2018 |
Balance, Beginning |  | $ | 692 |  |  | $ | 745 |
New loans |  |  | 4,777 |  |  |  | 114 |
Repayments |  |  | (3,855) |  |  |  | (167) |
Transactions due to changes in directors |  |  | 4,793 |  |  |  | - |
Balance, Ending |  | $ | 6,407 |  |  | $ | 692 |

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NOTE 19. Fair Value of Financial Instruments and Fair Value Measurements

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

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

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

• Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and

inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial

instrument.

• Level 3 inputs to the valuation methodology are unobservable and represent the Company’s own assumptions about the

assumptions that market participants would use in pricing the assets or liabilities.

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

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

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

Federal Home Loan Bank s tock - The fair value of Federal Home Loan Bank stock approximates carrying value and is classified as Level 1.

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

Loans - The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value. Most loans are classified as Level 2, but impaired loans with a related allowance are classified as Level 3.

Deposit l iabilities - The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date and is classified as Level 1. The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities and is classified as Level 2.

Subordinated d ebentures – The fair value of subordinated debentures is estimated by discounting the future cash flows using the current rates at which similar advances would be obtained. Subordinated debentures are classified as Level 2.

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

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

The carrying amount, estimated fair values, and placement in the fair value hierarchy of the Company’s financial instruments are as follows:

(dollars in thousands) |  | Carrying |  |  | Estimated |  |  | Level |
|  | Amount |  |  | Fair Value |  |  | 1 |  |  | 2 |  |  | 3 |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 104,092 |  |  | $ | 104,092 |  |  | $ | 104,092 |  |  | $ | - |  |  | $ | - |
Investment securities available for sale |  |  | 347,332 |  |  |  | 347,332 |  |  |  | - |  |  |  | 345,310 |  |  |  | 2,022 |
Federal Home Loan Bank stock |  |  | 4,288 |  |  |  | 4,288 |  |  |  | - |  |  |  | 4,288 |  |  |  | - |
Loans held for sale |  |  | 10,076 |  |  |  | 10,076 |  |  |  | - |  |  |  | 10,076 |  |  |  | - |
Loans, net |  |  | 961,696 |  |  |  | 938,475 |  |  |  | - |  |  |  | - |  |  |  | 938,475 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 1,293,742 |  |  |  | 1,294,506 |  |  |  | - |  |  |  | 1,294,506 |  |  |  | - |
Subordinated debentures |  |  | 24,229 |  |  |  | 24,229 |  |  |  | - |  |  |  | 24,229 |  |  |  | - |
Other borrowed money |  |  | 61,563 |  |  |  | 60,585 |  |  |  | - |  |  |  | 60,585 |  |  |  | - |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and short-term investments |  | $ | 60,156 |  |  | $ | 60,156 |  |  | $ | 60,156 |  |  | $ | - |  |  | $ | - |
Investment securities available for sale |  |  | 353,066 |  |  |  | 353,066 |  |  |  | - |  |  |  | 351,057 |  |  |  | 2,009 |
Federal Home Loan Bank stock |  |  | 2,978 |  |  |  | 2,978 |  |  |  | - |  |  |  | 2,978 |  |  |  | - |
Loans, net |  |  | 774,249 |  |  |  | 769,809 |  |  |  | - |  |  |  | - |  |  |  | 769,809 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 1,085,125 |  |  |  | 1,086,503 |  |  |  | - |  |  |  | 1,086,503 |  |  |  | - |
Subordinated debentures |  |  | 24,229 |  |  |  | 24,229 |  |  |  | - |  |  |  | 24,229 |  |  |  | - |
Other borrowed money |  |  | 44,000 |  |  |  | 44,032 |  |  |  | - |  |  |  | 44,032 |  |  |  | - |

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

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

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

Assets

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

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

Other Real Estate - Other real estate owned assets are adjusted to fair value less estimated selling costs upon transfer of the loans to other real estate owned. Typically, an external, third-party appraisal is performed on the collateral upon transfer into the other real estate owned account to determine the asset’s fair value. Subsequent adjustments to the collateral’s value may be based upon either updated third-party appraisals or management’s knowledge of the collateral and the current real estate market conditions. Appraised amounts used in determining the asset’s fair value, whether internally or externally prepared, are discounted 10 percent to account for selling and marketing costs. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a level 3 classification of the inputs for determining fair value. Because of the high degree of judgment required in estimating the fair value of other real estate owned assets and because of the relationship between fair value and general economic conditions, we consider the fair value of other real estate owned assets to be highly sensitive to changes in market conditions.

Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis - The following table presents the recorded amount of the Company’s assets measured at fair value on a recurring and nonrecurring basis as of December 31, 2019 and 2018, aggregated by the level in the fair value hierarchy within which those measurements fall. The table below includes only impaired loans with a specific reserve and only other real estate properties with a valuation allowance at December 31, 2019 and 2018. Those impaired loans and other real estate properties are shown net of the related specific reserves and valuation allowances.

F-42

(dollars in thousands) |  |  |  |  |  | Fair Value Measurements at Reporting Date Using |
|  | Total Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State, county and municipal securities |  | $ | 5,115 |  |  | $ | - |  |  | $ | 5,115 |  |  | $ | - |
Corporate debt securities |  |  | 2,806 |  |  |  | - |  |  |  | 784 |  |  |  | 2,022 |
Mortgage-backed securities |  |  | 339,411 |  |  |  | - |  |  |  | 339,411 |  |  |  | - |
Total available for sale securities |  | $ | 347,332 |  |  | $ | - |  |  | $ | 345,310 |  |  | $ | 2,022 |
Nonrecurring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans |  | $ | 5,985 |  |  | $ | - |  |  | $ | - |  |  | $ | 5,985 |
Other real estate |  | $ | 1,320 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,320 |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State, county and municipal securities |  | $ | 3,989 |  |  | $ | - |  |  | $ | 3,989 |  |  | $ | - |
Corporate debt securities |  |  | 2,872 |  |  |  | - |  |  |  | 863 |  |  |  | 2,009 |
Mortgage-backed securities |  |  | 346,205 |  |  |  | - |  |  |  | 346,205 |  |  |  | - |
Total available for sale securities |  | $ | 353,066 |  |  | $ | - |  |  | $ | 351,057 |  |  | $ | 2,009 |
Nonrecurring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans |  | $ | 3,352 |  |  | $ | - |  |  | $ | - |  |  | $ | 3,352 |
Other real estate |  | $ | 1,841 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,841 |

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

F-43

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

The following tables present quantitative information about the significant unobservable inputs used in the fair value measurements for assets in level 3 of the fair value hierarchy measured on a nonrecurring basis at December 31, 2019 and 2018. These tables are comprised primarily of collateral dependent impaired loans and other real estate owned:

|  |  |  |  | Valuation |  | Unobservable |  | Range
(dollars in thousands) |  | December 31, 2019 |  | Techniques |  | Inputs |  | Weighted Avg
Impaired Loans |  | $ | 5,985 |  | Appraised Value |  | Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell |  | 0% | - | 20%
Other Real Estate |  | $ | 1,320 |  | Appraised Value/ Comparable Sales |  | Discounts to reflect current market conditions and estimated costs to sell |  | 0% | - | 20%

|  |  |  |  | Valuation |  | Unobservable |  | Range
|  | December 31, 2018 |  | Techniques |  | Inputs |  | Weighted Avg
Impaired Loans |  | $ | 3,352 |  | Appraised Value |  | Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell |  | 0% | - | 20%
Other Real Estate |  | $ | 1,841 |  | Appraised Value/ Comparable Sales |  | Discounts to reflect current market conditions and estimated costs to sell |  | 0% | - | 20%

The following table presents a reconciliation and statement of income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (level 3) for the years ended December 31, 2019 and 2018:

|  | Available for Sale Securities |
(dollars in thousands) |  | 2019 |  |  | 2018 |
Beginning balance |  | $ | 2,009 |  |  | $ | 2,068 |
Sales |  |  | - |  |  |  | - |
Paydowns |  |  | - |  |  |  | - |
Accretion (amortization) of discounts and premiums |  |  | (18) |  |  |  | (18) |
Unrealized gains (loss) included in other comprehensive income (loss) |  |  | 31 |  |  |  | (41) |
Ending balance |  | $ | 2,022 |  |  | $ | 2,009 |

The Company’s policy is to recognize transfers in and transfers out of levels 1, 2 and 3 as of the end of a reporting period. There were no transfers of securities between level 1 and level 2 or level 3 for the years ended December 31, 2019 and 2018.

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The following table presents quantitative information about recurring level 3 fair value measurements as of December 31, 2019 and 2018:

|  | December 31, 2019 |
(dollars in thousands) |  | Fair Value |  | Valuation Techniques |  | Unobservable Inputs |  | Range (Weighted Avg) |
Corporate debt securities |  | $ | 2,022 |  | Discounted Cash Flow |  | Discount Rate or Yield |  |  | N/A* |

|  | December 31, 2018 |
|  |  |  |  | Valuation |  | Unobservable |  | Range |
(dollars in thousands) |  | Fair Value |  | Techniques |  | Inputs |  | (Weighted Avg) |
Corporate debt securities |  | $ | 2,009 |  | Discounted Cash Flow |  | Discount Rate or Yield |  |  | N/A* |

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

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NOTE 20. Regulatory Capital Matters

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

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

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier I capital to risk-weighted assets, and of Tier I capital to average assets. As of December 31, 2019, the interim final Basel III rules (Basel III) require the Company to also maintain minimum amounts and ratios of common equity Tier 1 capital to risk weighted assets. These amounts and ratios as defined in regulations are presented hereafter. Management believes, as of December 31, 2019, the Company meets all capital adequacy requirements to which it is subject under the regulatory framework for prompt corrective action. In the opinion of management, there are no conditions or events since prior notification of capital adequacy from the regulators that have changed the institution’s category.

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

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The following table summarizes regulatory capital information as of December 31, 2019 and December 31, 2018 on a consolidated basis and for the subsidiary, as defined. Regulatory capital ratios for December 31, 2019 and 2018 were calculated in accordance with the Basel III rules.

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | To Be Well |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Capitalized Under |
|  |  |  |  |  |  |  |  |  | For Capital |  |  | Prompt Corrective |
|  | Actual |  |  | Adequacy Purposes |  |  | Action Provisions |
(dollars in thousands) |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |
As of December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 140,973 |  |  |  | 13.17 | % |  | $ | 85,661 |  |  |  | 8.00 | % |  |  | N/A |  |  |  | N/A |
Colony Bank |  |  | 151,444 |  |  |  | 14.19 |  |  |  | 85,407 |  |  |  | 8.00 |  |  |  | 106,758 |  |  |  | 10.00 | %
Tier I Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 134,110 |  |  |  | 12.52 |  |  |  | 64,246 |  |  |  | 6.00 |  |  |  | N/A |  |  |  | N/A |
Colony Bank |  |  | 144,581 |  |  |  | 13.54 |  |  |  | 64,055 |  |  |  | 6.00 |  |  |  | 85,407 |  |  |  | 8.00 |
Common Equity Tier 1 Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 110,610 |  |  |  | 10.33 |  |  |  | 48,185 |  |  |  | 4.50 |  |  |  | N/A |  |  |  | N/A |
Colony Bank |  |  | 144,581 |  |  |  | 13.54 |  |  |  | 48,041 |  |  |  | 4.50 |  |  |  | 69,393 |  |  |  | 6.50 |
Tier I Capital to Average Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 134,110 |  |  |  | 8.92 |  |  |  | 60,141 |  |  |  | 4.00 |  |  |  | N/A |  |  |  | N/A |
Colony Bank |  |  | 144,581 |  |  |  | 9.77 |  |  |  | 59,977 |  |  |  | 4.00 |  |  |  | 74,972 |  |  |  | 5.00 |
As of December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 133,900 |  |  |  | 15.86 | % |  | $ | 67,527 |  |  |  | 8.00 | % |  |  | N/A |  |  |  | N/A |
Colony Bank |  |  | 131,723 |  |  |  | 15.63 |  |  |  | 67,418 |  |  |  | 8.00 |  |  |  | 84,272 |  |  |  | 10.00 | %
Tier I Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 126,623 |  |  |  | 15.00 |  |  |  | 50,645 |  |  |  | 6.00 |  |  |  | N/A |  |  |  | N/A |
Colony Bank |  |  | 124,446 |  |  |  | 14.77 |  |  |  | 50,563 |  |  |  | 6.00 |  |  |  | 67,418 |  |  |  | 8.00 |
Common Equity Tier 1 Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 103,123 |  |  |  | 12.22 |  |  |  | 37,984 |  |  |  | 4.50 |  |  |  | N/A |  |  |  | N/A |
Colony Bank |  |  | 124,446 |  |  |  | 14.77 |  |  |  | 37,923 |  |  |  | 4.50 |  |  |  | 54,777 |  |  |  | 6.50 |
Tier I Capital to Average Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 126,623 |  |  |  | 10.24 |  |  |  | 49,478 |  |  |  | 4.00 |  |  |  | N/A |  |  |  | N/A |
Colony Bank |  |  | 124,446 |  |  |  | 10.08 |  |  |  | 49,396 |  |  |  | 4.00 |  |  |  | 61,745 |  |  |  | 5.00 |

In 2018, the Bank obtained approval of its regulators and paid a $8,300,000 dividend to the Company. The dividend was utilized to pay dividends to shareholders and to repurchase the Warrant, which was for 500,000 shares of the Company’s common stock outstanding with private investors. The Warrant was repurchased during the second quarter of 2018 for $3.2 million.

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NOTE 21. STOCK-BASED COMPENSATION

In August 2018, the Company granted an award of 5,650 restricted shares of the Company’s common stock to T. Heath Fountain, the Company’s Chief Executive Officer (“CEO”), with a market price of $17.73 per share. The restricted shares vest in equal installments on each of July 30, 2019, 2020 and 2021, subject to continued service by Mr. Fountain through each applicable vesting date, or earlier upon the occurrence of a change in control. With the restricted stock, there will be no cash consideration to the Company for the shares. The CEO will have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested.

Compensation expense for restricted stock is based on the market price of the Company stock at the time of the grant and amortized on a straight-line basis over the vesting period. The balance of unearned compensation related to these restricted shares as of December 31, 2019 is $52,000 which is expected to be recognized over a weighted-average of 1.58 years. The balance of unearned compensation related to these restricted shares as of December 31, 2018 is $86,000 which is expected to be recognized over a weighted-average of 2.58 years. Total compensation expense recognized for the restricted shares granted for the year ended December 31, 2018 and 2019 was $34,000 and $14,000, respectively.

F-48

NOTE 22. Financial Information of Colony Bankcorp, Inc. (Parent Only)

The parent company’s balance sheets as of December 31, 2019 and 2018 and the related statements of operations and comprehensive income (loss) and cash flows for each of the years in the three-year period then ended are as follows:

COLONY BANKCORP, INC. (PARENT ONLY) BALANCE SHEETS DECEMBER 31 (DOLLARS IN THOUSANDS)

|  | 2019 |  |  | 2018 |
ASSETS |
Cash |  | $ | 2,049 |  |  | $ | 937 |
Premises and equipment, net |  |  | 1,171 |  |  |  | 1,198 |
Investment in subsidiaries |  |  | 165,836 |  |  |  | 117,743 |
Other |  |  | 483 |  |  |  | 236 |
Total Assets |  | $ | 169,539 |  |  | $ | 120,114 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
Liabilities |  |  |  |  |  |  |  |
Other borrowed money |  | $ | 14,563 |  |  | $ | - |
Other |  |  | 241 |  |  |  | 193 |
Subordinated debt |  |  | 24,229 |  |  |  | 24,229 |
Total Liabilities |  | $ | 39,033 |  |  | $ | 24,422 |
Stockholders’ Equity |  |  |  |  |  |  |  |
Common stock, par value $1; 20,000,000 shares authorized, 9,498,783 and 8,439,258 shares issued and outstanding as of December 31, 2019 and 2018, respectively |  |  | 9,499 |  |  |  | 8,445 |
Paid-in capital |  |  | 43,667 |  |  |  | 25,978 |
Retained earnings |  |  | 76,978 |  |  |  | 69,459 |
Accumulated other comprehensive income (loss), net of tax |  |  | 362 |  |  |  | (8,190 | )
Total Stockholder’s Equity |  |  | 130,506 |  |  |  | 95,692 |
Total Liabilities and Stockholders’ Equity |  | $ | 169,539 |  |  | $ | 120,114 |

F-49

COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS)

|  | 2019 |  |  | 2018 |
Income |  |  |  |  |  |  |  |
Dividends from subsidiaries |  | $ | 6,731 |  |  | $ | 8,329 |
Management fees |  |  | 750 |  |  |  | 601 |
Other |  |  | 18 |  |  |  | 106 |
Total income |  |  | 7,499 |  |  |  | 9,036 |
Expenses |  |  |  |  |  |  |  |
Interest |  |  | 1,541 |  |  |  | 972 |
Salaries and employee benefits |  |  | 1,097 |  |  |  | 1,084 |
Other |  |  | 1,262 |  |  |  | 691 |
Total expenses |  |  | 3,899 |  |  |  | 2,747 |
Income before income taxes and equity in undistributed earnings of subsidiaries |  |  | 3,600 |  |  |  | 6,289 |
Income tax benefit |  |  | 639 |  |  |  | 422 |
Income before equity in undistributed earnings of subsidiaries |  |  | 4,239 |  |  |  | 6,711 |
Equity in undistributed earnings of subsidiaries |  |  | 5,972 |  |  |  | 5,206 |
Net income |  | $ | 10,211 |  |  | $ | 11,917 |

F-50

COLONY BANKCORP, INC. (PARENT ONLY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS)

|  | 2019 |  |  | 2018 |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |  |  |
Net income |  | $ | 10,211 |  |  | $ | 11,917 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 81 |  |  |  | 85 |
Share-based compensation expense |  |  | 34 |  |  |  | 14 |
Equity in undistributed earnings of subsidiaries |  |  | (5,972) |  |  |  | (5,206) |
Change in interest payable |  |  | 21 |  |  |  | 3 |
Other |  |  | 1,065 |  |  |  | (240) |
Net cash provided by operating activities |  |  | 5,440 |  |  |  | 6,573 |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |  |  |
Purchase of premises and equipment |  |  | (54) |  |  |  | (183) |
Net cash and cash equivalents paid in acquisition |  |  | (16,145) |  |  |  | - |
Net cash (used in) provided by investing activities |  |  | (16,199) |  |  |  | (183) |
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |  |  |
Net increase (decrease) in other borrowed money |  |  | 14,563 |  |  |  | (1,500) |
Dividends paid for common stock |  |  | (2,692) |  |  |  | (1,688) |
Repurchase of warrants |  |  | - |  |  |  | (3,175) |
Net cash (used in) provided by financing activities |  |  | 11,871 |  |  |  | (6,363) |
Net increase (decrease) in cash and cash equivalents |  |  | 1,112 |  |  |  | 27 |
Cash and cash equivalents at beginning of period |  |  | 937 |  |  |  | 910 |
Cash and cash equivalents at end of period |  | $ | 2,049 |  |  | $ | 937 |

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NOTE 2 3. Earnings Per Share

The following table presents earnings per share for the years ended December 31, 2019 and 2018:

|  | 2019 |  |  | 2018 |
(dollars in thousands, except per share amounts) |  |  |  |  |  |  |  |
Numerator |  |  |  |  |  |  |  |
Net income available to common stockholders |  | $ | 10,211 |  |  | $ | 11,917 |
Denominator |  |  |  |  |  |  |  |
Weighted average number of common shares outstanding for basic earnings per common share |  |  | 9,129,705 |  |  |  | 8,439,454 |
Dilutive effect of potential common stock |  |  |  |  |  |  |  |
Restricted stock |  |  | - |  |  |  | - |
Stock warrants |  |  | - |  |  |  | 99,154 |
Weighted average number of common shares outstanding for diluted earnings per common share |  |  | 9,129,705 |  |  |  | 8,538,608 |
Earnings per share - basic |  | $ | 1.12 |  |  | $ | 1.41 |
Earnings per share - diluted |  | $ | 1.12 |  |  | $ | 1.40 |

NOTE 2 4. Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) for unrealized gains and losses securities available for sale for the years ended December 31, 2019 and 2018 are as follows:

(dollars in thousands) |  | 2019 |  |  | 2018 |
Beginning Balance |  | $ | (8,190) |  |  | $ | (6,492) |
Other comprehensive loss before reclassification |  |  | 8,629 |  |  |  | (1,606) |
Amounts reclassified from accumulated other comprehensive income |  |  | (77) |  |  |  | (92) |
Net current period other comprehensive income (loss) |  |  | 8,552 |  |  |  | (1,698) |
Ending Balance |  | $ | 362 |  |  | $ | (8,190) |

F-52

NOTE 25. SEGMENT INFORMATION

The Company’s operating segments include banking, mortgage banking and small business specialty lending division. The reportable segments are determined by the products and services offered, and internal reporting. The Bank segment derives its revenues from the delivery of full-service financial services, including retail and commercial banking services and deposit accounts. The Mortgage Banking segment derives its revenues from the origination and sales of residential mortgage loans held for sale. The Small Business Specialty Lending Division segment derives its revenue from the origination, sales and servicing of Small Business Administration loans and other government guaranteed loans. Segment performance is evaluated using net interest income and noninterest income. Income taxes are allocated based on income before income taxes, and indirect expenses (includes management fees) are allocated based on various internal factors for each segment. Transactions among segments are made at fair value. The following tables present information reported internally for performance assessment as of December 31, 2019 and 2018:

|  | December 31, 2019 |
(dollars in thousands) |  | Bank |  |  | Mortgage |  |  | Small Business Specialty Lending Division |  |  | Holding Company |  |  | Totals |
Net Interest Income |  | $ | 49,162 |  |  | $ | 164 |  |  | $ | - |  |  | $ | (1,481) |  |  | $ | 47,845 |
Provision for Loan Losses |  |  | 1,104 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,104 |
Noninterest Income |  |  | 11,224 |  |  |  | 3,139 |  |  |  | - |  |  |  | 399 |  |  |  | 14,762 |
Noninterest Expenses |  |  | 42,786 |  |  |  | 3,257 |  |  |  | 1,213 |  |  |  | 1,638 |  |  |  | 48,894 |
Income Taxes |  |  | 3,279 |  |  |  | 10 |  |  |  | (254) |  |  |  | (637) |  |  |  | 2,398 |
Net income/(loss) |  | $ | 13,217 |  |  | $ | 36 |  |  | $ | (959) |  |  | $ | (2,083) |  |  | $ | 10,211 |
Total assets |  | $ | 1,499,347 |  |  | $ | 11,624 |  |  | $ | 405 |  |  | $ | 3,937 |  |  | $ | 1,515,313 |

|  | December 31, 2018 |
(dollars in thousands) |  | Bank |  |  | Mortgage Banking |  |  | Small Business Specialty Lending Division |  |  | Holding Company |  |  | Totals |
Net Interest Income |  | $ | 41,194 |  |  | $ | - |  |  | $ | - |  |  | $ | (927) |  |  | $ | 40,797 |
Provision for Loan Losses |  |  | 165 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 201 |
Noninterest Income |  |  | 9,614 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 9,621 |
Noninterest Expenses |  |  | 33,770 |  |  |  | - |  |  |  | - |  |  |  | 1,084 |  |  |  | 35,300 |
Income Taxes |  |  | 3,411 |  |  |  | - |  |  |  | - |  |  |  | (422) |  |  |  | 3,000 |
Net income/(loss) |  | $ | 13,462 |  |  | $ | - |  |  | $ | - |  |  | $ | (1,589) |  |  | $ | 11,917 |
Total assets |  | $ | 1,249,173 |  |  | $ | - |  |  | $ | - |  |  | $ | 2,705 |  |  | $ | 1,251,878 |

| F-53 |