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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 000-12436
COLONY BANKCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)

Georgia | 58-1492391
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.)

115 South Grant Street, Fitzgerald, Georgia 31750
(Address of principal executive offices) (Zip Code)
(229) 426-6000
(Registrant’s Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Common Stock, Par Value $1.00 per share | CBAN | The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerate Filer ☐ Accelerated Filer ☐ Non-accelerated Filer ☒
Smaller Reporting Company ☒ Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with the new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 9, 2022, the registrant had 17,641,123 shares of common stock, $1.00 par value per share, issued and outstanding.

TABLE OF CONTENTS

| Page
PART I – Financial Information |
Item 1. | Financial Statements |
| Consolidated Balance Sheet – September 30, 2022 (unaudited) and December 31, 2021 (audited) | 4
| Consolidated Statements of Income – For the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) | 5
| Consolidated Statements of Comprehensive (Loss) Income – For the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) | 6
| Consolidated Statements of Changes in Stockholder's Equity – For the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) | 7
| Consolidated Statements of Cash Flows – For the Nine Months Ended September 30, 2022 and 2021 (unaudited) | 9
| Notes to Consolidated Financial Statements (unaudited) | 11
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 39
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 57
Item 4. | Controls and Procedures | 57
PART II – Other Information |
Item 1. | Legal Proceedings | 58
Item 1A. | Risk Factors | 58
Item 2. | Unregistered Sale of Equity Securities and Use of Proceeds | 58
Item 3. | Defaults Upon Senior Securities | 58
Item 4. | Mine Safety Disclosures | 58
Item 5. | Other Information | 58
Item 6. | Exhibits | 59
Signatures | 60

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

| September 30, 2022 |  | December 31, 2021
(dollars in thousands, except per share data) | (Unaudited) |  | (Audited)
ASSETS |  |  |
Cash and due from banks | $ | 18,533 |  |  | $ | 18,975 |
Federal funds sold and interest-bearing deposits in banks | 66,507 |  |  | 178,257 |
Cash and cash equivalents | 85,040 |  |  | 197,232 |
Investment securities available for sale, at fair value | 439,716 |  |  | 938,164 |
Investment securities held to maturity, at amortized cost | 468,306 |  |  | — |
Other investments, at cost | 12,850 |  |  | 14,012 |
Loans held for sale | 23,945 |  |  | 38,150 |
Loans | 1,586,613 |  |  | 1,337,977 |
Allowance for loan losses | (15,182) |  |  | (12,910) |
Loans, net | 1,571,431 |  |  | 1,325,067 |
Premises and equipment | 41,249 |  |  | 43,033 |
Other real estate owned | 246 |  |  | 281 |
Goodwill | 48,923 |  |  | 52,906 |
Other intangible assets | 6,065 |  |  | 7,389 |
Bank-owned life insurance | 55,157 |  |  | 55,159 |
Deferred income taxes, net | 30,614 |  |  | 3,644 |
Other assets | 22,370 |  |  | 16,678 |
Total assets | $ | 2,805,912 |  |  | $ | 2,691,715 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
Liabilities: |  |  |
Deposits |  |  |
Noninterest-bearing | $ | 558,347 |  |  | $ | 552,576 |
Interest-bearing | 1,851,315 |  |  | 1,822,032 |
Total deposits | 2,409,662 |  |  | 2,374,608 |
Federal funds purchased | — |  |  | — |
Federal Home Loan Bank advances | 95,000 |  |  | 51,656 |
Other borrowings | 63,364 |  |  | 36,792 |
Other liabilities | 11,819 |  |  | 10,952 |
Total liabilities | $ | 2,579,845 |  |  | $ | 2,474,008 |
Stockholders' equity: |  |  |
Preferred stock, no par value; 10,000,000 shares authorized, none issued or outstanding as of September 30, 2022 and December 31, 2021, respectively | — |  |  | — |
Common stock, par value $1.00 per share; 50,000,000 and 20,000,000 shares authorized, 17,641,123 and 13,673,898 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 17,641 |  |  | 13,674 |
Paid in capital | 167,608 |  |  | 111,021 |
Retained earnings | 107,918 |  |  | 99,189 |
Accumulated other comprehensive loss, net of tax | (67,100) |  |  | (6,177) |
Total stockholders' equity | 226,067 |  |  | 217,707 |
Total liabilities and stockholders' equity | $ | 2,805,912 |  |  | $ | 2,691,715 |

See accompanying notes to consolidated financial statements (unaudited).

COLONY BANKCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)

| Three Months Ended |  | Nine Months Ended
(dollars in thousands, except per share data) | September 30, 2022 |  | September 30, 2021 |  | September 30, 2022 |  | September 30, 2021
Interest income |  |  |  |  |  |  |
Loans, including fees | $ | 18,150 |  |  | $ | 16,013 |  |  | $ | 50,431 |  |  | $ | 43,684 |
Investment securities | 5,266 |  |  | 2,954 |  |  | 14,240 |  |  | 6,546 |
Federal funds sold, interest bearing deposits in banks and short term investments | 278 |  |  | 58 |  |  | 437 |  |  | 154 |
Total interest income | 23,694 |  |  | 19,025 |  |  | 65,108 |  |  | 50,384 |
Interest expense |  |  |  |  |  |  |
Deposits | 1,449 |  |  | 698 |  |  | 2,674 |  |  | 1,921 |
Federal funds purchased | 3 |  |  | — |  |  | 22 |  |  | — |
Federal Home Loan Bank Advances | 555 |  |  | 170 |  |  | 1,746 |  |  | 401 |
Paycheck Protection Program Liquidity Facility | — |  |  | — |  |  | — |  |  | 93 |
Other borrowings | 822 |  |  | 289 |  |  | 1,441 |  |  | 802 |
Total interest expense | 2,829 |  |  | 1,157 |  |  | 5,883 |  |  | 3,217 |
Net interest income | 20,865 |  |  | 17,868 |  |  | 59,225 |  |  | 47,167 |
Provision for loan losses | 1,320 |  |  | 150 |  |  | 2,470 |  |  | 650 |
Net interest income after provision for loan losses | 19,545 |  |  | 17,718 |  |  | 56,755 |  |  | 46,517 |
Noninterest income |  |  |  |  |  |  |
Service charges on deposits | 2,104 |  |  | 1,792 |  |  | 5,823 |  |  | 4,278 |
Mortgage fee income | 1,708 |  |  | 3,107 |  |  | 7,356 |  |  | 10,107 |
Gain on sales of SBA loans | 1,215 |  |  | 1,813 |  |  | 4,805 |  |  | 4,548 |
Gain (loss) on sales of securities | (96) |  |  | — |  |  | (72) |  |  | 137 |
Interchange fees | 2,179 |  |  | 1,745 |  |  | 6,338 |  |  | 4,941 |
BOLI Income | 312 |  |  | 280 |  |  | 977 |  |  | 710 |
Other | 757 |  |  | 701 |  |  | 2,157 |  |  | 754 |
Total noninterest income | 8,179 |  |  | 9,438 |  |  | 27,384 |  |  | 25,475 |
Noninterest expense |  |  |  |  |  |  |
Salaries and employee benefits | 12,154 |  |  | 11,826 |  |  | 40,498 |  |  | 31,907 |
Occupancy and equipment | 1,645 |  |  | 1,599 |  |  | 4,872 |  |  | 4,169 |
Acquisition related expenses | 2 |  |  | 1,994 |  |  | 142 |  |  | 3,031 |
Information technology expenses | 2,491 |  |  | 2,045 |  |  | 7,394 |  |  | 5,493 |
Professional fees | 881 |  |  | 804 |  |  | 2,773 |  |  | 1,975 |
Advertising and public relations | 876 |  |  | 674 |  |  | 2,406 |  |  | 1,817 |
Communications | 471 |  |  | 310 |  |  | 1,325 |  |  | 837 |
Other | 2,847 |  |  | 1,959 |  |  | 8,238 |  |  | 4,884 |
Total noninterest expense | 21,367 |  |  | 21,211 |  |  | 67,648 |  |  | 54,113 |
Income before income taxes | 6,357 |  |  | 5,945 |  |  | 16,491 |  |  | 17,879 |
Income taxes | 1,105 |  |  | 362 |  |  | 2,500 |  |  | 3,379 |
Net income | $ | 5,252 |  |  | $ | 5,583 |  |  | $ | 13,991 |  |  | $ | 14,500 |
Earnings per common share: |  |  |  |  |  |  |
Basic | $ | 0.30 |  |  | $ | 0.45 |  |  | $ | 0.82 |  |  | $ | 1.39 |
Diluted | 0.30 |  |  | $ | 0.45 |  |  | 0.82 |  |  | $ | 1.39 |
Dividends declared per share | 0.1075 |  |  | 0.1025 |  |  | 0.3225 |  |  | 0.3075 |
Weighted average common shares outstanding: |  |  |  |  |  |  |
Basic | 17,645,119 |  |  | 12,344,926 |  |  | 17,042,838 |  |  | 10,447,496 |
Diluted | 17,645,119 |  |  | 12,344,926 |  |  | 17,042,838 |  |  | 10,447,496 |

See accompanying notes to consolidated financial statements (unaudited).
5

COLONY BANKCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive (Loss) Income (unaudited)

| Three Months Ended |  | Nine Months Ended
(dollars in thousands) | September 30, 2022 |  | September 30, 2021 |  | September 30, 2022 |  | September 30, 2021
Net income | $ | 5,252 |  |  | $ | 5,583 |  |  | $ | 13,991 |  |  | $ | 14,500 |
Other comprehensive (loss) income: |  |  |  |  |  |  |
Unrealized losses on securities arising during the period | (14,256) |  |  | (7,335) |  |  | (70,913) |  |  | (13,186) |
Tax effect | 1,996 |  |  | 1,724 |  |  | 9,928 |  |  | 3,099 |
Realized (gains) losses on sales of available for sale securities | 96 |  |  | — |  |  | 72 |  |  | (137) |
Tax effect | (13) |  |  | — |  |  | (10) |  |  | 32 |
Change in unrealized (losses) gains on securities available for sale, net of reclassification adjustment and tax effects | (12,177) |  |  | (5,611) |  |  | (60,923) |  |  | (10,192) |
Comprehensive (loss) income | $ | (6,925) |  |  | $ | (28) |  |  | $ | (46,932) |  |  | $ | 4,308 |

See accompanying notes to consolidated financial statements (unaudited).
6

COLONY BANKCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (unaudited)

(dollars in thousands, except per share data) | Common Stock |  |  |  |  |  |  |  |
Three Months Ended | Shares |  | Amount |  | Paid-In Capital |  | Retained Earnings |  | Accumulated Other Comprehensive Income (Loss) |  | Total
Balance, June 30, 2022 | 17,581 |  |  | $ | 17,581 |  |  | $ | 167,376 |  |  | $ | 104,561 |  |  | $ | (54,923) |  |  | $ | 234,595 |
Change in net unrealized losses on securities available for sale, net of reclassification adjustment and tax effects | — |  |  | — |  |  | — |  |  | — |  |  | (12,177) |  |  | (12,177) |
Dividends on common shares ($0.1075 per share) | — |  |  | — |  |  | — |  |  | (1,895) |  |  | — |  |  | (1,895) |
Tax withholding related to vesting of restricted stock | (12) |  |  | (12) |  |  | (137) |  |  | — |  |  | — |  |  | (149) |
Issuance of restricted stock | 72 |  |  | 72 |  |  | (72) |  |  | — |  |  | — |  |  | — |
Stock-based compensation expense | — |  |  | — |  |  | 441 |  |  | — |  |  | — |  |  | 441 |
Net income | — |  |  | — |  |  | — |  |  | 5,252 |  |  | — |  |  | 5,252 |
Balance, September 30, 2022 | 17,641 |  |  | $ | 17,641 |  |  | $ | 167,608 |  |  | $ | 107,918 |  |  | $ | (67,100) |  |  | $ | 226,067 |
Balance, June 30, 2021 | 9,499 |  |  | $ | 9,499 |  |  | $ | 43,232 |  |  | $ | 91,963 |  |  | $ | 2,200 |  |  | $ | 146,894 |
Change in net unrealized losses on securities available for sale, net of reclassification adjustment and tax effects | — |  |  | — |  |  | — |  |  | — |  |  | (5,611) |  |  | (5,611) |
Dividends on common shares ($0.1025 per share) | — |  |  | — |  |  | — |  |  | (1,401) |  |  | — |  |  | (1,401) |
Issuance of common stock | 3,988 |  |  | 3,988 |  |  | 67,395 |  |  | — |  |  | — |  |  | 71,383 |
Issuance of restricted stock | 187 |  |  | 187 |  |  | (187) |  |  | — |  |  | — |  |  | — |
Stock-based compensation expense | — |  |  | — |  |  | 282 |  |  | — |  |  | — |  |  | 282 |
Net income | — |  |  | — |  |  | — |  |  | 5,583 |  |  | — |  |  | 5,583 |
Balance, September 30, 2021 | 13,674 |  |  | $ | 13,674 |  |  | $ | 110,722 |  |  | $ | 96,145 |  |  | $ | (3,411) |  |  | $ | 217,130 |

See accompanying notes to consolidated financial statements (unaudited).
7

COLONY BANKCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (unaudited)

(dollars in thousands, except per share data) | Common Stock |  |  |  |  |  |  |  |
Nine Months Ended | Shares |  | Amount |  | Paid-In Capital |  | Retained Earnings |  | Accumulated Other Comprehensive Income (Loss) |  | Total
Balance, December 31, 2021 | 13,674 |  |  | $ | 13,674 |  |  | $ | 111,021 |  |  | $ | 99,189 |  |  | $ | (6,177) |  |  | $ | 217,707 |
Change in net unrealized losses on securities available for sale, net of reclassification adjustment and tax effects | — |  |  | — |  |  | — |  |  | — |  |  | (60,923) |  |  | (60,923) |
Dividends on common shares ($0.3225 per share) | — |  |  | — |  |  | — |  |  | (5,262) |  |  | — |  |  | (5,262) |
Issuance of common stock | 3,848 |  |  | 3,848 |  |  | 55,620 |  |  | — |  |  | — |  |  | 59,468 |
Tax withholding related to vesting of restricted stock | (15) |  |  | (15) |  |  | (216) |  |  | — |  |  | — |  |  | (231) |
Issuance of restricted stock, net of forfeitures | 134 |  |  | 134 |  |  | (134) |  |  | — |  |  | — |  |  | — |
Stock-based compensation expense | — |  |  | — |  |  | 1,317 |  |  | — |  |  | — |  |  | 1,317 |
Net income | — |  |  | — |  |  | — |  |  | 13,991 |  |  | — |  |  | 13,991 |
Balance, September 30, 2022 | 17,641 |  |  | $ | 17,641 |  |  | $ | 167,608 |  |  | $ | 107,918 |  |  | $ | (67,100) |  |  | $ | 226,067 |
Balance, December 31, 2020 | 9,499 |  |  | $ | 9,499 |  |  | $ | 43,215 |  |  | $ | 84,993 |  |  | $ | 6,781 |  |  | $ | 144,488 |
Change in net unrealized losses on securities available for sale, net of reclassification adjustment and tax effects | — |  |  | — |  |  | — |  |  | — |  |  | (10,192) |  |  | (10,192) |
Dividends on common shares ($0.3075 per share) | — |  |  | — |  |  | — |  |  | (3,348) |  |  | — |  |  | (3,348) |
Issuance of common stock | 3,988 |  |  | 3,988 |  |  | 67,395 |  |  | — |  |  | — |  |  | 71,383 |
Issuance of restricted stock, net of forfeitures | 187 |  |  | 187 |  |  | (187) |  |  | — |  |  | — |  |  | — |
Stock-based compensation expense | — |  |  | — |  |  | 299 |  |  | — |  |  | — |  |  | 299 |
Net income | — |  |  | — |  |  | — |  |  | 14,500 |  |  | — |  |  | 14,500 |
Balance, September 30, 2021 | 13,674 |  |  | $ | 13,674 |  |  | $ | 110,722 |  |  | $ | 96,145 |  |  | $ | (3,411) |  |  | $ | 217,130 |

See accompanying notes to consolidated financial statements (unaudited).
8

COLONY BANKCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)

| Nine Months Ended
(dollars in thousands) | September 30, 2022 |  | September 30, 2021
Operating Activities |  |  |
Net income | $ | 13,991 |  |  | $ | 14,500 |
Adjustments reconciling net income to net cash provided by operating activities: |  |  |
Provision for loan losses | 2,470 |  |  | 650 |
Depreciation, amortization, and accretion | 9,322 |  |  | 5,592 |
Equity method investment income | 357 |  |  | — |
Share-based compensation expense | 1,317 |  |  | 299 |
Net change in servicing asset | (582) |  |  | (656) |
(Gain)/Loss on sales of securities, available-for-sale | 72 |  |  | (137) |
Gain on sales of SBA loans | (4,805) |  |  | (4,548) |
Loss on sales of other real estate owned | — |  |  | 54 |
Donation of other real estate owned | 35 |  |  | — |
Writedown on other real estate owned | — |  |  | 21 |
Gain on sales of premises & equipment | (65) |  |  | — |
Originations of loans held for sale | (269,586) |  |  | (294,759) |
Proceeds from sales of loans held for sale | 288,596 |  |  | 324,996 |
Change in bank-owned life insurance | (1,006) |  |  | (538) |
Deferred tax benefit | (990) |  |  | (2,794) |
Change in other assets | (4,529) |  |  | 1,924 |
Change in other liabilities | 867 |  |  | (3,426) |
Net cash provided by operating activities | 35,464 |  |  | 41,178 |
Investing Activities |  |  |
Purchases of investment securities, available-for-sale | (157,391) |  |  | (230,868) |
Proceeds from maturities, calls, and paydowns of investment securities, available-for-sale | 45,014 |  |  | 75,830 |
Proceeds from sales of investment securities, available-for-sale | 47,175 |  |  | 17,559 |
Proceeds from maturities, calls and paydowns of securities, held-to-maturity | 8,432 |  |  | — |
Change in loans, net | (249,384) |  |  | 56,679 |
Purchase of premises and equipment | (1,449) |  |  | (2,924) |
Proceeds from sales of premises and equipment | 71 |  |  | — |
Proceeds from sales of other real estate owned | — |  |  | 807 |
Proceeds from bank-owned life insurance | 1,008 |  |  | 585 |
Redemption (purchase of) other investments | 2,506 |  |  | (9,582) |
Redemption (purchase) of Federal Home Loan Bank Stock | (1,701) |  |  | 2,307 |
Net cash and cash equivalents received from acquisition | — |  |  | 34,087 |
Net cash used in investing activities | (305,719) |  |  | (55,520) |
Financing Activities |  |  |
Change in noninterest-bearing customer deposits | 5,771 |  |  | 72,982 |
Change in interest-bearing customer deposits | 29,283 |  |  | 45,738 |
Issuance of common stock, net of stock issuance cost | 59,468 |  |  | — |
Dividends paid for common stock | (5,262) |  |  | (3,348) |
Issuance of Subordinated Debt | 39,097 |  |  | — |
Repayment on Paycheck Protection Program Liquidity Fund | — |  |  | (106,789) |
Repayments on Federal Home Loan Bank Advances | (137,500) |  |  | — |
Proceeds from Federal Home Loan Bank Advances | 180,000 |  |  | — |
Repayments on Other borrowings | (12,563) |  |  | (750) |
Tax withholding related to vesting of restricted stock | (231) |  |  | — |
Net cash provided by financing activities | 158,063 |  |  | 7,833 |
Net decrease in cash and cash equivalents | (112,192) |  |  | (6,509) |
Cash and cash equivalents at beginning of period | 197,232 |  |  | 183,506 |
Cash and cash equivalents at end of period | $ | 85,040 |  |  | $ | 176,997 |

9

COLONY BANKCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
(DOLLARS IN THOUSANDS)

| Nine Months Ended
| September 30, 2022 |  | September 30, 2021
Supplemental Disclosure of Cash Flow Information |  |  |
Cash paid during the period for interest | $ | 5,053 |  |  | $ | 3,189 |
Cash paid during the period for income taxes | 3,625 |  |  | 4,923 |
Noncash Investing and Financing Activities |  |  |
Goodwill adjustment | (3,983) |  |  | — |
Acquisition of real estate through foreclosure | — |  |  | 145 |
Carrying amount of Securities AFS transferred to HTM, net of $34.0 million unrealized loss | 510,956 |  |  | — |

See accompanying notes to consolidated financial statements (unaudited).
10

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(1) Summary of Significant Accounting Policies
Presentation
Colony Bankcorp, Inc. (the “Company”) is a bank holding company located in Fitzgerald, Georgia. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Colony Bank, Fitzgerald, Georgia (the “Bank”). The “Company” or “our,” as used herein, includes Colony Bank, except where the context requires otherwise.
In July 2019, a new subsidiary of the Company was incorporated under the name Colony Risk Management, Inc. Colony Risk Management, Inc. is a subsidiary of the Company and is located in Las Vegas, Nevada. It is a captive insurance subsidiary which insures various liability and property damage policies for the Company and its related subsidiaries. Colony Risk Management is regulated by the State of Nevada Division of Insurance.
All adjustments consisting of normal recurring accruals which are, in the opinion of management, necessary for fair presentation of the interim consolidated financial statements, have been included and fairly and accurately present the financial position, results of operations and cash flows of the Company. All significant intercompany accounts have been eliminated in consolidation.
The accounting and reporting policies of the Company conform to generally accepted accounting principles and practices utilized in the commercial banking industry for interim financial information and Regulation S-X. Accordingly, the accompanying unaudited interim consolidated financial statements do not include all of the information or notes required for complete financial statements.
The results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results which may be expected for the year ending December 31, 2022. These statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”).
Nature of Operations
The Bank provides a full range of retail, commercial and mortgage banking services for consumers and small- to medium-size businesses located primarily in central, south and coastal Georgia. The Bank is headquartered in Fitzgerald, Georgia with banking and mortgage offices in Albany, Ashburn, Athens, Broxton, Centerville, Columbus, Cordele, Douglas, Eastman, Fitzgerald, LaGrange, Leesburg, Macon, Moultrie, Quitman, Rochelle, Savannah, Soperton, Statesboro, Sylvester, Tifton, Valdosta and Warner Robins. Lending and investing activities are funded primarily by deposits gathered through its retail banking office network.
Use of Estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and fair value of assets acquired and liabilities assumed in a business combination, including goodwill impairment.
Reclassifications
In certain instances, amounts reported in prior years’ consolidated financial statements have been reclassified to conform to statement presentations selected for 2022. Such reclassifications have not materially affected previously reported stockholders’ equity or net income.
Adjustments
The Company finalized its purchase accounting adjustment during the second and third quarters of 2022 with a $4.0 million net adjustment to goodwill primarily related to premises and equipment and deferred taxes.
11

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Concentrations of Credit Risk
Concentrations of credit risk can exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries, or certain geographic regions. The Company has a concentration in real estate loans as well as a geographic concentration that could pose an adverse credit risk. At September 30, 2022, approximately 86% of the Company’s loan portfolio was concentrated in loans secured by real estate. A substantial portion of borrowers’ ability to honor their contractual obligations is dependent upon the viability of the real estate economic sector. Management continues to monitor these concentrations and has considered these concentrations in its allowance for loan loss analysis.
The success of the Company is dependent, to a certain extent, upon the economic conditions in the geographic markets it serves. Adverse changes in the economic conditions in these geographic markets would likely have a material adverse effect on the Company’s results of operations and financial condition. The operating results of the Company depend primarily on its net interest income. Accordingly, operations are subject to risks and uncertainties surrounding the exposure to changes in the interest rate environment.
At times, the Company may have cash and cash equivalents at financial institutions in excess of federal deposit insurance limits. The Company places its cash and cash equivalents with high credit quality financial institutions whose credit ratings are monitored by management to minimize credit risk.
Changes in Accounting Principles and Effects of New Accounting Pronouncements
ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). This ASU sets forth a “current expected credit loss” ("CECL") model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supported forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. On October 16, 2019, the Financial Accounting Standards Board ("FASB") voted to extend the delay of the effective date of this ASU for smaller reporting companies, such as the Company, until fiscal years beginning after December 15, 2022. The Company is expecting a 15-25% increase in allowance for credit losses related to CECL implementation inclusive of expected credit losses for loans and unfunded commitments. The estimates provided above are subject to substantial change and will ultimately depend upon the composition of the loan portfolio, as well as economic conditions and forecasts at the time of CECL adoption.
In March 2020, the FASB issued ASU No. 2020-04, Reference Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments are effective for the Company as of March 12, 2020 through December 31, 2022. The provisions of ASU 2020-04 did not have a material impact on the consolidated financial statements.
12

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(2) Investment Securities
The amortized cost and estimated fair value of securities available-for-sale and held-to-maturity along with gross unrealized gains and losses are summarized as follows:

(dollars in thousands) |  |  |  |  |  |  |
September 30, 2022 | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Securities Available for Sale: |  |  |  |  |  |  |
U.S. treasury securities | $ | 1,642 |  |  | $ | — |  |  | $ | (12) |  |  | $ | 1,630 |
U.S. agency | 5,405 |  |  | — |  |  | (487) |  |  | 4,918 |
Asset backed securities | 26,919 |  |  | — |  |  | (747) |  |  | 26,172 |
State, county & municipal securities | 126,472 |  |  | — |  |  | (23,182) |  |  | 103,290 |
Corporate debt securities | 54,782 |  |  | — |  |  | (4,117) |  |  | 50,665 |
Mortgage-backed securities | 282,269 |  |  | 15 |  |  | (29,243) |  |  | 253,041 |
Total | $ | 497,489 |  |  | $ | 15 |  |  | $ | (57,788) |  |  | $ | 439,716 |
September 30, 2022 | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Securities Held to Maturity: |  |  |  |  |  |  |
U.S. treasury securities | $ | 91,189 |  |  | $ | — |  |  | $ | (4,460) |  |  | $ | 86,729 |
U.S. agency | 16,440 |  |  | — |  |  | (1,853) |  |  | 14,587 |
State, county & municipal securities | 135,994 |  |  | — |  |  | (21,030) |  |  | 114,964 |
Mortgage-backed securities | 224,683 |  |  | — |  |  | (29,945) |  |  | 194,738 |
Total | $ | 468,306 |  |  | $ | — |  |  | $ | (57,288) |  |  | $ | 411,018 |
December 31, 2021 |  |  |  |  |  |  |
Securities Available for Sale: |  |  |  |  |  |  |
U.S. treasury securities | $ | 88,638 |  |  | $ | — |  |  | $ | (1,087) |  |  | $ | 87,551 |
U.S. agency | 17,916 |  |  | 5 |  |  | (140) |  |  | 17,781 |
State, county & municipal securities | 252,632 |  |  | 877 |  |  | (3,356) |  |  | 250,153 |
Corporate debt securities | 48,153 |  |  | 520 |  |  | (265) |  |  | 48,408 |
Mortgage-backed securities | 539,172 |  |  | 2,160 |  |  | (7,061) |  |  | 534,271 |
Total | $ | 946,511 |  |  | $ | 3,562 |  |  | $ | (11,909) |  |  | $ | 938,164 |

The Company transferred certain agency-issued securities from the available-for-sale to held-to-maturity portfolio on January 1, 2022 and September 1, 2022, having a combined book value of approximately $511.0 million and a combined market value of approximately $477.0 million. As of the date of each transfer, the related pre-tax net unrecognized losses of approximately $34.0 million within the accumulated other comprehensive loss balance are being amortized over the remaining term of the securities using the effective interest method. This transfer was completed after careful consideration of the Company’s intent and ability to hold these securities to maturity. Factors used in assessing the ability to hold these securities to maturity were future liquidity needs and sources of funding.
The amortized cost and fair value of investment securities as of September 30, 2022, by contractual maturity, are shown hereafter. Expected maturities may differ from contractual maturities for certain investments because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. This is often the case with mortgage-backed
13

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
securities, which are disclosed separately in the table below.

| Available for Sale |  | Held to Maturity
(dollars in thousands) | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Due in one year or less | $ | 1,020 |  |  | $ | 1,011 |  |  | $ | — |  |  | $ | — |
Due after one year through five years | 13,612 |  |  | 12,701 |  |  | 62,300 |  |  | 59,996 |
Due after five years through ten years | 88,747 |  |  | 77,200 |  |  | 87,245 |  |  | 77,143 |
Due after ten years | 111,841 |  |  | 95,763 |  |  | 94,078 |  |  | 79,141 |
| $ | 215,220 |  |  | $ | 186,675 |  |  | $ | 243,623 |  |  | $ | 216,280 |
Mortgage-backed securities | 282,269 |  |  | 253,041 |  |  | 224,683 |  |  | 194,738 |
| $ | 497,489 |  |  | $ | 439,716 |  |  | $ | 468,306 |  |  | $ | 411,018 |

Proceeds from the sale of investment securities totaled $44.1 million and $47.2 million, and $0 and $17.6 million for the three and nine months ended September 30, 2022 and 2021, respectively. The sale of investment securities for the three months ended September 30, 2022 and 2021 resulted in no gross realized gains for each period and losses of $96,000 and $0, respectively. The sale of investment securities for the nine months ended September 30, 2022 and 2021 resulted in gross realized gains of $24,000 and $209,000 and losses of $96,000 and $72,000, respectively.
Investment securities having a carrying value of approximately $350.1 million and $247.4 million were pledged to secure public deposits and for other purposes as of September 30, 2022 and December 31, 2021, respectively.
Information pertaining to available-for-sale securities with gross unrealized losses at September 30, 2022 and December 31, 2021 aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows:

| Less Than 12 Months |  | 12 Months or Greater |  | Total
(dollars in thousands) | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses
September 30, 2022 |  |  |  |  |  |  |  |  |  |  |
U.S. treasury securities | $ | 841 |  |  | $ | (7) |  |  | $ | 789 |  |  | $ | (5) |  |  | $ | 1,630 |  |  | $ | (12) |
U.S. agency | 4,918 |  |  | (487) |  |  | — |  |  | — |  |  | 4,918 |  |  | (487) |
Asset backed securities | 14,785 |  |  | (262) |  |  | 11,387 |  |  | (485) |  |  | 26,172 |  |  | (747) |
State, county & municipal securities | 50,600 |  |  | (9,562) |  |  | 52,690 |  |  | (13,620) |  |  | 103,290 |  |  | (23,182) |
Corporate debt securities | 26,326 |  |  | (2,538) |  |  | 15,086 |  |  | (1,579) |  |  | 41,412 |  |  | (4,117) |
Mortgage-backed securities | 155,170 |  |  | (13,980) |  |  | 82,264 |  |  | (15,263) |  |  | 237,434 |  |  | (29,243) |
| $ | 252,640 |  |  | $ | (26,836) |  |  | $ | 162,216 |  |  | $ | (30,952) |  |  | $ | 414,856 |  |  | $ | (57,788) |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
U.S. treasury securities | $ | 87,302 |  |  | $ | (1,087) |  |  | $ | — |  |  | $ | — |  |  | $ | 87,302 |  |  | $ | (1,087) |
U.S. agency | 10,969 |  |  | (140) |  |  | — |  |  | — |  |  | 10,969 |  |  | (140) |
State, county & municipal securities | 180,551 |  |  | (3,131) |  |  | 5,970 |  |  | (225) |  |  | 186,521 |  |  | (3,356) |
Corporate debt securities | 31,977 |  |  | (265) |  |  | — |  |  | — |  |  | 31,977 |  |  | (265) |
Mortgage-backed securities | 377,413 |  |  | (6,421) |  |  | 21,129 |  |  | (640) |  |  | 398,542 |  |  | (7,061) |
| $ | 688,212 |  |  | $ | (11,044) |  |  | $ | 27,099 |  |  | $ | (865) |  |  | $ | 715,311 |  |  | $ | (11,909) |

14

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Information pertaining to held-to-maturity securities with gross unrealized losses at September 30, 2022 aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows:

| Less Than 12 Months |  | 12 Months or Greater |  | Total
(dollars in thousands) | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses
September 30, 2022 |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 77,682 |  |  | $ | (4,058) |  |  | $ | 9,047 |  |  | $ | (402,000) |  |  | $ | 86,729 |  |  | $ | (4,460) |
U.S. agency | 6,235 |  |  | (489) |  |  | 8,352 |  |  | (1,364) |  |  | 14,587 |  |  | (1,853) |
State, county & municipal securities | 47,941 |  |  | (7,526) |  |  | 67,023 |  |  | (13,504) |  |  | 114,964 |  |  | (21,030) |
Mortgage-backed securities | 31,436 |  |  | (3,299) |  |  | 163,302 |  |  | (26,646) |  |  | 194,738 |  |  | (29,945) |
| $ | 163,294 |  |  | $ | (15,372) |  |  | $ | 247,724 |  |  | $ | (41,916) |  |  | $ | 411,018 |  |  | $ | (57,288) |

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 September 30, 2022, there were 272 available-for-sale securities and 161 held-to-maturity securities that had unrealized losses. These securities are guaranteed by either the U.S. Government, other governments or U.S. corporations. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other than temporary.
15

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(3) Loans
The following table presents the composition of loans segregated by legacy and purchased loans and by class of loans, as of September 30, 2022 and December 31, 2021. Purchased loans are defined as loans that were acquired in bank acquisitions.

| September 30, 2022
(dollars in thousands) | Legacy Loans |  | Purchased Loans |  | Total
Construction, land and land development | $ | 215,731 |  |  | $ | 19,923 |  |  | $ | 235,654 |
Other commercial real estate | 750,531 |  |  | 135,276 |  |  | 885,807 |
Total commercial real estate | 966,262 |  |  | 155,199 |  |  | 1,121,461 |
Residential real estate | 198,377 |  |  | 42,874 |  |  | 241,251 |
Commercial, financial, & agricultural (*) | 191,362 |  |  | 15,223 |  |  | 206,585 |
Consumer and other | 16,256 |  |  | 1,060 |  |  | 17,316 |
Total Loans | $ | 1,372,257 |  |  | $ | 214,356 |  |  | $ | 1,586,613 |

| December 31, 2021
(dollars in thousands) | Legacy Loans |  | Purchased Loans |  | Total
Construction, land and land development | $ | 119,953 |  |  | $ | 45,493 |  |  | $ | 165,446 |
Other commercial real estate | 595,739 |  |  | 191,653 |  |  | 787,392 |
Total commercial real estate | 715,692 |  |  | 237,146 |  |  | 952,838 |
Residential real estate | 159,469 |  |  | 53,058 |  |  | 212,527 |
Commercial, financial, & agricultural (*) | 113,040 |  |  | 41,008 |  |  | 154,048 |
Consumer and other | 16,003 |  |  | 2,561 |  |  | 18,564 |
Total Loans | $ | 1,004,204 |  |  | $ | 333,773 |  |  | $ | 1,337,977 |

(*) Includes $98,000 and $9.0 million in PPP loans at September 30, 2022 and December 31, 2021, respectively.
Commercial and industrial loans are extended to a diverse group of businesses within the Company’s market area. These loans are often underwritten based on the borrower’s ability to service the debt from income from the business. Real estate construction loans often require loan funds to be advanced prior to completion of the project. Due to uncertainties inherent in estimating construction costs, changes in interest rates and other economic conditions, these loans often pose a higher risk than other types of loans. Consumer loans are originated at the Bank level.
Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (1) the risk grade assigned to commercial and consumer loans, (2) the level of classified commercial loans, (3) net charge-offs, (4) nonperforming loans, and (5) the general economic conditions in the Company’s geographic markets.
The Company uses a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 10. A description of the general characteristics of the grades is as follows:
•Grades 1, 2 and 3 - Borrowers with these assigned risk grades range from virtual absence of risk to minimal risk. Such loans may be secured by Company-issued and controlled certificates of deposit or properly margined equity securities or bonds. Other loans comprising these grades are made to companies that have been in existence for a long period of time with many years of consecutive profits and strong equity, good liquidity, excellent debt service ability and unblemished past performance, or to exceptionally strong individuals with collateral of unquestioned value that fully secures the loans. Loans in this category fall into the “pass” classification.
•Grades 4 and 5 - Loans assigned these “pass” risk grades are made to borrowers with acceptable credit quality and risk. The risk ranges from loans with no significant weaknesses in repayment capacity and collateral protection to acceptable loans with one or more risk factors considered to be more than average. These loans are also included in into the “pass” classification.
16

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
•Grade 6 - This grade includes “special mention” loans on management’s watch list and is intended to be used on a temporary basis for pass grade loans where risk-modifying action is intended in the short-term.
•Grades 7 and 8 - These grades includes “substandard” loans in accordance with regulatory guidelines. This category includes borrowers with well-defined weaknesses that jeopardize the payment of the debt in accordance with the agreed terms. Loans considered to be impaired are assigned grade 8, and these loans often have assigned loss allocations as part of the allowance for loan and lease losses. Generally, loans on which interest accrual has been stopped would be included in this grade.
•Grades 9 and 10 - These grades correspond to regulatory classification definitions of “doubtful” and “loss,” respectively. In practice, any loan with these grades would be for a very short period of time, and generally the Company has no loans with these assigned grades. Management manages the Company’s problem loans in such a way that uncollectible loans or uncollectible portions of loans are charged off immediately with any residual, collectible amounts assigned a risk grade of 7 or 8.
The following table presents the loan portfolio, excluding purchased loans, by credit quality indicator (risk grade) as of September 30, 2022 and December 31, 2021. Those loans with a risk grade of 1, 2, 3, 4 and 5 have been combined in the pass column for presentation purposes.

(dollars in thousands) | Pass |  | Special Mention |  | Substandard |  | Total Loans
September 30, 2022 |  |  |  |  |  |  |
Construction, land and land development | $ | 215,087 |  |  | $ | 240 |  |  | $ | 404 |  |  | $ | 215,731 |
Other commercial real estate | 726,455 |  |  | 14,872 |  |  | 9,204 |  |  | 750,531 |
Total commercial real estate | 941,542 |  |  | 15,112 |  |  | 9,608 |  |  | 966,262 |
Residential real estate | 188,721 |  |  | 5,819 |  |  | 3,837 |  |  | 198,377 |
Commercial, financial, & agricultural | 189,093 |  |  | 802 |  |  | 1,467 |  |  | 191,362 |
Consumer and other | 16,149 |  |  | 58 |  |  | 49 |  |  | 16,256 |
Total Loans | $ | 1,335,505 |  |  | $ | 21,791 |  |  | $ | 14,961 |  |  | $ | 1,372,257 |
(dollars in thousands) |  |  |  |  |  |  |
December 31, 2021 |  |  |  |  |  |  |
Construction, land and land development | $ | 117,044 |  |  | $ | 2,634 |  |  | $ | 275 |  |  | $ | 119,953 |
Other commercial real estate | 562,228 |  |  | 25,718 |  |  | 7,793 |  |  | 595,739 |
Total commercial real estate | 679,272 |  |  | 28,352 |  |  | 8,068 |  |  | 715,692 |
Residential real estate | 148,507 |  |  | 5,733 |  |  | 5,229 |  |  | 159,469 |
Commercial, financial, & agricultural | 110,267 |  |  | 1,488 |  |  | 1,285 |  |  | 113,040 |
Consumer and other | 15,787 |  |  | 78 |  |  | $ | 138 |  |  | 16,003 |
Total Loans | $ | 953,833 |  |  | $ | 35,651 |  |  | $ | 14,720 |  |  | $ | 1,004,204 |

17

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following table presents the purchased loan portfolio by credit quality indicator (risk grade) as of September 30, 2022 and December 31, 2021. Those loans with a risk grade of 1, 2, 3, 4 or 5 have been combined in the pass column for presentation purposes. For the period ending September 30, 2022, the Company did not have any loans classified as “doubtful” or a “loss”.

(dollars in thousands) | Pass |  | Special Mention |  | Substandard |  | Total Loans
September 30, 2022 |  |  |  |  |  |  |
Construction, land and land development | $ | 19,923 |  |  | $ | — |  |  | $ | — |  |  | $ | 19,923 |
Other commercial real estate | 131,111 |  |  | 3,117 |  |  | 1,048 |  |  | 135,276 |
Total commercial real estate | 151,034 |  |  | 3,117 |  |  | 1,048 |  |  | 155,199 |
Residential real estate | 40,444 |  |  | 632 |  |  | 1,798 |  |  | 42,874 |
Commercial, financial, & agricultural | 14,638 |  |  | 82 |  |  | 503 |  |  | 15,223 |
Consumer and other | 1,060 |  |  | — |  |  | — |  |  | 1,060 |
Total Loans | $ | 207,176 |  |  | $ | 3,831 |  |  | $ | 3,349 |  |  | $ | 214,356 |
December 31, 2021 |  |  |  |  |  |  |
Construction, land and land development | $ | 45,432 |  |  | $ | — |  |  | $ | 61 |  |  | $ | 45,493 |
Other commercial real estate | 186,905 |  |  | 3,518 |  |  | 1,230 |  |  | 191,653 |
Total commercial real estate | 232,337 |  |  | 3,518 |  |  | 1,291 |  |  | 237,146 |
Residential real estate | 49,875 |  |  | 563 |  |  | 2,620 |  |  | 53,058 |
Commercial, financial, & agricultural | 40,711 |  |  | — |  |  | 297 |  |  | 41,008 |
Consumer and other | 2,558 |  |  | 3 |  |  | — |  |  | 2,561 |
Total Loans | $ | 325,481 |  |  | $ | 4,084 |  |  | $ | 4,208 |  |  | $ | 333,773 |

A loan’s risk grade is assigned at loan origination and is based on the financial strength of the borrower and the type of collateral. Loan risk grades are subject to review at various times throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of six or below and an outstanding balance of $250,000 or more are reassessed on a quarterly basis. During this reassessment process individual reserves may be identified and placed against certain loans which are not considered impaired.
In assessing the overall economic condition of the markets in which it operates, the Company monitors the unemployment rates for its major service areas. The unemployment rates are reviewed on a quarterly basis as part of the allowance for loan loss determination.
Loans are placed on nonaccrual status if principal or interest payments become 90 days past due or when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory guidelines. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.
18

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following table presents the aging of the amortized cost basis in legacy loans by aging category and accrual status as of September 30, 2022 and December 31, 2021:

(dollars in thousands) | 30-89 Days Past Due |  | 90 Days or More Past Due |  | Total Accruing Loans Past Due |  | Nonaccrual Loans |  | Current Loans |  | Total Loans
September 30, 2022 |  |  |  |  |  |  |  |  |  |  |
Construction, land and land development | $ | 315 |  |  | $ | — |  |  | $ | 315 |  |  | $ | 143 |  |  | $ | 215,273 |  |  | $ | 215,731 |
Other commercial real estate | 650 |  |  | — |  |  | 650 |  |  | 1,283 |  |  | 748,598 |  |  | 750,531 |
Total commercial real estate | 965 |  |  | — |  |  | 965 |  |  | 1,426 |  |  | 963,871 |  |  | 966,262 |
Residential real estate | 411 |  |  | — |  |  | 411 |  |  | 1,457 |  |  | 196,509 |  |  | 198,377 |
Commercial, financial, & agricultural | 159 |  |  | — |  |  | 159 |  |  | 900 |  |  | 190,303 |  |  | 191,362 |
Consumer and other | 29 |  |  | — |  |  | 29 |  |  | 26 |  |  | 16,201 |  |  | 16,256 |
Total Loans | $ | 1,564 |  |  | $ | — |  |  | $ | 1,564 |  |  | $ | 3,809 |  |  | $ | 1,366,884 |  |  | $ | 1,372,257 |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Construction, land and land development | $ | 6 |  |  | $ | — |  |  | $ | 6 |  |  | $ | — |  |  | $ | 119,947 |  |  | $ | 119,953 |
Other commercial real estate | 349 |  |  | — |  |  | 349 |  |  | 577 |  |  | 594,813 |  |  | 595,739 |
Total commercial real estate | 355 |  |  | — |  |  | 355 |  |  | 577 |  |  | 714,760 |  |  | 715,692 |
Residential real estate | 421 |  |  | — |  |  | 421 |  |  | 2,641 |  |  | 156,407 |  |  | 159,469 |
Commercial, financial, & agricultural | 69 |  |  | — |  |  | 69 |  |  | 708 |  |  | 112,263 |  |  | 113,040 |
Consumer and other | 93 |  |  | — |  |  | 93 |  |  | 26 |  |  | 15,884 |  |  | 16,003 |
Total Loans | $ | 938 |  |  | $ | — |  |  | $ | 938 |  |  | $ | 3,952 |  |  | $ | 999,314 |  |  | $ | 1,004,204 |

19

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following table presents the aging of the amortized cost basis in purchased loans by aging category and accrual status as of September 30, 2022 and December 31, 2021:

(dollars in thousands) | 30-89 Days Past Due |  | 90 Days or More Past Due |  | Total Accruing Loans Past Due |  | Nonaccrual Loans |  | Current Loans |  | Total Loans
September 30, 2022 |  |  |  |  |  |  |  |  |  |  |
Construction, land and land development | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 19,923 |  |  | $ | 19,923 |
Other commercial real estate | — |  |  | — |  |  | — |  |  | 126 |  |  | 135,150 |  |  | 135,276 |
Total commercial real estate | — |  |  | — |  |  | — |  |  | 126 |  |  | 155,073 |  |  | 155,199 |
Residential real estate | 125 |  |  | — |  |  | 125 |  |  | 864 |  |  | 41,885 |  |  | 42,874 |
Commercial, financial, & agricultural | — |  |  | — |  |  | — |  |  | 503 |  |  | 14,720 |  |  | 15,223 |
Consumer and other | — |  |  | — |  |  | — |  |  | — |  |  | 1,060 |  |  | 1,060 |
Total Loans | $ | 125 |  |  | $ | — |  |  | $ | 125 |  |  | $ | 1,493 |  |  | $ | 212,738 |  |  | $ | 214,356 |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Construction, land and land development | $ | 2,680 |  |  | $ | — |  |  | $ | 2,680 |  |  | $ | 31 |  |  | $ | 42,782 |  |  | $ | 45,493 |
Other commercial real estate | — |  |  | — |  |  | — |  |  | 260 |  |  | 191,393 |  |  | 191,653 |
Total commercial real estate | 2,680 |  |  | — |  |  | 2,680 |  |  | 291 |  |  | 234,175 |  |  | 237,146 |
Residential real estate | 560 |  |  | — |  |  | 560 |  |  | 1,198 |  |  | 51,300 |  |  | 53,058 |
Commercial, financial, & agricultural | 389 |  |  | — |  |  | 389 |  |  | — |  |  | 40,619 |  |  | 41,008 |
Consumer and other | — |  |  | — |  |  | — |  |  | 8 |  |  | 2,553 |  |  | 2,561 |
Total Loans | $ | 3,629 |  |  | $ | — |  |  | $ | 3,629 |  |  | $ | 1,497 |  |  | $ | 328,647 |  |  | $ | 333,773 |

20

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following table details impaired loan data, including purchased credit impaired loans, as of September 30, 2022.

| September 30, 2022
(dollars in thousands) | Unpaid Contractual Principal Balance |  | Recorded Investment |  | Related Allowance |  | Average Recorded Investment
With No Related Allowance Recorded |  |  |  |  |  |  |
Construction, land and land development | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 21 |
Commercial real estate | 4,954 |  |  | 4,954 |  |  | — |  |  | 5,964 |
Residential real estate | 640 |  |  | 640 |  |  | — |  |  | 804 |
Commercial, financial & agriculture | 708 |  |  | 708 |  |  | — |  |  | 325 |
Consumer & other | — |  |  | — |  |  | — |  |  | 1 |
| 6,302 |  |  | 6,302 |  |  | — |  |  | 7,115 |
With An Allowance Recorded |  |  |  |  |  |  |
Construction, land and land development | 235 |  |  | 235 |  |  | 70 |  |  | 59 |
Commercial real estate | 412 |  |  | 412 |  |  | 126 |  |  | 624 |
Residential real estate | 299 |  |  | 350 |  |  | 57 |  |  | 781 |
Commercial, financial & agriculture | 452 |  |  | 456 |  |  | 251 |  |  | 369 |
Consumer & other | — |  |  | — |  |  | — |  |  | — |
| 1,398 |  |  | 1,453 |  |  | 504 |  |  | 1,833 |
Purchased Credit Impaired Loans |  |  |  |  |  |  |
Construction, land and land development | — |  |  | — |  |  | — |  |  | — |
Commercial real estate | 812 |  |  | 812 |  |  | 17 |  |  | 1,061 |
Residential real estate | — |  |  | — |  |  | — |  |  | 14 |
Commercial, financial & agriculture | — |  |  | — |  |  | — |  |  | — |
Consumer & other | — |  |  | — |  |  | — |  |  | 113 |
| 812 |  |  | 812 |  |  | 17 |  |  | 1,188 |
Total |  |  |  |  |  |  |
Construction, land and land development | 235 |  |  | 235 |  |  | 70 |  |  | 80 |
Commercial real estate | 6,178 |  |  | 6,178 |  |  | 143 |  |  | 7,649 |
Residential real estate | 939 |  |  | 990 |  |  | 57 |  |  | 1,599 |
Commercial, financial & agriculture | 1,160 |  |  | 1,164 |  |  | 251 |  |  | 694 |
Consumer & other | — |  |  | — |  |  | — |  |  | 114 |
| $ | 8,512 |  |  | $ | 8,567 |  |  | $ | 521 |  |  | $ | 10,136 |

21

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following table details impaired loan data, including purchased credit impaired loans. as of December 31, 2021.

| December 31, 2021 |  |  |  |
(dollars in thousands) | Unpaid Contractual Principal Balance |  | Recorded Investment |  | Related Allowance |  | Average Recorded Investment |  |  |  |
With No Related Allowance Recorded |  |  |  |  |  |  |  |  |  |  |
Construction, land and land development | $ | 62 |  |  | $ | 62 |  |  | $ | — |  |  | $ | 4,311 |  |  |  |  |
Commercial real estate | 7,203 |  |  | 6,369 |  |  | — |  |  | 8,113 |  |  |  |  |
Residential real estate | 958 |  |  | 997 |  |  | — |  |  | 1,083 |  |  |  |  |
Commercial, financial & agriculture | 75 |  |  | 75 |  |  | — |  |  | 56 |  |  |  |  |
Consumer & other | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
| 8,298 |  |  | 7,503 |  |  | — |  |  | 13,563 |  |  |  |  |
With An Allowance Recorded |  |  |  |  |  |  |  |  |  |  |
Construction, land and land development | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
Commercial real estate | 430 |  |  | 483 |  |  | 148 |  |  | 4,429 |  |  |  |  |
Residential real estate | 685 |  |  | 773 |  |  | 108 |  |  | 1,029 |  |  |  |  |
Commercial, financial & agriculture | — |  |  | — |  |  | — |  |  | 79 |  |  |  |  |
Consumer & other | — |  |  | — |  |  | — |  |  | 1 |  |  |  |  |
| 1,115 |  |  | 1,256 |  |  | 256 |  |  | 5,538 |  |  |  |  |
Purchased Credit Impaired Loans |  |  |  |  |  |  |  |  |  |  |
Construction, land and land development | — |  |  | — |  |  | — |  |  | 51 |  |  |  |  |
Commercial real estate | 2,003 |  |  | 1,916 |  |  | 18 |  |  | 802 |  |  |  |  |
Residential real estate | 4 |  |  | — |  |  | 6 |  |  | 7 |  |  |  |  |
Commercial, financial & agriculture | — |  |  | — |  |  | — |  |  | 35 |  |  |  |  |
Consumer & other | 192 |  |  | 73 |  |  | 96 |  |  | 72 |  |  |  |  |
| 2,199 |  |  | 1,989 |  |  | 120 |  |  | 967 |  |  |  |  |
Total |  |  |  |  |  |  |  |  |  |  |
Construction, land and land development | 62 |  |  | 62 |  |  | — |  |  | 4,362 |  |  |  |  |
Commercial real estate | 9,636 |  |  | 8,768 |  |  | 166 |  |  | 13,344 |  |  |  |  |
Residential real estate | 1,647 |  |  | 1,770 |  |  | 114 |  |  | 2,119 |  |  |  |  |
Commercial, financial & agriculture | 75 |  |  | 75 |  |  | — |  |  | 170 |  |  |  |  |
Consumer & other | 192 |  |  | 73 |  |  | 96 |  |  | 73 |  |  |  |  |
| $ | 11,612 |  |  | $ | 10,748 |  |  | $ | 376 |  |  | $ | 20,068 |  |  |  |  |

Interest income recorded on impaired loans during the three months ended September 30, 2022 and 2021 was $152,000 and $261,000, respectively. Interest income recorded on impaired loans during the nine months ended September 30, 2022 and 2021 was $532,000 and $825,000, respectively.
22

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Troubled Debt Restructurings
The restructuring of a loan is considered a troubled debt restructuring ("TDR") if both the borrower is experiencing financial difficulties and the Company has granted a concession to the terms of the loan. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.
As discussed in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2021, which are included in the Company’s 2021 Form 10-K, once a loan is identified as a TDR, it is accounted for as an impaired loan. The Company had no unfunded commitments to lend to a customer that has a troubled debt restructured loan as of September 30, 2022. The Company had one commercial real estate loan restructured during the three and nine month period ended September 30, 2022 with outstanding principal balance of $181,000. The loan was restructured related to payment terms. Loans modified in a TDR are considered to be in default once the loan becomes 90 days past due. A TDR may cease being classified as impaired if the loan is subsequently modified at market terms and, has performed according to the modified terms for at least six months, and there has not been any prior principal forgiveness on a cumulative basis.
The Company had no loans that subsequently defaulted during the three and nine months ended September 30, 2022 and 2021.
23

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(4) Allowance for Loan Losses
The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the three and nine month periods ended September 30, 2022 and September 30, 2021. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.

(dollars in thousands) | Construction, land and land development |  | Other commercial real estate |  | Residential real estate |  | Commercial, financial & agricultural |  | Consumer and other |  | Total
Three Months Ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |
Beginning Balance | $ | 1,052 |  |  | $ | 8,028 |  |  | $ | 1,488 |  |  | $ | 1,678 |  |  | $ | 1,717 |  |  | $ | 13,963 |
Charge-offs | — |  |  | — |  |  | — |  |  | (118) |  |  | (33) |  |  | (151) |
Recoveries | 5 |  |  | 5 |  |  | 23 |  |  | 7 |  |  | 10 |  |  | 50 |
Provision | 873 |  |  | 345 |  |  | 424 |  |  | 1,163 |  |  | (1,485) |  |  | $ | 1,320 |
Ending balance | $ | 1,930 |  |  | $ | 8,378 |  |  | $ | 1,935 |  |  | $ | 2,730 |  |  | $ | 209 |  |  | $ | 15,182 |
Nine Months Ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |
Beginning Balance | $ | 1,127 |  |  | $ | 7,691 |  |  | $ | 1,805 |  |  | $ | 1,083 |  |  | $ | 1,204 |  |  | $ | 12,910 |
Charge-offs | — |  |  | (58) |  |  | (48) |  |  | (266) |  |  | (54) |  |  | (426) |
Recoveries | 16 |  |  | 79 |  |  | 45 |  |  | 63 |  |  | 25 |  |  | 228 |
Provision | 787 |  |  | 666 |  |  | 133 |  |  | 1,850 |  |  | (966) |  |  | 2,470 |
Ending balance | $ | 1,930 |  |  | $ | 8,378 |  |  | $ | 1,935 |  |  | $ | 2,730 |  |  | $ | 209 |  |  | $ | 15,182 |
Period end amount allocated to |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 70 |  |  | $ | 126 |  |  | $ | 57 |  |  | $ | 251 |  |  | $ | — |  |  | $ | 504 |
Collectively evaluated for impairment | 1,860 |  |  | 8,235 |  |  | 1,878 |  |  | 2,479 |  |  | 209 |  |  | 14,661 |
Purchase credit impaired | — |  |  | 17 |  |  | — |  |  | — |  |  | — |  |  | 17 |
Ending Balance | $ | 1,930 |  |  | $ | 8,378 |  |  | $ | 1,935 |  |  | $ | 2,730 |  |  | $ | 209 |  |  | $ | 15,182 |
Loans |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 235 |  |  | $ | 5,366 |  |  | $ | 939 |  |  | $ | 1,160 |  |  | $ | — |  |  | $ | 7,700 |
Collectively evaluated for impairment | 235,419 |  |  | 879,629 |  |  | 240,312 |  |  | 205,425 |  |  | 17,316 |  |  | 1,578,101 |
Purchase credit impaired | — |  |  | 812 |  |  | — |  |  | — |  |  | — |  |  | 812 |
Ending balance | $ | 235,654 |  |  | $ | 885,807 |  |  | $ | 241,251 |  |  | $ | 206,585 |  |  | $ | 17,316 |  |  | $ | 1,586,613 |

24

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

(dollars in thousands) | Construction, land and land development |  | Other commercial real estate |  | Residential real estate |  | Commercial, financial & agricultural |  | Consumer and other |  | Total
Three Months Ended September 30, 2021 |  |  |  |  |  |  |  |  |  |  |
Beginning Balance | $ | 1,125 |  |  | $ | 7,277 |  |  | $ | 2,273 |  |  | $ | 1,773 |  |  | $ | 423 |  |  | $ | 12,871 |
Charge-offs | — |  |  | (531) |  |  | — |  |  | (209) |  |  | (3) |  |  | (743) |
Recoveries | 363 |  |  | 14 |  |  | 143 |  |  | 66 |  |  | 13 |  |  | 599 |
Provision | (439) |  |  | 540 |  |  | (126) |  |  | 203 |  |  | (28) |  |  | 150 |
Ending balance | $ | 1,049 |  |  | $ | 7,300 |  |  | $ | 2,290 |  |  | $ | 1,833 |  |  | $ | 405 |  |  | $ | 12,877 |
Nine Months Ended September 30, 2021 |  |  |  |  |  |  |  |  |  |  |
Beginning Balance | $ | 1,013 |  |  | $ | 6,880 |  |  | $ | 2,278 |  |  | $ | 1,713 |  |  | $ | 243 |  |  | $ | 12,127 |
Charge-offs | — |  |  | (568) |  |  | — |  |  | (225) |  |  | (44) |  |  | (837) |
Recoveries | 448 |  |  | 108 |  |  | 254 |  |  | 83 |  |  | 44 |  |  | 937 |
Provision | (412) |  |  | 880 |  |  | (242) |  |  | 262 |  |  | 162 |  |  | 650 |
Ending balance | $ | 1,049 |  |  | $ | 7,300 |  |  | $ | 2,290 |  |  | $ | 1,833 |  |  | $ | 405 |  |  | $ | 12,877 |
Year ended December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Period end amount allocated to |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | — |  |  | $ | 148 |  |  | $ | 108 |  |  | $ | — |  |  | $ | — |  |  | $ | 256 |
Collectively evaluated for impairment | 1,127 |  |  | 7,525 |  |  | 1,691 |  |  | 1,083 |  |  | 1,108 |  |  | 12,534 |
Purchase credit impaired | — |  |  | 18 |  |  | 6 |  |  | — |  |  | 96 |  |  | 120 |
Ending Balance | $ | 1,127 |  |  | $ | 7,691 |  |  | $ | 1,805 |  |  | $ | 1,083 |  |  | $ | 1,204 |  |  | $ | 12,910 |
Loans |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 62 |  |  | $ | 6,852 |  |  | $ | 1,770 |  |  | $ | 75 |  |  | $ | — |  |  | $ | 8,759 |
Collectively evaluated for impairment | 165,384 |  |  | 778,624 |  |  | 210,757 |  |  | 153,973 |  |  | 18,491 |  |  | 1,327,229 |
Purchase credit impaired | — |  |  | 1,916 |  |  | — |  |  | — |  |  | 73 |  |  | 1,989 |
Ending Balance | $ | 165,446 |  |  | $ | 787,392 |  |  | $ | 212,527 |  |  | $ | 154,048 |  |  | $ | 18,564 |  |  | $ | 1,337,977 |

Management continually evaluates the allowance for loan losses methodology seeking to refine and enhance this process as appropriate, and it is likely that the methodology will continue to evolve over time.
The Company determines its individual reserves during its quarterly review of substandard loans. This process involves reviewing all loans with a risk grade of 6 or greater and an outstanding balance of $250,000 or more, regardless of the loans impairment classification.
25

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(5) Borrowings
The following table presents information regarding the Company’s outstanding borrowings at September 30, 2022 and December 31, 2021:

(dollars in thousands) | September 30, 2022 |  | December 31, 2021
Federal Home Loan Bank advances | 95,000 |  |  | 51,656 |
Other borrowings | 63,364 |  |  | 36,792 |
| $ | 158,364 |  |  | $ | 88,448 |

Advances from the Federal Home Loan Bank (“FHLB”) have maturities ranging from 2022 to 2028 and interest rates ranging from 2.07% to 2.95%. As collateral on the outstanding FHLB advances, the Company has provided a blanket lien on its portfolio of qualifying residential first mortgage loans, commercial loans, multifamily loans and HELOC loans, as well as U.S. Treasury and Agency securities. At September 30, 2022, the lendable collateral of those loans pledged is $126.6 million. At September 30, 2022, the Company had remaining credit availability from the FHLB of $585.6 million. The Company may be required to pledge additional qualifying collateral in order to utilize the full amount of the remaining credit line.
On May 1, 2019, the Company entered into two borrowing arrangements with a correspondent bank for $10.0 million each. The term note is secured by the Bank’s stock, expiring on May 1, 2024, and bears a fixed interest rate of 4.70%. The line of credit is also secured by the Bank’s stock, expiring on July 30, 2022, and bears a variable interest rate of Wall Street Journal Prime minus 0.40%.The proceeds were used for the acquisition of LBC Bancshares, Inc. and its subsidiary, Calumet Bank. As of September 30, 2022, the term note and the line of credit were closed and had zero balances, as both were paid off with the proceeds from the Company's public offering of its common stock completed on February 10, 2022.
The Company's debentures issued in connection with trust preferred securities are recorded as other borrowings on the consolidated balance sheets, but, subject to certain limitations, qualify as Tier 1 capital for regulatory capital purposes. At September 30, 2022 and December 31, 2021, $24.2 million of debentures underlying trust preferred securities were outstanding. The proceeds from the offerings were used to fund certain acquisitions, pay off holding company debt and inject capital into the bank subsidiary. The debentures underlying the trust preferred securities require quarterly interest payments.
On May 20, 2022, the Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers in which the Company issued and sold $40.0 million in aggregate principal amount of its 5.25% Fixed-to-Floating Rate Subordinated Notes (the "Notes"). The Notes mature on May 20, 2032 and bear interest at a fixed rate of 5.25% per year, from May 20, 2022 to, but excluding, May 20, 2027, payable semi-annually in arrears on June 30 and December 30 of each year. From and including May 20, 2027 to, but excluding, the maturity date or early redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 265 basis points, payable quarterly in arrears. Prior to May 20, 2027, the Company may redeem the Notes, in whole but not in part, only under certain limited circumstances set forth in the Notes. On or after May 20, 2027, the Company may redeem the Notes, in whole or in part, at its option, on any interest payment date. The Notes are included on the consolidated balance sheets as other borrowings at the carrying value, net of issuance costs. The debt issuance costs are being amortized through maturity and recognized as a component of interest expense. At September 30, 2022, $39.1 million of Subordinated Notes were outstanding. The proceeds from the sale of the Notes was used for general corporate purposes.
The aggregate stated maturities of other borrowed money at September 30, 2022 are as follows:

(dollars in thousands) |  |
Year |  | Amount
2022 |  | $ | 90,000 |
2027 and After |  | 68,364 |
|  | $ | 158,364 |

The Company also has available federal funds lines of credit with various financial institutions totaling $64.5 million, with no outstanding balance at September 30, 2022.
26

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
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 September 30, 2022, the Company had borrowing capacity available under this arrangement, with no outstanding balances. The Company would be required to pledge certain available-for-sale investment securities as collateral under this agreement.
(6) Earnings Per Share
Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted earnings per share reflects the potential dilution of restricted stock.
The following table presents earnings per share for the three and nine months ended September 30, 2022 and 2021.

(dollars in thousands, except per share data) | Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Numerator |  |  |  |  |  |  |
Net income available to common stockholders | $ | 5,252 |  |  | $ | 5,583 |  |  | $ | 13,991 |  |  | $ | 14,500 |
Denominator |  |  |  |  |  |  |
Weighted average number of common shares |  |  |  |  |  |  |
Outstanding for basic earnings per common share | 17,645 |  |  | 12,345 |  |  | 17,043 |  |  | 10,447 |
Weighted-average number of shares outstanding for diluted earnings per common share | 17,645 |  |  | 12,345 |  |  | 17,043 |  |  | 10,447 |
Earnings per share - basic | $ | 0.30 |  |  | $ | 0.45 |  |  | $ | 0.82 |  |  | $ | 1.39 |
Earnings per share - diluted | $ | 0.30 |  |  | $ | 0.45 |  |  | $ | 0.82 |  |  | $ | 1.39 |

(7) Commitments and Contingencies
Credit-Related Financial Instruments. The Company is a party to credit related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.
The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include cash or cash equivalents, negotiable instruments, real estate, accounts receivable, inventory, oil, gas and mineral interests, property, plant, and equipment.
At September 30, 2022 and December 31, 2021 the following financial instruments were outstanding whose contract amounts represent credit risk:
27

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

| Contract Amount
(dollars in thousands) | September 30, 2022 |  | December 31, 2021
Loan commitments | $ | 365,739 |  |  | $ | 318,853 |
Letters of credit | 3,584 |  |  | 4,869 |

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.
Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.
Standby and performance letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
Legal Contingencies. In the ordinary course of business, there are various legal proceedings pending against the Company and the Bank. As of September 30, 2022, the aggregate liabilities, if any, arising from such proceedings would not, in the opinion of management, have a material adverse effect on the Company’s consolidated financial position.
(8) Fair Value of Financial Instruments and Fair Value Measurements
Generally accepted accounting standards in the U.S. require disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company and the Bank’s financial instruments are detailed hereafter. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.
Generally accepted accounting principles related to Fair Value Measurements define fair value, establish a framework for measuring fair value, establish a three-level valuation hierarchy for disclosure of fair value measurement and enhance disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
•Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
•Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•Level 3 inputs to the valuation methodology are unobservable and represent the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
28

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.
Cash and short-term investments – For cash, due from banks, bank-owned deposits and federal funds sold, the carrying amount is a reasonable estimate of fair value and is classified as Level 1.
Investment securities – Fair values for investment securities are based on quoted market prices where available and classified as Level 1. If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable instruments and classified as Level 2. If a comparable is not available, the investment securities are classified as Level 3.
Other investments, at cost– The fair value of other bank stock approximates carrying value and is classified as Level 2. Fair values for investment funds are based on quoted market prices where available and classified as Level 1. If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable instruments and classified as Level 2. If a comparable is not available, the investment securities are classified as Level 3.
Loans held for sale – The fair value of loans held for sale is determined on outstanding commitments from third party investors in the secondary markets and is classified within Level 2 of the valuation hierarchy.
Loans – The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value. Most loans are classified as Level 3.
Deposit liabilities – The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date and is classified as Level 2. The fair value of deposits is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities and is classified as Level 2.
Federal funds purchased – The carrying amounts of Federal funds purchased approximate fair value and are classified as Level 2.
Federal Home Loan Bank advances– The fair value of Federal Home Loan Bank advances is estimated by discounting the future cash flows using the current rates at which similar advances would be obtained. Federal Home Loan Bank advances are classified as Level 2.
Other borrowings – The fair value of other borrowings is calculated by discounting contractual cash flows using an estimated interest rate based on current rates available to the Company for debt of similar remaining maturities and collateral terms. Other borrowings is classified as Level 2 due to their expected maturities.
Disclosures of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis, are required in the financial statements.
29

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The carrying amount, estimated fair values, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2022 and December 31, 2021 are as follows:

| Fair Value Measurements
(dollars in thousands) | Carrying Value |  | Estimated Fair Value |  | Level 1 |  | Level 2 |  | Level 3
September 30, 2022 |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |
Cash and short-term investments | $ | 85,040 |  |  | $ | 85,040 |  |  | $ | 85,040 |  |  | $ | — |  |  | $ | — |
Investment securities available for sale | 439,716 |  |  | 439,716 |  |  | — |  |  | 439,716 |  |  | — |
Investment securities held to maturity | 468,306 |  |  | 411,018 |  |  | — |  |  | 411,018 |  |  | — |
Other investments, at cost | 12,850 |  |  | 12,850 |  |  | — |  |  | 11,235 |  |  | 1,615 |
Loans held for sale | 23,945 |  |  | 23,945 |  |  | — |  |  | 23,945 |  |  | — |
Loans, net | 1,571,431 |  |  | 1,420,257 |  |  | — |  |  | — |  |  | 1,420,257 |
Liabilities |  |  |  |  |  |  |  |  |
Deposits | 2,409,662 |  |  | 2,409,080 |  |  | — |  |  | 2,409,080 |  |  | — |
Federal Home Loan Bank advances | 95,000 |  |  | 95,011 |  |  | — |  |  | 95,011 |  |  | — |
Other borrowings | 63,364 |  |  | 57,807 |  |  | — |  |  | 57,807 |  |  | — |

| Fair Value Measurements
(dollars in thousands) | Carrying Value |  | Estimated Fair Value |  | Level 1 |  | Level 2 |  | Level 3
December 31, 2021 |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |
Cash and short-term investments | $ | 197,232 |  |  | $ | 197,232 |  |  | $ | 197,232 |  |  | $ | — |  |  | $ | — |
Investment securities available for sale | 938,164 |  |  | 938,164 |  |  | 87,551 |  |  | 850,613 |  |  | — |
Other investments, at cost | 14,012 |  |  | 14,012 |  |  | 5,574 |  |  | 4,183 |  |  | 4,255 |
Loans held for sale | 38,150 |  |  | 38,150 |  |  | — |  |  | 38,150 |  |  | — |
Loans, net | 1,325,067 |  |  | 1,328,853 |  |  | — |  |  | — |  |  | 1,328,853 |
Liabilities |  |  |  |  |  |  |  |  |
Deposits | 2,374,608 |  |  | 2,375,385 |  |  | — |  |  | 2,375,385 |  |  | — |
Federal Home Loan Bank advances | 51,656 |  |  | 51,162 |  |  | — |  |  | 51,162 |  |  | — |
Other borrowings | 36,792 |  |  | 36,796 |  |  | — |  |  | 36,796 |  |  | — |

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
30

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring and nonrecurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy:
Securities – Where quoted prices are available in an active market, securities are classified within level 1 of the valuation hierarchy. Level 1 inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Examples of such instruments, which would generally be classified within level 2 of the valuation hierarchy, include certain collateralized mortgage and debt obligations and certain high-yield debt securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within level 3 of the valuation hierarchy. When measuring fair value, the valuation techniques available under the market approach, income approach and/or cost approach are used. The Company’s evaluations are based on market data and the Company employs combinations of these approaches for its valuation methods depending on the asset class.
Impaired Loans – Impaired loans are those loans which the Company has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Other Real Estate Owned – Other real estate owned assets are adjusted to fair value less estimated selling costs upon transfer of the loans to other real estate owned. Typically, an external, third-party appraisal is performed on the collateral upon transfer into the other real estate owned account to determine the asset’s fair value. Subsequent adjustments to the collateral’s value may be based upon either updated third-party appraisals or management’s knowledge of the collateral and the current real estate market conditions. Appraised amounts used in determining the asset’s fair value, whether internally or externally prepared, are discounted 10% to account for selling and marketing costs. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a level 3 classification of the inputs for determining fair value. Because of the high degree of judgment required in estimating the fair value of other real estate owned assets and because of the relationship between fair value and general economic conditions, we consider the fair value of other real estate owned assets to be highly sensitive to changes in market conditions.
Assets Measured at Fair Value on a Recurring and Nonrecurring Basis – The following table presents the recorded amount of the Company’s assets measured at fair value on a recurring and nonrecurring basis as of September 30, 2022 and December 31, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall. The table below includes only impaired loans with a specific reserve and only other real estate properties with a valuation allowance at September 30, 2022 and December 31, 2021. Those impaired loans and other real estate properties are shown net of the related specific reserves and valuation allowances.

|  |  | Fair Value Measurements at Reporting Date Using
(dollars in thousands) | Total Fair Value |  | (Level 1) |  | (Level 2) |  | (Level 3)
September 30, 2022 |  |  |  |  |  |  |
Nonrecurring |  |  |  |  |  |  |
Collateral dependent impaired loans | $ | 949 |  |  | $ | — |  |  | $ | — |  |  | $ | 949 |
Other real estate owned | 246 |  |  | — |  |  | — |  |  | 246 |
Total nonrecurring assets | $ | 1,195 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,195 |

|  |  | Fair Value Measurements at Reporting Date Using
(dollars in thousands) | Total Fair Value |  | (Level 1) |  | (Level 2) |  | (Level 3)
December 31, 2021 |  |  |  |  |  |  |
Nonrecurring |  |  |  |  |  |  |
Collateral dependent impaired loans | $ | 1,837 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,837 |
Other real estate owned | 281 |  |  | — |  |  | — |  |  | 281 |
Total nonrecurring assets | $ | 2,118 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,118 |

31

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
The following table presents quantitative information about the significant unobservable inputs used in the fair value measurements for assets in level 3 of the fair value hierarchy measured on a nonrecurring basis at September 30, 2022 and December 31, 2021. This table is comprised primarily of collateral dependent impaired loans and other real estate owned:

(dollars in thousands) | September 30, 2022 |  | Valuation Techniques |  | Unobservable Inputs |  | Range Weighted Avg
Collateral dependent impaired loans | $ | 949 |  |  | Appraised Value |  | Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell |  | 25 | % |  | 100 | %
Other real estate owned | 246 |  |  | Appraised Value/Comparable Sales |  | Discounts to reflect current market conditions and estimated costs to sell |  | — | % |  | 20 | %

(dollars in thousands) | December 31, 2021 |  | Valuation Techniques |  | Unobservable Inputs |  | Range Weighted Avg
Collateral dependent impaired loans | $ | 1,837 |  |  | Appraised Value |  | Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell |  | 25 | % |  | 100 | %
Other real estate owned | 281 |  |  | Appraised Value/Comparable Sales |  | Discounts to reflect current market conditions and estimated costs to sell |  | — | % |  | 20 | %

32

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The following table presents quantitative information about recurring level 3 fair value measurements as of September 30, 2022 and December 31, 2021.

| As of September 30, 2022
(dollars in thousands) | Fair Value |  | Valuation Techniques |  | Unobservable Inputs |  | Range (Weighted Avg)
Other investments | $ | 1,615 |  |  | Discounted Cash Flow |  | Discount Rate or Yield |  | N/A*

| As of December 31, 2021
(dollars in thousands) | Fair Value |  | Valuation Techniques |  | Unobservable Inputs |  | Range (Weighted Avg)
Other investments | $ | 4,255 |  |  | 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.
The table below presents a reconciliation and statement of income classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (level 3) for the three and nine months ended September 30, 2022.

| Available for Sale Securities
| Three Months Ended September 30, 2022 |  | Nine Months Ended September 30, 2022
(dollars in thousands) |  |  |
Balance, Beginning | $ | 2,769 |  |  | $ | 4,255 |
Redemption of security | (1,151) |  |  | (2,507) |
Unrealized/realized losses included in earnings | (3) |  |  | (133) |
Balance, Ending | $ | 1,615 |  |  | $ | 1,615 |

The Company’s policy is to recognize transfers in and transfers out of levels 1, 2 and 3 as of the end of a reporting period. There were no transfers of securities between levels for the three and nine months ended September 30, 2022 and September 30, 2021.
33

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(9) Segment Information
The Company’s operating segments include banking, mortgage banking and small business specialty lending division. The reportable segments are determined by the products and services offered, and internal reporting. The Bank segment derives its revenues from the delivery of full-service financial services, including retail and commercial banking services and deposit accounts. The Mortgage Banking segment derives its revenues from the origination and sales of residential mortgage loans held for sale. The Small Business Specialty Lending Division segment derives its revenue from the origination, sales and servicing of Small Business Administration loans and other government guaranteed loans. Segment performance is evaluated using net interest income and noninterest income. Income taxes are allocated based on income before income taxes, and indirect expenses (includes management fees) are allocated based on various internal factors for each segment. Transactions among segments are made at fair value. Information reported internally for performance assessment follows. The following tables present information reported internally for performance assessment for the three and nine months ended September 30, 2022 and 2021:

(dollars in thousands) |  | Bank |  | Mortgage Banking |  | Small Business Specialty Lending Division |  | Totals
Nine Months Ended September 30, 2022 |  |  |  |  |  |  |  |
Net Interest Income |  | $ | 58,156 |  |  | $ | 145 |  |  | $ | 924 |  |  | $ | 59,225 |
Provision for Loan Losses |  | 2,470 |  |  | — |  |  | — |  |  | 2,470 |
Noninterest Income |  | 13,770 |  |  | 7,993 |  |  | 5,621 |  |  | 27,384 |
Noninterest Expenses |  | 54,742 |  |  | 7,799 |  |  | 5,107 |  |  | 67,648 |
Income Taxes |  | 2,174 |  |  | 104 |  |  | 222 |  |  | 2,500 |
Segment Profit |  | $ | 12,540 |  |  | $ | 235 |  |  | $ | 1,216 |  |  | $ | 13,991 |
Segments Assets at September 30, 2022 |  | $ | 2,738,082 |  |  | $ | 16,905 |  |  | $ | 50,925 |  |  | $ | 2,805,912 |
Full time employees at September 30, 2022 |  | 396 |  | 61 |  | 29 |  | 486

(dollars in thousands) |  | Bank |  | Mortgage Banking |  | Small Business Specialty Lending Division |  | Totals
Nine Months Ended September 30, 2021 |  |  |  |  |  |  |  |
Net Interest Income |  | $ | 45,977 |  |  | $ | 429 |  |  | $ | 761 |  |  | $ | 47,167 |
Provision for Loan Losses |  | 650 |  |  | — |  |  | — |  |  | 650 |
Noninterest Income |  | 10,409 |  |  | 10,087 |  |  | 4,979 |  |  | 25,475 |
Noninterest Expenses |  | 41,922 |  |  | 8,445 |  |  | 3,746 |  |  | 54,113 |
Income Taxes |  | 2,836 |  |  | 124 |  |  | 419 |  |  | 3,379 |
Segment Profit |  | $ | 10,978 |  |  | $ | 1,947 |  |  | $ | 1,575 |  |  | $ | 14,500 |
Segments Assets at December 31, 2021 |  | $ | 2,620,501 |  |  | $ | 25,149 |  |  | $ | 46,065 |  |  | $ | 2,691,715 |
Full time employees at September 30, 2021 |  | 417 |  | 53 |  | 24 |  | 494

34

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

(dollars in thousands) |  | Bank |  | Mortgage Banking |  | Small Business Specialty Lending Division |  | Totals
Three months ended September 30, 2022 |  |  |  |  |  |  |  |
Net Interest Income |  | $ | 20,508 |  |  | $ | 17 |  |  | $ | 340 |  |  | $ | 20,865 |
Provision for Loan Losses |  | 1,320 |  |  | — |  |  | — |  |  | 1,320 |
Noninterest Income |  | 4,288 |  |  | 2,345 |  |  | 1,546 |  |  | 8,179 |
Noninterest Expenses |  | 17,537 |  |  | 2,289 |  |  | 1,541 |  |  | 21,367 |
Income Taxes |  | 1,047 |  |  | 10 |  |  | 48 |  |  | 1,105 |
Segment Profit |  | $ | 4,892 |  |  | $ | 63 |  |  | $ | 297 |  |  | $ | 5,252 |

(dollars in thousands) |  | Bank |  | Mortgage Banking |  | Small Business Specialty Lending Division |  | Totals
Three months ended September 30, 2021 |  |  |  |  |  |  |  |
Net Interest Income |  | $ | 17,181 |  |  | $ | 138 |  |  | $ | 549 |  |  | $ | 17,868 |
Provision for Loan Losses |  | 150 |  |  | — |  |  | — |  |  | 150 |
Noninterest Income |  | 4,340 |  |  | 3,104 |  |  | 1,994 |  |  | 9,438 |
Noninterest Expenses |  | 16,941 |  |  | 2,765 |  |  | 1,505 |  |  | 21,211 |
Income Taxes |  | 434 |  |  | (290) |  |  | 218 |  |  | 362 |
Segment Profit |  | $ | 3,996 |  |  | $ | 767 |  |  | $ | 820 |  |  | $ | 5,583 |

35

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(10) Regulatory Capital Matters
The amount of dividends payable to the parent company from the subsidiary bank is limited by various banking regulatory agencies. Upon approval by regulatory authorities, the Bank may pay cash dividends to the parent company in excess of regulatory limitations.
As of September 30, 2022, the Company and the Bank were categorized as well-capitalized under the regulatory framework for prompt corrective action in effect at such time. To be categorized as well-capitalized, the Company and the Bank must have exceeded the well-capitalized guideline ratios in effect at the time, as set forth in the table below, and have met certain other requirements. Management believes that the Company and the Bank exceeded all well-capitalized requirements at September 30, 2022, and there have been no conditions or events since quarter-end that would change the status of well-capitalized.
The Board of Governors of the Federal Reserve raised the threshold for determining applicable of the Small Bank Holding Company and Savings and Loan Company Policy Statement in August 2018 from $1 billion to $3 billion in consolidated total assets to provide regulatory burden relief, therefore, the Company is no longer subject to the minimum capital requirements on a consolidated basis.
The following table summarizes regulatory capital information as of September 30, 2022 and December 31, 2021 on a consolidated basis and for the subsidiary, as defined. Regulatory capital ratios for September 30, 2022 and December 31,
36

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
2021 were calculated in accordance with the Basel III rules.

(dollars in thousands) | Actual |  | For Capital Adequacy Purposes |  | To Be Well Capitalized Under Prompt Corrective Action Provisions
| Amount |  | Ratio |  | Amount |  | Ratio |  | Amount |  | Ratio
As of September 30, 2022 |  |  |  |  |  |  |  |  |  |  |
Total Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | $ | 311,849 |  |  | 15.78 | % |  | $ | 158,098 |  |  | 8.00 | % |  | N/A |  | N/A
Colony Bank | 263,104 |  |  | 13.34 |  |  | 157,784 |  |  | 8.00 |  |  | $ | 197,229 |  |  | 10.00 | %
Tier 1 Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 257,531 |  |  | 13.04 |  |  | 118,496 |  |  | 6.00 |  |  | N/A |  | N/A
Colony Bank | 247,922 |  |  | 12.57 |  |  | 118,340 |  |  | 6.00 |  |  | 157,786 |  |  | 8.00 |
Common Equity Tier 1 Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 233,302 |  |  | 11.81 |  |  | 88,896 |  |  | 4.50 |  |  | N/A |  | N/A
Colony Bank | 247,922 |  |  | 12.57 |  |  | 88,755 |  |  | 4.50 |  |  | 128,202 |  |  | 6.50 |
Tier 1 Capital to Average Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 257,531 |  |  | 9.28 |  |  | 111,005 |  |  | 4.00 |  |  | N/A |  | N/A
Colony Bank | 247,922 |  |  | 8.96 |  |  | 110,679 |  |  | 4.00 |  |  | 138,349 |  |  | 5.00 |

(dollars in thousands) | Actual |  | For Capital Adequacy Purposes |  | To Be Well Capitalized Under Prompt Corrective Action Provisions
| Amount |  | Ratio |  | Amount |  | Ratio |  | Amount |  | Ratio
As of December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Total Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | $ | 207,366 |  |  | 12.05 | % |  | $ | 137,670 |  |  | 8.00 | % |  | N/A |  | N/A
Colony Bank | 203,265 |  |  | 12.18 |  |  | 133,507 |  |  | 8.00 |  |  | $ | 166,884 |  |  | 10.00 | %
Tier 1 Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 194,456 |  |  | 11.28 |  |  | 103,434 |  |  | 6.00 |  |  | N/A |  | N/A
Colony Bank | 190,355 |  |  | 11.41 |  |  | 100,099 |  |  | 6.00 |  |  | 133,465 |  |  | 8.00 |
Common Equity Tier 1 Capital to Risk-Weighted Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 170,956 |  |  | 9.87 |  |  | 77,943 |  |  | 4.50 |  |  | N/A |  | N/A
Colony Bank | 190,355 |  |  | 11.41 |  |  | 75,074 |  |  | 4.50 |  |  | 108,441 |  |  | 6.50 |
Tier 1 Capital to Average Assets |  |  |  |  |  |  |  |  |  |  |
Consolidated | 194,456 |  |  | 7.25 |  |  | 107,286 |  |  | 4.00 |  |  | N/A |  | N/A
Colony Bank | 190,355 |  |  | 7.53 |  |  | 101,118 |  |  | 4.00 |  |  | 126,398 |  |  | 5.00 |

37

COLONY BANKCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(11) Subsequent Events
Dividend
On October 20, 2022, the Board of Directors declared a quarterly cash dividend of $0.1075 per share, to be paid on its common stock on November 18, 2022, to shareholders of record as of the close of business on November 4, 2022.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The purpose of this discussion and analysis is to focus on significant changes in the financial condition of Colony Bankcorp, Inc. and our wholly owned subsidiary, Colony Bank, from December 31, 2021 through September 30, 2022 and on our results of operations for the three and nine months ended September 30, 2022 and 2021. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto in the Company's 2021 Form 10-K, and information presented elsewhere in this Quarterly Report on Form 10-Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.
Forward-looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control, particularly with regard to developments related to the COVID-19 (and the variants thereof) pandemic. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors discussed elsewhere in this Quarterly Report on Form 10-Q and the following:
•business and economic conditions, particularly those affecting the financial services industry and our primary market areas;
•the risk that a future economic downturn and contraction, including a recession, could have a material adverse effect on our capital, financial condition, credit quality, results of operations and future growth, including the risk that the strength of the current economic environment could be weakened by the impact of rising interest rates, supply chain challenges and inflation;
•factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our borrowers and the success of various projects that we finance;
•developments in our mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance;
•concentration of our loan portfolio in real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate;
•credit and lending risks associated with our construction and development, commercial real estate, commercial and industrial and residential real estate loan portfolios;
•our ability to attract sufficient loans that meet prudent credit standards, including in our construction and development, commercial and industrial and owner-occupied commercial real estate loan categories;
•our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas;
•changes in interest rate environment, including changes to the federal funds rate, and competition in our markets may result in increased funding costs or reduced earning assets yields, thus reducing our margins and net interest income;
39

•significant turbulence or a disruption in the capital or financial markets and the effect of a fall in stock market prices on our investment securities;
•our ability to successfully manage our credit risk and the sufficiency of our allowance for loan losses;
•the adequacy of our reserves (including allowance for loan losses) and the appropriateness of our methodology for calculating such reserves;
•our ability to successfully execute our business strategy to achieve profitable growth;
•the concentration of our business within our geographic areas of operation in Georgia and neighboring markets;
•our focus on small and mid-sized businesses;
•our ability to manage our growth;
•our ability to increase our operating efficiency;
•liquidity issues, including fluctuations in the fair value and liquidity of the securities we hold for sale and our ability to raise additional capital, if necessary;
•failure to maintain adequate liquidity and regulatory capital and comply with evolving federal and state banking regulations;
•risks that our cost of funding could increase, in the event we are unable to continue to attract stable, low-cost deposits and reduce our cost of deposits;
•inability of our risk management framework to effectively mitigate credit risk, interest rate risk, liquidity risk, price risk, compliance risk, operational risk, strategic risk and reputational risk;
•inflation, interest rate, securities market and monetary fluctuations and the respective impact on our financial condition and results of operation;
•the makeup of our asset mix and investments;
•external economic, political and/or market factors, such as changes in monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve, inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition;
•the risks relating to past acquisition including, without limitation: unexpected transaction costs, including the costs of integrating operations; the risks that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues being lower than expected;
•uncertainty related to the transition away from the London Inter-bank Offered Rate (“LIBOR”);
•adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions related to the COVID-19 pandemic, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic, including, but not limited to, the Paycheck Protection Program ("PPP");
•the impact of the continuing COVID-19 pandemic on our business;
•continued or increasing competition from other financial institutions (including fintech companies), credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are;
•challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services;
•restraints on the ability of the Bank to pay dividends to us, which could limit our liquidity;
40

•increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;
•a failure in the internal controls we have implemented to address the risks inherent to the business of banking;
•inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance;
•changes in our management personnel or our inability to retain motivate and hire qualified management personnel;
•the dependence of our operating model on our ability to attract and retain experienced and talented bankers in each of our markets, which may be impacted as a result of labor shortages;
•our ability to identify and address cyber-security risks, fraud and systems errors;
•disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems;
•disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions;
•an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies;
•fraudulent and negligent acts by our clients, employees or vendors and our ability to identify and address such acts;
•risks related to potential acquisitions;
•the impact of any claims or legal actions to which we may be subject, including any effect on our reputation;
•compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with commercial mortgage origination, sale and servicing operations;
•changes in the scope and cost of Federal Deposit Insurance Corporation ("FDIC") insurance and other coverage;
•changes in our accounting standards;
•changes in tariffs and trade barriers;
•changes in federal tax law or policy;
•the effects of war or other conflicts (including the military conflict between Russia and Ukraine), acts of terrorism, natural disasters, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions; and
•other risks and factors identified in our 2021 Form 10-K, this Quarterly Report on Form 10-Q for the period ended September 30, 2022, and in any of the Company's other reports filed with the U.S. Securities and Exchange Commission and available on its website at www.sec.gov.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
41

Overview
The following discussion and analysis presents the more significant factors affecting the Company’s financial condition as of September 30, 2022 and December 31, 2021, and results of operations for each of the three and nine month periods ended September 30, 2022 and 2021. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements, notes thereto and other financial information appearing elsewhere in this report.
At September 30, 2022, the Company had total consolidated assets of $2.8 billion, total loans, net of $1.6 billion, total deposits of $2.4 billion, and stockholders’ equity of $226.1 million. The Company reported net income of $5.3 million, or $0.30 per diluted share, for the three months ended September 30, 2022, and $14.0 million, or $0.82 per diluted share, for the first nine months of 2022, compared to net income of $5.6 million, or $0.45 per diluted share, for the three months ended September 30, 2021, and $14.5 million, or $1.39 per diluted share, for the first nine months of 2021. The slight decrease in net income for the three and nine months ended September 30, 2022 compared to the same periods ended September 30, 2021 was primarily driven by the increase in provision for loan losses, salaries and recognized mark on two FHLB advances that were acquired in the SouthCrest acquisition that were called early, offset by the increase in volume of taxable and tax-exempt investment securities and loans, acquisition of SouthCrest Financial Group, Inc. ("SouthCrest"), and an increase in interchange fees and gain on sale of SBA loans.
Net interest income on a tax equivalent basis increased to $21.0 million for the third quarter of 2022, compared to $18.0 million for the same period in 2021, primarily due to an increase in investment securities and loan volume. The net interest margin decreased to 3.25% for the quarter ended September 30, 2022 from 3.48% for the same period in 2021. Net interest income on a tax equivalent basis increased to $59.5 million for the first nine months of 2022, compared to $47.4 million for the first nine months of 2021, primarily due to an increase in investment securities and loan volume. The net interest margin decreased to 3.19% for the nine months ended September 30, 2022 from 3.49% for the same period in 2021. The reason for the decrease in net interest margin for the three months ended September 30, 2022 compared to the same period in 2021 is primarily due to a decrease in yield on loans as well as an increase in deposit and borrowing rates. For the nine months ended September 30, 2022 compared to the same period in 2021, the decrease in net interest margin was due to a decrease in yield on loans and an increase in borrowing rates partially offset by a decrease in deposit rates.
Provision for loan losses for the three and nine months ended September 30, 2022 was $1.3 million and $2.5 million compared to $150,000 and $650,000 for the same periods in 2021, respectively. Net charge-offs for the third quarter of 2022 were $101,000 compared to$144,000 for the same period in 2021. Net charge-offs for the first nine months of 2022 were $198,000 compared to net recoveries of $100,000 for the same period in 2021. As of September 30, 2022, Colony’s allowance for loan losses was $15.2 million, or 0.96% of total loans, compared to $12.9 million, or 0.96% of total loans, at December 31, 2021. At September 30, 2022 and December 31, 2021, nonperforming assets were $5.5 million and $5.8 million, or 0.20% and 0.21% of total assets, respectively.
Noninterest income of $8.2 million for the third quarter of 2022 was down $1.3 million, or 13.34%, from the third quarter of 2021. The decrease was primarily due to decreases in both mortgage fee income and gains on sales of SBA loans, offset by increases in service charges on deposits and interchange fees. Noninterest income of $27.4 million for the nine months ended of 2022 was up $1.9 million, or 7.49%, from the third quarter of 2021. The increase was primarily due to increases in service charges, interchange fees and gain on sales of SBA loans and other noninterest income, offset by a decrease in mortgage fee income. See "Table 3 - Noninterest income" for more detail and discussion on the primary drivers to the increase in noninterest income.
For the three months ended September 30, 2022, noninterest expense was $21.4 million, an increase of $156,000, or 0.74%, from the same period in 2021. For the nine months ended September 30, 2022, noninterest expense was $67.6 million, an increase of $13.5 million, or 25.0%, from the same period in 2021. Increases in noninterest expense are in part due to changes to the Company's organizational structure, along with acquisition expenses related to the SouthCrest merger. Those expenses that were the primary contributors to the increase year over year include salaries and employee benefits. See "Table 4 - Noninterest expense" for more detail and discussion on the primary drivers to the increase in noninterest expense.
On February 10, 2022, the Company completed a public offering of approximately 3.85 million shares of its common stock with aggregate proceeds totaling approximately $63.5 million. The offering generated net proceeds of approximately $59.5 million, which were used to fund the repayment of the Company's existing term note and the line of credit and for other general corporate purposes.
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On May 20, 2022, the Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers in which the Company issued and sold $40.0 million in aggregate principal amount of its 5.25% Fixed-to-Floating Rate Subordinated Notes due 2032.
Economic Conditions
The economic conditions and growth prospects for our markets, even against the headwinds of inflation and recessionary concerns, continue to reflect a solid and positive overall outlook with economic activity close to pre-pandemic levels. Increasing interest rates and rising building costs have caused some slowing of the highly robust single family housing market, however, there continues to be a shortage of housing in several Georgia markets. Worker shortages especially in the restaurant, hospitality and retail industries combined with supply chain disruptions impacting numerous industries and inflationary conditions has had some impact on the level of economic growth. Ongoing higher inflation levels and higher interest rates could have a negative impact on both our consumer and commercial borrowers.
Critical Accounting Policies
Our accounting and reporting policies are in accordance with GAAP and conform to general practices within the banking industry. We have identified certain of its accounting policies as “critical accounting policies,” consisting of those related to business combinations, allowance for loan losses and income taxes. In determining which accounting policies are critical in nature, we have identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee on a periodic basis, including the development, selection, implementation and disclosure of the critical accounting policies. The application of these policies has a significant impact on the Company’s unaudited interim consolidated financial statements. Our financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in Note 1 of our consolidated financial statements as of December 31, 2021, which are included in the Company’s 2021 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. There have been no significant changes to the Significant Accounting Policies as described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2021, which are included in the Company’s 2021 Form 10-K.
Results of Operations
We reported net income and diluted earnings per share of $5.3 million and $14.0 million and $0.30 and $0.82, respectively, for the first three and nine months of 2022. This compared to net income and diluted earnings per share of $5.6 million and $14.5 million and $0.45 and $1.39, respectively, for the same periods in 2021.
Net Interest Income
Net interest income, which is the difference between interest earned on assets and the interest paid on deposits and borrowed funds, is the single largest component of total revenue. Management strives to optimize this income while balancing interest rate, credit and liquidity risks.
The banking industry uses two key ratios to measure relative profitability of net interest income. The net interest spread measures the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities. The interest rate spread eliminates the effect of noninterest-bearing deposits and gives a direct perspective on the effect of market interest rate movements. The net interest margin is an indication of the profitability of a company's balance sheet and is defined as net interest income as a percent of average total interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and stockholders' equity.
Fully taxable equivalent net interest income for the third quarter of 2022 and 2021 was $21.0 million and $18.0 million, respectively. This increase is primarily due to an increase in volume of securities and loans. The net interest margin for the third quarter of 2022 and 2021 was 3.25% and 3.48% respectively. This decrease in net interest margin for the third quarter of 2022 compared to the same period in 2021 is primarily a result of the increase in higher borrowing yields as well as higher yields paid on deposits.
Fully taxable equivalent net interest income for the nine months ended September 30, 2022 and 2021 was $59.5 million and $47.4 million, respectively. This increase is primarily due to an increase in volume of securities and loans. The net interest margin for the nine months ended September 30, 2022 and 2021 was 3.19% and 3.49%, respectively. This decrease in net
43

interest margin for the nine months ended September 30, 2022 compared to the same period in 2021 is a result of the decrease in loan yields as well as higher deposit and borrowing yields.
The following tables indicate the relationship between interest income and interest expense and the average amounts of assets and liabilities for the periods indicated. As shown in the tables, both average assets and average liabilities for the three and nine months ended September 30, 2022 increased compared to the same period in 2021. The increase in average assets was primarily driven by the increase from the acquisition of SouthCrest in third quarter 2021 and purchasing of investment securities of $242.1 million and $431.7 million as well as an increase in loans of $310.8 million and $315.1 million for the three and nine months ended September 30, 2022 compared to the same periods in 2021. The loan increase is partially due to the SouthCrest acquisition and primarily due to loan growth. The increase in average liabilities for the three and nine months ended September 30, 2022 was funded primarily through an increase in deposits from the SouthCrest merger during the last half of 2021.The net interest spread, as well as the net interest margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment.
The yield on total interest-bearing liabilities increased from 0.30% in the third quarter of 2021 to 0.57% in the third quarter of 2022. The yield on total interest-bearing liabilities increased to 0.41% from 0.33% for the nine months ended September 30, 2022 and 2021, respectively, due to Federal Home Loan Bank advances interest expense including $751,000 for the recognized mark on two advances that were acquired in the SouthCrest acquisition that were called early. In March of 2020, the Federal Reserve's Federal Open Market Committee ("FOMC") lowered interest rates twice for a total reduction of 150 basis points in response to the COVID-19 pandemic, which was the most aggressive action taken by the FOMC since the financial crisis in 2008. In March 2022, the FOMC raised the rate 25 basis points. In second quarter 2022, the FOMC raised the rate twice, the first increase being 50 basis points and the second increase being 75 basis points. The FOMC again raised the rate twice during the third quarter of 2022, each time by 75 basis points.
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Table 1 - Average Balance Sheet and Net Interest Analysis
|  | Three Months Ended September 30,
|  | 2022 |  | 2021
(dollars in thousands) |  | Average Balances |  | Income/ Expense |  | Yields/ Rates |  | Average Balances |  | Income/ Expense |  | Yields/ Rates
Assets |  |  |  |  |  |  |  |  |  |  |  |
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |
Loans, net of unearned income(1) |  | $ | 1,553,882 |  |  | $ | 18,183 |  |  | 4.64 | % |  | $ | 1,243,066 |  |  | $ | 16,085 |  |  | 5.25 | %
Investment securities, taxable |  | 809,692 |  |  | 4,711 |  |  | 2.31 |  |  | 614,404 |  |  | 2,668 |  |  | 1.76 |
Investment securities, tax-exempt(2) |  | 124,038 |  |  | 638 |  |  | 2.04 |  |  | 77,255 |  |  | 362 |  |  | 1.90 |
Deposits in banks and short term investments |  | 70,455 |  |  | 278 |  |  | 1.56 |  |  | 166,064 |  |  | 57 |  |  | 0.14 |
Total interest-earning assets |  | $ | 2,558,067 |  |  | $ | 23,810 |  |  | 3.69 | % |  | $ | 2,100,789 |  |  | $ | 19,172 |  |  | 3.70 | %
Noninterest-earning assets |  | 219,323 |  |  |  |  |  |  | 172,115 |  |  |  |  |
Total assets |  | $ | 2,777,390 |  |  |  |  |  |  | $ | 2,272,904 |  |  |  |  |
Liabilities and stockholders' equity |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Interest-earning demand and savings |  | $ | 1,424,171 |  |  | $ | 772 |  |  | 0.21 | % |  | $ | 1,169,693 |  |  | $ | 319 |  |  | 0.11 | %
Other time |  | 370,282 |  |  | 677 |  |  | 0.72 |  |  | 320,484 |  |  | 380 |  |  | 0.48 |
Total interest-bearing deposits |  | 1,794,453 |  |  | 1,449 |  |  | 0.32 |  |  | 1,490,177 |  |  | 699 |  |  | 0.19 |
Federal funds purchased |  | 541 |  |  | 3 |  |  | 2.20 |  |  | — |  |  | — |  |  | — |
Federal Home Loan Bank advances |  | 96,848 |  |  | 555 |  |  | 2.27 |  |  | 42,391 |  |  | 171 |  |  | 1.64 |
Other borrowings |  | 65,741 |  |  | 822 |  |  | 4.96 |  |  | 37,289 |  |  | 289 |  |  | 3.14 |
Total other interest-bearing liabilities |  | 163,130 |  |  | 1,380 |  |  | 3.36 |  |  | 79,680 |  |  | 460 |  |  | 2.34 |
Total interest-bearing liabilities |  | $ | 1,957,583 |  |  | $ | 2,829 |  |  | 0.57 | % |  | $ | 1,569,857 |  |  | $ | 1,159 |  |  | 0.30 | %
Noninterest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  | 572,257 |  |  |  |  |  |  | 485,241 |  |  |  |  |
Other liabilities |  | 11,993 |  |  |  |  |  |  | 20,697 |  |  |  |  |
Stockholders' equity |  | 235,557 |  |  |  |  |  |  | 197,109 |  |  |  |  |
Total noninterest-bearing liabilities and stockholders' equity |  | 819,807 |  |  |  |  |  |  | 703,047 |  |  |  |  |
Total liabilities and stockholders' equity |  | $ | 2,777,390 |  |  |  |  |  |  | $ | 2,272,904 |  |  |  |  |
Interest rate spread |  |  |  |  |  | 3.12 | % |  |  |  |  |  | 3.40 | %
Net interest income |  |  |  | $ | 20,981 |  |  |  |  |  |  | $ | 18,013 |  |  |
Net interest margin |  |  |  |  |  | 3.25 | % |  |  |  |  |  | 3.48 | %

1.The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recognized and recorded on the cash basis. Taxable-equivalent adjustments totaling $33,000 and $73,000 for the quarters ended September 30, 2022 and 2021, respectively, are included in income and fees on loans. Accretion income of $122,000 and $104,000 for the quarters ended September 30, 2022 and 2021 are also included in income and fees on loans.
2.Taxable-equivalent adjustments totaling $83,000 and $72,000 for the quarters ended September 30, 2022 and 2021, respectively, are included in tax-exempt interest on investment securities.
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Table 1 - Average Balance Sheet and Net Interest Analysis
|  | Nine Months Ended September 30, 2022
|  | 2022 |  | 2021
(dollars in thousands) |  | Average Balances |  | Income/ Expense |  | Yields/ Rates |  | Average Balances |  | Income/ Expense |  | Yields/ Rates
Assets |  |  |  |  |  |  |  |  |  |  |  |
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |
Loans, net of unearned income(1) |  | $ | 1,448,661 |  |  | $ | 50,526 |  |  | 4.66 | % |  | $ | 1,133,533 |  |  | $ | 43,890 |  |  | 5.18 | %
Investment securities, taxable |  | 831,438 |  |  | 12,795 |  |  | 2.06 |  |  | 468,561 |  |  | 6,011 |  |  | 1.72 |
Investment securities, tax-exempt(2) |  | 116,615 |  |  | 1,661 |  |  | 1.90 |  |  | 47,839 |  |  | 677 |  |  | 1.89 |
Deposits in banks and short term investments |  | 101,432 |  |  | 437 |  |  | 0.58 |  |  | 165,280 |  |  | 155 |  |  | 0.13 |
Total interest-earning assets |  | 2,498,146 |  |  | 65,419 |  |  | 3.50 |  |  | 1,815,213 |  |  | 50,733 |  |  | 3.74 |
Noninterest-earning assets |  | 213,556 |  |  |  |  |  |  | 121,417 |  |  |  |  |
Total assets |  | $ | 2,711,702 |  |  |  |  |  |  | $ | 1,936,630 |  |  |  |  |
Liabilities and stockholders' equity |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Interest-earning demand and savings |  | $ | 1,432,892 |  |  | $ | 1,340 |  |  | 0.13 | % |  | $ | 978,181 |  |  | $ | 630 |  |  | 0.09 | %
Other time |  | 347,383 |  |  | 1,334 |  |  | 0.51 |  |  | 278,508 |  |  | 1,291 |  |  | 0.62 |
Total interest-bearing deposits |  | 1,780,275 |  |  | 2,674 |  |  | 0.14 |  |  | 1,256,689 |  |  | 1,921 |  |  | 0.20 |
Federal funds purchased |  | 2,820 |  |  | 22 |  |  | 1.04 |  |  | — |  |  | — |  |  | — |
Federal Home Loan Bank advances (3) |  | 65,191 |  |  | 1,746 |  |  | 3.58 |  |  | 29,197 |  |  | 401 |  |  | 1.84 |
Paycheck Protection Program Liquidity Facility |  | — |  |  | — |  |  | — |  |  | 34,155 |  |  | 93 |  |  | 0.36 |
Other borrowings |  | 47,675 |  |  | 1,441 |  |  | 4.04 |  |  | 37,536 |  |  | 896 |  |  | 3.19 |
Total other interest-bearing liabilities |  | 115,686 |  |  | 3,209 |  |  | 3.71 |  |  | 100,888 |  |  | 1,390 |  |  | 1.84 |
Total interest-bearing liabilities |  | 1,895,961 |  |  | 5,883 |  |  | 0.41 |  |  | 1,357,577 |  |  | 3,311 |  |  | 0.33 |
Noninterest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  | 564,425 |  |  |  |  |  |  | 411,307 |  |  |  |  |
Other liabilities |  | 11,357 |  |  |  |  |  |  | 5,096 |  |  |  |  |
Stockholders' equity |  | 239,959 |  |  |  |  |  |  | 162,650 |  |  |  |  |
Total noninterest-bearing liabilities and stockholders' equity |  | 815,741 |  |  |  |  |  |  | 579,053 |  |  |  |  |
Total liabilities and stockholders' equity |  | $ | 2,711,702 |  |  |  |  |  |  | $ | 1,936,630 |  |  |  |  |
Interest rate spread |  |  |  |  |  | 3.09 | % |  |  |  |  |  | 3.41 | %
Net interest income |  |  |  | $ | 59,536 |  |  |  |  |  |  | $ | 47,422 |  |  |
Net interest margin |  |  |  |  |  | 3.19 | % |  |  |  |  |  | 3.49 | %

1.The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recognized and recorded on the cash basis. Taxable-equivalent adjustments totaling $95,000 and $206,000 for the nine months ended September 30, 2022 and 2021, respectively, are included in income and fees on loans. Accretion income of $550,000 and $375,000 for the nine months ended September 30, 2022 and 2021 are also included in income and fees on loans.
2.Taxable-equivalent adjustments totaling $216,000 and $135,000 for the nine months ended September 30, 2022 and 2021, respectively, are included in tax-exempt interest on investment securities.
3. Federal Home Loan Bank advances interest expense includes $751,000 for the nine months ended September 30, 2022 and is the recognized mark on two advances that were acquired in the SouthCrest acquisition that were called early.
46

The following table presents the effect of net interest income for changes in the average outstanding volume amounts of interest-earning assets and interest-bearing liabilities and the rates earned and paid on these assets and liabilities for the nine month period ended September 30, 2022 compared to the nine month period ended September 30, 2021.

Table 2 - Change in Interest Revenue and Expense on a Taxable Equivalent Basis
| Nine Months Ended September 30, 2022
| Compared to Nine Months Ended September 30, 2021 Increase (Decrease) Due to Changes in
(dollars in thousands) | Volume |  | Rate |  | Total
Interest-earning assets: |  |  |  |  |
Loans, net of unearned fees | $ | 16,324 |  |  | $ | (9,688) |  |  | $ | 6,636 |
Investment securities, taxable | 6,241 |  |  | 543 |  |  | 6,784 |
Investment securities, tax-exempt | 1,300 |  |  | (316) |  |  | 984 |
Deposits in banks and short term investments | (83) |  |  | 365 |  |  | 282 |
Total interest-earning assets (FTE) | 23,782 |  | (9,096) |  | 14,686 |
Interest-bearing liabilities: |  |  |  |  |
Interest-Bearing Demand and Savings Deposits | 409 |  |  | 301 |  |  | 710 |
Time Deposits | 427 |  |  | (384) |  |  | 43 |
Federal funds purchased | — |  |  | 22 |  |  | 22 |
Federal Home Loan Bank Advances | 662 |  |  | 683 |  |  | 1,345 |
Paycheck Protection Program Liquidity Facility | (123) |  |  | 30 |  |  | (93) |
Other Borrowed Money | 323 |  |  | 222 |  |  | 545 |
Total interest-bearing liabilities | 1,698 |  |  | 874 |  |  | 2,572 |
Increase in net interest income (FTE) | $ | 22,084 |  |  | $ | (9,970) |  |  | $ | 12,114 |

Provision for Loan Losses
The provision for loan losses is based on management's evaluation of probable, inherent losses in the loan portfolio and unfunded commitments and the corresponding analysis of the allowance for loan losses at quarter-end. Provision for loan losses for the three and nine months ended September 30, 2022 was $1.3 million and $2.5 million compared to $150,000 and $650,000 for the same period in 2021, respectively. The amount of provision expense recorded in each period was the amount required such that the total allowance for loan losses reflected the appropriate balance, in the estimation of management, sufficient to cover probable, inherent loan losses in the loan portfolio. The increase in provision for loan losses in the three and nine months ended September 30, 2022 compared to the same periods in 2021 is largely due to the loan growth the Bank has experienced during 2022. See the section captioned “Loans and Allowance for Loan Losses” elsewhere in this discussion for further analysis of the provision for loan losses.
47

Noninterest Income
The following table represents the major components of noninterest income for the periods indicated.

Table 3 - Noninterest Income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended September 30, |  | Change |  | Nine Months Ended September 30, |  | Change |
(dollars in thousands) |  | 2022 |  | 2021 |  | Amount |  | Percent |  | 2022 |  | 2021 |  | Amount |  | Percent |  |  |  |  |  |  |
Service charges on deposits |  | $ | 2,104 |  |  | $ | 1,792 |  |  | $ | 312 |  |  | 17.4 | % |  | $ | 5,823 |  |  | $ | 4,278 |  |  | $ | 1,545 |  |  | 36.1 | % |  |  |  |  |  |  |
Mortgage fee income |  | 1,708 |  |  | 3,107 |  |  | (1,399) |  |  | (45.0) |  |  | 7,356 |  |  | 10,107 |  |  | (2,751) |  |  | (27.2) |  |  |  |  |  |  |  |
Gain on sales of SBA loans |  | 1,215 |  |  | 1,813 |  |  | (598) |  |  | (33.0) |  |  | 4,805 |  |  | 4,548 |  |  | 257 |  |  | 5.7 |  |  |  |  |  |  |  |
(Loss)/gain on sales of securities |  | (96) |  |  | — |  |  | (96) |  |  | 100.0 |  |  | (72) |  |  | 137 |  |  | (209) |  |  | (152.6) |  |  |  |  |  |  |  |
Interchange fee |  | 2,179 |  |  | 1,745 |  |  | 434 |  |  | 24.9 |  |  | 6,338 |  |  | 4,941 |  |  | 1,397 |  |  | 28.3 |  |  |  |  |  |  |  |
BOLI income |  | 312 |  |  | 280 |  |  | 32 |  |  | 11.4 |  |  | 977 |  |  | 710 |  |  | 267 |  |  | 37.6 |  |  |  |  |  |  |  |
Other noninterest income |  | 757 |  |  | 701 |  |  | 56 |  |  | 8.0 |  |  | 2,157 |  |  | 754 |  |  | 1,403 |  |  | 186.1 |  |  |  |  |  |  |  |
Total noninterest income |  | $ | 8,179 |  |  | $ | 9,438 |  |  | $ | (1,259) |  |  | (13.34) | % |  | $ | 27,384 |  |  | $ | 25,475 |  |  | $ | 1,909 |  |  | 7.49 | % |  |  |  |  |  |  |

For the three and nine months ended September 30, 2022, noninterest income decreased $1.3 million and increased $1.9 million, respectively, compared to the same periods in 2021. The primary reason for the three month decrease was due to decreases in both mortgage fee income and gains on sales of SBA loans. The nine month increase is primarily due to an increase in almost all noninterest income accounts offset by the decrease in mortgage fee income.
Service charges on deposit accounts. For the three and nine months ended September 30, 2022, services charges on deposits was $2.1 million and $5.8 million, an increase of $312,000, or 17.4%, and $1.5 million, or 36.1%, compared to the same periods in 2021, respectively. This increase in service charges on deposits was primarily attributable to the additional deposits acquired from the SouthCrest acquisition and the bank's strategic efforts to grow deposits.
Mortgage Fee Income. For the three and nine months ended September 30, 2022, mortgage fee income was $1.7 million and $7.4 million, a decrease of $1,399,000, or 45.0%, and $2.8 million, or 27.2%, compared to the same periods in 2021, respectively. During the three and nine months ended September 30, 2021, there was a continued increase in the demand for mortgage rate locks and mortgage closings due to a historically low interest rate environment. As the rates started to increase in 2022, the demand slowed down which primarily caused the corresponding decrease.
Gain on Sales of SBA loan s. For the three and nine months ended September 30, 2022, net realized gains on the sale of the guaranteed portion of SBA loans totaled $1.2 million and $4.8 million, a decrease of $598,000, or 33.0%, and an increase of $257,000, or 5.7%, compared to the same periods in 2021, respectively. The fluctuations in 2022, as compared to the same periods in 2021, were the result of production variations and secondary market changes driven by the current interest rate environment.
Interchange Fees. For the three and nine months ended September 30, 2022, interchange fee income was $2.2 million and $6.3 million, an increase of $434,000, or 24.9%, and $1.4 million, or 28.3%, compared to the same periods in 2021. The increase in interchange fees was primarily attributable to growth of customers from the SouthCrest acquisition and the continued success with the Discover® Card program.
Other noninterest income. For the three and nine months ended September 30, 2022, other noninterest income was $757,000 and $2.2 million, an increase of $56,000, or 8.0%, and $1.4 million, or 186.1%, compared to the same periods in 2021. The increase in other income was primarily attributable to insurance commissions from the insurance acquisitions that occurred in third and fourth quarters of 2021 partially offset by an equity method investment loss taken in first quarter of 2022.
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Noninterest Expense
The following table represents the major components of noninterest expense for the periods indicated.

Table 4 - Noninterest Expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Three Months Ended September 30, |  | Change |  | Nine Months Ended September 30, |  | Change |
(dollars in thousands) | 2022 |  | 2021 |  | Amount |  | Percent |  | 2022 |  | 2021 |  | Amount | Percent |  |  |  |  |  |  |
Salaries and employee benefits | $ | 12,154 |  |  | $ | 11,826 |  |  | $ | 328 |  |  | 2.8 | % |  | $ | 40,498 |  |  | $ | 31,907 |  |  | $ | 8,591 |  | 26.9 | % |  |  |  |  |  |  |
Occupancy and equipment | 1,645 |  |  | 1,599 |  |  | 46 |  |  | 2.9 |  |  | 4,872 |  |  | 4,169 |  |  | 703 |  | 16.9 |  |  |  |  |  |  |  |
Acquisition-related expenses | 2 |  |  | 1,994 |  |  | (1,992) |  |  | (99.9) |  |  | 142 |  |  | 3,031 |  |  | (2,889) |  | (95.3) |  |  |  |  |  |  |  |
Information technology expenses | 2,491 |  |  | 2,045 |  |  | 446 |  |  | 21.8 |  |  | 7,394 |  |  | 5,493 |  |  | 1,901 |  | 34.6 |  |  |  |  |  |  |  |
Professional fees | 881 |  |  | 804 |  |  | 77 |  |  | 9.6 |  |  | 2,773 |  |  | 1,975 |  |  | 798 |  | 40.4 |  |  |  |  |  |  |  |
Advertising and public relations | 876 |  |  | 674 |  |  | 202 |  |  | 30.0 |  |  | 2,406 |  |  | 1,817 |  |  | 589 |  | 32.4 |  |  |  |  |  |  |  |
Communications | 471 |  |  | 310 |  |  | 161 |  |  | 51.9 |  |  | 1,325 |  |  | 837 |  |  | 488 |  | 58.3 |  |  |  |  |  |  |  |
Other noninterest expense | 2,847 |  |  | 1,959 |  |  | 888 |  |  | 45.3 |  |  | 8,238 |  |  | 4,884 |  |  | 3,354 |  | 68.7 |  |  |  |  |  |  |  |
Total noninterest expense | $ | 21,367 |  |  | $ | 21,211 |  |  | $ | 156 |  |  | 0.7 | % |  | $ | 67,648 |  |  | $ | 54,113 |  |  | $ | 13,535 |  | 25.0 | % |  |  |  |  |  |  |

Noninterest expense increased for the three and nine months ended September 30, 2022 by $156,000 and $13.5 million, respectively, compared to the same periods in 2021. Increases in salaries and employee benefits and information technology expenses and other expenses accounted for the majority of the increases, which were partially offset by a decrease in acquisition expenses.
Salaries and Employee Benefits. Salaries and employee benefits for the three and nine months ended September 30, 2022 was $12.2 million and $40.5 million, an increase of $328,000, or 2.8%, and $8.6 million, or 26.9%, compared to the same periods in 2021, respectively. The increase in both periods of 2022 is primarily attributable to the salary and employee benefits from the additional employees from the SouthCrest acquisition compared to the same periods in 2021.
Information technology Expenses. Information technology expense for the three and nine months ended September 30, 2022 was $2.5 million and $7.4 million, an increase of $446,000, or 21.8% and $1.9 million, or 34.6%, compared to the same periods in 2021, respectively. These increases relate to increases in employees and data processing costs from the SouthCrest merger and software costs due to the implementation of new software platforms used in various areas of the bank.
Acquisition-related Expenses. Acquisition-related expenses for the three and nine months ended September 30, 2022 decreased $2.0 million, or 99.9% and $2,889,000, or 95.3%, compared to the same periods in 2021, respectively. These decreases are related to the completion of the SouthCrest and insurance acquisitions that occurred in 2021.
Other noninterest expenses. Other noninterest expense for the three and nine months ended September 30, 2022 was $2.8 million and $8.2 million, an increase of $888,000, or 45.3% and $3.4 million, or 68.7%, compared to the same periods in 2021, respectively. These increases relate primarily to increased amortization expense of intangibles and servicing rights valuations along with increased FDIC insurance premiums.
Income Tax Expense
Income tax expense for the three and nine months ended September 30, 2022 was $1.1 million and $2.5 million compared to $362,000 and $3.4 million for the same periods in 2021, respectively. The Company’s effective tax rates for the three and nine months ended September 30, 2022 were 17.4% and 15.2% compared to 6.1% and 18.9%, respectively for the same periods of 2021. The largest driver of the difference is tax exempt income primarily from BOLI and tax exempt interest along with the benefit of Georgia state tax credits.
Balance Sheet Review
Total assets increased to $2.8 billion at September 30, 2022 from $2.7 billion at December 31, 2021.
49

Loans and Allowance for Loan Losses
At September 30, 2022, gross loans outstanding (excluding loans held for sale) were $1.6 billion, an increase of $248.6 million, or 18.6%, compared to $1.3 billion at December 31, 2021. During the nine months ended September 30, 2022, PPP loans totaling approximately $8.4 million were forgiven through the SBA.
At September 30, 2022, approximately 70.7% of our loans are secured by commercial real estate. The following table presents a summary of the loan portfolio as of September 30, 2022 and December 31, 2021.

Table 5 - Loans Outstanding |  |  |  |
(dollars in thousands) |  | September 30, 2022 |  | December 31, 2021
Construction, land and land development |  | $ | 235,654 |  |  | $ | 165,446 |
Other commercial real estate |  | 885,807 |  |  | 787,392 |
Total commercial real estate |  | 1,121,461 |  |  | 952,838 |
Residential real estate |  | 241,251 |  |  | 212,527 |
Commercial, financial, & agricultural (*) |  | 206,585 |  |  | 154,048 |
Consumer and other |  | 17,316 |  |  | 18,564 |
Total loans |  | $ | 1,586,613 |  |  | $ | 1,337,977 |
As a percentage of total loans: |  |  |  |
Construction, land and land development |  | 14.9 | % |  | 12.4 | %
Other commercial real estate |  | 55.8 | % |  | 58.8 | %
Total commercial real estate |  | 70.7 | % |  | 71.2 | %
Residential real estate |  | 15.2 | % |  | 15.9 | %
Commercial, financial & agricultural |  | 13.0 | % |  | 11.5 | %
Consumer and other |  | 1.1 | % |  | 1.4 | %
Total loans |  | 100 | % |  | 100 | %

(*) Includes $98,000 and $9.0 million in PPP loans at September 30, 2022 and December 31, 2021, respectively.
The Company's risk mitigation processes include an independent loan review designed to evaluate the credit risk in the loan portfolio and to ensure credit grade accuracy. The analysis serves as a tool to assist management in assessing the overall credit quality of the loan portfolio and the adequacy of the allowance for loan losses. Loans classified as "substandard" are loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower and/or the collateral pledged. These assets exhibit well-defined weaknesses or are showing signs there is a distinct possibility the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as "doubtful" are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as "loss" are those loans which are considered uncollectible and are in the process of being charged off.
The Company regularly monitors the composition of the loan portfolio as part of its evaluation over the adequacy of the allowance for loan losses. The Company focuses on the following loan categories: (1) construction, land and land development; (2) commercial, financial and agricultural; (3) commercial and farmland real estate; (4) residential real estate; and (5) consumer.
The allowance for loan losses is a reserve established through charges to earnings in the form of a provision for loan losses. The provision for loan losses is based on management’s evaluation of the size and composition of the loan portfolio, the level of non-performing and past-due loans, historical trends of charged off loans and recoveries, prevailing economic conditions and other factors management deems appropriate. The Company’s management has established an allowance for loan losses which it believes is adequate for the probable incurred losses in the loan portfolio. Based on a credit evaluation of the loan portfolio, management presents a quarterly review of the allowance for loan losses to the Company’s Board of Directors, which primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner the Company’s
50

management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for loan losses.
The allowance for loan losses is established by examining (1) the large classified loans, nonaccrual loans and loans considered impaired and evaluating them individually to determine the specific reserve allocation and (2) the remainder of the loan portfolio to allocate a portion of the allowance based on past loss experience and the economic conditions for the particular loan category. The Company also considers other factors such as changes in lending policies and procedures; changes in national, regional and/or local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of either the market president or lending staff; changes in the volume and severity of past-due and classified loans; changes in the quality of the loan review system; and other factors management deems appropriate.
The allowance for loan losses was $15.2 million at September 30, 2022 compared to $12.9 million at September 30, 2021, an increase of $2.3 million, or 17.9%. The allowance for loan losses as a percentage of loans was 0.96% and 0.98% at September 30, 2022 and 2021, respectively. The provision was $2.5 million compared to $650,000 for the nine months ended September 30, 2022 and September 30, 2021, respectively. The provision was $1.3 million compared to $150,000 for the three months ended September 30, 2022 and September 30, 2021, respectively. The amount of provision expense recorded in each period was the amount required such that the total allowance for loan losses reflected the appropriate balance, in the estimation of management, sufficient to cover probable, inherent losses in the loan portfolio. The primary reason for the increase in allowance to loans as a percentage for loans and provision is primarily due to the Bank's loan growth.
Additional information about the Company’s allowance for loan losses is provided in Note 4 to our consolidated financial statements as of September 30, 2022, included elsewhere in this Quarterly Report on Form 10-Q.
The following table presents an analysis of the allowance for loan losses as of and for the nine months ended September 30, 2022 and 2021:

Table 6 - Analysis of Allowance for Loan Loss |  |  |  |  |  |  |
| September 30, 2022 |  | September 30, 2021
(dollars in thousands) | Reserve |  | %* |  | Reserve |  | %*
Construction, land and land development | $ | 1,930 |  |  | 14.9 | % |  | $ | 1,049 |  |  | 11.7 | %
Other commercial real estate | 8,378 |  |  | 55.8 | % |  | 7,300 |  |  | 57.3 | %
Residential real estate | 1,935 |  |  | 15.2 | % |  | 2,290 |  |  | 16.8 | %
Commercial, financial, & agricultural | 2,730 |  |  | 13.0 | % |  | 1,833 |  |  | 12.7 | %
Consumer and other | 209 |  |  | 1.1 | % |  | 405 |  |  | 1.5 | %
| $ | 15,182 |  |  | 100 | % |  | $ | 12,877 |  |  | 100 | %

*Percentage represents the loan balance in each category expressed as a percentage of total end of period loans.
51

The following table presents a summary of allowance for loan loss for the three and nine months ended September 30, 2022 and 2021.

Table 7 - Summary of Allowance for Loan Loss |  |  |  |  |  |  |  |
| Three Months Ended |  | Nine Months Ended
(dollars in thousands) |  | September 30, 2022 |  | September 30, 2021 |  | September 30, 2022 |  | September 30, 2021
Allowance for loan loss - beginning balance |  | $ | 13,963 |  |  | $ | 12,871 |  |  | $ | 12,910 |  |  | $ | 12,127 |
Charge-offs: |  |  |  |  |  |  |  |
Construction, land and land development |  | — |  |  | — |  |  | — |  |  | — |
Other commercial real estate |  | — |  |  | 531 |  |  | 58 |  |  | 568 |
Residential real estate |  | — |  |  | — |  |  | 48 |  |  | — |
Commercial, financial, & agricultural |  | 118 |  |  | 209 |  |  | 266 |  |  | 225 |
Consumer and other |  | 33 |  |  | 3 |  |  | 54 |  |  | 44 |
Total loans charged-off |  | 151 |  |  | 743 |  |  | 426 |  |  | 837 |
Recoveries: |  |  |  |  |  |  |  |
Construction, land and land development |  | 5 |  |  | 363 |  |  | 16 |  |  | 448 |
Other commercial real estate |  | 5 |  |  | 14 |  |  | 79 |  |  | 108 |
Residential real estate |  | 23 |  |  | 143 |  |  | 45 |  |  | 254 |
Commercial, financial, & agricultural |  | 7 |  |  | 66 |  |  | 63 |  |  | 83 |
Consumer and other |  | 10 |  |  | 13 |  |  | 25 |  |  | 44 |
Total recoveries |  | 50 |  |  | 599 |  |  | 228 |  |  | 937 |
Net (recoveries)/charge-offs |  | 101 |  |  | 144 |  |  | 198 |  |  | (100) |
Provision for loan loss |  | 1,320 |  |  | 150 |  |  | 2,470 |  |  | 650 |
Allowance for loan loss - ending balance |  | $ | 15,182 |  |  | $ | 12,877 |  |  | $ | 15,182 |  |  | $ | 12,877 |
Net (recoveries)/charge-offs to average loans (annualized) |  | 0.03 | % |  | 0.05 | % |  | 0.02 | % |  | (0.02) | %
Allowance for loan losses to total loans |  | 0.96 |  |  | 0.98 |  |  | 0.96 |  |  | 0.98 |
Allowance to nonperforming loans |  | 286.34 |  |  | 105.15 |  |  | 286.34 |  |  | 105.15 |

Management believes the allowance for loan losses is adequate to provide for losses inherent in the loan portfolio as of September 30, 2022.
52

Nonperforming Assets
Asset quality experienced slight improvement during the first nine months of 2022. Nonperforming assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property and other real estate owned ("OREO"). Nonaccrual loans totaled $5.3 million at September 30, 2022, a decrease of $147,000, or 2.7%, from $5.4 million at December 31, 2021. There were no loans contractually past due 90 days or more and still accruing for either period presented. At September 30, 2022, OREO totaled $246,000, a decrease of $35,000, or 12.5%, compared with $281,000 at December 31, 2021. The decrease in OREO was due to a donation of assets during the first nine months of 2022. As of September 30, 2022, total nonperforming assets as a percent of total assets decreased to 0.20% compared with 0.21% at December 31, 2021.
Generally, loans are placed on non-accrual status if principal or interest payments become 90 days past due and/or management deems the collectability of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to a customer whose financial condition has deteriorated are considered for non-accrual status whether or not the loan is 90 days or more past due. Once interest accruals are discontinued, accrued but uncollected interest is charged to current year operations. Subsequent loan payments made on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Classification of a loan as nonaccrual does not preclude the ultimate collection of loan principal or interest.
Foreclosed property is initially recorded at fair value, less estimated costs to sell. If the fair value, less estimated costs to sell, at the time of foreclosure is less than the loan balance, the deficiency is charged against the allowance for loan losses. If the lesser of the fair value, less estimated costs to sell, or the listed selling price, less the costs to sell, of the foreclosed property decreases during the holding period, a valuation allowance is established with a charge to foreclosed property expense. When the foreclosed property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property.
Nonperforming assets at September 30, 2022 and December 31, 2021 were as follows:

Table 8 - Nonperforming Assets |  |  |  |  |  |
(dollars in thousands) |  | September 30, 2022 |  | December 31, 2021 |  |
Nonaccrual loans |  | $ | 5,302 |  |  | $ | 5,449 |  |  |
Loans past due 90 days and accruing |  | — |  |  | — |  |  |
Other real estate owned |  | 246 |  |  | 281 |  |  |
Repossessed assets |  | — |  |  | 49 |  |  |
Total nonperforming assets |  | $ | 5,548 |  |  | $ | 5,779 |  |  |
Nonaccrual loans by loan segment |  |  |  |  |  |
Construction, land and land development |  | $ | 143 |  |  | $ | 31 |  |  |
Commercial real estate |  | 1,409 |  |  | 837 |  |  |
Residential real estate |  | 2,321 |  |  | 3,839 |  |  |
Commercial, financial & agriculture |  | 1,403 |  |  | 708 |  |  |
Consumer & other |  | 26 |  |  | 34 |  |  |
Total nonaccrual loans |  | $ | 5,302 |  |  | $ | 5,449 |  |  |
NPAs as a percentage of total loans and OREO |  | 0.35 | % |  | 0.43 | % |  |
NPAs as a percentages of total assets |  | 0.20 | % |  | 0.21 | % |  |
Nonaccrual loans as a percentage of total loans |  | 0.33 | % |  | 0.41 | % |  |

The restructuring of a loan is considered a troubled debt restructuring (" TDR") if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted the borrower a concession that we would not consider otherwise. At September 30, 2022, TDR increased to $7.5 million from $7.3 million reported at December 31, 2021. At September 30, 2022, $845,000 in TDRs were considered nonperforming and at December 31, 2021, all TDRs were performing according to their modified terms and were therefore not considered to be nonperforming assets.
53

Deposits
Deposits at September 30, 2022 and December 31, 2021 were as follows:

Table 9 - Deposits |  |  |  |
(dollars in thousands) |  | September 30, 2022 |  | December 31, 2021
Noninterest-bearing deposits |  | $ | 558,347 |  |  | $ | 552,576 |
Interest-bearing deposits |  | 823,179 |  |  | 930,811 |
Savings |  | 621,875 |  |  | 541,993 |
Time, $250,000 and over |  | 87,361 |  |  | 73,407 |
Other time |  | 318,900 |  |  | 275,821 |
Total deposits |  | $ | 2,409,662 |  |  | $ | 2,374,608 |

Total deposits increased $35.1 million to $2.41 billion at September 30, 2022 from $2.37 billion at December 31, 2021. As of September 30, 2022, 23.2% of total deposits were comprised of noninterest-bearing accounts and 76.8% comprised of interest-bearing deposit accounts, compared to 23.3% and 76.7% as of December 31, 2021, respectively. The increase in our deposits is due primarily to the increase in rates the Company offers on its deposit products as well as the increase in brokered deposits.
We had $30.4 million and $883,000 in brokered deposits at September 30, 2022 and December 31, 2021, respectively. We use brokered deposits, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network, which are our principal source of funding. Our level of brokered deposits varies from time to time depending on competitive interest rate conditions and other factors, and tends to increase as a percentage of total deposits when the brokered deposits are less costly than issuing internet certificates of deposit or borrowing from the FHLB.
Off-Balance Sheet Arrangements
The Company is a party to credit related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.
The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, upon extension of credit, is based on management’s credit evaluation of the borrower. The type of collateral held varies, but may include cash or cash equivalents, unimproved or improved real estate, personal property or other acceptable collateral.
See Note 7 to our consolidated financial statements as of September 30, 2022, included elsewhere in this Form 10-Q, for a table setting forth the financial instruments that were outstanding whose contract amounts represent credit risk and more information regarding our off-balance sheet arrangements as of September 30, 2022 and December 31, 2021.
Liquidity
An important part of the Bank's liquidity resides in the asset portion of the balance sheet, which provides liquidity primarily through loan interest and principal repayments and the maturities and sales of securities, as well as the ability to use these assets as collateral for borrowings on a secured basis.
The Bank's main source of liquidity is customer interest-bearing and noninterest-bearing deposit accounts. Liquidity is also available from wholesale funding sources consisting primarily of Federal funds purchased, FHLB advances and brokered deposits. These sources of liquidity are generally short-term in nature and are used as necessary to fund asset growth and meet other short-term liquidity needs.
To plan for contingent sources of funding not satisfied by both local and out-of-market deposit balances, the Company and the Bank have established multiple borrowing sources to augment their funds management. The Company has borrowing capacity through membership of the Federal Home Loan Bank program. The Bank has also established overnight borrowing
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for Federal Funds purchased through various correspondent banks. There were no outstanding balances of Federal Funds purchased at September 30, 2022 and December 31, 2021, respectively.
Cash and cash equivalents at September 30, 2022 and December 31, 2021 were $85.0 million and $197.2 million, respectively. This decrease is primarily attributable to the deployment of funds used for funding current loan growth. Management believes the various funding sources discussed above are adequate to meet the Company’s liquidity needs without any material adverse impact on our operating results.
On February 10, 2022, the Company completed a public offering of approximately $63.5 million of its common stock. The offering generated net proceeds of approximately $59.3 million, which were used to fund the repayment of the Company's existing term note and the line of credit and for other general corporate purposes.
On May 20, 2022, the Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers in which the Company issued and sold $40.0 million in aggregate principal amount of its 5.25% Fixed-to-Floating Rate Subordinated Notes due 2032.
Liquidity management involves the matching of cash flow requirements of customers and the ability of the Company to manage those requirements. These requirements of customers include, but are not limited to, deposits being withdrawn or providing assurance to borrowers that sufficient funds are available to meet their credit needs. We strive to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance we have in short-term assets at any given time will adequately cover any reasonably anticipated need for funds. Additionally, we maintain relationships with correspondent banks, which could provide funds on short notice, if needed. We have also invested in FHLB stock for the purpose of establishing credit lines with the FHLB. At September 30, 2022 and December 31, 2021, we had $95.0 million and $51.7 million, respectively, of outstanding advances from the FHLB. Based on the values of loans pledged as collateral, we had $585.6 million and $574.7 million of additional borrowing availability with the FHLB at September 30, 2022 and December 31, 2021, respectively.
The Company is a separate entity from the Bank, and as such it must provide for its own liquidity. The Company is responsible for the payment of dividends declared for its common shareholders and payment of interest and principal on any outstanding debt or trust preferred securities. These obligations are met through internal capital resources such as service fees and dividends from the Bank, which are limited by applicable laws and regulations.
Capital Resources
The Bank is required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution’s overall capital adequacy.
The table below summarizes the capital requirements applicable to the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Bank’s capital ratios as of September 30, 2022 and December 31, 2021. The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of September 30, 2022 and December 31, 2021. There have been no conditions or events since December 31, 2021 that management believes would change this classification.

Table 10 - Capital Ratio Requirements |  |  |  |
|  | Minimum Requirement |  | Well-capitalized¹
Risk-based ratios: |  |  |  |
Common equity tier 1 capital (CET1) |  | 4.5 | % |  | 6.5 | %
Tier 1 capital |  | 6.0 |  |  | 8.0 |
Total capital |  | 8.0 |  |  | 10.0 |
Leverage ratio |  | 4.0 |  |  | 5.0 |
(1) The prompt corrective action provisions are only applicable at the bank level. |  |  |  |

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Table 11 - Capital Ratios |  |  |  |
Company |  | September 30, 2022 |  | December 31, 2021
CET1 risk-based capital ratio |  | 11.81 | % |  | 9.87 | %
Tier 1 risk-based capital ratio |  | 13.04 |  |  | 11.28 |
Total risk-based capital ratio |  | 15.78 |  |  | 12.05 |
Leverage ratio |  | 9.28 |  |  | 7.25 |
Colony Bank |  |  |  |
CET1 risk-based capital ratio |  | 12.57 | % |  | 11.41 | %
Tier 1 risk-based capital ratio |  | 12.57 |  |  | 11.41 |
Total risk-based capital ratio |  | 13.34 |  |  | 12.18 |
Leverage ratio |  | 8.96 |  |  | 7.53 |

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposures are credit risk, interest rate risk, and to a lesser degree, liquidity risk. The Bank operates under an Asset Liability Management Policy which is approved by the ALCO, which is a Board committee that meets regularly. The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the net market values of assets and liabilities over certain changes in interest rate environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on the Bank's assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk and the process for the approval, implementation and monitoring of interest rate risk strategies to achieve the Bank's interest rate risk objectives.
The following table presents our interest sensitivity position at the dates indicated.

Table 12 - Interest Sensitivity |  |  |
| Increase (Decrease) in Net Interest Income from Base Scenario at
| September 30, 2022 |  | December 31, 2021
Changes in rates |  |  |
200 basis point increase | 4.56% |  | 13.80%
100 basis point increase | 2.34 |  | 6.83
100 basis point decrease | (2.53) |  | (3.18)

See Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2021 for additional disclosures related to market and interest rate risk.
There are no material changes during the period covered by this Report to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” previously disclosed in the Company's 2021 Form 10-K.
ITEM 4 – CONTROLS AND PROCEDURES
Under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for ensuring that information the Company is required to disclose in reports that it files or submits under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to the Company's senior management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
During the quarter ended September 30, 2022, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II – OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
In the ordinary course of business, there are various legal proceedings pending against the Company and the Bank. The aggregate liabilities, if any, arising from such proceedings would not, in the opinion of management, have a material adverse effect on the Company’s consolidated financial position.
ITEM 1A – RISK FACTORS
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in "Part I - Item IA - Risk Factors” of the Company’s 2021 Form 10-K, which could materially affect its business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.
There are no material changes during the period covered by this Report to the risk factors previously disclosed in the Company's 2021 Form 10-K.
ITEM 2 – UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) There were no unregistered shares of the Company’s common stock sold during the three-month period ended September 30, 2022.
(b) Not applicable.
(c) There were no purchases of the Company's equity securities by the Company or its affiliates during the three-month period ended September 30, 2022.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 – OTHER INFORMATION
None.
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ITEM 6 – EXHIBITS

3.1 | Articles of Incorporation, As Amended -filed as Exhibit 99.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 0-12436), filed with the Commission on August 4, 2014 and incorporated herein by reference.
3.2 | Articles of Amendment to Articles of Incorporation, As Amended, of Colony Bankcorp, Inc.-filed as Exhibit 3.2 to the Registrant's Quarterly Report on Form 10Q (File No. 0-12436), filed with the Commission on August 12, 2022 and incorporated herein by reference.
3.3 | Amended and Restated Bylaws -filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 000-12436), filed with the Commission on September 18, 2020 and incorporated herein by reference.
10.1 | Employment Agreement, Dated Septemb er 9, 2022, Between R Dallis Copeland, Jr. and Colony Bankcorp, Inc.†
10.2 | Employment Agreement, Dated September 9, 2022, Between Max Edward Hoyle and Colony Bankcorp, Inc.†
31.1 | Certificate of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2 | Certificate of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 | Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021; (ii) Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and 2021; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021; (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021; (v) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements*
104 | The cover page from Colony Bankcorp’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2022 (formatted in Inline XBRL and included in Exhibit 101)
† | Represents a management contract or a compensatory plan or arrangement.

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

| Colony Bankcorp, Inc.
| /s/ T. Heath Fountain
Date: November 10, 2022 | T. Heath Fountain
| Chief Executive Officer
| (Principal Executive Officer)
| /s/ Andrew Borrmann
Date: November 10, 2022 | Andrew Borrmann
| Executive Vice President and Chief Financial Officer
| (Principal Financial Officer)

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