Colony Bankcorp (CBAN) 10-Q 2024 Q2 Quarterly report

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 June 30, 2024

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 August 6, 2024, the registrant had 17,589,884 shares of common stock, $1.00 par value per share, issued and outstanding.

1

TABLE OF CONTENTS

		Page
PART I – Financial Information
Item 1.	Financial Statements
	Consolidated Balance Sheets – June 30, 2024 (unaudited) and December 31, 2023 (audited)	3
	Consolidated Statements of Income – For the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	4
	Consolidated Statements of Comprehensive Income – For the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	5
	Consolidated Statements of Changes in Stockholder's Equity – For the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	6
	Consolidated Statements of Cash Flows – For the Six Months Ended June 30, 2024 and 2023 (unaudited)	8
	Notes to Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	61
PART II – Other Information
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sale of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	63
Item 6.	Exhibits	63
Signatures		64

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COLONY BANKCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	June 30, 2024		December 31, 2023
(dollars in thousands, except per share data)	(Unaudited)		(Audited)
ASSETS
Cash and due from banks	$	22,404	$	25,339
Federal funds sold and interest-bearing deposits in banks	59,598		57,983
Cash and cash equivalents	82,002		83,322
Investment securities available-for-sale, at fair value (amortized cost $424,685 and $455,294, respectively)	376,580		407,382
Investment securities held-to-maturity, at amortized cost (fair value $393,359 and $405,576, respectively)	442,945		449,031
Other investments	18,491		16,868
Loans held for sale	40,132		27,958
Loans, net of unearned income	1,865,574		1,883,470
Allowance for credit losses	(18,806)		(18,371)
Loans, net	1,846,768		1,865,099
Premises and equipment	38,343		39,870
Other real estate owned	582		448
Goodwill	48,923		48,923
Other intangible assets	3,535		4,192
Bank-owned life insurance	57,173		56,925
Deferred income taxes, net	24,164		25,405
Other assets	28,269		27,999
Total assets	$	3,007,907	$	3,053,422
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing	$	437,623	$	498,992
Interest-bearing	2,022,602		2,045,798
Total deposits	2,460,225		2,544,790
Federal Home Loan Bank advances	205,000		175,000
Other borrowings	62,992		63,445
Other liabilities	14,947		15,252
Total liabilities	2,743,164		2,798,487
Stockholders' equity:
Preferred stock, stated value $1,000; 10,000,000 shares authorized, none issued or outstanding as of June 30, 2024 and December 31, 2023, respectively	—		—
Common stock, par value $1.00 per share; 50,000,000 shares authorized, 17,538,611 and 17,564,182 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	17,539		17,564
Paid in capital	169,132		168,614
Retained earnings	131,256		124,400
Accumulated other comprehensive loss, net of tax	(53,184)		(55,643)
Total stockholders' equity	264,743		254,935
Total liabilities and stockholders' equity	$	3,007,907	$	3,053,422

See accompanying notes to consolidated financial statements (unaudited).

3

COLONY BANKCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Income (unaudited)

	Three Months Ended				Six Months Ended
(dollars in thousands, except per share data)	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Interest income
Loans, including fees	$	27,604	$	24,067	$	54,701	$	46,220
Investment securities	5,048		5,989		10,569		11,849
Deposits with other banks and short term investments	684		708		1,376		1,065
Total interest income	33,336		30,764		66,646		59,134
Interest expense
Deposits	12,106		8,556		24,198		13,555
Federal funds purchased	—		47		—		135
Federal Home Loan Bank advances	1,821		1,947		3,392		3,573
Other borrowings	1,000		1,033		1,993		2,122
Total interest expense	14,927		11,583		29,583		19,385
Net interest income	18,409		19,181		37,063		39,749
Provision for credit losses	650		200		1,650		1,100
Net interest income after provision for credit losses	17,759		18,981		35,413		38,649
Noninterest income
Service charges on deposits	2,288		2,027		4,662		3,941
Mortgage fee income	1,442		2,014		2,691		3,197
Gain on sales of SBA loans	2,347		1,105		4,393		2,162
Loss on sales of securities	(425)		—		(980)		—
Interchange fees	2,078		2,131		4,105		4,199
BOLI Income	398		358		931		689
Insurance commissions	420		449		886		909
Other	949		868		2,296		1,514
Total noninterest income	9,497		8,952		18,984		16,611
Noninterest expense
Salaries and employee benefits	12,277		13,348		24,296		25,957
Occupancy and equipment	1,475		1,499		2,982		3,121
Information technology expenses	2,227		2,001		4,338		4,342
Professional fees	704		881		1,537		1,596
Advertising and public relations	967		673		1,927		1,666
Communications	216		192		442		486
Other	2,464		2,838		5,205		5,429
Total noninterest expense	20,330		21,432		40,727		42,597
Income before income taxes	6,926		6,501		13,670		12,663
Income taxes	1,452		1,199		2,863		2,318
Net income	$	5,474	$	5,302	$	10,807	$	10,345
Earnings per common share:
Basic	$	0.31	$	0.30	$	0.62	$	0.59
Diluted	0.31		0.30		0.62		0.59
Dividends declared per share	0.1125		0.1100		0.2250		0.2200
Weighted average common shares outstanding:
Basic	17,551,007		17,580,557		17,555,609		17,588,081
Diluted	17,551,007		17,580,557		17,555,609		17,588,081

 See accompanying notes to consolidated financial statements (unaudited).

4

COLONY BANKCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

	Three Months Ended				Six Months Ended
(dollars in thousands)	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Net income	$	5,474	$	5,302	$	10,807	$	10,345
Other comprehensive income (loss):
Net unrealized gains (losses) on securities arising during the period	(326)		(8,433)		(1,126)		(809)
Tax effect	68		1,556		235		148
Reclassification adjustment for amortization of unrealized holding losses from the transfer of securities from available-for-sale to held-to-maturity	1,222		4,889		2,344		4,880
Tax effect	(256)		(902)		(491)		(893)
Realized losses on sales of available-for-sale securities included in net income	425		—		980		—
Tax effect	(89)		—		(205)		—
Unrealized gains on derivative instruments designated as cash flow hedges	336		253		1,264		253
Tax effect	(70)		(47)		(265)		(47)
Realized gains on derivative instruments recognized in net income	(177)		(9)		(351)		(9)
Tax effect	37		2		74		2
Total other comprehensive income (loss)	1,170		(2,691)		2,459		3,525
Comprehensive income	$	6,644	$	2,611	$	13,266	$	13,870

 See accompanying notes to consolidated financial statements (unaudited).

5

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, March 31, 2024	17,558,611	$	17,559	$	168,951	$	127,758	$	(54,354)	$	259,914
Other comprehensive loss	—	—		—		—		1,170		1,170
Dividends on common shares ($0.1125 per share)	—	—		—		(1,976)		—		(1,976)
Issuance of common stock	—	—		—		—		—		—
Issuance of restricted stock, net of forfeitures	—	—		—		—		—		—
Tax withholding related to vesting of restricted stock	—	—		—		—		—		—
Repurchase of shares	(20,000)	(20)		(219)		—		—		(239)
Stock-based compensation expense	—	—		400		—		—		400
Net income	—	—		—		5,474		—		5,474
Balance, June 30, 2024	17,538,611	$	17,539	$	169,132	$	131,256	$	(53,184)	$	264,743
Balance, March 31, 2023	17,593,879	$	17,594	$	167,922	$	113,485	$	(60,224)	$	238,777
Other comprehensive loss	—	—		—		—		(2,691)		(2,691)
Dividends on common shares ($0.1100 per share)	—	—		—		(1,930)		—		(1,930)
Issuance of restricted stock, net of forfeitures	(10,217)	(10)		10		—		—		—
Tax withholding related to vesting of restricted stock	(520)	(1)		(4)		—		—		(5)
Repurchase of shares	(41,481)	(41)		(365)		—		—		(406)
Stock-based compensation expense	—	—		408		—		—		408
Net income	—	—		—		5,302		—		5,302
Balance, June 30, 2023	17,541,661	$	17,542	$	167,971	$	116,857	$	(62,915)	$	239,455

6

(dollars in thousands, except per share data)	Common Stock
Six Months Ended	Shares	Amount		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance, December 31, 2023	17,564,182	$	17,564	$	168,614	$	124,400	$	(55,643)	$	254,935
Other comprehensive income	—	—		—		—		2,459		2,459
Dividends on common shares ($0.2250 per share)	—	—		—		(3,951)		—		(3,951)
Issuance of restricted stock, net of forfeitures	(594)	—		—		—		—		—
Tax withholding related to vesting of restricted stock	(4,977)	(5)		(61)		—		—		(66)
Repurchase of shares	(20,000)	(20)		(219)		—		—		(239)
Stock-based compensation expense	—	—		798		—		—		798
Net income	—	—		—		10,807		—		10,807
Balance, June 30, 2024	17,538,611	$	17,539	$	169,132	$	131,256	$	(53,184)	$	264,743
Balance, December 31, 2022	17,598,123	$	17,598	$	167,537	$	111,573	$	(66,440)	$	230,268
Cumulative change in accounting principle for ASU 2016-13, net of tax (1)	—	—		—		(1,198)		—		(1,198)
Other comprehensive income	—	—		—		—		3,525		3,525
Dividends on common shares ($0.2200 per share)	—	—		—		(3,863)		—		(3,863)
Issuance of restricted stock, net of forfeitures	(8,671)	(9)		9		—		—		—
Tax withholding related to vesting of restricted stock	(6,310)	(6)		(72)		—		—		(78)
Repurchase of shares	(41,481)	(41)		(365)		—		—		(406)
Stock-based compensation expense	—	—		862		—		—		862
Net income	—	—		—		10,345		—		10,345
Balance, June 30, 2023	17,541,661	$	17,542	$	167,971	$	116,857	$	(62,915)	$	239,455

 (1) Represents the impact of the adoption of Accounting Standards Update ("ASU") No. 2016-13: CECL

See accompanying notes to consolidated financial statements (unaudited).

7

COLONY BANKCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

	Six Months Ended
(dollars in thousands)	June 30, 2024		June 30, 2023
Operating Activities
Net income	$	10,807	$	10,345
Adjustments reconciling net income to net cash provided by operating activities:
Provision for credit losses	1,650		1,100
Depreciation, amortization, and accretion	4,230		4,512
Equity method investment loss	(117)		(95)
Share-based compensation expense	798		862
Net change in servicing asset	(743)		(373)
Loss on sales of securities, available-for-sale	980		—
Gain on sales of SBA loans	(4,393)		(2,162)
Gain on sales of other real estate owned	(174)		(13)
Writedown of bank building	197		—
Gain on sales of premises & equipment	(10)		(107)
Originations of loans held for sale	(140,472)		(134,992)
Proceeds from sales of loans held for sale	132,691		126,629
Change in bank-owned life insurance	(948)		(702)
Deferred tax benefit	400		(544)
Change in other assets	1,442		(279)
Change in other liabilities	(189)		2,483
Net cash provided by operating activities	6,149		6,664
Investing Activities
Purchases of investment securities, available-for-sale	(23,217)		(3,914)
Proceeds from maturities, calls, and paydowns of investment securities, available-for-sale	34,221		15,925
Proceeds from sales of investment securities, available-for-sale	17,750		—
Proceeds from maturities, calls and paydowns of securities, held-to-maturity	7,150		13,359
Change in loans, net	16,105		(102,403)
Purchase of premises and equipment	(231)		(2,073)
Proceeds from sales of premises and equipment	10		125
Proceeds from sales of other real estate owned	870		215
Proceeds from bank-owned life insurance	700		—
Redemption of other investments	—		800
Redemption (purchase) of Federal Home Loan Bank Stock	(1,506)		(1,395)
Net cash provided by (used in) investing activities	51,852		(79,361)
Financing Activities
Change in noninterest-bearing customer deposits	(61,369)		(28,051)
Change in interest-bearing customer deposits	(23,196)		164,265
Dividends paid for common stock	(3,951)		(3,863)
Repayments on Federal Home Loan Bank Advances	(140,000)		(575,000)
Proceeds from Federal Home Loan Bank Advances	170,000		605,000
Repayments on other borrowings	(20,000)		(15,000)
Proceeds from other borrowings	20,000		—
Redemption of subordinated debt	(500)		—
Repurchase of shares	(239)		(406)
Tax withholding related to vesting of restricted stock	(66)		(78)
Net cash provided by (used in) financing activities	(59,321)		146,867
Net increase in cash and cash equivalents	(1,320)		74,170
Cash and cash equivalents at beginning of period	83,322		80,678
Cash and cash equivalents at end of period	$	82,002	$	154,848

8

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)

	Six Months Ended
(dollars in thousands)	June 30, 2024		June 30, 2023
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	$	30,019	$	17,954
Cash paid during the period for income taxes	2,911		1,930

 See accompanying notes to consolidated financial statements (unaudited).

9

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.

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 U.S. generally accepted accounting principles ("GAAP") 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 three and six months ended June 30, 2024 are not necessarily indicative of the results which may be expected for the year ending December 31, 2024. 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, 2023 (“2023 Form 10-K”).

Nature of Operations

The Bank provides a full range of retail, commercial and mortgage banking services as well as government guaranteed lending, consumer insurance, wealth management and merchant services for consumers and small- to medium-size businesses located primarily in north, central, south and coastal Georgia, Birmingham, Alabama and Tallahassee and the Florida Panhandle. The Bank is headquartered in Fitzgerald, Georgia with locations in the Georgia cities of Albany, Ashburn, Athens, Atlanta, Augusta, Broxton, Cedartown, Centerville, Chickamauga, Columbus, Cordele, Douglas, Eastman, Fayetteville, Fitzgerald, LaGrange, Leesburg, Macon, Manchester, Moultrie, Quitman, Rochelle, Rockmart, Savannah, Statesboro, Sylvester, Thomaston, Tifton, Valdosta and Warner Robins along with loan production offices in Birmingham, Alabama and Tallahassee, Florida. 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 credit 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 2024. Such reclassifications have not materially affected previously reported stockholders’ equity or net income.

Concentrations of Credit Risk

Concentrations of credit risk can exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries, or certain geographic regions. The Company has a concentration in real estate loans as well as a geographic concentration that could pose an adverse credit risk. At June 30, 2024, approximately 83% of the Company’s loan portfolio was concentrated in loans secured by real estate. A substantial portion of borrowers’ ability to honor their

10

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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 credit 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.

Allowance for Credit Losses ("ACL") – Loans

The current expected credit loss (“CECL”) approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It replaced the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was probable a loss event was incurred. The estimate of expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the historical period used. The Company also considers future economic conditions and portfolio performance as part of a reasonable and supportable forecast period.

The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed. Accrued interest receivable is excluded from the estimate of credit losses.

Management determines the ACL balance using relevant available information from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit behaviors along with model judgments provide the basis for the estimation of expected credit losses. Adjustments to modeled loss estimates may be made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in economic conditions, property values, or other relevant factors. For the majority of loans and leases the ACL is calculated using a discounted cash flow methodology applied at a loan level with a one-year reasonable and supportable forecast period and a two-year straight-line reversion period.

The ACL-loans are measured on a collective basis when similar risk characteristics exist. The Company has identified the following portfolio segments and calculates the ACL for each using a discounted cash flow methodology at the loan level, with loss rates, prepayment assumptions and curtailment assumptions driven by each loan’s collateral type:

•Construction, land & land development - Risks common to construction, land & development loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements and declines in real estate values.

•Other commercial real estate - Loans in this category are susceptible to business failures and declines in general economic conditions, including declines in real estate value, declines in occupancy rates, and lack of suitable alternative use for the property.

•Residential real estate - Residential real estate loans are susceptible to weakening general economic conditions, increases in unemployment rates and declining real estate values.

•Commercial, financial & agricultural - Risks to this loan category include the inability to monitor the condition of the collateral, which often consists of inventory, accounts receivable and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.

11

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

•Consumer and other - Risks common to consumer direct loans include unemployment and changes in local economic conditions as well as the inability to monitor collateral consisting of personal property.

When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Allowance for Credit Losses – Off-Balance Sheet Credit Exposures

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

Management estimates expected credit losses on commitments to extend credit over the contractual period during which the Company is exposed to credit risk on the underlying commitments. The ACL on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The ACL is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund.

Allowance for Credit Losses – Held-to-Maturity ("HTM") Securities

Management measures current expected credit losses on HTM debt securities on a collective basis by major security type. The estimate of current expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the HTM portfolio into the following major security types: U.S. treasury securities, U.S. agency securities, State, county & municipal securities, and Mortgage-backed securities. Accrued interest receivable on HTM debt is excluded from the estimate of credit losses.

All of the residential and commercial mortgage-backed securities held by the Company as HTM are issued by U.S. government agencies and government sponsored entities. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The state and political subdivision securities are also highly rated by major rating agencies.

Allowance for Credit Losses – Available-for-Sale ("AFS") Securities

For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or whether it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an ACL is recognized in other comprehensive income. Accrued interest receivable on AFS debt securities is excluded from the estimate of credit losses.

Changes in the ACL are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the ACL when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

12

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Derivatives

The Company records cash flow hedges at the inception of a derivative contract based on management’s intentions and belief as to the likely effectiveness of the hedge. Cash flow hedges represent a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability. For a cash flow hedge, the gain or loss on the derivative is recorded in other comprehensive income ("OCI") and is reclassified into earnings in the same period during which the hedged transaction affects earnings. The changes in the fair value of a derivative that is not highly effective in hedging the expected cash flows of the hedged item are recognized immediately as interest expense in the consolidated statements of income.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income or noninterest expense. Cash flows from hedges are classified in the consolidated statements of cash flows in the same manner as the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in cash flows of the hedged item. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in cash flows of the hedged item, the derivative is settled or terminated, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as interest expense. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in OCI are amortized into earnings over the same periods which the hedged transactions will affect earnings.

Changes in Accounting Principles

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-04, Reference Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). This ASU 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. It provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The updated guidance was originally effective for all entities from March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU 2022-06 which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The Company has adopted this ASU with no material impact to its financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures ("ASU 2023-07"). This ASU was issued to improve segment reporting disclosures. The amendments in this ASU improve financial reporting by requiring disclosure of incremental segment information including significant segment expenses regularly provided to the chief operating decision maker as well as the amount and composition of other segment items on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. Retrospective application is required in all prior periods unless impracticable to do so. The amendments in this standard will be effective for the Company for the fiscal year ended December 31, 2024 and subsequent interim periods. The Company is currently evaluating the impact of the incremental segment information that will be required to be disclosed as well as the impact to the Segment Reporting footnote.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures ("ASU 2023-09"). This ASU was issued to enhance the transparency and decision usefulness of income tax disclosures. The ASU addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Retrospective application in all prior periods is permitted. The amendments in this standard will be effective for the Company on January 1, 2025. The Company is currently evaluating the impact of the incremental income taxes information that will be required to be disclosed as well as the impact to the Income Taxes footnote.

13

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)
June 30, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available-for-Sale:
U.S. treasury securities	$	7,068	$	—	$	(10)	$	7,058
U.S. agency securities	4,238		—		(390)		3,848
Asset backed securities	22,182		2		(274)		21,910
State, county & municipal securities	113,089		—		(15,924)		97,165
Corporate debt securities	53,337		—		(6,613)		46,724
Mortgage-backed securities	224,771		173		(25,069)		199,875
Total	$	424,685	$	175	$	(48,280)	$	376,580
June 30, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Held-to-Maturity:
U.S. treasury securities	$	94,150	$	—	$	(3,986)	$	90,164
U.S. agency securities	16,218		—		(1,498)		14,720
State, county & municipal securities	136,942		17		(15,586)		121,373
Mortgage-backed securities	195,635		—		(28,533)		167,102
Total	$	442,945	$	17	$	(49,603)	$	393,359
December 31, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available-for-Sale:
U.S. treasury securities	$	500	$	—	$	(2)	$	498
U.S. agency securities	4,500		—		(361)		4,139
Asset backed securities	25,035		—		(405)		24,630
State, county & municipal securities	124,524		6		(15,494)		109,036
Corporate debt securities	53,834		16		(6,460)		47,390
Mortgage-backed securities	246,901		36		(25,248)		221,689
Total	$	455,294	$	58	$	(47,970)	$	407,382
December 31, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Held-to-Maturity:
U.S. treasury securities	$	93,306	$	—	$	(3,212)	$	90,094
U.S. agency securities	16,282		—		(1,424)		14,858
State, county & municipal securities	136,685		356		(13,859)		123,182
Mortgage-backed securities	202,758		—		(25,316)		177,442
Total	$	449,031	$	356	$	(43,811)	$	405,576

14

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The Company elected to exclude accrued interest receivable from the amortized cost basis of available-for-sale and held-to-maturity securities disclosed throughout this note. As of June 30, 2024 and December 31, 2023, accrued interest receivable for available-for-sale and held-to-maturity securities totaled $2.2 million and $2.4 million, and $1.9 million and $1.9 million, respectively, and is included in the "Other assets" line item on the Company’s consolidated balance sheet.

The amortized cost and fair value of investment securities as of June 30, 2024, by contractual maturity, are shown hereafter. Expected maturities may differ from contractual maturities for certain investments because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. This is often the case with mortgage-backed securities, which are disclosed separately in the table below.

	Available-for-Sale				Held-to-Maturity
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	9,283	$	9,231	$	19,839	$	19,580
Due after one year through five years	16,080		14,713		88,816		84,362
Due after five years through ten years	101,749		87,331		67,878		59,370
Due after ten years	72,802		65,430		70,777		62,945
	$	199,914	$	176,705	$	247,310	$	226,257
Mortgage-backed securities	224,771		199,875		195,635		167,102
	$	424,685	$	376,580	$	442,945	$	393,359

Proceeds from the sale of investment securities totaled $9.2 million and $17.8 million for the three and six month periods ended June 30, 2024, respectively, and resulted in gross realized losses of $425,000 and $980,000 for each respective period. The purpose of these sales in 2024 was to restructure underperforming assets and reinvest at higher yields. The sales do not impact our ability to hold the remaining available-for-sale securities, and we are not in a position to be required to sell any remaining securities at this time. The Company had no sales of investment securities for the three and six month periods ended June 30, 2023.

Investment securities having a carrying value of approximately $364.4 million and $429.9 million were pledged to secure public deposits and for other purposes as of June 30, 2024 and December 31, 2023, respectively.

Information pertaining to available-for-sale securities with gross unrealized losses at June 30, 2024 and December 31, 2023 aggregated by investment category and length of time that individual securities have been in a continuous loss position is as

15

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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
June 30, 2024
U.S. treasury securities	$	7,058	$	(10)	$	—	$	—	$	7,058	$	(10)
U.S. agency securities	—		—		3,848		(390)		3,848		(390)
Asset backed securities	10,079		(62)		10,753		(212)		20,832		(274)
State, county & municipal securities	1,802		(155)		95,148		(15,769)		96,950		(15,924)
Corporate debt securities	2,844		(556)		43,880		(6,057)		46,724		(6,613)
Mortgage-backed securities	2,331		(7)		183,863		(25,062)		186,194		(25,069)
	$	24,114	$	(790)	$	337,492	$	(47,490)	$	361,606	$	(48,280)
December 31, 2023
U.S. treasury securities	$	—	$	—	$	498	$	(2)	$	498	$	(2)
U.S. agency securities	—		—		4,139		(361)		4,139		(361)
Asset backed securities	6,196		(75)		17,424		(330)		23,620		(405)
State, county & municipal securities	1,033		(138)		107,443		(15,356)		108,476		(15,494)
Corporate debt securities	1,446		(105)		45,044		(6,355)		46,490		(6,460)
Mortgage-backed securities	5,921		(49)		212,876		(25,199)		218,797		(25,248)
	$	14,596	$	(367)	$	387,424	$	(47,603)	$	402,020	$	(47,970)

Information pertaining to held-to-maturity securities with gross unrealized losses at June 30, 2024 and December 31, 2023 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
June 30, 2024
U.S. treasury securities	$	—	$	—	$	90,164	$	(3,986)	$	90,164	$	(3,986)
U.S. agency securities	—		—		14,720		(1,498)		14,720		(1,498)
State, county & municipal securities	11,588		(213)		103,719		(15,373)		115,307		(15,586)
Mortgage-backed securities	—		—		167,102		(28,533)		167,102		(28,533)
	$	11,588	$	(213)	$	375,705	$	(49,390)	$	387,293	$	(49,603)
December 31, 2023
U.S. treasury securities	$	—	$	—	$	90,094	$	(3,212)	$	90,094	$	(3,212)
U.S. agency securities	—		—		14,858		(1,424)		14,858		(1,424)
State, county & municipal securities	1,461		(78)		103,500		(13,781)		104,961		(13,859)
Mortgage-backed securities	—		—		177,442		(25,316)		177,442		(25,316)
	$	1,461	$	(78)	$	385,894	$	(43,733)	$	387,355	$	(43,811)

Management evaluates available-for-sale securities in an unrealized loss position at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation to determine if credit-related impairment exists. Management first evaluates whether they intend to sell or more likely than not will be required to sell an impaired security

16

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

before recovering its amortized cost basis. If either criteria is met, the entire amount of unrealized loss is recognized in earnings with a corresponding adjustment to the security's amortized cost basis. If either of the above criteria is not met, management evaluates whether the decline in fair value is attributable to credit or resulted from other factors. The Company does not intend to sell these investment securities in an unrealized loss position as of June 30, 2024, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Based on management's review, the Company's available-for-sale securities have no expected credit losses and no related allowance for credit losses has been established.

The Company uses a systematic methodology to determine its ACL for debt securities held-to-maturity considering the effects of past events, current conditions, and reasonable and supportable forecasts on the collectibility of the portfolio. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the held-to-maturity portfolio. The Company monitors the held-to-maturity portfolio on a quarterly basis to determine whether a valuation account would need to be recorded. Based on management's review, the Company's held-to-maturity securities have no expected credit losses and no related allowance for credit losses has been established.

At June 30, 2024, there were 261 available-for-sale securities and 155 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 due to reasons of credit quality.

The Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326), as amended on January 1, 2023 which included evaluation of expected credit losses on debt securities. As part of the Company's calculated credit losses, the allowance for credit losses on investment securities was determined to be de minimis due to the high credit quality of the portfolio, which includes securities issued or guaranteed by the U.S. treasury and U.S. government agencies and high quality municipalities. Therefore, no allowance for credit losses was recorded as of June 30, 2024. See Note 1 for additional details on the allowance for credit losses as it relates to the securities portfolio.

(3) Loans

The following table presents the composition of loans segregated by class of loans, as of June 30, 2024 and December 31, 2023.

(dollars in thousands)	June 30, 2024		December 31, 2023
Construction, land & land development	$	199,916	$	247,146
Other commercial real estate	985,102		974,375
Total commercial real estate	1,185,018		1,221,521
Residential real estate	360,847		356,234
Commercial, financial & agricultural	242,205		242,756
Consumer and other	77,504		62,959
Total Loans	$	1,865,574	$	1,883,470

17

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Included in the above table are government guaranteed loans totaling $96.3 million at June 30, 2024 and $86.8 million at December 31, 2023. The following table presents the composition of government guaranteed loans segregated by class of loans for each respective period.

(dollars in thousands)	June 30, 2024		December 31, 2023
Construction, land & land development	$	4,190	$	7,027
Other commercial real estate	52,444		40,852
Total commercial real estate	56,634		47,879
Residential real estate	9,377		12,170
Commercial, financial & agricultural	30,254		26,716
Consumer and other	—		—
Total Loans	$	96,265	$	86,765

The Company elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this note. As of June 30, 2024 and December 31, 2023, accrued interest receivable for loans totaled $8.8 million and $8.8 million, respectively, and is included in the "Other assets" line item on the Company’s consolidated balance sheet.

Commercial, financial & agricultural loans are extended to a diverse group of businesses within the Company’s market area. These loans are often underwritten based on the borrower’s ability to service the debt from income from the business. Real estate construction loans often require loan funds to be advanced prior to completion of the project. Due to uncertainties inherent in estimating construction costs, changes in interest rates and other economic conditions, these loans often pose a higher risk than other types of loans. Consumer and other 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. For commercial loans over $500,000, 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 - Loans 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.

•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 include “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 credit losses. Generally, loans on which interest accrual has been stopped would be included in this grade range.

•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

18

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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. 

For smaller commercial loans (under $500,000) and consumer loans, the Company began using behavioral based risk grades during the second quarter of 2024. These loans are assigned risk grades of 98 or 99 based on payment performance with the Company.

◦Grade 98 - Loans assigned this risk grade indicates a "pass" credit.

◦Grade 99 - Loans assigned this risk grade indicates a "substandard" credit and is moved to a nonaccrual status.

The following tables present the loan portfolio segregated by class of loans and the risk category of term loans by vintage year, which is the year of origination or most recent renewal, as of June 30, 2024 and December 31, 2023. Those loans with a risk grade of 1, 2, 3, 4, 5 and 98 have been combined in the pass line for presentation purposes. Loans with a risk grade of 7, 8 and 99 have been combined in the substandard line. There were no loans with a risk rating of "doubtful" or "loss" at June 30, 2024 or December 31, 2023.

	Term Loans Amortized Cost Basis by Origination Year
(dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolvers		Revolvers converted to term loans		Total
June 30, 2024
Construction, land & land development
Risk rating
Pass	$	44,124	$	70,360	$	51,070	$	24,673	$	2,727	$	6,273	$	63	$	—	$	199,290
Special Mention	—		291		—		—		—		—		281		—		572
Substandard	—		—		—		—		—		54		—		—		54
Total Construction, land & land development	44,124		70,651		51,070		24,673		2,727		6,327		344		—		199,916
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other commercial real estate
Risk rating
Pass	13,935		83,226		348,545		192,294		81,713		208,832		22,835		2,177		953,557
Special Mention	812		1,400		4,654		457		1,470		7,612		610		539		17,554
Substandard	—		1,590		10,118		396		355		725		807		—		13,991
Total Other commercial real estate	14,747		86,216		363,317		193,147		83,538		217,169		24,252		2,716		985,102
Current period gross write offs	—		—		—		—		—		20		—		—		20
Residential real estate
Risk rating
Pass	8,407		83,088		118,146		50,323		20,485		49,756		23,929		1,283		355,417
Special Mention	—		1,238		—		—		—		2,024		—		—		3,262
Substandard	—		—		552		357		69		1,190		—		—		2,168
Total Residential real estate	8,407		84,326		118,698		50,680		20,554		52,970		23,929		1,283		360,847
Current period gross write offs	—		—		340		—		—		—		—		—		340
Commercial, financial & agricultural
Risk rating
Pass	31,715		52,528		41,998		16,573		10,535		16,555		64,512		608		235,024
Special Mention	—		598		—		95		173		—		241		—		1,107
Substandard	71		712		2,076		1,804		361		272		771		7		6,074

19

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Total Commercial, financial & agricultural	31,786		53,838		44,074		18,472		11,069		16,827		65,524		615		242,205
Current period gross write offs	23		350		432		179		20		10		—		—		1,014
Consumer and other
Risk rating
Pass	36,250		34,034		3,065		1,397		832		1,422		425		11		77,436
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		60		—		1		3		4		—		—		68
Total Consumer and other	36,250		34,094		3,065		1,398		835		1,426		425		11		77,504
Current period gross write offs	—		186		23		—		—		42		—		—		251
Total Loans
Risk rating
Pass	134,431		323,236		562,824		285,260		116,292		282,838		111,764		4,079		1,820,724
Special Mention	812		3,527		4,654		552		1,643		9,636		1,132		539		22,495
Substandard	71		2,362		12,746		2,558		788		2,245		1,578		7		22,355
Total Loans	$	135,314	$	329,125	$	580,224	$	288,370	$	118,723	$	294,719	$	114,474	$	4,625	$	1,865,574
Total current period gross write offs	$	23	$	536	$	795	$	179	$	20	$	72	$	—	$	—	$	1,625

	Term Loans Amortized Cost Basis by Origination Year
(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolvers		Revolvers converted to term loans		Total
December 31, 2023
Construction, land & land development
Risk rating
Pass	$	112,587	$	91,981	$	27,332	$	5,654	$	1,000	$	5,765	$	605	$	31	$	244,955
Special Mention	792		—		25		—		—		29		282		—		1,128
Substandard	—		888		4		—		20		151		—		—		1,063
Total Construction, land & land development	113,379		92,869		27,361		5,654		1,020		5,945		887		31		247,146
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other commercial real estate
Risk rating
Pass	61,816		341,656		204,145		88,629		79,123		145,374		24,158		2,031		946,932
Special Mention	75		3,251		766		2,113		5,733		4,694		545		48		17,225
Substandard	2,303		2,615		211		—		486		4,395		208		—		10,218
Total Other commercial real estate	64,194		347,522		205,122		90,742		85,342		154,463		24,911		2,079		974,375
Current period gross write offs	—		—		69		—		—		—		—		—		69
Residential real estate
Risk rating
Pass	78,088		116,704		50,986		21,892		8,510		43,038		22,642		100		341,960
Special Mention	856		466		10		50		679		4,687		424		—		7,172
Substandard	—		1,169		384		296		272		4,735		246		—		7,102

20

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Total Residential real estate	78,944		118,339		51,380		22,238		9,461		52,460		23,312		100		356,234
Current period gross write offs	253		492		26		—		—		—		—		—		771
Commercial, financial & agricultural
Risk rating
Pass	66,820		51,439		21,673		12,489		4,734		14,002		58,607		306		230,070
Special Mention	4,186		894		376		745		188		40		974		—		7,403
Substandard	164		1,872		1,979		190		25		165		866		22		5,283
Total Commercial, financial & agricultural	71,170		54,205		24,028		13,424		4,947		14,207		60,447		328		242,756
Current period gross write offs	150		168		408		200		9		134		—		—		1,069
Consumer and other
Risk rating
Pass	53,117		4,021		2,004		1,240		925		908		462		1		62,678
Special Mention	79		42		38		12		25		1		—		—		197
Substandard	43		20		3		5		4		9		—		—		84
Total Consumer and other	53,239		4,083		2,045		1,257		954		918		462		1		62,959
Current period gross write offs	9		12		10		2		—		2		—		—		35
Total Loans
Risk rating
Pass	372,428		605,801		306,140		129,904		94,292		209,087		106,474		2,469		1,826,595
Special Mention	5,988		4,653		1,215		2,920		6,625		9,451		2,225		48		33,125
Substandard	2,510		6,564		2,581		491		807		9,455		1,320		22		23,750
Total Loans	$	380,926	$	617,018	$	309,936	$	133,315	$	101,724	$	227,993	$	110,019	$	2,539	$	1,883,470
Total current period gross write offs	$	412	$	672	$	513	$	202	$	9	$	136	$	—	$	—	$	1,944

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 7, 8, 9, 10 or 99 and an outstanding balance of $500,000 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 credit 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.

Collateral-Dependent Loans

We classify a loan as collateral-dependent when our borrower is experiencing financial difficulty, and we expect repayment to be provided substantially through the operation or sale of collateral. Our commercial loans have collateral that is comprised of real estate and business assets. Our consumer loans have collateral that is substantially comprised of residential real estate. The Company had $1.4 million in collateral-dependent loans at June 30, 2024 and December 31, 2023.

21

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

There were no significant changes in the extent to which collateral secures our collateral-dependent loans during the three and six month periods ended June 30, 2024.

The following table presents the aging of the amortized cost basis of loans by aging category and accrual status as of June 30, 2024 and December 31, 2023:

(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
June 30, 2024
Construction, land & land development	$	4	$	—	$	4	$	54	$	199,858	$	199,916
Other commercial real estate	1,071		—		1,071		1,894		982,137		985,102
Total commercial real estate	1,075		—		1,075		1,948		1,181,995		1,185,018
Residential real estate	4,999		—		4,999		2,131		353,717		360,847
Commercial, financial & agricultural	488		—		488		2,520		239,197		242,205
Consumer and other	251		41		292		70		77,142		77,504
Total Loans	$	6,813	$	41	$	6,854	$	6,669	$	1,852,051	$	1,865,574
December 31, 2023
Construction, land & land development	$	812	$	—	$	812	$	85	$	246,249	$	247,146
Other commercial real estate	1,796		—		1,796		4,219		968,360		974,375
Total commercial real estate	2,608		—		2,608		4,304		1,214,609		1,221,521
Residential real estate	2,503		350		2,853		3,561		349,820		356,234
Commercial, financial & agricultural	775		—		775		1,956		240,025		242,756
Consumer and other	183		20		203		18		62,738		62,959
Total Loans	$	6,069	$	370	$	6,439	$	9,839	$	1,867,192	$	1,883,470

The following tables display a summary of the Company's nonaccrual loans by major categories for the periods indicated.

	June 30, 2024
(dollars in thousands)	Nonaccrual Loans with No Related ACL		Nonaccrual Loans with a Related ACL		Total Nonaccrual Loans
Construction, land & land development	$	—	$	54	$	54
Other commercial real estate	—		1,894		1,894
Total commercial real estate	—		1,948		1,948
Residential real estate	—		2,131		2,131
Commercial, financial & agricultural	—		2,520		2,520
Consumer and other	—		70		70
Total Loans	$	—	$	6,669	$	6,669

22

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

	December 31, 2023
(dollars in thousands)	Nonaccrual Loans with No Related ACL		Nonaccrual Loans with a Related ACL		Total Nonaccrual Loans
Construction, land & land development	$	27	$	58	$	85
Other commercial real estate	2,806		1,413		4,219
Total commercial real estate	2,833		1,471		4,304
Residential real estate	725		2,836		3,561
Commercial, financial & agricultural	—		1,956		1,956
Consumer and other	—		18		18
Total Loans	$	3,558	$	6,281	$	9,839

Interest income recorded on nonaccrual loans during the three months ended June 30, 2024 and 2023 was $135,000 and $206,000, respectively. Interest income recorded on nonaccrual loans during the six months ended June 30, 2024 and 2023 was $217,000 and $360,000, respectively.

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a discounted cash flow model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. Upon the Company's determination that a modified loan, or portion of a loan, has subsequently been deemed uncollectible, the loan, or portion of the loan, is written off.

The following tables present loans modified due to a financial difficulty under the above terms during the three and six month periods ended June 30, 2024.

	Three months ended June 30, 2024
(dollars in thousands)	Term Extension		Payment Delay		Term Extension and Payment Delay		Total*
Commercial, financial & agricultural	—		377		—		377
Total Loans	$	—	$	377	$	—	$	377
*less than .05% of total class of receivable

There was one loan in the above category for the three months ended June 30, 2024. The commercial, financial & agricultural loan had been given a payment delay.

23

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

	Six months ended June 30, 2024
(dollars in thousands)	Term Extension		Payment Delay		Term Extension and Payment Delay		Total*
Commercial real estate	$	131	$	—	$	145	$	276
Commercial, financial & agricultural	—		377		40		417
Total Loans	$	131	$	377	$	185	$	693
*less than .05% of total class of receivable

There were a total of four loans in the above categories for the six months ended June 30, 2024. The commercial real estate loans consist of two loans, each with a term extension of one year with one loan also given a payment delay. There were two commercial, financial & agricultural loans, each of which had been given a payment delay and one with a term extension of five years.

The Company had no loans that subsequently defaulted during the three and six month periods ended June 30, 2024 and for the year ended December 31, 2023.

24

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(4) Allowance for Credit Losses

The ACL for loans represents management's estimate of life of loan credit losses in the portfolio as of the end of the period. The ACL related to unfunded commitments is included in other liabilities in the consolidated balance sheet. The following tables present the balance sheet activity in the ACL by portfolio segment for loans for the three and six month periods ended June 30, 2024 and June 30, 2023.

(dollars in thousands)	Balance, March 31, 2024		Charge-Offs		Recoveries		Provision for credit losses on loans		Balance, June 30, 2024
Three Months Ended June 30, 2024
Construction, land & land development	$	2,046	$	—	$	1	$	(752)	$	1,295
Other commercial real estate	7,389		—		9		(2)		7,396
Total commercial real estate	9,435		—		10		(754)		8,691
Residential real estate	5,327		(270)		39		894		5,990
Commercial, financial & agricultural	2,020		(356)		37		314		2,015
Consumer and other	1,875		(131)		4		362		2,110
Total allowance for credit losses on loans	$	18,657	$	(757)	$	90	$	816	$	18,806

(dollars in thousands)	Balance, December 31, 2023		Charge-Offs		Recoveries		Provision for credit losses on loans		Balance, June 30, 2024
Six Months Ended June 30, 2024
Construction, land & land development	$	2,204	$	—	$	2	$	(911)	1,295
Other commercial real estate	7,064		(20)		18		334		7,396
Total commercial real estate	9,268		(20)		20		(577)		8,691
Residential real estate	5,105		(340)		207		1,018		5,990
Commercial, financial & agricultural	2,110		(1,014)		59		860		2,015
Consumer and other	1,888		(251)		8		465		2,110
Total allowance for credit losses on loans	$	18,371	$	(1,625)	$	294	$	1,766	$	18,806

25

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(dollars in thousands)	Balance, March 31, 2023		Charge-Offs		Recoveries		Provision for credit losses on loans		Balance, June 30, 2023
Three Months Ended June 30, 2023
Construction, land & land development	$	2,342	$	—	$	5	$	(66)	$	2,281
Other commercial real estate	8,122		—		11		600		8,733
Total commercial real estate	10,464		—		16		534		11,014
Residential real estate	4,112		—		26		(1,496)		2,642
Commercial, financial & agricultural	1,657		(170)		160		1,337		2,984
Consumer and other	366		—		5		55		426
Total allowance for loan losses	$	16,599	$	(170)	$	207	$	430	$	17,066

(dollars in thousands)	Balance December 31, 2021				Charge-Offs		Recoveries		Provision		Balance, September 30, 2022
Six Months Ended June 30, 2023	Balance December 31, 2022		Adoption of ASU 2016-13		Charge-Offs		Recoveries		Provision for credit losses on loans		Balance, June 30, 2023
Construction, land & land development	$	1,959	$	148	$	—	$	8	$	166	$	2,281
Other commercial real estate	8,886		(630)		—		25		452		8,733
Total commercial real estate	10,845		(482)		—		33		618		11,014
Residential real estate	2,354		1,053		—		37		(802)		2,642
Commercial, financial & agricultural	2,709		(690)		(443)		167		1,241		2,984
Consumer and other	220		66		(3)		9		134		426
Total allowance for loan losses	$	16,128	$	(53)	$	(446)	$	246	$	1,191	$	17,066

Colony used a one-year reasonable and supportable forecast period. The changes in loss rates used as the basis for the estimate of credit losses during this period were modeled using historical data from peer banks and macroeconomic forecast data obtained from a third party vendor, which were then applied to Colony's recent default experience as a starting point. As of June 30, 2024, the Company expects that the markets in which it operates will experience stable economic and unemployment conditions with the trend of delinquencies returning to more normalized levels, over the next two years. Management adjusted the historical loss experience for these expectations. No reversion adjustments were necessary, as the starting point for the Company's estimate was a cumulative loss rate covering the expected contractual term of the portfolio.

The Company determines its individual reserves during its quarterly review of substandard loans. This process involves reviewing all loans with a risk grade of 7, 8, 9, 10 or 99 and an outstanding balance of $500,000 or more, regardless of the loans impairment classification.

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable. The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss

26

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded commitments is separately classified on the balance sheet within other liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded commitments for the three and six month periods ended June 30, 2024 and June 30, 2023.

	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2024		2023		2024		2023
Beginning balance	$	1,425	$	1,800	$	1,375	$	—
Adjustment to allowance for unfunded commitments for adoption of ASU 2016-13	—		—		—		1,661
Change in unfunded commitments	(166)		(230)		(116)		(91)
Ending balance	$	1,259	$	1,570	$	1,259	$	1,570

(5) Derivatives

As part of its asset liability management activities, the Company may enter into interest rate swaps to help manage its interest rate risk position and mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company entered into two interest rate swaps during the second quarter of 2023, to hedge the variability of cash flows due to changes in the benchmark Secured Overnight Financing Rate ("SOFR") interest rate risk for its short-term funding over the term of these cash flow hedges.

The notional amount of an interest rate swap does not represent the amount exchanged by the parties. The exchange of cash flows is determined by reference to the notional amount and the other terms of the interest rate swap agreements.

On June 23, 2023, the Company entered into a five-year interest rate swap with a notional amount totaling $25.0 million. On June 26, 2023 the Company entered into a three-year interest rate swap with a notional amount totaling $25.0 million. Both of the swaps were designated as cash flow hedges of certain variable rate liabilities.

The derivatives are recorded in "Other assets" on the Company's balance sheet and have a value of $531,000 as of June 30, 2024.

Gains were recorded on the swap transactions, which totaled $177,000 and $351,000 for the three and six months ended June 30, 2024, respectively, and $9,000 for both the three and six months ended June 30, 2023, as a component of interest expense in the consolidated statements of income. Amounts reported in accumulated OCI related to swaps are reclassified to interest expense as interest payments are made on the Bank's variable rate liabilities.

The following table presents the amounts recorded in the consolidated statements of income and the consolidated statements of comprehensive income relating to the interest rate swaps for the three and six months ended June 30, 2024 and 2023.

	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2024		2023		2024		2023
Amount of gain recognized in OCI, net of tax	$	126	$	199	$	722	$	199
Amount of gain reclassified from OCI to interest expense, net of tax	140		7		$	277	7

27

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(6) Borrowings

The following table presents information regarding the Company’s outstanding borrowings at June 30, 2024 and December 31, 2023:

(dollars in thousands)	June 30, 2024		December 31, 2023
Federal Home Loan Bank advances	205,000		175,000
Other borrowings	62,992		63,445
	$	267,992	$	238,445

Advances from the Federal Home Loan Bank (“FHLB”) have maturities ranging from 2024 to 2029 and interest rates ranging from 3.69% to 5.57%. As collateral on the outstanding FHLB advances, the Company has provided a blanket lien on its portfolio of qualifying residential first mortgage loans, commercial real estate loans, farmland loans, multifamily loans and HELOC loans. At June 30, 2024, the lendable collateral value of those loans pledged is $213.7 million. At June 30, 2024, the Company had remaining credit availability from the FHLB of $546.3 million. The Company may be required to pledge additional qualifying collateral in order to utilize the full amount of the remaining credit line.

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 June 30, 2024 and December 31, 2023, $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.

The Company also has fixed-to-floating rate subordinated notes which are due 2032 (the "Notes"). The Notes will bear a fixed rate of 5.25% for the first five years and will reset quarterly thereafter to then current three-month SOFR, as published by the Federal Reserve Bank of New York, plus 265 basis points for the five-year floating term. The Company is entitled to redeem the Notes, in whole or in part, on any interest payment date on or after May 20, 2027, or at any time, in whole but not in part, upon certain other specified events. At June 30, 2024 and December 31, 2023, $38.8 million and $39.2 million, respectively, of the Notes, net of debt issuance costs were outstanding. The Notes are recorded as other borrowings on the consolidated balance sheets and, subject to certain limitations, qualify as Tier 2 capital for regulatory capital purposes.

The aggregate stated maturities of other borrowed money at June 30, 2024 are as follows:

(dollars in thousands)
Year	Amount
2024	$	70,000
2025	—
2026	25,000
2027	15,000
2028	65,000
2029 and After	92,992
	$	267,992

The Company also has available federal funds lines of credit with various financial institutions totaling $64.5 million, with no outstanding balance at June 30, 2024.

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 June 30, 2024, the Company had $107.8 million 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.

28

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(7) 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 six months ended June 30, 2024 and 2023.

(dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator
Net income available to common stockholders	$	5,474	$	5,302	$	10,807	$	10,345
Denominator
Weighted average number of common shares
Outstanding for basic earnings per common share	17,551,007		17,580,557		17,555,609		17,588,081
Weighted-average number of shares outstanding for diluted earnings per common share	17,551,007		17,580,557		17,555,609		17,588,081
Earnings per share - basic	$	0.31	$	0.30	$	0.62	$	0.59
Earnings per share - diluted	$	0.31	$	0.30	$	0.62	$	0.59

(8) 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 June 30, 2024 and December 31, 2023 the following financial instruments were outstanding whose contract amounts represent credit risk:

29

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

 

	Contract Amount
(dollars in thousands)	June 30, 2024		December 31, 2023
Loan commitments	$	338,106	$	362,878
Letters of credit	5,318		5,656

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 June 30, 2024, 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.

(9) 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.

30

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– 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, net – 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.

Derivative instruments – The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The interest rate swaps are classified as Level 2.

Deposits – 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 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.

31

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 June 30, 2024 and December 31, 2023 are as follows:

	Fair Value Measurements
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
June 30, 2024
Assets
Cash and short-term investments	$	82,002	$	82,002	$	82,002	$	—	$	—
Investment securities available-for-sale	376,580		376,580		—		367,207		9,373
Investment securities held-to-maturity	442,945		393,359		—		393,359		—
Other investments	18,491		18,491		—		18,491		—
Loans held for sale	40,132		40,132		—		40,132		—
Loans, net	1,846,768		1,701,073		—		—		1,701,073
Derivative instruments	531		531		—		531		—
Liabilities
Deposits	2,460,225		2,454,409		—		2,454,409		—
Federal Home Loan Bank advances	205,000		207,372		—		207,372		—
Other borrowings	62,992		50,554		—		50,554		—

	Fair Value Measurements
(dollars in thousands)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2023
Assets
Cash and short-term investments	$	83,322	$	83,322	$	83,322	$	—	$	—
Investment securities available-for-sale	407,382		407,382		—		396,568		10,814
Investment securities held-to-maturity	449,031		405,576		—		405,576		—
Other investments	16,868		16,868		—		16,868		—
Loans held for sale	27,958		27,958		—		27,958		—
Loans, net	1,865,099		1,699,870		—		—		1,699,870
Liabilities
Deposits	2,544,790		2,538,477		—		2,538,477		—
Federal Home Loan Bank advances	175,000		176,022		—		176,022		—
Other borrowings	63,445		51,056		—		51,056		—
Derivative instruments	438		438		—		438		—

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.

32

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.

Collateral dependent loans – 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.

33

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis – The following tables present the recorded amount of the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis as of June 30, 2024 and December 31, 2023, aggregated by the level in the fair value hierarchy within which those measurements fall. The tables below include collateral dependent impaired loans and other real estate properties at June 30, 2024 and December 31, 2023. Those collateral dependent 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)
June 30, 2024
Recurring
Investment securities available-for-sale
U.S. treasury securities	$	7,058	$	—	$	7,058	$	—
U.S. agency securities	3,848		—		3,848		—
Asset backed securities	21,910		—		21,910		—
State, county & municipal securities	97,165		—		97,165		—
Corporate debt securities	46,724		—		40,166		6,558
Mortgage-backed securities	199,875		—		197,060		2,815
Total investment securities available-for-sale	376,580		—		367,207		9,373
Loans held for sale	40,132		—		40,132		—
Derivative instruments	531		—		531		—
Total recurring assets	$	417,243	$	—	$	407,870	$	9,373
Nonrecurring
Collateral dependent loans	$	1,427	$	—	$	—	$	1,427
Other real estate owned	582		—		—		582
Total nonrecurring assets	$	2,009	$	—	$	—	$	2,009

			Fair Value Measurements at Reporting Date Using
(dollars in thousands)	Total Fair Value		(Level 1)		(Level 2)		(Level 3)
December 31, 2023
Recurring
Investment securities available-for-sale
U.S. treasury securities	$	498	$	—	$	498	$	—
U.S. agency securities	4,139		—		4,139		—
Asset backed securities	24,630		—		24,630		—
State, county & municipal securities	109,036		—		109,036		—
Corporate debt securities	47,390		—		40,465		6,925
Mortgage-backed securities	221,689		—		217,800		3,889
Total investment securities available-for-sale	407,382		—		396,568		10,814
Loans held for sale	27,958		—		27,958		—
Total recurring assets	$	435,340	$	—	$	424,526	$	10,814
Derivative instruments	$	438	$	—	$	438	$	—
Total recurring liabilities	$	438	$	—	$	438	$	—
Nonrecurring
Collateral dependent loans	$	1,410	$	—	$	—	$	1,410
Other real estate owned	448		—		—		448
Total nonrecurring assets	$	1,858	$	—	$	—	$	1,858

34

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 June 30, 2024 and December 31, 2023. This table is comprised of collateral dependent impaired loans and other real estate owned:

(dollars in thousands)	June 30, 2024		Valuation Techniques	Unobservable Inputs	Discount rate
Collateral dependent loans	$	1,427	Appraised Value	Discounts to reflect estimated costs to sell		10	%
Other real estate owned	582		Appraised Value/Comparable Sales	Discounts to reflect current market conditions and estimated costs to sell		10	%

(dollars in thousands)	December 31, 2023		Valuation Techniques	Unobservable Inputs	Discount rate
Collateral dependent loans	$	1,410	Appraised Value	Discounts to reflect estimated costs to sell		10	%
Other real estate owned	448		Appraised Value/Comparable Sales	Discounts to reflect current market conditions and estimated costs to sell		10	%

35

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 June 30, 2024 and December 31, 2023.

	As of June 30, 2024
(dollars in thousands)	Fair Value		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Available-for-sale securities	$	9,373	Discounted Cash Flow	Discount Rate or Yield	N/A*

	As of December 31, 2023
(dollars in thousands)	Fair Value		Valuation Techniques	Unobservable Inputs	Range (Weighted Avg)
Available-for-sale securities	$	10,814	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 six months ended June 30, 2024.

	Three Months Ended		Six Months Ended
	June 30, 2024		June 30, 2024
(dollars in thousands)	Available-for-sale securities			Available-for-sale securities
Balance, Beginning	$	7,145		$	10,814
Additions	2,588			2,588
Redemptions/Payments	(338)			(3,251)
Fair value adjustments	(22)			1,647
Transfers between levels	—			(2,425)
Balance, Ending	$	9,373		$	9,373

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 between levels for the three month periods ended June 30, 2024 and 2023 and $2.4 million and $380,000 in transfers between levels for the six month periods ended June 30, 2024 and 2023, respectively.

36

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(10) 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 assessed based on income before income taxes, and indirect expenses (including 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 six months ended June 30, 2024

37

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

and 2023:

(dollars in thousands)	Bank		Mortgage Banking		Small Business Specialty Lending Division		Totals
Six Months Ended June 30, 2024
Net Interest Income	$	34,769	$	90	$	2,204	$	37,063
Provision for Credit Losses	551		—		1,099		1,650
Noninterest Income	10,766		2,621		5,597		18,984
Noninterest Expenses	34,264		2,544		3,919		40,727
Income Taxes	2,226		43		594		2,863
Segment Profit	$	8,494	$	124	$	2,189	$	10,807
Segments Assets at June 30, 2024	$	2,889,013	$	19,004	$	99,890	$	3,007,907
Full time employees at June 30, 2024	385		42		33		460

(dollars in thousands)	Bank		Mortgage Banking		Small Business Specialty Lending Division		Totals
Six Months Ended June 30, 2023
Net Interest Income	$	38,700	$	34	$	1,015	$	39,749
Provision for Credit Losses	960		—		140		1,100
Noninterest Income	10,351		3,292		2,968		16,611
Noninterest Expenses	35,462		3,683		3,452		42,597
Income Taxes	2,312		(72)		78		2,318
Segment Profit	$	10,317	$	(285)	$	313	$	10,345
Segments Assets at December 31, 2023	$	2,956,121	$	7,890	$	89,411	$	3,053,422
Full time employees at June 30, 2023	383		51		32		466

(dollars in thousands)	Bank		Mortgage Banking		Small Business Specialty Lending Division		Totals
Three Months Ended June 30, 2024
Net Interest Income	$	17,217	$	50	$	1,142	$	18,409
Provision for Credit Losses	96		—		554		650
Noninterest Income	5,086		1,456		2,955		9,497
Noninterest Expenses	17,135		1,326		1,869		20,330
Income Taxes	1,060		42		350		1,452
Segment Profit	$	4,012	$	138	$	1,324	$	5,474

38

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 June 30, 2023
Net Interest Income	$	18,562	$	31	$	588	$	19,181
Provision for Credit Losses	60		—		140		200
Noninterest Income	5,433		2,015		1,504		8,952
Noninterest Expenses	17,650		1,971		1,811		21,432
Income Taxes	1,157		14		28		1,199
Segment Profit	$	5,128	$	61	$	113	$	5,302

39

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(11) 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 June 30, 2024, 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 tables below, and have met certain other requirements. Management believes that the Company and the Bank exceeded all well-capitalized requirements at June 30, 2024, and there have been no conditions or events since quarter-end that would change the status of well-capitalized.

The following tables summarize regulatory capital information as of June 30, 2024 and December 31, 2023 on a consolidated basis and for the subsidiary, as defined.  Regulatory capital ratios for June 30, 2024 and December 31, 2023 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 June 30, 2024
Total Capital to Risk-Weighted Assets
Consolidated	$	342,134	16.17	%	$	169,269	8.00	%	$	211,586	10.00	%
Colony Bank	312,286		14.80		168,803		8.00		211,004		10.00
Tier 1 Capital to Risk-Weighted Assets
Consolidated	283,305		13.39		126,948		6.00		169,264		8.00
Colony Bank	292,220		13.85		126,594		6.00		168,791		8.00
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated	259,076		12.25		95,171		4.50		137,469		6.50
Colony Bank	292,220		13.85		94,945		4.50		137,143		6.50
Tier 1 Capital to Average Assets
Consolidated	283,305		9.44		120,044		4.00		150,056		5.00
Colony Bank	292,220		9.76		119,762		4.00		149,703		5.00

40

COLONY BANKCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(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, 2023
Total Capital to Risk-Weighted Assets
Consolidated	$	337,159	15.47	%	$	174,355	8.00	%	$	217,944	10.00	%
Colony Bank	300,497		13.85		173,572		8.00		216,965		10.00
Tier 1 Capital to Risk-Weighted Assets
Consolidated	278,196		12.77		130,711		6.00		174,281		8.00
Colony Bank	280,751		12.94		130,178		6.00		173,571		8.00
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated	253,967		11.66		98,015		4.50		141,577		6.50
Colony Bank	280,751		12.94		97,634		4.50		141,026		6.50
Tier 1 Capital to Average Assets
Consolidated	278,196		9.17		121,350		4.00		151,688		5.00
Colony Bank	280,751		9.28		121,013		4.00		151,267		5.00

(12) Subsequent Events

Dividend

On July 24, 2024, the Board of Directors declared a quarterly cash dividend of $0.1125 per share, to be paid on its common stock on August 21, 2024, to shareholders of record as of the close of business on August 7, 2024.

41

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, 2023 through June 30, 2024 and on our results of operations for the three and six months ended June 30, 2024 and 2023. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto in the Company's 2023 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. 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: 

•the impact of current and future economic and market conditions generally (including seasonality) and in the financial services industry, nationally and within our primary market areas, including the effects of inflationary pressures, changes in interest rates (including the impact of prolonged elevated interest rates on our financial projections and models), slowdowns in economic growth, and the potential for high unemployment rates, as well as the financial stress on borrowers and changes to customer and client behavior (including the velocity of loan repayment) and credit risk as a result of the foregoing

•changes in interest rate environment (including changes to the federal funds rate, the level and composition of deposits (as well as the cost of, and competition for, deposits), loan demand, liquidity and the values of loan collateral, securities and market fluctuations, and interest rate sensitive assets and liabilities), and competition in our markets may result in increased funding costs or reduced earning assets yields, thus reducing our margins and net interest income;

•our ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets;

•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 prolonged elevated interest rates 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 and credit quality of our borrowers and the success of various projects that we finance;

•concentration of our loan portfolio in real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate;

•weakness in the real estate market, which can affect, among other things, the value of collateral securing mortgage loans, mortgage loan originations and delinquencies, and mortgage fee income;

42

•credit and lending risks associated with our construction and development, commercial real estate, commercial and industrial and residential real estate loan portfolios;

•factors that negatively impact our mortgage banking services, including declines in our mortgage originations or profitability due to rising or elevated interest rates and increased competition and regulation, the Bank’s or third party’s failure to satisfy mortgage servicing obligations, loan modifications, the effects of judicial or regulatory requirements or guidance, and the possibility of the Bank being required to repurchase mortgage loans or indemnify buyers;

•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;

•our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses ("ACL");

•the adequacy of our reserves (including ACL) and the appropriateness of our methodology for calculating such reserves;

•adverse developments in the banking industry highlighted by high-profile bank failures and the impact of such developments on customer confidence, liquidity and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments and increased regulatory scrutiny), our ability to effectively manage our liquidity risk and any growth plans and the availability of capital and funding;

•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, Alabama, Florida and neighboring markets;

•our focus on small and mid-sized businesses;

•our ability to manage our growth;

•our ability to increase our operating efficiency;

•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;

•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 (including by virtue of our relationships with third party business partners, as well as our relationships with third party vendors and other service providers), strategic risk, reputational risk and other risks inherent to the business of banking;

•our ability to maintain expenses in line with current projections;

•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, the possibility that the U.S. could default on its debt obligations, 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;

•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;

43

•restraints on the ability of the Bank to pay dividends to us, which could limit our liquidity;

•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 prevent, identify and address cyber-security risks (which may be exacerbated by the development of generative artificial intelligence), fraud and systems errors;

•disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems, and the cost of defending against them and any reputational or other financial risks following such a cybersecurity incident;

•our business relationships with, and reliance upon, third parties that have strategic partnerships with us or that provide key components of our business infrastructure, including the costs of services and products provided to us by third parties, and disruptions in service, security breaches, financial difficulties with or other adverse events affecting a third-party vendor or business relationship;

•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, including the risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and may reduce the anticipated benefit;

•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 institution and outcome of litigation and other legal proceedings against us or to which we may become subject to;

•the impact of recent and future legislative and regulatory changes;

•examinations by our regulatory authorities;

44

•the effects of war or other conflicts (including the military conflict between Russia and Ukraine or the conflict in Israel and surrounding areas), acts of terrorism, acts of God, natural disasters, health emergencies, epidemics or pandemics, climate changes, or other catastrophic events that may affect general economic conditions;

•risks related to environmental, social and governance ("ESG") strategies and initiatives, the scope and pace of which could alter the Company's reputation and shareholder, associate, customer and third-party affiliations;

•a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget; and

•other risks and factors identified in our 2023 Form 10-K, this Quarterly Report on Form 10-Q for the period ended June 30, 2024, 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.

Overview

The following discussion and analysis presents the more significant factors affecting the Company’s financial condition as of June 30, 2024 and December 31, 2023, and results of operations for the three and six month periods ended June 30, 2024 and 2023. 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 June 30, 2024, the Company had total consolidated assets of $3.0 billion, total loans, net of $1.8 billion, total deposits of $2.5 billion, and stockholders’ equity of $264.7 million. The Company reported net income of $5.5 million, or $0.31 per diluted share, for the three months ended June 30, 2024 and $10.8 million, or $0.62 per diluted share, for the first six months of 2024 compared to net income of $5.3 million, or $0.30 per diluted share, for the three months ended June 30, 2023 and $10.3 million, or $0.59 per diluted share, for the first six months of 2023. The increases in net income for the three and six months ended June 30, 2024 compared to the same periods ended June 30, 2023 was primarily the result of increased noninterest income from our complementary lines of business which include mortgage, small business specialty lending, marine/RV lending, insurance and wealth and merchant services coupled with the continued impact of the expense reduction initiative implemented in 2023 which included a reduction in force along with an intentional focus on expense control in all noninterest expense categories.

Net interest income on a tax equivalent basis was $18.6 million for the second quarter of 2024 compared to $19.3 million for the second quarter of 2023, a decrease of $747,000. Net interest income on a tax equivalent basis for the six months ended June 30, 2024 was $37.4 million, compared to $40.1 million for the six months ended June 30, 2023, a decrease of $2.7 million. Increases can be seen in income on interest earning assets which is more than offset by increases in expenses on interest bearing liabilities due to the significant rise in interest rates period over period along with increases in FHLB advances. Income on interest earning assets increased $2.6 million to $33.5 million for the second quarter of 2024 compared to the respective period in 2023. Expense on interest bearing liabilities increased $3.3 million to $14.9 million for the second quarter of 2024 compared to the respective period in 2023. Income on interest earning assets increased $7.6 million to $67.0 million for the first six months of 2024 compared to the respective period in 2023. Expense on interest bearing liabilities increased $10.2 million to $29.6 million for the first six months of 2024 compared to the respective period in 2023.

Provision for credit losses for the three and six months ended June 30, 2024 was $650,000 and $1.7 million, which represents $816,000 and $1.8 million in provision for credit losses on loans and $166,000 and $116,000 in release of credit losses on unfunded commitments, respectively. This is compared to $200,000 and $1.1 million for the three and six months ended June 30, 2023, which represents $430,000 and $1.2 million in provision for credit losses on loans and $230,000 and $91,000 in release of credit losses on unfunded commitments, respectively. For the second quarter of 2024, there were net charge-offs of $667,000 compared to net recoveries of $37,000 for the same period in 2023. Net charge-offs for the first six months of 2024 were $1.3 million compared to $200,000 for the same period in 2023. Although we did see an increase in loan charge-

45

offs, this uptick pertains to a small number of loans and does not raise any concerns regarding the quality of our overall loan portfolio. Colony’s allowance for credit losses on loans was $18.8 million, or 1.01% of total loans at June 30, 2024, compared to $18.4 million, or 0.98% of total loans, at December 31, 2023. At June 30, 2024 and December 31, 2023, nonperforming assets were $7.3 million and $10.7 million, or 0.24% and 0.35% of total assets, respectively.

Noninterest income of $9.5 million for the second quarter of 2024 represents an increase of $545,000, or 6.09%, from the second quarter of 2023. Noninterest income of $19.0 million for the six months ended June 30, 2024 represents an increase of $2.4 million, or 14.29%, compared to the same period of 2023. These increases were primarily related to increases in service charges on deposits, gain on sales of SBA loans and other noninterest income which were partially offset by decreases in mortgage fee income, interchange fee income and losses on sales of securities. See "Table 3 - Noninterest income" for more detail and discussion on the primary drivers to the variances in noninterest income.

For the three months ended June 30, 2024, noninterest expense was $20.3 million, a decrease of $1.1 million, or 5.14%, from the same period in 2023. For the six months ended June 30, 2024, noninterest expense was $40.7 million, a decrease of $1.9 million, or 4.39%, from the same period in 2023. Decreases in noninterest expense were a result of overall decreases in salaries and employee benefits expenses related to the Company's expense reduction initiative in 2023 which lowered the total number of employees period over period. Occupancy and equipment expenses, communications expenses, deposit related expenses and insurance expenses also saw decreases period over period which were partially offset by an increase in advertising and public relation expenses. See "Table 4 - Noninterest expense" for more detail and discussion on the primary drivers to the decrease in noninterest expense.

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 credit 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, 2023, which are included in the Company’s 2023 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. Other than our methodology for estimating allowance for credit losses (mentioned below), 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, 2023, which are included in the Company’s 2023 Form 10-K.

Allowance for Credit Losses

A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic conditions such as rising interest rates and the financial performance of borrower.

The allowance for credit losses consists of the allowance for credit losses (“ACL”) and the allowance for unfunded commitments. The standard replaced the “incurred loss” approach, which was used prior to our adoption of ASU No. 2016-13 on January 1, 2023, with an “expected loss” approach known as the Current Expected Credit Losses (“CECL”). The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred.”

The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable. The allowance for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit. This allowance is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur.

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Management’s evaluation of the appropriateness of the reserve for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the reserve for credit losses is a critical accounting estimate as it requires significant reliance on the credit risk rating we assign to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows, reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), local/regional economic trends and conditions, changes in underwriting standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.

Recent Industry Developments

During 2023, the banking industry experienced significant volatility with multiple high-profile bank failures which led to industry wide concerns related to liquidity, deposit outflows, uninsured deposit concentrations, unrealized securities losses and eroding consumer confidence in the banking system, which has begun to soften in 2024. These negative industry developments did not impact the Company’s liquidity position and our balance sheet remains robust. The Company’s total deposits did experience a minimal decline of 3.32% as compared to December 31, 2023, to $2.46 billion at June 30, 2024 which was due to wholesale deposit payoffs. Our customer deposits also saw a slight decline due to seasonality of deposits during this time of year, but we anticipate a return to growth in the coming quarters. The Company’s uninsured deposits represented 31.23% of total Bank deposits at June 30, 2024 compared to 30.22% of total Bank deposits at December 31, 2023. The Company continues to maintain strong liquidity with available sources of funding of approximately $1.2 billion at June 30, 2024. Furthermore, the Company’s capital remains strong with common equity Tier 1 and total capital ratios of 12.25% and 16.17%, respectively, as of June 30, 2024.

Results of Operations

We reported net income and diluted earnings per share of $5.5 million and $0.31, respectively, for the second quarter of 2024. This compares to net income and diluted earnings per share of $5.3 million and $0.30, respectively, for the same period in 2023. We reported net income and diluted earnings per share of $10.8 million and $0.62, respectively, for the first six months of 2024. This compares to net income and diluted earnings per share of $10.3 million and $0.59, respectively, for the same period in 2023.

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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: net interest spread and net interest margin. 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 second quarter of 2024 and 2023 was $18.6 million and $19.3 million, respectively. This decrease quarter over quarter can be seen in increases in rates paid on deposits and other borrowings which outpaced the increases in rates and volume on loans and deposits in banks. The net interest margin for the second quarter of 2024 and 2023 was 2.68% and 2.77%, respectively. This decrease in net interest margin for the second quarter of 2024 compared to the same period in 2023 is primarily a result of the increase in higher yields paid on deposits that outpaced the increase in rates on loans and deposits in banks. Fully taxable equivalent net interest income for the six months ended June 30, 2024 and 2023 was $37.4 million and $40.1 million, respectively. This decrease quarter over quarter can be seen in increases in rates paid on deposits and other borrowings which outpaced the increases in rates and volume on loans and deposits in banks. The net interest margin for the six months ended June 30, 2024 compared to the same period in 2023 was 2.69% and 2.92%, respectively. This decrease in net interest margin is primarily a result of the increase in higher yields paid on deposits that outpaced the increase in rates on loans and deposits in banks. While we did experience a decline in our net interest margin for both periods, the decrease was less pronounced than expected. The resilience in our margin performance highlights the effectiveness of our strategic initiatives aimed at optimizing our balance sheet and managing interest rate risks.

The following tables indicates 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 decreased for the three months ended June 30, 2024 compared to the same period in 2023. The decrease in average assets was primarily driven by the decrease in investment securities and deposits in banks of $68.4 million and $11.4 million, respectively, which was offset by an increase in the loan portfolio of $66.8 million. The decrease in average liabilities was primarily attributed to a decrease in borrowings of $7.8 million partially offset by an increase in interest bearing deposits of $4.5 million. For the six months ended June 30, 2024, both average assets and average liabilities increased compared to the same period in 2023. The increase in average assets was primarily driven by the increase in the loan portfolio and deposits in banks of $91.3 million and $4.5 million, respectively, partially offset by a decrease in investment securities of $62.7 million. The increase in average liabilities was funded through an increase in interest bearing deposits of $75.2 million partially offset by a decrease in borrowings of $10.2 million. The net interest spread, as well as the net interest margin, will continue to 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 2.04% in the second quarter of 2023 to 2.64% in the second quarter of 2024. The yield on total interest-bearing liabilities increased from 1.77% for the six months ended June 30, 2024 to 2.61% for the six months ended June 30, 2023. These increases were primarily due to increases in the federal funds interest rate of an additional 50 basis points during the second and third quarters of 2023.

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Table 1 - Average Balance Sheet and Net Interest Analysis
	Three Months Ended June 30,
	2024						2023
(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)	$	1,902,202	$	27,661	5.85	%	$	1,835,409	$	24,113	5.27	%
Investment securities, taxable	722,535		4,616		2.57		777,133		5,498		2.84
Investment securities, tax-exempt(2)	100,143		547		2.20		113,931		592		2.08
Deposits in banks and short term investments	62,614		684		4.39		73,988		708		3.84
Total interest-earning assets	$	2,787,494	$	33,508	4.83	%	$	2,800,461	$	30,911	4.43	%
Noninterest-earning assets	222,992						229,583
Total assets	$	3,010,486					$	3,030,044
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-earning demand and savings	$	1,451,300	$	6,784	1.88	%	$	1,372,569	$	3,422	1.00	%
Other time	577,173		5,322		3.71		651,426		5,134		3.16
Total interest-bearing deposits	2,028,473		12,106		2.40		2,023,995		8,556		1.70
Federal funds purchased	—		—				3,402		47		5.49
Federal Home Loan Bank advances	178,516		1,821		4.10		178,132		1,947		4.38
Other borrowings	63,638		1,000		6.32		68,385		1,033		6.06
Total other interest-bearing liabilities	242,154		2,821		4.69		249,919		3,027		4.86
Total interest-bearing liabilities	$	2,270,627	$	14,927	2.64	%	$	2,273,914	$	11,583	2.04	%
Noninterest-bearing liabilities:
Demand deposits	464,007						500,954
Other liabilities	15,690						15,597
Stockholders' equity	260,162						239,579
Total noninterest-bearing liabilities and stockholders' equity	739,859						756,130
Total liabilities and stockholders' equity	$	3,010,486					$	3,030,044
Interest rate spread					2.19	%					2.38	%
Net interest income			$	18,581					$	19,328
Net interest margin					2.68	%					2.77	%

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 $56,000 and $45,000 for the three months ended June 30, 2024 and 2023, respectively, are calculated using the statutory federal tax rate and are included in income and fees on loans. Accretion income of $15,000 and $53,000 for the three months ended June 30, 2024 and 2023 are also included in income and fees on loans.

2.Taxable-equivalent adjustments totaling $115,000 and $108,000 for the three months ended June 30, 2024 and 2023, respectively, are included in tax-exempt interest on investment securities.

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Table 1 - Average Balance Sheet and Net Interest Analysis
	Six Months Ended June 30,
	2024						2023
(dollars in thousands)	Average Balances		Income/ Expense		Yields/ Rates		Average Balances		Income/ Expense		Yields/ Rates
Assets
Interest-earning assets:
Loans, net of unearned income(3)	$	1,899,108	$	54,804	5.80	%	$	1,807,784	$	46,313	5.17	%
Investment securities, taxable	729,896		9,658		2.66		781,989		10,872		2.80
Investment securities, tax-exempt(4)	103,481		1,152		2.24		114,137		1,187		2.10
Deposits in banks and short term investments	67,023		1,376		4.13		62,507		1,065		3.44
Total interest-earning assets	$	2,799,508	$	66,990	4.81	%	$	2,766,417	$	59,437	4.33	%
Noninterest-earning assets	223,781						223,818
Total assets	$	3,023,289					$	2,990,235
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-earning demand and savings	$	1,451,395	$	13,193	1.83	%	$	1,391,099	$	5,746	0.83	%
Other time	594,707		11,005		3.72		579,818		7,809		2.72
Total interest-bearing deposits	2,046,102		24,198		2.38		1,970,917		13,555		1.39
Federal funds purchased	6		—		5.95		5,197		135		5.24
Federal Home Loan Bank advances	167,747		3,392		4.07		163,867		3,572		4.40
Other borrowings	63,362		1,993		6.33		72,213		2,122		5.93
Total other interest-bearing liabilities	231,115		5,385		4.69		241,277		5,829		4.87
Total interest-bearing liabilities	$	2,277,217	$	29,583	2.61	%	$	2,212,194	$	19,384	1.77	%
Noninterest-bearing liabilities:
Demand deposits	471,768						528,432
Other liabilities	16,259						12,731
Stockholders' equity	258,045						236,878
Total noninterest-bearing liabilities and stockholders' equity	746,072						778,041
Total liabilities and stockholders' equity	$	3,023,289					$	2,990,235
Interest rate spread					2.20	%					2.57	%
Net interest income			$	37,407					$	40,053
Net interest margin					2.69	%					2.92	%

3 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 $103,000 and $91,000 for the six months ended June 30, 2024 and 2023, respectively, are calculated using the statutory federal tax rate and are included in income and fees on loans. Accretion income of $10,000 and $124,000 for the six months ended June 30, 2024 and 2023 are also included in income and fees on loans.

4 Taxable-equivalent adjustments totaling $242,000 and $217,000 for the six months ended June 30, 2024 and 2023, respectively, are included in tax-exempt interest on investment securities.

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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 three and six month periods ended June 30, 2024 compared to the three and six month periods ended June 30, 2023.

Table 2 - Change in Interest Revenue and Expense on a Taxable Equivalent Basis
	Three Months Ended June 30, 2024						Six Months Ended June 30, 2024
	Compared to Three Months Ended June 30, 2023 Increase (Decrease) Due to Changes in						Compared to Six Months Ended June 30, 2023 Increase (Decrease) Due to Changes in
(dollars in thousands)	Volume		Rate		Total		Volume		Rate		Total
Interest-earning assets:
Loans, net of unearned fees	$	3,520	$	28	$	3,548	$	4,721	$	3,770	$	8,491
Investment securities, taxable	(1,551)		669		(882)		(1,459)		245		(1,214)
Investment securities, tax-exempt	(287)		242		(45)		(224)		189		(35)
Deposits in banks and short term investments	(437)		413		(24)		155		156		311
Total interest-earning assets (FTE)	1,245		1,352		2,597		3,193		4,360		7,553
Interest-bearing liabilities:
Interest-Bearing Demand and Savings Deposits	787		2,575		3,362		500		6,947		7,447
Time Deposits	(2,346)		2,534		188		405		2,791		3,196
Federal funds purchased	(187)		140		(47)		(272)		137		(135)
Federal Home Loan Bank Advances	17		(143)		(126)		171		(351)		(180)
Other Borrowed Money	(288)		255		(33)		(525)		396		(129)
Total interest-bearing liabilities	(2,017)		5,361		3,344		279		9,920		10,199
Increase in net interest income (FTE)	$	3,262	$	(4,009)	$	(747)	$	2,914	$	(5,560)	$	(2,646)

Provision for Credit Losses

The provision for credit losses recorded in each period is based on the amount required such that the total allowance for credit losses reflects the appropriate balance, in the estimation of management, sufficient to cover expected credit losses over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur. Provision for credit losses for the three and six months ended June 30, 2024 was $650,000 and $1.7 million, respectively, compared to $200,000 and $1.1 million, respectively, for the same period in 2023. The provision for credit losses for the three and six months ended June 30, 2024 includes $816,000 and $1.8 million, respectively, in credit losses on loans and $166,000 and $116,000, respectively, in release of credit losses on unfunded commitments. The provision for credit losses for the three and six months ended June 30, 2023 includes $430,000 and $1.2 million, respectively, in credit losses on loans and $230,000 and $91,000, respectively, in release of credit losses on unfunded commitments. See the section captioned “Loans and Allowance for Credit Losses” elsewhere in this discussion for further analysis of the provision for credit losses.

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Noninterest Income

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

Table 3 - Noninterest Income
	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
(dollars in thousands)	2024		2023		Amount		Percent		2024		2023		Amount		Percent
Service charges on deposits	$	2,288	$	2,027	$	261	12.9	%	$	4,662	$	3,941	$	721	18.3	%
Mortgage fee income	1,442		2,014		(572)		(28.4)		2,691		3,197		(506)		(15.8)
Gain on sales of SBA loans	2,347		1,105		1,242		112.4		4,393		2,162		2,231		103.2
Loss on sales of securities	(425)		—		(425)		(100.0)		(980)		—		(980)		(100.0)
Interchange fees	2,078		2,131		(53)		(2.5)		4,105		4,199		(94)		(2.2)
BOLI income	398		358		40		11.2		931		689		242		35.1
Insurance commissions	420		449		(29)		(6.5)		886		909		(23)		(2.5)
Other noninterest income	949		868		81		9.3		2,296		1,514		782		51.7
Total noninterest income	$	9,497	$	8,952	$	545	6.1	%	$	18,984	$	16,611	$	2,373	14.3	%

Noninterest income increased for the three and six month periods ended June 30, 2024 as compared to the same periods in 2023. The increases in both periods is a result of increases in service charges on deposits, gain on sales of SBA loans and other noninterest income which were partially offset by decreases in mortgage fee income, interchange fee income and losses on sales of securities.

Service charges on deposits. For the three and six months ended June 30, 2024, service charges on deposits experienced increases compared to the same periods ended June 30, 2023. These increases in service charges on deposits can be attributed to the Company's ability to maintain a strong deposit base despite the challenging rate environment.

Mortgage Fee Income. For the three and six months ended June 30, 2024, mortgage fee income decreased as compared to the same periods ended June 30, 2023. These decreases in mortgage fee income are the result of decreases in mortgage production which can be partially attributed to the Federal Reserve's decision to leave interest rates unchanged during the first half of 2024.

Gain on sales of SBA loans. For the three and six months ended June 30, 2024, net realized gains on the sale of the guaranteed portion of SBA loans increased as compared to the same periods ended June 30, 2023. These increases are related to increased production and sales in the Small Business Specialty Lending division which hit its highest mark in five consecutive quarters during the first quarter of 2024 and continues to perform at a high level.

BOLI income. For the three and six months ended June 30, 2024, BOLI income was higher when compared to the same periods ended June 30, 2023. These increases are primarily related to income from the payout of death benefits during the first quarter of 2024.

Interchange fees. For the three and six months ended June 30, 2024, interchange fee income was slightly lower than the same periods ended June 30, 2023. These minimal decreases in interchange fees are the result of customer use of our card programs whose buying habits can fluctuate between periods.

Insurance commissions. For the three and six months ended June 30, 2024, insurance commissions decreased slightly compared to the same periods ended June 30, 2023. These variances are volume driven by activity in the Company's insurance division.

Other noninterest income. For the three and six months ended June 30, 2024, other noninterest income increased as compared to the same periods ended June 30, 2023. These increases in other noninterest income were primarily attributable to increases in wealth advisory and merchant services, gains on sales of other real estate along with increases in SBA servicing and other related fee income, partially offset by a writedown of Bank premises in the second quarter of 2024.

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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 June 30,				Change				Six Months Ended June 30,				Change
(dollars in thousands)	2024		2023		Amount		Percent		2024		2023		Amount		Percent
Salaries and employee benefits	$	12,277	$	13,348	$	(1,071)	(8.0)	%	$	24,296	$	25,957	$	(1,661)	(6.4)	%
Occupancy and equipment	1,475		1,499		(24)		(1.6)		2,982		3,121		(139)		(4.5)
Information technology expenses	2,227		2,001		226		11.3		4,338		4,342		(4)		(0.1)
Professional fees	704		881		(177)		(20.1)		1,537		1,596		(59)		(3.7)
Advertising and public relations	967		673		294		43.7		1,927		1,666		261		15.7
Communications	216		192		24		12.5		442		486		(44)		(9.1)
Other noninterest expense	2,464		2,838		(374)		(13.2)		5,205		5,429		(224)		(4.1)
Total noninterest expense	$	20,330	$	21,432	$	(1,102)	(5.1)	%	$	40,727	$	42,597	$	(1,870)	(4.4)	%

Noninterest expense decreased for the three and six months ended June 30, 2024 compared to the same periods in 2023.

Salaries and employee benefits. Salaries and employee benefits for the three and six months ended June 30, 2024 decreased as compared to the same periods ended June 30, 2023. These decreases in salaries and employee benefits expenses are related to the Company's expense reduction initiative in 2023 which lowered total number of employees period over period.

Information technology expenses. Information technology expenses increased for the three months ended June 30, 2024 and decreased slightly for the six months ended June 30, 2024 as compared to the same periods ended June 30, 2023. The second quarter 2024 increase relates primarily to an increase in software expenses.

Professional fees. Professional fees decreased for the three and six months ended June 30, 2024 compared to the same periods ended June 30, 2023. These decreases are the result of decreased audit and consulting fees partially offset by increased legal fees.

Advertising and public relations. Advertising and public relations expenses increased for the three and six months ended June 30, 2024 compared to the same periods ended June 30, 2023. The increase for both periods can be attributed to a donation in the second quarter of 2024 to Colony Museum, an organization in Fitzgerald, Georgia that Colony Bank helped to establish. Colony Museum has the most extensive African Art collection in the U.S. and several Colony employees serve on its Board of Directors.

Communications. Communications expenses increased for the three months ended June 30, 2024 and decreased for the six months ended June 30, 2024 compared to the respective periods ended June 30, 2023. The changes in each period are related to fluctuations in data circuit fees and postage and freight charges.

Other noninterest expense. Other noninterest expense decreased for the three and six months ended June 30, 2024 as compared to the same periods ended June 30, 2023. These decreases relate primarily to decreases in other loan related expenses, printing and supplies and business development expenses which are partially offset by increased servicing rights valuation.

Income Tax Expense

Income tax expense for the three and six months ended June 30, 2024 was $1.5 million and $2.9 million, respectively, compared to $1.2 million and $2.3 million, respectively, for the same periods in 2023. The Company’s effective tax rate for the three and six months ended June 30, 2024 was 21.0% and 20.9%, respectively, compared to 18.4% and 18.3%, respectively, for the three and six months ended June 30, 2023. The largest driver of the difference is the tax exempt income

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primarily from BOLI and tax exempt interest. Also, in both the first quarter of 2024 and 2023, the Company experienced a favorable tax impact from the donation made to the Georgia Scholarship Program.

Balance Sheet Review

Total assets decreased to $3.0 billion at June 30, 2024 from $3.1 billion at December 31, 2023.

Loans and Allowance for Credit Losses

At June 30, 2024, gross loans outstanding (excluding loans held for sale) were $1.87 billion, a decrease of $17.9 million, or 0.95%, compared to $1.88 billion at December 31, 2023.

At June 30, 2024, approximately 63.5% of our loans were secured by commercial real estate. Our total commercial real estate loans have decreased slightly since December 31, 2023 as well as our commercial, financial & agricultural loans while increases can be seen in residential real estate and consumer lending which is driven by our marine and RV division. These movements are largely due to the sale of portfolio mortgages and credit related payoffs of a limited number of loans, along with the general slowdown in loan production over the past several quarters. We continue to maintain competitive loan pricing and tightened credit standards.

The following table presents a summary of the loan portfolio as of June 30, 2024 and December 31, 2023.

Table 5 - Loans Outstanding
(dollars in thousands)	June 30, 2024		December 31, 2023
Construction, land & land development	$	199,916	$	247,146
Other commercial real estate	985,102		974,375
Total commercial real estate	1,185,018		1,221,521
Residential real estate	360,847		356,234
Commercial, financial & agricultural	242,205		242,756
Consumer and other	77,504		62,959
Total loans	$	1,865,574	$	1,883,470

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 credit 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 credit losses. The Company focuses on the following loan categories: (1) construction, land & land development; (2) other commercial real estate; (3) residential real estate; (4) commercial, financial & agricultural; and (5) consumer and other.

The allowance for credit losses for loans is a reserve established through charges to earnings in the form of a provision for credit losses. The provision for credit losses for loans is based on management’s evaluation of the size and composition of the loan portfolio, the level of nonperforming 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 credit losses for loans which it believes is adequate to cover expected credit losses over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur. Based on a credit evaluation of the loan portfolio, management presents a quarterly review of the allowance for credit losses for loans and allowance for credit losses on unfunded commitments 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 management is able to effectively evaluate the

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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 credit losses on loans.

The allowance for credit losses on loans 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 reasonable and supportable forecasts of 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 credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The ACL is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund.

The allowance for credit losses on loans was $18.8 million at June 30, 2024 compared to $17.1 million at June 30, 2023, an increase of $1.7 million, or 10.2%. The allowance for credit losses on loans as a percentage of loans was 1.01% and 0.93% at June 30, 2024 and 2023, respectively. The provision for credit losses was $650,000 compared to $200,000 for the three months ended June 30, 2024 and June 30, 2023, respectively. The provision for credit losses for the quarter ended June 30, 2024 includes $816,000 in credit losses on loans and a release of $166,000 in credit losses on unfunded commitments. The provision for credit losses for the quarter ended June 30, 2023 includes $430,000 in credit losses on loans and a release of $230,000 in credit losses on unfunded commitments. The provision for credit losses was $1.7 million compared to $1.1 million for the six months ended June 30, 2024 and 2023, respectively. The provision for credit losses for the six months ended June 30, 2024 includes $1.8 million in credit losses on loans and a release of $116,000 in credit losses on unfunded commitments. The provision for credit losses for the six months ended June 30, 2023 includes $1.2 million in credit losses on loans and a release of $91,000 in credit losses on unfunded commitments. The amount of provision expense recorded in each period was the amount required such that the total allowance for credit losses reflected the appropriate balance, in the estimation of management, that was sufficient to cover expected credit losses on loans over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur.

Additional information about the Company’s allowance for credit losses is provided in Note 4 to our consolidated financial statements as of June 30, 2024, included elsewhere in this Quarterly Report on Form 10-Q.

The following table presents an analysis of the allowance for credit losses on loans as of and for the six months ended June 30, 2024 and 2023:

Table 6 - Analysis of Allowance for Credit Losses on Loans
	June 30, 2024				June 30, 2023
(dollars in thousands)	Reserve		%*		Reserve		%*
Construction, land & land development	$	1,295	10.7	%	$	2,281	13.6	%
Other commercial real estate	7,396		52.8	%	8,733		53.3	%
Residential real estate	5,990		19.3	%	2,642		17.7	%
Commercial, financial & agricultural	2,015		13.0	%	2,984		13.2	%
Consumer and other	2,110		4.2	%	426		2.2	%
	$	18,806	100	%	$	17,066	100	%

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

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The following table presents a summary of allowance for credit loss for the three and six months ended June 30, 2024 and 2023.

Table 7 - Summary of Allowance for Credit Losses on Loans
	Three Months Ended							Six Months Ended
(dollars in thousands)		June 30, 2024			June 30, 2023			June 30, 2024			June 30, 2023
Allowance for credit losses on loans - beginning balance		$	18,657		$	16,599		$	18,371		$	16,128
Adoption of ASU 2016-13		—			—			—			(53)
Charge-offs:
Construction, land & land development		—			—			—			—
Other commercial real estate		—			—			20			—
Residential real estate		270			—			340			—
Commercial, financial & agricultural		356			170			1,014			443
Consumer and other		131			—			251			3
Total charge-offs		757			170			1,625			446
Recoveries:
Construction, land & land development		1			5			2			8
Other commercial real estate		9			11			18			25
Residential real estate		39			26			207			37
Commercial, financial & agricultural		37			160			59			167
Consumer and other		4			5			8			9
Total recoveries		90			207			294			246
Net charge-offs		667			(37)			1,331			200
Provision for credit losses on loans		816			430			1,766			1,191
Allowance for credit losses on loans- ending balance		$	18,806		$	17,066		$	18,806		$	17,066
Net charge-offs to average loans (annualized)		0.14		%	(0.01)		%	0.14		%	0.01		%
Allowance for credit losses on loans to total loans		1.01			0.93			1.01			0.93
Allowance to nonperforming loans		280.27			153.96			280.27			153.96

Management believes the allowance for credit losses for loans is adequate to provide for losses expected in the loan portfolio as of June 30, 2024.

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Nonperforming Assets

Asset quality experienced improvement during the first six months of 2024. 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 $6.7 million at June 30, 2024, a decrease of $3.2 million, or 32.2%, from $9.8 million at December 31, 2023. There was one loan contractually past due 90 days or more and still accruing totaling $41,000 at June 30, 2024 and one loan totaling $370,000 at December 31, 2023. There was $13,000 in repossessed personal property at June 30, 2024 and none at June 30, 2023. OREO totaled $582,000 at June 30, 2024 compared to $448,000 at December 31, 2023. As of June 30, 2024, total nonperforming assets as a percent of total assets decreased to 0.24% compared with 0.35% at December 31, 2023. The decrease in nonperforming assets was a result of repayments, payoffs and charged off loans.

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 credit losses on loans. 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 June 30, 2024 and December 31, 2023 were as follows:

Table 8 - Nonperforming Assets
(dollars in thousands)	June 30, 2024			December 31, 2023
Nonaccrual loans	$	6,669		$	9,839
Loans past due 90 days and accruing	41			370
Other real estate owned	582			448
Repossessed assets	13			—
Total nonperforming assets	$	7,305		$	10,657
Nonaccrual loans by loan segment
Construction, land & land development	$	54		$	85
Commercial real estate	1,894			4,219
Residential real estate	2,131			3,561
Commercial, financial & agricultural	2,520			1,956
Consumer & other	70			18
Total nonaccrual loans	$	6,669		$	9,839
NPAs as a percentage of total loans and OREO	0.39		%	0.57		%
NPAs as a percentages of total assets	0.24		%	0.35		%
Nonaccrual loans as a percentage of total loans	0.36		%	0.52		%

The Company had four loans modified due to financial difficulty during the six month period ended June 30, 2024. See Note 3 - Loans, included elsewhere in this Quarterly Report on Form 10-Q for additional details on loan modifications.

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Deposits

Deposits at June 30, 2024 and December 31, 2023 were as follows:

Table 9 - Deposits
(dollars in thousands)	June 30, 2024		December 31, 2023
Noninterest-bearing deposits	$	437,623	$	498,992
Interest-bearing deposits	788,674		759,299
Savings	670,848		660,311
Time, $250,000 and over	168,856		167,680
Other time	394,224		458,508
Total deposits	$	2,460,225	$	2,544,790

Total deposits decreased $84.6 million to $2.46 billion at June 30, 2024 from $2.54 billion at December 31, 2023. As of June 30, 2024, 17.8% of total deposits were comprised of noninterest-bearing accounts and 82.2% were comprised of interest-bearing deposit accounts, compared to 19.6% and 80.4% as of December 31, 2023, respectively. The overall decrease in our deposits is due primarily to wholesale deposit payoffs. Also, customer deposits have historically experienced seasonality during the second quarter of the year and therefore saw declines as they managed their cash flow needs. However, we remain confident in the underlying strength of our deposit base and anticipate a return to growth in the coming quarters.

We had $39.2 million and $93.6 million in brokered deposits at June 30, 2024 and December 31, 2023, 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.

The Company's estimated uninsured deposits were $775.2 million at June 30, 2024, or 31.23% of total Bank deposits compared to $777.8 million at December 31, 2023, or 30.22% of total Bank deposits. Adjusted uninsured deposit estimate (which excludes deposits collateralized by public funds and internal accounts) were $428.7 million at June 30, 2024, or 17.27% of total Bank deposits compared to $453.1 million at December 31, 2023, or 17.60% of total Bank deposits. Adjusted uninsured deposits represent a small percentage of our overall deposits, which increases the stability of our deposit base and lowers our overall funding risk.

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 8 to our consolidated financial statements as of June 30, 2024, 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 June 30, 2024 and December 31, 2023.

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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 FHLB program. The Bank has also established overnight borrowing for federal funds purchased through various correspondent banks. There were no outstanding balances of federal funds purchased at June 30, 2024 and December 31, 2023, respectively.

Cash and cash equivalents at June 30, 2024 and December 31, 2023 were $82.0 million and $83.3 million, respectively. Cash and cash equivalents have decreased slightly since year end 2023, primarily due to decreases in deposits. 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.

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 June 30, 2024 and December 31, 2023, we had $205.0 million and $175.0 million, respectively, of outstanding advances from the FHLB. Based on the values of loans pledged as collateral, we had $546.3 million and $596.2 million of additional borrowing availability with the FHLB at June 30, 2024 and December 31, 2023, respectively.

Other sources of liquidity include overnight borrowings from the Federal Reserve Discount Window of $107.8 million of which there was no outstanding balance at June 30, 2024. The Company also had unencumbered securities of $440.4 million, $34.8 million in FRB Reserves and $44.6 million in other cash and due from banks as of June 30, 2024. Unencumbered investment securities provide the ability to either be pledged as collateral with borrowing sources or sold and converted to cash.

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 Company and the Bank are 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 Company and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company's and the Bank’s capital ratios as of June 30, 2024 and December 31, 2023. The Company and the Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of June 30, 2024 and December 31, 2023. There have been no conditions or events since June 30, 2024

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that management believes would change this classification.

Table 10 - Capital Ratio Requirements
	Minimum Requirement		Well-capitalized
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

Table 11 - Capital Ratios
Company	June 30, 2024		December 31, 2023
CET1 risk-based capital ratio	12.25	%	11.66	%
Tier 1 risk-based capital ratio	13.39		12.77
Total risk-based capital ratio	16.17		15.47
Leverage ratio	9.44		9.17
Colony Bank
CET1 risk-based capital ratio	13.85	%	12.94	%
Tier 1 risk-based capital ratio	13.85		12.94
Total risk-based capital ratio	14.80		13.85
Leverage ratio	9.76		9.28

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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 Asset/Liability Management Committee, 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
	June 30, 2024	December 31, 2023
Changes in rates
200 basis point increase	2.87%	0.97%
100 basis point increase	1.52	0.54
100 basis point decrease	(1.08)	2.03

See Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of the Company’s 2023 Form 10-K 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 2023 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 June 30, 2024, 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 2023 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 2023 Form 10-K.

ITEM 2 – UNREGISTERED SALE OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) There were no unregistered shares of the Company’s common stock sold during the three-month period ended June 30, 2024.

(b) Not applicable.

(c) The table below sets forth information regarding repurchases of our common stock during the second quarter of 2024.

(dollars in thousands, except per share data)	Total Number of Shares Repurchased	Average Price Paid per Share		Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2024 to April 30, 2024	—	$	—	—	$	—
May 1, 2024 to May 31, 2024	20,000	11.90		20,000	10,816
June 1, 2024 to June 30, 2024	—	—		—	—
Total	20,000	$	11.90	20,000	$	10,816

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5 – OTHER INFORMATION

Pursuant to Item 408(a) of Regulation S-K, none of the Company's directors or executive officers adopted, terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2024.

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 10-Q (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.
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 June 30, 2024 and December 31, 2023; (ii) Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2024 and 2023; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2024 and 2023; (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023; (v) Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023; 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 six months ended June 30, 2024 (formatted in Inline XBRL and included in Exhibit 101)

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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:     August 8, 2024	T. Heath Fountain
	Chief Executive Officer
	(Principal Executive Officer)
Date: August 8, 2024	/s/ Derek Shelnutt
	Derek Shelnutt
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

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