Colony Bankcorp (CBAN) 10-K 2006 FY Annual report

EXHIBIT NO. 13

MCNAIR, MCLEMORE, MIDDLEBROOKS & CO., LLP

CERTIFIED PUBLIC ACCOUNTANTS

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

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

www.mmmcpa.com

RALPH S. McLEMORE, SR., CPA (1902-1981)
SIDNEY B. McNAIR, CPA (1913-1992)
SIDNEY E. MIDDLEBROOKS, CPA, PC	RICHARD A. WHITTEN, JR., CPA
RAY C. PEARSON, CPA	ELIZABETH WARE HARDIN, CPA
J. RANDOLPH NICHOLS, CPA	CAROLINE E. GRIFFIN, CPA
WILLIAM H. EPPS, JR., CPA	RONNIE K. GILBERT, CPA
RAYMOND A. PIPPIN, JR., CPA	RON C. DOUTHIT, CPA
JERRY A. WOLFE, CPA	CHARLES A. FLETCHER, CPA
W. E. BARFIELD, JR., CPA	MARJORIE HUCKABEE CARTER, CPA
HOWARD S. HOLLEMAN, CPA	BRYAN A. ISGETT, CPA
F. GAY McMICHAEL, CPA	DAVID PASCHAL MUSE, JR., CPA

March 15, 2007

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Colony Bankcorp, Inc.

We have audited the accompanying consolidated balance sheets ofColony Bankcorp, Inc. and Subsidiaries as of December 31, 2006 and 2005 and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Colony Bankcorp, Inc. and Subsidiaries as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Colony Bankcorp, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2006, based on criteria established inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 15, 2007 expressed an unqualified opinion on management’s assessment of internal control over financial reporting and an unqualified opinion on the effectiveness of internal control over financial reporting.

McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP

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MCNAIR, MCLEMORE, MIDDLEBROOKS & CO., LLP

CERTIFIED PUBLIC ACCOUNTANTS

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

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

www.mmmcpa.com

RALPH S. McLEMORE, SR., CPA (1902-1981)
SIDNEY B. McNAIR, CPA (1913-1992)
SIDNEY E. MIDDLEBROOKS, CPA, PC	RICHARD A. WHITTEN, JR., CPA
RAY C. PEARSON, CPA	ELIZABETH WARE HARDIN, CPA
J. RANDOLPH NICHOLS, CPA	CAROLINE E. GRIFFIN, CPA
WILLIAM H. EPPS, JR., CPA	RONNIE K. GILBERT, CPA
RAYMOND A. PIPPIN, JR., CPA	RON C. DOUTHIT, CPA
JERRY A. WOLFE, CPA	CHARLES A. FLETCHER, CPA
W. E. BARFIELD, JR., CPA	MARJORIE HUCKABEE CARTER, CPA
HOWARD S. HOLLEMAN, CPA	BRYAN A. ISGETT, CPA
F. GAY McMICHAEL, CPA	DAVID PASCHAL MUSE, JR., CPA

March 15, 2007

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Colony Bankcorp, Inc.

We have audited management’s assessment, included in the accompanying management’s report on internal controls, that Colony Bankcorp, Inc. and Subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Colony Bankcorp, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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

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

In our opinion, management’s assessment that Colony Bankcorp, Inc. and Subsidiaries maintained effective internal control over financial reporting as of December 31, 2006 is fairly stated, in all material respects, based on criteria established inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, Colony Bankcorp, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Colony Bankcorp, Inc. and Subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2006 and our report dated March 15, 2007, expressed an unqualified opinion.

McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP

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COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31

ASSETS

	2006			2005
Cash and Cash Equivalents
Cash and Due from Banks	$	27,231,017		$	21,605,731
Federal Funds Sold		45,149,434			57,456,211
		72,380,451			79,061,942
Interest-Bearing Deposits		3,075,481			1,635,414
Investment Securities
Available for Sale, at Fair Value		149,236,225			124,246,264
Held to Maturity, at Cost (Fair Value of $70,874 and $79,286 as of December 31, 2006 and 2005, Respectively)		70,874			79,286
		149,307,099			124,325,550
Federal Home Loan Bank Stock, at Cost		5,086,800			5,034,200
Loans		942,273,015			859,117,396
Allowance for Loan Losses		(11,989,359	)		(10,761,915	)
Unearned Interest and Fees		(501,143	)		(302,229	)
		929,782,513			848,053,252
Premises and Equipment		27,453,132			25,675,832
Other Real Estate		970,320			2,170,145
Goodwill		2,412,338			2,412,338
Other Intangible Assets		438,714			519,915
Other Assets		22,597,010			19,449,748
Total Assets	$	1,213,503,858		$	1,108,338,336

The accompanying notes are an integral part of these balance sheets.

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COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31

LIABILITIES AND STOCKHOLDERS’ EQUITY

	2006			2005
Deposits
Noninterest-Bearing	$	77,335,680		$	78,778,141
Interest-Bearing		965,110,219			865,586,513
		1,042,445,899			944,364,654
Borrowed Money
Federal Funds Purchased		1,070,000			—
Subordinated Debentures		24,229,000			19,074,000
Other Borrowed Money		61,500,000			70,226,205
		86,799,000			89,300,205
Other Liabilities		7,647,798			6,545,485
Commitments and Contingencies
Stockholders’ Equity
Common Stock, Par Value $1 a Share; Authorized 20,000,000 Shares, Issued 7,189,937 and 7,181,320 Shares as of December 31, 2006 and 2005, Respectively		7,189,937			7,181,320
Paid-In Capital		24,257,392			23,999,775
Retained Earnings		46,416,571			38,601,441
Restricted Stock – Unearned Compensation		(277,918	)		(301,883	)
Accumulated Other Comprehensive Loss, Net of Tax		(974,821	)		(1,352,661	)
		76,611,161			68,127,992
Total Liabilities and Stockholders’ Equity	$	1,213,503,858		$	1,108,338,336

The accompanying notes are an integral part of these balance sheets.

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COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31

	2006		2005		2004
Interest Income
Loans, Including Fees	$	75,086,845	$	58,308,810	$	47,503,663
Federal Funds Sold		2,034,823		1,266,120		418,957
Deposits with Other Banks		133,321		86,121		74,888
Investment Securities
U. S. Government Agencies		5,198,384		3,412,711		3,287,948
State, County and Municipal		381,085		240,864		283,857
Corporate Obligations		162,377		138,559		224,366
Other Investments		3,808		3,223		27,617
Dividends on Other Investments		278,974		177,335		108,748
		83,279,617		63,633,743		51,930,044
Interest Expense
Deposits		36,610,386		22,590,018		15,174,581
Federal Funds Purchased		28,853		16,259		4,927
Borrowed Money		4,752,642		3,873,730		3,203,767
		41,391,881		26,480,007		18,383,275
Net Interest Income		41,887,736		37,153,736		33,546,769
Provision for Loan Losses		3,987,000		3,443,750		3,469,000
Net Interest Income After Provision for Loan Losses		37,900,736		33,709,986		30,077,769
Noninterest Income
Service Charges on Deposits		4,580,181		4,127,889		4,232,798
Other Service Charges, Commissions and Fees		831,472		708,276		547,513
Mortgage Fee Income		767,803		493,458		984,343
Other		1,170,725		822,337		659,007
		7,350,181		6,151,960		6,423,661
Noninterest Expenses
Salaries and Employee Benefits		16,870,488		14,127,949		12,594,057
Occupancy and Equipment		4,034,909		3,777,759		3,530,745
Directors’ Fees		638,721		616,534		543,992
Legal and Professional Fees		1,070,605		764,896		706,940
Other Real Estate and Repossession Expense		162,384		126,630		206,718
Securities Losses		—		—		30,958
Loss on Sale of Other Real Estate		20,263		185,379		549,636
Other		7,084,189		6,476,263		6,107,596
		29,881,559		26,075,410		24,270,642
Income Before Income Taxes		15,369,358		13,786,536		12,230,788
Income Taxes		5,217,363		4,809,320		4,161,494
Net Income	$	10,151,995	$	8,977,216	$	8,069,294
Net Income Per Share of Common Stock
Basic	$	1.41	$	1.25	$	1.13
Diluted	$	1.41	$	1.25	$	1.13
Cash Dividends Declared Per Share of Common Stock	$	0.325	$	0.285	$	0.252
Weighted Average Shares Outstanding		7,176,894		7,168,406		7,131,028

The accompanying notes are an integral part of these statements.

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COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31

	2006		2005			2004
Net Income	$	10,151,995	$	8,977,216		$	8,069,294
Other Comprehensive Income, Net of Tax
Gains (Losses) on Securities Arising During the Year		377,840		(755,824	)		(638,921	)
Reclassification Adjustment		—		—			20,432
Unrealized Gains (Losses) on Securities		377,840		(755,824	)		(618,489	)
Comprehensive Income	$	10,529,835	$	8,221,392		$	7,450,805

The accompanying notes are an integral part of these statements.

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COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

	Shares Issued		Common Stock			Paid-In Capital			Retained Earnings			Restricted Stock - Unearned Compensation			Accumulated Other Comprehensive Income			Total
Balance, December 31, 2003	5,727,968		$	5,727,968		$	23,498,550		$	26,857,379		$	(129,874	)	$	21,652		$	55,975,675
Issuance of Restricted Stock	12,250			12,250			235,200						(247,450	)					—
Forfeiture of Restricted Stock	(1,875	)		(1,875	)		(20,550	)					22,425						—
Amortization of Unearned Compensation													144,066						144,066
Unrealized Loss on Securities Available for Sale, Net of Tax Benefit of $414,263																(618,489	)		(618,489	)
Dividends Paid										(1,807,583	)								(1,807,583	)
Net Income										8,069,294									8,069,294
Balance, December 31, 2004	5,738,343			5,738,343			23,713,200			33,119,090			(210,833	)		(596,837	)		61,762,963
5 for 4 Stock Split Effected as a Stock Dividend	1,436,579			1,436,579						(1,436,579	)								—
Issuance of Restricted Stock	11,200			11,200			369,600						(380,800	)					—
Forfeiture of Restricted Stock	(4,802	)		(4,802	)		(83,025	)					87,827						—
Amortization of Unearned Compensation													201,923						201,923
Unrealized Loss on Securities Available for Sale, Net of Tax Benefit of $389,364																(755,824	)		(755,824	)
Dividends Paid										(2,058,286	)								(2,058,286	)
Net Income										8,977,216									8,977,216
Balance, December 31, 2005	7,181,320			7,181,320			23,999,775			38,601,441			(301,883	)		(1,352,661	)		68,127,992
Issuance of Restricted Stock	12,790			12,790			303,123						(315,913	)					—
Forfeiture of Restricted Stock	(4,173	)		(4,173	)		(106,663	)					110,836						—
Tax Benefit of Restricted Stock							61,157												61,157
Amortization of Unearned Compensation													229,042						229,042
Unrealized Gain on Securities Available for Sale, Net of Tax of $194,645																377,840			377,840
Dividends Paid										(2,336,865	)								(2,336,865	)
Net Income										10,151,995									10,151,995
Balance, December 31, 2006	7,189,937		$	7,189,937		$	24,257,392		$	46,416,571		$	(277,918	)	$	(974,821	)	$	76,611,161

The accompanying notes are an integral part of these statements.

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COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

	2006			2005			2004
Cash Flows from Operating Activities
Net Income	$	10,151,995		$	8,977,216		$	8,069,294
Adjustments to Reconcile Net Income to Net
Cash Provided from Operating Activities
Depreciation		1,933,290			1,903,242			1,754,053
Amortization and Accretion		720,446			1,307,710			1,122,970
Provision for Loan Losses		3,987,000			3,443,750			3,469,000
Deferred Income Taxes		112,518			(546,891	)		(464,530	)
Securities Losses		—			—			30,958
(Gain) Loss on Sale of Equipment		7,507			(1,886	)		13,110
(Gain) Loss on Sale of Other Real Estate and Repossessions		(14,239	)		34,339			535,973
Unrealized Loss on Other Real Estate		32,773			150,000			1,000
Increase in Cash Surrender Value of Life Insurance		(185,850	)		(203,367	)		(225,825	)
Change In
Loans Held for Sale		—			1,190,937			486,371
Interest Receivable		(2,913,483	)		(1,566,643	)		(953,389	)
Prepaid Expenses		87,542			(122,165	)		256,062
Interest Payable		1,040,748			932,717			89,222
Accrued Expenses and Accounts Payable		344,075			470,293			222,531
Other		(301,677	)		(94,880	)		1,169,713
		15,002,645			15,874,372			15,576,513
Cash Flows from Investing Activities
Interest-Bearing Deposits in Other Banks		(1,440,066	)		1,593,274			8,386,014
Purchase of Investment Securities
Available for Sale		(48,498,815	)		(49,527,780	)		(39,055,855	)
Proceeds from Sale of Investment Securities
Available for Sale		—			—			10,476,743
Proceeds from Maturities, Calls and Paydowns of Investment Securities
Available for Sale		23,868,423			35,864,083			24,634,839
Held to Maturity		18,035			11,417			17,580
Proceeds from Sale of Premises and Equipment		4,691			11,750			—
Net Loans to Customers, Net of Loans Received in Business Acquisition		(88,764,174	)		(85,879,622	)		(111,762,526	)
Purchase of Premises and Equipment, Net of Property and Equipment Received in Business Acquisition		(3,722,786	)		(5,765,092	)		(4,331,847	)
Other Real Estate and Repossessions		4,136,207			1,633,964			2,985,888
Cash Received in Business Acquisition, Net		—			—			14,356,597
Federal Home Loan Bank Stock		(52,600	)		(555,100	)		(1,479,100	)
Investment in Statutory Trusts		(155,000	)		—			(140,000	)
Other Investments		(400,000	)		—			—
		(115,006,085	)		(102,613,106	)		(95,911,667	)
Cash Flows from Financing Activities
Interest-Bearing Customer Deposits		99,529,936			83,461,129			78,773,399
Noninterest-Bearing Customer Deposits		(1,442,462	)		10,609,094			3,628,447
Proceeds from Other Borrowed Money		41,500,000			19,500,000			7,500,000
Principal Payments on Other Borrowed Money		(50,226,206	)		(10,723,429	)		(7,234,122	)
Dividends Paid		(2,264,319	)		(1,993,100	)		(1,749,447	)
Proceeds from Issuance of Subordinated Debentures		5,155,000			—			4,640,000
Federal Funds Purchased		1,070,000			—			—
		93,321,949			100,853,694			85,558,277
Net Increase (Decrease) in Cash and Cash Equivalents		(6,681,491	)		14,114,960			5,223,123
Cash and Cash Equivalents, Beginning		79,061,942			64,946,982			59,723,859
Cash and Cash Equivalents, Ending	$	72,380,451		$	79,061,942		$	64,946,982

The accompanying notes are an integral part of these statements.

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COLONY BANKCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

Principles of Consolidation

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

Nature of Operations

The Banks provide a full range of retail and commercial banking services for consumers and small to medium size businesses located primarily in south and central Georgia. Lending and investing activities are funded primarily by deposits gathered through its retail branch office network.

Use of Estimates

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

Reclassifications

In certain instances, amounts reported in prior years�� consolidated financial statements have been reclassified to conform to statement presentations selected for 2006. Such reclassifications had no effect on previously reported stockholders’ equity or net income.

Concentrations of Credit Risk

Lending is concentrated in commercial and real estate loans to local borrowers. The Company has a high concentration of real estate loans; however, these loans are well collateralized and, in management’s opinion, do not pose an adverse credit risk. In addition, the balance of the loan portfolio is sufficiently diversified to avoid significant concentration of credit risk. Although the Company has a diversified loan portfolio, a substantial portion of borrowers’ ability to honor their contracts is dependent upon the viability of the real estate economic sector.

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(1) Summary of Significant Accounting Policies (Continued)

Concentrations of Credit Risk (Continued)

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

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

Investment Securities

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

Securities available for sale are reported at estimated fair value. Unrealized gains and losses on securities available for sale are excluded from earnings and are reported, net of deferred taxes, in accumulated other comprehensive income, a component of stockholders’ equity. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other than temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses from sales of securities available for sale are computed using the specific identification method. This caption includes securities, which may be sold to meet liquidity needs arising from unanticipated deposit and loan fluctuations, changes in regulatory capital requirements, or unforeseen changes in market conditions.

Federal Home Loan Bank Stock

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

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(1) Summary of Significant Accounting Policies (Continued)

Loans

Loans that the Company has the ability and intent to hold for the foreseeable future or until maturity are recorded at their principal amount outstanding, net of unearned interest and fees. Loan origination fees, net of certain direct origination costs, are deferred and amortized over the estimated terms of the loans using the straight-line method. Interest income on loans is recognized using the effective interest method.

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

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

Allowance for Loan Losses

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

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

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

- 11 -

(1) Summary of Significant Accounting Policies (Continued)

Allowance for Loan Losses (Continued)

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

Premises and Equipment

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

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

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

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

Goodwill and Intangible Assets

Goodwill represents the excess of the cost over the fair value of the net assets purchased in a business combination. Impairment testing of goodwill is performed annually or more frequently if events or circumstances indicate possible impairment. No impairment was identified as a result of the testing performed during 2006 or 2005.

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

- 12 -

(1) Summary of Significant Accounting Policies (Continued)

Transfers of Financial Assets

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

Statement of Cash Flows

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

Income Taxes

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

Other Real Estate

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

Comprehensive Income

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

- 13 -

(1) Summary of Significant Accounting Policies (Continued)

Off-Balance Sheet Credit Related Financial Instruments

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

Changes in Accounting Principles and Effects of New Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 155,Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140. This statement provides entities with relief from having to separately determine the fair value of an embedded derivative that would otherwise be required to be bifurcated from its host contract in accordance with the requirements of SFAS 133. Entities can make an irrevocable election to measure such hybrid financial instruments at fair value in its entirety, with subsequent changes in fair value recognized in earnings. This election can be made on an instrument-by-instrument basis. The effective date of this standard is for all financial instruments acquired, issued or subject to a remeasurement event occurring after the beginning of an entity’s first fiscal year that begins after September 15, 2006. Management does not expect this standard to have an effect on the Company’s financial position, results of operations or disclosures.

In March 2006, the FASB issued SFAS No. 156,Accounting for Servicing of Financial Assets. This statement, which is an amendment to SFAS No. 140, will simplify the accounting for servicing assets and liabilities, such as those common with mortgage securitization activities. Specifically, SFAS No. 156 addresses the recognition and measurement of separately recognized servicing assets and liabilities and provides an approach to simplify efforts to obtain hedge-like (offset) accounting. SFAS No. 156 also clarifies when an obligation to service financial assets should be separately recognized as a servicing initially measured at fair value, if practicable, and permits an entity with a separately recognized servicing asset or servicing liability to choose either the amortization or fair value methods for subsequent measurement. The provisions of SFAS No. 156 are effective as of the beginning of the first fiscal year that begins after September 15, 2006. Management does not expect this standard to have a material effect on the Company’s financial position, results of operations or disclosures.

In June 2006, the FASB issued Interpretation No. 48,Accounting for Uncertainty in Income Taxes. This pronouncement, which will be effective for the Company in 2007, clarifies accounting for income tax positions that are either: (1) complex and, therefore, subject to varied interpretation or (2) controversial. Management is currently evaluating this pronouncement; however, management does not expect this pronouncement to have a significant effect on the Company’s financial position, results of operations or disclosures.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 enhances existing guidance for measuring assets and liabilities using fair value. Before the issuance of SFAS No. 157, guidance for applying fair value was incorporated in several accounting pronouncements. SFAS No. 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS No. 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. Under SFAS No. 157, fair value measurements are disclosed by level within that hierarchy. While SFAS No. 157 does not add any new fair value measurements, it does change current practice. Changes to practice include: (1) a requirement for an entity to include its own credit standing in the measurement of its liabilities; (2) a modification of the transaction price presumption; (3) a prohibition on the use of block discounts when valuing large blocks of securities for broker-dealers and investment companies; and (4) a requirement to adjust the value of restricted stock for the effect of the restriction even if the restriction lapses within one year. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company does not expect the adoption of this standard to have a material effect on the financial position, results of operations or disclosures.

- 14 -

(1) Summary of Significant Accounting Policies (Continued)

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

In September 2006, the FASB issued SFAS No. 158,Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans—an Amendment of FASB Statements No. 87, 88, 106 and 123(R) (FASB 158). This statement requires companies to recognize a net liability or asset to report the funded status of their defined benefit pension and other post retirement plans on the balance sheet. SFAS 158 requires additional new disclosures to be made in companies’ financial statements. SFAS 158 is effective for publicly-held companies for fiscal years ending after December 15, 2006, except for the measurement date provisions, which are effective for fiscal years ending after December 15, 2008. The Company does not expect this standard to have an effect on the financial position, results of operations or disclosures.

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment to FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement requires a business entity to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. An entity may decide whether to elect the fair value option for each eligible item on its election date, subject to certain requirements described in the statement. This statement shall be effective as of the beginning of each reporting entity’s first fiscal year that begins after November 15, 2007. The Company is currently assessing the impact of SFAS No. 159 on its financial position, results of operations and disclosures.

(2) Cash and Balances Due from Banks

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

	2006		2005
Cash on Hand and Cash Items	$	8,307,648	$	8,970,595
Noninterest-Bearing Deposits with Other Banks		18,923,369		12,635,136
	$	27,231,017	$	21,605,731

As of December 31, 2006, the Banks had required deposits of approximately $3,375,000 with the Federal Reserve.

- 15 -

(3) Investment Securities

Investment securities as of December 31, 2006 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
U.S. Government Agencies
Mortgage Backed	$	80,053,405	$	106,426	$	(1,124,365	)	$	79,035,466
Other		54,870,102		65,487		(569,214	)		54,366,375
State, County and Municipal		11,839,893		36,337		(135,965	)		11,740,265
Corporate Obligations		3,786,691		—		(41,556	)		3,745,135
Marketable Equity Securities		163,135		192,442		(6,593	)		348,984
	$	150,713,226	$	400,692	$	(1,877,693	)	$	149,236,225
Securities Held to Maturity
State, County and Municipal	$	70,874	$	—	$	—		$	70,874

The amortized cost and fair value of investment securities as of December 31, 2006, by contractual maturity, are shown hereafter. Expected maturities will differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or prepayment penalties.

	Securities
	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in One Year or Less	$	14,586,126	$	14,486,182
Due After One Year Through Five Years		48,019,408		47,482,412
Due After Five Years Through Ten Years		7,119,777		7,133,181	$	70,874	$	70,874
Due After Ten Years		771,375		750,000
		70,496,686		69,851,775		70,874		70,874
Marketable Equity Securities		163,135		348,984
Mortgage Backed Securities		80,053,405		79,035,466
	$	150,713,226	$	149,236,225	$	70,874	$	70,874

- 16 -

(3) Investment Securities (Continued)

Investment securities as of December 31, 2005 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
U.S. Government Agencies
Mortgage Backed	$	74,811,272	$	21,787	$	(1,546,513	)	$	73,286,546
Other		39,073,380		22,852		(650,722	)		38,445,510
State, County and Municipal		9,186,466		51,761		(47,410	)		9,190,817
Corporate Obligations		3,061,499		—		(38,378	)		3,023,121
Marketable Equity Securities		163,135		150,725		(13,590	)		300,270
	$	126,295,752	$	247,125	$	(2,296,613	)	$	124,246,264
Securities Held to Maturity
State, County and Municipal	$	79,286	$	—	$	—		$	79,286

There were no proceeds from the sale of investments available for sale during 2006 and 2005. In 2004, proceeds from sales of investments available for sale totaled $10,476,743 resulting in gross realized gains of $194,329 and gross realized losses of $225,287.

Investment securities having a carrying value approximating $86,141,000 and $63,487,000 as of December 31, 2006 and 2005, respectively, were pledged to secure public deposits and for other purposes.

Information pertaining to securities with gross unrealized losses at December 31, 2006 and 2005, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
December 31, 2006
U.S. Government Agencies
Mortgage Backed	$	11,989,365	$	(54,716	)	$	52,139,791	$	(1,069,649	)	$	64,129,156	$	(1,124,365	)
Other		5,461,550		(24,616	)		31,033,305		(544,598	)		36,494,855		(569,214	)
State, County and Municipal		2,708,622		(69,220	)		5,396,659		(66,745	)		8,105,281		(135,965	)
Corporate Obligations		1,750,000		(24,379	)		995,135		(17,177	)		2,745,135		(41,556	)
Marketable Equity Securities		—		—			53,454		(6,593	)		53,454		(6,593	)
	$	21,909,537	$	(172,931	)	$	89,618,344	$	(1,704,762	)	$	111,527,881	$	(1,877,693	)
December 31, 2005
U.S. Government Agencies
Mortgage Backed	$	28,900,181	$	(409,623	)	$	37,481,884	$	(1,136,890	)	$	66,382,065	$	(1,546,513	)
Other		20,677,300		(337,198	)		11,304,910		(313,524	)		31,982,210		(650,722	)
State, County and Municipal		4,041,213		(33,530	)		406,120		(13,880	)		4,447,333		(47,410	)
Corporate Obligations		1,002,405		(20,460	)		1,015,700		(17,918	)		2,018,105		(38,378	)
Marketable Equity Securities		46,457		(13,590	)		—		—			46,457		(13,590	)
	$	54,667,556	$	(814,401	)	$	50,208,614	$	(1,482,212	)	$	104,876,170	$	(2,296,613	)

- 17 -

(3) Investment Securities (Continued)

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

At December 31, 2006, the debt securities with unrealized losses have depreciated 1.66 percent from the Company’s amortized cost basis. These securities are guaranteed by either U.S. Government or other governments. These unrealized losses relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other than temporary.

At December 31, 2006, one marketable equity security had an unrealized loss with depreciation of 11.0 percent from the Company’s cost basis. This unrealized loss has existed for over twelve months; however, no credit issues have been identified that cause management to believe the decline in market value is other than temporary. In analyzing the issuer’s financial condition, management considers industry analysts’ reports, financial performance and projected target prices of investment analysts within a one-year time frame.

(4) Loans

The composition of loans as of December 31 are:

	2006		2005
Commercial, Financial and Agricultural	$	61,887,534	$	48,849,320
Real Estate-Construction		193,951,793		152,943,631
Real Estate-Farmland		40,936,126		37,151,806
Real Estate-Other		549,600,833		529,598,781
Installment Loans to Individuals		76,929,633		73,473,423
All Other Loans		18,967,096		17,100,435
	$	942,273,015	$	859,117,396

Nonaccrual loans are loans for which principal and interest are doubtful of collection in accordance with original loan terms and for which accruals of interest have been discontinued due to payment delinquency. Nonaccrual loans totaled $8,068,685 and $8,579,086 as of December 31, 2006 and 2005, respectively, and total recorded investment in loans past due 90 days or more and still accruing interest approximated $9,346 and $14,000, respectively. Foregone interest on nonaccrual loans approximated $533,000 in 2006, $426,000 in 2005 and $403,000 in 2004.

- 18 -

(4) Loans (Continued)

The following table details impaired loan data as of December 31 for the years ended as indicated:

	2006			2005
Total Investment in Impaired Loans	$	5,736,240		$	5,555,257
Less Allowance for Impaired Loan Losses		(1,664,792	)		(1,844,346	)
Net Investment, December 31	$	4,071,448		$	3,710,911
Average Investment during the Year	$	6,801,922		$	7,242,063
Income Recognized during the Year	$	423,652		$	190,724
Income Collected during the Year	$	374,571		$	211,371

(5) Allowance for Loan Losses

Transactions in the allowance for loan losses are summarized below for the years ended December 31:

	2006			2005			2004
Balance, Beginning	$	10,761,915		$	10,012,179		$	8,515,840
Provision Charged to Operating Expenses		3,987,000			3,443,750			3,469,000
Loans Charged Off		(3,373,273	)		(3,046,192	)		(2,135,478	)
Loan Recoveries		613,717			352,178			162,817
Balance, Ending	$	11,989,359		$	10,761,915		$	10,012,179

(6) Premises and Equipment

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

	2006			2005
Land	$	7,413,927		$	6,094,209
Building		20,885,790			18,687,218
Furniture, Fixtures and Equipment		12,059,702			11,547,121
Leasehold Improvements		994,282			965,382
Construction in Progress		114,429			1,075,983
		41,468,130			38,369,913
Accumulated Depreciation		(14,014,998	)		(12,694,081	)
	$	27,453,132		$	25,675,832

- 19 -

(6) Premises and Equipment (Continued)

Depreciation charged to operations totaled $1,933,290 in 2006, $1,903,242 in 2005 and $1,754,053 in 2004.

Certain Company facilities and equipment are leased under various operating leases. Rental expense approximated $329,000 for 2006, $334,000 for 2005 and $315,000 for 2004.

Future minimum rental payments as of December 31, 2006 are as follows:

Year Ending December 31	Amount
2007	$122,296
2008	113,376
2009	93,376
2010	89,376
2011 and Thereafter	226,506
	$644,930

(7) Goodwill and Intangible Assets

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

	2006		2005
Goodwill
Balance, Beginning	$	2,412,338	$	2,412,338
Goodwill Acquired		—		—
Balance, Ending	$	2,412,338	$	2,412,338

	Core Deposit Intangible		Accumulated Amortization			Net Core Deposit Intangible
Core Deposit Intangible
Balance, December 31, 2005	$	1,056,693	$	(536,778	)	$	519,915
Amortization Expense		—		(81,201	)		(81,201	)
Balance, December 31, 2006	$	1,056,693	$	(617,979	)	$	438,714

- 20 -

(7) Goodwill and Intangible Assets (Continued)

Amortization expense related to the core deposit intangible was $81,201, $114,645 and $144,985 for the years ended December 31, 2006, 2005 and 2004, respectively.

The following table reflects the expected amortization schedule for the core deposit intangible at December 31, 2006:

2007	$	36,461
2008		35,749
2009		35,749
2010		35,749
2011 and Thereafter		295,006
	$	438,714

(8) Income Taxes

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

	2006		2005			2004
Current Federal Expense	$	4,994,008	$	5,041,180		$	4,344,013
Deferred Federal (Benefit) Expense		112,518		(546,891	)		(464,530	)
Federal Income Tax Expense		5,106,526		4,494,289			3,879,483
Current State Income Tax Expense		110,837		315,031			282,011
	$	5,217,363	$	4,809,320		$	4,161,494

The federal income tax expense of $5,106,526 in 2006, $4,494,289 in 2005 and $3,879,483 in 2004 is less than the income taxes computed by applying the federal statutory rates to income before income taxes. The reasons for the differences are as follows:

	2006			2005			2004
Statutory Federal Income Taxes	$	5,290,356		$	4,725,288		$	4,158,468
Tax-Exempt Interest		(188,408	)		(163,184	)		(166,382	)
Interest Expense Disallowance		28,211			17,136			16,483
Premiums on Officers’ Life Insurance		(50,419	)		(56,374	)		(41,060	)
Meal and Entertainment Disallowance		16,644			10,756			9,287
State Income Taxes		(46,441	)		(94,719	)		(91,006	)
Other		56,583			55,386			(6,307	)
Actual Federal Income Taxes	$	5,106,526		$	4,494,289		$	3,879,483

- 21 -

(8) Income Taxes (Continued)

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

	2006			2005
Deferred Tax Assets
Allowance for Loan Losses	$	4,076,487		$	3,659,158
Deferred Compensation		376,297			378,347
Other Real Estate		45,143			51,000
Other		498,571			354,908
		4,996,498			4,443,413
Deferred Tax Liabilities
Premises and Equipment		(1,020,752	)		(468,386	)
Other		(325,224	)		(211,987	)
		(1,345,976	)		(680,373	)
Deferred Tax Assets on Unrealized Securities Losses		502,180			696,825
Net Deferred Tax Assets	$	4,152,702		$	4,459,865

(9) Deposits

The aggregate amount of overdrawn deposit accounts reclassified as loan balances totaled $838,935 and $593,997 as of December 31, 2006 and 2005, respectively.

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

	2006		2005
Interest-Bearing Demand	$	185,768,785	$	187,735,342
Savings		33,305,542		35,245,132
Time, $100,000 and Over		366,041,185		283,583,136
Other Time		379,994,707		359,022,903
	$	965,110,219	$	865,586,513

At December 31, 2006 and 2005, the Company had brokered deposits of $72,682,000 and $45,729,000, respectively. The aggregate amount of short-term jumbo certificates of deposit, each with a minimum denomination of $100,000, was approximately $328,788,000 and $234,307,000 as of December 31, 2006 and 2005, respectively.

- 22 -

(9) Deposits (Continued)

As of December 31, 2006, the scheduled maturities of certificates of deposit are as follows:

Year	Amount
2007	$663,217,378
2008	44,385,132
2009	10,138,807
2010	19,004,563
2011 and Thereafter	9,290,012
	$746,035,892

(10) Other Borrowed Money

Other borrowed money at December 31 is summarized as follows:

	2006		2005
Federal Home Loan Bank Advances	$	61,500,000	$	67,500,000
The Banker’s Bank Note Payable		—		2,500,000
The Banker’s Bank Note Payable		—		226,205
	$	61,500,000	$	70,226,205

Advances from the Federal Home Loan Bank (FHLB) have maturities ranging from 2007 to 2019 and interest rates ranging from 2.74 percent to 5.93 percent. Under the Blanket Agreement for Advances and Security Agreement with the FHLB, residential first mortgage loans, commercial loans and cash balances held by the FHLB are pledged as collateral for the FHLB advances outstanding. At December 31, 2006, the Company had available line of credit commitments totaling $99,472,631, of which $37,972,631 was available.

The Banker’s Bank note payable originated on May 27, 2005 for $1,500,000. On December 20, 2005, the original $1,500,000 was renewed into a new note with an additional $1,000,000 advanced at an interest rate of The Wall Street Prime minus 0.75 percent. Interest payments are due quarterly with the entire unpaid balance due May 27, 2006. The loan is collateralized by a negative pledge of Colony Bank Wilcox stock. The loan was paid off in April 2006.

The Banker’s Bank note payable was renewed on January 7, 2003 for $1,112,735 at a rate of The Wall Street Prime minus .50 percent. Payments are due monthly with the entire unpaid balance due January 7, 2007. The debt is secured by all furniture, fixtures, machinery, equipment and software of Colony Management Services, Inc. Colony Bankcorp, Inc. guarantees the debt. The loan was paid off in August 2006.

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(10) Other Borrowed Money (Continued)

The aggregate stated maturities of other borrowed money at December 31, 2006 are as follows:

Year	Amount
2007	$	16,000,000
2008		9,500,000
2009		—
2010		1,000,000
2011 and Thereafter		35,000,000
	$	61,500,000

The Company also has available federal funds lines of credit with various financial institutions totaling $39,300,000, of which there was $1,070,000 outstanding amount at December 31, 2006.

(11) Subordinated Debentures (Trust Preferred Securities)

During the first quarter of 2002, the Company formed a subsidiary whose sole purpose was to issue $9,000,000 in Trust Preferred Securities through a pool sponsored by FTN Financial Capital Markets. The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions. At December 31, 2006, the floating-rate securities had an 8.97 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 3.60 percent.

During the fourth quarter of 2002, the Company formed a second subsidiary whose sole purpose was to issue $5,000,000 in Trust Preferred Securities through a pool sponsored by FTN Financial Capital Markets. The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions. At December 31, 2006, the floating-rate securities had an 8.62 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 3.25 percent.

During the second quarter of 2004, the Company formed a third subsidiary whose sole purpose was to issue $4,500,000 in Trust Preferred Securities through a pool sponsored by FTN Financial Capital Markets. The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions. At December 31, 2006, the floating rate securities had an 8.04 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 2.68 percent.

During the second quarter of 2006, the Company formed a fourth subsidiary whose sole purpose was to issue $5,000,000 in Trust Preferred Securities in a private placement by SunTrust Bank Capital Markets. The Trust Preferred Securities have a maturity of 30 years and are redeemable after 5 years with certain exceptions. At December 31, 2006, the following rate securities had a 6.86 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 1.50 percent.

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

The total aggregate principal amount of trust preferred certificates outstanding at December 31, 2006 was $23,500,000. The total aggregate principal amount of subordinated debentures outstanding at December 31, 2006 was $24,229,000.

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(12) Restricted Stock—Unearned Compensation

In 1999, the board of directors of Colony Bankcorp, Inc. adopted a restricted stock grant plan which awards certain executive officers common shares of the Company. The maximum number of shares (split-adjusted) which may be subject to restricted stock awards is 64,701. During 2000-2006, 72,928 split-adjusted shares were issued under this plan and since the plan’s inception, 11,102 shares have been forfeited; thus, remaining shares which may be subject to restricted stock awards are 2,875 at December 31, 2006. The shares are recorded at fair market value (on the date granted) as a separate component of stockholders’ equity. The cost of these shares is being amortized against earnings using the straight-line method over three years (the restriction period).

In April 2004, the stockholders of Colony Bankcorp, Inc. adopted a restricted stock grant plan which awards certain executive officers common shares of the Company. The maximum number of shares which may be subject to restricted stock awards (split-adjusted) is 143,500. During 2006, 6,855 split-adjusted shares were issued under this plan and since the plan’s inception, 1,298 shares have been forfeited; thus remaining shares which may be subject to restricted stock awards are 137,943 at December 31, 2006. The shares are recorded at fair market value (on the date granted) as a separate component of stockholders’ equity. The cost of these shares is being amortized against earnings using the straight-line method over three years (the restriction period).

(13) Profit Sharing Plan

The Company has a profit sharing plan that covers substantially all employees who meet certain age and service requirements. It is the Company’s policy to make contributions to the plan as approved annually by the board of directors. The total provision for contributions to the plan was $662,730 for 2006, $558,138 for 2005 and $479,108 for 2004.

(14) Commitments and Contingencies

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

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

At December 31, 2006 and 2005, the following financial instruments were outstanding whose contract amounts represent credit risk:

	Contract Amount
	2006		2005
Commitments to Extend Credit	$	105,165,000	$	112,056,000
Standby Letters of Credit		3,279,000		2,572,000
Performance Letters of Credit		—		472,000

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(14) Commitments and Contingencies (Continued)

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

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

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

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

(15) Deferred Compensation Plan

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

Liabilities accrued under the plans totaled $1,107,653 and $1,113,685 as of December 31, 2006 and 2005, respectively. Benefit payments under the contracts were $171,029 in 2006 and $167,126 in 2005. Provisions charged to operations totaled $164,997 in 2006, $359,787 in 2005 and $219,064 in 2004.

Fee income recognized with deferred compensation plans totaled $148,290 in 2006, $328,942 in 2005 and $120,766 in 2004.

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(16) Interest Income and Expense

Interest income of $311,828, $257,639 and $329,211 from state, county and municipal bonds was exempt from regular income taxes in 2006, 2005 and 2004, respectively.

Interest on deposits includes interest expense on time certificates of $100,000 or more totaling $16,189,086 $8,180,847 and $4,633,304 for the years ended December 31, 2006, 2005 and 2004, respectively.

(17) Supplemental Cash Flow Information

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

	2006		2005		2004
Interest Expense	$	40,351,134	$	25,547,290	$	18,294,053
Income Taxes	$	5,371,395	$	5,353,702	$	4,777,702

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

	2006			2005		2004
Acquisitions of Real Estate Through Loan Foreclosures	$	2,815,716		$	2,793,978	$	1,835,125
Acquisitions, Net of Cash Acquired
Cash Paid (Received), Net	$	—		$	—	$	(14,356,597	)
Liabilities Assumed		—			—		35,859,268
Fair Value of Net Assets Acquired	$	—		$	—	$	21,502,671
Unrealized (Gain) Loss on Investment Securities	$	(572,485	)	$	1,145,190	$	1,032,750

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(18) Related Party Transactions

The aggregate balance of direct and indirect loans to directors, executive officers or principal holders of equity securities of the Company was $18,142,109 as of December 31, 2006 and $15,103,982 as of December 31, 2005. All such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than a normal risk of collectibility. A summary of activity of related party loans is shown below:

	2006			2005
Balance, Beginning	$	15,103,982		$	15,047,046
New Loans		18,540,907			14,239,044
Repayments		(15,528,723	)		(14,182,108	)
Transactions Due to Changes in Directors		25,943			—
Balance, Ending	$	18,142,109		$	15,103,982

Deposits from related parties held by the Company at December 31, 2006 and 2005 totaled approximately $13,091,000 and $13,978,000, respectively.

(19) Fair Value of Financial Instruments

SFAS No. 107,Disclosures about Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of Colony Bankcorp, Inc. and Subsidiaries’ financial instruments are detailed hereafter. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.

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

Investment Securities - Fair values for investment securities are based on quoted market prices.

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

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

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

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(19) Fair Value of Financial Instruments (Continued)

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

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

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

Standby Letters of Credit and Commitments to Extend Credit – Because standby letters of credit and commitments to extend credit are made using variable rates, the contract value is a reasonable estimate of fair value.

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

	2006				2005
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(in Thousands)
Assets
Cash and Short-Term Investments	$	75,456	$	75,456	$	80,697	$	80,697
Investment Securities Available for Sale		149,236		149,236		124,246		124,246
Investment Securities Held to Maturity		71		71		79		79
Federal Home Loan Bank Stock		5,087		5,087		5,034		5,034
Loans		942,273		930,716		859,117		849,888
Liabilities
Deposits		1,042,446		1,040,991		944,365		942,606
Federal Funds Purchased		1,070		1,070		—		—
Subordinated Debentures		24,229		24,229		19,074		19,074
Other Borrowed Money		61,500		58,345		70,226		66,310
Unrecognized Financial Instruments
Standby Letters of Credit		—		3,279		—		2,572
Performance Letters of Credit		—		—		—		472
Commitments to Extend Credit		—		105,165		—		112,056

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.

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(19) Fair Value of Financial Instruments (Continued)

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.

(20) Regulatory Capital Matters

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

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

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier I capital to risk-weighted assets, and of Tier I capital to average assets. The amounts and ratios as defined in regulations are presented hereafter. Management believes, as of December 31, 2006, the Company meets all capital adequacy requirements to which it is subject under the regulatory framework for prompt corrective action. In the opinion of management, there are no conditions or events since prior notification of capital adequacy from the regulators that have changed the institution’s category.

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(20) Regulatory Capital Matters (Continued)

The following table summarizes regulatory capital information as of December 31, 2006 and 2005 on a consolidated basis and for each significant subsidiary, as defined.

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2006	(In Thousands)
Total Capital to Risk-Weighted Assets
Consolidated	$	110,304	11.50	%	$	76,710	8.00	%	$	95,887	10.00	%
Fitzgerald		18,697	11.33			13,206	8.00			16,508	10.00
Ashburn		28,908	10.77			21,464	8.00			26,830	10.00
Worth		14,618	11.02			10,610	8.00			13,262	10.00
Southeast		20,091	10.76			14,934	8.00			18,667	10.00
Quitman		12,183	11.65			8,367	8.00			10,458	10.00
Tier I Capital to Risk-Weighted Assets
Consolidated		98,235	10.24			38,355	4.00			57,532	6.00
Fitzgerald		16,567	10.04			6,603	4.00			9,905	6.00
Ashburn		25,551	9.52			10,732	4.00			16,098	6.00
Worth		12,958	9.77			5,305	4.00			7,957	6.00
Southeast		17,981	9.63			7,467	4.00			11,200	6.00
Quitman		10,985	10.50			4,183	4.00			6,275	6.00
Tier I Capital to Average Assets
Consolidated		98,235	8.17			48,087	4.00			60,109	5.00
Fitzgerald		16,567	8.07			8,207	4.00			10,259	5.00
Ashburn		25,551	7.68			13,306	4.00			16,632	5.00
Worth		12,958	7.44			6,969	4.00			8,711	5.00
Southeast		17,981	8.52			8,445	4.00			10,556	5.00
Quitman		10,985	7.78			5,647	4.00			7,059	5.00

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(20) Regulatory Capital Matters (Continued)

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2005	(in Thousands)
Total Capital to Risk-Weighted Assets
Consolidated	$	95,873	11.02	%	$	69,600	8.00	%	$	87,000	10.00	%
Fitzgerald		16,801	11.34			11,849	8.00			14,811	10.00
Ashburn		28,183	11.07			20,363	8.00			25,454	10.00
Worth		13,718	10.48			10,475	8.00			13,094	10.00
Southeast		15,025	10.30			11,665	8.00			14,581	10.00
Quitman		11,237	12.15			7,397	8.00			9,246	10.00
Tier I Capital to Risk-Weighted Assets
Consolidated		85,049	9.78			34,800	4.00			52,200	6.00
Fitzgerald		14,988	10.12			5,924	4.00			8,887	6.00
Ashburn		24,999	9.82			10,181	4.00			15,272	6.00
Worth		12,079	9.22			5,238	4.00			7,856	6.00
Southeast		13,687	9.39			5,833	4.00			8,749	6.00
Quitman		10,164	10.99			3,698	4.00			5,548	6.00
Tier I Capital to Average Assets
Consolidated		85,049	7.77			43,768	4.00			54,710	5.00
Fitzgerald		14,988	8.03			7,463	4.00			9,329	5.00
Ashburn		24,999	7.60			13,162	4.00			16,452	5.00
Worth		12,079	7.25			6,668	4.00			8,335	5.00
Southeast		13,687	8.36			6,551	4.00			8,188	5.00
Quitman		10,164	8.06			5,044	4.00			6,305	5.00

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

The parent company’s balance sheets as of December 31, 2006 and 2005 and the related statements of income and comprehensive income and cash flows for each of the years in the three-year period then ended are as follows:

COLONY BANKCORP, INC. (PARENT ONLY)

BALANCE SHEETS

DECEMBER 31

	2006			2005
ASSETS
Cash	$	2,223,581		$	229,532
Premises and Equipment, Net		1,273,215			1,284,350
Investment in Subsidiaries, at Equity		97,270,695			88,376,235
Other		998,759			788,257
Total Assets	$	101,766,250		$	90,678,374
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Dividends Payable	$	641,314		$	538,599
Other		284,775			437,783
		926,089			976,382
Other Borrowed Money		—			2,500,000
Subordinated Debt		24,229,000			19,074,000
Stockholders’ Equity
Common Stock, Par Value $1 a Share; Authorized 20,000,000 Shares, Issued 7,189,937 and 7,181,320 Shares as of December 31, 2006 and 2005, Respectively		7,189,937			7,181,320
Paid-In Capital		24,257,392			23,999,775
Retained Earnings		46,416,571			38,601,441
Restricted Stock – Unearned Compensation		(277,918	)		(301,883	)
Accumulated Other Comprehensive Loss, Net of Tax		(974,821	)		(1,352,661	)
		76,611,161			68,127,992
Total Liabilities and Stockholders’ Equity	$	101,766,250		$	90,678,374

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

COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31

	2006		2005			2004
Income
Dividends from Subsidiaries	$	6,800,000	$	4,350,000		$	2,350,000
Other		168,763		109,119			89,888
		6,968,763		4,459,119			2,439,888
Expenses
Interest		1,926,647		1,323,247			856,993
Amortization		30,317		30,317			29,379
Salaries and Employee Benefits		1,013,523		1,053,636			807,142
Other		735,821		716,954			638,068
		3,706,308		3,124,154			2,331,582
Income Before Taxes and Equity in Undistributed Earnings of Subsidiaries		3,262,455		1,334,965			108,306
Income Tax Benefits		1,027,921		1,000,501			728,733
Income Before Equity in Undistributed Earnings of Subsidiaries		4,290,376		2,335,466			837,039
Equity in Undistributed Earnings of Subsidiaries		5,861,619		6,641,750			7,232,255
Net Income		10,151,995		8,977,216			8,069,294
Other Comprehensive Income, Net of Tax
Gains (Losses) on Securities Arising During the Year		377,840		(755,824	)		(638,921	)
Reclassification Adjustment		—		—			20,432
Unrealized Gains (Losses) on Securities		377,840		(755,824	)		(618,489	)
Comprehensive Income	$	10,529,835	$	8,221,392		$	7,450,805

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

COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

	2006			2005			2004
Cash Flows from Operating Activities
Net Income	$	10,151,995		$	8,977,216		$	8,069,294
Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities
Depreciation and Amortization		309,388			294,155			255,546
Equity in Undistributed Earnings of Subsidiaries		(5,861,619	)		(6,641,750	)		(7,232,255	)
Other		(267,646	)		123,856			122,362
		4,332,118			2,753,477			1,214,947
Cash Flows from Investing Activities
Capital Infusion in Subsidiary		(2,500,000	)		(2,950,000	)		(2,800,000	)
Purchases of Premises and Equipment		(73,749	)		(244,268	)		(16,930	)
Investment in Statutory Trusts	��	(155,000	)		—			(140,000	)
		(2,728,749	)		(3,194,268	)		(2,956,930	)
Cash Flows from Financing Activities
Dividends Paid		(2,264,320	)		(1,993,100	)		(1,749,447	)
Principal Payments on Notes and Debentures		(2,500,000	)		(1,500,000	)		(1,000,000	)
Proceeds from Notes and Debentures		5,155,000			4,000,000			4,640,000
		390,680			506,900			1,890,553
Increase in Cash		1,994,049			66,109			148,570
Cash, Beginning		229,532			163,423			14,853
Cash, Ending	$	2,223,581		$	229,532		$	163,423

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(22) Earnings Per Share

SFAS No. 128 establishes standards for computing and presenting basic and diluted earnings per share. Basic earnings per share is calculated and presented based on income available to common stockholders divided by the weighted average number of shares outstanding during the reporting periods. Diluted earnings per share reflects the potential dilution of restricted stock. The following presents earnings per share for the years ended December 31, 2006, 2005 and 2004 under the requirements of Statement 128:

December 31, 2006	Income Numerator		Common Shares Denominator	EPS
Basic EPS
Income Available to Common Stockholders	$	10,151,995	7,176,894	$	1.41
Dilutive Effect of Potential Common Stock
Restricted Stock			843
Diluted EPS
Income Available to Common Stockholders After Assumed Conversions of Dilutive Securities	$	10,151,995	7,177,737	$	1.41
December 31, 2005
Basic EPS
Income Available to Common Stockholders	$	8,977,216	7,168,406	$	1.25
Dilutive Effect of Potential Common Stock
Restricted Stock			2,694
Diluted EPS
Income Available to Common Stockholders After Assumed Conversions of Dilutive Securities	$	8,977,216	7,171,100	$	1.25
December 31, 2004
Basic EPS
Income Available to Common Stockholders	$	8,069,294	7,131,028	$	1.13
Dilutive Effect of Potential Common Stock
Restricted Stock			26,605
Diluted EPS
Income Available to Common Stockholders After Assumed Conversions of Dilutive Securities	$	8,069,294	7,157,633	$	1.13

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