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., CPARAY
      C. PEARSON, CPA
            ELIZABETH WARE HARDIN, CPAJ.
      RANDOLPH NICHOLS, CPA
            CAROLINE E. GRIFFIN, CPAWILLIAM
      H. EPPS, JR., CPA
            RONNIE K. GILBERT, CPARAYMOND
      A. PIPPIN, JR., CPA
            RON C. DOUTHIT, CPAJERRY
      A. WOLFE, CPA
            CHARLES A. FLETCHER, CPAW.
      E. BARFIELD, JR., CPA
            MARJORIE HUCKABEE CARTER, CPAHOWARD
      S. HOLLEMAN, CPA
            BRYAN A. ISGETT, CPAF.
      GAY McMICHAEL, CPA
            DAVID PASCHAL MUSE, JR., CPA


March 14,
2008





REPORT
OF INDEPENDENT


REGISTERED
PUBLIC ACCOUNTING FIRM





The Board
of Directors and Stockholders


Colony
Bankcorp, Inc.





We have
audited the accompanying consolidated balance sheets of Colony Bankcorp, Inc. and
Subsidiaries as of December 31, 2007 and 2006 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, 2007.  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, 2007 and 2006, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2007 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), Colony Bankcorp, Inc.’s internal control over
financial reporting as of December 31, 2007, based on criteria established in
Internal Control-Integrated
Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and our report dated March 14, 2008 expressed an unqualified opinion on the
effectiveness of Colony Bankcorp, Inc.’s internal control over financial
reporting.





/s/
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP


McNAIR,
McLEMORE, MIDDLEBROOKS & CO., LLP


- 1
-


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., CPARAY
      C. PEARSON, CPA
            ELIZABETH WARE HARDIN, CPAJ.
      RANDOLPH NICHOLS, CPA
            CAROLINE E. GRIFFIN, CPAWILLIAM
      H. EPPS, JR., CPA
            RONNIE K. GILBERT, CPARAYMOND
      A. PIPPIN, JR., CPA
            RON C. DOUTHIT, CPAJERRY
      A. WOLFE, CPA
            CHARLES A. FLETCHER, CPAW.
      E. BARFIELD, JR., CPA
            MARJORIE HUCKABEE CARTER, CPAHOWARD
      S. HOLLEMAN, CPA
            BRYAN A. ISGETT, CPAF.
      GAY McMICHAEL, CPA
            DAVID PASCHAL MUSE, JR., CPA


March 14,
2008





REPORT
OF INDEPENDENT


REGISTERED PUBLIC ACCOUNTING
FIRM





The Board
of Directors and Stockholders


Colony
Bankcorp, Inc.





We have
audited Colony Bankcorp, Inc.’s internal control over financial reporting as of
December 31, 2007, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). 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
included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on 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, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk.  Our audit also included
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, Colony Bankcorp, Inc. maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2007 based on
criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).





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, 2007 and 2006, 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, 2007 and our report dated March 14, 2008, expressed an
unqualified opinion.





/s/
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP


McNAIR,
McLEMORE, MIDDLEBROOKS & CO., LLP


- 2
-


COLONY
BANKCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


DECEMBER
31








ASSETS








2007
            
            
            2006Cash
      and Cash EquivalentsCash
      and Due from Banks
            
            $
            28,369,037
            
            
            $
            27,231,017Federal
      Funds Sold
            
            
            21,737,143
            
            
            
            45,149,43450,106,180
            
            
            
            72,380,451Interest-Bearing
      Deposits
            
            
            1,466,690
            
            
            
            3,075,481Investment
      SecuritiesAvailable
      for Sale, at Fair Value
            
            
            167,123,042
            
            
            
            149,236,225Held
      to Maturity, at Cost (Fair Value of $72,005 and $70,874 as of December 31,
      2007 and 2006, Respectively)
            
            
            68,170
            
            
            
            70,874167,191,212
            
            
            
            149,307,099Federal
      Home Loan Bank Stock, at Cost
            
            
            5,532,700
            
            
            
            5,086,800Loans
            
            
            945,278,642
            
            
            
            942,273,015Allowance
      for Loan Losses
            
            
            (15,512,940
            )
            
            
            (11,989,359
            )Unearned
      Interest and Fees
            
            
            (300,577
            )
            
            
            (501,143
            )929,465,125
            
            
            
            929,782,513Premises
      and Equipment
            
            
            27,808,838
            
            
            
            27,453,132Other
      Real Estate
            
            
            1,332,391
            
            
            
            970,320Goodwill
            
            
            2,412,338
            
            
            
            2,412,338Other
      Intangible Assets
            
            
            402,253
            
            
            
            438,714Other
      Assets
            
            
            23,058,742
            
            
            
            22,597,010Total
      Assets
            
            $
            1,208,776,469
            
            
            $
            1,213,503,858





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


- 3
-


COLONY
BANKCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


DECEMBER
31








LIABILITIES
AND STOCKHOLDERS' EQUITY





2007
            
            
            2006DepositsNoninterest-Bearing
            
            $
            86,111,783
            
            
            $
            77,335,680Interest-Bearing
            
            
            932,490,203
            
            
            
            965,110,2191,018,601,986
            
            
            
            1,042,445,899Borrowed
      MoneyFederal
      Funds Purchased
            
            
            1,346,000
            
            
            
            1,070,000Subordinated
      Debentures
            
            
            24,229,000
            
            
            
            24,229,000Other
      Borrowed Money
            
            
            73,600,000
            
            
            
            61,500,00099,175,000
            
            
            
            86,799,000Other
      Liabilities
            
            
            7,256,365
            
            
            
            7,647,798Commitments
      and ContingenciesStockholders'
      EquityCommon
      Stock, Par Value $1 a Share; Authorized 20,000,000 Shares, Issued
      7,200,913 and 7,189,937 Shares as of December 31, 2007 and 2006,
      Respectively
            
            
            7,200,913
            
            
            
            7,189,937Paid-In
      Capital
            
            
            24,420,497
            
            
            
            24,257,392Retained
      Earnings
            
            
            52,086,834
            
            
            
            46,416,571Restricted
      Stock – Unearned Compensation
            
            
            (237,002
            )
            
            
            (277,918
            )Accumulated
      Other Comprehensive Income (Loss), Net of Tax
            
            
            271,876
            
            
            
            (974,821
            )83,743,118
            
            
            
            76,611,161Total
      Liabilities and Stockholders' Equity
            
            $
            1,208,776,469
            
            
            $
            1,213,503,858





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


- 4
-


COLONY
BANKCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE YEARS ENDED DECEMBER 31








2007
            
            
            2006
            
            
            2005Interest
      IncomeLoans,
      Including Fees
            
            $
            80,973,666
            
            
            $
            75,086,845
            
            
            $
            58,308,810Federal
      Funds Sold
            
            
            1,477,985
            
            
            
            2,034,823
            
            
            
            1,266,120Deposits
      with Other Banks
            
            
            142,785
            
            
            
            133,321
            
            
            
            86,121Investment
      SecuritiesU.
      S. Government Agencies
            
            
            6,437,743
            
            
            
            5,198,384
            
            
            
            3,412,711State,
      County and Municipal
            
            
            549,031
            
            
            
            381,085
            
            
            
            240,864Corporate
      Obligations
            
            
            269,283
            
            
            
            162,377
            
            
            
            138,559Other
      Investments
            
            
            -
            
            
            
            3,808
            
            
            
            3,223Dividends
      on Other Investments
            
            
            308,840
            
            
            
            278,974
            
            
            
            177,33590,159,333
            
            
            
            83,279,617
            
            
            
            63,633,743Interest
      ExpenseDeposits
            
            
            42,730,760
            
            
            
            36,610,386
            
            
            
            22,590,018Federal
      Funds Purchased
            
            
            59,145
            
            
            
            28,853
            
            
            
            16,259Borrowed
      Money
            
            
            4,910,945
            
            
            
            4,752,642
            
            
            
            3,873,73047,700,850
            
            
            
            41,391,881
            
            
            
            26,480,007Net
      Interest Income
            
            
            42,458,483
            
            
            
            41,887,736
            
            
            
            37,153,736Provision
      for Loan Losses
            
            
            5,930,756
            
            
            
            3,987,000
            
            
            
            3,443,750Net
      Interest Income After Provision for Loan Losses
            
            
            36,527,727
            
            
            
            37,900,736
            
            
            
            33,709,986Noninterest
      IncomeService
      Charges on Deposits
            
            
            4,771,239
            
            
            
            4,580,181
            
            
            
            4,127,889Other
      Service Charges, Commissions and Fees
            
            
            921,502
            
            
            
            831,472
            
            
            
            708,276Mortgage
      Fee Income
            
            
            966,897
            
            
            
            767,803
            
            
            
            493,458Securities
      Gains
            
            
            183,656
            
            
            
            -
            
            
            
            -Other
            
            
            973,687
            
            
            
            1,170,725
            
            
            
            822,3377,816,981
            
            
            
            7,350,181
            
            
            
            6,151,960Noninterest
      ExpensesSalaries
      and Employee Benefits
            
            
            17,866,304
            
            
            
            16,870,488
            
            
            
            14,127,949Occupancy
      and Equipment
            
            
            4,039,327
            
            
            
            4,034,909
            
            
            
            3,777,759Directors'
      Fees
            
            
            632,547
            
            
            
            638,721
            
            
            
            616,534Legal
      and Professional Fees
            
            
            1,144,229
            
            
            
            1,070,605
            
            
            
            764,896Other
      Real Estate and Repossession Expense
            
            
            100,959
            
            
            
            162,384
            
            
            
            126,630Loss
      on Sale of Other Real Estate
            
            
            48,384
            
            
            
            20,263
            
            
            
            185,379Other
            
            
            7,747,539
            
            
            
            7,084,189
            
            
            
            6,476,26331,579,289
            
            
            
            29,881,559
            
            
            
            26,075,410Income
      Before Income Taxes
            
            
            12,765,419
            
            
            
            15,369,358
            
            
            
            13,786,536Income
      Taxes
            
            
            4,218,463
            
            
            
            5,217,363
            
            
            
            4,809,320Net
      Income
            
            $
            8,546,956
            
            
            $
            10,151,995
            
            
            $
            8,977,216Net
      Income Per Share of Common StockBasic
            
            $
            1.19
            
            
            $
            1.41
            
            
            $
            1.25Diluted
            
            $
            1.19
            
            
            $
            1.41
            
            
            $
            1.25Cash
      Dividends Declared Per Share of Common Stock
            
            $
            0.365
            
            
            $
            0.325
            
            
            $
            0.285Weighted
      Average Shares Outstanding
            
            
            7,188,696
            
            
            
            7,176,894
            
            
            
            7,168,406





The
accompanying notes are an integral part of these statements.


- 5
-


COLONY
BANKCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME


FOR
THE YEARS ENDED DECEMBER 31








2007
            
            
            2006
            
            
            2005Net
      Income
            
            $
            8,546,956
            
            
            $
            10,151,995
            
            
            $
            8,977,216Other
      Comprehensive Income, Net of TaxGains
      (Losses) on Securities Arising During the Year
            
            
            1,367,910
            
            
            
            377,840
            
            
            
            (755,824
            )Reclassification
      Adjustment
            
            
            (121,213
            )
            
            
            -
            
            
            
            -Change
      in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of
      Reclassification Adjustment and Tax Effects
            
            
            1,246,697
            
            
            
            377,840
            
            
            
            (755,824
            )Comprehensive
      Income
            
            $
            9,793,653
            
            
            $
            10,529,835
            
            
            $
            8,221,392








The
accompanying notes are an integral part of these statements.


- 6
-


COLONY
BANKCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


FOR
THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005





Shares
              Issued
            
            
            Common
              Stock
            
            
            Paid-In
              Capital
            
            
            Retained
              Earnings
            
            
            Restricted
              Stock
      -
              Unearned
              Compensation
            
            
            Accumulated
      Other Comprehensive Income (Loss)
            
            
            TotalBalance,
      December 31, 2004
            
            
            5,738,343
            
            
            $
            5,738,343
            
            
            $
            23,713,200
            
            
            $
            33,119,090
            
            
            $
            (210,833
            )
            
            $
            (596,837
            )
            
            $
            61,762,9635
      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
            
            
            
            
            
            
            
            201,923Change
      in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of
      Reclassification Adjustment and Tax Effects
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (755,824
            )
            
            
            (755,824
            )Dividends
      Declared
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,058,286
            )
            
            
            
            
            
            
            
            
            
            
            (2,058,286
            )Net
      Income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            8,977,216
            
            
            
            
            
            
            
            
            
            
            
            8,977,216Balance,
      December 31, 2005
            
            
            7,181,320
            
            
            
            7,181,320
            
            
            
            23,999,775
            
            
            
            38,601,441
            
            
            
            (301,883
            )
            
            
            (1,352,661
            )
            
            
            68,127,992Issuance
      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
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            61,157Amortization
      of Unearned Compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            229,042
            
            
            
            
            
            
            
            229,042Change
      in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of
      Reclassification Adjustment and Tax Effects
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            377,840
            
            
            
            377,840Dividends
      Declared
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,336,865
            )
            
            
            
            
            
            
            
            
            
            
            (2,336,865
            )Net
      Income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10,151,995
            
            
            
            
            
            
            
            
            
            
            
            10,151,995Balance,
      December 31, 2006
            
            
            7,189,937
            
            
            
            7,189,937
            
            
            
            24,257,392
            
            
            
            46,416,571
            
            
            
            (277,918
            )
            
            
            (974,821
            )
            
            
            76,611,161Cumulative
      Effect of Change in Accounting for Uncertainty in Income
    Taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (247,312
            )
            
            
            
            
            
            
            
            
            
            
            (247,312
            )Issuance
      of Restricted Stock
            
            
            16,175
            
            
            
            16,175
            
            
            
            270,122
            
            
            
            
            
            
            
            (286,297
            )
            
            
            
            
            
            
            -Forfeiture
      of Restricted Stock
            
            
            (5,199
            )
            
            
            (5,199
            )
            
            
            (110,514
            )
            
            
            
            
            
            
            115,713
            
            
            
            
            
            
            
            -Tax
      Benefit of Restricted Stock
            
            
            
            
            
            
            
            
            
            
            3,497
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,497Amortization
      of Unearned Compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            211,500
            
            
            
            
            
            
            
            211,500Change
      in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of
      Reclassification Adjustment and Tax Effects
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,246,697
            
            
            
            1,246,697Dividends
      Declared
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,629,381
            )
            
            
            
            
            
            
            
            
            
            
            (2,629,381
            )Net
      Income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            8,546,956
            
            
            
            
            
            
            
            
            
            
            
            8,546,956Balance,
      December 31, 2007
            
            
            7,200,913
            
            
            $
            7,200,913
            
            
            $
            24,420,497
            
            
            $
            52,086,834
            
            
            $
            (237,002
            )
            
            $
            271,876
            
            
            $
            83,743,118





The
accompanying notes are an integral part of these statements.


- 7
-


COLONY
BANKCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31








2007
            
            
            2006
            
            
            2005Cash
      Flows from Operating ActivitiesNet
      Income
            
            $
            8,546,956
            
            
            $
            10,151,995
            
            
            $
            8,977,216Adjustments
      to Reconcile Net Income to Net Cash Provided from Operating
      ActivitiesDepreciation
            
            
            1,875,779
            
            
            
            1,933,290
            
            
            
            1,903,242Amortization
      and Accretion
            
            
            529,805
            
            
            
            720,446
            
            
            
            1,307,710Provision
      for Loan Losses
            
            
            5,930,756
            
            
            
            3,987,000
            
            
            
            3,443,750Deferred
      Income Taxes
            
            
            (1,233,259
            )
            
            
            112,518
            
            
            
            (546,891
            )Securities
      Gains
            
            
            (183,656
            )
            
            
            -
            
            
            
            -(Gain)
      Loss on Sale of Equipment
            
            
            (5,813
            )
            
            
            7,507
            
            
            
            (1,886
            )(Gain)
      Loss on Sale of Other Real Estate and Repossessions
            
            
            53,851
            
            
            
            (14,239
            )
            
            
            34,339Unrealized
      Loss on Other Real Estate
            
            
            -
            
            
            
            32,773
            
            
            
            150,000Increase
      in Cash Surrender Value of Life Insurance
            
            
            (15,427
            )
            
            
            (185,850
            )
            
            
            (203,367
            )Change
      InLoans
      Held for Sale
            
            
            -
            
            
            
            -
            
            
            
            1,190,937Interest
      Receivable
            
            
            362,311
            
            
            
            (2,913,483
            )
            
            
            (1,566,643
            )Prepaid
      Expenses
            
            
            144,931
            
            
            
            87,542
            
            
            
            (122,165
            )Interest
      Payable
            
            
            291,225
            
            
            
            1,040,748
            
            
            
            932,717Accrued
      Expenses and Accounts Payable
            
            
            (109,441
            )
            
            
            344,075
            
            
            
            470,293Other
            
            
            (1,018,977
            )
            
            
            (301,677
            )
            
            
            (94,880
            )15,169,041
            
            
            
            15,002,645
            
            
            
            15,874,372Cash
      Flows from Investing ActivitiesInterest-Bearing
      Deposits in Other Banks
            
            
            1,608,791
            
            
            
            (1,440,066
            )
            
            
            1,593,274Purchase
      of Investment Securities Available for Sale
            
            
            (60,521,076
            )
            
            
            (48,498,815
            )
            
            
            (49,527,780
            )Proceeds
      from Sale of Investment Securities Available for Sale
            
            
            16,984,665
            
            
            
            -
            
            
            
            -Proceeds
      from Maturities, Calls and Paydowns of Investment
    SecuritiesAvailable
      for Sale
            
            
            27,603,088
            
            
            
            23,868,423
            
            
            
            35,864,083Held
      to Maturity
            
            
            12,054
            
            
            
            18,035
            
            
            
            11,417Proceeds
      from Sale of Premises and Equipment
            
            
            267,120
            
            
            
            4,691
            
            
            
            11,750Net
      Loans to Customers
            
            
            (8,333,042
            )
            
            
            (88,764,174
            )
            
            
            (85,879,622
            )Purchase
      of Premises and Equipment
            
            
            (2,492,797
            )
            
            
            (3,722,786
            )
            
            
            (5,765,092
            )Other
      Real Estate and Repossessions
            
            
            2,318,696
            
            
            
            4,136,207
            
            
            
            1,633,964Federal
      Home Loan Bank Stock
            
            
            (445,900
            )
            
            
            (52,600
            )
            
            
            (555,100
            )Investment
      in Capital Trusts
            
            
            (434,000
            )
            
            
            (155,000
            )
            
            
            -Liquidation
      of Statutory Trusts
            
            
            434,000
            
            
            
            -
            
            
            
            -Other
      Investments
            
            
            (420,560
            )
            
            
            (400,000
            )
            
            
            -(23,418,961
            )
            
            
            (115,006,085
            )
            
            
            (102,613,106
            )Cash
      Flows from Financing ActivitiesInterest-Bearing
      Customer Deposits
            
            
            (32,620,017
            )
            
            
            99,529,936
            
            
            
            83,461,129Noninterest-Bearing
      Customer Deposits
            
            
            8,776,104
            
            
            
            (1,442,462
            )
            
            
            10,609,094Proceeds
      from Other Borrowed Money
            
            
            41,100,000
            
            
            
            41,500,000
            
            
            
            19,500,000Principal
      Payments on Other Borrowed Money
            
            
            (29,000,000
            )
            
            
            (50,226,206
            )
            
            
            (10,723,429
            )Dividends
      Paid
            
            
            (2,556,438
            )
            
            
            (2,264,319
            )
            
            
            (1,993,100
            )Proceeds
      from Issuance of Subordinated Debentures
            
            
            14,434,000
            
            
            
            5,155,000
            
            
            
            -Principal
      Payments of Subordinated Debentures
            
            
            (14,434,000
            )
            
            
            -
            
            
            
            -Federal
      Funds Purchased
            
            
            276,000
            
            
            
            1,070,000
            
            
            
            -(14,024,351
            )
            
            
            93,321,949
            
            
            
            100,853,694Net
      Increase (Decrease) in Cash and Cash Equivalents
            
            
            (22,274,271
            )
            
            
            (6,681,491
            )
            
            
            14,114,960Cash
      and Cash Equivalents, Beginning
            
            
            72,380,451
            
            
            
            79,061,942
            
            
            
            64,946,982Cash
      and Cash Equivalents, Ending
            
            $
            50,106,180
            
            
            $
            72,380,451
            
            
            $
            79,061,942





The
accompanying notes are an integral part of these statements.


- 8
-


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 and note disclosures have been reclassified to conform to statement
presentations selected for 2007.  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.


- 9
-


(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.


- 10
-


(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 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
            
            MethodBanking
      Premises
            
            15-40
            
            Straight-Line
      and AcceleratedFurniture
      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 2007 or 2006.





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.





Advertising
Costs





The
Company expenses the cost of advertising in the periods in which those costs are
incurred.





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.





Positions
taken in the Company’s tax returns may be subject to challenge by the taxing
authorities upon examination.  Uncertain tax positions are initially
recognized in the financial statements when it is more likely than not the
position will be sustained upon examination by the tax
authorities.  Such tax positions are both initially and subsequently
measured as the largest amount of tax benefit that is greater than 50 percent
likely of being realized upon settlement with the tax authority, assuming full
knowledge of the position and all relevant facts.  The Company
provides for interest and, in some cases, penalties on tax positions that may be
challenged by the taxing authorities. Interest expense is recognized beginning
in the first period that such interest would begin
accruing.  Penalties are recognized in the period that the Company
claims the position in the tax return.  Interest and penalties on
income tax uncertainties are classified within income tax expense in the
consolidated statement of income.


- 13
-


(1)  Summary
of Significant Accounting Policies (Continued)





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.





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





SFAS No. 141, Business
Combinations (Revised 2007).SFAS No. 141R replaces SFAS No. 141,
Business Combinations,
and applies to all transactions and other events in which one entity obtains
control over one or more other businesses.  SFAS No. 141R
requires an acquirer, upon initially obtaining control of another entity, to
recognize the assets, liabilities and any noncontrolling interest in the
acquiree at fair value as of the acquisition date.  Contingent
consideration is required to be recognized and measured at fair value on the
date of acquisition rather than at a later date when the amount of that
consideration may be determinable beyond a reasonable doubt.  This
fair value approach replaces the cost-allocation process required under
SFAS No. 141 whereby the cost of an acquisition was allocated to the
individual assets acquired and liabilities assumed based on their estimated fair
value.  SFAS No. 141R requires acquirers to expense
acquisition-related costs as incurred rather than allocating such costs to the
assets acquired and liabilities assumed, as was previously the case under
SFAS No. 141.  Under SFAS No. 141R, the requirements of
SFAS No. 146, Accounting
for Costs Associated with Exit or Disposal Activities, would have to be
met in order to accrue for a restructuring plan in purchase
accounting.  Pre-acquisition contingencies are to be recognized at
fair value, unless it is a noncontractual contingency that is not likely to
materialize, in which case, nothing should be recognized in purchase accounting
and, instead, that contingency would be subject to the probable and estimable
recognition criteria of SFAS No. 5,Accounting for
Contingencies.  SFAS No. 141R is expected to have an
impact on the Company’s accounting for business combinations closing on or after
January 1, 2009.


- 14
-


(1)  Summary
of Significant Accounting Policies (Continued)





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





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 adoption of SFAS No. 155 on January 1, 2007 did not impact
the Company’s consolidated financial statements.





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 adoption of SFAS No. 156 on January 1, 2007 did not
have a significant impact on the Company’s consolidated financial
statements.





FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
109.Interpretation No. 48 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return.  Benefits from tax positions should be recognized in the
financial statements only when it is more likely than not that the tax position
will be sustained upon examination by the appropriate taxing authority that
would have full knowledge of all relevant information.  A tax position
that meets the more-likely-than-not recognition threshold is measured at the
largest amount of benefit that is greater than fifty percent likely of being
realized upon ultimate settlement.  Tax positions that previously
failed to meet the more-likely-than-not recognition threshold should be
recognized in the first subsequent financial reporting period in which that
threshold is met.  Previously recognized tax positions that no longer
meet the more-likely-than-not recognition threshold should be derecognized in
the first subsequent financial reporting period in which that threshold is no
longer met.  Interpretation No. 48 also provides guidance on the
accounting for and disclosure of unrecognized tax benefits, interest and
penalties.  The adoption of Interpretation No. 48 on January 1,
2007 did not significantly impact the Company’s consolidated financial
statements.




FSP No. 48-1 Definition of
Settlement in FASB Interpretation No. 48.FSP No.
48-1 provides guidance on how to determine whether a tax position is effectively
settled for the purpose of recognizing previously unrecognized tax benefits.
FSP No. 48-1 was effective retroactively to January 1, 2007 and did
not significantly impact the Company’s consolidated financial
statements.


- 15
-


(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. 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 its financial position,
results of operations or disclosures.





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 adoption of this standard did not have an
effect on the Company’s 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 does not expect this
standard to have an effect on its financial position, results of operations or
disclosures.


- 16
-


(1)  Summary
of Significant Accounting Policies (Continued)





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





SFAS No. 160,
Noncontrolling Interest in Consolidated Financial Statements, an amendment of
ARB Statement No. 51.SFAS No. 160 amends Accounting
Research Bulletin (ARB) No. 51, Consolidated Financial
Statements, to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary.  SFAS No. 160 clarifies that a noncontrolling interest in
a subsidiary, which is sometimes referred to as minority interest, is an
ownership interest in the consolidated entity that should be reported as a
component of equity in the consolidated financial statements.  Among
other requirements, SFAS No. 160 requires consolidated net income to be
reported at amounts that include the amounts attributable to both the parent and
the noncontrolling interest.  It also requires disclosure, on the face
of the consolidated statements of income, of the amounts of consolidated net
income attributable to the parent and to the noncontrolling
interest.  SFAS No. 160 is effective for the Company on
January 1, 2009 and is not expected to have a significant impact on the
Company’s consolidated financial statements.





Emerging Issues Task Force (EITF)
Issue No. 06-4, Accounting for Deferred Compensation and Postretirement
Benefit Aspects of EndorsementSplitDollar Life Insurance
Arrangements.EITF No. 06-4 requires the recognition of a
liability and related compensation expense for endorsement split-dollar life
insurance policies that provide a benefit to an employee that extends to
post-retirement periods.  Under EITF No. 06-4, life insurance
policies purchased for the purpose of providing such benefits do not effectively
settle an entity’s obligation to the employee.  Accordingly, the
entity must recognize a liability and related compensation expense during the
employee’s active service period based on the future cost of insurance to be
incurred during the employee’s retirement.  If the entity has agreed
to provide the employee with a death benefit, then the liability for the future
death benefit should be recognized by following the guidance in SFAS
No. 106, Employer’s
Accounting for Postretirement Benefits Other Than
Pensions.  The Company expects to adopt EITF No. 06-4
effective as of January 1, 2008 as a change in accounting principle through
a cumulative-effect adjustment to retained earnings.  The amount of
the adjustment is not expected to be significant.





SAB No. 109, Written Loan
Commitments Recorded at Fair Value Through
Earnings.SAB No. 109 supersedes SAB No. 105, Application of Accounting Principles
to Loan Commitments, and indicates that the expected net future cash
flows related to the associated servicing of the loan should be included in the
measurement of all written loan commitments that are accounted for at fair value
through earnings. The guidance in SAB No. 109 is applied on a prospective basis
to derivative loan commitments issued or modified in fiscal quarters beginning
after December 15, 2007. SAB No. 109 is not expected to have a material
impact on the Company’s consolidated financial statements.








(2)  Cash
and Balances Due from Banks





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





2007
            
            
            2006Cash
      on Hand and Cash Items
            
            $
            8,527,336
            
            
            $
            8,307,648Noninterest-Bearing
      Deposits with Other Banks
            
            
            19,841,701
            
            
            
            18,923,369$
            28,369,037
            
            
            $
            27,231,017





As of
December 31, 2007, the Banks had required deposits of approximately $4,068,000
with the Federal Reserve.


- 17
-


(3)  Investment
Securities





Investment
securities as of December 31, 2007 are summarized as follows:





Amortized
              Cost
            
            
            Gross
              Unrealized
              Gains
            
            
            Gross
              Unrealized
              Losses
            
            
            Fair
              ValueSecurities
      Available for SaleU.S.
      Government AgenciesMortgage
      Backed
            
            $
            109,023,711
            
            
            $
            758,105
            
            
            $
            (459,043
            )
            
            $
            109,322,773Other
            
            
            36,817,832
            
            
            
            314,276
            
            
            
            (36,536
            )
            
            
            37,095,572State,
      County and Municipal
            
            
            14,178,545
            
            
            
            32,979
            
            
            
            (295,869
            )
            
            
            13,915,655Corporate
      Obligations
            
            
            5,689,011
            
            
            
            105,029
            
            
            
            (6,748
            )
            
            
            5,787,292Asset-Backed
      Securities
            
            
            1,000,000
            
            
            
            -
            
            
            
            -
            
            
            
            1,000,000Marketable
      Equity Securities
            
            
            2,010
            
            
            
            -
            
            
            
            (260
            )
            
            
            1,750$
            166,711,109
            
            
            $
            1,210,389
            
            
            $
            (798,456
            )
            
            $
            167,123,042Securities
      Held to MaturityState,
      County and Municipal
            
            $
            68,170
            
            
            $
            3,835
            
            
            $
            -
            
            
            $
            72,005





The
amortized cost and fair value of investment securities as of December 31, 2007,
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.





SecuritiesAvailable
      for Sale
            
            
            Held
      to MaturityAmortized
              Cost
            
            
            Fair
              Value
            
            
            Amortized
              Cost
            
            
            Fair
              ValueDue
      in One Year or Less
            
            $
            15,558,431
            
            
            $
            15,517,260Due
      After One Year Through Five Years
            
            
            26,378,407
            
            
            
            26,531,598Due
      After Five Years Through Ten Years
            
            
            11,820,453
            
            
            
            11,856,841
            
            
            $
            68,170
            
            
            $
            72,005Due
      After Ten Years
            
            
            3,928,097
            
            
            
            3,892,820
            
            
            
            -
            
            
            
            -57,685,388
            
            
            
            57,798,519
            
            
            
            68,170
            
            
            
            72,005Marketable
      Equity Securities
            
            
            2,010
            
            
            
            1,750
            
            
            
            -
            
            
            
            -Mortgage
      Backed Securities
            
            
            109,023,711
            
            
            
            109,322,773
            
            
            
            -
            
            
            
            -$
            166,711,109
            
            
            $
            167,123,042
            
            
            $
            68,170
            
            
            $
            72,005


- 18
-


(3)  Investment
Securities (Continued)





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





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





Proceeds
from sales of investments available for sale were $16,984,665 in 2007 and $0 in
2006 and 2005.  Gross realized gains totaled $211,676 in 2007 and $0
in 2006 and 2005.  Gross realized losses totaled $28,020 in 2007 and
$0 in 2006 and 2005.





Investment
securities having a carrying value approximating $89,145,000 and $86,141,000 as
of December 31, 2007 and 2006, respectively, were pledged to secure public
deposits and for other purposes.





Information
pertaining to securities with gross unrealized losses at December 31, 2007 and
2006, 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
            
            
            TotalFair
              Value
            
            
            Gross
      Unrealized Losses
            
            
            Fair
              Value
            
            
            Gross
      Unrealized Losses
            
            
            Fair
              Value
            
            
            Gross
      Unrealized LossesDecember
      31, 2007U.S.
      Government AgenciesMortgage
      Backed
            
            $
            13,721,144
            
            
            $
            (56,190
            )
            
            $
            30,761,318
            
            
            $
            (402,853
            )
            
            $
            44,482,462
            
            
            $
            (459,043
            )Other
            
            
            -
            
            
            
            -
            
            
            
            14,100,741
            
            
            
            (36,536
            )
            
            
            14,100,741
            
            
            
            (36,536
            )State,
      County and Municipal
            
            
            6,917,719
            
            
            
            (255,263
            )
            
            
            3,114,838
            
            
            
            (40,606
            )
            
            
            10,032,557
            
            
            
            (295,869
            )Corporate
      Obligations
            
            
            -
            
            
            
            -
            
            
            
            995,090
            
            
            
            (6,748
            )
            
            
            995,090
            
            
            
            (6,748
            )Marketable
      Equity Securities
            
            
            1,750
            
            
            
            (260
            )
            
            
            -
            
            
            
            -
            
            
            
            1,750
            
            
            
            (260
            )$
            20,640,613
            
            
            $
            (311,713
            )
            
            $
            48,971,987
            
            
            $
            (486,743
            )
            
            $
            69,612,600
            
            
            $
            (798,456
            )December
      31, 2006U.S.
      Government AgenciesMortgage
      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
            )


- 19
-


(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, 2007, the debt securities with unrealized losses have depreciated
1.12 percent from the Company’s amortized cost basis. These securities are
guaranteed by either the 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.








(4)  Loans





The
composition of loans as of December 31 are:





2007
            
            
            2006Commercial,
      Financial and Agricultural
            
            $
            52,322,654
            
            
            $
            61,887,534Real
      Estate-Construction
            
            
            211,483,898
            
            
            
            193,951,793Real
      Estate-Farmland
            
            
            42,438,731
            
            
            
            40,936,126Real
      Estate-Other
            
            
            544,654,646
            
            
            
            549,600,833Installment
      Loans to Individuals
            
            
            72,350,201
            
            
            
            76,929,633All
      Other Loans
            
            
            22,028,512
            
            
            
            18,967,096$
            945,278,642
            
            
            $
            942,273,015





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
$14,955,945 and $8,068,685 as of December 31, 2007 and 2006, respectively, and
total recorded investment in loans past due 90 days or more and still accruing
interest approximated $60,057 and $9,346, respectively.  Foregone
interest on nonaccrual loans approximated $576,000 in 2007, $533,000 in 2006 and
$426,000 in 2005.


- 20
-


(4)  Loans
(Continued)





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





2007
            
            
            2006Total
      Investment in Impaired Loans
            
            $
            14,955,945
            
            
            $
            8,068,685Less
      Allowance for Impaired Loan Losses
            
            
            (1,323,108
            )
            
            
            (210,283
            )Net
      Investment, December 31
            
            $
            13,632,837
            
            
            $
            7,858,402Average
      Investment during the Year
            
            $
            8,086,620
            
            
            $
            7,607,659Income
      Recognized during the Year
            
            $
            812,378
            
            
            $
            393,215Income
      Collected during the Year
            
            $
            910,725
            
            
            $
            391,242








(5)  Allowance
for Loan Losses





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





2007
            
            
            2006
            
            
            2005Balance,
      Beginning
            
            $
            11,989,359
            
            
            $
            10,761,915
            
            
            $
            10,012,179Provision
      Charged to Operating Expenses
            
            
            5,930,756
            
            
            
            3,987,000
            
            
            
            3,443,750Loans
      Charged Off
            
            
            (3,908,011
            )
            
            
            (3,373,273
            )
            
            
            (3,046,192
            )Loan
      Recoveries
            
            
            1,500,836
            
            
            
            613,717
            
            
            
            352,178Balance,
      Ending
            
            $
            15,512,940
            
            
            $
            11,989,359
            
            
            $
            10,761,915








(6)  Premises
and Equipment





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





2007
            
            
            2006Land
            
            $
            7,799,149
            
            
            $
            7,413,927Building
            
            
            20,900,517
            
            
            
            20,885,790Furniture,
      Fixtures and Equipment
            
            
            12,641,372
            
            
            
            12,059,702Leasehold
      Improvements
            
            
            994,283
            
            
            
            994,282Construction
      in Progress
            
            
            448,087
            
            
            
            114,42942,783,408
            
            
            
            41,468,130Accumulated
      Depreciation
            
            
            (14,974,570
            )
            
            
            (14,014,998
            )$
            27,808,838
            
            
            $
            27,453,132


- 21
-


(6)  Premises
and Equipment (Continued)





Depreciation
charged to operations totaled $1,875,779 in 2007, $1,933,290 in 2006 and
$1,903,242 in 2005.





Certain
Company facilities and equipment are leased under various operating
leases.  Rental expense approximated $360,000 for 2007, $329,000 for
2006 and $334,000 for 2005.





Future
minimum rental payments as of December 31, 2007 are as follows:





Year
      Ending December 31
            
            Amount2008
            
            $
            122,6202009
            
            
            93,7002010
            
            
            89,7002011
            
            
            89,7002012
      and Thereafter
            
            
            143,405$
            539,125








(7)  Goodwill
and Intangible Assets





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


2007
            
            
            2006GoodwillBalance,
      Beginning
            
            $
            2,412,338
            
            
            $
            2,412,338Goodwill
      Acquired
            
            
            -
            
            
            
            -Balance,
      Ending
            
            $
            2,412,338
            
            
            $
            2,412,338





Core
      Deposit Intangible
            
            
            Accumulated
      Amortization
            
            
            Net
      Core Deposit IntangibleCore
      Deposit IntangibleBalance,
      December 31, 2006
            
            $
            1,056,693
            
            
            $
            (617,979
            )
            
            $
            438,714Amortization
      Expense
            
            
            -
            
            
            
            (36,461
            )
            
            
            (36,461
            )Balance,
      December 31, 2007
            
            $
            1,056,693
            
            
            $
            (654,440
            )
            
            $
            402,253





Amortization
expense related to the core deposit intangible was $36,461, $81,201 and $114,645
for the years ended December 31, 2007, 2006 and 2005,
respectively.


- 22
-


(7)  Goodwill
and Intangible Assets (Continued)





The
following table reflects the expected amortization schedule for the core deposit
intangible at December 31, 2007:





2008
            
            $
            35,7492009
            
            
            35,7492010
            
            
            35,7492011
            
            
            35,7492012
      and Thereafter
            
            
            259,257$
            402,253








(8)  Income
Taxes





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





2007
            
            
            2006
            
            
            2005Current
      Federal Expense
            
            $
            5,339,925
            
            
            $
            4,994,008
            
            
            $
            5,041,180Deferred
      Federal (Benefit) Expense
            
            
            (1,233,259
            )
            
            
            112,518
            
            
            
            (546,891
            )Federal
      Income Tax Expense
            
            
            4,106,666
            
            
            
            5,106,526
            
            
            
            4,494,289Current
      State Income Tax Expense
            
            
            111,797
            
            
            
            110,837
            
            
            
            315,031$
            4,218,463
            
            
            $
            5,217,363
            
            
            $
            4,809,320





The
federal income tax expense of $4,106,666 in 2007, $5,106,526 in 2006 and
$4,494,289 in 2005 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:





2007
            
            
            2006
            
            
            2005Statutory
      Federal Income Taxes
            
            $
            4,340,243
            
            
            $
            5,290,356
            
            
            $
            4,725,288Tax-Exempt
      Interest
            
            
            (234,863
            )
            
            
            (188,408
            )
            
            
            (163,184
            )Interest
      Expense Disallowance
            
            
            46,847
            
            
            
            28,211
            
            
            
            17,136Premiums
      on Officers' Life Insurance
            
            
            (47,369
            )
            
            
            (50,419
            )
            
            
            (56,374
            )Meal
      and Entertainment Disallowance
            
            
            14,488
            
            
            
            16,644
            
            
            
            10,756State
      Income Taxes
            
            
            (2,281
            )
            
            
            (46,441
            )
            
            
            (94,719
            )Other
            
            
            (10,399
            )
            
            
            56,583
            
            
            
            55,386Actual
      Federal Income Taxes
            
            $
            4,106,666
            
            
            $
            5,106,526
            
            
            $
            4,494,289


- 23
-


(8)  Income
Taxes (Continued)





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





2007
            
            
            2006Deferred
      Tax AssetsAllowance
      for Loan Losses
            
            $
            5,274,506
            
            
            $
            4,076,487Deferred
      Compensation
            
            
            393,617
            
            
            
            376,297Other
      Real Estate
            
            
            -
            
            
            
            45,143Restricted
      Stock
            
            
            347,169
            
            
            
            275,259Other
            
            
            263,618
            
            
            
            223,3126,278,910
            
            
            
            4,996,498Deferred
      Tax LiabilitiesPremises
      and Equipment
            
            
            (1,013,824
            )
            
            
            (1,020,752
            )Restricted
      Stock
            
            
            (190,117
            )
            
            
            (125,545
            )Other
            
            
            (191,188
            )
            
            
            (199,679
            )(1,395,129
            )
            
            
            (1,345,976
            )Deferred
      Tax Assets (Liabilities) on Unrealized Securities Losses
            
            
            (140,058
            )
            
            
            502,180Net
      Deferred Tax Assets
            
            $
            4,743,723
            
            
            $
            4,152,702





As
discussed in Note 1, the Company applied the provisions of FASB Interpretation
No. 48, Accounting for
Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109,
on January 1, 2007.  An analysis of activity related to unrecognized
tax benefits follows as of December 31, 2007.





Balance,
      Beginning
            
            $
            247,312Positions
      Taken During the Current Year
            
            
            62,427Reductions
      Resulting from Lapse of Statutes of Limitation
            
            
            -Balance,
      Ending
            
            $
            309,739




- 24
-


(9)  Deposits





The
aggregate amount of overdrawn deposit accounts reclassified as loan balances
totaled $573,939 and $838,935 as of December 31, 2007 and 2006,
respectively.





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





2007
            
            
            2006Interest-Bearing
      Demand
            
            $
            190,303,611
            
            
            $
            185,768,785Savings
            
            
            31,588,035
            
            
            
            33,305,542Time,
      $100,000 and Over
            
            
            347,219,102
            
            
            
            366,041,185Other
      Time
            
            
            363,379,455
            
            
            
            379,994,707$
            932,490,203
            
            
            $
            965,110,219





At
December 31, 2007 and 2006, the Company had brokered deposits of $54,737,011 and
$72,682,000, respectively. The aggregate amount of short-term jumbo certificates
of deposit, each with a minimum denomination of $100,000, was approximately
$310,971,000 and $328,788,000 as of December 31, 2007 and 2006,
respectively.





As of
December 31, 2007, the scheduled maturities of certificates of deposit are as
follows:





Year
            
            Amount2008
            
            $
            632,936,4342009
            
            
            42,977,3832010
            
            
            20,928,9112011
            
            
            9,574,2892012
      and Thereafter
            
            
            4,181,540$
            710,598,557








(10)
Other Borrowed Money





Other
borrowed money at December 31 is summarized as follows:





2007
            
            
            2006Federal
      Home Loan Bank Advances
            
            $
            73,500,000
            
            
            $
            61,500,000Silverton
      Bank Note Payable
            
            
            100,000
            
            
            
            -$
            73,600,000
            
            
            $
            61,500,000




- 25
-


(10)
Other Borrowed Money (Continued)





Advances
from the Federal Home Loan Bank (FHLB) have maturities ranging from 2008 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, 2007, the Company had available line of credit commitments totaling
$99,131,763, of which $25,631,763 was available.





Silverton
Bank note payable originated on February 15, 2007 as a line of credit with funds
available of $1,000,000 at a rate of The Wall Street prime minus 0.75
percent.  Interest payments are due monthly with the entire balance
due February 14, 2008.  The debt is secured by all furniture,
fixtures, equipment and software of Colony Management
Services.  Colony Bankcorp, Inc. guarantees the debt.  As of
December 31, 2007, $900,000 was available to be drawn on the line of
credit.





The
aggregate stated maturities of other borrowed money at December 31, 2007 are as
follows:





Year
            
            Amount2008
            
            $
            9,600,0002009
            
            
            -2010
            
            
            1,000,0002011
            
            
            -2012
      and Thereafter
            
            
            63,000,000$
            73,600,000





The
Company also has available federal funds lines of credit with various financial
institutions totaling $47,300,000, of which there was $1,346,000 outstanding at
December 31, 2007.








(11)
Subordinated Debentures (Trust Preferred Securities)





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, 2007, the floating rate
securities had a 7.67 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, 2007, the floating rate
securities had a 6.33 percent interest rate, which will reset quarterly at the
three-month LIBOR rate plus 1.50 percent.





During
the first quarter of 2007, the Company formed a fifth subsidiary whose sole
purpose was to issue $9,000,000 in Trust Preferred Securities through a pool
sponsored by Trapeza Capital Management, LLC.  The Trust Preferred
Securities have a maturity of 30 years and are redeemable after five years with
certain exceptions.  At December 31, 2007, the floating rate
securities had a 6.48 percent interest rate, which will reset quarterly at the
three-month LIBOR rate plus 1.50 percent.  Proceeds from this issuance
were used to pay off the Trust Preferred Securities with the first subsidiary
formed in March 2002 as the Company exercised its option to
call.


- 26
-


(11)
Subordinated Debentures (Trust Preferred Securities) (Continued)





During
the third quarter of 2007, the Company formed a sixth subsidiary whose sole
purpose was to issue $5,000,000 in Trust Preferred Securities through a pool
sponsored by Trapeza Capital Management, LLC.  The Trust Preferred
Securities have a maturity of 30 years and are redeemable after five years with
certain exceptions.  At December 31, 2007, the floating rate
securities had a 6.38 percent interest rate, which will reset quarterly at the
three-month LIBOR rate plus 1.40 percent.  Proceeds from this issuance
were used to pay off the Trust Preferred Securities with the second subsidiary
formed in December 2002 as the Company exercised its option to
call.





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 offerings 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, 2007 was $23,500,000.  The total aggregate principal
amount of subordinated debentures outstanding at December 31, 2007 was
$24,229,000.








(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.  To date, 75,803 shares
have been issued under this plan and 12,351 shares have been forfeited; thus,
remaining shares which may be issued are 1,249 at December 31,
2007.  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 second 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.  To date, 20,155
shares have been issued under this plan and 5,248 shares have been forfeited;
thus, remaining shares which may be issued are 128,593 at December 31,
2007.   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
$583,690 for 2007, $662,730 for 2006 and $558,138 for 2005.


- 27
-


(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, 2007 and 2006, the following financial instruments were outstanding
whose contract amounts represent credit risk:





Contract
      Amount2007
            
            
            2006Commitments
      to Extend Credit
            
            $
            93,105,000
            
            
            $
            105,165,000Standby
      Letters of Credit
            
            
            3,814,000
            
            
            
            3,279,000





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.





Purchase
Commitments.  As of December 31, 2007, the Company had an
outstanding commitment of approximately $1,967,000 to construct its second
office in Savannah, Georgia.  As of December 31, 2007, the Company has
paid $305,119 toward construction in progress.





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.


- 28
-


(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 $1,158,597 and $1,107,653 as of December 31,
2007 and 2006, respectively.  Benefit payments under the contracts
were $187,059 in 2007 and $171,029 in 2006.  Provisions charged to
operations totaled $238,003 in 2007, $164,997 in 2006 and $359,787 in
2005.





Fee
income recognized with deferred compensation plans totaled $139,322 in 2007,
$148,290 in 2006 and $328,942 in 2005.








(16)
Interest Income and Expense





Interest
income of $506,896, $311,828 and $257,639 from state, county and municipal bonds
was exempt from regular income taxes in 2007, 2006 and 2005,
respectively.





Interest
on deposits includes interest expense on time certificates of $100,000 or more
totaling $18,700,653, $16,189,086 and $8,180,847 for the years ended December
31, 2007, 2006 and 2005, respectively.








(17)
Supplemental Cash Flow Information





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





2007
            
            
            2006
            
            
            2005Interest
      Expense
            
            $
            47,409,731
            
            
            $
            40,351,134
            
            
            $
            25,547,290Income
      Taxes
            
            $
            6,380,000
            
            
            $
            5,371,395
            
            
            $
            5,353,702





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





2007
            
            
            2006
            
            
            2005Acquisitions
      of Real EstateThrough
      Loan Foreclosures
            
            $
            2,576,332
            
            
            $
            2,815,716
            
            
            $
            2,793,978Unrealized
      (Gain) Loss on Investment Securities
            
            $
            (1,888,934
            )
            
            $
            (572,485
            )
            
            $
            1,145,190


- 29
-


(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 $16,544,057 as of
December 31, 2007 and $18,142,109 as of December 31, 2006.  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:





2007
            
            
            2006Balance,
      Beginning
            
            $
            18,142,109
            
            
            $
            15,103,982New
      Loans
            
            
            10,009,867
            
            
            
            18,540,907Repayments
            
            
            (10,981,245
            )
            
            
            (15,528,723
            )Transactions
      Due to Changes in Directors
            
            
            (626,674
            )
            
            
            25,943Balance,
      Ending
            
            $
            16,544,057
            
            
            $
            18,142,109








(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.


- 30
-


(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.





Unrecognized Financial
Instruments – Fair values for off-balance sheet, credit-related financial
instruments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties’ credit standing.  The fees associated with these
instruments are not material.





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


2007
            
            
            2006Carrying
            
            
            Estimated
            
            
            Carrying
            
            
            EstimatedAmount
            
            
            Fair
      Value
            
            
            Amount
            
            
            Fair
      Value(in
      Thousands)AssetsCash
      and Short-Term Investments
            
            $
            51,573
            
            
            $
            51,573
            
            
            $
            75,456
            
            
            $
            75,456Investment
      Securities Available for Sale
            
            
            167,123
            
            
            
            167,123
            
            
            
            149,236
            
            
            
            149,236Investment
      Securities Held to Maturity
            
            
            68
            
            
            
            72
            
            
            
            71
            
            
            
            71Federal
      Home Loan Bank Stock
            
            
            5,533
            
            
            
            5,533
            
            
            
            5,087
            
            
            
            5,087Loans
            
            
            945,278
            
            
            
            943,970
            
            
            
            942,273
            
            
            
            930,716LiabilitiesDeposits
            
            
            1,018,602
            
            
            
            1,020,855
            
            
            
            1,042,446
            
            
            
            1,040,991Federal
      Funds Purchased
            
            
            1,346
            
            
            
            1,346
            
            
            
            1,070
            
            
            
            1,070Subordinated
      Debentures
            
            
            24,229
            
            
            
            24,229
            
            
            
            24,229
            
            
            
            24,229Other
      Borrowed Money
            
            
            73,600
            
            
            
            72,301
            
            
            
            61,500
            
            
            
            58,345





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.


- 31
-


(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, 2007, 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.





- 32
-


(20)
Regulatory Capital Matters (Continued)





The
following table summarizes regulatory capital information as of December 31,
2007 and 2006 on a consolidated basis and for each significant subsidiary, as
defined.





For
      Capital
                
                
                To
      Be Well
                  Capitalized
      Under
                  Prompt
      CorrectiveActual
                
                
                Adequacy
      Purposes
                
                
                Action
      ProvisionsAmount
                
                
                Ratio
                
                
                Amount
                
                
                Ratio
                
                
                Amount
                
                
                RatioAs
      of December 31, 2007
                
                
                
                
                
                
                
                (In
      Thousands)Total
      Capital to Risk-Weighted AssetsConsolidated
                
                $
                116,222
                
                
                
                12.08
                %
                
                $
                76,944
                
                
                
                8.00
                %
                
                
                N/A
                
                
                
                N/AFitzgerald
                
                
                19,771
                
                
                
                12.65
                
                
                
                12,508
                
                
                
                8.00
                
                
                $
                15,635
                
                
                
                10.00
                %Ashburn
                
                
                29,873
                
                
                
                11.38
                
                
                
                21,000
                
                
                
                8.00
                
                
                
                26,251
                
                
                
                10.00Worth
                
                
                15,808
                
                
                
                11.23
                
                
                
                11,264
                
                
                
                8.00
                
                
                
                14,079
                
                
                
                10.00Southeast
                
                
                22,702
                
                
                
                12.19
                
                
                
                14,895
                
                
                
                8.00
                
                
                
                18,619
                
                
                
                10.00Quitman
                
                
                12,979
                
                
                
                11.70
                
                
                
                8,872
                
                
                
                8.00
                
                
                
                11,091
                
                
                
                10.00Tier
      I Capital to Risk-Weighted AssetsConsolidated
                
                
                104,157
                
                
                
                10.83
                
                
                
                38,472
                
                
                
                4.00
                
                
                
                N/A
                
                
                
                N/AFitzgerald
                
                
                17,809
                
                
                
                11.39
                
                
                
                6,254
                
                
                
                4.00
                
                
                
                9,381
                
                
                
                6.00Ashburn
                
                
                26,571
                
                
                
                10.12
                
                
                
                10,500
                
                
                
                4.00
                
                
                
                15,750
                
                
                
                6.00Worth
                
                
                14,043
                
                
                
                9.97
                
                
                
                5,632
                
                
                
                4.00
                
                
                
                8,448
                
                
                
                6.00Southeast
                
                
                20,364
                
                
                
                10.94
                
                
                
                7,447
                
                
                
                4.00
                
                
                
                11,171
                
                
                
                6.00Quitman
                
                
                11,592
                
                
                
                10.45
                
                
                
                4,436
                
                
                
                4.00
                
                
                
                6,654
                
                
                
                6.00Tier
      I Capital to Average AssetsConsolidated
                
                
                104,157
                
                
                
                8.60
                
                
                
                48,467
                
                
                
                4.00
                
                
                
                N/A
                
                
                
                N/AFitzgerald
                
                
                17,809
                
                
                
                9.13
                
                
                
                7,800
                
                
                
                4.00
                
                
                
                9,750
                
                
                
                5.00Ashburn
                
                
                26,571
                
                
                
                7.92
                
                
                
                13,426
                
                
                
                4.00
                
                
                
                16,783
                
                
                
                5.00Worth
                
                
                14,043
                
                
                
                7.87
                
                
                
                7,139
                
                
                
                4.00
                
                
                
                8,924
                
                
                
                5.00Southeast
                
                
                20,364
                
                
                
                9.72
                
                
                
                8,377
                
                
                
                4.00
                
                
                
                10,471
                
                
                
                5.00Quitman
                
                
                11,592
                
                
                
                7.86
                
                
                
                5,899
                
                
                
                4.00
                
                
                
                7,374
                
                
                
                5.00


- 33
-


(20)
Regulatory Capital Matters (Continued)





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




- 34
-


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





The
parent company's balance sheets as of December 31, 2007 and 2006 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








ASSETS








2007
            
            
            2006Cash
            
            $
            972,960
            
            
            $
            2,223,581Premises
      and Equipment, Net
            
            
            1,235,508
            
            
            
            1,273,215Investment
      in Subsidiaries, at Equity
            
            
            105,323,496
            
            
            
            97,270,695Other
            
            
            1,490,676
            
            
            
            998,759Total
      Assets
            
            $
            109,022,640
            
            
            $
            101,766,250








LIABILITIES
AND STOCKHOLDERS' EQUITY








LiabilitiesDividends
      Payable
            
            $
            684,087
            
            
            $
            641,314Other
            
            
            366,435
            
            
            
            284,7751,050,522
            
            
            
            926,089Subordinated
      Debt
            
            
            24,229,000
            
            
            
            24,229,000Stockholders'
      EquityCommon
      Stock, Par Value $1 a Share; Authorized 20,000,000 Shares, Issued
      7,200,913 and 7,189,937 Shares as of December 31, 2007 and 2006,
      Respectively
            
            
            7,200,913
            
            
            
            7,189,937Paid-In
      Capital
            
            
            24,420,497
            
            
            
            24,257,392Retained
      Earnings
            
            
            52,086,834
            
            
            
            46,416,571Restricted
      Stock – Unearned Compensation
            
            
            (237,002
            )
            
            
            (277,918
            )Accumulated
      Other Comprehensive Income (Loss), Net of Tax
            
            
            271,876
            
            
            
            (974,821
            )83,743,118
            
            
            
            76,611,161Total
      Liabilities and Stockholders' Equity
            
            $
            109,022,640
            
            
            $
            101,766,250


- 35
-


(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








2007
            
            
            2006
            
            
            2005IncomeDividends
      from Subsidiaries
            
            $
            5,662,500
            
            
            $
            6,800,000
            
            
            $
            4,350,000Other
            
            
            281,885
            
            
            
            168,763
            
            
            
            109,1195,944,385
            
            
            
            6,968,763
            
            
            
            4,459,119ExpensesInterest
            
            
            2,005,971
            
            
            
            1,926,647
            
            
            
            1,323,247Amortization
            
            
            295,093
            
            
            
            30,317
            
            
            
            30,317Salaries
      and Employee Benefits
            
            
            974,524
            
            
            
            1,013,523
            
            
            
            1,053,636Other
            
            
            889,093
            
            
            
            735,821
            
            
            
            716,9544,164,681
            
            
            
            3,706,308
            
            
            
            3,124,154Income
      Before Taxes and Equity in Undistributed Earnings of
      Subsidiaries
            
            
            1,779,704
            
            
            
            3,262,455
            
            
            
            1,334,965Income
      Tax Benefits
            
            
            1,213,835
            
            
            
            1,027,921
            
            
            
            1,000,501Income
      Before Equity in Undistributed Earnings of Subsidiaries
            
            
            2,993,539
            
            
            
            4,290,376
            
            
            
            2,335,466Equity
      in Undistributed Earnings of Subsidiaries
            
            
            5,553,417
            
            
            
            5,861,619
            
            
            
            6,641,750Net
      Income
            
            
            8,546,956
            
            
            
            10,151,995
            
            
            
            8,977,216Other
      Comprehensive Income, Net of TaxGains
      (Losses) on Securities Arising During the Year
            
            
            1,367,910
            
            
            
            377,840
            
            
            
            (755,824
            )Reclassification
      Adjustment
            
            
            (121,213
            )
            
            
            -
            
            
            
            -Change
      in Net Unrealized Gains (Losses) on Securities Available for Sale, Net of
      Reclassification Adjustment and Tax Effects
            
            
            1,246,697
            
            
            
            377,840
            
            
            
            (755,824
            )Comprehensive
      Income
            
            $
            9,793,653
            
            
            $
            10,529,835
            
            
            $
            8,221,392


- 36
-


(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








2007
            
            
            2006
            
            
            2005Cash
      Flows from Operating ActivitiesNet
      Income
            
            $
            8,546,956
            
            
            $
            10,151,995
            
            
            $
            8,977,216Adjustments
      to Reconcile Net Income to Net Cash Provided from Operating
      ActivitiesDepreciation
      and Amortization
            
            
            294,121
            
            
            
            309,388
            
            
            
            294,155Equity
      in Undistributed Earnings of Subsidiaries
            
            
            (5,553,417
            )
            
            
            (5,861,619
            )
            
            
            (6,641,750
            )Other
            
            
            (436,928
            )
            
            
            (267,646
            )
            
            
            123,8562,850,732
            
            
            
            4,332,118
            
            
            
            2,753,477Cash
      Flows from Investing ActivitiesCapital
      Infusion in Subsidiary
            
            
            (1,500,000
            )
            
            
            (2,500,000
            )
            
            
            (2,950,000
            )Purchases
      of Premises and Equipment
            
            
            (44,915
            )
            
            
            (73,749
            )
            
            
            (244,268
            )Investment
      in Capital Trusts
            
            
            (434,000
            )
            
            
            (155,000
            )
            
            
            -Liquidation
      of Statutory Trusts
            
            
            434,000
            
            
            
            -
            
            
            
            -(1,544,915
            )
            
            
            (2,728,749
            )
            
            
            (3,194,268
            )Cash
      Flows from Financing ActivitiesDividends
      Paid
            
            
            (2,556,438
            )
            
            
            (2,264,320
            )
            
            
            (1,993,100
            )Principal
      Payments on Notes and Debentures
            
            
            (14,434,000
            )
            
            
            (2,500,000
            )
            
            
            (1,500,000
            )Proceeds
      from Notes and Debentures
            
            
            14,434,000
            
            
            
            5,155,000
            
            
            
            4,000,000(2,556,438
            )
            
            
            390,680
            
            
            
            506,900Increase
      (Decrease) in Cash
            
            
            (1,250,621
            )
            
            
            1,994,049
            
            
            
            66,109Cash,
      Beginning
            
            
            2,223,581
            
            
            
            229,532
            
            
            
            163,423Cash,
      Ending
            
            $
            972,960
            
            
            $
            2,223,581
            
            
            $
            229,532


- 37
-


(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, 2007, 2006 and 2005
under the requirements of Statement 128:





December
      31, 2007
            
            Income
              Numerator
            
            
            Common
              Shares
              Denominator
            
            
            EPSBasic
      EPSIncome
      Available to Common Stockholders
            
            $
            8,546,956
            
            
            
            7,188,696
            
            
            $
            1.19Dilutive
      Effect of Potential Common StockRestricted
      Stock
            
            
            
            
            
            
            8,635Diluted
      EPSIncome
      Available to Common Stockholders After Assumed Conversions of Dilutive
      Securities
            
            $
            8,546,956
            
            
            
            7,197,331
            
            
            $
            1.19December
      31, 2006Basic
      EPSIncome
      Available to Common Stockholders
            
            $
            10,151,995
            
            
            
            7,176,894
            
            
            $
            1.41Dilutive
      Effect of Potential Common StockRestricted
      Stock
            
            
            
            
            
            
            843Diluted
      EPSIncome
      Available to Common Stockholders After Assumed Conversions of Dilutive
      Securities
            
            $
            10,151,995
            
            
            
            7,177,737
            
            
            $
            1.41December
      31, 2005Basic
      EPSIncome
      Available to Common Stockholders
            
            $
            8,977,216
            
            
            
            7,168,406
            
            
            $
            1.25Dilutive
      Effect of Potential Common StockRestricted
      Stock
            
            
            
            
            
            
            2,694Diluted
      EPSIncome
      Available to Common Stockholders After Assumed Conversions of Dilutive
      Securities
            
            $
            8,977,216
            
            
            
            7,171,100
            
            
            $
            1.25