##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



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QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES

EXCHANGE
ACT OF 1934



|                                     |  |                               
|------------------------------------ |  | ------------------------------
|FOR QUARTER ENDED SEPTEMBER 30, 2005 |  | COMMISSION FILE NUMBER 0-12436



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COLONY BANKCORP, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|GEORGIA                                                        |  | 58-1492391                             
|(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER IDENTIFICATION NUMBER)



115 SOUTH GRANT
STREET, FITZGERALD, GEORGIA 31750

ADDRESS OF PRINCIPAL EXECUTIVE OFFICES



229/426-6000

REGISTRANTS TELEPHONE NUMBER INCLUDING AREA CODE



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INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED REPORTS
REQUIRED TO BE FILED BY SECTIONS 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.    YES  x ̈NO



INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN
ACCELERATED FILER (AS DEFINED IN RULE 12b-2 OF THE ACT)    YES  x ̈NO



INDICATE BY CHECK MARK WHETHER
THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE ACT).     YES ̈NO  x



INDICATE THE NUMBER OF
SHARES OUTSTANDING OF EACH OF THE ISSUERS CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.



|                           |  |                                
|-------------------------- |  | -------------------------------
|CLASS                      |  | OUTSTANDING AT NOVEMBER 7, 2005
|COMMON STOCK, $1 PAR VALUE |  | 7,181,320                      



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##### Table of Contents

PART 1  FINANCIAL INFORMATION



|                                                                                                                                                                                                                                                                                                       |  |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -
|ITEM 1. FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                           |  |  
|                                                                                                                                                                                                                                                                                                       | 
|THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED FOR COLONY BANKCORP, INC. AND SUBSIDIARIES: COLONY BANK OF FITZGERALD, COLONY BANK ASHBURN, COLONY BANK WILCOX, COLONY BANK OF DODGE COUNTY,
COLONY BANK WORTH, COLONY BANK SOUTHEAST, COLONY MANAGEMENT SERVICES, INC., AND COLONY BANK QUITMAN, FSB. |  |  
|                                                                                                                                                                                                                                                                                                       | 
|A.     
CONSOLIDATED BALANCE SHEETS  SEPTEMBER 30, 2005 AND DECEMBER 31, 2004.                                                                                                                                                                                                                        |  | 3
|                                                                                                                                                                                                                                                                                                       | 
|B.     
CONSOLIDATED STATEMENTS OF INCOME  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004.                                                                                                                                          |  | 4
|                                                                                                                                                                                                                                                                                                       | 
|C.     
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004.                                                                                                                            |  | 5
|                                                                                                                                                                                                                                                                                                       | 
|D.     
CONSOLIDATED STATEMENTS OF CASH FLOWS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004.                                                                                                                                                                                                 |  | 6
|                                                                                                                                                                                                                                                                                                       | 
|THE CONSOLIDATED FINANCIAL STATEMENTS FURNISHED HAVE NOT BEEN AUDITED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, BUT REFLECT, IN THE OPINION OF MANAGEMENT, ALL ADJUSTMENTS NECESSARY FOR A FAIR
PRESENTATION OF THE RESULTS OF OPERATIONS FOR THE PERIODS PRESENTED.                                |  |  
|                                                                                                                                                                                                                                                                                                       | 
|THE RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2005 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.                                                                                                                                           |  |  



2



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##### Table of Contents

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2005 AND DECEMBER 31, 2004

(DOLLARS IN THOUSANDS)



|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | - | ----------------- | - | ------- | -
|                                                                                                                                                                     |  | September 30, 2005 |           |   | December 31, 2004 |  
|                                                                                                                                                                     |  | (Unaudited)        |           |   |                   |  
|ASSETS                                                                                                                                                               |  |                    |           |   |                   |   |         |  
|                                                                                                                                                                     |  |                   
|Cash and Cash Equivalents                                                                                                                                            |  |                    |           |   |                   |   |         |  
|Cash and Due from Banks                                                                                                                                              |  | $                  | 23,064    |   |                   |   | 20,950  |  
|Federal Funds Sold                                                                                                                                                   |  |                    | 43,204    |   |                   |   | 43,997  |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|                                                                                                                                                                     |  |                    | 66,268    |   |                   |   | 64,947  |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Interest-Bearing Deposits                                                                                                                                            |  |                    | 4,233     |   |                   |   | 3,229   |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Investment Securities                                                                                                                                                |  |                    |           |   |                   |   |         |  
|Available for Sale, at Fair Value                                                                                                                                    |  |                    | 107,910   |   |                   |   | 112,512 |  
|Held to Maturity, at Cost (Fair Value of $80 and $81, Respectively)                                                                                                  |  |                    | 80        |   |                   |   | 81      |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|                                                                                                                                                                     |  |                    | 107,990   |   |                   |   | 112,593 |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Federal Home Loan Bank Stock, at Cost                                                                                                                                |  |                    | 5,102     |   |                   |   | 4,479   |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Loans Held for Sale                                                                                                                                                  |  |                    | 0         |   |                   |   | 1,191   |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Loans                                                                                                                                                                |  |                    | 842,354   |   |                   |   | 778,680 |  
|Allowance for Loan Losses                                                                                                                                            |  |                    | (10,663   | ) |                   |   | (10,012 | )
|Unearned Interest and Fees                                                                                                                                           |  |                    | (198      | ) |                   |   | (37     | )
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|                                                                                                                                                                     |  |                    | 831,493   |   |                   |   | 768,631 |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Premises and Equipment                                                                                                                                               |  |                    | 24,461    |   |                   |   | 21,824  |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Other Real Estate                                                                                                                                                    |  |                    | 2,695     |   |                   |   | 1,127   |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Goodwill                                                                                                                                                             |  |                    | 2,412     |   |                   |   | 2,412   |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Intangible Assets                                                                                                                                                    |  |                    | 545       |   |                   |   | 635     |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Other Assets                                                                                                                                                         |  |                    | 18,012    |   |                   |   | 16,523  |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Total Assets                                                                                                                                                         |  | $                  | 1,063,211 |   |                   | $ | 997,591 |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                 |  |                    |           |   |                   |   |         |  
|                                                                                                                                                                     |  |                   
|Deposits                                                                                                                                                             |  |                    |           |   |                   |   |         |  
|Noninterest-Bearing                                                                                                                                                  |  | $                  | 66,381    |   |                   | $ | 68,169  |  
|Interest-Bearing                                                                                                                                                     |  |                    | 834,350   |   |                   |   | 782,160 |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|                                                                                                                                                                     |  |                    | 900,731   |   |                   |   | 850,329 |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Borrowed Money                                                                                                                                                       |  |                    |           |   |                   |   |         |  
|Subordinated Debentures                                                                                                                                              |  |                    | 19,074    |   |                   |   | 19,074  |  
|Other Borrowed Money                                                                                                                                                 |  |                    | 70,781    |   |                   |   | 61,450  |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|                                                                                                                                                                     |  |                    | 89,855    |   |                   |   | 80,524  |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Other Liabilities                                                                                                                                                    |  |                    | 5,732     |   |                   |   | 4,975   |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Commitments and Contingencies                                                                                                                                        |  |                    |           |   |                   |   |         |  
|Stockholders Equity                                                                                                                                                 |  |                    |           |   |                   |   |         |  
|Common Stock, Par Value $1 a Share, Authorized 20,000,000 Shares, Issued 7,181,320 and 5,738,343 Shares as of September 30, 2005 and
December 31, 2004, Respectively |  |                    | 7,181     |   |                   |   | 5,738   |  
|Paid-In Capital                                                                                                                                                      |  |                    | 24,000    |   |                   |   | 23,713  |  
|Retained Earnings                                                                                                                                                    |  |                    | 36,834    |   |                   |   | 33,119  |  
|Restricted Stock - Unearned Compensation                                                                                                                             |  |                    | (358      | ) |                   |   | (210    | )
|Accumulated Other Comprehensive Income (Loss), Net of Tax                                                                                                            |  |                    | (764      | ) |                   |   | (597    | )
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|                                                                                                                                                                     |  |                    | 66,893    |   |                   |   | 61,763  |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  
|Total Liabilities and Stockholders Equity                                                                                                                           |  | $                  | 1,063,211 |   |                   | $ | 997,591 |  
|                                                                                                                                                                     |  |                    |           |   |                   |   |         |  



The
accompanying notes are an integral part of these statements.



3



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##### Table of Contents

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(UNAUDITED)

(DOLLARS IN THOUSANDS)



|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|---------------------------------------------------- |  | ------------------ | --------- | ----------------- | - | --------- |  | --------- | --------- |  | - | ---------
|                                                     |  | Three Months Ended |           | Nine Months Ended
|                                                     |  | 9/30/2005          |           | 9/30/2004         |   | 9/30/2005 |  | 9/30/2004
|Interest Income                                      |  |                    |           |                   |   |           |  |           |           |  |   |          
|Loans, including fees                                |  | $                  | 15,065    |                   | $ | 12,256    |  | $         | 42,179    |  | $ | 34,763   
|Federal Funds Sold                                   |  |                    | 241       |                   |   | 89        |  |           | 669       |  |   | 227      
|Deposits with Other Banks                            |  |                    | 23        |                   |   | 13        |  |           | 57        |  |   | 59       
|Investment Securities                                |  |                    |           |                   |   |           |  |           |           |  |   |          
|U.S. Government Agencies                             |  |                    | 782       |                   |   | 792       |  |           | 2,420     |  |   | 2,441    
|State, County and Municipal                          |  |                    | 60        |                   |   | 63        |  |           | 178       |  |   | 229      
|Corporate Obligations                                |  |                    | 36        |                   |   | 54        |  |           | 102       |  |   | 222      
|Dividends on Other Investments                       |  |                    | 55        |                   |   | 27        |  |           | 136       |  |   | 87       
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|                                                     |  |                    | 16,262    |                   |   | 13,294    |  |           | 45,741    |  |   | 38,028   
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Interest Expense                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Deposits                                             |  |                    | 5,984     |                   |   | 3,904     |  |           | 15,531    |  |   | 10,873   
|Federal Funds Purchased                              |  |                    | 8         |                   |   | 1         |  |           | 15        |  |   | 4        
|Borrowed Money                                       |  |                    | 1,004     |                   |   | 816       |  |           | 2,832     |  |   | 2,375    
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|                                                     |  |                    | 6,996     |                   |   | 4,721     |  |           | 18,378    |  |   | 13,252   
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Net Interest Income                                  |  |                    | 9,266     |                   |   | 8,573     |  |           | 27,363    |  |   | 24,776   
|Provision for Loan Losses                            |  |                    | 869       |                   |   | 864       |  |           | 2,702     |  |   | 2,709    
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Net Interest Income After Provisions for Loan Losses |  |                    | 8,397     |                   |   | 7,709     |  |           | 24,661    |  |   | 22,067   
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Noninterest Income                                   |  |                    |           |                   |   |           |  |           |           |  |   |          
|Service Charges on Deposits                          |  |                    | 1,077     |                   |   | 1,100     |  |           | 3,057     |  |   | 3,170    
|Other Service Charges, Commissions & Fees            |  |                    | 186       |                   |   | 149       |  |           | 539       |  |   | 413      
|Mortgage Banking Income                              |  |                    | 219       |                   |   | 281       |  |           | 553       |  |   | 823      
|Other                                                |  |                    | 124       |                   |   | 92        |  |           | 659       |  |   | 365      
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|                                                     |  |                    | 1,606     |                   |   | 1,622     |  |           | 4,808     |  |   | 4,771    
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Noninterest Expense                                  |  |                    |           |                   |   |           |  |           |           |  |   |          
|Salaries and Employee Benefits                       |  |                    | 3,580     |                   |   | 3,189     |  |           | 10,454    |  |   | 9,433    
|Occupancy and Equipment                              |  |                    | 994       |                   |   | 940       |  |           | 2,819     |  |   | 2,606    
|Security Losses, net                                 |  |                    | 0         |                   |   | 31        |  |           | 0         |  |   | 31       
|Other Operating Expenses                             |  |                    | 1,990     |                   |   | 2,095     |  |           | 5,968     |  |   | 5,694    
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|                                                     |  |                    | 6,564     |                   |   | 6,255     |  |           | 19,241    |  |   | 17,764   
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Income Before Income Taxes                           |  |                    | 3,439     |                   |   | 3,076     |  |           | 10,228    |  |   | 9,074    
|Income Taxes                                         |  |                    | 1,188     |                   |   | 1,019     |  |           | 3,556     |  |   | 3,085    
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Net Income                                           |  | $                  | 2,251     |                   | $ | 2,057     |  | $         | 6,672     |  | $ | 5,989    
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Net Income Per Share of Common Stock                 |  |                    |           |                   |   |           |  |           |           |  |   |          
|Basic                                                |  | $                  | 0.32      |                   | $ | 0.29      |  | $         | 0.93      |  | $ | 0.84     
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Diluted                                              |  | $                  | 0.31      |                   | $ | 0.29      |  | $         | 0.93      |  | $ | 0.84     
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Dividends Paid Per Share of Common Stock             |  | $                  | 0.072     |                   | $ | 0.064     |  | $         | 0.21      |  | $ | 0.186    
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Weighted Average Basic Shares Outstanding            |  |                    | 7,143,741 |                   |   | 7,134,803 |  |           | 7,143,741 |  |   | 7,129,773
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          
|Weighted Average Diluted Shares Outstanding          |  |                    | 7,171,622 |                   |   | 7,159,523 |  |           | 7,173,602 |  |   | 7,154,343
|                                                     |  |                    |           |                   |   |           |  |           |           |  |   |          



Per
Share Data has been adjusted to reflect 5-for-4 stock split effective May 16, 2005.

The accompanying notes are an
integral part of these statements.



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##### Table of Contents

COLONY BANKCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(UNAUDITED)

(DOLLARS IN THOUSANDS)



|                                                 |  |                    |       |                   |          |   |          |  |   |          |   |  |   |       |  
|------------------------------------------------ |  | ------------------ | ----- | ----------------- | -------- | - | -------- |  | - | -------- | - |  | - | ----- | -
|                                                 |  | Three Months Ended |       | Nine Months Ended |         
|                                                 |  | 09/30/05           |       |                   | 09/30/04 |   | 09/30/05 |  |   | 09/30/04 |  
|Net Income                                       |  | $                  | 2,251 |                   |          | $ | 2,057    |  | $ | 6,672    |   |  | $ | 5,989 |  
|                                                 |  |                    |       |                  
|Other Comprehensive Income, Net of Tax           |  |                    |       |                   |          |   |          |  |   |          |   |  |   |       |  
|Gains (Losses) on Securities Arising During Year |  |                    | (150  | )                 |          |   | 857      |  |   | (167     | ) |  |   | (228  | )
|Reclassification Adjustment                      |  |                    | 0     |                   |          |   | 20       |  |   | 0        |   |  |   | 20    |  
|                                                 |  |                    |       |                   |          |   |          |  |   |          |   |  |   |       |  
|Unrealized Gains (Losses) on Securities          |  |                    | (150  | )                 |          |   | 877      |  |   | (167     | ) |  |   | (208  | )
|                                                 |  |                    |       |                   |          |   |          |  |   |          |   |  |   |       |  
|Comprehensive Income                             |  | $                  | 2,101 |                   |          | $ | 2,934    |  | $ | 6,505    |   |  | $ | 5,781 |  
|                                                 |  |                    |       |                   |          |   |          |  |   |          |   |  |   |       |  



The
accompanying notes are an integral part of these statements.



5



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##### Table of Contents

COLONY BANKCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(UNAUDITED)

(DOLLARS IN THOUSANDS)



|                                                                                  |  |      |         |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | -
|                                                                                  |  | 2005 |         |   | 2004 |  
|CASH FLOW FROM OPERATING ACTIVITIES                                               |  |      |         |   |      |   |          |  
|                                                                                  |  |     
|Net Income                                                                        |  | $    | 6,672   |   |      | $ | 5,989    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |         |   |      |   |          |  
|Loss on sale of investment securities                                             |  |      | 0       |   |      |   | 31       |  
|Depreciation                                                                      |  |      | 1,396   |   |      |   | 1,304    |  
|Provision for loan losses                                                         |  |      | 2,702   |   |      |   | 2,709    |  
|Amortization of excess costs                                                      |  |      | 89      |   |      |   | 107      |  
|Other prepaids, deferrals and accruals, net                                       |  |      | 1,303   |   |      |   | 1,970    |  
|                                                                                  |  |      |         |   |      |   |          |  
|Total adjustments                                                                 |  |      | 5,490   |   |      |   | 6,121    |  
|                                                                                  |  |      |         |   |      |   |          |  
|Net cash provided by operating activities                                         |  |      | 12,162  |   |      |   | 12,110   |  
|                                                                                  |  |      |         |   |      |   |          |  
|CASH FLOW FROM INVESTING ACTIVITIES                                               |  |      |         |   |      |   |          |  
|                                                                                  |  |     
|Cash received in business acquistion, net                                         |  |      | 0       |   |      |   | 14,357   |  
|Purchase of other assets (FHLB stock)                                             |  |      | (623    | ) |      |   | (402     | )
|Purchases of securities available for sale                                        |  |      | (24,691 | ) |      |   | (25,793  | )
|Proceeds from sales of securities available for sale                              |  |      | 0       |   |      |   | 10,477   |  
|Proceeds from maturities, calls, and paydowns of investment securities:           |  |      |         |   |      |   |          |  
|Available for Sale                                                                |  |      | 28,292  |   |      |   | 19,233   |  
|Held to Maturity                                                                  |  |      | 8       |   |      |   | 7        |  
|Decrease (increase) in interest-bearing deposits in banks                         |  |      | (1,004  | ) |      |   | 8,426    |  
|Proceeds from sale of premises and equipment                                      |  |      | 12      |   |      |   | 0        |  
|Increase in loans                                                                 |  |      | (68,286 | ) |      |   | (109,948 | )
|Purchase of premises and equipment                                                |  |      | (4,033  | ) |      |   | (3,289   | )
|Other real estate and repossessions                                               |  |      | 1,303   |   |      |   | 1,175    |  
|Investment in other                                                               |  |      | 0       |   |      |   | (140     | )
|Cash surrender value of insurance                                                 |  |      | (116    | ) |      |   | (155     | )
|                                                                                  |  |      |         |   |      |   |          |  
|Net cash used by investing activities                                             |  |      | (69,138 | ) |      |   | (86,052  | )
|                                                                                  |  |      |         |   |      |   |          |  
|CASH FLOW FROM FINANCING ACTIVITIES                                               |  |      |         |   |      |   |          |  
|                                                                                  |  |     
|Net increase in deposits                                                          |  |      | 50,431  |   |      |   | 56,466   |  
|Dividends paid                                                                    |  |      | (1,465  | ) |      |   | (1,290   | )
|Net increase in other borrowed money                                              |  |      | 9,331   |   |      |   | 1,323    |  
|Proceeds from issuance of subordinated debentures                                 |  |      | 0       |   |      |   | 4,640    |  
|                                                                                  |  |      |         |   |      |   |          |  
|Net cash provided by financing activities                                         |  |      | 58,297  |   |      |   | 61,139   |  
|                                                                                  |  |      |         |   |      |   |          |  
|Net increase (decrease) in cash and cash equivalents                              |  |      | 1,321   |   |      |   | (12,803  | )
|Cash and cash equivalents at beginning of period                                  |  |      | 64,947  |   |      |   | 59,723   |  
|                                                                                  |  |      |         |   |      |   |          |  
|Cash and cash equivalents at end of period                                        |  | $    | 66,268  |   |      | $ | 46,920   |  
|                                                                                  |  |      |         |   |      |   |          |  



The
accompanying notes are an integral part of these statements.



6



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##### Table of Contents

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, 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.



All dollars in notes to consolidated financial statements are rounded to the nearest thousand.



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 deferred tax assets.



Reclassifications



In certain instances, amounts reported in
prior years consolidated financial statements have been reclassified to conform to statement presentations selected for 2005. 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.



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.



Accounting Policies



The accounting and reporting policies of Colony Bankcorp, Inc. and its subsidiaries are in
accordance with accounting principles generally accepted and conform to general practices within the banking industry. The significant accounting policies followed by Colony and the methods of applying those policies are summarized hereafter.



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##### Table of Contents

(1) Summary of Significant Accounting Policies (Continued)



Investment Securities



Investment securities are recorded under Statement of Financial Accounting Standards (SFAS) No. 115, whereby the Company classifies its
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.



Loans Held for Sale



Loans held for sale are reported at the lower of cost or market value on an aggregate loan
portfolio basis. Gains or losses realized on the sales of loans are recognized at the time of sale and are determined by the difference between the net sales proceeds and the carrying value of the loans sold. Gains and losses on sales of loans are
included in noninterest income.



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. Interest income on loans is recognized using the effective interest method.



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



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##### Table of Contents

(1) Summary of Significant Accounting Policies (Continued)



Allowance for Loan Losses (Continued)



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.



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 for commercial and construction loans by either the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable
market price or the fair value of the collateral if the loan is collateral dependent.



Large groups of smaller balance homogenous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are
the subject of a restricting agreement.



Premises and Equipment



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



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



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



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



Transfers of Financial Assets



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



Statement of Cash Flows



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



Income Taxes



The provision for income taxes is based upon income for financial statement purposes, adjusted for nontaxable income and nondeductible expenses. Deferred income taxes have been provided when different accounting
methods have been used in determining income for income tax purposes and for financial reporting purposes. Deferred tax assets and liabilities are recognized based on future tax consequences attributable to differences arising from the financial
statement carrying values of assets and liabilities and their tax bases. The differences relate primarily to depreciable assets (use of different depreciation methods for financial statement and income tax purposes) and allowance for loan losses
(use of the allowance method for financial statement purposes and



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##### Table of Contents

(1) Summary of Significant Accounting Policies (Continued)



Income Taxes (Continued)



the direct write-off method for tax purposes). In the event of changes in the tax laws,
deferred tax assets and liabilities are adjusted in the period of the enactment of those changes, with effects included in the income tax provision. The Company and its subsidiaries file a consolidated federal income tax return. Each subsidiary pays
its proportional share of federal income taxes to the Company based on its taxable income.



Other Real Estate



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



Comprehensive Income



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



Off-Balance Sheet Credit Related
Financial Instruments



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



Changes in Accounting Principles and Effects of New Accounting Pronouncements



In May 2005, the Financial Accounting Standards Board (FASB) issued Statement
No. 154, (SFAS No. 154) Accounting Changes and Error Corrections  A Replacement of APB Opinion No. 20 and FASB Statement No. 3. This new standard replaces Accounting Principles Board
(APB) Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statement. Among other changes, SFAS No. 154 requires that a voluntary change in
accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. SFAS No. 154 also provides that (1) a change in method of
depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements
should be termed a restatement. The new standard is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not anticipate this revision will have a
material effect on its financial statements.



In December 2004, the FASB issued
Statement No. 123 (Revised 2004) (SFAS No. 123R) Share-Based Payment, which requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. SFAS No. 123R
replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Share-based compensation arrangements include share options, restricted
share plans, performance-based awards, share appreciation rights and employee share purchase plans. SFAS No. 123R requires all share-based payments to employees be valued using a fair value method on the date of grant and expensed based on that
fair value over the applicable vesting period. The Company adopted the cost recognition provision of SFAS No. 123 in 1995 and has been expensing compensation cost related to its restricted plan. SFAS No. 123R also amends SFAS No. 95
Statement of Cash Flows, requiring the benefits of tax deductions in excess of recognized compensation cost be reported as financing instead of operating cash flows. The Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 107, (SAB No. 107) which expresses the SECs views regarding the interaction between SFAS No. 123R and certain SEC rules and regulations. Additionally, SAB No. 107 provides guidance
related to share-based payment transactions for public companies. The Company will be required to apply SFAS No. 123R as of the annual reporting period that begins after September 15, 2005. The Company does not anticipate this revision
will have a material effect on its financial statements.



In November 2004, the
Emerging Issues Task Force (EITF) published Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The Task Force discussed the meaning of other-than-temporary impairment and
its application to certain investments carried at cost. The Task Force requested that the FASB staff consider other impairment models within the U.S. Generally Accepted Accounting Principles (GAAP) when developing its views. The Task
Force also



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##### Table of Contents

(1) Summary of Significant Accounting Policies (Continued)



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



requested that the scope of the impairment issue be expanded to include
equity investments and investments subject to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, and that the issue be addressed by the Task Force as a separate EITF issue. At the EITF meeting,
the Task Force reached a consensus on one issue that certain quantitative and qualitative disclosures should be required for securities accounted for under Statement 115 that are impaired at the balance sheet date but for which an
other-than-temporary impairment has not been recognized. The Board ratified the consensus on that one issue at its November 25, 2004 meeting. In September 2004, the Financial Accounting Standards Board (FASB) directed the FASB staff
to issue two proposed FASB Staff Positions (FSP): Proposed FSP EITF Issue 03-1-a, which provides guidance for the application of paragraph 16 of EITF Issue 03-1 to debt securities that are impaired because of interest rate and/or sector
spread increases, and Proposed FSP EITF Issue 03-1-b, which delays the effective date of Issue 03-1 for debt securities that are impaired because of interest rate and/or sector spread increases. In September 2005, the FASB reached a decision whereby
they declined to provide additional guidance on the meaning of other-than-temporary impairment. The Board directed the FASB staff to issue EITF 03-1a as final and to draft a new FSP that will replace EITF 03-01. The final FSP (retitled FAS 115-1,
The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments) would be effective for other-than-temporary impairment analysis conducted in periods beginning after September 15, 2005. The Company does not
anticipate this revision will have a material effect on its financial statements.



Restricted Stock  Unearned Compensation



In 1999, the
board of directors of Colony Bankcorp, Inc. adopted a restricted stock grant plan which awards certain executive officers common shares of the Company. The maximum number of shares (split-adjusted) which may be subject to restricted stock awards is
64,701. During 2000 - 2005, 66,993 split-adjusted shares were issued under this plan, respectively and since the plans inception, 8,227 shares have been forfeited; thus, remaining shares which may be subject to restricted stock awards are
5,935 at September 30, 2005. 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 3 years (the restriction period).



In April 2004, the shareholders 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 143,500. No shares
have been issued pursuant to this stock grant plan.



(2) Cash and Balances
Due from Banks



Components of cash and
balances due from banks are as follows as of September 30, 2005 and December 31, 2004:



|                                              |  |                   |        |                  |   |       
|--------------------------------------------- |  | ----------------- | ------ | ---------------- | - | ------
|                                              |  | September 30,2005 |        | December 31,2004
|Cash on Hand and Cash Items                   |  | $                 | 8,641  |                  | $ | 8,316 
|Noninterest-Bearing Deposits with Other Banks |  |                   | 14,423 |                  |   | 12,634
|                                              |  |                   |        |                  |   |       
|                                              |  | $                 | 23,064 |                  | $ | 20,950
|                                              |  |                   |        |                  |   |       



As of September 30, 2005, the
Banks had required deposits of approximately $2,749 with the Federal Reserve; of which, $2,734 was met by cash on hand and $15 was met through a reserve allocation with a correspondent bank.



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##### Table of Contents

(3) Investment Securities



Investment securities as of September 30, 2005 are summarized as follows:



|                               |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|------------------------------ |  | ------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                               |  | AmortizedCost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Securities Available for Sale: |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|U.S. Government Agencies       |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|Mortgage-Backed                |  | $             | 71,341  |                      | $ | 53                    |  | $ | (1,013     | ) |  | $ | 70,381 
|Other                          |  |               | 28,285  |                      |   | 32                    |  |   | (362       | ) |  |   | 27,955 
|State, County & Municipal      |  |               | 6,205   |                      |   | 68                    |  |   | (18        | ) |  |   | 6,255  
|Corporate Obligations          |  |               | 3,074   |                      |   | 0                     |  |   | (28        | ) |  |   | 3,046  
|Marketable Equity Securities   |  |               | 163     |                      |   | 129                   |  |   | (19        | ) |  |   | 273    
|                               |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|                               |  | $             | 109,068 |                      | $ | 282                   |  | $ | (1,440     | ) |  | $ | 107,910
|                               |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|Securities Held to Maturity:   |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|State, County and Municipal    |  | $             | 80      |                      | $ | 0                     |  | $ | 0          |   |  | $ | 80     
|                               |  |               |         |                      |   |                       |  |   |            |   |  |   |        



The amortized cost and fair value of
investment securities as of September 30, 2005, by contractual maturity, are shown hereafter. Expected maturities will differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or
prepayment penalties.



|                                       |  |                    |         |                  |   |                |  |            |    |  |   |   
|-------------------------------------- |  | ------------------ | ------- | ---------------- | - | -------------- |  | ---------- | -- |  | - | --
|                                       |  | Securities        
|                                       |  | Available for Sale |         | Held to Maturity
|                                       |  | Amortized Cost     |         | Fair Value       |   | Amortized Cost |  | Fair Value
|Due in One Year or Less                |  | $                  | 3,659   |                  | $ | 3,631          |  | $          | 0  |  | $ | 0 
|Due After One Year Through Five Years  |  |                    | 26,506  |                  |   | 26,139         |  |            | 0  |  |   | 0 
|Due After Five Years Through Ten Years |  |                    | 6,184   |                  |   | 6,259          |  |            | 0  |  |   | 0 
|Due After Ten Years                    |  |                    | 1,215   |                  |   | 1,227          |  |            | 80 |  |   | 80
|                                       |  |                    |         |                  |   |                |  |            |    |  |   |   
|                                       |  |                    | 37,564  |                  |   | 37,256         |  |            | 80 |  |   | 80
|                                       |  |                    |         |                 
|Mortgage-Backed Securities             |  |                    | 71,341  |                  |   | 70,381         |  |            | 0  |  |   | 0 
|Marketable Equity Securities           |  |                    | 163     |                  |   | 273            |  |            | 0  |  |   | 0 
|                                       |  |                    |         |                  |   |                |  |            |    |  |   |   
|                                       |  | $                  | 109,068 |                  | $ | 107,910        |  | $          | 80 |  | $ | 80
|                                       |  |                    |         |                  |   |                |  |            |    |  |   |   



Investment securities as of December 31, 2004 are summarized as follows:



|                               |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|------------------------------ |  | ------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                               |  | AmortizedCost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Securities Available for Sale: |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|U.S. Government Agencies       |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|Mortgage-Backed                |  | $             | 74,431  |                      | $ | 106                   |  | $ | (1,079     | ) |  | $ | 73,458 
|Other                          |  |               | 29,076  |                      |   | 81                    |  |   | (103       | ) |  |   | 29,054 
|State, County & Municipal      |  |               | 6,800   |                      |   | 98                    |  |   | (11        | ) |  |   | 6,887  
|Corporate Obligations          |  |               | 3,109   |                      |   | 4                     |  |   | 0          |   |  |   | 3,113  
|                               |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|                               |  | $             | 113,416 |                      | $ | 289                   |  | $ | (1,193     | ) |  | $ | 112,512
|                               |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|Securities Held to Maturity:   |  |               |         |                      |   |                       |  |   |            |   |  |   |        
|State, County and Municipal    |  | $             | 81      |                      | $ | 0                     |  | $ | 0          |   |  | $ | 81     
|                               |  |               |         |                      |   |                       |  |   |            |   |  |   |        



Proceeds from sales of investments
available for sale during first three quarters of 2005 and 2004 was $0 and $10,477 respectively.



Investment securities having a carry value approximating $63,213 and $70,117 as of September 30, 2005 and December 31, 2004, respectively, were pledged to secure public deposits and for other purposes.



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##### Table of Contents

(3) Investment Securities (Continued)



Information pertaining to securities with gross unrealized losses at September 30, 2005 and December 31, 2004 aggregated by
investment category and length of time that individual securities have been in a continuous loss position, follows:



|                             |  |                     |        |                       |                      |      |           |       |                       |        |  |           |        |                       |  |   |        |  |   |        |  
|---------------------------- |  | ------------------- | ------ | --------------------- | -------------------- | ---- | --------- | ----- | --------------------- | ------ |  | --------- | ------ | --------------------- |  | - | ------ |  | - | ------ | -
|                             |  | Less Than 12 Months |        |                       | 12 Months or Greater |      |           | Total |                      
|                             |  | FairValue           |        | GrossUnrealizedLosses |                      |      | FairValue |       | GrossUnrealizedLosses |        |  | FairValue |        | GrossUnrealizedLosses | 
|September 30, 2005           |  |                     |        |                       |                      |      |           |       |                       |        |  |           |        |                       |  |   |        |  |   |        |  
|U.S. Government Agencies     |  |                     |        |                       |                      |      |           |       |                       |        |  |           |        |                       |  |   |        |  |   |        |  
|Mortgage-Backed              |  | $                   | 22,545 |                       | $                    | (213 | )         |       | $                     | 41,318 |  | $         | (800   | )                     |  | $ | 63,863 |  | $ | (1,013 | )
|Other                        |  |                     | 8,406  |                       |                      | (64  | )         |       |                       | 17,265 |  |           | (298   | )                     |  |   | 25,671 |  |   | (362   | )
|State, County and Municipal  |  |                     | 798    |                       |                      | (1   | )         |       |                       | 1,376  |  |           | (17    | )                     |  |   | 2,174  |  |   | (18    | )
|Corporate Obligations        |  |                     | 0      |                       |                      | 0    |           |       |                       | 2,040  |  |           | (28    | )                     |  |   | 2,040  |  |   | (28    | )
|Marketable Equity Securities |  |                     | 60     |                       |                      | (19  | )         |       |                       | 0      |  |           | 0      |                       |  |   | 60     |  |   | (19    | )
|                             |  |                     |        |                       |                      |      |           |       |                       |        |  |           |        |                       |  |   |        |  |   |        |  
|                             |  | $                   | 31,809 |                       | $                    | (297 | )         |       | $                     | 61,999 |  | $         | (1,143 | )                     |  | $ | 93,808 |  | $ | (1,440 | )
|                             |  |                     |        |                       |                      |      |           |       |                       |        |  |           |        |                       |  |   |        |  |   |        |  
|December 31, 2004            |  |                     |        |                       |                      |      |           |       |                       |        |  |           |        |                       |  |   |        |  |   |        |  
|U.S. Government Agencies     |  |                     |        |                       |                      |      |           |       |                       |        |  |           |        |                       |  |   |        |  |   |        |  
|Mortgage-Backed              |  | $                   | 31,300 |                       | $                    | (423 | )         |       | $                     | 31,391 |  | $         | (656   | )                     |  | $ | 62,691 |  | $ | (1,079 | )
|Other                        |  |                     | 13,811 |                       |                      | (92  | )         |       |                       | 1,180  |  |           | (11    | )                     |  |   | 14,991 |  |   | (103   | )
|State, County and Municipal  |  |                     | 2,246  |                       |                      | (11  | )         |       |                       | 0      |  |           | 0      |                       |  |   | 2,246  |  |   | (11    | )
|                             |  |                     |        |                       |                      |      |           |       |                       |        |  |           |        |                       |  |   |        |  |   |        |  
|                             |  | $                   | 47,357 |                       | $                    | (526 | )         |       | $                     | 32,571 |  | $         | (667   | )                     |  | $ | 79,928 |  | $ | (1,193 | )
|                             |  |                     |        |                       |                      |      |           |       |                       |        |  |           |        |                       |  |   |        |  |   |        |  



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



At September 30, 2005, the debt securities with unrealized losses
have depreciated 1.51 percent from the Companys amortized cost basis. These securities are guaranteed by either U.S. Government or other governments. These unrealized losses relate principally to current interest rates for similar type 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 September 30, 2005 and December 31, 2004 was as follows:



|                                       |  |                    |         |                   |   |        
|-------------------------------------- |  | ------------------ | ------- | ----------------- | - | -------
|                                       |  | September 30, 2005 |         | December 31, 2004
|Commercial, Financial and Agricultural |  | $                  | 59,543  |                   | $ | 44,284 
|Real Estate  Construction             |  |                    | 129,300 |                   |   | 100,774
|Real Estate  Farmland                 |  |                    | 40,604  |                   |   | 38,246 
|Real Estate  Other                    |  |                    | 522,058 |                   |   | 500,869
|Installment Loans to Individuals       |  |                    | 72,705  |                   |   | 73,685 
|All Other Loans                        |  |                    | 18,144  |                   |   | 20,822 
|                                       |  |                    |         |                   |   |        
|                                       |  | $                  | 842,354 |                   | $ | 778,680
|                                       |  |                    |         |                   |   |        



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 $9,145 and $7,856 as of September 30, 2005
and December 31, 2004, respectively and total recorded investment in loans past due 90 days or more and still accruing interest approximated $8 and $953, respectively.



13



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##### Table of Contents

(5) Allowance for Loan Losses



Transactions in the allowance for loan losses are summarized below for nine months ended September 30, 2005 and September 30, 2004
as follows:



|                                        |  |                    |        |   |                    |   |        |  
|--------------------------------------- |  | ------------------ | ------ | - | ------------------ | - | ------ | -
|                                        |  | September 30, 2005 |        |   | September 30, 2004 |  
|Balance, Beginning                      |  | $                  | 10,012 |   |                    | $ | 8,516  |  
|Provision Charged to Operating Expenses |  |                    | 2,702  |   |                    |   | 2,709  |  
|Loans Charged Off                       |  |                    | (2,266 | ) |                    |   | (1,249 | )
|Loan Recoveries                         |  |                    | 215    |   |                    |   | 138    |  
|                                        |  |                    |        |   |                    |   |        |  
|Balance, Ending                         |  | $                  | 10,663 |   |                    | $ | 10,114 |  
|                                        |  |                    |        |   |                    |   |        |  



(6) Premises and Equipment



Premises and equipment are comprised of
the following as of September 30, 2005 and December 31, 2004:



|                                  |  |                    |         |   |                   |   |         |  
|--------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | -
|                                  |  | September 30, 2005 |         |   | December 31, 2004 |  
|Land                              |  | $                  | 6,094   |   |                   | $ | 4,889   |  
|Building                          |  |                    | 17,322  |   |                   |   | 16,418  |  
|Furniture, Fixtures and Equipment |  |                    | 11,736  |   |                   |   | 10,821  |  
|Leasehold Improvements            |  |                    | 991     |   |                   |   | 967     |  
|Construction in Progress          |  |                    | 1,303   |   |                   |   | 455     |  
|                                  |  |                    |         |   |                   |   |         |  
|                                  |  |                    | 37,446  |   |                   |   | 33,550  |  
|                                  |  |                    |         |   |                   |   |         |  
|Accumulated Depreciation          |  |                    | (12,985 | ) |                   |   | (11,726 | )
|                                  |  |                    |         |   |                   |   |         |  
|                                  |  | $                  | 24,461  |   |                   | $ | 21,824  |  
|                                  |  |                    |         |   |                   |   |         |  



Depreciation charged to operations
totaled $1,396 and $1,304 for September 30, 2005 and September 30, 2004, respectively.



Certain Company facilities and equipment are leased under various operating leases. Rental expense approximated $152 and $128 for nine months ended September 30, 2005 and September 30, 2004, respectively.



(7) Income Taxes



The Company records income taxes under SFAS No. 109, Accounting for Income Taxes, which
requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.



(8) Deposits



The aggregate amount of overdrawn deposit accounts reclassified as loan balances totaled $931 and $462 as of September 30, 2005 and
December 31, 2004.



Components of
interest-bearing deposits as of September 30, 2005 and December 31, 2004 are as follows:



|                        |  |                    |         |                   |   |        
|----------------------- |  | ------------------ | ------- | ----------------- | - | -------
|                        |  | September 30, 2005 |         | December 31, 2004
|Interest-Bearing Demand |  | $                  | 161,333 |                   | $ | 167,320
|Savings                 |  |                    | 38,119  |                   |   | 38,862 
|Time, $100,000 and Over |  |                    | 280,685 |                   |   | 203,886
|Other Time              |  |                    | 354,213 |                   |   | 372,092
|                        |  |                    |         |                   |   |        
|                        |  | $                  | 834,350 |                   | $ | 782,160
|                        |  |                    |         |                   |   |        



14



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##### Table of Contents

(8) Deposits (Continued)



The aggregate amount of short-term jumbo certificates of deposit, each with a minimum denomination of one hundred thousand was approximately
$230,827 and $180,731 as of September 30, 2005 and December 31, 2004, respectively.



As of September 30, 2005 and December 31, 2004, the scheduled maturities of certificates of deposits are as follows:



|                     |  |                    |         |                   |   |        
|-------------------- |  | ------------------ | ------- | ----------------- | - | -------
|Maturity             |  | September 30, 2005 |         | December 31, 2004
|One Year and Under   |  | $                  | 531,419 |                   | $ | 511,310
|One to Three Years   |  |                    | 79,630  |                   |   | 44,752 
|Three Years and Over |  |                    | 23,849  |                   |   | 19,916 
|                     |  |                    |         |                   |   |        
|                     |  | $                  | 634,898 |                   | $ | 575,978
|                     |  |                    |         |                   |   |        



Brokered deposits are third party
deposits placed by or through the assistance of a deposit broker. As of September 30, 2005, the Company had $53,070 in brokered deposits compared to $0 at December 31, 2004.



(9) Other Borrowed Money



Other borrowed money at September 30, 2005 and December 31, 2004 is summarized as follows:



|                                   |  |                    |        |                   |   |       
|---------------------------------- |  | ------------------ | ------ | ----------------- | - | ------
|                                   |  | September 30, 2005 |        | December 31, 2004
|Federal Home Loan Bank Advances    |  | $                  | 69,000 |                   | $ | 61,000
|The Bankers Bank Note Payable (1) |  |                    | 281    |                   |   | 450   
|The Bankers Bank (2)              |  |                    | 1,500  |                   |   | 0     
|                                   |  |                    |        |                   |   |       
|                                   |  | $                  | 70,781 |                   | $ | 61,450
|                                   |  |                    |        |                   |   |       



Advances from the Federal Home Loan
Bank (FHLB) have maturities ranging from 2005 to 2013 and interest rates ranging from 2.46 percent to 5.93 percent. Under the Blanket Agreement for Advances and Security Agreement with the FHLB, residential first mortgage loans and cash balances
held by the FHLB are pledged as collateral for the FHLB advances outstanding. At September 30, 2005, the Company had available line of credit commitments totaling $94,521, of which $25,521 was available.

---

|(1) | The Bankers Bank note payable was renewed on January 7, 2003 for $1,113 at a rate of the Wall Street Prime minus one half percent. Payments are due monthly with the
entire unpaid balance due January 7, 2007. The debt is secured by all furniture, fixtures, machinery, equipment and software of Colony Management Services, Inc. Colony Bankcorp, Inc. guarantees the debt.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Bankers Bank note payable originated on May 27, 2005 at a rate of Wall Street Prime minus 0.75 percent with a maturity date of May 27, 2006. Interest only
payments will be made quarterly. Any outstanding principal and accrued interest will be due and payable at maturity. Collateral is a negative pledge of Colony Bank Wilcox stock.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The aggregate stated maturities of other borrowed money at
September 30, 2005 are as follows:



|                    |  |        |       
|------------------- |  | ------ | ------
|Year                |  | Amount
|2005                |  | $      | 4,073 
|2006                |  |        | 13,208
|2007                |  |        | 2,500 
|2008                |  |        | 16,000
|2009 and Thereafter |  |        | 35,000
|                    |  |        |       
|                    |  | $      | 70,781
|                    |  |        |       



(10) Subordinated Debentures
(Trust Preferred Securities)



During the first quarter of 2002, the
Company formed a subsidiary whose sole purpose was to issue $9,000 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 five
years with certain exceptions. At September 30, 2005, the floating-rate securities had a 7.56 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 3.60 percent.



During the fourth quarter of 2002, the Company formed a second subsidiary whose sole purpose
was to issue $5,000 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 five years with certain exceptions. At
September 30, 2005, the floating-rate securities had a 7.21 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 3.25 percent.



15



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##### Table of Contents

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



During the second quarter of 2004, the Company formed a third subsidiary whose sole purpose
was to issue $4,500 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 five years with certain exceptions. At
September 30, 2005, the floating rate securities had a 6.57 percent interest rate, which will reset quarterly at the three-month LIBOR rate plus 2.68 percent.



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



(11) Rate Lock Commitments



On July 1, 2003, the Company adopted SFAS No. 149, Amendment of Statement
No. 133 on Derivative Instruments and Hedging Activities. This statement requires that all derivates be recognized as assets or liabilities in the balance sheet and measured at fair value. Loan commitments related to the origination or
acquisition of mortgage loans that will be held for sale must be accounted for as derivative instruments.



The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Rate lock commitments on mortgage loans that are intended to be sold
are considered to be derivatives. Accordingly, such commitments, along with related fees received from potential borrowers, are to be recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in the net gain or
loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments also considers the difference between current levels of interest rates and the committed rates. The
Company has not recorded rate lock commitments as derivative assets or liabilities as of September 30, 2005 as the effects did not have a material effect upon the consolidated financial statements.



(12) 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 $479 for 2004, $426 for 2003 and $427 for
2002.



(13) 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 September 30, 2005 and December 31, 2004 the following financial instruments were outstanding whose contract amounts represent credit risk:



|                             |  |                    |         |                   |   |       
|---------------------------- |  | ------------------ | ------- | ----------------- | - | ------
|                             |  | Contract Amount   
|                             |  | September 30, 2005 |         | December 31, 2004
|Loan Commitments             |  | $                  | 102,714 |                   | $ | 85,094
|Standby Letters of Credit    |  |                    | 2,062   |                   |   | 1,829 
|Performance Letter of Credit |  |                    | 468     |                   |   | 329   



16



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##### Table of Contents

(13) Commitments and Contingencies (Continued)



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



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



Standby and performance letters of
credit are conditional lending commitments issue 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. The Company has signed a contract for approximately $991 for the
construction of a Savannah office. As of September 30, 2005 the Company has paid $838 toward construction in progress. The Company has also signed a contract for approximately $759 for construction of a second office in Warner Robins. As of
September 30, 2005, the Company has paid $324 toward construction in progress. The Company has signed a contract for approximately $886 for construction of a Columbus office. As of September 30, 2005 no payments have been made.



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.



(14) 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 $1,106 and $945 as of September 30, 2005 and
December 31, 2004, respectively. Benefit payments under the contracts were $126 and $132 for the nine month periods ended September 30, 2005 and September 30, 2004, respectively. Provisions charged to operations totaled $314 and $164
for the nine month periods ended September 30, 2005 and September 30, 2004, respectively.



Fee income recognized with deferred compensation plans totaled $279 and $88 for nine month periods ended September 30, 2005 and September 30, 2004, respectively.



(15) Regulatory Capital Matters



The Company is subject to various regulatory capital requirements administered by 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 classifications 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 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. The amounts and ratios as defined in regulations are presented hereafter. Management
believes, as of September 30, 2005, 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.



17



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##### Table of Contents

(15) Regulatory Capital Matters (Continued)



The following table summarizes regulatory capital information as of September 30, 2005 and December 31, 2004 on a consolidated
basis and for each significant subsidiary, as defined.



|                                       |  |        |        |       |                              |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|-------------------------------------- |  | ------ | ------ | ----- | ---------------------------- | - | ------ | -------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                                       |  | Actual |        |       | For CapitalAdequacy Purposes |   |        | To Be Well CapitalizedUnder Prompt CorrectiveAction Provisions |       
|                                       |  | Amount |        | Ratio |                              |   | Amount |                                                                | Ratio  |  |      | Amount |  | Ratio |       
|As of September 30, 2005               |  |        |        |       |                              |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|                                       |  |        |        |       |                              |  
|Total Capital to Risk-Weighted Assets  |  |        |        |       |                              |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|Consolidated                           |  | $      | 93,722 |       | 11.19                        | % |        | $                                                              | 67,007 |  | 8.00 | %      |  | $     | 83,759 |  | 10.00 | %
|Fitzgerald                             |  |        | 16,190 |       | 11.09                        |   |        |                                                                | 11,683 |  | 8.00 |        |  |       | 14,604 |  | 10.00 |  
|Ashburn                                |  |        | 27,574 |       | 11.09                        |   |        |                                                                | 19,893 |  | 8.00 |        |  |       | 24,866 |  | 10.00 |  
|Worth                                  |  |        | 13,326 |       | 10.50                        |   |        |                                                                | 10,152 |  | 8.00 |        |  |       | 12,690 |  | 10.00 |  
|Southeast                              |  |        | 13,665 |       | 10.80                        |   |        |                                                                | 10,119 |  | 8.00 |        |  |       | 12,649 |  | 10.00 |  
|Quitman                                |  |        | 10,952 |       | 12.04                        |   |        |                                                                | 7,276  |  | 8.00 |        |  |       | 9,096  |  | 10.00 |  
|                                       |  |        |        |       |                              |  
|Tier 1 Capital to Risk-Weighted Assets |  |        |        |       |                              |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|Consolidated                           |  | $      | 83,200 |       | 9.93                         | % |        | $                                                              | 33,504 |  | 4.00 | %      |  | $     | 50,076 |  | 6.00  | %
|Fitzgerald                             |  |        | 14,470 |       | 9.91                         |   |        |                                                                | 5,842  |  | 4.00 |        |  |       | 8,762  |  | 6.00  |  
|Ashburn                                |  |        | 24,464 |       | 9.84                         |   |        |                                                                | 9,946  |  | 4.00 |        |  |       | 14,920 |  | 6.00  |  
|Worth                                  |  |        | 11,735 |       | 9.25                         |   |        |                                                                | 5,076  |  | 4.00 |        |  |       | 7,614  |  | 6.00  |  
|Southeast                              |  |        | 12,418 |       | 9.82                         |   |        |                                                                | 5,060  |  | 4.00 |        |  |       | 7,590  |  | 6.00  |  
|Quitman                                |  |        | 9,921  |       | 10.91                        |   |        |                                                                | 3,638  |  | 4.00 |        |  |       | 5,457  |  | 6.00  |  
|                                       |  |        |        |       |                              |  
|Tier 1 Capital to Average Assets       |  |        |        |       |                              |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|Consolidated                           |  | $      | 83,200 |       | 8.07                         | % |        | $                                                              | 41,217 |  | 4.00 | %      |  | $     | 51,521 |  | 5.00  | %
|Fitzgerald                             |  |        | 14,470 |       | 7.90                         |   |        |                                                                | 7,324  |  | 4.00 |        |  |       | 9,155  |  | 5.00  |  
|Ashburn                                |  |        | 24,464 |       | 7.97                         |   |        |                                                                | 12,279 |  | 4.00 |        |  |       | 15,348 |  | 5.00  |  
|Worth                                  |  |        | 11,735 |       | 7.47                         |   |        |                                                                | 6,281  |  | 4.00 |        |  |       | 7,851  |  | 5.00  |  
|Southeast                              |  |        | 12,418 |       | 8.78                         |   |        |                                                                | 5,659  |  | 4.00 |        |  |       | 7,073  |  | 5.00  |  
|Quitman                                |  |        | 9,921  |       | 7.86                         |   |        |                                                                | 5,047  |  | 4.00 |        |  |       | 6,309  |  | 5.00  |  



18



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##### Table of Contents

(15) Regulatory Capital Matters (Continued)



|                                       |  |        |        |       |                               |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|-------------------------------------- |  | ------ | ------ | ----- | ----------------------------- | - | ------ | -------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                                       |  | Actual |        |       | For Capital Adequacy Purposes |   |        | To Be Well CapitalizedUnder Prompt CorrectiveAction Provisions |       
|                                       |  | Amount |        | Ratio |                               |   | Amount |                                                                | Ratio  |  |      | Amount |  | Ratio |       
|As of December 31, 2004                |  |        |        |       |                               |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|                                       |  |        |        |       |                               |  
|Total Capital to Risk-Weighted Assets  |  |        |        |       |                               |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|Consolidated                           |  | $      | 87,446 |       | 11.35                         | % |        | $                                                              | 61,620 |  | 8.00 | %      |  | $     | 77,025 |  | 10.00 | %
|Fitzgerald                             |  |        | 15,024 |       | 11.55                         |   |        |                                                                | 10,407 |  | 8.00 |        |  |       | 13,009 |  | 10.00 |  
|Ashburn                                |  |        | 26,709 |       | 11.01                         |   |        |                                                                | 19,413 |  | 8.00 |        |  |       | 24,266 |  | 10.00 |  
|Worth                                  |  |        | 12,398 |       | 10.24                         |   |        |                                                                | 9,687  |  | 8.00 |        |  |       | 12,108 |  | 10.00 |  
|Southeast                              |  |        | 10,686 |       | 10.59                         |   |        |                                                                | 8,075  |  | 8.00 |        |  |       | 10,093 |  | 10.00 |  
|Quitman                                |  |        | 10,049 |       | 12.90                         |   |        |                                                                | 6,232  |  | 8.00 |        |  |       | 7,790  |  | 10.00 |  
|                                       |  |        |        |       |                               |  
|Tier 1 Capital to Risk-Weighted Assets |  |        |        |       |                               |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|Consolidated                           |  | $      | 77,813 |       | 10.10                         | % |        | $                                                              | 30,810 |  | 4.00 | %      |  | $     | 46,215 |  | 6.00  | %
|Fitzgerald                             |  |        | 13,396 |       | 10.30                         |   |        |                                                                | 5,204  |  | 4.00 |        |  |       | 7,805  |  | 6.00  |  
|Ashburn                                |  |        | 23,674 |       | 9.76                          |   |        |                                                                | 9,706  |  | 4.00 |        |  |       | 14,559 |  | 6.00  |  
|Worth                                  |  |        | 10,882 |       | 8.99                          |   |        |                                                                | 4,843  |  | 4.00 |        |  |       | 7,265  |  | 6.00  |  
|Southeast                              |  |        | 9,560  |       | 9.47                          |   |        |                                                                | 4,037  |  | 4.00 |        |  |       | 6,056  |  | 6.00  |  
|Quitman                                |  |        | 9,230  |       | 11.85                         |   |        |                                                                | 3,116  |  | 4.00 |        |  |       | 4,674  |  | 6.00  |  
|                                       |  |        |        |       |                               |  
|Tier 1 Capital to Average Assets       |  |        |        |       |                               |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|Consolidated                           |  | $      | 77,813 |       | 7.88                          | % |        | $                                                              | 39,488 |  | 4.00 | %      |  | $     | 49,360 |  | 5.00  | %
|Fitzgerald                             |  |        | 13,396 |       | 8.02                          |   |        |                                                                | 6,680  |  | 4.00 |        |  |       | 8,350  |  | 5.00  |  
|Ashburn                                |  |        | 23,674 |       | 7.56                          |   |        |                                                                | 12,521 |  | 4.00 |        |  |       | 15,652 |  | 5.00  |  
|Worth                                  |  |        | 10,882 |       | 6.93                          |   |        |                                                                | 6,277  |  | 4.00 |        |  |       | 7,846  |  | 5.00  |  
|Southeast                              |  |        | 9,560  |       | 8.26                          |   |        |                                                                | 4,628  |  | 4.00 |        |  |       | 5,785  |  | 5.00  |  
|Quitman                                |  |        | 9,230  |       | 8.49                          |   |        |                                                                | 4,349  |  | 4.00 |        |  |       | 5,436  |  | 5.00  |  



(16) Business Combination



Colony Bankcorp, Inc.s wholly-owned subsidiary, Colony Bank
Ashburn, and Flag Bank entered into a Purchase and Assumption Agreement dated as of December 19, 2003, for Flag Banks Thomaston office pursuant to which Flag Bank-Thomaston was merged with and into Colony Bank Ashburn, becoming a branch
office of Colony Bank Ashburn contemporaneous with the consummation of the purchase. The purchase was consummated and became effective as of March 19, 2004. The business combination was accounted for by the purchase method of accounting, and
the results of operations of Flag Bank  Thomaston office since the date of acquisition are included in the consolidated financial statements.



Following is a condensed balance sheet showing fair values of the assets acquired and the liabilities assumed as of the date of acquisition:



|                                            |  |   |         |  
|------------------------------------------- |  | - | ------- | -
|Cash, Due from Banks and Federal Funds Sold |  | $ | 14,357  |  
|Loans, Net                                  |  |   | 16,760  |  
|Premises and Equipment                      |  |   | 2,188   |  
|Goodwill Arising in Acquisition             |  |   | 1,964   |  
|Core Deposit Intangible                     |  |   | 536     |  
|Other Assets                                |  |   | 54      |  
|Deposits                                    |  |   | (35,804 | )
|Other Liabilities                           |  |   | (55     | )
|                                            |  |   |         |  
|Net Assets Acquired                         |  | $ |        |  
|                                            |  |   |         |  



19



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##### Table of Contents

(16) Business Combination (Continued)



The following proforma information is based on the assumption that the acquisition took place as of
January 1, 2004:



|                                  |  |                    |           |                    |   |                    |  |                    |           |  |   |          
|--------------------------------- |  | ------------------ | --------- | ------------------ | - | ------------------ |  | ------------------ | --------- |  | - | ---------
|                                  |  | Three Months Ended |           | Nine Months Ended 
|                                  |  | September 30, 2005 |           | September 30, 2004 |   | September 30, 2005 |  | September 30, 2004
|Interest Income                   |  | $                  | 16,262    |                    | $ | 13,294             |  | $                  | 45,741    |  | $ | 38,343   
|Interest Expense                  |  |                    | 6,996     |                    |   | 4,721              |  |                    | 18,378    |  |   | 13,379   
|Net Income                        |  |                    | 2,251     |                    |   | 2,057              |  |                    | 6,672     |  |   | 6,062    
|                                  |  |                    |           |                   
|Earnings Per Share                |  |                    |           |                    |   |                    |  |                    |           |  |   |          
|Basic                             |  | $                  | 0.32      |                    | $ | 0.29               |  | $                  | 0.93      |  | $ | 0.85     
|Diluted                           |  | $                  | 0.31      |                    | $ | 0.29               |  | $                  | 0.93      |  | $ | 0.85     
|                                  |  |                    |           |                   
|Weighted Average Shares - Basic   |  |                    | 7,143,741 |                    |   | 7,134,803          |  |                    | 7,143,741 |  |   | 7,129,773
|                                  |  |                    |           |                   
|Weighted Average Shares - Diluted |  |                    | 7,171,622 |                    |   | 7,159,523          |  |                    | 7,173,602 |  |   | 7,154,343



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##### Table of Contents

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



The parent companys balance sheets as of September 30, 2005 and December 31,
2004 and the related statements of income and comprehensive income and cash flows are as follows:



COLONY BANKCORP, INC. (PARENT ONLY)

BALANCE SHEETS

FOR PERIOD ENDED SEPTEMBER 30, 2005 AND DECEMBER 31, 2004



|                                                                                                                                                                     |  |                    |        |   |                   |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | -
|                                                                                                                                                                     |  | September 30, 2005 |        |   | December 31, 2004 |  
|                                                                                                                                                                     |  | (Unaudited)        |        |   |                   |  
|ASSETS                                                                                                                                                               |  |                    |        |   |                   |   |        |  
|                                                                                                                                                                     |  |                   
|Cash                                                                                                                                                                 |  | $                  | 166    |   |                   | $ | 163    |  
|Premises and Equipment, Net                                                                                                                                          |  |                    | 1,251  |   |                   |   | 1,102  |  
|Investment in Subsidiaries, at Equity                                                                                                                                |  |                    | 86,036 |   |                   |   | 79,540 |  
|Other                                                                                                                                                                |  |                    | 878    |   |                   |   | 703    |  
|                                                                                                                                                                     |  |                    |        |   |                   |   |        |  
|Totals Assets                                                                                                                                                        |  | $                  | 88,331 |   |                   | $ | 81,508 |  
|                                                                                                                                                                     |  |                    |        |   |                   |   |        |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                 |  |                    |        |   |                   |   |        |  
|Liabilities                                                                                                                                                          |  |                    |        |   |                   |   |        |  
|Dividends Payable                                                                                                                                                    |  | $                  | 517    |   |                   | $ | 473    |  
|Other                                                                                                                                                                |  |                    | 347    |   |                   |   | 198    |  
|                                                                                                                                                                     |  |                    |        |   |                   |   |        |  
|                                                                                                                                                                     |  |                    | 864    |   |                   |   | 671    |  
|                                                                                                                                                                     |  |                    |        |   |                   |   |        |  
|Other Borrowed Money                                                                                                                                                 |  |                    | 1,500  |   |                   |   | 0      |  
|                                                                                                                                                                     |  |                    |        |   |                   |   |        |  
|Subordinated Debt                                                                                                                                                    |  |                    | 19,074 |   |                   |   | 19,074 |  
|                                                                                                                                                                     |  |                    |        |   |                   |   |        |  
|Stockholders Equity                                                                                                                                                 |  |                    |        |   |                   |   |        |  
|Common Stock, Par Value $1 a Share; Authorized 20,000,000 Shares, Issued 7,181,320 and 5,738,343 Shares as of September 30, 2005 and
December 31, 2004, Respectively |  |                    | 7,181  |   |                   |   | 5,738  |  
|Paid-In Capital                                                                                                                                                      |  |                    | 24,000 |   |                   |   | 23,713 |  
|Retained Earnings                                                                                                                                                    |  |                    | 36,834 |   |                   |   | 33,119 |  
|Restricted Stock - Unearned Compensation                                                                                                                             |  |                    | (358   | ) |                   |   | (210   | )
|Accumulated Other Comprehensive Income (Loss), Net of Tax                                                                                                            |  |                    | (764   | ) |                   |   | (597   | )
|                                                                                                                                                                     |  |                    |        |   |                   |   |        |  
|                                                                                                                                                                     |  |                    | 66,893 |   |                   |   | 61,763 |  
|                                                                                                                                                                     |  |                    |        |   |                   |   |        |  
|Total Liabilities and Stockholders Equity                                                                                                                           |  | $                  | 88,331 |   |                   | $ | 81,508 |  
|                                                                                                                                                                     |  |                    |        |   |                   |   |        |  



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



COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENT OF INCOME AND COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND SEPTEMBER 30, 2004

(UNAUDITED)



|                                                                         |  |                    |       |   |                    |   |       |  
|------------------------------------------------------------------------ |  | ------------------ | ----- | - | ------------------ | - | ----- | -
|                                                                         |  | SEPTEMBER 30, 2005 |       |   | SEPTEMBER 30, 2004 |  
|Income                                                                   |  |                    |       |   |                    |   |       |  
|Dividends from Subsidiaries                                              |  | $                  | 3,452 |   |                    | $ | 1,942 |  
|Other                                                                    |  |                    | 52    |   |                    |   | 49    |  
|                                                                         |  |                    |       |   |                    |   |       |  
|                                                                         |  |                    | 3,504 |   |                    |   | 1,991 |  
|                                                                         |  |                    |       |   |                    |   |       |  
|Expenses                                                                 |  |                    |       |   |                    |   |       |  
|Interest                                                                 |  |                    | 946   |   |                    |   | 600   |  
|Salaries and Employee Benefits                                           |  |                    | 773   |   |                    |   | 600   |  
|Other                                                                    |  |                    | 551   |   |                    |   | 467   |  
|                                                                         |  |                    |       |   |                    |   |       |  
|                                                                         |  |                    | 2,270 |   |                    |   | 1,667 |  
|                                                                         |  |                    |       |   |                    |   |       |  
|Income Before Taxes and Equity in Undistributed Earnings of Subsidiaries |  |                    | 1,234 |   |                    |   | 324   |  
|Income Tax (Benefits)                                                    |  |                    | (725  | ) |                    |   | (524  | )
|                                                                         |  |                    |       |   |                    |   |       |  
|Income Before Taxes and Equity in Undistributed Earnings of Subsidiaries |  |                    | 1,959 |   |                    |   | 848   |  
|Equity in Undistributed Earnings of Subsidiaries                         |  |                    | 4,713 |   |                    |   | 5,141 |  
|                                                                         |  |                    |       |   |                    |   |       |  
|Net Income                                                               |  |                    | 6,672 |   |                    |   | 5,989 |  
|                                                                         |  |                    |       |   |                    |   |       |  
|Other Comprehensive Income, Net of Tax                                   |  |                    |       |   |                    |   |       |  
|Losses on Securities Arising During Year                                 |  |                    | (167  | ) |                    |   | (228  | )
|Reclassification Adjustment                                              |  |                    | 0     |   |                    |   | 20    |  
|                                                                         |  |                    |       |   |                    |   |       |  
|Unrealized Losses in Securities                                          |  |                    | (167  | ) |                    |   | (208  | )
|                                                                         |  |                    |       |   |                    |   |       |  
|Comprehensive Income                                                     |  | $                  | 6,505 |   |                    | $ | 5,781 |  
|                                                                         |  |                    |       |   |                    |   |       |  



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##### Table of Contents

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



COLONY BANKCORP, INC. (PARENT ONLY)

STATEMENT OF CASH FLOWS

FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2005 AND SEPTEMBER 30, 2004

(UNAUDITED)



|                                                                                   |  |      |        |   |      |   |        |  
|---------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                                   |  | 2005 |        |   | 2004 |  
|Cash Flows from Operating Activities                                               |  |      |        |   |      |   |        |  
|Net Income                                                                         |  | $    | 6,672  |   |      | $ | 5,989  |  
|Adjustments to Reconcile Net Income to Net Cash Provided from Operating Activities |  |      |        |   |      |   |        |  
|Depreciation and Amortization                                                      |  |      | 69     |   |      |   | 61     |  
|Equity in Undistributed Earnings of Subsidiary                                     |  |      | (4,713 | ) |      |   | (5,141 | )
|Other                                                                              |  |      | 86     |   |      |   | 195    |  
|                                                                                   |  |      |        |   |      |   |        |  
|                                                                                   |  |      | 2,114  |   |      |   | 1,104  |  
|                                                                                   |  |      |        |   |      |   |        |  
|Cash Flows from Investing Activities                                               |  |      |        |   |      |   |        |  
|Capital Infusion in Subsidiary                                                     |  |      | (1,950 | ) |      |   | (2,300 | )
|Purchases of Premises and Equipment                                                |  |      | (196   | ) |      |   | (15    | )
|Investment in Statutory Trust                                                      |  |      | 0      |   |      |   | (140   | )
|                                                                                   |  |      |        |   |      |   |        |  
|                                                                                   |  |      | (2,146 | ) |      |   | (2,455 | )
|                                                                                   |  |      |        |   |      |   |        |  
|Cash Flows from Financing Activities                                               |  |      |        |   |      |   |        |  
|Dividends Paid                                                                     |  |      | (1,465 | ) |      |   | (1,290 | )
|Principal Payments on Notes and Debentures                                         |  |      | 0      |   |      |   | (1,000 | )
|Proceeds from Notes                                                                |  |      | 1,500  |   |      |   | 0      |  
|Proceeds from Subordinated Debt                                                    |  |      | 0      |   |      |   | 4,640  |  
|                                                                                   |  |      |        |   |      |   |        |  
|                                                                                   |  |      | 35     |   |      |   | 2,350  |  
|                                                                                   |  |      |        |   |      |   |        |  
|Increase in Cash                                                                   |  |      | 3      |   |      |   | 999    |  
|                                                                                   |  |     
|Cash, Beginning                                                                    |  |      | 163    |   |      |   | 15     |  
|                                                                                   |  |      |        |   |      |   |        |  
|Cash, Ending                                                                       |  | $    | 166    |   |      | $ | 1,014  |  
|                                                                                   |  |      |        |   |      |   |        |  



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(18) 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 three months and nine months ended September 30, 2005 and 2004, respectively, under the requirements of Statement 128:



|                                                                                         |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |       |  | 
|---------------------------------------------------------------------------------------- |  | ------------------------------------- | ----- | ------------------------------------- | ----- | --- | - | --------------- |  | ----------------------- | ----- | --- | ----- |  | ----- |  | 
|                                                                                         |  | Three Months Ended September 30, 2005 |       | Three Months Ended September 30, 2004
|                                                                                         |  | IncomeNumerator                       |       | CommonSharesDenominator               |       | EPS |   | IncomeNumerator |  | CommonSharesDenominator |       | EPS
|Basic EPS                                                                                |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|Income Available to Common Stockholders                                                  |  | $                                     | 2,251 |                                       | 7,144 |     | $ | 0.32            |  | $                       | 2,057 |     | 7,135 |  | $0.29
|                                                                                         |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|Dilutive Effect of Potential Common Stock                                                |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|Restricted Stock                                                                         |  |                                       |       |                                       | 28    |     |   |                 |  |                         |       |     | 24    |  |      
|                                                                                         |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|Diluted EPS                                                                              |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|Income Available to Common Stockholders After Assumed Conversions of Dilutive Securities |  | $                                     | 2,251 |                                       | 7,172 |     | $ | 0.31            |  | $                       | 2,057 |     | 7,159 |  | $0.29
|                                                                                         |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|                                                                                         |  |                                      
|                                                                                         |  | Nine Months Ended September 30, 2005  |       | Nine Months Ended September 30, 2004 
|                                                                                         |  | IncomeNumerator                       |       | CommonSharesDenominator               |       | EPS |   | IncomeNumerator |  | CommonSharesDenominator |       | EPS
|Basic EPS                                                                                |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|Income Available to Common Stockholders                                                  |  | $                                     | 6,672 |                                       | 7,144 |     | $ | 0.93            |  | $                       | 5,989 |     | 7,130 |  | $0.84
|                                                                                         |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|Dilutive Effect of Potential Common Stock                                                |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|Restricted Stock                                                                         |  |                                       |       |                                       | 30    |     |   |                 |  |                         |       |     | 24    |  |      
|                                                                                         |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|                                                                                         |  |                                       |       |                                       |       |    
|Diluted EPS                                                                              |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      
|Income Available to Common Stockholders After Assumed Conversions of Dilutive Securities |  | $                                     | 6,672 |                                       | 7,174 |     | $ | 0.93            |  | $                       | 5,989 |     | 7,154 |  | $0.84
|                                                                                         |  |                                       |       |                                       |       |     |   |                 |  |                         |       |     |       |  |      



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Forward-Looking Statements and Factors that Could Affect Future Results



Certain statements contained in this Quarterly Report that are not statements of
historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the Act), notwithstanding that such statements are not specifically identified. In addition, certain
statements may be contained in the Companys future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Company that are not statements of historical fact and constitute
forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, income or loss, earnings or loss per share, the payment or nonpayment of dividends,
capital structure and other financial items; (ii) statements of plans and objectives of Colony Bankcorp, Inc. or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic
performance; and (iv) statements of assumptions underlying such statements. Words such as believes, anticipates, expects, intends, targeted and similar expressions are intended to
identify forward-looking statements but are not the exclusive means of identifying such statements.



Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in
the forward-looking statements include, but are not limited to:



| |  |  | Local and regional economic conditions and the impact they may have on the Company and its customers and the Companys assessment of that impact.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Inflation, interest rate, market and monetary fluctuations.
| | - |  | -----------------------------------------------------------



| |  |  | Political instability.
| | - |  | ----------------------



| |  |  | Acts of war or terrorism.
| | - |  | -------------------------



| |  |  | The timely development and acceptance of new products and services and perceived overall value of these products and services by users.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in consumer spending, borrowings and savings habits.
| | - |  | ------------------------------------------------------------



| |  |  | Technological changes.
| | - |  | ----------------------



| |  |  | Acquisitions and integration of acquired businesses.
| | - |  | ----------------------------------------------------



| |  |  | The ability to increase market share and control expenses.
| | - |  | ----------------------------------------------------------



| |  |  | The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiaries must
comply.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting
standard setters.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in the Companys organization, compensation and benefit plans.
| | - |  | ----------------------------------------------------------------------



| |  |  | The costs and effects of litigation and of unexpected or adverse outcomes in such litigation.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Greater than expected costs or difficulties related to the integration of new lines of business.
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | The Companys success at managing the risks involved in the foregoing items.
| | - |  | ----------------------------------------------------------------------------



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##### Table of Contents

Forward-looking statements speak only as of the date on which such statements are made. The Company undertakes no
obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.



The Company



Colony Bankcorp, Inc. (Colony) is a bank holding company headquartered in Fitzgerald, Georgia that provides, through its wholly owned subsidiaries (collectively referred
to as the Company), a broad array of products and services throughout 18 Georgia markets. The Company offers commercial, consumer and mortgage banking services.



Application of Critical Accounting Policies and Accounting Estimates



The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of
America and conform to general practices within the banking industry. The Companys financial position and results of operations are affected by managements application of accounting policies, including judgments made to arrive at the
carrying value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different assumptions in the application of these policies could result in material changes in the Companys financial position and/or
results of operations. Critical accounting policies are those policies that management believes are the most important to the portrayal of the Companys financial condition and results of operations, and they require management to make
estimates that are difficult, subjective or complete.



Allowance for Loan
Losses  The allowance for loan losses provides coverage for probable losses inherent in the Companys loan portfolio. Management evaluates the adequacy of the allowance for loan losses quarterly based on changes, if any, in
underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), trends in loan performance, regulatory guidance and economic factors. This evaluation is inherently
subjective, as it requires the use of significant management estimates. Many factors can affect managements estimates of specific and expected losses, including volatility of default probabilities, collateral values, rating migrations, loss
severity and economic and political conditions. The allowance is increased through provisions charged to operating earnings and reduced by net charge-offs.



The company determines the amount of the allowance based on relative risk characteristics of the loan portfolio. The allowance recorded for loans is based on reviews of
individual credit relationships and historical loss experience. The allowance for losses relating to impaired loans is based on the loans observable market price, the discounted cash flows using the loans effective interest rate, or the
value of collateral for collateral dependent loans.



Regardless of the extent
of the Companys analysis of customer performance, portfolio trends or risk management processes, certain inherent but undetected losses are probable within the loan portfolio. This is due to several factors, including inherent delays in
obtaining information regarding a customers financial condition or changes in their unique business conditions, the judgmental nature of individual loan evaluations, collateral assessments and the interpretation of economic trends. Volatility
of economic or customer-specific conditions affecting the identification and estimation of losses for larger nonhomogeneous credits and the sensitivity of assumptions utilized to establish allowances for homogeneous groups of loans are among other
factors. The Company estimates a range of inherent losses related to the existence of these exposures. The estimates are based upon the Companys evaluation of risk associated with the commercial and consumer levels and the estimated impact of
the current economic environment.



Goodwill and Other Intangibles 
The Company records all assets and liabilities acquired in purchase acquisitions, including goodwill and other intangibles, at fair value as required by SFAS 141. Goodwill is subject, at a minimum, to annual tests for impairment. Other intangible
assets are amortized over their estimated useful lives using straight-line and accelerated methods, and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying amount. The initial goodwill and other
intangibles recorded and subsequent impairment analysis require management to make subjective judgments concerning estimates of how the acquired asset will perform in the future. Events and factors that may significantly affect the estimates
include, among others, customer attrition, changes in revenue growth trends, specific industry conditions and changes in competition.



Overview



The following discussion and analysis presents the more significant factors affecting the Companys financial condition as of September 30, 2005 and 2004, and results of operations for each of three months
and nine months in the periods ended September 30, 2005 and 2004. This discussion and analysis should be read in conjunction with the Companys consolidated financial statements, notes thereto and other financial information appearing
elsewhere in this report. All of the acquisitions during the reported periods were accounted for as purchase transactions, and as such, their related results of operations are included from the date of acquisition.



Taxable-equivalent adjustments are the result of increasing income from tax-free loans and
investments by an amount equal to the taxes that would be paid if the income were fully taxable based on a 34 percent federal tax rate, thus making tax-exempt yields comparable to taxable asset yields.



26



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Dollar amounts in tables are stated in thousands, except for per share amounts.



Results of Operations



The Companys results of operations are determined by its ability to effectively manage
interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Since market forces and economic conditions beyond the control of the Company determine interest rates, the
ability to generate net interest income is dependent upon the Companys ability to obtain an adequate spread between the rate earned on earning assets and the rate paid on interest-bearing liabilities. Thus, the key performance for net interest
income is the interest margin or net yield, which is taxable-equivalent net interest income divided by average earning assets. Net income totaled $2.251 million, or $0.31 diluted per common share, in three months ended September 30, 2005
compared to $2.057 million, or $0.29 diluted per common share, in three months ended September 30, 2004 and net income totaled $6.672 million or $0.93 diluted per common share in nine months ended September 30, 2005 compared to $5.989
million, or $0.84 diluted per common share, in nine months ended September 30, 2004.



Selected income statement data, returns on average assets and average equity and dividends per share for the comparable periods were as follows:



|                                       |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |        |  
|-------------------------------------- |  | ------------------------------ | ----- | - | ----------------------------- | - | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                       |  | Three Months EndedSeptember 30 |       |   | Nine Months EndedSeptember 30 |  
|                                       |  | 2005                           |       |   | 2004                          |   |       | 2005 |  |   | 2004   |  
|Taxable-equivalent net interest income |  | $                              | 9,325 |   |                               | $ | 8,639 |      |  | $ | 27,533 |   |  | $ | 24,981 |  
|Taxable-equivalent adjustment          |  |                                | 59    |   |                               |   | 66    |      |  |   | 170    |   |  |   | 205    |  
|                                       |  |                                |       |  
|Net interest income                    |  |                                | 9,266 |   |                               |   | 8,573 |      |  |   | 27,363 |   |  |   | 24,776 |  
|Provision for possible loan losses     |  |                                | 869   |   |                               |   | 864   |      |  |   | 2,702  |   |  |   | 2,709  |  
|Non-interest income                    |  |                                | 1,606 |   |                               |   | 1,622 |      |  |   | 4,808  |   |  |   | 4,771  |  
|Non-interest expense                   |  |                                | 6,564 |   |                               |   | 6,255 |      |  |   | 19,241 |   |  |   | 17,764 |  
|                                       |  |                                |       |  
|Income before income taxes             |  |                                | 3,439 |   |                               |   | 3,076 |      |  |   | 10,228 |   |  |   | 9,074  |  
|Income Taxes                           |  |                                | 1,188 |   |                               |   | 1,019 |      |  |   | 3,556  |   |  |   | 3,085  |  
|                                       |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |        |  
|Net income                             |  | $                              | 2,251 |   |                               | $ | 2,057 |      |  | $ | 6,672  |   |  | $ | 5,989  |  
|                                       |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |        |  
|Basic per common share:                |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |        |  
|Net income                             |  | $                              | 0.32  |   |                               | $ | 0.29  |      |  | $ | 0.93   |   |  | $ | 0.84   |  
|Diluted per common share:              |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |        |  
|Net income                             |  | $                              | 0.31  |   |                               | $ | 0.29  |      |  | $ | 0.93   |   |  | $ | 0.84   |  
|Return on average assets:              |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |        |  
|Net income                             |  |                                | 0.87  | % |                               |   | 0.86  | %    |  |   | 0.88   | % |  |   | 0.87   | %
|Return on average equity:              |  |                                |       |   |                               |   |       |      |  |   |        |   |  |   |        |  
|Net income                             |  |                                | 13.60 | % |                               |   | 13.82 | %    |  |   | 13.83  | % |  |   | 13.71  | %



Income from operations for three
months ended September 30, 2005 increased $0.19 million, or 9.43 percent, compared to the same period in 2004. The increase was primarily the result of a $0.69 million increase in net interest income, a decrease of $0.02 million in non-interest
income, an increase of $0.005 million in the provision for loan losses, a $0.31 million increase in non-interest expense and a $0.17 million increase in income tax expense.



Income from operations for nine months ended September 30, 2005 increased $0.68 million, or 11.40 percent compared to the same period
in 2004. The increase was primarily the result of a $2.59 million increase in net interest income and an increase of $0.04 million in non-interest income. These positive impacts were partly offset by $1.48 million increase in non-interest expense
and $0.47 million increase in income tax expense.



Details of the changes in the various components of net income are further discussed below.



27



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##### Table of Contents

Net Interest Income



Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and
borrowings, which are used to fund those assets. Net interest income is the Companys largest source of revenue, representing 54.13 percent of total revenue for nine months ended September 30, 2005 and 57.89 percent for the same period a
year ago.



Net interest margin is the taxable-equivalent net interest income as
a percentage of average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net interest income and net interest margin.



The Federal Reserve Board influences the general market rates of interest, including the
deposit and loan rates offered by many financial institutions. The Companys loan portfolio is significantly affected by changes in the prime interest rate. The prime interest rate, which is the rate offered on loans to borrowers with strong
credit, began 2001 at 9.50 percent and decreased 150 basis points in the first quarter, decreased 125 basis points in the second quarter, decreased 75 basis points in the third quarter and decreased 125 basis points in the fourth quarter to end the
year at 4.75 percent. During 2002, the prime rate remained at 4.75 percent until the fourth quarter when the rate decreased 50 basis points to 4.25 percent. During 2003, the prime rate remained at 4.25 percent until the end of the second quarter,
when the rate decreased 25 basis points to 4.00 percent. During 2004, the prime rate increased 100 basis points to 5.00 percent and to date in 2005 has increased another 175 basis points to 6.75 percent. The federal funds rate, which is the cost of
immediately available overnight funds, decreased in a similar manner. It began 2001 at 6.50 percent and decreased 475 basis points over the course of the year, and began 2002 at 1.75 percent and decreased 50 basis points in the fourth quarter.
During 2003, the federal funds rate remained at 1.25 percent until the end of the second quarter, when the rate decreased 25 basis points to 1.00 percent. During 2004, the federal funds rate increased 100 basis points to 2.00 percent and to date in
2005 has increased another 175 basis points to 3.75 percent. It is anticipated that future interest rate hikes will occur during the balance of 2005.



The following table presents the changes in taxable-equivalent net interest income and identifies the changes due to differences in the average volume of earning assets
and interest-bearing liabilities and the changes due to changes in the average interest rate on those assets and liabilities. The changes in net interest income due to changes in both average volume and average interest rate have been allocated to
the average volume change or the average interest rate change in proportion to the absolute amounts of the change in each. The Companys consolidated average balance sheets along with an analysis of taxable-equivalent net interest earnings are
presented in the Quantitative and Qualitative Disclosures About Market Risk included elsewhere in this report.



28



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##### Table of Contents

Rate/Volume Analysis



The rate/volume analysis presented hereafter illustrates the change from September 30, 2004 to September 30, 2005 for each component of the taxable equivalent
net interest income separated into the amount generated through volume changes and the amount generated by changes in the yields/rates.



|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|---------------------------------------- |  | -------------------------------------------------------- | ----- | - | ---- | - | ----- | ----- |  | - | ----- | -
|                                         |  | Changes from September 30,2004 to September 30, 2005 (1) |      
|($ in thousands)                         |  | Volume                                                   |       |   | Rate |   |       | Total | 
|Interest Income                          |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Loans, Net-taxable                       |  | $                                                        | 4,339 |   |      | $ | 3,068 |       |  | $ | 7,407 |  
|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Investment Securities                    |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Taxable                                  |  |                                                          | 69    |   |      |   | (210  | )     |  |   | (141  | )
|Tax-exempt                               |  |                                                          | (84   | ) |      |   | 7     |       |  |   | (77   | )
|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Total Investment Securities              |  |                                                          | (15   | ) |      |   | (203  | )     |  |   | (218  | )
|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Interest-Bearing Deposits in other Banks |  |                                                          | (39   | ) |      |   | 37    |       |  |   | (2    | )
|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Funds Sold                               |  |                                                          | 23    |   |      |   | 419   |       |  |   | 442   |  
|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Other Interest - Earning Assets          |  |                                                          | 46    |   |      |   | 3     |       |  |   | 49    |  
|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Total Interest Income                    |  |                                                          | 4,354 |   |      |   | 3,324 |       |  |   | 7,678 |  
|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Interest Expense                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Interest-Bearing Demand and              |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Savings Deposits                         |  |                                                          | 15    |   |      |   | 203   |       |  |   | 218   |  
|Time Deposits                            |  |                                                          | 1,306 |   |      |   | 3,134 |       |  |   | 4,440 |  
|                                         |  |                                                          |      
|Other Interest-Bearing Liabilities       |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Funds Purchased and Securities           |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Under Agreement to Repurchase            |  |                                                          | 2     |   |      |   | 9     |       |  |   | 11    |  
|Subordinated Debentures                  |  |                                                          | 105   |   |      |   | 213   |       |  |   | 318   |  
|Other Debt                               |  |                                                          | 104   |   |      |   | 35    |       |  |   | 139   |  
|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Total Interest Expense                   |  |                                                          | 1,532 |   |      |   | 3,594 |       |  |   | 5,126 |  
|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  
|Net Interest Income                      |  | $                                                        | 2,822 |   |      | $ | (270  | )     |  | $ | 2,552 |  
|                                         |  |                                                          |       |   |      |   |       |       |  |   |       |  

---

|(1) | Changes in net interest income for the periods, based on either changes in average balances or changes in average rates for interest-earning assets and interest-bearing liabilities,
are shown on this table. During each year. there are numerous and simultaneous balance and rate changes; therefore, it is not possible to precisely allocate the changes between balances and rates. For the purpose of this table, changes that are not
exclusively due to balance changes or rate changes have been attributed to rates.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our financial performance is impacted by, among other factors, interest rate risk and credit risk. We do not utilize derivatives to mitigate our interest rate or credit risk, relying instead on an extensive loan
review process and our allowance for loan losses.



Interest rate risk is the
change in value due to changes in interest rates. The Company is exposed only to U.S. dollar interest rate changes and accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not
have any trading instruments nor does it classify any portion of its investment portfolio as held for trading. The Company does not engage in any hedging activity or utilize any derivatives. The Company has no exposure to foreign currency exchange
rate risk, commodity price risk and other market risks. This risk is addressed by our Asset & Liability Management Committee (ALCO) which includes senior management representatives. The ALCO monitors interest rate risk by
analyzing the potential impact to the net portfolio of equity value and net interest income from potential changes to interest rates and considers the impact of alternative strategies or changes in balance sheet structure.



29



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##### Table of Contents

Interest rates play a major part in the net interest income of financial institutions. The repricing of interest earning
assets and interest-bearing liabilities can influence the changes in net interest income. The timing of repriced assets and liabilities is Gap management and our Company has established its policy to maintain a Gap ratio in the one-year time horizon
of 0.80 to 1.20.



Our exposure to interest rate risk is reviewed on at least a
quarterly basis by our Board of Directors and the ALCO. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine our change in net portfolio value in the event of assumed changes in interest rates, in order to
reduce the exposure to interest rate fluctuations, we have implemented strategies to more closely match our balance sheet composition. We are generally focusing our investment activities on securities with terms or average lives in the 2-5 year
range.



The Company maintains about 41 percent of its loan portfolio in
adjustable rate loans that reprice with prime rate changes, while the bulk of its other loans mature within 3 years. The liabilities to fund assets are primarily in short term certificate of deposits that mature within one year. This balance sheet
composition has allowed the Company to be relatively constant with its net interest margin the past several years, though the unprecedented 475 basis point decrease by U.S. Federal Reserve in 2001, 50 basis point decrease in 2002 and 25 basis point
decrease in 2003 resulted in significant net interest margin pressure. Net interest margin remained flat at 3.82 percent for nine months ended September 30, 2005 compared to 3.82 percent for the same period a year ago. We anticipate slight
compression or a flat margin for the balance of 2005 given the Federal Reserves present increased interest rate forecast for the balance of 2005.



Taxable-equivalent net interest income for nine months ended September 30, 2005 increased $2.55 million, or 10.22 percent compared to the same period a year ago. The
significant fluctuation between the comparable periods resulted from the positive impact of growth in the average volume of earning assets that was partially offset by the negative impact of increasing average interest rates. The average volume of
earning assets during nine months ended September 30, 2005 increased almost $89 million compared to the same period a year ago while over the same period the net interest margin remained flat at 3.82 percent. Growth in average earning assets
during 2005 and 2004 was primarily in loans.



The average volume of loans
increased $89.6 million in nine months ended September 30, 2005 compared to the same period a year ago. The average yield on loans increased 51 basis points in nine months ended September 30, 2005 compared to the same period a year ago.
Funding for this growth was primarily provided by deposit growth. The average volume of deposits increased $79.3 million in nine months ended September 30, 2005 compared to the same period a year ago. Interest-bearing deposits made up 95.3
percent of the growth in average deposits in nine months ended September 30, 2005. Accordingly, the ratio of average interest-bearing deposits to total average deposits was 92.3 percent in nine months ended September 30, 2005 compared to
92.02 percent in the same period a year ago. This deposit mix, combined with a general increase in market rates, had the effect of (i) increasing the average cost of total deposits by 55 basis points in nine months ended September 30, 2005
compared to the same period a year ago and, (ii) mitigating a portion of the impact of increasing yields on earning assets on the Companys net interest income.



The Companys net interest spread, which represents the difference between the average rate earned on earning assets and the average
rate paid on interest-bearing liabilities, was 3.59 percent in nine months ended September 30, 2005 compared to 3.63 percent in the same period a year ago. The net interest spread, as well as the net interest margin, will be impacted by future
changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment. A discussion of the effects of changing interest rates on net interest income is set forth in Quantitative and Qualitative Disclosures
About Market Risk included elsewhere in this report.



Provision for Possible
Loan Losses



The provision for possible loan losses is determined by
management as the amount to be added to the allowance for possible loan losses after net charge-offs have been deducted to bring the allowance to a level which, in managements best estimate, is necessary to absorb probable losses within the
existing loan portfolio. The provision for possible loan losses totaled $2.70 million in nine months ended September 30, 2005 compared to $2.71 million in same period a year ago. See the section captioned Allowance for Possible Loan
Losses elsewhere in this discussion for further analysis of the provision for possible loan losses.



30



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##### Table of Contents

Non-Interest Income



The components of non-interest income were as follows:



|                                    |  |                                |       |                               |   |       |  |      |       |  |   |      
|----------------------------------- |  | ------------------------------ | ----- | ----------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                    |  | Three Months EndedSeptember 30 |       | Nine Months EndedSeptember 30
|                                    |  | 2005                           |       | 2004                          |   | 2005  |  | 2004
|Service charges on deposit accounts |  | $                              | 1,077 |                               | $ | 1,100 |  | $    | 3,057 |  | $ | 3,170
|Other charges, commissions and fees |  |                                | 186   |                               |   | 149   |  |      | 539   |  |   | 413  
|Other                               |  |                                | 124   |                               |   | 92    |  |      | 659   |  |   | 365  
|Mortgage banking income             |  |                                | 219   |                               |   | 281   |  |      | 553   |  |   | 823  
|                                    |  |                                |       |                               |   |       |  |      |       |  |   |      
|Total                               |  | $                              | 1,606 |                               | $ | 1,622 |  | $    | 4,808 |  | $ | 4,771
|                                    |  |                                |       |                               |   |       |  |      |       |  |   |      



Total non-interest income for three
months ended September 30, 2005 decreased $16 thousand, or 0.99 percent compared to the same period a year ago. Total interest income for nine months ended September 30, 2005 increased $37 thousand, or 0.78 percent compared to the
same period a year ago. Growth in non-interest income over the comparable periods was primarily in other income while mortgage banking fees decreased significantly over the comparable periods. Changes in these items and the other components of
non-interest income are discussed in more detail below.



Service Charges on
Deposit Accounts. Service charges on deposit accounts for three months ended September 30, 2005 decreased $23 thousand, or 2.09 percent, compared to the same period a year ago. Service charges on deposit accounts for nine months ended
September 30, 2005 decreased $113 thousand, or 3.56 percent, compared to the same period a year ago. In both periods, the decrease was primarily due to a reduction in overdraft fees, which was mostly related to consumer and commercial demand
deposit accounts.



Other Charges, Commissions, and Fees. Other
commission and fee income for three months ended September 30, 2005 increased $37 thousand, or 24.83 percent, compared to the same year ago period. The increase was primarily due to increased ATM fees of $25 thousand and increased credit life
insurance commissions of $8 thousand for three months ended September 30, 2005 compared to the same year ago period. Other commission and fee income for nine months ended September 30, 2005 increased $126 thousand, or 30.51 percent,
compared to the same year ago period. The increase was primarily due to increased ATM fees of $106 thousand and increased credit life insurance commissions of $10 thousand for nine months ended September 30, 2005 compared to the same year ago
period.



Other Income. Other income for three months ended
September 30, 2005 increased $32 thousand, or 34.78 percent, compared to the same year ago period. Deferred compensation income increased $21 thousand and gain on the sale of SBA loans increased $10 thousand to account for the increase in the
three month period ended September 30, 2005 compared to the same year ago period. Other income for nine months ended September 30, 2005 increased $294 thousand, or 80.55 percent, compared to the same year ago period. Non-recurring deferred
compensation income accounts for $163 thousand of the increase. The non-recurring income results from an accounting entry recording stock received from the demutualization of two insurance companies. Other miscellaneous income accounts increased $32
thousand and gain on the sale of SBA loans increased $42 thousand to account for the other significant increase in other income.



Mortgage Banking Fees. Mortgage banking fees for three months ended September 30, 2005 decreased $62 thousand, or 22.06 percent, compared to the same period a
year ago and for the nine months ended September 30, 2005 decreased $270 thousand, or 32.81 percent, compared to the same period a year ago. The decrease in both periods is primarily attributable to a decrease in mortgage loan refinancing
activity. The company anticipates mortgage loan refinancing to trend downward in future years as most borrowers have already refinanced to historical low rates.



31



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##### Table of Contents

Non-Interest Expense



The components of non-interest expense were as follows:



|                               |  |                                 |       |                                |   |       |  |      |        |  |   |       
|------------------------------ |  | ------------------------------- | ----- | ------------------------------ | - | ----- |  | ---- | ------ |  | - | ------
|                               |  | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                               |  | 2005                            |       | 2004                           |   | 2005  |  | 2004
|Salaries and employee benefits |  | $                               | 3,580 |                                | $ | 3,189 |  | $    | 10,454 |  | $ | 9,433 
|Occupancy and equipment        |  |                                 | 994   |                                |   | 940   |  |      | 2,819  |  |   | 2,606 
|Security Losses, net           |  |                                 | 0     |                                |   | 31    |  |      | 0      |  |   | 31    
|Other                          |  |                                 | 1,990 |                                |   | 2,095 |  |      | 5,968  |  |   | 5,694 
|                               |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Total                          |  | $                               | 6,564 |                                | $ | 6,255 |  | $    | 19,241 |  | $ | 17,764
|                               |  |                                 |       |                                |   |       |  |      |        |  |   |       



Total non-interest expense for three
months ended September 30, 2005 increased $309 thousand, or 4.94 percent, compared to the same period a year ago. Growth in non-interest expense in three months ended September 30, 2005 was primarily in salaries, employee benefits,
occupancy and equipment expense and other non-interest expenses. Total non-interest expense for nine months ended September 30, 2005 increased $1.48 million, or 8.31 percent, compared to the same period a year ago. As with the three month
period, growth in non-interest expense for the nine month period ended September 30, 2005 was primarily in salaries, employee benefits, occupancy and equipment expense and other non-interest expenses. These items and the changes in the various
components of non-interest expense are discussed in more detail below.



Salaries and Employee Benefits. Salaries and employee benefits expense for three months ended September 30, 2005 increased $391 thousand, or 12.26 percent, compared to the same period a year ago. Salaries and employee
benefits expense for nine months ended September 30, 2005 increased $1.02 million, or 10.82 percent, compared to the same year ago period. In both periods, increases are due primarily to increases in headcount and merit increases as the Company
opened three new offices during 2004, acquired one branch office in 2004 and has opened two new offices in 2005.



Occupancy and Equipment. Net occupancy expense for three months ended September 30, 2005 increased $54 thousand, or 5.74 percent, compared to the same period
a year ago. Net occupancy expense for nine months ended September 30, 2005 increased $213 thousand, or 8.17 percent, compared to the same period a year ago. The company experienced increased net occupancy and equipment expense due to new
offices opened in 2004 and 2005. The impact of new offices resulted in higher building maintenance, insurance, utilities expense and higher depreciation expense for both periods.



All Other Non-Interest Expense. All other non-interest expense for three months ended September 30, 2005 decreased
$105 thousand, or 5.01 percent, compared to the same period a year ago. Losses on sale/writedown of OREO property decreased $187 thousand, software and license fee expense decreased $26 thousand, stationery and supply expense increased $27
thousand, accounting fees increased $16 thousand, director fees increased $26 thousand, ATM fees increased $28 thousand and city and county taxes decreased $50 thousand to primarily account for significant changes from the same period a year ago.
All other non-interest expense for the nine months ended September 30, 2005 increased $274 thousand, or 4.81 percent, compared to the same year ago period. Software and license fee expense decreased $68 thousand, stationery and supply expense
increased $48 thousand, accounting fees increased $79 thousand, director fees increased $55 thousand, ATM fees increased $36 thousand, other losses from sale/writedown of OREO property decreased $227 thousand, deferred compensation expense increased
$151 thousand and mortgage operations expense increased $141 thousand to primarily account for significant changes from the same year ago period.



Security losses, net. Security losses, net decreased $31 thousand for the three months and nine months ended September 30, 2005 compared to the same year ago
periods.



32



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##### Table of Contents

Sources and Uses of Funds



The following table illustrates, during the years presented, the mix of the Companys funding sources and the assets in which those
funds are invested as a percentage of the Companys average total assets for the period indicated. Average assets totaled $1.014 billion in nine months ended September 30, 2005 compared to $921 million in nine months ended
September 30, 2004.



|                                         |  |                                 |           |  |        |   |  |   |         |  |        |  
|---------------------------------------- |  | ------------------------------- | --------- |  | ------ | - |  | - | ------- |  | ------ | -
|                                         |  | Nine Months Ended September 30, |          
|                                         |  | 2005                            |           |  | 2004   |  
|Source of Funds:                         |  |                                 |           |  |        |   |  |  
|Deposits:                                |  |                                 |           |  |        |   |  |   |         |  |        |  
|Noninterest Bearing                     |  | $                               | 65,982    |  | 6.51   | % |  | $ | 62,214  |  | 6.76   | %
|Interest-Bearing                         |  |                                 | 793,086   |  | 78.23  |   |  |   | 717,551 |  | 77.92  |  
|Federal Funds Purchased                  |  |                                 | 549       |  | 0.06   |   |  |   | 372     |  | 0.04   |  
|Long-term Debt and Other Borrowings      |  |                                 | 84,698    |  | 8.35   |   |  |   | 78,218  |  | 8.49   |  
|Other Noninterest-Bearing Liabilities    |  |                                 | 5,155     |  | 0.51   |   |  |   | 4,285   |  | 0.46   |  
|Equity Capital                           |  |                                 | 64,323    |  | 6.34   |   |  |   | 58,251  |  | 6.33   |  
|                                         |  |                                 |           |  |        |   |  |   |         |  |        |  
|Total                                    |  | $                               | 1,013,793 |  | 100.00 | % |  | $ | 920,891 |  | 100.00 | %
|                                         |  |                                 |           |  |        |   |  |   |         |  |        |  
|Uses of Funds:                           |  |                                 |           |  |        |   |  |   |         |  |        |  
|Loans                                    |  | $                               | 798,530   |  | 78.77  | % |  | $ | 709,956 |  | 77.10  | %
|Securities                               |  |                                 | 112,297   |  | 11.08  |   |  |   | 111,881 |  | 12.15  |  
|Federal Funds Sold                       |  |                                 | 31,365    |  | 3.09   |   |  |   | 28,473  |  | 3.09   |  
|Interest-Bearing Deposits in Other Banks |  |                                 | 2,725     |  | 0.27   |   |  |   | 8,045   |  | 0.87   |  
|Other Interest-Earning Assets            |  |                                 | 4,820     |  | 0.47   |   |  |   | 3,142   |  | 0.34   |  
|Other Noninterest-Earning Assets         |  |                                 | 64,056    |  | 6.32   |   |  |   | 59,394  |  | 6.45   |  
|                                         |  |                                 |           |  |        |   |  |   |         |  |        |  
|Total                                    |  | $                               | 1,013,793 |  | 100.00 | % |  | $ | 920,891 |  | 100.00 | %
|                                         |  |                                 |           |  |        |   |  |   |         |  |        |  



Deposits continue to be the
Companys primary source of funding. Over the comparable periods, the relative mix of deposits continues to be high in interest-bearing deposits. Interest-bearing deposits totaled 92.32 percent of total average deposits in nine months ended
September 30, 2005 compared to 92.02 percent in the same period a year ago.



The Company primarily invests funds in loans and securities. Loans continue to be the largest component of the Companys mix of invested assets. Loan demand continues to be strong as total loans were $842 million at September 30,
2005, up 8.09 percent, compared to loans of $779 million at December 31, 2004. See additional discussion regarding the Companys loan portfolio in the section captioned Loans included elsewhere in this discussion. The majority
of funds provided by deposit growth have been invested in loans.



Loans



The following table presents the composition of the Companys loan
portfolio as of September 30, 2005 and December 31, 2004:



|                                       |  |                   |         |   |                  |   |         |  
|-------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                       |  | September 30,2005 |         |   | December 31,2004 |  
|Commercial, Financial and Agricultural |  | $                 | 59,543  |   |                  | $ | 44,284  |  
|Real Estate                            |  |                   |         |   |                  |   |         |  
|Construction                           |  |                   | 129,300 |   |                  |   | 100,774 |  
|Mortgage, Farmland                     |  |                   | 40,604  |   |                  |   | 38,245  |  
|Mortgage, Other                        |  |                   | 522,058 |   |                  |   | 500,869 |  
|Consumer                               |  |                   | 72,705  |   |                  |   | 73,685  |  
|Other                                  |  |                   | 18,144  |   |                  |   | 20,823  |  
|                                       |  |                   |         |   |                  |   |         |  
|                                       |  |                   | 842,354 |   |                  |   | 778,680 |  
|Unearned Interest and Fees             |  |                   | (198    | ) |                  |   | (37     | )
|Allowance for Loan Losses              |  |                   | (10,663 | ) |                  |   | (10,012 | )
|                                       |  |                   |         |   |                  |   |         |  
|Loans                                  |  | $                 | 831,493 |   |                  | $ | 768,631 |  
|                                       |  |                   |         |   |                  |   |         |  



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The following table presents total loans as of September 30, 2005 according to maturity distribution and/or
repricing opportunity on adjustable rate loans:



|                                     |  |                  |         
|------------------------------------ |  | ---------------- | --------
|Maturity and Repricing Opportunity   |  | ($ in Thousands)
|One Year or Less                     |  | $                | 536,295 
|After One Year through Three Years   |  |                  | 235,014 
|After Three Years through Five Years |  |                  | 59,879  
|Over Five Years                      |  |                  | 11,166  
|                                     |  |                  |         
|                                     |  |                  | $842,354
|                                     |  |                  |         



Overview. Loans totaled $842
million at September 30, 2005, up 8.09 percent from December 31, 2004 loans of $779 million. The majority of the Companys loan portfolio is comprised of the real estate loans-other, real estate construction and installment loans to
individuals. Real estate-other, which is primarily 1-4 family residential properties and nonfarm nonresidential properties, made up 61.98 percent and 64.32 percent of total loans, real estate construction made up 15.35 percent and 12.94 percent,
while installment loans to individuals made up 8.63 percent and 9.46 percent of total loans at September 30, 2005 and December 31, 2004, respectively. Real estate loans-other include both commercial and consumer balances.



Loan Origination/Risk Management.In accordance with the Companys decentralized
banking model, loan decisions are made at the local bank level. The Company utilizes a Senior Loan Committee to assist lenders with the decision making and underwriting process of larger loan requests. Due to the diverse economic markets served by
the Company, evaluation and underwriting criterion may vary slightly by bank. Overall, loans are extended after a review of the borrowers repayment ability, collateral adequacy, and overall credit worthiness.



Commercial purpose, commercial real estate, and industrial loans are underwritten similar to
other loans throughout the company. The properties securing the Companys commercial real estate portfolio are diverse in terms of type and geographic location. This diversity helps reduce the Companys exposure to adverse economic events
that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. The company also utilizes information provided by third-party agencies to provide
additional insight and guidance about economic conditions and trends affecting the markets it serves.



The Company extends loans to builders and developers that are secured by non-owner occupied properties. In such cases, the Company reviews the overall economic conditions and trends for each market to determine the
desirability of loans to be extended for residential construction and development. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim
mini-perm loan commitment from the Company until permanent financing is obtained. In some cases, loans are extended for residential loan construction for speculative purposes and are based on the perceived present and future demand for housing in a
particular market served by the Company. These loans are monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic
conditions and trends, the demand for the properties, and the availability of long-term financing.



The Company originates consumer loans at the bank level. Due to the diverse economic markets served by the Company, underwriting criterion may vary slightly by bank. The Company is committed to serving the borrowing
needs of all markets served and, in some cases, adjusts certain evaluation methods to meet the overall credit demographics of each market. Consumer loans represent relatively small loan amounts that are spread across many individual borrowers
that helps minimize risk. Additionally, consumer trends and outlook reports are reviewed by management on a regular basis.



The Company maintains an independent loan review department that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented
to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Companys policies and procedures.



Commercial, Financial and Agricultural.Commercial, financial and agricultural loans
at September 30, 2005 increased 34.46 percent from December 31, 2004 to $59.5 million. The Companys commercial and industrial loans are a diverse group of loans to small, medium and large businesses. The purpose of these loans
varies from supporting seasonal working capital needs to term financing of equipment. While some short-term loans may be made on an unsecured basis, most are secured by the assets being financed with collateral margins that are consistent with the
Companys loan policy guidelines.



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Industry Concentrations. As of September 30, 2005 and December 31, 2004, there were no concentrations of
loans within any single industry in excess of 10 percent of total loans, as segregated by Standard Industrial Classification code (SIC code). The SIC code is a federally designed standard industrial numbering system used by the Company
to categorize loans by the borrowers type of business.



Collateral
Concentrations. Lending is concentrated in commercial and real estate loans primarily 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
borrowers ability to honor their contracts is dependent upon the viability of the real estate economic sector.



Large Credit Relationships. Colony is currently in eighteen counties in South and Central Georgia and include metropolitan markets in Doughtery, Lowndes, Houston,
Chatham and Muscogee counties. As a result, the Company originates and maintains large credit relationships with several commercial customers in the ordinary course of business. The Company considers large credit relationships to be those with
commitments equal to or in excess of $5.0 million prior to any portion being sold. Large relationships also include loan participations purchased if the credit relationship with the agent is equal to or in excess of $5.0 million. In addition to the
Companys normal policies and procedures related to the origination of large credits, the Companys Central Credit Committee must approve all new and renewed credit facilities which are part of large credit relationships. The following
table provides additional information on the Companys large credit relationships outstanding at period end.



|                            |  |                        |           |                     |             |  |                        |                     |           |   |             |   |        |  |   |       
|--------------------------- |  | ---------------------- | --------- | ------------------- | ----------- |  | ---------------------- | ------------------- | --------- | - | ----------- | - | ------ |  | - | ------
|                            |  | September 30, 2005     |           | December 31, 2004  
|                            |  | Number ofRelationships |           | Period End Balances |             |  |                        | Period End Balances
|                            |  |                        | Committed |                     | Outstanding |  | Number ofRelationships |                     | Committed |   | Outstanding
|Large Credit Relationships: |  |                        |           |                     |             |  |                        |                     |           |   |             |   |        |  |   |       
|$10 million and greater     |  | 2                      |           | $                   | 27,531      |  | $                      | 20,506              |           | 1 |             | $ | 11,264 |  | $ | 10,461
|$5 million to $9.9 million  |  | 6                      |           | $                   | 34,949      |  | $                      | 29,215              |           | 4 |             | $ | 24,293 |  | $ | 21,722



Maturities and Sensitivities of
Loans to Changes in Interest Rates. The following table presents the maturity distribution of the Companys loans at September 30, 2005. The table also presents the portion of loans that have fixed interest rates or variable
interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index such as the prime rate.



|                                   |  |                         |         |                                   |   |                                    |  |                  |        |       |   |        |  |   |        
|---------------------------------- |  | ----------------------- | ------- | --------------------------------- | - | ---------------------------------- |  | ---------------- | ------ | ----- | - | ------ |  | - | -------
|                                   |  | Due in One Year or Less |         | After One, but Within Three Years |   | After Three, but Within Five Years |  | After Five Years |        | Total
|Loans with fixed interest rates    |  | $                       | 204,627 |                                   | $ | 220,839                            |  | $                | 59,860 |       | $ | 11,166 |  | $ | 496,492
|Loans with floating interest rates |  |                         | 331,668 |                                   |   | 14,175                             |  |                  | 19     |       |   | 0      |  |   | 345,862
|                                   |  |                         |         |                                   |   |                                    |  |                  |        |       |   |        |  |   |        
|Total                              |  | $                       | 536,295 |                                   | $ | 235,014                            |  | $                | 59,879 |       | $ | 11,166 |  | $ | 842,354
|                                   |  |                         |         |                                   |   |                                    |  |                  |        |       |   |        |  |   |        



The Company may renew loans at
maturity when requested by a customer whose financial strength appears to support such renewal or when such renewal appears to be in the Companys best interest. In such instances, the Company generally requires payment of accrued interest and
may adjust the rate of interest, require a principal reduction or modify other terms of the loan at the time of renewal.



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Non-Performing Assets and Potential Problem Loans



Non-performing assets and accruing past due loans as of September 30, 2005 and December 31, 2004
were as follows:



|                                          |  |                   |        |   |                  |   |       |  
|----------------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ----- | -
|                                          |  | September 30,2005 |        |   | December 31,2004 |  
|Loans accounted for on nonaccrual         |  | $                 | 9,145  |   |                  | $ | 7,856 |  
|Loans past due 90 days or more            |  |                   | 8      |   |                  |   | 953   |  
|Renegotiated loans                        |  |                   | 0      |   |                  |   | 0     |  
|Other real estate foreclosed              |  |                   | 2,695  |   |                  |   | 1,127 |  
|                                          |  |                   |        |   |                  |   |       |  
|Total non-performing assets               |  | $                 | 11,848 |   |                  | $ | 9,936 |  
|                                          |  |                   |        |   |                  |   |       |  
|Non-performing assets as a percentage of: |  |                   |        |   |                  |   |       |  
|Total loans and foreclosed assets         |  |                   | 1.40   | % |                  |   | 1.27  | %
|Total assets                              |  |                   | 1.11   | % |                  |   | 1.00  | %
|Accruing past due loans:                  |  |                   |        |   |                  |   |       |  
|30-89 days past due                       |  | $                 | 7,768  |   |                  | $ | 8,302 |  
|90 or more days past due                  |  |                   | 8      |   |                  |   | 953   |  
|                                          |  |                   |        |   |                  |   |       |  
|Total accruing past due loans             |  | $                 | 7,776  |   |                  | $ | 9,255 |  
|                                          |  |                   |        |   |                  |   |       |  



Non-performing assets include
non-accrual loans, loans past due 90 days or more, restructured loans and foreclosed real estate. Non-performing assets at September 30, 2005 increased 19.24 percent from December 31, 2004.



Generally, loans are placed on non-accrual status if principal or interest payments become
90 days past due and/or management deems the collectibility of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to a customer whose financial condition has deteriorated are considered
for non-accrual status whether or not the loan is 90 days or more past due. For consumer loans, collectibility and loss are generally determined before the loan reaches 90 days past due. Accordingly, losses on consumer loans are recorded
at the time they are determined. Consumer loans that are 90 days or more past due are generally either in liquidation/payment status or bankruptcy awaiting confirmation of a plan. Once interest accruals are discontinued, accrued but uncollected
interest is charged to current year operations. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Classification of a loan as
non-accrual does not preclude the ultimate collection of loan principal or interest.



Renegotiated loans are loans on which, due to deterioration in the borrowers financial condition, the original terms have been modified in favor of the borrower or either principal or interest has been forgiven.



Foreclosed assets represent property acquired as the result of borrower defaults on loans.
Foreclosed assets are recorded at the lower of cost or estimated fair value, less estimated selling costs, at the time of foreclosure. Write-downs occurring at foreclosure are charged against the allowance for possible loan losses. On an ongoing
basis, properties are appraised as required by market indications and applicable regulations. Write-downs are provided for subsequent declines in value and are included in other non-interest expense along with other expenses related to maintaining
the properties.



Allowance for Possible Loan Losses



The allowance for possible loan losses is a reserve established through a provision for
possible loan losses charged to expense, which represents managements best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for
estimated loan losses and risks inherent in the loan portfolio.



The allowance
for possible loan losses includes allowance allocations calculated in accordance with SFAS No. 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS 118, and allowance allocations determined in accordance with
SFAS No. 5, Accounting for Contingencies. The level of the allowance reflects managements continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present
economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in
managements judgment, should be charged off. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Companys control, including the
performance of the Companys loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications. The companys allowance for possible loan losses consists of specific valuation
allowances established for probable losses on specific loans and historical valuation allowances for other loans with similar risk characteristics.



The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of classified loans. Loans are classified based on an
internal credit risk grading process that evaluates, among other things: (i) the obligors ability to



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##### Table of Contents

repay; (ii) the underlying collateral, if any; and (iii) the economic environment and industry in which the
borrower operates. This analysis is performed at the subsidiary bank level and is reviewed at the parent company level. Once a loan is classified, it is reviewed to determine whether the loan is impaired and, if impaired, a portion of the allowance
for possible loan losses is specifically allocated to the loan. Specific valuation allowances are determined after considering the borrowers financial condition, collateral deficiencies, and economic conditions affecting the borrowers
industry, among other things.



Historical valuation allowances are calculated
from loss factors applied to loans with similar risk characteristics. The loss factors are based on loss ratios for groups of loans with similar risk characteristics. The loss ratios are derived from the proportional relationship between actual loan
losses and the total population of loans in the risk category. The historical loss ratios are periodically updated based on actual charge-off experience. The Companys groups of similar loans include similarly risk-graded groups of loans not
reviewed for individual impairment.



Management evaluates the adequacy of the
allowance for each of these components on a quarterly basis. Peer comparisons, industry comparisons, and regulatory guidelines are also used in the determination of the general valuation allowance.



Loans identified as losses by management, internal loan
review, and/or bank examiners are charged-off.



An allocation for loan losses
has been made according to the respective amounts deemed necessary to provide for the possibility of incurred losses within the various loan categories. The allocation is based primarily on previous charge-off experience adjusted for changes in
experience among each category. Additional amounts are allocated by evaluating the loss potential of individual loans that management has considered impaired. The reserve for loan loss allocation is subjective since it is based on judgment and
estimates, and therefore is not necessarily indicative of the specific amounts or loan categories in which the charge-offs may ultimately occur. The following table shows a comparison of the allocation of the reserve for loan losses for the periods
indicated.



|                                       |  |                    |        |    |                   |   |         |   |        |  |     |  
|-------------------------------------- |  | ------------------ | ------ | -- | ----------------- | - | ------- | - | ------ |  | --- | -
|                                       |  | September 30, 2005 |        |    | December 31, 2004 |  
|                                       |  | Reserve            |        | %* |                   |   | Reserve |   | %*     | 
|Commercial, Financial and Agricultural |  | $                  | 3,199  |    | 7                 | % |         | $ | 3,004  |  | 6   | %
|Real Estate  Construction             |  |                    | 640    |    | 15                | % |         |   | 501    |  | 13  | %
|Real Estate  Farmland                 |  |                    | 533    |    | 5                 | % |         |   | 501    |  | 5   | %
|Real Estate  Other                    |  |                    | 3,412  |    | 62                | % |         |   | 3,304  |  | 64  | %
|Loans to Individuals                   |  |                    | 2,133  |    | 9                 | % |         |   | 2,002  |  | 9   | %
|All other Loans                        |  |                    | 746    |    | 2                 | % |         |   | 700    |  | 3   | %
|                                       |  |                    |        |    |                   |   |         |   |        |  |     |  
|Total                                  |  | $                  | 10,663 |    | 100               | % |         | $ | 10,012 |  | 100 | %
|                                       |  |                    |        |    |                   |   |         |   |        |  |     |  

---

|* | Loan balance in each category expressed as a percentage of total end of period loans.
|- | -------------------------------------------------------------------------------------



Activity in the allowance for loan losses is presented in the following table. There were no charge-offs or recoveries related to foreign
loans during any of the periods presented.



37



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##### Table of Contents

The following table presents an analysis of the Companys loan loss experience for
the periods indicated.



|                                                  |  |                                      |        |   |                                      |   |        |  
|------------------------------------------------- |  | ------------------------------------ | ------ | - | ------------------------------------ | - | ------ | -
|($ in thousands)                                  |  | Three Months EndedSeptember 30, 2005 |        |   | Three Months EndedSeptember 30, 2004 |  
|Allowance for Loan Losses at Beginning of Quarter |  | $                                    | 10,119 |   |                                      | $ | 9,677  |  
|                                                  |  |                                      |        |   |                                      |   |        |  
|Charge-Off                                        |  |                                      |        |   |                                      |   |        |  
|Commercial, Financial and Agricultural            |  |                                      | 181    |   |                                      |   | 83     |  
|Real Estate                                       |  |                                      | 2      |   |                                      |   | 113    |  
|Consumer                                          |  |                                      | 139    |   |                                      |   | 244    |  
|All Other                                         |  |                                      | 44     |   |                                      |   | 21     |  
|                                                  |  |                                      |        |   |                                      |   |        |  
|                                                  |  |                                      | 366    |   |                                      |   | 461    |  
|                                                  |  |                                      |        |   |                                      |   |        |  
|Recoveries                                        |  |                                      |        |   |                                      |   |        |  
|                                                  |  |                                      |        |   |                                      |   |        |  
|Commercial, Financial and Agricultural            |  |                                      | 10     |   |                                      |   | 9      |  
|Real Estate                                       |  |                                      | 2      |   |                                      |   | 2      |  
|Consumer                                          |  |                                      | 23     |   |                                      |   | 21     |  
|All Other                                         |  |                                      | 6      |   |                                      |   | 2      |  
|                                                  |  |                                      |        |   |                                      |   |        |  
|                                                  |  |                                      | 41     |   |                                      |   | 34     |  
|                                                  |  |                                      |        |   |                                      |   |        |  
|Net Charge-Offs                                   |  |                                      | 325    |   |                                      |   | 427    |  
|                                                  |  |                                      |        |   |                                      |   |        |  
|Provision for Loan Losses                         |  |                                      | 869    |   |                                      |   | 864    |  
|                                                  |  |                                      |        |   |                                      |   |        |  
|Allowance for Loan Losses at End of Quarter       |  | $                                    | 10,663 |   |                                      | $ | 10,114 |  
|                                                  |  |                                      |        |   |                                      |   |        |  
|Ratio of Net Charge-Offs to Average Loans         |  |                                      | 0.04   | % |                                      |   | 0.06   | %
|                                                  |  |                                      |        |   |                                      |   |        |  



The allowance for possible loan losses
is maintained at a level considered appropriate by management, based on estimated probable losses within the existing loan portfolio. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent
in the loan portfolio. The provision for possible loan losses reflects loan quality trends, including the level of net charge-offs or recoveries, among other factors. The provision for possible loan losses increased $5 thousand from $864 thousand in
three months ended September 30, 2004 to $869 thousand in three months ended September 30, 2005. Provisions remained flat due to stable net charge-offs during third quarter 2005.



Net charge-offs in three months ended September 30, 2005 decreased $102 thousand
compared to the same period a year ago. Net charge-offs of 0.04 percent for third quarter 2005 that annualizes to 0.16 percent is below normal for our company. We anticipate annual charge-offs to be in the 0.30 percent to 0.35 percent range.



Management believes the level of the allowance for possible loan losses was
adequate as of September 30, 2005. Should any of the factors considered by management in evaluating the adequacy of the allowance for possible loan losses change, the Companys estimate of probable loan losses could also change, which
could affect the level of future provisions for possible loan losses.



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##### Table of Contents

The following table presents an analysis of the Companys loan loss experience for
the periods indicated.



|                                               |  |                                     |        |   |                                     |   |        |  
|---------------------------------------------- |  | ----------------------------------- | ------ | - | ----------------------------------- | - | ------ | -
|($ in thousands)                               |  | Nine Months EndedSeptember 30, 2005 |        |   | Nine Months EndedSeptember 30, 2004 |  
|Allowance for Loan Losses at Beginning of Year |  | $                                   | 10,012 |   |                                     | $ | 8,516  |  
|                                               |  |                                     |        |   |                                     |   |        |  
|Charge-Off                                     |  |                                     |        |   |                                     |   |        |  
|Commercial, Financial and Agricultural         |  |                                     | 432    |   |                                     |   | 388    |  
|Real Estate                                    |  |                                     | 568    |   |                                     |   | 184    |  
|Consumer                                       |  |                                     | 1,077  |   |                                     |   | 461    |  
|All Other                                      |  |                                     | 189    |   |                                     |   | 216    |  
|                                               |  |                                     |        |   |                                     |   |        |  
|                                               |  |                                     | 2,266  |   |                                     |   | 1,249  |  
|                                               |  |                                     |        |   |                                     |   |        |  
|Recoveries                                     |  |                                     |        |   |                                     |   |        |  
|Commercial, Financial and Agricultural         |  |                                     | 107    |   |                                     |   | 36     |  
|Real Estate                                    |  |                                     | 14     |   |                                     |   | 8      |  
|Consumer                                       |  |                                     | 59     |   |                                     |   | 78     |  
|All Other                                      |  |                                     | 35     |   |                                     |   | 16     |  
|                                               |  |                                     |        |   |                                     |   |        |  
|                                               |  |                                     | 215    |   |                                     |   | 138    |  
|                                               |  |                                     |        |   |                                     |   |        |  
|Net Charge-Offs                                |  |                                     | 2,051  |   |                                     |   | 1,111  |  
|                                               |  |                                     |        |   |                                     |   |        |  
|Provision for Loan Losses                      |  |                                     | 2,702  |   |                                     |   | 2,709  |  
|                                               |  |                                     |        |   |                                     |   |        |  
|Allowance for Loan Losses at End of Quarter    |  | $                                   | 10,663 |   |                                     | $ | 10,114 |  
|                                               |  |                                     |        |   |                                     |   |        |  
|Ratio of Net Charge-Offs to Average Loans      |  |                                     | 0.25   | % |                                     |   | 0.15   | %
|                                               |  |                                     |        |   |                                     |   |        |  



The allowance for possible loan losses
is maintained at a level considered appropriate by management, based on estimated probable losses within the existing loan portfolio. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent
in the loan portfolio. The provision for possible loan losses reflects loan quality trends, including the level of net charge-offs or recoveries, among other factors. The provision for possible loan losses decreased $7 thousand from $2.709 million
in nine months ended September 30, 2004 to $2.702 million in nine months ended September 30, 2005. Provisions were relatively flat for both periods due to stability in our asset quality.



Net charge-offs in nine months ended September 30, 2005 increased $940 thousand compared
to the same period a year ago. The general increase in net charge-offs during the comparable periods is reflective of more stringent credit standards, weaker economic conditions and higher interest rates. Net charge-offs for 2005 will approximate
0.30  0.35 percent which compares to 0.27 percent for calendar year 2004.



Management believes the level of the allowance for possible loan losses was adequate as of September 30, 2005. Should any of the factors considered by management in evaluating the adequacy of the allowance for possible loan losses
change, the Companys estimate of probable loan losses could also change, which could affect the level of future provisions for possible loan losses.



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##### Table of Contents

Investment Portfolio



The following table presents carrying values of investment securities held by the Company as of September 30, 2005 and December 31, 2004.



|                                                           |  |                    |         |                   |   |        
|---------------------------------------------------------- |  | ------------------ | ------- | ----------------- | - | -------
|($ in thousands)                                           |  | September 30, 2005 |         | December 31, 2004
|U.S. Government Agencies                                   |  | $                  | 27,955  |                   | $ | 29,054 
|State, County and Municipal                                |  |                    | 6,335   |                   |   | 6,968  
|Corporate Obligations                                      |  |                    | 3,046   |                   |   | 3,113  
|Marketable Equity Securities                               |  |                    | 273     |                   |   | 0      
|                                                           |  |                    |         |                   |   |        
|Investment Securities                                      |  |                    | 37,609  |                   |   | 39,135 
|Mortgage-Backed Securities                                 |  |                    | 70,381  |                   |   | 73,458 
|                                                           |  |                    |         |                   |   |        
|Total Investment Securities and Mortgage-Backed Securities |  | $                  | 107,990 |                   | $ | 112,593
|                                                           |  |                    |         |                   |   |        



The following table represents
maturities and weighted-average yields of investment securities held by the Company as of September 30, 2005. (Mortgage backed securities are based on the average life at the projected speed, while Agencies and State and Political subdivisions
reflect anticipated calls being exercised.)



|                             |  |               |        |       |                                |   |        |                                  |        |  |                |        |  |       |       |  |        |   |       |   |     |  |       |  
|---------------------------- |  | ------------- | ------ | ----- | ------------------------------ | - | ------ | -------------------------------- | ------ |  | -------------- | ------ |  | ----- | ----- |  | ------ | - | ----- | - | --- |  | ----- | -
|                             |  | Within 1 Year |        |       | After 1 Year ButWithin 5 Years |   |        | After 5 Years ButWithin 10 Years |        |  | After 10 Years |       
|                             |  | Amount        |        | Yield |                                |   | Amount |                                  | Yield  |  |                | Amount |  | Yield |       |  | Amount |   | Yield |  
|U.S. Government Agencies     |  | $             | 1,668  |       | 4.26                           | % |        | $                                | 22,821 |  | 3.70           | %      |  | $     | 3,466 |  | 4.91   | % |       | $ |    |  |      | %
|Mortgage-Backed Securities   |  |               | 5,837  |       | 0.91                           |   |        |                                  | 60,065 |  | 3.73           |        |  |       | 4,480 |  | 4.24   |   |       |   |    |  |      |  
|                             |  |               |        |       |                                |   |        |                                 
|State, County and Municipal  |  |               | 3,682  |       | 4.14                           |   |        |                                  | 1,276  |  | 4.04           |        |  |       | 1,296 |  | 5.94   |   |       |   | 80  |  | 17.16 |  
|Corporate Obligations        |  |               |       |       |                               |   |        |                                  | 3,046  |  | 4.37           |        |  |       |      |  |       |   |       |   |    |  |      |  
|Marketable Equity Securities |  |               |       |       |                               |   |        |                                  |       |  |               |        |  |       |      |  |       |   |       |   | 273 |  |      |  
|                             |  |               |        |       |                                |   |        |                                  |        |  |                |        |  |       |       |  |        |   |       |   |     |  |       |  
|Total Investment Portfolio   |  | $             | 11,187 |       | 2.47                           | % |        | $                                | 87,208 |  | 3.75           | %      |  | $     | 9,242 |  | 4.73   | % |       | $ | 353 |  | 3.89  | %
|                             |  |               |        |       |                                |   |        |                                  |        |  |                |        |  |       |       |  |        |   |       |   |     |  |       |  



Securities are classified as held to
maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried
at fair value, with unrealized holding gains and losses reported in other comprehensive income. The Company has 99.9 percent of its portfolio classified as available for sale.



At September 30, 2005, there were no holdings of any one issuer, other than the U.S. government and its agencies, in an amount greater
than 10 percent of the Companys shareholders equity.



The average
yield of the securities portfolio was 3.30 percent in nine months ended September 30, 2005 compared to 3.57 percent in the same period a year ago. The decrease in the average yield over the comparable periods primarily resulted from
amortization on mortgage-backed securities due to prepayments received. The early repayment of mortgage-backed securities primarily resulted from borrower refinancing due to lower market interest rates. The overall reduction in the securities
portfolio over the comparable periods was by design to utilize proceeds to fund loans.



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##### Table of Contents

Deposits



The following table presents the average amount outstanding and the average rate paid on deposits by the Company for the nine months period ended September 30, 2005
and September 30, 2004.



|                                             |  |                    |         |             |                    |   |               |   |             |  |      |  
|-------------------------------------------- |  | ------------------ | ------- | ----------- | ------------------ | - | ------------- | - | ----------- |  | ---- | -
|                                             |  | September 30, 2005 |         |             | September 30, 2004 |  
|($ in thousands)                             |  | AverageAmount      |         | AverageRate |                    |   | AverageAmount |   | AverageRate | 
|Noninterest-Bearing Demand Deposits          |  | $                  | 65,982  |             |                    |   |               | $ | 62,214      |  |      |  
|Interest-Bearing Demand and Savings Deposits |  |                    | 198,183 |             | 1.24               | % |               |   | 196,427     |  | 1.11 | %
|Time Deposits                                |  |                    | 594,903 |             | 3.07               | % |               |   | 521,124     |  | 2.36 | %
|                                             |  |                    |         |             |                    |   |               |   |             |  |      |  
|Total Deposits                               |  | $                  | 859,068 |             | 2.41               | % |               | $ | 779,765     |  | 1.86 | %
|                                             |  |                    |         |             |                    |   |               |   |             |  |      |  



The
following table presents the maturities of the Companys time deposits as of September 30, 2005.



|                                 |  |                                 |         |                                |   |         |  |   |        
|-------------------------------- |  | ------------------------------- | ------- | ------------------------------ | - | ------- |  | - | -------
|($ in thousands)                 |  | Time Deposits$100,000 orGreater |         | Time DepositsLess Than$100,000 |   | Total  
|Months to Maturity               |  |                                 |         |                                |   |         |  |   |        
|3 or Less                        |  | $                               | 66,274  |                                | $ | 70,458  |  | $ | 136,732
|Over 3 through 12 Months         |  |                                 | 164,555 |                                |   | 230,133 |  |   | 394,688
|Over 12 Months through 36 Months |  |                                 | 36,794  |                                |   | 42,835  |  |   | 79,629 
|Over 36 Months                   |  |                                 | 13,062  |                                |   | 10,787  |  |   | 23,849 
|                                 |  |                                 |         |                                |   |         |  |   |        
|                                 |  | $                               | 280,685 |                                | $ | 354,213 |  | $ | 634,898
|                                 |  |                                 |         |                                |   |         |  |   |        



Average deposits increased $79.3
million to $859.1 million at September 30, 2005 from $779.8 million at September 30, 2004. The increase included $3.8 million, or 4.75 percent, related to noninterest-bearing deposits. Accordingly the ratio of average noninterest-bearing
deposits to total average deposits was 7.68 percent for nine months ended September 30, 2005 compared to 7.98 percent for nine months ended September 30, 2004. The general increase in market rates, had the effect of (i) increasing the
average cost of total deposits by 55 basis points in nine months ended September 30, 2005 compared to the same period a year ago; and (ii) mitigating a portion of the impact of increasing yields on earning assets on the Companys net
interest income.



Total average interest-bearing deposits increased $75.5
million, or 10.53 percent in nine months ended September 30, 2005 compared to the same period a year ago. The growth in average deposits at September 30, 2005 compared to September 30, 2004 was primarily in money market deposit
accounts and savings and interest-on-checking accounts and other time accounts. Due to the uncertainty of the low interest rate environment, it appears that many customers are less inclined to invest their funds for extended periods and are choosing
to maintain such funds in readily accessible money market and interest-on-checking accounts and short term time accounts.



Off-Balance-Sheet Arrangements, Commitments, Guarantees, and Contractual Obligations



The following table summarizes the Companys contractual obligations and other commitments to make future payments as of
September 30, 2005. Payments for borrowings do not include interest. Payments related to leases are based on actual payments specified in the underlying contracts. Loan commitments and standby letters of credit are presented at contractual
amounts; however, since many of these commitments are expected to expire unused or only partially used, the total amounts of these commitments do not necessarily reflect future cash requirements.



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##### Table of Contents

|                                                    |  |                        |         |                                      |   |                                     |  |                |        |       |   |        |  |   |        
|--------------------------------------------------- |  | ---------------------- | ------- | ------------------------------------ | - | ----------------------------------- |  | -------------- | ------ | ----- | - | ------ |  | - | -------
|                                                    |  | Payments Due by Period
|                                                    |  | 1 Year or Less         |         | More than 1Year but LessThan 3 Years |   | 3 Years orMore but LessThan 5 Years |  | 5 Years orMore |        | Total
|Contractual obligations:                            |  |                        |         |                                      |   |                                     |  |                |        |       |   |        |  |   |        
|Subordinated debentures                             |  | $                      |        |                                      | $ |                                    |  | $              |       |       | $ | 19,074 |  | $ | 19,074 
|Other borrowed money                                |  |                        | 1,725   |                                      |   | 56                                  |  |                |       |       |   |        |  |   | 1,781  
|Federal Home Loan Bank advances                     |  |                        | 15,500  |                                      |   | 18,500                              |  |                | 1,000  |       |   | 34,000 |  |   | 69,000 
|Operating leases                                    |  |                        | 132     |                                      |   | 177                                 |  |                | 101    |       |   | 152    |  |   | 562    
|Deposits with stated maturity dates                 |  |                        | 531,420 |                                      |   | 79,629                              |  |                | 23,825 |       |   | 24     |  |   | 634,898
|                                                    |  |                        |         |                                      |   |                                     |  |                |        |       |   |        |  |   |        
|                                                    |  |                        | 548,777 |                                      |   | 98,362                              |  |                | 24,926 |       |   | 53,250 |  |   | 725,315
|Other commitments:                                  |  |                        |         |                                      |   |                                     |  |                |        |       |   |        |  |   |        
|Loan commitments                                    |  |                        | 102,714 |                                      |   |                                    |  |                |       |       |   |       |  |   | 102,714
|Standby letters of credit                           |  |                        | 2,062   |                                      |   |                                    |  |                |       |       |   |       |  |   | 2,062  
|Performance letters of credit                       |  |                        | 468     |                                      |   |                                    |  |                |       |       |   |       |  |   | 468    
|Construction Contracts                              |  |                        | 1,474   |                                      |   |                                    |  |                |       |       |   |       |  |   | 1,474  
|                                                    |  |                        |         |                                      |   |                                     |  |                |        |       |   |        |  |   |        
|                                                    |  |                        | 106,718 |                                      |   |                                    |  |                |       |       |   |       |  |   | 106,718
|                                                    |  |                        |         |                                      |   |                                     |  |                |        |       |   |        |  |   |        
|Total contractual obligations and Other commitments |  | $                      | 655,495 |                                      | $ | 98,362                              |  | $              | 24,926 |       | $ | 53,250 |  | $ | 832,033
|                                                    |  |                        |         |                                      |   |                                     |  |                |        |       |   |        |  |   |        



In the ordinary course of business,
the Banks have entered into off-balance sheet financial instruments which are not reflected in the consolidated financial statements. These instruments include commitments to extend credit, standby letters of credit, performance letters of credit,
guarantees and liability for assets held in trust. Such financial instruments are recorded in the financial statements when funds are disbursed or the instruments become payable. The Company uses the same credit policies for these off-balance sheet
financial instruments as they do for instruments that are recorded in the consolidated financial statements.



Loan Commitments. The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all
of the Companys commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding. The Company minimizes its exposure to loss under these commitments by subjecting them to credit
approval and monitoring procedures. Management assesses the credit risk associated with certain commitments to extend credit in determining the level of the allowance for possible loan losses. Loan commitments outstanding at September 30, 2005
are included in the table above.



Standby and Performance Letters of
Credit. Letters of credit are written conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event the customer does not perform in accordance with the terms of the agreement with the
third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, the
Company would be entitled to seek recovery from the customer. The Companys policies generally require that standby and performance letters of credit arrangements contain security and debt covenants similar to those contained in loan
agreements. Standby and performance letters of credit outstanding at September 30, 2005 are included in the table above.



Capital and Liquidity



At September 30, 2005, shareholders equity totaled $66.9 million compared to $61.8 million at December 31, 2004. In addition to net income of $6.7 million, other significant changes in
shareholders equity during nine months ended September 30, 2005 included $1.5 million of dividends paid and an increase of $145 thousand resulting from the amortization of the stock grant plan. The accumulated other comprehensive
income component of shareholders equity totaled ($764) thousand at September 30, 2005 compared to ($597) thousand at December 31, 2004. This fluctuation was mostly related to the after-tax effect of changes in the fair value of
securities available for sale. Under regulatory requirements, the unrealized gain or loss on securities available for sale does not increase or reduce regulatory capital and is not included in the calculation of risk-based capital and leverage
ratios. Regulatory agencies for banks and bank holding companies utilize capital guidelines designed to measure Tier 1 and total capital and take into consideration the risk inherent in both on-balance sheet and off-balance sheet items. Tier 1
capital consists of common stock and qualifying preferred stockholders equity less goodwill. Tier 2 capital consists of certain convertible, subordinated and other qualifying debt and the allowance for loan losses up to 1.25 percent of
risk-weighted assets. The Company has no Tier 2 capital other than the allowance for loan losses and gain on marketable equity securities.



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Using the capital requirements presently in effect, the Tier 1 ratio as of September 30, 2005 was 9.93 percent and
total Tier 1 and 2 risk-based capital was 11.19 percent. Both of these measures compare favorably with the regulatory minimum of 4 percent for Tier 1 and 8 percent for total risk-based capital. The Companys Tier 1 leverage ratio as of
September 30, 2005 was 8.07 percent, which exceeds the required ratio standard of 4 percent.



The Company, primarily through the actions of its subsidiary banks, engages in liquidity management to ensure adequate cash flow for deposit withdrawals, credit commitments and repayments of borrowed funds. Needs are
met through loan repayments, net interest and fee income and the sale or maturity of existing assets. In addition, liquidity is continuously provided through the acquisition of new deposits, the renewal of maturing deposits and external borrowings.



Management monitors deposit flow and evaluates alternate pricing structures to
retain and grow deposits. To the extent needed to fund loan demand, traditional local deposit funding sources are supplemented by the use of FHLB borrowings, brokered deposits and other wholesale deposit sources outside the immediate market area.
Internal policies have been updated to monitor the use of various core and non-core funding sources, and to balance ready access with risk and cost. Through various asset/liability management strategies, a balance is maintained among goals of
liquidity, safety and earnings potential. Internal policies that are consistent with regulatory liquidity guidelines are monitored and enforced by the banks.



The investment portfolio provides a ready means to raise cash without loss if liquidity needs arise. As of September 30, 2005, the Company held $108 million in bonds
(excluding FHLB stock), at current market value in the available for sale portfolio. At December 31, 2004, the available for sale bond portfolio totaled $112.6 million. Only marketable investment grade bonds are purchased. Although most of the
banks bond portfolios are encumbered as pledges to secure various public funds deposits, repurchase agreements, and for other purposes, management can restructure and free up investment securities for a sale if required to meet liquidity
needs.



Management continually monitors the relationship of loans to deposits
as it primarily determines the Companys liquidity posture. Colony had ratios of loans to deposits of 93.5 percent as of September 30, 2005 and 91.6 percent at December 31, 2004. Management employs alternative funding sources when
deposit balances will not meet loan demands. The ratios of loans to all funding sources (excluding Subordinated Debentures) at September 30, 2005 and December 31, 2004 were 86.7 percent and 85.4 percent, respectively. Management continues
to emphasize programs to generate local core deposits as our Companys primary funding sources. The stability of the banks core deposit base is an important factor in Colonys liquidity position. A heavy percentage of the deposit
base is comprised of accounts of individuals and small business with comprehensive banking relationships and limited volatility. At September 30, 2005 and December 31, 2004, the banks had $280.7 million and $203.9 million in certificates
of deposit of $100,000 or more. These larger deposits represented 33.6 percent and 26.1 percent of respective total deposits. Management seeks to monitor and control the use of these larger certificates, which tend to be more volatile in nature, to
ensure an adequate supply of funds as needed. Relative interest costs to attract local core relationships are compared to market rates of interest on various external deposit sources to help minimize the Companys overall cost of funds.



Local market deposit sources proved insufficient to fund the strong loan
growth trends at Colony over the past several years. The Company supplemented deposit sources with brokered deposits. As of September 30, 2005, the Company had $53.1 million, or 6.4 percent of total deposits, in brokered certificates of deposit
attracted by external third parties. Additionally, the banks use external wholesale or Internet services to obtain out-of-market certificates of deposit at competitive interest rates when funding is needed.



To plan for contingent sources of funding not satisfied by both local and out-of-market
deposit balances, Colony and its subsidiaries have established multiple borrowing sources to augment their funds management. The Company has borrowing capacity through membership of the Federal Home Loan Bank program. The banks have also established
overnight borrowing for Federal Funds Purchased through various correspondent banks. Management believes the various funding sources discussed above are adequate to meet the Companys liquidity needs in the future without any material adverse
impact on operating results.



For nine months ended September 30, 2005,
average capital was $64.3 million, representing 6.34 percent of average assets for the year. This compares to 6.33 percent for nine months ended September 30, 2004 and 6.29 percent for calendar year 2004.



The Company paid cash dividends of $0.21 per common share during the first three quarters of
2005, and a cash dividend of $0.186 per common share during the first three quarters of 2004, respectively. This equates to a dividend payout ratio of 22.58 percent for first three quarters of 2005 compared to 22.14 percent for the same period a
year ago.



Liquidity measures the ability to meet current and future cash flow
needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial
institution to meet its current financial obligations is a function of balance sheet structure, the ability to liquidate assets, and the availability of alternative sources of funds. The Company seeks to ensure its funding needs are met by
maintaining a level of liquid funds through asset/liability management.



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Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near
future. Liquid assets include cash, interest-bearing deposits in banks, securities available for sale, maturities and cash flow from securities held to maturity, and federal funds sold and securities purchased under resale agreements.



Liability liquidity is provided by access to funding sources which include core deposits.
Should the need arise; the Company also maintains relationships with the Federal Home Loan Bank and several correspondent banks that can provide funds on short notice. Since Colony is a holding company and does not conduct operations, its primary
sources of liquidity are dividends up streamed from subsidiary banks and borrowings from outside sources.



The liquidity position of the Company is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Management is not aware of any events that are
reasonably likely to have a material adverse effect on the Companys liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity, which if implemented, would have a
material adverse effect on the Company.



Impact of Inflation and Changing
Prices



The Companys financial statements included herein have been
prepared in accordance with accounting principles generally accepted in the United States (GAAP). GAAP presently requires the Company to measure financial position and operating results primarily in terms of historic dollars. Changes in
the relative value of money due to inflation or recession are generally not considered. The primary effect of inflation on the operations of the Company is reflected in increased operating costs. In managements opinion, changes in interest
rates affect the financial condition of a financial institution to a far greater degree than changes in the inflation rate. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate
or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond the control of the Company, including changes in the expected rate of inflation, the influence of general and local economic
conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities, among other things, as further discussed in the next section.



Regulatory and Economic Policies



The Companys business and earnings are affected by general and local economic
conditions and by the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities, among other things. The Federal Reserve Board regulates the supply of money in order to influence
general economic conditions. Among the instruments of monetary policy available to the Federal Reserve Board are (i) conducting open market operations in United States government obligations, (ii) changing the discount rate on financial
institution borrowings, (iii) imposing or changing reserve requirements against financial institution deposits, and (iv) restricting certain borrowings and imposing or changing reserve requirements against certain borrowing by financial
institutions and their affiliates. These methods are used in varying degrees and combinations to affect directly the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone,
the policies of the Federal Reserve Board have a material effect on the earnings of the Company.



Governmental policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future; however, the Company cannot accurately predict the
nature, timing or extent of any effect such policies may have on its future business and earnings.



Recently Issued Accounting Pronouncements



See Note 1  Summary of Significant Accounting Policies, under the section headed Changes in Accounting Principles and Effects of New Accounting Pronouncements included in the Notes to Consolidated Financial Statements.



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Quantitative and Qualitative Disclosures About Market Risk



AVERAGE BALANCE SHEETS



|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|-------------------------------------------------------------- |  | ----------------------------------- | --------- | - | ----------------------------------- | - | ------------ |  | ---- | --------------- |  | - | -------------- | - | ------------ | - | ------ |  | ---- | -
|                                                               |  | Nine Months EndedSeptember 30, 2005 |           |   | Nine Months EndedSeptember 30, 2004 |  
|($ in thousands)                                               |  | AverageBalances                     |           |   | Income/Expense                      |   | Yields/Rates |  |      | AverageBalances |  |   | Income/Expense |   | Yields/Rates |  
|Assets                                                         |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Interest-Earning Assets                                        |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Loans, Net of Unearned Interest and fees Taxable (1)           |  | $                                   | 808,906   |   |                                     | $ | 42,269       |  | 6.97 | %               |  | $ | 719,340        |   |              | $ | 34,862 |  | 6.46 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Investment Securities                                          |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Taxable                                                        |  |                                     | 106,223   |   |                                     |   | 2,545        |  | 3.19 | %               |  |   | 103,578        |   |              |   | 2,686  |  | 3.46 | %
|Tax-Exempt (2)                                                 |  |                                     | 6,074     |   |                                     |   | 235          |  | 5.16 | %               |  |   | 8,303          |   |              |   | 312    |  | 5.01 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Total Investment Securities                                    |  |                                     | 112,297   |   |                                     |   | 2,780        |  | 3.30 | %               |  |   | 111,881        |   |              |   | 2,998  |  | 3.57 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Interest-Bearing Deposits in Other Banks                       |  |                                     | 2,725     |   |                                     |   | 57           |  | 2.79 | %               |  |   | 8,045          |   |              |   | 59     |  | 0.98 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Federal Funds Sold                                             |  |                                     | 31,365    |   |                                     |   | 669          |  | 2.84 | %               |  |   | 28,473         |   |              |   | 227    |  | 1.06 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Interest-Bearing Other Assets                                  |  |                                     | 4,820     |   |                                     |   | 136          |  | 3.76 | %               |  |   | 3,142          |   |              |   | 87     |  | 3.69 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Total Interest-Earning Assets                                  |  |                                     | 960,113   |   |                                     | $ | 45,911       |  | 6.38 | %               |  |   | 870,881        |   |              | $ | 38,233 |  | 5.85 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Non-interest-Earning Assets                                    |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Cash and Cash Equivalents                                      |  |                                     | 20,236    |   |                                     |   |              |  |      |                 |  |   | 18,503         |   |              |   |        |  |      |  
|Allowance for Loan Losses                                      |  |                                     | (10,376   | ) |                                     |   |              |  |      |                 |  |   | (9,384         | ) |              |   |        |  |      |  
|Other Assets                                                   |  |                                     | 43,820    |   |                                     |   |              |  |      |                 |  |   | 40,891         |   |              |   |        |  |      |  
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Total Noninterest-Earning Assets                               |  |                                     | 53,680    |   |                                     |   |              |  |      |                 |  |   | 50,010         |   |              |   |        |  |      |  
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Total Assets                                                   |  | $                                   | 1,013,793 |   |                                     |   |              |  |      |                 |  | $ | 920,891        |   |              |   |        |  |      |  
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Liabilities and Stockholders Equity                           |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Interest-Bearing Liabilities                                   |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Interest-Bearing Deposits                                      |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Interest-Bearing Demand and Savings                            |  | $                                   | 198,183   |   |                                     | $ | 1,850        |  | 1.24 | %               |  | $ | 196,427        |   |              | $ | 1,632  |  | 1.11 | %
|Other Time                                                     |  |                                     | 594,903   |   |                                     |   | 13,681       |  | 3.07 | %               |  |   | 521,124        |   |              |   | 9,241  |  | 2.36 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Total Interest-Bearing Deposits                                |  |                                     | 793,086   |   |                                     |   | 15,531       |  | 2.61 | %               |  |   | 717,551        |   |              |   | 10,873 |  | 2.02 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Other Interest-Bearing Liabilities                             |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Other Borrowed Money                                           |  |                                     | 65,624    |   |                                     |   | 1,914        |  | 3.89 | %               |  |   | 61,988         |   |              |   | 1,775  |  | 3.82 | %
|Subordinated Debentures                                        |  |                                     | 19,074    |   |                                     |   | 918          |  | 6.42 | %               |  |   | 16,230         |   |              |   | 600    |  | 4.93 | %
|Federal Funds Purchased and Securities                         |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Sold Under Agreement to Repurchase                             |  |                                     | 549       |   |                                     |   | 15           |  | 3.64 | %               |  |   | 372            |   |              |   | 4      |  | 1.43 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Total Other Interest-Bearing Liabilities                       |  |                                     | 85,247    |   |                                     |   | 2,847        |  | 4.45 | %               |  |   | 78,590         |   |              |   | 2,379  |  | 4.04 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Total Interest-Bearing Liabilities                             |  |                                     | 878,333   |   |                                     | $ | 18,378       |  | 2.79 | %               |  |   | 796,141        |   |              | $ | 13,252 |  | 2.22 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Noninterest-Bearing Liabilities and Stockholders Equity       |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Demand Deposits                                                |  |                                     | 65,982    |   |                                     |   |              |  |      |                 |  |   | 62,214         |   |              |   |        |  |      |  
|Other Liabilities                                              |  |                                     | 5,155     |   |                                     |   |              |  |      |                 |  |   | 4,285          |   |              |   |        |  |      |  
|Stockholders Equity                                           |  |                                     | 64,323    |   |                                     |   |              |  |      |                 |  |   | 58,251         |   |              |   |        |  |      |  
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Total Noninterest-Bearing Liabilities and Stockholders Equity |  |                                     | 135,460   |   |                                     |   |              |  |      |                 |  |   | 124,750        |   |              |   |        |  |      |  
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Total Liabilities and Stockholders Equity                     |  | $                                   | 1,013,793 |   |                                     |   |              |  |      |                 |  | $ | 920,891        |   |              |   |        |  |      |  
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Interest Rate Spread                                           |  |                                     |           |   |                                     |   |              |  | 3.59 | %               |  |   |                |   |              |   |        |  | 3.63 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Net Interest Income                                            |  |                                     |           |   |                                     | $ | 27,533       |  |      |                 |  |   |                |   |              | $ | 24,981 |  |      |  
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  
|Net Interest Margin                                            |  |                                     |           |   |                                     |   |              |  | 3.82 | %               |  |   |                |   |              |   |        |  | 3.82 | %
|                                                               |  |                                     |           |   |                                     |   |              |  |      |                 |  |   |                |   |              |   |        |  |      |  

---

|(1) | The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recognized and recorded on the cash basis. Taxable equivalent adjustments
totaling $90 and $99 for nine month period ended September 30, 2005 and 2004 respectively, are included in tax-exempt interest on loans.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(2) | Taxable-equivalent adjustments totaling $80 and $106 for nine month period ended September 30, 2005 and 2004, respectively, are included in tax-exempt interest on investment
securities. The adjustments are based on a federal tax rate of 34 percent with appropriate reductions for the effect of disallowed interest expense incurred in carrying tax-exempt obligations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Colony Bankcorp, Inc. and Subsidiary

Interest Rate Sensitivity



The following table is an analysis of the Companys interest rate-sensitivity position at September 30, 2005. The interest-bearing rate-sensitivity gap, which
is the difference between interest-earning assets and interest-bearing liabilities by repricing period, is based upon maturity or first repricing opportunity, along with a cumulative interest rate-sensitivity gap. It is important to note that the
table indicates a position at a specific point in time and may not be reflective of positions at other times during the year or in subsequent periods. Major changes in the gap position can be, and are, made promptly as market outlooks change.



|                                                                                   |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|---------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | - | -------------- | - | -------- | ------ |  | - | ------------ | -- |  | ------------ | ------- | - | ----- | - | ------- | -- |  | - | ---------
|                                                                                   |  | Assets and Liabilities Repricing Within
|($ in Thousands)                                                                   |  | 3 Months or Less                        |         |   | 4 to 12 Months |   |          | 1 Year |  |   | 1 to 5 Years |    |  | Over 5 Years |         |   | Total
|                                                                                   |  |                                         |         |   |               
|                                                                                   |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|EARNING ASSETS:                                                                    |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|Interest-bearing Deposits                                                          |  | $                                       | 4,233   |   |                | $ | 0        |        |  | $ | 4,233        |    |  | $            | 0       |   |       | $ | 0       |    |  | $ | 4,233    
|Federal Funds Sold                                                                 |  |                                         | 43,204  |   |                |   | 0        |        |  |   | 43,204       |    |  |              | 0       |   |       |   | 0       |    |  |   | 43,204   
|Investment Securities                                                              |  |                                         | 15,893  |   |                |   | 3,146    |        |  |   | 19,039       |    |  |              | 76,945  |   |       |   | 12,006  |    |  |   | 107,990  
|Loans, Net of Unearned Income                                                      |  |                                         | 364,513 |   |                |   | 171,584  |        |  |   | 536,097      |    |  |              | 294,893 |   |       |   | 11,166  |    |  |   | 842,156  
|Other Interest-bearing Assets                                                      |  |                                         | 5,102   |   |                |   | 0        |        |  |   | 5,102        |    |  |              | 0       |   |       |   | 0       |    |  |   | 5,102    
|                                                                                   |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|Total Interest-earning assets                                                      |  |                                         | 432,945 |   |                |   | 174,730  |        |  |   | 607,675      |    |  |              | 371,838 |   |       |   | 23,172  |    |  |   | 1,002,685
|                                                                                   |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|INTEREST-BEARING LIABILITIES:                                                      |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|Interest-bearing Demand Deposits (1)                                               |  |                                         | 161,333 |   |                |   | 0        |        |  |   | 161,333      |    |  |              | 0       |   |       |   | 0       |    |  |   | 161,333  
|Savings (1)                                                                        |  |                                         | 38,119  |   |                |   | 0        |        |  |   | 38,119       |    |  |              | 0       |   |       |   | 0       |    |  |   | 38,119   
|Time Deposits                                                                      |  |                                         | 136,732 |   |                |   | 394,688  |        |  |   | 531,420      |    |  |              | 103,454 |   |       |   | 24      |    |  |   | 634,898  
|Other Borrowings (2)                                                               |  |                                         | 15,781  |   |                |   | 3,000    |        |  |   | 18,781       |    |  |              | 18,000  |   |       |   | 34,000  |    |  |   | 70,781   
|Subordinated Debentures                                                            |  |                                         | 19,074  |   |                |   | 0        |        |  |   | 19,074       |    |  |              | 0       |   |       |   | 0       |    |  |   | 19,074   
|                                                                                   |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|Total Interest-bearing liabilities                                                 |  |                                         | 371,039 |   |                |   | 397,688  |        |  |   | 768,727      |    |  |              | 121,454 |   |       |   | 34,024  |    |  |   | 924,205  
|                                                                                   |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|Interest rate-sensitivity gap                                                      |  |                                         | 61,906  |   |                |   | (222,958 | )      |  |   | (161,052     | )  |  |              | 250,384 |   |       |   | (10,852 | )  |  |   | 78,480   
|                                                                                   |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|Cumulative interest-sensitivity gap                                                |  |                                         | 61,906  |   |                |   | (161,052 | )      |  |   | (161,052     | )  |  |              | 89,332  |   |       |   | 78,480  |    |  |   |          
|                                                                                   |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|Interest rate-sensivitiy gap as a percentage of interest-earning assets            |  |                                         | 6.17    | % |                |   | (22.24   | )%     |  |   | (16.06       | )% |  |              | 24.97   | % |       |   | (1.08   | )% |  |   |          
|                                                                                   |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          
|Cumulative interest rate-sensitivity as as a percentage of interest-earning assets |  |                                         | 6.17    | % |                |   | (16.06   | )%     |  |   | (16.06       | )% |  |              | 8.91    | % |       |   | 7.83    | %  |  |   |          
|                                                                                   |  |                                         |         |   |                |   |          |        |  |   |              |    |  |              |         |   |       |   |         |    |  |   |          

---

|(1) | Interest-bearing Demand and Savings Accounts for repricing purposes are considered to reprice within 3 months or less.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(2) | Short-term borrowings for repricing purposes are considered to reprice within 3 months or less.
|--- | -----------------------------------------------------------------------------------------------



The foregoing table indicates that we had a one year negative gap of ($161) million, or (16.06) percent of total assets at
September 30, 2005. In theory, this would indicate that at September 30, 2005, $161 million more in liabilities than assets would reprice if there were a change in interest rates over the next 365 days. Thus, if interest rates were to
increase, the gap would indicate a resulting decrease in net interest margin. However, changes in the mix of earning assets or supporting liabilities can either increase or decrease the net interest margin without affecting interest rate
sensitivity. In addition, the interest rate spread between an asset and our



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supporting liability can vary significantly while the timing of repricing of both the assets and our supporting liability
can remain the same, thus impacting net interest income. This characteristic is referred to as a basis risk and, generally, relates to the repricing characteristics of short-term funding sources such as certificates of deposits. Net interest margin
has remained flat at 3.82 percent for nine months ended September 30, 2005 and 2004.



Gap analysis has certain limitations. Measuring the volume of repricing or maturing assets and liabilities does not always measure the full impact on the portfolio value of equity or net interest income. Gap analysis
does not account for rate caps on products; dynamic changes such as increasing prepay speeds as interest rates decrease, basis risk, or the benefit of non-rate funding sources. The majority of our loan portfolio reprices quickly and completely
following changes in market rates, while non-term deposit rates in general move slowly and usually incorporate only a fraction of the change in rates. Products categorized as non-rate sensitive, such as our noninterest-bearing demand deposits, in
the gap analysis behave like long term fixed rate funding sources. Both of these factors tend to make our actual behavior more asset sensitive than is indicated in the gap analysis. In fact, we experience higher net interest income when rates rise,
opposite what is indicated by the gap analysis. In fact, during the recent period of declines in interest rates, our net interest margin has declined. Therefore, management uses gap analysis, net interest margin analysis and market value of
portfolio equity as our primary interest rate risk management tools.



Return
on Assets and Stockholders Equity



The following table presents selected financial ratios for each of the periods indicated.



|                           |  |                                |       |   |                               |   |       |      |  |   |       |   |  |   |       |  
|-------------------------- |  | ------------------------------ | ----- | - | ----------------------------- | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                           |  | Three Months EndedSeptember 30 |       |   | Nine Months EndedSeptember 30 |  
|                           |  | 2005                           |       |   | 2004                          |   |       | 2005 |  |   | 2004  |  
|Return on Assets           |  |                                | 0.87  | % |                               |   | 0.86  | %    |  |   | 0.88  | % |  |   | 0.87  | %
|Return on Equity           |  |                                | 13.60 | % |                               |   | 13.82 | %    |  |   | 13.83 | % |  |   | 13.71 | %
|Dividend Payout            |  |                                | 22.50 | % |                               |   | 22.07 | %    |  |   | 22.58 | % |  |   | 22.14 | %
|Avg. Equity to Avg. Assets |  |                                | 6.41  | % |                               |   | 6.23  | %    |  |   | 6.34  | % |  |   | 6.33  | %
|Dividends Declared         |  | $                              | 0.072 |   |                               | $ | 0.064 |      |  | $ | 0.21  |   |  | $ | 0.186 |  



Future Outlook



Colony is an emerging company in an industry filled with nonregulated competitors and a
rapid pace of consolidation. The year brings with it new opportunities for growth in our existing markets, as well as opportunities to expand into new markets through acquisitions and denovo branching. The Company completed construction of its main
office in Valdosta/Lowndes County that opened during second quarter 2005. Real estate has been purchased for a future office in Thomasville/Thomas County. The Company completed renovation of its Savannah office during third quarter 2005 and opened
its first full-service branch in the Savannah/Chatham County market. The Company awarded the bid on its first full-service branch in Columbus/Muscogee County that should be completed in first quarter 2006. The Company has begun construction on a
second office in Warner Robins that should be completed during fourth quarter 2005. Entry into the MSA markets  Savannah, Columbus, Warner Robins, and Macon  will require multi-branch offices and the company is presently looking for
available real estate to purchase in those markets.



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BUSINESS



General



The Company was organized in 1983 as a bank holding company through the merger of Colony Bank of Fitzgerald with a subsidiary of the Company. Since that time, Colony Bank
of Fitzgerald, which was formed by principals of Colony Bankcorp, Inc. in 1976, has operated as a wholly-owned subsidiary of the Company. In April 1984, Colony Bankcorp, Inc. acquired Colony Bank Wilcox, and in November 1984, Colony Bank Ashburn
became a wholly-owned subsidiary of Colony Bankcorp, Inc. Colony Bankcorp, Inc. continued its growth with the acquisition of Colony Bank of Dodge County in September 1985. In August 1991, Colony Bankcorp, Inc. acquired Colony Bank Worth. In November
1996, Colony Bankcorp, Inc. acquired Colony Bank Southeast and in November 1996 formed a non-bank subsidiary Colony Management Services, Inc. In March 2002, Colony Bankcorp, Inc. acquired Colony Bank Quitman, FSB and also formed Colony Bankcorp
Statutory Trust I. In December 2002, Colony formed its second trust, Colony Bankcorp Statutory Trust II. In September, 2004, Colony formed its third Trust, Colony Bankcorp Statutory Trust III.



Through its seven subsidiary banks, Colony Bankcorp, Inc. operates a full-service banking
business and offers a broad range of retail and commercial banking services including checking, savings, NOW accounts, money market and time deposits of various types; loans for business, agriculture, real estate, personal uses, home improvement and
automobiles; credit card; letters of credit; investment and discount brokerage services; IRAs; safe deposit box rentals, bank money orders; electronic funds transfer services, including wire transfers and automated teller machines and internet
accounts. Each of the Banks is a member of Federal Deposit Insurance Corporation whose customer deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation.



On April 2, 1998, the Company was listed on Nasdaq National Market. The Companys common stock trades on the Nasdaq Stock Market
under the symbol CBAN. The Company presently has approximately 2,005 shareholders as of September 30, 2005. The Nasdaq Stock Market or Nasdaq is a highly-regulated electronic securities market comprised of
competing Market Makers whose trading is supported by a communications network linking them to quotation dissemination, trade reporting and order execution systems. This market also provides specialized automation services for screen-based
negotiations of transactions, on-line comparison of transactions, and a range of informational services tailored to the needs of the securities industry, investors and issuers. The Nasdaq Stock Market is operated by The Nasdaq Stock Market, Inc., a
wholly-owned subsidiary of the National Association of Securities Dealers, Inc.



ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



See pages 43-45 of this report for disclosures



ITEM 4  CONTROLS AND PROCEDURES



As of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our Chief Executive Officer, James D. Minix, and the Principal Financial and Accounting Officer, Terry L. Hester, of the design and operation of our disclosure controls and procedures. Based on this
evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer concluded that our disclosure controls and procedures are effective.



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PART II  OTHER INFORMATION



ITEM 1  LEGAL PROCEEDINGS



Not applicable



ITEM 2  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



Not applicable



ITEM 3  DEFAULTS UPON SENIOR SECURITIES



Not applicable



ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS



Not applicable



ITEM 5  OTHER INFORMATION



None



ITEM 6  EXHIBITS



3.1 Articles of Incorporation



-filed as Exhibit 3(a) to the Registrants Registration Statement on
Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990 and incorporated herein by reference



3.2 Bylaws, as Amended



-filed as Exhibit 3(b) to the Registrants Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990
and incorporated herein by reference



4.1 Instruments
Defining the Rights of Security Holders



-incorporated
herein by reference to page 1 of the Companys Definitive Proxy Statement for Annual Meeting of Stockholders to be held on April 27, 2004, filed with the Securities and Exchange Commission on March 3, 2004 (File No. 000-12436)



10.1 Deferred Compensation Plan and Sample Director
Agreement



-filed as Exhibit 10(a) to the
Registrants Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990 and incorporated herein by reference



10.2 Profit-Sharing Plan Dated January 1, 1979



-filed as Exhibit 10(b) to the Registrants Registration Statement on Form 10 (File No. 0-18486), filed with the Commission on April 25, 1990
and incorporated herein by reference



10.3 1999 Restricted
Stock Grant Plan and Restricted Stock Grant Agreement



-filed as Exhibit 10(c) the Registrants Annual Report on Form 10-K (File No. 000-12436), filed with the Commission on March 30, 2001 and incorporated herein by reference



10.4 2004 Restricted Stock Grant Plan and Restricted Stock Grant
Agreement



- filed as Exhibit C to the Registrants
Definitive Proxy Statement for Annual Meeting of Shareholders held on April 27, 2004, filed with the Securities and Exchange Commission on March 3, 2004 (File No. 000-12436) and incorporated herein by reference



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10.5 Lease Agreement  Mobile Home Tracts, LLC c/o Stafford Properties, Inc. and Colony Bank
Worth



- filed as Exhibit 10.5 to the Registrants
Quarterly Report on Form 10Q (File No. 000-12436), filed with Securities and Exchange Commission on November 5, 2004 and incorporated herein by reference



11.1 Statement of Computation of Earnings Per Share



31.1 Certificate of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002



31.2 Certificate of Chief Financial Officer Pursuant to Section 302
of Sarbanes  Oxley Act of 2002



32.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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##### Table of Contents

SIGNATURE



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



|                       |  |                                              
|---------------------- |  | ---------------------------------------------
|                       |  | /s/ James D. Minix                           
|Date: November 7, 2005 |  | James D. Minix,                              
|                       |  | Chief Executive Officer                      
|                       |  | /s/ Terry L.
Hester                          
|Date: November 7, 2005 |  | Terry L. Hester, Executive Vice President and
|                       |  | Chief Financial Officer                      



51