COLONY BANKCORP INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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The purpose of this discussion and analysis is to focus on significant changes
in the financial condition of Colony Bankcorp, Inc. and our wholly owned
subsidiary, Colony Bank, from December 31, 2021 through June 30, 2022 and on our
results of operations for the three and six months ended June 30, 2022 and 2021.
This discussion and analysis should be read in conjunction with our audited
consolidated financial statements and notes thereto in the Company's 2021 Form
10-K, and information presented elsewhere in this Quarterly Report on Form 10-Q,
particularly the unaudited consolidated financial statements and related notes
appearing in Item 1.

Forward-looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These forward-looking statements reflect our
current views with respect to, among other things, future events and our
financial performance. These statements are often, but not always, made through
the use of words or phrases such as "may," "might," "should," "could,"
"predict," "potential," "believe," "expect," "continue," "will," "anticipate,"
"seek," "estimate," "intend," "plan," "strive," "projection," "goal," "target,"
"outlook," "aim," "would," "annualized" and "outlook," or the negative version
of those words or other comparable words or phrases of a future or
forward-looking nature. These forward-looking statements are not historical
facts, and are based on current expectations, estimates and projections about
our industry, management's beliefs and certain assumptions made by management,
many of which, by their nature, are inherently uncertain and beyond our control,
particularly with regard to developments related to the COVID-19 (and the
variants thereof) pandemic. Accordingly, we caution you that any such
forward-looking statements are not guarantees of future performance and are
subject to risks, assumptions, estimates and uncertainties that are difficult to
predict. Although we believe that the expectations reflected in these
forward-looking statements are reasonable as of the date made, actual results
may prove to be materially different from the results expressed or implied by
the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including the factors discussed elsewhere in this annual report and the following:

•business and economic conditions, particularly those affecting the financial services industry and our principal markets;

•the risk that a future economic downturn and contraction, including a
recession, could have a material adverse effect on our capital, financial
condition, credit quality, results of operations and future growth, including
the risk that the strength of the current economic environment could be weakened
by the impact of rising interest rates, supply chain challenges and inflation;

•factors that can impact the performance of our loan portfolio, including real
estate values and liquidity in our primary market areas, the financial health of
our borrowers and the success of various projects that we finance;

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

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

•our ability to attract sufficient loans that meet prudent credit standards,
including in our construction and development, commercial and industrial and
owner-occupied commercial real estate loan categories;

• our ability to attract and maintain banking relationships with qualified businesses, real estate developers and investors with a proven track record in our markets;

•changes in interest rate environment, including changes to the federal funds
rate, and competition in our markets may result in increased funding costs or
reduced earning assets yields, thus reducing our margins and net interest
income;

•our ability to successfully manage our credit risk and the adequacy of our loan loss provision;

•the adequacy of our reserves (including the provision for loan losses) and the appropriateness of our method of calculating these reserves;

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• our ability to successfully execute our business strategy to achieve profitable growth;

•the concentration of our activities within our geographical areas of operation in
Georgia and neighboring markets;

•our focus on small and medium-sized enterprises;

•our ability to manage our growth;

•our ability to increase our operational efficiency;

• liquidity issues, including fluctuations in the fair value and liquidity of securities we hold for sale and our ability to raise additional capital, if needed;

•failure to maintain adequate liquidity and regulatory capital and to comply with changing federal and state banking regulations;

•the risks that our cost of funding may increase, in the event that we are unable to continue to attract stable, low-cost deposits and reduce the cost of our deposits;

•inability of our risk management framework to effectively mitigate credit risk,
interest rate risk, liquidity risk, price risk, compliance risk, operational
risk, strategic risk and reputational risk;

• inflation, interest rates, securities markets and currency fluctuations and the respective impact on our financial condition and results of operations;

•the composition of our asset mix and investments;

•external economic, political and/or market factors, such as changes in monetary
and fiscal policies and laws, including the interest rate policies of the
Federal Reserve, inflation or deflation, changes in the demand for loans, and
fluctuations in consumer spending, borrowing and savings habits, which may have
an adverse impact on our financial condition;

•the risks relating to the completed acquisition including, without limitation:
unexpected transaction costs, including the costs of integrating operations; the
risks that the businesses will not be integrated successfully or that such
integration may be more difficult, time-consuming or costly than expected; the
potential failure to fully or timely realize expected revenues and revenue
synergies, including as the result of revenues being lower than expected;

•uncertainty related to the abandonment of the London Inter-bank Offered Rate (“LIBOR”);

•adverse results from current or future litigation, regulatory examinations or
other legal and/or regulatory actions related to the COVID-19 pandemic,
including as a result of our participation in and execution of government
programs related to the COVID-19 pandemic, including, but not limited to, the
Paycheck Protection Program ("PPP");

•the impact of the continuing COVID-19 pandemic on our business;

•continued or increasing competition from other financial institutions (including fintech companies), credit unions and non-bank financial services companies, many of which are subject to regulations different from ours;

• challenges arising from unsuccessful attempts to expand into new geographic markets, products or services;

• restrictions on the Bank’s ability to pay dividends to us, which could limit our liquidity;

•increased capital requirements imposed by banking regulators, which may require
us to raise capital at a time when capital is not available on favorable terms
or at all;

•failure of the internal controls that we have put in place to deal with the risks inherent in the banking business;

• inaccuracies in our assumptions about future events, which could cause our financial projections to differ materially from actual financial performance;


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• changes in our management personnel or our inability to retain, motivate and hire qualified management personnel;

•the dependence of our operating model on our ability to attract and retain
experienced and talented bankers in each of our markets, which may be impacted
as a result of labor shortages;

•our ability to identify and address cybersecurity risks, fraud and system errors;

• disruptions, security breaches or other adverse events, failures or interruptions of, or attacks on, our information technology systems;

• disruptions, security breaches or other adverse events affecting third-party vendors that perform many of our critical processing functions;

•an inability to keep pace with technological advances due to a lack of resources to invest in new technologies;

• the fraudulent and negligent acts of our customers, employees or suppliers and our ability to identify and deal with these acts;

•risks related to potential acquisitions;

• the impact of any claim or legal action we may face, including any effect on our reputation;

•compliance with governmental and regulatory requirements, including the
Dodd-Frank Act and others relating to banking, consumer protection, securities
and tax matters, and our ability to maintain licenses required in connection
with commercial mortgage origination, sale and servicing operations;

•changes in the scope and cost of FDIC insurance and other coverage;

•changes to our accounting standards;

•changes in tariffs and trade barriers;

• changes in federal tax law or policy;

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

•other risks and factors identified in our 2021 Form 10-K, this Quarterly Report
on Form 10-Q for the period ended June 30, 2022, and in any of the Company's
other reports filed with the U.S. Securities and Exchange Commission and
available on its website at www.sec.gov.

The foregoing factors should not be construed as exhaustive and should be read
together with the other cautionary statements included in this Quarterly Report
on Form 10-Q. Because of these risks and other uncertainties, our actual future
results, performance or achievement, or industry results, may be materially
different from the results indicated by the forward looking statements in this
Quarterly Report on Form 10-Q. In addition, our past results of operations are
not necessarily indicative of our future results. You should not rely on any
forward looking statements, which represent our beliefs, assumptions and
estimates only as of the dates on which they were made, as predictions of future
events. Any forward-looking statement speaks only as of the date on which it is
made, and we do not undertake any obligation to update or review any
forward-looking statement, whether as a result of new information, future
developments or otherwise.


Overview

The following discussion and analysis presents the more significant factors
affecting the Company's financial condition as of June 30, 2022 and December 31,
2021, and results of operations for each of the three and six month periods
ended June 30, 2022 and 2021. This discussion and analysis should be read in
conjunction with the Company's consolidated financial statements, notes thereto
and other financial information appearing elsewhere in this report.


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At June 30, 2022, the Company had total consolidated assets of $2.7 billion,
total loans, net of $1.4 billion, total deposits of $2.3 billion, and
stockholders' equity of $234.6 million. The Company reported net income of $3.4
million, or $0.19 per diluted share, for the three months ended June 30, 2022,
and $8.7 million, or $0.52 per diluted share, for the first six months of 2022,
compared to net income of $4.0 million, or $0.42 per diluted share, for the
three months ended June 30, 2021, and $8.9 million, or $0.94 per diluted share,
for the first six months of 2021. The small decrease in net income for the three
and six months ended June 30, 2022 compared to the same periods ended June 30,
2021 was primarily driven by the increase in provision for loan loss and
salaries and recognized mark on two FHLB advances that were acquired in the
SouthCrest acquisition that were called early, offset by the increase in volume
of taxable and tax-exempt investment securities and loans, acquisition of
SouthCrest Financial Group, Inc. ("SouthCrest"), and an increase in interchange
fees and gain on sale of SBA loans.

Net interest income on a tax equivalent basis increased to $19.3 million for the
second quarter of 2022, compared to $15.2 million for the same period in 2021,
primarily due to an increase in investment securities and loan volume. The net
interest margin decreased to 3.15% for the quarter ended June 30, 2022 from
3.68% for the same period in 2021. Net interest income on a tax equivalent basis
increased to $38.5 million for the first six months of 2022, compared to $29.6
million for the first six months of 2021, primarily due to an increase in
investment securities and loan volume. The net interest margin decreased to
3.15% for the six months ended June 30, 2022 from 3.57% for the same period in
2021. The reason for the decrease in net interest margin for the three and six
months ended June 30, 2022 compared to the same periods in 2021 is primarily due
to a decrease in yield on loans offset by slight decrease in deposit and
borrowing rates.

Provision for loan losses for the three and six months ended June 30, 2022 was
$1.1 million and $1.2 million compared to zero and $500,000 for the same period
in 2021, respectively. Net charge-offs for the second quarter of 2022 were
$56,000 compared to net recoveries of $178,000 for the same period in 2021. Net
charge-offs for the first six months of 2022 were $97,000 compared to net
recoveries of $244,000 for the same period in 2021. As of June 30, 2022,
Colony's allowance for loan losses was $14.0 million, or 0.96% of total loans,
compared to $12.9 million, or 0.96% of total loans, at December 31, 2021. At
June 30, 2022 and December 31, 2021, nonperforming assets were $5.2 million and
$5.8 million, or 0.19% and 0.21% of total assets, respectively.

Noninterest income of $10.1 million for the second quarter of 2022 was up $2.3
million, or 29.76%, from the second quarter of 2021. The increase was primarily
due to increases in service charges, interchange fees and gain on sale of SBA
loans, offset by a decrease in mortgage fee income. Noninterest income of $19.2
million for the six months ended of 2022 was up $2.9 million, or 17.45%, from
the second quarter of 2021. The increase was primarily due to increases in
service charges, interchange fees and gain on sale of SBA loans other
noninterest income, offset by a decrease in mortgage fee income. See "Table 3 -
Noninterest income" for more detail and discussion on the primary drivers to the
increase in noninterest income.

For the three months ended June 30, 2022, noninterest expense was $24.5 million,
an increase of $7.0 million, or 40.14%, from the same period in 2021. For the
six months ended June 30, 2022, noninterest expense was $46.3 million, an
increase of $13.1 million, or 39.3%, from the same period in 2021. Increases in
noninterest expense are in part due to changes to the Company's organizational
structure, along with acquisition expenses related to the SouthCrest merger.
Those expenses that were the primary contributors to the increase year over year
include salaries and employee benefits. See "Table 4 - Noninterest expense" for
more detail and discussion on the primary drivers to the increase in noninterest
expense.

On February 10, 2022the Company completed a public offering of approximately 3.85 million common shares with aggregate proceeds of approximately $63.5 million. The offering generated net proceeds of approximately $59.3 millionwhich were used to fund the repayment of the Company’s existing term note and line of credit and for other general corporate purposes.

On May 20, 2022, the Company entered into a Subordinated Note Purchase Agreement
with certain qualified institutional buyers in which the Company issued and sold
$40.0 million in aggregate principal amount of its 5.25% Fixed-to-Floating Rate
Subordinated Notes due 2032.

Economic Conditions

The economic conditions and growth prospects for our markets, even against the
headwinds of inflation and recessionary concerns, continue to reflect a solid
and positive overall outlook with economic activity close to pre-pandemic
levels. Increasing interest rates and rising building costs have caused some
slowing of the highly robust single family housing market, however, there
continues to be a shortage of housing in several Georgia markets. Worker
shortages especially in the restaurant, hospitality and retail industries
combined with supply chain disruptions impacting numerous industries and
inflationary conditions has had some impact on the level of economic growth.
Ongoing higher inflation levels and higher


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interest rates could adversely affect both our consumer and commercial borrowers. Globally, Georgia continues to experience economic growth due to relocations and business expansions combined with overall population growth.

Critical accounting policies

Our accounting and reporting policies are in accordance with GAAP and conform to
general practices within the banking industry. We have identified certain of its
accounting policies as "critical accounting policies," consisting of those
related to business combinations, allowance for loan losses and income taxes. In
determining which accounting policies are critical in nature, we have identified
the policies that require significant judgment or involve complex estimates. It
is management's practice to discuss critical accounting policies with the Board
of Directors' Audit Committee on a periodic basis, including the development,
selection, implementation and disclosure of the critical accounting policies.
The application of these policies has a significant impact on the Company's
unaudited interim consolidated financial statements. Our financial results could
differ significantly if different judgments or estimates are used in the
application of these policies. All accounting policies described in Note 1 of
our consolidated financial statements as of December 31, 2021, which are
included in the Company's 2021 Form 10-K should be reviewed for a greater
understanding of how we record and report our financial performance. There have
been no significant changes to the Significant Accounting Policies as described
in Note 1 of the Notes to Consolidated Financial Statements for the year ended
December 31, 2021, which are included in the Company's 2021 Form 10-K.


Operating results

We reported net income and diluted earnings per share of $3.4 million and $8.7
million and $0.19 and $0.52, respectively, for the first three and six months of
2022. This compared to net income and diluted earnings per share of $4.0 million
and $8.9 million and $0.42 and $0.94, respectively, for the same periods in
2021.


Net Interest Income

Net interest income, which is the difference between interest earned on assets
and the interest paid on deposits and borrowed funds, is the single largest
component of total revenue. Management strives to optimize this income while
balancing interest rate, credit and liquidity risks.

The banking industry uses two key ratios to measure relative profitability of
net interest income. The net interest spread measures the difference between the
average yield on interest-earning assets and the average rate paid on
interest-bearing liabilities. The interest rate spread eliminates the effect of
noninterest-bearing deposits and gives a direct perspective on the effect of
market interest rate movements. The net interest margin is an indication of the
profitability of a company's balance sheet and is defined as net interest income
as a percent of average total interest-earning assets, which includes the
positive effect of funding a portion of interest-earning assets with
noninterest-bearing deposits and stockholders' equity.

Fully taxable equivalent net interest income for the second quarter of 2022 and
2021 was $19.3 million and $15.2 million, respectively. This increase is
primarily due to an increase in volume of securities and loans. The net interest
margin for the second quarter of 2022 and 2021 was 3.15% and 3.68% respectively.
This decrease in net interest margin for the second quarter of 2022 compared to
same period in 2021 is a result of the decrease in loan yields and higher
borrowing yields, offset by lower yields paid on deposits.

Fully taxable equivalent net interest income for the six months ended June 30,
2022 and 2021 was $38.5 million and $29.6 million, respectively. This increase
is primarily due to an increase in volume of securities and loans. The net
interest margin for the six months ended June 30, 2022 and 2021 was 3.15% and
3.57% respectively. This decrease in net interest margin for the six months
ended June 30, 2022 compared to the same period in 2021 is a result of the
decrease in loan yields and higher borrowing yields, offset by lower yields paid
on deposits.

The following tables indicate the relationship between interest income and
interest expense and the average amounts of assets and liabilities for the
periods indicated. As shown in the tables, both average assets and average
liabilities for the three and six months ended June 30, 2022 increased compared
to the same period in 2021. The increase in average assets was primarily driven
by the increase from the acquisition of SouthCrest in third quarter 2021 and
purchasing of investment securities of $506.6 million and $528.0 million as well
as an increase in loans of $350.8 million and $317.3 million for the three and
six months ended June 30, 2022 compared to the same periods in 2021. The loan
increase is primarily due to the SouthCrest acquisition and loan growth. The
increase in average liabilities for the three and six months ended June 30, 2022
was funded primarily through an increase in deposits from the SouthCrest merger
during the last half of 2021.The net interest spread, as


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as well as the net interest margin, will be impacted by the future evolution of short-term and long-term interest rates, as well as by the impact of the competitive environment.

The yield on total interest-bearing liabilities increased from 0.32% in the
second quarter of 2021 to 0.43% in the second quarter of 2022. The yield on
total interest-bearing liabilities remained the same at 0.33% for the six months
ended June 30, 2022 and 2021, due to Federal Home Loan Bank advances interest
expense including $751,000 for the recognized mark on two advances that were
acquired in the SouthCrest acquisition that were called early. In March of 2020,
the Federal Reserve's Federal Open Market Committee ("FOMC") lowered interest
rates twice for a total reduction of 150 basis points in response to the
COVID-19 pandemic, which was the most aggressive action taken by the FOMC since
the financial crisis in 2008. In March 2022, the FOMC raised the rate 25 basis
points. In second quarter 2022, the FOMC raised the rate twice, the first
increase being 50 basis points and the second increase being 75 basis points.


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Table 1 – Average balance sheet and net interest analysis

                                                                                 Three Months Ended June 30,
                                                              2022                                                        2021
                                         Average             Income/            Yields/              Average             Income/            Yields/
(dollars in thousands)                   Balances            Expense             Rates               Balances            Expense             Rates

Assets

Interest-earning assets:
Loans, net of unearned
income(1)                             $ 1,427,563          $ 16,317                 4.58  %       $ 1,076,784          $ 14,165                 5.34  %
Investment securities, taxable            842,481             4,332                 2.06              417,343             1,794                 1.74
Investment securities,
tax-exempt(2)                             114,658               542                 1.90               33,156               160                 1.96
Deposits in banks and short
term investments                           73,190               103                 0.56              146,591                45                 0.12
Total interest-earning assets           2,457,892            21,294                 3.47            1,673,874            16,164                 3.92
Noninterest-earning assets                218,720                                                     103,685
Total assets                          $ 2,676,612                                                 $ 1,777,559
Liabilities and stockholders'
equity
Interest-bearing liabilities:
Interest-earning demand and
savings                               $ 1,429,331          $    307                 0.09  %       $   901,978          $    146                 0.07  %
Other time                                328,355               319                 0.39              253,944               423                 0.68
Total interest-bearing deposits         1,757,686               626                 0.14            1,155,922               569                 0.20
Federal funds purchased                     7,916                27                 1.37  %                 -                 -                    -
Federal Home Loan Bank advances
(3)                                        46,550               943                 8.13               22,500               115                 2.09
Paycheck Protection Program
Liquidity Facility                              -                 -                    -               19,031                25                 0.53
Other borrowings                           44,729               409                 3.67               37,536               258                 2.78
Total other interest-bearing
liabilities                                99,195             1,379                 5.58               79,067               398                 2.04
Total interest-bearing
liabilities                             1,856,881             2,005                 0.43            1,234,989               967                 0.32
Noninterest-bearing
liabilities:
Demand deposits                           568,070                                                     391,217
Other liabilities                          10,380                                                       6,592
Stockholders' equity                      241,281                                                     144,761
Total noninterest-bearing
liabilities and stockholders'
equity                                    819,731                                                     542,570
Total liabilities and
stockholders' equity                  $ 2,676,612                                                 $ 1,777,559
Interest rate spread                                                                3.04  %                                                     3.60  %
Net interest income                                        $ 19,289                                                    $ 15,197
Net interest margin                                                                 3.15  %                                                     3.68  %


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 $31,000 and $67,000 for the quarters
ended June 30, 2022 and 2021, respectively, are included in income and fees on
loans. Accretion income of $269,000 and $104,000 for the quarters ended June 30,
2022 and 2021 are also included in income and fees on loans.

2.Taxable-equivalent adjustments totaling $70,000 and $43,000 for the quarters
ended June 30, 2022 and 2021, respectively, are included in tax-exempt interest
on investment securities.

3. Federal Home Loan Bank advances interest expense includes $751,000 for the
quarter ended June 30, 2022 and is the recognized mark on two advances that were
acquired in the SouthCrest acquisition that were called early.


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Table 1 – Average balance sheet and net interest analysis

                                                                                    Six Months Ended June 30, 2022
                                                                  2022                                                        2021
                                             Average             Income/            Yields/             Average             Income/             Yields/
(dollars in thousands)                       Balances            Expense             Rates              Balances            Expense              Rates
Assets
Interest-earning assets:
Loans, net of unearned income(1)          $ 1,395,179          $ 32,339                4.67  %       $ 1,077,859          $ 27,805                   5.20  %
Investment securities, taxable                842,491             8,084                1.93              394,431             3,401                   1.74
Investment securities,
tax-exempt(2)                                 112,843             1,022                1.83               32,887               314                   1.93
Deposits in banks and short term
investments                                   117,177               159                0.27              164,882                97                   

0.12

Total interest-earning assets               2,467,690            41,604                3.40            1,670,059            31,617                   

3.82

Noninterest-earning assets                    210,625                                                    105,746
Total assets                              $ 2,678,315                                                $ 1,775,805
Liabilities and stockholders'
equity
Interest-bearing liabilities:
Interest-earning demand and savings       $ 1,437,325          $    568                0.08  %       $   880,838          $    311                   0.07  %
Other time                                    335,744               657                0.39              257,173               912                   0.72
Total interest-bearing deposits             1,773,069             1,225                0.14            1,138,011             1,223                   0.22
Federal funds purchased                         3,978                27                1.37                    -                 -                      -
Federal Home Loan Bank advances (3)            49,100             1,192                4.90               22,500               230                   

2.05

Paycheck Protection Program
Liquidity Facility                                  -                 -                                   51,516                93                   0.36
Other borrowings                               38,492               611                3.20               37,715               514                   2.75
Total other interest-bearing
liabilities                                    91,570             1,830                4.03              111,731               837                   

1.51

Total interest-bearing liabilities          1,864,639             3,055                0.33            1,249,742             2,060                   

0.33

Noninterest-bearing liabilities:
Demand deposits                               560,444                                                    373,728
Other liabilities                              11,036                                                      6,791
Stockholders' equity                          242,196                                                    145,544
Total noninterest-bearing
liabilities and stockholders'
equity                                        813,676                                                    526,063
Total liabilities and stockholders'
equity                                    $ 2,678,315                                                $ 1,775,805
Interest rate spread                                                                   3.08  %                                                       3.49  %
Net interest income                                            $ 38,549                                                   $ 29,557
Net interest margin                                                                    3.15  %                                                       3.57  %


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 $62,000 and $124,000 for the six months
ended June 30, 2022 and 2021, respectively, are included in income and fees on
loans. Accretion income of $429,000 and $313,000 for the six months ended June
30, 2022 and 2021 are also included in income and fees on loans.

2. Taxable equivalent adjustments totaling $133,000 and $84,000 for the six months ended June 30, 2022 and 2021, respectively, are included in tax-exempt interest on marketable securities.

3. Federal Home Loan Bank advances interest expense includes $751,000 for the
six months ended June 30, 2022 and is the recognized mark on two advances that
were acquired in the SouthCrest acquisition that were called early.


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

Table 2 – Change in interest income and expense on a tax equivalent basis

                                                                  Six 

Months ended June 30, 2022

                                                        Compared to Six 

Months ended June 30, 2021 Increase

                                                                   (Decrease) Due to Changes in
(dollars in thousands)                                    Volume                 Rate                Total
Interest-earning assets:
Loans, net of unearned fees                          $       16,501          $  (11,967)         $    4,534
Investment securities, taxable                                7,796              (3,113)              4,683
Investment securities, tax-exempt                             1,543                (835)                708
Deposits in banks and short term investments                    (57)                119                  62
Total interest-earning assets (FTE)                             25,783            (15,796)            9,987
Interest-bearing liabilities:
Interest-Bearing Demand and Savings Deposits                    390                (133)                257
Time Deposits                                                   566                (821)               (255)
Federal funds purchased                                           -                  27                  27
Federal Home Loan Bank Advances                                 545                 417                 962
Paycheck Protection Program Liquidity Facility                 (185)                 92                 (93)
Other Borrowed Money                                             21                  76                  97
Total interest-bearing liabilities                            1,337                (342)                995
Increase in net interest income (FTE)                $       24,446         

($15,454) $8,992

Allowance for loan losses

The provision for loan losses is based on management's evaluation of probable,
inherent losses in the loan portfolio and unfunded commitments and the
corresponding analysis of the allowance for loan losses at quarter-end.
Provision for loan losses for the three and six months ended June 30, 2022 was
$1.1 million and $1.2 million compared to zero and $500,000 for the same period
in 2021, respectively. The amount of provision expense recorded in each period
was the amount required such that the total allowance for loan losses reflected
the appropriate balance, in the estimation of management, sufficient to cover
probable, inherent loan losses in the loan portfolio. The increase in provision
for loan losses in the three and six months ended June 30, 2022 compared to the
same periods in 2021 is largely due to the loan growth the Bank has experienced
in the second quarter of 2022. See the section captioned "Loans and Allowance
for Loan Losses" elsewhere in this discussion for further analysis of the
provision for loan losses.



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Non-interest income

The following table represents the major components of noninterest income for
the periods indicated.
Table 3 - Noninterest Income
                                Three Months Ended June 30,                    Change                       Six Months Ended June 30,                        Change
(dollars in thousands)             2022              2021            Amount            Percent                2022                2021             Amount            Percent
Service charges on
deposits                       $   1,895          $ 1,264          $   631                49.9  %       $       3,720          $  2,486          $ 1,234                 49.6  %
Mortgage fee income                2,736            3,005             (269)               (9.0)                 5,648             7,000           (1,352)               (19.3)
Gain on sales of SBA
loans                              1,863            1,263              600                47.5                  3,589             2,735              854                 31.2
(Loss)/gain on sales of
securities                             -              141             (141)              100.0                     24               137             (113)               (82.5)
Interchange fee                    2,159            1,667              492                29.5                  4,159             3,197              962                 30.1
BOLI income                          353              222              131                59.0                    665               430              235                 54.7
Other noninterest income           1,052              189              863               456.6                  1,400               367            1,033                281.5
Total noninterest income       $  10,058          $ 7,751          $ 2,307               29.76  %       $      19,205          $ 16,352          $ 2,853                17.45  %


For the three and six months ended June 30, 2022, noninterest income increased
$2.3 million and $2.9 million, respectively, compared to the same periods in
2021. The primary reason for this increase was due to increases in almost all
noninterest income accounts offset by the decrease in mortgage fee income.

Service charges on deposit accounts. For the three and six months ended June 30,
2022, services charges on deposits was $1.9 million and $3.7 million, an
increase of $631,000, or 49.9%, and $1.2 million, or 49.6%, compared to the same
periods in 2021, respectively. This increase in service charges on deposits was
primarily attributable to the additional deposits acquired from the SouthCrest
acquisition and the bank's strategic efforts to grow deposits.

Mortgage Fee Income. For the three and six months ended June 30, 2022, mortgage
fee income was $2.7 million and $5.6 million, a decrease of $269,000, or 9.0%,
and $1.4 million, or 19.3%, compared to the same periods in 2021, respectively.
During the three and six months ended June 30, 2021, there was a continued
increase in the demand for mortgage rate locks and mortgage closings due to a
historically low interest rate environment. As the rates started to increase in
2022, the demand slowed down which primarily caused the decrease.

Gain on Sale of SBA loans. For the three and six months ended June 30, 2022, net
realized gains on the sale of the guaranteed portion of SBA loans totaled $1.9
million and $3.6 million, an increase of $600,000, or 47.5%, and $854,000, or
31.2%, compared to the same periods in 2021, respectively. The increase in 2022
was a result of continued growth in the Small Business Specialty Lending
division compared to the same periods in 2021.

Interchange Fees. For the three and six months ended June 30, 2022, interchange
fee income was $2.2 million and $4.2 million, an increase of $492,000, or 29.5%,
and $962,000, or 30.1%, compared to the same periods in 2021. The increase in
interchange fees was primarily attributable growth of customers from the
SouthCrest acquisition and the continued success with the Discover® Card
program.

Other noninterest income. For the three and six months ended June 30, 2022,
other noninterest income was $1.1 million and $1.4 million, an increase of
$863,000, or 456.6%, and $1.0 million, or 281.5%, compared to the same periods
in 2021. The increase in other income was primarily attributable to insurance
commissions from the insurance acquisitions that occurred in third and fourth
quarter of 2021 and equity method investment loss taken in first quarter of
2022. .


                                       47
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Non-interest expenses

The following table represents the major components of noninterest expense for
the periods indicated.
Table 4 - Noninterest Expense
                                       Three Months Ended June 30,                        Change                        Six Months Ended June 30,                     Change
(dollars in thousands)                   2022                 2021             Amount             Percent                 2022                2021             Amount       Percent
Salaries and employee benefits     $       15,072          $ 10,126          $ 4,946                  48.8  %       $      28,344          $ 20,081          $  8,263          41.1  %
Occupancy and equipment                     1,608             1,245              363                  29.2                  3,227             2,571               656          25.5
Acquisition-related expenses                    1               699             (698)                (99.9)                   125               699              (574)        (82.1)
Information technology expenses             2,549             1,856              693                  37.3                  4,903             3,448             1,455          42.2
Professional fees                           1,073               690              383                  55.5                  1,946             1,177               769          65.3
Advertising and public relations              695               566              129                  22.8                  1,464             1,146               318          27.7
Communications                                417               308              109                  35.4                    854               527               327          62.0

Other noninterest expense                   3,061             1,975            1,086                  55.0                  5,419             3,570             1,849          51.8
Total noninterest expense          $       24,476          $ 17,465          $ 7,011                  40.1  %       $      46,282          $ 33,219     

$13,063 39.3%


Noninterest expense increased for the three and six months ended June 30, 2022
by $7.0 million and $13.1 million, respectively, compared to the same periods in
2021. Increases in salaries and employee benefits and information technology
expenses and other expenses accounted for the majority of the increases, which
were partially offset by a decrease in acquisition expenses.

Salaries and Employee Benefits. Salaries and employee benefits for the three and
six months ended June 30, 2022 was $15.1 million and $28.3 million, an increase
of $4.9 million, or 48.8%, and $8.3 million, or 41.1%, compared to the same
periods in 2021, respectively. The increase in both periods of 2022 is primarily
attributable to the salary and employee benefits from the additional employees
from the SouthCrest acquisition compared to the same periods in 2021.

Information technology Expenses. Information technology expense for the three
and six months ended June 30, 2022 was $2.5 million and $4.9 million, an
increase of $693,000, or 37.3% and $1.5 million, or 42.2%, compared to the same
periods in 2021. These increases relate to increases in employees and data
processing costs from the SouthCrest merger and software costs due to the
implementation of new software platforms used in various areas of the bank.

Acquisition-related Expenses. Acquisition-related expenses for the three and six
months ended June 30, 2022 decreased $698,000, or 99.9% and $574,000, or 82.1%,
compared to the same periods in 2021, respectively. These decreases are related
to the completion of the SouthCrest and insurance acquisitions that occurred in
2021.

Other noninterest expenses. Other noninterest expense for the three and six
months ended June 30, 2022 was $3.1 million and $5.4 million, an increase of
$1.1 million, or 55.0% and $1.8 million, or 51.8%, compared to the same periods
in 2021. These increases relate primarily to increased amortization expense of
intangibles and servicing rights valuations.

income tax expense

Income tax expense for the three and six months ended June 30, 2022 was $234,000
and $1.4 million compared to $1.4 million and $3.0 million for the three and six
months ended June 30, 2021, respectively. The Company's effective tax rates for
the three and six months ended June 30, 2022 were 6.4% and 13.8% compared to
25.4% and 25.3%, respectively for the same periods of 2021. The largest driver
of the difference is tax exempt income primarily from BOLI and tax exempt
interest along with the benefit of Georgia state tax credits.

Balance sheet review

Total assets remained stable at $2.7 billion at June 30, 2022 and December 31, 2021.


                                       48

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Loans and provision for loan losses

At June 30, 2022, gross loans outstanding (excluding loans held for sale) were
$1.5 billion, an increase of $114.8 million, or 8.6%, compared to $1.3 billion
at December 31, 2021. During the six months ended June 30, 2022, PPP loans
totaling approximately $8.4 million were forgiven through the SBA.

At June 30, 2022, approximately 71.1% of our loans are secured by commercial
real estate. The following table presents a summary of the loan portfolio as of
June 30, 2022 and December 31, 2021.
Table 5 - Loans Outstanding
(dollars in thousands)                          June 30, 2022      December 31, 2021
Construction, land and land development        $    187,045       $         165,446
Other commercial real estate                        846,381                 787,392
Total commercial real estate                      1,033,426                 952,838
Residential real estate                             216,189                 212,527
Commercial, financial, & agricultural (*)           184,798                 154,048
Consumer and other                                   18,392                  18,564
Total loans                                    $  1,452,805       $       1,337,977

As a percentage of total loans:
Construction, land and land development                12.9  %                 12.4  %
Other commercial real estate                           58.2  %                 58.8  %
Total commercial real estate                           71.1  %                 71.2  %
Residential real estate                                14.9  %                 15.9  %
Commercial, financial & agricultural                   12.7  %                 11.5  %
Consumer and other                                      1.3  %                  1.4  %
Total loans                                             100  %                  100  %

Understand $128,000 and $9.0 million of PPP loans to June 30, 2022
andDecember 31, 2021

The Company's risk mitigation processes include an independent loan review
designed to evaluate the credit risk in the loan portfolio and to ensure credit
grade accuracy. The analysis serves as a tool to assist management in assessing
the overall credit quality of the loan portfolio and the adequacy of the
allowance for loan losses. Loans classified as "substandard" are loans which are
inadequately protected by the current credit worthiness and paying capacity of
the borrower and/or the collateral pledged. These assets exhibit well-defined
weaknesses or are showing signs there is a distinct possibility the Company will
sustain some loss if the deficiencies are not corrected. These weaknesses may be
characterized by past due performance, operating losses and/or questionable
collateral values. Loans classified as "doubtful" are those loans that have
characteristics similar to substandard loans but have an increased risk of loss.
Loans classified as "loss" are those loans which are considered uncollectible
and are in the process of being charged off.

The Company regularly monitors the composition of the loan portfolio as part of
its evaluation over the adequacy of the allowance for loan losses. The Company
focuses on the following loan categories: (1) construction, land and land
development; (2) commercial, financial and agricultural; (3) commercial and
farmland real estate; (4) residential real estate; and (5) consumer.

The allowance for loan losses is a reserve established through charges to
earnings in the form of a provision for loan losses. The provision for loan
losses is based on management's evaluation of the size and composition of the
loan portfolio, the level of non-performing and past-due loans, historical
trends of charged off loans and recoveries, prevailing economic conditions and
other factors management deems appropriate. The Company's management has
established an allowance for loan losses which it believes is adequate for the
probable incurred losses in the loan portfolio. Based on a credit evaluation of
the loan portfolio, management presents a quarterly review of the allowance for
loan losses to the Company's Board of Directors, which primarily focuses on risk
by evaluating individual loans in certain risk categories. These categories have
also been established by management and take the form of loan grades. By grading
the loan portfolio in this manner the Company's


                                       49

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respectively.

The allowance for loan losses is established by examining (1) the large
classified loans, nonaccrual loans and loans considered impaired and evaluating
them individually to determine the specific reserve allocation and (2) the
remainder of the loan portfolio to allocate a portion of the allowance based on
past loss experience and the economic conditions for the particular loan
category. The Company also considers other factors such as changes in lending
policies and procedures; changes in national, regional and/or local economic and
business conditions; changes in the nature and volume of the loan portfolio;
changes in the experience, ability and depth of either the market president or
lending staff; changes in the volume and severity of past-due and classified
loans; changes in the quality of the loan review system; and other factors
management deems appropriate.

The allowance for loan losses was $14.0 million at June 30, 2022 compared to
$12.9 million at June 30, 2021, an increase of $1.1 million, or 8.5%. The
allowance for loan losses as a percentage of loans was 0.96% and 1.26% at
June 30, 2022 and 2021, respectively. The provision was $1.2 million compared to
$500,000 for the six months ended June 30, 2022 and June 30, 2021, respectively.
The provision was $1.1 million compared to $0 for the three months ended
June 30, 2022 and June 30, 2021, respectively. The amount of provision expense
recorded in each period was the amount required such that the total allowance
for loan losses reflected the appropriate balance, in the estimation of
management, sufficient to cover probable, inherent losses in the loan portfolio.
The primary reason for the increase in allowance to loans as a percentage for
loans and provision is primarily due to the bank's loan growth.

Additional information about the Company's allowance for loan losses is provided
in Note 4 to our consolidated financial statements as of June 30, 2022, included
elsewhere in this Form 10-Q.

management is able to effectively assess the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thereby analyze the adequacy of the loan loss provision. The following table presents an analysis of the allowance for loan losses as at and for the six months ended June 30, 2022

Table 6 - Analysis of Allowance for
Loan Loss
                                                     June 30, 2022                                  June 30, 2021
(dollars in thousands)                      Reserve                   %*                   Reserve                   %*
Construction, land and land development $       1,052                    12.9  %       $       1,125                    12.4  %
Other commercial real estate                    8,028                    58.2  %               7,277                    58.8  %
Residential real estate                         1,488                    14.9  %               2,273                    15.9  %
Commercial, financial, & agricultural           1,678                    12.7  %               1,773                    11.5  %
Consumer and other                              1,717                     1.3  %                 423                     1.4  %
                                        $      13,963                     100  %       $      12,871                     100  %

and 2021:

                                       50

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*The percentage represents the loan balance in each category expressed as a percentage of the total loans at the end of the period. The following table provides a summary of the allowance for loan losses for the three and six month periods ended June 30, 2022

and 2021.

                                                               Three Months Ended                                Six Months Ended
(dollars in thousands)                                   June 30, 2022      

Table 7 – Summary of Allowance for Loan Losses June 30, 2021 June 30, 2022
June 30, 2021

             $      12,919       

Provision for loan loss – opening balance $12,693 $12,910
$12,127

                             -                      -                      -                      -
Other commercial real estate                                        -                     36                     58                     36
Residential real estate                                            30                      -                     48                      -
Commercial, financial, & agricultural                             132                      -                    148                     15
Consumer and other                                                  5                     32                     21                     43
Total loans charged-off                                           167                     68                    275                     94
Recoveries:
Construction, land and land development                             5                     70                     11                     85
Other commercial real estate                                       67                     95                     74                     95
Residential real estate                                            18                     44                     22                    110
Commercial, financial, & agricultural                              12                     15                     56                     18
Consumer and other                                                  9                     22                     15                     30
Total recoveries                                                  111                    246                    178                    338
Net (recoveries)/charge-offs                                       56                   (178)                    97                   (244)
Provision for loan loss                                         1,100                      -                  1,150                    500
Allowance for loan loss - ending balance                $      13,963       

Allocations: construction, land and land development $12,871 $13,963

Net (recoveries)/charge-offs to average loans
(annualized)                                                     0.02  %               (0.07) %                0.01  %               (0.05) %
Allowance for loan losses to total loans                         0.96                   1.26                   0.96                   1.26
Allowance to nonperforming loans                               282.31                 139.83                 282.31                 139.83


$12,871 Management believes that the allowance for loan losses is sufficient to cover the losses inherent in the loan portfolio atJune 30, 2022

                                       51

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.

Asset quality experienced some improvement during the first six months of 2022.
Nonperforming assets include nonaccrual loans, accruing loans contractually past
due 90 days or more, repossessed personal property and other real estate owned
("OREO"). Nonaccrual loans totaled $4.9 million at June 30, 2022, a decrease of
$503,000, or 9.2%, from $5.4 million at December 31, 2021. There were no loans
contractually past due 90 days or more and still accruing for either period
presented. At June 30, 2022, OREO totaled $246,000, a decrease of $35,000, or
12.5%, compared with $281,000 at December 31, 2021. The decrease in OREO was due
to a donation of assets during the first six months of 2022. As of June 30, 2022
, total nonperforming assets as a percent of total assets decreased to 0.19%
compared with 0.21% at December 31, 2021.

Generally, loans are placed on non-accrual status if principal or interest
payments become 90 days past due and/or management deems the collectability of
the principal and/or interest to be in question, as well as when required by
regulatory requirements. Loans to a customer whose financial condition has
deteriorated are considered for non-accrual status whether or not the loan is
90 days or more past due. Once interest accruals are discontinued, accrued but
uncollected interest is charged to current year operations. Subsequent loan
payments made on nonaccrual loans are recorded as a reduction of principal, and
interest income is recorded only after principal recovery is reasonably assured.
Classification of a loan as nonaccrual does not preclude the ultimate collection
of loan principal or interest.

Foreclosed property is initially recorded at fair value, less estimated costs to
sell. If the fair value, less estimated costs to sell, at the time of
foreclosure is less than the loan balance, the deficiency is charged against the
allowance for loan losses. If the lesser of the fair value, less estimated costs
to sell, or the listed selling price, less the costs to sell, of the foreclosed
property decreases during the holding period, a valuation allowance is
established with a charge to foreclosed property expense. When the foreclosed
property is sold, a gain or loss is recognized on the sale for the difference
between the sales proceeds and the carrying amount of the property.

Nonperforming assets at June 30, 2022 and December 31, 2021 were as follows:
Table 8 - Nonperforming Assets
(dollars in thousands)                                June 30, 2022      December 31, 2021
Nonaccrual loans                                     $      4,946       $   

Non-performing assets

Loans past due 90 days and accruing                             -                      -
Other real estate owned                                       246                    281
Repossessed assets                                             48                     49
Total nonperforming assets                           $      5,240       $          5,779
Nonaccrual loans by loan segment
Construction, land and land development              $         68       $             31
Commercial real estate                                        805                    837
Residential real estate                                     2,367                  3,839
Commercial, financial & agriculture                         1,537                    708
Consumer & other                                              169                     34
Total nonaccrual loans                               $      4,946       $          5,449

NPAs as a percentage of total loans and OREO                 0.36  %                0.43  %
NPAs as a percentages of total assets                        0.19  %                0.21  %
Nonaccrual loans as a percentage of total loans              0.34  %        

5,449


The restructuring of a loan is considered a troubled debt restructuring (" TDR")
if both (i) the borrower is experiencing financial difficulties and (ii) the
Company has granted the borrower a concession that we would not consider
otherwise. At June 30, 2022, TDR increased to $7.6 million from $7.3 million
reported at December 31, 2021. At June 30, 2022, $514,000 in TDRs were
considered nonperforming and at December 31, 2021, all TDRs were performing
according to their modified terms and were therefore not considered to be
nonperforming assets.





                                       52
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0.41%

Deposits Deposits at June 30, 2022 and December 31, 2021

               June 30, 2022       December 31, 2021
Noninterest-bearing deposits      $      572,978      $          552,576
Interest-bearing deposits                872,668                 930,811
Savings                                  556,738                 541,993
Time, $250,000 and over                   59,900                  73,407
Other time                               269,227                 275,821
Total deposits                    $    2,331,511      $        2,374,608


Total deposits decreased $43.1 million to $2.33 billion at June 30, 2022 from
$2.37 billion at December 31, 2021. As of June 30, 2022, 24.6% of total deposits
were comprised of noninterest-bearing accounts and 75.4% comprised of
interest-bearing deposit accounts, compared to 23.3% and 76.7% as of
December 31, 2021, respectively. The decline in our deposits is due to a
combination of changes in post COVID-19 customer saving and spending habits as
well as the seasonality of our public funds.

We had $10.3 million and $883,000 in brokered deposits at June 30, 2022 and
December 31, 2021, respectively. We use brokered deposits, subject to certain
limitations and requirements, as a source of funding to support our asset growth
and augment the deposits generated from our branch network, which are our
principal source of funding. Our level of brokered deposits varies from time to
time depending on competitive interest rate conditions and other factors, and
tends to increase as a percentage of total deposits when the brokered deposits
are less costly than issuing internet certificates of deposit or borrowing from
the FHLB.


were as follows: Table 9 – Deposits (in thousands of dollars)

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

The Company's exposure to credit loss is represented by the contractual amount
of these commitments. The Company follows the same credit policies in making
commitments as it does for on-balance sheet instruments. The Company evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary, upon extension of credit, is based on
management's credit evaluation of the borrower. The type of collateral held
varies, but may include cash or cash equivalents, unimproved or improved real
estate, personal property or other acceptable collateral.

See Note 7 to our consolidated financial statements as of June 30, 2022,
included elsewhere in this Form 10-Q, for a table setting forth the financial
instruments that were outstanding whose contract amounts represent credit risk
and more information regarding our off-balance sheet arrangements as of June 30,
2022 and December 31, 2021.

Liquidity

An important part of the Bank's liquidity resides in the asset portion of the
balance sheet, which provides liquidity primarily through loan interest and
principal repayments and the maturities and sales of securities, as well as the
ability to use these assets as collateral for borrowings on a secured basis.

The Bank's main source of liquidity is customer interest-bearing and
noninterest-bearing deposit accounts. Liquidity is also available from wholesale
funding sources consisting primarily of Federal funds purchased, FHLB advances
and brokered deposits. These sources of liquidity are generally short-term in
nature and are used as necessary to fund asset growth and meet other short-term
liquidity needs.

To plan for contingent sources of funding not satisfied by both local and
out-of-market deposit balances, the Company and the Bank have established
multiple borrowing sources to augment their funds management. The Company has
borrowing capacity through membership of the Federal Home Loan Bank program. The
Bank has also established overnight borrowing


                                       53

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for Federal Funds purchased through various correspondent banks. The outstanding
balance of Federal Funds purchased at June 30, 2022 and December 31, 2021 was
$23.8 million and $0, respectively.

Cash and cash equivalents at June 30, 2022 and December 31, 2021 were $76.5
million and $197.2 million, respectively. This decrease is primarily
attributable to the deployment of funds used for funding current loan growth.
Management believes the various funding sources discussed above are adequate to
meet the Company's liquidity needs without any material adverse impact on our
operating results.

Off-balance sheet arrangements OnFebruary 10, 2022
the Company carried out a public offering of approximately $63.5 million of its ordinary shares. The offering generated net proceeds of approximately$59.3 million

On May 20, 2022, the Company entered into a Subordinated Note Purchase Agreement
with certain qualified institutional buyers in which the Company issued and sold
$40.0 million in aggregate principal amount of its 5.25% Fixed-to-Floating Rate
Subordinated Notes due 2032.

Liquidity management involves the matching of cash flow requirements of
customers and the ability of the Company to manage those requirements. These
requirements of customers include, but are not limited to, deposits being
withdrawn or providing assurance to borrowers that sufficient funds are
available to meet their credit needs. We strive to maintain an adequate
liquidity position by managing the balances and maturities of interest-earning
assets and interest-bearing liabilities so that the balance we have in
short-term assets at any given time will adequately cover any reasonably
anticipated need for funds. Additionally, we maintain relationships with
correspondent banks, which could provide funds on short notice, if needed. We
have also invested in FHLB stock for the purpose of establishing credit lines
with the FHLB. At June 30, 2022 and December 31, 2021, we had $65.0 million of
outstanding advances from the FHLB. Based on the values of loans pledged as
collateral, we had $605.6 million and $574.7 million of additional borrowing
availability with the FHLB at June 30, 2022 and December 31, 2021, respectively.

The Company is a separate entity from the Bank, and as such it must provide for
its own liquidity. The Company is responsible for the payment of dividends
declared for its common shareholders and payment of interest and principal on
any outstanding debt or trust preferred securities. These obligations are met
through internal capital resources such as service fees and dividends from the
Bank, which are limited by applicable laws and regulations.


which were used to fund the repayment of the Company’s existing term note and line of credit and for other general corporate purposes.

The Bank is required under federal law to maintain certain minimum capital
levels based on ratios of capital to total assets and capital to risk-weighted
assets. The required capital ratios are minimums, and the federal banking
agencies may determine that a banking organization, based on its size,
complexity or risk profile, must maintain a higher level of capital in order to
operate in a safe and sound manner. Risks such as concentration of credit risks
and the risk arising from non-traditional activities, as well as the
institution's exposure to a decline in the economic value of its capital due to
changes in interest rates, and an institution's ability to manage those risks
are important factors that are to be taken into account by the federal banking
agencies in assessing an institution's overall capital adequacy.

The table below summarizes the capital requirements applicable to the Bank in
order to be considered "well-capitalized" from a regulatory perspective, as well
as the Bank's capital ratios as of June 30, 2022 and December 31, 2021. The Bank
exceeded all regulatory capital requirements and was considered to be
"well-capitalized" as of June 30, 2022 and December 31, 2021. There have been no
conditions or events since December 31, 2021 that management believes would
change this classification.
Table 10 - Capital Ratio Requirements
                                                               Minimum Requirement                   Well-capitalized¹
Risk-based ratios:
Common equity tier 1 capital (CET1)                                             4.5  %                                  6.5  %
Tier 1 capital                                                                  6.0                                     8.0
Total capital                                                                   8.0                                    10.0
Leverage ratio                                                                  4.0                                     5.0

Capital resources



                                       54

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Table 11 - Capital Ratios
Company                               June 30, 2022      December 31, 2021
CET1 risk-based capital ratio               12.31  %                9.87  %
Tier 1 risk-based capital ratio             13.62                  11.28
Total risk-based capital ratio              16.48                  12.05
Leverage ratio                               9.22                   7.25

Colony Bank
CET1 risk-based capital ratio               11.66  %               11.41  %
Tier 1 risk-based capital ratio             11.66                  11.41
Total risk-based capital ratio              12.41                  12.18
Leverage ratio                               8.10                   7.53





                                       55

(1) The provisions relating to prompt corrective actions only apply at bank level.

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