CAPITAL CITY BANK GROUP INC
For the period ended Jun 30, 2026. Filed Jul 29, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Jul 29, 2026
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Item 6. Exhibits
Signatures
INTRODUCTORY NOTE
Special Cautionary Notice Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations,
estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of
which are beyond our control.
The words “may,” “could,” “should,” “would,” “believe,”
“anticipate,” “estimate,” “expect,” “intend,” “plan,”
“target,” “vision,” “goal,” and similar expressions are intended to identify forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and uncertainties.
Forward-looking statements are based on current
assumptions and expectations that are subject to change and may prove to be inaccurate.
Our actual future results may differ materially from
those set forth in our forward-looking statements.
Our
ability
to
achieve
our
financial
objectives
could
be
adversely
affected
by
the
factors
discussed
in
detail
in
Part
II,
Item
1A.
“Risk
Factors” in this Quarterly Report on Form 10-Q and in Part I, Item 1A. “Risk Factors” in our Annual Report on
Form 10-K for the year ended
December 31,
(the “2025
Form 10-K”),
as updated
in our
subsequent
quarterly reports
filed on
Form 10-Q,
as well
as,
among other
factors:
Changes in trade, monetary, and fiscal policies and laws, including
actual changes in interest rates and the Fed Funds rate and
changes in international trade policies, tariffs and treaties affecting imports and exports, and their related impacts on
macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios;
Inflation, interest rate, market and monetary fluctuations;
Local, regional, national, and international economic conditions (including the value of the U.S. Dollar in relation to the
currencies of other advanced and emerging market countries and the performance of both domestic and international equity
and debt markets and valuation of securities traded on recognized domestic and international exchanges), and the impact they
may have on us and our clients and our assessment of that impact;
Supply-demand imbalances and general economic conditions affecting local real estate prices and a general deterioration in
commercial real estate market fundamentals;
The costs and effects of legal and regulatory developments, the outcomes of legal proceedings or regulatory or other
governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory
approvals;
The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and
insurance) and their application with which we and our subsidiaries must comply;
The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as other
accounting standard setters;
The accuracy of our financial statement estimates and assumptions;
Changes in the creditworthiness, financial performance and/or condition of our borrowers;
Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs;
Changes in estimates of future credit loss reserve requirements based upon the periodic review thereof under relevant
regulatory and accounting requirements;
Changes in our liquidity position;
Changes in our capital levels, capital requirements or our ability to maintain adequate regulatory capital ratios;
The timely development and acceptance of new products and services as well as risks (including reputational and litigation)
attendant thereto, and perceived overall value of these products and services by users;
Changes in consumer spending, borrowing, and saving habits;
Changes in deposit levels, deposit mix, pricing, or the availability and cost of other funding sources;
Greater than expected costs or difficulties related to the integration of new products and lines of business;
Increased competition and its effect on deposit fees;
Technological changes;
Risks associated with the development and use of artificial intelligence;
The cost and effects of cyber incidents or other failures, interruptions, or security breaches of our systems or those of our
customers or third-party providers;
Fraud or misconduct by internal or external parties which we may not be able to prevent, detect or mitigate;
Dispositions, acquisitions and integration of acquired businesses;
Impairment of our goodwill or other intangible assets;
Changes in the reliability of our vendors, internal control systems, or information systems;
Our ability to increase market share and control expenses;
Our ability to attract and retain qualified employees;
Changes in our organization, compensation, and benefit plans;
The soundness of other financial institutions;
Volatility
and disruption in national and international financial and commodity markets;
Changes in the competitive environment in our markets and among banking organizations and other financial service
providers;
Action or inaction by the federal government, including as a result of any prolonged government shutdown or government
intervention in the U.S. financial system;
A deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid
exceeding the debt ceiling, and uncertainties surrounding the federal budget and economic policy;
The effects of natural disasters (including hurricanes), widespread health emergencies (including pandemics), military conflict
(including impacts related to the conflicts in the Middle East and resulting disruptions to energy and other commodities
markets and supply chains),
terrorism, civil unrest, climate change or other geopolitical events;
Our ability to declare and pay dividends;
Structural changes in the markets for origination, sale and servicing of residential mortgages;
Any inability to implement and maintain effective internal control over financial reporting and/or disclosure control;
Potential claims, damages, penalties, fines, costs and reputational damage resulting from pending or future litigation,
regulatory proceedings and enforcement actions;
Negative publicity and the impact on our reputation; including the speed and scale at which information can spread through
social media or digital channels, which could amplify adverse market or customer reactions; and
The limited trading activity and concentration of ownership of our common stock.
However, other factors besides those listed in
or discussed in this Form 10-Q also could adversely affect our results,
and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties.
Any forward-looking
statements made by us or on our behalf speak only as of the date they are made.
We do not undertake to update any forward-looking
statement, except as required by applicable law.
PART
I.
FINANCIAL INFORMATION
GROUP,
INC.
OF FINANCIAL CONDITION
December 31,
(Dollars in Thousands, Except Par Value)
ASSETS
Cash and Due From Banks
$
67,124
$
62,189
Federal Funds Sold and Interest Bearing Deposits
412,609
467,782
Total Cash and Cash Equivalents
479,733
529,971
Investment Securities, Available
for Sale, at fair value (amortized cost of $
872,397
and $
656,546
)
853,608
643,922
Investment Securities, Held to Maturity (fair value of $
294,070
and $
369,320
)
304,460
377,446
2,068
2,069
Total Investment
Securities
1,160,136
1,023,437
Loans Held For Sale, at fair value
34,278
21,695
(31,007)
(31,001)
Loans Held for Investment, Net
2,468,864
2,515,117
Premises and Equipment, Net
81,148
79,457
Goodwill
89,095
89,095
Other Real Estate Owned
3,424
1,936
Other Assets
133,805
125,057
Total Assets
$
$
LIABILITIES
Deposits:
Noninterest Bearing Deposits
$
1,344,694
$
1,251,886
Interest Bearing Deposits
2,376,315
2,410,426
Total Deposits
3,721,009
3,662,312
46,907
50,092
33,303
42,582
Other Long-Term
Other Liabilities
78,602
77,248
Total Liabilities
3,880,388
3,832,914
SHAREOWNERS’ EQUITY
Preferred Stock, $
0.01
par value;
3,000,000
shares authorized;
no
shares issued and outstanding
Common Stock, $
0.01
par value;
90,000,000
shares authorized;
and
17,084,386
shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively
Additional Paid-In Capital
40,821
41,650
Retained Earnings
531,291
508,443
Accumulated Other Comprehensive (Loss) Income, net of tax
(2,188)
2,587
Total Shareowners’
Equity
570,095
552,851
Total Liabilities and Shareowners’
Equity
$
$
GROUP,
INC.
OF INCOME
(Dollars in Thousands, Except Per Share
Data)
INTEREST INCOME
Loans, including Fees
$
38,212
$
40,872
$
76,466
$
81,350
Investment Securities:
Taxable
10,249
6,666
19,291
12,469
Tax Exempt
Funds Sold and Interest Bearing Deposits
3,366
3,909
7,077
7,405
Total Interest Income
51,838
51,459
102,858
101,241
INTEREST EXPENSE
6,933
7,405
14,328
14,788
1,090
Other Long-Term
Total Interest Expense
7,640
8,275
15,843
16,510
NET INTEREST INCOME
44,198
43,184
87,015
84,731
1,631
1,388
Net Interest Income After Provision For Credit Losses
43,279
42,564
85,384
83,343
NONINTEREST INCOME
5,656
5,320
11,254
10,381
3,858
3,774
7,488
7,288
Fees
4,185
5,206
8,236
10,969
4,660
4,190
8,912
8,010
Other
2,240
1,524
4,642
3,273
Total Noninterest
Income
20,599
20,014
40,532
39,921
NONINTEREST EXPENSE
Compensation
25,836
26,490
51,539
52,738
Occupancy, Net
7,319
7,071
14,402
13,864
Other
9,485
8,977
18,072
14,637
Total Noninterest
Expense
42,640
42,538
84,013
81,239
INCOME BEFORE INCOME TAXES
21,238
20,040
41,903
42,025
4,961
4,996
9,809
10,123
NET INCOME
$
16,277
$
15,044
$
32,094
$
31,902
BASIC NET INCOME PER SHARE
$
0.95
$
0.88
$
1.88
$
1.87
DILUTED NET INCOME PER SHARE
$
0.95
$
0.88
$
1.87
$
1.87
Average Common
Basic Shares Outstanding
17,101
17,056
17,115
17,042
Average Common
Diluted Shares Outstanding
17,126
17,088
17,133
17,067
GROUP,
INC.
OF COMPREHENSIVE INCOME (LOSS)
NET INCOME
$
16,277
$
15,044
$
32,094
$
31,902
Other comprehensive income, before
tax:
Investment Securities:
Change in net unrealized loss on securities available for sale
(3,130)
2,737
(6,163)
7,744
Amortization of unrealized losses on securities transferred from
available for sale to held to maturity
Derivative:
Change in net unrealized gain on effective cash flow
derivative
(485)
(1,189)
Amortization of terminated cash flow derivative gain
(200)
(398)
Other comprehensive (loss) income, before
tax
(3,274)
2,596
(6,397)
7,397
Deferred tax (benefit) expense related to other comprehensive (loss) income
(831)
(1,622)
1,851
Other comprehensive (loss) income, net of tax
(2,443)
1,947
(4,775)
5,546
TOTAL COMPREHENSIVE
INCOME
$
13,834
$
16,991
$
27,319
$
37,448
GROUP,
INC.
OF CHANGES IN SHAREOWNERS’ EQUITY
Accumulated
Other
Additional
Comprehensive
Shares
Common
Paid-In
Retained
Income (Loss),
(Dollars In Thousands, Except Share Data)
Outstanding
Stock
Capital
Earnings
Net of Taxes
Total
Balance, April 1, 2026
17,097,636
$
$
39,854
$
519,632
$
$
559,912
16,277
16,277
Other Comprehensive Loss, net of tax
(2,443)
(2,443)
0.2700
(4,618)
(4,618)
13,441
Balance, June 30, 2026
$
$
40,821
$
531,291
$
(2,188)
$
570,095
Balance, April 1, 2025
17,054,787
$
$
38,576
$
476,715
$
(2,887)
$
512,575
15,044
15,044
Other Comprehensive Income, net of tax
1,947
1,947
0.2400
(4,094)
(4,094)
11,608
Balance, June 30, 2025
17,066,395
$
$
39,527
$
487,665
$
(940)
$
526,423
Balance, January 1, 2026
17,084,386
$
$
41,650
$
508,443
$
2,587
$
552,851
32,094
32,094
Other Comprehensive Loss, net of tax
(4,775)
(4,775)
0.5400
(9,246)
(9,246)
Repurchase of Common Stock
(63,088)
(2,639)
(2,639)
89,779
Balance, June 30, 2026
$
$
40,821
$
531,291
$
(2,188)
$
570,095
Balance, January 1, 2025
16,974,513
$
$
37,684
$
463,949
$
(6,486)
$
495,317
31,902
31,902
Other Comprehensive Income, net of tax
5,546
5,546
0.4800
(8,186)
(8,186)
91,882
Balance, June 30, 2025
17,066,395
$
$
39,527
$
487,665
$
(940)
$
526,423
GROUP,
INC.
OF CASH FLOWS
CASH FLOWS FROM OPERATING
ACTIVITIES
$
32,094
$
31,902
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
1,631
1,388
Depreciation
3,649
3,676
Amortization of Premiums, Discounts and Fees, net
1,503
2,272
Amortization of Intangible Asset
Originations of Loans Held-for-Sale
(222,589)
(218,167)
Proceeds From Sales of Loans Held-for-Sale
221,097
232,204
(8,912)
(8,010)
Net (Additions) Deletions for Capitalized Mortgage Servicing Rights
(3)
Net Tax Benefit from
(132)
(154)
Deferred Income Taxes
1,109
1,391
Net Change in Operating Leases
(10)
(33)
Net Gain on Sales and Write-Downs of Other Real Estate Owned
(334)
(4,514)
Gain from Insurance Claim on Premises
(453)
Net (Increase) Decrease in Other Assets
(2,334)
5,124
Net Increase in Other Liabilities
1,468
6,363
Net Cash Provided By Operating Activities
28,700
54,491
CASH FLOWS FROM INVESTING ACTIVITIES
Securities Held to Maturity:
(79,337)
(47,841)
Proceeds from Payments, Maturities, and Calls
152,205
152,124
Sale:
(271,711)
(155,436)
Proceeds from Payments, Maturities, and Calls
56,081
32,471
Equity Securities:
(110)
(60)
Net Decrease in Equity Securities
Purchases of Loans Held for Investment
(269)
(304)
Proceeds from Sales of Loans
34,982
25,696
Net Decrease (Increase) in Loans Held for Investment
4,086
(4,047)
Purchase of Bank Owned Life Insurance
(6,000)
Proceeds from Insurance Claims on Premises
Proceeds From Sales of Other Real Estate Owned
2,226
7,341
Purchases of Premises and Equipment
(6,590)
(4,222)
Net Cash (Used In) Provided By Investing Activities
(113,873)
5,816
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits
58,697
32,876
Net (Decrease) Increase in Short-Term
(3,185)
6,237
Principal Payments of Subordinated Notes
(9,279)
(10,305)
Dividends Paid
(9,246)
(8,186)
Payments to Repurchase Common Stock
(2,639)
Proceeds from Issuance of Common Stock Under Purchase Plans
Net Cash Provided By Financing Activities
34,935
21,241
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(50,238)
81,548
Cash and Cash Equivalents at Beginning of Period
529,971
391,854
Cash and Cash Equivalents at End of Period
$
479,733
$
473,402
Supplemental Cash Flow Disclosures:
Interest Paid
$
16,397
$
16,543
Federal Income Taxes
Paid
$
5,250
$
2,600
State and Local Income Taxes Paid:
Florida
1,585
All Other
Supplemental Noncash Items:
Loans and Premises Transferred to Other Real Estate Owned
$
3,380
$
2,592
Loans Transferred from Held for Investment
to Held for Sale, net
$
37,161
$
22,232
GROUP,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 –
BUSINESS AND BASIS OF PRESENTATION
Nature of Operations
.
Capital City Bank Group, Inc. (“CCBG” or the “Company”) provides a full range of
banking and banking-
related services to individual and corporate clients through its wholly owned
subsidiary, Capital City Bank (“CCB” or the
“Bank”),
with banking offices located in Florida, Georgia,
and Alabama.
The Company is subject to competition from other financial
institutions, is subject to regulation by certain government agencies and undergoes
periodic examinations by those regulatory
authorities.
Basis of Presentation
.
The consolidated financial statements in this Quarterly Report on Form
10-Q include the accounts of CCBG
and CCB.
All material inter-company transactions and accounts have
been eliminated.
Certain previously reported amounts have
been reclassified to conform to the current year’s presentation.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X.
Accordingly,
they do not include all of the information and notes required by generally accepted
accounting principles for complete financial
statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included.
The Consolidated Statement of Financial Condition at December
31, 2025 has been derived from the audited consolidated financial
statements at that date, but does not include all of the information and notes
required by generally accepted accounting principles for
complete financial statements.
For further information, refer to the consolidated financial statements and notes
thereto included in the
Company’s 2025 Form
10-K.
Accounting Standards Updates
Proposed Accounting Standards
,
ASU No. 2023-06, “Disclosure Improvements:
Codification Amendments in Response to the SEC’s
Disclosure Update and Simplification Initiative.”
Accounting Standards Update
(“ASU”) 2023-06 is intended to clarify or improve
disclosure and presentation requirements of a variety of topics, which will allow users to
more easily compare entities subject to the
SEC’s existing disclosures with those
entities that were not previously subject to the requirements and align the requirements
in the
FASB accounting
standard codification with the SEC’s
regulations. ASU 2023-06 is to be applied prospectively,
and early adoption is
prohibited. For reporting entities subject to the SEC’s
existing disclosure requirements, the effective
dates of ASU 2023-06 will be the
date on which the SEC’s removal of
that related disclosure requirement from Regulation S-X or Regulation
S-K becomes effective. If
by June 30, 2027, the SEC has not removed the applicable requirement from
Regulation S-X or Regulation S-K, the pending content
of the related amendment will not become effective for
any entities. The Company is currently evaluating the provisions of the
amendments and the impact on its future consolidated statements.
ASU No. 2024-03, “Income Statement — Reporting Comprehensive
Income — Expense Disaggregation
Disclosures (Subtopic 220-
40): Disaggregation of Income Statement
Expenses.”
ASU 2024-03 introduces new requirements to disclose additional information
about certain types of expenses, including employee compensation, depreciation,
intangible asset amortization, and selling expenses.
ASU 2024-03 is effective for the Company as of January 1, 2027. The
Company is currently evaluating the impact of the incremental
disclosures that will be required under the standard.
ASU 2025-06, “Intangibles - Goodwill and Other -Internal-Use Software
(Subtopic 350-40): Targeted
Improvements to the
Accounting for Internal-Use Software.”
The ASU updates accounting for internal-use software by shifting
from a stage-based model
to a principles-based approach aligned with modern development. Key
provisions include new capitalization criteria based on
authorization, funding commitment, and probable completion, removal
of development stages, integrated website guidance, and
enhanced disclosures. ASU 2025-06 is effective for the Company
as of January 1, 2027. The Company is currently evaluating the
provisions of the amendments and the impact on its future consolidated statements
and disclosures.
ASU 2025-08, “Financial Instruments—Credit Losses
(Topic
326): Purchased Loans.”
The ASU updates the accounting for
purchased loans under ASC 326. The amendments expand the population of
loans subject to the “gross-up” accounting model by
eliminating the former distinction between purchased credit
-deteriorated (“PCD”) and non-PCD loans. Under the new guidance,
entities will apply a single model for purchased loans by recognizing an allowance
for credit losses and adjusting the amortized cost
basis for the associated noncredit discount at acquisition. ASU 2025 -08
is effective for the Company as of January 1, 2027. The
Company is currently evaluating the provisions of the amendments and
the impact on its future consolidated statements and
disclosures.
ASU 2025-11,
“Interim Reporting (Topic
270): Narrow-Scope Improvements.”
The ASU aims to clarify and enhance interim financial
reporting by defining its scope, consolidating GAAP disclosures in Topic
270, adding a principle for material post-year-end event
disclosure, and refining statement format guidance to improve consistency
for all preparers. These changes do not alter the
fundamental requirements of interim reporting but seek to streamline and
standardize the process. ASU 2025-11 is effective for
interim reporting periods beginning after December 15, 2027. The Company
is currently evaluating the provisions of the amendments
and the impact on its future consolidated statements.
ASU 2025-12, “Codification Improvements
.”
The ASU was issued to make technical corrections, clarify ambiguous
guidance and
generally streamline the Accounting Standards Codification across various
topics, affecting most reporting entities, with key changes
including clarifications for diluted EPS during losses, lease receivable disclosures,
beneficial interest calculations, and treasury stock
accounting, aiming for better usability without significantly altering
core accounting outcomes. ASU 2025-12 is effective for the
Company as of January 1, 2027. The Company is currently evaluating
the provisions of the amendments and the impact on its future
consolidated statements.
NOTE 2 –
INVESTMENT SECURITIES
Investment Portfolio Composition
. The following table summarizes the amortized cost and related fair value of investment
securities available-for-sale (“AFS”) and securities held-to-maturity (“HTM”)
and the corresponding amounts of gross
unrealized gains and losses.
Sale
Amortized
Allowance for
Fair
Cost
Gains
Losses
Credit Losses
Value
$
554,416
$
$
3,884
$
$
550,602
180,039
2,781
177,294
36,230
2,047
34,212
(1)
56,624
8,000
48,624
36,933
2,169
(44)
34,721
(2)
8,155
8,155
Total
$
872,397
$
$
18,881
$
(44)
$
853,608
$
331,495
$
1,940
$
$
$
333,264
174,527
2,484
172,114
36,918
2,045
34,911
(1)
59,699
7,697
52,004
45,810
2,236
(42)
43,532
(2)
8,097
8,097
Total
$
656,546
$
2,051
$
14,633
$
(42)
$
643,922
Amortized
Fair
Cost
Gains
Losses
Value
$
8,587
$
$
$
8,579
(1)
295,873
10,528
285,491
Total
$
304,460
$
$
10,536
$
294,070
$
129,782
$
$
$
129,268
(1)
247,664
8,542
240,052
Total
$
377,446
$
$
9,056
$
369,320
(1)
Comprised of residential mortgage-backed
securities.
(2)
Includes Federal Home Loan Bank stock recorded
at cost of $
3.1
3.0
million at June 30, 2026 and December 31,
2025, respectively,
and Federal Reserve Bank stock recorded
at cost of $
5.1
million at June 30, 2026 and December 31, 2025.
At June 30, 2026 and December 31, 2025, the investment portfolio had $
2.1
million in equity securities. These securities do not have a
readily determinable fair value and were not credit impaired.
Securities with an amortized cost of $
563.0
461.3
million at June 30, 2026 and December 31, 2025, respectively,
were
pledged to secure public deposits and for other purposes.
The Bank, as a member of the Federal Home Loan Bank of Atlanta (“FHLB”), is required
to own capital stock in the FHLB based
generally upon the balances of residential and commercial real estate loans, and
FHLB advances. The Bank’s investment
in FHLB
stock, which is included in other securities,
is pledged to secure FHLB advances.
No ready market exists for this stock, and it has no
quoted fair value; however, redemption
of this stock has historically been at par value.
As a member of the Federal Reserve Bank of
Atlanta, the Bank is required to maintain stock in the Federal Reserve Bank of Atlanta
based on a specified ratio relative to the Bank’s
capital.
Federal Reserve Bank stock is carried at cost.
Investment Sales.
There were
no
sales of investment securities for the three and six months ended June 30, 2026
and 2025.
Maturity Distribution
.
At June 30, 2026, the Company’s investment
securities had the following maturity distribution based on
contractual maturity.
Expected maturities may differ from contractual maturities because borrowers
may have the right to call or
prepay obligations.
Mortgage-backed securities, certain amortizing U.S. government agency
securities and other securities are shown
separately because they are not due at a certain maturity date.
Sale
Amortized Cost
Amortized Cost
Due in one year or less
$
164,396
$
163,918
$
8,587
$
8,579
Due after one year through five years
490,095
482,562
Due after five year through ten years
3,220
2,852
56,624
48,624
295,873
285,491
149,907
147,497
8,155
8,155
Total
$
872,397
$
853,608
$
304,460
$
294,070
Unrealized Losses on Investment Securities.
The following table summarizes the available for sale and held to maturity
investment
securities with unrealized losses aggregated by major security type and length
of time in a continuous unrealized loss position:
Less Than
Greater Than
Total
Fair
Fair
Fair
Value
Losses
Value
Losses
Value
Losses
Sale
$
455,403
$
3,841
$
5,968
$
$
461,371
$
3,884
73,602
92,621
2,184
166,223
2,781
32,331
2,033
33,296
2,047
48,562
8,000
48,614
8,000
33,889
2,169
33,889
2,169
Total
$
530,022
$
4,452
$
213,371
$
14,429
$
743,393
$
18,881
8,578
8,578
156,316
1,640
90,125
8,888
246,441
10,528
Total
$
156,316
$
1,640
$
98,703
$
8,896
$
255,019
$
10,536
Sale
$
31,319
$
$
8,902
$
$
40,221
$
62,809
91,760
2,302
154,569
2,484
3,030
30,705
1,921
33,735
2,045
51,932
7,697
51,932
7,697
42,333
2,236
42,333
2,236
Total
$
97,158
$
$
225,632
$
14,305
$
322,790
$
14,633
129,268
129,268
33,589
106,262
8,444
139,851
8,542
Total
$
33,589
$
$
235,530
$
8,958
$
269,119
$
9,056
At June 30, 2026, there were
positions (combined AFS and HTM) with unrealized pre-tax losses totaling $
29.4
of
these positions are U.S. Treasury bonds
and carry the full faith and credit of the U.S. Government.
are U.S. government agency
securities issued by U.S. government sponsored entities.
We believe
the long history of no credit losses on government securities
indicates that the expectation of nonpayment of the amortized cost basis is effectively
zero.
At June 30, 2026, all collateralized
mortgage obligation securities, mortgage-backed securities, Small Business
Administration securities, U.S. Agency,
and U.S. Treasury
bonds held were AAA rated.
The remaining
positions (municipal securities and corporate bonds) have a credit component.
At
June 30, 2026, corporate debt securities had an allowance for credit
losses of $
44,000
.
No
ne of the securities held by the Company
were past due or in nonaccrual status at June 30, 2026.
Credit Quality Indicators
The Company monitors the credit quality of its investment securities through
various risk management procedures, including the
monitoring of credit ratings.
A majority of the debt securities in the Company’s
investment portfolio were issued by a U.S.
government entity or agency and are either explicitly or implicitly guaranteed
by the U.S. government.
The Company believes the
long history of no credit losses on these securities indicates that the expectation
of nonpayment of the amortized cost basis is
effectively zero, even if the U.S. government were
to technically default.
Further, certain municipal securities held by the Company
have been pre-refunded and secured by government guaranteed
treasuries.
Therefore, for the aforementioned securities, the Company
does
no
t assess or record expected credit losses due to the zero loss assumption.
The Company monitors the credit quality of its
municipal and corporate securities portfolio via credit ratings
which are updated on a quarterly basis.
On a quarterly basis, municipal
and corporate securities in an unrealized loss position are evaluated to determine
if the loss is attributable to credit related factors and
if an allowance for credit loss is needed.
NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE
FOR CREDIT LOSSES
Loan Portfolio Composition
.
The composition of the held for investment (“HFI”) loan portfolio was as follows:
$
172,536
$
180,341
149,127
146,920
750,637
768,731
(1)
244,462
240,897
(2)
182,296
183,539
Loans Held For Investment, Net of Unearned Income
$
$
(1)
Includes loans in process balances of $
3.1
5.6
million at June 30, 2026 and December 31, 2025, respectively.
(2)
Includes overdraft balances of $
1.4
1.2
million at June 30, 2026 and December 31, 2025, respectively.
Net deferred loan costs, which include premiums on purchased loans,
included in loans were $
8.6
million at June 30, 2026 and
December 31, 2025.
Accrued interest receivable on loans which is excluded from amortized
cost, totaled $
9.5
million at June 30, 2026 and $
9.8
million at
December 31, 2025, and is reported separately in Other Assets.
The Company has pledged a blanket floating lien on all 1-4 family residential mortgage
loans, commercial real estate mortgage loans,
and home equity loans to support available borrowing capacity at the FHLB of
Atlanta and has pledged a blanket floating lien on all
consumer loans, commercial loans, and construction loans to support available
borrowing capacity at the Federal Reserve Bank of
Atlanta.
.
The methodology for estimating the amount of credit losses reported in the
allowance for credit losses
(“ACL”) has two basic components: first, an asset-specific component
involving loans that do not share risk characteristics and the
measurement of expected credit losses for such individual loans; and second,
a pooled component for expected credit losses for pools
of loans that share similar risk characteristics.
This allowance methodology is discussed further in Note 1 – Significant
Accounting
Policies in the Company’s 2025
Form 10-K.
The following table details the activity in the allowance for credit losses by
portfolio segment.
Allocation of a portion of the
allowance to one category of loans does not preclude its availability to
absorb losses in other categories.
Commercial,
Financial,
Commercial
Agricultural
Construction
Mortgage
Residential
Home Equity
Total
$
1,662
$
1,383
$
6,579
$
16,064
$
2,373
$
2,938
$
30,999
(101)
(1,176)
(577)
(38)
(1,137)
(1,752)
(512)
(11)
(384)
(896)
$
1,828
$
1,282
$
7,540
$
14,877
$
2,467
$
3,013
$
31,007
$
1,751
$
1,681
$
6,859
$
15,317
$
2,368
$
3,025
$
31,001
(399)
(506)
1,539
(877)
(38)
(13)
(2,620)
(3,548)
1,667
2,015
(738)
(953)
(1,533)
$
1,828
$
1,282
$
7,540
$
14,877
$
2,467
$
3,013
$
31,007
June 30, 2025
$
1,468
$
2,233
$
6,061
$
14,885
$
2,029
$
3,058
$
29,734
(86)
(422)
(33)
(74)
(49)
(24)
(1,351)
(1,498)
(673)
(590)
$
1,425
$
1,811
$
6,256
$
15,264
$
2,014
$
3,092
$
29,862
June 30, 2025
$
1,514
$
2,384
$
5,867
$
14,568
$
1,952
$
2,966
$
29,251
(39)
(573)
1,429
1,801
(242)
(57)
(24)
(2,786)
(3,109)
1,483
1,919
(50)
(1,303)
(1,190)
$
1,425
$
1,811
$
6,256
$
15,264
$
2,014
$
3,092
$
29,862
At June 30, 2026, the allowance for credit losses for loans HFI totaled $
31.0
million comparable to December 31, 2025 and $
29.9
million at June 30, 2025. Activity within the allowance for the six-month
period ended June 30, 2026, reflected a provision expense of
$
1.5
million and net loan charge-offs of $
1.5
million. The June 30, 2026 allowance reflected utilization of a higher forecasted
unemployment rate in forecasting loan loss rates that was partially offset
by lower loan balances, as compared to the December 31,
2025 allowance. At June 30, 2025, the allowance for loans HFI totaled $
29.9
million, a $
0.6
million increase over December 31, 2024.
Activity within the allowance for the six-month period ended June
30, 2025, reflected a provision expense of $
1.8
million and net loan
charge-offs of $
1.2
million. The net increase in the allowance was primarily attributable
to qualitative factor adjustments that were
partially offset by lower loan balances. Four unemployment
forecast scenarios were utilized to estimate probability of default and are
weighted based on management’s
estimate of their respective probabilities, which at June 30, 2026, were weighted
more heavily
towards an adverse economic outcome given ongoing uncertainty
in growth and inflation.
See Note 8 – Commitments and
Contingencies for information on the allowance for off-balance
sheet credit commitments.
Loan Portfolio Aging.
A loan is defined as a past due loan when one full payment is past due or a contractual maturity
is over 30 days
past due (“DPD”).
The following table presents the aging of the amortized cost basis in accruing
past due loans by class of loans.
30-59
60-89
90 +
Total
Total
Total
DPD
DPD
DPD
Past Due
Current
Loans
Loans
$
$
$
$
$
171,139
$
1,127
$
172,536
148,748
149,127
747,553
3,060
750,637
996,385
3,430
242,985
1,190
244,462
1,029
1,101
180,370
182,296
Total
$
1,905
$
$
$
2,680
$
2,487,180
$
10,011
$
$
$
$
$
$
178,354
$
1,278
$
180,341
146,625
146,920
1,386
1,386
764,785
2,560
768,731
1,930
2,737
1,020,810
2,143
239,061
1,769
240,897
1,561
1,823
180,871
183,539
Total
$
4,653
$
2,364
$
$
7,017
$
2,530,506
$
8,595
$
Nonaccrual Loans
.
Loans are generally placed on nonaccrual 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 doubtful.
Loans are returned to accrual status when the
principal and interest amounts contractually due are brought current
or when future payments are reasonably assured.
The following table presents the amortized cost basis of loans in nonaccrual
status and loans past due over 90 days and still on accrual
by class of loans.
With No
With
90 + Days
With No
With
90 + Days
ACL
ACL
Still Accruing
ACL
ACL
Still Accruing
$
1,016
$
$
$
1,038
$
$
1,038
2,022
1,807
1,399
2,031
1,275
1,382
Total Nonaccrual
Loans
$
4,498
$
5,513
$
$
4,448
$
4,147
$
Collateral Dependent Loans.
The following table presents the amortized cost basis of collateral-dependent
loans.
Non Real Estate
Non Real Estate
Secured
Secured
Secured
Secured
$
$
1,165
$
$
1,087
12,164
2,450
2,142
1,275
1,561
Total Collateral Dependent
Loans
$
15,488
$
1,165
$
5,286
$
1,087
A loan is collateral dependent when the borrower is experiencing
financial difficulty and repayment of the loan is dependent on
the
sale or operation of the underlying collateral.
The Bank’s collateral dependent
loan portfolio is comprised primarily of real estate secured loans, collateralized
by either residential
or commercial collateral types.
The loans are carried at fair value based on current values determined by
either independent appraisals
or internal evaluations, adjusted for selling costs or other amounts to be deducted
when estimating expected net sales proceeds.
Residential Real Estate Loans In Process of Foreclosure
.
At June 30, 2026, the Company had $
0.4
million of 1-4 family residential
real estate loans for which formal foreclosure proceedings were in process, compared
to $
0.2
million at December 31, 2025.
Modifications to Borrowers Experiencing
Financial Difficulty.
Occasionally, the Company may
modify loans to borrowers who are
experiencing financial difficulty.
Loan modifications to borrowers in financial difficulty are loans in
which the Company has granted
an economic concession to the borrower that it would not otherwise consider.
In these instances, as part of a work-out alternative, the
Company will make concessions including the extension of the loan
term, a principal moratorium, a reduction in the interest rate, or a
combination thereof.
The impact of the modifications and defaults are factored into the allowance for credit
losses on a loan-by-loan
basis.
Thus, specific reserves are established based upon the results of either a
discounted cash flow analysis or the underlying
collateral value, if the loan is deemed to be collateral dependent.
A modified loan classification can be removed if the borrower’s
financial condition improves such that the borrower is no longer in financial difficulty,
the loan has not had any forgiveness of
principal or interest, and the loan is subsequently refinanced or restructured
at market terms and qualifies as a new loan.
During the six months ended June 30, 2026 and 2025, the Company did
no
t modify any loans to borrowers experiencing financial
difficulty.
The Company closely monitors the performance of loans modified for borrowers
experiencing financial difficulty to evaluate the
effectiveness of its modification strategies. At June 30, 2026,
the amortized cost basis of loans modified during the preceding twelve
months was $
3.4
million, of which $
2.0
million were current and $
1.4
million were 120+ days past due, compared to $
0.3
million at
June 30, 2025.
Credit Risk Management
.
The Company has adopted comprehensive lending policies, underwriting standards and
loan review
procedures designed to maximize loan income within an acceptable
level of risk.
Management and the Board of Directors review and
approve these policies and procedures on a regular basis (at least annually).
Reporting systems are used to monitor loan originations, loan quality,
concentrations of credit, loan delinquencies and nonperforming
loans and potential problem loans.
Management and the Credit Risk Oversight Committee periodically
review the Company’s lines
of business to monitor asset quality trends and the appropriateness of credit policies.
In addition, total borrower exposure limits are
established and concentration risk is monitored.
As part of this process, the overall composition of the portfolio is reviewed to gauge
diversification of risk, client concentrations, industry group, loan
type, geographic area, or other relevant classifications of loans.
Specific segments of the loan portfolio are monitored and reported
to the Board on a quarterly basis and have strategic plans in place
to supplement Board approved credit policies governing exposure
limits and underwriting standards.
Detailed below are the types of
loans within the Company’s
loan portfolio and risk characteristics unique to each.
Commercial, Financial, and Agricultural – Loans in this category
are primarily made based on identified cash flows of the borrower
with consideration given to underlying collateral and personal or
other guarantees.
Lending policy establishes debt service coverage
ratio limits that require a borrower’s cash flow to be sufficient
to cover principal and interest payments on all new and existing debt.
The majority of these loans are secured by the assets being financed or other
business assets such as accounts receivable, inventory,
or
equipment.
Loan to value ratios at origination are
governed by established policy guidelines.
Real Estate Construction – Loans in this category consist of short-term
construction loans, revolving and non-revolving credit lines
and construction/permanent loans made to individuals and investors
to finance the acquisition, development, construction or
rehabilitation of real property.
These loans are primarily made based on identified cash flows of the borrower
or project and generally
secured by the property being financed, including 1-4 family residential
properties and commercial properties that are either owner-
occupied or investment in nature.
These properties may include either vacant or improved property.
Construction loans are generally
based upon estimates of costs and value associated with the completed
project.
Collateral values are determined based upon third
party appraisals and evaluations.
Loan to value ratios at origination are governed by established policy guidelines.
The disbursement
of funds for construction loans is made in relation to the progress of the project
and as such these loans are closely monitored by on-
site inspections.
Real Estate Commercial Mortgage – Loans in this category consists of commercial
mortgage loans secured by property that is either
owner-occupied or investment in nature.
These loans are primarily made based on identified cash flows of the borrower or
project
with consideration given to underlying real estate collateral and
personal guarantees.
Lending policy establishes debt service
coverage ratios and loan to value ratios specific to the property type.
Collateral values are determined based upon third party
appraisals and evaluations.
Real Estate Residential – Residential mortgage loans held in the Company’s
loan portfolio are made to borrowers that demonstrate the
ability to make scheduled payments with full consideration to underwriting
factors such as current income, employment status, current
assets, and other financial resources, credit history,
and the value of the collateral.
Collateral consists of mortgage liens on 1-4 family
residential properties.
The Company does not
originate sub-prime loans.
Real Estate Home Equity – Home equity loans and lines are made to qualified
individuals for legitimate purposes generally secured
by senior or junior mortgage liens on owner-occupied
1-4 family homes or vacation homes.
Borrower qualifications include
favorable credit history combined with supportive income and
debt ratio requirements and combined loan to value ratios within
established policy guidelines.
Consumer Loans – This loan portfolio includes personal installment loans,
direct and indirect automobile financing, and overdraft
lines of credit.
The majority of the consumer loan category consists of direct and indirect automobile
loans.
Lending policy
establishes maximum debt to income ratios, minimum credit scores, and
includes guidelines for verification of applicants’ income and
receipt of credit reports.
Credit Quality Indicators
.
As part of the ongoing monitoring of the Company’s
loan portfolio quality, management
categorizes loans
into risk categories based on relevant information about the ability of
borrowers to service their debt such as: current financial
information, historical payment performance, credit documentation,
and current economic and market trends, among other
factors.
Risk ratings are assigned to each loan and revised as needed through established monitoring
procedures for individual loan
relationships over a predetermined amount and review of smaller balance homogenous
loan pools.
The Company uses the definitions
noted below for categorizing and managing its criticized loans.
Loans categorized as “Pass” do not meet the criteria set forth below
and are not considered criticized.
Special Mention – Loans in this category are presently protected from loss,
but weaknesses are apparent which, if not corrected, could
cause future problems.
Loans in this category may not meet required underwriting criteria and
have no mitigating factors.
More than
the ordinary amount of attention is warranted for these loans.
Substandard – Loans in this category exhibit well-defined weaknesses that would
typically bring normal repayment into jeopardy.
These loans are no longer adequately protected due to well-defined
weaknesses that affect the repayment capacity of the
borrower.
The possibility of loss is much more evident and above average supervision is required
for these loans.
Doubtful – Loans in this category have all the weaknesses inherent in a loan categorized
as Substandard, with the characteristic that
the weaknesses make collection or liquidation in full, on the basis of
currently existing facts, conditions, and values, highly
questionable and improbable.
Performing/Nonperforming – Loans within certain homogenous
loan pools (home equity and consumer) are not individually reviewed,
but are monitored for credit quality via the aging status of the loan and by payment
activity.
The performing or nonperforming status
is updated on an ongoing basis dependent upon improvement and
deterioration in credit quality.
The following tables summarize gross loans held for investment at June
30, 2026 and December 31, 2025 and current period gross
writeoffs for the six months ended June 30, 2026 and 12 months
ended December 31, 2025
by years of origination and internally
assigned credit risk ratings (refer to Credit Risk Management section for detail
on risk rating system).
Term
Loans by Origination Year
Revolving
As of June 30, 2026
Prior
Loans
Total
Commercial, Financial,
Agriculture:
Pass
$
22,502
$
31,522
$
18,553
$
15,458
$
17,724
$
15,347
$
46,644
$
167,750
2,539
3,350
1,132
1,436
Total
$
22,574
$
31,522
$
18,704
$
18,050
$
17,788
$
15,352
$
48,546
$
172,536
$
$
$
$
$
$
$
$
Real Estate - Construction:
Pass
$
28,895
$
90,468
$
9,848
$
2,342
$
9,973
$
$
6,554
$
148,133
Total
$
28,895
$
90,468
$
9,848
$
2,721
$
10,588
$
$
6,554
$
149,127
Real Estate - Commercial
Mortgage:
Pass
$
49,678
$
81,993
$
66,431
$
92,599
$
150,330
$
221,684
$
22,532
$
685,247
7,799
3,458
22,818
7,688
1,307
43,825
6,580
3,595
6,891
2,778
20,135
Doubtful
1,402
1,430
Total
$
50,481
$
96,372
$
71,428
$
96,154
$
180,039
$
232,178
$
23,985
$
750,637
Real Estate - Residential:
Pass
$
74,161
$
119,673
$
111,221
$
242,512
$
300,311
$
135,148
$
9,248
$
992,274
1,164
1,632
1,103
1,446
3,563
6,907
Total
$
74,553
$
119,803
$
111,848
$
243,615
$
301,871
$
139,875
$
9,248
$
$
$
$
$
$
$
$
$
Real Estate - Home Equity:
$
$
$
$
$
$
$
241,901
$
243,344
1,118
1,118
Total
$
$
$
$
$
$
$
243,019
$
244,462
$
$
$
$
$
$
$
$
Consumer:
$
40,451
$
51,488
$
17,057
$
21,109
$
22,674
$
16,189
$
12,502
$
181,470
Total
$
40,551
$
51,719
$
17,113
$
21,224
$
22,861
$
16,326
$
12,502
$
182,296
$
1,175
$
$
$
$
$
$
$
2,620
Term
Loans by Origination Year
Revolving
As of December 31, 2025
Prior
Loans
Total
Commercial, Financial,
Agriculture:
Pass
$
37,680
$
23,425
$
22,907
$
23,068
$
10,922
$
8,740
$
48,354
$
175,096
2,740
3,593
1,114
1,652
Total
$
38,002
$
23,692
$
25,742
$
23,376
$
10,942
$
8,956
$
49,631
$
180,341
$
$
$
$
$
$
$
$
Real Estate - Construction:
Pass
$
76,850
$
39,024
$
3,298
$
14,996
$
$
$
9,295
$
143,703
2,127
2,499
Total
$
76,850
$
39,024
$
4,388
$
17,123
$
$
$
9,295
$
146,920
Real Estate - Commercial
Mortgage:
Pass
$
93,723
$
76,348
$
101,262
$
174,959
$
92,388
$
152,307
$
22,555
$
713,542
9,830
4,477
5,725
20,547
3,922
4,074
49,295
1,402
1,229
1,847
5,894
Total
$
104,303
$
82,227
$
107,085
$
195,924
$
97,539
$
158,228
$
23,425
$
768,731
$
$
$
$
$
$
$
$
Real Estate - Residential:
Pass
$
142,278
$
130,895
$
269,844
$
316,402
$
59,950
$
87,545
$
10,521
$
1,017,435
2,255
1,201
1,310
2,341
6,000
Total
$
142,278
$
131,453
$
270,273
$
317,719
$
62,214
$
90,693
$
11,060
$
$
$
$
$
$
$
$
$
Real Estate - Home Equity:
$
$
$
$
$
$
$
237,678
$
239,201
1,696
1,696
Total
$
$
$
$
$
$
$
239,374
$
240,897
$
$
$
$
$
$
$
$
Consumer:
$
63,443
$
21,866
$
27,919
$
31,464
$
21,524
$
5,164
$
11,315
$
182,695
Total
$
63,629
$
22,057
$
28,068
$
31,679
$
21,596
$
5,195
$
11,315
$
183,539
$
2,789
$
$
1,003
$
1,036
$
$
$
$
5,954
NOTE 4 – MORTGAGE BANKING ACTIVITIES
The Company’s mortgage
banking activities include mandatory delivery loan sales, forward sales contracts used
to manage residential
loan pipeline price risk, utilization of warehouse lines to fund secondary
market residential loan closings, and residential mortgage
servicing.
Residential Mortgage Loan Production
The Company originates, markets, and services conventional and
government-sponsored residential mortgage loans.
Generally,
conforming fixed rate residential mortgage loans are held for sale in the
secondary market and non-conforming and adjustable-rate
residential mortgage loans may be held for investment.
The volume of residential mortgage loans originated for sale and secondary
market prices are the primary drivers of origination revenue.
Residential mortgage loan commitments are generally outstanding for 30
to 90 days, which represents the typical period from
commitment to originate a residential mortgage loan to when the
closed loan is sold to an investor.
Residential mortgage loan
commitments are subject to both credit and price risk.
Credit risk is managed through underwriting policies and procedures, including
collateral requirements, which are generally accepted by the secondary
loan markets.
Price risk is primarily related to interest rate
fluctuations and is partially managed through forward sales of residential
mortgage-backed securities (primarily to-be announced
securities, or TBAs) or mandatory delivery commitments with investors.
The unpaid principal balance of residential mortgage loans held
for sale, notional amounts of derivative contracts related to residential
mortgage loan commitments,
such as interest rate lock commitments (“IRLCs”) and forward contract
sales and their related fair values
are set forth below.
Unpaid Principal
Unpaid Principal
Balance/Notional
Balance/Notional
Residential Mortgage Loans Held for Sale
$
33,214
34,278
$
20,944
$
21,695
(1)
28,726
20,699
(2)
30,000
25,500
(1)
Recorded in other assets at fair value.
(2)
Recorded in other liabilities at fair value.
At June 30, 2026 and December 31, 2025, the Company had
no
residential mortgage loans held for sale 30-89 days past due or on
nonaccrual status.
Mortgage banking revenue was as follows:
Net realized gains on sales of mortgage loans
$
3,529
$
3,605
$
6,479
$
6,485
Net change in unrealized gain (loss) on mortgage loans held for
sale
(62)
Net change in the fair value of IRLCs
(111)
(91)
Net change in the fair value of forward sales contracts
(179)
(109)
(285)
Pair-Offs on net settlement of forward
sales contracts
(169)
Mortgage servicing rights additions
Net origination fees
1,624
1,359
Total mortgage banking
revenues
$
4,660
$
4,190
$
8,912
$
8,010
Residential Mortgage Servicing
The Company may retain the right to service residential mortgage
loans sold.
The unpaid principal balance of loans serviced for
others is the primary driver of servicing revenue.
The following represents a summary of mortgage servicing rights.
Number of residential mortgage loans serviced for others
Outstanding principal balance of residential mortgage loans serviced
for others
$
124,200
$
118,429
interest rate
5.71%
5.69%
Remaining contractual term (in months)
Conforming conventional loans serviced by the Company are sold to Federal
National Mortgage Association (“FNMA”) on a non-
recourse basis, whereby foreclosure losses are generally the responsibility
of FNMA and not the Company.
The government loans
serviced by the Company are secured through the Government National
Mortgage Association (“GNMA”), whereby the Company is
insured against loss by the Federal Housing Administration or partially
guaranteed against loss by the Veterans
Administration.
At
June 30, 2026, the servicing portfolio balance consisted of the
following loan types: FNMA (
61.9
%), GNMA (
4.3
%), and private
investor (
33.8
%).
FNMA and private investor loans are structured as actual/actual payment remittance.
At June 30, 2026 and December 31, 2025, the Company did
no
t have delinquent residential mortgage loans in GNMA pools serviced
by the Company.
The right to repurchase these loans and the corresponding liability has been recorded
in other assets and other
liabilities, respectively, in
the Consolidated Statements of Financial Condition.
The Company had
no
repurchases for the three months
ended June 30, 2026 and 2025, and
no
repurchases and $
0.3
million repurchases in the six months ended June 30, 2026 and June 30,
2025, respectively, of
GNMA delinquent or defaulted mortgage loans with the intention to modify
their terms and include the loans in
new GNMA pools.
Activity in the capitalized mortgage servicing rights was as follows:
Beginning balance
$
$
$
$
Additions due to loans sold with servicing retained
Deletions and amortization
(46)
(43)
(93)
(88)
Ending balance
$
$
$
$
The Company did
no
t record any permanent impairment losses on mortgage servicing rights for the
three or six months ended June 30,
or 2025.
The key unobservable inputs used in determining the fair value of
the Company’s mortgage servicing rights were
as follows:
Minimum
Maximum
Minimum
Maximum
Discount rates
9.50%
12.00%
9.50%
12.00%
Annual prepayment speeds
8.85%
19.13%
8.50%
18.73%
Cost of servicing (per loan)
$
$
$
$
Changes in residential mortgage interest rates directly affect
the prepayment speeds used in valuing the Company’s
mortgage
servicing rights.
A separate third party model is used to estimate prepayment speeds based on interest rates, housing
turnover rates,
estimated loan curtailment, anticipated defaults, and other relevant factors.
The weighted average annual prepayment speed was
13.10
% at June 30, 2026 and
13.05
% at December 31, 2025.
Warehouse
Line Borrowings
The Company has the following warehouse lines of credit and master
repurchase agreements with various financial institutions at June
30, 2026:
Amounts
Outstanding
$
million master repurchase agreement without defined expiration.
Interest is at the secured overnight
financing rate (SOFR) rate plus
2.25%
to
3.25%
, with a floor rate of
3.25%
to
4.25%
.
A cash pledge deposit of
$
0.1
million is required by the lender.
$
21,950
$
million warehouse line of credit agreement expiring in
September 2026
.
Interest is at the SOFR rate plus
2.50%
to
3.00%
, with a floor rate of
3.00%
to
3.50%
.
17,537
Total Warehouse
$
39,487
Warehouse
line borrowings are classified as short-term borrowings.
At December 31, 2025, warehouse line borrowings totaled $
28.1
million. At June 30, 2026, the Company had residential mortgage loans
held for sale pledged as collateral under the above warehouse
lines of credit and master repurchase agreements.
The above agreements also contain covenants which include certain financial
requirements, including maintenance of minimum tangible net worth, minimum
liquid assets, and maximum debt to net worth ratio, as
defined in the agreements. The Company was in compliance with all significant
debt covenants at June 30, 2026.
NOTE 5 – DERIVATIVES
The Company enters into derivative financial instruments to manage exposures
that arise from business activities that result in the
receipt or payment of future known and uncertain cash amounts, the value of
which are determined by interest rates.
The Company’s
derivative financial instruments are used to manage differences in
the amount, timing, and duration of the Company’s
known or
expected cash receipts and its known or expected cash payments principally
related to the Company’s subordinated
debt.
Cash Flow Hedges of Interest Rate Risk
The Company previously maintained interest rate swaps with notional amounts
totaling $
million designated as a cash flow hedge
for subordinated debt. Under the swap arrangement, the Company paid
a fixed interest rate of
2.50
% and received a variable interest
rate based on three-month CME Term
SOFR. In October 2025, the Company terminated the swaps and derecognized
the derivative
assets. The unrealized gain of $
2.7
million is deferred in accumulated other comprehensive income and will be amortized
on a
straight-line basis into interest expense through the remaining term of the
original cash flow hedge. The Company estimates there will
be approximately $
0.8
million reclassified as a decrease to interest expense within the next 12 months.
For derivatives designated and that qualify as cash flow hedges of interest rate
risk, the gain or loss on the derivative is recorded in
accumulated other comprehensive income (“AOCI”) and subsequently
reclassified into interest expense in the same period(s) during
which the hedged transaction affects earnings. Amounts reported
in AOCI related to derivatives will be reclassified to interest expense
as interest payments are made on the Company’s
variable-rate subordinated debt.
The following table presents the change in net gains (losses) recorded in AOCI and
the consolidated statements of income related to
the cash flow derivative instruments (interest rate swaps related to subordinated
debt).
Change in Gain
Amount of Gain
(Loss) Recognized
(Loss) Reclassified
Category
in AOCI
from AOCI to Income
Three months ended June 30, 2026
$
$
Three months ended June 30, 2025
(363)
Six months ended June 30, 2026
$
$
Six months ended June 30, 2025
(888)
NOTE 6 – LEASES
Operating leases in which the Company is the lessee are recorded as operating
lease right of use (“ROU”) assets and operating
liabilities, included in other assets and liabilities, respectively,
on its Consolidated Statements of Financial Condition.
The Company’s operating
leases primarily relate to banking offices with remaining lease
terms from less than
one
to
years.
The
Company’s leases are not complex
and do not contain residual value guarantees, variable lease payments, or
significant assumptions
or judgments made in applying the requirements of Topic
Operating leases with an initial term of 12 months or less are not
recorded on the Consolidated Statements of Financial Condition and the related lease expense is recognized on a straight-line basis
over the lease term.
At June 30, 2026, the operating lease ROU assets and liabilities were $
25.7
26.4
million,
respectively. At December
31, 2025, ROU assets and liabilities were $
26.3
26.9
million, respectively. The Company
does not have any finance leases.
The table below summarizes our lease expense and other information related
to the Company’s operating leases.
Operating lease expense
$
$
$
1,824
$
1,761
Short-term lease expense
Total lease expense
$
1,090
$
1,137
$
2,152
$
2,312
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
$
$
1,845
$
1,794
Right-of-use assets obtained in exchange for new operating lease liabilities
1,117
3,997
remaining lease term — operating leases (in years)
15.4
15.8
15.4
15.8
discount rate — operating leases
3.7%
3.7%
3.7%
3.7%
The table below summarizes the maturity of remaining lease liabilities:
$
1,853
3,534
3,271
2,986
2,939
2031 and thereafter
18,792
Total
$
33,375
Less: Interest
(7,004)
Present Value
of Lease liability
$
26,371
A related party is the lessor in a land lease with the Company.
The payments under the lease agreement provide for annual lease
payments of approximately $
0.1
million annually through December 2033, and thereafter,
increase by
% every
years until 2053 at
which time the rent amount will adjust based on reappraisal of the parcel rental
value.
The Company then has
four
successive options
to extend the lease for
five years
each with rental increases of
% at each extension.
The aggregate remaining obligation of the lease
totaled $
2.0
million at June 30, 2026.
Further, in accordance with the lease agreement, the Company
made a $
0.2
million payment in
July 2025 to the lessor as reimbursement for a portion of the costs related to the development
of subject property to support the
construction of a new banking office by the Company.
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all full-time
and eligible part-time associates and a
Supplemental Executive Retirement Plan (“SERP”) and a Supplemental
Executive Retirement Plan II (“SERP II”) covering its
executive officers.
The defined benefit plan was amended in December 2019 to remove plan eligibility
for new associates hired after
December 31, 2019.
The SERP II was adopted by the Company’s
Board on May 21, 2020 and covers certain executive officers that
were not covered by the SERP.
The components of the net periodic benefit cost for the Company’s
qualified benefit pension plan were as follows:
Service Cost
$
$
$
1,665
$
1,720
Interest Cost
1,532
1,676
3,063
3,353
Expected Return on Plan Assets
(2,218)
(2,264)
(4,435)
(4,529)
Net Loss Amortization
(473)
(414)
(947)
(827)
Net Periodic Benefit Cost
$
(327)
$
(142)
$
(654)
$
(283)
Discount Rate
5.67%
5.82%
5.67%
5.82%
Long-term Rate of Return on Assets
6.50%
6.75%
6.50%
6.75%
The components of the net periodic benefit cost for the Company’s
SERP and SERP II were as follows:
Service Cost
$
$
$
$
Interest Cost
Prior Service Cost Amortization
Net Loss Amortization
(29)
(58)
Net Periodic Benefit Cost
$
$
$
$
Discount Rate
5.24%
5.57%
5.24%
5.57%
The service cost component of net periodic benefit cost is reflected in
compensation expense in the accompanying statements of
income.
The other components of net periodic cost are included in “other” within the noninterest
expense category in the
Consolidated Statements of Income.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Lending Commitments
.
The Company is a party to financial instruments with off-balance
sheet risks in the normal course of business
to meet the financing needs of its clients.
These financial instruments consist of commitments to extend credit and standby
letters of
credit.
The Company’s maximum exposure
to credit loss under standby letters of credit and commitments to extend credit is represented
by
the contractual amount of those instruments.
The Company uses the same credit policies in establishing commitments
and issuing
letters of credit as it does for on-balance sheet instruments.
The amounts associated with the Company’s
off-balance sheet
obligations were as follows:
Fixed
Variable
Total
Fixed
Variable
Total
Commitments to Extend Credit
(1)
$
187,192
$
450,348
$
637,540
$
188,834
$
456,328
$
645,162
Standby Letters of Credit
7,298
7,298
7,828
7,828
Total
$
194,490
$
450,348
$
644,838
$
196,662
$
456,328
$
652,990
(1)
Commitments include unfunded loans, revolving
lines of credit, and off-balance sheet residential
loan commitments.
Commitments to extend credit are agreements to lend to a client so 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.
Since
many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily
represent future cash requirements.
Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a client to a third
party.
The credit risk involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities. In
general, management does not anticipate any material losses as a result
of participating in these types of transactions.
However, any
potential losses arising from such transactions are reserved for in the
same manner as management reserves for its other credit
facilities.
For both on- and off-balance sheet financial instruments, the Company
requires collateral to support such instruments when it is
deemed necessary.
The Company evaluates each client’s
creditworthiness on a case-by-case basis.
The amount of collateral
obtained upon extension of credit is based on management’s
credit evaluation of the counterparty.
Collateral held varies, but may
include deposits held in financial institutions; U.S. Treasury
securities; other marketable securities; real estate; accounts receivable;
property, plant and
equipment; and inventory.
The allowance for credit losses for off-balance sheet credit commitments
that are not unconditionally cancellable by the bank is
adjusted as a provision for credit loss expense and is recorded in other liabilities.
The following table shows the activity in the
allowance.
Three Months Ended June
30,
$
2,189
$
1,832
$
2,107
$
2,155
(94)
(417)
$
2,197
$
1,738
$
2,197
$
1,738
Other Commitments.
In the normal course of business, the Company enters into lease commitments
which are classified as operating
leases. See Note 6 – Leases for additional information on the maturity of the
Company’s operating lease commitments.
The Company has an outstanding commitment of up to $
1.0
million in a bank tech venture capital fund focused on finding and
funding technology solutions for community banks and a commitment
of up to $
10.0
million in a solar tax credit equity fund.
At June
30, 2026, the amount remaining to be funded for the bank tech venture capital
and solar tax credit equity investment fund
commitments was $
0.2
10.0
million, respectively.
Contingencies
.
The Company is a party to lawsuits and claims arising out of the normal course of business.
In management's opinion,
there are
no
known pending claims or litigation, the outcome of which would, individually or in
the aggregate, have a material effect
on the consolidated results of operations, financial position, or cash flows
of the Company.
Indemnification Obligation
.
The Company is a member of the Visa U.S.A. network.
Visa U.S.A member banks are
required to
indemnify the Visa U.S.A.
network for potential future settlement of certain litigation (the “Covered Litigation”)
that relates to several
antitrust lawsuits challenging the practices of Visa
and MasterCard International.
In 2008, the Company, as a member
of the Visa
U.S.A. network, obtained Class B shares of Visa,
Inc. upon its initial public offering.
Since its initial public offering, Visa,
Inc. has
funded a litigation reserve for the Covered Litigation resulting in a reduction
in the Class B shares held by the Company.
In 2011, the
Company sold its remaining Class B shares.
Associated with this sale, the Company entered into a swap contract with the purchaser
of the shares that requires a payment to the counterparty in the event that Visa,
Inc. makes subsequent revisions to the conversion
ratio.
Conversion ratio payments and ongoing fixed quarterly charges are reflected
in earnings in the period incurred.
Fixed charges
included in the swap liability are payable quarterly until the litigation reserve
is fully liquidated and at which time the aforementioned
swap contract will be terminated.
Quarterly fixed payments are approximately $
0.1
There was a $
0.1
million counterparty
payment accrued and payable at June 30, 2026
due to a revision to the share conversion rate related to additional funding by VISA of
the merchant litigation reserve.
NOTE 9 – FAIR VALUE
MEASUREMENTS
The fair value of an asset or liability is the price that would be received to sell that asset or paid
to transfer that liability in an orderly
transaction occurring in the principal market (or most advantageous market in
the absence of a principal market) for such asset or
liability.
In estimating fair value, the Company utilizes valuation techniques that are consistent with
the market approach, the income
approach and/or the cost approach.
Such valuation techniques are consistently applied.
Inputs to valuation techniques include the
assumptions that market participants would use in pricing an asset or liability.
Accounting Standards Codification Topic
establishes a fair value hierarchy for valuation inputs that gives the highest priority
to quoted prices in active markets for identical
assets or liabilities and the lowest priority to unobservable inputs.
The fair value hierarchy is as follows:
Level 1 Inputs -
Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting
entity has the
ability to access at the measurement date
.
Level 2 Inputs -
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly
or indirectly. These might
include quoted prices for similar assets or liabilities in active markets, quoted prices
for identical
or similar assets or liabilities in markets that are not active, inputs other
than quoted prices that are observable for the asset or
liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.)
or inputs that are derived principally from, or
corroborated, by market data by correlation or other means
.
Level 3 Inputs -
Unobservable inputs for determining the fair values of assets or liabilities that reflect
an entity’s own
assumptions about the assumptions that market participants would
use in pricing the assets or liabilities.
Assets and Liabilities Measured at Fair Value
on a Recurring Basis
Securities Available for Sale.
U.S. Treasury securities are reported at fair value
utilizing Level 1 inputs.
Other securities classified as
available for sale are reported at fair value utilizing Level 2 inputs.
For these securities, the Company obtains fair value measurements
from an independent pricing service.
The fair value measurements consider observable data that may include dealer quotes,
market
spreads, cash flows, the U.S. Treasury yield curve,
live trading levels, trade execution data, credit information and the bond’s
terms
and conditions, among other things.
In general, the Company does not purchase securities that have a complicated structure.
The Company’s entire portfolio consists
of
traditional investments, nearly all of which are U.S. Treasury
obligations, federal agency bullet or mortgage pass-through
securities, or
general obligation or revenue-based municipal bonds.
Pricing for such instruments is easily obtained.
At least annually, the Company
will validate prices supplied by the independent pricing service by compari
ng them to prices obtained from an independent third-party
source.
Equity Securities.
Investment securities classified as equity securities are carried at cost and
the share of earnings or losses is reported
through net income as an adjustment to the investment balance. These securities are not
readily marketable and therefore are classified
as a Level 3 input within the fair value hierarchy.
.
The fair value of residential mortgage loans held for sale based on Level 2 inputs is determined,
when possible,
using either quoted secondary-market prices or investor commitments.
If no such quoted price exists, the fair value is determined
using quoted prices for a similar asset or assets, adjusted for the specific attributes of
that loan, which would be used by other market
participants.
The Company has elected the fair value option accounting for its held for sale loans.
Mortgage Banking Derivative Instruments.
The fair values of interest rate lock commitments (“IRLCs”) are derived by valuation
models incorporating market pricing for instruments with similar characteristics,
commonly referred to as best execution pricing, or
investor commitment prices for best effort IRLCs which have
unobservable inputs, such as an estimate of the fair value of the
servicing rights expected to be recorded upon sale of the loans, net estimated costs to originate
the loans, and the pull-through rate,
and are therefore classified as Level 3 within the fair value hierarchy.
The fair value of forward sale commitments is based on
observable market pricing for similar instruments and are therefore
classified as Level 2 within the fair value hierarchy.
Interest Rate Swap.
The Company’s derivative positions
are classified as Level 2 within the fair value hierarchy and are valued
using
models generally accepted in the financial services industry and
that use actively quoted or observable market input values from
external market data providers.
The fair value derivatives are determined using discounted cash flow models.
Swap
.
The Company entered into a stand-alone derivative contract with the purchaser of
its Visa Class B shares.
The
valuation represents the amount due and payable to the counterparty based upon
the revised share conversion rate, if any,
during the
period. The Company’s
derivative positions are classified as Level 2 within the fair value hierarchy and use
actively quoted or
observable market input values from external market data providers.
There was a $
0.1
0.2
million counterparty payment
accrued and payable at June 30, 2026 and December 31, 2025, respectively
.
A summary of fair values for assets and liabilities recorded at fair
value on a recurring basis consisted of the following:
Level 1
Level 2
Level 3
Total
Fair
Inputs
Inputs
Inputs
Value
ASSETS:
Sale:
$
550,602
$
$
$
550,602
177,294
177,294
34,212
34,212
48,624
48,624
34,721
34,721
2,068
2,068
34,278
34,278
ASSETS:
Sale:
$
333,264
$
$
$
333,264
172,114
172,114
34,911
34,911
52,004
52,004
43,532
43,532
2,069
2,069
21,695
21,695
Mortgage Banking Activities
.
The Company had Level 3 issuances and transfers related to mortgage banking
activities of $
4.4
million
and $
8.5
million, respectively, for the
six months ended June 30, 2026, and $
4.3
8.4
million, respectively,
for the six
months ended June 30, 2025.
Issuances are valued based on the change in fair value of the underlying
mortgage loan from inception
of the IRLC to the Consolidated Statement of Financial Condition date,
adjusted for pull-through rates and costs to originate.
IRLCs
transferred out of Level 3 represent IRLCs that were funded and moved
to mortgage loans held for sale, at fair value.
Assets Measured at Fair Value
on a Non-Recurring Basis
Certain assets are measured at fair value on a non-recurring basis (i.e., the
assets are not measured at fair value on an ongoing basis
but are subject to fair value adjustments in certain circumstances).
An example would be assets exhibiting evidence of impairment.
The following is a description of valuation methodologies used for assets measured
on a non-recurring basis.
Collateral Dependent Loans
.
Impairment for collateral dependent loans is measured using the fair
value of the collateral less selling
costs.
The fair value of collateral is determined by an independent valuation
or professional appraisal in conformance with banking
regulations.
Collateral values are estimated using Level 3 inputs due to the volatility in the real estate market,
and the judgment and
estimation involved in the real estate appraisal process.
Collateral dependent loans are reviewed and evaluated on at least a quarterly
basis for additional impairment and adjusted accordingly.
Valuation
techniques are consistent with those techniques applied in prior
periods.
Collateral-dependent loans had a carrying value of $
16.7
million with valuation allowance of $
1.1
million at June 30, 2026
and a carrying value of $
6.4
million and a $
0.1
million valuation allowance at December 31, 2025.
Other Real Estate Owned
.
During the first six months of 2026, certain foreclosed assets, upon initial recognition,
were measured and
reported at fair value through a charge-off to the allowance
for credit losses based on the fair value of the foreclosed asset less
estimated cost to sell.
The fair value of the foreclosed asset is determined by an independent valuation or
professional appraisal in
conformance with banking regulations.
On an ongoing basis, we obtain updated appraisals on foreclosed assets and realize valuation
adjustments as necessary.
The fair value of foreclosed assets is estimated using Level 3 inputs due to the judgment
and estimation
involved in the real estate valuation process.
.
Residential mortgage loan servicing rights are evaluated for impairment
at each reporting period based
upon the fair value of the rights as compared to the carrying amount.
Fair value is determined by a third party valuation model using
estimated prepayment speeds of the underlying mortgage loans serviced and
stratifications based on the risk characteristics of the
underlying loans (predominantly loan type and note interest rate).
The fair value is estimated using Level 3 inputs, including a
discount rate, weighted average prepayment speed, and the cost of loan
servicing.
Further detail on the key inputs utilized are
provided in Note 4 – Mortgage Banking Activities.
At each of June 30, 2026 and December 31, 2025, there was
no
valuation
allowance for loan servicing rights.
Assets and Liabilities Disclosed at Fair Value
The Company is required to disclose the estimated fair value of financial instruments,
both assets and liabilities, for which it is
practical to estimate fair value and the following is a description of valuation
methodologies used for those assets and liabilities.
Cash and Short-Term
Investments.
The carrying amount of cash and short-term investments is used to approximate
fair value, given
the short time frame to maturity and as such assets do not present unanticipated
credit concerns.
Securities Held to Maturity
.
Securities held to maturity are valued in accordance with the methodology previously
noted in the
caption “Assets and Liabilities Measured at Fair Value
on a Recurring Basis – Securities Available
for Sale.”
Other Equity Securities.
Other equity securities are accounted for under the equity method (Topic
- and recorded at cost.
These
securities are not readily marketable securities and are reflected in Other
Assets on the Statement of Financial Condition.
Loans.
The loan portfolio is segregated into categories and the fair value of each loan category is calculated
using present value
techniques based upon projected cash flows and estimated discount
rates.
The values reported reflect the incorporation of a liquidity
discount to meet the objective of “exit price” valuation.
Deposits.
The fair value of Noninterest Bearing Deposits, NOW Accounts, Money Market
Accounts and Savings Accounts are the
amounts payable on demand at the reporting date. The fair value of fixed maturity
certificates of deposit is estimated using present
value techniques and rates currently offered for deposits of
similar remaining maturities.
Subordinated Notes Payable.
The fair value of each note is calculated using present value techniques,
based upon projected cash
flows and estimated discount rates as well as rates being offered
for similar obligations.
and Long-Term
Borrowings.
The fair value of each note is calculated using present value techniques,
based upon
projected cash flows and estimated discount rates as well as rates being offered
for similar debt.
A summary of estimated fair values of significant financial instruments not
recorded at fair value consisted of the following:
Carrying
Level 1
Level 2
Level 3
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
67,124
$
67,124
$
$
Fed Funds Sold and Interest Bearing Deposits
412,609
412,609
Investment Securities, Held to Maturity
304,460
8,579
285,491
Other Equity Securities
2,848
2,848
1,464
Loans, Net of Allowance for Credit Losses
2,468,864
2,360,728
$
3,721,009
$
$
3,720,435
$
46,907
46,907
33,303
32,693
Long-Term Borrowings
Carrying
Level 1
Level 2
Level 3
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
62,189
$
62,189
$
$
Fed Funds Sold and Interest Bearing Deposits
467,782
467,782
Investment Securities, Held to Maturity
377,446
129,268
240,052
Other Equity Securities
2,848
2,848
1,359
Loans, Net of Allowance for Credit Losses
2,515,117
2,416,937
$
3,662,312
$
$
3,662,466
$
50,092
50,092
42,582
40,116
Long-Term Borrowings
All non-financial instruments are excluded from the above table.
The disclosures also do not include goodwill.
Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
NOTE 10 – ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The amounts allocated to accumulated other comprehensive income
(loss) are presented in the table below.
Accumulated
Securities
Other
Available
Interest Rate
Retirement
Comprehensive
for Sale
Swap
Plans
Income (Loss)
Balance as of January 1, 2026
$
(9,530)
$
2,676
$
9,441
$
2,587
Other comprehensive loss during the period
(4,478)
(297)
(4,775)
Balance as of June 30, 2026
$
(14,008)
$
2,379
$
9,441
$
(2,188)
Balance as of January 1, 2025
$
(20,179)
$
3,971
$
9,722
$
(6,486)
Other comprehensive income (loss) during the period
6,434
(888)
5,546
Balance as of June 30, 2025
$
(13,745)
$
3,083
$
9,722
$
(940)
NOTE 11 - SEGMENT REPORTING
The Company operates a single reportable business segment that is comprised
of commercial banking within the states of Florida,
Georgia, and Alabama.
The Company’s chief executive
officer is deemed the Chief Operating Decision Maker (“CODM”). The
CODM evaluates the financial performance of the Company by evaluating
revenue streams, significant expenses, and budget to actual
results in assessing the Company’s
single reporting segment and in the determination of allocating resources. The
CODM uses
consolidated net income to benchmark the Company against peers and to evaluate
performance and allocate resources.
Significant
revenue and expense categories evaluated by the CODM are consistent with the presentation
of the Consolidated Statement of Income
and components of other noninterest expense.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
Management’s discussion
and analysis (“MD&A”) provides supplemental information, which sets forth
the major factors that have
affected our financial condition and results of operations
and should be read in conjunction with the Consolidated Financial
Statements and related notes.
The following information should provide a better understanding of
the major factors and trends that
affect our earnings performance and financial condition,
and how our performance during the second quarter of 2026 compares with
prior periods.
Throughout this section, Capital City Bank Group, Inc., and subsidiaries, collectively,
is referred to as “CCBG,”
“Company,”
“we,” “us,” or “our.”
CAUTION CONCERNING FORWARD
-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including this MD&A section,
contains “forward-looking statements”
within the meaning of the
Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, among others, statements about
our
beliefs, plans, objectives, goals, expectations, estimates and intentions that are
subject to significant risks and uncertainties and are
subject to change based on various factors, many of which are beyond
our control.
The words “may,”
“could,” “should,” “would,”
“believe,” “anticipate,” “contemplate,” “estimate,” “expect,” “intend,”
“plan,” “point to,” “project,” “target,” “vision,” “goal,”
“continue,” “further,” and similar expressions
are intended to identify forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and uncertainties.
Our actual future results may differ materially
from those set forth in our forward-looking statements.
Please see the Introductory Note of this quarterly report on Form 10-Q as well
as the Introductory Note and
of our 2025 Form 10-K, as updated in our subsequent quarterly reports filed
on
Form 10-Q, and in our other filings made from time to time with the SEC after the date
of this report.
However, other factors besides those listed in our
Quarterly Report or in our Annual Report also could adversely affect our
results,
and you should not consider any such list of factors to be a complete set of all potential risks or
uncertainties.
Any forward-looking
statements made by us or on our behalf speak only as of the date they are made.
We do not undertake to
update any forward-looking
statement, except as required by applicable law.
BUSINESS OVERVIEW
We are a financial
holding company headquartered in Tallahassee,
Florida, and we are the parent of our wholly owned subsidiary,
Capital City Bank (the “Bank” or “CCB”).
We offer
a broad array of products and services through a total of 62 full-service offices
and 107 ATMs/ITMs
located in Florida, Georgia, and Alabama.
Through Capital City Home Loans, LLC (“CCHL”), we have 27
additional offices in the Southeast for our mortgage banking business.
We provide
a full range of banking services, including
traditional deposit and credit services, mortgage banking, asset management,
trust, merchant services, bankcards, securities brokerage
services and financial advisory services, including life insurance products
,
risk management and asset protection services.
Our profitability, like
most financial institutions, is dependent to a large extent upon net
interest income, which is the difference
between the interest and fees received on interest earning assets, such as loans and
securities, and the interest paid on interest-bearing
liabilities, principally deposits and borrowings.
Results of operations are also affected by the provision for credit losses, operating
expenses such as salaries and employee benefits, occupancy and other
operating expenses including income taxes, and noninterest
income such as mortgage banking revenues, wealth management fees,
deposit fees, and bank card fees.
We have included
a detailed discussion of our long-term strategic objectives as part of the MD&A section
of our 2025 Form 10-K.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
We present a tangible
common equity ratio and a tangible book value per diluted share that, in each case, removes the
effect of
goodwill and other intangibles that resulted from merger
and acquisition activity. We
believe these measures are useful to investors
because they allow investors to more easily compare our capital adequacy
to other companies in the industry.
Non-GAAP financial
measures should not be considered alternatives to generally accepted
accounting principles (“GAAP”)-basis financial statements and
other bank holding companies may define or calculate these non-GAAP measures
or similar measures differently.
The GAAP to non-GAAP reconciliation for each quarter presented is provided
below.
(Dollars in Thousands, except per share data)
Second
First
Fourth
Third
Second
Shareowners' Equity (GAAP)
$
570,095
$
559,912
$
552,851
$
540,635
$
526,423
Less: Goodwill and Other Intangibles (GAAP)
89,095
89,095
89,095
89,095
92,693
Tangible Shareowners' Equity (non-GAAP)
A
481,000
470,817
463,756
451,540
433,730
Total Assets (GAAP)
4,453,734
4,323,774
4,391,753
Less: Goodwill and Other Intangibles (GAAP)
89,095
89,095
89,095
89,095
92,693
Tangible Assets (non-GAAP)
B
$
4,361,388
$
4,364,639
$
4,296,670
$
4,234,679
$
4,299,060
Tangible Common Equity Ratio (non-GAAP)
A/B
11.03%
10.79%
10.79%
10.66%
10.09%
Actual Diluted Shares Outstanding (GAAP)
C
17,135,824
17,114,954
17,154,586
17,115,336
17,097,986
Tangible Book Value
per Diluted Share (non-GAAP)
A/C
28.07
27.51
27.03
26.38
25.37
SELECTED QUARTERLY
FINANCIAL DATA
(UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
Second
First
Fourth
Third
Second
Summary of Operations
:
Interest Income
$
51,838
$
51,020
$
51,715
$
51,431
$
51,459
Interest Expense
7,640
8,203
8,355
7,874
8,275
44,198
42,817
43,360
43,557
43,184
1,995
1,881
Net Interest Income After
43,279
42,105
41,365
41,676
42,564
20,599
19,933
20,103
22,331
20,014
42,640
41,373
42,867
42,916
42,538
Income Before Income Taxes
21,238
20,665
18,601
21,091
20,040
4,961
4,848
4,896
5,141
4,996
Net Income Attributable to CCBG
16,277
15,817
13,705
15,950
15,044
Net Interest Income (FTE)
(1)
44,241
42,857
43,404
43,602
43,228
Per Common Share
:
Net Income Basic
$
0.95
$
0.92
$
0.80
$
0.93
$
0.88
Net Income Diluted
0.95
0.92
0.80
0.93
0.88
Cash Dividends Declared
0.27
0.27
0.26
0.26
0.24
Diluted Book Value
33.27
32.71
32.23
31.59
30.79
Diluted Tangible Book Value
(2)
28.07
27.51
27.03
26.38
25.37
Market Price:
High
51.04
46.83
45.63
44.69
39.82
Low
42.79
39.26
38.27
38.00
32.38
Close
49.42
43.46
42.57
41.79
39.35
Selected Average Balances
:
Investment Securities
$
1,167,321
$
1,119,125
$
1,006,040
$
993,880
$
1,007,981
2,505,875
2,538,318
2,568,073
2,606,213
2,652,572
Earning Assets
4,068,827
4,089,838
4,035,910
3,981,530
4,032,008
Total Assets
4,418,904
4,367,036
4,317,951
3,678,776
3,691,016
3,647,510
3,612,331
3,680,707
Shareowners’ Equity
573,839
567,663
556,100
542,216
527,583
Common Equivalent Average Shares:
Basic
17,101
17,129
17,070
17,068
17,056
Diluted
17,126
17,146
17,140
17,114
17,088
Performance Ratios:
Return on Average Assets (annualized)
1.48
%
1.45
%
1.25
%
1.47
%
1.38
%
Return on Average Equity (annualized)
11.38
11.30
9.78
11.67
11.44
Net Interest Margin (FTE)
4.35
4.24
4.26
4.34
4.30
Noninterest Income as % of Operating Revenue
31.79
31.77
31.68
33.89
31.67
Efficiency Ratio
65.76
65.89
67.50
65.09
67.26
Asset Quality:
Allowance for Credit Losses (“ACL”)
$
31,007
$
30,999
$
31,001
$
30,202
$
29,862
Nonperforming Assets (“NPAs”)
13,435
12,965
10,531
10,026
6,581
ACL to Loans HFI
1.24
%
1.23
%
1.22
%
1.17
%
1.13
%
NPAs to Total
Assets
0.30
0.29
0.24
0.23
0.15
NPAs to Loans HFI plus OREO
0.54
0.51
0.41
0.39
0.25
ACL to Non-Performing Loans
309.72
278.19
360.69
368.54
463.01
Net Charge-Offs to Average Loans HFI
0.14
0.10
0.18
0.18
0.09
Capital Ratios:
Tier 1 Capital
21.10
%
20.37
%
20.20
%
19.33
%
18.38
%
Total Capital
22.35
21.62
21.45
20.59
19.60
Common Equity Tier 1
19.80
19.08
18.56
17.73
16.81
Leverage
11.96
11.65
11.77
11.64
11.14
Tangible Common Equity
(2)
11.03
10.79
10.79
10.66
10.09
(1)
Fully Tax Equivalent.
(2)
Non-GAAP financial measure.
See non-GAAP reconciliation on page 38.
FINANCIAL OVERVIEW
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.