Capital City Bank Group Q3 2026 profit rises to $16.9M
Operating activities generated less cash during the first nine months than in 2025, despite higher third-quarter net income.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Capital City Bank Group, Inc. reported third-quarter 2026 net income of $16.940 million, compared with $15.950 million in the third quarter of 2025. Net interest income was $45.010 million, versus $43.557 million, while noninterest income was $19.384 million, versus $22.331 million. Deposit fees, wealth management fees and mortgage banking revenue were each lower than in the year-earlier quarter; total noninterest expense was $42.295 million, versus $42.916 million.
At September 30, 2026, assets were $4.397 billion, deposits were $3.667 billion and loans held for investment were $2.490 billion. Cash and cash equivalents were $411.632 million, compared with $529.971 million at December 31, 2025. Operating activities provided $61.837 million in cash during the first nine months of 2026, compared with $76.054 million in 2025; investing activities used $148.133 million. The investment portfolio had $52.3 million of aggregate unrealized pre-tax losses across 848 positions at September 30, 2026. The allowance for credit losses on loans was $30.369 million, versus $31.001 million at December 31, 2025.
1 point · 0 major0 major · 2 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointQuarterly net income reached $16.940 million, versus $15.950 million a year earlier.
Negative
- Moderate pointNoninterest income was $19.384 million, versus $22.331 million in Q3 2025.
- Moderate pointOperating cash flow was $61.837 million, versus $76.054 million in nine-month 2025.
Filing Explained
At September 30, 2026, Capital City Bank Group reported
Key Figures
Net income: $16.940 million
Net interest income: $45.010 million
Noninterest income: $19.384 million
+5 more
8 metrics
Net income
$16.940 million
Three months ended September 30, 2026; $15.950 million in 2025
Net interest income
$45.010 million
Three months ended September 30, 2026; $43.557 million in 2025
Noninterest income
$19.384 million
Three months ended September 30, 2026; $22.331 million in 2025
Net cash provided by operating activities
$61.837 million
Nine months ended September 30, 2026; $76.054 million in 2025
Total assets
$4.397 billion
September 30, 2026
Total deposits
$3.667 billion
September 30, 2026
Loans held for investment
$2.490 billion
September 30, 2026
Diluted net income per share
$0.99
Three months ended September 30, 2026; $0.93 in 2025
Key Terms
Allowance for Credit Losses, Available for Sale, Held to Maturity, Tangible Common Equity Ratio, +1 more
5 terms
Allowance for Credit Losses financial
"allowance for credit losses (“ACL”)"
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
Available for Sale financial
"Investment Securities, Available for Sale, at fair value"
Available for sale describes investments, usually bonds or stocks, that a company intends to keep but may sell before they mature; they are reported at current market value on the balance sheet while any unrealized profit or loss is kept separate from regular earnings. For investors, this matters because changes in market value affect a company’s reported net worth and can become realized gains or losses when sold, similar to how the changing resale value of a collectible affects your net wealth even before you sell it.
Held to Maturity financial
"Investment Securities, Held to Maturity"
A "held to maturity" classification applies to debt securities a company intends and is able to keep until they are fully repaid. Think of it like putting a bond in a locked safe until the issuer returns your money; the company does not mark the holding to daily market swings, so reported income and balance-sheet values are steadier. For investors, it signals predictable future interest receipts and reduced volatility in reported results, but also less liquidity if cash is needed before maturity.
Tangible Common Equity Ratio financial
"Tangible Common Equity Ratio (non-GAAP)"
Tangible common equity ratio measures how much real, loss-absorbing capital common shareholders have relative to a company's tangible assets—calculated by removing intangible items (like goodwill) and preferred equity from total equity and comparing that net amount to tangible assets. Think of it as the thickness of a safety cushion made of solid, visible value rather than accounting entries; investors use it to judge how well a company could withstand losses and protect common shareholders' claims.
Accumulated Other Comprehensive Income (Loss) financial
"NOTE 10 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)"
A balance-sheet line that tracks certain gains and losses that haven’t flowed through the company’s profit-and-loss statement, such as unrealized changes in the value of investments, foreign-currency adjustments, and some pension-related items. Think of it like a storage closet for value swings the company hasn’t ‘realized’ by selling or settling them yet; it changes shareholders’ equity and helps investors see hidden volatility or potential future impacts on book value.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did CCBG earn in the third quarter of 2026?
Capital City Bank Group reported net income of $16.940 million for the three months ended September 30, 2026, compared with $15.950 million in the same 2025 period. Basic and diluted net income per share were both $0.99, compared with $0.93 for the 2025 quarter.
Which CCBG fee categories changed in Q3 2026?
Deposit fees were $5.168 million, wealth management fees were $4.640 million, and mortgage banking revenues were $3.673 million in the third quarter of 2026. Their respective year-earlier amounts were $5.877 million, $5.173 million, and $4.794 million.
AI-generated analysis. How Rhea-AI works. Not financial advice.
See more from StockTitan in Google Search and AI answers.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number:
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
,
,
(Address of principal executive office)
(Zip Code)
(
)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
[X]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes
[X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
☒
Non-accelerated filer
☐
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No
At October 29, 2026,
2
CAPITAL CITY BANK GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 2026
TABLE OF CONTENTS
PART I – Financial Information
Page
Item 1.
Consolidated Statements of Financial Condition – September 30, 2026 and December 31, 2025
5
Consolidated Statements of Income – Three and Nine Months Ended September 30, 2026 and 2025
6
Consolidated Statements of Comprehensive Income (Loss) – Three and Nine Months Ended September 30, 2026 and 2025
7
Consolidated Statements of Changes in Shareowners’ Equity – Three and Nine Months Ended September 30, 2026 and 2025
8
Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2026 and 2025
9
Notes to Consolidated Financial Statements
11
Item 2.
36
Item 3.
52
Item 4.
52
PART II – Other Information
Item 1.
Legal Proceedings
52
Item 1A.
Risk Factors
52
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
52
Item 3.
Defaults Upon Senior Securities
52
Item 4.
Mine Safety Disclosure
52
Item 5.
Other Information
52
Item 6.
Exhibits
53
Signatures
54
3
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,” “will,” “project,” “continue,” “outlook,” “approximate,” “seasonal,” “future,” 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, 2025 (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 pricing (including deposit fees), spending, third-party relationships and revenues;
●
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;
4
●
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
Item 1A Risk Factors
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.
5
PART I.
FINANCIAL INFORMATION
Item 1.
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
September 30,
December 31,
(Dollars in Thousands, Except Par Value)
2026
2025
ASSETS
Cash and Due From Banks
$
$
Federal Funds Sold and Interest Bearing Deposits
Total Cash and Cash Equivalents
Investment Securities, Available for Sale, at fair value (amortized cost of $
)
Investment Securities, Held to Maturity (fair value of $
)
Equity Securities
Total Investment Securities
Loans Held For Sale, at fair value
Loans Held for Investment
Allowance for Credit Losses
(30,369 )
(31,001 )
Loans Held for Investment, Net
Premises and Equipment, Net
Goodwill
Other Real Estate Owned
Other Assets
Total Assets
$
$
LIABILITIES
Deposits:
Noninterest Bearing Deposits
$
$
Interest Bearing Deposits
Total Deposits
Short-Term Borrowings
Subordinated Notes Payable
Other Long-Term Borrowings
Other Liabilities
Total Liabilities
SHAREOWNERS’ EQUITY
Preferred Stock, $
-
-
Common Stock, $
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive (Loss) Income, net of tax
(11,436 )
Total Shareowners’
Equity
Total Liabilities and Shareowners’ Equity
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
6
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
Nine Months Ended
(Dollars in Thousands, Except Per Share Data)
2026
2025
2026
2025
INTEREST INCOME
Loans, including Fees
$
$
$
$
Investment Securities:
Taxable
Tax Exempt
Funds Sold and Interest Bearing Deposits
Total Interest Income
INTEREST EXPENSE
Deposits
Short-Term Borrowings
Subordinated Notes Payable
Other Long-Term Borrowings
Total Interest Expense
NET INTEREST INCOME
Provision for Credit Losses
(80 )
Net Interest Income After Provision For Credit Losses
NONINTEREST INCOME
Deposit Fees
Bank Card Fees
Wealth Management Fees
Mortgage Banking Revenues
Other
Total Noninterest Income
NONINTEREST EXPENSE
Compensation
Occupancy, Net
Other
Total Noninterest Expense
INCOME BEFORE INCOME TAXES
Income Tax Expense
NET INCOME
$
$
$
$
BASIC NET INCOME PER SHARE
$
$
$
$
DILUTED NET INCOME PER SHARE
$
$
$
$
Average Common Basic Shares Outstanding
Average Common Diluted Shares Outstanding
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
7
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in Thousands)
2026
2025
2026
2025
NET INCOME
$
$
$
$
Other comprehensive income, before tax:
Investment Securities:
Change in net unrealized loss on securities available for sale
(12,163 )
(18,326 )
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
(253 )
(1,442 )
Amortization of terminated cash flow derivative gain
(202 )
(600 )
Other comprehensive (loss) income, before tax
(12,365 )
(18,762 )
Deferred tax (benefit) expense related to other comprehensive (loss) income
(3,117 )
(4,739 )
Other comprehensive (loss) income, net of tax
(9,248 )
(14,023 )
TOTAL COMPREHENSIVE INCOME
$
$
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
8
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY
(Unaudited)
Accumulated
Additional
Comprehensive
Shares
Common
Paid-In
Retained
(Loss) Income,
(Dollars In Thousands, Except Share Data)
Outstanding
Stock
Capital
Earnings
Net of Taxes
Total
Balance, July 1, 2026
$
$
$
$
(2,188 )
$
Net Income
-
Other Comprehensive Loss, net of tax
-
(9,248 )
(9,248 )
Cash Dividends ($
-
(4,620 )
(4,620 )
Stock Based Compensation
-
Stock Compensation Plan Transactions, net
Balance, September 30, 2026
$
$
$
$
(11,436 )
$
Balance, July 1, 2025
$
$
$
$
(940 )
$
Net Income
-
Other Comprehensive Income, net of tax
-
Cash Dividends ($
-
(4,439 )
(4,439 )
Stock Based Compensation
-
Stock Compensation Plan Transactions, net
Balance, September 30, 2025
$
$
$
$
$
Balance, January 1, 2026
$
$
$
$
$
Net Income
-
Other Comprehensive Loss, net of tax
-
(14,023 )
(14,023 )
Cash Dividends ($
-
(13,866 )
(13,866 )
Repurchase of Common Stock
(63,088 )
(2,639 )
(2,639 )
Stock Based Compensation
-
Stock Compensation Plan Transactions, net
Balance, September 30, 2026
$
$
$
$
(11,436 )
$
Balance, January 1, 2025
$
$
$
$
(6,486 )
$
Net Income
-
Other Comprehensive Income, net of tax
-
Cash Dividends ($
-
(12,625 )
(12,625 )
Stock Based Compensation
-
Stock Compensation Plan Transactions, net
Balance, September 30, 2025
$
$
$
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
9
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
(Dollars in Thousands)
2026
2025
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income
$
$
Adjustments to Reconcile Net Income to
(773 )
(315,284 )
(332,760 )
(12,585 )
(12,804 )
(132 )
(154 )
(2,532 )
(18 )
(796 )
(4,514 )
(453 )
(1,000 )
Net Cash Provided By Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Securities Held to Maturity:
(113,266 )
(66,697 )
Securities Available for Sale:
(360,296 )
(225,039 )
Equity Securities:
(1,219 )
(60 )
Purchases of Loans Held for Investment
(7,013 )
(958 )
Proceeds from Sales of Loans
Net Decrease in Loans Held for Investment
Purchase of Bank Owned Life Insurance
(6,000 )
Net Cash Received for Divestitures
Proceeds from Insurance Claims on Premises
Proceeds From Sales of Other Real Estate Owned
Purchases of Premises and Equipment
(10,571 )
(5,967 )
Net Cash (Used In) Provided By Investing Activities
(148,133 )
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits
(57,065 )
Net (Decrease) Increase in Short-Term Borrowings
(11,211 )
Principal Payments of Subordinated Notes
(9,279 )
(10,305 )
Dividends Paid
(13,866 )
(12,625 )
Payments to Repurchase Common Stock
(2,639 )
Proceeds from Issuance of Common Stock Under Purchase Plans
Net Cash Used In Financing Activities
(32,043 )
(67,345 )
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(118,339 )
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
$
$
10
Supplemental Cash Flow Disclosures:
$
$
$
$
$
$
$
$
Supplemental Noncash Items:
$
$
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
11
CAPITAL CITY BANK 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, 2028. 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 amorti zed 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.
12
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 the
Company in interim reporting periods beginning as of January 1, 2028. The Company is currently evaluating the provisions of the
amendments and the impact on its future consolidated statements.
ASU 2025-12, “Codification Improvements.”
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.
13
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.
Available for Sale
Amortized
Unrealized
Unrealized
Allowance for
Fair
(Dollars in Thousands)
Cost
Gains
Losses
Credit Losses
Value
September 30, 2026
U.S. Government Treasury
$
$
$
$
$
U.S. Government Agency
States and Political Subdivisions
Mortgage-Backed Securities
(1)
Corporate Debt Securities
(49 )
Total
$
$
$
$
(49 )
$
December 31, 2025
U.S. Government Treasury
$
$
$
$
$
U.S. Government Agency
States and Political Subdivisions
Mortgage-Backed Securities
(1)
Corporate Debt Securities
(42 )
Other Securities
(2)
Total
$
$
$
$
(42 )
$
Held to Maturity
Amortized
Unrealized
Unrealized
Fair
(Dollars in Thousands)
Cost
Gains
Losses
Value
September 30, 2026
Mortgage-Backed Securities
(1)
Total
$
$
$
$
December 31, 2025
U.S. Government Treasury
$
$
$
$
Mortgage-Backed Securities
(1)
Total
$
$
$
$
(1)
(2)
Includes Federal Home Loan Bank stock and Federal Reserve Bank stock recorded at cost of $
December 31, 2025, respectively. These securities are presented in Other Assets beginning September 30, 2026.
At September 30, 2026 and December 31, 2025, the investment portfolio had $
securities. These securities do not have a readily determinable fair value and were not credit impaired.
Securities with an amortized cost of $
were pledged to secure public deposits and for other purposes.
Investment Sales.
There were
Maturity Distribution
. At September 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.
14
Available for Sale
Held to Maturity
(Dollars in Thousands)
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Due in one year or less
$
$
$
$
Due after one year through five years
Mortgage-Backed Securities
U.S. Government Agency
Total
$
$
$
$
15
Unrealized Losses on Investment Securities.
securities with unrealized losses aggregated by major security type and length of time in a continuous unrealized loss position:
Less Than
Greater Than
12 Months
12 Months
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
(Dollars in Thousands)
Value
Losses
Value
Losses
Value
Losses
September 30, 2026
Available for Sale
U.S. Government Treasury
$
$
$
$
$
$
U.S. Government Agency
States and Political Subdivisions
Mortgage-Backed Securities
Corporate Debt Securities
Total
$
$
$
$
$
$
Held to Maturity
Mortgage-Backed Securities
Total
$
$
$
$
$
$
December 31, 2025
Available for Sale
U.S. Government Treasury
$
$
$
$
$
$
U.S. Government Agency
States and Political Subdivisions
Mortgage-Backed Securities
Corporate Debt Securities
Total
$
$
$
$
$
$
Held to Maturity
U.S. Government Treasury
Mortgage-Backed Securities
Total
$
$
$
$
$
$
At September 30, 2026, there were
of these positions are U.S. Treasury bonds and carry the full faith and credit of the U.S. Government.
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 September 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
September 30, 2026, corporate debt securities had
an
allowance for credit losses of $
.
ne of the securities held by the
Company were past due or in nonaccrual status
at
September 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
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 rating s 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.
16
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:
(Dollars in Thousands)
September 30, 2026
December 31, 2025
Commercial, Financial and Agricultural
$
$
Real Estate – Construction
Real Estate – Commercial Mortgage
Real Estate – Residential
(1)
Real Estate – Home Equity
Consumer
(2)
Loans Held For Investment, Net of Unearned Income
$
$
(1)
Includes loans in process balances of $
(2)
Includes overdraft balances of $
Net deferred loan costs, which include premiums on purchased loans, included in loans were $
$
Accrued interest receivable on loans which is excluded from amortized cost, totaled $
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.
Loan Purchase s.
The Company will periodically purchase commercial real estate loans for its portfolio. Commercial loan purchases
totaled $
ne were purchased
during the comparable 2025 periods.
17
Allowance for Credit Losses
. 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,
Real Estate
Financial,
Real Estate
Commercial
Real Estate
Real Estate
(Dollars in Thousands)
Agricultural
Construction
Mortgage
Residential
Home Equity
Consumer
Total
Three Months Ended
September 30, 2026
Beginning Balance
$
$
$
$
$
$
$
Provision for Credit Losses
(25 )
(241 )
(837 )
(52 )
(129 )
Charge-Offs
(251 )
(9 )
(1,883 )
(2,136 )
Recoveries
Net Recoveries (Charge-Offs)
(712 )
(509 )
Ending Balance
$
$
$
$
$
$
$
Nine Months Ended
September 30, 2026
Beginning Balance
$
$
$
$
$
$
$
Provision for Credit Losses
(220 )
(1,343 )
Charge-Offs
(1,128 )
(47 )
(6 )
(4,503 )
(5,684 )
Recoveries
Net (Charge-Offs) Recoveries
(707 )
(1,665 )
(2,042 )
Ending Balance
$
$
$
$
$
$
$
Three Months Ended
September 30, 2025
Beginning Balance
$
$
$
$
$
$
$
Provision for Credit Losses
(352 )
Charge-Offs
(373 )
(12 )
(10 )
(1,573 )
(1,968 )
Recoveries
Net (Charge-Offs) Recoveries
(278 )
(941 )
(1,210 )
Ending Balance
$
$
$
$
$
$
$
Nine Months Ended
September 30, 2025
Beginning Balance
$
$
$
$
$
$
$
Provision for Credit Losses
(925 )
Charge-Offs
(615 )
(69 )
(34 )
(4,359 )
(5,077 )
Recoveries
Net (Charge-Offs) Recoveries
(328 )
(2,244 )
(2,400 )
Ending Balance
$
$
$
$
$
$
$
18
At September 30, 2026, the allowance for credit losses for loans HFI totaled $
at
December 31,
2025 and $
at
September 30, 2025. Activity within the allowance for the nine month period ended September 30, 2026,
reflected a provision expense of $
offs
of $
utilization of a lower forecasted unemployment rate in forecasting loan loss rates and lower loan balances,
as
compared to the
December 31, 2025 allowance. At September 30, 2025, the allowance for loans HFI totaled $
December 31, 2024. Activity within the allowance for the nine-month period ended September 30, 2025, reflected a provision expense
of $
offs
of $
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 probabilit
y.
See Note 8 – Commitments and Contingencies
for information on the allowance for off-balance sheet credit commitments.
19
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
Nonaccrual
Total
(Dollars in Thousands)
DPD
DPD
DPD
Past Due
Current
Loans
Loans
September 30, 2026
Commercial, Financial and Agricultural
$
$
$
$
$
$
$
Real Estate – Construction
Real Estate – Commercial Mortgage
Real Estate – Residential
Real Estate – Home Equity
Consumer
Total
$
$
$
$
$
$
$
December 31, 2025
Commercial, Financial and Agricultural
$
$
$
$
$
$
$
Real Estate – Construction
Real Estate – Commercial Mortgage
Real Estate – Residential
Real Estate – Home Equity
Consumer
Total
$
$
$
$
$
$
$
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.
September 30, 2026
December 31, 2025
Nonaccrual
Nonaccrual
Nonaccrual
Nonaccrual
With No
With
90 + Days
With No
With
90 + Days
(Dollars in Thousands)
ACL
ACL
Still Accruing
ACL
ACL
Still Accruing
Commercial, Financial and Agricultural
$
$
$
$
$
$
Real Estate – Construction
Real Estate – Commercial Mortgage
Real Estate – Residential
Real Estate – Home Equity
Consumer
Total Nonaccrual Loans
$
$
$
$
$
$
20
Collateral Dependent Loans.
The following table presents the amortized cost basis of collateral -dependent loans.
September 30, 2026
December 31, 2025
Real Estate
Non Real Estate
Real Estate
Non Real Estate
(Dollars in Thousands)
Secured
Secured
Secured
Secured
Commercial, Financial and Agricultural
$
$
$
$
Real Estate – Construction
Real Estate – Commercial Mortgage
Real Estate – Residential
Real Estate – Home Equity
Consumer
Total Collateral Dependent Loans
$
$
$
$
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 September 30, 2026, the Company had $
residential real estate loans for which formal foreclosure proceedings were in process, compared to $
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 nine months ended September 30, 2026, the Company did
t modify any loans to borrowers experiencing financial
difficulty. During the nine months ended September 30, 2025,
-
month interest only extension in exchange for additional collateral.
The Company closely monitors the performance of loans modified for borrowers experiencing financial difficulty to evaluate the
effectiveness of its modification strategies. At September 30, 2026, there were
preceding twelve months . At September 30, 202 5, the amortized cost basis of loans modified during the preceding twelve months was
$
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.
21
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
account s receivable, inventory, or
equipment. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios
at
origination are
governed by established policy guidelines.
Real Estate Construction – Loans in this category consists 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. Collateral values are determined based upon third party appraisals and evaluati ons. 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. Collateral values are determined based upon third party appraisals and evaluations.
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.
22
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 table s summarize gross loans held for investment at September 30, 2026 and December 31, 2025 and current period
gross writeoffs for the nine months ended September 30, 2026 and 12 months ended December 31, 202 5 by years of origination and
internally assigned credit risk ratings (refer to Credit Risk Management section for detail on risk rating system).
23
(Dollars in Thousands)
Term Loans by Origination Year
Revolving
As of September 30, 2026
2026
2025
2024
2023
2022
Prior
Loans
Total
Commercial, Financial,
Agriculture:
Pass
$
$
$
$
$
$
$
$
Special Mention
Substandard
Total
$
$
$
$
$
$
$
$
Current-Period Gross
Writeoffs
$
$
$
$
$
$
$
$
Real Estate - Construction:
Pass
$
$
$
$
$
$
$
$
Special Mention
Substandard
Total
$
$
$
$
$
$
$
$
Real Estate - Commercial
Mortgage:
Pass
$
$
$
$
$
$
$
$
Special Mention
Substandard
Doubtful
Total
$
$
$
$
$
$
$
$
Real Estate - Residential:
Pass
$
$
$
$
$
$
$
$
Special Mention
Substandard
Total
$
$
$
$
$
$
$
$
Current-Period Gross
Writeoffs
$
$
$
$
$
$
$
$
Real Estate - Home Equity:
Performing
$
$
$
$
$
$
$
$
Nonperforming
Total
$
$
$
$
$
$
$
$
Current-Period Gross
Writeoffs
$
$
$
$
$
$
(33 )
$
$
Consumer:
Performing
$
$
$
$
$
$
$
$
Nonperforming
Total
$
$
$
$
$
$
$
$
Current-Period Gross
Writeoffs
$
$
$
$
$
$
$
$
24
(Dollars in Thousands)
Term Loans by Origination Year
Revolving
As of December 31, 2025
2025
2024
2023
2022
2021
Prior
Loans
Total
Commercial, Financial,
Agriculture:
Pass
$
$
$
$
$
$
$
$
Special Mention
Substandard
Total
$
$
$
$
$
$
$
$
Current-Period Gross
Writeoffs
$
$
$
$
$
$
$
$
Real Estate - Construction:
Pass
$
$
$
$
$
$
$
$
Special Mention
Substandard
Total
$
$
$
$
$
$
$
$
Real Estate - Commercial
Mortgage:
Pass
$
$
$
$
$
$
$
$
Special Mention
Substandard
Total
$
$
$
$
$
$
$
$
Current-Period Gross
Writeoffs
$
$
$
$
$
$
$
$
Real Estate - Residential:
Pass
$
$
$
$
$
$
$
$
Special Mention
Substandard
Total
$
$
$
$
$
$
$
$
Current-Period Gross
Writeoffs
$
$
$
$
$
$
$
$
Real Estate - Home Equity:
Performing
$
$
$
$
$
$
$
$
Nonperforming
Total
$
$
$
$
$
$
$
$
Current-Period Gross
Writeoffs
$
$
$
$
$
$
$
$
Consumer:
Performing
$
$
$
$
$
$
$
$
Nonperforming
Total
$
$
$
$
$
$
$
$
Current-Period Gross
Writeoffs
$
$
$
$
$
$
$
$
25
NOTE 4 – MORTGAGE BANKING ACTIVITIES
The Company’s mortgage banki ng 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.
September 30, 2026
December 31, 2025
Unpaid Principal
Unpaid Principal
(Dollars in Thousands)
Balance/Notional
Fair Value
Balance/Notional
Fair Value
Residential Mortgage Loans Held for Sale
$
$
$
$
Residential Mortgage Loan Commitments ("IRLCs")
(1)
Forward Sales Contracts
(2)
(1)
(2)
At September 30, 2026 and December 31, 2025, the Company had
on nonaccrual status.
Mortgage banking revenue was
as
follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Dollars in Thousands)
2026
2025
2026
2025
Net realized gains on sales of mortgage loans
$
$
$
$
Net change in unrealized (loss) gain on mortgage loans held for
sale
(595 )
(266 )
Net change in the fair value of IRLCs
(152 )
(45 )
Net change in the fair value of forward sales contracts
(85 )
Pair-Offs on net settlement of forward sales contracts
(234 )
(404 )
Mortgage servicing rights additions
Net origination fees
Total mortgage banking revenues
$
$
$
$
26
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.
(Dollars in Thousands)
September 30, 2026
December 31, 2025
Number of residential mortgage loans serviced for others
Outstanding principal balance of residential mortgage loans serviced for others
$
$
Weighted average interest rate
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 United States Department of
Veterans Affairs. At September 30, 2026, the servicing portfolio balance consisted of the following loan types: FNMA (
%),
GNMA (
%), and private investor (
%). FNMA and private investor loans are structured
as
actual /actual payment remittance .
At September 30, 2026 and December 31, 2025, the Company did
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
months ended September 30, 2026 and 2025, and
30, 2026 and 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:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Dollars in Thousands)
2026
2025
2026
2025
Beginning balance
$
$
$
$
Additions due to loans sold with servicing retained
Deletions and amortization
(47 )
(44 )
(140 )
(132 )
Ending balance
$
$
$
$
The Company did
t record any permanent impairment losses on mortgage servicing rights for the three or nine months ended
September 30, 2026 or 2025.
The key unobservable inputs used in determining the fair value of the Company’s mortgage servicing rights were
as
follows:
September 30, 2026
December 31, 2025
Minimum
Maximum
Minimum
Maximum
Discount rates
Annual prepayment speeds
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
% at September 30, 2026 and
%
at
December 31, 2025.
27
Warehouse Line Borrowings
The Company has the following warehouse lines of credit and master repurchase agreements with various financial institutions
at
September 30, 2026:
Amounts
(Dollars in Thousands)
Outstanding
$
financing rate (SOFR) rate plus
, with a floor rate of
. A cash pledge deposit of
$
$
$
September 2027
. Interest is at the SOFR rate plus
, with a floor rate of
.
Total Warehouse Borrowings
$
Warehouse line borrowings are classified as short-term borrowings. At December 31, 2025, warehouse line borrowings totaled $
million. At September 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 September 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 $
for subordinated debt. Under the swap arrangement, the Company paid a fixed interest rate of
% 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 $
straight-line basis into interest expense through the remaining term of the original cash flow hedge. The Company estimates there will
be approximately $
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
Reclassified
(Dollars in Thousands)
Category
in AOCI
from AOCI to Income
Three months ended September 30, 2026
Interest expense
$
$
Three months ended September 30, 2025
Interest expense
(189 )
Nine months ended September 30, 2026
Interest expense
$
$
Nine months ended September 30, 2025
Interest expense
(1,076 )
28
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
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 842.
respectively. At December 31, 2025, ROU assets and liabilities were $
does not have any finance leases.
The table below summarizes our lease expense and other information related to the Company’s operating leases.
Three Months Ended
Nine Months Ended
September 30,
September 30,
(Dollars in Thousands)
2026
2025
2026
2025
Operating lease expense
$
$
$
$
Short-term lease expense
Total lease expense
$
$
$
$
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
$
$
$
Right-of-use assets obtained in exchange for new operating lease liabilities
Weighted average remaining lease term — operating leases (in years)
Weighted average discount rate — operating leases
The table below summarizes the maturity of remaining lease liabilities:
(Dollars in Thousands)
September 30, 2026
2026
$
2027
2028
2029
2030
2031 and thereafter
Total
$
Less: Interest
(6,757 )
Present Value of Lease liability
$
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 $
% every
which time the rent amount will adjust based on reappraisal of the parcel rental value. The Company then has
to extend the lease for
% at each extension. The aggregate remaining obligation of the lease
totaled $
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.
29
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:
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in Thousands)
2026
2025
2026
2025
Service Cost
$
$
$
$
Interest Cost
Expected Return on Plan Assets
(2,218 )
(2,265 )
(6,653 )
(6,794 )
Net Loss Amortization
(474 )
(413 )
(1,421 )
(1,240 )
Net Periodic Benefit Cost
$
(328 )
$
(141 )
$
(982 )
$
(424 )
Discount Rate
Long-term Rate of Return on Assets
The components of the net periodic benefit cost for the Company’s SERP and SERP II were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in Thousands)
2026
2025
2026
2025
Service Cost
$
$
$
$
Interest Cost
Prior Service Cost Amortization
Net Loss Amortization
(30 )
(88 )
Net Periodic Benefit Cost
$
$
$
$
Discount Rate
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:
September 30, 2026
December 31, 2025
(Dollars in Thousands)
Fixed
Variable
Total
Fixed
Variable
Total
Commitments to Extend Credit
$
$
$
$
$
$
Standby Letters of Credit
Total
$
$
$
$
$
$
(1)
Commitments include unfunded loans, revolving lines of credit, and off-balance sheet residential loan commitments.
30
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
al
lowance 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 September 30,
Nine Months Ended September 30,
(Dollars in Thousands)
2026
2025
2026
2025
Beginning Balance
$
$
$
$
Provision for Credit Losses
(60 )
Ending Balance
$
$
$
$
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 $
funding technology solutions for community banks and a commitment of up to $
September 30, 202 6, the amount remaining to be funded for the bank tech venture capital and solar tax credit equity investment fund
commitments was $
Contingencies
. The Company is a party to lawsuits and claims arising out of the normal course of business. In management's opinion,
there are
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 $
payment accrued and payable at September 30, 2026 due to a revision to the share conversion rate related to additional funding by
VISA of the merchant litigation reserve.
31
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 820
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.
Loans Held for Sale
. 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.
Fair Value 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 $
accrued and payable
at
September 30, 2026 and December 31, 202 5, respectively.
32
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
(Dollars in Thousands)
Inputs
Inputs
Inputs
Value
September 30, 2026
ASSETS:
Securities Available for Sale:
U.S. Government Treasury
$
$
$
$
U.S. Government Agency
States and Political Subdivisions
Mortgage-Backed Securities
Corporate Debt Securities
Loans Held for Sale
Forward Sales Contracts
Residential Mortgage Loan Commitments ("IRLCs")
December 31, 2025
ASSETS:
Securities Available for Sale:
U.S. Government Treasury
$
$
$
$
U.S. Government Agency
States and Political Subdivisions
Mortgage-Backed Securities
Corporate Debt Securities
Equity Securities
Loans Held for Sale
Residential Mortgage Loan Commitments ("IRLCs")
LIABILITIES:
Forward Sales Contracts
Mortgage Banking Activities
. The Company had Level 3 issuances and transfers related to mortgage banking activities of $
and $
the nine months ended September 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 $
2026 and a carrying value of $
33
Other Real Estate Owned
. During the first nine 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.
Mortgage Servicing Rights
. 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 September 30, 2026 and December 31, 2025, there was
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.”
Loans.
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.
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.
flows and estimated discount rates as well as rates being offered for similar obligations.
Short-Term and Long-Term Borrowings.
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:
September 30, 2026
Carrying
Level 1
Level 2
Level 3
(Dollars in Thousands)
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
$
$
$
Fed Funds Sold and Interest Bearing Deposits
Investment Securities, Held to Maturity
Mortgage Servicing Rights
Loans, Net of Allowance for Credit Losses
LIABILITIES:
Deposits
$
$
$
$
Short-Term Borrowings
Subordinated Notes Payable
Long-Term Borrowings
34
December 31, 2025
Carrying
Level 1
Level 2
Level 3
(Dollars in Thousands)
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
$
$
$
Fed Funds Sold and Interest Bearing Deposits
Investment Securities, Held to Maturity
Other Equity Securities
Mortgage Servicing Rights
Loans, Net of Allowance for Credit Losses
LIABILITIES:
Deposits
$
$
$
$
Short-Term Borrowings
Subordinated Notes Payable
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.
35
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
(Dollars in Thousands)
Swap
Plans
Income (Loss)
Balance as of January 1, 2026
$
(9,530 )
$
$
$
Other comprehensive loss during the period
(13,575 )
(448 )
(14,023 )
Balance as of September 30, 2026
$
(23,105 )
$
$
$
(11,436 )
Balance as of January 1, 2025
$
(20,179 )
$
$
$
(6,486 )
Other comprehensive income (loss) during the period
(1,076 )
Balance as of September 30, 2025
$
(11,396 )
$
$
$
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.
36
Item 2.
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 third 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
Item 1A. Risk Factors
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.
37
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.
2026
2025
(Dollars in Thousands, except per share data)
Third
Second
First
Fourth
Third
Shareowners' Equity (GAAP)
$
573,862
$
570,095
$
559,912
$
552,851
$
540,635
Less: Goodwill and Other Intangibles (GAAP)
89,095
89,095
89,095
89,095
89,095
Tangible Shareowners' Equity (non-GAAP)
A
484,767
481,000
470,817
463,756
451,540
Total Assets (GAAP)
4,396,752
4,450,483
4,453,734
4,385,765
4,323,774
Less: Goodwill and Other Intangibles (GAAP)
89,095
89,095
89,095
89,095
89,095
Tangible Assets (non-GAAP)
B
$
4,307,657
$
4,361,388
$
4,364,639
$
4,296,670
$
4,234,679
Tangible Common Equity Ratio (non-GAAP)
A/B
11.25%
11.03%
10.79%
10.79%
10.66%
Actual Diluted Shares Outstanding (GAAP)
C
17,152,603
17,135,824
17,114,954
17,154,586
17,115,336
Tangible Book Value per Diluted Share (non-GAAP)
A/C
28.26
28.07
27.51
27.03
26.38
38
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
2026
2025
(Dollars in Thousands, Except Per Share Data)
Third
Second
First
Fourth
Third
Summary of Operations
:
Interest Income
$
52,486
$
51,838
$
51,020
$
51,715
$
51,431
Interest Expense
7,476
7,640
8,203
8,355
7,874
Net Interest Income
45,010
44,198
42,817
43,360
43,557
Provision for Credit Losses
(80)
919
712
1,995
1,881
Net Interest Income After
45,090
43,279
42,105
41,365
41,676
Noninterest Income
19,384
20,599
19,933
20,103
22,331
Noninterest Expense
42,295
42,640
41,373
42,867
42,916
Income Before Income Taxes
22,179
21,238
20,665
18,601
21,091
Income Tax Expense
5,239
4,961
4,848
4,896
5,141
Net Income
16,940
16,277
15,817
13,705
15,950
Net Interest Income (FTE)
(1)
45,059
44,241
42,857
43,404
43,602
Per Common Share
:
Net Income Basic
$
0.99
$
0.95
$
0.92
$
0.80
$
0.93
Net Income Diluted
0.99
0.95
0.92
0.80
0.93
Cash Dividends Declared
0.27
0.27
0.27
0.26
0.26
Diluted Book Value
33.46
33.27
32.71
32.23
31.59
Diluted Tangible Book Value
(2)
28.26
28.07
27.51
27.03
26.38
Market Price:
53.60
51.04
46.83
45.63
44.69
47.63
42.79
39.26
38.27
38.00
48.33
49.42
43.46
42.57
41.79
Selected Average Balances
:
Investment Securities
$
1,177,883
$
1,167,321
$
1,119,125
$
1,006,040
$
993,880
Loans Held for Investment
2,495,535
2,505,875
2,538,318
2,568,073
2,606,213
Earning Assets
4,038,273
4,068,827
4,089,838
4,035,910
3,981,530
Total Assets
4,386,496
4,407,371
4,418,904
4,367,036
4,317,951
Deposits
3,647,526
3,678,776
3,691,016
3,647,510
3,612,331
Shareowners’ Equity
575,766
573,839
567,663
556,100
542,216
Common Equivalent Average Shares:
17,113
17,101
17,129
17,070
17,068
17,152
17,126
17,146
17,140
17,114
Performance Ratios:
Return on Average Assets (annualized)
1.53
%
1.48
%
1.45
%
1.25
%
1.47
%
Return on Average Equity (annualized)
11.67
11.38
11.30
9.78
11.67
Net Interest Margin (FTE)
4.42
4.35
4.24
4.26
4.34
Noninterest Income as % of Operating Revenue
30.10
31.79
31.77
31.68
33.89
Efficiency Ratio
65.63
65.76
65.89
67.50
65.09
Asset Quality:
Allowance for Credit Losses (“ACL”)
$
30,369
$
31,007
30,999
$
31,001
$
30,202
Nonperforming Assets (“NPAs”)
9,708
13,435
12,965
10,531
10,026
ACL to Loans HFI
1.22
%
1.24
%
1.23
%
1.22
%
1.17
%
NPAs to Total Assets
0.22
0.30
0.29
0.24
0.23
NPAs to Loans HFI plus OREO
0.39
0.54
0.51
0.41
0.39
ACL to Non-Performing Loans
412.92
309.72
278.19
360.69
368.54
Net Charge-Offs to Average Loans HFI
0.08
0.14
0.10
0.18
0.18
Capital Ratios:
Tier 1 Capital
21.74
%
21.10
%
20.37
%
20.20
%
19.33
%
Total Capital
22.99
22.35
21.62
21.45
20.59
Common Equity Tier 1
20.43
19.80
19.08
18.56
17.73
Leverage
12.31
11.96
11.65
11.77
11.64
Tangible Common Equity
(2)
11.25
11.03
10.79
10.79
10.66
(1)
Fully Tax Equivalent.
(2)
Non-GAAP financial measure. See non-GAAP reconciliation on page 37.
39
FINANCIAL OVERVIEW
Results of Operations
Performance Summary.
Net income of $16.9 million, or $0.99 per diluted share, for the third quarter of 2026 compared to $16.3
million, or $0. 95 per diluted share, for the second quarter of 2026, and $16.0 million, or $0.93 per diluted share, for the third quarter of
2025. For the first nine months of 2026, net income totaled $49.0 million, or $2.86 per diluted share, compared to net income of $47.9
million, or $2.80 per diluted share, for the same period of 2025.
Net Interest Income.
Tax
-equivalent net interest income for the third quarter of 2026 totaled $45.1 million, compared to $44.2 million
for the second quarter of 2026, and $43.6 million for the third quarter of 2025. Compared to the second quarter of 2026, the increase
was primarily attributable to higher income from investment securities and loan interest, in addition to lower deposit interest expense,
partially offset by lower overnight funds income due to lower average balances. The increase over the third quarter of 2025 was also
driven by the same aforementioned factors. One additional calendar day also contributed to the increase over the second quarter of
2026. For the first nine months of 2026, tax -equivalent net interest income totaled $132.2 million compared to $128.4 million for the
same period of 2025, primarily attributable to higher investment securities income and lower deposit interest expense, partially offset
by lower loan interest income and overnight funds income.
Provision and Allowance for Credit Losses.
We recorded a provision benefit for credit losses of $0.1 million for the third quarter of
2026, compared to a provision expense of $0.9 million for the second quarter of 2026 and $1.9 million for the third quarter of 2025.
For the first nine months of 2026, we recorded a provision expense for credit losses of $1.6 million compared to $3.3 million for the
same period of 2025. At September 30, 2026, the allowance for credit losses for loans HFI totaled $30.4 million (1.22% of loans HFI)
compared to $31.0 million (1.24% of loans HFI) at June 30, 2026 and $31.0 million at December 31, 202 5 (1.22% of loans HFI). We
discuss the various factors that impacted our provision expense in further detail below under the heading Allowance for Credit Losses.
Noninterest Income
. Noninterest income for the third quarter of 2026 totaled $19.4 million, a $1.2 million, or 5.9%, decrease from the
second quarter of 2026 and a $2.9 million, or 13.2%, decrease from the third quarter of 2025. The decrease from the second quarter of
2026 was primarily attributable to decreases in mortgage banking revenues of $1.0 million, deposit fees of $0.5 million and other
income of $0.2 million partially offset by a $0.5 million increase in wealth management fees. The decrease from the third quarter of
2025 was driven by decreases in mortgage banking revenues of $1.1 million, deposit fees of $0.7 million, other income of $0.7 million
and wealth management fees of $0.5 million, partially offset by an increase in bank card fees of $0.1 million. For the first nine months
of 2026, noninterest income totaled $59.9 million, a $2.3 million, or 3.8%, decrease from the same period of 2025, primarily
attributable to decreases in wealth management fees of $3.3 million, partially offset by increases in other income of $0.7 million and
bank card fees of $0.3 million.
Noninterest Expense.
Noninterest expense for the third quarter of 2026 totaled $42.3 million, a $0.3 million, or 0.8%, decrease from
the second quarter of 2026 and a $0.6 million, or 1.4%, decrease from the third quarter of 2025. The decrease from the second quarter
of 2026 was primarily attributable to decreases in compensation expense of $0.2 million and other expense of $0.1 million. The
decrease from the third quarter of 2025 reflected decreases in compensation expense of $0.4 million and other expense of $0.4 million
offset by a $0.3 million increase in occupancy expense. For the first nine months of 2026, noninterest expense totaled $126.3 million,
a $2.2 million, or 1.7%, increase over the same period of 2025 and reflected increases in other expense of $3.0 million and occupancy
expense of $0.8 million partially offset by a decrease in compensation expense of $1.6 million. The increase in other expense was
primarily due to a $3.9 million increase in ORE expense, reflecting lower gains on property sales compared to the prior year period,
which included a significant gain from the sale of our operations center building in the first quarter of 2025.
Financial Condition
Earning Assets.
the second quarter of 2026, and an increase of $2.4 million, or 0.1% over the fourth quarter of 2025. Compared to the second quarter
of 2026, the change in earning asset mix reflected a $27.2 million decrease in overnight funds ,
a $
10.3 million decrease in loans held
for investment , and a $3.5 million decrease in loans held for sale (“HFS”), partially offset by a $10.5 million increase in investment
securities. Compared to the fourth quarter of 2025, the change reflected a $171.8 million increase in investment securities and a $2.7
million increase in loans HFS, partially offset by a $99.7 million decrease in overnight funds and a $72.5 million decrease in loans
held for investment.
Loans.
Average loans HFI decreased by $10.3 million, or 0.4%, from the second quarter of 2026, and decreased by $72.5 million, or
2.8%, from the fourth quarter of 2025. Loans HFI at September 30, 2026, decreased by $10.1 million, or 0.4%, from June 30, 2026,
and decreased by $56.4 million, or 2.2%, from December 31, 2025.
40
Credit Quality
. Nonperforming assets (nonaccrual loans and other real estate) totaled $9.7 million at September 30, 2026 compared to
$13.4 million at June 30, 2026 and $10.5 million at December 31, 2025. At September 30, 2026, nonperforming assets as a percentage
of total assets was 0.22%, compared to 0.30% at June 30, 2026 and 0.24% at December 31, 2025. Nonaccrual loans totaled $7.4
million at September 30, 2026, a $2.7 million decrease from June 30, 2026 and a $1.2 million decrease from December 31, 2025.
Other real estate totaled $2.4 million at September 30, 2026, a $1.1 million decrease from June 30, 2026, and a $0.4 million increase
over December 31, 2025. Further, classified loans totaled $20.8 million at September 30, 2026, a $9.0 million decrease from June 30,
2026, and a $6.5 million increase over December 31, 2025.
Deposits
. Average total deposits were $3.648 billion for the third quarter of 2026, a decrease of $31.2 million, or 0.9%, from the
second quarter of 2026, and comparable to the fourth quarter of 2025. At September 30, 2026, total deposits were $3.667 billion, a
decrease of $54.4 million, or 1.5%, from June 30, 2026, and an increase of $4.3 million, or 0.1%, over December 31, 2025. Total
public funds balances were $503.2 million at September 30, 2026, $561.5 million at June 30, 202 6, and $654.7 million at December
31, 2025.
Capital
. At September 30, 2026, we were “well-capitalized” with a total risk-based capital ratio of 22.99% and a tangible common
equity ratio (a non-GAAP financial measure) of 11.25% compared to 22.35% and 11.03%, respectively,
at
June 30, 2026, and 21.45 %
and 10.79 %, respectively,
at
December 31, 2025. At September 30, 2026, all of our regulatory capital ratios exceeded the threshold to
be “well-capitalized” under the Basel III capital standards.
RESULTS OF OPERATIONS
The following table provides a condensed summary of our results of operations - a discussion of the various components are discussed
in further detail below.
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
(Dollars in Thousands, except per share data)
2026
2026
2025
2026
2025
Interest Income
$
52,486
$
51,838
$
51,431
$
155,344
$
152,672
Taxable Equivalent Adjustments
49
43
45
132
133
Total Interest Income (FTE)
52,535
51,881
51,476
155,476
152,805
Interest Expense
7,476
7,640
7,874
23,319
24,384
Net Interest Income (FTE)
45,059
44,241
43,602
132,157
128,421
Provision for Credit Losses
(80)
919
1,881
1,551
3,269
Taxable Equivalent Adjustments
49
43
45
132
133
Net Interest Income After Provision for Credit Losses
45,090
43,279
41,676
130,474
125,019
Noninterest Income
19,384
20,599
22,331
59,916
62,252
Noninterest Expense
42,295
42,640
42,916
126,308
124,155
Income Before Income Taxes
22,179
21,238
21,091
64,082
63,116
Income Tax Expense
5,239
4,961
5,141
15,048
15,264
Net Income Attributable to Common Shareowners
$
16,940
$
16,277
$
15,950
$
49,034
$
47,852
Basic Net Income Per Share
$
0.99
$
0.95
$
0.93
$
2.87
$
2.81
Diluted Net Income Per Share
$
0.99
$
0.95
$
0.93
$
2.86
$
2.80
41
Net Interest Income
Net interest income represents our single largest source of earnings and is equal to interest income and fees generated by earning assets
less interest expense paid on interest bearing liabilities. This information is provided on a “taxable equivalent” basis to reflect the tax-
exempt status of income earned on certain loans and state and local government debt obligations. We provide an analysis of our net
interest income including average yields and rates in Table I, “Average Balances & Interest Rates,” on page 51.
Tax
-equivalent net interest income for the third quarter of 2026 totaled $45.1 million, compared to $44.2 million for the second quarter
of 2026, and $43.6 million for the third quarter of 2025. Compared to the second quarter of 2026, the increase was primarily
attributable to higher income from investment securities and loan interest income, in addition to lower deposit interest expense,
partially offset by lower overnight funds income due to lower average balances. The increase in investment securities income reflected
new investment purchases at higher rates and higher balances as we deploy additional liquidity into the investment security portfolio.
The decrease in deposit interest expense was primarily driven by lower average balances on seasonal public funds accounts and lower
rates on time deposits. One additional calendar day also contributed to the increase over the second quarter of 2026. The increase over
the third quarter of 2025 was also driven by the same aforementioned factors.
For the first nine months of 2026, tax -equivalent net interest income totaled $132.2 million compared to $128.4 million for the same
period of 2025. The increase was primarily attributable to higher investment securities income and lower deposit interest expense,
partially offset by lower loan interest income and overnight funds income. New investment purchases at higher yields and higher
balances drove the increase in investment securities income. The decrease in deposit interest expense was primarily attributable to
lower rates across several product lines. Lower average loan balances contributed to the decrease in loan interest income, while the
decrease in overnight funds income reflected the deployment of more liquidity into the investment portfolio as well as a lower average
overnight funds rate.
Our net interest margin for the third quarter of 2026 was 4.42%, an increase of seven basis points over the second quarter of 2026 and
an increase of eight basis points over the third quarter of 2025. For the first nine months of 2026, our net interest margin increased by
six basis points to 4.34% compared to the same period of 2025. The increase in net interest margin over all prior periods was largely
attributable to higher investment security yield driven by new purchases at higher rates and lower deposit costs. For the third quarter of
2026, our cost of funds was 73 basis points, a decrease of two basis points from the second quarter of 2026 and five basis points from
the third quarter of 2025. Our cost of deposits (including noninterest bearing accounts) was 74 basis points, 76 basis points, and 80
basis points, respectively, for the same periods.
Provision for Credit Losses
We recorded a provision benefit for credit losses of $0.1 million for the third quarter of 2026, compared to a provision expense of $0.9
million for the second quarter of 2026 and $1.9 million for the third quarter of 2025. For the first nine months of 2026, we recorded a
provision expense for credit losses of $1. 6 million compared to $3.3 million for the same period of 2025. For the first nine months of
2026, the provision reflected a $1.4 million expense for loans HFI and a $0.1 million expense for unfunded loan commitments
compared to a $3.4 million expense for loans HFI and
a
$0.1 million benefit for unfunded loan commitments for the same period
of
2025. We discuss the various factors that impacted our provision expense in further detail below under the heading Allowance for
Credit Losses.
Noninterest Income
Noninterest income for the third quarter of 2026 totaled $19.4 million, a $1.2 million, or 5.9%, decrease from the second quarter of
2026 and a $2.9 million, or 13.2%, decrease from the third quarter of 2025. The decrease from the second quarter of 2026 was
attributable to decreases in mortgage banking revenues of $1.0 million, deposit fees of $0.5 million and other income of $0.2 million
partially offset by a $0.5 million increase in wealth management fees. The decrease in mortgage banking revenues was primarily due
to lower production volume and the decrease in deposit fees reflected lower overdraft fees attributable to processing changes that
better align with industry practices. The increase in wealth management fees was primarily due to higher retail brokerage fee s.
The decrease from the third quarter of 2025 was driven by decreases in mortgage banking revenues of $1.1 million, deposit fees of
$0.7 million, other income of $0.7 million and wealth management fees of $0.5 million, partially offset by an increase in bank card
fees of $0.1 million. The decrease in mortgage banking revenues was due to lower production volume and gain on sale margin. The
decrease in deposit fees reflected lower overdraft fees. The decrease in other income reflected a $0.7 million gain from the sale of our
insurance subsidiary in the third quarter of 2025 – the advisors at this subsidiary also serviced retail brokerage clients which drove the
decline in wealth management fees.
42
For the first nine months of 2026, noninterest income totaled $59.9 million, a $2.3 million, or 3.8%, decrease from the same period of
2025, attributable to decreases in wealth management fees of $3.3 million partially offset by increases in other income of $0.7 million
and bank card fees of $0.3 million. The decrease in wealth management fees was attributable to decreases in retail brokerage fees (due
to lower assets under management) and lower insurance commissions (attributable to the aforementioned sale of our insurance
subsidiary). The increase in other income was primarily attributable to increases in other fees/commissions of $0.3 million and bank
owned life insurance income of $0.2 million. The increase in bank card fees reflected higher card volume.
Noninterest income represented 30.1% of operating revenues (net interest income plus noninterest income) for the third quarter of
2026 compared to 31.8% for the second quarter of 2026 and 33.9% for the third quarter of 2025. For the first nine months of 2026,
noninterest income represented 31.2% of operating revenues compared to 32.7% for the same period of 2025.
The table below reflects the major components of noninterest income.
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
(Dollars in Thousands)
2026
2026
2025
2026
2025
Deposit Fees
$
5,168
$
5,656
$
5,877
$
16,422
$
16,258
Bank Card Fees
3,830
3,858
3,733
11,318
11,021
Wealth Management Fees
4,640
4,185
5,173
12,876
16,142
Mortgage Banking Revenues
3,673
4,660
4,794
12,585
12,804
Other
2,073
2,240
2,754
6,715
6,027
Total Noninterest Income
$
19,384
$
20,599
$
22,331
$
59,916
$
62,252
Significant components of noninterest income are discussed in more detail below.
Deposit Fees
. Deposit fees for the third quarter of 2026 totaled $5. 2 million, a decrease of $0.5 million, or 8.6%, from the second
quarter of 2026, and a decrease of $0.7 million, or 12.1%, from the third quarter of 2025. For the first nine months of 2026, deposit
fees totaled $16.4 million, a $0.2 million, or 1.0%, increase over the same period of 202 5. Compared to the second quarter of 2026 and
third quarter of 2025, the decreases reflected lower overdraft fees attributable to processing changes that better align with industry
practices. Compared to the first nine months of 2025, the increase was primarily due to higher service charge fees and commercial
account analysis fees.
Bank Card Fees
. Bank card fees for the third quarter of 202 6 totaled $3.8 million,
a
decrease of $0.1 million, or 0.7%, from the second
quarter of 2026, and an increase of $0.1 million, or 2.6%, over the third quarter of 2025. For the first nine months of 2026, bank card
fees totaled $11.3 million, a $0. 3 million, or 2.7% increase over the same period of 2025. The increase over the first nine months of
2025 reflected higher card volume.
Wealth Management Fees
. Wealth management fees include trust fees through Capital City Trust (i.e., managed accounts and
trusts/estates), and retail brokerage fees through Capital City Investments (i.e., investment, insurance products, and retirement
accounts) . Wealth management fees for the third quarter of 2026 totaled $4.6 million, an increase of $0. 5 million, or 10.9%, over the
second quarter of 202 6 and a $0.5 million, or 10.3%, decrease from the third quarter of 2025. For the first nine months of 2026, wealth
management fees totaled $12.9 million, a decrease of $3.3 million, or 20.2%, from the same period of 2025. The increase compared to
the second quarter of 2026 was driven by higher retail brokerage fees. The decrease compared to the prior year periods was primarily
attributable to a decrease in retail brokerage assets under management. Further, to a lesser extent, lower insurance commissions
contributed to the decrease s and reflected the sale of our insurance subsidiary in the third quarter of 2025. At September 30, 2026,
total assets under management were approximately $2.892 billion compared to $2.839 billion at June 30, 2026 and $3. 244 billion at
September 30, 2025. The increase over June 30, 2026 reflected higher account valuations . Compared to September 30, 2025, the
decline was due to lower retail brokerage assets partially attributable to the sale of our insurance subsidiary in the third quarter of
2025.
Mortgage Banking Revenues.
Mortgage banking revenues totaled $3.7 million for the third quarter of 2026, a decrease
of
$1.0 million,
or 21.2%, from the second quarter of 2026 and a decrease
of
$1.1 million, or 23.4%, from the third quarter of 2025. For the first nine
months of 2026, mortgage banking revenues totaled $12.6 million, a decrease of $0.2 million, or 1.7%, from the same period of 2025.
Compared to the second quarter of 2026, the decrease was attributable to lower production volume. The decrease compared to the
prior year periods was due to lower production volume and gain on sale margin. We provide a detailed overview of our mortgage
banking operation, including a detailed break -down of mortgage banking revenues, mortgage servicing activity, and warehouse
funding within Note 4 – Mortgage Banking Activities in the Notes to Consolidated Financial Statements.
43
Other
. Other income totaled $2.1 million for the third quarter of 2026, a decrease
of
$0.2 million, or 7.5%, from the second quarter of
2026, and a decrease of $0.7 million, or 24.7%, from the third quarter of 2025. For the first nine months of 2026, other income totaled
$6.7 million, an increase of $0.7 million, or 11.4 %, over the same period of 2025. Compared to the third quarter of 2025, the decrease
was due to the aforementioned $0.7 million gain from the sale of our insurance subsidiary in the third quarter of 2025. The increase
over the first nine months of 2025 was primarily attributable to increases in other fees/commissions of $0.3 million and bank owned
life insurance income of $0.2 million.
Noninterest Expense
Noninterest expense for the third quarter of 2026 totaled $42.3 million, a $0.3 million, or 0.8%, decrease from the second quarter of
2026 and a $0.6 million, or 1.4%, decrease from the third quarter of 2025. The decrease from the second quarter of 2026 was primarily
attributable to decreases in compensation expense of $0.2 million (commission expense) and other expense of $0.1 million. A $0.5
million decrease in other real estate expense that was partially offset by a $0.3 million increase in telephone expense drove the
variance in other expense. The decrease from the third quarter of 2025 was also driven by the same aforementioned factors.
For the first nine months of 2026, noninterest expense totaled $126.3 million, a $2.2 million, or 1.7%, increase over the same period of
2025 and reflected increases in other expense of $3.0 million and occupancy expense of $0.8 million partially offset by a $1.6 million
decrease in compensation expense. The increase in other expense was primarily due to a $3.9 million increase in ORE expense,
reflecting lower gains on property sales compared to the prior year period, which included a significant gain from the sale of our
operations center building in the first quarter of 2025. Lower charitable contribution expense of $0.6 million and professional fee
expense of $0.6 million partially offset the increase. The increase in occupancy expense reflected higher expense for FF&E
maintenance agreements and software licenses. The decrease in compensation expense reflected lower salary expense of $1.1 million
and associate benefit expense of $0.5 million. Lower commission expense drove the decline in salary expense and the decrease in
associate benefit expense was primarily attributable to lower stock based compensation.
The table below reflects the major components of noninterest expense.
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
(Dollars in Thousands)
2026
2026
2025
2026
2025
Salaries
$
21,502
21,668
21,740
64,542
65,636
Associate Benefits
4,118
4,168
4,316
12,617
13,158
Total Compensation
25,620
25,836
26,056
77,159
78,794
Premises
3,132
3,096
3,176
9,407
9,620
Equipment
4,162
4,223
3,861
12,289
11,281
Total Occupancy
7,294
7,319
7,037
21,696
20,901
Legal Fees
492
537
491
1,529
1,474
Professional Fees
1,460
1,400
1,621
4,165
4,761
Processing Services
2,513
2,440
2,475
7,386
7,434
Advertising
787
854
711
2,511
2,350
Telephone
1,148
845
762
2,813
2,195
Insurance – Other
735
738
750
2,205
2,239
Other Real Estate Owned, net
(352)
117
18
(556)
(4,431)
Pension - Other
(747)
(744)
(871)
(2,236)
(2,616)
Miscellaneous
3,345
3,298
3,866
9,636
11,054
Total Other
9,381
9,485
9,823
27,453
24,460
Total Noninterest Expense
$
42,295
42,640
42,916
126,308
124,155
Significant components of noninterest expense are discussed in more detail below.
Compensation.
Compensation expense totaled $25.6 million for the third quarter of 2026, a decrease of $0.2 million, or 0.8%, from
the second quarter of 2026 and a decrease of $0.4 million, or 1.7%, from the third quarter of 2025. Compared to the second quarter of
2026, the decrease reflected a $0.2 million decrease in salary expense (primarily commission expense ). Compared to the third quarter
of 2025, the decrease reflected lower salary expense of $0.2 million (primarily commission expense) and lower associate benefits of
$0.2 million (primarily lower health insurance costs).
44
For the first nine months of 2026, compensation expense totaled $77.2 million compared to $78.8 million for the same period of 2025
with the $1.6 million decrease reflective of lower salary expense of $1.1 million and associate benefit expense of $0.5 million. Lower
commission expense drove the decline in salary expense and the decrease in associate benefit expense was primarily attributable to
lower health care insurance costs.
Occupancy
. Occupancy expense totaled $7.3 million for the third quarter of 2026, comparable to the second quarter of 2026 and
a
$0.3 million, or 3.7%, increase over the third quarter of 2025. For the first nine months of 2026, occupancy expense totaled $21.7
million, a $0.8 million, or 3.8%, increase over the same period of 2025. The increase compared to all prior periods was primarily
attributable to higher FF&E maintenance agreements and software license expense.
Other
. Other expense totaled $9.4 million for the third quarter of 2026, a $0.1 million, or 1.1% decrease from the second quarter of
2026 and a $0.4 million, or 4.5%, decrease from the third quarter of 2025. For the first nine months of 2026, other expense totaled
$27.5 million, a $3.0 million, or 12.2%, increase over the same period of 2025. Compared to the second quarter of 2026 and the third
quarter of 2025, the decrease was primarily attributable to
a
decrease in other real estate expense (ORE) that was partially offset by
higher telephone expense. The increase over the first nine months of 2025 was primarily due to a $3.9 million increase in ORE
expense, which reflected a lower level of gains from the sale of properties, namely a large gain realized from the sale of our operations
center building in the first quarter of 2025. Lower expense for charitable contributions of $0.6 million and professional fees of $0.6
million were partially offsetting.
Our operating efficiency ratio (expressed as noninterest expense as a percentage of the sum of taxable -equivalent net interest income
plus noninterest income) was 65.63% for the third quarter of 2026 compared to 65.76% for the second quarter of 2026 and 65.09 % for
the third quarter
of
2025. For the first nine months of 2026, this ratio was 65.76% compared to 65.11% for the same period of 2025.
Income Taxes
We realized income tax expense of $5.2 million (effective rate of 23.6%) for the third quarter of 2026, compared to $5.0 million
(effective rate of 23.4%) for the second quarter of 2026 and $5.1 million (effective rate of 24.4%) for the third quarter of 2025. For the
first nine months of 2026, we realized income tax expense of $15.0 million (effective rate of 23.5%) compared to $15.3 million
(effective rate of 24.2%) for the same period of 2025. Tax benefits accrued from a solar tax credit investment in 2026 drove the
decrease in our effective tax rate compared to the prior year periods. Absent discrete items or new tax credit investments, we expect
our annual effective tax rate to approximate 23-24% for 2026.
FINANCIAL CONDITION
Average earning assets totaled $4.038 billion for the third quarter of 2026, a decrease of $30.6 million, or 0.8%, from the second
quarter of 2026, and an increase of $2.4 million, or 0.1% over the fourth quarter of 2025. Compared to the second quarter of 2026, the
change in earning asset mix reflected a $27.2 million decrease in overnight funds, a $10.3 million decrease in loans held for
investment, and a $3.5 million decrease in loans held for sale (“HFS”), partially offset by a $10.5 million increase in investment
securities. Compared to the fourth quarter of 2025, the change reflected a $171.8 million increase in investment securities and a $2.7
million increase in loans HFS, partially offset by a $99.7 million decrease in overnight funds and a $72.5 million decrease in loans
held for investment.
Investment Securities
Average investments totaled $1.178 billion for the third quarter of 2026, a $10.6 million, or 0.9%, increase over the second quarter of
2026 and
a
$171.8 million, or 17.1%, increase over the fourth quarter of 2025. Average investments represented 29.2% of our average
earning assets for the third quarter of 2026 compared to 28.7% for the second quarter of 2026 and 24.9% for the fourth quarter of
2025. For the remainder of 2026, we will continue to monitor our overall liquidity position and market conditions to determine if cash
flow from the investment portfolio should be reinvested or utilized to support loan growth.
The investment portfolio is a significant component of our operations and, as such, it functions as a key element of liquidity and
asset/liability management. Two types of classifications are approved for investment securities which are Available -for-Sale (“AFS”)
and Held-to-Maturity (“HTM”). At September 30, 2026, $862.1 million, or 73.0%, of the investment portfolio was classified as AFS
and $315.1 million, or 26.7%, was classified as HTM. The average maturity of our total investment portfolio
at
September 30, 2026
was 2.98 years compared to 2.95 years
at
June 30, 2026 and 2.57 years
at
December 31, 2025. The duration of our total investment
portfolio
at
September 30, 2026 was 2.63 years compared to 2.60 years
at
June 30, 2026 and 2.12 years
at
December 31, 2025.
Additional information on unrealized gains/ losses in the AFS and HTM investment portfolios is provided in Note 2 – Investment
Securities.
45
We determine the classification of a security
at
the time of acquisition based on how the purchase will affect our asset/liability strategy
and future business plans and opportunities. We consider multiple factors in determining classification, including regulatory capital
requirements, volatility in earnings or other comprehensive income, and liquidity needs. Securities in the AFS portfolio are recorded at
fair value with unrealized gains and losses associated with these securities recorded net of tax, in the accumulated other
comprehensive loss component of shareowners’ equity. HTM securities are acquired or owned with the intent of holding them to
maturity. HTM investments are measured
at
amortized cost. We do not trade, nor do we presently intend to begin trading investment
securities for the purpose of recognizing gains and therefore we do not maintain a trading portfolio.
At September 30, 2026, there were 848 positions (combined AFS and HTM) with unrealized pre-tax losses totaling $52.3 million. 91
of these positions are U.S. Treasury bonds and carry the full faith and credit of the U.S. Government. 688 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 September 30, 2026, all collateralized
mortgage obligation securities, mortgage -backed securities, Small Business Administration securities, U.S. Agency, and U.S. Treasury
bonds held were rated AA+ or higher. The remaining 69 positions (municipal securities and corporate bonds) have a credit
component. At September 30, 2026, municipal securities and corporate debt securities had
an
immaterial allowance for credit losses.
None of these securities were past due or in nonaccrual status
at
September 30, 2026.
Loans HFI
Average loans HFI decreased by $10.3 million, or 0.4%, from the second quarter of 2026, and decreased by $72.5 million, or 2.8%,
from the fourth quarter of 2025. Compared to the second quarter of 2026, the decline was primarily attributable to decreases in
commercial real estate loans of $8.4 million, residential real estate loans of $4.5 million, and construction loans of $3.7 million,
partially offset by increases in consumer loans (primarily indirect auto) of $2.2 million, home equity loans of $2.0 million, and
commercial loans of $1.5 million. Compared to the fourth quarter of 2025, the decline was primarily attributable to decreases in
residential real estate loans of $35.2 million, commercial real estate loans of $33.0 million, construction loans of $7.8 million,
commercial loans of $5.1 million, and consumer loans (primarily indirect auto) of $0.7 million, partially offset by increases in home
equity loans of $7.9 million.
Loans HFI at September 30, 2026, decreased $10.1 million, or 0.4%, from June 30, 2026, and decreased $56.4 million, or 2.2%, from
December 31, 2025. Compared to June 30, 2026, the decline was primarily attributable to decreases in commercial real estate loans of
$14.3 million, commercial loans of $4.4 million, and other loans of $2.3 million, partially offset by increases in residential real estate
loans of $5.9 million, consumer loans (primarily indirect auto) of $3.2 million, home equity loans of $1.7 million, and construction
loans of $0.2 million. Compared to December 31, 2025, the decline was primarily attributable to decreases in commercial real estate
loans of $32.4 million, residential real estate loans of $16.9 million, commercial loans of $12.2 million, and other loans of $4.4
million, partially offset by increases in home equity loans of $5.2 million, construction loans of $2.4 million, and consumer loans
(primarily indirect auto) of $1.7 million.
Without compromising our credit standards , changing our underwriting standards, or taking on inordinate interest rate risk, we
continue to closely monitor our markets and make minor adjustments as necessary.
Credit Quality
Nonperforming assets (nonaccrual loans and other real estate) totaled $9.7 million at September 30, 2026, compared to $13.4 million
at June 30, 2026 and $10.5 million at December 31, 2025. At September 30, 2026, nonperforming assets as a percentage of total assets
was 0.22%, compared to 0.30% at June 30, 2026 and 0.24% at December 31, 2025. Nonaccrual loans totaled $7.4 million at
September 30, 2026, a $2.7 million decrease from June 30, 2026 and a $1.2 million decrease from December 31, 2025. Other real
estate totaled $2.4 million at September 30, 2026, a $1.1 million decrease from June 30, 2026 and a $0.4 million increase over
December 31, 2025. Further, classified loans totaled $20.8 million at September 30, 2026, a $9.0 million decrease from June 30, 2026
and a $6.5 million increase over December 31, 2025.
Allowance for Credit Losses
The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount
expected to be collected on the loans. The allowance for credit losses is adjusted by a credit loss provision which is reported in
earnings and reduced by the charge-off of loan amounts (net of recoveries). Loans are charged off against the allowance when
management believes the uncollectability of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts
previously charged -off and expected to be charged-
off.
Expected credit loss inherent in non-cancellable off-balance sheet credit
exposures is provided through the credit loss provision but recorded
as
a separate liability included in other liabilities.
46
Management estimates the allowance balance using relevant available information, from internal and external sources relating to past
events, current conditions, and reasonable and supportable forecasts. Historical loan default and loss experience provides the basis for
the estimation of expected credit losses. Adjustments to historical loss information incorporate management’s view of current
conditions and forecasts.
At September 30, 2026, the allowance for credit losses for loans HFI totaled $30.4 million compared to $31.0 million
at
June 30, 2026
and $31.0 million
at
December 31, 2025. Activity within the allowance is provided in Note 3 – Loans Held for Investment and
Allowance for Credit Losses in the Notes to Consolidated Financial Statements. Compared to June 30, 2026, the decline in the
allowance reflected improved credit quality metrics and a lower level of net loan charge-
offs
of 8 basis points of average loans for the
third quarter of 2026 versus 14 basis points for the second quarter of 2026 and 18 basis points for the third quarter of 2025. Net loan
charge-
offs
for the nine months ended September 30, 2026 were 11 basis points compared to 12 basis points for the same period of
2025. Compared to December 31, 2025, the decline in the allowance was primarily attributable to a decline in loan balances. At
September 30, 2026, the allowance represented 1.22% of loans HFI compared to 1.24%
at
June 30, 2026, and 1.22%
at
December 31,
2025.
At September 30, 2026, the allowance for credit losses for unfunded commitments totaled $2.2 million compared to $2.2 million and
$2.1 million
at
June 30, 2026 and December 31, 2025, respectively. The slight change in the allowance for unfunded commitments
from December 31, 2025 reflected a variance in the level of unfunded loan commitments. The allowance for unfunded commitments
is recorded in other liabilities.
Deposits
Average total deposits were $3.648 billion for the third quarter of 2026, a decrease of $31.2 million, or 0.9%, from the second quarter
of 2026, and comparable to the fourth quarter of 2025. Compared to the second quarter of 2026, the decrease was primarily due to
lower public funds balances of $63.8 million (primarily NOW accounts) due to the seasonal reduction in those balances, partially
offset by higher core deposit balances of $32.6 million (primarily MMA and noninterest bearing checking).
At September 30, 2026, total deposits were $3.667 billion, a decrease of $54.4 million, or 1.5%, from June 30, 2026, and an increase
of $4.3 million, or 0.1%, over December 31, 2025. The decrease from June 30, 2026, was driven by lower public funds balances of
$58.3 million (primarily NOW accounts), partially offset by an increase in core deposit balances of $3.9 million (primarily NOW
accounts). The increase over December 31, 2025, was primarily due to core deposit growth of $155.8 million, partially offset by lower
public funds balances of $151.5 million. Total public funds balances were $503.2 million at September 30, 2026, $561.5 million at
June 30, 2026, and $654.7 million at December 31, 2025, respectively.
Business deposit transaction accounts classified as repurchase agreements averaged $14.2 million for the third quarter of 2026, an
increase of $3.2 million over the second quarter of 2026 and a decrease of $6.5 million from the fourth quarter of 2025. At September
30, 2026, repurchase agreement balances were $7.2 million compared to $7.4 million at June 30, 2026 and $22.0 million at December
31, 2025.
We continue to closely monitor our cost of deposits and deposit mix as we manage through the current rate environment.
MARKET RISK AND INTEREST RATE SENSITIVITY
Market Risk and Interest Rate Sensitivity
Overview.
Market risk arises from changes in interest rates, exchange rates, commodity prices, and equity prices. We have risk
management policies designed to monitor and limit exposure to market risk and we do not participate in activities that give rise to
significant market risk involving exchange rates, commodity prices, or equity prices. In asset and liability management activities, our
policies are designed to minimize structural interest rate risk.
Interest Rate Risk Management.
Our net income is largely dependent on net interest income. Net interest income is susceptible to
interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. When
interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a given period, a significant increase in
market rates of interest could adversely affect net interest income. Similarly, when interest-earning assets mature or reprice more
quickly than interest-bearing liabilities, falling market interest rates could result in a decrease in net interest income. Net interest
income is also affected by changes in the portion of interest-earning assets that are funded by interest-bearing liabilities rather than by
other sources of funds, such as noninterest-bearing deposits and shareowners’ equity.
47
We have established what we believe to be a comprehensive interest rate risk management policy, which is administered by
management’s Asset Liability Management Committee (“ALCO”). The policy establishes limits of risk, which are quantitative
measures of the percentage change in net interest income (a measure of net interest income at risk) and the fair value of equity capital
(a measure of economic value of equity (“EVE”) at risk) resulting from a hypothetical change in interest rates for maturities from one
day to 30 years. We measure the potential adverse impacts that changing interest rates may have on our short-term earnings, long-
term value, and liquidity by employing simulation analysis through the use of computer modeling. The simulation model captures
optionality factors such as call features and interest rate caps and floors embedded in investment and loan portfolio contracts. As with
any method of gauging interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology used by
us. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan
prepayments, and withdrawals of time and other deposits, may deviate significantly from assumptions used in the model. Finally, the
methodology does not measure or reflect the impact that higher rates may have on adjustable -rate loan clients’ ability to service their
debts, or the impact of rate changes on demand for loan and deposit products.
The statement of financial condition is subject to testing for both parallel and upward and downward shifts in interest rates (assuming
no balance sheet growth) to indicate the inherent interest rate risk. We prepare a base case (assumes a static rate environment) and
several alternative interest rate simulations for various ranges of upward and downward interest rate changes. This analysis is prepared
quarterly and reported to ALCO, our Market Risk Oversight Committee (“MROC”), our Risk Oversight Committee (“ROC”) and the
Board of Directors. We will periodically augment our interest rate simulations with alternative interest rate scenarios that may include
various non-parallel shifts in interest rates, including a flattening or steepening of the yield curve.
Our goal is to structure the statement of financial condition so that net interest earnings at risk over 12-month and 24-month periods
and the economic value of equity at risk do not exceed policy guidelines at the various interest rate shock levels. We attempt to
achieve this goal by balancing, within policy limits, the volume of floating -rate liabilities with a similar volume of floating -rate assets,
by keeping the average maturity of fixed-rate asset and liability contracts reasonably matched, by managing the mix of our core
deposits, and by adjusting our rates to market conditions on a continuing basis.
Analysis.
Measures of net interest income at risk produced by simulation analysis are indicators of an institution’s short-term
performance in alternative rate environments. These measures are typically based upon a relatively brief period, and do not
necessarily indicate the long-term prospects or economic value of the institution. The following table presents our net interest income
simulation results for gradual 12-month and 24-month “ramp” scenarios applied to the base scenario. The “ramp” scenario is a parallel
shift applied gradually over a 12-month period for the projected 12-month and 24-month period on a pro rata basis.
ESTIMATED CHANGES IN NET INTEREST INCOME
As of September 30, 2026
% Change in NII
Change in Interest Rates
12 Months
24 Months
+200 bp Ramp
3.9%
17.5%
+100 bp Ramp
2.0%
11.1%
-100 bp Ramp
-2.0%
-1.9%
-200 bp Ramp
-4.0%
-8.9%
As of June 30, 2026
% Change in NII
Change in Interest Rates
12 Months
24 Months
+200 bp Ramp
4.8%
18.0%
+100 bp Ramp
2.4%
11.0%
-100 bp Ramp
-2.3%
-3.6%
-200 bp Ramp
-4.8%
-11.5%
The Net Interest Income (“NII”) at Risk position of an instantaneous , parallel rate shock indicates that in the short-term (over the next
12 months), all rising rate environments will positively impact the net interest margin of the Company, while declining rate
environment s will have a negative impact on the net interest margin. Compared to the second quarter of 2026, these metrics became
more favorable in the declining rate scenarios due to the deployment of variable rate overnight funds into the investment securities
portfolio.
The measures of equity value at risk indicate our ongoing economic value by considering the effects of changes in interest rates on all
of our cash flows by discounting the cash flows to estimate the present value of assets and liabilities. The difference between these
discounted values of the assets and liabilities is the economic value of equity, which in theory approximates the fair value of our net
assets.
48
ESTIMATED CHANGES IN ECONOMIC VALUE OF EQUITY
% Change in EVE
EVE Ratio
Changes in Interest
Rates
September 30, 2026
June 30, 2026
September 30, 2026
June 30, 2026
+200 bp Shock
4.6%
10.6%
29.9%
27.2%
+100 bp Shock
3.2%
7.0%
29.0%
25.9%
-100 bp Shock
-6.1%
-9.0%
25.5%
21.4%
-200 bp Shock
-14.9%
-20.7%
22.7%
18.3%
At September 30, 2026, the economic value of equity was favorable in all rising rate environments and unfavorable in the falling rate
environment s. EVE was within prescribed tolerance levels as the EVE ratio (EVE/EVA) in all rate scenarios is greater than 5.0%.
Factors that can impact EVE values include the absolute level of rates, the overall structure of the balance sheet (including liquidity
levels), pre-payment speeds, loan floors, and the change of model assumptions.
As the interest rate environment and the dynamics of the economy continue to change, additional simulations will be analyzed to
address not only the changing rate environment, but also the change in mix of our financial assets and liabilities measured over
multiple years, to help assess the risk to the Company.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
In general terms, liquidity is a measurement of our ability to meet our cash needs. Our objective in managing our liquidity is to
maintain our ability to meet loan commitments, purchase securities or repay deposits and other liabilities in accordance with their
terms, without an adverse impact on our current or future earnings. Our liquidity strategy is guided by policies that are formulated and
monitored by our ALCO and senior management, which take into account the marketability of assets, the sources and stability of
funding and the level of unfunded commitments. We regularly evaluate all of our various funding sources with an emphasis on
accessibility, stability, reliability and cost-effectiveness. Our principal source of funding has been our client deposits, supplemented
by our short-term and long-term borrowings, primarily from securities sold under repurchase agreements, federal funds purchased and
FHLB borrowings. We believe that the cash generated from operations, our borrowing capacity and our access to capital resources are
sufficient to meet our future operating capital and funding requirements.
At September 30, 2026, we had the ability to generate approximately $1.745 billion (excludes overnight funds position of $340
million) in additional liquidity through various sources including various federal funds purchased lines, Federal Home Loan Bank
borrowings, the Federal Reserve Discount Window, and brokered deposits. We recognize the importance of maintaining liquidity and
have developed a Contingent Liquidity Plan, which addresses various liquidity stress levels and our response and action based on the
level of severity. We periodically test our credit facilities for access to the funds but also understand that as the severity of the
liquidity level increases certain credit facilities may no longer be available. We conduct a liquidity stress test on a quarterly basis
based on events that could potentially occur at the Bank and report results to our ALCO, MROC, ROC, and Board of Directors. We
believe the liquidity available to us at September 30, 2026 was sufficient to meet our ongoing needs and execute our business strategy.
We also view our investment portfolio as a liquidity source and have the option to pledge securities in our portfolio as collateral for
borrowings or deposits, and/or to sell selected securities. Our portfolio consists of debt issued by the U.S. Treasury, U.S. governmental
agencies, municipal governments, and corporate entities. Additional information on our investment portfolio is provided within Note 2
– Investment Securities.
The Bank maintained an average net overnight funds (i.e., deposits with banks plus FED funds sold, less FED funds purchased) sold
position of $337.9 million in the third quarter of 2026 compared to $365.1 million in the second quarter of 2026 and $437.5 million in
the fourth quarter of 2025. Compared to the second quarter of 2026, the variance reflected lower average deposits and the deployment
of excess liquidity into the investment security portfolio. Compared to the fourth quarter of 2025, the variance was driven by the
deployment of excess liquidity into the investment security portfolio. During the first nine months of 2026, excess liquidity was
partially deployed into investment securities as loan demand remained selective and management continued its disciplined
underwriting approach. Management believes the repositioning enhances earnings while maintaining appropriate liquidity levels.
We expect our capital expenditures will be approximately $10.0 million over the next 12 months, which will primarily consist of
construction of a new office, office remodeling, office equipment/furniture, and technology purchases. Management expects that
these capital expenditures will be funded with existing resources without impairing our ability to meet our ongoing obligations.
49
Borrowings
Average short-term borrowings totaled $45.7 million for the third quarter of 2026 compared to $44.5 million for the second quarter of
2026 and $41.6 million for the fourth quarter of 2025. The increase over the second quarter of 2026 reflected higher repurchase
agreement balances . The increase over the fourth quarter of 2025 was attributable to higher mortgage warehouse line borrowings.
Additional detail on warehouse borrowings is provided in Note 4 – Mortgage Banking Activities in the Consolidated Financial
Statements.
We have issued two junior subordinated deferrable interest notes to our wholly owned Delaware statutory trusts. The first note for
$30.9 million was issued to CCBG Capital Trust I in November 2004, of which $10 million was retired in April 2016. We made
principal payments on this note of $4.1 million and $5.1 million in the first quarter of 2026 and the second quarter of 2025,
respectively. The second note for $32.0 million was issued to CCBG Capital Trust II in May 2005. We made principal payments on
this note of $5.1 million each in the first quarter of 2026 and the second quarter of 2025. The interest payment for the CCBG Capital
Trust I borrowing is due quarterly and adjusts quarterly to a variable rate of three-month CME Term SOFR (secured overnight
financing rate) plus a margin of 1.90%. This note matures on December 31, 2034. The interest payment for the CCBG Capital Trust II
borrowing is due quarterly and adjusts quarterly to a variable interest rate based on three-month CME Term SOFR plus a margin of
1.80%. This note matures on June 15, 2035. The proceeds from these borrowings were used to partially fund acquisitions. Under the
terms of each junior subordinated deferrable interest note, in the event of default or if we elect to defer interest on the note, we may
not, with certain exceptions, declare or pay dividends or make distributions on our capital stock or purchase or acquire any of our
capital stock.
The Company previously maintained a derivative cash flow hedge of our interest rate risk related to our subordinated debt. The
notional amount of the derivative is $30 million ($10 million of the CCBG Capital Trust I borrowing and $20 million of the CCBG
Capital Trust II borrowing). In October 2025, the interest rate swaps were terminated. Additional detail on the interest rate swap
agreement is provided in Note 5 – Derivatives in the Consolidated Financial Statements.
Capital
Our capital ratios are presented in the Selected Quarterly Financial Data table on page 38. At September 30, 202 6, our regulatory
capital ratios exceeded the threshold to be designated as “well-capitalized” under the Basel III capital standards.
Shareowners’ equity was $573.9 million at September 30, 2026 compared to $570.1 million at June 30, 202 6 and $552.9 million at
December 31, 2025. For the first nine months of 2026, shareowners’ equity was positively impacted by net income of $49.0 million,
the issuance of stock of $3.5 million, and stock compensation accretion of $1.5 million. Shareowners’ equity was reduced by a
common stock dividends of $13.9 million ($0.81 per share), repurchases of our common stock of $2.6 million (63,088 shares), net
adjustments totaling $2.5 million related to transactions under our stock-based compensation plans, and an unfavorable net change of
$14.0 million in accumulated other comprehensive loss due to an unfavorable fair value mark on investment securities driven by
higher bond rates .
At September 30, 2026, our total risk-based capital ratio was 22.99% compared to 22.35% at June 30, 2026 and 21.45 % at December
31, 2025. Our common equity tier 1 capital ratio was 20.43 %, 19.80%, and 18.56%, respectively, on these dates. Our leverage ratio
was 12.31%, 11.96 %, and 11. 77%, respectively, on these dates. At September 30, 2026, all our regulatory capital ratios exceeded the
thresholds to be designated as “well-capitalized” under the Basel III capital standards. Further, our tangible common equity ratio (non-
GAAP financial measure) was 11.25% at September 30, 2026, compared to 11.03% at June 30, 2026, and 10.79% at December 31,
2025. If our unrealized held-to-maturity securities loss of $16.0 million (after -tax) were recognized in accumulated other
comprehensive loss, our adjusted tangible capital ratio would be 10.88%.
Our tangible capital ratio is also impacted by the recording of our unfunded pension liability through other comprehensive income in
accordance with Accounting Standards Codification Topic 715. At September 30, 2026, June 30, 2026 and December 31, 2025, the
net pension asset reflected in other comprehensive income was $9. 4 million. This liability is re-measured annually on December 31
st
based on an actuarial calculation of our pension liability. Significant assumptions used in calculating the liability include the weighted
average discount rate used to measure the present value of the pension liability, the weighted average expected long-term rate of return
on pension plan assets, and the assumed rate of annual compensation increases, all of which will vary when re-measured. The discount
rate assumption used to calculate the pension liability is subject to long-term corporate bond rates at December 31
st
. These
assumptions and sensitivities are discussed in the section entitled “Critical Accounting Policies and Estimates” in Part II, Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our 2025 Form 10-K.
50
OFF-BALANCE SHEET ARRANGEMENTS
We are a party to financial instruments with off-balance sheet risks in the normal course of business to meet the financing needs of our
clients.
At September 30, 2026, we had $628.8 million in commitments to extend credit and $7.3 million in standby letters of credit.
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 us to guarantee the performance
of a client to a third party. We use the same credit policies in establishing commitments and issuing letters of credit as we do for on-
balance sheet instruments.
If commitments arising from these financial instruments continue to require funding at historical levels, management does not
anticipate that such funding will adversely impact our ability to meet our ongoing obligations. In the event these commitments require
funding in excess of historical levels, management believes current liquidity, advances available from the FHLB and the Federal
Reserve, and investment security maturities provide a sufficient source of funds to meet these commitments.
Certain agreements provide that the commitments are unconditionally cancellable by the bank and for those agreements no allowance
for credit losses has been recorded. We have recorded
an
allowance for credit losses on loan commitments that are not
unconditionally cancellable by the Bank, which is included in other liabilities on the Consolidated Statements of Financial Condition
and totaled $2.2 million
at
September 30, 2026.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements included in our 2025 Form 10-K.
The preparation of our Consolidated Financial Statement s in accordance with GAAP and reporting practices applicable to the banking
industry requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses,
and to disclose contingent assets and liabilities. Actual results could differ from those estimates.
We have identified accounting for (i) the allowance for credit losses, (ii) goodwill, (iii) pension assumptions, and (iv) income taxes as
our most critical accounting policies and estimates in that they are important to the portrayal of our financial condition and results, and
they require our subjective and complex judgment as a result of the need to make estimates about the effects of matters that are
inherently uncertain. These accounting policies, including the nature of the estimates and types of assumptions used, are described
throughout this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2025 Form 10-K.
51
TABLE I
AVERAGE BALANCES & INTEREST RATES (UNAUDITED)
Three Months Ended September 30,
Nine Months Ended September 30,
2026
2025
2026
2025
Average
Average
Average
Average
Average
Average
Average
Average
(Dollars in Thousands)
Balances
Interest
Rate
Balances
Interest
Rate
Balances
Interest
Rate
Balances
Interest
Rate
Assets:
Loans Held for Sale
$
26,993
$
420
6.17
%
$
25,276
$
425
6.68
%
$
27,413
$
1,324
6.46
%
$
24,226
$
1,390
7.67
%
Loans Held for Investment
(1)(2)
2,495,535
38,277
6.09
2,606,213
39,894
6.07
2,513,086
113,914
6.06
2,641,346
120,359
6.09
Taxable Securities
1,176,534
10,629
3.60
992,260
7,175
2.88
1,153,550
29,920
3.46
993,460
19,644
2.64
Tax-Exempt Securities
(2)
1,349
15
4.39
1,620
18
4.44
1,441
47
4.35
1,313
43
4.43
Federal Funds Sold and Interest Bearing
Deposits
337,862
3,194
3.75
356,161
3,964
4.42
369,967
10,271
3.71
342,094
11,369
4.44
Total Earning Assets
4,038,273
52,535
5.15
%
3,981,530
51,476
5.12
%
4,065,457
155,476
5.11
%
4,002,439
152,805
5.10
%
Cash & Due From Banks
70,540
65,085
66,013
68,074
Allowance For Credit Losses
(31,607)
(30,342)
(31,585)
(30,282)
Other Assets
309,290
301,678
304,254
300,788
TOTAL ASSETS
$
4,386,496
$
4,317,951
$
4,404,139
$
4,341,019
Liabilities:
Noninterest Bearing Deposits
1,316,425
1,314,560
1,302,686
1,324,753
NOW Accounts
$
1,224,587
$
3,804
1.23
%
$
1,198,124
$
3,782
1.25
%
$
1,263,412
$
11,963
1.27
%
$
1,224,402
$
11,386
1.24
%
Money Market Accounts
433,430
1,964
1.80
416,656
2,090
1.99
419,028
5,573
1.78
422,817
6,617
2.09
Savings Accounts
511,313
102
0.08
503,189
159
0.13
511,500
334
0.09
506,255
509
0.13
Other Time Deposits
161,771
910
2.23
179,802
1,234
2.72
175,655
3,238
2.46
174,418
3,541
2.71
Total Interest Bearing Deposits
2,331,101
6,780
1.15
2,297,771
7,265
1.25
2,369,595
21,108
1.19
2,327,892
22,053
1.27
Total Deposits
3,647,526
6,780
0.74
3,612,331
7,265
0.80
3,672,281
21,108
0.77
3,652,645
22,053
0.81
Repurchase Agreements
14,160
79
2.20
21,966
158
2.86
13,616
213
2.09
24,752
478
2.58
Other Short-Term Borrowings
31,532
316
3.98
12,753
58
1.82
30,984
992
4.28
10,251
354
4.62
Subordinated Notes Payable
33,303
293
3.45
42,582
383
3.52
36,045
979
3.58
49,113
1,473
3.95
Other Long-Term Borrowings
567
8
5.55
681
10
5.55
635
27
5.68
755
26
4.50
Total Interest Bearing Liabilities
2,410,663
7,476
1.23
%
2,375,753
7,874
1.32
%
2,450,875
23,319
1.27
%
2,412,763
24,384
1.35
%
Other Liabilities
83,642
85,422
78,126
75,664
TOTAL LIABILITIES
3,810,730
3,775,735
3,831,687
3,813,180
TOTAL SHAREOWNERS’ EQUITY
575,766
542,216
572,452
527,839
TOTAL LIABILITIES AND
$
4,386,496
$
4,317,951
$
4,404,139
$
4,341,019
Interest Rate Spread
3.92
%
3.81
%
3.83
%
3.75
%
Net Interest Income
$
45,059
$
43,602
$
132,157
$
128,421
Net Interest Margin
(3)
4.42
%
4.34
%
4.34
%
4.28
%
(1)
Average Balances include net loan fees, discounts and premiums. Interest income includes loan costs of $0.5 million and $1.5 million for the three and nine months ended September 30, 2026,
(2)
Interest income includes the effects of taxable equivalent adjustments using a 21% Federal tax rate.
(3)
Taxable equivalent net interest income divided by average earning assets.
52
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See “Market Risk and Interest Rate Sensitivity” in Management’s Discussion and Analysis of Financial Condition and Results of
Operations, above, which is incorporated herein by reference. Management has determined that no additional disclosures are
necessary to assess changes in information about market risk that have occurred since December 31, 2025.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
At September 30, 2026 , the end of the period covered by this Form 10-Q, our management, including our Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.
Our management, including our Chief Executive Officer and Chief Financial Officer, has reviewed our internal control over financial
reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). During the quarter ended September 30, 2026,
there have been no significant changes in our internal control over financial reporting during our most recently completed fiscal
quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are party to lawsuits arising out of the normal course of business. In management's opinion, there is no known pending litigation,
the outcome of which would, individually or in the aggregate, have a material effect on our consolidated results of operations,
financial position, or cash flows.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I,
Item 1A. “Risk Factors” in our 2025 Form 10-K, as updated in our subsequent quarterly reports. The risks described in our 2025 Form
10-K, and our subsequent quarterly reports are not the only risks facing us. Additional risks and uncertainties not currently known to
us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating
results.
There have not been any material changes to the risk factors disclosed in Item 1A. of Part I of the Company’s Annual Report on Form
10-K for the year ended December 31, 2025, previously filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not Applicable.
Item 5. Other Information
(c) Rule 10b5 -1 Trading Plans
During the three months ended September 30, 2026, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange
Act)
, modified or
intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “
arrangement” as defined in Item 408(c) of Regulation S-K.
53
Item 6. Exhibits
(A) Exhibits
3.1
Amended and Restated Articles of Incorporation - incorporated herein by reference to Exhibit 3.1 of
the Registrant’s
Form 8-K (filed 5/3/21) (No. 000-13358).
3.2
Amended and Restated Bylaws - incorporated herein by reference to Exhibit 3.1 of the Registrant’s
Form 8-K (filed
12/20/2024) (No. 000-13358).
31.1
Certification of William G Smith, Jr., Chairman and Chief Executive Officer of Capital City Bank Group, Inc., Pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2
Certification of Jeptha E. Larkin, Executive Vice President and Chief Financial Officer of Capital City Bank Group, Inc.,
Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1
Certification of William G. Smith, Jr., Chairman and Chief Executive Officer of Capital City Bank Group, Inc., Pursuant
to 18 U.S.C. Section 1350.
32.2
Certification of Jeptha E. Larkin, Executive Vice President and Chief Financial Officer of Capital City Bank Group, Inc.,
Pursuant to 18 U.S.C. Section 1350.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
54
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned Chief Financial Officer hereunto duly authorized.
CAPITAL CITY BANK GROUP, INC.
/s/ Jeptha E. Larkin
Jeptha E. Larkin
Executive Vice President and Chief Financial Officer
(Mr. Larkin is the Principal Financial Officer and has
been duly authorized to sign on behalf of the Registrant)
Date: October 30, 2026