CAPITAL CITY BANK GROUP INC

Capital City Bank Group, Inc. (CCBG) is a financial holding company headquartered in Tallahassee, Florida, and is one of the largest publicly traded financial holding companies headquartered in Florida with approximately $4.4 billion in assets ¹. The company operates in the commercial and retail banking industry, providing 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 the sale of life insurance, risk management and asset protection services. The Bank has 62 banking offices and 108 ATMs/ITMs in Florida, Georgia, and Alabama ², and through Capital City Home Loans, LLC (CCHL), has 28 additional offices in the Southeast for its mortgage banking business ³. The majority of revenue, approximately 81%, is derived from Florida market areas while approximately 17% and 2% of revenue is derived from Georgia and other market areas, respectively ⁴. The company's primary market area consists of 21 counties in Florida, six counties in Georgia, and one county in Alabama ⁵.

CCBG faces significant competition in its market areas from a wide range of banking and nonbanking institutions including banks, savings and loan associations, credit unions, money market funds, mutual fund advisory companies, mortgage banking companies, investment banking companies, insurance agencies and companies, securities firms, brokerage firms, financial technology firms, personal and commercial finance companies, peer-to-peer lending businesses and other types of financial institutions ⁶. The company also faces increasing competition from nontraditional financial service providers including wealth technology companies, financial technology companies, technology-enabled lenders, digital-only banks, crowdfunding platforms, and mobile-based payment applications ⁷. Some competitors are larger financial institutions with greater resources, higher lending limits, and broader product offerings ⁸. However, CCBG believes larger financial institutions are less familiar with its markets and typically target a different client base, and that clients who bank at community banks tend to prefer the relationship style service of community banks ⁹. In 7 of 12 markets in Florida and one of three Georgia markets (excluding Northern Arc of Atlanta markets entered into in 2022 and 2023), CCBG frequently ranks within the top three banks in terms of deposit market share ¹⁰. In the counties in which it operates, CCBG maintains an 8.0% deposit market share in the Florida counties and 5.0% in the Georgia counties (excluding Northern Arc of Atlanta) ¹¹. Leon County deposits totaled $1.195 billion, or 32.6% of consolidated deposits at December 31, 2025 ¹².

CCBG generates revenue through two principal services: Banking Services and Wealth Management Services. Banking Services are operated at Capital City Bank (CCB), and Wealth Management Services are operated under two divisions (Capital City Trust Company and Capital City Investments). Revenues from these principal services for the year ended 2025 totaled approximately 92.8% and 7.2% of total revenue, respectively ¹³. In 2024 and 2023, Banking Services (CCB) revenue was approximately 92.6% and 93.5% of total revenue for each respective year ¹⁴. The company's profitability depends to a large extent on net interest income, which is the difference between income on interest-earning assets such as loans and investment securities, and expense on interest-bearing liabilities such as deposits and borrowings ¹⁵. Revenue represents interest income plus noninterest income ¹⁶. Dividends and management fees received from the Bank are CCBG's primary source of income ¹⁷. The company has one reportable segment with two principal services ¹⁸.

Banking Services offered by CCB include Business Banking, which provides banking services to corporations and other business clients with credit products for commercial business properties, equipment, inventories and accounts receivable, as well as commercial leasing and letters of credit, and treasury management services and merchant credit card transaction processing services through a marketing alliance with Elavon, Inc. ¹⁹. Commercial Real Estate Lending provides products to meet financing needs of commercial developers and investors, residential builders and developers, and community development, with credit products available to purchase land and build structures for business use and for investors developing residential or commercial property ²⁰. Residential Real Estate Lending provides an array of loan products through CCHL including conventional permanent and construction-to-permanent financing arrangements as well as FHA, VA and USDA rural development loan products, and both fixed and adjustable-rate residential mortgage loans ²¹. Retail Credit provides a full-range of loan products including personal loans, automobile loans, boat/RV loans, home equity loans, and through a marketing alliance with ELAN, credit card programs ²². Institutional Banking provides banking services to state and local governments, public schools and colleges, charities, membership and not-for-profit associations including customized checking and savings accounts, cash management systems, tax-exempt loans, lines of credit, and term loans ²³. Retail Banking provides a full-range of consumer banking services including checking accounts, savings programs, interactive/automated teller machines (ATMs/ITMs), debit/credit cards, night deposit services, safe deposit facilities, online banking, and mobile banking ²⁴.

Wealth Management Services are operated under two divisions. Capital City Trust Company provides asset management for individuals through agency, personal trust, IRA, and personal investment management accounts, and also serves associations, endowments, and other nonprofit entities, as well as individuals requiring trustee, personal representative, or guardian services ²⁵. The market value of trust assets under discretionary management exceeded $1.326 billion at December 31, 2025, with total assets under administration exceeding $1.375 billion ²⁶. Capital City Investments offers retail investment products through LPL Financial, including U.S. Government bonds, tax-free municipal bonds, stocks, mutual funds, unit investment trusts, annuities, life insurance and long-term health care ²⁷. The market value of total assets under administration exceeded $1.541 billion at December 31, 2025 ²⁸. Capital City Strategic Wealth, LLC provided multi-disciplinary strategic planning services including business, estate, financial, insurance and business planning, tax planning, and asset protection advisory services, and insurance sales including life, health, disability, long-term care, and annuity solutions; this subsidiary was sold in August 2025 ²⁹. At December 31, 2025, total assets under management (AUM) were approximately $2.867 billion compared to $3.049 billion at December 31, 2024, and $2.588 billion at December 31, 2023 ³⁰.

In January 2024, the Board of Directors authorized the Capital City Bank Group, Inc. Share Repurchase Program, effective February 1, 2024, which authorizes the repurchase of up to 750,000 shares of outstanding common stock over a five-year period ³¹. CCBG repurchased 73,349 shares under the Program in 2024 at an average price of $28.03 per share and 9,101 shares in January 2024 at an average price of $29.47 per share under a substantially similar repurchase plan that was authorized in 2019 and expired in 2024 ³². There are 676,561 shares remaining for purchase under the Program ³³. CCBG did not repurchase any shares under the Program in the year ending December 31, 2025 ³⁴. On November 15, 2024, CCB entered into an agreement with BMG to transfer the 49% Interest in CCHL to CCB, which closed on January 1, 2025 ³⁵. CCBG expanded into the Northern Arc of Atlanta, Georgia by opening full-service offices in Marietta (Cobb County) in the fourth quarter of 2022 and Duluth (Gwinnett County) in the second quarter of 2023 ³⁶. Additionally, CCBG expanded its presence in the Florida Panhandle by opening a full-service office in Watersound, Florida in the first quarter of 2023, Panama City, Florida (Lynn Haven) in the first quarter of 2024, and Panama City, Florida (West Bay) in the first quarter of 2025 ³⁷. CCBG sold its insurance subsidiary, Capital City Strategic Wealth, LLC, in August 2025 ³⁸. In 2025, the Board of Directors declared four quarterly cash dividends totaling $1.00 per share ³⁹. CCBG recorded 7,914 community service hours in 2025, and 9,542 and 10,526 hours in 2024 and 2023, respectively ⁴⁰. The CCBG Foundation donated approximately $0.3 million in 2025, 2024 and 2023 to various non-profit organizations ⁴¹. In 2025, the CCBG Foundation made grants totaling $173,000 to Community Reinvestment Act eligible organizations ⁴².

For 2025, net income attributable to common shareowners totaled $61.6 million, or $3.60 per diluted share, compared to net income of $52.9 million, or $3.12 per diluted share, for 2024, and $52.3 million, or $3.07 per diluted share, for 2023 ⁴³. The increase in net income attributable to common shareowners in 2025 reflected a $12.7 million increase in net interest income and a $6.4 million increase in noninterest income, partially offset by a $6.2 million increase in income taxes, a $1.7 million increase in noninterest expense, and a $1.2 million increase in provision for credit losses ⁴⁴. Net income attributable to common shareowners included a $1.3 million decrease in the deduction to record the non-controlling interest in the earnings of CCHL ⁴⁵. Total revenue (interest income plus noninterest income) was $286.7 million in 2025, compared to $270.6 million in 2024 and $252.7 million in 2023 ⁴⁶. Net interest margin increased by 20 basis points to 4.28% ⁴⁷. The efficiency ratio was 65.71% in 2025, compared to 70.30% in 2024 and 67.99% in 2023 ⁴⁸. Return on average assets was 1.42% in 2025, compared to 1.25% in 2024 and 1.22% in 2023 ⁴⁹. Return on average equity was 11.51% in 2025, compared to 11.18% in 2024 and 12.40% in 2023 ⁵⁰.

CCBG's strategic plan guides the company in the areas of client experience, channel optimization, market expansion, and culture ⁵¹. As part of the strategic plan, CCBG aims to take its brand of relationship banking to the next level, further deepen relationships within communities, expand into new higher growth markets, diversify revenue sources, invest in new technology that will support the expansion of client relationships, scale within lines of business, and drive higher profitability ⁵². CCBG has implemented initiatives in support of the strategic plan, including the implementation of an integrated marketing software aimed at deepening client relationships, the continuation of a comprehensive review of its banking office network, and expansion into new markets and further diversification of revenues by expanding residential mortgage banking and wealth businesses ⁵³. CCBG expanded into the Northern Arc of Atlanta, Georgia by opening full-service offices in Marietta (Cobb County) in the fourth quarter of 2022 and Duluth (Gwinnett County) in the second quarter of 2023 ⁵⁴. Additionally, CCBG expanded its presence in the Florida Panhandle by opening a full-service office in Watersound, Florida in the first quarter of 2023, Panama City, Florida (Lynn Haven) in the first quarter of 2024, and Panama City, Florida (West Bay) in the first quarter of 2025 ⁵⁵. During 2022 and 2023, CCBG hired leadership and banking teams in the Northern Arc and Walton County office markets, including commercial bankers, retail delivery support, private banking, wealth advisors, and treasury professionals ⁵⁶. CCHL loan originators reside in the Northern Arc and Walton County offices ⁵⁷.

CCBG's markets provide for a strong core deposit funding base, a key differentiator and driver of profitability and franchise value ⁵⁸. These markets also benefit from favorable demographic trends, including population growth, state government stability, and expanding healthcare and education sectors, which support the long-term relationship banking strategy and contribute to the resilience of the deposit base ⁵⁹. CCBG serves an additional 15 smaller, less competitive, rural markets located on the outskirts of, and centered between, its larger markets where it is positioned as a market leader ⁶⁰. The larger markets include Tallahassee (Leon County, Florida), Gainesville (Alachua County, Florida), Macon (Bibb County, Georgia), and Suncoast (Hernando/Pasco/Citrus Counties, Florida) ⁶¹. The larger employers in these markets are state and local governments, healthcare providers, educational institutions, and small businesses, providing stability and good growth dynamics that have historically grown in excess of the national average ⁶².

The operating efficiency ratio (expressed as noninterest expense as a percentage of taxable equivalent net interest income plus noninterest income) was 65.71%, 70.30% and 67.99% in 2025, 2024 and 2023, respectively ⁶³. The improvement in this metric for 2025 was driven by higher taxable equivalent net interest income ⁶⁴. Expense management is an important part of CCBG's culture and strategic focus, and the company will continue to review and evaluate opportunities to optimize its delivery operations and invest in technology that provides favorable returns/scale and/or mitigates risk ⁶⁵. For 2025, the $1.7 million increase in noninterest expense was primarily due to a $6.5 million increase in compensation expense that was partially offset by a $4.7 million decrease in other expense ⁶⁶. The increase in compensation was driven by higher performance-based pay and health insurance cost, and to a lesser extent an increase in 401k matching expense ⁶⁷. The decrease in other expense was primarily due to a $3.4 million decrease in other real estate expense due to higher gains from the sale of banking facilities in 2025 and a $3.7 million decrease in pension expense (non-service component), partially offset by increases in processing expense of $1.2 million (outsource of core processing system) and charitable contribution expense of $0.9 million ⁶⁸.

CCBG expects capital expenditures over the next 12 months to be approximately $10.0 million, which will consist primarily of technology purchases for banking offices, office leasehold improvements, business applications, and information technology security needs as well as furniture and fixtures and banking office remodels ⁶⁹. CCBG expects that these capital expenditures will be funded with existing resources without impairing its ability to meet its ongoing obligations ⁷⁰. In 2026, CCBG plans to reinvest cash flow from the investment portfolio and as appropriate allocate to support loan demand and other liquidity management strategies ⁷¹. CCBG anticipates using a 5.67% discount rate in 2026 for pension accounting ⁷². CCBG anticipates using a rate of return on plan assets of 6.50% for 2026 ⁷³. Absent discrete items or new tax credit investments, CCBG expects its annual effective tax rate to approximate 24% for 2026 ⁷⁴.

In January 2024, the Board of Directors authorized the Capital City Bank Group, Inc. Share Repurchase Program, effective February 1, 2024, which authorizes the repurchase of up to 750,000 shares of outstanding common stock over a five-year period ⁷⁵. There are 676,561 shares remaining for purchase under the Program ⁷⁶. CCBG did not repurchase any shares under the Program in the year ending December 31, 2025 ⁷⁷. In 2025, the Board of Directors declared four quarterly cash dividends totaling $1.00 per share ⁷⁸. When determining the level of dividends, the following factors are considered: compliance with state and federal laws and regulations; capital position and ability to meet financial obligations; projected earnings and asset levels; and the ability of the Bank and CCBG to fund dividends ⁷⁹. Based on current estimates, CCBG expects the Company and the Bank to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2026 ⁸⁰.

CCBG is currently operating in an environment in which the Federal Reserve has shifted toward reducing interest rates, with cuts implemented in September, October and December 2025 ⁸¹. However, the inflationary outlook remains uncertain and if the Federal Reserve were to further decrease interest rates, this may constrain CCBG's interest rate spread due to its asset sensitivity and may adversely affect its business forecasts ⁸². Rapid increases in the target federal funds rate may result in a change in the mix of noninterest and interest-bearing accounts and affect CCBG's interest rate spread ⁸³. New appointments to the Board of Governors at the Federal Reserve could result in a change in monetary policy and interest rates, and the potential erosion of Federal Reserve independence could negatively impact financial markets and impact CCBG's profitability ⁸⁴. CCBG is unable to predict changes in interest rates, which are affected by factors beyond its control, including inflation, deflation, recession, unemployment, money supply and other changes in financial markets ⁸⁵.

CCBG's profitability and the success of its business depends substantially on the general economic conditions of the States of Florida and, to a lesser extent, Georgia, as well as the specific local markets in which it operates ⁸⁶. Unlike larger national or other regional banks that are more geographically diversified, CCBG provides banking and financial services primarily to customers across northern Florida and Georgia ⁸⁷. The local economic conditions in these areas have a significant impact on the demand for products and services as well as the ability of customers to repay loans, the value of the collateral securing loans and the stability of deposit funding sources ⁸⁸. A significant decline in general economic conditions in Florida or Georgia, whether caused by recession, inflation, unemployment, in-flows and out-flows of residents, shifts in political landscape, changes in securities markets, acts of terrorism, pandemics, natural disasters, climate change, outbreak of hostilities or other occurrences or other factors could have a material adverse effect on CCBG's business, financial condition and results of operations ⁸⁹. CCBG's market areas in Florida are susceptible to hurricanes, tropical storms and related flooding and wind damage and other similar weather events, which can disrupt operations, result in damage to properties and negatively affect the local economies ⁹⁰.

CCBG's loan portfolio is heavily concentrated in mortgage loans secured by properties in Florida and Georgia, with approximately 85.7% of loans including real estate as a primary, secondary, or tertiary component of collateral at December 31, 2025 ⁹¹, and approximately 31.5% and 54.2% of the $2.546 billion loan portfolio secured by commercial real estate and residential real estate, respectively ⁹². This geographic and collateral concentration subjects CCBG to higher risk from a downturn in the economy or recession in these areas, as well as from natural disasters such as hurricanes ⁹³. The allowance for credit losses for loans held for investment was $31.0 million at December 31, 2025, representing approximately 1.22% of total loans held for investment ⁹⁴, and CCBG had $8.6 million in nonaccruing loans at December 31, 2025 ⁹⁵. CCBG faces significant competition from both traditional financial institutions and nontraditional providers including financial technology companies, digital-only banks, and large technology companies offering embedded financial services, which may reduce net income, margins, or market share ⁹⁶. CCBG's profitability depends substantially on net interest income, and changes in interest rates could materially affect results; the Federal Reserve lowered the federal funds rate three times in 2024 for a cumulative decrease of 1.00% ⁹⁷, and further cuts in 2025 may constrain the interest rate spread due to asset sensitivity ⁹⁸. CCBG is subject to extensive regulation by the Federal Reserve, Florida OFR, and FDIC, and failure to maintain well-capitalized status could result in restrictions on activities, including the ability to pay dividends ⁹⁹.

Management's message emphasizes that CCBG's philosophy is to build long-term client relationships based on quality service, high ethical standards, and safe and sound banking practices ¹⁰⁰. The strategic plan guides the company in the areas of client experience, channel optimization, market expansion, and culture, with the aim of taking the brand of relationship banking to the next level, further deepening relationships within communities, expanding into new higher growth markets, diversifying revenue sources, investing in new technology, scaling within lines of business, and driving higher profitability ¹⁰¹. Management highlights that for 2025, net income attributable to common shareowners totaled $61.6 million, or $3.60 per diluted share, compared to net income of $52.9 million, or $3.12 per diluted share, for 2024 ¹⁰². Key themes include strong credit quality metrics remaining strong throughout the year with the allowance coverage ratio increasing to 1.22% in 2025 compared to 1.10% in 2024, and net loan charge-offs being 14 basis points of average loans for 2025 compared to 21 basis points for 2024 ¹⁰³. Management also highlights that tangible book value per diluted share (non-GAAP financial measure) increased by $3.38, or 14.3% ¹⁰⁴. The three strategic priorities emphasized are: client experience and relationship deepening, market expansion into higher growth markets, and investment in technology to support expansion and drive higher profitability ¹⁰⁵.