Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and, assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors,” and elsewhere in this Annual Report on Form 10-K, may cause actual results to differ materially from those projected in the forward-looking statements. We assume no obligation to update any of these forward-looking statements.
The Company
Colony Bankcorp, Inc. is a bank holding company headquartered in Fitzgerald, Georgia that provides, through its wholly-owned subsidiary Colony Bank (collectively referred to as the Company), a broad array of products and services throughout north, central, south and coastal Georgia markets, Birmingham, Alabama and Santa Rosa Beach, Tallahassee and Jacksonville, Florida. The Company offers commercial and consumer banking services as well as specialized solutions including mortgage, government guaranteed lending, consumer insurance, credit cards, wealth management and merchant services.
Recent Developments
The Company paid dividends to its shareholders throughout 2025 and 2024 on a quarterly basis. In 2025, we had a quarterly dividend of $0.1150 per share of common stock and in 2024, we had a quarterly dividend of $ 0.1125 per share of common stock.
On January 1, 2023, the Company adopted ASC Topic 326 which replaced the incurred loss approach for measuring credit losses with an expected loss model, referred to the current expected credit loss ("CECL") model. CECL applies to financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures, which include, but are not limited to, loans, leases, held-to-maturity securities, loan commitments and financial guarantees. The adoption of this guidance resulted in a decrease of the allowance for credit losses on loans of $53,000, the creation of an allowance for unfunded commitments of $1.7 million and a reduction of retained earnings of $1.2 million, net of the increase in deferred tax assets of $410,000 as of December 31, 2024.
Effective October 1, 2025, the Company early adopted ASU 2025-08, Financial Instruments - Credit Losses (Topic 326): Purchased Loans , which amended the accounting for certain purchased financial assets. Under the new guidance, the Company is allowed to apply the 'gross-up' approach to acquired loans that meet the definition of 'purchased seasoned loans' (PSLs), whereby an allowance for credit losses is recognized at the acquisition date with an offsetting adjustment to the amortized cost basis of the assets. This aligns the accounting for PSLs with the treatment of purchased financial assets with credit deterioration (PCD assets). This change eliminated the immediate recognition of day-one credit loss expense and resulted in an increase to the allowance for credit losses on loans of $4.6 million and an increase to the allowance for unfunded commitments of $134,000.
Going forward, the impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the provision for credit losses, and therefore, greater volatility to our reported earnings. See Notes 1 and 5, included elsewhere in this Form 10-K, for additional information on the allowance for credit losses and the allowance for unfunded commitments.
In June 2023 and August, September and October 2024, the Company entered into a total of five derivative instruments, specifically interest rate swaps, to help manage its interest rate risk position and mitigate exposure to the variability of future cash flows or other forecasted transactions. Three of the interest rate swaps are designated as cash flow hedges of certain variable rate liabilities and two are designated as fair value hedges of certain fixed rate assets. Gains and losses are recorded on the swap transactions as a component of interest expense in the consolidated statements of income. Amounts reported in accumulated OCI related to swaps are reclassified to interest income or expense as interest payments are made on the Bank's fixed rate assets and variable rate liabilities. For additional discussion of the Company's derivative instruments, see "Note 11 - Derivatives".
Reconciliation and Management Explanation of Non-GAAP Financial Measures
Our accounting and reporting policies conform to generally accepted accounting principles (GAAP) in the United States and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of our performance. These include the fully-taxable equivalent measures: tax-equivalent net interest income, tax-equivalent net interest margin and tax-equivalent net interest spread, which include the effects of taxable-equivalent adjustments using a statutory federal income tax rate of 21% to increase tax-exempt interest income to a tax-equivalent basis for the years ended December 31, 2025 and 2024. Tax-equivalent adjustments are reported to the Average Balances with Average Yields and Rates table under Rate/Volume Analysis in the tables that follow. Management believes that non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Management believes these non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance.
Tax-equivalent net interest income, net interest margin and net interest spread .
Net interest income on a tax-equivalent basis is a non-GAAP measure that adjusts for the tax-favored status of net interest income from loans and investments. We believe this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. The most directly comparable financial measure calculated in accordance with GAAP is our net interest income. Net interest margin on a tax-equivalent basis is net interest income on a tax-equivalent basis divided by average interest-earning assets on a tax-equivalent basis. The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin. Net interest spread on a tax-equivalent basis is the difference in the average yield on average interest-earning assets on a tax equivalent basis and the average rate paid on average interest-bearing liabilities. The most directly comparable financial measure calculated in accordance with GAAP is our net interest spread.
These non-GAAP financial measures should not be considered alternatives to GAAP-basis financial statements, and other bank holding companies may define or calculate these non-GAAP measures or similar measures differently.
A reconciliation of these performance measures to GAAP performance measures is included in the tables below.
Non-GAAP Performance Measures Reconciliation
Years Ended December 31,
(dollars in thousands, except per share data)
Operating noninterest income reconciliation
Noninterest income (GAAP)
Writedown of bank premises
Loss on sales of securities
Operating noninterest income
Operating noninterest expense reconciliation
Noninterest expense (GAAP)
Severance costs
Acquisition-related expenses
Loss related to wire fraud incident
Operating noninterest expense
Operating net income reconciliation
Net income (GAAP)
Severance costs
Acquisition-related expenses
Writedown of bank premises
Loss related to wire fraud incident
Loss on sales of securities
Income tax benefit
Operating net income
Weighted average diluted shares
Adjusted earnings per diluted share
Operating return on average assets reconciliation
Return on average assets (GAAP)
Severance costs
Acquisition-related expenses
Writedown of bank premises
Loss related to wire fraud incident
Loss on sales of securities
Tax effect of adjustment items
Operating return on average assets
Operating return on average equity reconciliation
Return on average equity (GAAP)
Severance costs
Acquisition-related expenses
Writedown of bank premises
Loss related to wire fraud incident
Loss on sales of securities
Tax effect of adjustment items
Operating return on average equity
Operating return on average tangible equity reconciliation
Return on average tangible equity
Severance costs
Acquisition-related expenses
Writedown of bank premises
Loss related to wire fraud incident
Loss on sales of securities
Tax effect of adjustment items
Operating return on average tangible equity
Tangible book value per common share reconciliation
Book value per common share (GAAP)
Effect of goodwill and other intangibles
Tangible book value per common share
Tangible equity to tangible assets reconciliation
Equity to assets (GAAP)
Effect of goodwill and other intangibles
Tangible equity to tangible assets
Operating efficiency ratio calculation
Efficiency ratio (GAAP)
Severance costs
Acquisition-related expenses
Writedown of bank premises
Loss related to wire fraud incident
Loss on sales of securities
Operating efficiency ratio
Operating net noninterest expense (1) to average assets calculation
Net noninterest expense to average assets
Severance costs
Acquisition-related expenses
Writedown of bank premises
Loss related to wire fraud incident
Loss on sales of securities
Operating net noninterest expense to average assets
Pre-provision net revenue
Net interest income before provision for credit losses
Noninterest income
Total income
Noninterest expense
Pre-provision net revenue
Operating pre-provision net revenue
Net interest income before provision for credit losses
Operating noninterest income
Total operating income
Operating noninterest expense
Operating pre-provision net revenue
(1) Net noninterest expense is defined as noninterest expense less noninterest income .
Critical Accounting Policies and Estimates
The consolidated financial statements of Colony are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and follow general practices within the industry in which it operates. This preparation requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the consolidated financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the consolidated financial statements. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Estimates that are particularly susceptible to significant change include the valuation of loan acquisition transactions, as well as the determination of the allowance for credit losses and income taxes and, therefore, are critical accounting policies. In addition to the discussion that follows, the accounting policies related to these estimates are further described in Note 1, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements, under Part II, Item 8.
Reserve for Credit Losses
A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic conditions such as rising interest rates and the financial performance of the borrower.
The reserve for credit losses consists of the allowance for credit losses (“ACL”) and the allowance for unfunded commitments. As a result of our January 1, 2023 adoption of ASU No. 2016-13, and its related amendments, our methodology for estimating the reserve for credit losses changed significantly from prior years. The standard replaced the “incurred loss” approach with an “expected loss” approach known as the Current Expected Credit Losses (“CECL”). The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred.”
The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable. The allowance for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit. This allowance is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur.
Management’s evaluation of the appropriateness of the reserve for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the reserve for credit losses is a critical accounting estimate as it requires significant reliance on the credit risk rating we assign to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows, reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), local/regional economic trends and conditions, changes in underwriting standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.
Overview
The following discussion and analysis present the more significant factors affecting the Company’s financial condition as of December 31, 2025 and 2024 and results of operations for each of the two year-periods ended December 31, 2025. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements, notes thereto and other financial information appearing elsewhere in this report.
Taxable-equivalent adjustments are the result of increasing income from tax-free loans and investments by an amount equal to the taxes that would be paid if the income were fully taxable based on a 21% federal tax rate for 2025 and 2024, thus making tax-exempt yields comparable to taxable asset yields.
Dollar amounts in tables are stated in thousands, except for per share amounts.
Results of Operations
The Company’s results of operations are determined by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Since market forces and economic conditions beyond the control of the Company determine interest rates, the ability to generate net interest income is dependent upon the Company’s ability to obtain an adequate spread between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities. Thus, the key performance for net interest income is the interest margin or net yield, which is taxable-equivalent net interest income divided by average interest-earning assets. Net income available to common shareholders totaled $28.3 million, or $1.59 per diluted shares in 2025, compared to $23.9 million, or $1.36 per diluted shares in 2024.
Net Interest Income
Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is the Company’s largest component of income, representing 69.5% of total income during 2025 and 65.9% of total income during 2024.
Net interest margin is the taxable-equivalent net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin.
The Company’s loan portfolio is significantly affected by changes in the prime interest rate. The prime interest rate, which is the rate offered on loans to borrowers with strong credit, was 6.75% as of December 31, 2025 and 7.50% as of December 31, 2024. The Federal Reserve Board sets general market rates of interest, including the deposit and loan rates offered by many financial institutions. During 2025, the prime interest rate decreased 0.75%. During 2024, the prime interest rate decreased 1.00%.
The following table presents the changes in taxable-equivalent net interest income and identifies the changes due to differences in the average volume of interest-earning assets and interest-bearing liabilities and the changes due to changes in the average interest rate on those assets and liabilities. The changes in net interest income due to changes in both average volume and average interest rate have been allocated to the average volume change or the average interest rate change in proportion to the absolute amounts of the change in each. The Company’s consolidated average balance sheets along with an analysis of taxable-equivalent net interest earnings are presented in the Rate/Volume Analysis.
Rate/Volume Analysis
The rate/volume analysis presented hereafter illustrates the change from year to year for each component of the taxable equivalent net interest income separated into the amount generated through volume changes and the amount generated by changes in the yields/rates.
Changes from 2024 to 2025
(dollars in thousands)
Volume
Rate
Total
Interest income
Loans held for sale
Loans, net of unearned fees
Investment securities, taxable
Investment securities, exempt
Deposits in banks and short-term investments
Total interest income
Interest expense
Interest-bearing demand and savings deposits
Time deposits
FHLB advances
Other borrowings
Total interest expense
Net interest income
The Company maintains about 41.60% of its loan portfolio in adjustable rate loans that reprice with prime rate changes, while a little over half of its other loans mature within 5 years. The liabilities to fund assets are primarily in non-maturing core deposits and short-term certificates of deposit that mature within one year. During 2025, Federal Reserve rates decreased 75 basis points. During 2024, Federal Reserve rates decreased 100 basis points. We have seen the net interest margin increase to 3.14% for 2025, compared to 2.72% for 2024 primarily due to lower rates paid on interest bearing liabilities while maintaining increased rates on loans.
Taxable-equivalent net interest income for 2025 increased by $15.9 million or 20.7%, compared to 2024, primarily due to increases in loan volume and rates along with decreases in deposit rates. The average volume of interest-earning assets during 2025 increased $127.1 million compared to 2024, primarily related to increases in loans and deposits in banks and short-term investments. The total yield on interest-earning assets increased year over year with increases in loan and deposits in banks and
short-term investments volume, partially offset by decreases in investment securities balances along with increased rates on loans in banks.
The average volume of loans increased $131.8 million in 2025 compared to 2024, which reflects a combination of organic and acquired loan growth in 2025. The average yield on loans increased by 24 basis points in 2025 compared to 2024, primarily due to the increased loan volume. The average volume of interest-bearing deposits increased $106.1 million in 2025 compared to 2024. Average savings and interest-bearing demand deposits increased $65.1 million and average time deposits increased $41.0 million in 2025 compared to 2024. Increases in average balances attributable to the acquisition of TC Bancshares, Inc. on December 1, 2025, were $34.7 million in loans, $20.3 million in interest-bearing demand and savings deposits and $11.0 million in time deposits.
Accordingly, the ratio of average interest-bearing deposits to total average deposits was 83.01% in 2025 and 81.81% in 2024. For 2025, this deposit mix, combined with a decrease in interest rates, had the effect of decreasing the average cost of total deposits by 27 basis points in 2025 compared to 2024. Other interest-bearing liabilities also decreased by 11 basis points for the same periods.
The Company’s net interest spread, which represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities, increased to 2.70% in 2025 from 2.23% in 2024 and was also a result of deposit rate decreases as well as increases in loan volume and rates. The net interest spread, as well as the net interest margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment. A discussion of the effects of changing interest rates on net interest income is set forth in "Market Risk and Interest Rate Sensitivity" included elsewhere in this report.
AVERAGE BALANCE SHEETS
Average
Income/
Yields/
Average
Income/
Yields/
(dollars in thousands)
Balances
Expense
Rates
Balances
Expense
Rates
Assets
Loans held for sale
Loans, net of unearned fees (1)
Investment securities, taxable
Investment securities, tax-exempt (2)
Deposits in banks and short-term investments
Total interest-earning assets
Total noninterest-earning assets
Total assets
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings and interest-bearing demand deposits
Time deposits
Total interest-bearing deposits
FHLB advances
Other borrowings
Total other interest-bearing liabilities
Total interest-bearing liabilities
Noninterest-bearing demand deposits
Other liabilities
Stockholders' equity
Total liabilities and stockholders' equity
Interest rate spread
Net interest income
Net interest margin
(1) The average balance of loans includes the average balance of nonaccrual loans. Income on such loans is recognized and recorded on the cash basis. Taxable-equivalent adjustments totaling $330,000 and $229,000 for the years ended December 31, 2025 and 2024, respectively, are calculated using the statutory federal tax rate and are included in income and fees on loans. Accretion income of $489,000 and $47,000 for the years ended December 31, 2025 and 2024 are also included in income and fees on loans.
(2) Taxable-equivalent adjustments totaling $412,000 and $453,000 for the years ended December 31, 2025 and 2024, respectively, are calculated using the statutory federal tax rate and are included in tax-exempt interest on investment securities.
Provision for Credit Losses
Provision for credit losses totaled $4.5 million in 2025 compared to $3.1 million in 2024. The amount of provision expense recorded in each period was the amount required such that the total allowance for credit losses reflected the appropriate balance, in the estimation of management, sufficient to cover expected credit losses over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur. The provision for credit losses for the years ended December 31, 2025 and 2024 includes $4.5 million and $3.6 million, respectively, in credit losses on loans and $3,000 in provision for and $562,000 in release of, respectively, credit losses on unfunded commitments. See the section captioned “Allowance for Credit Losses” elsewhere in this discussion for further analysis of the provision for credit losses. The increase in provision for credit losses for the year ended December 31, 2025 compared to 2024 is primarily related to the change in our loan balances year over year which was impacted by the acquisition of TC Bancshares, Inc. on December 1, 2025, with the addition of $412.7 million in loan balances. See the sections captioned “Loans" and "Allowance for Credit ” elsewhere in this discussion for further analysis of the provision for credit . Net charge-offs for the year ended December 31, 2025 were $5.1 million compared to $3.0 million for the same period in 2024. As of December 31, 2025, Colony’s allowance for credit was $23.0 million, or 0.97% of total loans, compared to $19.0 million, or 1.03% of total loans, at December 31,
2024. At December 31, 2025 and 2024 , nonperforming assets were $24.7 million and $11.3 million, or 0.66% and 0.36% of total assets, respectively, with credit quality in the overall loan portfolio remaining strong.
Noninterest Income
The components of noninterest income were as follows:
(dollars in thousands)
Variance
Variance
Service charges on deposit accounts
Mortgage fee income
Gain on sales of SBA loans
Loss on sales of securities
Interchange fees
BOLI income
Insurance commissions
Other
Total
Noninterest income in 2025 increased $905,000 , or 2.30% from 2024 . All variances were impacted by the acquisition of TC Bancshares, Inc. on December 1, 2025. Increases were seen in service charges on deposit accounts, mortgage fee income, losses on sales of investment securities, interchange fees, BOLI income, insurance commission and other noninterest income, which included increases in equity investment income and income on wealth advisory and merchant services . These increases were offset by a decrease in gain on sales of SBA loans. The increase in service charges on deposit accounts is primarily a result of increased deposit account fees implemented in June 2025 as well as our ability to continue to grow deposits. The increase in mortgage fee income was a result of higher mortgage production year over year and interchange fees increased as a result of customer use of our card programs and fluctuating purchase habits between periods. Insurance commissions increased $1.1 million which was driven by increased volume in the Company's insurance division, impacted by the acquisition of the Ellerbee Insurance Agency in the second quarter of 2025 . The increase of $881,000 in other noninterest income was attributable to equity investment market valuation gains of $300,000 in 2025 compared to $270,000 in 2024, an increase of $235,000 in wealth advisory and merchant services along with increases in SBA servicing and other related fee income of $156,000 . Investment securities were sold in 2025 and 2024 for the purpose of assets in order to reinvest at higher yields and resulted in of $1.0 million and $1.8 million, respectively. The decrease of $3.9 million in on sales of SBA loans is due to the sale of only 208 loans in 2025 compared to 451 loans in 2024.
Noninterest Expense
The components of noninterest expense were as follows:
(dollars in thousands)
Variance
Variance
Salaries and employee benefits
Occupancy and equipment
Acquisition related expenses
Information technology
Professional Fees
Advertising and public relations
Communications
Other
Total
Noninterest expense in 2025 increased by $9.7 million, or 11.72% from 2024. All variances were impacted by the acquisition of TC Bancshares, Inc. on December 1, 2025. The Company's in creases were seen in salaries and employee benefits, occupancy and equipment, acquisition related expenses, information technology, professional fees, advertising and public relations and other noninterest expense. These increases were offset by a decrease in communications expense. The increase in salaries and employee benefits was primarily due to the aforementioned acquisitions of the Ellerbee Insurance Agency and TC
Bancshares, Inc. as well as employee insurance and bonus expense which was partially offset by a decrease in stock award expense and an increase in deferred costs accounted for under ASC 310-20 due to loan growth. The increase in occupancy and equipment expenses can be seen in increases in repair and maintenance expense as well as lease expenses. Acquisition expenses in 2025 were all related to the TC Bancshares, Inc. acquisition and consisted primarily of professional and information technology expenses. The increase in information technology expense is due to increases in software and ATM expense. Professional fees saw increases in accounting and consulting fees, partially offset by decreases in legal fees, excluding acquisition related legal fees. The increase in advertising and public relations is primarily related to increases in subscription services and business development expenses, partially offset by decreases in appraisal fees. The increase in other noninterest expense of $1.8 million is primarily the result of a nonrecoverable loss of $1.3 million related to a wire fraud incident recorded in the third quarter of 2025 as well as changes in the valuation of the SBA servicing asset. The decrease in communications expense can be explained by fluctuations in data circuit fees
Sources and Uses of Funds
The following table illustrates, during the years presented, the mix of the Company’s funding sources and the assets in which those funds are invested as a percentage of the Company’s average total assets for the period indicated. Average assets totaled $3.18 billion in 2025 compared to $3.05 billion in 2024 .
(dollars in thousands)
Sources of Funds:
Noninterest-bearing deposits
Interest-bearing deposits
FHLB advances
Other borrowings
Other noninterest-bearing liabilities
Equity capital
Total
Uses of Funds:
Loans held for sale and loans
Investment securities
Deposits in banks and short term investments
Other noninterest-bearing assets
Total
Deposits continue to be the Company’s primary source of funding. Over the comparable periods, interest-bearing deposits continues to be the largest component of the Company's mix of deposits. Average interest-bearing deposits totaled 83.0% in 2025 compared to 81.8% of total average deposits in 2024.
The Company primarily invests funds in loans and securities. Loans continue to be the largest component of the Company’s mix of invested assets.
Loans
The following table presents the composition of the Company’s loan portfolio as of December 31 for the past five years.
(dollars in thousands)
December 31, 2025
December 31, 2024
December 31, 2023
December 31, 2022
December 31, 2021
Construction, land & land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial & agricultural
Consumer and other
Total loans, net of unearned fees
Allowance for credit losses on loans
Loans, net
Maturity and Repricing Opportunity
The following table presents total loans as of December 31, 2025 according to maturity distribution and/or repricing opportunity on adjustable rate loans.
(dollars in thousands)
One year
or less
After one year through five years
After five
years through
fifteen years
After fifteen years
Total
Construction, land & land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial & agricultural
Consumer and other
Total loans, net of unearned fees
Overview . Loans totaled $2.4 billion at December 31, 2025, an increase of 29.2% from $1.8 billion at December 31, 2024, which was attributable to a combination of organic growth and the TC Bancshares, Inc. acquisition. The majority of the Company’s loan portfolio is comprised of real estate loans. Commercial and residential real estate loans which is primarily for 1-4 family residential properties, nonfarm nonresidential properties and real estate construction loans made up 84.5% and 83.6% of total loans at December 31, 2025 and December 31, 2024, respectively. Commercial, financial and agriculture loans represents 9.2% of total loans at December 31, 2025 and 11.6% at December 31, 2024. Consumer and other loans increased to 6.3% of total loans at December 31, 2025 from 4.8% at December 31, 2024 . All categories of loans reflect increases as a result of the acquisition of TC Bancshares, Inc. in December 2025.
Loan origination/risk management. In accordance with the Company’s decentralized banking model, loan decisions are made at the local bank level. The Company utilizes both an Executive Loan Committee and a Director Loan Committee to assist lenders with the decision making and underwriting process of larger loan requests. Due to the diverse economic markets served by the Company, evaluation and underwriting criterion may vary slightly by market. Overall, loans are extended after a review of the borrower’s repayment ability, collateral adequacy, and overall credit worthiness.
Commercial purpose, commercial real estate, and agricultural loans are underwritten similarly to how other loans are underwritten throughout the Company. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location. In addition, the Company restricts any single loan to a $20 million transaction amount, unless approved by the Director Loan Committee ("DLC"). This diversity helps reduce the Company’s exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans monthly based on collateral, geography, and risk grade criteria. The Company also utilizes information provided by third-party agencies to provide additional insight and guidance about economic conditions and trends affecting the markets it serves.
The Company extends loans to builders and developers that are secured by non-owner occupied properties. In such cases, the Company reviews the overall economic conditions and trends for each market to determine the desirability of loans to be extended for residential construction and development. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim mini-perm loan commitment from the Company until permanent financing is obtained. In some cases, loans are extended for residential loan construction for speculative purposes and are based on the perceived present and future demand for housing in a particular market served by the Company. These loans are monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and trends, the demand for the properties, and the availability of long-term financing.
The Company originates consumer loans at the bank level. Due to the diverse economic markets served by the Company, underwriting criterion may vary slightly by market. The Company is committed to serving the borrowing needs of all markets served and, in some cases, adjusts certain evaluation methods to meet the overall credit demographics of each market. Consumer loans represent relatively small loan amounts that are spread across many individual borrowers to help minimize risk. Additionally, consumer trends and outlook reports are reviewed by management on a regular basis.
The Company utilizes an independent third-party company for loan review and validation of the credit risk program on an ongoing quarterly basis. Results of these reviews are presented to management and the audit committee. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.
For additional discussion of our loan portfolio and deposit accounts, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Loans" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Deposits.”
Commercial, financial & agricultural. Commercial, financial and agricultural loans at December 31, 2025 increased by $4.6 million, or 2.2% to $218.5 million from December 31, 2024 at $213.9 million. This increase was related to the acquisition of TC Bancshares, Inc. mentioned above partially offset by loan payoffs during the year. The Company’s commercial, financial and agricultural loans are a diverse group of loans to small, medium and large businesses. The purpose of these loans varies from supporting seasonal working capital needs to term financing of equipment. These agricultural lines typically reduce in size at year end as crops are sold. While some short-term loans may be made on an unsecured basis, most are secured by the assets being financed with collateral margins that are consistent with the Company’s loan policy guidelines.
Construction, land & land development. Construction, land and land development loans increased by $97.5 million, or 47.5%, at December 31, 2025 to $302.5 million from $205.0 million at December 31, 2024. This increase was primarily attributable to the acquisition of TC Bancshares, Inc. and the continued growth of the business in 2025.
Other commercial real estate . Other commercial real estate loans increased by $259.1 million, or 26.2%, at December 31, 2025 to $1,249.7 million from $990.6 million at December 31, 2024. This increase was primarily attributable to the acquisition of TC Bancshares, Inc. as well as growth of the business in 2025 despite the impact of the current lending and rate environment. At December 31, 2025 , the Company's other commercial real estate loans were comprised of 61.6% of non-owner occupied loans and 38.4% of owner occupied loans.
The Company's non-owner occupied portfolio is well diversified as can be seen in the table below as of December 31, 2025 and 2024.
(dollars in thousands)
December 31, 2025
December 31, 2024
Multifamily
Hotel/Motel
Retail
Office
Industrial & Warehouse
Other Specialty
Government guaranteed SBSL
Total
Residential Real Estate Loans. Residential real estate loans increased by $115.4 million or 33.5%, at December 31, 2025 to $459.5 million from $344.2 million at December 31, 2024. This increase was primarily attributable to the acquisition of TC
Bancshares, Inc. and the continued growth of the business in 2025. Residential real estate loans consist of revolving, open-end and closed-end loans as well as those secured by closed-end first and junior liens.
Consumer and other. Consumer and other loans include loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit. Consumer and other loans at December 31, 2025 increased $61.7 million or 69.2% to $150.9 million from $89.2 million at December 31, 2024. This increase was primarily attributable to the acquisition of TC Bancshares, Inc. as well as increases in the Company's marine and RV lending division and increases in Upstart loans, consumer loans to individuals with no or limited credit history.
Industry concentrations . As of December 31, 2025 and 2024, the Company had one industry, identified as Lessors of Non-Residential real estate, where the concentrations of loans was in excess of 10% of total loans, as segregated by Standard Industrial Classification code (“SIC code”). The SIC code is a federally designed standard industrial numbering system used by the Company to categorize loans by the borrower’s type of business. The Company has established industry-specific guidelines with respect to maximum loans permitted for each industry with which the Company does business.
Collateral concentrations . Concentrations of credit risk can exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries, or certain geographic regions. The Company has a concentration in real estate loans as well as a geographic concentration that could pose an adverse credit risk. At December 31, 2025, approximately 84.5% of the Company’s loan portfolio was concentrated in loans secured by real estate. A substantial portion of borrowers’ ability to honor their contractual obligations is dependent upon the viability of the real estate economic sector. In addition, a large portion of the Company’s foreclosed assets are also located in these same geographic markets, making the recovery of the carrying amount of foreclosed assets susceptible to changes in market conditions. Management continues to monitor these concentrations and has considered these concentrations in its allowance for credit loss analysis. In recent years, we have seen real estate values stabilizing in our markets.
Large credit relationships . The Company currently operates locations in north, central, south and coastal Georgia as well as Bi rmingham, Alabama and Jacksonville, Santa Rosa Beach and Tallahassee, Florida. As a result, the Company originates and maintains large credit relationships with several commercial customers in the ordinary course of business. The required approval of loans (new or renewal) is based on the total credit exposure of a borrower, the type of loan, combined with whether or not there are any material policy exceptions on the loan. For non-owner occupied commercial real estate loans, the DLC approves loans $18 million or greater with material exceptions and loans $26 million or greater without exceptions. For other loans that are not commercial real estate, the DLC approves loans $21 million or greater with material exceptions and loans $30 million or greater with no exceptions. At December 31, 2025, our largest 20 relationships consisted of loans and loan commitments, where the total committed balance was $359.9 million with $312.0 million outstanding. At December 31, 2024, our largest 20 relationships had total committed balance of $304.5 million with $286.1 million outstanding.
Maturities and sensitivities of loans to changes in interest rates . The following table presents the maturity distribution of the Company’s loans at December 31, 2025. The table also presents the portion of loans that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index such as the prime rate.
(dollars in thousands)
Due in One
Year or
Less
After One Year, but
within
Five Years
After Five
Years, but within Fifteen Years
After Fifteen Years
Total
Loans with fixed interest rates:
Construction, land & land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial & agricultural
Consumer and other
Total loans with fixed interest rates, net of unearned fees
Loans with floating interest rates:
Construction, land & land development
Other commercial real estate
Total commercial real estate
Residential real estate
Commercial, financial & agricultural
Consumer and other
Total loans with floating interest rates, net of unearned fees
Total loans, net of unearned fees
The Company may renew loans at maturity when requested by a customer whose financial strength appears to support such renewal or when such renewal appears to be in the Company’s best interest. In such instances, the Company generally requires payment of accrued interest and may adjust the rate of interest, require a principal reduction or modify other terms of the loan at the time of renewal.
Nonperforming Assets and Potential Problem Loans
Asset quality experienced a slight decrease during the year ended December 31, 2025. Nonperforming assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property and other real estate owned ("OREO"). Nonaccrual loans totaled $23.4 million at December 31, 2025, an increase of $12.7 million , or 119.3%, from $10.7 million at December 31, 2024 . There were eight loans contractually past due 90 days or more and still accruing totaling $95,000 at December 31, 2025 and six loans totaling $152,000 at December 31, 2024. At December 31, 2025, OREO totaled $1.0 million, an increase of $846,000, or 418.8%, compared with $202,000 at December 31, 2024. The change in OREO is primarily the result of four properties added to other real estate totaling $1.15 million offset by $310,000 from the sale of two OREO properties. At the end of the year ended December 31, 2025, total nonperforming assets as a percentage of total asset s increased to 0.66% compared with 0.36% at December 31, 2024. The increase in nonperforming assets was primarily the result of increases in construction, land & land development, commercial real estate and residential real estate loans as well as the addition of $5.7 million of loans acquired in the acquisition of TC Bancshares, Inc., partially offset by repayments, payoffs and charged off loans.
Year-end nonperforming assets and accruing past due loans were as follows:
(dollars in thousands)
Loans accounted for on nonaccrual
Loans accruing past due 90 days or more
Other real estate foreclosed
Repossessed assets
Total nonperforming assets
Nonperforming loans by segment
Construction, land & land development
Other commercial real estate
Residential real estate
Commercial, financial & agricultural
Consumer and other
Total nonperforming loans
Nonperforming assets as a percentage of:
Total loans, other real estate and foreclosed assets
Total assets
Nonperforming loans as a percentage of:
Total loans
Supplemental data:
Accruing past due loans:
30-89 days past due
90 or more days past due
Total accruing past due loans
Allowance for credit losses
Allowance for credit losses as a percentage of:
Total loans
Nonperforming loans
Nonperforming assets include nonaccrual loans, loans past due 90 days or more, foreclosed real estate and repossessed assets. Nonperforming assets at December 31, 2025 increased 117.9% from December 31, 2024, as a result of the increase in nonaccrual loans and other real estate, offset by decreases in loans accruing past due 90 days or more and repossessed assets.
Generally, loans are 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 in question, as well as when required by regulatory requirements. Loans to a customer whose financial condition has deteriorated are considered for nonaccrual status whether or not the loan is 90 days or more past due. For consumer loans, collectability and loss are generally determined before the loan reaches 90 days past due. Accordingly, losses on consumer loans are recorded at the time they are determined. Consumer loans that are 90 days or more past due are generally either in liquidation/payment status or bankruptcy awaiting confirmation of a plan. Once interest accruals are discontinued, accrued but uncollected interest is charged to current year operations. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Classification of a loan as nonaccrual does not the ultimate collection of loan principal or interest.
The Company had five loans modified due to financial difficulty during the year ended December 31, 2025. See Note 4. Loans, for additional details on loan modifications.
Foreclosed assets represent property acquired as the result of borrower defaults on loans. Foreclosed assets are recorded at estimated fair value, less estimated selling costs, at the time of foreclosure. Write-downs occurring at foreclosure are charged against the allowance for credit losses. On an ongoing basis, properties are appraised as required by market indications and applicable regulations. Write-downs are provided for subsequent declines in value and are included in other non-interest expense along with other expenses related to maintaining the properties.
Allowance for Credit Losses
The allowance for credit losses for loans is a reserve established through charges to earnings in the form of a provision for credit losses. The provision for credit losses is based on management's evaluation of the size and composition of the loan portfolio, the level of non-performing and past due loans, historical trends of charged-off loans and recoveries, prevailing economic conditions and other factors management deems appropriate. The Company's management has established an allowance for credit losses for loans which it believes is adequate to cover expected credit losses over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur. Based on a credit evaluation of the loan portfolio, management presents a quarterly review of the allowance for credit losses for loans and allowance for credit losses on unfunded commitments to the Company's Board of Directors, which primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner, the Company's management is to effectively evaluate the portfolio by risk, which management believes is the most way to analyze the loan portfolio and thus analyze the adequacy of the allowance for credit on loans.
The allowance for credit losses on loans is established by examining (1) the large classified loans, nonaccrual loans and loans considered impaired and evaluating them individually to determine the specific reserve allocation and (2) the remainder of the loan portfolio to allocate a portion of the allowance based on past loss experience and reasonable and supportable forecasts of economic conditions for the particular loan category. The Company also considers other factors such as changes in lending policies and procedures; changes in national, regional and/or local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of either the market president or lending staff; changes in the volume and severity of past due and classified loans; changes in the quality of the loan review system; and other factors management deems appropriate.
The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The ACL is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund.
Management evaluates the adequacy of the allowance for credit losses for each of these components on a quarterly basis. Peer comparisons, industry comparisons, and regulatory guidelines are also used in the determination of the valuation allowance. Loans identified as losses by management, internal loan review, and/or bank examiners are charged off. Additional information about the Company’s allowance for credit losses is provided in the Notes to the Consolidated Financial Statements for Allowance for Credit Losses.
The following table sets forth the breakdown of the allowance for credit losses on loans by loan category for the periods indicated. The allocation of the allowance to each category is subjective and is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any other category.
December 31,
December 31,
December 31,
December 31,
December 31,
(dollars in thousands)
Reserve
Reserve
Reserve
Reserve
Reserve
Construction, land & land development
Other commercial real estate
Residential real estate
Commercial, financial & agricultural
Consumer and other
(1) Percentage represents the loan balance in each category expressed as a percentage of total end of period loans .
The following table presents an analysis of the Company’s allowance for credit losses on loans for the periods indicated.
(dollars in thousands)
Allowance for credit losses on loans at beginning of year
Adoption of ASU 2016-13
Adoption of ASU 2025-08
Charge-offs
Construction, land & land development
Other commercial real estate
Residential real estate
Commercial, financial & agricultural
Consumer and other
Total charge-offs
Recoveries
Construction, land & land development
Other commercial real estate
Residential real estate
Commercial, financial & agricultural
Consumer and other
Total recoveries
Net charge-offs/(recoveries)
Provision for credit losses on loans
Allowance for credit losses on loans at end of year
Ratio of net charge-offs/(recoveries) to average loans
The allowance for credit losses on loans increased from $19.0 million or 1.03% of total loans at December 31, 2024 to $23.0 million, or 0.97% of total loans at December 31, 2025. The provision for credit losses on loans reflects loan quality trends, including the level of net charge-offs or recoveries, among other factors. Although net charge-offs were slightly higher which impacted the provision for credit losses, the primary reason for the year over year increase was due to the adoption of ASU 2025-08 which resulted in an addition of $4.6 million to the allowance in 2025.
The amount of provision expense recorded in 2025 and 2024 was the amount required such that the total allowance for credit losses reflected the appropriate balance, in the estimation of management, that was sufficient to cover expected credit losses on loans over the expected life of a loan exposure and unfunded commitments where the likelihood is that funding will occur.
Investment Portfolio
The following table presents carrying values of investment securities available-for-sale held by the Company as of December 31, 2025, 2024 and 2023.
(dollars in thousands)
U.S. treasury securities
U.S. agency securities
Asset backed securities
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
The following table presents investment securities held-to-maturity, carried at cost by the Company as of December 31, 2025, 2024 and 2023.
(dollars in thousands)
U.S. treasury securities
U.S. agency securities
State, county and municipal securities
Mortgage-backed securities
Total debt securities
The following table represents expected maturities and weighted-average yields of investment securities held by the Company as of December 31, 2025 (mortgage-backed securities are based on the average life at the projected speed, while State and Political Subdivisions reflect anticipated calls being exercised).
After 1 Year But
After 5 Years But
Available-for-Sale
Within 1 Year
Within 5 Years
Within 10 Years
After 10 Years
(dollars in thousands)
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
U.S. treasury securities
U.S. agency securities
Asset backed securities
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
After 1 Year But
After 5 Years But
Held-to-Maturity
Within 1 Year
Within 5 Years
Within 10 Years
After 10 Years
(dollars in thousands)
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
U.S. treasury securities
U.S. agency securities
State, county and municipal securities
Mortgage-backed securities
Total debt securities
Securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available-for-sale when they might be sold before maturity. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income. The Company had both held-to-maturity and available-for-sale securities in the investment portfolio at December 31, 2025. Management also evaluates its securities portfolio for any credit-related losses on a quarterly basis. The Company did not identify any credit-related losses in its held-to-maturity or available-for-sale portfolios at December 31, 2025.
At December 31, 2025, there were no holdings of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of the Company’s stockholders’ equity.
The average yield of the securities portfolio was 2.60% in 2025 and 2.61% in 2024. The slight decrease in the average yield from 2024 to 2025 was primarily attributed to the decrease in average balances of investment securities related to paydowns and the sales of investments securities during both periods.
Deposits
The following table presents the average amount outstanding and the average rate paid on deposits by the Company for the years 2025, 2024, and 2023.
(dollars in thousands)
Average
Amount
Average
Rate
Average
Amount
Average
Rate
Average
Amount
Average
Rate
Noninterest-bearing demand deposits
Interest-bearing demand and savings deposits
Time deposits
Total deposits
The following table presents the maturities of the Company’s time deposits as of December 31, 2025.
(dollars in thousands)
Time
Deposits
or Greater
Time
Deposits
Less than
Total
Months to Maturity
3 months or less
Over 3 months through 6 months
Over 6 months through 12 months
Over 12 months
Average deposits increased $91.1 million in 2025 compared to 2024. The increase in 2025 included increases of $41.0 million, or 6.8% in time deposits and an increase in interest-bearing demand and savings deposits of $65.1 million, or 4.4%, partially offset by a decrease of $15.0 million, or 3.3% in noninterest-bearing deposits. The increase in our overall deposits is due primarily to the acquisition of TC Bancshares, Inc The Company continues to focus on the importance of customer relationships and our ability to attract noninterest-bearing demand and interest-bearing demand and savings deposits despite the challenging interest rate environment.
As of December 31, 2025 and 2024 , $980.0 million and $857.6 million , respectively, of our deposit portfolio was uninsured. The uninsured amounts are estimated based on the methodologies and assumptions used for the Bank's regulatory reporting requirements. The adjusted uninsured deposit estimate (which excludes deposits collateralized by public funds and internal accounts) was $576.5 million as of December 31, 2025 compared to $457.3 million as of December 31, 2024, Adjusted uninsured deposits represents a small percentage of our overall deposits, which increases the stability of our deposit base and lowers our overall funding risk.
The Company supplements deposit sources with brokered deposits. As of December 31, 2025, the Company had $131.9 million, or 4.30% of total deposits, in brokered certificates of deposit attracted by external third parties. Additional information is provided in the Notes to Consolidated Financial Statements for Deposits.
Off-Balance-Sheet Arrangements and Contractual Obligations
In the ordinary course of business, our Bank has granted commitments to extend credit to approved customers. Generally, these commitments to extend credit have been granted on a temporary basis for seasonal or inventory requirements or for construction period financing and have been approved within the Bank’s credit guidelines. Our Bank has also granted commitments to approved customers for financial standby letters of credit. These commitments are recorded in the financial statements when funds are disbursed or the financial instruments become payable. The Bank uses the same credit policies for these off-balance-sheet commitments as it does for financial instruments that are recorded in the consolidated financial statements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitment amounts expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
The following table summarizes commitments and contractual obligations outstanding at December 31, 2025.
(dollars in thousands)
Payments Due by Period
Total
Less Than 1
Year
1 – 3 Years
3 – 5 Years
More Than 5 Years
Contractual Obligations:
Borrowings
Operating lease liabilities
Time Deposits
Other Commitments:
Loan commitments
Standby letters of credit
Total Contractual Obligations and Other Commitments
Loan Commitments . The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of the Company’s commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding. The Company minimizes its exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures. Management assesses the credit risk associated with certain commitments to extend credit in determining the level of the allowance for credit losses. Loan commitments outstanding at December 31, 2025 are included in the preceding table.
Standby Letters of Credit . Letters of credit are written conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, the Company would be entitled to seek recovery from the customer. The Company’s policies generally require that standby letters of credit arrangements contain security and debt covenants similar to those contained in loan agreements. Standby letters of credit outstanding at December 31, 2025 are included in the preceding table.
Capital Requirements
The Bank and the Company are each required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution’s overall capital adequacy. For more information, see “Item 1. Business – Supervision and Regulation – Regulation of the Company – Capital Requirements.”
At December 31, 2025, shareholders’ equity totaled $375.9 million compared to $278.7 million at December 31, 2024. The primary driver of the increase was the issuance of common stock of $65.9 million as a result of the acquisition of TC Bancshares, Inc. in December 2025. In addition to net income of $28.3 million, another significant change in shareholders’ equity during 2025 included $8.0 million of dividends declared on common stock. The accumulated other comprehensive loss component of stockholders’ equity totaled $34.5 million at December 31, 2025 compared to $47.6 million at December 31, 2024. This fluctuation was mostly related to the after-tax effect of changes in the fair value of securities available-for-sale. Under regulatory requirements, the unrealized gain or loss on securities available for sale does not increase or reduce regulatory capital and is not included in the calculation of risk-based capital and leverage ratios. Regulatory agencies for banks and bank holding companies utilize capital guidelines designed to measure Tier 1 and total capital and take into consideration the risk inherent in both on-balance sheet and off-balance sheet items.
Tier 1 capital consists of common stock and qualifying preferred securities less goodwill, intangibles and disallowed deferred tax assets. Tier 2 capital consists of certain convertible, subordinated and other qualifying debt and the allowance for credit losses up to 1.25% of risk-weighted assets. The Company's Tier 2 capital consists of subordinated notes and the allowance for credit losses.
Using the capital requirements presently in effect, the Tier 1 ratio as of December 31, 2025 was 13.60% and total Tier 1 and 2 risk-based capital was 15.95%. Both of these measures compare favorably with the regulatory minimum of 6.0% for Tier 1 and 8% for total risk-based capital. The Company’s common equity Tier 1 ratio as of December 31, 2025 was 12.67%, which exceeds the regulatory minimum of 4.50%. The Company’s Tier 1 leverage ratio as of December 31, 2025 was 10.78%, which exceeds the required ratio standard of 4.0%.
For the year ended December 31, 2025, average capital was $297.6 million representing 9.3% of average assets for the year. This compares to average capital of $265.3 million, representing 8.7% of average assets for 2024.
For the years ended December 31, 2025 and 2024, the Company did not have any material commitments for capital expenditures.
The Company granted 63,426 and 74,358 restricted shares of common stock for the years ended December 31, 2025 and 2024, respectively. All restricted shares vest over a three year period.
A cash dividend of $8.0 million and $7.9 million was paid for the years ended December 31, 2025 and 2024, respectively.
Liquidity
The Company, primarily through the actions of its subsidiary bank, engages in liquidity management to ensure adequate cash flow for deposit withdrawals, credit commitments and repayments of borrowed funds. Needs are met through loan repayments, net interest and fee income and the sale or maturity of existing assets. In addition, liquidity is continuously provided through the acquisition of new deposits, the renewal of maturing deposits and external borrowings.
Cash and cash equivalents at December 31, 2025 and 2024 were $257.6 million and $231.0 million, respectively. The increase in cash and cash equivalents was partially due to sales and paydowns of investment securities, paydowns and maturities of loans, as well as increases in deposits and other borrowings. Management believes the various funding sources discussed above are adequate to meet the Company’s liquidity needs in these unsettled times without any material adverse impact on our operating results.
Management monitors deposit flow and evaluates alternate pricing structures to retain and grow deposits. To the extent needed to fund loan demand, traditional local deposit funding sources are supplemented by the use of FHLB borrowings, brokered deposits and other wholesale deposit sources outside the immediate market area. Internal policies have been updated to monitor the use of various core and non-core funding sources, and to balance ready access with risk and cost. Through various asset/liability management strategies, a balance is maintained among goals of liquidity, safety and earnings potential. Internal policies that are consistent with regulatory liquidity guidelines are monitored and enforced by the Bank.
The investment portfolio provides a ready means to raise cash if liquidity needs arise. As of December 31, 2025, the available-for-sale bond portfolio totaled $383.8 million. At December 31, 2024, the available-for-sale bond portfolio totaled $366.0 million. This increase is primarily attributable to available-for-sale investment securities acquired in the acquisition of TC Bancshares, Inc. in December 2025. Only marketable investment grade bonds are purchased. Although approximately 51.5% of the Bank’s bond portfolio is encumbered as pledges to secure various public funds deposits, repurchase agreements, and for other purposes, management can restructure and free up investment securities for sale if required to meet liquidity needs.
Management continually monitors the relationship of loans to deposits as it primarily determines the Company’s liquidity posture. Colony had ratios of loans to deposits of 77.6% as of December 31, 2025 and 71.8% as of December 31, 2024. Management employs alternative funding sources when deposit balances will not meet loan demands. The ratios of loans to all funding sources (excluding Subordinated Debentures) at December 31, 2025 and December 31, 2024 were 73.0% and 71.8%, respectively. Management continues to emphasize programs to generate local core deposits as our Company’s primary funding sources. The stability of the Banks’ core deposit base is an important factor in Colony’s liquidity position. A heavy percentage of the deposit base is comprised of accounts of individuals and small businesses with comprehensive banking relationships and limited volatility. At December 31, 2025 and December 31, 2024, the Bank had $239.2 million and $185.2 million, respectively, in certificates of deposit of $250,000 or more. These larger deposits represented 7.8% and 7.2% of total deposits as of December 31, 2025 and 2024, respectively. Management seeks to monitor and control the use of these larger certificates, which tend to be more volatile in nature, to ensure an adequate supply of funds as needed. Relative interest costs to attract local core relationships are compared to market rates of interest on various external deposit sources to help minimize the Company’s overall cost of funds.
The Company supplemented deposit sources with brokered deposits. As of December 31, 2025, the Company had $131.9 million or 4.30% of total deposits in brokered deposits. Additional information is provided in the Notes to the Consolidated Financial Statements regarding these brokered deposits. Additionally, the Company uses external deposit listing services to obtain out-of-market certificates of deposit at competitive interest rates when funding is needed. The deposits obtained from listing services are often referred to as wholesale or internet CDs.
To plan for contingent sources of funding not satisfied by both local and out-of-market deposit balances, Colony and its subsidiary have established multiple borrowing sources to augment their funds management. The Company has borrowing capacity through membership of the Federal Home Loan Bank program. The Bank has also established overnight borrowing for Federal Funds Purchased through various correspondent banks. Management believes the various funding sources discussed above are adequate to meet the Company’s liquidity needs in the future without any material adverse impact on operating results. At December 31, 2025 and 2024 , we had $195.0 million and $185.0 million , respectively, of outstanding advances from the FHLB. Based on the values of loans pledged as collateral, we had $747.0 million and $578.7 million of additional borrowing availability with the FHLB at December 31, 2025 and 2024 , respectively.
Other sources of liquidity include overnight borrowings from the Federal Reserve Discount Window. The Company also has unencumbered investment securities which provide the ability to either be pledged as collateral with borrowing sources or sold and converted to cash.
Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of balance sheet structure, the ability to liquidate assets, and the availability of alternative sources of funds. The Company seeks to ensure its funding needs are met by maintaining a level of liquid funds through asset/liability management.
Asset liquidity is provided by liquid assets which are readily marketable or pledgeable or which will mature in the near future. Liquid assets include cash, interest-bearing deposits in banks, securities available for sale and federal funds sold and securities purchased under resale agreements.
Liability liquidity is provided by access to funding sources which include core deposits. Should the need arise, the Company also maintains relationships with the Federal Home Loan Bank, Federal Reserve Bank, three correspondent banks and repurchase agreement lines that can provide funds on short notice.
Since Colony is a bank holding Company and does not conduct operations, its primary sources of liquidity are dividends up streamed from the subsidiary bank and borrowings from outside sources.
The liquidity position of the Company is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Management is not aware of any events that are reasonably likely to have a material adverse effect on the Company’s liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity, which if implemented, would have a material adverse effect on the Company.
Impact of Inflation and Changing Prices
The Company’s financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). GAAP presently requires the Company to measure financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession are generally not considered. The primary effect of inflation on the operations of the Company is reflected in increased operating costs, and the Company has experienced material effects of inflation during the last five fiscal years due to the government's monetary policies and the current economic climate. In management’s opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the inflation rate. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond the control of the Company, including changes in the expected rate of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities, among other things, as further discussed in the next section.
Regulatory and Economic Policies
The Company’s business and earnings are affected by general and local economic conditions and by the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities, among other things. The Federal Reserve Board regulates the supply of money in order to influence general economic conditions. Among the instruments of monetary policy available to the Federal Reserve Board are (i) conducting open market operations in United States government obligations, (ii) changing the discount rate on financial institution borrowings, (iii) imposing or changing reserve requirements against financial institution deposits, and (iv) restricting certain borrowings and imposing or changing reserve requirements against certain borrowings by financial institutions and their affiliates. These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone, the policies of the Federal Reserve Board have a material effect on the earnings of the Company.
Governmental policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future; however, the Company cannot accurately predict the nature, timing or extent of any effect such policies may have on its future business and earnings.
Recently Issued Accounting Pronouncements
See Note 1 - Summary of Significant Accounting Policies included in the Notes to the Consolidated Financial Statements.
Market Risk and Interest Rate Sensitivity
Our financial performance is impacted by, among other factors, interest rate risk and credit risk. We utilize derivatives to help manage our interest rate risk position and mitigate exposure to the variability of future cash flows or other forecasted transactions. We mitigate our credit risk through reliance on an extensive loan review process and our allowance for credit losses.
Interest rate risk is the change in value due to changes in interest rates. The Company is exposed only to U.S. dollar interest rate changes and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not have any trading instruments nor does it classify any portion of its investment portfolio as held for trading. The Company has no exposure to foreign currency exchange rate risk, commodity price risk and other market risks. Interest rate risk is addressed by our Risk Management Committee which includes senior management representatives. The Risk Management Committee monitors interest rate risk by analyzing the potential impact to the net portfolio of equity value and net interest income from potential changes to interest rates and considers the impact of alternative strategies or changes in balance sheet structure.
Interest rates play a major part in the net interest income of financial institutions. The repricing of interest earnings assets and interest-bearing liabilities can influence the changes in net interest income. The timing of repriced assets and liabilities is Gap management and our Company has established its policy to maintain a Gap ratio in the one-year time horizon of .80 to 1.20.
Our exposure to interest rate risk is reviewed at least quarterly by our Board of Directors and by our Risk Management Committee. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine our change in net portfolio value in the event of assumed changes in interest rates. In order to reduce the exposure to interest rate fluctuations, we have implemented strategies to more closely match our balance sheet composition. The Company has engaged Stifel to run a quarterly asset/liability model for interest rate risk analysis. We are generally focusing our investment activities on securities with terms or average lives in the 3 ½ - 5 ½ year range.
Market risk reflects the risk of economic loss resulting from adverse changes in market prices and interest rates. This risk of loss can be reflected in either reduced current market values or reduced current and potential net income. Colony’s most significant market risk is interest rate risk. This risk arises primarily from Colony’s extension of loans and acceptance of deposits.
Managing interest rate risk is a primary goal of the asset liability management function. Colony attempts to achieve stability in net interest income while limiting volatility arising from changes in interest rates. Colony seeks to achieve this goal by balancing the maturity and repricing characteristics of assets and liabilities. Colony manages its exposure to fluctuations in interest rates through policies established by the Risk Management Committee and approved by the Board of Directors. The Risk Management Committee meets at least quarterly and has responsibility for developing asset liability management policies, reviewing the interest rate sensitivity of Colony, and developing and implementing strategies to improve balance sheet structure and interest rate risk positioning.
Colony measures the sensitivity of net interest income to changes in market interest rates through the utilization of Asset/Liability simulation modeling. On at least a quarterly basis, the following twenty-four month time period is simulated to determine a baseline net interest income forecast and the sensitivity of this forecast to changes in interest rates. These simulations include all of Colony’s earning assets and liabilities. Forecasted balance sheet changes, primarily reflecting loan and deposit growth and forecasts, are included in the periods modeled. Projected rates for loans and deposits are based on management’s outlook and local market conditions.
The magnitude and velocity of rate changes among the various asset and liability groups exhibit different characteristics for each possible interest rate scenario; additionally, customer loan and deposit preferences can vary in response to changing interest rates. Simulation modeling enables Colony to capture the expected effect of these differences. Assumptions utilized in the model are updated on an ongoing basis and are reviewed and approved by the Risk Management Committee of the Board of Directors.
Colony has modeled its baseline net interest income forecast assuming a flat interest rate environment with the federal funds rate at the Federal Reserve's targeted range of 3.50% and the prime rate of 6.75% at December 31, 2025. Colony has modeled the impact of a gradual increase in short-term rates of 100 and 200 basis points and a decline of 100 and 200 basis points to determine the sensitivity of net interest income for the next twelve months. As illustrated in the table below, the net interest income sensitivity model indicates that, compared with a net interest income forecast assuming stable rates, net interest income is projected to increase by 4.33% and 8.10% if interest rates increased by 100 and 200 basis points, respectively. Net interest income is projected to decline by 0.63% and 1.72% if interest rates decreased by 100 and 200 basis points. These changes were within Colony’s policy limit of a maximum 15% negative change.
Twelve Month Net Interest Income Sensitivity
Estimated Change in Net Interest
Income as of December 31,
Change in Short-term Interest Rates
(in basis points)
Flat
The measured interest rate sensitivity indicates an asset sensitive position over the next year, which could serve to improve net interest income in a rising interest rate environment. The actual realized change in net interest income would depend on several factors, some of which could serve to reduce or eliminate the asset sensitivity noted above. These factors include a higher than projected level of deposit customer migration to higher cost deposits, such as certificates of deposit, which would increase total interest expense and serve to reduce the realized level of asset sensitivity. Another factor which could impact the realized interest rate sensitivity in a rising rate environment is the repricing behavior of interest-bearing non-maturity deposits. Assumptions for repricing are expressed as a beta relative to the change in the prime rate. For instance, a 25% beta would correspond to a deposit rate that would increase 0.25% for every 1% increase in the prime rate. Projected betas for interest bearing non-maturity deposit repricing are a key component of determining the Company's interest rate risk position. Should realized betas be higher than projected betas, the expected benefit from higher interest rates would be reduced.
Colony is also subject to market risk in certain of its fee income business lines. Mortgage banking income is subject to market risk. Mortgage loan originations are sensitive to levels of mortgage interest rates and therefore, mortgage banking income could be negatively impacted during a period of rising interest rates. The extension of commitments to customers to fund mortgage loans also subjects Colony to market risk. This risk is primarily created by the time period between making the commitment and closing and delivering the loan. Colony seeks to minimize this exposure by utilizing various risk management tools, the primary of which are forward sales commitments and best efforts commitments.
