CAPITAL CITY BANK GROUP INC
For the period ended Sep 30, 2025. Filed Oct 31, 2025.
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Sep 30, 2025 · Filed Oct 31, 2025
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Item 6. Exhibits
Signatures
INTRODUCTORY NOTE
Special Cautionary Notice Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations,
estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of
which are beyond our control.
The words “may,” “could,” “should,” “would,” “believe,”
“anticipate,” “contemplate,” “estimate,” “expect,”
“intend,” “plan,” “point to,” “project,” “target,” “vision,” “goal,” “continue,” “further,”
and similar expressions are intended to identify
forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and uncertainties.
Our actual future results may differ materially from
those set forth in our forward-looking statements.
Our
ability
to
achieve
our
financial
objectives
could
be
adversely
affected
by
the
factors
discussed
in
detail
in
Part
II,
Item
1A.
“Risk
Factors” in this Quarterly Report on Form 10-Q and in Part I, Item 1A. “Risk Factors” in our Annual Report on
Form 10-K for the year ended
December 31,
(the “2024
Form 10-K”),
as updated
in our
subsequent
quarterly reports
filed on
Form 10-Q,
as well
as,
among other
factors:
The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal
Reserve Board;
Inflation, interest rate, market and monetary fluctuations;
Local, regional, national, and international economic conditions and the impact they may have on us and our clients and our
assessment of that impact;
The costs and effects of legal and regulatory developments, the outcomes of legal proceedings or regulatory or other
governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory
approvals;
The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and
insurance) and their application with which we and our subsidiaries must comply;
The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as other
accounting standard setters;
The accuracy of our financial statement estimates and assumptions;
Changes in the financial performance and/or condition of our borrowers;
Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs;
Changes in estimates of future credit loss reserve requirements based upon the periodic review thereof under relevant
regulatory and accounting requirements;
Changes in our liquidity position;
The timely development and acceptance of new products and services and perceived overall value of these products and
services by users;
Changes in consumer spending, borrowing, and saving habits;
Greater than expected costs or difficulties related to the integration of new products and lines of business;
Technological changes;
The cost and effects of cyber incidents or other failures, interruptions, or security breaches of our systems or those of our
customers or third-party providers;
Fraud or misconduct by internal or external parties which we may not be able to prevent, detect or mitigate;
Acquisitions and integration of acquired businesses;
Dispositions (including the impact from the sale of our insurance subsidiary),
acquisitions and integration of acquired
businesses;
Impairment of our goodwill or other intangible assets;
Changes in the reliability of our vendors, internal control systems, or information systems;
Our ability to increase market share and control expenses;
Our ability to attract and retain qualified employees;
Changes in our organization, compensation, and benefit plans;
The soundness of other financial institutions;
Volatility
and disruption in national and international financial and commodity markets;
Changes in the competitive environment in our markets and among banking organizations and other financial service
providers;
Action or inaction by the federal government, including as a result of any prolonged government shutdown or government
intervention in the U.S. financial system;
A deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid
exceeding the debt ceiling, and uncertainties surrounding the federal budget and economic policy;
The effects of natural disasters (including hurricanes), widespread health emergencies (including pandemics), military conflict,
terrorism, civil unrest, climate change or other geopolitical events;
Our ability to declare and pay dividends;
Structural changes in the markets for origination, sale and servicing of residential mortgages;
Any inability to implement and maintain effective internal control over financial reporting and/or disclosure control;
Potential claims, damages, penalties, fines, costs and reputational damage resulting from pending or future litigation,
regulatory proceedings and enforcement actions;
Negative publicity and the impact on our reputation;
The limited trading activity and concentration of ownership of our common stock; and
Other factors and risks described under “Risk Factors” herein and in any of the Company’s subsequent
reports filed with the
SEC and available on its website at www.sec.gov.
However, other factors besides those listed in
or discussed in this Form 10-Q also could adversely affect our results,
and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties.
Any forward-looking
statements made by us or on our behalf speak only as of the date they are made.
We do not undertake to update any forward-looking
statement, except as required by applicable law.
PART
I.
FINANCIAL INFORMATION
GROUP,
INC.
OF FINANCIAL CONDITION
December 31,
(Dollars in Thousands, Except Par Value)
ASSETS
Cash and Due From Banks
$
68,397
$
70,543
Federal Funds Sold and Interest Bearing Deposits
397,502
321,311
Total Cash and Cash Equivalents
465,899
391,854
Investment Securities, Available
for Sale, at fair value (amortized cost of $
592,323
and $
429,033
)
577,333
403,345
Investment Securities, Held to Maturity (fair value of $
394,125
and $
544,460
)
404,659
567,155
2,145
2,399
Total Investment
Securities
984,137
972,899
Loans Held For Sale, at fair value
24,204
28,672
(30,202)
(29,251)
Loans Held for Investment, Net
2,551,805
2,622,299
Premises and Equipment, Net
79,748
81,952
Goodwill and Other Intangibles
89,095
92,773
Other Real Estate Owned
1,831
127,055
134,116
Total Assets
$
$
LIABILITIES
Deposits:
Noninterest Bearing Deposits
$
1,303,786
$
1,306,254
Interest Bearing Deposits
2,311,126
2,365,723
Total Deposits
3,614,912
3,671,977
40,244
28,304
42,582
52,887
Other Long-Term
Other Liabilities
84,721
75,653
Total Liabilities
3,783,139
3,829,615
SHAREOWNERS’ EQUITY
Preferred Stock, $
0.01
par value;
3,000,000
shares authorized;
no
shares issued and outstanding
Common Stock, $
0.01
par value;
90,000,000
shares authorized;
and
16,974,513
shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively
Additional Paid-In Capital
40,067
37,684
Retained Earnings
499,176
463,949
Accumulated Other Comprehensive Income (Loss), net of tax
1,221
(6,486)
Total Shareowners’
Equity
540,635
495,317
Total Liabilities and Shareowners’
Equity
$
$
GROUP,
INC.
OF INCOME
(Dollars in Thousands, Except Per Share
Data)
INTEREST INCOME
Loans, including Fees
$
40,279
$
41,659
$
121,629
$
123,480
Investment Securities:
Taxable
7,175
4,149
19,644
12,385
Tax Exempt
Funds Sold and Interest Bearing Deposits
3,964
3,514
11,369
9,031
Total Interest Income
51,431
49,328
152,672
144,914
INTEREST EXPENSE
7,265
8,223
22,053
24,396
1,473
1,868
Other Long-Term
Total Interest Expense
7,874
9,117
24,384
27,079
NET INTEREST INCOME
43,557
40,211
128,288
117,835
1,881
1,206
3,269
3,330
Net Interest Income After Provision For Credit Losses
41,676
39,005
125,019
114,505
NONINTEREST INCOME
5,877
5,512
16,258
16,139
3,733
3,624
11,021
11,010
Wealth Management
Fees
5,173
4,770
16,142
13,891
4,794
3,966
12,804
11,225
Other
2,754
1,641
6,027
4,951
Total Noninterest
Income
22,331
19,513
62,252
57,216
NONINTEREST EXPENSE
Compensation
26,056
25,800
78,794
74,613
Occupancy, Net
7,037
7,098
20,901
21,089
Other
9,823
10,023
24,460
27,831
Total Noninterest
Expense
42,916
42,921
124,155
123,533
INCOME BEFORE INCOME TAXES
21,091
15,597
63,116
48,188
5,141
2,980
15,264
9,705
NET INCOME
15,950
12,617
47,852
38,483
Loss Attributable to Noncontrolling Interests
1,342
NET INCOME ATTRIBUTABLE
TO COMMON SHAREOWNERS
$
15,950
$
13,118
$
47,852
$
39,825
BASIC NET INCOME PER SHARE
$
0.93
$
0.77
$
2.81
$
2.35
DILUTED NET INCOME PER SHARE
$
0.93
$
0.77
$
2.80
$
2.35
Average Common
Basic Shares Outstanding
17,068
16,943
17,050
16,942
Average Common
Diluted Shares Outstanding
17,114
16,979
17,083
16,966
GROUP,
INC.
OF COMPREHENSIVE INCOME (LOSS)
NET INCOME ATTRIBUTABLE
TO COMMON SHAREOWNERS
$
15,950
$
13,118
$
47,852
$
39,825
Other comprehensive income, before
tax:
Investment Securities:
Change in net unrealized loss on securities available for sale
2,932
9,505
10,676
9,099
Amortization of unrealized losses on securities transferred from
available for sale to held to maturity
1,044
2,521
Derivative:
Change in net unrealized gain on effective cash flow
derivative
(253)
(1,261)
(1,442)
(873)
Other comprehensive income, before
tax
2,881
9,029
10,278
10,747
Deferred tax expense related to other comprehensive income
2,435
2,571
2,683
Other comprehensive income, net of tax
2,161
6,594
7,707
8,064
TOTAL COMPREHENSIVE
INCOME
$
18,111
$
19,712
$
55,559
$
47,889
GROUP,
INC.
OF CHANGES IN SHAREOWNERS’ EQUITY
Accumulated
Other
Additional
Comprehensiv
e
Shares
Common
Paid-In
Retained
(Loss) Income,
(Dollars In Thousands, Except Share Data)
Outstanding
Stock
Capital
Earnings
Net of Taxes
Total
Balance, July 1, 2025
17,066,395
$
$
39,527
$
487,665
$
(940)
$
526,423
15,950
15,950
2,161
2,161
0.2600
(4,439)
(4,439)
2,255
Balance, September 30, 2025
$
$
40,067
$
499,176
$
1,221
$
540,635
Balance, July 1, 2024
16,941,553
$
$
35,547
$
445,959
$
(20,676)
$
460,999
13,118
13,118
Reclassification to Temporary Equity
(1)
(838)
(838)
6,594
6,594
0.2300
(3,897)
(3,897)
2,817
Balance, September 30, 2024
16,944,370
$
$
36,070
$
454,342
$
$
476,499
Balance, January 1, 2025
16,974,513
$
$
37,684
$
463,949
$
(6,486)
$
495,317
47,852
47,852
7,707
7,707
0.7400
1,373
1,373
94,137
1,010
1,011
Balance, September 30, 2025
$
$
40,067
$
499,176
$
1,221
$
540,635
Balance, January 1, 2024
16,950,222
$
$
36,326
$
426,275
$
(22,146)
$
440,625
39,825
39,825
Reclassification to Temporary Equity
(1)
(751)
(751)
8,064
8,064
0.6500
Repurchase of Common Stock
(82,540)
(2,330)
(2,330)
1,139
1,139
76,688
(1)
Balance, September 30, 2024
16,944,370
$
$
36,070
$
454,342
$
$
476,499
(1)
Adjustments to redemption value for non-controlling
interest in Capital City Home Loans, LLC ("CCHL")
GROUP,
INC.
OF CASH FLOWS
CASH FLOWS FROM OPERATING
ACTIVITIES
$
47,852
$
39,825
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
3,269
3,330
Depreciation
5,548
5,798
Amortization of Premiums, Discounts and Fees, net
3,403
3,130
Amortization of Intangible Asset
Gain on Sale of Subsidiary
(773)
Originations of Loans Held-for-Sale
(332,760)
(366,700)
Proceeds From Sales of Loans Held-for-Sale
350,882
369,063
(12,804)
(11,225)
Net Additions for Capitalized Mortgage Servicing Rights
(138)
Stock Compensation
1,373
1,139
Net Tax Benefit from
Stock-Based Compensation
(154)
Deferred Income Taxes
2,429
1,400
Net Change in Operating Leases
Net (Gain) Loss on Sales and Write-Downs of Other Real Estate
Owned
(4,514)
Net Decrease in Other Assets
3,770
1,738
Net Increase in Other Liabilities
8,364
4,645
Net Cash Provided By Operating Activities
76,054
52,334
CASH FLOWS FROM INVESTING ACTIVITIES
Securities Held to Maturity:
(66,697)
(20,287)
Proceeds from Payments, Maturities, and Calls
228,784
83,657
Sale:
(225,039)
(49,436)
Proceeds from Payments, Maturities, and Calls
60,899
55,229
Equity Securities:
(60)
Net Decrease in Equity Securities
1,191
Purchases of Loans Held for Investment
(958)
(302)
Proceeds from Sales of Loans
39,802
31,462
Net Decrease in Loans Held for Investment
23,666
19,779
Net Cash Received for Divestitures
2,375
Proceeds From Sales of Other Real Estate Owned
7,340
Purchases of Premises and Equipment
(5,967)
(6,442)
Net Cash Provided by Investing Activities
65,336
113,851
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Deposits
(57,065)
(122,745)
Net Increase in Short-Term
11,940
1,729
Redemption of Subordinated Notes
(10,305)
Net Increase in Other Long-Term
Dividends Paid
Payments to Repurchase Common Stock
(2,330)
Proceeds from Issuance of Common Stock Under Purchase Plans
Net Cash Used In Financing Activities
(67,345)
(133,042)
NET INCREASE IN CASH AND CASH EQUIVALENTS
74,045
33,143
Cash and Cash Equivalents at Beginning of Period
391,854
312,067
Cash and Cash Equivalents at End of Period
$
465,899
345,210
Supplemental Cash Flow Disclosures:
Interest Paid
$
24,148
$
26,143
Income Taxes Paid
$
8,700
$
5,741
Supplemental Noncash Items:
Loans and Premises Transferred to Other Real Estate Owned
$
4,290
$
Loans Transferred from Held for Investment
to Held for Sale, net
$
40,652
$
25,640
GROUP,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 –
BUSINESS AND BASIS OF PRESENTATION
Nature of Operations
.
Capital City Bank Group, Inc. (“CCBG” or the “Company”) provides a full range of
banking and banking-
related services to individual and corporate clients through its wholly owned
subsidiary, Capital City Bank (“CCB” or the
“Bank”),
with banking offices located in Florida, Georgia,
and Alabama.
The Company is subject to competition from other financial
institutions, is subject to regulation by certain government agencies and undergoes
periodic examinations by those regulatory
authorities.
Basis of Presentation
.
The consolidated financial statements in this Quarterly Report on Form
10-Q include the accounts of CCBG
and CCB.
All material inter-company transactions and accounts have
been eliminated.
Certain previously reported amounts have
been reclassified to conform to the current year’s presentation.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X.
Accordingly,
they do not include all of the information and notes required by generally accepted
accounting principles for complete financial
statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included.
The Consolidated Statement of Financial Condition at December
31, 2024 has been derived from the audited consolidated financial
statements at that date, but does not include all of the information and notes
required by generally accepted accounting principles for
complete financial statements.
For further information, refer to the consolidated financial statements and notes
thereto included in the
Company’s 2024 Form
10-K.
Accounting Standards Updates
Proposed Accounting Standards
,
ASU No. 2023-06, “Disclosure Improvements:
Codification Amendments in Response to the SEC’s
Disclosure Update and Simplification Initiative.”
Accounting Standards Update
(“ASU”) 2023-06 is intended to clarify or improve
disclosure and presentation requirements of a variety of topics, which will allow users to
more easily compare entities subject to the
SEC’s existing disclosures with those
entities that were not previously subject to the requirements and align the requirements
in the
FASB accounting
standard codification with the SEC’s
regulations. ASU 2023-06 is to be applied prospectively,
and early adoption is
prohibited. For reporting entities subject to the SEC’s
existing disclosure requirements, the effective
dates of ASU 2023-06 will be the
date on which the SEC’s removal of
that related disclosure requirement from Regulation S-X or Regulation
S-K becomes effective. If
by June 30, 2027, the SEC has not removed the applicable requirement from
Regulation S-X or Regulation S-K, the pending content
of the related amendment will not become effective for
any entities. The Company is currently evaluating the provisions of the
amendments and the impact on its future consolidated statements.
ASU No. 2023-09, “Income Taxes
(Topic
740): Improvements to Income Tax
Disclosures.”
ASU 2023-09 is intended to enhance
transparency and decision usefulness of income tax disclosures. The ASU addresses
investor requests for more transparency about
income tax information through improvements to income tax disclosures,
primarily related to the rate reconciliation and income taxes
paid information. Retrospective application in all prior periods is permitted.
ASU 2023-09 is effective for the Company as of January
1, 2025. The Company is currently evaluating the impact of the incremental
income taxes information that will be required to be
disclosed within its Annual Report on Form 10-K for the year ended December
31, 2025 and subsequent annual reports.
ASU No. 2023-03, “Income Statement — Reporting Comprehensive
Income — Expense Disaggregation
Disclosures (Subtopic 220-
40): Disaggregation of Income Statement
Expenses.”
ASU 2024-03 introduces new requirements to disclose additional information
about certain types of expenses, including employee compensation, depreciation,
intangible asset amortization, and selling expenses.
ASU 2024-03 is effective for the Company as of January 1, 2026. The
Company is currently evaluating the impact of the incremental
disclosures that will be required under the standard.
ASU 2025-06, “Intangibles - Goodwill and Other -Internal-Use Software (Subtopic
350-40): Targeted
Improvements to the
Accounting for Internal-Use Software.”
The ASU updates accounting for internal-use software by shifting from a stage-based
model
to a principles-based approach aligned with modern development. Key
provisions include new capitalization criteria based on
authorization, funding commitment, and probable completion, removal
of development stages, integrated website guidance, and
enhanced disclosures.
The Company is currently evaluating the provisions of the amendments and
the impact on its future
consolidated statements and disclosures.
NOTE 2 –
INVESTMENT SECURITIES
Investment Portfolio Composition
. The following table summarizes the amortized cost and related fair value of investment
securities available-for-sale (“AFS”) and securities held-to-maturity (“HTM”)
and the corresponding amounts of gross
unrealized gains and losses.
Sale
Amortized
Allowance for
Fair
Cost
Gains
Losses
Credit Losses
Value
$
272,030
$
1,567
$
$
$
273,314
165,774
3,148
162,685
37,525
2,319
35,248
(1)
61,225
8,286
52,940
47,672
2,580
(43)
45,049
(2)
8,097
8,097
Total
$
592,323
$
1,669
$
16,616
$
(43)
$
577,333
$
106,710
$
$
$
$
105,801
148,666
5,578
143,127
43,212
3,827
(3)
39,382
(1)
66,379
10,902
55,477
55,970
4,444
(64)
51,462
(2)
8,096
8,096
Total
$
429,033
$
$
25,685
$
(67)
$
403,345
Amortized
Fair
Cost
Gains
Losses
Value
$
170,612
$
$
1,348
$
169,264
(1)
234,047
9,811
224,861
Total
$
404,659
$
$
11,159
$
394,125
$
368,005
$
$
6,476
$
361,529
(1)
199,150
16,235
182,931
Total
$
567,155
$
$
22,711
$
544,460
(1)
Comprised of residential mortgage-backed
securities.
(2)
Includes Federal Home Loan Bank and Federal Reserve Bank stock, recorded
at cost of $
3.0
5.1
respectively,
at September 30, 2025 and at December 31, 2024.
At September 30, 2025 and December 31, 2024, the investment portfolio
had $
2.1
2.4
million, respectively, in equity
securities. These securities do not have a readily determinable fair value
and were not credit impaired.
Securities with an amortized cost of $
442.6
489.5
million at September 30, 2025 and December 31, 2024, respectively,
were pledged to secure public deposits and for other purposes.
The Bank, as a member of the Federal Home Loan Bank of Atlanta (“FHLB”), is required
to own capital stock in the FHLB based
generally upon the balances of residential and commercial real estate loans, and
FHLB advances. The Bank’s investment
in FHLB
stock, which is included in other securities is pledged to secure FHLB advances.
No ready market exists for this stock, and it has no
quoted fair value; however, redemption
of this stock has historically been at par value.
As a member of the Federal Reserve Bank of
Atlanta, the Bank is required to maintain stock in the Federal Reserve Bank of Atlanta
based on a specified ratio relative to the Bank’s
capital.
Federal Reserve Bank stock is carried at cost.
Investment Sales.
There were
no
sales of investment securities for the three and nine months ended September 30, 2025 and
Maturity Distribution
.
At September 30, 2025, the Company’s
investment securities had the following maturity distribution based on
contractual maturity.
Expected maturities may differ from contractual maturities because borrowers
may have the right to call or
prepay obligations.
Mortgage-backed securities, certain amortizing U.S. government agency
securities and other securities are shown
separately because they are not due at a certain maturity date.
Sale
Amortized Cost
Amortized Cost
Due in one year or less
$
89,433
$
88,479
$
170,612
$
169,264
Due after one year through five years
306,889
304,548
Due after five year through ten years
12,896
11,675
61,225
52,940
234,047
224,861
113,783
111,594
8,097
8,097
Total
$
592,323
$
577,333
$
404,659
$
394,125
Unrealized Losses on Investment Securities.
The following table summarizes the available for sale and held to maturity
investment
securities with unrealized losses aggregated by major security type and length
of time in a continuous unrealized loss position:
Less Than
Greater Than
12 Months
12 Months
Total
Fair
Fair
Fair
Value
Losses
Value
Losses
Value
Losses
Sale
$
14,604
$
$
11,832
$
$
26,436
$
68,734
82,855
2,692
151,589
3,148
1,876
31,747
2,195
33,623
2,319
52,861
8,286
52,897
8,286
43,522
2,580
43,522
2,580
Total
$
85,250
$
$
222,817
$
15,993
$
308,067
$
16,616
169,264
1,348
169,264
1,348
17,694
113,104
9,718
130,798
9,811
Total
$
17,694
$
$
282,368
$
11,066
$
300,062
$
11,159
Sale
$
81,363
$
$
14,510
$
$
95,873
$
33,155
100,844
5,394
133,999
5,578
2,728
36,654
3,663
39,382
3,827
55,409
10,902
55,463
10,902
3,093
48,369
4,195
51,462
4,444
Total
$
120,393
$
$
255,786
$
24,770
$
376,179
$
25,685
361,529
6,476
361,529
6,476
58,230
1,000
119,353
15,235
177,583
16,235
Total
$
58,230
$
1,000
$
480,882
$
21,711
$
539,112
$
22,711
At September 30, 2025, there were
positions (combined AFS and HTM) with unrealized pre-tax losses totaling
$
27.8
of these positions are U.S. Treasury bonds and carry
the full faith and credit of the U.S. Government.
are U.S. government
agency securities issued by U.S. government sponsored entities.
We believe the
long history of no credit losses on government
securities indicates that the expectation of nonpayment of the amortized
cost basis is effectively zero.
At September 30, 2025, all
collateralized mortgage obligation securities, mortgage
-backed securities, Small Business Administration securities, U.S. Agency,
and
U.S. Treasury bonds held were AAA rated.
The remaining
positions (municipal securities and corporate bonds) have a credit
component.
At September 30, 2025, corporate debt securities had an allowance for credit losses of $
43,000
and municipal securities
had an allowance of less than $
1,000
.
No
ne of the securities held by the Company were past due or in nonaccrual status at September
30, 2025.
Credit Quality Indicators
The Company monitors the credit quality of its investment securities through
various risk management procedures, including the
monitoring of credit ratings.
A majority of the debt securities in the Company’s
investment portfolio were issued by a U.S.
government entity or agency and are either explicitly or implicitly guaranteed
by the U.S. government.
The Company believes the
long history of no credit losses on these securities indicates that the expectation
of nonpayment of the amortized cost basis is
effectively zero, even if the U.S. government were
to technically default.
Further, certain municipal securities held by the Company
have been pre-refunded and secured by government guaranteed
treasuries.
Therefore, for the aforementioned securities, the Company
does
no
t assess or record expected credit losses due to the zero loss assumption.
The Company monitors the credit quality of its
municipal and corporate securities portfolio via credit ratings
which are updated on a quarterly basis.
On a quarterly basis, municipal
and corporate securities in an unrealized loss position are evaluated to determine
if the loss is attributable to credit related factors and
if an allowance for credit loss is needed.
NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE
FOR CREDIT LOSSES
Loan Portfolio Composition
.
The composition of the held for investment (“HFI”) loan portfolio was as follows:
$
179,018
$
189,208
156,756
219,994
785,290
779,095
(1)
234,111
220,064
(2)
187,225
200,685
Loans Held For Investment, Net of Unearned Income
$
$
(1)
Includes loans in process balances of $
2.6
13.6
(2)
Includes overdraft balances of $
1.4
1.2
Net deferred loan costs, which include premiums on purchased loans,
included in loans were $
8.5
million at September 30, 2025 and
$
8.3
million at December 31, 2024.
Accrued interest receivable on loans which is excluded from amortized
cost totaled $
9.8
million at September 30, 2025 and $
10.3
million at December 31, 2024, and is reported separately in Other Assets.
The Company has pledged a blanket floating lien on all 1-4 family residential mortgage
loans, commercial real estate mortgage loans,
and home equity loans to support available borrowing capacity at the FHLB of
Atlanta and has pledged a blanket floating lien on all
consumer loans, commercial loans, and construction loans to support available
borrowing capacity at the Federal Reserve Bank of
Atlanta.
.
The methodology for estimating the amount of credit losses reported in the
allowance for credit losses
(“ACL”) has two basic components: first, an asset-specific component
involving loans that do not share risk characteristics and the
measurement of expected credit losses for such individual loans; and second,
a pooled component for expected credit losses for pools
of loans that share similar risk characteristics.
This allowance methodology is discussed further in Note 1 – Significant
Accounting
Policies in the Company’s 2024 Form
10-K.
The following table details the activity in the allowance for credit losses by
portfolio segment.
Allocation of a portion of the
allowance to one category of loans does not preclude its availability to
absorb losses in other categories.
Commercial,
Financial,
Commercial
Agricultural
Construction
Mortgage
Residential
Home Equity
Total
$
1,425
$
1,811
$
6,256
$
15,264
$
2,014
$
3,092
$
29,862
(352)
1,550
(373)
(12)
(10)
(1,573)
(1,968)
(278)
(941)
(1,210)
$
1,517
$
1,459
$
6,532
$
15,429
$
2,214
$
3,051
$
30,202
$
1,514
$
2,384
$
5,867
$
14,568
$
1,952
$
2,966
$
29,251
(925)
2,329
3,351
(615)
(69)
(34)
(4,359)
(5,077)
2,115
2,677
(328)
(2,244)
(2,400)
$
1,517
$
1,459
$
6,532
$
15,429
$
2,214
$
3,051
$
30,202
September 30, 2024
$
1,575
$
1,751
$
6,076
$
14,788
$
1,865
$
3,164
$
29,219
(240)
(49)
1,045
1,879
(331)
(3)
(23)
(1,926)
(2,283)
1,021
(155)
(1,233)
(1,262)
$
1,554
$
2,193
$
6,625
$
14,636
$
1,852
$
2,976
$
29,836
September 30, 2024
$
1,482
$
2,502
$
5,782
$
15,056
$
1,818
$
3,301
$
29,941
(309)
(551)
3,310
3,890
(1,013)
(3)
(17)
(99)
(5,746)
(6,878)
2,111
2,883
(737)
(3,635)
(3,995)
$
1,554
$
2,193
$
6,625
$
14,636
$
1,852
$
2,976
$
29,836
For the nine months ended September 30, 2025, the allowance for
loans HFI increased by $
0.9
million and reflected a provision
expense of $
3.4
million and net loan charge-offs of $
2.4
The increase in the allowance over December 31, 2024 was
primarily attributable to qualitative factor adjustments that were partially
offset by lower loan balances.
For the nine months ended
September 30, 2024, the allowance for loans HFI decreased by $
0.1
million and reflected a provision expense of $
3.9
million and net
loan charge-offs of $
4.0
The decrease in the allowance was primarily due to lower loan balances offset
by higher loss rates
and loan grade migration.
Four unemployment forecast scenarios were utilized to estimate probability of default
and are weighted
based on management’s estimate
of probability.
See Note 8 – Commitments and Contingencies for information on the allowance for
off-balance sheet credit commitments.
Loan Portfolio Aging.
A loan is defined as a past due loan when one full payment is past due or a contractual maturity
is over 30 days
past due (“DPD”).
The following table presents the aging of the amortized cost basis in accruing
past due loans by class of loans.
30-59
60-89
90 +
Total
Total
Total
DPD
DPD
DPD
Past Due
Current
Loans
Loans
$
$
$
$
$
177,354
$
1,366
$
179,018
156,756
156,756
1,232
782,051
2,007
785,290
1,154
1,560
1,035,791
2,256
231,849
1,838
234,111
1,669
1,954
184,543
187,225
Total
$
3,587
$
1,881
$
$
5,468
$
2,568,344
$
8,195
$
$
$
$
$
$
188,781
$
$
189,208
219,994
219,994
777,710
779,095
1,038,694
3,127
218,160
1,782
220,064
2,154
2,297
197,598
200,685
Total
$
3,520
$
$
$
4,311
$
2,640,937
$
6,302
$
Nonaccrual Loans
.
Loans are generally placed on nonaccrual status if principal or interest payments
become 90 days past due and/or
management deems the collectability of the principal and/or interest to
be doubtful.
Loans are returned to accrual status when the
principal and interest amounts contractually due are brought current
or when future payments are reasonably assured.
The following table presents the amortized cost basis of loans in nonaccrual
status and loans past due over 90 days and still on accrual
by class of loans.
With No
With
90 + Days
With No
With
90 + Days
ACL
ACL
Still Accruing
ACL
ACL
Still Accruing
$
1,210
$
$
$
$
$
1,780
1,452
2,046
1,081
1,614
1,273
Total Nonaccrual
Loans
$
6,056
$
2,139
$
$
2,982
$
3,320
$
Collateral Dependent Loans.
The following table presents the amortized cost basis of collateral-dependent
loans.
Non Real Estate
Non Real Estate
Secured
Secured
Secured
Secured
$
$
1,210
$
$
1,780
2,180
2,476
1,614
Total Collateral Dependent
Loans
$
5,574
$
1,210
$
3,554
$
A loan is collateral dependent when the borrower is experiencing
financial difficulty and repayment of the loan is dependent on
the
sale or operation of the underlying collateral.
The Bank’s collateral dependent
loan portfolio is comprised primarily of real estate secured loans, collateralized
by either residential
or commercial collateral types.
The loans are carried at fair value based on current values determined by
either independent appraisals
or internal evaluations, adjusted for selling costs or other amounts to be deducted
when estimating expected net sales proceeds.
Residential Real Estate Loans In Process of Foreclosure
.
At September 30, 2025, the Company had $
0.9
million of 1-4 family
residential real estate loans for which formal foreclosure proceedings were
in process, compared to $
0.5
million at December 31,
Modifications to Borrowers Experiencing
Financial Difficulty.
Occasionally, the Company may
modify loans to borrowers who are
experiencing financial difficulty.
Loan modifications to borrowers in financial difficulty are loans in
which the Company has granted
an economic concession to the borrower that it would not otherwise consider.
In these instances, as part of a work-out alternative, the
Company will make concessions including the extension of the loan
term, a principal moratorium, a reduction in the interest rate, or a
combination thereof.
The impact of the modifications and defaults are factored into the allowance for credit
losses on a loan-by-loan
basis.
Thus, specific reserves are established based upon the results of either a
discounted cash flow analysis or the underlying
collateral value, if the loan is deemed to be collateral dependent.
A modified loan classification can be removed if the borrower’s
financial condition improves such that the borrower is no longer in financial difficulty,
the loan has not had any forgiveness of
principal or interest, and the loan is subsequently refinanced or restructured
at market terms and qualifies as a new loan.
At September 30, 2025, the Company maintained
two
modified commercial mortgage loans to borrowers experiencing financial
difficulty.
One
loan for $
2.5
million was provided a 6-month interest only extension in exchange for
additional collateral and was
current with
no
payment delay.
A second loan
for $
0.3
million was provided a below market interest rate and extended repayment
terms and was
30 days past due
at September 30, 2025.
No
other new modifications to borrowers experiencing financial difficulty
were made during the nine months ended September 30, 2025 and 2024.
Credit Risk Management
.
The Company has adopted comprehensive lending policies, underwriting standards and
loan review
procedures designed to maximize loan income within an acceptable
level of risk.
Management and the Board of Directors review and
approve these policies and procedures on a regular basis (at least annually).
Reporting systems are used to monitor loan originations, loan quality,
concentrations of credit, loan delinquencies and nonperforming
loans and potential problem loans.
Management and the Credit Risk Oversight Committee periodically
review the Company’s lines
of business to monitor asset quality trends and the appropriateness of credit policies.
In addition, total borrower exposure limits are
established and concentration risk is monitored.
As part of this process, the overall composition of the portfolio is reviewed to gauge
diversification of risk, client concentrations, industry group, loan
type, geographic area, or other relevant classifications of loans.
Specific segments of the loan portfolio are monitored and reported
to the Board on a quarterly basis and have strategic plans in place
to supplement Board approved credit policies governing exposure
limits and underwriting standards.
Detailed below are the types of
loans within the Company’s
loan portfolio and risk characteristics unique to each.
Commercial, Financial, and Agricultural – Loans in this category
are primarily made based on identified cash flows of the borrower
with consideration given to underlying collateral and personal or
other guarantees.
Lending policy establishes debt service coverage
ratio limits that require a borrower’s cash flow to be sufficient
to cover principal and interest payments on all new and existing debt.
The majority of these loans are secured by the assets being financed or other
business assets such as accounts receivable, inventory,
or
equipment.
Loan to value ratios at origination are
governed by established policy guidelines.
Real Estate Construction – Loans in this category consist of short-term
construction loans, revolving and non-revolving credit lines
and construction/permanent loans made to individuals and investors
to finance the acquisition, development, construction or
rehabilitation of real property.
These loans are primarily made based on identified cash flows of the borrower
or project and generally
secured by the property being financed, including 1-4 family residential
properties and commercial properties that are either owner-
occupied or investment in nature.
These properties may include either vacant or improved property.
Construction loans are generally
based upon estimates of costs and value associated with the completed
project.
Collateral values are determined based upon third
party appraisals and evaluations.
Loan to value ratios at origination are governed by established policy guidelines.
The disbursement
of funds for construction loans is made in relation to the progress of the project
and as such these loans are closely monitored by on-
site inspections.
Real Estate Commercial Mortgage – Loans in this category consists of commercial
mortgage loans secured by property that is either
owner-occupied or investment in nature.
These loans are primarily made based on identified cash flows of the borrower or
project
with consideration given to underlying real estate collateral and
personal guarantees.
Lending policy establishes debt service
coverage ratios and loan to value ratios specific to the property type.
Collateral values are determined based upon third party
appraisals and evaluations.
Real Estate Residential – Residential mortgage loans held in the Company’s
loan portfolio are made to borrowers that demonstrate the
ability to make scheduled payments with full consideration to underwriting
factors such as current income, employment status, current
assets, and other financial resources, credit history,
and the value of the collateral.
Collateral consists of mortgage liens on 1-4 family
residential properties.
The Company does not
originate sub-prime loans.
Real Estate Home Equity – Home equity loans and lines are made to qualified
individuals for legitimate purposes generally secured
by senior or junior mortgage liens on owner-occupied
1-4 family homes or vacation homes.
Borrower qualifications include
favorable credit history combined with supportive income and
debt ratio requirements and combined loan to value ratios within
established policy guidelines.
Consumer Loans – This loan portfolio includes personal installment loans,
direct and indirect automobile financing, and overdraft
lines of credit.
The majority of the consumer loan category consists of direct and indirect automobile
loans.
Lending policy
establishes maximum debt to income ratios, minimum credit scores, and
includes guidelines for verification of applicants’ income and
receipt of credit reports.
Credit Quality Indicators
.
As part of the ongoing monitoring of the Company’s
loan portfolio quality, management
categorizes loans
into risk categories based on relevant information about the ability of
borrowers to service their debt such as: current financial
information, historical payment performance, credit documentation,
and current economic and market trends, among other
factors.
Risk ratings are assigned to each loan and revised as needed through established monitoring
procedures for individual loan
relationships over a predetermined amount and review of smaller balance homogenous
loan pools.
The Company uses the definitions
noted below for categorizing and managing its criticized loans.
Loans categorized as “Pass” do not meet the criteria set forth below
and are not considered criticized.
Special Mention – Loans in this category are presently protected from loss,
but weaknesses are apparent which, if not corrected, could
cause future problems.
Loans in this category may not meet required underwriting criteria and
have no mitigating factors.
More than
the ordinary amount of attention is warranted for these loans.
Substandard – Loans in this category exhibit well-defined weaknesses that would
typically bring normal repayment into jeopardy.
These loans are no longer adequately protected due to well-defined
weaknesses that affect the repayment capacity of the
borrower.
The possibility of loss is much more evident and above average supervision is required
for these loans.
Doubtful – Loans in this category have all the weaknesses inherent in a loan categorized
as Substandard, with the characteristic that
the weaknesses make collection or liquidation in full, on the basis of
currently existing facts, conditions, and values, highly
questionable and improbable.
Performing/Nonperforming – Loans within certain homogenous
loan pools (home equity and consumer) are not individually reviewed,
but are monitored for credit quality via the aging status of the loan and by payment
activity.
The performing or nonperforming status
is updated on an on-going basis dependent upon improvement
and deterioration in credit quality.
The following tables summarize gross loans held for investment at September
30, 2025 and December 31, 2024 and current period
gross write-offs for the nine months ended September 30, 2025
and 12 months ended December 31, 2024 by years of origination and
internally assigned credit risk ratings (refer to Credit Risk Management section
for detail on risk rating system).
Term
Loans by Origination Year
Revolving
As of September 30, 2025
Prior
Loans
Total
Commercial, Financial,
Agriculture:
Pass
$
28,710
$
27,329
$
25,719
$
26,672
$
13,671
$
9,439
$
41,051
$
172,591
2,851
1,722
4,913
1,241
1,514
Total
$
28,710
$
27,329
$
28,700
$
26,835
$
13,699
$
9,731
$
44,014
$
179,018
$
$
$
$
$
$
$
$
Real Estate - Construction:
Pass
$
50,730
$
63,161
$
10,010
$
14,284
$
$
$
15,022
$
153,450
2,588
2,588
Total
$
50,730
$
63,161
$
10,728
$
16,872
$
$
$
15,022
$
156,756
Real Estate - Commercial
Mortgage:
Pass
$
74,048
$
82,444
$
108,719
$
180,457
$
95,397
$
162,220
$
25,699
$
728,984
3,885
5,550
23,406
3,948
6,663
1,143
44,595
1,402
3,808
5,158
11,711
Total
$
78,317
$
83,846
$
114,368
$
207,671
$
100,205
$
174,041
$
26,842
$
785,290
Real Estate - Residential:
Pass
$
115,780
$
133,764
$
286,851
$
326,723
$
62,441
$
92,274
$
9,682
$
1,027,515
1,653
3,866
1,309
1,314
3,782
10,439
Total
$
115,780
$
137,630
$
286,851
$
328,032
$
64,730
$
96,333
$
10,251
$
$
$
$
$
$
$
$
$
Real Estate - Home Equity:
$
1,600
$
$
$
$
$
$
229,459
$
232,273
1,764
1,838
Total
$
1,674
$
$
$
$
$
$
231,223
$
234,111
$
$
$
$
$
$
$
$
Consumer:
$
51,487
$
24,496
$
31,429
$
36,559
$
26,315
$
6,955
$
9,256
$
186,497
Total
$
51,682
$
24,611
$
31,498
$
36,839
$
26,376
$
6,963
$
9,256
$
187,225
$
1,872
$
$
$
$
$
$
$
4,359
Term
Loans by Origination Year
Revolving
As of December 31, 2024
Prior
Loans
Total
Commercial, Financial,
Agriculture:
Pass
$
35,596
$
36,435
$
37,506
$
18,433
$
4,610
$
9,743
$
41,720
$
184,043
3,979
4,760
Total
$
36,031
$
40,414
$
37,960
$
18,454
$
4,668
$
9,814
$
41,867
$
189,208
$
$
$
$
$
$
$
$
1,512
Real Estate - Construction:
Pass
$
105,148
$
73,615
$
29,821
$
$
$
$
8,288
$
217,110
1,555
1,329
2,884
Total
$
106,703
$
73,615
$
31,150
$
$
$
$
8,288
$
219,994
$
$
$
$
$
$
$
$
Real Estate - Commercial
Mortgage:
Pass
$
77,561
$
110,183
$
207,574
$
109,863
$
87,369
$
122,272
$
26,324
$
741,146
2,913
17,031
2,253
4,402
27,300
2,463
3,403
2,508
1,305
10,649
Total
$
77,732
$
115,559
$
228,008
$
110,732
$
92,130
$
127,979
$
26,955
$
779,095
$
$
$
$
$
$
$
$
Real Estate - Residential:
Pass
$
165,050
$
316,521
$
358,851
$
71,423
$
31,169
$
76,921
$
11,872
$
1,031,807
1,104
2,892
1,450
1,446
1,295
2,918
7,805
Total
$
165,050
$
317,314
$
360,301
$
73,973
$
32,932
$
80,373
$
12,561
$
$
$
$
$
$
$
$
$
Real Estate - Home Equity:
$
$
$
$
$
$
$
215,981
$
218,282
1,782
1,782
Total
$
$
$
$
$
$
$
217,763
$
220,064
$
$
$
$
$
$
$
$
Consumer:
$
32,293
$
44,995
$
55,942
$
42,002
$
10,899
$
4,116
$
9,648
$
199,895
Total
$
32,303
$
45,169
$
56,263
$
42,158
$
10,957
$
4,187
$
9,648
$
200,685
$
2,562
$
1,605
$
2,088
$
$
$
$
$
7,627
NOTE 4 – MORTGAGE BANKING ACTIVITIES
The Company’s mortgage
banking activities include mandatory delivery loan sales, forward sales contracts used
to manage residential
loan pipeline price risk, utilization of warehouse lines to fund secondary
market residential loan closings, and residential mortgage
servicing.
Residential Mortgage Loan Production
The Company originates, markets, and services conventional and
government-sponsored residential mortgage loans.
Generally,
conforming fixed rate residential mortgage loans are held for sale in the
secondary market and non-conforming and adjustable-rate
residential mortgage loans may be held for investment.
The volume of residential mortgage loans originated for sale and secondary
market prices are the primary drivers of origination revenue.
Residential mortgage loan commitments are generally outstanding for 30
to 90 days, which represents the typical period from
commitment to originate a residential mortgage loan to when the
closed loan is sold to an investor.
Residential mortgage loan
commitments are subject to both credit and price risk.
Credit risk is managed through underwriting policies and procedures, including
collateral requirements, which are generally accepted by the secondary
loan markets.
Price risk is primarily related to interest rate
fluctuations and is partially managed through forward sales of residential
mortgage-backed securities (primarily to-be announced
securities, or TBAs) or mandatory delivery commitments with investors.
The unpaid principal balance of residential mortgage loans held
for sale, notional amounts of derivative contracts related to residential
mortgage loan commitments,
such as interest rate lock commitments (“IRLC’s”)
and forward contract sales and their related fair
values are set forth below.
Unpaid Principal
Unpaid Principal
Balance/Notional
Balance/Notional
Residential Mortgage Loans Held for Sale
$
23,481
24,204
$
28,117
$
28,672
(1)
29,911
15,000
(1)
27,000
16,000
(1)
Recorded in other assets at fair value.
At September 30, 2025, the Company had
no
residential mortgage loans held for sale 30-89 days past due or on nonaccrual
status. At
December 31, 2024, the Company had
no
residential mortgage loans held for sale 30-89 days past due or on nonaccrual
status.
Mortgage banking revenue was as follows:
Net realized gains on sales of mortgage loans
$
3,871
$
3,664
$
10,356
$
8,499
Net change in unrealized gain on mortgage loans held for sale
Net change in the fair value of IRLC's
(45)
(135)
Net change in the fair value of forward sales contracts
(52)
(85)
Pair-Offs on net settlement of forward
sales contracts
(234)
(383)
(404)
(173)
Mortgage servicing rights additions
Net origination fees
2,192
2,051
Total mortgage banking
revenues
$
4,794
$
3,966
$
12,804
$
11,225
Residential Mortgage Servicing
The Company may retain the right to service residential mortgage
loans sold.
The unpaid principal balance of loans serviced for
others is the primary driver of servicing revenue.
The following represents a summary of mortgage servicing rights.
Number of residential mortgage loans serviced for others
Outstanding principal balance of residential mortgage loans serviced
for others
$
121,767
$
135,416
interest rate
5.74%
5.86%
Remaining contractual term (in months)
Conforming conventional loans serviced by the Company are sold to Federal
National Mortgage Association (“FNMA”) on a non-
recourse basis, whereby foreclosure losses are generally the responsibility
of FNMA and not the Company.
The government loans
serviced by the Company are secured through the Government National
Mortgage Association (“GNMA”), whereby the Company is
insured against loss by the Federal Housing Administration or partially
guaranteed against loss by the Veterans
Administration.
At
September 30, 2025, the servicing portfolio balance consisted of
the following loan types: FNMA (
61.4
%), GNMA (
4.3
%), and
private investor (
34.3
%).
FNMA and private investor loans are structured as actual/actual payment remittance.
At September 30, 2025 and December 31, 2024, the Company did
no
t have delinquent residential mortgage loans in GNMA pools
serviced by the Company.
The right to repurchase these loans and the corresponding liability has been recorded in other assets and
other liabilities, respectively,
in the Consolidated Statements of Financial Condition.
The Company had
no
repurchases for the three
months ended September 30, 2025 and 2024, and $
0.3
million and
no
repurchases in the nine months ended September 30, 2025 and
2024, respectively, of
GNMA delinquent or defaulted mortgage loans with the intention to modify
their terms and include the loans in
new GNMA pools.
Activity in the capitalized mortgage servicing rights was as follows:
Beginning balance
$
$
$
$
Additions due to loans sold with servicing retained
Deletions and amortization
(44)
(46)
(132)
(154)
Ending balance
$
$
$
$
The Company did
no
t record any permanent impairment losses on mortgage servicing rights for the
three or nine months ended
September 30, 2025 or 2024.
The key unobservable inputs used in determining the fair value of
the Company’s mortgage servicing rights were
as follows:
Minimum
Maximum
Minimum
Maximum
Discount rates
9.50%
12.00%
9.50%
12.00%
Annual prepayment speeds
9.83%
18.89%
9.14%
18.88%
Cost of servicing (per loan)
$
$
$
$
Changes in residential mortgage interest rates directly affect
the prepayment speeds used in valuing the Company’s
mortgage
servicing rights.
A separate third party model is used to estimate prepayment speeds based on interest rates, housing
turnover rates,
estimated loan curtailment, anticipated defaults, and other relevant factors.
The weighted average annual prepayment speed was
13.09
% at September 30, 2025 and
13.44
% at December 31, 2024.
Warehouse
Line Borrowings
The Company has the following warehouse lines of credit and master
repurchase agreements with various financial institutions at
September 30, 2025.
Amounts
Outstanding
$
million master repurchase agreement without defined expiration.
Interest is at the SOFR rate plus
2.25%
to
3.25%
, with a floor rate of
3.25%
to
4.25%
.
A cash pledge deposit of $
0.1
million is required by the lender.
$
$
million warehouse line of credit agreement expiring in
June 2026
.
Interest is at the SOFR plus
2.50%
to
3.00%
.
14,289
Total Warehouse
$
14,615
Warehouse
line borrowings are classified as short-term borrowings.
At December 31, 2024, warehouse line borrowings totaled $
1.9
million. At September 30, 2025, the Company had residential mortgage
loans held for sale pledged as collateral under the above
warehouse lines of credit and master repurchase agreements.
The above agreements also contain covenants which include certain
financial requirements, including maintenance of minimum tangible
net worth, minimum liquid assets, and maximum debt to net
worth ratio, as defined in the agreements. The Company was in compliance with all
significant debt covenants at September 30, 2025.
NOTE 5 – DERIVATIVES
The Company enters into derivative financial instruments to manage exposures
that arise from business activities that result in the
receipt or payment of future known and uncertain cash amounts, the value of
which are determined by interest rates.
The Company’s
derivative financial instruments are used to manage differences in
the amount, timing, and duration of the Company’s
known or
expected cash receipts and its known or expected cash payments principally
related to the Company’s subordinated
debt.
Cash Flow Hedges of Interest Rate Risk
Interest rate swaps with notional amounts totaling $
million at September 30, 2025 were designed as a cash flow hedge for
subordinated debt.
Under the swap arrangement, the Company will pay a fixed interest rate of
2.50
% and receive a variable interest
rate based on three-month CME Term
SOFR (secured overnight financing rate).
For derivatives designated and that qualify as cash flow hedges of interest rate
risk, the gain or loss on the derivative is recorded in
accumulated other comprehensive income (“AOCI”) and subsequently
reclassified into interest expense in the same period(s) during
which the hedged transaction affects earnings. Amounts reported
in accumulated other comprehensive income related to derivatives
will be reclassified to interest expense as interest payments are made on the
Company’s variable-rate subordinated
debt.
The following table reflects the cash flow hedges included in the consolidated
statements of financial condition
.
Statement of Financial
Notional
Fair
Weighted Average
Condition Location
Amount
Value
Maturity (Years)
Interest rate swaps related to subordinated debt
$
30,000
$
3,877
4.8
Interest rate swaps related to subordinated debt
$
30,000
$
5,319
5.5
The following table presents the change in net gains (losses) recorded in AOCI and
the consolidated statements of income related to
the cash flow derivative instruments (interest rate swaps related to subordinated
debt).
Change in Gain
Amount of Gain
(Loss) Recognized
(Loss) Reclassified
Category
in AOCI
from AOCI to Income
Three months ended September 30, 2025
$
(189)
$
Three months ended September 30, 2024
(941)
Nine months ended September 30, 2025
$
(1,076)
$
Nine months ended September 30, 2024
(652)
1,128
The Company had a collateral liability of $
4.0
5.5
On October 4, 2025, the Company terminated the interest rate swap related to subordinated
debt and will amortize an unrecognized
gain of $
3.8
million over the remaining life of the swap agreement.
NOTE 6 – LEASES
Operating leases in which the Company is the lessee are recorded as operating
lease right of use (“ROU”) assets and operating
liabilities, included in other assets and liabilities, respectively,
on its Consolidated Statements of Financial Condition.
The Company’s operating
leases primarily relate to banking offices with remaining lease terms
from
less than one
to
years.
The
Company’s leases are not complex
and do not contain residual value guarantees, variable lease payments, or
significant assumptions
or judgments made in applying the requirements of Topic
Operating leases with an initial term of 12 months or less are not
recorded on the Consolidated Statements of Financial Condition and the related lease expense is recognized on a straight-line basis
over the lease term.
At September 30, 2025, the operating lease ROU assets and liabilities were $
26.9
27.5
respectively. At December
31, 2024, ROU assets and liabilities were $
24.9
25.5
million, respectively.
The Company
recognized $
0.1
million of rental income during the nine months ended September 30, 2025 for
a lease that terminated in February
The Company does not have any finance leases.
The table below summarizes our lease expense and other information related
to the Company’s operating leases.
Operating lease expense
$
$
$
2,689
$
2,509
Short-term lease expense
Total lease expense
$
1,099
$
1,070
$
3,411
$
3,127
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
$
1,095
$
2,676
$
2,315
Right-of-use assets obtained in exchange for new operating lease liabilities
4,041
remaining lease term — operating leases (in years)
15.7
16.7
15.7
16.7
discount rate — operating leases
3.7%
3.5%
3.7%
3.5%
The table below summarizes the maturity of remaining lease liabilities:
$
3,591
3,387
3,102
2,880
2030 and thereafter
21,293
Total
$
35,149
Less: Interest
(7,601)
Present Value
of Lease liability
$
27,548
A related party is the lessor in a land lease with the Company.
The payments under the lease agreement provide for annual lease
payments of approximately $
0.1
million annually through December 2033, and thereafter,
increase by
% every
years until 2053 at
which time the rent amount will adjust based on reappraisal of the parcel rental
value.
The Company then has
four
successive options
to extend the lease for
five years
each with rental increases of 5% at each extension.
The aggregate remaining obligation of the lease
totaled $
2.1
million at September 30, 2025.
Further, in accordance with this lease agreement,
the Company made a $
0.2
million
payment in July 2025 to the lessor as reimbursement for a portion of the costs related
to the development of subject property to
support the construction of a new banking office by the Company.
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all full-time
and eligible part-time associates and a
Supplemental Executive Retirement Plan (“SERP”) and a Supplemental
Executive Retirement Plan II (“SERP II”) covering its
executive officers.
The defined benefit plan was amended in December 2019 to remove plan eligibility
for new associates hired after
December 31, 2019.
The SERP II was adopted by the Company’s
Board on May 21, 2020 and covers certain executive officers that
were not covered by the SERP.
The components of the net periodic benefit cost for the Company’s
qualified benefit pension plan were as follows:
Service Cost
$
$
$
2,581
$
2,786
Interest Cost
1,676
1,524
5,029
4,572
Expected Return on Plan Assets
(2,265)
(2,029)
(6,794)
(6,087)
Net Loss Amortization
(413)
(1,240)
Net Periodic Benefit Cost
$
(141)
$
$
(424)
$
1,394
Discount Rate
5.82%
5.29%
5.82%
5.29%
Long-term Rate of Return on Assets
6.75%
6.75%
6.75%
6.75%
The components of the net periodic benefit cost for the Company’s
SERP and SERP II were as follows:
Service Cost
$
$
$
$
Interest Cost
Prior Service Cost Amortization
Net Loss Amortization
(30)
(71)
(88)
(210)
Net Periodic Benefit Cost
$
$
$
$
Discount Rate
5.57%
5.11%
5.57%
5.11%
The service cost component of net periodic benefit cost is reflected in
compensation expense in the accompanying statements of
income.
The other components of net periodic cost are included in “other” within the noninterest
expense category in the
Consolidated Statements of Income.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Lending Commitments
.
The Company is a party to financial instruments with off-balance
sheet risks in the normal course of business
to meet the financing needs of its clients.
These financial instruments consist of commitments to extend credit and standby
letters of
credit.
The Company’s maximum exposure
to credit loss under standby letters of credit and commitments to extend credit is represented
by
the contractual amount of those instruments.
The Company uses the same credit policies in establishing commitments
and issuing
letters of credit as it does for on-balance sheet instruments.
The amounts associated with the Company’s
off-balance sheet
obligations were as follows:
Fixed
Variable
Total
Fixed
Variable
Total
Commitments to Extend Credit
(1)
$
187,658
$
517,663
$
705,321
$
184,223
$
479,191
$
663,414
Standby Letters of Credit
7,114
7,114
7,287
7,287
Total
$
194,772
$
517,663
$
712,435
$
191,510
$
479,191
$
670,701
(1)
Commitments include unfunded loans, revolving
lines of credit, and off-balance sheet residential
loan commitments.
Commitments to extend credit are agreements to lend to a client so long as there is no violation
of any condition established in the
contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee.
Since
many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily
represent future cash requirements.
Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a client to a third
party.
The credit risk involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities. In
general, management does not anticipate any material losses as a result
of participating in these types of transactions.
However, any
potential losses arising from such transactions are reserved for in the
same manner as management reserves for its other credit
facilities.
For both on- and off-balance sheet financial instruments, the Company
requires collateral to support such instruments when it is
deemed necessary.
The Company evaluates each client’s
creditworthiness on a case-by-case basis.
The amount of collateral
obtained upon extension of credit is based on management’s
credit evaluation of the counterparty.
Collateral held varies, but may
include deposits held in financial institutions; U.S. Treasury
securities; other marketable securities; real estate; accounts receivable;
property, plant and
equipment; and inventory.
The allowance for credit losses for off-balance sheet credit commitments
that are not unconditionally cancellable by the bank is
adjusted as a provision for credit loss expense and is recorded in other liabilities.
The following table shows the activity in the
allowance.
$
1,738
$
3,139
$
2,155
$
3,191
(617)
(60)
(669)
$
2,095
$
2,522
$
2,095
$
2,522
Other Commitments.
In the normal course of business, the Company enters into lease commitments
which are classified as operating
leases. See Note 6 – Leases for additional information on the maturity of the
Company’s operating lease commitments.
The Company has an outstanding commitment of up to $
1.0
million in a bank tech venture capital fund focused on finding and
funding technology solutions for community banks.
At September 30, 2025, the amount remaining to be funded for the bank tech
venture capital commitment was $
0.3
Contingencies
.
The Company is a party to lawsuits and claims arising out of the normal course of business.
In management's opinion,
there are
no
known pending claims or litigation, the outcome of which would, individually or in
the aggregate, have a material effect
on the consolidated results of operations, financial position, or cash flows
of the Company.
Indemnification Obligation
.
The Company is a member of the Visa U.S.A. network.
Visa U.S.A member banks are
required to
indemnify the Visa U.S.A.
network for potential future settlement of certain litigation (the “Covered Litigation”)
that relates to several
antitrust lawsuits challenging the practices of Visa
and MasterCard International.
In 2008, the Company, as a member
of the Visa
U.S.A. network, obtained Class B shares of Visa,
Inc. upon its initial public offering.
Since its initial public offering, Visa,
Inc. has
funded a litigation reserve for the Covered Litigation resulting in a reduction
in the Class B shares held by the Company.
In 2011, the
Company sold its remaining Class B shares.
Associated with this sale, the Company entered into a swap contract with the purchaser
of the shares that requires a payment to the counterparty in the event that Visa,
Inc. makes subsequent revisions to the conversion
ratio.
Conversion ratio payments and ongoing fixed quarterly charges are reflected
in earnings in the period incurred.
Fixed charges
included in the swap liability are payable quarterly until the litigation reserve
is fully liquidated and at which time the aforementioned
swap contract will be terminated.
Quarterly fixed payments are approximately $
0.2
There was a $
0.2
million counterparty
payment accrued and payable at September 30, 2025 due to a revision
to the share conversion rate related to additional funding by
VISA of the merchant litigation reserve.
NOTE 9 – FAIR VALUE
MEASUREMENTS
The fair value of an asset or liability is the price that would be received to sell that asset or paid
to transfer that liability in an orderly
transaction occurring in the principal market (or most advantageous market in
the absence of a principal market) for such asset or
liability.
In estimating fair value, the Company utilizes valuation techniques that are consistent with
the market approach, the income
approach and/or the cost approach.
Such valuation techniques are consistently applied.
Inputs to valuation techniques include the
assumptions that market participants would use in pricing an asset or liability.
Accounting Standards Codification Topic
establishes a fair value hierarchy for valuation inputs that gives the highest priority
to quoted prices in active markets for identical
assets or liabilities and the lowest priority to unobservable inputs.
The fair value hierarchy is as follows:
Level 1 Inputs -
Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting
entity has the
ability to access at the measurement date
.
Level 2 Inputs -
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly
or indirectly. These might
include quoted prices for similar assets or liabilities in active markets, quoted prices
for identical
or similar assets or liabilities in markets that are not active, inputs other
than quoted prices that are observable for the asset or
liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.)
or inputs that are derived principally from, or
corroborated, by market data by correlation or other means
.
Level 3 Inputs -
Unobservable inputs for determining the fair values of assets or liabilities that reflect
an entity’s own
assumptions about the assumptions that market participants would
use in pricing the assets or liabilities.
Assets and Liabilities Measured at Fair Value
on a Recurring Basis
Securities Available for Sale.
U.S. Treasury securities are reported at fair value
utilizing Level 1 inputs.
Other securities classified as
available for sale are reported at fair value utilizing Level 2 inputs.
For these securities, the Company obtains fair value measurements
from an independent pricing service.
The fair value measurements consider observable data that may include dealer quotes,
market
spreads, cash flows, the U.S. Treasury yield curve,
live trading levels, trade execution data, credit information and the bond’s
terms
and conditions, among other things.
In general, the Company does not purchase securities that have a complicated structure.
The Company’s entire portfolio consists
of
traditional investments, nearly all of which are U.S. Treasury
obligations, federal agency bullet or mortgage pass-through
securities, or
general obligation or revenue-based municipal bonds.
Pricing for such instruments is easily obtained.
At least annually, the Company
will validate prices supplied by the independent pricing service by compari
ng them to prices obtained from an independent third-party
source.
Equity Securities.
Investment securities classified as equity securities are carried at cost and
the share of earnings or losses is reported
through net income as an adjustment to the investment balance. These securities are not
readily marketable and therefore are classified
as a Level 3 input within the fair value hierarchy.
.
The fair value of residential mortgage loans held for sale based on Level 2 inputs is determined,
when possible,
using either quoted secondary-market prices or investor commitments.
If no such quoted price exists, the fair value is determined
using quoted prices for a similar asset or assets, adjusted for the specific attributes of
that loan, which would be used by other market
participants.
The Company has elected the fair value option accounting for its held for sale loans.
Mortgage Banking Derivative Instruments.
The fair values of interest rate lock commitments (“IRLCs”) are derived by valuation
models incorporating market pricing for instruments with similar characteristics,
commonly referred to as best execution pricing, or
investor commitment prices for best effort IRLCs which have
unobservable inputs, such as an estimate of the fair value of the
servicing rights expected to be recorded upon sale of the loans, net estimated costs to originate
the loans, and the pull-through rate,
and are therefore classified as Level 3 within the fair value hierarchy.
The fair value of forward sale commitments is based on
observable market pricing for similar instruments and are therefore
classified as Level 2 within the fair value hierarchy.
Interest Rate Swap.
The Company’s derivative positions
are classified as Level 2 within the fair value hierarchy and are valued
using
models generally accepted in the financial services industry and
that use actively quoted or observable market input values from
external market data providers.
The fair value derivatives are determined using discounted cash flow models.
Swap
.
The Company entered into a stand-alone derivative contract with the purchaser of
its Visa Class B shares.
The
valuation represents the amount due and payable to the counterparty based upon
the revised share conversion rate, if any,
during the
period. The Company’s
derivative positions are classified as Level 2 within the fair value hierarchy and use
actively quoted or
observable market input values from external market data providers.
There was a $
0.2
million counterparty payment accrued and
payable at September 30, 2025 and
no
amount payable at December 31, 2024.
A summary of fair values for assets and liabilities recorded at fair
value on a recurring basis consisted of the following:
Level 1
Level 2
Level 3
Total
Fair
Inputs
Inputs
Inputs
Value
ASSETS:
Sale:
$
273,314
$
$
$
273,314
162,685
162,685
35,248
35,248
52,940
52,940
45,049
45,049
2,145
2,145
24,204
24,204
Interest Rate Swap Derivative
3,877
3,877
ASSETS:
Sale:
$
105,801
$
$
$
105,801
143,127
143,127
39,382
39,382
55,477
55,477
51,462
51,462
2,399
2,399
28,672
28,672
Interest Rate Swap Derivative
5,319
5,319
Mortgage Banking Activities
.
The Company had Level 3 issuances and transfers related to mortgage banking
activities of $
6.1
million
and $
13.0
million, respectively, for the
nine months ended September 30, 2025, and $
5.9
11.0
million, respectively,
for
the nine months ended September 30, 2024.
Issuances are valued based on the change in fair value of the underlying mortgage loan
from inception of the IRLC to the Consolidated Statement of Financial Condition
date, adjusted for pull-through rates and costs to
originate.
IRLCs transferred out of Level 3 represent IRLCs that were funded
and moved to mortgage loans held for sale, at fair
value.
Assets Measured at Fair Value
on a Non-Recurring Basis
Certain assets are measured at fair value on a non-recurring basis (i.e., the
assets are not measured at fair value on an ongoing basis
but are subject to fair value adjustments in certain circumstances).
An example would be assets exhibiting evidence of impairment.
The following is a description of valuation methodologies used for assets measured
on a non-recurring basis.
Collateral Dependent Loans
.
Impairment for collateral dependent loans is measured using the fair
value of the collateral less selling
costs.
The fair value of collateral is determined by an independent valuation
or professional appraisal in conformance with banking
regulations.
Collateral values are estimated using Level 3 inputs due to the volatility in the real estate market,
and the judgment and
estimation involved in the real estate appraisal process.
Collateral dependent loans are reviewed and evaluated on at least a quarterly
basis for additional impairment and adjusted accordingly.
Valuation
techniques are consistent with those techniques applied in prior
periods.
Collateral-dependent loans had a carrying value of $
6.8
million with valuation allowance of less than $
0.1
million at
September 30, 2025 and a carrying value of $
3.6
million and a $
0.1
million valuation allowance at December 31, 2024.
Other Real Estate Owned
.
During the first nine months of 2025, certain foreclosed assets, upon initial recognition,
were measured and
reported at fair value through a charge-off to the allowance
for credit losses based on the fair value of the foreclosed asset less
estimated cost to sell.
The fair value of the foreclosed asset is determined by an independent valuation or
professional appraisal in
conformance with banking regulations.
On an ongoing basis, we obtain updated appraisals on foreclosed assets and realize valuation
adjustments as necessary.
The fair value of foreclosed assets is estimated using Level 3 inputs due to the judgment
and estimation
involved in the real estate valuation process.
.
Residential mortgage loan servicing rights are evaluated for impairment
at each reporting period based
upon the fair value of the rights as compared to the carrying amount.
Fair value is determined by a third party valuation model using
estimated prepayment speeds of the underlying mortgage loans serviced and
stratifications based on the risk characteristics of the
underlying loans (predominantly loan type and note interest rate).
The fair value is estimated using Level 3 inputs, including a
discount rate, weighted average prepayment speed, and the cost of loan
servicing.
Further detail on the key inputs utilized are
provided in Note 4 – Mortgage Banking Activities.
At each of September 30, 2025 and December 31, 2024, there was
no
valuation
allowance for loan servicing rights.
Assets and Liabilities Disclosed at Fair Value
The Company is required to disclose the estimated fair value of financial instruments,
both assets and liabilities, for which it is
practical to estimate fair value and the following is a description of valuation
methodologies used for those assets and liabilities.
Cash and Short-Term
Investments.
The carrying amount of cash and short-term investments is used to approximate
fair value, given
the short time frame to maturity and as such assets do not present unanticipated
credit concerns.
Securities Held to Maturity
.
Securities held to maturity are valued in accordance with the methodology previously
noted in the
caption “Assets and Liabilities Measured at Fair Value
on a Recurring Basis – Securities Available
for Sale.”
Other Equity Securities.
Other equity securities are accounted for under the equity method (Topic
- and recorded at cost.
These
securities are not readily marketable securities and are reflected in Other
Assets on the Statement of Financial Condition.
Loans.
The loan portfolio is segregated into categories and the fair value of each loan category is calculated
using present value
techniques based upon projected cash flows and estimated discount
rates.
The values reported reflect the incorporation of a liquidity
discount to meet the objective of “exit price” valuation.
Deposits.
The fair value of Noninterest Bearing Deposits, NOW Accounts, Money Market
Accounts and Savings Accounts are the
amounts payable on demand at the reporting date. The fair value of fixed maturity
certificates of deposit is estimated using present
value techniques and rates currently offered for deposits of
similar remaining maturities.
Subordinated Notes Payable.
The fair value of each note is calculated using present value techniques,
based upon projected cash
flows and estimated discount rates as well as rates being offered
for similar obligations.
and Long-Term
Borrowings.
The fair value of each note is calculated using present value techniques,
based upon
projected cash flows and estimated discount rates as well as rates being offered
for similar debt.
A summary of estimated fair values of significant financial instruments not
recorded at fair value consisted of the following:
Carrying
Level 1
Level 2
Level 3
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
68,397
$
68,397
$
$
Fed Funds Sold and Interest Bearing Deposits
397,502
397,502
Investment Securities, Held to Maturity
404,659
169,264
224,861
Other Equity Securities
(1)
2,848
2,848
1,412
Loans, Net of Allowance for Credit Losses
2,551,805
2,357,689
LIABILITIES:
$
3,614,912
$
$
2,993,838
$
40,244
40,244
42,582
38,971
Long-Term Borrowings
Carrying
Level 1
Level 2
Level 3
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
70,543
$
70,543
$
$
Fed Funds Sold and Interest Bearing Deposits
321,311
321,311
Investment Securities, Held to Maturity
567,155
361,529
182,931
Other Equity Securities
(1)
2,848
2,848
1,616
Loans, Net of Allowance for Credit Losses
2,622,299
2,457,883
LIABILITIES:
$
3,671,977
$
$
3,046,926
$
28,304
28,304
52,887
42,530
Long-Term Borrowings
(1)
Accounted for under the equity method – not readily
marketable securities – reflected in other assets.
All non-financial instruments are excluded from the above table.
The disclosures also do not include goodwill.
Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
NOTE 10 – ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The amounts allocated to accumulated other comprehensive income
(loss) are presented in the table below.
Accumulated
Securities
Other
Available
Interest Rate
Retirement
Comprehensive
for Sale
Swap
Plans
(Loss) Income
Balance as of January 1, 2025
$
(20,179)
$
3,971
$
9,722
$
(6,486)
Other comprehensive income (loss) during the period
8,783
(1,076)
7,707
Balance as of September 30, 2025
$
(11,396)
$
2,895
$
9,722
$
1,221
Balance as of January 1, 2024
$
(25,691)
$
3,970
$
(425)
$
(22,146)
Other comprehensive income during the period
8,716
(652)
8,064
Balance as of September 30, 2024
$
(16,975)
$
3,318
$
(425)
$
Note 11 - SEGMENT REPORTING
The Company operates a single reportable business segment that is comprised
of commercial banking within the states of Florida,
Georgia, and Alabama.
The Company’s chief executive
officer is deemed the Chief Operating Decision Maker (“CODM”). The
CODM evaluates the financial performance of the Company by evaluating
revenue streams, significant expenses, and budget to actual
results in assessing the Company’s
single reporting segment and in the determination of allocating resources. The
CODM uses
consolidated net income to benchmark the Company against peers and to evaluate
performance and allocate resources.
Significant
revenue and expense categories evaluated by the CODM are consistent with the presentation
of the Consolidated Statement of Income
and components of other noninterest expense.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
Management’s discussion
and analysis (“MD&A”) provides supplemental information, which sets forth
the major factors that have
affected our financial condition and results of operations
and should be read in conjunction with the Consolidated Financial
Statements and related notes.
The following information should provide a better understanding of
the major factors and trends that
affect our earnings performance and financial condition,
and how our performance during the third quarter of 2025 compares with
prior periods.
Throughout this section, Capital City Bank Group, Inc., and subsidiaries, collectively,
is referred to as “CCBG,”
“Company,”
“we,” “us,” or “our.”
CAUTION CONCERNING FORWARD
-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including this MD&A section,
contains “forward-looking statements”
within the meaning of the
Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, among others, statements about
our
beliefs, plans, objectives, goals, expectations, estimates and intentions that are
subject to significant risks and uncertainties and are
subject to change based on various factors, many of which are beyond
our control.
The words “may,”
“could,” “should,” “would,”
“believe,” “anticipate,” “contemplate,” “estimate,” “expect,” “intend,”
“plan,” “point to,” “project,” “target,” “vision,” “goal,”
“continue,” “further,” and similar expressions
are intended to identify forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and uncertainties.
Our actual future results may differ materially
from those set forth in our forward-looking statements.
Please see the Introductory Note of this quarterly report on Form 10-Q as well
as the Introductory Note and
of our 2024 Form 10-K, as updated in our subsequent quarterly reports filed on
Form 10-Q, and in our other filings made from time to time with the SEC after the date
of this report.
However, other factors besides those listed in our
Quarterly Report or in our Annual Report also could adversely affect our
results,
and you should not consider any such list of factors to be a complete set of all potential risks or
uncertainties.
Any forward-looking
statements made by us or on our behalf speak only as of the date they are made.
We do not undertake to
update any forward-looking
statement, except as required by applicable law.
BUSINESS OVERVIEW
We are a financial
holding company headquartered in Tallahassee,
Florida, and we are the parent of our wholly owned subsidiary,
Capital City Bank (the “Bank” or “CCB”).
We offer
a broad array of products and services through a total of 62 full-service offices
and 108 ATMs/ITMs
located in Florida, Georgia, and Alabama.
Through Capital City Home Loans, LLC (“CCHL”), we have 28
additional offices in the Southeast for our mortgage banking business.
We provide
a full range of banking services, including
traditional deposit and credit services, mortgage banking, asset management,
trust, merchant services, bankcards, securities brokerage
services and financial advisory services, including life insurance products
,
risk management and asset protection services.
Our profitability, like
most financial institutions, is dependent to a large extent upon net
interest income, which is the difference
between the interest and fees received on interest earning assets, such as loans and
securities, and the interest paid on interest-bearing
liabilities, principally deposits and borrowings.
Results of operations are also affected by the provision for credit losses, operating
expenses such as salaries and employee benefits, occupancy and other
operating expenses including income taxes, and noninterest
income such as mortgage banking revenues, wealth management fees,
deposit fees, and bank card fees.
We have included
a detailed discussion of our long-term strategic objectives as part of the MD&A section
of our 2024 Form 10-K.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
We present a tangible
common equity ratio and a tangible book value per diluted share that, in each case, removes the
effect of
goodwill and other intangibles that resulted from merger
and acquisition activity. We
believe these measures are useful to investors
because they allow investors to more easily compare our capital adequacy
to other companies in the industry.
Non-GAAP financial
measures should not be considered alternatives to generally accepted
accounting principles (“GAAP”)-basis financial statements and
other bank holding companies may define or calculate these non-GAAP measures
or similar measures differently.
The GAAP to non-GAAP reconciliation for each quarter presented is provided
below.
(Dollars in Thousands, except per share data)
Third
Second
First
Fourth
Third
Shareowners' Equity (GAAP)
$
540,635
$
526,423
$
512,575
$
495,317
$
476,499
Less: Goodwill and Other Intangibles (GAAP)
89,095
92,693
92,733
92,773
92,813
Tangible Shareowners' Equity (non-GAAP)
A
451,540
433,730
419,842
402,544
383,686
Total Assets (GAAP)
4,391,753
4,461,233
4,225,316
Less: Goodwill and Other Intangibles (GAAP)
89,095
92,693
92,733
92,773
92,813
Tangible Assets (non-GAAP)
B
$
4,234,679
$
4,299,060
$
4,368,500
$
4,232,159
$
4,132,503
Tangible Common Equity Ratio (non-GAAP)
A/B
10.66%
10.09%
9.61%
9.51%
9.28%
Actual Diluted Shares Outstanding (GAAP)
C
17,115,336
17,097,986
17,072,330
17,018,122
16,980,686
Tangible Book Value
per Diluted Share (non-GAAP)
A/C
26.38
25.37
24.59
23.65
22.60
SELECTED QUARTERLY
FINANCIAL DATA
(UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
Third
Second
First
Fourth
Third
Summary of Operations
:
Interest Income
$
51,431
$
51,459
$
49,782
$
49,743
$
49,328
Interest Expense
7,874
8,275
8,235
8,640
9,117
43,557
43,184
41,547
41,103
40,211
1,881
1,206
Net Interest Income After
41,676
42,564
40,779
40,402
39,005
22,331
20,014
19,907
18,760
19,513
42,916
42,538
38,701
41,782
42,921
Income Before Income Taxes
21,091
20,040
21,985
17,380
15,597
5,141
4,996
5,127
4,219
2,980
(Income) Loss Attributable to NCI
(71)
Net Income Attributable to CCBG
15,950
15,044
16,858
13,090
13,118
Net Interest Income (FTE)
(1)
43,602
43,228
41,591
41,150
40,260
Per Common Share
:
Net Income Basic
$
0.93
$
0.88
$
0.99
$
0.77
$
0.77
Net Income Diluted
0.93
0.88
0.99
0.77
0.77
Cash Dividends Declared
0.26
0.24
0.24
0.23
0.23
Diluted Book Value
31.59
30.79
30.02
29.11
28.06
Diluted Tangible Book Value
(2)
26.38
25.37
24.59
23.65
22.60
Market Price:
High
44.69
39.82
38.27
40.86
36.67
Low
38.00
32.38
33.00
33.00
26.72
Close
41.79
39.35
35.96
36.65
35.29
Selected Average Balances
:
Investment Securities
$
993,880
$
1,007,981
$
982,330
$
915,202
$
908,456
2,606,213
2,652,572
2,665,910
2,677,396
2,693,533
Earning Assets
3,981,530
4,032,008
3,993,914
3,921,900
3,883,414
Total Assets
4,370,261
4,335,033
4,259,669
3,612,331
3,680,707
3,665,482
3,600,424
3,572,034
Shareowners’ Equity
542,216
527,583
513,401
491,143
480,137
Common Equivalent Average Shares:
Basic
17,068
17,056
17,027
16,946
16,943
Diluted
17,114
17,088
17,044
16,990
16,979
Performance Ratios:
Return on Average Assets (annualized)
1.47
%
1.38
%
1.58
%
1.22
%
1.24
%
Return on Average Equity (annualized)
11.67
11.44
13.32
10.60
10.87
Net Interest Margin (FTE)
4.34
4.30
4.22
4.17
4.12
Noninterest Income as % of Operating Revenue
33.89
31.67
32.39
31.34
32.67
Efficiency Ratio
65.09
67.26
62.93
69.74
71.81
Asset Quality:
Allowance for Credit Losses (“ACL”)
$
30,202
$
29,862
$
29,734
$
29,251
$
29,836
Nonperforming Assets (“NPAs”)
10,026
6,581
4,428
6,669
7,242
ACL to Loans HFI
1.17
%
1.13
%
1.12
%
1.10
%
1.11
%
NPAs to Total
Assets
0.23
0.15
0.10
0.15
0.17
NPAs to Loans HFI plus OREO
0.39
0.25
0.17
0.25
0.27
ACL to Non-Performing Loans
368.54
463.01
692.10
464.14
452.64
Net Charge-Offs to Average Loans HFI
0.18
0.09
0.09
0.25
0.19
Capital Ratios:
Tier 1 Capital
19.33
%
18.38
%
18.01
%
17.46
%
16.77
%
Total Capital
20.59
19.60
19.20
18.64
17.97
Common Equity Tier 1
17.73
16.81
16.08
15.54
14.88
Leverage
11.64
11.14
11.17
11.05
10.89
Tangible Common Equity
(2)
10.66
10.09
9.61
9.51
9.28
(1)
Fully Tax Equivalent.
(2)
Non-GAAP financial measure.
See non-GAAP reconciliation on page 34.
FINANCIAL OVERVIEW
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.