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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C.
20549
FORM
10-Q
☒
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
June 30, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number:
0-13358
Capital City Bank Group, Inc.
(Exact name of Registrant as specified in its charter)
Florida
59-2273542
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
217 North Monroe Street
,
Tallahassee
,
Florida
32301
(Address of principal executive office)
(Zip Code)
(
850
)
402-7821
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, Par value $0.01
CCBG
Nasdaq Stock Market
, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
[X] No [
]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Yes [
X
] No [
]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or
an emerging growth company.
See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards pursuant to Section 13(a) of The Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [
]
No
[X]
At July 29, 2025,
17,066,511
shares of the Registrant’s Common Stock, $.01 par value, were outstanding.
2
CAPITAL CITY BANK
GROUP,
INC.
QUARTERLY
REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2025
TABLE OF CONTENTS
PART I –
Financial Information
Page
Item 1.
Consolidated Financial Statements (Unaudited)
Consolidated Statements of Financial Condition – June 30, 2025 and December 31, 2024
5
Consolidated Statements of Income – Three and Six Months Ended June 30, 2025 and 2024
6
Consolidated Statements of Comprehensive Income (Loss) – Three and Six Months Ended June 30, 2025 and 2024
7
Consolidated Statements of Changes in Shareowners’ Equity – Three and Six Months Ended June 30, 2025 and 2024
8
Consolidated Statements of Cash Flows – Six Months Ended June 30, 2025 and 2024
9
Notes to Consolidated Financial Statements
10
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
32
Item 3.
Quantitative and Qualitative Disclosure About Market Risk
49
Item 4.
Controls and Procedures
49
PART II –
Other Information
Item 1.
Legal Proceedings
49
Item 1A.
Risk Factors
49
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
49
Item 3.
Defaults Upon Senior Securities
49
Item 4.
Mine Safety Disclosure
49
Item 5.
Other Information
49
Item 6.
Exhibits
50
Signatures
51
3
INTRODUCTORY NOTE
Special Cautionary Notice Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations,
estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of
which are beyond our control.
The words “may,” “could,” “should,” “would,” “believe,”
“anticipate,” “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,
2024
(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;
●
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;
●
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;
4
●
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
Item 1A Risk Factors
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.
5
PART
I.
FINANCIAL INFORMATION
Item 1.
CAPITAL CITY BANK
GROUP,
INC.
CONSOLIDATED STATEMENTS
OF FINANCIAL CONDITION
(Unaudited)
June 30,
December 31,
(Dollars in Thousands, Except Par Value)
2025
2024
ASSETS
Cash and Due From Banks
$
78,485
$
70,543
Federal Funds Sold and Interest Bearing Deposits
394,917
321,311
Total Cash and Cash Equivalents
473,402
391,854
Investment Securities, Available
for Sale, at fair value (amortized cost of $
551,404
and $
429,033
)
533,457
403,345
Investment Securities, Held to Maturity (fair value of $
448,911
and $
544,460
)
462,599
567,155
Equity Securities
3,242
2,399
Total Investment
Securities
999,298
972,899
Loans Held For Sale, at fair value
19,181
28,672
Loans Held for Investment
2,631,490
2,651,550
Allowance for Credit Losses
(29,862)
(29,251)
Loans Held for Investment, Net
2,601,628
2,622,299
Premises and Equipment, Net
79,906
81,952
Goodwill and Other Intangibles
92,693
92,773
Other Real Estate Owned
132
367
Other Assets
125,513
134,116
Total Assets
$
4,391,753
$
4,324,932
LIABILITIES
Deposits:
Noninterest Bearing Deposits
$
1,332,080
$
1,306,254
Interest Bearing Deposits
2,372,773
2,365,723
Total Deposits
3,704,853
3,671,977
Short-Term
Borrowings
34,541
28,304
Subordinated Notes Payable
42,582
52,887
Other Long-Term
Borrowings
680
794
Other Liabilities
82,674
75,653
Total Liabilities
3,865,330
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;
17,066,395
and
16,974,513
shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively
171
170
Additional Paid-In Capital
39,527
37,684
Retained Earnings
487,665
463,949
Accumulated Other Comprehensive Loss, net of tax
(940)
(6,486)
Total Shareowners’
Equity
526,423
495,317
Total Liabilities and Shareowners’
Equity
$
4,391,753
$
4,324,932
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
6
CAPITAL CITY BANK
GROUP,
INC.
CONSOLIDATED STATEMENTS
OF INCOME
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
(Dollars in Thousands, Except Per Share
Data)
2025
2024
2025
2024
INTEREST INCOME
Loans, including Fees
$
40,872
$
41,138
$
81,350
$
81,821
Investment Securities:
Taxable
6,666
3,998
12,469
8,236
Tax Exempt
12
6
17
12
Funds Sold and Interest Bearing Deposits
3,909
3,624
7,405
5,517
Total Interest Income
51,459
48,766
101,241
95,586
INTEREST EXPENSE
Deposits
7,405
8,579
14,788
16,173
Short-Term
Borrowings
335
285
616
525
Subordinated Notes Payable
530
630
1,090
1,258
Other Long-Term
Borrowings
5
3
16
6
Total Interest Expense
8,275
9,497
16,510
17,962
NET INTEREST INCOME
43,184
39,269
84,731
77,624
Provision for Credit Losses
620
1,204
1,388
2,124
Net Interest Income After Provision For Credit Losses
42,564
38,065
83,343
75,500
NONINTEREST INCOME
Deposit Fees
5,320
5,377
10,381
10,627
Bank Card Fees
3,774
3,766
7,288
7,386
Wealth Management
Fees
5,206
4,439
10,969
9,121
Mortgage Banking Revenues
4,190
4,381
8,010
7,259
Other
1,524
1,643
3,273
3,310
Total Noninterest
Income
20,014
19,606
39,921
37,703
NONINTEREST EXPENSE
Compensation
26,490
24,406
52,738
48,813
Occupancy, Net
7,071
6,997
13,864
13,991
Other
8,977
9,038
14,637
17,808
Total Noninterest
Expense
42,538
40,441
81,239
80,612
INCOME BEFORE INCOME TAXES
20,040
17,230
42,025
32,591
Income Tax Expense
4,996
3,189
10,123
6,725
NET INCOME
15,044
14,041
31,902
25,866
Loss Attributable to Noncontrolling Interests
-
109
-
841
NET INCOME ATTRIBUTABLE
TO COMMON SHAREOWNERS
$
15,044
$
14,150
$
31,902
$
26,707
BASIC NET INCOME PER SHARE
$
0.88
$
0.84
$
1.87
$
1.58
DILUTED NET INCOME PER SHARE
$
0.88
$
0.83
$
1.87
$
1.57
Average Common
Basic Shares Outstanding
17,056
16,931
17,042
16,941
Average Common
Diluted Shares Outstanding
17,088
16,960
17,067
16,964
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
7
CAPITAL CITY BANK
GROUP,
INC.
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
(Dollars in Thousands)
2025
2024
2025
2024
NET INCOME ATTRIBUTABLE
TO COMMON SHAREOWNERS
$
15,044
$
14,150
$
31,902
$
26,707
Other comprehensive income, before
tax:
Investment Securities:
Change in net unrealized loss on securities available for sale
2,737
769
7,744
(406)
Amortization of unrealized losses on securities transferred from
available for sale to held to maturity
344
845
842
1,736
Derivative:
Change in net unrealized gain on effective cash flow
derivative
(485)
(50)
(1,189)
387
Other comprehensive income, before
tax
2,596
1,564
7,397
1,717
Deferred tax expense related to other comprehensive income
649
160
1,851
247
Other comprehensive income, net of tax
1,947
1,404
5,546
1,470
TOTAL COMPREHENSIVE
INCOME
$
16,991
$
15,554
$
37,448
$
28,177
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
8
CAPITAL CITY BANK
GROUP,
INC.
CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREOWNERS’ EQUITY
(Unaudited)
Accumulated
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, April 1, 2025
17,054,787
$
171
$
38,576
$
476,715
$
(2,887)
$
512,575
Net Income Attributable to Common Shareowners
-
-
-
15,044
-
15,044
Other Comprehensive Income, net of tax
-
-
-
-
1,947
1,947
Cash Dividends ($
0.2400
per share)
-
-
-
(4,094)
-
(4,094)
Stock Based Compensation
-
-
526
-
-
526
Stock Compensation Plan Transactions, net
11,608
-
425
-
-
425
Balance, June 30, 2025
17,066,395
$
171
$
39,527
$
487,665
$
(940)
$
526,423
Balance, April 1, 2024
16,928,507
$
169
$
34,861
$
435,364
$
(22,080)
$
448,314
Net Income Attributable to Common Shareowners
-
-
-
14,150
-
14,150
Other Comprehensive Income, net of tax
-
-
-
-
1,404
1,404
Cash Dividends ($
0.2100
per share)
-
-
-
(3,555)
-
(3,555)
Stock Based Compensation
-
-
322
-
-
322
Stock Compensation Plan Transactions, net
13,046
-
364
-
-
364
Balance, June 30, 2024
16,941,553
$
169
$
35,547
$
445,959
$
(20,676)
$
460,999
Balance, January 1, 2025
16,974,513
$
170
$
37,684
$
463,949
$
(6,486)
$
495,317
Net Income Attributable to Common Shareowners
-
-
-
31,902
-
31,902
Other Comprehensive Income, net of tax
-
-
-
-
5,546
5,546
Cash Dividends ($
0.4800
per share)
-
-
-
(8,186)
-
(8,186)
Stock Based Compensation
-
-
925
-
-
925
Stock Compensation Plan Transactions, net
91,882
1
918
-
-
919
Balance, June 30, 2025
17,066,395
$
171
$
39,527
$
487,665
$
(940)
$
526,423
Balance, January 1, 2024
16,950,222
$
170
$
36,326
$
426,275
$
(22,146)
$
440,625
Net Income Attributable to Common Shareowners
-
-
-
26,707
-
26,707
Reclassification to Temporary Equity
(1)
-
-
-
87
-
87
Other Comprehensive Income, net of tax
-
-
-
-
1,470
1,470
Cash Dividends ($
0.4200
per share)
-
-
-
(7,110)
-
(7,110)
Repurchase of Common Stock
(82,540)
-
(2,330)
-
-
(2,330)
Stock Based Compensation
-
-
715
-
-
715
Stock Compensation Plan Transactions, net
73,871
(1)
836
-
-
835
Balance, June 30, 2024
16,941,553
$
169
$
35,547
$
445,959
$
(20,676)
$
460,999
(1)
Adjustments to redemption value for non-controlling
interest in Capital City Home Loans, LLC ("CCHL")
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
9
CAPITAL CITY BANK
GROUP,
INC.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
(Dollars in Thousands)
2025
2024
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income Attributable to Common Shareowners
$
31,902
$
26,707
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Credit Losses
1,388
2,124
Depreciation
3,676
4,050
Amortization of Premiums, Discounts and Fees, net
2,272
1,842
Amortization of Intangible Asset
80
80
Originations of Loans Held-for-Sale
(218,167)
(241,631)
Proceeds From Sales of Loans Held-for-Sale
232,204
249,378
Mortgage Banking Revenues
(8,010)
(7,259)
Net Additions for Capitalized Mortgage Servicing Rights
44
134
Stock Compensation
925
715
Net Tax Benefit from
Stock-Based Compensation
(154)
-
Deferred Income Taxes (Benefit)
1,391
(1,346)
Net Change in Operating Leases
(33)
195
Net Gain on Sales and Write-Downs of Other Real Estate Owned
(4,514)
-
Net Decrease in Other Assets
5,124
1,425
Net Increase in Other Liabilities
6,363
3,170
Net Cash Provided By Operating Activities
54,491
39,584
CASH FLOWS FROM INVESTING ACTIVITIES
Securities Held to Maturity:
Purchases
(47,841)
(3,944)
Proceeds from Payments, Maturities, and Calls
152,124
45,849
Securities Available for
Sale:
Purchases
(155,436)
(5,661)
Proceeds from Payments, Maturities, and Calls
32,471
32,169
Equity Securities:
Purchases
(60)
-
Net Decrease (Increase) in Equity Securities
94
(10)
Purchases of Loans Held for Investment
(304)
(302)
Proceeds from Sales of Loans
25,696
19,176
Net (Increase) Decrease in Loans Held for Investment
(4,047)
24,288
Proceeds From Sales of Other Real Estate Owned
7,341
-
Purchases of Premises and Equipment
(4,222)
(4,198)
Net Cash Provided by Investing Activities
5,816
107,367
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits
32,876
(93,258)
Net Increase (Decrease) in Short-Term
Borrowings
6,237
(9,571)
Redemption of Subordinated Notes
(10,305)
-
Net Increase (Decrease) in Other Long-Term
Borrowings
-
694
Dividends Paid
(8,186)
(7,110)
Payments to Repurchase Common Stock
-
(2,330)
Proceeds from Issuance of Common Stock Under Purchase Plans
619
536
Net Cash Provided By (Used In) Financing Activities
21,241
(111,039)
NET INCREASE IN CASH AND CASH EQUIVALENTS
81,548
35,912
Cash and Cash Equivalents at Beginning of Period
391,854
312,067
Cash and Cash Equivalents at End of Period
$
473,402
347,979
Supplemental Cash Flow Disclosures:
Interest Paid
$
16,543
$
17,153
Income Taxes Paid
$
3,220
$
3,005
Supplemental Noncash Items:
Loans and Premises Transferred to Other Real Estate Owned
$
2,592
$
649
Loans Transferred from Held for Investment
to Held for Sale, net
$
22,232
$
15,475
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
10
CAPITAL CITY BANK
GROUP,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 –
BUSINESS AND BASIS OF PRESENTATION
Nature of Operations
.
Capital City Bank Group, Inc. (“CCBG” or the “Company”) provides a full range of
banking and banking-
related services to individual and corporate clients through its wholly owned
subsidiary, Capital City Bank (“CCB” or the
“Bank”),
with banking offices located in Florida, Georgia,
and Alabama.
The Company is subject to competition from other financial
institutions, is subject to regulation by certain government agencies and undergoes
periodic examinations by those regulatory
authorities.
Basis of Presentation
.
The consolidated financial statements in this Quarterly Report on Form
10-Q include the accounts of CCBG
and CCB.
All material inter-company transactions and accounts have
been eliminated.
Certain previously reported amounts have
been reclassified to conform to the current year’s presentation.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X.
Accordingly,
they do not include all of the information and notes required by generally accepted
accounting principles for complete financial
statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included.
The Consolidated Statement of Financial Condition at December
31, 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.
11
NOTE 2 –
INVESTMENT SECURITIES
Investment Portfolio Composition
. The following table summarizes the amortized cost and related fair value of investment
securities available-for-sale (“AFS”) and securities held-to-maturity (“HTM”)
and the corresponding amounts of gross
unrealized gains and losses.
Available for
Sale
Amortized
Unrealized
Unrealized
Allowance for
Fair
(Dollars in Thousands)
Cost
Gains
Losses
Credit Losses
Value
June 30, 2025
U.S. Government Treasury
$
221,568
$
1,116
$
363
$
-
$
222,321
U.S. Government Agency
166,665
69
3,666
-
163,068
States and Political Subdivisions
40,551
31
2,708
(1)
37,873
Mortgage-Backed Securities
(1)
62,904
1
9,277
-
53,628
Corporate Debt Securities
51,619
-
3,080
(69)
48,470
Other Securities
(2)
8,097
-
-
-
8,097
Total
$
551,404
$
1,217
$
19,094
$
(70)
$
533,457
December 31, 2024
U.S. Government Treasury
$
106,710
$
25
$
934
$
-
$
105,801
U.S. Government Agency
148,666
39
5,578
-
143,127
States and Political Subdivisions
43,212
-
3,827
(3)
39,382
Mortgage-Backed Securities
(1)
66,379
-
10,902
-
55,477
Corporate Debt Securities
55,970
-
4,444
(64)
51,462
Other Securities
(2)
8,096
-
-
-
8,096
Total
$
429,033
$
64
$
25,685
$
(67)
$
403,345
Held to Maturity
Amortized
Unrealized
Unrealized
Fair
(Dollars in Thousands)
Cost
Gains
Losses
Value
June 30, 2025
U.S. Government Treasury
$
235,499
$
-
$
2,748
$
232,751
Mortgage-Backed Securities
(1)
227,100
236
11,176
216,160
Total
$
462,599
$
236
$
13,924
$
448,911
December 31, 2024
U.S. Government Treasury
$
368,005
$
-
$
6,476
$
361,529
Mortgage-Backed Securities
(1)
199,150
16
16,235
182,931
Total
$
567,155
$
16
$
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
million and $
5.1
million,
respectively,
at June 30, 2025 and at December 31, 2024.
At June 30, 2025 and December 31, 2024, the investment portfolio had $
3.2
million and $
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 $
385.5
million and $
489.5
million at June 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.
12
Investment Sales.
There were
no
sales of investment securities for the three and six months ended June 30, 2025 and
2024.
Maturity Distribution
.
At June 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.
Available for
Sale
Held to Maturity
(Dollars in Thousands)
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Due in one year or less
$
58,288
$
57,421
$
227,073
$
224,454
Due after one year through five years
298,624
294,770
8,426
8,297
Due after five year through ten years
16,353
14,603
-
-
Mortgage-Backed Securities
62,904
53,628
227,100
216,160
U.S. Government Agency
107,138
104,938
-
-
Other Securities
8,097
8,097
-
-
Total
$
551,404
$
533,457
$
462,599
$
448,911
13
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
Unrealized
Fair
Unrealized
Fair
Unrealized
(Dollars in Thousands)
Value
Losses
Value
Losses
Value
Losses
June 30, 2025
Available for
Sale
U.S. Government Treasury
$
28,929
$
14
$
11,742
$
349
$
40,671
$
363
U.S. Government Agency
41,132
264
93,868
3,402
135,000
3,666
States and Political Subdivisions
1,622
66
34,125
2,642
35,747
2,708
Mortgage-Backed Securities
39
-
53,545
9,277
53,584
9,277
Corporate Debt Securities
1,077
68
47,393
3,012
48,470
3,080
Total
$
72,799
$
412
$
240,673
$
18,682
$
313,472
$
19,094
Held to Maturity
U.S. Government Treasury
-
-
232,751
2,748
232,751
2,748
Mortgage-Backed Securities
50,264
204
110,114
10,972
160,378
11,176
Total
$
50,264
$
204
$
342,865
$
13,720
$
393,129
$
13,924
December 31, 2024
Available for
Sale
U.S. Government Treasury
$
81,363
$
318
$
14,510
$
616
$
95,873
$
934
U.S. Government Agency
33,155
184
100,844
5,394
133,999
5,578
States and Political Subdivisions
2,728
164
36,654
3,663
39,382
3,827
Mortgage-Backed Securities
54
-
55,409
10,902
55,463
10,902
Corporate Debt Securities
3,093
249
48,369
4,195
51,462
4,444
Total
$
120,393
$
915
$
255,786
$
24,770
$
376,179
$
25,685
Held to Maturity
U.S. Government Treasury
-
-
361,529
6,476
361,529
6,476
Mortgage-Backed Securities
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 June 30, 2025, there were
788
positions (combined AFS and HTM) with unrealized pre-tax losses totaling $
33.0
million.
48
of
these positions are U.S. Treasury bonds
and carry the full faith and credit of the U.S. Government.
650
are U.S. government agency
securities issued by U.S. government sponsored entities.
We believe
the long history of no credit losses on government securities
indicates that the expectation of nonpayment of the amortized cost basis is effectively
zero.
At June 30, 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
90
positions (municipal securities and corporate bonds) have a credit component.
At
June 30, 2025, corporate debt securities had an allowance for credit losses of
$
69,000
and municipal securities had an allowance of
less than $
1,000
. None of the securities held by the Company were past due or in nonaccrual status at June 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.
14
NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE
FOR CREDIT LOSSES
Loan Portfolio Composition
.
The composition of the held for investment (“HFI”) loan portfolio was as follows:
(Dollars in Thousands)
June 30, 2025
December 31, 2024
Commercial, Financial and Agricultural
$
180,008
$
189,208
Real Estate – Construction
174,115
219,994
Real Estate – Commercial Mortgage
802,504
779,095
Real Estate – Residential
(1)
1,047,920
1,042,504
Real Estate – Home Equity
228,201
220,064
Consumer
(2)
198,742
200,685
Loans Held For Investment, Net of Unearned Income
$
2,631,490
$
2,651,550
(1)
Includes loans in process balances of $
1.6
million and $
13.6
million at June 30, 2025 and December 31, 2024, respectively.
(2)
Includes overdraft balances of $
1.3
million and $
1.2
million at June 30, 2025 and December 31, 2024, respectively.
Net deferred loan costs, which include premiums on purchased loans,
included in loans were $
8.5
million at June 30, 2025 and $
8.3
million at December 31, 2024.
Accrued interest receivable on loans which is excluded from amortized
cost totaled $
8.1
million at June 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.
15
Allowance for Credit Losses
.
The methodology for estimating the amount of credit losses reported in the
allowance for credit losses
(“ACL”) has two basic components: first, an asset-specific component
involving loans that do not share risk characteristics and the
measurement of expected credit losses for such individual loans; and second,
a pooled component for expected credit losses for pools
of loans that share similar risk characteristics.
This allowance methodology is discussed further in Note 1 – Significant
Accounting
Policies in the Company’s 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,
Real Estate
Financial,
Real Estate
Commercial
Real Estate
Real Estate
(Dollars in Thousands)
Agricultural
Construction
Mortgage
Residential
Home Equity
Consumer
Total
Three Months Ended
June 30, 2025
Beginning Balance
$
1,468
$
2,233
$
6,061
$
14,885
$
2,029
$
3,058
$
29,734
Provision for Credit Losses
(86)
(422)
189
363
(33)
707
718
Charge-Offs
(74)
-
-
(49)
(24)
(1,351)
(1,498)
Recoveries
117
-
6
65
42
678
908
Net (Charge-Offs) Recoveries
43
-
6
16
18
(673)
(590)
Ending Balance
$
1,425
$
1,811
$
6,256
$
15,264
$
2,014
$
3,092
$
29,862
Six Months Ended
June 30, 2025
Beginning Balance
$
1,514
$
2,384
$
5,867
$
14,568
$
1,952
$
2,966
$
29,251
Provision for Credit Losses
(39)
(573)
380
569
35
1,429
1,801
Charge-Offs
(242)
-
-
(57)
(24)
(2,786)
(3,109)
Recoveries
192
-
9
184
51
1,483
1,919
Net (Charge-Offs) Recoveries
(50)
-
9
127
27
(1,303)
(1,190)
Ending Balance
$
1,425
$
1,811
$
6,256
$
15,264
$
2,014
$
3,092
$
29,862
Three Months Ended
June 30, 2024
Beginning Balance
$
1,525
$
1,869
$
5,947
$
14,828
$
1,896
$
3,264
$
29,329
Provision for Credit Losses
391
(118)
110
(63)
(68)
877
1,129
Charge-Offs
(400)
-
-
-
-
(1,632)
(2,032)
Recoveries
59
-
19
23
37
655
793
Net (Charge-Offs) Recoveries
(341)
-
19
23
37
(977)
(1,239)
Ending Balance
$
1,575
$
1,751
$
6,076
$
14,788
$
1,865
$
3,164
$
29,219
Six Months Ended
June 30, 2024
Beginning Balance
$
1,482
$
2,502
$
5,782
$
15,056
$
1,818
$
3,301
$
29,941
Provision for Credit Losses
675
(751)
71
(311)
62
2,265
2,011
Charge-Offs
(682)
-
-
(17)
(76)
(3,820)
(4,595)
Recoveries
100
-
223
60
61
1,418
1,862
Net (Charge-Offs) Recoveries
(582)
-
223
43
(15)
(2,402)
(2,733)
Ending Balance
$
1,575
$
1,751
$
6,076
$
14,788
$
1,865
$
3,164
$
29,219
For the six months ended June 30, 2025, the allowance for loans HFI increased by $
0.6
million and reflected a provision expense of
$
1.8
million and net loan charge-offs of $
1.2
million.
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 six months ended June 30,
2024, the allowance for loans HFI decreased by $
0.7
million and reflected a provision expense of $
2.0
million and net loan charge-
offs of $
2.7
million.
The decrease in the allowance was primarily due to lower loan balances.
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.
16
Loan Portfolio Aging.
A loan is defined as a past due loan when one full payment is past due or a contractual maturity
is over 30 days
past due (“DPD”).
The following table presents the aging of the amortized cost basis in accruing
past due loans by class of loans.
30-59
60-89
90 +
Total
Total
Nonaccrual
Total
(Dollars in Thousands)
DPD
DPD
DPD
Past Due
Current
Loans
Loans
June 30, 2025
Commercial, Financial and Agricultural
$
278
$
84
$
-
$
362
$
179,327
$
319
$
180,008
Real Estate – Construction
-
-
-
-
174,115
-
174,115
Real Estate – Commercial Mortgage
765
-
-
765
800,335
1,404
802,504
Real Estate – Residential
303
1,319
-
1,622
1,044,753
1,545
1,047,920
Real Estate – Home Equity
248
19
-
267
225,343
2,591
228,201
Consumer
1,269
238
-
1,507
196,645
590
198,742
Total
$
2,863
$
1,660
$
-
$
4,523
$
2,620,518
$
6,449
$
2,631,490
December 31, 2024
Commercial, Financial and Agricultural
$
340
$
50
$
-
$
390
$
188,781
$
37
$
189,208
Real Estate – Construction
-
-
-
-
219,994
-
219,994
Real Estate – Commercial Mortgage
719
100
-
819
777,710
566
779,095
Real Estate – Residential
185
498
-
683
1,038,694
3,127
1,042,504
Real Estate – Home Equity
122
-
-
122
218,160
1,782
220,064
Consumer
2,154
143
-
2,297
197,598
790
200,685
Total
$
3,520
$
791
$
-
$
4,311
$
2,640,937
$
6,302
$
2,651,550
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.
June 30, 2025
December 31, 2024
Nonaccrual
Nonaccrual
Nonaccrual
Nonaccrual
With No
With
90 + Days
With No
With
90 + Days
(Dollars in Thousands)
ACL
ACL
Still Accruing
ACL
ACL
Still Accruing
Commercial, Financial and Agricultural
$
-
$
319
$
-
$
-
$
37
$
-
Real Estate – Construction
-
-
-
-
-
-
Real Estate – Commercial Mortgage
1,403
1
-
427
139
-
Real Estate – Residential
968
577
-
2,046
1,081
-
Real Estate – Home Equity
2,440
151
-
509
1,273
-
Consumer
-
590
-
-
790
-
Total Nonaccrual
Loans
$
4,811
$
1,638
$
-
$
2,982
$
3,320
$
-
17
Collateral Dependent Loans.
The following table presents the amortized cost basis of collateral-dependent
loans.
June 30, 2025
December 31, 2024
Real Estate
Non Real Estate
Real Estate
Non Real Estate
(Dollars in Thousands)
Secured
Secured
Secured
Secured
Commercial, Financial and Agricultural
$
-
$
1,210
$
-
$
39
Real Estate – Construction
-
-
-
-
Real Estate – Commercial Mortgage
2,192
-
427
-
Real Estate – Residential
2,694
-
2,476
-
Real Estate – Home Equity
1,166
-
651
-
Consumer
-
-
-
55
Total Collateral Dependent
Loans
$
6,052
$
1,210
$
3,554
$
94
A loan is collateral dependent when the borrower is experiencing financial
difficulty and repayment of the loan is dependent on
the
sale or operation of the underlying collateral.
The Bank’s collateral dependent
loan portfolio is comprised primarily of real estate secured loans, collateralized
by either residential
or commercial collateral types.
The loans are carried at fair value based on current values determined by
either independent appraisals
or internal evaluations, adjusted for selling costs or other amounts to be deducted
when estimating expected net sales proceeds.
Residential Real Estate Loans In Process of Foreclosure
.
At June 30, 2025, the Company had $
0.2
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, 2024.
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 June 30, 2025 and December 31, 2024, the Company maintained
one
modified commercial mortgage loan due to a borrower
experiencing financial difficulty.
The Company reduced the interest rate on the loan by
1
% in addition to extending the term of the
loan from
5
to
20
years.
The balance of the nonaccrual loan at June 30, 2025 and December 31, 2024 was $
0.3
million and did not
have a payment delay.
No
new modifications to borrowers experiencing financial difficulty
were made during the six months ended
June 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.
Collateral values are determined based upon third party appraisals and evaluations.
Loan to value ratios at origination are
governed by established policy guidelines.
18
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.
Collateral values are determined based upon third party appraisals and evaluations.
The Company does not
originate sub-prime loans.
Real Estate Home Equity – Home equity loans and lines are made to qualified
individuals for legitimate purposes generally secured
by senior or junior mortgage liens on owner-occupied
1-4 family homes or vacation homes.
Borrower qualifications include
favorable credit history combined with supportive income and debt ratio
requirements and combined loan to value ratios within
established policy guidelines.
Collateral values are determined based upon third party appraisals and evaluations.
Consumer Loans – This loan portfolio includes personal installment loans,
direct and indirect automobile financing, and overdraft
lines of credit.
The majority of the consumer loan category consists of direct and indirect automobile
loans.
Lending policy
establishes maximum debt to income ratios, minimum credit scores, and
includes guidelines for verification of applicants’ income and
receipt of credit reports.
Credit Quality Indicators
.
As part of the ongoing monitoring of the Company’s
loan portfolio quality, management
categorizes loans
into risk categories based on relevant information about the ability of borrowers
to service their debt such as: current financial
information, historical payment performance, credit documentation,
and current economic and market trends, among other
factors.
Risk ratings are assigned to each loan and revised as needed through established monitoring
procedures for individual loan
relationships over a predetermined amount and review of smaller balance homogenous
loan pools.
The Company uses the definitions
noted below for categorizing and managing its criticized loans.
Loans categorized as “Pass” do not meet the criteria set forth below
and are not considered criticized.
Special Mention – Loans in this category are presently protected from loss, but
weaknesses are apparent which, if not corrected, could
cause future problems.
Loans in this category may not meet required underwriting criteria and
have no mitigating factors.
More than
the ordinary amount of attention is warranted for these loans.
Substandard – Loans in this category exhibit well-defined weaknesses that would
typically bring normal repayment into jeopardy.
These loans are no longer adequately protected due to well-defined
weaknesses that affect the repayment capacity of the
borrower.
The possibility of loss is much more evident and above average supervision is required
for these loans.
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 June
30, 2025 and December 31, 2024 and current period gross
write-offs for the six months ended June 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).
19
(Dollars in Thousands)
Term
Loans by Origination Year
Revolving
As of June 30, 2025
2025
2024
2023
2022
2021
Prior
Loans
Total
Commercial, Financial,
Agriculture:
Pass
$
21,285
$
29,681
$
28,473
$
29,399
$
15,176
$
10,549
$
40,078
$
174,641
Special Mention
-
289
3,151
116
13
-
50
3,619
Substandard
-
135
45
167
21
111
1,269
1,748
Total
$
21,285
$
30,105
$
31,669
$
29,682
$
15,210
$
10,660
$
41,397
$
180,008
Current-Period Gross
Writeoffs
$
-
$
-
$
42
$
188
$
12
$
-
$
-
$
242
Real Estate - Construction:
Pass
$
29,488
$
87,990
$
26,659
$
12,267
$
53
$
193
$
13,306
$
169,956
Special Mention
-
-
583
3,576
-
-
-
4,159
Total
$
29,488
$
87,990
$
27,242
$
15,843
$
53
$
193
$
13,306
$
174,115
Real Estate - Commercial
Mortgage:
Pass
$
39,009
$
97,387
$
113,036
$
198,192
$
102,760
$
178,711
$
33,667
$
762,762
Special Mention
3,922
164
52
18,373
1,120
2,871
1,065
27,567
Substandard
390
1,402
100
3,658
863
5,762
-
12,175
Total
$
43,321
$
98,953
$
113,188
$
220,223
$
104,743
$
187,344
$
34,732
$
802,504
Real Estate - Residential:
Pass
$
85,110
$
141,045
$
299,506
$
340,188
$
63,490
$
95,076
$
10,416
$
1,034,831
Special Mention
-
-
290
-
1,060
315
453
2,118
Substandard
-
2,543
454
1,690
1,421
4,695
168
10,971
Total
$
85,110
$
143,588
$
300,250
$
341,878
$
65,971
$
100,086
$
11,037
$
1,047,920
Current-Period Gross
Writeoffs
$
-
$
-
$
47
$
-
$
-
$
10
$
-
$
57
Real Estate - Home Equity:
Performing
$
1,292
$
11
$
412
$
19
$
114
$
607
$
223,155
$
225,610
Nonperforming
-
-
-
-
-
-
2,591
2,591
Total
$
1,292
$
11
$
412
$
19
$
114
$
607
$
225,746
$
228,201
Current-Period Gross
Writeoffs
$
-
$
-
$
-
$
-
$
-
$
-
$
24
$
24
Consumer:
Performing
$
42,832
$
28,000
$
35,926
$
42,138
$
30,933
$
9,127
$
9,196
$
198,152
Nonperforming
152
-
37
214
114
73
-
590
Total
$
42,984
$
28,000
$
35,963
$
42,352
$
31,047
$
9,200
$
9,196
$
198,742
Current-Period Gross
Writeoffs
$
1,029
$
91
$
636
$
707
$
204
$
45
$
74
$
2,786
20
(Dollars in Thousands)
Term
Loans by Origination Year
Revolving
As of December 31, 2024
2024
2023
2022
2021
2020
Prior
Loans
Total
Commercial, Financial,
Agriculture:
Pass
$
35,596
$
36,435
$
37,506
$
18,433
$
4,610
$
9,743
$
41,720
$
184,043
Special Mention
435
3,979
261
9
-
-
76
4,760
Substandard
-
-
193
12
58
71
71
405
Total
$
36,031
$
40,414
$
37,960
$
18,454
$
4,668
$
9,814
$
41,867
$
189,208
Current-Period Gross
Writeoffs
$
9
$
548
$
500
$
111
$
160
$
1
$
183
$
1,512
Real Estate - Construction:
Pass
$
105,148
$
73,615
$
29,821
$
53
$
-
$
185
$
8,288
$
217,110
Special Mention
1,555
-
1,329
-
-
-
-
2,884
Total
$
106,703
$
73,615
$
31,150
$
53
$
-
$
185
$
8,288
$
219,994
Current-Period Gross
Writeoffs
$
-
$
-
$
47
$
-
$
-
$
-
$
-
$
47
Real Estate - Commercial
Mortgage:
Pass
$
77,561
$
110,183
$
207,574
$
109,863
$
87,369
$
122,272
$
26,324
$
741,146
Special Mention
171
2,913
17,031
-
2,253
4,402
530
27,300
Substandard
-
2,463
3,403
869
2,508
1,305
101
10,649
Total
$
77,732
$
115,559
$
228,008
$
110,732
$
92,130
$
127,979
$
26,955
$
779,095
Current-Period Gross
Writeoffs
$
-
$
-
$
-
$
-
$
-
$
-
$
3
$
3
Real Estate - Residential:
Pass
$
165,050
$
316,521
$
358,851
$
71,423
$
31,169
$
76,921
$
11,872
$
1,031,807
Special Mention
-
265
-
1,104
468
534
521
2,892
Substandard
-
528
1,450
1,446
1,295
2,918
168
7,805
Total
$
165,050
$
317,314
$
360,301
$
73,973
$
32,932
$
80,373
$
12,561
$
1,042,504
Current-Period Gross
Writeoffs
$
-
$
13
$
-
$
-
$
-
$
48
$
-
$
61
Real Estate - Home Equity:
Performing
$
801
$
521
$
30
$
119
$
9
$
821
$
215,981
$
218,282
Nonperforming
-
-
-
-
-
-
1,782
1,782
Total
$
801
$
521
$
30
$
119
$
9
$
821
$
217,763
$
220,064
Current-Period Gross
Writeoffs
$
-
$
-
$
-
$
-
$
-
$
-
$
132
$
132
Consumer:
Performing
$
32,293
$
44,995
$
55,942
$
42,002
$
10,899
$
4,116
$
9,648
$
199,895
Nonperforming
10
174
321
156
58
71
-
790
Total
$
32,303
$
45,169
$
56,263
$
42,158
$
10,957
$
4,187
$
9,648
$
200,685
Current-Period Gross
Writeoffs
$
2,562
$
1,605
$
2,088
$
897
$
237
$
76
$
162
$
7,627
21
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.
June 30, 2025
December 31, 2024
Unpaid Principal
Unpaid Principal
(Dollars in Thousands)
Balance/Notional
Fair Value
Balance/Notional
Fair Value
Residential Mortgage Loans Held for Sale
$
18,391
$
19,181
$
28,117
$
28,672
Residential Mortgage Loan Commitments ("IRLCs")
(1)
24,479
652
15,000
248
Forward Sales Contracts
(2)
22,500
189
16,000
96
(1)
Recorded in other assets at fair value.
(2)
Recorded in other liabilities and other assets at fair value,
respectively.
At June 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:
Three Months Ended June 30,
Six Months Ended June 30,
(Dollars in Thousands)
2025
2024
2025
2024
Net realized gains on sales of mortgage loans
$
3,605
$
3,159
$
6,485
$
4,835
Net change in unrealized
(loss) gain on mortgage loans held
for sale
(62)
76
171
169
Net change in the fair value of IRLC's
(91)
(37)
405
167
Net change in the fair value of forward sales contracts
(109)
132
(285)
264
Pair-Offs on net settlement of forward sales contracts
16
152
(169)
210
Mortgage servicing rights additions
24
92
44
242
Net origination fees
807
807
1,359
1,372
Total mortgage banking
revenues
$
4,190
$
4,381
$
8,010
$
7,259
22
Residential Mortgage Servicing
The Company may retain the right to service residential mortgage loans
sold.
The unpaid principal balance of loans serviced for
others is the primary driver of servicing revenue.
The following represents a summary of mortgage servicing rights.
(Dollars in Thousands)
June 30, 2025
December 31, 2024
Number of residential mortgage loans serviced for others
465
504
Outstanding principal balance of residential mortgage loans serviced
for others
$
123,895
$
135,416
Weighted average
interest rate
5.71%
5.86%
Remaining contractual term (in months)
353
348
Conforming conventional loans serviced by the Company are sold to Federal
National Mortgage Association (“FNMA”) on a non-
recourse basis, whereby foreclosure losses are generally the responsibility
of FNMA and not the Company.
The government loans
serviced by the Company are secured through the Government National
Mortgage Association (“GNMA”), whereby the Company is
insured against loss by the Federal Housing Administration or partially
guaranteed against loss by the Veterans
Administration.
At
June 30, 2025, the servicing portfolio balance consisted of the following
loan types: FNMA (
59.6
.%), GNMA (
4.3
%), and private
investor (
36.1
%).
FNMA and private investor loans are structured as actual/actual payment remittance.
At June 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 June 30, 2025 and 2024, and $
0.3
million and
no
repurchases in the six months ended June 30, 2025 and June 30, 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:
Three Months Ended June 30,
Six Months Ended June 30,
(Dollars in Thousands)
2025
2024
2025
2024
Beginning balance
$
908
$
919
$
933
$
831
Additions due to loans sold with servicing retained
24
92
44
242
Deletions and amortization
(43)
(46)
(88)
(108)
Ending balance
$
889
$
965
$
889
$
965
The Company did
no
t record any permanent impairment losses on mortgage servicing rights for the
three or six months ended June 30,
2025 or 2024.
The key unobservable inputs used in determining the fair value of the Company’s
mortgage servicing rights were as follows:
June 30, 2025
December 31, 2024
Minimum
Maximum
Minimum
Maximum
Discount rates
9.50%
12.00%
9.50%
12.00%
Annual prepayment speeds
9.59%
18.60%
9.14%
18.88%
Cost of servicing (per loan)
$
85
$
95
$
85
$
95
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
13.01
.% at June 30, 2025 and
13.44
% at December 31, 2024.
23
Warehouse
Line Borrowings
The Company has the following warehouse lines of credit and master repurchase
agreements with various financial institutions at June
30, 2025.
Amounts
(Dollars in Thousands)
Outstanding
$
20
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.
$
12,446
$
25
million warehouse line of credit agreement expiring in
June 2026
.
Interest is at the SOFR plus
2.50%
to
3.00%
.
279
Total Warehouse
Borrowings
$
12,725
Warehouse
line borrowings are classified as short-term borrowings.
At December 31, 2024, warehouse line borrowings totaled $
1.9
million. At June 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 June 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 $
30
million at June 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
(Dollars in Thousands)
Condition Location
Amount
Value
Maturity (Years)
June 30, 2025
Interest rate swaps related to subordinated debt
Other Assets
$
30,000
$
4,130
5.0
December 31, 2024
Interest rate swaps related to subordinated debt
Other Assets
$
30,000
$
5,319
5.5
24
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
(Dollars in Thousands)
Category
in AOCI
from AOCI to Income
Three months ended June 30, 2025
Interest expense
$
(363)
$
299
Three months ended June 30, 2024
Interest expense
(37)
376
Six months ended June 30, 2025
Interest expense
$
(888)
$
596
Six months ended June 30, 2024
Interest expense
289
751
The Company estimates there will be approximately $
1.0
million reclassified as a decrease to interest expense within the next 12
months.
The Company had a collateral liability of $
4.3
million and $
5.5
million at June 30, 2025 and December 31, 2024, respectively.
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
40
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
842.
Operating leases with an initial term of 12 months or less are not
recorded on the Consolidated Statements of Financial Condition and the related lease expense is recognized on a straight-line basis
over the lease term.
At June 30, 2025, the operating lease ROU assets and liabilities were $
27.6
million and $
28.2
million,
respectively. At December
31, 2024, ROU assets and liabilities were $
24.9
million and $
25.5
million, respectively.
The Company
recognized $
0.1
million of rental income during the six months ended June 30, 2025 for a lease that terminated
in February 2025.
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.
Three Months Ended
Six Months Ended
June 30,
June 30,
(Dollars in Thousands)
2025
2024
2025
2024
Operating lease expense
$
897
$
828
$
1,761
$
1,668
Short-term lease expense
240
195
551
389
Total lease expense
$
1,137
$
1,023
$
2,312
$
2,057
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
882
$
784
$
1,794
$
1,494
Right-of-use assets obtained in exchange for new operating lease liabilities
1,117
40
3,997
40
Weighted average
remaining lease term — operating leases (in years)
15.8
16.7
15.8
16.7
Weighted average
discount rate — operating leases
3.7%
3.5%
3.7%
3.5%
25
The table below summarizes the maturity of remaining lease liabilities:
(Dollars in Thousands)
June 30, 2025
2025
$
1,797
2026
3,601
2027
3,374
2028
3,102
2029
2,880
2030 and thereafter
21,293
Total
$
36,047
Less: Interest
(7,860)
Present Value
of Lease liability
$
28,187
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
5
% every
10
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 June 30, 2025.
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all full-time
and eligible part-time associates and a
Supplemental Executive Retirement Plan (“SERP”) and a Supplemental
Executive Retirement Plan II (“SERP II”) covering its
executive officers.
The defined benefit plan was amended in December 2019 to remove plan eligibility
for new associates hired after
December 31, 2019.
The SERP II was adopted by the Company’s
Board on May 21, 2020 and covers certain executive officers that
were not covered by the SERP.
The components of the net periodic benefit cost for the Company’s
qualified benefit pension plan were as follows:
Three Months Ended June 30,
Six Months Ended June 30,
(Dollars in Thousands)
2025
2024
2025
2024
Service Cost
$
860
$
929
$
1,720
$
1,857
Interest Cost
1,676
1,524
3,353
3,048
Expected Return on Plan Assets
(2,264)
(2,029)
(4,529)
(4,058)
Net Loss Amortization
(414)
41
(827)
82
Net Periodic Benefit Cost
$
(142)
$
465
$
(283)
$
929
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:
Three Months Ended June 30,
Six Months Ended June 30,
(Dollars in Thousands)
2025
2024
2025
2024
Service Cost
$
12
$
9
$
23
$
18
Interest Cost
131
114
264
227
Prior Service Cost Amortization
26
-
51
-
Net Loss Amortization
(29)
(71)
(58)
(140)
Net Periodic Benefit Cost
$
140
$
52
$
280
$
105
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.
26
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:
June 30, 2025
December 31, 2024
(Dollars in Thousands)
Fixed
Variable
Total
Fixed
Variable
Total
Commitments to Extend Credit
(1)
$
178,568
$
493,686
$
672,254
$
184,223
$
479,191
$
663,414
Standby Letters of Credit
7,402
-
7,402
7,287
-
7,287
Total
$
185,970
$
493,686
$
679,656
$
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.
Three Months Ended June 30,
Six Months Ended June 30,
(Dollars in Thousands)
2025
2024
2025
2024
Beginning Balance
$
1,832
$
3,121
$
2,155
$
3,191
Provision for Credit Losses
(94)
18
(417)
(52)
Ending Balance
$
1,738
$
3,139
$
1,738
$
3,139
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 June 30, 2025, the amount remaining to be funded for the bank tech venture
capital commitment was $
0.3
million.
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.
27
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
million.
NOTE 9 – FAIR VALUE
MEASUREMENTS
The fair value of an asset or liability is the price that would be received to sell that asset or paid
to transfer that liability in an orderly
transaction occurring in the principal market (or most advantageous market in
the absence of a principal market) for such asset or
liability.
In estimating fair value, the Company utilizes valuation techniques that are consistent with
the market approach, the income
approach and/or the cost approach.
Such valuation techniques are consistently applied.
Inputs to valuation techniques include the
assumptions that market participants would use in pricing an asset or liability.
Accounting Standards Codification Topic
820
establishes a fair value hierarchy for valuation inputs that gives the highest priority
to quoted prices in active markets for identical
assets or liabilities and the lowest priority to unobservable inputs.
The fair value hierarchy is as follows:
●
Level 1 Inputs -
Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting
entity has the
ability to access at the measurement date
.
●
Level 2 Inputs -
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly
or indirectly. These might
include quoted prices for similar assets or liabilities in active markets, quoted prices
for identical
or similar assets or liabilities in markets that are not active, inputs other
than quoted prices that are observable for the asset or
liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.)
or inputs that are derived principally from, or
corroborated, by market data by correlation or other means
.
●
Level 3 Inputs -
Unobservable inputs for determining the fair values of assets or liabilities that reflect
an entity’s own
assumptions about the assumptions that market participants would
use in pricing the assets or liabilities.
Assets and Liabilities Measured at Fair Value
on a Recurring Basis
Securities Available for Sale.
U.S. Treasury securities are reported at fair value
utilizing Level 1 inputs.
Other securities classified as
available for sale are reported at fair value utilizing Level 2 inputs.
For these securities, the Company obtains fair value measurements
from an independent pricing service.
The fair value measurements consider observable data that may include dealer quotes,
market
spreads, cash flows, the U.S. Treasury yield curve,
live trading levels, trade execution data, credit information and the bond’s
terms
and conditions, among other things.
In general, the Company does not purchase securities that have a complicated structure.
The Company’s entire portfolio consists
of
traditional investments, nearly all of which are U.S. Treasury
obligations, federal agency bullet or mortgage pass-through
securities, or
general obligation or revenue-based municipal bonds.
Pricing for such instruments is easily obtained.
At least annually, the Company
will validate prices supplied by the independent pricing service by compari
ng them to prices obtained from an independent third-party
source.
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.
Loans Held for Sale
.
The fair value of residential mortgage loans held for sale based on Level 2 inputs is determined,
when possible,
using either quoted secondary-market prices or investor commitments.
If no such quoted price exists, the fair value is determined
using quoted prices for a similar asset or assets, adjusted for the specific attributes of
that loan, which would be used by other market
participants.
The Company has elected the fair value option accounting for its held for sale loans.
Mortgage Banking Derivative Instruments.
The fair values of interest rate lock commitments (“IRLCs”) are derived by valuation
models incorporating market pricing for instruments with similar characteristics,
commonly referred to as best execution pricing, or
investor commitment prices for best effort IRLCs which have
unobservable inputs, such as an estimate of the fair value of the
servicing rights expected to be recorded upon sale of the loans, net estimated costs to originate
the loans, and the pull-through rate,
and are therefore classified as Level 3 within the fair value hierarchy.
The fair value of forward sale commitments is based on
observable market pricing for similar instruments and are therefore
classified as Level 2 within the fair value hierarchy.
28
Interest Rate Swap.
The Company’s derivative positions
are classified as Level 2 within the fair value hierarchy and are valued
using
models generally accepted in the financial services industry and
that use actively quoted or observable market input values from
external market data providers.
The fair value derivatives are determined using discounted cash flow models.
Fair Value
Swap
.
The Company entered into a stand-alone derivative contract with the purchaser of
its Visa Class B shares.
The
valuation represents the amount due and payable to the counterparty based upon
the revised share conversion rate, if any,
during the
period. The Company’s
derivative positions are classified as Level 2 within the fair value hierarchy and use
actively quoted or
observable market input values from external market data providers.
At June 30, 2025 and December 31, 2024, there were
no
amounts payable.
A summary of fair values for assets and liabilities recorded at fair
value on a recurring basis consisted of the following:
Level 1
Level 2
Level 3
Total
Fair
(Dollars in Thousands)
Inputs
Inputs
Inputs
Value
June 30, 2025
ASSETS:
Securities Available for
Sale:
U.S. Government Treasury
$
222,321
$
-
$
-
$
222,321
U.S. Government Agency
-
163,068
-
163,068
States and Political Subdivisions
-
37,873
-
37,873
Mortgage-Backed Securities
-
53,628
-
53,628
Corporate Debt Securities
-
48,470
-
48,470
Equity Securities
-
-
3,242
3,242
Loans Held for Sale
-
19,181
-
19,181
Residential Mortgage Loan Commitments ("IRLCs")
-
-
652
652
Interest Rate Swap Derivative
-
4,130
-
4,130
LIABILITIES:
Forward Sales Contracts
-
189
-
189
December 31, 2024
ASSETS:
Securities Available for
Sale:
U.S. Government Treasury
$
105,801
$
-
$
-
$
105,801
U.S. Government Agency
-
143,127
-
143,127
States and Political Subdivisions
-
39,382
-
39,382
Mortgage-Backed Securities
-
55,477
-
55,477
Corporate Debt Securities
-
51,462
-
51,462
Equity Securities
-
-
2,399
2,399
Loans Held for Sale
-
28,672
-
28,672
Interest Rate Swap Derivative
-
5,319
-
5,319
Forward Sales Contracts
-
96
-
96
Residential Mortgage Loan Commitments ("IRLCs")
-
-
248
248
Mortgage Banking Activities
.
The Company had Level 3 issuances and transfers related to mortgage banking
activities of $
4.3
million
and $
8.4
million, respectively, for the six months
ended June 30, 2025, and $
4.1
million and $
7.1
million, respectively,
for the six
months ended June 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.
29
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 $
7.3
million with
no
valuation allowance at June 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 six 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.
Mortgage Servicing Rights
.
Residential mortgage loan servicing rights are evaluated for impairment
at each reporting period based
upon the fair value of the rights as compared to the carrying amount.
Fair value is determined by a third party valuation model using
estimated prepayment speeds of the underlying mortgage loans serviced and
stratifications based on the risk characteristics of the
underlying loans (predominantly loan type and note interest rate).
The fair value is estimated using Level 3 inputs, including a
discount rate, weighted average prepayment speed, and the cost of loan
servicing.
Further detail on the key inputs utilized are
provided in Note 4 – Mortgage Banking Activities.
At each of June 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
323) 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.
Short-Term
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.
30
A summary of estimated fair values of significant financial instruments not
recorded at fair value consisted of the following:
June 30, 2025
Carrying
Level 1
Level 2
Level 3
(Dollars in Thousands)
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
78,485
$
78,485
$
-
$
-
Fed Funds Sold and Interest Bearing Deposits
394,917
394,917
-
-
Investment Securities, Held to Maturity
462,599
232,751
216,160
-
Other Equity Securities
(1)
3,242
-
3,242
-
Mortgage Servicing Rights
889
-
-
1,465
Loans, Net of Allowance for Credit Losses
2,601,628
-
-
2,468,513
LIABILITIES:
Deposits
$
3,704,853
$
-
$
3,077,764
$
-
Short-Term
Borrowings
34,541
-
34,092
-
Subordinated Notes Payable
42,582
-
39,537
-
Long-Term Borrowings
680
-
680
-
December 31, 2024
Carrying
Level 1
Level 2
Level 3
(Dollars in Thousands)
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
-
Mortgage Servicing Rights
933
-
-
1,616
Loans, Net of Allowance for Credit Losses
2,622,299
-
-
2,457,883
LIABILITIES:
Deposits
$
3,671,977
$
-
$
3,046,926
$
-
Short-Term
Borrowings
28,304
-
28,304
-
Subordinated Notes Payable
52,887
-
42,530
-
Long-Term Borrowings
794
-
794
-
(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.
31
NOTE 10 – ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The amounts allocated to accumulated other comprehensive income
(loss) are presented in the table below.
Accumulated
Securities
Other
Available
Interest Rate
Retirement
Comprehensive
(Dollars in Thousands)
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
6,434
(888)
-
5,546
Balance as of June 30, 2025
$
(13,745)
$
3,083
$
9,722
$
(940)
Balance as of January 1, 2024
$
(25,691)
$
3,970
$
(425)
$
(22,146)
Other comprehensive income during the period
1,181
289
-
1,470
Balance as of June 30, 2024
$
(24,510)
$
4,259
$
(425)
$
(20,676)
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.
32
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
Management’s discussion
and analysis (“MD&A”) provides supplemental information, which sets forth
the major factors that have
affected our financial condition and results of operations
and should be read in conjunction with the Consolidated Financial
Statements and related notes.
The following information should provide a better understanding of
the major factors and trends that
affect our earnings performance and financial condition,
and how our performance during the second 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
Item 1A. Risk Factors
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 107 ATMs/ITMs
located in Florida, Georgia, and Alabama.
Through Capital City Home Loans, LLC (“CCHL”), we have 27
additional offices in the Southeast for our mortgage banking business.
We provide
a full range of banking services, including
traditional deposit and credit services, mortgage banking, asset management,
trust, merchant services, bankcards, securities brokerage
services and financial advisory services, including life insurance products
,
risk management and asset protection services.
Our profitability, like
most financial institutions, is dependent to a large extent upon net
interest income, which is the difference
between the interest and fees received on interest earning assets, such as loans and
securities, and the interest paid on interest-bearing
liabilities, principally deposits and borrowings.
Results of operations are also affected by the provision for credit losses, operating
expenses such as salaries and employee benefits, occupancy and other
operating expenses including income taxes, and noninterest
income such as mortgage banking revenues, wealth management fees,
deposit fees, and bank card fees.
We have included
a detailed discussion of our long-term strategic objectives as part of the MD&A section
of our 2024 Form 10-K.
33
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.
2025
2024
(Dollars in Thousands, except per share data)
Second
First
Fourth
Third
Second
Shareowners' Equity (GAAP)
$
526,423
$
512,575
$
495,317
$
476,499
$
460,999
Less: Goodwill and Other Intangibles (GAAP)
92,693
92,733
92,773
92,813
92,853
Tangible Shareowners' Equity (non-GAAP)
A
433,730
419,842
402,544
383,686
368,146
Total Assets (GAAP)
4,391,753
4,461,233
4,324,932
4,225,316
4,225,695
Less: Goodwill and Other Intangibles (GAAP)
92,693
92,733
92,773
92,813
92,853
Tangible Assets (non-GAAP)
B
$
4,299,060
$
4,368,500
$
4,232,159
$
4,132,503
$
4,132,842
Tangible Common Equity Ratio (non-GAAP)
A/B
10.09%
9.61%
9.51%
9.28%
8.91%
Actual Diluted Shares Outstanding (GAAP)
C
17,097,986
17,072,330
17,018,122
16,980,686
16,970,228
Tangible Book Value
per Diluted Share (non-GAAP)
A/C
25.37
24.59
23.65
22.60
21.69
34
SELECTED QUARTERLY
FINANCIAL DATA
(UNAUDITED)
2025
2024
(Dollars in Thousands, Except Per Share Data)
Second
First
Fourth
Third
Second
Summary of Operations
:
Interest Income
$
51,459
$
49,782
$
49,743
$
49,328
$
48,766
Interest Expense
8,275
8,235
8,640
9,117
9,497
Net Interest Income
43,184
41,547
41,103
40,211
39,269
Provision for Credit Losses
620
768
701
1,206
1,204
Net Interest Income After
Provision for Credit Losses
42,564
40,779
40,402
39,005
38,065
Noninterest Income
20,014
19,907
18,760
19,513
19,606
Noninterest Expense
42,538
38,701
41,782
42,921
40,441
Income Before Income Taxes
20,040
21,985
17,380
15,597
17,230
Income Tax Expense
4,996
5,127
4,219
2,980
3,189
(Income) Loss Attributable to NCI
-
-
(71)
501
109
Net Income Attributable to CCBG
15,044
16,858
13,090
13,118
14,150
Net Interest Income (FTE)
(1)
43,228
41,591
41,150
40,260
39,334
Per Common Share
:
Net Income Basic
$
0.88
$
0.99
$
0.77
$
0.77
$
0.84
Net Income Diluted
0.88
0.99
0.77
0.77
0.83
Cash Dividends Declared
0.24
0.24
0.23
0.23
0.21
Diluted Book Value
30.79
30.02
29.11
28.06
27.17
Diluted Tangible Book Value
(2)
25.37
24.59
23.65
22.60
21.69
Market Price:
High
39.82
38.27
40.86
36.67
28.58
Low
32.38
33.00
33.00
26.72
25.45
Close
39.35
35.96
36.65
35.29
28.44
Selected Average Balances
:
Investment Securities
$
1,007,981
$
982,330
$
915,202
$
908,456
$
919,832
Loans Held for Investment
2,652,572
2,665,910
2,677,396
2,693,533
2,726,748
Earning Assets
4,032,008
3,993,914
3,921,900
3,883,414
3,935,280
Total Assets
4,370,261
4,335,033
4,259,669
4,215,862
4,272,188
Deposits
3,680,707
3,665,482
3,600,424
3,572,034
3,641,028
Shareowners’ Equity
527,583
513,401
491,143
480,137
465,297
Common Equivalent Average Shares:
Basic
17,056
17,027
16,946
16,943
16,931
Diluted
17,088
17,044
16,990
16,979
16,960
Performance Ratios:
Return on Average Assets (annualized)
1.38
%
1.58
%
1.22
%
1.24
%
1.33
%
Return on Average Equity (annualized)
11.44
13.32
10.60
10.87
12.23
Net Interest Margin (FTE)
4.30
4.22
4.17
4.12
4.02
Noninterest Income as % of Operating Revenue
31.67
32.39
31.34
32.67
33.30
Efficiency Ratio
67.26
62.93
69.74
71.81
68.61
Asset Quality:
Allowance for Credit Losses (“ACL”)
$
29,862
$
29,734
$
29,251
$
29,836
$
29,219
Nonperforming Assets (“NPAs”)
6,581
4,428
6,669
7,242
6,165
ACL to Loans HFI
1.13
%
1.12
%
1.10
%
1.11
%
1.09
%
NPAs to Total
Assets
0.15
0.10
0.15
0.17
0.15
NPAs to Loans HFI plus OREO
0.25
0.17
0.25
0.27
0.23
ACL to Non-Performing Loans
463.01
692.10
464.14
452.64
529.79
Net Charge-Offs to Average Loans HFI
0.09
0.09
0.25
0.19
0.18
Capital Ratios:
Tier 1 Capital
18.38
%
18.01
%
17.46
%
16.77
%
16.31
%
Total Capital
19.60
19.20
18.64
17.97
17.50
Common Equity Tier 1
16.81
16.08
15.54
14.88
14.44
Leverage
11.14
11.17
11.05
10.89
10.51
Tangible Common Equity
(2)
10.09
9.61
9.51
9.28
8.91
(1)
Fully Tax Equivalent.
(2)
Non-GAAP financial measure.
See non-GAAP reconciliation on page 33.
35
FINANCIAL OVERVIEW
Results of Operations
Performance Summary.
Net income attributable to common shareowners totaled $15.0
million, or $0.88 per diluted share, for the
second quarter of 2025 compared to $16.9 million, or $0.99 per diluted
share, for the first quarter of 2025, and $14.2 million, or $0.83
per diluted share, for the second quarter of 2024. For the first six months of
2025, net income attributable to common shareowners
totaled $31.9 million, or $1.87 per diluted share, compared to net income of $26.7
million, or $1.57 per diluted share, for the same
period of 2024.
Net Interest Income.
Tax-equivalent net
interest income for the second quarter of 2025 totaled $43.2 million compared
to $41.6
million for the first quarter 2025 and $39.3 million for the second quarter of
2024.
Compared to the first quarter of 2025, the increase
was driven by a $0.9 million increase in investment securities income and
a $0.4 million increase in overnight funds income.
One
additional calendar day in the second quarter of 2025 also contributed
to the increase.
Compared to the second quarter of 2024, the
increase was primarily due to a $2.7 million increase in investment securities income
and a $1.2 million decrease in deposit interest
expense.
For the first six months of 2025, tax-equivalent net interest income totaled $84.8 million
compared to $77.8 million for the
same period of 2024 with the increase primarily attributable to a $4.2 million
increase in investment securities income, a $1.9 million
increase in overnight funds income, and a $1.4 million decrease in deposit
interest expense.
Provision and Allowance for Credit
Losses.
We recorded
a provision expense for credit losses of $0.6 million for the second quarter of
2025 compared to $0.8 million for the first quarter of 2025 and $1.2 million for the
second quarter of 2024.
For the first six months of
2025, we recorded a provision expense for credit losses of $1.4 million
compared to $2.1 million for the first six months of 2024. At
June 30, 2025, the allowance for credit losses for loans HFI totaled $29.9
million (1.13% of loans HFI) compared to $29.7 million
(1.12% of loans HFI) at March 31, 2025 and $29.3 million at December 31,
2024 (1.10% of loans HFI).
Noninterest Income
.
Noninterest income for the second quarter of 2025 totaled $20.0 million compared
to $19.9 million for the first
quarter of 2025 and $19.6 million for the second quarter of 2024.
The $0.1 million, or 0.5%, increase over the first quarter of 2025
was primarily due to a $0.4 million increase in mortgage banking revenues
and a $0.3 million increase in deposit fees, partially offset
by a $0.6 million decrease in wealth management fees. Compared
to the second quarter of 2024, the $0.4 million, or 2.1%, increase
was primarily due to a $0.8 million increase in wealth management fees, partially
offset by a $0.2 million decrease in mortgage
banking revenues and a $0.1 million decrease in other income.
For the first six months of 2025, noninterest income totaled $39.9
million compared to $37.7 million for the same period of 2024, primarily
attributable to a $1.8 million increase in wealth management
fees and a $0.7 million increase in mortgage banking revenues that was partially offset
by a $0.2 million decrease in deposit fees.
Noninterest Expense.
Noninterest expense for the second quarter of 2025 totaled
$42.5 million compared to $38.7 million for the first
quarter of 2025 and $40.4 million for the second quarter of 2024.
The $3.8 million, or 9.9%, increase over the first quarter of 2025,
reflected a $3.3 million increase in other expense (primarily lower gains
from sale of banking facilities), a $0.3 million increase in
occupancy expense, and a $0.2 million increase in compensation expense.
Compared to the second quarter of 2024, the $2.1 million,
or 5.2%, increase was primarily due to a $2.1 million increase in compensation expense.
For the first six months of 2025, noninterest
expense totaled $81.2 million compared to $80.6 million for the same period
of 2024 with the $0.6 million, or 0.8%, increase due to a
$3.9 million increase in compensation expense that was partially offset
by a $3.2 million decrease in other expense and a $0.1 million
decrease in occupancy expense.
Financial Condition
Earning Assets.
Average earning assets totaled
$4.032 billion for the second quarter of 2025, an increase of $38.1 million, or 1.0%,
over the first quarter of 2025, and an increase of $110.1
million, or 2.8%, over the fourth quarter of 2024.
The increase over both
prior periods was driven by higher average deposit balances.
Compared to the first quarter of 2025, the change in the earning asset
mix reflected a $27.8 million increase in overnight funds and a $25.7
million increase in investment securities that was partially offset
by a $13.3 million decrease in loans held for investment (“HFI”) and a $2.1 million decrease in loans
held for sale (“HFS”).
Compared to the fourth quarter of 2024, the change in the earning asset mix reflected
a $92.8 million increase in investment securities
and a $50.5 million increase in overnight funds sold partially offset
by a $24.8 million decrease in loans HFI and a $8.4 million
decrease in loans HFS.
Loans.
Average loans HFI decreased
$13.3 million, or 0.5%, from the first quarter of 2025 and decreased $24.8
million, or 0.9%,
from the fourth quarter of 2024.
Loans HFI at June 30, 2025 decreased $29.3 million, or 1.1%, from March 31, 2025
and decreased
$20.1 million, or 0.8%, from December 31, 2024.
36
Credit Quality
.
Nonperforming assets (nonaccrual loans and other real estate) totaled $6.6 million
at June 30, 2025 compared to $4.4
million at March 31, 2025 and $6.7 million at December 31, 2024.
At June 30, 2025, nonperforming assets as a percentage of total
assets was 0.15%, compared to 0.10% at March 31, 2025 and 0.15% at December 31, 2024.
Nonaccrual loans totaled $6.4 million at
June 30, 2025, a $2.2 million increase over March 31, 2025 and a $0.1 million increase
over December 31, 2024.
Further, classified
loans totaled $28.6 million at June 30, 2025, a $9.4 million increase over
March 31, 2025 and a $8.7 million increase over December
31, 2024. The increase over the prior periods was primarily due to downgrade
of four residential real estate loans totaling $4.2 million
and two commercial real estate loans totaling $4.3 million.
Deposits
.
Average total
deposits were $3.681 billion for the second quarter of 2025, an increase of $15.2 million,
or 0.4%, over the
first quarter of 2025 and an increase of $80.3 million, or 2.2%, over the fourth quarter
of 2024.
At June 30, 2025, total deposits were
$3.705 billion, a decrease of $79.0 million, or 2.1%, from March 31,
2025, and an increase of $32.9 million, or 0.9%, over December
31, 2024.
Public funds totaled $596.6 million at June 30, 2025, $648.0 million at March 31, 2025,
and $660.9 million at December
31, 2024.
Capital
.
At June 30, 2025, we were “well-capitalized”
with a total risk-based capital ratio of 19.60% and a tangible common
equity
ratio (a non-GAAP financial measure) of 10.09% compared to 19.20%
and 9.61%, respectively, at March
31, 2025 and 18.64% and
9.51%, respectively,
at December 31, 2024.
At June 30, 2025, all of our regulatory capital ratios exceeded the threshold to
be “well-
capitalized”
under the Basel III capital standards.
RESULTS
OF OPERATIONS
The following table provides a condensed summary of our results of operations
- a discussion of the various components are discussed
in further detail below.
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
(Dollars in Thousands, except per share data)
2025
2025
2024
2025
2024
Interest Income
$
51,459
$
49,782
$
48,766
$
101,241
$
95,586
Taxable Equivalent Adjustments
44
44
65
88
145
Total Interest Income (FTE)
51,503
49,826
48,831
101,329
95,731
Interest Expense
8,275
8,235
9,497
16,510
17,962
Net Interest Income (FTE)
43,228
41,591
39,334
84,819
77,769
Provision for Credit Losses
620
768
1,204
1,388
2,124
Taxable Equivalent Adjustments
44
44
65
88
145
Net Interest Income After Provision for Credit Losses
42,564
40,779
38,065
83,343
75,500
Noninterest Income
20,014
19,907
19,606
39,921
37,703
Noninterest Expense
42,538
38,701
40,441
81,239
80,612
Income Before Income Taxes
20,040
21,985
17,230
42,025
32,591
Income Tax Expense
4,996
5,127
3,189
10,123
6,725
Pre-Tax Loss Attributable to Noncontrolling Interest
-
-
109
-
841
Net Income Attributable to Common Shareowners
$
15,044
$
16,858
$
14,150
$
31,902
$
26,707
Basic Net Income Per Share
$
0.88
$
0.99
$
0.84
$
1.87
$
1.58
Diluted Net Income Per Share
$
0.88
$
0.99
$
0.83
$
1.87
$
1.57
37
Net Interest Income
Net interest income represents our single largest source of earnings
and is equal to interest income and fees generated by earning assets
less interest expense paid on interest bearing liabilities.
This information is provided on a “taxable equivalent” basis to reflect the tax-
exempt status of income earned on certain loans and state and local government
debt obligations.
We provide an
analysis of our net
interest income including average yields and rates in Table
I, “Average Balances &
Interest Rates,” on page 47.
Tax-equivalent net
interest income for the second quarter of 2025 totaled $43.2 million compared to $41.6
million for the first quarter
of 2025 and $39.3 million for the second quarter of 2024.
Compared to the first quarter of 2025, the increase was driven by a $0.9
million increase in investment securities income and a $0.4 million increase
in overnight funds income.
One additional calendar day in
the second quarter of 2025 contributed to the increase.
Compared to the second quarter of 2024, the increase was primarily due to a
$2.7 million increase in investment securities income and a $1.2 million decrease
in deposit interest expense.
New investment
purchases at higher yields drove the increase in investment securities income
for both prior period comparisons.
Further, the decrease
in deposit interest expense from the prior year period reflected the gradual
decrease in our deposit rates, as short term rates began
declining in the second half of 2024.
For the first six months of 2025, tax-equivalent net interest income totaled $84.8
million compared to $77.8 million for the same period
of 2024 with the increase primarily attributable to a $4.2 million increase in
investment securities income, a $1.9 million increase in
overnight funds income, and a $1.4 million decrease in deposit interest expense.
New investment purchases at higher yields drove the
increase in investment securities income.
Higher average deposit balances contributed to the increase in overnight funds income.
The
decrease in deposit interest expense reflected the aforementioned decrease in
our deposit rates.
Our net interest margin for the second quarter of 2025 was 4.30%,
an increase of eight basis points over the first quarter of 2025 and an
increase of 28 basis points over the second quarter of 2024.
For the month of June 2025, our net interest margin was 4.36%.
For the
first six months of 2025, our net interest margin increased
by 25 basis points to 4.26% compared to the same period of 2024.
The
increase in net interest margin over all prior periods reflected a higher
yield in the investment portfolio driven by new purchases at
higher yields.
Lower deposit cost also contributed to the improvement over both prior year periods.
For the second quarter of 2025,
our cost of funds was 82 basis points, a decrease of two basis points from the first quarter of
2025 and a 15-basis point decrease from
the second quarter of 2024.
Our cost of deposits (including noninterest bearing accounts) was 81 basis points, 82
basis points, and 95
basis points, respectively,
for the same periods.
Provision for Credit Losses
We recorded
a provision expense for credit losses of $0.6 million for the second quarter of 2025 compared
to $0.8 million for the first
quarter of 2025 and $1.2 million for the second quarter of 2024.
For the first six months of 2025, we recorded a provision expense for
credit losses of $1.4 million compared to $2.1 million for the first six months of 2024.
For the second quarter of 2025, the provision
reflected an expense of $0.7 million for loans HFI and a benefit of $0.1
million for unfunded loan commitments.
This compares to a
$1.1 million expense for loans HFI, and $0.3 million benefit for the first quarter of 2025,
and a $1.1 million expense for loans HFI and
$0.1 million expense for debt securities in the second quarter of 2024.
For the first six months of 2025, the provision reflected a $1.8
million expense for loans HFI and a $0.4 million benefit for unfunded
loan commitments compared to a $2.1 million expense for loans
HFI, $0.1 million for debt securities, and a $0.1 million benefit for
unfunded loan commitments for the first six months of 2024.
We
discuss the various factors that impacted our provision expense in further detail
below under the heading Allowance for Credit Losses.
38
Noninterest Income
Noninterest income for the second quarter of 2025 totaled $20.0 million
compared to $19.9 million for the first quarter of 2025 and
$19.6 million for the second quarter of 2024.
The $0.1 million, or 0.5%, increase over the first quarter of 2025 was primarily
due to a
$0.4 million increase in mortgage banking revenues and a $0.3 million increase
in deposit fees, partially offset by a $0.6 million
decrease in wealth management fees.
The decrease in wealth management fees reflected lower insurance
commission revenues.
Compared to the second quarter of 2024, the $0.4 million, or 2.1%,
increase was primarily due to a $0.8 million increase in wealth
management fees, partially offset by a $0.2 million decrease in mortgage
banking revenues and a $0.1 million decrease in other
income.
The increase in wealth management fees reflected increases in trust fees of $0.5 million
and retail brokerage fees of $0.4
million.
For the first six months of 2025, noninterest income totaled $39.9 million compared
to $37.7 million for the same period of 2024,
primarily attributable to a $1.8 million increase in wealth management
fees and a $0.7 million increase in mortgage banking revenues
that was partially offset by a $0.2 million decrease in deposit fees.
The increase in wealth management fees reflected increases in
retail brokerage fees of $1.0 million, trust fees of $0.7 million, and
insurance commission revenue of $0.1 million.
The increases in
retail brokerage and trust fees were attributable to a combination of new business,
higher account valuations, and fee increases
implemented in early 2025.
The increase in mortgage banking revenues was due to a higher gain on sale margin.
Noninterest income represented 31.7% of operating revenues (net
interest income plus noninterest income) in the second quarter of
2025 compared to 32.4% in the first quarter of 2025 and 33.3% in the second
quarter of 2024.
For the first six months of 2025,
noninterest income represented 32.0% of operating revenues compared
to 32.7% for the same period of 2024.
The table below reflects the major components of noninterest income.
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
(Dollars in Thousands)
2025
2025
2024
2025
2024
Deposit Fees
$
5,320
$
5,061
$
5,377
$
10,381
$
10,627
Bank Card Fees
3,774
3,514
3,766
7,288
7,386
Wealth Management
Fees
5,206
5,763
4,439
10,969
9,121
Mortgage Banking Revenues
4,190
3,820
4,381
8,010
7,259
Other
1,524
1,749
1,643
3,273
3,310
Total
Noninterest Income
$
20,014
$
19,907
$
19,606
$
39,921
$
37,703
Significant components of noninterest income are discussed in more
detail below.
Deposit Fees
.
Deposit fees for the second quarter of 2025
totaled $5.3
million, an increase of $0.3 million, or 5.1%, over the first
quarter of 2025, and a decrease of $0.1 million from the second quarter of
2024.
For the first six months of 2025, deposit fees totaled
$10.4 million, a decrease of $0.2 million, or 2.3%, from the same period of
2024.
Compared to the first quarter of 2025, the increase
was driven by higher account maintenance and overdraft fees.
The decrease from both prior year periods reflected lower overdraft
fees and commercial account analysis fee income that was partially offset
by higher account maintenance fees.
Bank Card Fees
.
Bank card fees for the second quarter of 2025 totaled $3.8
million, an increase of $0.3 million, or 7.4%, over the
first quarter of 2025, and comparable to the second quarter of 2024.
For the first six months of 2025, bank card fees totaled $7.3
million, a decrease of $0.1 million, or 1.3%, from the same period of 2024.
Compared to the first quarter of 2025, the increase
reflected growth in new checking accounts.
The decrease from the prior year periods reflected lower debit card utilization
as
consumer spending patterns normalize.
Wealth
Management Fees
.
Wealth management fees
include trust fees through Capital City Trust (i.e., managed
accounts and
trusts/estates), retail brokerage fees through Capital City Investments (i.e.,
investment, insurance products, and retirement accounts),
and financial advisory fees through Capital City Strategic Wealth
(i.e., including the sale of life insurance, risk management and asset
protection services).
Wealth management
fees for the second quarter of 2025 totaled $5.2 million, a decrease of $0.6 million,
or 9.7%,
from the first quarter of 2025, and an increase of $0.8
million, or 17.3%, over the second quarter of 2024.
Compared to the first
quarter of 2025, the decrease reflected lower insurance commission revenue.
For the first six months of 2025, wealth management
fees totaled $11.0 million, an increase of
$1.8 million, or 20.3%, over the same period of 2024, and reflected a $1.0 million increase
in
retail brokerage fees, a $0.7
million increase in trust fees, and a $0.1 million increase insurance commission
revenue.
At June 30,
2025, total assets under management were approximately $3.192 billion
compared to $3.068 billion at March 31, 2025
and $3.049
billion at December 31, 2024.
Compared to the prior periods, the growth in assets under management
was primarily due to new retail
brokerage accounts and to a lesser extent new managed trust accounts.
39
Mortgage Banking Revenues.
Mortgage banking revenues totaled $4.2 million for the second quarter
of 2025, an increase of $0.4
million, or 9.7%, over the first quarter of 2025 and a decrease of $0.2
million, or 4.4%, from the second quarter of 2024.
For the first
six months of 2025, mortgage banking revenues totaled $8.0
million compared to $7.3 million for the same period of 2024.
The
increase compared to the first quarter of 2025 was attributable to higher
loan sale volume.
A higher gain on sale margin drove the
favorable variance for the six month period comparison.
We provide a detailed
overview of our mortgage banking operation,
including a detailed break-down of mortgage banking revenues, mortgage
servicing activity, and
warehouse funding within Note 4 –
Mortgage Banking Activities in the Notes to Consolidated Financial Statements.
Other
.
Other income totaled $1.5 million for the second quarter of 202
5, a decrease of $0.2 million, or 12.9%, from the first quarter of
2025, and a decrease of $0.1 million, or 7.2%, from the second quarter
of 2024.
For the first six months of 2025, other income totaled
$3.3 million, comparable to the same period of 2024.
The decrease from the first quarter of 2025 was primarily attributable to
decreases in loan servicing income and miscellaneous income.
Noninterest Expense
Noninterest expense for the second quarter of 2025 totaled $42.5 million
compared to $38.7 million for the first quarter of 2025 and
$40.4 million for the second quarter of 2024.
The $3.8 million, or 9.9%, increase over the first quarter of 2025, reflected
a $3.3
million increase in other expense, a $0.3 million increase in occupancy expense, and
a $0.2 million increase in compensation expense.
The increase in other expense was driven by a $4.5 million increase in other real
estate expense which reflected lower gains from the
sale of banking facilities, primarily the sale of our operations center building
in the first quarter of 2025, partially offset by a $0.5
million decrease in charitable contribution expense and a $0.6 million decrease
in miscellaneous expense.
Compared to the second
quarter of 2024, the $2.1 million, or 5.2%, increase was primarily due to a $2.1 million increase
in compensation expense which
reflected a $1.3 million increase in salary expense and a $0.8 million increase
in associate benefit expense.
For the first six months of 2025, noninterest expense totaled $81.2 million compared
to $80.6 million for the same period of 2024 with
the $0.6 million, or 0.8%, increase due to a $3.9 million increase in compensation
expense that was partially offset by a $3.2 million
decrease in other expense and a $0.1 million decrease in occupancy expense.
The increase in compensation was due to a $2.5 million
increase in salary expense and a $1.4 million increase in associate benefit expense.
The decrease in other expense was primarily due
to a $4.5 million decrease in other real estate expense due to lower gains from
the sale of banking facilities, and a $1.0 million
decrease in miscellaneous expense (non-service component of pension
expense), partially offset by increases in processing expense
of
$1.1 million (outsource of core processing system), charitable contribution
expense of $0.7 million, and professional fees of $0.5
million.
40
The table below reflects the major components of noninterest expense.
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
(Dollars in Thousands)
2025
2025
2024
2025
2024
Salaries
$
22,013
$
21,883
$
20,754
$
43,896
$
41,358
Associate Benefits
4,477
4,365
3,652
8,842
7,455
Total Compensation
26,490
26,248
24,406
52,738
48,813
Premises
3,272
3,172
3,043
6,444
6,216
Equipment
3,799
3,621
3,954
7,420
7,775
Total Occupancy
7,071
6,793
6,997
13,864
13,991
Legal Fees
480
504
430
984
865
Professional Fees
1,518
1,622
1,340
3,140
2,598
Processing Services
2,491
2,469
1,938
4,960
3,771
Advertising
801
838
851
1,639
1,666
Telephone
714
719
718
1,433
1,427
Insurance – Other
757
732
749
1,489
1,664
Other Real Estate Owned, net
21
(4,470)
19
(4,449)
37
Pension - Other
(872)
(873)
(419)
(1,745)
(838)
Miscellaneous
3,067
4,119
3,412
7,186
6,618
Total Other
8,977
5,660
9,038
14,637
17,808
Total
Noninterest Expense
$
42,538
$
38,701
$
40,441
$
81,239
$
80,612
Significant components of noninterest expense are discussed in more detail
below.
Compensation.
Compensation expense totaled $26.5 million for the second quarter of 2025,
a $0.2 million, or 0.9%, increase over the
first quarter of 2025 and a $2.1
million, or 8.5%, increase over the second quarter of 2024.
The increase over the first quarter of 2025
reflected a $0.1 million increase in salary expense and a $0.1 million increase
in associate benefit expense.
Compared to the second
quarter of 2024, the $2.1 million, or 8.5%, increase reflected a $1.3 million
increase in salary expense and a $0.8 million increase in
associate benefit expense.
The increase in salary expense was primarily due to increases in incentive plan expense of $0.9
million and
base salaries of $0.4 million (merit-based).
The increase in associate benefit expense was attributable to a $0.6 million
increase in
associate insurance expense and a $0.2 million increase in stock compensation
expense.
For the first six months of 2025,
compensation expense totaled $52.7 million compared to $48.8
million for the same period of 2024
with the $3.9 million increase
attributable to a $2.5 million increase in salary expense and a $1.4 million
increase in associate benefit expense.
The increase in
salary expense was primarily due to increases in incentive plan expense of $1.2
million, base salaries of $0.9 million (merit-based),
and commissions of $0.7 million (retail brokerage and mortgage).
The increase in associate benefit expense was attributable to a
higher cost for associate insurance.
Occupancy
.
Occupancy expense totaled $7.1 million for the second quarter of 2025, a $0.3
million, or 4.1%, increase over the first
quarter of 2025 and a $0.1 million, or 1.1%, increase over the second quarter
of 2024.
For the first six months of 2025, occupancy
expense totaled $13.9 million compared to $14.0 million for the same period
of 2024.
Compared to the first quarter of 2025, the
increase was primarily due to higher expense for maintenance agreements
and banking office leases.
Other
.
Other expense totaled $9.0 million for the second quarter of 2025
compared to $5.7 million for the first quarter of 2025
and
$9.0
million for the second quarter of 2024.
For the first six months of 2025, other expense totaled $14.6 million compared
to $17.8
million for the same period of 2024.
Compared to the first quarter of 2025, the $3.3 million increase was driven by
a $4.5 million
increase in other real estate expense which reflected lower gains from the
sale of banking facilities, primarily the sale of our operations
center building in the first quarter of 2025, partially offset
by a $0.5 million decrease in charitable contribution expense and a $0.6
million decrease in miscellaneous expense.
Our operating efficiency ratio (expressed as noninterest
expense as a percentage of the sum of taxable-equivalent net interest income
plus noninterest income) was 67.26%
for the second quarter of 2025 compared to 62.93% for the first quarter of 202
5
and 68.61% for
the second quarter of 2024.
For the first six months of 2025, this ratio was 65.13% compared to 69.81% for
the same period of 2024.
41
Income Taxes
We realized income
tax expense of $5.0 million (effective rate of 24.9%) for the second
quarter of 2025 compared to $5.1 million
(effective rate of 23.3%) for the first quarter of 2025 and $3.2
million (effective rate of 18.5%) for the second quarter of 2024.
For the
first six months of 2025, we realized income tax expense of $10.1 million
(effective rate of 24.1%) compared to $6.7 million
(effective rate of 20.6%) for the same period of 2024.
A lower level of tax benefit accrued from a solar tax credit equity fund drove
the increase in our effective tax rate for all prior period comparisons.
Absent discrete items or new tax credit investments, we expect
our annual effective tax rate to approximate 24% for 2025.
FINANCIAL CONDITION
Average earning
assets totaled $4.032 billion for the second quarter of 2025, an increase of $38.1 million, or
1.0%, over the first
quarter of 2025, and an increase of $110.1 million,
or 2.8%, over the fourth quarter of 2024.
The increase over both prior periods was
driven by higher average deposit balances (see below –
Deposits
).
Compared to the first quarter of 2025, the change in the earning
asset mix reflected a $27.8 million increase in overnight funds and a $25.7 million
increase in investment securities that was partially
offset by a $13.3 million decrease in loans held for investment (“HFI”)
and a $2.1 million decrease in loans held for sale (“HFS”).
Compared to the fourth quarter of 2024, the change in the earning asset mix reflected
a $92.8 million increase in investment securities
and a $50.5 million increase in overnight funds sold partially offset
by a $24.8 million decrease in loans HFI and a $8.4 million
decrease in loans HFS.
Investment Securities
Average investments
totaled $1.008 billion, a $25.7 million, or 2.6%, increase over the first quarter of 2025
and $92.8 million, or
10.1%, increase over the fourth quarter of 2024. Our investment portfolio
represented 25.0% of our average earning assets for the
second quarter of 2025 compared to 24.6% for the first quarter of 2025 and
23.3% for the fourth quarter of 2024.
For the remainder of
2025, we will continue to monitor our overall liquidity position and market conditions
to determine if cash flow from the investment
portfolio should be reinvested or allowed to flow into overnight
funds.
The investment portfolio is a significant component of our operations and, as such,
it functions as a key element of liquidity and
asset/liability management.
Two types of classifications are approved
for investment securities which are Available
-for-Sale (“AFS”)
and Held-to-Maturity (“HTM”).
At June 30, 2025, $462.6 million, or 46.3%, of the investment portfolio was classified as HTM
and
$533.5 million, or 53.4%, was classified as AFS.
The average maturity of our total portfolio at June 30, 2025 was 2.66
years
compared to 2.64 years at March 31, 2025 and 2.54 years at December
31, 2024.
The duration of our investment portfolio at June 30,
2025 was 2.14 years compared to 2.10 years at March 31, 2025 and 2.19
years at December 31, 2024.
Additional information on
unrealized gains/losses in the AFS and HTM portfolios is provided
in Note 2 – Investment Securities.
We
determine the classification of a security at the time of acquisition based
on how the purchase will affect our asset/liability strategy
and future business plans and opportunities.
We
consider multiple factors in determining classification, including
regulatory capital
requirements, volatility in earnings or other comprehensive income,
and liquidity needs. Securities in the AFS portfolio are recorded at
fair value with unrealized gains and losses associated with these securities recorded
net of tax, in the accumulated other
comprehensive income component of shareowners’ equity.
HTM securities are acquired or owned with the intent of holding
them to
maturity.
HTM investments are measured at amortized cost.
We
do not trade, nor do we presently intend to begin trading investment
securities for the purpose of recognizing gains and therefore we do not
maintain a trading portfolio.
At June 30, 2025, there were 788 positions (combined AFS and HTM)
with unrealized losses pre-tax totaling $33.0 million.
48 of
these positions are U.S. Treasury bonds
and carry the full faith and credit of the U.S. Government.
650 are U.S. government agency
securities issued by U.S. government sponsored entities.
We believe
the long history of no credit losses on government securities
indicates that the expectation of nonpayment of the amortized cost basis is effectively
zero.
At June 30, 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 90 positions (municipal securities and corporate bonds)
have a credit component.
At
June 30, 2025, corporate debt securities had an allowance for credit losses of
$69,000 and municipal securities had an allowance of
less than $1,000. None of the securities held by the Company were past due or
in nonaccrual status at June 30, 2025.
42
Loans HFI
Average loans
HFI decreased by $13.3 million, or 0.5%, from the first quarter of 2025 and decreased by $24.8
million, or 0.9%, from
the fourth quarter of 2024.
Compared to the first quarter of 2025, the decrease was due to decreases in construction
loans of $24.6
million, consumer loans (primarily indirect auto) of $1.9 million, and commercial
loans of $3.4 million, partially offset by increases to
residential real estate loans of $10.2 million, commercial real estate loans of $2.1
million, and home equity loans of $4.1 million.
Compared to the fourth quarter of 2024, the decline was primarily attributable
to decreases in construction loans of $33.2 million,
commercial loans of $9.2 million, and consumer loans (primarily indirect
auto) of $4.0 million, partially offset by increases in home
equity loans of $10.8 million, residential real estate loans of $9.9 million,
and commercial real estate loans of $1.9 million.
Loans HFI at June 30, 2025 decreased by $29.3 million, or 1.1%, from March
31, 2025 and decreased by $20.1 million, or 0.8%, from
December 31, 2024.
Compared to the first quarter of 2025, the decline was primarily due to decreases in construction
loans of $18.2
million, consumer loans (primarily indirect auto) of $8.7 million, commercial
loans of $4.4 million, and commercial real estate loans
of $4.4 million, partially offset by increases in residential
real estate loans of $5.8 million and home equity loans of $2.2 million.
Compared to December 31, 2024, the decrease was primarily attributable
to decreases in construction loans of $45.9 million,
commercial loans of $9.2 million, and consumer loans (primarily indirect
auto) of $2.0 million, partially offset by increases in
commercial real estate loans of $23.4 million, residential real estate loans of $17.9
million, and home equity loans of $8.1 million.
Without compromising our credit standards
,
changing our underwriting standards, or taking on inordinate interest rate risk,
we
continue to closely monitor our markets and make minor adjustments as necessary.
Credit Quality
Nonperforming assets (nonaccrual loans and other real estate) totaled $6.6
million at June 30, 2025 compared to $4.4 million at March
31, 2025 and $6.7 million at December 31, 2024.
At June 30, 2025, nonperforming assets as a percentage of total assets was 0.15%,
compared to 0.10% at March 31, 2025 and 0.15% at December 31, 2024.
Nonaccrual loans totaled $6.4 million at June 30, 2025, a
$2.2 million increase over March 31, 2025 and a $0.1 million increase over
December 31, 2024 with the increase over the first quarter
of 2025 primarily attributable to two home equity loans totaling $1.8
million.
Classified loans totaled $28.6 million at June 30, 2025,
a $9.4 million increase over March 31, 2025 and a $8.7 million increase over
December 31, 2024.
The increase over the prior periods
was primarily due to the downgrade of four residential real estate loans totaling $4.2
million and two commercial real estate loans
totaling $4.3 million.
Allowance for Credit Losses
The allowance for credit losses is a valuation account that is deducted from
the loans’ amortized cost basis to present the net amount
expected to be collected on the loans.
The allowance for credit losses is adjusted by a credit loss provision which is reported in
earnings and reduced by the charge-off
of loan amounts (net of recoveries).
Loans are charged off against the allowance when
management believes the uncollectability of a loan balance is confirmed.
Expected recoveries do not exceed the aggregate of amounts
previously charged-off and expected to be charged
-off.
Expected credit loss inherent in non-cancellable off-balance sheet credit
exposures is provided through the credit loss provision but recorded
as a separate liability included in other liabilities.
Management estimates the allowance balance using relevant available
information, from internal and external sources relating to past
events, current conditions, and reasonable and supportable forecasts.
Historical loan default and loss experience provides the basis for
the estimation of expected credit losses.
Adjustments to historical loss information incorporate management’s
view of current
conditions and forecasts.
At June 30, 2025, the allowance for credit losses for loans HFI totaled $29.9
million compared to $29.7 million at March 31, 2025 and
$29.3 million at December 31, 2024. Activity within the allowance is provided
in Note 3 – Loans Held for Investment and Allowance
for Credit Losses in the Notes to Consolidated Financial Statements. The
slight increase in the allowance over March 31, 2025 and
December 31, 2024 was primarily attributable to qualitative factor
adjustments that were partially offset by lower loan balances.
Net
loan charge-offs for both the second quarter
of 2025 and the first quarter of 2025 were comparable at nine basis points of average
loans.
At June 30, 2025, the allowance represented 1.13% of loans HFI compared to 1.12% at March
31, 2025, and 1.10% at
December 31, 2024.
At June 30, 2025, the allowance for credit losses for unfunded commitments
totaled $1.7 million compared to $1.8 million and $2.2
million at March 31, 2025 and December 31, 2024, respectively.
The decline in the allowance for unfunded commitments from March
31, 2025 and December 31, 2024 reflected a lower level of unfunded
loan commitments. The allowance for unfunded commitments is
recorded in other liabilities.
43
Deposits
Average total
deposits were $3.681 billion for the second quarter of 2025, an increase of $15.2 million, or 0.4%,
over the first quarter
of 2025 and an increase of $80.3 million, or 2.2%, over the fourth quarter
of 2024.
Compared to the first quarter of 2025, the increase
was attributable to higher core deposit balances (primarily noninterest
bearing checking and money market), partially offset by
a
decline in public funds balances (primarily NOW accounts) due to the seasonal
reduction in those balances.
The increase over the
fourth quarter of 2024 reflected strong growth in core deposit balances and
a seasonal increase in public funds balances (primarily
NOW) which are received/deposited by those clients starting in December
and peak on average in the first quarter.
At June 30, 2025, total deposits were $3.705 billion, a decrease of $79.0
million, or 2.1%, from March 31, 2025, and an increase of
$32.9 million, or 0.9%, over December 31, 2024.
The decrease from March 31, 2025 was primarily due to a seasonal decline in
public
funds balances, (primarily money market and noninterest bearing).
The increase over December 31, 2024 reflected higher core
deposit balances, primarily noninterest bearing accounts. Public funds
totaled $596.6 million at June 30, 2025, $648.0 million at
March 31, 2025, and $660.9 million at December 31, 2024.
Business deposit transaction accounts classified as repurchase agreements
averaged $22.6 million for the second quarter of 2025, a
decrease of $7.3 million from the first quarter of 2025 and a decrease of
$5.5 million from the fourth quarter of 2024. At June 30,
2025,
repurchase agreement balances were $21.8 million compared to $22.8
million at March 31, 2025 and $26.2 million at December
31, 2024.
We continue
to closely monitor our cost of deposits and deposit mix as we manage through the current rate
environment.
MARKET RISK AND INTEREST RATE
SENSITIVITY
Market Risk and Interest Rate Sensitivity
Overview.
Market risk arises from changes in interest rates, exchange rates,
commodity prices, and equity prices.
We have risk
management policies designed to monitor and limit exposure to market
risk and we do not participate in activities that give rise to
significant market risk involving exchange rates, commodity prices, or
equity prices.
In asset and liability management activities, our
policies are designed to minimize structural interest rate risk.
Interest Rate Risk Management.
Our net income is largely dependent on net interest income.
Net interest income is susceptible to
interest rate risk to the degree that interest-bearing liabilities mature
or reprice on a different basis than interest-earning assets.
When
interest-bearing liabilities mature or reprice more quickly
than interest-earning assets in a given period, a significant increase in
market rates of interest could adversely affect net interest
income.
Similarly, when interest-earning
assets mature or reprice more
quickly than interest-bearing liabilities, falling market interest rates could
result in a decrease in net interest income.
Net interest
income is also affected by changes in the portion of interest-earning
assets that are funded by interest-bearing liabilities rather than by
other sources of funds, such as noninterest-bearing deposits and shareowners’
equity.
We have established
what we believe to be a comprehensive interest rate risk management policy,
which is administered by
management’s Asset Liability Management
Committee (“ALCO”).
The policy establishes limits of risk, which are quantitative
measures of the percentage change in net interest income (a measure of net
interest income at risk) and the fair value of equity capital
(a measure of economic value of equity (“EVE”) at risk) resulting from a hypothetical change
in interest rates for maturities from one
day to 30 years.
We measure the potential
adverse impacts that changing interest rates may have on our short-term
earnings, long-
term value, and liquidity by employing simulation analysis through the use of
computer modeling.
The simulation model captures
optionality factors such as call features and interest rate caps and floors
embedded in investment and loan portfolio contracts.
As with
any method of gauging interest rate risk, there are certain shortcomings
inherent in the interest rate modeling methodology used by
us.
When interest rates change, actual movements in different categories
of interest-earning assets and interest-bearing liabilities, loan
prepayments, and withdrawals of time and other deposits, may deviate significantly
from assumptions used in the model.
Finally, the
methodology does not measure or reflect the impact that higher rates may have
on adjustable-rate loan clients’ ability to service their
debts, or the impact of rate changes on demand for loan and deposit products.
The statement of financial condition is subject to testing for interest rate shock
possibilities to indicate the inherent interest rate risk.
We apply instantaneous,
parallel rate shocks to the base case in 100 basis point (bp) increments ranging from down
400bp to up
400bps at least once per quarter, with the
analysis reported to ALCO, our Market Risk Oversight Committee (“MROC”),
our
Enterprise Risk Oversight Committee (“EROC”) and the Board of Directors.
We augment our interest rate
shock analysis with
alternative interest rate scenarios on a quarterly basis that may include ramps,
and a flattening or steepening of the yield curve (non-
parallel shift).
In addition, more frequent forecasts may be produced when interest rates are particularly
uncertain or when other
business conditions so dictate.
44
Our goal is to structure the statement of financial condition so that net interest earnings at risk over
12-month and 24-month periods
and the economic value of equity at risk do not exceed policy guidelines
at the various interest rate shock levels. We
attempt to
achieve this goal by balancing, within policy limits, the volume of floating-rate
liabilities with a similar volume of floating-rate assets,
by keeping the average maturity of fixed-rate asset and liability contracts
reasonably matched, by managing the mix of our core
deposits, and by adjusting our rates to market conditions on a continuing
basis.
Analysis.
Measures
of net interest income at risk produced by simulation analysis are indicators of
an institution’s short-term
performance in alternative rate environments.
These measures are typically based upon a relatively brief period, and do not
necessarily indicate the long-term prospects or economic value of the institution.
ESTIMATED CHANGES
IN NET INTEREST INCOME
Percentage Change (12-month shock)
+400 bp
+300 bp
+200 bp
+100 bp
-100 bp
-200 bp
-300 bp
-400 bp
Policy Limit
-15.0%
-12.5%
-10.0%
-7.5%
-7.5%
-10.0%
-12.5%
-15.0%
June 30, 2025
19.2%
14.4%
9.6%
5.0%
-5.3%
-11.1%
-17.5%
-23.3%
March 31, 2025
17.3%
13.0%
8.7%
4.5%
-4.7%
-9.8%
-15.3%
-20.9%
Percentage Change (24-month shock)
+400 bp
+300 bp
+200 bp
+100 bp
-100 bp
-200 bp
-300 bp
-400 bp
Policy Limit
-17.5%
-15.0%
-12.5%
-10.0%
-10.0%
-12.5%
-15.0%
-17.5%
June 30, 2025
39.3%
31.0%
22.5%
14.4%
-3.8%
-14.4%
-26.2%
-37.0%
March 31, 2025
39.1%
31.1%
23.0%
15.2%
-1.9%
-11.7%
-22.5%
-32.8%
The Net Interest Income (“NII”) at Risk position of an instantaneous,
parallel rate shock indicates that in the short-term (over the next
12 months), all rising rate environments will positively impact the net interest
margin of the Company,
while declining rate
environments
will have a negative impact on the net interest margin.
Compared to the first quarter of 2025, these metrics generally
became more favorable in the rising rate scenarios and less favorable
in the falling rate scenarios primarily due to the increase in loan
prepayment speed assumptions.
The instantaneous parallel rate shock results over the next 12-month
and 24-month periods are
outside of policy in the rates down 200 bps, 300 bps,
and 400 bps scenarios
largely due to the limited ability to decrease deposit rates
the full extent of this rate change, and to a lesser extent the increase in variable
rate overnight funds.
The measures of equity value at risk indicate our ongoing economic value
by considering the effects of changes in interest rates on all
of our cash flows by discounting the cash flows to estimate the present value of
assets and liabilities. The difference between these
discounted values of the assets and liabilities is the economic value of equity,
which in theory approximates the fair value of our net
assets.
ESTIMATED CHANGES
IN ECONOMIC VALUE
OF EQUITY
Changes in Interest Rates
+400 bp
+300 bp
+200 bp
+100 bp
-100 bp
-200 bp
-300 bp
-400 bp
Policy Limit
-30.0%
-25.0%
-20.0%
-15.0%
-15.0%
-20.0%
-25.0%
-30.0%
June 30, 2025
29.4%
23.9%
17.1%
9.2%
-11.5%
-23.9%
-34.8%
-40.8%
March 31, 2025
29.0%
23.7%
17.1%
9.3%
-11.2%
-23.1%
-33.7%
-40.3%
EVE Ratio (policy minimum 5.0%)
31.6%
29.7%
27.6%
25.4%
19.9%
16.8%
14.2%
12.8%
At June 30, 2025, the economic value of equity was favorable in all rising
rate environments and unfavorable in the falling rate
environments.
Compared to March 31, 2025, EVE metrics remained stable.
EVE is currently in compliance with policy in all rate
scenarios as the EVE ratio exceeds the policy minimum of 5.0% in each shock
scenario.
As the interest rate environment and the dynamics of the economy continue to change,
additional simulations will be analyzed to
address not only the changing rate environment, but also the change
in mix of our financial assets and liabilities measured over
multiple years, to help assess the risk to the Company.
45
LIQUIDITY AND CAPITAL
RESOURCES
Liquidity
In general terms, liquidity is a measurement of our ability to meet our
cash needs.
Our objective in managing our liquidity is to
maintain our ability to meet loan commitments, purchase securities or repay deposits and
other liabilities in accordance with their
terms, without an adverse impact on our current or future earnings.
Our liquidity strategy is guided by policies that are formulated and
monitored by our ALCO and senior management, which take into account
the marketability of assets, the sources and stability of
funding and the level of unfunded commitments.
We regularly evaluate
all of our various funding sources with an emphasis on
accessibility, stability,
reliability and cost-effectiveness.
Our principal source of funding has been our client deposits, supplemented
by our short-term and long-term borrowings, primarily from securities sold under
repurchase agreements, federal funds purchased and
FHLB borrowings.
We believe that the cash
generated from operations, our borrowing capacity and our access to capital resources
are
sufficient to meet our future operating capital and funding requirements.
At June 30, 2025, we had the ability to generate approximately $1.603 billion
(excludes overnight funds position of $395 million) in
additional liquidity through various sources including various federal funds
purchased lines, Federal Home Loan Bank borrowings, the
Federal Reserve Discount Window,
and brokered deposits. We
recognize the importance of maintaining liquidity and have developed
a Contingent Liquidity Plan, which addresses various liquidity stress levels and
our response and action based on the level of severity.
We periodically
test our credit facilities for access to the funds, but also understand that as the severity
of the liquidity level increases
that certain credit facilities may no longer be available.
We conduct
a liquidity stress test on a quarterly basis based on events that
could potentially occur at the Bank and report results to our ALCO, MROC
,
EROC, and Board of Directors.
We believe the liquidity
available to us at June 30, 2025 was sufficient to meet our
on-going needs and execute our business strategy.
We also view our
investment portfolio as a liquidity source and have the option to pledge securities in our
portfolio as collateral for
borrowings or deposits, and/or to sell selected securities. Our portfolio consists of
debt issued by the U.S. Treasury,
U.S. governmental
agencies, municipal governments, and corporate entities. Additional
information on our investment portfolio is provided within Note 2
– Investment Securities.
The Bank maintained an average net overnight funds (i.e., deposits with banks
plus FED funds sold less FED funds purchased) sold
position of $348.8 million in the second quarter of 2025 compared
to $320.9 million in the first quarter of 2025 and $298.3 million in
the fourth quarter of 2024.
Compared to both prior periods, the increase reflected higher average deposits and
lower average loans.
We expect our
capital expenditures will be approximately $10.0 million over the next 12 months,
which will primarily consist of
construction of new offices, office remodeling,
office equipment/furniture, and technology purchases.
Management expects that these
capital expenditures will be funded with existing resources without impairing
our ability to meet our on-going obligations.
Borrowings
Average short
-term borrowings totaled $33.1 million for the second quarter of 2025 compared
to $37.3 million for the first quarter of
2025 and $34.5 million for the fourth quarter of 2024.
The decrease from both prior periods reflected lower repurchase agreement
balances,
partially offset by an increase in mortgage warehouse borrowings.
Additional detail on warehouse borrowings is provided in
Note 4 – Mortgage Banking Activities in the Consolidated Financial Statements.
We have issued two
junior subordinated deferrable interest notes to our wholly owned
Delaware statutory trusts.
The first note for
$30.9 million was issued to CCBG Capital Trust I in
November 2004, of which $10 million was retired in April 2016.
In the second
quarter of 2025, we made a principal payment of $5.1 million on this note.
The second note for $32.0 million was issued to CCBG
Capital Trust II in May 2005.
In the second quarter of 2025, we made a principal payment of $5.1
million on this note.
The interest
payment for the CCBG Capital Trust I borrowing
is due quarterly and adjusts quarterly to a variable rate of three-month CME Term
SOFR (secured overnight financing rate) plus a margin of
1.90%. This note matures on December 31, 2034. The interest payment for
the CCBG Capital Trust II borrowing is due quarterly
and adjusts quarterly to a variable interest rate based on three-month CME Term
SOFR plus a margin of 1.80%.
This note matures on June 15, 2035.
The proceeds from these borrowings were used to partially fund
acquisitions.
Under the terms of each junior subordinated deferrable interest note, in the event of
default or if we elect to defer interest
on the note, we may not, with certain exceptions, declare or pay dividends or make distributions
on our capital stock or purchase or
acquire any of our capital stock.
In the second quarter of 2020, we entered into a derivative cash flow hedge
of our interest rate risk related to our subordinated debt.
The notional amount of the derivative is $30 million ($10 million of
the CCBG Capital Trust I borrowing and $20 million of
the
CCBG Capital Trust II borrowing).
The interest rate swap agreement requires CCBG to pay fixed and receive variable (three-month
CME Term SOFR plus spread)
and has an average all-in fixed rate of 2.50% for 10 years. Additional detail on the
interest rate swap
agreement is provided in Note 5 – Derivatives in the Consolidated Financial
Statements.
46
Capital
Our capital ratios are presented in the Selected Quarterly Financial Data
table on page 34.
At June 30, 2025, our regulatory capital
ratios exceeded the threshold to be designated as “well-capitalized”
under the Basel III capital standards.
Shareowners’ equity was $526.4 million at June 30, 2025 compared to
$512.6 million at March 31, 2025 and $495.3 million at
December 31, 2024.
For the first six months of 2025, shareowners’ equity was positively impacted by net income
attributable to
shareowners of $31.9 million, a net $5.5 million decrease in the accumulated
other comprehensive loss, the issuance of common stock
of $2.8 million, and stock compensation accretion of $0.9 million.
The net favorable change in accumulated other comprehensive loss
reflected a $6.4 million decrease in the investment securities loss that was partially offset
by a $0.9 million decrease in the fair value
of the interest rate swap related to subordinated debt.
Shareowners’ equity was reduced by common stock dividends of $8.2 million
($0.48 per share) and net adjustments totaling $1.8 million related to transactions
under our stock compensation plans.
At June 30, 2025, our total risk-based capital ratio was 19.60% compared to 19.20% at March
31, 2025 and 18.64% at December 31,
2024.
Our common equity tier 1 capital ratio was 16.81%, 16.08%, and 15.54%, respectively,
on these dates.
Our leverage ratio was
11.14%, 11.17%,
and 11.05%, respectively,
on these dates.
At June 30, 2025, all our regulatory capital ratios exceeded the thresholds
to be designated as “well-capitalized” under the Basel III capital standards.
Further, our tangible common equity
ratio (non-GAAP
financial measure) was 10.09% at June 30, 2025 compared to 9.61%
and 9.51% at March 31, 2025 and December 31, 2024,
respectively.
If the unrealized loss for held-to-maturity securities of $9.9 million (after-tax) was recognized
in accumulated other
comprehensive loss, our adjusted tangible capital ratio would be 9.86%.
Our tangible capital ratio is also impacted by the recording of our unfunded pension
liability through other comprehensive income in
accordance with Accounting Standards Codification
Topic 715. At June 30, 2025,
the net pension asset reflected in other
comprehensive loss was $9.7 million comparable to March 31, 2025
and December 31, 2024. This liability is re-measured annually on
December 31
st
based on an actuarial calculation of our pension liability.
Significant assumptions used in calculating the liability
include the weighted average discount rate used to measure the present
value of the pension liability, the
weighted average expected
long-term rate of return on pension plan assets, and the assumed rate of annual compensation
increases, all of which will vary when
re-measured. The discount rate assumption used to calculate the pension
liability is subject to long-term corporate bond rates at
December 31
st
. These assumptions and sensitivities are discussed in the section entitled “Critical Accounting
Policies and Estimates”
in Part II, Item7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations, of
our 2024 Form 10-K.
OFF-BALANCE SHEET ARRANGEMENTS
We are a party
to financial instruments with off-balance sheet risks in the normal
course of business to meet the financing needs of our
clients.
At June 30, 2025, we had $672.3 million in commitments to extend credit
and $7.4 million in standby letters of credit.
Commitments
to extend credit are agreements to lend to a client so long as there is no violation of any
condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee.
Since many of the
commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future
cash requirements.
Standby letters of credit are conditional commitments issued by us to guarantee the performance
of a client to a
third party.
We use the same credit policies
in establishing commitments and issuing letters of credit as we do for on-balance
sheet
instruments.
If commitments arising from these financial instruments continue to require
funding at historical levels, management does not
anticipate that such funding will adversely impact our ability to meet our on-going
obligations.
In the event these commitments
require funding in excess of historical levels, management believes current
liquidity, advances available from the
FHLB and the
Federal Reserve, and investment security maturities provide a sufficient
source of funds to meet these commitments.
Certain agreements provide that the commitments are unconditionally
cancellable by the bank and for those agreements no allowance
for credit losses has been recorded.
We
have recorded an allowance for credit losses on loan commitments that are not
unconditionally cancellable by the Bank, which is included in other
liabilities on the Consolidated Statements of Financial Condition
and totaled $1.7 million at June 30, 2025.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are described in Note 1 to the Consolidated
Financial Statements included in our 2024 Form 10-K.
The preparation of our Consolidated Financial Statements
in accordance with GAAP and reporting practices applicable to the banking
industry requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses,
and to disclose contingent assets and liabilities.
Actual results could differ from those estimates.
47
We have identified
accounting for (i) the allowance for credit losses, (ii) goodwill,
(iii) pension assumptions, and (iv) income taxes as
our most critical accounting policies and estimates in that they are important
to the portrayal of our financial condition and results, and
they require our subjective and complex judgment as a result of the need to make estimates about
the effects of matters that are
inherently uncertain.
These accounting policies, including the nature of the estimates and types of assumptions
used, are described
throughout this Item 2, Management’s
Discussion and Analysis of Financial Condition and Results of Operations, and
Part II, Item 7,
Management’s Discussion and Analysis
of Financial Condition and Results of Operations included
in our 2024 Form 10-K.
48
TABLE I
AVERAGE BALANCES & INTEREST RATES (UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Average
Average
Average
Average
Average
Average
Average
Average
(Dollars in Thousands)
Balances
Interest
Rate
Balances
Interest
Rate
Balances
Interest
Rate
Balances
Interest
Rate
Assets:
Loans Held for Sale
$
22,668
$
475
8.40
%
$
26,281
$
517
5.26
%
$
23,692
$
965
8.21
%
$
26,797
$
1,080
5.62
%
Loans Held for Investment
(1)(2)
2,652,572
40,436
6.11
2,726,748
40,683
6.03
2,659,204
80,465
6.10
2,727,688
80,879
5.99
Taxable Securities
1,006,514
6,666
2.65
918,989
3,998
1.74
994,068
12,468
2.52
935,658
8,237
1.76
Tax-Exempt Securities
(2)
1,467
17
4.50
843
9
4.36
1,158
26
4.43
850
18
4.35
Federal Funds Sold and Interest Bearing
Deposits
348,787
3,909
4.49
262,419
3,624
5.56
334,944
7,405
4.46
201,454
5,517
5.51
Total Earning Assets
4,032,008
51,503
5.12
%
3,935,280
48,831
4.99
%
4,013,066
101,329
5.09
%
3,892,447
95,731
4.94
%
Cash & Due From Banks
65,761
74,803
69,593
75,283
Allowance For Credit Losses
(30,492)
(29,564)
(30,251)
(29,797)
Other Assets
302,984
291,669
300,336
293,473
TOTAL ASSETS
$
4,370,261
$
4,272,188
$
4,352,744
$
4,231,406
Liabilities:
Noninterest Bearing Deposits
1,342,304
1,346,546
1,329,933
1,345,367
NOW Accounts
$
1,225,697
$
3,750
1.23
%
$
1,207,643
$
4,425
1.47
%
$
1,237,759
$
7,604
1.24
%
$
1,204,337
$
8,922
1.49
%
Money Market Accounts
431,774
2,340
2.17
407,387
2,752
2.72
425,949
4,527
2.14
380,489
4,737
2.50
Savings Accounts
507,950
174
0.14
519,374
176
0.14
507,813
350
0.14
529,374
364
0.14
Other Time Deposits
172,982
1,141
2.65
160,078
1,226
3.08
171,682
2,307
2.71
149,203
2,150
2.90
Total Interest Bearing Deposits
2,338,403
7,405
1.27
2,294,482
8,579
1.50
2,343,203
14,788
1.27
2,263,403
16,173
1.44
Total Deposits
3,680,707
7,405
0.81
3,641,028
8,579
0.95
3,673,136
14,788
0.81
3,608,770
16,173
0.90
Repurchase Agreements
22,557
156
2.78
26,999
217
3.24
26,169
320
2.47
26,362
418
3.19
Other Short-Term Borrowings
10,503
179
6.82
6,592
68
4.16
8,978
296
6.64
5,176
107
4.16
Subordinated Notes Payable
51,981
530
4.03
52,887
630
4.71
52,432
1,090
4.13
52,887
1,258
4.70
Other Long-Term Borrowings
792
5
2.41
258
3
4.31
793
16
4.04
270
6
4.56
Total Interest Bearing Liabilities
2,424,236
8,275
1.37
%
2,381,218
9,497
1.60
%
2,431,575
16,510
1.37
%
2,348,098
17,962
1.54
%
Other Liabilities
76,138
72,634
70,705
70,464
TOTAL LIABILITIES
3,842,678
3,800,398
3,832,213
3,763,929
Temporary Equity
-
6,493
-
6,821
TOTAL SHAREOWNERS’ EQUITY
527,583
465,297
520,531
460,656
TOTAL LIABILITIES, TEMPORARY
AND SHAREOWNERS’ EQUITY
$
4,370,261
$
4,272,188
$
4,352,744
$
4,231,406
Interest Rate Spread
3.75
%
3.38
%
3.72
%
3.40
%
Net Interest Income
$
43,228
$
39,334
$
84,819
$
77,769
Net Interest Margin
(3)
4.30
%
4.02
%
4.26
%
4.01
%
(1)
Average Balances include net loan fees, discounts and premiums and nonaccrual loans.
Interest income includes loan costs of $0.3 million and
$0.7 million for the three and six months ended June
30, 2025,
and net loan fees of $0.2 and $0.3 million for the three and six
month periods ended June 30, 2024.
(2)
Interest income includes the effects of taxable equivalent adjustments
using a 21% Federal tax rate.
(3)
Taxable equivalent net interest income divided by average earning assets.
49
Item 3.
QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
See “Market Risk and Interest Rate Sensitivity” in Management’s
Discussion and Analysis of Financial Condition and Results of
Operations, above, which is incorporated herein by reference.
Management has determined that no additional disclosures are
necessary to assess changes in information about market risk that have occurred
since December 31, 2024.
Item 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
At June 30, 2025, the end of the period covered by this Form 10-Q, our management,
including our Chief Executive Officer and Chief
Financial Officer, evaluated
the effectiveness of our disclosure controls and procedures (as defined
in Rule 13a-15(e) under the
Securities Exchange Act of 1934).
Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded
that, as of the end of the period covered by this report,
our disclosure controls and procedures were effective.
Our management, including our Chief Executive Officer
and Chief Financial Officer, has reviewed
our internal control over financial
reporting (as defined in Rule 13a-15(f) under the Securities Exchange
Act of 1934). During the quarter ended June 30, 2025, there
have been no significant changes in our internal control over financial reporting
during our most recently completed fiscal quarter that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART
II.
OTHER INFORMATION
Item 1.
Legal Proceedings
We are party
to lawsuits arising out of the normal course of business.
In management's opinion, there is no known pending litigation,
the outcome of which would, individually or in the aggregate, have a material effect
on our consolidated results of operations,
financial position, or cash flows.
Item 1A.
Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider
the factors discussed in Part I,
Item 1A. “Risk Factors” in our 2024 Form 10-K, as updated in our subsequent
quarterly reports. The risks described in our 2024 Form
10-K, and our subsequent quarterly reports are not the only risks facing us.
Additional risks and uncertainties not currently known to
us or that we currently deem to be immaterial also may materially adversely affect
our business, financial condition and/or operating
results.
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
None.
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
Mine Safety Disclosure
Not Applicable.
Item 5.
Other Information
(c) Rule 10b5-1 Trading Plans
During the three months ended June 30, 2025, none of our directors or
officers (as defined in Rule 16a-1(f) under the Exchange Act)
adopted
, modified or
terminated
any contract, instruction or written plan for the purchase or sale of our securities that was intended
to
satisfy the affirmative defense conditions of Rule 10b5-1(c)
under the Exchange Act or any “
non-Rule
10b5-1
trading arrangement” as
defined in Item 408(c) of Regulation S-K.
50
Item 6.
Exhibits
(A)
Exhibits
3.1
Amended and Restated Articles of Incorporation - incorporated herein by reference to Exhibit 3.1 of
the Registrant’s
Form 8-K (filed 5/3/21) (No. 0-13358).
3.2
Amended and Restated Bylaws - incorporated herein by reference to Exhibit 3.1 of the Registrant’s
Form 8-K (filed
12/20/2024) (No. 0-13358).
31.1
Certification of William G Smith, Jr., Chairman and Chief Executive Officer of Capital City Bank Group, Inc., Pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2
Certification of Jeptha E. Larkin, Executive Vice President and Chief Financial Officer of Capital City Bank Group, Inc.,
Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1
Certification of William G. Smith, Jr., Chairman and Chief Executive Officer of Capital City Bank Group, Inc., Pursuant
to 18 U.S.C. Section 1350.
32.2
Certification of Jeptha E. Larkin, Executive Vice President and Chief Financial Officer of Capital City Bank Group, Inc.,
Pursuant to 18 U.S.C. Section 1350.
101.SCH
XBRL Taxonomy
Extension Schema Document
101.CAL
XBRL Taxonomy
Extension Calculation Linkbase Document
101.LAB
XBRL Taxonomy
Extension Label Linkbase Document
101.PRE
XBRL Taxonomy
Extension Presentation Linkbase Document
101.DEF
XBRL Taxonomy
Extension Definition Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
51
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its
behalf by the undersigned Chief Financial Officer hereunto duly
authorized.
CAPITAL CITY
BANK GROUP,
INC.
(Registrant)
/s/ Jeptha E. Larkin
Jeptha E. Larkin
Executive Vice President
and Chief Financial Officer
(Mr. Larkin is the Principal Financial
Officer and has
been duly authorized to sign on behalf of the Registrant)
Date: July 31, 2025