CAPITAL CITY BANK GROUP INC
For the period ended Sep 30, 2024. Filed Nov 4, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 4, 2024
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Item 6. Exhibits
Signatures
INTRODUCTORY NOTE
Caution Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations,
estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of
which are beyond our control.
The words “may,” “could,” “should,” “would,” “believe,”
“anticipate,” “estimate,” “expect,” “intend,” “plan,”
“target,” “vision,” “goal,” 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,
2023,
as
amended (the
“2023 Form
10-K”), as
updated
in our
subsequent quarterly
reports
filed
on Form
10-Q,
as
well as,
among other factors:
our ability to successfully manage credit risk, interest rate risk, liquidity risk, and other risks inherent to our industry;
the effects of changes in the level of checking or savings account deposits and the competition for deposits on our funding costs, net
interest margin and ability to replace maturing deposits and advances;
legislative or regulatory changes;
adverse developments in the financial services industry generally;
inflation, interest rate, market and monetary fluctuations;
uncertainty in the pricing of residential mortgage loans that we sell, as well as competition for the mortgage servicing rights related to these
loans;
interest rate risk and price risk resulting from retaining mortgage servicing rights and the effects of higher interest rates on our loan
origination volumes;
changes in monetary and fiscal policies of the U.S. Government;
the cost and effects of cybersecurity incidents or other failures, interruptions, or security breaches of our systems or those of our customers
or third-party providers;
the effects of fraud related to debit card products;
the accuracy of our financial statement estimates and assumptions;
changes in accounting principles, policies, practices or guidelines;
the frequency and magnitude of foreclosure of our loans;
the effects of our lack of a diversified loan portfolio;
the strength of the local economies in which we operate;
our ability to declare and pay dividends;
structural changes in the markets for origination, sale and servicing of residential mortgages;
our ability to retain key personnel;
the effects of natural disasters (including hurricanes), widespread health emergencies (including pandemics), military conflict, terrorism,
civil unrest or other geopolitical events;
our ability to comply with the extensive laws and regulations to which we are subject;
the impact of the restatement of our previously issued consolidated statements of cash flows;
any deficiencies in the processes undertaken to effect these restatements and to identify and correct all errors in our historical financial
statements that may require restatement;
any inability to implement and maintain effective internal control over financial reporting and/or disclosure control or inability to
remediate our existing material weaknesses in our internal controls deemed ineffective;
the willingness of clients to accept third-party products and services rather than our products and services;
technological changes;
the outcomes of litigation or regulatory proceedings;
negative publicity and the impact on our reputation;
changes in consumer spending and saving habits;
growth and profitability of our noninterest income;
the limited trading activity of our common stock;
the concentration of ownership of our common stock;
anti-takeover provisions under federal and state law as well as our Articles of Incorporation and our Bylaws;
other risks described from time to time in our filings with the Securities and Exchange Commission; and
our ability to manage the risks involved in the foregoing.
However, other factors besides those listed in
or discussed in this Form 10-Q also could adversely affect our results,
and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties.
Any forward-looking
statements made by us or on our behalf speak only as of the date they are made.
We do not undertake to update any forward-looking
statement, except as required by applicable law.
PART
I.
FINANCIAL INFORMATION
GROUP,
INC.
OF FINANCIAL CONDITION
December 31,
(Dollars in Thousands, Except Par Value)
ASSETS
Cash and Due From Banks
$
83,431
$
83,118
Federal Funds Sold and Interest Bearing Deposits
261,779
228,949
Total Cash and Cash Equivalents
345,210
312,067
Investment Securities, Available
for Sale, at fair value (amortized cost of $
356,994
and $
367,747
)
336,187
337,902
Investment Securities, Held to Maturity (fair value of $
542,328
and $
591,751
)
561,480
625,022
6,976
3,450
Total Investment
Securities
904,643
966,374
Loans Held For Sale, at fair value
31,251
28,211
(29,836)
(29,941)
Loans Held for Investment, Net
2,653,260
2,703,977
Premises and Equipment, Net
81,876
81,266
Goodwill and Other Intangibles
92,813
92,933
Other Real Estate Owned
115,613
119,648
Total Assets
$
$
LIABILITIES
Deposits:
Noninterest Bearing Deposits
$
1,330,715
$
1,377,934
Interest Bearing Deposits
2,248,362
2,323,888
Total Deposits
3,579,077
3,701,822
37,268
35,341
52,887
52,887
Other Long-Term
Other Liabilities
71,974
66,080
Total Liabilities
3,742,000
3,856,445
Temporary Equity
6,817
7,407
SHAREOWNERS’ EQUITY
Preferred Stock, $
0.01
par value;
3,000,000
shares authorized;
no
shares issued and outstanding
Common Stock, $
0.01
par value;
90,000,000
shares authorized;
and
16,950,222
shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively
Additional Paid-In Capital
36,070
36,326
Retained Earnings
454,342
426,275
Accumulated Other Comprehensive Loss, net of tax
Total Shareowners’
Equity
476,499
440,625
Total Liabilities, Temporary
Equity, and Shareowners’ Equity
$
$
GROUP,
INC.
OF INCOME
(Dollars in Thousands, Except Per Share
Data)
INTEREST INCOME
Loans, including Fees
$
41,659
$
39,344
$
123,480
$
111,845
Investment Securities:
Taxable
4,149
4,550
12,385
14,265
Tax Exempt
Funds Sold and Interest Bearing Deposits
3,514
1,848
9,031
8,741
Total Interest Income
49,328
45,753
144,914
134,886
INTEREST EXPENSE
8,223
5,214
24,396
11,710
1,542
1,868
1,800
Other Long-Term
Total Interest Expense
9,117
6,473
27,079
15,067
NET INTEREST INCOME
40,211
39,280
117,835
119,819
1,206
2,393
3,330
7,689
Net Interest Income After Provision For Credit Losses
39,005
36,887
114,505
112,130
NONINTEREST INCOME
5,512
5,456
16,139
16,021
3,624
3,684
11,010
11,205
Wealth Management
Fees
4,770
3,984
13,891
12,061
3,966
1,839
11,225
8,072
Other
1,641
1,765
4,951
7,093
Total Noninterest
Income
19,513
16,728
57,216
54,452
NONINTEREST EXPENSE
Compensation
25,800
23,003
74,613
69,965
Occupancy, Net
7,098
6,980
21,089
20,562
Other
10,023
9,122
27,831
26,539
Total Noninterest
Expense
42,921
39,105
123,533
117,066
INCOME BEFORE INCOME TAXES
15,597
14,510
48,188
49,516
2,980
3,004
9,705
10,130
NET INCOME
12,617
11,506
38,483
39,386
Loss Attributable to Noncontrolling Interests
1,149
1,342
1,153
NET INCOME ATTRIBUTABLE
TO COMMON SHAREOWNERS
$
13,118
$
12,655
$
39,825
$
40,539
BASIC NET INCOME PER SHARE
$
0.77
$
0.75
$
2.35
$
2.38
DILUTED NET INCOME PER SHARE
$
0.77
$
0.74
$
2.35
$
2.38
Average Common
Basic Shares Outstanding
16,943
16,985
16,942
17,001
Average Common
Diluted Shares Outstanding
16,979
17,025
16,966
17,031
GROUP,
INC.
OF COMPREHENSIVE INCOME (LOSS)
NET INCOME ATTRIBUTABLE
TO COMMON SHAREOWNERS
$
13,118
$
12,655
$
39,825
$
40,539
Other comprehensive income (loss), before
tax:
Investment Securities:
Change in net unrealized loss on securities available for sale
9,505
(3,405)
9,099
Amortization of unrealized losses on securities transferred from
available for sale to held to maturity
2,521
2,628
Derivative:
Change in net unrealized gain on effective cash flow
derivative
(1,261)
(873)
Benefit Plans:
Pension plan settlement
(217)
Total Benefit Plans
(217)
Other comprehensive income (loss), before
tax
9,029
(1,748)
10,747
3,480
Deferred tax expense (benefit) related to other comprehensive income
2,435
(444)
2,683
Other comprehensive income (loss), net of tax
6,594
(1,304)
8,064
2,553
TOTAL COMPREHENSIVE
INCOME
$
19,712
$
11,351
$
47,889
$
43,092
GROUP,
INC.
OF CHANGES IN SHAREOWNERS’ EQUITY
Accumulated
Other
Additional
Comprehensive
Shares
Common
Paid-In
Retained
(Loss) Income,
(Dollars In Thousands, Except Share Data)
Outstanding
Stock
Capital
Earnings
Net of Taxes
Total
Balance, July 1, 2024
16,941,553
$
$
35,547
$
445,959
$
(20,676)
$
460,999
13,118
13,118
Reclassification to Temporary Equity
(1)
(838)
(838)
6,594
6,594
0.2300
(3,897)
(3,897)
2,817
Balance, September 30, 2024
$
$
36,070
$
454,342
$
$
476,499
Balance, July 1, 2023
16,991,634
$
$
36,853
$
408,771
$
(33,372)
$
412,422
12,655
12,655
Other Comprehensive Loss, net of tax
(1,304)
(1,304)
0.1800
(3,396)
(3,396)
(36,411)
(1,099)
(1,099)
2,530
Balance, September 30, 2023
16,957,753
$
$
36,182
$
418,030
$
$
419,706
Balance, January 1, 2024
16,950,222
$
$
36,326
$
426,275
$
$
440,625
39,825
39,825
Reclassification to Temporary Equity
(1)
(751)
(751)
8,064
8,064
0.6500
(82,540)
(2,330)
(2,330)
1,139
1,139
76,688
(1)
Balance, September 30, 2024
$
$
36,070
$
454,342
$
$
476,499
Balance, January 1, 2023
16,986,785
$
$
37,331
$
387,009
$
(37,229)
$
387,281
40,539
40,539
2,553
2,553
0.3600
(9,518)
(9,518)
(102,147)
(3,121)
(3,121)
1,110
1,110
73,115
Balance, September 30, 2023
16,957,753
$
$
36,182
$
418,030
$
$
419,706
(1)
Adjustments to redemption value for non-controlling
interest in Capital City Home Loans, LLC ("CCHL")
GROUP,
INC.
OF CASH FLOWS
CASH FLOWS FROM OPERATING
ACTIVITIES
$
39,825
$
40,539
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
3,330
7,689
Depreciation
5,798
5,920
Amortization of Premiums, Discounts and Fees, net
3,130
3,216
Amortization of Intangible Asset
Pension Plan Settlement Gain
(291)
Originations of Loans Held-for-Sale
(366,700)
(308,263)
Proceeds From Sales of Loans Held-for-Sale
369,063
303,731
(11,225)
(8,072)
Net Additions for Capitalized Mortgage Servicing Rights
(138)
(392)
Stock Compensation
1,139
1,110
Deferred Income Taxes (Benefit)
1,400
(2,464)
Net Change in Operating Leases
(12)
Net Loss (Gain) on Sales and Write-Downs of Other Real Estate
Owned
(1,915)
Net Decrease in Other Assets
1,738
8,207
Net Increase in Other Liabilities
4,645
1,069
Net Cash Provided By Operating Activities
52,334
50,192
CASH FLOWS FROM INVESTING ACTIVITIES
Securities Held to Maturity:
Purchases
(20,287)
Proceeds from Payments, Maturities, and Calls
83,657
28,159
Sale:
Purchases
(49,436)
(9,399)
Proceeds from Sale of Securities
30,420
Proceeds from Payments, Maturities, and Calls
55,229
53,045
Equity Securities:
Net Decrease in Equity Securities
Purchases of Loans Held for Investment
(302)
(2,249)
Proceeds from Sales of Loans
31,462
39,125
Net Decrease (Increase) in Loans Held for Investment
19,779
(194,631)
Proceeds From Sales of Other Real Estate Owned
3,840
Purchases of Premises and Equipment
(6,442)
(5,459)
Net Cash Provided by (Used In) Investing Activities
113,851
(57,149)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Deposits
(122,745)
(398,872)
Net Increase (Decrease) in Short-Term
1,729
(15,097)
Net Increase (Decrease) in Other Long-Term
(149)
Dividends Paid
(9,518)
Payments to Repurchase Common Stock
(2,330)
(3,121)
Proceeds from Issuance of Common Stock Under Purchase Plans
Net Cash Used In by Financing Activities
(133,042)
(426,195)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
33,143
(433,152)
Cash and Cash Equivalents at Beginning of Period
312,067
600,650
Cash and Cash Equivalents at End of Period
$
345,210
167,498
Supplemental Cash Flow Disclosures:
Interest Paid
$
26,143
$
15,026
Income Taxes Paid
$
5,741
$
7,395
Noncash Investing Activities:
Loans and Premises Transferred to Other Real Estate Owned
$
$
1,495
Loans Transferred from Held for Investment
to Held for Sale, net
$
25,640
$
33,625
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, 2023 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 2023 Form
10-K, as amended.
Accounting Standards Updates
Proposed Accounting Standards
,
ASU 2023-01, “Leases (Topic
:
Common Control Arrangements.” Accounting Standards
Update (“ASU”) 2023-01 requires entities to amortize leasehold
improvements associated with common control leases over the useful
life to the common control group. ASU 2023-01 also provides certain
practical expedients applicable to private companies and not-
for-profit organizations. The standard is effective
for the Company on January 1, 2024. As the Company does not have any such
common control leases, adoption of this standard did not have any immediate
impact on its consolidated financial statements and
related disclosures.
ASU 2023-02, “Investments—Equity Method and Joint Ventures
(Topic
: Accounting for Investments in Tax
Credit Structures
Using the Proportional Amortization Method.” ASU 2023-02 is intended
to improve the accounting and disclosures for investments in
tax credit structures. ASU 2023-02 allows entities to elect to account for qualifying
tax equity investments using the proportional
amortization method, regardless of the program giving rise to the
related income tax credits. Previously,
this method was only
available for qualifying tax equity investments in low-income housing
tax credit structures. The standard was effective for the
Company on January 1, 2024. As the Company does not have any such investments
in tax credit structures that are accounted for
using the proportional amortization method, adoption of this standard did not have
any immediate impact on its consolidated financial
statements or disclosures.
ASU 2023-06, “Disclosure Improvements:
Codification Amendments in Response to the SEC’s
Disclosure Update and Simplification
Initiative.”
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. The
Company is currently evaluating the provisions of the amendments and
the impact on its future consolidated statements.
ASU 2023-07, “Improvements to Reportable
Segment Disclosures.”
ASU 2023-07 requires disclosure of significant segment expenses
and other segment items on an interim and annual basis. The standard is effective
for fiscal years beginning after December 15, 2023,
and for interim periods beginning after December 15, 2024. The Company
is currently evaluating the provisions of the amendments
and the impact on its future consolidated statements.
ASU 2023-09, ”Income Taxes
(Topic
- – Improvements to Income Tax
Disclosures.”
ASU 2023-09 is intended to increase
transparency about income tax information by requiring consistent categories
and greater disaggregation of information in the rate
reconciliation and income taxes paid, disaggregated by jurisdiction. This
guidance will be effective for annual periods beginning after
December 15, 2024. The Company is currently evaluating the provisions
of the amendments and the impact on its future consolidated
statements.
NOTE 2 –
INVESTMENT SECURITIES
Investment Portfolio Composition
. The following table summarizes the amortized cost and related fair value of investment
securities available-for-sale (“AFS”) and securities held-to-maturity (“HTM”)
and the corresponding amounts of gross
unrealized gains and losses.
Sale
Amortized
Allowance for
Fair
Cost
Gains
Losses
Credit Losses
Value
$
51,082
$
$
$
$
50,646
130,176
4,909
125,330
43,258
3,239
(4)
40,017
(1)
68,054
8,274
59,781
56,328
3,932
(79)
52,317
(2)
8,096
8,096
Total
$
356,994
$
$
21,012
$
(83)
$
336,187
$
25,947
$
$
1,269
$
$
24,679
152,983
8,053
145,034
43,951
4,861
(8)
39,083
(1)
73,015
9,714
63,303
63,600
6,031
(17)
57,552
(2)
8,251
8,251
Total
$
367,747
$
$
29,928
$
(25)
$
337,902
Amortized
Fair
Cost
Gains
Losses
Value
$
397,977
$
$
7,424
$
390,553
(1)
163,503
11,884
151,775
Total
$
561,480
$
$
19,308
$
542,328
$
457,681
$
$
16,492
$
441,189
(1)
167,341
16,792
150,562
Total
$
625,022
$
$
33,284
$
591,751
(1)
Comprised of residential mortgage-backed
securities.
(2)
Includes Federal Home Loan Bank and Federal Reserve Bank stock, recorded
at cost of $
3.0
5.1
million,
respectively,
at September 30, 2024 and $
3.2
5.1
million, respectively,
At September 30, 2024 and December 31, 2023, the investment portfolio
had $
7.0
3.5
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 $
413.6
578.5
million at September 30, 2024 and December 31, 2023, 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 is a restricted investment carried at par value ($
per share), which approximates its fair value.
No ready market exists for the
FHLB stock, and it has no quoted market value; however,
the Bank may request redemption at par value of any stock in excess of the
amount the Bank is required to hold.
Stock redemptions are made at the discretion of the FHLB.
Investment Sales.
There were
no
sales of investment securities for the three and nine months ended September 30,
2024 and $
30.4
million in sales for the three and nine months ended September 30, 2023.
Maturity Distribution
.
At September 30, 2024, 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 (“MBS”) and certain amortizing U.S. government
agency securities are shown
separately because they are not due at a certain maturity date.
Sale
Amortized Cost
Amortized Cost
Due in one year or less
$
32,570
$
31,822
$
227,491
$
224,457
Due after one year through five years
152,256
145,849
170,486
166,096
Due after five year through ten years
26,898
23,813
68,054
59,781
163,503
151,775
69,120
66,826
8,096
8,096
Total
$
356,994
$
336,187
$
561,480
$
542,328
Unrealized Losses on Investment Securities.
The following table summarizes the available for sale and held to maturity investment
securities with unrealized losses aggregated by major security type and length
of time in a continuous unrealized loss position:
Less Than
Greater Than
12 Months
12 Months
Total
Fair
Fair
Fair
Value
Losses
Value
Losses
Value
Losses
Sale
$
$
$
17,490
$
$
17,490
$
10,677
106,912
4,877
117,589
4,909
1,904
37,262
3,099
39,166
3,239
59,709
8,274
59,709
8,274
51,417
3,820
52,396
3,932
Total
$
13,560
$
$
272,790
$
20,728
$
286,350
$
21,012
117,561
1,063
272,992
6,361
390,553
7,424
2,954
130,035
11,880
132,989
11,884
Total
$
120,515
$
1,067
$
403,027
$
18,241
$
523,542
$
19,308
Sale
$
$
$
19,751
$
1,269
$
19,751
$
1,269
12,890
121,220
7,979
134,110
8,053
1,149
37,785
4,830
38,934
4,861
63,195
9,714
63,218
9,714
57,568
6,031
57,568
6,031
Total
$
14,062
$
$
299,519
$
29,823
$
313,581
$
29,928
153,880
3,178
287,310
13,314
441,190
16,492
148,282
16,778
149,068
16,792
Total
$
154,666
$
3,192
$
435,592
$
30,092
$
590,258
$
33,284
At September 30, 2024, there were
positions (combined AFS and HTM) with unrealized losses totaling $
40.3
of these
positions are U.S. Treasury bonds and
carry the full faith and credit of the U.S. Government.
are U.S. government agency
securities issued by U.S. government sponsored entities.
We believe
the long history of no credit losses on government securities
indicates that the expectation of nonpayment of the amortized cost basis is effectively
zero.
At September 30, 2024, all collateralized
mortgage obligation securities, mortgage-backed securities, Small Business
Administration securities, U.S. Agency,
and U.S. Treasury
bonds held were AAA rated.
The remaining
positions (municipal securities and corporate bonds) have a credit component.
At
September 30, 2024, corporate debt securities had an allowance for credit
losses of $
79,000
and municipal securities had an allowance
of $
4,000
.
Credit Quality Indicators
The Company monitors the credit quality of its investment securities through
various risk management procedures, including the
monitoring of credit ratings.
A majority of the debt securities in the Company’s
investment portfolio were issued by a U.S.
government entity or agency and are either explicitly or implicitly guaranteed
by the U.S. government.
The Company believes the
long history of no credit losses on these securities indicates that the expectation
of nonpayment of the amortized cost basis is
effectively zero, even if the U.S. government were
to technically default.
Further, certain municipal securities held by the Company
have been pre-refunded and secured by government guaranteed
treasuries.
Therefore, for the aforementioned securities, the Company
does
no
t assess or record expected credit losses due to the zero loss assumption.
The Company monitors the credit quality of its
municipal and corporate securities portfolio via credit ratings
which are updated on a quarterly basis.
On a quarterly basis, municipal
and corporate securities in an unrealized loss position are evaluated to determine
if the loss is attributable to credit related factors and
if an allowance for credit loss is needed.
NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE
FOR CREDIT LOSSES
Loan Portfolio Composition
.
The composition of the held for investment (“HFI”) loan portfolio was as follows:
$
194,625
$
225,190
218,899
196,091
819,955
825,456
(1)
210,988
210,920
(2)
214,683
272,042
Loans Held For Investment, Net of Unearned Income
$
$
(1)
Includes loans in process balances of $
2.7
3.2
(2)
Includes overdraft balances of $
1.4
1.0
Net deferred loan costs, which include premiums on purchased loans,
included in loans were $
7.9
million at September 30, 2024 and
$
7.8
million at December 31, 2023.
Accrued interest receivable on loans which is excluded from amortized
cost totaled $
10.6
million at September 30, 2024 and $
10.1
million at December 31, 2023, and is reported separately in Other Assets.
The Company has pledged a blanket floating lien on all 1-4 family residential mortgage
loans, commercial real estate mortgage loans,
and home equity loans to support available borrowing capacity at the FHLB of
Atlanta and has pledged a blanket floating lien on all
consumer loans, commercial loans, and construction loans to support available
borrowing capacity at the Federal Reserve Bank of
Atlanta.
Loan Purchase and Sales
.
The Company will periodically purchase newly originated 1-4 family real
estate secured adjustable-rate
loans from CCHL, a related party.
Residential loan purchases from CCHL totaled $
111.1
293.1
million for the nine
months ended September 30, 2024 and September 30, 2023, respectively,
and were not credit impaired.
.
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 2023 Form
10-K, as amended.
The following table details the activity in the allowance for credit losses by
portfolio segment.
Allocation of a portion of the
allowance to one category of loans does not preclude its availability to
absorb losses in other categories.
Commercial,
Financial,
Commercial
Agricultural
Construction
Mortgage
Residential
Home Equity
Total
$
1,575
$
1,751
$
6,076
$
14,788
$
1,865
$
3,164
$
29,219
(240)
(49)
1,045
1,879
(331)
(3)
(23)
(1,926)
(2,283)
1,021
Net (Charge-Offs) Recoveries
(155)
(1,233)
(1,262)
$
1,554
$
2,193
$
6,625
$
14,636
$
1,852
$
2,976
$
29,836
$
1,482
$
2,502
$
5,782
$
15,056
$
1,818
$
3,301
$
29,941
(309)
(551)
3,310
3,890
(1,013)
(3)
(17)
(99)
(5,746)
(6,878)
2,111
2,883
Net (Charge-Offs) Recoveries
(737)
(3,635)
(3,995)
$
1,554
$
2,193
$
6,625
$
14,636
$
1,852
$
2,976
$
29,836
September 30, 2023
$
1,446
$
2,848
$
5,453
$
13,388
$
1,783
$
3,325
$
28,243
(59)
(536)
1,356
(71)
1,219
1,993
(76)
(1,999)
(2,075)
Net Charge-Offs
(48)
(1,205)
(1,153)
$
1,339
$
2,312
$
5,554
$
14,774
$
1,765
$
3,339
$
29,083
September 30, 2023
$
1,506
$
2,654
$
4,815
$
10,741
$
1,864
$
3,488
$
25,068
(67)
(344)
3,814
(269)
3,218
7,175
(294)
(120)
(39)
(6,252)
(6,705)
2,885
3,545
Net Charge-Offs
(100)
(84)
(3,367)
(3,160)
$
1,339
$
2,312
$
5,554
$
14,774
$
1,765
$
3,339
$
29,083
For the nine months ended September 30, 2024, the allowance for
loans HFI decreased by $
0.1
million and reflected a provision
expense of $
3.9
million and net loan charge-offs of $
4.0
The decrease in the allowance was primarily due to lower loan
balances offset by higher loss rates and loan grade migration
.
For the nine months ended September 30, 2023, the allowance for loans
HFI increased by $
4.0
million and reflected a provision expense of $
7.2
million and net loan charge-offs of $
3.2
The increase
was primarily driven by incremental reserves needed for loan growth and
a higher loss rate for the residential real estate portfolio due
to slower prepayment speeds.
Unemployment forecast scenarios were utilized to estimate probability
of default and are weighted
based on management’s estimate
of probability.
See Note 8 – Commitments and Contingencies for information on the allowance for
off-balance sheet credit commitments.
Loan Portfolio Aging.
A loan is defined as a past due loan when one full payment is past due or a contractual maturity
is over 30 days
past due (“DPD”).
The following table presents the aging of the amortized cost basis in accruing
past due loans by class of loans.
30-59
60-89
90 +
Total
Total
Total
DPD
DPD
DPD
Past Due
Current
Loans
Loans
$
$
$
$
$
193,816
$
$
194,625
2,025
2,025
216,552
218,899
818,870
819,955
1,070
1,459
1,018,892
3,595
209,478
210,988
3,697
3,893
209,508
1,282
214,683
Total
$
8,793
$
$
$
9,388
$
2,667,116
$
6,592
$
$
$
$
$
$
224,463
$
$
225,190
195,563
196,091
823,753
825,456
1,000,525
2,990
209,653
210,920
3,693
4,467
266,864
272,042
Total
$
5,942
$
$
$
6,855
$
2,720,821
$
6,242
$
Nonaccrual Loans
.
Loans are generally placed on nonaccrual status if principal or interest payments
become 90 days past due and/or
management deems the collectability of the principal and/or interest to
be doubtful.
Loans are returned to accrual status when the
principal and interest amounts contractually due are brought current
or when future payments are reasonably assured.
The following table presents the amortized cost basis of loans in nonaccrual
status and loans past due over 90 days and still on accrual
by class of loans.
With No
With
90 + Days
With No
With
90 + Days
ACL
ACL
Still Accruing
ACL
ACL
Still Accruing
$
$
$
$
$
$
2,293
1,302
1,705
1,285
1,282
Total Nonaccrual
Loans
$
2,797
$
3,795
$
$
2,486
$
3,756
$
Collateral Dependent Loans.
The following table presents the amortized cost basis of collateral-dependent
loans.
Non Real Estate
Non Real Estate
Secured
Secured
Secured
Secured
$
$
$
$
1,296
2,999
1,706
Total Collateral Dependent
Loans
$
3,503
$
$
3,277
$
A loan is collateral dependent when the borrower is experiencing financial
difficulty and repayment of the loan is dependent on
the
sale or operation of the underlying collateral.
The Bank’s collateral dependent
loan portfolio is comprised primarily of real estate secured loans, collateralized
by either residential
or commercial collateral types.
The loans are carried at fair value based on current values determined by
either independent appraisals
or internal evaluations, adjusted for selling costs or other amounts to be deducted
when estimating expected net sales proceeds.
Residential Real Estate Loans In Process of Foreclosure
.
At September 30, 2024 and December 31, 2023, the Company had $
0.7
0.5
million, respectively, in
1-4 family residential real estate loans for which formal foreclosure proceedings were
in
process.
Modifications to Borrowers Experiencing
Financial Difficulty.
Occasionally, the Company may
modify loans to borrowers who are
experiencing financial difficulty.
Loan modifications to borrowers in financial difficulty are loans in
which the Company has granted
an economic concession to the borrower that it would not otherwise consider.
In these instances, as part of a work-out alternative, the
Company will make concessions including the extension of the loan
term, a principal moratorium, a reduction in the interest rate, or a
combination thereof.
The impact of the modifications and defaults are factored into the allowance for credit
losses on a loan-by-loan
basis.
Thus, specific reserves are established based upon the results of either a
discounted cash flow analysis or the underlying
collateral value, if the loan is deemed to be collateral dependent.
A modified loan classification can be removed if the borrower’s
financial condition improves such that the borrower is no longer in financial difficulty,
the loan has not had any forgiveness of
principal or interest, and the loan is subsequently refinanced or restructured
at market terms and qualifies as a new loan.
At September 30, 2024, and December 31, 2023, the Company did
no
t have any modified loans made to borrowers due to the
borrower experiencing financial difficulty.
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 our lines of business to
monitor asset quality trends and the appropriateness of credit policies.
In addition, total borrower exposure limits are established and
concentration risk is monitored.
As part of this process, the overall composition of the portfolio is reviewed to gauge
diversification
of risk, client concentrations, industry group, loan type, geographic
area, or other relevant classifications of loans.
Specific segments
of the loan portfolio are monitored and reported to the Board on a quarterly
basis and have strategic plans in place to supplement
Board approved credit policies governing exposure limits and underwriting
standards.
Detailed below are the types of loans within
the Company’s loan portfolio
and risk characteristics unique to each.
Commercial, Financial, and Agricultural – Loans in this category
are primarily made based on identified cash flows of the borrower
with consideration given to underlying collateral and personal or
other guarantees.
Lending policy establishes debt service coverage
ratio limits that require a borrower’s cash flow to be sufficient
to cover principal and interest payments on all new and existing debt.
The majority of these loans are secured by the assets being financed or other business
assets such as accounts receivable, inventory,
or
equipment.
Loan to value ratios at origination are
governed by established policy guidelines.
Real Estate Construction – Loans in this category consist of short-term
construction loans, revolving and non-revolving credit lines
and construction/permanent loans made to individuals and investors to
finance the acquisition, development, construction or
rehabilitation of real property.
These loans are primarily made based on identified cash flows of the borrower
or project and generally
secured by the property being financed, including 1-4 family residential
properties and commercial properties that are either owner-
occupied or investment in nature.
These properties may include either vacant or improved property.
Construction loans are generally
based upon estimates of costs and value associated with the completed
project.
Collateral values are determined based upon third
party appraisals and evaluations.
Loan to value ratios at origination are governed by established policy
guidelines.
The disbursement
of funds for construction loans is made in relation to the progress of the project
and as such these loans are closely monitored by on-
site inspections.
Real Estate Commercial Mortgage – Loans in this category consists of commercial
mortgage loans secured by property that is either
owner-occupied or investment in nature.
These loans are primarily made based on identified cash flows of the borrower or
project
with consideration given to underlying real estate collateral and
personal guarantees.
Lending policy establishes debt service
coverage ratios and loan to value ratios specific to the property type.
Collateral values are determined based upon third party
appraisals and evaluations.
Real Estate Residential – Residential mortgage loans held in the Company’s
loan portfolio are made to borrowers that demonstrate the
ability to make scheduled payments with full consideration to underwriting
factors such as current income, employment status, current
assets, and other financial resources, credit history,
and the value of the collateral.
Collateral consists of mortgage liens on 1-4 family
residential properties.
The Company does not
originate sub-prime loans.
Real Estate Home Equity – Home equity loans and lines are made to qualified
individuals for legitimate purposes generally secured
by senior or junior mortgage liens on owner-occupied
1-4 family homes or vacation homes.
Borrower qualifications include
favorable credit history combined with supportive income and debt ratio
requirements and combined loan to value ratios within
established policy guidelines.
Consumer Loans – This loan portfolio includes personal installment loans,
direct and indirect automobile financing, and overdraft
lines of credit.
The majority of the consumer loan category consists of direct and indirect automobile
loans.
Lending policy
establishes maximum debt to income ratios, minimum credit scores, and
includes guidelines for verification of applicants’ income and
receipt of credit reports.
Credit Quality Indicators
.
As part of the ongoing monitoring of the Company’s
loan portfolio quality, management
categorizes loans
into risk categories based on relevant information about the ability of borrowers
to service their debt such as: current financial
information, historical payment performance, credit documentation,
and current economic and market trends, among other
factors.
Risk ratings are assigned to each loan and revised as needed through established monitoring
procedures for individual loan
relationships over a predetermined amount and review of smaller balance homogenous
loan pools.
The Company uses the definitions
noted below for categorizing and managing its criticized loans.
Loans categorized as “Pass” do not meet the criteria set forth below
and are not considered criticized.
Special Mention – Loans in this category are presently protected from loss, but
weaknesses are apparent which, if not corrected, could
cause future problems.
Loans in this category may not meet required underwriting criteria and
have no mitigating factors.
More than
the ordinary amount of attention is warranted for these loans.
Substandard – Loans in this category exhibit well-defined weaknesses that would
typically bring normal repayment into jeopardy.
These loans are no longer adequately protected due to well-defined
weaknesses that affect the repayment capacity of the
borrower.
The possibility of loss is much more evident and above average supervision is required
for these loans.
Doubtful – Loans in this category have all the weaknesses inherent in a loan categorized
as Substandard, with the characteristic that
the weaknesses make collection or liquidation in full, on the basis of
currently existing facts, conditions, and values, highly
questionable and improbable.
Performing/Nonperforming – Loans within certain homogenous
loan pools (home equity and consumer) are not individually reviewed,
but are monitored for credit quality via the aging status of the loan and by payment
activity.
The performing or nonperforming status
is updated on an on-going basis dependent upon improvement
and deterioration in credit quality.
The following tables summarize gross loans held for investment at September
30, 2024 and December 31, 2023 and current period
gross write-offs for the nine months ended September 30, 2024
and twelve months ended December 31, 2023 by years of origination
and internally assigned credit risk ratings (refer to Credit Risk Management
section for detail on risk rating system).
Term
Loans by Origination Year
Revolving
As of September 30, 2024
Prior
Loans
Total
Commercial, Financial,
Agriculture:
Pass
$
28,841
$
45,675
$
41,999
$
20,867
$
6,012
$
10,488
$
39,124
$
193,006
1,001
Total
$
29,041
$
46,009
$
42,613
$
20,973
$
6,114
$
10,574
$
39,301
$
194,625
$
$
$
$
$
$
$
$
1,013
Real Estate - Construction:
Pass
$
72,961
$
101,277
$
34,631
$
4,129
$
$
$
$
213,850
3,472
1,255
4,727
Total
$
76,433
$
101,277
$
35,933
$
4,404
$
$
$
$
218,899
Real Estate - Commercial
Mortgage:
Pass
$
60,755
$
117,689
$
234,557
$
124,203
$
90,813
$
128,123
$
23,897
$
780,037
2,947
14,385
5,349
24,019
5,162
2,330
3,477
2,526
1,649
15,899
Total
$
66,090
$
122,966
$
252,419
$
124,958
$
93,857
$
135,121
$
24,544
$
819,955
$
$
$
$
$
$
$
$
Real Estate - Residential:
Pass
$
117,374
$
330,178
$
367,873
$
72,716
$
31,994
$
80,541
$
11,118
$
1,011,794
1,176
2,607
2,091
2,568
1,173
3,596
9,545
Total
$
117,374
$
330,561
$
369,964
$
76,460
$
33,778
$
84,691
$
11,118
$
$
$
$
$
$
$
$
$
Real Estate - Home Equity:
$
$
$
$
$
$
$
208,073
$
210,107
Total
$
$
$
$
$
$
$
208,954
$
210,988
$
$
$
$
$
$
$
$
Consumer:
$
24,067
$
49,898
$
63,085
$
48,338
$
13,116
$
5,851
$
9,045
$
213,400
1,283
Total
$
24,247
$
50,274
$
63,436
$
48,579
$
13,226
$
5,863
$
9,058
$
214,683
$
1,871
$
1,142
$
1,690
$
$
$
$
$
5,746
Term
Loans by Origination Year
Revolving
As of December 31, 2023
Prior
Loans
Total
Commercial, Financial,
Agriculture:
Pass
$
57,320
$
66,671
$
28,933
$
10,610
$
7,758
$
7,502
$
44,350
$
223,144
1,227
Total
$
57,652
$
67,456
$
29,387
$
10,697
$
7,787
$
7,624
$
44,587
$
225,190
$
$
$
$
$
$
$
$
Real Estate - Construction:
Pass
$
101,684
$
68,265
$
18,181
$
$
$
$
4,617
$
192,935
1,882
1,274
Total
$
102,315
$
68,812
$
19,296
$
$
$
$
4,617
$
196,091
Real Estate - Commercial
Mortgage:
Pass
$
117,840
$
275,079
$
135,663
$
101,210
$
43,878
$
109,878
$
18,367
$
801,915
3,266
5,684
1,358
11,110
1,226
6,695
1,637
1,574
12,431
Total
$
121,106
$
281,989
$
142,358
$
103,076
$
45,841
$
112,025
$
19,061
$
825,456
$
$
$
$
$
$
$
$
Real Estate - Residential:
Pass
$
372,394
$
400,437
$
83,108
$
35,879
$
24,848
$
68,685
$
8,252
$
993,603
1,255
1,110
1,906
1,626
1,007
3,142
9,361
Total
$
373,232
$
401,636
$
85,097
$
38,007
$
25,855
$
72,140
$
8,252
$
$
$
$
$
$
$
$
$
Real Estate - Home Equity:
$
$
$
$
$
$
$
207,509
$
209,921
Total
$
$
$
$
$
$
$
208,508
$
210,920
$
$
$
$
$
$
$
$
Consumer:
$
68,496
$
90,031
$
70,882
$
21,314
$
10,210
$
4,258
$
5,431
$
270,622
1,420
Total
$
68,789
$
90,386
$
70,940
$
21,318
$
10,210
$
4,258
$
6,141
$
272,042
$
3,137
$
3,224
$
1,362
$
$
$
$
$
8,543
NOTE 4 – MORTGAGE BANKING ACTIVITIES
The Company’s mortgage
banking activities include mandatory delivery loan sales, forward sales contracts used
to manage residential
loan pipeline price risk, utilization of warehouse lines to fund secondary
market residential loan closings, and residential mortgage
servicing.
Residential Mortgage Loan Production
The Company originates, markets, and services conventional and
government-sponsored residential mortgage loans.
Generally,
conforming fixed rate residential mortgage loans are held for sale in the
secondary market and non-conforming and adjustable-rate
residential mortgage loans may be held for investment.
The volume of residential mortgage loans originated for sale and secondary
market prices are the primary drivers of origination revenue.
Residential mortgage loan commitments are generally outstanding for 30
to 90 days, which represents the typical period from
commitment to originate a residential mortgage loan to when the closed
loan is sold to an investor.
Residential mortgage loan
commitments are subject to both credit and price risk.
Credit risk is managed through underwriting policies and procedures, including
collateral requirements, which are generally accepted by the secondary
loan markets.
Price risk is primarily related to interest rate
fluctuations and is partially managed through forward sales of residential
mortgage-backed securities (primarily to-be announced
securities, or TBAs) or mandatory delivery commitments with investors.
The unpaid principal balance of residential mortgage loans held for sale,
notional amounts of derivative contracts related to residential
mortgage loan commitments,
such as interest rate lock commitments (“IRLC’s”)
and forward contract sales and their related fair
values are set- forth below.
Unpaid Principal
Unpaid Principal
Balance/Notional
Balance/Notional
Residential Mortgage Loans Held for Sale
$
30,186
$
31,251
$
27,944
$
28,211
(1)
29,734
23,545
(2)
31,500
24,500
(1)
Recorded in other assets at fair value
(2)
Recorded in other assets and other liabilities at
fair value, respectively
At September 30, 2024, the Company had
no
residential mortgage loans held for sale 30-89 days past due and $
0.7
million of loans
were on nonaccrual status. At December 31, 2023, the Company had
no
residential mortgage loans held for sale 30-89 days past due
and $
0.7
million of loans were on nonaccrual status.
Mortgage banking revenue was as follows:
Net realized gains on sales of mortgage loans
$
3,664
$
1,350
$
8,499
$
4,843
Net change in unrealized gain on mortgage loans held for sale
(1,223)
(1,700)
Net change in the fair value of IRLC's
(135)
(412)
Net change in the fair value of forward sales contracts
(52)
(5)
Pair-Offs on net settlement of forward sales contracts
(383)
(173)
Mortgage servicing rights additions
Net origination fees
1,501
2,051
3,970
Total mortgage banking
revenues
$
3,966
$
1,839
$
11,225
$
8,072
Residential Mortgage Servicing
The Company may retain the right to service residential mortgage loans
sold.
The unpaid principal balance of loans serviced for
others is the primary driver of servicing revenue.
The following represents a summary of mortgage servicing rights.
Number of residential mortgage loans serviced for others
Outstanding principal balance of residential mortgage loans serviced
for others
$
130,292
$
108,897
interest rate
5.74%
5.37%
Remaining contractual term (in months)
Conforming conventional loans serviced by the Company are sold to Federal
National Mortgage Association (“FNMA”) on a non-
recourse basis, whereby foreclosure losses are generally the responsibility
of FNMA and not the Company.
The government loans
serviced by the Company are secured through the Government National
Mortgage Association (“GNMA”), whereby the Company is
insured against loss by the Federal Housing Administration or partially
guaranteed against loss by the Veterans
Administration.
At
September 30, 2024, the servicing portfolio balance consisted of
the following loan types: FNMA (
%), GNMA (
%), and private
investor (
%).
FNMA and private investor loans are structured as actual/actual payment remittance.
The Company had
no
delinquent residential mortgage loans in GNMA pools serviced by the Company
at September 30, 2024 and
December 31, 2023, respectively.
The Company had
no
repurchases for the three and nine months ended September 30, 2024, and
$
0.8
2.2
million for the three and nine months ended September 30, 2023, in delinquent
residential loans from the
GNMA pools.
When delinquent residential loans are repurchased, the Company
has the intention to modify their terms and include the
loans in new GNMA pools.
Activity in the capitalized mortgage servicing rights was as follows:
Beginning balance
$
$
$
$
2,599
Additions due to loans sold with servicing retained
Deletions and amortization
(46)
(45)
(154)
(79)
Sale of servicing rights
(2,287)
Ending balance
$
$
$
$
The Company did
no
t record any permanent impairment losses on mortgage servicing rights for the
three months ended September 30,
2024 or 2023.
The key unobservable inputs used in determining the fair value of the Company’s
mortgage servicing rights were as follows:
Minimum
Maximum
Minimum
Maximum
Discount rates
9.50%
12.00%
9.50%
12.00%
Annual prepayment speeds
9.79%
20.51%
11.23%
17.79%
Cost of servicing (per loan)
$
$
$
$
Changes in residential mortgage interest rates directly affect
the prepayment speeds used in valuing the Company’s
mortgage
servicing rights.
A separate third party model is used to estimate prepayment speeds based on interest rates, housing
turnover rates,
estimated loan curtailment, anticipated defaults, and other relevant factors.
The weighted average annual prepayment speed was
14.16
% at September 30, 2024 and
14.22
% at December 31, 2023.
Warehouse
Line Borrowings
The Company has the following warehouse lines of credit and master repurchase
agreements with various financial institutions at
September 30, 2024.
Amounts
Outstanding
$
million master repurchase agreement without defined expiration.
Interest is at the SOFR rate plus
2.00%
to
3.00%
, with a floor rate of
3.25%
to
4.25%
.
A cash pledge deposit of $
0.1
million is required by the lender.
$
1,954
$
million warehouse line of credit agreement expiring in
December 2024
.
Interest is at the SOFR plus
2.75%
,
to
3.25%
.
5,810
Total Warehouse
$
7,764
Warehouse
line borrowings are classified as short-term borrowings.
At December 31, 2023, warehouse line borrowings totaled $
8.4
million. At September 30, 2024, the Company had residential mortgage
loans held for sale pledged as collateral under the above
warehouse lines of credit and master repurchase agreements.
The above agreements also contain covenants which include certain
financial requirements, including maintenance of minimum tangible
net worth, minimum liquid assets, and maximum debt to net
worth ratio, as defined in the agreements.
The Company was in compliance with all significant debt covenants at September 30,
The Company has extended a $
million warehouse line of credit to CCHL, a
% owned subsidiary entity.
Balances and
transactions under this line of credit are eliminated in the Company’s
consolidated financial statements and thus not included in the
total short term borrowings noted on the Consolidated Statement of
Financial Condition.
The balance of this line of credit was $
35.9
31.4
NOTE 5 – DERIVATIVES
The Company enters into derivative financial instruments to manage exposures
that arise from business activities that result in the
receipt or payment of future known and uncertain cash amounts, the value of
which are determined by interest rates.
The Company’s
derivative financial instruments are used to manage differences in
the amount, timing, and duration of the Company’s
known or
expected cash receipts and its known or expected cash payments principally
related to the Company’s subordinated
debt.
Cash Flow Hedges of Interest Rate Risk
Interest rate swaps with notional amounts totaling $
million at September 30, 2024 were designed as a cash flow hedge for
subordinated debt.
Under the swap arrangement, the Company will pay a fixed interest rate of
2.50
% and receive a variable interest
rate based on three-month CME Term
SOFR (secured overnight financing rate).
For derivatives designated and that qualify as cash flow hedges of interest rate
risk, the gain or loss on the derivative is recorded in
accumulated other comprehensive income (“AOCI”) and subsequently
reclassified into interest expense in the same period(s) during
which the hedged transaction affects earnings. Amounts reported
in accumulated other comprehensive income related to derivatives
will be reclassified to interest expense as interest payments are made on the
Company’s variable-rate subordinated
debt.
The following table reflects the cash flow hedges included in the consolidated
statements of financial condition
.
Statement of Financial
Notional
Fair
Weighted Average
Condition Location
Amount
Value
Maturity (Years)
Interest rate swaps related to subordinated debt
$
30,000
$
4,444
5.8
Interest rate swaps related to subordinated debt
$
30,000
$
5,317
6.5
The following table presents the change in net gains (losses) recorded
in AOCI and the consolidated statements of income related to
the cash flow derivative instruments (interest rate swaps related to subordinated
debt) for the three and nine months ended September
30, 2024.
Change in Gain
Amount of Gain
(Loss) Recognized
(Loss) Reclassified
Category
in AOCI
from AOCI to Income
Three months ended September 30, 2024
$
(941)
$
Three months ended September 30, 2023
Nine months ended September 30, 2024
$
(652)
$
1,128
Nine months ended September 30, 2023
1,016
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 $
4.4
5.5
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 Statement of Financial Condition.
The Company’s operating
leases primarily relate to banking offices with remaining lease terms
from one to
years.
The Company’s
leases are not complex and do not contain residual value guarantees, variable
lease payments, or significant assumptions or judgments
made in applying the requirements of Topic
Operating leases with an initial term of 12 months or less are not recorded on the
Consolidated Statement of Financial Condition and the related lease expense is recognized on a straight-line basis over the lease term.
At September 30, 2024, the operating lease ROU assets and liabilities were $
25.2
25.8
million, respectively. At
December 31, 2023, ROU assets and liabilities were $
27.0
27.4
million, respectively.
The Company does not have any
finance leases and has recognized $
0.5
million of income for a short-term operating lease agreement in which the
Company is a lessor.
The table below summarizes our lease expense and other information related
to the Company’s operating leases.
Operating lease expense
$
$
$
2,509
$
2,114
Short-term lease expense
Total lease expense
$
1,070
$
$
3,127
$
2,552
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
1,095
$
$
2,315
$
2,131
Right-of-use assets obtained in exchange for new operating lease liabilities
3,048
remaining lease term — operating leases (in years)
16.7
18.4
16.7
18.4
discount rate — operating leases
3.5%
3.3%
3.5%
3.3%
The table below summarizes the maturity of remaining lease liabilities:
$
1,098
3,093
2,957
2,888
2,633
2029 and thereafter
20,690
Total
$
33,359
Less: Interest
(7,541)
Present Value
of Lease liability
$
25,818
At September 30, 2024, the Company had
one
additional operating lease obligation for a banking office (to be constructed)
that has
not yet commenced.
The lease has payments totaling $
3.8
million based on an initial contract term of
years.
Payments for the
banking office are expected to commence after the construction
period ends, which is expected to occur during the fourth quarter of
A related party is the lessor in a land lease with the Company.
The payments under the lease agreement provide for annual lease
payments of approximately $
0.1
million annually through December 2033, and thereafter,
increase by
% every
years until 2053 at
which time the rent amount will adjust based on reappraisal of the parcel rental
value.
The Company then has
four
successive options
to extend the lease for
five years
each with rental increases of 5% at each extension.
The aggregate remaining obligation of the lease
totaled $
2.2
million at September 30, 2024.
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all full-time
and eligible part-time associates and a
Supplemental Executive Retirement Plan (“SERP”) and a Supplemental
Executive Retirement Plan II (“SERP II”) covering its
executive officers.
The defined benefit plan was amended in December 2019 to remove plan eligibility
for new associates hired after
December 31, 2019.
The SERP II was adopted by the Company’s
Board on May 21, 2020 and covers certain executive officers that
were not covered by the SERP.
The components of the net periodic benefit cost for the Company’s
qualified benefit pension plan were as follows:
Service Cost
$
$
$
2,786
$
2,616
Interest Cost
1,524
1,458
4,572
4,374
Expected Return on Plan Assets
(2,029)
(1,701)
(6,087)
(5,104)
Prior Service Cost Amortization
Net Loss Amortization
Net Periodic Benefit Cost
$
$
$
1,394
$
2,591
Discount Rate
5.29%
5.63%
5.29%
5.63%
Long-term Rate of Return on Assets
6.75%
6.75%
6.75%
6.75%
The components of the net periodic benefit cost for the Company’s
SERP and SERP II were as follows:
Service Cost
$
$
$
$
Interest Cost
Prior Service Cost Amortization
Net Loss Amortization
(71)
(111)
(210)
(420)
Pension Settlement Gain
(291)
Net Periodic Benefit Cost
$
$
$
$
(203)
Discount Rate
5.11%
5.33%
5.11%
5.41%
During the month of June 2023, lump sum payments made under the SERP triggered
settlement accounting and remeasurement of the
plan at June 30, 2023.
In accordance with applicable accounting guidance for retirement benefit plans, the
Company recorded a
settlement gain of $
0.3
million in June 2023.
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 statements
of income.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Lending Commitments
.
The Company is a party to financial instruments with off-balance
sheet risks in the normal course of business
to meet the financing needs of its clients.
These financial instruments consist of commitments to extend credit and standby
letters of
credit.
The Company’s maximum exposure
to credit loss under standby letters of credit and commitments to extend credit is represented
by
the contractual amount of those instruments.
The Company uses the same credit policies in establishing commitments
and issuing
letters of credit as it does for on-balance sheet instruments.
The amounts associated with the Company’s
off-balance sheet
obligations were as follows:
Fixed
Variable
Total
Fixed
Variable
Total
Commitments to Extend Credit
(1)
$
214,353
$
499,853
$
714,206
$
207,605
$
534,745
$
742,350
Standby Letters of Credit
6,126
6,126
6,094
6,094
Total
$
220,479
$
499,853
$
720,332
$
213,699
$
534,745
$
748,444
(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.
$
3,139
$
3,120
$
3,191
$
2,989
(617)
(669)
$
2,522
$
3,502
$
2,522
$
3,502
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 and commitments
of up to $
8.9
million for a solar tax credit equity fund
investment.
At September 30, 2024, the amount remaining to be funded for the bank tech venture
capital and solar tax credit equity
investment fund commitments was $
0.4
1.2
million, respectively.
Contingencies
.
The Company is a party to lawsuits and claims arising out of the normal course of business.
In management's opinion,
there are
no
known pending claims or litigation, the outcome of which would, individually or in
the aggregate, have a material effect
on the consolidated results of operations, financial position, or cash flows
of the Company.
Indemnification Obligation
.
The Company is a member of the Visa U.S.A. network.
Visa U.S.A member banks are
required to
indemnify the Visa U.S.A.
network for potential future settlement of certain litigation (the “Covered Litigation”)
that relates to several
antitrust lawsuits challenging the practices of Visa
and MasterCard International.
In 2008, the Company, as a member
of the Visa
U.S.A. network, obtained Class B shares of Visa,
Inc. upon its initial public offering.
Since its initial public offering, Visa,
Inc. has
funded a litigation reserve for the Covered Litigation resulting in a reduction
in the Class B shares held by the Company.
During the
first quarter of 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 for its Class B shares.
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 approximate $
0.2
There was a $
0.5
million counterparty payment accrued and payable at September 30, 2024
due to a revision to the share
conversion rate related to additional funding by VISA of the merchant
litigation reserve.
NOTE 9 – FAIR VALUE
MEASUREMENTS
The fair value of an asset or liability is the price that would be received to sell that asset or paid
to transfer that liability in an orderly
transaction occurring in the principal market (or most advantageous market in
the absence of a principal market) for such asset or
liability.
In estimating fair value, the Company utilizes valuation techniques that are consistent with
the market approach, the income
approach and/or the cost approach.
Such valuation techniques are consistently applied.
Inputs to valuation techniques include the
assumptions that market participants would use in pricing an asset or liability.
Accounting Standards Codification Topic
establishes a fair value hierarchy for valuation inputs that gives the highest priority
to quoted prices in active markets for identical
assets or liabilities and the lowest priority to unobservable inputs.
The fair value hierarchy is as follows:
Level 1 Inputs -
Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting
entity has the
ability to access at the measurement date
.
Level 2 Inputs -
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly
or indirectly. These might
include quoted prices for similar assets or liabilities in active markets, quoted prices
for identical
or similar assets or liabilities in markets that are not active, inputs other
than quoted prices that are observable for the asset or
liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.)
or inputs that are derived principally from, or
corroborated, by market data by correlation or other means
.
Level 3 Inputs -
Unobservable inputs for determining the fair values of assets or liabilities that reflect
an entity’s own
assumptions about the assumptions that market participants would
use in pricing the assets or liabilities.
Assets and Liabilities Measured at Fair Value
on a Recurring Basis
Securities Available for Sale.
U.S. Treasury securities are reported at fair value
utilizing Level 1 inputs.
Other securities classified as
available for sale are reported at fair value utilizing Level 2 inputs.
For these securities, the Company obtains fair value measurements
from an independent pricing service.
The fair value measurements consider observable data that may include dealer quotes,
market
spreads, cash flows, the U.S. Treasury yield curve,
live trading levels, trade execution data, credit information and the bond’s
terms
and conditions, among other things.
In general, the Company does not purchase securities that have a complicated structure.
The Company’s entire portfolio consists of
traditional investments, nearly all of which are U.S. Treasury
obligations, federal agency bullet or mortgage pass-through
securities, or
general obligation or revenue-based municipal bonds.
Pricing for such instruments is easily obtained.
At least annually, the Company
will validate prices supplied by the independent pricing service by compari
ng them to prices obtained from an independent third-party
source.
Equity Securities.
Investment securities classified as equity securities are carried at cost and
the share of earnings or losses is reported
through net income as an adjustment to the investment balance. These securities are not
readily marketable and therefore are classified
as a Level 3 input within the fair value hierarchy.
.
The fair value of residential mortgage loans held for sale based on Level 2 inputs is determined,
when possible,
using either quoted secondary-market prices or investor commitments.
If no such quoted price exists, the fair value is determined
using quoted prices for a similar asset or assets, adjusted for the specific attributes of
that loan, which would be used by other market
participants.
The Company has elected the fair value option accounting for its held for sale loans.
Mortgage Banking Derivative Instruments.
The fair values of interest rate lock commitments (“IRLCs”) are derived by valuation
models incorporating market pricing for instruments with similar characteristics,
commonly referred to as best execution pricing, or
investor commitment prices for best effort IRLCs which have
unobservable inputs, such as an estimate of the fair value of the
servicing rights expected to be recorded upon sale of the loans, net estimated costs to originate
the loans, and the pull-through rate,
and are therefore classified as Level 3 within the fair value hierarchy.
The fair value of forward sale commitments is based on
observable market pricing for similar instruments and are therefore
classified as Level 2 within the fair value hierarchy.
Interest Rate Swap.
The Company’s derivative positions
are classified as Level 2 within the fair value hierarchy and are valued
using
models generally accepted in the financial services industry and
that use actively quoted or observable market input values from
external market data providers.
The fair value derivatives are determined using discounted cash flow models.
Swap
.
The Company entered into a stand-alone derivative contract with the purchaser of
its Visa Class B shares.
The
valuation represents the amount due and payable to the counterparty based upon
the revised share conversion rate, if any,
during the
period. There was $
0.5
million counterparty payment accrued and payable at September 30, 2024,
and
no
amounts payable at
A summary of fair values for assets and liabilities recorded at fair
value on a recurring basis consisted of the following:
Level 1
Level 2
Level 3
Total
Fair
Inputs
Inputs
Inputs
Value
ASSETS:
Sale:
$
50,646
$
$
$
50,646
125,330
125,330
40,017
40,017
59,781
59,781
52,317
52,317
6,976
6,976
31,251
31,251
Interest Rate Swap Derivative
4,444
4,444
Swap
ASSETS:
Sale:
$
24,679
$
$
$
24,679
145,034
145,034
39,083
39,083
63,303
63,303
57,552
57,552
3,450
3,450
28,211
28,211
Interest Rate Swap Derivative
5,317
5,317
Mortgage Banking Activities
.
The Company had Level 3 issuances and transfers related to mortgage banking
activities of $
5.9
million
and $
11.0
million, respectively, for the
nine months ended September 30, 2024, and $
11.1
16.3
million, respectively,
for
the nine months ended September 30, 2023.
Issuances are valued based on the change in fair value of the underlying mortgage loan
from inception of the IRLC to the Consolidated Statement of Financial Condition
date, adjusted for pull-through rates and costs to
originate.
IRLCs transferred out of Level 3 represent IRLCs that were funded
and moved to mortgage loans held for sale, at fair
value.
Assets Measured at Fair Value
on a Non-Recurring Basis
Certain assets are measured at fair value on a non-recurring basis (i.e., the
assets are not measured at fair value on an ongoing basis
but are subject to fair value adjustments in certain circumstances).
An example would be assets exhibiting evidence of impairment.
The following is a description of valuation methodologies used for assets measured
on a non-recurring basis.
Collateral Dependent Loans
.
Impairment for collateral dependent loans is measured using the fair
value of the collateral less selling
costs.
The fair value of collateral is determined by an independent valuation
or professional appraisal in conformance with banking
regulations.
Collateral values are estimated using Level 3 inputs due to the volatility in the real estate market,
and the judgment and
estimation involved in the real estate appraisal process.
Collateral dependent loans are reviewed and evaluated on at least a quarterly
basis for additional impairment and adjusted accordingly.
Valuation
techniques are consistent with those techniques applied in prior
periods.
Collateral-dependent loans had a carrying value of $
3.6
million with a valuation allowance of $
0.1
million at September 30,
2024 and a carrying value of $
3.3
million and a $
0.1
million valuation allowance at December 31, 2023.
Other Real Estate Owned
.
During the first nine months of 2024, certain foreclosed assets, upon initial recognition,
were measured and
reported at fair value through a charge-off
to the allowance for credit losses based on the fair value of the foreclosed asset less
estimated cost to sell.
The fair value of the foreclosed asset is determined by an independent valuation or
professional appraisal in
conformance with banking regulations.
On an ongoing basis, we obtain updated appraisals on foreclosed assets and realize valuation
adjustments as necessary.
The fair value of foreclosed assets is estimated using Level 3 inputs due to the judgment
and estimation
involved in the real estate valuation process.
.
Residential mortgage loan servicing rights are evaluated for impairment
at each reporting period based
upon the fair value of the rights as compared to the carrying amount.
Fair value is determined by a third party valuation model using
estimated prepayment speeds of the underlying mortgage loans serviced and
stratifications based on the risk characteristics of the
underlying loans (predominantly loan type and note interest rate).
The fair value is estimated using Level 3 inputs, including a
discount rate, weighted average prepayment speed, and the cost of loan
servicing.
Further detail on the key inputs utilized are
provided in Note 4 – Mortgage Banking Activities.
At each of September 30, 2024 and December 31, 2023, there was
no
valuation
allowance for loan servicing rights.
Assets and Liabilities Disclosed at Fair Value
The Company is required to disclose the estimated fair value of financial instruments,
both assets and liabilities, for which it is
practical to estimate fair value and the following is a description of valuation
methodologies used for those assets and liabilities.
Cash and Short-Term
Investments.
The carrying amount of cash and short-term investments is used to approximate
fair value, given
the short time frame to maturity and as such assets do not present unanticipated
credit concerns.
Securities Held to Maturity
.
Securities held to maturity are valued in accordance with the methodology
previously noted in the
caption “Assets and Liabilities Measured at Fair Value
on a Recurring Basis – Securities Available
for Sale.”
Other Equity Securities.
Other equity securities are accounted for under the equity method (Topic
- and recorded at cost.
These
securities are not readily marketable securities and are reflected in Other
Assets on the Statement of Financial Condition.
Loans.
The loan portfolio is segregated into categories and the fair value of each loan category is calculated
using present value
techniques based upon projected cash flows and estimated discount
rates.
The values reported reflect the incorporation of a liquidity
discount to meet the objective of “exit price” valuation.
Deposits.
The fair value of Noninterest Bearing Deposits, NOW Accounts, Money Market
Accounts and Savings Accounts are the
amounts payable on demand at the reporting date. The fair value of fixed maturity
certificates of deposit is estimated using present
value techniques and rates currently offered for deposits of
similar remaining maturities.
Subordinated Notes Payable.
The fair value of each note is calculated using present value techniques,
based upon projected cash
flows and estimated discount rates as well as rates being offered
for similar obligations.
and Long-Term
Borrowings.
The fair value of each note is calculated using present value techniques,
based upon
projected cash flows and estimated discount rates as well as rates being offered
for similar debt.
A summary of estimated fair values of significant financial instruments not
recorded at fair value consisted of the following:
Carrying
Level 1
Level 2
Level 3
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
83,431
$
83,431
$
$
Fed Funds Sold and Interest Bearing Deposits
261,779
261,779
Investment Securities, Held to Maturity
561,480
390,553
151,775
Other Equity Securities
2,848
2,848
1,484
Loans, Net of Allowance for Credit Losses
2,653,260
2,529,755
$
3,579,077
$
$
3,140,058
$
37,268
37,268
52,887
42,259
Long-Term Borrowings
Carrying
Level 1
Level 2
Level 3
Value
Inputs
Inputs
Inputs
ASSETS:
Cash
$
83,118
$
83,118
$
$
Fed Funds Sold and Interest Bearing Deposits
228,949
228,949
Investment Securities, Held to Maturity
625,022
441,189
150,562
Other Equity Securities
2,848
2,848
1,280
Loans, Net of Allowance for Credit Losses
2,703,977
2,510,529
$
3,701,822
$
$
3,243,896
$
35,341
35,341
52,887
44,323
Long-Term Borrowings
All non-financial instruments are excluded from the above table.
The disclosures also do not include goodwill.
Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
NOTE 10 – ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
The amounts allocated to accumulated other comprehensive income
(loss) are presented in the table below.
Accumulated
Securities
Other
Available
Interest Rate
Retirement
Comprehensive
for Sale
Swap
Plans
(Loss) Income
Balance as of January 1, 2024
$
(25,691)
$
3,970
$
(425)
$
Other comprehensive income (loss) during the period
8,716
(652)
8,064
Balance as of September 30, 2024
$
(16,975)
$
3,318
$
(425)
$
Balance as of January 1, 2023
$
(37,349)
$
4,625
$
(4,505)
$
(37,229)
Other comprehensive income (loss) during the period
2,357
(217)
2,553
Balance as of September 30, 2023
$
(34,992)
$
5,038
$
(4,722)
$
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
Management’s discussion
and analysis (“MD&A”) provides supplemental information, which sets forth
the major factors that have
affected our financial condition and results of operations
and should be read in conjunction with the Consolidated Financial
Statements and related notes.
The following information should provide a better understanding of
the major factors and trends that
affect our earnings performance and financial condition,
and how our performance during the third quarter of 2024 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,”
“estimate,” “expect,”
“intend,” “plan,”
“target,”
“vision,” “goal,”
and similar expressions are intended to
identify forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and uncertainties.
Our actual future results may differ materially
from those set forth in our forward-looking statements.
Please see the Introductory Note of this quarterly report on Form 10-Q
as well
as the Introductory Note and
of our 2023 Form 10-K, as amended, 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 63 full-service offices
and 105 ATMs/ITMs
located in Florida, Georgia, and Alabama.
Through Capital City Home Loans, LLC (“CCHL”), we have 29
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 2023 Form 10-K, as
amended.
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 it allows investors to more easily compare our capital adequacy to
other companies in the industry.
The generally accepted
accounting principles (“GAAP”) to non-GAAP reconciliation for
each quarter presented is provided below.
(Dollars in Thousands, except per share data)
Third
Second
First
Fourth
Third
Shareowners' Equity (GAAP)
$
476,499
$
460,999
$
448,314
$
440,625
$
419,706
Less: Goodwill and Other Intangibles (GAAP)
92,813
92,853
92,893
92,933
92,973
Tangible Shareowners' Equity (non-GAAP)
A
383,686
368,146
355,421
347,692
326,733
Total Assets (GAAP)
4,225,695
4,259,922
4,138,287
Less: Goodwill and Other Intangibles (GAAP)
92,813
92,853
92,893
92,933
92,973
Tangible Assets (non-GAAP)
B
$
4,132,503
$
4,132,842
$
4,167,029
$
4,211,544
$
4,045,314
Tangible Common Equity Ratio (non-GAAP)
A/B
9.28%
8.91%
8.53%
8.26%
8.08%
Actual Diluted Shares Outstanding (GAAP)
C
16,980,686
16,970,228
16,947,204
17,000,758
16,997,886
Tangible Book Value
per Diluted Share (non-GAAP)
A/C
22.60
21.69
20.97
20.45
19.22
SELECTED QUARTERLY
FINANCIAL DATA
(UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
Third
Second
First
Fourth
Third
Summary of Operations
:
Interest Income
$
49,328
$
48,766
$
46,820
$
46,184
$
45,753
Interest Expense
9,117
9,497
8,465
7,013
6,473
40,211
39,269
38,355
39,171
39,280
1,206
1,204
2,025
2,393
Net Interest Income After
39,005
38,065
37,435
37,146
36,887
19,513
19,606
18,097
17,157
16,728
42,921
40,441
40,171
39,958
39,105
Income Before Income Taxes
15,597
17,230
15,361
14,345
14,510
2,980
3,189
3,536
2,909
3,004
Loss Attributable to NCI
1,149
Net Income Attributable to CCBG
13,118
14,150
12,557
11,720
12,655
Net Interest Income (FTE)
(1)
40,260
39,334
38,435
39,264
39,367
Per Common Share
:
Net Income Basic
$
0.77
$
0.84
$
0.74
$
0.69
$
0.75
Net Income Diluted
0.77
0.83
0.74
0.70
0.74
Cash Dividends Declared
0.23
0.21
0.21
0.20
0.20
Diluted Book Value
28.06
27.17
26.45
25.92
24.69
Diluted Tangible Book Value
(2)
22.60
21.69
20.97
20.45
19.22
Market Price:
High
36.67
28.58
31.34
32.56
33.44
Low
26.72
25.45
26.59
26.12
28.64
Close
35.29
28.44
27.70
29.43
29.83
Selected Average Balances
:
Investment Securities
$
908,456
$
919,832
$
953,184
$
963,184
$
1,005,003
2,693,533
2,726,748
2,728,629
2,711,243
2,672,653
Earning Assets
3,883,414
3,935,280
3,849,615
3,823,980
3,876,980
Total Assets
4,272,188
4,190,623
4,166,777
3,572,034
3,641,028
3,576,513
3,548,506
3,596,816
Shareowners’ Equity
480,137
465,297
456,014
435,116
427,580
Common Equivalent Average Shares:
Basic
16,943
16,931
16,951
16,947
16,985
Diluted
16,979
16,960
16,969
16,997
17,025
Performance Ratios:
Return on Average Assets (annualized)
1.24
%
1.33
%
1.21
%
1.12
%
1.19
%
Return on Average Equity (annualized)
10.87
12.23
11.07
10.69
11.74
Net Interest Margin (FTE)
4.12
4.02
4.01
4.07
4.03
Noninterest Income as % of Operating Revenue
32.67
33.30
32.06
30.46
29.87
Efficiency Ratio
71.81
68.61
71.06
70.82
69.88
Asset Quality:
Allowance for Credit Losses (“ACL”)
$
29,836
$
29,219
$
29,329
$
29,941
$
29,083
Nonperforming Assets (“NPAs”)
7,242
6,165
6,799
6,243
4,695
ACL to Loans HFI
1.11
%
1.09
%
1.07
%
1.10
%
1.08
%
NPAs to Total
Assets
0.17
0.15
0.16
0.15
0.11
NPAs to Loans HFI plus OREO
0.27
0.23
0.25
0.23
0.17
ACL to Non-Performing Loans
452.64
529.79
431.46
479.70
619.58
Net Charge-Offs to Average Loans HFI
0.19
0.18
0.22
0.23
0.17
Capital Ratios:
Tier 1 Capital
16.77
%
16.31
%
15.67
%
15.37
%
15.11
%
Total Capital
17.97
17.50
16.84
16.57
16.30
Common Equity Tier 1
14.88
14.44
13.82
13.52
13.26
Leverage
10.89
10.51
10.45
10.30
9.98
Tangible Common Equity
(2)
9.28
8.91
8.53
8.26
8.08
(1)
Fully Tax Equivalent
(2)
Non-GAAP financial measure.
See non-GAAP reconciliation on page 33.
FINANCIAL OVERVIEW
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.