Management’s Discussion and Analysis of
Financial Condition and Results of Operations under the section captioned
“Business Overview” for discussion related to the expansion of our
Business.
Competition
We face significant
competition in our market areas. We
compete against a wide range of banking and nonbanking institutions
including banks, savings and loan associations, credit unions, money market
funds, mutual fund advisory companies, mortgage
banking companies, investment banking companies, insurance agencies and
companies, securities firms, brokerage firms,
financial technology firms, personal and commercial finance companies
peer-to-peer lending businesses and other types of
financial institutions. In addition to traditional competitors, we also face increasing
competition from a rapidly expanding group
of nontraditional financial service providers. These include established and
emerging wealth technology companies
(“wealthtechs”), financial technology companies (“fintechs”), technology
-enabled lenders, digital-only banks, crowdfunding
platforms, and mobile-based payment applications. These firms often
leverage advanced technologies, agile product development
cycles, and streamlined digital interfaces that allow them to deliver certain
financial products and services—such as unsecured
consumer loans, small business working-capital loans, digital wallets, and peer-to-peer
payments—more quickly or conveniently
than traditional banking institutions. Some fintech competitors operate
with lower overhead and, in some cases, are subject to
fewer regulatory requirements than banks and bank holding companies.
This can allow them to offer competitive pricing, faster
decision making or funding, and simplified user experiences. Some
of our competitors are larger financial institutions with greater
resources and, as such, may have higher lending limits and may offer
other services that are not provided by us. Industry
consolidation also intensifies competition in our markets. Mergers
among financial institutions have created larger,
better-capitalized, and more geographically diverse
competitors with expanded digital capabilities and broader product sets. These
institutions may be better positioned to make significant investments in technology,
marketing, and infrastructure, which can
enhance their ability to compete for both clients and talent.
However, we believe that the larger
financial institutions are less
familiar with the markets in which we operate and typically target
a different client base. We
also believe clients who bank at
community banks tend to prefer the relationship style service of community
banks compared to larger banks and financial
services companies.
As a result, we expect to be able to effectively compete in our markets
with larger financial institutions through providing
superior client service and leveraging our knowledge and experience
in providing banking products and services in our market
areas. See Item 1A. Risk Factors under the section captioned “Our future success is dependent
on our ability to compete
effectively in the highly competitive banking and financial
services industry” for further discussion related to the competitive
environment in which we operate.
Our primary market area consists of 21 counties in Florida, six counties in Georgia,
and one county in Alabama. Most of Florida’s
major banking concerns have a presence in Leon County,
where our main office is located.
Our Leon County deposits totaled
$1.195 billion, or 32.6% of our consolidated deposits at December
The table below depicts our market share percentage within each county,
based on commercial bank deposits within the county.
Market Share as of June 30,
County
Florida
Alachua
Bay
Bradford
Citrus
Clay
Dixie
Gadsden
Gilchrist
Gulf
Hernando
Jefferson
Leon
Levy
Madison
Putnam
St. Johns
Suwannee
Taylor
Wakulla
Walton
Washington
Georgia
Bibb
Cobb
Gwinnett
Grady
Laurens
Troup
Alabama
Chambers
Obtained from the FDIC Summary of Deposits Report for the year indicated.
Bank office opened in the second quarter of 2023.
Seasonality
We believe our
commercial banking operations are not generally seasonal in nature; however,
public deposits tend to increase
with tax collections in the fourth and first quarters of each year and decline
as a result of governmental spending thereafter.
Human Capital Matters
Our culture distinguishes us from our competitors and is the driving force
behind our continued success. Our leadership is
committed to a culture that values people alongside results.
Our brand promise (“More than your bank. Your
banker.”)
and purpose (“We
empower our clients’ financial wellness and help
them build secure futures”), together with our core values statement (“Do
the Right Thing, Build Relationships & Loyalty,
Embrace Individuality & Value
Others, Promote Career Growth, Be Committed to Community,
and Represent the Star (our bank)
Proudly”), are the foundation on which our culture is built.
The bank has grown significantly since its beginnings in 1895. Our commitment
to fostering a culture that values our associates
across our entire footprint remains unwavering. We
have a Chief Culture Officer and a Chief Inclusion Officer
who make it a
priority to ensure our culture is maintained and associates exemplify our values.
We reinforce these
cultural priorities through
ongoing communication, leadership engagement across our markets,
and programs designed to strengthen associate connection,
belonging, and service to our clients and communities.
At December 31, 2025, we had approximately 902 full-time associates and approximately
25 part-time associates. At December
31, 2025, approximately 68% of our workforce was female, 32% was male, and
approximately 22% was ethnic minorities. None
of our associates are represented by a labor union or covered by a collective bargaining
agreement.
All of our associates are hired
on the basis of their individual skills, qualifications, merit,
and in accordance with applicable law.
Our commitment to people and being an employer with integrity and heart has
earned us numerous accolades including: one of
the “Best Companies to Work
for in Florida” by Florida Trend for 14 consecutive
years, a “Best Bank to Work
For” by American
Banker for 13 consecutive years and being named World’s
Best Banks, America’s Best Banks (ranked
#13) and America’s Best-
in-State Banks (Ranked #5 in Florida and Ranked #4 in Georgia)
by Forbes in 2025, a selection made from direct consumer
feedback and online reviews.
The average tenure of our associates is approximately 9.8 years, and
the average tenure of our management team is 24.3 years.
Tenure statistics support
these accolades and further demonstrate that associates enjoy working
for CCBG.
Compensation and Benefits Program
. To attract and retain experienced
associates we offer a competitive compensation and
benefits program, foster a culture where everyone feels included and empowered
to do to their best work, and give associates the
opportunity to give back to their communities and make a social impact.
Our compensation program is designed to attract and reward talented individuals
who possess the skills necessary to support our
business objectives, assist in the achievement of our strategic goals and
create long-term value for our shareowners. We
provide
our associates with compensation packages that include base salary and
annual incentive bonuses, and certain associates can
receive equity awards tied to the Company’s
performance.
Experience has taught us that a compensation program with both
short-
and long-term awards provides fair and competitive
compensation and aligns associate and shareowner interests by incentivizing
business and individual performance. This dual
approach also encourages long-term company performance and integrates compensation
with our business plans.
In addition to cash and equity compensation, we offer associates benefits
including life and health (medical, dental & vision)
insurance, paid time off, an associate stock purchase plan, and a
401(k) plan. Associates hired prior to 2020 are eligible to
participate in a pension plan.
We periodically
evaluate our benefits and total rewards offerings to ensure
they remain competitive
within our industry and responsive to the evolving needs of our workforce.
A core value is providing associates the ability to “grow a career.”
To that end, we support and encourage
associates to develop a
life-long habit of continuous learning that focuses on personal and professional
development through higher education. We
offer
an educational Tuition Assistance Plan to help eligible
associates continue or begin post-high school education, develop skills,
increase knowledge and aid in career development.
We have invested
in tools and capabilities that allow our team members to work remotely as appropriate.
These tools also
support flexible work arrangements, increased collaboration, and the ability
to maintain continuity while meeting the needs of
associates and clients.
Talent
Acquisition, Development, Retention and Culture
. Our culture emphasizes our longstanding dedication to being respectful
to others and having a workforce that is representative of the communities we serve.
We believe in attracting,
retaining and
promoting quality talent. Our success depends on our ability to attract,
retain and develop employees, and our talent acquisition
teams partner with hiring managers in sourcing and presenting a slate of qualified
candidates to strengthen our organization.
Professional development is a key priority,
which is facilitated through our many corporate development initiatives including
extensive training programs, corporate mentoring, leadership programs,
educational reimbursement and professional speaker
series. Our talent acquisition, development and retention focuses on rewarding
merit and achievement while nurturing and
progressing skilled talent across various business segments.
Integral to our culture and values is a commitment to an equal-opportunity
and inclusive work environment whereby respect,
acceptance and belonging are practiced and experienced by all.
Our associates are our most valuable assets, and our differences make
us stronger, produce more creative solutions,
offer better
client service and are vital to attracting and retaining talent. The individual
perspectives, life experiences, capabilities and talents,
which our associates invest in their work, represent a significant part of our
culture, reputation and collective achievements.
Health and Safety
. Our business success is fundamentally connected to our associates’ well-being.
We make available to our
associates a voluntary wellness program,
StarFit, that provides associates with resources and good-health opportunities through
exercise, diet and preventive care.
We continue
to evaluate and enhance our well-being programs to support physical, emotional,
and financial wellness across our workforce.
In response to emerging workplace practices, we made changes to our
flex–work program to assist our associates in maintaining a
work/life balance consistent with their professional and personal goals.
We remain committed to
providing tools, support and
flexibility that enable associates to perform their roles effectively
while managing personal commitments.
Social Matters
Community Involvement.
We aim to give back
to the communities where we live and work and believe that this commitment
helps in our efforts to attract and retain associates. Our commitment
to help our community starts with our associates. Community
involvement is a hallmark for our organization, and it comes naturally
to our associates. We encourage
our associates to volunteer
their hours with service organizations and philanthropic groups in
the communities we serve.
We recorded
7,914 community service hours in 2025, and 9,542, and 10,526 hours in 202
and 2023, respectively.
Additionally,
the CCBG Foundation donated approximately $0.3 million in 2025,
2024 and 2023 to various non-profit organizations in the
communities we serve.
Since 2015, we have annually supported the United Way
of the Big Bend in analyzing financial information for its annual grant
review process. Many of these grants are provided to low-moderate income
communities in the Big Bend area.
Access, affordability,
and financial inclusion.
Our community commitment to further financial literacy in the markets we service
remains an ongoing focus. In 2025, the CCBG Foundation made grants totaling
$173,000 to Community Reinvestment Act of
1977 (“CRA”) eligible organizations in our market
area. We are committed
to providing educational outreach regarding home
ownership and financial access for minorities. We
are a long-time supporter of Habitat for Humanity,
with our associates
providing volunteer hours on home builds.
Further, we continue to originate loans under the
Habitat for Humanity loan program
and community development loans under various affordable
housing, community service, and revitalization projects.
During tax season, we provide locations for community residents to access Volunteer
Income Tax Assistance (VITA)
services.
VITA is a nationwide
IRS program that offers free tax preparation assistance to people who generally
make $60,000 or less,
persons with disabilities, the elderly,
and limited English-speaking taxpayers who need assistance in preparing their
own tax
returns.
Regulatory Considerations
must comply with state and federal banking laws and regulations
that control virtually all aspects of our operations.
These
laws and regulations generally aim to
protect our depositors, not necessarily our shareowners
or our creditors. Any changes in
applicable laws or regulations may materially
affect our business and prospects. Proposed
legislative or regulatory changes may
also affect our operations. The following description summarizes some of the
laws and regulations to which we are
subject.
References to applicable statutes and
regulations are brief summaries,
do not purport to be complete, and are qualified
in their
entirety by reference
to such statutes and regulations.
Capital City Bank Group, Inc.
We are extensively
regulated under federal and state law.
The following is a brief summary that does not purport to be a complete
description of all regulations that affect us or all aspects of those regulations.
This discussion is qualified in its entirety by
reference to the particular statutory and regulatory provisions described below
and is not intended to be an exhaustive description
of the statutes or regulations applicable to the Company’s
and the Bank’s business. In addition, proposals
to change the laws and
regulations governing the banking industry are frequently raised at both
the state and federal levels. The likelihood and timing of
any changes in these laws and regulations, and the impact such changes may
have on us and the Bank, are difficult to predict.
Regulatory agencies may issue enforcement actions, policy statements, interpretive
letters, and similar written guidance
applicable to us or to the Bank. Changes in applicable laws, regulations, or regulatory
guidance, or their interpretation by
regulatory agencies or courts may have a material adverse effect on
our and the Bank’s business, operations,
and earnings.
We and the Bank
must undergo regular examinations by the Board of Governors of the Federal
Reserve System (the “Federal
Reserve”), which will examine for adherence to a range of legal and regulatory
compliance responsibilities. A bank regulator
conducting an examination has complete access to the books and records
of the examined institution. The results of the
examination are confidential. Supervision and regulation of banks,
their holding companies, and affiliates is intended primarily
for the protection of depositors and clients, the Deposit Insurance Fund
(“DIF”) of the Federal Deposit Insurance Corporation
(“FDIC”), and the U.S. banking and financial system rather than holders
of our securities.
We are registered
as a bank holding company with the Federal Reserve under the Bank Holding Company
Act (“BHC Act”) and
have elected to be treated as a financial holding company.
As such, we are subject to comprehensive supervision and regulation
by the Federal Reserve and are subject to its regulatory reporting requirements.
Federal law subjects bank holding companies,
such as the Company, to
restrictions on the types of activities in which they may engage, and to a range of supervisory
requirements produce more creative solutions, offer better
client service and are vital to attracting and retaining talent. In addition,
the Florida Office of Financial Regulation (“Florida OFR”) regulates
bank holding companies that own Florida-chartered banks,
such as us, under the bank holding company laws of the State of Florida. Various
federal and state bodies regulate and supervise
our non-bank activities including our brokerage, investment advisory,
and insurance agency activities. These include, but are not
limited to, the Securities and Exchange Commission (“SEC”), the Financial
Industry Regulatory Authority,
federal and state
banking regulators, and various state regulators of insurance and brokerage activities.
Violations of laws and regulations,
or other unsafe and unsound practices, may result in regulatory agencies imposing
fines or
penalties, cease and desist orders, or taking other enforcement actions. Under
certain circumstances, these agencies may enforce
these remedies directly against officers, directors, employees, and
other parties participating in the affairs of a bank or bank
holding company.
Like all bank holding companies, we are regulated extensively under federal and
state law. Under federal and
state laws and regulations pertaining to the safety and soundness of insured depository
institutions, state banking regulators, the
Federal Reserve, and separately the FDIC as the insurer of bank deposits have the
authority to compel or restrict certain actions
on our part if they determine that we have insufficient capital or
other resources, or are otherwise operating in a manner that may
be deemed to be inconsistent with safe and sound banking practices. Under
this authority, our regulators
can require us or our
subsidiaries to enter into informal or formal supervisory agreements, including
board resolutions, memoranda of understanding,
written agreements, and consent or cease and desist orders pursuant to which
we would be required to take identified corrective
actions to address cited concerns and to refrain from taking certain actions.
If we become subject to and are unable to comply with the terms of any regulatory
actions or directives, supervisory agreements
or orders, then we could become subject to additional, heightened supervisory
actions and orders, possibly including prompt
corrective action restrictions and/or other regulatory actions, including
prohibitions on the payment of dividends on our common
stock and preferred stock. If our regulators were to take such supervisory actions,
then we could, among other things, become
subject to significant restrictions on our ability to develop any new business, as well as restrictions
on our existing business, and
we could be required to raise additional capital, dispose of certain assets and liabilities within
a prescribed period of time, or both.
The terms of any such action could have a material negative effect
on our business, reputation, operating flexibility,
financial
condition, and the value of our capital stock.
Permitted Activities
As a financial holding company,
we are permitted to engage directly or indirectly in a broader range of activities than
those
permitted for a bank holding company that has not elected to be a financial holding
company. Bank holding companies
are
generally restricted to engaging in the business of banking, managing,
or controlling banks and certain other activities determined
by the Federal Reserve to be closely related to banking. Financial holding companies
may also engage in activities that are
considered to be financial in nature, as well as those incidental or,
if determined by the Federal Reserve, complementary to
financial activities. If the Bank ceases to be “well capitalized” or “well managed”
under applicable regulatory standards, or if the
Bank receives a rating of less than satisfactory under the CRA, the Federal
Reserve may, among other
things, place limitations on
our ability to conduct these broader financial activities or,
if the deficiencies persist, require us to divest the banking subsidiary or
the businesses engaged in activities permissible only for financial holding
companies.
In addition, the Federal Reserve has the power to order a bank holding
company or its subsidiaries to terminate any nonbanking
activity or terminate its ownership or control of any nonbank subsidiary
when it has reasonable cause to believe that continuation
of such activity or such ownership or control constitutes a serious risk to the financial
safety, soundness, or stability of
any bank
subsidiary of that bank holding company.
As further described below, each of
the Company and the Bank is well-capitalized
under applicable regulatory standards as of December 31, 2025,
and the Bank has an overall rating of “Satisfactory” in its most
recent CRA evaluation.
Source of Strength Obligations
A bank holding company,
such as us, is required to act as a source of financial and managerial strength to its subsidiary bank.
The
term “source of financial strength” means the ability of a company,
such as us, that directly or indirectly owns or controls an
insured depository institution, such as the Bank, to provide financial
assistance to such insured depository institution in the event
of financial distress. The appropriate federal banking agency for
the depository institution (in the case of the Bank, this agency is
the Federal Reserve) may require reports from us to assess our ability
to serve as a source of strength and to enforce compliance
with the source of strength requirements by requiring us to provide financial
assistance to the Bank in the event of financial
distress. If we were to enter bankruptcy or become subject to the orderly
liquidation process established by the Dodd-Frank Wall
Street Reform and Consumer Protection Act (“Dodd-Frank Act”),
any commitment by us to a federal bank regulatory agency to
maintain the capital of the Bank would be assumed by the bankruptcy
trustee or the FDIC, as appropriate, and entitled to a
priority of payment. In addition, the FDIC provides that any insured
depository institution generally will be liable for any loss
incurred by the FDIC in connection with the default of, or any assistance provided
by the FDIC to, a commonly controlled insured
depository institution. The Bank is an FDIC-insured depository institution
and thus subject to these requirements.
Acquisitions
The BHC Act permits acquisitions of banks by bank holding companies,
such that we and any other bank holding company,
whether located in Florida or elsewhere, may acquire a bank located in
any other state, subject to certain deposit-percentage, age
of bank charter requirements, and other restrictions. The BHC Act requires that
a bank holding company obtain the prior approval
of the Federal Reserve before (i) acquiring direct or indirect ownership
or control of more than 5% of the voting shares of any
additional bank or bank holding company,
(ii) taking any action that causes an additional bank or bank holding company
become a subsidiary of the bank holding company,
or (iii) merging or consolidating with any other bank
holding company. The
Federal Reserve may not approve any such transaction that would result
in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any section of the United States, or
the effect of which may be substantially to lessen competition
or to tend to create a monopoly in any section of the country,
that in any other manner would be in restraint of trade unless the anticompetitive
effects of the proposed transaction are clearly
outweighed in the public interest by the probable effect of the transaction
in meeting the convenience and needs of the community
to be served. The Federal Reserve is also required to consider: (i) the financial and managerial
resources of the companies
involved, including pro forma capital ratios; (ii) the risk to the stability of
the United States banking or financial system; (iii) the
convenience and needs of the communities to be served, including performance
under the CRA; and (iv) the effectiveness of the
company in combatting money laundering.
Change in Control
Federal law restricts the amount of voting stock of a bank holding company
or a bank that a person may acquire without the prior
approval of banking regulators. Under the Change in Bank Control
Act and the regulations thereunder, a person or group
must
give advance notice to the Federal Reserve before acquiring control
of any bank holding company,
such as the Company, or
before acquiring control of any FDIC-insured bank, such as the Bank.
Upon receipt of such notice, the Federal Reserve may
approve or disapprove the acquisition. The Change in Bank Control Act creates
a rebuttable presumption of control if a person or
group acquires the power to vote 10% or more of our outstanding
common stock.
Under Florida law,
a person or entity proposing to directly or indirectly acquire control of a Florida chartered
bank must also
obtain permission from the Florida Office of Financial
Regulation (the “Florida OFR”). The Florida Statutes define “control”
either (i) indirectly or directly owning, controlling or having power
to vote 25% or more of the voting securities of a bank; (ii)
controlling the election of a majority of directors of a bank; (iii) owning,
controlling, or having power to vote 10% or more of the
voting securities as well as directly or indirectly exercising a controlling
influence over management or policies of a bank; or (iv)
as determined by the
Florida OFR. These requirements will affect us because the Bank is chartered
under Florida law and
changes in control of the Company are indirect changes in control
of the Bank.
The overall effect of such laws is to make it more difficult
to acquire a bank holding company and a bank by tender offer or
similar means than it might be to acquire control of another type of corporation.
Consequently, shareholders
of the Company may
be less likely to benefit from the rapid increases in stock prices that may result
from tender offers or similar efforts to acquire
control of other companies. Investors should be aware of these requirements
when acquiring shares of our stock.
Incentive Compensation
The Dodd-Frank Act required the federal banking agencies and
the SEC to establish joint rules or guidelines for financial
institutions with more than $1 billion in assets, such as us and the Bank,
which prohibit incentive compensation arrangements that
the agencies determine to encourage inappropriate risks by the institution.
The federal banking agencies issued proposed rules in
2011 and previously issued guidance
on sound incentive compensation policies. In 2016, the federal banking
agencies and the
SEC proposed rules that would, depending upon the assets of the institution, directly
regulate incentive compensation
arrangements and would require enhanced oversight and recordkeeping.
As of December 31, 2025, these rules have not been
implemented, although the SEC did adopt final rules implementing
the clawback provisions of the Dodd-Frank Act in 2022.
and the Bank have undertaken efforts to ensure that our
incentive compensation plans do not encourage inappropriate risks,
consistent with three key principles - that incentive compensation arrangements
should appropriately balance risk and financial
rewards, be compatible with effective controls and risk management,
and be supported by strong corporate governance.
Source of Strength Obligations
A bank holding company,
such as us, is required to act as a source of financial and managerial strength to its subsidiary bank.
The
term “source of financial strength” means the ability of a company,
such as us, that directly or indirectly owns or controls an
insured depository institution, such as the Bank, to provide financial
assistance to such insured depository institution in the event
of financial distress. The appropriate federal banking agency for
the depository institution (in the case of the Bank, this agency is
the Federal Reserve) may require reports from us to assess our ability
to serve as a source of strength and to enforce compliance
with the source of strength requirements by requiring us to provide financial
assistance to the Bank in the event of financial
distress. If we were to enter bankruptcy or become subject to the orderly
liquidation process established by the Dodd-Frank Act,
any commitment by us to a federal bank regulatory agency to maintain
the capital of the Bank would be assumed by the
bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority
of payment. In addition, the FDIC provides that any
insured depository institution generally will be liable for any loss incurred
by the FDIC in connection with the default of, or any
assistance provided by the FDIC to, a commonly controlled insured
depository institution. The Bank is an FDIC-insured
depository institution and thus subject to these requirements.
Capital Requirements
and the Bank are required under federal law to maintain certain minimum
capital levels based on ratios of capital to total
assets and capital to risk-weighted assets. The required capital ratios are minimums,
and the Federal Reserve may determine that a
banking organization based on its size, complexity,
or risk profile must maintain a higher level of capital in order to operate in a
safe and sound manner.
Risks such as concentration of credit risks and the risk arising from nontraditional activities,
as well as the
institution’s exposure
to a decline in the economic value of its capital due to changes in interest rates, and an
institution’s ability
to manage those risks, are important factors that are to be taken into account
in assessing an institution’s overall
capital adequacy.
The following is a brief description of the relevant provisions of these capital
rules and their potential impact on our capital levels.
and the Bank are subject to the following risk-based capital ratios: a CET1 risk-based
capital ratio, a Tier 1 risk-based capital
ratio, which includes CET1 and additional Tier
1 capital, and a total risk-based capital ratio, which includes Tier
1 and Tier 2
capital. CET1 is primarily comprised of the sum of common stock instruments
and related surplus net of treasury stock plus
retained earnings less certain adjustments and deductions, including
with respect to goodwill, intangible assets, mortgage
servicing assets, and deferred tax assets subject to temporary timing differences.
Additional Tier 1 capital is primarily comprised
of noncumulative perpetual preferred stock. Tier
2 capital consists of instruments disqualified from Tier
1 capital, including
qualifying subordinated debt and a limited amount of loan loss reserves up
to a maximum of 1.25% of risk-weighted assets,
subject to certain eligibility criteria. The capital rules also define the
risk-weights assigned to assets and off-balance sheet items to
determine the risk-weighted asset components of the risk-based capital
rules, including, for example, certain “high volatility”
commercial real estate, past due assets, structured securities, and equity
holdings.
The leverage capital ratio, which serves as a minimum capital standard,
is the ratio of Tier 1 capital to quarterly average
total
consolidated assets net of goodwill, certain other intangible assets, and certain
required deduction items. The required minimum
leverage ratio for all banks and bank holding companies is 4%.
In addition, effective January 1, 2019, the capital rules required
a capital conservation buffer of 2.5% above each of the minimum
risk-based capital ratio requirements (CET1, Tier
1, and total capital), which is designed to absorb losses during periods of
economic stress. These buffer requirements must be
met for a bank or bank holding company to be able to pay dividends, engage
in share buybacks, or make discretionary bonus payments to executive
management without restriction.
The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”),
among other things, requires the federal bank
regulatory agencies to take “prompt corrective action” regarding depository
institutions that do not meet minimum capital
requirements. FDICIA establishes five regulatory capital tiers: “well capitalized,”
“adequately capitalized,” “undercapitalized,”
“significantly undercapitalized,” and “critically undercapitalized.” A depository
institution’s capital tier will depend
upon how its
capital levels compare to various relevant capital measures and certain
other factors, as established by regulation. FDICIA
generally prohibits a depository institution from making any capital distribution
(including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. The FDICIA imposes
progressively more restrictive restraints on operations, management,
and capital distributions depending on the category in which
an institution is classified. Undercapitalized depository institutions are
subject to restrictions on borrowing from the Federal
Reserve System. In addition, undercapitalized depository institutions
may not accept brokered deposits absent a waiver from the
FDIC, are subject to growth limitations, and are required to submit capital
restoration plans for regulatory approval. A depository
institution's holding company must guarantee any required capital restoration
plan up to an amount equal to the lesser of 5% of
the depository institution's assets at the time it becomes undercapitalized
or the amount of the capital deficiency when the
institution fails to comply with the plan. Federal banking agencies may not
accept a capital plan without determining, among
other things, that the plan is based on realistic assumptions and is likely to
succeed in restoring the depository institution's capital.
If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly
undercapitalized.
To be well-capitalized,
the Bank must maintain at least the following capital ratios:
6.5% CET1 to risk-weighted assets;
8.0% Tier 1 capital to risk-weighted assets;
10.0% Total capital to
risk-weighted assets; and
5.0% leverage ratio.
The Federal Reserve has not yet revised the well-capitalized standard
for bank holding companies to reflect the higher capital
requirements imposed under the current capital rules applicable to
banks. For purposes of the Federal Reserve’s
Regulation
including determining whether a bank holding company meets the requirements
to be a financial holding company,
bank holding
companies, such as the Company,
must maintain a Tier 1 risk-based capital ratio of 6.0%
or greater and a total risk-based capital
ratio of 10.0% or greater to be well-capitalized. Also, the Federal Reserve
may require bank holding companies, including the
Company, to maintain
capital ratios substantially in excess of mandated minimum levels depending
upon general economic
conditions and a bank holding company’s
particular condition, risk profile, and growth plans.
Failure to be well-capitalized or to meet minimum capital requirements
could result in certain mandatory and possible additional
discretionary actions by regulators that, if undertaken, could have an adverse
material effect on our operations or financial
condition. Failure to meet minimum capital requirements could also result
in restrictions on the Company’s
or the Bank’s ability
to pay dividends or otherwise distribute capital or to receive regulatory
approval of applications or other restrictions on its growth.
In 2025, the Company’s and
the Bank’s regulatory capital ratios were above
the applicable well-capitalized standards and met the
capital conservation buffer.
Based on current estimates, we expect the Company and the Bank to exceed
all applicable well-
capitalized regulatory capital requirements and the capital conservation
buffer in 2026.
Payment of Dividends
are a legal entity separate and distinct from the Bank and our other subsidiaries.
Under the laws of the State of Florida, we, as
a business corporation, may declare and pay dividends in cash or property
unless the payment or declaration would be contrary to
restrictions contained in our Articles of Incorporation, or unless, after
payment of the dividend, we would not be able to pay our
debts when they become due in the usual course of our business or our
total assets would be less than the sum of our total
liabilities. In addition, we are also subject to federal regulatory capital requirements
that effectively limit the amount of cash
dividends that we may pay.
Under a Federal Reserve policy adopted in 2009, the board of directors
of a bank holding company must consider different factors
to ensure that its dividend level is prudent relative to maintaining a strong
financial position and is not based on overly optimistic
earnings scenarios, such as potential events that could affect its ability
to pay, while still maintaining
a strong financial position.
As a general matter, the Federal Reserve has indicated
that the board of directors of a bank holding company should consult with
the Federal Reserve and eliminate, defer,
or significantly reduce the bank holding company’s
dividends if:
its net income available to shareholders for the past four quarters, net
of dividends previously paid during that period, is
not sufficient to fully fund the dividends;
its prospective rate of earnings retention is not consistent with its capital needs and
overall current and prospective
financial condition; or
it will not meet, or is in danger of not meeting, its minimum regulatory capital
adequacy ratios.
The primary sources of funds for our payment of dividends to our shareholders
are cash on hand and dividends from the Bank and
our non-bank subsidiaries. The Bank is subject to legal limitations on
the frequency and amount of dividends that can be paid to
the Company. The
Federal Reserve may restrict the ability of the Bank to pay dividends if such payments would
constitute an
unsafe or unsound banking practice.
In addition, Florida law and Federal regulation place restrictions on the declaration
of dividends from state-chartered banks to
their holding companies. Under the Florida Financial Institutions Code,
the board of directors of a state-chartered bank, after it
charges off bad debts, depreciation and other
worthless assets, if any, and makes provisions
for reasonably anticipated future
losses on loans and other assets, may quarterly,
semi-annually or annually declare a dividend of up to the aggregate net profits of
that period combined with the bank’s
retained net profits for the preceding two years. In addition, with the approval of the Florida
OFR and Federal Reserve, the bank’s
board of directors may declare a dividend from retained net profits which
accrued prior to
the preceding two years. Before declaring such dividends, 20% of the net profits for
the preceding period as is covered by the
dividend must be transferred to the surplus fund of the bank until this fund becomes
equal to the amount of the bank’s common
stock then issued and outstanding. However,
a Florida state-chartered bank may not declare any dividend if (i) its net income
(loss) from the current year combined with the retained net income (loss) for
the preceding two years aggregates a loss or (ii) the
payment of such dividend would cause the capital account of the bank
to fall below the minimum amount required by law,
regulation, order or any written agreement with the Florida OFR or a federal
regulatory agency. Under
Federal Reserve
regulations, a state member bank may,
without the prior approval of the Federal Reserve, pay a dividend in an amount that, when
taken together with all dividends declared during the calendar year,
does not exceed the sum of the bank’s net
income during the
current calendar year and the retained net income of the prior two calendar years.
The Federal Reserve may approve greater
amounts.
In addition, we and the Bank are subject to various general regulatory policies
and requirements relating to the payment of
dividends, including requirements to maintain adequate capital above
regulatory minimums. The Federal Reserve has indicated
that paying dividends that deplete a bank’s
capital base to an inadequate level would be an unsafe and unsound banking
practice.
The Federal Reserve has indicated that depository institutions and their
holding companies should generally pay dividends only
out of current operating earnings.
Safe and Sound Banking Practices
Bank holding companies and their nonbanking subsidiaries are prohibited
from engaging in activities that represent unsafe and
unsound banking practices or that constitute a violation of law or regulations.
Under certain conditions the Federal Reserve may
conclude that some actions of a bank holding company,
such as a payment of a cash dividend, would constitute an unsafe and
unsound banking practice. The Federal Reserve also has the authority
to regulate the debt of bank holding companies, including
the authority to impose interest rate ceilings and reserve requirements on
such debt. The Federal Reserve may also require a bank
holding company to file written notice and obtain its approval prior to purchasing
or redeeming its equity securities, unless certain
conditions are met.
Capital City Bank
Capital City Bank is a state-chartered commercial banking institution that is chartered
by and headquartered in the State of Florida
and is subject to supervision and regulation by the Florida OFR. The Florida OFR supervises and
regulates all areas of our
operations including, without limitation, the making of loans, the issuance of
securities, the conduct of our corporate affairs, the
satisfaction of capital adequacy requirements, the payment of dividends,
and the establishment or closing of banking centers. We
are also a member bank of the Federal Reserve System, which makes our operations
subject to broad federal regulation and
oversight by the Federal Reserve. In addition, our deposit accounts are insured
by the FDIC up to the maximum extent permitted
by law, and the FDIC has certain
supervisory enforcement powers over us.
As a Florida state-chartered bank, we are empowered by statute, subject to
the limitations contained in those statutes, to take and
pay interest on savings and time deposits, to accept demand deposits, to
make loans on residential and other real estate, to make
consumer and commercial loans, to invest (with certain limitations) in equity securities
and in debt obligations of banks and
corporations and to provide various other banking services for the benefit
of our clients. Various
consumer laws and regulations
also affect our operations, including state usury laws, laws relating to
fiduciaries, consumer credit and equal credit opportunity
laws, and fair credit reporting. In addition, FDICIA prohibits insured state-chartered
institutions from conducting activities as
principal that are not permitted for national banks. A bank, however,
may engage in certain otherwise prohibited activity if it
meets its minimum capital requirements and the FDIC determines that the
activity does not present a significant risk to the DIF.
Safety and Soundness Standards / Risk Management
The Federal Deposit Insurance Act requires the federal bank regulatory
agencies to prescribe, by regulation or guideline,
operational and managerial standards for all insured depository institutions
relating to: (i) internal controls; (ii) information
systems and audit systems; (iii) loan documentation; (iv) credit underwriting;
(v) interest rate risk exposure; and (vi) asset quality.
The federal banking agencies have adopted regulations and Interagency
Guidelines Establishing Standards for Safety and
Soundness to implement these required standards. These guidelines set forth
the safety and soundness standards used to identify
and address problems at insured depository institutions before capital
becomes impaired. Under the regulations, if a regulator
determines that a bank fails to meet any standards prescribed by
the guidelines, the regulator may require the bank to submit an
acceptable plan to achieve compliance, consistent with deadlines for
the submission and review of such safety and soundness
compliance plans.
The bank regulatory agencies have increasingly emphasized the importance
of sound risk management processes and strong
internal controls when evaluating the activities of the financial institutions they
supervise. Properly managing risks has been
identified as critical to the conduct of safe and sound banking activities and has
become even more important as new
technologies, product innovation and the size and speed of financial transactions have
changed the nature of banking markets. The
agencies have identified a spectrum of risks facing a banking institution including,
but not limited to, credit, market, liquidity,
operational, legal and reputational risk. A particular area of focus for regulators
has been operational risk, which arises from the
potential that inadequate information systems, operational problems,
breaches in internal controls, fraud or unforeseen
catastrophes will result in unexpected losses. New products and services, third
party risk management and cybersecurity are
critical sources of operational risk that financial institutions are expected
to address in the current environment. The Bank is
expected to have active board and senior management oversight; adequate
policies, procedures and limits; adequate risk
measurement, monitoring and management information systems; and
comprehensive internal controls.
Insurance of Accounts and Other Assessments
The Bank’s deposits are insured
by the FDIC’s DIF up to the limits under
applicable law, which currently
are set at $250,000 per
depositor, per insured bank, for each account
ownership category. The Bank
is subject to FDIC assessments for its deposit
insurance. The FDIC calculates quarterly deposit insurance assessments based
on an institution’s average
total consolidated assets
less its average tangible equity and applies one of four risk categories determined
by reference to its capital levels, supervisory
ratings, and certain other factors. The assessment rate schedule can change
from time to time, at the discretion of the FDIC,
subject to certain limits.
As of June 30, 2020, the DIF reserve ratio fell to 1.30%, below the statutory
minimum of 1.35%. The FDIC, as required under the
Federal Deposit Insurance Act, established a plan on September 15, 2020
to restore the DIF reserve ratio to meet or exceed the
statutory minimum of 1.35% within eight years. On October 18, 2022,
the FDIC adopted an amended restoration plan to increase
the likelihood that the reserve ratio would be restored to at least 1.35% by September
30, 2028. The FDIC's amended restoration
plan increased the initial base deposit insurance assessment rate schedules
uniformly by 2 bps, beginning with the first quarterly
assessment period of 2023. The FDIC could further increase the deposit
insurance assessments for certain insured depository
institutions, including the Bank, if the DIF reserve ratio is not restored as projected.
In November 2023, the FDIC approved a final rule to implement a special assessment to
recover the loss to the DIF associated
with several bank failures that occurred during the first half of 2023. The assessment base
for the special assessment is equal to a
bank's uninsured deposits reported as of December 31, 2022, adjusted
to exclude the first $5 billion, to be collected at an annual
rate of approximately 13.4 bps for an anticipated total of eight quarterly
assessment periods, beginning with the first quarterly
assessment period of 2024. The final rule does not apply to any banking organization
with less than $5 billion in total
consolidated assets and therefore the special assessment did not directly
impact the Bank.
Insurance of deposits may be terminated by the FDIC upon a finding that the
institution has engaged in unsafe and unsound
practices, is in an unsafe or unsound condition to continue operations, or has violated
any applicable law, regulation,
rule, order,
or condition imposed by a bank’s federal
regulatory agency. In addition,
the Federal Deposit Insurance Act provides that, in the
event of the liquidation or other resolution of an insured depository institution,
the claims of depositors of the institution,
including the claims of the FDIC as subrogee of insured depositors, and certain
claims for administrative expenses of the FDIC as
a receiver, will have priority over other general
unsecured claims against the institution, including those of the parent bank
holding company.
Transactions with Affiliates and
Insiders
The Bank is subject to restrictions on extensions of credit and certain
other transactions between the Bank and the Company or
any nonbank affiliate. Generally,
these covered transactions with either the Company or any affiliate
are limited to 10% of the
Bank’s capital and surplus, and all such
transactions between the Bank and the Company and all of its nonbank affiliates
combined are limited to 20% of the Bank’s
capital and surplus. Loans and other extensions of credit from the Bank to the
Company or any affiliate generally are required
to be secured by eligible collateral in specified amounts. In addition, any
transaction between the Bank and the Company or any affiliate are
required to be on an arm’s length
basis. Federal banking laws
also place similar restrictions on certain extensions of credit by insured banks,
such as the Bank, to their directors, executive
officers, and principal shareholders.
Anti-Tying Restrictions
In general, a bank may not extend credit, lease, sell property,
or furnish any services or fix or vary the consideration for them on
the condition that (i) the client obtain or provide some additional credit, property,
or services from or to the bank or bank holding
company or their subsidiaries or (ii) the client not obtain some other credit, property,
or services from a competitor, except to the
extent reasonable conditions are imposed to assure the soundness of
the credit extended. A bank may,
however, offer combined-
balance products and may otherwise offer more favorable
terms if a client obtains two or more traditional bank products. The law
also expressly permits banks to engage in other forms of tying and authorizes
the Federal Reserve Board to grant additional
exceptions by regulation or order.
Also, certain foreign transactions are exempt from the general rule.
Community Reinvestment Act
The Bank is subject to the provisions of the CRA, which imposes a continuing and affirmative
obligation, consistent with safe and
sound operation, to help meet the credit needs of entire communities where the
bank accepts deposits, including low- and
moderate-income neighborhoods. The Federal Reserve’s
assessment of the Bank’s CRA record
is made available to the public.
CRA agreements with private parties must be disclosed and annual
CRA reports must be made to the Federal Reserve. A bank
holding company will not be permitted to become or remain a financial
holding company and no new activities authorized under
GLB may be commenced by a holding company or by a bank financial subsidiary
if any of its bank subsidiaries received less than
a “satisfactory” CRA rating in its latest CRA examination. Federal CRA regulations
require, among other things, that evidence of
discrimination against applicants on a prohibited basis and illegal or abusive lending
practices be considered in the CRA
evaluation. The Bank has a rating of “Satisfactory” in its most recent CRA evaluation.
In 2023 the Federal Reserve, OCC, and FDIC issued a final rule to modernize their
respective CRA regulations. The revised rules
would substantially alter the methodology for assessing compliance with
the CRA, with material aspects taking effect January
2026 and revised data reporting requirements taking effect
January 1, 2027. The revised CRA regulations have been subject to an
injunction since March 29, 2024. On July 16, 2025, the Federal Reserve, OCC, and FDIC
issued a joint proposal to rescind the
2023 modernization rule. The agencies continue to apply the CRA rules as they existed
before the 2023 modernization,
considering the injunction and pending finalization of the recission of the modernization
rule.
Commercial Real Estate Concentration Guidelines
The federal banking regulators have implemented guidelines to address
increased concentrations in commercial real estate loans.
These guidelines describe the criteria regulatory agencies will use as indicators
to identify institutions potentially exposed to
commercial real estate concentration risk. An institution that has (i) experienced
rapid growth in commercial real estate lending,
(ii) notable exposure to a specific type of
commercial real estate, (iii) total reported loans for construction, land development,
and
other land representing 100% or more of total risk-based capital, or (iv)
total commercial real estate (including construction) loans
representing 300% or more of total risk-based capital and the outstanding
balance of the institutions commercial real estate
portfolio has increased by 50% or more in the prior 36 months, may be identified
for further supervisory analysis of a potential
concentration risk.
At December 31, 2025, CCB’s ratio
of construction, land development and other land loans to total tier 1 risk-based
capital was
49%, its ratio of commercial real estate loans to total tier 1 risk-based capital was 119%
and, therefore, CCB was under the 100%
and 300% thresholds, respectively,
set forth in clauses (iii) and (iv) above.
As a result, we are not deemed to have a concentration
in commercial real estate lending under applicable regulatory guidelines.
Interstate Banking and Branching
The Dodd-Frank Act relaxed interstate branching restrictions by modifying
the federal statute governing de novo interstate
branching by state member banks. Consequently,
a state member bank may open its initial branch in a state outside of the bank’s
home state by way of an interstate bank branch, so long as a bank chartered under
the laws of that state would be permitted to
open a branch at that location.
Anti-money Laundering
A continued focus of governmental policy relating to financial institutions in recent
years has been combating money laundering
and terrorist financing. The USA PATRIOT
Act broadened the application of anti-money laundering
regulations to apply to
additional types of financial institutions such as broker-dealers, investment advisors,
and insurance companies, and strengthened
the ability of the U.S. government to help prevent, detect, and prosecute
international money laundering and the financing of
terrorism. The principal provisions of Title
III of the USA PATRIOT
Act require that regulated financial institutions, including
state member banks: (i) establish an anti-money laundering program
that includes training and audit components; (ii) comply with
regulations regarding the verification of the identity of any person seeking
to open an account; (iii) take additional required
precautions with non-U.S. owned accounts; and (iv) perform certain
verification and certification of money laundering risk for
their foreign correspondent banking relationships. Failure of a
financial institution to comply with the USA PATRIOT
Act’s
requirements could have serious legal and reputational consequences
for the institution. The Bank has augmented its systems and
procedures to meet the requirements of these regulations and will continue
to revise and update its policies, procedures, and
controls to reflect changes required by law.
FinCEN has adopted rules that require financial institutions to obtain beneficial
ownership information with respect to legal
entities with which such institutions conduct business, subject to certain exclusions
and exemptions. Bank regulators are focusing
their examinations on anti-money laundering compliance, and we continue
to monitor and augment, where necessary,
our anti-
money laundering compliance programs. Banking regulators will consider
compliance with the USA PATRIOT
Act’s money
laundering provisions in acting upon merger and acquisition
proposals. Bank regulators routinely examine institutions for
compliance with these obligations and have been active in imposing
cease and desist and other regulatory orders and civil money
penalties against institutions found to be violating these obligations.
Sanctions for violations of the USA PATRIOT
Act can be
imposed in an amount equal to twice the sum involved in the violating transaction
up to $1 million. The Anti-Money Laundering
Act (“AMLA”), which amends the BSA, was enacted in early 2021. The AMLA
is intended to be a comprehensive reform and
modernization of U.S. bank secrecy and anti-money laundering
laws. In particular, it codifies a risk-based approach
to anti-money
laundering compliance for financial institutions, requires the U.S. Department
of the Treasury to promulgate priorities for anti-
money laundering and countering the financing of terrorism policy,
requires the development of standards for testing technology
and internal processes for BSA compliance, expands enforcement
and investigation-related authority (including increasing
available sanctions for certain BSA violations), and expands BSA whistleblower
incentives and protections.
Many AMLA provisions require additional rulemakings, reports,
and other measures, and the impact of the AMLA will depend
on, among other things, rulemaking and implementation
guidance. In June 2021, the Financial Crimes Enforcement Network, a
bureau of the U.S. Department of the Treasury,
issued the priorities for anti-money laundering and countering the financing of
terrorism policy required under the AMLA. The priorities include corruption,
cybercrime, terrorist financing, fraud, transnational
crime, drug trafficking, human trafficking
and proliferation financing.
Economic Sanctions
OFAC is responsible
for helping to ensure that U.S. entities do not engage in transactions with certain
prohibited parties, as
defined by various executive orders and acts of Congress. OFAC
publishes, and routinely updates, lists of names of persons and
organizations suspected of aiding, harboring, or engaging
in terrorist acts, including the Specially Designated Nationals and
Blocked Persons List. If we find a name on any transaction, account, or wire transfer
that is on an OFAC list, we must undertake
certain specified activities, which could include blocking or freezing
the account or transaction requested, and we must notify the
appropriate authorities.
Privacy, Credit Reporting, and Data Security
The Gramm-Leach-Bliley Act (“GLB”) generally prohibits disclosure
of non-public consumer information to non-affiliated third
parties unless the consumer has been given the opportunity to object and
has not objected to such disclosure. Financial institutions
are further required to disclose their privacy policies to clients annually.
Financial institutions, however, will be required
comply with state law if it is more protective of consumer privacy than the
GLB. The GLB also directed federal regulators to
prescribe standards for the security of consumer information. The
Bank is subject to such standards, as well as standards for
notifying clients in the event of a security breach. The Bank utilizes credit bureau
data in underwriting activities. Use of such data
is regulated under the Fair Credit Reporting Act and Regulation V on
a uniform, nationwide basis, including credit reporting,
prescreening, and sharing of information between affiliates
and the use of credit data. The Fair and Accurate Credit Transactions
Act, which amended the Fair Credit Reporting Act, permits states to enact identity
theft laws that are not inconsistent with the
conduct required by the provisions of that Act. Clients must be notified
when unauthorized disclosure involves sensitive client
information that may be misused. On November 18, 2021, the federal
banking agencies issued a new rule effective in 2022 that
requires banks to notify their primary federal regulator within 36
hours of a “computer-security incident” that rises to the level of
a “notification incident.” In addition, effective in December 2023,
the SEC issued a new rule that generally requires SEC
registrants to disclose on Form 8-K certain information about a material
cybersecurity incident within four business days of
determining it is material, with periodic updates as to the status of the incident in
subsequent filings, as necessary.
The SEC rule
also requires registrants to disclose certain information concerning
cybersecurity risk management, strategy and governance on
Form 10-K.
The federal banking regulators regularly issue guidance regarding
cybersecurity intended to enhance cyber risk management
standards among financial institutions. As a result, financial institutions, like the
Company and the Bank, are expected to establish
multiple lines of defense and to ensure their risk management processes address
the risk posed by potential threats to the
institution. A financial institution’s
management is expected to maintain sufficient processes to effectively
respond and recover
the institution’s operations after
a cyber-attack. A financial institution is also expected to develop
appropriate processes to enable
recovery of data and business operations if a critical service provider
of the institution falls victim to this type of cyber-attack. In
addition, effective in December 2023, the SEC enhanced and standardized
the disclosure obligations related to a registrant's
cybersecurity risk management, strategy,
and governance. Our information security protocols are designed in part to adhere to
the
requirements of bank regulatory guidance and these enhanced SEC disclosure requirements.
See "Part I - Item 1C. Cybersecurity"
of this Report for additional information on cybersecurity.
State regulators have also been increasingly active in implementing privacy
and cybersecurity standards and regulations.
Recently, several states have
adopted regulations requiring certain financial institutions to implement
cybersecurity programs and
providing detailed requirements with respect to these programs, including data
encryption requirements. Many states have also
recently implemented or modified their data breach notification and data
privacy requirements. We
expect this trend of state-level
activity in those areas to continue and are continually monitoring developments in
the states in which our clients are located.
See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity
and Item 1C. Cybersecurity for a further
discussion of risk management strategies and governance processes related to
cybersecurity.
Consumer Laws and Regulations
Activities of the Bank are subject to a variety of statutes and regulations designed
to protect consumers. These laws and
regulations include, among numerous other things, provisions that:
limit the interest and other charges collected or contracted for by
the Bank, including rules respecting the terms of credit
cards and of debit card overdrafts;
govern the Bank’s disclosures of
credit terms to consumer borrowers;
require the Bank to provide information to enable the public and public officials
to determine whether it is fulfilling its
obligation to help meet the housing needs of the communities it serves;
prohibit the Bank from discriminating on the basis of race, creed, or other prohibited
factors when it makes decisions to
extend credit;
govern the manner in which the Bank may collect consumer debts; and
prohibit unfair, deceptive, or abusive
acts or practices in the provision of consumer financial products and services.
The Consumer Financial Protection Bureau (“CFPB”) adopted a rule
that implements the ability-to-repay and qualified mortgage
provisions of the Dodd-Frank Act (the “ATR/QM
rule”), which requires lenders to consider,
among other things, income,
employment status, assets, payment amounts, and credit history before
approving a mortgage, and provides a compliance “safe
harbor” for lenders that issue certain “qualified mortgages.” The ATR/QM
rule defines a “qualified mortgage” to have certain
specified characteristics and generally prohibits loans with negative amortization,
interest-only payments, balloon payments, or
terms exceeding 30 years from being qualified mortgages. The
rule also establishes general underwriting criteria for qualified
mortgages, including that monthly payments be calculated based on the highest
payment that will apply in the first five years of
the loan and that the borrower have a total debt-to-income ratio that is less than or
equal to 43%. While “qualified mortgages” will
generally be afforded safe harbor status, a rebuttable presumption
of compliance with the ability-to-repay requirements will attach
to “qualified mortgages” that are “higher priced mortgages” (which are generally
subprime loans). In addition, the securitizer of
asset-backed securities must retain not less than 5% of the credit risk of the assets collateralizing
the asset-backed securities,
unless subject to an exemption for asset-backed securities that are collateralized
exclusively by residential mortgages that qualify
as “qualified residential mortgages.”
The CFPB has also issued rules to implement requirements of the Dodd-Frank
Act pertaining to mortgage loan origination
(including with respect to loan originator compensation and loan originator qualifications)
as well as integrated mortgage
disclosure rules. In addition, the CFPB has issued rules that require servicers
to comply with certain standards and practices with
regard to error correction; information disclosure; force-placement
of insurance; information management policies and
procedures; requiring information about mortgage loss mitigation options be
provided to delinquent borrowers; providing
delinquent borrowers access to servicer personnel with continuity of contact
about the borrower’s mortgage loan account; and
evaluating borrowers’ applications for available loss mitigation options. These
rules also address initial rate adjustment notices for
adjustable-rate mortgages, periodic statements for residential mortgage
loans, and prompt crediting of mortgage payments and
response to requests for payoff amounts.
Future Legislative Developments
Various
bills are from time to time introduced in the U.S. Congress and the Florida legislature.
This legislation may change
banking and tax statutes and the environment in which our banking subsidiary
and we operate in substantial and unpredictable
ways. We cannot
determine the ultimate effect that potential legislation, if enacted, or
implementing regulations with respect
thereto, would have upon our financial condition or results of operations or
that of our banking subsidiary.
Effect of Governmental Monetary Policies
The commercial banking business is affected not only by general
economic conditions, but also by the monetary policies of the
Federal Reserve. Changes in the discount rate on member bank borrowing,
availability of borrowing at the “discount window,”
open market operations, changes in the Fed Funds target
interest rate, changes in interest rates payable on reserve accounts, the
imposition of changes in reserve requirements against member banks’ deposits
and assets of foreign banking centers and the
imposition of and changes in reserve requirements against certain borrowings
by banks and their affiliates are some of the
instruments of monetary policy available to the Federal Reserve. These monetary
policies are used in varying combinations to
influence overall growth and distributions of bank loans, investments and deposits,
which may affect interest rates charged on
loans or paid on deposits. The monetary policies of the Federal Reserve have
had a significant effect on the operating results of
commercial banks and are expected to continue to do so in the future. The
Federal Reserve’s policies are primarily
influenced by
its dual mandate of price stability and full employment, and, to a lesser degree by
short-term and long-term changes in the
international trade balance and in the fiscal policies of the U.S. Government. Future
changes in monetary policy and the effect of
such changes on our business and earnings in the future cannot be predicted.
Website Access to Company’s
Reports
Our Internet website is www.ccbg.com.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on
Form 8-K, including any amendments to those reports filed or furnished pursuant
to section 13(a) or 15(d), and reports filed
pursuant to Section 16, 13(d), and 13(g) of the Exchange Act are available
free of charge through our website as soon as
reasonably practicable after they are electronically filed with, or furnished
to, the SEC.
The information on our website is not
incorporated by reference into this report.
Item 1A.
Risk Factors
An investment in our common stock contains a high degree
of risk. You should
consider carefully the following risk factors before
deciding whether to invest in our common stock. Our business, including
our operating results and financial condition, could be
harmed by any of these risks. Additional risks and uncertainties not currently
known to us or that we currently deem to be
immaterial also may materially and adversely affect our business. The trading
price of our common stock could decline due to
any of these risks, and you may lose all or part of your investment. In assessing these risks,
you should also refer to the other
information contained in our filings with the SEC, including our financial
statements and related notes.
Market Risks
We may incur losses if we are
unable to successfully manage interest rate risk.
Our profitability depends to a large extent on Capital City Bank’s
net interest income, which is the difference between income on
interest-earning assets, such as loans and investment securities, and
expense on interest-bearing liabilities such as deposits and
borrowings. We
are unable to predict changes in market interest rates, which are affected
by many factors beyond our control,
including inflation, changes in trade policies by the United States or other
countries, such as tariffs or retaliatory tariffs, recession,
unemployment, federal funds target rate, money supply,
domestic and international events and changes in the United States and
other financial markets. Our net interest income may be reduced if: (i) more
interest-earning assets than interest-bearing liabilities
reprice or mature during a time when interest rates are declining or (ii) more interest-bearing
liabilities than interest-earning assets
reprice or mature during a time when interest rates are rising.
Changes in the difference between short-term
and long-term interest rates may also harm our business. We
generally use short-
term deposits to fund longer-term assets. When interest rates change,
assets and liabilities with shorter terms reprice more quickly
than those with longer terms, which could have a material adverse effect
on our net interest margin. During 2022 and 2023, the
Federal Reserve raised the federal funds rate 11
times for a cumulative increase of 5.25%. In 2024, the Federal Reserve began
lowering the federal funds rate and lowered it three times during the year for a cumulative
decrease of 1.00%. We
are currently
operating in an environment in which the Federal Reserve has shifted toward reducing
interest rates, although modestly,
with cuts
implemented in September, October
and December 2025.
However, the inflationary outlook remains uncertain
and if the Federal
Reserve were to further decrease interest rates, this may constrain our interest
rate spread due to our asset sensitivity and may
adversely affect our business forecasts. On the other hand,
rapid increases in the target federal funds rate may result in a change
the mix of noninterest and interest-bearing accounts and effect
our interest rate spread. New appointments to the Board of
Governors at the Federal Reserve could result in a change in monetary policy
and interest rates, and the potential erosion of
Federal Reserve independence could negatively impact financial markets
and impact our profitability.
We are unable to
predict
changes in interest rates, which are affected by factors beyond
our control, including inflation, deflation, recession,
unemployment, money supply and other changes in financial markets.
Although we continuously monitor interest rates and have a number
of tools to manage our interest rate risk exposure, changes in
market assumptions regarding future interest rates could significantly impact our
interest rate risk strategy, our financial
position
and results of operations. If we do not properly monitor our interest rate risk management
strategies, these activities may not
effectively mitigate our interest rate sensitivity or have the desired
impact on our results of operations or financial condition.
Interest rates and economic conditions affect consumer
demand for housing and can create volatility in the mortgage industry.
These risks can have a material impact on the volume of mortgage originations
and refinancings, adversely affecting mortgage
banking revenues and the profitability of our mortgage banking business.
See Item 7.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations under the section captioned
“Net Interest Income” and “Market Risk and Interest Rate Sensitivity” elsewhere
in this report for further discussion related to
interest rate sensitivity and our management of interest rate risk.
The impact of interest rates on our mortgage banking business can
have a significant impact on revenues.
Changes in interest rates can impact our mortgage-related revenues and net revenues
associated with our mortgage activities.
decline in mortgage rates generally increases the demand for mortgage loans
as borrowers refinance, but also generally leads to
accelerated payoffs. Conversely,
in a constant or increasing rate environment, we would expect fewer loans to be refinanced
and a
decline in payoffs. Although we use models to assess the impact
of interest rates on mortgage-related revenues, the estimates of
revenues produced by these models are dependent on estimates and assumptions
of future loan demand, prepayment speeds and
other factors which may differ from actual subsequent
experience.
Inflationary pressures and rising prices may
affect our results of operations and financial condition.
Small to medium-sized businesses may be impacted more during periods
of high inflation as they are not able to leverage
economies of scale to mitigate cost pressures compared to larger
businesses. Consequently, the
ability of our business customers
to repay their loans may deteriorate, and in some cases this deterioration may occur
quickly, which would adversely impact
our
results of operations and financial condition. Furthermore, a prolonged
period of inflation could cause wages and other costs to
further increase which could adversely affect our results of
operations and financial condition. Sustained higher interest rates by
the Federal Reserve may be needed to tame persistent inflationary price
pressures, which could push down asset prices and
weaken economic activity.
A deterioration in economic conditions in the United States and our markets could result in
an increase
in loan delinquencies and non-performing assets, decreases in loan collateral
values and a decrease in demand for our products
and services, all of which, in turn, would adversely affect our business,
financial condition and results of operations.
Our profitability depends significantly on economic
conditions in the States of Florida and Georgia.
Our profitability and the success of our business depends substantially on the general
economic conditions of the States of Florida
and, to a lesser extent, Georgia, as well as the specific local markets in
which we operate. Unlike larger national or other regional
banks that are more geographically diversified, we provide banking
and financial services primarily to customers across northern
Florida and Georgia. The local economic conditions in
these areas have a significant impact on the demand for our products and
services as well as the ability of our customers to repay loans, the value of the
collateral securing loans and the stability of our
deposit funding sources. As a result, a significant decline in general economic
conditions in Florida or Georgia, whether caused
by recession, inflation, unemployment, in-flows and out-flows of residents,
shifts in political landscape, changes in securities
markets, acts of terrorism, pandemics, natural disasters, climate change,
outbreak of hostilities or other occurrences or other
factors could have a material adverse effect on our business, financial
condition and results of operations.
Changes in customer behavior may have a negative impact on our business, financial
condition, and results of operations.
Individual,
economic,
political, industry
-specific
conditions and
other factors
outside of
our
control,
such as
fuel prices,
energy
costs,
real
estate
values,
inflation,
tariffs
and
trade
wars,
taxes
other
factors
that
affect
customer
income
levels,
could
alter
anticipated
customer
behavior,
including
borrowing,
repayment,
investment
and
deposit
practices.
Such
change
these
practices
could
materially
adversely
affect
our
ability
anticipate
business
needs
and
meet
regulatory
requirements.
Further,
difficult economic conditions may
negatively affect consumer confidence
levels. A decrease in consumer confidence
levels would
likely aggravate the adverse effects of these difficult
market conditions on us and our customers.
The fair value of our investments could decline, which would cause a reduction
in shareowners’ equity.
A portion of our investment securities portfolio (62.9%) at December
31, 2025 has been designated as available-for-sale pursuant
to U.S. generally accepted accounting principles relating to accounting for
investments. Such principles require that unrealized
gains and losses in the estimated value of the available-for-sale
portfolio be “marked to market” and reflected as a separate item in
shareowners’ equity (net of tax) as accumulated other comprehensive
income/losses. Shareowners’ equity will continue to reflect
the unrealized gains and losses (net of tax) of these investments. The fair value
of our investment portfolio may decline, causing a
corresponding decline in shareowners’ equity.
Management believes that several factors will affect the
fair values of our investment portfolio. These include, but are not limited
to, changes in interest rates or expectations of changes in interest rates, the degree
of volatility in the securities markets, inflation
rates or expectations of inflation and the slope of the interest rate yield curve
(the yield curve refers to the differences between
short-term and long-term interest rates; a positively sloped yield curve means short
-term rates are lower than long-term rates).
These and other factors may impact specific categories of the portfolio differently,
and we cannot predict the effect these factors
may have on any specific category.
Shares of our common stock are not an insured
deposit and may lose value.
The shares of our common stock are not a bank deposit and will not be insured or guaranteed
by the FDIC or any other
government agency.
Your
investment will be subject to investment risk, and you must be capable of affording the
loss of your
entire investment.
Limited trading activity for shares of our common stock may
contribute to price volatility.
While our common stock is listed and traded on the Nasdaq Global Select Market, there
has historically been limited trading
activity in our common stock.
The average daily trading volume of our common stock over the 12-month
period ending
December 31, 2025 was approximately 37,371 shares. Due to the limited
trading activity of our common stock, relativity small
trades may have a significant impact on the price of our common stock. Similarly,
significant sales of our common stock, or the
expectation of these sales, could cause our stock prices to fall.
Securities analysts may not initiate coverage or continue to cover our common
stock, and this may have a negative impact
on its market price.
The trading market for our common stock will depend in part on the research
and reports that securities analysts publish about us
and our business. We do
not have any control over securities analysts, and they may not initiate coverage
or continue to cover our
common stock. If any securities analysts covering our common stock publishes
an unfavorable report, our stock price would
likely decline. If one or more of analysts covering our common stock ceases to cover
our Company or fails to publish regular
reports on us, the lack of research coverage and lose of visibility in the financial
markets may cause our stock price or trading
volume to decline.
Credit Risks
Our loan portfolio includes loans with a higher risk of loss which could lead to higher loan losses and nonperforming
assets.
We originate
commercial real estate loans, commercial loans, construction loans, vacant land
loans, consumer loans, and
residential mortgage loans primarily within our market area. Commercial
real estate, commercial, construction, vacant land, and
consumer loans may expose a lender to greater credit risk than traditional
fixed-rate fully amortizing loans secured by residential
real estate because the collateral securing these loans may not be sold as easily as residential
real estate. In addition, these loan
types tend to involve larger loan balances to a single borrower or
groups of related borrowers and are more susceptible to a risk of
loss during a downturn in the business cycle. These loans also have historically
had greater credit risk than other loans for the
following reasons:
Commercial Real Estate Loans
. Repayment is dependent on income being generated in amounts sufficient
to cover
operating expenses and debt service. These loans also involve greater risk because
they are generally not fully amortizing
over the loan period, but rather have a balloon payment due at maturity.
A borrower’s ability to make a balloon payment
typically will depend on the borrower’s ability to either refinance
the loan or timely sell the underlying property.
Further,
these loans generally are more affected by adverse conditions in the
economy. Because payments
on loans secured by
commercial real estate often depend upon the successful operation and
management of the properties and the businesses
which operate from within them, repayment of such loans may be affected
by factors outside the borrower’s control,
such as adverse conditions in the real estate market or the economy or changes
in government regulations.
At December
31, 2025, commercial mortgage loans comprised approximately
30.2% of our total loan portfolio.
Commercial Loans
. Repayment is generally dependent upon the successful operation of the borrower’s
business. In
addition, the collateral securing the loans may depreciate over time, be
difficult to appraise, be illiquid, or fluctuate in
value based on the success of the business. These loans are also sensitive to broader
economic conditions, competitive
pressures, and industry-specific trends, any of which may disproportionately
impact certain segments during periods of
stress and increase the likelihood of credit deterioration.
At December 31, 2025, commercial loans comprised
approximately 7.1% of our total loan portfolio.
Construction Loans
. The risk of loss is largely dependent on our initial estimate of whether
the property’s value at
completion equals or exceeds the cost of property construction and the availability
of take-out financing. During the
construction phase, a number of factors can result in delays or cost overruns. If
our estimate is inaccurate or if actual
construction costs exceed estimates,
which could be impacted by factors outside of our control, including
tariff, trade,
and immigration policies, the value of the property securing our
loan may be insufficient to ensure full repayment when
completed through a permanent loan, sale of the property,
or by seizure of collateral.
At December 31, 2025,
construction loans comprised approximately 5.8% of our total loan
portfolio.
Vacant
Land Loans
. Because vacant or unimproved land is generally held by the borrower
for investment purposes or
future use, payments on loans secured by vacant or unimproved land will typically
rank lower in priority to the borrower
than a loan the borrower may have on their primary residence or business. These loans
are susceptible to adverse
conditions in the real estate market and local economy.
At December 31, 2025, vacant land loans comprised
approximately 3.8% of our total loan portfolio.
HELOCs
. Our open-ended home equity loans have an interest-only draw period
followed by a five-year repayment
period of 0.75% of the principal balance monthly and a balloon payment
at maturity. Upon the commencement
of the
repayment period, the monthly payment can increase significantly,
thus, there is a heightened risk that the borrower will
be unable to pay the increased payment. Further,
these loans also involve greater risk because they are generally not fully
amortizing over the loan period but rather have a balloon payment due at maturity.
A borrower’s ability to make a
balloon payment may depend on the borrower’s ability
to either refinance the loan or timely sell the underlying property.
At December 31, 2025, HELOCs comprised approximately 9.5% of
our total loan portfolio.
Consumer Loans
. Consumer loans (such as automobile loans and personal lines of
credit) are collateralized, if at all,
with assets that may not provide an adequate source of payment of the loan due
to depreciation, damage, or loss. At
December 31, 2025, consumer loans comprised approximately 7.2%
of our total loan portfolio, with indirect auto loans
making up a majority of this portfolio at approximately 85.9% of the total balance.
The increased risks associated with these types of loans result in a correspondingly
higher probability of default on such loans (as
compared to fixed-rate fully amortizing single-family real estate loans).
Loan defaults would likely increase our loan losses and
nonperforming assets and could adversely affect our allowance
for credit losses and our results of operations.
In addition, credit
risk may be elevated by borrower or third party fraud, inaccuracies in financial
information, or misrepresentations in loan
documentation. As seen across the banking industry,
evolving fraud schemes and greater digitization of financial transactions can
increase the risk that loans are underwritten based on incomplete, inaccurate,
or falsified information, which may heighten the risk
of unexpected credit losses.
Our loan portfolio is heavily concentrated in mortgage loans secured
by properties in Florida and Georgia which causes
our risk of loss to be higher than if we had a more geographically diversified
portfolio.
Our interest-earning assets are heavily concentrated in mortgage loans secured
by real estate, particularly real estate located in
Florida and Georgia.
At December 31, 2025, approximately 85.7% of our loans included real estate as a primary,
secondary, or
tertiary component of collateral. The real estate collateral in each case provides
an alternate source of repayment in the event of
default by the borrower; however, the value
of the collateral may decline during the time the credit is extended. If we are required
to liquidate the collateral securing a loan during a period of reduced real estate values
to satisfy the debt, our earnings and capital
could be adversely affected.
Additionally, at December
31, 2025, a significant number of our loans secured by real estate are secured by commercial and
residential properties located in Florida and Georgia. The
concentration of our loans in these areas subjects us to risk that a
downturn in the economy or recession in these areas could result in a decrease in
loan originations and increases in delinquencies
and foreclosures, which would more greatly affect us than
if our lending were more geographically diversified. In addition, since
a large portion of our portfolio is secured by properties located
in Florida and Georgia, the occurrence of a natural disaster,
such
as a hurricane, or a man-made disaster could result in a decline in loan originations,
a decline in the value or destruction of
mortgaged properties and an increase in the risk of delinquencies, foreclosures
or loss on loans originated by us. Severe weather
events, catastrophic natural disasters, or other large-scale
disruptions may also rapidly impair collateral values and borrower
repayment capacity across an entire geographic market, increasing both
credit losses and required credit-loss reserves. We
may
suffer further losses due to the decline in the value of the properties underlying
our mortgage loans, which would have an adverse
impact on our results of operations and financial condition.
Our concentration in loans secured by real estate
may increase our credit losses, which would negatively
affect our
financial results.
Due to the lack of diversified industry within some of the markets served by CCB and the relatively
close proximity of our
geographic markets, we have both geographic concentrations as well as concentrations
in the types of loans funded. Specifically,
due to the nature of our markets, a significant portion of the portfolio has historically
been secured with real estate. At December
31, 2025, approximately 31.5% and 54.2% of our $2.546 billion loan
portfolio was secured by commercial real estate and
residential real estate, respectively.
As of this same date, approximately 5.8% was secured by property under construction.
Due to
the exposure in these concentrations, disruptions in markets, economic
conditions, changes in laws or regulations or other events
could cause a significant impact on the ability of borrowers to repay and may
have a material adverse effect on our business,
financial condition and results of operations.
In weak economies, or in areas where real estate market conditions are distressed,
we may experience a higher than normal level
of nonperforming real estate loans. The collateral value of the portfolio and the revenue stream
from those loans could come
under stress, and additional provisions for the allowance for credit losses could
be necessitated. In the event we are required to
foreclose on a property securing one of our mortgage loans or otherwise pursue
our remedies in order to protect our investment,
we may be unable to recover funds in an amount equal to our projected return
on our investment or in an amount sufficient to
prevent a loss to us due to prevailing economic conditions, real estate values and
other factors associated with the ownership of
real property. As a result,
the market value of the real estate or other collateral underlying our loans may not, at any given
time, be
sufficient to satisfy the outstanding principal amount of the
loans, and consequently, we would
sustain loan losses.
An inadequate allowance for credit losses would reduce our
earnings.
We are exposed
to the risk that our clients may be unable to repay their loans according to their terms and
that any collateral
securing the payment of their loans may not be sufficient
to assure full repayment. This could result in credit losses that are
inherent in the lending business. We
evaluate the collectability of our loan portfolio and provide an allowance
for credit losses
that we believe is adequate based upon such factors as: the risk characteristics of various
classifications of loans; previous loan
loss experience; specific loans that have loss potential; delinquency trends;
estimated fair market value of the collateral; current
and future economic conditions; and geographic and industry loan
concentrations.
At December 31, 2025, our allowance for credit losses for loans held for investment
was $31.0 million, which represented
approximately 1.22% of our total loans held for investment.
We had $8.6
million in nonaccruing loans at December 31, 2025.
We cannot provide
any assurance that our monitoring procedures and policies will reduce certain lending
risks, and while the
allowance is based on management’s
reasonable estimate and may not prove sufficient to cover future
loan losses.
Although
management uses the best information available to make determinations
with respect to the allowance for credit losses, future
adjustments may be necessary if economic conditions differ substantially
from the assumptions used or adverse developments
arise with respect to our nonperforming or performing loans.
In addition, regulatory agencies, as an integral part of their
examination process, periodically review our estimated losses on loans.
Our regulators may require us to recognize additional
losses based on their judgments about information available to them at the time of
their examination.
Accordingly, the allowance
for credit losses may not be adequate to cover all future loan losses and significant increases
to the allowance may be required in
the future if, for example, economic conditions worsen.
A material increase in our allowance for credit losses would adversely
impact our net income and capital in future periods, while having the effect
of overstating our current period earnings.
Failures in the analytical
and forecasting models
relied upon for our
accounting estimates and risk
management processes
could have a material adverse effect on our business, financial condition, and results
of operations.
The processes
we use
to estimate
our expected
credit losses and
to measure
the fair value
of financial
instruments, as
well as
the
processes used
to estimate
the effects
of changing
interest rates
and other
market measures
on our
financial condition
and results
operations,
depends
upon
the
use
analytical
and
forecasting
models.
These
models
reflect
assumptions
that
may
not
accurate,
particularly
times
market
stress
other
unforeseen
circumstances.
Even
these
assumptions
are
adequate,
the
models may
prove to
be inadequate
or inaccurate
because of
other flaws
in their
design or
their implementation,
including flaws
caused by failures in controls, data management, human error
or from the reliance on technology.
If the models we use for interest
rate
risk
and
asset-liability
management
are
inadequate,
may
incur
increased
unexpected
losses
upon
changes
market
interest
rates
other
market
measures.
the
models
use
for
estimating
our
expected
credit
losses
are
inadequate,
the
allowance for
credit losses
may not
be sufficient
to support
future charge-offs.
If the
models we
use to
measure the
fair value
financial
instruments
are
inadequate,
the
fair
value
such
financial
instruments
may
fluctuate
unexpectedly
may
not
accurately reflect
what we
could realize
upon sale
or settlement
of such
financial instruments.
Any such
failure in
our analytical
or forecasting models could have a material adverse effect
on our business, financial condition, and results of operations.
We may incur significant costs associated
with the ownership of real property as a
result of foreclosures, which could
reduce our net income.
Since we originate loans secured by real estate, we may have to foreclose on the
collateral property to protect our investment and
may thereafter own and operate such property,
in which case we would be exposed to the risks inherent in the ownership of real
estate.
The amount that we, as a mortgagee, may realize after a foreclosure is dependent
upon factors outside of our control, including,
but not limited to: general or local economic conditions; environmental
cleanup liability; neighborhood values; interest rates; real
estate tax rates; operating expenses of the mortgaged properties; supply of
and demand for rental units or properties; ability to
obtain and maintain adequate occupancy of the properties; zoning
laws; governmental rules, regulations and fiscal policies; and
acts of God.
Certain expenditures associated with the ownership of real estate, including
real estate taxes, insurance and maintenance costs,
may adversely affect the income from the real estate. Furthermore,
we may need to advance funds to continue to operate or to
protect these assets. As a result, the cost of operating real property
assets may exceed the rental income earned from such
properties or we may be required to dispose of the real property at a loss.
Reliance on inaccurate or misleading financial statements, credit
reports, or other financial information could have a
material adverse impact on our business, financial condition,
and results of operations.
In deciding whether to extend credit or enter into other transactions, we rely
on information furnished by or on behalf of
customers and counterparties, including financial statements, credit
reports, and other financial information. We
also rely on
representations of those customers, counterparties, or other third parties, such
as independent auditors, as to the accuracy and
completeness of that information. Reliance on inaccurate or misleading
financial statements, credit reports, or other financial
information could have a material adverse impact on our business, financial condition,
and results of operations.
Liquidity and Capital Risks
Liquidity risk could impair our ability to fund operations and jeopardize our financial
condition.
Effective liquidity management is essential for the operation of
our business. We require
sufficient liquidity to meet client loan
requests, client deposit maturities and withdrawals, payments on our debt obligations
as they come due and other cash
commitments under both normal operating conditions and other unpredictable
circumstances causing industry or general financial
market stress. If we are unable to raise funds through deposits, borrowings,
earnings and other sources, it could have a substantial
negative effect on our liquidity.
In particular, a majority of our liabilities during
2025 were checking accounts and other liquid
deposits, which are generally payable on demand or upon short notice.
By comparison, a substantial majority of our assets were
loans, which cannot generally be called or sold in the same time frame. Although
we have historically been able to replace
maturing deposits and advances as necessary,
we might not be able to replace such funds in the future, especially if a large
number of our depositors seek to withdraw their accounts at the same time, regardless
of the reason. Our access to funding
sources in amounts adequate to finance our activities on terms that are acceptable
to us could be impaired by factors that affect us
specifically or the financial services industry or economy in general.
Factors that could negatively impact our access to liquidity
sources include a decrease in the level of our business activity as a result of a downturn
in the markets in which our loans are
concentrated, adverse regulatory action against us, or our inability to attract and
retain deposits. Our access to deposits may be
negatively impacted by,
among other factors, periods of low interest rates or high interest rates.
Periods of high interest rates
could promote increased competition for deposits, including from new
financial technology competitors, or provide customers
with alternative investment options.
Our ability to borrow could also be impaired by factors that are not specific to us, such
disruption in the financial markets or negative views and expectations about
the prospects for the financial services industry.
are unable to maintain adequate liquidity,
it could materially and adversely affect our business, results of operations
or financial
condition.
significant
decrease
our
public
fund
deposit
balances
result
increased
competition
the
current
higher
interest-rate environment and seasonal nature
of these deposits could materially and adversely affect our liquidity.
The Company has many long-standing relationships with municipal entities
throughout its markets and the deposits held by these
customers have provided a relatively attractive and stable (although seasonal)
funding source for the Company over an extended
period of time. Public fund deposits from local government entities such as universities,
counties, school districts, and other
municipalities generally have higher average balances and historically been
more volatile than nonpublic deposits because they
are heavily impacted by the seasonality of tax collection, changes in competitive
and market forces, and fiscal spending patterns,
as well as the longer-term financial position of local government entities, which
can change from year to year. Such public
fund
deposits are often subject to competitive bidding and in many cases must be secured
by pledging a portion of our investment
securities.
The Company’s inability to
retain public fund deposit balances due to increased competition in the current higher
interest-rate environment and seasonal nature of these deposits could materially
and adversely affect our liquidity or result in the
use of higher-cost funding sources, which, in turn, could
materially and adversely affect our business, results of operations or
financial condition.
Unrealized losses in our securities portfolio could materially
and adversely affect our liquidity.
We have experienced
significant unrealized losses on our available-for-sale securities portfolio
as a result of increases in market
interest rates. Unrealized losses related to available-for-sale
securities are reflected in accumulated other comprehensive income
in our consolidated statements of financial condition and reduce the level of our
book capital and tangible common equity.
However, such unrealized losses do not
affect our regulatory capital ratios. We
actively monitor our available-for-sale securities
portfolio and we do not currently anticipate the need to realize material losses from
the sale of securities for liquidity purposes.
Furthermore, we believe it is unlikely that we would be required to sell any such securities
before recovery of their amortized cost
bases, which may be at maturity.
Nonetheless, our access to liquidity sources could be affected by unrealized
losses if securities
must be sold at a loss, tangible capital ratios decline from an increase in unrealized
losses or realized credit losses, the Federal
Home Loan Bank of Atlanta (“FHLB”) or other funding sources reduce capacity,
or bank regulators impose restrictions on us that
impact the level of interest rates we may pay on deposits or our ability to access federal
funds lines or brokered deposits.
Additionally, significant
unrealized losses could negatively impact market and customer perceptions
of the Company, which
could lead to a loss of depositor confidence and an increase in deposit withdrawals,
particularly among those with uninsured
deposits.
We may need to raise additional capital
in the future, and such capital may not be available on acceptable terms or at all.
may
need
raise
additional
capital
the
future
provide
with
sufficient
capital
resources
and
liquidity
meet
our
commitments and business
needs, particularly if our
asset quality or earnings
were to deteriorate significantly.
Our ability to raise
additional capital,
if needed, will
depend on, among
other things, conditions
in the capital
markets at that
time, which are
outside
of our
control, and
our financial
condition. Economic
conditions and
the loss of
confidence in
financial institutions
may increase
our
cost
funding
and
limit
access
certain
customary
sources
capital,
including
inter-bank
borrowings,
repurchase
agreements and borrowings from the discount window of the Federal Reserve.
As a result, we may be unable to raise capital on terms favorable to us, in a timely manner
or at all, which could materially and
adversely affect our liquidity,
business, results of operations, or financial condition. Moreover,
if we need to raise capital in the
future, we may have to do so when many other financial institutions are also seeking
to raise capital and would have to compete
with those institutions for investors.
We may be unable to pay dividends in the future.
In 2025, our Board of Directors declared four quarterly cash dividends.
Declarations of any future dividends will be contingent on
our ability to earn sufficient profits and to remain well capitalized, including
our ability to hold and generate sufficient capital to
comply with the Common Equity Tier 1 (“CET1”)
Capital conservation buffer requirement. In addition,
due to our contractual
obligations with the holders of our trust preferred securities, if we defer the payment of accrued
interest owed to the holders of our
trust preferred securities, we may not make dividend payments to our
shareowners.
Further, under applicable statutes and regulations,
CCB’s board of directors,
after charging-off bad debts, depreciation and other
worthless assets, if any,
and making provisions for reasonably anticipated future losses on loans and other assets, may
quarterly,
semi-annually, or
annually declare and pay dividends to CCBG of up to the aggregate net income
of that period combined with
the CCB’s retained net income for
the preceding two years and, with the approval of the Florida OFR, declare a dividend from
retained net income which accrued prior to the preceding two years. The prior
approval of the Federal Reserve is required if the
total of all dividends declared by a state-chartered member bank in any calendar
year would exceed the sum of the bank’s net
income for that year and its retained net income for the preceding two calendar
years, less any required transfers to surplus or to
fund the retirement of preferred stock. Additional state laws generally
applicable to Florida corporations and guidelines of the
Federal Reserve may also limit our ability to declare and pay dividends. Thus,
our ability to fund future dividends may be
restricted by state and federal laws and regulations.
Regulatory and Compliance Risks
We are subject to
extensive regulation, which could restrict our activities
and impose financial requirements or limitations
on the conduct of our business.
We are subject to
extensive regulation, supervision and examination by our regulators, including
the Florida OFR, the Federal
Reserve, and the FDIC. Our compliance with these industry regulations
is costly and restricts certain of our activities, including
payment of dividends, mergers and acquisitions, investments,
lending and interest rates charged on loans, interest rates paid
deposits, the fees we can charge for certain products or transactions, access to
capital and brokered deposits, and locations of
banking offices. If we are unable to meet these regulatory requirements,
our financial condition, liquidity and results of operations
would be materially and adversely affected.
Our activities are also regulated under consumer protection laws applicable to
our lending, deposit, and other activities. Many of
these regulations are intended primarily for the protection of our
depositors, the DIF,
and the banking system as a whole, and not
for the benefit of our shareowners. In addition to the regulations of the bank regulatory
agencies, as a member of the FHLB of
Atlanta, we must also comply with applicable regulations of the Federal
Housing Finance Agency and the Federal Home Loan
Bank.
Regulators have continued to focus on compliance with AMLA and BSA obligations
and the rules enforced by OFAC.
If our
policies, procedures and systems are deemed deficient or the policies, procedures
are deficient, we would be subject to liability,
including fines and regulatory actions such as restrictions on our
ability to pay dividends and the necessity to obtain regulatory
approvals to proceed with certain aspects of our business plan, including any acquisition
plans.
Our failure to comply with these laws and regulations could subject us to the loss of
FDIC insurance, reputational damage, the
revocation of our banking charter,
enforcement actions, sanctions, or other legal actions by regulatory agencies, restrictions
on our
business activities, fines, and other penalties, any of which could adversely
affect our results of operations, capital base, and the
price of our securities. Changes to any new laws, rules, regulations, policies,
and supervisory guidance (including changes in
interpretation and implementation) have and could make compliance
more difficult or expensive and could otherwise adversely
affect our business and financial condition.
Government authorities, including the bank regulatory agencies, are pursuing
aggressive enforcement actions with respect to
compliance and other legal matters involving financial activities (including
new prohibitions on politicized debanking), which
heightens the risks associated with actual and perceived compliance failures.
Directives issued to enforce such actions may be
confidential and thus, in some instances, we are not permitted to publicly
disclose these actions. Litigation challenging actions or
regulations by federal or state authorities could, depending on the outcome,
significantly affect the regulatory and supervisory
framework affecting our operations. Any of the foregoing could
have a material adverse effect on our business, financial
condition, and results of operations.
In addition, we face increased regulatory scrutiny,
in the course of routine examinations and otherwise, and new regulations
response to negative developments in the banking industry,
which may increase our cost of doing business and reduce our
profitability. Among
other things, there may be increased focus by both regulators and investors on
deposit composition, the level
of uninsured deposits, brokered deposits, unrealized losses in securities portfolios,
liquidity, commercial real estate loan
composition and concentrations, and capital as well as general oversight
and control of the foregoing. We
could face increased
scrutiny or be viewed as higher risk by regulators and the investor community,
which could have a material adverse effect on our
business, financial condition, and results of operations.
U.S. federal banking agencies may require us to increase
our regulatory capital, long-term debt or liquidity
requirements,
which could result in the need to issue additional qualifying securities or to
take other actions, such as to sell company
assets.
We are subject to
U.S. regulatory capital and liquidity rules. These rules, among other things, establish minimum
requirements to
qualify as a well-capitalized institution. If CCB fails to maintain its status as well capitalized
under the applicable regulatory
capital rules, the Federal Reserve will require us to agree to bring the bank back to
well-capitalized status. For the duration of
such an agreement, the Federal Reserve may impose restrictions on our
activities. If we were to fail to enter into or comply with
such an agreement or fail to comply with the terms of such agreement, the Federal
Reserve may impose more severe restrictions
on our activities, including requiring us to cease and desist activities permitted
under the Bank Holding Company Act of 1956.
Additionally, if our
CET1 to Risk Weighted Assets ratio
does not exceed the minimum required plus the additional CET1
conservation buffer,
we may be restricted in our ability to pay dividends or make other distributions of capital to our shareowners.
Capital and liquidity requirements are frequently introduced and amended.
It is possible that regulators may increase regulatory
capital requirements, change how regulatory capital is calculated or increase liquidity
requirements. Requirements to maintain
higher levels of capital may lower our return on equity.
Further changes to and compliance with the regulatory capital and liquidity requirements
may impact our operations by requiring
us to liquidate assets, increase borrowings, issue additional equity or other securities,
cease or alter certain operations, sell
company assets or hold highly liquid assets, which may adversely affect
our results of operations. We
may be prohibited from
taking capital actions such as paying or increasing dividends or repurchasing
securities.
Changes in accounting standards or assumptions in applying accounting policies
could adversely affect us.
Our accounting policies and methods are fundamental to how we record and report
our financial condition and results of
operations. Some of these policies require use of estimates and assumptions that
may affect the reported value of our assets or
liabilities and results of operations and are critical because they require management
to make difficult, subjective and complex
judgments about matters that are inherently uncertain. If those assumptions, estimates or
judgments were incorrectly made, we
could be required to correct and restate prior-period financial statements. Accounting
standard-setters and those who interpret the
accounting standards, the SEC, banking regulators and our independent registered
public accounting firm may also amend or even
reverse their previous interpretations or positions on how various standards
should be applied. These changes may be difficult to
predict and could impact how we prepare and report our financial statements. In
some cases, we could be required to apply a new
or revised standard retrospectively,
resulting in us revising prior-period financial statements.
We are subject to
government regulation and oversight relating to
data and privacy protection.
Our business requires the collection and retention of large
volumes of customer data, including personally identifiable information
in various information systems that we maintain and in those maintained
by third parties with whom we contract. We
also
maintain important internal company data such as personally identifiable information
about our associates and information
relating to our operations. The integrity and protection of that customer and company
data is important to us.
We are subject to
complex and evolving laws and regulations relating to the privacy of the information
of our customers,
associates and others, and any failure to comply with these laws and regulations,
or any misuse or mismanagement of such
information, could expose us to liability and reputational damage, which could
adversely affect our financial condition and results
of operations. As new privacy-related laws and regulations are implemented,
the time and resources needed for us to comply with
such laws and regulations, as well as our potential liability for non-compliance
and reporting obligations in the case of data
breaches, may significantly increase. It is possible that these laws may be interpreted
and applied by various jurisdictions in a
manner inconsistent with our current or future practices, or that is inconsistent
with one another.
Operational Risks
Many types of operational risks can affect our earnings negatively.
We regularly
assess and monitor operational risk in our businesses. Despite our efforts to
assess and monitor operational risk, our
risk management framework may not be effective in all cases.
Factors that can impact operations and expose us to risks varying
size, scale and scope include:
failures of technological systems or breaches of security measures, including, but not
limited to, those resulting from
computer viruses or cyber-attacks;
unsuccessful or difficult implementation of computer
systems upgrades;
human errors or omissions, including failures to comply with applicable
laws or corporate policies and procedures;
theft, fraud or misappropriation of assets, whether arising from the intentional
actions of internal personnel or external
third parties;
breakdowns in processes, breakdowns in internal controls or failures of
the systems and facilities that support our
operations;
deficiencies in services or service delivery;
negative developments in relationships with key counterparties, third-party
vendors, or associates in our day-to-day
operations; and
external events that are wholly or partially beyond our control, such as pandemics,
geopolitical events, political unrest,
natural disasters or acts of terrorism.
Operational risks can also arise from increased reliance on digital platforms,
remote‑work technologies, cloud‑based solutions,
and other external service providers whose performance or resilience may be outside
of our direct control. These forms of reliance
may increase the speed and breadth with which disruptions, control
failures, or cyber‑events can affect our operations.
While we have in place many controls and business continuity plans designed
to address these factors and others, these plans may
not operate successfully to mitigate these risks effectively.
If our controls and business continuity plans do not mitigate the
associated risks successfully,
such factors may have a negative impact on our business, financial condition or results
operations. In addition, an important aspect of managing our operational
risk is creating a risk culture in which all associates fully
understand that there is risk in every aspect of our business and the importance of
managing risk as it relates to their job functions.
We continue
to enhance our risk management program to support our risk culture.
Nonetheless, if we fail to provide the
appropriate environment that sensitizes all of our associates to managing
risk, our business could be impacted adversely.
We are subject to
certain operational risks, including, but not limited to
risk arising from failure or circumvention
of our
controls and procedures.
Our internal controls, including fraud detection and controls, disclosure controls
and procedures, and corporate governance
procedures are based in part on certain assumptions and can provide only reasonable,
not absolute, assurances that the objectives
of the controls and procedures are met. Notwithstanding the proliferation of
technology and technology-based risk and control
systems, we rely on the ability of our associates and systems to process a high number
of transactions, and we are subject to the
risk that our associates may make mistakes or engage in violations of applicable
policies, laws, rules, or procedures that in the
past have not, and in the future may not, always be prevented by our technological
processes or by our controls and other
procedures intended to prevent and detect such errors or violations. Any
failure or circumvention of our controls and procedures,
failure to comply with regulations related to controls and procedures, failure to comply
with our corporate governance procedures,
fraud by associates or persons outside our Company,
the execution of unauthorized transactions by associates, or errors relating to
transaction processing and technology could have a material adverse effect
on our reputation, business, financial condition and
results of operations, including subjecting us to litigation, customer attrition,
regulatory fines, penalties, or other sanctions.
Insurance coverage may not be available for losses relating to such event,
or where available, such losses may exceed insurance
limits.
In addition, evolving regulatory expectations regarding operational
resilience, business continuity,
vendor oversight, and
internal control effectiveness may require additional investment
and may heighten supervisory scrutiny if deficiencies are
identified.
We are subject to
credit and/or settlement risk arising from
the soundness of other financial institutions and
counterparties which may have a material adverse effect on our business, financial condition,
and results of operations.
Financial services institutions are interrelated as a result of trading,
clearing, counterparty, or other
relationships. We
have
exposure to many different industries and counterparties,
and routinely execute transactions with counterparties in the financial
services industry, including
commercial banks, brokers and dealers, investment banks, other institutional clients,
and certain
vendors. Many of these transactions expose us to credit or settlement risk in the
event of a default or other failure to adhere to
contractual obligations by a counterparty or client. In addition, our credit or
settlement risk may be exacerbated when any
collateral held by us cannot be realized upon or is liquidated at prices not sufficient
to recover the full amount of the credit or
derivative exposure due to us. Increased interconnectivity amongst
financial institutions also increases the risk of cyber-attacks
and information system failures for financial institutions. Any such losses could
have a material adverse effect on our business,
financial condition, and results of operations.
Cybersecurity
incidents,
including
security
breaches
and
failures
our
information
systems
could
significantly
disrupt
our
business,
result
the
unintended
disclosure
misuse
confidential
proprietary
information,
damage
our
reputation, increase our costs, and cause losses.
In the ordinary course of business, we rely on electronic communications
and information systems to conduct our operations and
to store sensitive data, including our proprietary business information
and that of our clients, and personal information of our
clients and associates. The secure processing, maintenance, and transmission
of this information is critical to our operations.
Our
systems, including those we maintain with our service providers, vendors,
or our clients, could be vulnerable to cybersecurity-
related incidents, which include compromises of information systems, attempts to
access information, including customer and
company information, malicious code, computer viruses or other malware,
denial of service attacks, phishing attempts, brute
force attacks, exploiting software vulnerabilities (including “zero-day
attacks”), ransomware, supply chain attacks, and other
events that could result in unauthorized access, theft, misuse, loss, release, or
destruction of data (including confidential customer
information), account takeovers, unavailability of service, or other events. These
types of threats may result from human error,
fraud, or criminal activity on the part of external or internal parties, or may result from
the failure of technology or information
systems. Further, these types of threats may
be exacerbated by recent developments in artificial intelligence and their increased
use to produce sophisticated malware, phishing schemes, and other fraudulent
activities. Any failure, interruption, or compromise
in security of these systems could result in significant disruption to our operations.
Financial institutions and companies engaged in data processing have
increasingly reported compromises in the security of their
websites or other systems, some of which have involved sophisticated and
targeted attacks intended to obtain unauthorized access
to confidential information, destroy data, disrupt or degrade service, sabotage
systems, or cause other damage. Our technologies,
systems, networks, and software have been and continue to be subject to cybersecurity
threats and attacks, which range from
uncoordinated individual attempts to sophisticated and targeted
measures by criminal organizations directed at us. Our customers,
associates, and third parties that we do business with have been, and will likely continue
to be, targeted in cybersecurity-related
incidents by parties using fraudulent e-mails, artificial intelligence,
and other communications in attempts to misappropriate
passwords, bank account information, or other personal information,
or to introduce viruses or other malware programs to our
information systems, or the information systems and devices of our third-party
(or fourth-party) service providers and our
customers that are beyond our security control systems. Although we try to mitigate
these threats through product improvements,
use of encryption and authentication technology,
and customer and employee education, among other things, cybersecurity-
attacks against us, our third-party (or fourth-party) service providers
and our customers are a risk to our business.
We may be required
to spend significant capital and other resources to protect against the threat of
cybersecurity-related incidents
or to alleviate problems caused by such incidents. Any failures related to upgrades
and maintenance of our technology and
information systems could increase our information and system security
risk. Our increased use of cloud and other technologies,
such as remote work technologies, and the increased connectivity of third parties
and electronic devices to our systems also
increases our risk of being subject to a cybersecurity-related incident. The risk
of a cybersecurity-related incident has increased as
the number, intensity,
and sophistication of attempted attacks and intrusions from around the world have
increased. A
cybersecurity-related incident or other significant disruption of our information
systems or those of our customers or third-party
service providers and vendors could (i) disrupt the proper functioning of
our networks and systems and, therefore, our operations
and
those of our customers; (ii) result in the unauthorized access to, destruction, loss, theft, misappropriation,
or release of
confidential, sensitive, or otherwise valuable information of ours or
our customers; (iii) result in a violation of applicable privacy,
data protection, and other laws, subjecting us to additional regulatory
scrutiny and exposing us to civil litigation, enforcement
actions, governmental fines, sanctions, or penalties (which may not be
covered by our insurance policies), and possible financial
liability; (iv) require significant management attention and resources to remedy
the damages that result; (v) cause increased
expenses and lost revenue; or (vi) cause negative publicity,
harm our reputation, or cause a decrease in the number of customers
that choose to do business with us, damaging our ability to generate deposits. The
occurrence of any of the foregoing could have a
material adverse effect on our business, financial condition,
and results of operations. Furthermore, in the event of a
cybersecurity-related incident, we may be delayed in identifying or responding to
the incident, which could increase the negative
impact of the incident on our business, financial condition, and results of
operations. While we maintain cybersecurity insurance
coverage, which may apply in the event of certain cybersecurity-related
incidents, the amount of coverage may not be adequate
depending on the magnitude of the incident. Furthermore, because cybersecurity
-related incidents are inherently difficult to
predict and can take many forms, some incidents may not be covered under
our cyber insurance coverage.
Increased fraudulent activity may cause losses to us or our clients, damage
to our brand, and increases in our costs, in
turn, materially and adversely affecting our business, financial condition,
and results of operations.
Additionally, fraud
losses have risen in recent years due in large part to growing and evolving schemes,
as well as the
advancement of artificial intelligence.
Fraudulent activity has taken many forms, ranging from wire fraud, debit card fraud,
credit
card fraud, check fraud, mechanical devices attached to ATMs,
social engineering, and phishing attacks to obtain personal
information, business email compromise, or impersonation of clients through
the use of falsified or stolen credentials. Many
financial institutions have suffered significant losses in recent years
due to the theft of cardholder data that has been illegally
exploited for personal gain. The potential for debit and credit card fraud, as well as check
fraud, against us or our clients and our
third-party service providers is a serious issue. Debit and credit card fraud
and check fraud are pervasive, and the risks of
cybercrime are complex and continue to evolve. While we have policies and procedures,
as well as fraud detection tools, designed
to prevent fraud losses, such policies, procedures, and tools may be insufficient
to accurately detect and prevent fraud. A
significant increase in fraudulent activities could lead us to take additional
steps to reduce fraud risk, which could increase our
costs. Fraud losses could cause losses to us or our clients, damage to our brand, and an
increase in our costs, in turn, materially
and adversely affecting our business, financial condition,
and results of operations.
The development and use of Artificial Intelligence (“AI”) presents risks
and challenges that may adversely impact our
business.
The banking and financial services industry continually experiences technological
changes, with frequent introductions
of new
technology-driven products and services, including recent and rapid developments
in AI, including with agentic AI. Our
future
success will depend, in part, upon our ability to address the needs of our clients by using
technology to provide products
and
services that will satisfy client demands for convenience, as well as to assess the proper
operation of AI models and
capabilities
to create additional efficiencies in our operations. We
may not be able to effectively implement new technology- driven products
and services or be successful in marketing these products and services to our
clients. In addition, the
implementation of
technological changes and upgrades to maintain current systems and
integrate new ones may also create
service interruptions,
transaction processing errors, and system conversion delays and
may cause us to fail to comply with
applicable laws. There can
be no assurance that we will be able to successfully manage the risks associated with our
increased
dependency on technology.
Failure to successfully keep pace with technological change affecting
the banking and financial
services industry could
negatively affect our revenue and profitability.
We or our
third-party (or fourth party) vendors, customers or counterparties may develop or incorporate
AI technology
in certain
business processes, services, or products. The development and use of AI
presents a number of risks and challenges to
our
business. The legal and regulatory environment relating to AI is uncertain
and rapidly evolving, both in the U.S. and
internationally,
and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual
property,
privacy,
consumer protection, employment, and other laws applicable to the use of AI.
These evolving laws and regulations
could require
changes in our implementation of AI technology and increase our compliance costs and
the risks to us of non- compliance. AI
models, particularly generative or agentic AI models, may produce outputs or
take action that is incorrect, that
reflects biases
included in the data on which they are trained, that results in the release of private,
confidential, or proprietary
information, that
infringes on the intellectual property rights of others, or that is otherwise harmful.
In addition, the complexity
of many AI models
makes it difficult to understand why they are generating particular
outputs. This limited transparency
increases the challenges
associated with assessing the proper operation of AI models, understanding
and monitoring the
capabilities of the AI models,
reducing erroneous output, eliminating bias, and complying with regulations
that require
documentation or explanation of the
basis on which decisions are made. Further,
we may rely on AI models developed by third
parties, and, to that extent, would be
dependent in part on the manner in which those third parties develop and train their
models, including risks arising from the
inclusion of any unauthorized material in the training data for their models and
the
effectiveness of the steps these third parties
have taken to limit the risks associated with the output of their models, matters over
which we may have limited visibility.
Any of
these risks could expose us to liability or adverse legal or regulatory
consequences and harm our reputation and the public
perception of our business or the effectiveness of our security
measures.
We may not be able to attract and
retain skilled people, which may have a negative impact on
our business and
operations.
Our success depends, in large part, on our ability to attract and retain
key people. Competition for the best people in many
activities engaged in by us is intense, including with respect to compensation
and emerging workplace practices and
accommodations, and, as a result, we may not be able to sufficiently
hire or to retain key people. We
do not currently have
employment agreements or non-competition agreements with any of our senior officers.
The unexpected loss of service of key
personnel could have a material adverse impact on our business, financial
condition, and results of operations because of their
customer relationships, skills, knowledge of our market, years of industry
experience, and the difficulty of promptly finding
qualified replacement personnel. In addition, the scope and content of U.S. banking
regulators’ policies on incentive
compensation, as well as changes to these policies, could adversely affect
our ability to hire, retain, and motivate our key
associates.
Issues we encounter with respect to external vendors upon which we rely
could have a material adverse effect on our
business and, in turn, our financial condition and results of operations.
We rely on
certain external vendors to provide products and services necessary to maintain our day-to-day
operations. These
third-party vendors are sources of operational, cybersecurity and informational
security risk to us, including risks associated with
operational errors, coding errors, information system failures, interruptions
or breaches, and unauthorized disclosures of sensitive
or confidential client or customer information. If we encounter any of these
issues in connection with our external vendors, or if
we have difficulty communicating with these vendors, we
could be exposed to disruption of operations, loss of service, or
connectivity to customers, reputational damage, and litigation risk that could
have a material adverse effect on our business and,
in turn, our financial condition and results of operations.
In addition, our operations are exposed to risk that these vendors will not perform in
accordance with the contracted arrangements
under service level agreements. Although we have selected these external vendors
carefully, we do not control their actions.
The
failure of an external vendor to perform in accordance with the contracted
arrangements under service level agreements could be
disruptive to our operations, which could have a material adverse effect
on our business and, in turn, our financial condition and
results of operations. Replacing these external vendors could also entail
significant delay and expense.
Severe weather,
natural disasters, global climate change, widespread health emergencies
(including pandemics), acts of
terrorism and global conflicts may have a negative impact
on our business and operations.
Severe weather, natural disasters, global
climate change, widespread health emergencies (including pandemics),
acts of terrorism,
global conflicts, or other similar events have in the past, and may in the future
have, a negative impact on our business and
operations. These events impact us negatively to the extent that they result
in reduced capital markets activity,
lower asset price
levels, or disruptions in general economic activity in the United States or abroad,
or in financial market settlement functions. In
addition, such events could affect the stability of our deposit base,
impair the ability of borrowers to repay outstanding loans,
impair the value of collateral securing loans, cause significant property damage,
result in loss of revenue, cause us to incur
additional expenses, and impact economic growth negatively.
If any of these risks materialized, they could have an adverse effect
on our business and operations and may have other adverse effects on
us in ways that we are unable to predict.
Specifically, our market
areas in Florida are susceptible to hurricanes, tropical storms and related flooding
and wind damage and
other similar weather events. Such weather events can disrupt operations,
result in damage to properties and negatively affect the
local economies in the markets where we operate. We
cannot predict whether or to what extent damage that may be caused by
future weather events will affect our operations or the economies in our
current or future market areas, but such events could
result in a decline in loan originations, a decline in the value or destruction of properties securing
our loans and an increase in
delinquencies, foreclosures or loan losses, negatively impacting our business and
results of operations. As a result of the potential
for such weather events, many of our customers have incurred significantly
higher property and casualty insurance premiums on
their properties located in our markets, which may adversely affect
real estate sales and values in our markets.
Litigation may adversely affect our results.
We are subject to
litigation in the ordinary course of business. Claims and legal actions, including
claims pertaining to our
performance of our fiduciary responsibilities as well as supervisory actions
by our regulators, could involve large monetary
claims and significant defense costs. The outcome of litigation and regulatory
matters as well as the timing of ultimate resolution
are inherently difficult to predict. Actual legal and other costs of resolving
claims may be greater than our legal reserves. The
ultimate resolution of a pending legal proceeding, depending on the remedy sought
and granted, could materially adversely affect
our results of operations and financial condition.
In addition, governmental authorities have, at times, sought criminal penalties
against companies in the financial services sector
for violations, and, at times, have required an admission of wrongdoing from
financial institutions in connection with resolving
such matters. Criminal convictions or admissions of wrongdoing in a settlement with
the government can lead to greater exposure
in civil litigation and reputational harm.
Substantial legal liability or significant regulatory action against us could have material
adverse financial effects or cause
significant reputational harm, which adversely impact our business prospects. Further,
we may be exposed to substantial
uninsured liabilities, which could adversely affect
our results of operations and financial condition.
fail
maintain
effective
system
internal
control
over
financial
reporting,
may
not
able
to accurately
report our
financial results,
prevent fraud,
or file
our periodic
reports in
a timely
manner,
which may
cause investors
lose confidence in our reported financial information and may lead
to a decline in our stock price.
As a public
company,
we are required
to maintain internal
control over financial
reporting and to
report any material
weaknesses
in such internal control.
Section 404 of the Sarbanes
-Oxley Act requires that
we furnish a report
by management on, among
other
things,
the
effectiveness
our
internal
control
over
financial
reporting.
This
assessment
requires
disclosure
any
material
weaknesses
identified
our
management
our
internal
control
over
financial
reporting.
Our
independent
registered
public
accounting firm
also needs
to attest to
the effectiveness
of our
internal control
over financial
reporting. Effective
internal control
over financial reporting is necessary for us to provide reliable financial
reports and, together with adequate disclosure controls and
procedures,
designed
prevent
fraud.
Any
failure
maintain
implement
required
new
improved
controls
had
recently
discussed
Item
difficulties
encountered
implementation
could
cause
fail
meet
our
reporting
obligations,
which
could
subject
the
Company
litigation,
investigations,
breach
contract
claims,
require
management
resources, increase costs, negatively affect investor confidence,
and adversely impact its stock price.
Strategic Risks
Our future success is dependent on our ability to compete effectively
in the highly competitive banking and financial
services industry.
We face vigorous
competition for deposits, loans and other financial services in our market area
from other banks and financial
institutions, including savings and loan associations, savings banks,
finance companies and credit unions. A number of our
competitors are significantly larger than we are and have greater access to
capital and other resources. Many of our competitors
also have higher lending limits, more expansive branch networks, and offer
a wider array of financial products and services.
We also compete
with other non-bank providers of financial services, such as money market mutual
funds, brokerage firms,
consumer finance companies, insurance companies, governmental
organizations, and non-bank financial technology and wealth
technology providers, including digital asset service providers. Many of our
non-bank competitors are not subject to the same
extensive regulations that govern our activities. As a result, these non-bank
competitors have advantages over us in providing
certain services, including the ability to offer financial products and
services on more favorable terms than we are able to offer.
Technology
and other changes have lowered barriers to entry and made it possible for non-banks to
offer products and services
traditionally provided by banks. In particular,
the activity of financial technology companies has grown significantly over recent
years and is expected to continue to grow.
The emergence, adoption and evolution of new technologies that do
not require
intermediation, including distributed ledgers such as digital assets and blockchain,
as well as advances in robotic process
automation, could significantly affect the competition
for financial services. Large technology companies offering
embedded
financial services, digital wallets, and payment platforms have also increased
competitive pressures and may accelerate customer
migration away from traditional banking products. Customer preferences
have also shifted toward digital channels and real‑time,
seamless financial experiences. Failure to meet evolving expectations for
convenience, speed, and personalized service may
negatively impact our ability to retain and attract customers.
Additionally the recently-enacted GENIUS Act establishes a regulatory
framework for “payment stablecoins” and their issuers,
which consumers and businesses may view as a substitute for traditional bank
deposits, resulting in deposit withdrawals.
Depending on consumer and business interest in payment stablecoins, and
the characteristics and utility of payment stablecoins,
the passage of the GENIUS Act could result in increased competition with respect
to our deposit products.
The effect of this competition may reduce or limit our net income,
margins or our market share and may adversely affect our
results of operations and financial condition. Further,
the process of eliminating banks as intermediaries for financial transactions
could result in the loss of fee income, as well as the loss of customer deposits and the related
income generated from those
deposits. The foregoing could have a material adverse effect
on our financial condition and results of operations. Increased
competition may negatively affect our earnings by creating
pressure to lower prices or credit standards on our products and
services requiring additional investment to improve the quality and
delivery of our technology, reducing
our market share, or
affecting the willingness of our clients to do business with us.
Our inability to adapt our business strategies, products, and services could
harm our business.
We rely on
a diversified mix of financial products and services through multiple distribution channels.
Our success depends on
our and our third-party providers’ of products and services abilities to adapt our
business strategies, products, and services and
their respective features in a timely manner,
including available payment processing services and technology to rapidly
evolving
industry standards and consumer preferences.
The widespread adoption and rapid evolution of emerging
technologies in the financial services industry,
including artificial
intelligence, analytic capabilities, cloud technologies, self-service
digital trading platforms and automated trading markets,
internet services, and digital assets, such as central bank digital currencies,
cryptocurrencies (including stablecoins and
memecoins), tokens, and other cryptoassets that utilize blockchain and distributed
ledger technology (DLT),
as well as DLT in
payment, clearing, and settlement processes creates additional risks, could
negatively impact our ability to compete, and require
substantial expenditures to the extent we were to modify or adapt our existing
products and services to keep pace with such new
technologies.
We may not
be timely or successful in developing or introducing new products and services, integrating
new products or services
into our existing offerings, responding, managing, or adapting
to changes in consumer behavior, preferences, spending,
investing
and saving habits, achieving market acceptance of our products and services,
or reducing costs in response to pressures to deliver
products and services at lower prices. There are substantial risks and uncertainties
associated with these efforts, particularly in
instances where the markets are not fully developed. In developing
and marketing new products and services, we invest
significant time and resources. Initial timetables for the introduction and development
of new products or services may not be
achieved, and price and profitability targets may not prove
feasible. External factors, such as compliance with regulations,
competitive alternatives, and shifting market preferences, may also impact
the successful implementation of new products or
services. Potential future actions such as the proposed consumer credit
card interest rate cap may lead to unprofitable products,
especially for riskier borrowers, and could lead to cutting credit lines or eliminating
cards, increased reliance on fees and
increased debt burdens for those needing credit most, thereby having the potential
to negatively impact bank asset quality.
The
Company’s, or its third-party providers’,
inability or resistance to timely innovate or adapt its operations, products, and services to
evolving industry standards and consumer preferences could result in service
disruptions and harm our business, and materially
and adversely affect our results of operations, financial
condition, and reputation.
Furthermore, our implementation of new products, services, or technology
could have unintended negative consequences,
including a significant impact on the effectiveness of
our system of internal controls. Failure to successfully manage these risks in
the development and implementation of new products or services could
have a material adverse effect on our business, financial
condition, and results of operations.
Our directors, executive officers, and principal shareowners,
if acting together,
have substantial control over all matters
requiring shareowner approval,
including changes of control. Because Mr.
William G. Smith, Jr.
is a principal
shareowner and our Chairman, President, and Chief Executive
Officer and Chairman of CCB, he has substantial control
over all matters on a day-to-day basis.
Our directors, executive officers, and principal shareowners beneficially
owned approximately 19.3% of the outstanding shares of
our common stock at December 31, 2025.
William G. Smith, Jr.,
our Chairman and Chief Executive Officer beneficially owned
17.3% of our shares as of that date.
Accordingly, these directors, executive
officers, and principal shareowners, if acting together,
may be able to influence or control matters requiring approval by our shareowners,
including the election of directors and the
approval of mergers, acquisitions or other extraordinary
transactions. Moreover, because William
G. Smith, Jr. is the Chairman
and Chief Executive Officer of CCBG, he has substantial control
over all matters on a day-to-day basis, including the nomination
and election of directors.
These directors, executive officers, and principal shareowners may
also have interests that differ from yours and may vote in a
way with which you disagree, and which may be adverse to your interests. The concentration
of ownership may have the effect of
delaying, preventing or deterring a change of control of our Company,
could deprive our shareowners of an opportunity to receive
a premium for their common stock as part of a sale of our Company and might ultimately
affect the market price of our common
stock. You
may also have difficulty changing management, the composition of
the Board of Directors, or the general direction of
our Company.
Our Articles of Incorporation, Bylaws, and certain laws and regulations
may prevent or delay transactions you might
favor,
including a sale or merger of CCBG.
CCBG is registered with the Federal Reserve as a financial holding
company under the Bank Holding Company Act, or BHC Act.
As a result, we are subject to supervisory regulation and examination by the
Federal Reserve. The GLBA, the Dodd-Frank Act,
the BHC Act, and other federal laws subject financial holding companies to
restrictions on the types of activities in which they
may engage, and to a range of supervisory requirements and activities, including
regulatory enforcement actions for violations of
laws and regulations.
Provisions of our Articles of Incorporation, Bylaws, certain laws and regulations
and various other factors may make it more
difficult and expensive for companies or persons to acquire control
of us without the consent of our Board of Directors. It is
possible, however, that you would want a
takeover attempt to succeed because, for example, a potential buyer could offer
premium over the then prevailing price of our common stock.
For example, our Articles of Incorporation permit our Board of Directors
to issue preferred stock without shareowner action. The
ability to issue preferred stock could discourage a company from attempting
to obtain control of us by means of a tender offer,
merger, proxy contest or
otherwise. We are also subject to
certain provisions of the Florida Business Corporation Act and our
Articles of Incorporation that relate to business combinations with interested
shareowners. Other provisions in our Articles of
Incorporation or Bylaws that may discourage takeover attempts or make them
more difficult include: Supermajority voting
requirements to remove a director from office; Provisions
regarding the timing and content of shareowner proposals and
nominations; Supermajority voting requirements to amend Articles of Incorporation
unless approval is received by a majority of
“disinterested directors”; Absence of cumulative voting; and Inability
for shareowners to take action by written consent.
Potential acquisitions and other strategic transactions by us, or our inability to
complete acquisitions or strategic
transactions, may have a material adverse effect on our business, financial
condition, and results of operations.
We may seek to
strategically dispose of assets or acquire other banks, businesses, or branches, which
involves various risks,
including, among other things, (i) potential exposure to unknown or
contingent liabilities of the target company; (ii) exposure to
potential asset quality issues of the target company; (iii) potential disruption
to our business; (iv) potential diversion of our
management’s time and attention;
(v) the possible loss of key employees and customers of the target company;
(vi) difficulty in
estimating the value of the target company or assets to be sold; and
(vii) potential changes in banking or tax laws or regulations
that may affect the target company.
Acquisitions by financial institutions, including us, are subject to approval by a variety
of regulatory agencies and, therefore,
dependent on the regulators' views at the time as to, among other things, our capital
levels, quality of management, compliance
with laws, and overall condition, in addition to their assessment of a variety of
other factors. Regulatory approvals could be
delayed, impeded, restrictively conditioned, or denied due to existing or new
regulatory issues we have, or may have, with
regulatory agencies. We
may fail to pursue, evaluate or complete strategic and competitively significant
acquisition opportunities
as a result of our inability, or perceived
or anticipated inability, to obtain
regulatory approvals in a timely manner,
under
reasonable conditions or at all.
Accordingly, any acquisition,
disposition or other strategic transaction may not be successful, may not benefit
our business
strategy or may not otherwise result in the intended benefits. It also may take us longer
than expected to fully realize the
anticipated benefits and synergies of these transactions,
and those benefits and synergies may ultimately be smaller than
anticipated or may not be realized at all, which could adversely affect
our business and operating results. Acquisitions typically
involve the payment of a premium over book and market values, and, therefore,
some dilution of our tangible book value and net
income per common share may occur in connection with any future transaction.
Acquisitions may also result in potential dilution
to existing shareowners of our earnings per share if we issue common stock in connection with
the acquisition. Furthermore,
failure to realize the expected revenue increases, cost savings, increases in geographic
or product presence, and/or other projected
benefits from an acquisition, as well as the difficulties associated with potential
acquisitions or dispositions discussed herein
could have a material adverse effect on our business, financial condition
and results of operations.
Reputational Risks
Damage to our reputation could harm our businesses, including our
competitive position and business prospects.
Reputation risk, or the risk to our earnings, liquidity,
and capital from negative public opinion, is inherent in our business.
Negative public opinion could adversely affect our ability to attract
and retain customers, clients, investors and associates and
expose us to adverse legal and regulatory consequences. Negative public
opinion could result from our actual or alleged conduct
and can arise from various sources, including (1) officer,
director or associate fraud, misconduct, and unethical behavior; (2)
security breaches; (3) litigation or regulatory outcomes; (4) compensation practices;
(5) lending practices; (6) branching strategy;
(7) the suitability or reasonableness of recommending particular trading or
investment strategies, including the reliability of our
research and models; (8) prohibiting clients from engaging in certain transactions
or actions taken to debank certain clients; (h)
associate sales practices; (9) failure to deliver products and services; (10) subpar
standards of service and quality expected by our
customers, clients, and the community; (11
compliance failures; (12) mergers and acquisitions; (13)
the inability to manage
technology change or maintain effective data management; (14)
cyber incidents; (15) internal and external fraud (including check
fraud and debit card and credit card fraud); (16) inadequacy of responsiveness
to internal controls; (17) unintended disclosure of
personal, proprietary or confidential information; (18) failure (or
perceived failure) to identify and manage actual and potential
conflicts of interest; (19) breach of fiduciary obligations; (20) the handling of health
emergencies or pandemics, (21) the activities
of our clients, customers, counterparties, and third parties, including vendors;
(22) our environmental, social, and governance
practices and disclosures, including practices and disclosures related to
climate change; (23) our response (or lack of response) to
social and sustainability concerns; and (24) actions by the financial services industry
generally or by certain members or
individuals in the industry.
Reputation risk may be amplified by the speed and reach of social media, which can rapidly
disseminate accurate or inaccurate information and significantly influence public
perception before we have time to respond.
Negative coverage, regardless of accuracy,
may lead to rapid customer reactions, including deposit withdrawals, heightened
regulatory attention, or community criticism.
Tax Risks
Changes in the Federal, State or Local Tax
Laws May Negatively Impact Our Financial Performance and We
are Subject
to Examinations and Challenges by Tax
Authorities
We are subject to
federal and applicable state tax laws and regulations. Changes in these tax laws and
regulations, some of which
may be retroactive to previous periods, could increase our effective
tax rates and, as a result, could negatively affect our current
and future financial performance. Furthermore, tax laws and regulations are often
complex and require interpretation. In the
normal course of business, we are routinely subject to examinations and challenges
from federal and applicable state tax
authorities regarding the amount of taxes due in connection with investments we
have made and the businesses in which we have
engaged. Recently,
federal and state taxing authorities have become increasingly been aggressive in challenging
tax positions
taken by financial institutions. These tax positions may relate to tax compliance,
sales and use, franchise, gross receipts, payroll,
property and income tax issues, including tax base, apportionment and tax
credit planning. The challenges made by tax authorities
may result in adjustments to the timing or amount of taxable income or deductions
or the allocation of income among tax
jurisdictions. If any such challenges are made and are not resolved in our
favor, they could have a material adverse effect
on our
business, financial condition and results of operations.
Item 1B.
Unresolved Staff Comments
None.
Item 1C.
Cybersecurity
Risk Management
and Strategy
Our enterprise risk management program is designed to identify,
assess, and mitigate risks across various aspects of our
Company, including
financial, operational, market, regulatory,
technology, legal, and reputational.
Cybersecurity is a critical risk
area given the increasing reliance on technology and potential of cyber
risk threats.
Our Chief Information Security Officer
(“CISO”) reports to the CCB President who provides oversight of the information
security program and its activities, along with
our management-level Enterprise Risk Oversight Committee
(“ROC”) and our Board of Directors.
Our objective for managing cybersecurity risk is to avoid or minimize the impacts
of external threat events or other efforts to
penetrate, disrupt or misuse systems or information.
Our cybersecurity risk management program is designed around the National
Institute of Standards and Technology
(“NIST”) Cybersecurity Framework, regulatory guidance, and other industry
standards,
although we cannot guarantee that we meet all technical specifications, or
requirements under NIST.
Our CISO and Information
Security Officers (“ISOs”) along with key members of
the information security team collaborate with peer banks, industry groups,
and policymakers to discuss cybersecurity trends and issues and identify best practices.
Our information security program,
including our cyber risk management policies and procedures and
our incident response program, are periodically reviewed by
the
CISO with the goal of addressing changing threats and conditions.
The parts of our information security program relating to cybersecurity are built
on a multi-layered and integrated defense model
and include the following processes:
Risk-based controls for information systems and information
on our networks:
We maintain risk
management
processes designed to identify,
assess, and manage cybersecurity risks associated with external service
providers and the
services we provide to our clients. We
leverage people, processes, and technology as part of our efforts
to manage and
maintain cybersecurity controls. We
also employ a variety of preventative and detective tools designed
to monitor, block,
and provide alerts regarding suspicious activity,
as well as to report on suspected advanced persistent threats. We
seek to
maintain a risk management infrastructure that implements physical, administrative
and technical controls that are
designed, based on risk, to protect our information systems and the information
stored on our networks, including personal
information, intellectual property and proprietary information of our
Company and our clients.
Incident response program:
We have an
incident response program and dedicated teams to respond to cybersecurity
incidents. When a cybersecurity incident occurs, we have cross-functional
teams that are responsible for leading the initial
assessment of priority and severity and communicating potentially material
cybersecurity incidents to the appropriate
members of management and the Board of Directors.
Training and testing:
We have
established processes and systems designed to mitigate cybersecurity risk, including
regular education and training for associates, preparedness simulations and
tabletop exercises, and recovery and resilience
tests. We also monitor
our email gateways for malicious phishing email campaigns and monitor remote
connections.
Internal and external risk assessments:
We engage
in ongoing assessments of our infrastructure, software systems,
and
network architecture using internal experts and
third-party
specialists, including to identify material risks from
cybersecurity threats.
Our internal auditor and other independent external partners will periodically
review
our processes,
systems, and controls, including with respect to our information security program,
to assess their design and operating
effectiveness and make recommendations to strengthen
our risk management processes.
Notwithstanding our defensive measures and processes, threats posed
by cyberattacks are severe.
Our internal systems,
processes, and controls are designed to mitigate loss from cyber-attacks
and, while we have experienced cybersecurity incidents
in the past, to date, risks from cybersecurity threats have
not materially
affected, and are not reasonably likely to materially affect,
the Company, including
its business strategy, results of
operations or financial condition. Despite the Company’s
efforts, there
can be no assurance that its cybersecurity risk management processes and
measures described will be fully implemented,
complied with, or effective in protecting its systems and information.
The company faces risks from certain cybersecurity threats
that, if realized, are reasonably likely to materially affect
its business strategy, results of
operations or financial condition.
For
further discussion of risks from cybersecurity threats, see Item 1A. Risk Factors under
the section captioned “Cybersecurity
incidents, including security breaches and failures of our information
systems could significantly disrupt our business, result in
the unintended disclosure or misuse of confidential or proprietary information,
damage our reputation, increase our costs, and
cause losses.”
Governance
Management’s
Role
Our
CISO
is responsible for managing our Corporate Security Department
and overseeing our information security program,
including cybersecurity risks.
The responsibilities of this department include cybersecurity risk assessment, defense
operations,
incident response, vulnerability assessment, threat intelligence, third-party
risk management, information governance risk and
compliance and business resilience. The foregoing responsibilities are covered
on a day-to-day basis with oversight and guidance
provided by our CISO, the ISOs and key members of the information security
team.
The department, as a whole, consists of
information security professionals with varying degrees of education and
experience. Associates within the department are
generally subject to professional education and certification requirements.
In particular, our CISO has over 15 years of substantial
relevant expertise and formal training in the areas of information security and cybersecurity
risk management and also serves on
several advisory boards and committees within the financial sector.
Our CISO regularly
reports
on the status of the information
security program to the CCB President.
On a quarterly basis, and as needed, the CISO reports the status of the information
security program, notable threats or incidents, and other developments related
to information security and cybersecurity risks to
our ROC.
Board Oversight of Cybersecurity
The Board of Directors oversee cybersecurity risk and the information security
program which includes overseeing management’s
actions to identify, assess, mitigate
and remediate or prevent material cybersecurity risks. The CISO provides
reports to the Board
of Directors annually on the status of the information security program and risks, notable
threats and incidents, and other
developments related to cybersecurity of the information security program
An appropriate committee of the Board of Directors
may also receive from the CISO periodic reports on these activities, as well as the status of
any incident response and remediation
efforts the Company may undertake.
Item 2.
Properties
We are headquartered
in Tallahassee, Florida.
Our executive office is in the Capital City Bank building located
on the corner of
Tennessee and Monroe
Streets in downtown Tallahassee.
The building is owned by CCB, but is located on land leased under a
long-term agreement.
At December 31, 2025, Capital City Bank had 62 banking offices.
Of these locations, we lease the land, buildings, or both at 18
locations and own the land and buildings at the remaining 44. CCHL had
28 loan production offices, 27 of which were leased.
Capital City Strategic Wealth,
LLC (“CCSW”) maintained five offices, all of which were leased and
subsequently sold with the
divestiture of CCSW in the third quarter of 2025.
Item 3.
Legal Proceedings
We are 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 our
consolidated results of operations, financial position, or cash flows.
Item 4
Mine Safety Disclosure
Not applicable.
PART
Item 5.
Market for the Registrant’s
Common Equity, Related Shareowner Matters,
and Issuer Purchases of Equity
Securities
Common Stock Market Prices and Dividends
Our common stock trades on the Nasdaq Global Select Market under
the symbol “CCBG.”
We had a total of
951 shareowners of
record at January 31, 2025.
The following table presents the range of high and low closing sales prices reported
on the Nasdaq Global Select Market and cash
dividends declared for each quarter during the past two years.
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Common stock price:
High
Low
Close
Cash dividends per share
Florida law and Federal regulations impose restrictions on our ability
to pay dividends and limitations on the amount of dividends
that the Bank can pay annually to us.
See Item 1. “Capital; Dividends; Sources of Strength” and “Dividends” in the Business
section on page 14 and 16, Item 1A. “Market Risks” in the Risk Factors section on
page 23, Item 7. “Liquidity and Capital
Resources – Dividends” – in Management’s
Discussion and Analysis of Financial Condition and Operating Results on page
and Note 17 in the Notes to Consolidated Financial Statements.
Securities Authorized for Issuance Under Equity Compensation Plans
See the information included under Part III, Item 12, which is incorporated
in response to this item by reference, for information
with respect to shares of common stock that are authorized for issuance under
the Company's equity compensation plans as of
December 31, 2025.
Issuer Purchase of Equity Securities
In January 2024, our Board of Directors authorized the Capital City Bank Group,
Inc. Share Repurchase Program (“the
Program”), effective February 1, 2024, which authorizes
the repurchase of up to 750,000 shares of our outstanding common stock
over a five-year period.
Repurchases under Program may be made from time to time through open
market purchases, privately
negotiated transactions or such other manners as will comply with applicable
laws and regulations. The timing and actual number
of shares repurchased will depend on a variety of factors including price,
corporate and regulatory requirements, market
conditions and other corporate liquidity requirements and priorities. The
Program does not obligate the Company to purchase any
particular number of shares and there is no guarantee as to the exact number
of shares that will be repurchased by the Company.
We repurchased
(i) 73,349 shares under the Program in 2024 at an average price of $28.03 per share
and (ii) 9,101 shares in
January 2024 at an average price of $29.47 per share under a substantially similar repurchase
plan that was authorized in 2019
and expired in 2024. There are 676,561 shares remaining for purchase under
the Program.
We did not
repurchase any shares under the Program in the year ending December 31, 2025.
Performance Graph
This performance graph compares the cumulative total shareowner
return on our common stock with the cumulative total
shareowner return of the Nasdaq Composite Index and the S&P U.S. Small Cap Banks Index
for the past five years.
The graph
assumes that $100 was invested on December 31, 2020 in our common stock and each of
the above indices, and that all dividends
were reinvested.
The shareowner return shown below represents past performance and should not
be considered indicative of
future performance.
Period Ending
Index
Capital City Bank Group, Inc.
Nasdaq Composite Index
S&P U.S. SmallCap Banks Index
Item 6.
Selected Financial Data
(Dollars in Thousands, Except Per Share Data)
Interest Income
Net Interest Income
Provision for Credit Losses
Noninterest Income
Noninterest Expense
Pre-Tax Loss Attributable to Noncontrolling Interests
Net Income Attributable to Common Shareowners
Per Common Share:
Basic Net Income
Diluted Net Income
Cash Dividends Declared
Diluted Book Value
Diluted Tangible Book Value
Performance Ratios:
Return on Average Assets
Return on Average Equity
Net Interest Margin (FTE)
Noninterest Income as % of Operating Revenues
Efficiency Ratio
Asset Quality:
Allowance for Credit Losses ("ACL")
ACL to Loans Held for Investment ("HFI")
Nonperforming Assets ("NPAs")
NPAs to Total
Assets
NPAs to Loans HFI plus OREO
ACL to Non-Performing Loans
Net Charge-Offs to Average Loans HFI
Capital Ratios:
Tier 1 Capital
Total Capital
Common Equity Tier 1 Capital
Tangible Common Equity
Leverage
Equity to Assets
Dividend Pay-Out
Averages for the Year:
Loans Held for Investment
Earning Assets
Total Assets
Deposits
Shareowners’ Equity
Year
-End Balances:
Loans Held for Investment
Earning Assets
Total Assets
Deposits
Shareowners’ Equity
Other Data:
Basic Average Shares Outstanding
Diluted Average Shares Outstanding
Shareowners of Record
Banking Locations
Headcount
For 2025 and 2023, includes pension settlement gains of $1.5
million and $0.3 million, respectively.
In 2023 and 2024, we owned 51% of Capital City Home Loans,
LLC, a consolidated entity. We
acquired the remaining 49% interest
on January 1, 2025.
Diluted tangible book value and tangible common equity ratio are
non-GAAP financial measures. For additional information,
including a reconciliation
to GAAP, refer
to page 44.
As of January 31st of the following year.
As of December 31, 2025.
NON-GAAP FINANCIAL MEASURES
We present a tangible
common equity ratio and a tangible book value per diluted share that, in each case,
removes the effect of
goodwill 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.
The generally accepted accounting
principles (“GAAP”) to non-GAAP reconciliation for selected year-to-date
financial data is provided below.
Non-GAAP Reconciliation - Selected Financial Data
(Dollars in Thousands, except per share data)
Shareowners' Equity (GAAP)
Less: Goodwill and Other Intangibles (GAAP)
Tangible Shareowners' Equity (non-GAAP)
Total Assets (GAAP)
Less: Goodwill and Other Intangibles (GAAP)
Tangible Assets (non-GAAP)
Tangible Common Equity Ratio (non-GAAP)
Actual Diluted Shares Outstanding (GAAP)
Tangible Book Value
per Diluted Share (non-GAAP)
Item 7.
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 included in the Annual Report on Form 10-K.
The MD&A is divided into subsections entitled
“Business Overview,” “Executive
Overview,” “Results of Operations,”
“Financial Condition,” “Liquidity and Capital Resources,”
“Off-Balance Sheet Arrangements,” and “Accounting Policies.”
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
2025 compares with prior years.
Throughout this section, Capital City Bank Group, Inc., and its subsidiaries,
collectively, are
referred to as “CCBG,” “Company,”
“we,” “us,” or “our.”
CAUTION CONCERNING FORWARD
-LOOKING STATEMENTS
This Annual Report on Form 10-K, 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 and
Item 1A Risk Factors
this Annual Report for a discussion of factors that could cause our actual results to differ
materially from those in the forward-
looking statements.
However, other factors besides those listed in
Item 1A Risk Factors
or discussed in this 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
Our Business
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”).
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.
The Bank has 62 banking offices and 108 ATMs/ITMs
in Florida, Georgia and Alabama.
Through Capital City
Home Loans, LLC (“CCHL”), we have 28 additional offices
in the Southeast for our mortgage banking business.
Please see the
section captioned “About Us” beginning on page 5 for more detailed information
about our business.
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.
Strategic Review
Operating Philosophy
Our philosophy is to build long-term client relationships based on quality
service, high ethical standards,
and safe and sound banking practices.
We maintain a locally
oriented, community-based focus, which is augmented by
experienced, centralized support in select specialized areas.
Our local market orientation is reflected in our network of banking
office locations, experienced community executives with
a dedicated President for each market, and community boards which
support our focus on responding to local banking needs.
We strive to offer
a broad array of sophisticated products and to provide
quality service by empowering associates to make decisions in their local
markets.
Strategic Initiatives
Our strategic plan guides us in the areas of client experience, channel optimization, market
expansion, and
culture.
As part of the strategic plan, we aim to take our brand of relationship banking to the next
level, further deepen
relationships within our communities, expand into new higher growth
markets, diversify our revenue sources, invest in new
technology that will support the expansion of client relationships, scale within
our lines of business, and drive higher profitability.
We have implemented
initiatives in support of the strategic plan, including the implementation of an integrated marketing
software aimed at deepening client relationships, the continuation of
our comprehensive review of our banking office network,
and expansion into new markets and further diversification of revenues by
expanding our residential mortgage banking and
wealth businesses.
Markets
We maintain a blend
of large and small markets in Florida and Georgia,
all in close proximity to major interstate
thoroughfares such as Interstates 10 and 75.
Our larger markets include Tallahassee
(Leon County, Florida),
Gainesville
(Alachua County, Florida),
Macon (Bibb County,
Georgia), and Suncoast (Hernando/Pasco/Citrus Counties, Florida).
The larger
employers in these markets are state and local governments, healthcare
providers, educational institutions, and small businesses,
providing stability and good growth dynamics that have historically grown
in excess of the national average.
We serve an
additional 15 smaller, less competitive,
rural markets located on the outskirts of, and centered between, our larger
markets where
we are positioned as a market leader.
In 7 of 12 markets in Florida and one of three Georgia markets (excluding
Northern Arc of
Atlanta markets entered into in 2022 and 2023),
we frequently rank within the top three banks in terms of deposit market share.
Furthermore, in the counties in which we operate, we maintain an 8.0% deposit
market share in the Florida counties and 5.0% in
the Georgia counties (excluding Northern Arc of
Atlanta).
Our markets provide for a strong core deposit funding base, a key
differentiator and driver of our profitability and franchise
value.
These markets also benefit from favorable demographic trends,
including population growth, state government stability,
and expanding healthcare and education sectors, which support our long-
term relationship banking strategy and contribute to the resilience of our
deposit base.
Recent Acquisition/Expansion Activity
We expanded
into the Northern Arc of Atlanta, Georgia by opening full-service offices
Marietta (Cobb County) in the fourth quarter of 2022 and Duluth (Gwinnett
County) in the second quarter of 2023.
Additionally,
we expanded our presence in the Florida Panhandle by opening a full-service office
in Watersound,
Florida in the first quarter of
2023, Panama City, Florida
(Lynn Haven) in the first quarter of 2024, and
Panama City, Florida (West
Bay) in the first quarter of
To expand our presence and
commitment to our Gainesville market, we opened a third full-service banking
office in the
area in early 2023.
During 2022 and 2023, we hired leadership and banking teams in the Northern
Arc and Walton County
office
markets, including commercial bankers, retail delivery support, private banking,
wealth advisors, and treasury professionals.
Further, CCHL loan originators reside in the Northern
Arc and Walton County
offices.
On March 1, 2020, CCB acquired from BMGBMG, LLC (“BMG”) an initial 51% membership
interest in CCHL (formerly
known as Brand Mortgage Group, LLC), which became a consolidated entity
in the Company’s financial statements. On
November 15, 2024, CCB entered into an agreement with BMG to transfer
the 49% Interest to CCB, which closed on January 1,
EXECUTIVE OVERVIEW
For 2025, net income attributable to common shareowners totaled $61.6
million, or $3.60 per diluted share, compared to net
income of $52.9 million, or $3.12 per diluted share, for 2024, and $52.3
million, or $3.07 per diluted share, for 2023.
For 2025, the increase in net income attributable to common shareowners
reflected a $12.7 million increase in net interest income
and a $6.4 million increase in noninterest income, that were partially
offset by a $6.2 million increase in income taxes, a $1.7
million increase in noninterest expense,
and a $1.2 million increase in provision for credit losses.
Net income attributable to
common shareowners included a $1.3 million decrease in the deduction
to record the non-controlling interest in the earnings of
CCHL.
For 2024, the increase in net income attributable to common shareowners
reflected a $5.7 million decrease in provision for credit
losses and a $4.4 million increase in noninterest income, that were partially
offset by a $8.3 million increase in noninterest
expense, a $0.9 million increase in income taxes, and a $0.1 million decrease
in net interest income.
Net income attributable to
common shareowners included a $0.2 million decrease in the deduction
to record the non-controlling interest in the earnings of
CCHL.
Below are
Summary Highlights
of our 2025
financial performance:
Income Statement
Tax-equivalent
net interest income totaled $171.8 million compared
to $159.2 million for 2024
Net interest margin increased
by 20 basis points to 4.28% (increase in earning asset yield
of 10 basis points and decrease
in cost of funds of 10 basis points)
Credit quality metrics remained
strong throughout
the year – allowance coverage ratio increased to 1.22%
compared to 1.10% in 2024 - net loan
charge-offs were 14 basis points of
average loans for 2025 compared to 21 basis
points for 2024
Noninterest income increased
by $6.4 million, or 8.4%, due to higher mortgage banking revenues
of $2.6 million, wealth
management fees of $1.6 million, other income of $1.5 million, and deposit fees of $0.7
million
Noninterest expense increased
$1.7 million, or 1.0%, primarily due to higher compensation expense (primarily performance-
based pay and health care cost) partially offset by lower pension
expense and higher gains from the sale of banking
facilities
Balance Sheet
Loan balances decreased by $83.6 million, or 3.1%
(average), and decreased by $105.4 million, or 4.0%
(end of period)
Average deposit balances increased
by $53.9 million, or 1.5% driven by strong core
deposit growth
Tangible
book value per diluted share (non-GAAP financial measure)
increased by $3.38, or 14.3%
For more detailed information, refer to the following additional sections of the
MD&A “Results of Operations” and “Financial
Condition”.
RESULTS
OF OPERATIONS
A condensed earnings summary for the last three fiscal years is presented
in Table 1 below:
Table 1
CONDENSED SUMMARY OF EARNINGS
(Dollars in Thousands, Except Per Share
Data)
Interest Income
Taxable Equivalent
Adjustments
Total Interest Income
(FTE)
Interest Expense
Net Interest Income (FTE)
Provision for Credit Losses
Taxable Equivalent
Adjustments
Net Interest Income After Provision for Credit Losses
Noninterest Income
Noninterest Expense
Income Before Income Taxes
Income Tax Expense
Pre-Tax Loss Attributable
to Noncontrolling Interests
Net Income Attributable to Common Shareowners
Basic Net Income Per Share
Diluted Net Income Per Share
Net Interest Income and Margin
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.
We provide
an analysis of our net interest income, including
average yields and rates in Tables
2 and 3 below.
We provide this information
on a “taxable equivalent” basis to reflect the tax-
exempt status of income earned on certain loans and investments.
For 2025, our taxable equivalent net interest income totaled $171.8
million compared to $159.2
million for 2024 and $159.4
million for 2023.
The $12.6 million, or 7.9%, increase in 2025 was primarily attributable to an
increase in investment securities
income and to a lesser extent an increase in overnight funds income and lower deposit
interest expense, partially offset by lower
loan income.
The $0.2 million, or 0.1%, decrease in 2024 was driven by higher deposit interest expense
that was substantially
offset by higher loan income and to a lesser extent higher overnight
funds income.
We discuss these variances in more
detail
below.
For 2025, our taxable equivalent interest income totaled $204.6
million compared to $194.9 million in 2024
and $181.4 million in
The $9.7 million, or 5.0%, increase in 2025 was primarily attributable to a $10.3
million increase in investment securities
income due to growth in the portfolio and favorable repricing.
A $3.7 million decrease in loan income was partially offset by a
$3.1 million increase in overnight funds income.
The $13.5 million, or 7.4%, increase in 2024 was primarily attributable to
$13.0 million increase in loan income driven by loan growth and favorable loan
repricing.
For 2025, interest expense totaled $32.7 million compared to $35.7 million for 2024
and $22.1 million for 2023.
The $3.0 million
decrease in 2025 was primarily due to decreased deposit interest expense,
including a $1.4 million decrease in NOW account
expense and a $1.4 million decrease in money market account expense
partially offset by a $0.2 million increase in certificates of
deposit expense.
The decreases for NOW and money market accounts reflected adjustments
to our board and managed rates for
these products, as interest rates declined over the year.
The $13.6 million increase in 2024 compared to 2023 was primarily
attributable to increased deposit interest expense,
including a $6.3 million increase attributable to money market accounts,
million increase attributable to NOW accounts, and a $3.7 million increase
attributable to certificates of deposit,
all reflective of a
shift in balances from noninterest bearing to interest bearing products
driven by the higher interest rate environment and clients
seeking higher yield deposit products.
Our cost of interest bearing deposits was 127 basis points for 2025, 142 basis points
for 2024, and 81 basis points for 2023.
Our
total cost of deposits (including noninterest bearing accounts) was 81
basis points for 2025, 89 basis points for 2024, and 48 basis
points for 2023.
Our total cost of funds (interest expense/average earning assets) was 82 basis points for 2025,
92 basis points for
2024, and 56 basis points for 2023.
Our net interest margin (defined as taxable-equivalent interest income
less interest expense divided by average earning assets)
was 4.28% for 2025, 4.08% for 2024, and 4.05% for 2023.
The increase in the net interest margin for 2025 was primarily due
higher yield for investment securities driven by new purchases at higher
yields, favorable loan repricing, and lower deposit costs.
The increase in the net interest margin for 2024
reflected a combination of earning assets repricing at higher interest rates and an
improved earning asset mix driven by loan growth, partially offset
by a higher, but well controlled cost of deposits.
The Federal Open Market Committee decreased the Federal Funds Rate during
The Federal Funds Rate is currently in a
target range of 3.50% to 3.75%, with the Effective
Federal Funds Rate at 3.64%
at December 31, 2025, and 4.33% at
December 31, 2024. Management actively manages its balance sheet
mix and volume and will make loan and deposit product
pricing changes to help mitigate interest rate risk.
See section titled “Financial Condition - Market Risk and Interest Rate
Sensitivity” in Management’s Discussion
and Analysis of Financial Condition and Results of Operations for additional
information regarding this risk.
Table 2
AVERAGE
BALANCES AND INTEREST RATES
(Taxable Equivalent Basis - Dollars
in Thousands)
Average
Balance
Interest
Average
Rate
Average
Balance
Interest
Average
Rate
Average
Balance
Interest
Average
Rate
ASSETS
Loans Held for Sale
Loans Held for Investment
Investment Securities
Taxable Investment Securities
Tax-Exempt Investment Securities
Total Investment Securities
Fed Funds Sold & Int Bearing Dep
Total Earning Assets
Cash & Due From Banks
Allowance for Credit Losses
Other Assets
TOTAL ASSETS
LIABILITIES
Noninterest Bearing Deposits
NOW Accounts
Money Market Accounts
Savings Accounts
Time Deposits
Total Interest Bearing Deposits
Total Deposits
Repurchase Agreements
Short-Term Borrowings
Subordinated Notes Payable
Other Long-Term Borrowings
Total Interest Bearing Liabilities
Other Liabilities
TOTAL LIABILITIES
Temporary Equity
TOTAL SHAREOWNERS’
EQUITY
TOTAL LIABILITIES,
TEMPORARY EQUITY AND
SHAREOWNERS’ EQUITY
Interest Rate Spread
Net Interest Income
Net Interest Margin
Average balances include net loan fees, discounts and premiums, and nonaccrual loans.
Interest income includes net loan cost of $1.4 million for 2025
and $0.7 million for 2024 and net loan fees of $0.05 million
for 2023.
Interest income includes the effects of taxable equivalent adjustments using
a 21% tax rate.
Taxable equivalent net interest income divided by average earning assets.
Table 3
RATE/VOLUME
ANALYSIS
(Taxable Equivalent Basis -
Dollars in Thousands)
Increase (Decrease) Due to Change In
Increase (Decrease) Due to Change In
Total
Calendar
Volume
Rate
Total
Calendar
Volume
Rate
Earnings Assets:
Loans Held for Sale
Loans Held for Investment
Taxable Investment Securities
Tax-Exempt Investment
Securities
Funds Sold
Total
Interest Bearing Liabilities:
NOW Accounts
Money Market Accounts
Savings Accounts
Time Deposits
Short-Term Borrowings
Subordinated Notes Payable
Other Long-Term Borrowings
Total
Changes in Net Interest Income
This table shows the change in taxable equivalent net interest income for comparative periods based on either changes in
average volume or changes in average rates for interest earning assets and interest bearing liabilities. Changes which
are not solely due to volume changes or solely due to rate changes have been attributed to rate changes.
Interest income includes the effects of taxable equivalent adjustments using a 21% tax rate to adjust on tax-exempt loans and
and securities to a taxable equivalent basis.
Reflects one extra calendar day in 2024.
Provision for Credit Losses
For 2025, we recorded a provision for credit loss expense of $5.3 million ($5.3
million expense for loans held for investment
(“HFI”)) compared to provision expense of $4.0 million for 2024 ($5.0
million expense for loans HFI and $1.0 million benefit for
unfunded loan commitments) and provision expense of $9.7 million for
2023 ($9.5 million expense for loans HFI and $0.2
million expense for unfunded loan commitments).
We discuss the various
factors that impacted our provision expense for Loans
HFI in further detail below under the heading Allowance for Credit Losses.
Noninterest Income
For 2025, noninterest income totaled $82.4 million, a $6.4 million, or 8.4%,
increase over 2024, attributable to increases in
mortgage banking revenues of $2.6 million, wealth management fees of $1.6
million, other income of $1.5 million, and deposit
fees of $0.7 million.
Higher secondary market production volume and gain on sale margin
drove the improvement in mortgage
banking revenues.
The increase in wealth management fees was due to higher trust fees and reflected
a combination of new
business, higher account valuations, and fee adjustments.
The increase in other income reflected the aforementioned $0.7 million
gain from the sale of our insurance subsidiary,
CCSW,
Fee adjustments implemented in mid-2025 contributed to the
increase in deposit fees and other income.
For 2024, noninterest income totaled $76.0 million, a $4.4 million, or 6.1%
increase over 2023, primarily attributable to a $3.9
million increase in mortgage banking revenues and a $2.8 million increase in
wealth management fees, partially offset by a $2.2
million decrease in other income.
The increase in mortgage banking revenues was due to a higher gain on sale margin.
The
increase in wealth management fees was primarily driven by higher retail brokerage
fees and to a lesser extent trust fees,
primarily attributable to both new account growth and higher account
values driven by higher market returns.
The decrease in
other income was primarily attributable to a $1.4 million gain from the
sale of mortgage servicing rights in 2023, and to a lesser
extent a decrease in vendor bonus income and miscellaneous income.
Noninterest income as a percentage of total operating revenues (net interest income
plus noninterest income) was 32.42% in 2025,
32.34% in 2024, and 31.05% in 2023.
The variance in 2024 was primarily attributable to higher mortgage banking revenues and
wealth management fees.
The table below reflects the major components of noninterest income.
Table 4
NONINTEREST INCOME
(Dollars in Thousands)
Deposit Fees
Bank Card Fees
Wealth Management
Fees
Mortgage Banking Revenues
Other
Total Noninterest
Income
Significant components of noninterest income are discussed in more
detail below.
Deposit Fees
For 2025, deposit fees (service charge fees, insufficient
fund/overdraft fees, and business account analysis fees)
totaled $22.1 million compared to $21.3 million in 2024
and $21.3 million in 2023.
The increase in 2025 was primarily due to
service charge fee adjustments made late in the second quarter of
Deposit fees for 2024 reflected a $0.2 million increase in
commercial account analysis fees that was offset by a $0.2 million
decrease in overdraft fees.
Bank Card Fees
Bank card fees totaled $14.7 million in 2025 compared to $14.7 million in 2024
and $14.9 million in 2023.
The
decrease in 2024 was generally due to lower card volume reflective of
overall slower consumer spending.
Wealth
Management Fees
Wealth management fees
include
trust fees through Capital City Trust (i.e., managed
accounts and
trusts/estates) and retail brokerage fees through Capital City Investments (i.e.,
investment, insurance products, and retirement
accounts).
In September 2025, we sold our subsidiary,
Capital City Strategic Wealth, which
provided the sale of life insurance,
risk management and asset protection services, and whose insurance commission
and retail brokerage fees were included in
wealth management fees.
Wealth management
fees for 2025 totaled $20.7 million compared to $19.1 million in 2024 and $16.3
million in 2023.
The
increase in 2025 reflected a $1.4 million increase in trust fees and a $0.2 million
increase in retail brokerage fees.
The increase in
trust fees reflected new account growth and a fee increase in the first quarter of 2025.
The increase in 2024 was attributable to a
$2.1 million increase in retail brokerage fees and a $0.9 million increase
in trust fees, which were partially offset by a $0.3 million
decrease in insurance commission revenue.
The increase in retail brokerage fees was driven by increased fixed income and
annuity product sales and new account growth, and the increase in trust fees reflected
new account growth, higher account values
reflective of improved market returns, and a mid-year fee increase.
Capital City Strategic Wealth
insurance commission revenues were $1.1
million for 2025, $1.1 million for 2024 and $1.3 million
for 2023, and retail brokerage fees were $1.3 million, $2.4 million,
and $1.0 million for those respective years, and resulted in
nominal impact on consolidated operating profit of $0.2 million, $0.4
million, and ($0.3
million) in each respective year.
At December 31, 2025, total assets under management (“AUM”)
were approximately $2.867 billion compared to $3.049 billion at
December 31, 2024, and $2.588 billion at December 31, 2023.
The slight decline in 2025 was primarily attributable to lower
retail brokerage assets related to the sale of Capital City Strategic Wealth.
The increase in AUM in 2024 reflected a combination
of new account growth and higher account values due to improved market returns.
Mortgage Banking Revenues
Mortgage banking revenues totaled $17.0 million in 2025 compared
to $14.3 million in 2024 and
$10.4 million in 2023.
The increase in both 2025 and 2024 was attributable to a higher gain on sale margin
which reflected a
higher percentage of secondary market/mandatory delivery loan sales.
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 noninterest income totaled $8.0 million in 2025 compared to $6.5 million
in 2024 and $8.6 million in 2023.
The
increase in 2025 was primarily due to a $0.7 million gain from the sale of our
insurance subsidiary (Capital City Strategic Wealth)
in the third quarter of 2025 and to a lesser extent higher miscellaneous income
primarily other fees and commissions which
reflected a mid-year fee increase.
The decrease in 2024 was attributable to lower miscellaneous income,
primarily a $1.4 million
gain from the sale of mortgage servicing rights realized in 2023, and to a lesser extent
a decrease in vendor bonus income and
miscellaneous income.
Noninterest Expense
For 2025, noninterest expense totaled $167.0 million compared to $165.3
million for 2024 with the $1.7 million, or 1.0%,
increase primarily due to a $6.5 million increase in compensation expense
that was partially offset by a $4.7 million decrease in
other expense.
The increase in compensation was driven by higher performance-based
pay and health insurance cost, and to a
lesser extent an increase in 401k matching expense.
The decrease in other expense was primarily due to a $3.4 million decrease
in other real estate expense due to higher gains from the sale of banking facilities in 2025
and a $3.7 million decrease in pension
expense (non-service component), partially offset by
increases in processing expense of $1.2 million (outsource of core
processing system) and charitable contribution expense of $0.9 million.
The variance in pension expense included a $1.5 million
pension settlement gain that occurred in the fourth quarter of 2025.
For 2024, noninterest expense totaled $165.3 million, an $8.3 million,
or 5.3%, increase over 2023, primarily attributable to
increases in compensation expense of $6.9 million, occupancy expense of
$0.3 million, and other expense of $1.1 million.
The
increase in compensation reflected a $5.3 million increase in salary expense
and a $1.6 million increase in other associate benefit
expense.
The increase in salary expense was primarily due to a decrease of $3.1 million in realized loan
cost (credit offset to
salary expense - lower new loan volume in 2024), a $2.2 million increase
in base salary expense (primarily annual merit raises),
and a $1.2 million increase in cash incentive compensation that were
partially offset by a decrease of $1.4 million in commission
expense (lower residential mortgage volume).
The unfavorable variance in other associate benefit expense was due to a $0.9
million increase in associate insurance cost and a $0.6 million increase in stock compensation
expense.
The increase in
occupancy expense was attributable to increases in software license and
maintenance agreement expenses.
The increase in other
expense was driven by a $1.1 million increase in other real estate expense and
a $1.4 million increase in processing expense that
were partially offset by a $1.4 million decrease in miscellaneous
expense.
The increase in other real estate expense reflected a
lower level of gains from the sale of banking offices in 2024.
The increase in processing expense reflected both inflationary
increases on contract renewals and the outsourcing of our core processing
system.
The decrease in miscellaneous expense was
attributable to lower pension plan expense for the non-service related component
of the plan.
Our operating efficiency ratio (expressed as noninterest
expense as a percentage of taxable equivalent net interest income plus
noninterest
income) was 65.71%, 70.30% and 67.99% in 2025, 2024 and 2023, respectively.
The improvement in this metric for
2025 was driven by higher taxable equivalent net interest income (refer to caption
headed Net Interest Income and Margin).
The
decline in this metric for 2024 was attributable to a higher level of noninterest
expense.
Expense management is an important
part of our culture and strategic focus.
We will continue
to review and evaluate opportunities to optimize our delivery operations
and invest in technology that provides
favorable returns/scale and/or mitigates
risk.
The table below reflects the major
components of noninterest expense.
Table 5
NONINTEREST EXPENSE
(Dollars in Thousands)
Salaries
Associate Benefits
Total Compensation
Premises
Equipment
Total Occupancy,
net
Legal Fees
Professional Fees
Processing Services
Advertising
Travel and Entertainment
Telephone
Insurance – Other
Pension - Other
Pension Settlement Gain
Other Real Estate, Net
Miscellaneous
Total Other Expense
Total Noninterest
Expense
Significant components of noninterest expense are discussed in more detail
below.
Compensation
Compensation expense totaled $107.2 million in 2025 compared to $100.7 million
in 2024, and $93.8 million in
2023. For 2025, the $6.5 million, or 6.4%, net increase reflected a $4.1 million
increase in salary expense and a $2.4 million
increase in associate benefit expense.
The increase in salary expense was driven by a $2.6 million increase in incentive
plan
expense, a $0.7 million increase in base salary expense, and a $0.6 million
increase in 401k matching expense.
Improved
company performance drove the increase in incentive plan expense.
Annual merit raises drove the increase in base salary
expense.
The increase in 401k plan expense was primarily due to the addition of CCHL associates in 2025
to the company’s 401k
plan.
The unfavorable variance in associate benefit expense was primarily attributable
million increase in associate
insurance cost due to higher health insurance cost and a $0.4 million increase in
stock compensation expense attributable to a
higher incentive pay-out.
For 2024, the $6.9 million, or 7.4%, net increase reflected a $5.3
million increase in salary expense and a $1.6 million increase in
associate benefit expense.
The increase in salary expense was primarily due to a $3.1 million decrease in realized
loan cost which
is a credit offset to salary expense and reflected lower new loan volume and a
$2.2 million increase in base salary expense,
primarily annual merit raises, which were partially offset
by a $1.4 million decrease in commission expense driven by lower
residential mortgage volume.
The unfavorable variance in other associate benefit expense was due to a $0.9
million increase in
associate insurance cost due to higher health insurance cost and a $0.6 million increase
in stock compensation expense
attributable to a higher incentive pay-out.
Occupancy
Occupancy expense (including premises and equipment) totaled $28.0 million for
compared to $28.0 million
for 2024, and $27.7 million for 2023.
For 2025, higher premises rent expense of $0.8 million related to a new banking office
opening in late 2024 was offset by lower expenses for our
operations center building that was sold in early 2025, and to a lesser
extent lower building/FF&E insurance cost due to a lower premium in 2025.
For 2024, the $0.3 million, or 1.2%, increase was
attributable to an increase in maintenance agreement expense, primarily
for security upgrades and addition of interactive teller
machines.
Other
Other noninterest expense totaled $31.9 million in 2025 compared
to $36.6 million in 2024
and $35.6 million in 2023.
For 2025, the $4.7 million decrease was primarily due to a $3.4
million decrease in other real estate expense due to higher gains
from the sale of banking facilities in 2025 and a $3.7 million decrease in pension
expense (non-service component), partially
offset by increases in processing expense of $1.2 million
and charitable contribution expense of $0.9 million.
The outsourcing of
our core processing system in mid-2024 drove the increase in processing
expense.
The variance in pension expense was due to
the aforementioned $1.5 million pension settlement gain
and strong asset returns in the plan.
For 2024, the $1.0 million variance in other expense was driven by a $1.1
million increase in other real estate expense and a $1.4
million increase in processing expense that were partially offset by
a $1.4 million decrease in miscellaneous expense.
The
increase in other real estate expense reflected a lower level of gains from the sale of banking
offices in 2024.
The increase in
processing expense reflected both inflationary increases on contract renewals
and the outsourcing of our core processing system.
The decrease in miscellaneous expense was attributable to lower pension
plan expense for the non-service related component of
the plan.
Income Taxes
For 2025, we realized income tax expense of $20.2 million (effective
rate of 24.7%) compared to $13.9 million (effective rate of
21.2%) for 2024 and $13.0 million (effective rate of 20.4%)
for 2023.
A lower level of tax benefit accrued from a solar tax credit
equity fund drove the increase in our effective tax rate compared
to 2024 and to a lesser extent a higher than projected Internal
Revenue Code (“IRC”) Section 162(m) limitation related to current
and future compensation.
The increase in our effective tax
rate in 2024 was due to a higher than projected Internal Revenue Code Section 162(m)
limitation and lower tax-exempt interest
income.
Absent discrete items or new tax credit investments, we expect our annual effective
tax rate to approximate 24% for 2026.
FINANCIAL CONDITION
Average assets totaled
approximately $4.348 billion for 2025, an increase
of $113.0 million, or 2.7%, over 2024.
Average
earning assets were approximately $4.011 billion
for 2025, an increase of $113.3 million, or
2.9%, over 2024.
Compared to 2024,
the change in earning assets was primarily attributable to a $126.4 million
increase in overnight funds sold and a $73.5 million
increase in investment securities that was partially offset by an
$83.6 million decrease
in loans HFI.
We discuss these variances
in more detail below.
Table 2 provides
information on average balances and rates, Table
3 provides an analysis of rate and volume variances,
and Table
6 highlights the changing mix of our interest earning assets over the last three fiscal
years.
Loans
For 2025, average loans HFI decreased $83.6 million or 3.1% compared
to an increase of $50.1 million, or 1.9% in 2024.
Compared to 2024, the decrease in loans was primarily driven by
a decrease of $39.1 million in consumer loans, primarily
indirect auto loans, a decrease of $27.8 million in construction loans, and a decrease
in commercial real estate loans of $26.7
million, partially offset by increases in residential real estate loans
of $17.4 million and home equity loans of $16.2 million.
Total loans HFI at December
31, 2025 totaled $2.546 billion, a $105.4 million decrease from December
31, 2024 that was largely
attributable to a decrease in construction loans of $73.1 million,
and to a lesser extent decreases in consumer loans (primarily auto
indirect)
of $17.2 million, commercial real estate loans of $10.4 million, commercial loans of $8.9
million, and residential real
estate loans of $16.8 million, that were partially offset by
a $20.8 million increase in home equity loans.
As part of our overall strategy,
we will originate 1-4 family real estate secured adjustable-rate loans and home
equity loans
through CCHL, which provides us a larger pool of loan origination
opportunities, and in large part drove the aforementioned
growth in average residential real estate and home equity loans in 2025.
This loan volume can vary according to the direction of
residential mortgage interest rates.
In 2025, average loans held for sale (“HFS”) decreased $3.1 million, or $11.3%
from 2024.
Loans HFI and HFS as a percentage
of average earning assets decreased to 66.0% in 2025 compared to 70.1%
in 2024, primarily attributable to a decline in loans HFI.
Table 6
SOURCES OF EARNING ASSET GROWTH
Percentage
Components of
of Total
Average
Earning Assets
(Average Balances – Dollars In Thousands)
Change
Change
Loans:
Loans HFS
Loans HFI:
Commercial, Financial, and Agricultural
Real Estate – Construction
Real Estate – Commercial Mortgage
Real Estate – Residential
Real Estate – Home Equity
Consumer
Total HFI Loans
Total Loans HFS and
HFI
Investment Securities:
Taxable
Tax-Exempt
Total Securities
Federal Funds Sold and Interest Bearing Deposits
Total Earning Assets
Our average total loans (HFS and HFI)-to-deposit ratio was 72.5%
in 2025, 76.0% in 2024, and 73.9% in 2023.
The composition of our HFI loan portfolio at December 31 for each of
the past three years is shown in Table
Table 8 arrays
our HFI loan portfolio at December 31, 2025, by maturity period.
As a percentage of the HFI loan portfolio, loans with fixed
interest rates represented 24.1% at December 31, 2025 compared to 25.3% at
December 31, 2024.
Higher residential real estate
adjustable-rate loan balances and lower commercial real estate mortgage
adjustable-rate loan balances at December 31, 2025
drove the decrease in the percentage.
Table 7
LOANS HFI BY CATEGORY
(Dollars in Thousands)
Commercial, Financial and Agricultural
Real Estate – Construction
Real Estate – Commercial Mortgage
Real Estate – Residential
Real Estate – Home Equity
Consumer
Total Loans HFI, Net
of Unearned Income
Table 8
LOANS HFI MATURITIES
Maturity Periods
(Dollars in Thousands)
One Year
or Less
Over One
Through
Five Years
Five
Through
Fifteen
Years
Over
Fifteen
Years
Total
Commercial, Financial and Agricultural
Real Estate – Construction
Real Estate – Commercial Mortgage
Real Estate – Residential
Real Estate – Home Equity
Consumer
Total
Total Loans HFI with
Fixed Rates
Total Loans HFI with
Floating or Adjustable-Rates
Total
Demand loans and overdrafts are
reported in the category of one year or less.
Credit Quality
Table 9 provides
the components of nonperforming assets and various other credit quality and risk metrics
at December 31 for the
last three fiscal years.
Information regarding our accounting policies related to nonaccruals, past due
loans, and financial
difficulty modifications is provided in Note 3 – Loans
Held for Investment and Allowance for Credit Losses.
Nonperforming assets (nonaccrual loans and other real estate) totaled $10.5
million at December 31, 2025, compared to $6.7
million at December 31, 2024.
At December 31, 2025, nonperforming assets as a percentage of total assets was 0.24%,
compared
to 0.15% at December 31, 2024.
Nonaccrual loans totaled $8.6 million at December 31, 2025, a $2.3
million increase over
December 31, 2024.
Further, classified loans totaled $14.3 million at December
31, 2025, a $5.6 million decrease from
December 31, 2024.
Table 9
CREDIT QUALITY
(Dollars in Thousands)
Nonaccruing Loans:
Commercial, Financial and Agricultural
Real Estate – Construction
Real Estate – Commercial Mortgage
Real Estate – Residential
Real Estate – Home Equity
Consumer
Total Nonaccruing
Loans
Other Real Estate Owned
Total Nonperforming
Assets
Past Due Loans 30 – 89 Days
Classified Loans
Nonaccruing Loans/Loans
Nonperforming Assets/Total
Assets
Nonperforming Assets/Loans Plus OREO
Allowance/Nonaccruing Loans
Nonaccrual Loans
Nonaccrual loans totaled $8.6 million at December 31, 2025, a $2.3 million increase
over December 31, 2024
with the increase primarily attributable to two home equity loans totaling
$1.8 million.
Generally, loans are placed on
nonaccrual
status if principal or interest payments become 90 days past due or management
deems the collectability of the principal and
interest to be doubtful.
Once a loan is placed in nonaccrual status, all previously accrued and uncollected
interest is reversed
against interest income.
Interest income on nonaccrual loans is recognized when the ultimate collectability is no
longer
considered 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.
If interest on our loans classified as nonaccrual during 2025 had been
recognized on a fully accruing basis, we would have recorded an additional
$0.4 million of interest income for the year ended
December 31, 2025.
Other Real Estate Owned
OREO represents property acquired as the result of borrower defaults on
loans or by receiving a deed
in lieu of foreclosure.
OREO is recorded at the lower of cost or estimated fair value, less estimated selling costs, at the
time of
foreclosure.
Write-downs occurring at foreclosure are
charged against the allowance for credit losses.
On an ongoing basis,
properties are either revalued internally or by a third-party appraiser
as required by applicable regulations.
Subsequent declines in
value are reflected as other noninterest expense.
Carrying costs related to maintaining the OREO properties are expensed as
incurred and are also reflected as other noninterest expense.
OREO totaled $1.9 million at December 31, 2025, versus $0.4 million
at December 31, 2024.
During 2025, we added properties
totaling $4.4 million and sold properties totaling $2.9 million.
For 2024, we added properties totaling $1.0 million and sold
properties totaling $0.6 million.
Modifications to Borrowers Experiencing
Financial Difficulty
Occasionally, we will modify
loans to borrowers who are
experiencing financial difficulty.
Loan modifications to borrowers in financial difficulty are loans in
which we will grant an
economic concession to the borrower that we would not otherwise consider.
In these instances, as part of a work-out alternative,
we will make concessions including the extension of the loan term, a principal
moratorium, a reduction in the interest rate, or a
combination thereof.
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 December 31, 2025, we maintained four
loans for $3.8 million that we modified due to the borrower experiencing
financial difficulty.
Past Due Loans
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.
Past due loans at December 31, 2025 totaled $7.0 million compared to $4.3 million
at December 31, 2024.
Indirect
auto loans represented a large portion of the past due balances representing
26% and 56%, respectively,
of the total dollars past
due at December 31, 2025 and December 31, 2024, respectively.
Potential Problem Loans
Potential problem loans are defined as those loans which are now current but where management
has
doubt as to the borrower’s ability to comply with present
loan repayment terms.
At December 31, 2025, we had $4.7 million in
loans of this type which were not included in either of the nonaccrual or
90 days past due loan categories compared to $2.8
million at December 31, 2024.
Management monitors these loans closely and reviews their performance
on a regular basis.
Loan Concentrations
Loan concentrations exist when there are amounts loaned to multiple borrowers engaged
in similar
activities which cause them to be similarly impacted by economic or other conditions
and such amount exceeds 10% of our total
loans.
Due to the lack of diversified industry within our markets and the relatively
close proximity of the markets, we have both
geographic concentrations as well as concentrations in the types of loans funded.
Specifically, due to the nature of our markets,
significant portion of our HFI loan portfolio has historically been
secured with real estate, approximately 86% at December 31,
2025 and 85% at December 31, 2024, with the increase driven by lower loan volume
for commercial and consumer
(indirect auto) loans and a higher volume of 1-4 family residential real estate loans
originated in 2025 in comparison to other loan
types.
The primary types of real estate collateral are commercial properties and 1-4 family
residential properties.
We review our
loan portfolio segments and concentration limits on an ongoing basis and will make
adjustments as needed to
mitigate/reduce risk to segments that reflect decline or stress.
have established an internal lending limit of $10 million for the total aggregate
amount of credit that will be extended to a
client and any related entities within our Board approved policies.
This compares to our legal lending limit of approximately
$101 million.
The following table summarizes our real estate loan category as segregated
by the type of property.
Property type concentrations
are stated as a percentage of total real estate loans at December 31.
Table 10
REAL ESTATE
LOANS BY PROPERTY TYPE
(Dollars in Thousands)
Investor Real
Estate
Owner
Occupied
Real Estate
Investor Real
Estate
Owner
Occupied
Real Estate
Vacant
Land, Construction, and Land
Development
Improved Property
A major portion of our real estate loan segment is centered in the owner occupied
category, which carries a lower risk
of non-
collection than certain segments of the investor category.
The owner occupied category was approximately 65% of total real
estate loans at December 31, 2025 and 62% of total real estate loans at December 31, 2024.
Further, investor real estate totaled
35% and 38% of total real estate loans at December 31, 2025 and December
31, 2024, respectively.
The table below further segments the investor real estate category for improved
property.
Table 11
REAL ESTATE
LOANS IMPROVED PROPERTY
DISTRIBUTION
(Dollars in Thousands)
Hotel/Motel
Gas Station/C-Store
Industrial/Warehouse
Multi-Family
Office
Retail & Shopping Centers
Commercial Condos
Other
Total Improved
Property
Non-Owner Occupied 1-4 Residential
Total Investor
Real Estate Improved Property
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 separately 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.
Detailed information regarding the methodology for estimating
the amount reported in the allowance for credit losses is provided
in Note 1 – Significant Accounting Policies/Allowance for Credit Losses in
the Consolidated Financial Statements.
Note 3 – Loans Held for Investment and Allowance for Credit Losses in the
Consolidated Financial Statements provides the
activity in the allowance and the allocation by loan type for each of
the past three fiscal years.
At December 31, 2025, the allowance for credit losses for HFI loans totaled
$31.0 million compared to $29.2 million at December
31, 2024 and $29.9 million at December 31, 2023.
The $1.8 million increase in the allowance in 2025 reflected a credit loss
provision of $5.3 million and net loan charge-offs
of $3.6 million.
The $0.7 million decrease in the allowance in 2024 reflected a
credit loss provision of $5.0 million and net loan charge
-offs of $5.7 million.
The increase in the allowance in 2025 was primarily
attributable to qualitative factor adjustments that were partially offset
by lower loan balances.
The decrease in the allowance in
2024 was primarily attributable to lower new loan volume and loan balances
and favorable loan migration.
For 2025, we realized net loan charge-offs
of $3.6 million, or 0.14%, of average HFI loans, compared to net loan charge
-offs of
$5.7 million, or 0.21%, for 2024, and net loan charge-offs
of $4.7 million, or 0.18%, for 2023.
Consumer (indirect auto) net loan
charge-offs represented 66%, 62%, and
76% of total net loan charge-offs for the same respective
years.
Further, indirect auto net
loan charge-offs represented approximately
1.38% of average indirect auto loans in 2025, 1.68% in 2024, and 1.31% in 2023.
Since 2022,
we have reduced our exposure to this loan segment.
At December 31, 2025, the allowance for credit losses represented 1.22%
of HFI loans and provided coverage of 361% of
nonperforming loans compared to 1.10% and 464%, respectively,
at December 31, 2024 and 1.10% and 480%, respectively,
December 31, 2023.
Table 12 further
segments the allocation of allowance for credit losses at December 31 for each of
the last three fiscal years.
Table 12
ALLOCATION OF
ALLOWANCE
FOR CREDIT LOSSES
(Dollars in Thousands)
ACL
Amount
Percent of
Loans to
Total
Loans
ACL
Amount
Percent of
Loans to
Total
Loans
ACL
Amount
Percent of
Loans to
Total
Loans
Commercial, Financial and Agricultural
Real Estate:
Construction
Commercial
Residential
Home Equity
Consumer
Total
Investment Securities
Our average investment portfolio balance was $998 million
in 2025, $924 million in 2024, and $1.019 billion in 2023.
percentage of average earning assets, our investment portfolio
represented 24.9% in 2025, compared to 23.7% in 2024,
and 25.9%
Compared to 2024, investment portfolio activity reflected the reinvestment of
cash flow from matured securities as well
as growth in the balance due to a higher level of liquidity.
For comparison to 2023, the decline in the investment portfolio was
attributable to the allocation of investment cash flows to support loan
growth.
In 2026, we plan to reinvest cash flow from the
investment portfolio and as appropriate allocate to support loan demand
and other liquidity management strategies.
For 2025, average taxable investments increased by $73.0 million, or 7.9%,
while tax-exempt investments increased $0.5 million,
Both taxable and non-taxable bonds increased as part of our overall investment strategy
to reinvest cash flows from
investments plus additional funds to grow the portfolio. At December 31, 2025,
municipal securities (taxable and non-taxable)
comprised 3% of the portfolio.
Our 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”).
For 2025
and 2024, we maintained securities under both the AFS and HTM
designations.
At December 31, 2025, $643.9 million, or 62.9%, of our investment portfolio was classified as AFS,
with $377.4
million, or 36.9%, classified as HTM, and $2.1 million, or 0.2%, classified as equity
securities.
At December 31, 2024, $403.3
million, or 41.5%, of our investment portfolio was classified as AFS, with $567.2
million, or 58.3%, classified as HTM and $2.4
million, or 0.2%, classified as equity securities.
Table 13 provides
the composition of our investment securities portfolio at December 31 for each of
the last three fiscal years.
Table 13
INVESTMENT SECURITIES COMPOSITION
(Dollars in Thousands)
Carrying
Amount
Percent
Carrying
Amount
Percent
Carrying
Amount
Percent
Available for
Sale
U.S. Government Treasury
U.S. Government Agency
States and Political Subdivisions
Mortgage-Backed Securities
Corporate Debt Securities
Other Securities
Total
Held to Maturity
U.S. Government Treasury
Mortgage-Backed Securities
Total
Other Equity Securities
Total Investment
Securities
The classification of a security is determined upon acquisition based
on how the purchase will affect our asset/liability strategy
and future business plans and opportunities.
Classification determinations will also factor in 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 (loss) component of shareowners’ equity.
Securities designated as HTM are those acquired or owned with
the intent of holding them to maturity (final payment date).
HTM investments are measured at amortized cost.
It is neither
management’s current
intent nor practice to participate in the trading of investment securities for the purpose of recognizing
gains
and therefore we do not maintain a trading portfolio.
At December 31, 2025, there were 736 positions (combined AFS and HTM)
with pre-tax unrealized losses totaling $23.7 million.
The Government National Mortgage Association mortgage-backed
securities, U.S. Treasuries, and SBA securities held carry
the
full faith and credit guarantee of the U.S. Government and are deemed
to be 0% risk-weighted assets.
Other mortgage-backed
securities held (Federal National Mortgage Association and Federal
Home Loan Mortgage Corporation) are issued by U.S.
Government sponsored entities.
Direct obligations of U.S. Government agencies (Federal Farm Credit
Bank and Federal Home
Loan Bank of Atlanta) are also owned.
We believe the
long history of no credit losses on government securities indicates that the
expectation of nonpayment of the amortized cost basis is zero.
A large portion of the SBA securities float monthly or quarterly
with the prime rate and are uncapped.
The remaining positions owned are municipal and corporate bonds.
At December 31,
2025, 42 corporate bond positions had a total allowance for credit loss of $42,000.
All of these positions maintain an overall
rating of at least “BBB+”, and all are expected to mature at par.
The average maturity of our investment portfolio at December 31,
was 2.57 years, with a duration of 2.12 compared to 2.54
years and 2.19, respectively,
at December 31, 2024. The average life of our investment portfolio increased
primarily due to
continued reinvestment of maturities in the portfolio in conjunction
with additional purchases of new securities.
The weighted average taxable equivalent yield of our investment portfolio
at December 31, 2025 was 3.17% versus 2.41% in
This increase in yield reflected a favorable reinvestment rate on securities purchased
in 2025. Our bond portfolio contained
no investments in obligations, other than U.S. Governments, of any state, municipality,
political subdivision, or any other issuer
that exceeded 10% of our shareowners’ equity at December 31, 2025.
Table 14 and Note 2
in the Notes to Consolidated Financial Statements present a detailed analysis of our
investment securities as
to type, maturity, unrealized
losses, and yield at December 31.
Table 14
MATURITY DISTRIBUTION
OF INVESTMENT SECURITIES
Within 1 year
1 - 5 years
5 - 10 years
After 10 years
Total
(Dollars in
Thousands)
Amount
WAY
Amount
WAY
Amount
WAY
Amount
WAY
Amount
WAY
Available for
Sale
U.S. Government
Treasury
U.S. Government
Agency
States and Political
Subdivisions
Mortgage-Backed
Securities
Corporate Debt
Securities
Other Securities
Total
Held to Maturity
U.S. Government
Treasury
Mortgage-Backed
Securities
Total
Equity Securities
Total Investment
Securities
Based on weighted-average maturity.
Federal Home Loan Bank Stock and Federal Reserve
Bank Stock are included in this category for weighted average yield, but
do not have stated maturities.
Weighted average yield ("WAY")
calculated based on current amortized cost balances – not presented on a tax equivalent basis.
Deposits
Average total
deposits for 2025 were $3.651 billion compared to $3.597 billion in 2024 with the
$53.9 million, or 1.5%, increase
reflective of increases in NOW accounts of $43.3 million, money market
accounts of $20.3 million, and certificates of deposit of
$21.4 million, partially offset by decreases in noninterest
bearing accounts of $17.3 million and savings accounts of $13.9 million.
The aforementioned increases generally reflected growth in average
core deposit balances throughout 2025 and re-mix in
balances due to clients seeking higher yield deposit products.
At December 31, 2025, total deposits were $3.662 billion, a decrease of $9.7 million,
or 0.3% from December 31, 2024.
The
decrease reflected decreases in noninterest bearing accounts of $54.4 million,
money market accounts of $13.5 million, and
savings accounts of $3.3 million, partially offset by increases in NOW accounts
of $36.8 million and certificates of deposit of
$24.7 million.
Public funds balances totaled $654.7 million at December 31, 2025 and $660.9 million at December
Although the overnight funds rate was lowered in the second half of 2025 by
75 basis points to a target range of 3.50%-3.75%,
the overall rate environment remains higher than early 2022 when the overnight
funds rate was 0.00%-0.25%.
As a result in
2025, we continued to see a shift in mix out of noninterest bearing accounts into interest
bearing accounts, primarily NOW,
money market, and certificates of deposit accounts.
We have several strategies in
place to protect core deposits and mitigate
deposit run-off, and we will continue to closely monitor
several metrics such as the sensitivity of our clients to our deposit rates,
our overall liquidity position, and competitor rates when pricing deposits.
This strategy is consistent with previous rate cycles and
allows us to manage the mix of our deposits as well as the overall client relationship
rather than competing solely on rate.
Table 2 provides
an analysis of our average deposits, by category,
and average rates paid for each of the last three fiscal years.
Table 15 reflects the
shift in our deposit mix over the last year and Table
16 provides a maturity distribution of time deposits in
denominations of greater than $250,000 at December 31, 2025.
For 2025, noninterest bearing deposits represented 36.1% of total
average deposits.
This compares to 37.2% in 2024 and 41.1% in 2023. The declines
in 2025 and 2024 reflected slight migration
into higher yielding deposit products.
Table 15
SOURCES OF DEPOSIT GROWTH
Percentage
Components of
of Total
Total
Deposits
(Average Balances - Dollars in Thousands)
Change
Change
Noninterest Bearing Deposits
NOW Accounts
Money Market Accounts
Savings Accounts
Time Deposits
Total Deposits
Table 16
MATURITY DISTRIBUTION
OF CERTIFICATES
OF DEPOSITS GREATER
THAN $250,000
(Dollars in Thousands)
Certificates
of Deposit
Percent
Three months or less
Over three through six months
Over six through 12 months
Over 12 months
Total
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 Company’s interest rate risk sensitivity
simulations apply various behavior models and assumptions to account
for customer
tendencies stemming from interest rate risk changes. The key behavior
models and assumptions incorporated in the NII and EVE
simulations impact deposit pricing, deposit runoff,
time deposit early withdrawal, and prepayments on loans and investments. The
deposit pricing model is one of the most significant of these assumptions and
determines to what degree our deposit rates change
when benchmark interest rates change. The deposit runoff
model reflects the increased attrition rate observed in noninterest
bearing deposits in higher rate scenarios as customers migrate to interest bearing
deposits and/or alternative investments. The time
deposit early withdrawal model incorporates the customer’s
ability to early terminate time deposits and reprice higher.
The
prepayment models applied to loans and investments reflects the incentive
borrowers have to refinance when market rates are low
while conversely slowing down their payments in higher rate environments.
Each of the models and assumptions are tailored to
the specific interest rate environment and validated on a regular basis. However,
assumptions and models are inherently uncertain
and actual results may differ from those derived in simulation analysis
for multiple reasons, which may include actual balance
sheet composition differences, timing, magnitude
and frequency of interest rate changes, deviations from projected customer
behavioral assumptions, and changes in market conditions or management
strategies.
The statement of financial condition is subject to testing for both parallel and
non-parallel upward and downward shifts in interest
rates (assuming no balance sheet growth) to indicate the inherent interest
rate risk.
We prepare a base
case (assumes a static rate
environment) and several alternative interest rate simulations for
various ranges of upward and downward interest rate changes.
This analysis is prepared quarterly and reported to ALCO, our Market
Risk Oversight Committee (“MROC”), our Risk Oversight
Committee (“ROC”) and the Board of Directors.
We will periodically
augment our interest rate simulations with alternative
interest rate scenarios that may include various non-parallel shifts in interest rates,
including a flattening or steepening of the yield
curve.
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.
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.
The following table presents our net interest
income simulation results for gradual 12-month and 24-month “ramp”
scenarios applied to base scenario.
The “ramp” scenario is
a parallel shift applied gradually over a 12-month period for the projected
12-month and 24-month period on a pro rata basis.
Table 17
ESTIMATED CHANGES
IN NET INTEREST INCOME
% Change in NII
Policy Limit
Change in Interest Rates
12 Months
24 Months
12 Months
24 Months
+200 bp Ramp
+100 bp Ramp
-100 bp Ramp
-200 bp Ramp
Net Interest Income at risk is within our prescribed policy limits over both
the 12-month and 24-month periods for all rate
scenarios with the exception of the down 200 bps scenario primarily due to our
limited ability to lower our deposit rates relative
to the decline in market rates for that scenario. Given that our average nonmaturity
deposit rate is less than 1.00%, this down 200
bps scenario is more impactful to asset yields than deposit rates.
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.
The following table presents our equity value at risk simulation applied to immediate parallel
shock
scenarios.
Table 18
ESTIMATED CHANGES
IN ECONOMIC VALUE
OF EQUITY
Changes in Interest Rates
% Change in
EVE
Policy Limit
% Change in
EVE
Policy Limit
EVE Ratio
Policy
Minimum
+200 bp Shock
+100 bp Shock
-100 bp Shock
-200 bp Shock
At December 31, 2025, the economic value of equity was favorable in all rising
rate scenarios and unfavorable in the falling rate
scenarios.
EVE was within prescribed tolerance levels as the EVE ratio (EVE/EVA)
in all rate scenarios is greater than 5.0%.
Factors that can impact EVE values include the absolute level of rates, the overall
structure of the balance sheet (including
liquidity levels), pre-payment speeds, loan floors, and the change
of model assumptions.
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 changing
statement of financial condition mix, measured over
multiple years, to help assess the risk to the Company.
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 fund loan commitments, purchase securities, accommodate
deposit withdrawals or repay 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,
and 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.
For 2025
and 2024, our principal
source of funding was client deposits, supplemented by our short-term
and long-term borrowings, primarily from our trust-
preferred securities, 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 December 31, 2025, we had the ability to generate approximately $1.523
billion (excludes overnight funds position of $467.8
million) in additional liquidity through various sources,
including various Federal Home Loan Bank borrowings, the Federal
Reserve Discount Window,
federal funds purchased lines, 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 certain credit facilities may no longer
be available.
We conduct quarterly
liquidity
stress tests, and the results are reported to ALCO, MROC, ROC and the Board
of Directors.
We believe the
liquidity available to
us is sufficient to meet our ongoing needs.
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,
governmental agencies, municipal governments, and corporate entities.
At December 31, 2025, the weighted-average maturity
and duration of our portfolio were 2.57 years and 2.12, respectively,
and the AFS portfolio had a net unrealized tax-effected loss
of $9.5 million.
Our average net overnight funds sold position (defined as funds sold plus interest-bearing
deposits with other banks less funds
purchased) was $366.2 million in 2025 compared to an average net overnight
funds sold position of $239.7 million in 2024.
The
increase was primarily attributable to deposit growth and a decline in our average
loan balances, partially offset by growth in the
investment portfolio.
We expect capital
expenditures over the next 12 months to be approximately $10.0 million, which
will consist primarily of
technology purchases for banking offices, office
leasehold improvements, business applications, and information technology
security needs as well as furniture and fixtures and banking office
remodels.
We expect that these capital
expenditures will be
funded with existing resources without impairing our ability to meet our
ongoing obligations.
Borrowings
Average short
-term borrowings totaled $36.7 million in 2025 compared to $31.9 million in 2024
with the $4.8 million increase
primarily attributable to a higher level of warehouse line of credit borrowing
to support loans held for sale.
Additional detail on
these warehouse borrowings is provided in Note 4 – Mortgage Banking
Activities in the Consolidated Financial Statements.
At December 31, 2025, there were no outstanding advances from the FHLB.
One advance totaling $0.1 million comprised of one
note was paid off in the third quarter of 2025.
FHLB advances are collateralized by a floating lien on certain 1-4 family
residential mortgage loans, commercial real estate mortgage loans,
and home equity mortgage loans.
We have issued two
junior subordinated deferrable interest notes to 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 and an
additional $5.1 million of principal payments were made in 2025.
The second note for $32.0 million was issued to CCBG Capital
Trust II in May 2005, of which $5.1
million of principal payments were made in 2025.
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 ten-year 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).
In October 2025, the interest
rate swaps were terminated.
Additional detail on the interest rate swap agreement is provided in Note 5
– Derivatives in the
Consolidated Financial Statements.
See Note 11 – Short Term
Borrowings and Note 12 – Long Term
Borrowings in the Notes to Consolidated Financial Statements
for additional information on borrowings.
In the ordinary course of business, we have entered into contractual obligations
and have made other commitments to make future
payments.
Refer to the accompanying notes to consolidated financial statements elsewhere in
this report for the expected timing
of such payments as of December 31, 2025.
These include payments related to (i) long-term borrowings (Note 12 – Long-Term
Borrowings), (ii) short-term borrowings (Note 11
– Short-Term Borrowings),
(iii) operating leases (Note 7 – Leases), (iv) time
deposits with stated maturities (Note 10 – Deposits), and (v) commitments
to extend credit and standby letters of credit (Note 21 –
Commitments and Contingencies).
Capital Resources
Shareowners’ equity was $552.9 million at December 31, 2025,
compared to $495.3 million at December 31, 2024.
For 2025,
shareowners’ equity was positively impacted by net income attributable
to shareowners of $61.6 million, a net $9.1 million
decrease in the accumulated other comprehensive loss, the issuance of
common stock of $3.5 million, and stock compensation
accretion of $2.4 million. The net favorable change in accumulated other
comprehensive loss reflected a $10.7 million decrease in
the investment securities loss that was partially offset by a $1.3 million
decrease in the fair value of the interest rate swap related
to subordinated debt and a $0.3 million decrease in the pension plan loss from the year-end
re-measurement of the plan.
Shareowners’ equity was reduced by common stock dividends of $17.1
million ($1.00 per share) and net adjustments totaling
$1.9 million related to transactions under our stock compensation plans.
Additional historical information on capital changes is provided in the Consolidated
Statements of Changes in Shareowners’
Equity in the Consolidated Financial Statements.
We continue
to maintain a strong capital position.
The ratio of shareowners' equity to total assets at December 31, 2025 was
12.61% compared to 11.45% at December
Further, our tangible common equity ratio was 10.79%
(non-GAAP
financial measure) at December 31, 2025
compared to 9.51% at December 31, 2024.
If our unrealized HTM securities losses of
$6.0 million (after-tax) were recognized in accumulated other comprehensive
loss, our adjusted tangible capital ratio would be
The improvement in the ratios in 2025 was primarily attributable to
strong earnings and a decrease in the unrealized loss
on AFS securities which is recognized in accumulated other comprehensive
loss.
We are subject to
regulatory risk-based capital requirements that measure capital relative
to risk-weighted assets and off-balance
sheet financial instruments.
At December 31, 2025, our total risk-based capital ratio was 21.45% compared
December 31, 2024.
Our common equity tier 1 capital ratio was 18.56% and 15.54%, respectively,
on these dates.
Our leverage
ratio was 11.77% and 11.05%,
respectively, on these
dates.
For a detailed discussion of our regulatory capital requirements, refer
to the “Regulatory Considerations – Capital Regulations” section
on page 14.
See Note 17 in the Notes to Consolidated Financial
Statements for additional information as to our capital adequacy.
At December 31, 2025, our common stock had a book value of $32.23 per diluted
share compared to $29.11 at December 31,
Book value is impacted by the net unrealized gains and losses on investment
securities.
At December 31, 2025, the net
unrealized loss was $9.5 million compared to an unrealized loss of
$20.2 million at December 31, 2024.
Book value is also
impacted by the recording of our unfunded pension liability through
other comprehensive income in accordance with Accounting
Standards Codification Topic
At December 31, 2025, the net pension asset reflected in accumulated other comprehensive
loss was $9.4 million compared to $9.7 million at December 31, 2024.
In January 2024, our Board of Directors authorized the Capital City Bank Group,
Inc. Share Repurchase Program (“the
Program”), effective February 1, 2024, which authorizes
the repurchase of up to 750,000 shares of our outstanding common stock
over a five-year period.
Under the Program, shares may be repurchased by the Company from time to time
in the open market or
in privately negotiated transactions,
as market conditions warrant; however, the
Program does not obligate the Company to
repurchase any specified number of shares.
We did not repurchase
any shares in 2025.
We repurchased
(i) 73,349 shares under
the Program in 2024 at an average price of $28.03 per share and (ii) 9,101
shares in January 2024 at an average price of $29.47
per share under a substantially similar repurchase plan that was authorized
in 2019 and expired in 2024. There are 676,561 shares
remaining for purchase under the Program.
Dividends
Adequate capital and financial strength are paramount to our stability
and the stability of CCB.
Cash dividends declared and paid
should not place unnecessary strain on our capital levels.
When determining the level of dividends,
the following factors are
considered:
Compliance with state and federal laws and regulations;
Our capital position and our ability to meet our financial obligations;
Projected earnings and asset levels; and
The ability of the Bank and us to fund dividends.
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.
See Note 21 in the Notes to Consolidated Financial Statements.
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 on-going
obligations.
In the event these commitments
require funding in excess of historical levels, management believes current
liquidity, investment security
maturities, available
advances from the FHLB and Federal Reserve Bank, and warehouse
lines of credit provide a sufficient source of funds to meet
these commitments.
In conjunction with the sale and securitization of loans held for sale and their related
servicing rights, we may be exposed to
liability resulting from recourse, repurchase,
and make-whole agreements.
If it is determined subsequent to our sale of a loan or
its related servicing rights that a breach of the representations or warranties
made in the applicable sale agreement has occurred,
which may include guarantees that prepayments will not occur within a specified
and customary time frame, we may have an
obligation to either (a) repurchase the loan for the unpaid principal balance,
accrued interest, and related advances; (b) indemnify
the purchaser against any loss it suffers;
or (c) make the purchaser whole for the economic benefits of the
loan and its related
servicing rights. Although such claims can vary with market condition,
they have historically been limited.
Our repurchase, indemnification and make-whole obligations vary based upon
the terms of the applicable agreements, the nature
of the asserted breach, and the status of the mortgage loan at the time a claim is made.
We establish reserves for
estimated losses
of this nature inherent in the origination of mortgage loans by estimating the losses inherent
in the population of all loans sold
based on trends in claims and actual loss severities experienced. The reserve
will include accruals for probable contingent losses
in addition to those identified in the pipeline of claims received. The estimation
process is designed to include amounts based on
actual losses experienced from actual activity.
ACCOUNTING POLICIES
Critical Accounting Policies and Estimates
The consolidated financial statements and accompanying Notes to Consolidated
Financial Statements are prepared in accordance
with accounting principles generally accepted in the United States of America,
which require us to make various estimates and
assumptions (see Note 1 in the Notes to Consolidated Financial Statements).
We believe that,
of our significant accounting
policies, the following may involve a higher degree of judgment and
complexity.
Allowance for Credit Losses
The amount of the allowance for credit losses represents managemen
t’s best estimate of current
expected credit losses considering available information, from internal
and external sources, relevant to assessing exposure to
credit loss over the contractual term of the instrument.
Relevant available information includes historical credit loss experience,
current conditions,
and reasonable and supportable forecasts.
While historical credit loss experience provides
the basis for the
estimation of expected credit losses, adjustments to historical loss information
may be made for changes in loan risk grades, loss
experience trends, loan prepayment trends, differences
in current portfolio-specific risk characteristics, environmental conditions,
future expectations, or other relevant factors.
While management utilizes its best judgment and information available, the
ultimate adequacy of our allowance accounts is dependent upon
a variety of factors beyond our control, including the
performance of our portfolios, the economy,
changes in interest rates, and the view of the regulatory authorities toward
classification of assets. Detailed information on the Allowance
for Credit Losses valuation, and the assumptions used are provided
in Note 1 – Significant Accounting Policies of the Notes to Consolidated
Financial Statements.
Goodwill
Goodwill represents the excess of the cost of acquired businesses over the fair value
of their identifiable net
assets.
We perform
an impairment review on an annual basis or more frequently if events or changes in circumstances
indicate
that the carrying value may not be recoverable.
Adverse changes in the economic environment, declining operations, or other
factors could result in a decline in the estimated implied fair value of goodwill.
If the estimated implied fair value of goodwill is
less than the carrying amount, a loss would be recognized to reduce the
carrying amount to the estimated implied fair value.
We evaluate goodwill
for impairment on an annual basis.
Accounting Standards Update 2017-04, Intangibles – Goodwill and
Other (Topic 350):
Simplifying Accounting for Goodwill Impairment allows for a qualitative assessment of
goodwill impairment
indicators.
If the assessment indicates that impairment has more than likely occurred, the Company
must compare the estimated
fair value of the reporting unit to its carrying amount.
If the carrying amount of the reporting unit exceeds its estimated fair value,
an impairment charge is recorded equal to the excess.
During the fourth quarter of 2025, we performed our annual impairment
testing.
We proceeded with qualitative
assessment by
evaluating impairment indicators and concluded there were none that
indicated that goodwill impairment had occurred.
Pension Assumptions
We have a defined benefit
pension plan for the benefit of a portion of our associates.
On December 30,
2019, the plan was amended to remove plan eligibility for new associates hired after
December 31, 2019.
Our funding policy
with respect to the pension plan is to contribute, at a minimum, amounts sufficient
to meet minimum funding requirements as set
by law.
Pension expense is determined by an external actuarial valuation based on assumptions that are
evaluated annually as of
December 31, the measurement date for the pension obligation.
The service cost component of pension expense is reflected as
“Compensation Expense” in the Consolidated Statements of Income.
All other components of pension expense are reflected as
“Other Expense”.
The Consolidated Statements of Financial Condition reflect an accrued
pension benefit cost due to funding levels and
unrecognized actuarial amounts.
The most significant assumptions used in calculating the pension
obligation are the weighted-
average discount rate used to determine the present value of the pension obligation,
the weighted-average expected long-term rate
of return on plan assets, and the assumed rate of annual compensation increases.
These assumptions are re-evaluated annually
with the external actuaries, taking into consideration both current market
conditions and anticipated long-term market conditions.
The discount rate is determined by matching the anticipated defined
pension plan cash flows to the spot rates of a corporate AA-
rated bond index/yield curve and solving for the single equivalent discount
rate which would produce the same present value.
This methodology is applied consistently from year to year.
The discount rate utilized in 2025 was 5.82%.
The estimated impact
to 2025 pension expense of a 25 basis point increase or decrease in the discount
rate would have been an approximate $0.5
million decrease or increase, respectively.
We anticipate using
a 5.67% discount rate in 2026.
Based on the balances at the December 31, 2025 measurement date, the
estimated impact on accumulated other comprehensive
loss of a 25 basis point increase or decrease in the discount rate would have been a decrease
or increase of approximately $3.2
million (after-tax).
The estimated impact on accumulated other comprehensive loss of a 1% favorable/unfavorable
variance in the
actual rate of return on plan assets versus the assumed rate of return
on plan assets of 6.75% would have been an approximate
$1.0 million (after-tax) decrease/increase,
respectively.
The weighted-average expected long-term rate of return on plan assets is determined
based on the current and anticipated future
mix of assets in the plan.
The assets currently consist of equity securities, U.S. Government and Government
agency debt
securities, and other securities (typically temporary liquid funds awaiting investment).
The weighted-average expected long-term
rate of return on plan assets utilized for 2025 was 6.75%.
The estimated impact to 2024 pension expense of a 25 basis point
increase or decrease in the rate of return would have been an approximate $0.2 million
decrease or increase, respectively.
anticipate using a rate of return on plan assets of 6.50% for 2026.
The assumed rate of annual compensation increases of 4.67% for 2025
was based on an experience study performed for the plan
It is anticipated that this compensation increase assumption may change based on updates
to the actual plan participants
remaining in the plan at the end of each plan year.
Detailed information on the pension plan, the actuarially determined
disclosures, and the assumptions used are provided in Note
15 of the Notes to Consolidated Financial Statements.
Income Taxes
Income tax expense is the total of the current year income tax due or refundable and the change in deferred
tax
assets and liabilities.
Deferred tax assets and liabilities are the expected future tax amounts for the
temporary differences between
carrying amounts and tax bases of assets and liabilities, computed using enacted
tax rates.
A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax
position would be sustained in a tax
examination, with a tax examination being presumed to occur.
The amount recognized is the largest amount of tax benefit that is
greater than 50% likely of being realized on examination.
For tax positions not meeting the “more likely than not” test, no tax
benefit is recorded.
recognize interest and/or penalties related to income tax matters in other
expenses.
