UNITED STATES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2017

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 0-13358

CCB Group logo

(Exact name of registrant as specified in its charter)

Florida		59-2273542
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

217 North Monroe Street, Tallahassee, Florida		32301
(Address of principal executive office)		(Zip Code)

(850) 402-7821

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of The Exchange Act. [ ]

Large accelerated filer [ ]	Accelerated filer [X]	Non-accelerated filer [ ]	Smaller reporting company [ ]
		(Do not check if smaller reporting company)	Emerging growth company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

At April 30, 2017, 16,954,074 shares of the Registrant's Common Stock, $.01 par value, were outstanding.

CAPITAL CITY BANK GROUP, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED MARCH 31, 2017

TABLE OF CONTENTS

PART I – Financial Information			Page

Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition – March 31, 2017 and December 31, 2016			4
	Consolidated Statements of Income – Three Months Ended March 31, 2017 and 2016			5
	Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2017 and 2016			6
	Consolidated Statements of Changes in Shareowners’ Equity – Three Months Ended March 31, 2017 and 2016			7
	Consolidated Statements of Cash Flows – Three Months Ended March 31, 2017 and 2016			8
	Notes to Consolidated Financial Statements			9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations			27

Item 3.	Quantitative and Qualitative Disclosure About Market Risk			43

Item 4.	Controls and Procedures			43

PART II – Other Information

Item 1.		Legal Proceedings		43

Item 1A.		Risk Factors		43

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		43

Item 3.		Defaults Upon Senior Securities		43

Item 4.		Mine Safety Disclosure		43

Item 5.		Other Information		43

Item 6.		Exhibits		43

Signatures				45

INTRODUCTORY NOTE

Caution Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements.

All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements.

Our ability to achieve our financial objectives could be adversely affected by the factors discussed in detail in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and the following sections of our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”): (a) “Introductory Note” in Part I, Item 1. “Business”; (b) “Risk Factors” in Part I, Item 1A, as updated in our subsequent quarterly reports filed on Form 10-Q; and (c) “Introduction” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Part II, Item 7, as well as:

· our ability to successfully manage interest rate risk, liquidity risk, and other risks inherent to our industry;

· legislative or regulatory changes, including the Dodd-Frank Act, Basel III, and the ability to repay and qualified mortgage standards;

· the effects of security breaches and computer viruses that may affect our computer systems or fraud related to debit card products;

· the accuracy of our financial statement estimates and assumptions, including the estimates used for our loan loss provision, deferred tax asset valuation and pension plan;

· the frequency and magnitude of foreclosure of our loans;

· the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations;

· the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

· our ability to declare and pay dividends, the payment of which is now subject to our compliance with heightened capital requirements;

· changes in the securities and real estate markets;

· changes in monetary and fiscal policies of the U.S. Government;

· inflation, interest rate, market and monetary fluctuations;

· the effects of harsh weather conditions, including hurricanes, and man-made disasters;

· our ability to comply with the extensive laws and regulations to which we are subject, including the laws for each jurisdiction where we operate;

· the willingness of clients to accept third-party products and services rather than our products and services and vice versa;

· increased competition and its effect on pricing;

· technological changes;

· negative publicity and the impact on our reputation;

· changes in consumer spending and saving habits;

· growth and profitability of our noninterest income;

· changes in accounting principles, policies, practices or guidelines;

· the limited trading activity of our common stock;

· the concentration of ownership of our common stock;

· anti-takeover provisions under federal and state law as well as our Articles of Incorporation and our Bylaws;

· other risks described from time to time in our filings with the Securities and Exchange Commission; and

· our ability to manage the risks involved in the foregoing.

However, other factors besides those listed in Item 1A Risk Factors or discussed in this Form 10-Q also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required by applicable law.

PART I. FINANCIAL INFORMATION
Item 1.

CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

			(Unaudited)
			March 31,		December 31,
(Dollars in Thousands)			2017		2016
ASSETS
Cash and Due From Banks			$	47,650	$	48,268
Federal Funds Sold and Interest Bearing Deposits				290,897		247,779
		Total Cash and Cash Equivalents		338,547		296,047

Investment Securities, Available for Sale, at fair value				541,102		522,734
Investment Securities, Held to Maturity, at amortized cost (fair value of $157,885 and $176,746)				158,515		177,365
		Total Investment Securities		699,617		700,099

Loans Held For Sale				7,498		10,886

Loans, Net of Unearned Income				1,584,959		1,561,289
	Allowance for Loan Losses			(13,335)		(13,431)
		Loans, Net		1,571,624		1,547,858

Premises and Equipment, Net				93,755		95,476
Goodwill				84,811		84,811
Other Real Estate Owned				9,501		10,638
Other Assets				90,178		99,382
		Total Assets	$	2,895,531	$	2,845,197

LIABILITIES
Deposits:
	Noninterest Bearing Deposits		$	836,011	$	791,182
	Interest Bearing Deposits			1,623,294		1,621,104
		Total Deposits		2,459,305		2,412,286

Short-Term Borrowings				7,603		12,749
Subordinated Notes Payable				52,887		52,887
Other Long-Term Borrowings				16,460		14,881
Other Liabilities				81,217		77,226
		Total Liabilities		2,617,472		2,570,029

SHAREOWNERS’ EQUITY
Preferred Stock, $.01 par value; 3,000,000 shares authorized; no shares issued and outstanding				-		-
Common Stock, $.01 par value; 90,000,000 shares authorized; 16,954,049 and 16,844,698 shares
issued and outstanding at March 31, 2017 and December 31, 2016, respectively				170		168
Additional Paid-In Capital				34,859		34,188
Retained Earnings				268,934		267,037
Accumulated Other Comprehensive Loss, Net of Tax				(25,904)		(26,225)
Total Shareowners’ Equity				278,059		275,168
Total Liabilities and Shareowners' Equity			$	2,895,531	$	2,845,197

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

			Three Months Ended March 31,
(Dollars in Thousands, Except Per Share Data)			2017		2016
INTEREST INCOME
Loans, including Fees			$	18,005	$	18,045
Investment Securities:
	Taxable Securities			1,783		1,420
	Tax Exempt Securities			259		217
Federal Funds Sold and Interest Bearing Deposits				493		362
		Total Interest Income		20,540		20,044

INTEREST EXPENSE
Deposits				281		221
Short-Term Borrowings				45		10
Subordinated Notes Payable				379		387
Other Long-Term Borrowings				99		216
	Total Interest Expense			804		834

NET INTEREST INCOME				19,736		19,210
Provision for Loan Losses				310		452
Net Interest Income After Provision For Loan Losses				19,426		18,758

NONINTEREST INCOME
Deposit Fees				5,090		5,400
Bank Card Fees				2,803		2,853
Wealth Management Fees				1,842		1,792
Mortgage Banking Fees				1,308		1,030
Other				1,675		1,602
Total Noninterest Income				12,718		12,677

NONINTEREST EXPENSE
Compensation				16,496		16,241
Occupancy, net				4,381		4,459
Other Real Estate Owned, net				583		1,425
Other				6,462		6,805
Total Noninterest Expense				27,922		28,930

INCOME BEFORE INCOME TAXES				4,222		2,505
Income Tax Expense				1,478		858

NET INCOME			$	2,744	$	1,647

BASIC NET INCOME PER SHARE			$	0.16	$	0.10
DILUTED NET INCOME PER SHARE			$	0.16	$	0.10

Average Basic Shares Outstanding				16,919		17,202
Average Diluted Shares Outstanding				16,944		17,235

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

			Three Months Ended
			March 31,
(Dollars in Thousands)			2017		2016
NET INCOME			$	2,744	$	1,647
	Other comprehensive income, before tax:
		Change in net unrealized gain/loss on securities available for sale		505		1,784
		Amortization of unrealized losses on securities transferred from available for sale to held to maturity		20		19
		Total Investment Securities		525		1,803
	Other comprehensive income, before tax			525		1,803
	Deferred tax benefit related to other comprehensive income			(204)		(695)
	Other comprehensive income, net of tax			321		1,108
TOTAL COMPREHENSIVE INCOME			$	3,065	$	2,755

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
(Unaudited)

								Accumulated
								Other
								Comprehensive
	Shares	Common		Additional		Retained		Loss, Net of
(Dollars In Thousands, Except Share Data)	Outstanding	Stock		Paid-In Capital		Earnings		Taxes		Total
Balance, January 1, 2016	17,156,919	$	172	$	38,256	$	258,181	$	(22,257)	$	274,352
Net Income	-		-		-		1,647		-		1,647
Other Comprehensive Income, Net of Tax	-		-		-		-		1,108		1,108
Cash Dividends ($0.0400 per share)	-		-		-		(689)		-		(689)
Repurchase of Common Stock	(3,600)		-		(50)		-		-		(50)
Stock Based Compensation	-		-		247		-		-		247
Impact of Transactions Under Compensation Plans, net	68,335		-		218		-		-		218
Balance, March 31, 2016	17,221,654	$	172	$	38,671	$	259,139	$	(21,149)	$	276,833

Balance, January 1, 2017	16,844,698	$	168	$	34,188	$	267,037	$	(26,225)	$	275,168
Net Income	-		-		-		2,744		-		2,744
Other Comprehensive Income, Net of Tax	-		-		-		-		321		321
Cash Dividends ($0.0500 per share)	-		-		-		(847)		-		(847)
Stock Based Compensation	-		-		408		-		-		408
Impact of Transactions Under Compensation Plans, net	109,351		2		263		-		-		265
Balance, March 31, 2017	16,954,049	$	170	$	34,859	$	268,934	$	(25,904)	$	278,059

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Three Months Ended March 31,
(Dollars in Thousands	2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	2,744	$	1,647
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses		310		452
Depreciation		1,735		1,705
Amortization of Premiums, Discounts, and Fees, net		1,575		1,569
Net Decrease in Loans Held-for-Sale		3,388		1,157
Stock Compensation		408		247
Deferred Income Taxes		1,174		693
Loss on Sales and Write-Downs of Other Real Estate Owned		490		1,076
Loss on Disposal of Premises and Equipment		6		2
Net Decrease (Increase) in Other Assets		7,920		(2,063)
Net Increase in Other Liabilities		4,168		2,765
Net Cash Provided By Operating Activities		23,918		9,250

CASH FLOWS FROM INVESTING ACTIVITIES
Securities Held to Maturity:
Purchases		(10,738)		(5,064)
Payments, Maturities, and Calls		29,338		5,631
Securities Available for Sale:
Purchases		(50,022)		(39,499)
Payments, Maturities, and Calls		30,732		28,566
Purchases of Loans Held for Investment		(18,513)		-
Net Increase in Loans		(6,099)		(16,574)
Proceeds From Sales of Other Real Estate Owned		2,114		1,965
Purchases of Premises and Equipment		(923)		(917)
Net Cash Used In Investing Activities		(24,111)		(25,892)

CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits		47,019		(11,441)
Net (Decrease) Increase in Short-Term Borrowings		(2,146)		1,427
Repayment of Other Long-Term Borrowings		(1,421)		(766)
Dividends Paid		(847)		(689)
Payments to Repurchase Common Stock		-		(50)
Issuance of Common Stock Under Compensation Plans		88		78
Net Cash Provided By (Used In) Financing Activities		42,693		(11,441)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		42,500		(28,083)

Cash and Cash Equivalents at Beginning of Period		296,047		378,905
Cash and Cash Equivalents at End of Period	$	338,547	$	350,822

Supplemental Cash Flow Disclosures:
Interest Paid	$	808	$	829
Income Taxes Paid	$	691	$	50

Noncash Investing and Financing Activities:
Loans and Premises Transferred to Other Real Estate Owned	$	1,541	$	1,201
Transfer of Current Portion of Long-Term Borrowings	$	-	$	437

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

CAPITAL CITY BANK GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations. Capital City Bank Group, Inc. (“CCBG” or the “Company”) provides a full range of banking and banking-related services to individual and corporate clients through its subsidiary, Capital City Bank, with banking offices located in Florida, Georgia, and Alabama. The Company is subject to competition from other financial institutions, is subject to regulation by certain government agencies and undergoes periodic examinations by those regulatory authorities.

Basis of Presentation. The consolidated financial statements in this Quarterly Report on Form 10-Q include the accounts of CCBG and its wholly-owned subsidiary, Capital City Bank (“CCB” or the “Bank” and together with the Company). All material inter-company transactions and accounts have been eliminated. Certain previously reported amounts have been reclassified to conform to the current year’s presentation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The consolidated statement of financial condition at December 31, 2016 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2016.

NOTE 2 – INVESTMENT SECURITIES

Investment Portfolio Composition. The amortized cost and related market value of investment securities available-for-sale and
held-to-maturity were as follows:
	March 31, 2017									December 31, 2016
	Amortized		Unrealized		Unrealized		Market		Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value		Cost		Gain		Losses		Value
Available for Sale
U.S. Government Treasury	$	288,661	$	106	$	778	$	287,989	$	286,867	$	262	$	851	$	286,278
U.S. Government Agency		143,066		660		293		143,433		131,489		495		344		131,640
States and Political Subdivisions		99,685		126		111		99,700		95,197		23		381		94,839
Mortgage-Backed Securities		1,275		117		-		1,392		1,312		118		-		1,430
Equity Securities⁽¹⁾		8,588		-		-		8,588		8,547		-		-		8,547
Total	$	541,275	$	1,009	$	1,182	$	541,102	$	523,412	$	898	$	1,576	$	522,734

Held to Maturity
U.S. Government Treasury	$	93,335	$	26	$	98	$	93,263	$	119,131	$	107	$	81	$	119,157
States and Political Subdivisions		7,610		17		4		7,623		8,175		1		38		8,138
Mortgage-Backed Securities		57,570		58		629		56,999		50,059		29		637		49,451
Total	$	158,515	$	101	$	731	$	157,885	$	177,365	$	137	$	756	$	176,746

Total Investment Securities	$	699,790	$	1,110	$	1,913	$	698,987	$	700,777	$	1,035	$	2,332	$	699,480

⁽¹⁾ Includes Federal Home Loan Bank, Federal Reserve Bank, and FNBB, Inc. stock recorded at cost of $3.3 million, $4.8 million, and $0.5 million, respectively, at March 31, 2017 and $3.3 million, $4.8 million, and $0.5 million, respectively, at December 31, 2016.

Securities with an amortized cost of $332.4 million and $332.7 million at March 31, 2017 and December 31, 2016, respectively, were pledged to secure public deposits and for other purposes.

The Bank, as a member of the Federal Home Loan Bank of Atlanta (“FHLB”), is required to own capital stock in the FHLB based generally upon the balances of residential and commercial real estate loans, and FHLB advances. FHLB stock which is included in equity securities is pledged to secure FHLB advances. No ready market exists for this stock, and it has no quoted market value; however, redemption of this stock has historically been at par value.

As a member of the Federal Reserve Bank of Atlanta, the Bank is required to maintain stock in the Federal Reserve Bank of Atlanta based on a specified ratio relative to the Bank’s capital. Federal Reserve Bank stock is carried at cost and may be sold back to the Federal Reserve Bank at its carrying value.

Maturity Distribution. As of March 31, 2017, the Company's investment securities had the following maturity distribution based on contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations. Mortgage-backed securities and certain amortizing U.S. government agency securities are shown separately because they are not due at a certain maturity date.

	Available for Sale				Held to Maturity
	Amortized		Market		Amortized		Market
(Dollars in Thousands)	Cost		Value		Cost		Value
Due in one year or less	$	185,316	$	185,386	$	35,468	$	35,485
Due after one through five years		242,632		241,724		65,477		65,401
Mortgage-Backed Securities		1,275		1,392		57,570		56,999
U.S. Government Agency		103,464		104,012		-		-
Equity Securities		8,588		8,588		-		-
Total	$	541,275	$	541,102	$	158,515	$	157,885

Unrealized Losses on Investment Securities. The following table summarizes the investment securities with unrealized losses aggregated by major security type and length of time in a continuous unrealized loss position:

	Less Than				Greater Than
	12 Months				12 Months				Total
	Market		Unrealized		Market		Unrealized		Market		Unrealized
(Dollars in Thousands)	Value		Losses		Value		Losses		Value		Losses
March 31, 2017
Available for Sale
U.S. Government Treasury	$	133,781	$	778	$	-	$	-	$	133,781	$	778
U.S. Government Agency	$	52,628	$	278	$	3,871	$	15	$	56,499	$	293
States and Political Subdivisions		48,786		109		542		2		49,328		111
Mortgage-Backed Securities		-		-		3		-		3		-
Total		235,195		1,165		4,416		17		239,611		1,182

Held to Maturity
U.S. Government Treasury		47,679		98		-		-		47,679		98
States and Political Subdivisions		2,545		4		-		-		2,545		4
Mortgage-Backed Securities		35,437		592		3,404		37		38,841		629
Total	$	85,661	$	694	$	3,404	$	37	$	89,065	$	731

December 31, 2016
Available for Sale
U.S. Government Treasury	$	116,704	$	851	$	-	$	-	$	116,704	$	851
U.S. Government Agency		48,520		310		6,699		34		55,219		344
States and Political Subdivisions		81,521		380		294		1		81,815		381
Mortgage-Backed Securities		3		-		-		-		3		-
Total		246,748		1,541		6,993		35		253,741		1,576

Held to Maturity
U.S. Government Treasury		35,210		81		-		-		35,210		81
States and Political Subdivisions		7,491		38		-		-		7,491		38
Mortgage-Backed Securities		36,710		599		4,010		38		40,720		637
Total	$	79,411	$	718	$	4,010	$	38	$	83,421	$	756

Management evaluates securities for other than temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, the Company considers, (i) whether it has decided to sell the security, (ii) whether it is more likely than not that the Company will have to sell the security before its market value recovers, and (iii) whether the present value of expected cash flows is sufficient to recover the entire amortized cost basis. When assessing a security’s expected cash flows, the Company considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost and (ii) the financial condition and near-term prospects of the issuer. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by rating agencies have occurred, regulatory issues, and analysts’ reports.

At March 31, 2017, there were 287 positions (combined Available-for-Sale and Held-to-Maturity) with an unrealized loss totaling $1.9 million. Included were 116 positions comprised of Ginnie Mae mortgage-backed securities (51), US Treasuries (39), and SBA securities (26) with an unrealized loss totaling $1.6 million. Each of these positions carries the full faith and credit guarantee of the US Government. SBA securities float monthly or quarterly to the prime rate and are uncapped. Of these 116 positions, there were 11 GNMA positions and seven SBA positions in an unrealized loss position for longer than 12 months, with unrealized losses of $37,000 and $15,000, respectively. There were 22 agency positions with an unrealized loss of $0.2 million. The remaining 149 positions in an unrealized loss position were municipal bonds that were pre-refunded, or rated “AA-“or better, with unrealized losses of $0.1 million. Of these 149 positions, two were in an unrealized loss position greater than 12 months, with an unrealized loss of $2,000. Because the declines in the market value of these investments are attributable to changes in interest rates and not credit quality and because the Company has the present ability and intent to hold these investments until there is a recovery in fair value, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2017.

NOTE 3 – LOANS, NET

Loan Portfolio Composition. The composition of the loan portfolio was as follows:

(Dollars in Thousands)		March 31, 2017		December 31, 2016
Commercial, Financial and Agricultural		$	214,595	$	216,404
Real Estate – Construction			59,938		58,443
Real Estate – Commercial Mortgage			503,868		503,978
Real Estate – Residential⁽¹⁾			304,992		281,509
Real Estate – Home Equity			231,300		236,512
Consumer			270,266		264,443
	Loans, Net of Unearned Income	$	1,584,959	$	1,561,289

⁽¹⁾ Includes loans in process with outstanding balances of $10.5 million and $9.6 million at March 31, 2017 and December 31, 2016, respectively.

Net deferred costs included in loans were $0.6 million at March 31, 2017 and $0.5 million at December 31, 2016.

The Company has pledged a blanket floating lien on all 1-4 family residential mortgage loans, commercial real estate mortgage loans, and home equity loans to support available borrowing capacity at the FHLB of Atlanta and has pledged a blanket floating lien on all consumer loans, commercial loans, and construction loans to support available borrowing capacity at the Federal Reserve Bank of Atlanta.

Nonaccrual Loans. Loans are generally placed on nonaccrual status if principal or interest payments become 90 days past due and/or management deems the collectability of the principal and/or interest to be doubtful. Loans are returned to accrual status when the principal and interest amounts contractually due are brought current or when future payments are reasonably assured.

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days and still on accrual by class of loans.

	March 31, 2017				December 31, 2016
(Dollars in Thousands)	Nonaccrual		90 + Days		Nonaccrual		90 + Days
Commercial, Financial and Agricultural	$	538	$	-	$	468	$	-
Real Estate – Construction		363		-		311		-
Real Estate – Commercial Mortgage		3,970		-		3,410		-
Real Estate – Residential		1,724		-		2,330		-
Real Estate – Home Equity		1,587		-		1,774		-
Consumer		116		-		240		-
Total Nonaccrual Loans	$	8,298	$	-	$	8,533	$	-

Loan Portfolio Aging. A loan is defined as a past due loan when one full payment is past due or a contractual maturity is over 30 days past due (“DPD”).

The following table presents the aging of the recorded investment in past due loans by class of loans.

	30-59		60-89		90 +		Total		Total		Total
(Dollars in Thousands)	DPD		DPD		DPD		Past Due		Current		Loans
March 31, 2017
Commercial, Financial and Agricultural	$	205	$	32	$	-	$	237	$	213,820	$	214,595
Real Estate – Construction		-		-		-		-		59,575		59,938
Real Estate – Commercial Mortgage		69		177		-		246		499,652		503,868
Real Estate – Residential		1,094		67		-		1,161		302,107		304,992
Real Estate – Home Equity		263		15		-		278		229,435		231,300
Consumer		1,123		218		-		1,341		268,809		270,266
Total Past Due Loans	$	2,754	$	509	$	-	$	3,263	$	1,573,398	$	1,584,959

December 31, 2016
Commercial, Financial and Agricultural	$	209	$	48	$	-	$	257	$	215,679	$	216,404
Real Estate – Construction		949		282		-		1,231		56,901		58,443
Real Estate – Commercial Mortgage		835		1		-		836		499,732		503,978
Real Estate – Residential		1,199		490		-		1,689		277,490		281,509
Real Estate – Home Equity		577		51		-		628		234,110		236,512
Consumer		1,516		281		-		1,797		262,406		264,443
Total Past Due Loans	$	5,285	$	1,153	$	-	$	6,438	$	1,546,318	$	1,561,289

Allowance for Loan Losses. The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of incurred losses within the existing portfolio of loans. Loans are charged-off to the allowance when losses are deemed to be probable and reasonably quantifiable.

The following table details the activity in the allowance for loan losses by portfolio class. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

		Commercial,				Real Estate
		Financial,		Real Estate		Commercial		Real Estate		Real Estate
(Dollars in Thousands)		Agricultural		Construction		Mortgage		Residential		Home Equity		Consumer		Total
Three Months Ended
March 31, 2017
Beginning Balance		$	1,198	$	168	$	4,315	$	3,445	$	2,297	$	2,008	$	13,431
	Provision for Loan Losses		(36)		(68)		(187)		(166)		288		479		310
	Charge-Offs		(93)		-		(71)		(116)		(92)		(624)		(996)
	Recoveries		81		-		23		213		29		244		590
	Net Charge-Offs		(12)		-		(48)		97		(63)		(380)		(406)
Ending Balance		$	1,150	$	100	$	4,080	$	3,376	$	2,522	$	2,107	$	13,335

Three Months Ended
March 31, 2016
Beginning Balance		$	905	$	101	$	4,498	$	4,409	$	2,473	$	1,567	$	13,953
	Provision for Loan Losses		(24)		-		44		(30)		118		344		452