Capital City Bank Group, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS	12 Months Ended
EMPLOYEE BENEFIT PLANS	Dec. 31, 2021
Employee benefits plans [Abstract]
EMPLOYEE BENEFIT PLANS	Note 15 EMPLOYEE BENEFIT PLANS Pension Plan The Company sponsors a noncontributory pension plan covering substantially all of its associates. Benefits under this plan generally are based on the associate's total years of service and average of the five highest years of compensation during the ten years immediately preceding their departure. The Company’s general funding policy is to contribute amounts sufficient to meet minimum funding requirements as set by law and to ensure deductibility for federal income tax purposes. On December 30, 2019, the plan was amended to remove plan eligibility for new associates hired after December 31, 2019. The following table details on a consolidated basis the changes in benefit obligation, changes in plan assets, the funded status of the plan, components of pension expense, amounts recognized in the Company's consolidated statements of financial condition, and major assumptions used to determine these amounts. (Dollars in Thousands) 2021 2020 2019 Change in Projected Benefit Obligation: Benefit Obligation at Beginning of Year $ 212,566 $ 180,830 $ 149,347 Service Cost 6,971 5,828 6,114 Interest Cost 4,885 5,612 6,178 Actuarial (Gain) Loss (14,934) 32,172 25,715 Benefits Paid (2,087) (11,677) (6,255) Expenses Paid (259) (260) (269) Settlements (34,634) - - Special/Contractual Termination Benefits - 61 - Projected Benefit Obligation at End of Year $ 172,508 $ 212,566 $ 180,830 Change in Plan Assets: Fair Value of Plan Assets at Beginning of Year $ 171,775 $ 161,646 $ 134,535 Actual Return on Plan Assets 30,479 17,066 28,635 Employer Contributions - 5,000 5,000 Benefits Paid (2,087) (11,677) (6,255) Expenses Paid (259) (260) (269) Settlements (34,634) - - Fair Value of Plan Assets at End of Year $ 165,274 $ 171,775 $ 161,646 Funded Status of Plan and Accrued Liability Recognized at End of Year: Other Liabilities $ 7,234 $ 40,791 $ 19,184 Accumulated Benefit Obligation at End of Year $ 149,569 $ 177,362 $ 156,327 Components of Net Periodic Benefit Costs: Service Cost $ 6,971 $ 5,828 $ 6,114 Interest Cost 4,885 5,612 6,178 Expected Return on Plan Assets (11,147) (10,993) (9,527) Amortization of Prior Service Costs 15 15 15 Special/Contractual Termination Benefits - 61 - Net Loss Amortization 6,764 3,933 3,862 Net Loss Settlements 3,072 - - Net Periodic Benefit Cost $ 10,560 $ 4,456 $ 6,642 Weighted-Average Assumptions Used to Determine Benefit Obligation: Discount Rate 3.11% 2.88% 3.53% Rate of Compensation Increase (1) 4.40% 4.00% 4.00% Measurement Date 12/31/21 12/31/20 12/31/19 Weighted-Average Assumptions Used to Determine Benefit Cost: Discount Rate 2.88% 3.53% 4.43% Expected Return on Plan Assets 6.75% 7.00% 7.25% Rate of Compensation Increase (1) 4.00% 4.00% 4.00% Amortization Amounts from Accumulated Other Comprehensive Income: Net Actuarial Loss (Gain) $ (34,265) $ 26,098 $ 6,606 Prior Service Cost (15) (15) (15) Net Loss (9,836) (3,933) (3,862) Deferred Tax (Benefit) Expense 11,183 (5,615) (694) Other Comprehensive Loss (Gain), net of tax $ (32,933) $ 16,535 $ 2,035 Amounts Recognized in Accumulated Other Comprehensive Income: Net Actuarial Losses $ 15,300 $ 59,400 $ 37,235 Prior Service Cost 20 35 50 Deferred Tax Benefit (3,884) (15,066) (9,451) Accumulated Other Comprehensive Loss, net of tax $ 11,436 $ 44,369 $ 27,834 (1) The Company utilized an age-graded approach that varies the rate based on the age of the participants. During 2021, lump sum payments made under the Company’s defined benefit pension plan triggered settlement accounting. In accordance with the applicable accounting guidance for defined benefit plans, the Company recorded a settlement loss of $ 3.1 million. The service cost component of net periodic benefit cost is reflected in compensation expense in the accompanying statements of income. The other components of net periodic cost are included in “other” within the noninterest expense category in the statements of income. See Note 1 – Significant Accounting Policies for additional information. The Company expects to recognize $ 1.7 million of the net actuarial loss reflected in accumulated other comprehensive income at December 31, 2021 as a component of net periodic benefit cost during 2022. Plan Assets. The Company’s pension plan asset allocation at December 31, 2021 and 2020, and the target asset allocation for 2021 are as follows: Target Percentage of Plan Allocation Assets at December 31 (1) 2022 2021 2020 Equity Securities 68 % 73 % 71 % Debt Securities 27 % 23 % 21 % Cash and Cash Equivalents 5 % 4 % 8 % Total 100 % 100 % 100 % (1) Represents asset allocation at December 31 which may differ from the average target allocation for the year due to the year- end cash contribution to the plan. The Company’s pension plan assets are overseen by the CCBG Retirement Committee. Capital City Trust Company acts as the investment manager for the plan. The investment strategy is to maximize return on investments while minimizing risk. The Company believes the best way to accomplish this goal is to take a conservative approach to its investment strategy by investing in mutual funds that include various high-grade equity securities and investment -grade debt issuances with varying investment strategies. The target asset allocation will periodically be adjusted based on market conditions and will operate within the following investment policy statement allocation ranges: equity securities ranging from 55 % and 81 %, debt securities ranging from 17 % and 37 %, and cash and cash equivalents ranging from 0 % and 10 %. The overall expected long-term rate of return on assets is a weighted-average expectation for the return on plan assets. The Company considers historical performance data and economic/financial data to arrive at expected long-term rates of return for each asset category. The major categories of assets in the Company’s pension plan at December 31 are presented in the following table. Assets are segregated by the level of the valuation inputs within the fair value hierarchy established by ASC Topic 820 utilized to measure fair value (see Note 22 – Fair Value Measurements). (Dollars in Thousands) 2021 2020 Level 1: U.S. Treasury Securities $ 200 $ 405 Mutual Funds 156,726 155,192 Cash and Cash Equivalents 6,881 12,789 Level 2: U.S. Government Agency 527 1,555 Corporate Notes/Bonds 940 1,834 Total Fair Value of Plan Assets $ 165,274 $ 171,775 Expected Benefit Payments. At December 31, expected benefit payments related to the defined benefit pension plan were as follows: (Dollars in Thousands) 2021 2022 $ 13,463 2023 12,567 2024 12,774 2025 12,703 2026 12,070 2027 through 2031 51,009 Total $ 114,586 Contributions. The following table details the amounts contributed to the pension plan in 2021 and 2020, and the expected amount to be contributed in 2022. Expected Contribution (Dollars in Thousands) 2020 2021 2022 (1) Actual Contributions $ 5,000 $ - $ - - $ 5,000 (1) For 2022, the Company will have the option to make a cash contribution to the plan or utilize pre-funding balances. Supplemental Executive Retirement Plan The Company has a Supplemental Executive Retirement Plan (“SERP”) and a Supplemental Executive Retirement Plan II (“SERP II”) covering selected executive officers. Benefits under this plan generally are based on the same service and compensation as used for the pension plan, except the benefits are calculated without regard to the limits set by the Internal Revenue Code on compensation and benefits. The net benefit payable from the SERP is the difference between this gross benefit and the benefit payable by the pension plan. The SERP II was adopted by the Company’s Board on May 21, 2020 and covers certain executive officers that were not covered by the SERP. The following table details on a consolidated basis the changes in benefit obligation, the funded status of the plan, components of pension expense, amounts recognized in the Company's consolidated statements of financial condition, and major assumptions used to determine these amounts. (Dollars in Thousands) 2021 2020 2019 Change in Projected Benefit Obligation: Benefit Obligation at Beginning of Year $ 13,402 $ 10,244 $ 8,860 Service Cost 35 31 - Interest Cost 243 321 349 Actuarial (Gain) Loss (146) 1,826 1,035 Plan Amendments - 980 - Projected Benefit Obligation at End of Year $ 13,534 $ 13,402 $ 10,244 Funded Status of Plan and Accrued Liability Recognized at End of Year: Other Liabilities $ 13,534 $ 13,402 $ 10,244 Accumulated Benefit Obligation at End of Year $ 12,803 $ 12,339 $ 8,778 Components of Net Periodic Benefit Costs: Service Cost $ 35 $ 31 $ - Interest Cost 243 321 349 Amortization of Prior Service Cost 277 327 - Net Loss Amortization 970 503 761 Net Periodic Benefit Cost $ 1,525 $ 1,182 $ 1,110 Weighted-Average Assumptions Used to Determine Benefit Obligation: Discount Rate 2.80% 2.38% 3.16% Rate of Compensation Increase (1) 4.40% 4.00% 4.00% Measurement Date 12/31/21 12/31/20 12/31/19 Weighted-Average Assumptions Used to Determine Benefit Cost: Discount Rate 2.38% 3.16% 4.23% Rate of Compensation Increase (1) 4.00% 3.50% 3.50% Amortization Amounts from Accumulated Other Comprehensive Income: Net Actuarial (Gain) Loss $ (146) $ 1,826 $ 1,035 Prior Service (Benefit) Cost (219) 895 - Net Loss (970) (458) (761) Deferred Tax (Benefit) Expense 154 (573) (70) Other Comprehensive (Gain) Loss, net of tax $ (1,181) $ 1,690 $ 204 Amounts Recognized in Accumulated Other Comprehensive Income: Net Actuarial Loss $ 1,875 $ 2,991 $ 1,622 Prior Service Cost 429 895 - Deferred Tax Benefit (584) (985) (411) Accumulated Other Comprehensive Loss, net of tax $ 1,720 $ 2,901 $ 1,211 (1) The Company utilized an age-graded approach that varies the rate based on the age of the participants. The Company expects to recognize approximately $ 1.0 million of the net actuarial loss reflected in accumulated other comprehensive income at December 31, 2021 as a component of net periodic benefit cost during 2022. Expected Benefit Payments . As of December 31, expected benefit payments related to the SERP were as follows: (Dollars in Thousands) 2021 2022 $ 7,521 2023 4,994 2024 952 2025 36 2026 28 2027 through 2031 316 Total $ 13,847 401(k) Plan The Company has a 401(k) Plan which enables CCB and CCBG associates to defer a portion of their salary on a pre-tax basis. The plan covers substantially all associates of the Company who meet minimum age requirements. The plan is designed to enable participants to contribute any amount, up to the maximum annual limit allowed by the IRS, of their compensation withheld in any plan year placed in the 401(k) Plan trust account. Matching contributions of 50 % from the Company are made up to 6 % of the participant's compensation for eligible associates. Further, in addition to the 50 % match, all associates hired after December 31, 2019 will receive annually a contribution by the Company equal to 3 % of their compensation. For 2021, the Company made annual matching contributions of $ 1.0 million. For 2020 and 2019, the Company made annual matching contributions of $ 0.8 million and $ 0.7 million, respectively. The participant may choose to invest their contributions into thirty-three investment options available to 401(k) participants, including the Company’s common stock. A total of 50,000 shares of CCBG common stock have been reserved for issuance. Shares issued to participants have historically been purchased in the open market. CCHL, a 51 % owned subsidiary of the Company has a 401(k) Plan available to all CCHL associates who are employed. The plan allows participants to contribute any amount, up to the maximum annual limit allowed by the IRS, of their compensation withheld in any plan year placed in the 401(k) Plan trust account. A discretionary matching contribution is determined annually by CCHL. For 2021 and 2020, matching contributions were made by CCHL up to 3 % of eligible participant's compensation totaling $ 0.7 million and $ 0.5 million, respectively. Other Plans The Company has a Dividend Reinvestment and Optional Stock Purchase Plan. A total of 250,000 shares have been reserved for issuance. In recent years, shares for the Dividend Reinvestment and Optional Stock Purchase Plan have been acquired in the open market and, thus, the Company did not issue any shares under this plan in 2021, 2020 and 2019.