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What changed in CAPITAL CITY BANK GROUP INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CAPITAL CITY BANK GROUP INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+522 added−457 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-01)

Top changes in CAPITAL CITY BANK GROUP INC's 2023 10-K

522 paragraphs added · 457 removed · 335 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

79 edited+35 added−32 removed129 unchanged
Biggest changeThe BHC Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Gramm-Leach-Bliley Financial Modernization 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. 11 Permitted Activities The Gramm-Leach-Bliley Act reformed the U.S. banking system by: (i) allowing bank holding companies that qualify as “financial holding companies,” such as CCBG, to engage in a broad range of financial and related activities; (ii) allowing insurers and other financial service companies to acquire banks; (iii) removing restrictions that applied to bank holding company ownership of securities firms and mutual fund advisory companies; and (iv) establishing the overall regulatory scheme applicable to bank holding companies that also engage in insurance and securities operations.
Biggest changePermitted Activities The GLBA reformed the U.S. banking system by: (i) allowing bank holding companies (“BHCs”) that qualify as “financial holding companies,” such as CCBG, to engage in a broad range of financial and related activities; (ii) allowing insurers and other financial service companies to acquire banks; (iii) removing restrictions that applied to bank holding company ownership of securities firms and mutual fund advisory companies; and (iv) establishing the overall regulatory scheme applicable to bank holding companies that also engage in insurance and securities operations.
While these programs have generally expired, governmental authorities may take additional actions in the future to limit the adverse impacts of COVID-19 that may affect the Bank and its clients. 19 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.
While these programs have generally expired, governmental authorities may take additional actions in the future to limit the adverse impacts of COVID-19 that may affect the Bank and its clients. 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.
In addition, CCB generally may not purchase securities issued or underwritten by affiliates. 15 Loans to executive officers and directors of an insured depository institution or any of its affiliates or to any person who directly or indirectly, or acting through or in concert with one or more persons, owns, controls or has the power to vote more than 10% of any class of voting securities of a bank, which we refer to as “10% Shareowners,” or to any political or campaign committee the funds or services of which will benefit those executive officers, directors, or 10% Shareowners or which is controlled by those executive officers, directors or 10% Shareowners, are subject to Sections 22(g) and 22(h) of the Federal Reserve Act and the corresponding regulations (Regulation O) and Section 13(k) of the Exchange Act relating to the prohibition on personal loans to executives (which exempts financial institutions in compliance with the insider lending restrictions of Section 22(h) of the Federal Reserve Act).
In addition, CCB generally may not purchase securities issued or underwritten by affiliates. 17 Loans to executive officers and directors of an insured depository institution or any of its affiliates or to any person who directly or indirectly, or acting through or in concert with one or more persons, owns, controls or has the power to vote more than 10% of any class of voting securities of a bank, which we refer to as “10% Shareowners,” or to any political or campaign committee the funds or services of which will benefit those executive officers, directors, or 10% Shareowners or which is controlled by those executive officers, directors or 10% Shareowners, are subject to Sections 22(g) and 22(h) of the Federal Reserve Act and the corresponding regulations (Regulation O) and Section 13(k) of the Exchange Act relating to the prohibition on personal loans to executives (which exempts financial institutions in compliance with the insider lending restrictions of Section 22(h) of the Federal Reserve Act).
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.
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. 13 Capital City Bank Group, Inc.
Residential Real Estate Loans We originate 1-4 family, owner-occupied residential real estate loans at CCHL for sale in the secondary market. A vast majority of residential loan originations are fixed-rate loans which are sold in the secondary market on a non-recourse basis. We will frequently sell loans and retain the servicing rights.
Residential Real Estate Loans We originate 1-4 family, owner-occupied residential real estate loans at CCHL for sale in the secondary market. Historically, a vast majority of residential loan originations are fixed-rate loans which are sold in the secondary market on a non-recourse basis. We will frequently sell loans and retain the servicing rights.
An institution may borrow from the Federal Reserve Bank “discount window” as a secondary source of funds, provided that the institution meets the Federal Reserve Bank’s credit standards. 14 Dividends CCB is subject to legal limitations on the frequency and amount of dividends that can be paid to CCBG.
An institution may borrow from the Federal Reserve Bank “discount window” as a secondary source of funds, provided that the institution meets the Federal Reserve Bank’s credit standards. Dividends CCB is subject to legal limitations on the frequency and amount of dividends that can be paid to CCBG.
The USA Patriot Act, and BSA Acts and the related federal regulations require banks to establish anti-money laundering programs that include policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers and of beneficial owners of their legal entity customers.
The USA Patriot Act, BSA, and the related federal regulations require banks to establish anti-money laundering programs that include policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers and of beneficial owners of their legal entity customers.
If a consumer does not opt in, any ATM transaction or debit that overdraws the consumer’s account will be denied. Overdrafts on the payment of checks and regular electronic bill payments are not covered by this new rule.
If a consumer does not opt in, any ATM transaction or debit that overdraws the consumer’s account will be denied. Overdrafts on the payment of checks and regular electronic bill payments are not covered by this rule.
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 Deposit Insurance Fund.
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 Deposit Insurance Fund (“DIF”).
Reserves The Federal Reserve requires all depository institutions to maintain reserves against transaction accounts (noninterest bearing and NOW checking accounts). The balances maintained to meet the reserve requirements imposed by the Federal Reserve may be used to satisfy liquidity requirements.
Reserves 16 The Federal Reserve requires all depository institutions to maintain reserves against transaction accounts (noninterest bearing and NOW checking accounts). The balances maintained to meet the reserve requirements imposed by the Federal Reserve may be used to satisfy liquidity requirements.
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.
Safe and Sound Banking Practices 15 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.
Section 22(g) identifies limited circumstances in which we are permitted to extend credit to executive officers. Community Reinvestment Act The Community Reinvestment Act and its corresponding regulations are intended to encourage banks to help meet the credit needs of the communities they serve, including low- and moderate-income neighborhoods, consistent with safe and sound banking practices.
Section 22(g) identifies limited circumstances in which we are permitted to extend credit to executive officers. Community Reinvestment Act The CRA and its corresponding regulations are intended to encourage banks to help meet the credit needs of the communities they serve, including low- and moderate-income (“LMI”) neighborhoods, consistent with safe and sound banking practices.
Insurance sales within this division include life, health, disability, long-term care, and annuity solutions. 6 Lending Activities One of our core goals is to support the communities in which we operate. We seek loans from within our primary market area, which is defined as the counties in which our banking offices are located.
Insurance sales within this division include life, health, disability, long-term care, and annuity solutions. 8 Lending Activities One of our core goals is to support the communities in which we operate. We seek loans from within our primary market area, which is defined as the counties in which our banking offices are located.
Also, the more recent TILA- RESPA Integrated Disclosure, or TRID, rules for mortgage closings have impacted our loan applications. These rules, including the required loan forms, generally increased the time it takes to approve mortgage loans. Future Legislative Developments Various bills are from time to time introduced in Congress and the Florida legislature.
Also, the more recent TILA-RESPA Integrated Disclosure, or TRID, rules for mortgage closings have impacted our loan applications. These rules, including the required loan forms, generally increased the time it takes to approve mortgage loans. Future Legislative Developments Various bills are from time to time introduced in the U.S. Congress and the Florida legislature.
The Federal Reserve may approve greater amounts. Insurance of Accounts and Other Assessments Deposits at U.S. domiciled banks are insured by the FDIC, subject to limits and conditions of applicable laws and regulations. Our deposit accounts are insured by the Deposit Insurance Fund, or DIF, generally up to a maximum of $250,000 per separately insured depositor.
The Federal Reserve may approve greater amounts. Insurance of Accounts and Other Assessments Deposits at U.S. domiciled banks are insured by the FDIC, subject to limits and conditions of applicable laws and regulations. Our deposit accounts are insured by the DIF generally up to a maximum of $250,000 per separately insured depositor.
The Bank commenced operations in 1895. In this report, the terms “Company,” “we,” “us,” or “our” mean CCBG and all subsidiaries included in our consolidated financial statements. CCBG is one of the largest publicly traded financial holding companies headquartered in Florida and has approximately $4.5 billion in assets.
The Bank commenced operations in 1895. In this report, the terms “Company,” “we,” “us,” or “our” mean CCBG and all subsidiaries included in our consolidated financial statements. CCBG is one of the largest publicly traded financial holding companies headquartered in Florida and has approximately $4.3 billion in assets.
Capital Regulations The federal banking regulators have adopted risk-based, capital adequacy guidelines for financial holding companies and their subsidiary banks based on the Basel III standards. Under these guidelines, assets and off -balance sheet items are assigned to specific risk categories each with designated risk weightings.
Capital Regulations The federal banking regulators have adopted rules implementing risk-based, capital adequacy guidelines for financial holding companies and their subsidiary banks based on the Basel III standards. Under these guidelines, assets and off-balance sheet items are assigned to specific risk categories each with designated risk weightings.
Subsidiaries of CCBG CCBG’s principal asset is the capital stock of CCB, our wholly owned banking subsidiary, which accounted for nearly 100% of consolidated assets and net income attributable to CCBG at December 31, 2022. CCBG also maintains an insurance subsidiary, Capital City Strategic Wealth, LLC.
Subsidiaries of CCBG CCBG’s principal asset is the capital stock of CCB, our wholly owned banking subsidiary, which accounted for nearly 100% of consolidated assets and net income attributable to CCBG at December 31, 2023. CCBG also maintains an insurance subsidiary, Capital City Strategic Wealth, LLC.
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.
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.
The majority of our commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory. Many of the loans in the commercial portfolio have variable interest rates tied to the Prime Rate or U.S. Treasury indices.
The majority of our commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory. Many of the loans in the commercial portfolio have variable interest rates tied to the Prime Rate or U.S.
Failure to meet capital guidelines may subject a banking organization to a variety of other enforcement remedies, including additional substantial restrictions on its operations and activities, termination of deposit insurance by the FDIC and, under certain conditions, the appointment of a conservator or receiver. 17 At December 31, 2022, we exceeded the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy to be classified as “well capitalized” and are unaware of any material violation or alleged violation of these regulations, policies or directives (see table below).
Failure to meet capital guidelines may subject a banking organization to a variety of other enforcement remedies, including additional substantial restrictions on its operations and activities, termination of deposit insurance by the FDIC and, under certain conditions, the appointment of a conservator or receiver. 19 At December 31, 2023, we exceeded the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy to be classified as “well capitalized” and are unaware of any material violation or alleged violation of these regulations, policies or directives (see table below).
Under the CBCA, if an individual or a company that acquires 10% or more of any class of voting securities of an insured depository institution or its holding company and either that institution or company has registered securities under Section 12 of the Exchange Act, or no other person will own a greater percentage of that class of voting securities immediately after the acquisition, then that investor is presumed to have control and may be required to file a change in bank control notice with the institution’s or the holding company’s primary federal regulator.
Under the CBCA, if an individual or a company that acquires 10% or more of any class of voting securities of an insured depository institution or its holding company and either that institution or company has registered securities under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or no other person will own a greater percentage of that class of voting securities immediately after the acquisition, then that investor is presumed to have control and may be required to file a change in bank control notice with the institution’s or the holding company’s primary federal regulator.
Commercial Real Estate Loans We have adopted guidelines for debt service coverage ratios, LTV ratios and documentation standards for commercial real estate loans. These loans are primarily made based on identified cash flows of the borrower with consideration given to underlying real estate collateral and personal guarantees.
Treasury indices. 9 Commercial Real Estate Loans We have adopted guidelines for debt service coverage ratios, LTV ratios and documentation standards for commercial real estate loans. These loans are primarily made based on identified cash flows of the borrower with consideration given to underlying real estate collateral and personal guarantees.
As of December 31, 2022, approximately 56% of our residential home equity loan portfolio consisted of first mortgages. Interest rates may be fixed or adjustable. Adjustable-rate loans are tied to the Prime Rate with a typical margin of 1.0% or more. Commercial Loans Our policy sets forth guidelines for debt service coverage ratios, LTV ratios and documentation standards.
As of December 31, 2023, approximately 53% of our residential home equity loan portfolio consisted of first mortgages. Interest rates may be fixed or adjustable. Adjustable-rate loans are tied to the Prime Rate with a typical margin of 1.0% or more. Commercial Loans Our policy sets forth guidelines for debt service coverage ratios, LTV ratios and documentation standards.
The types of payments subject to this limitation include dividends, share buybacks, discretionary payments on Tier 1 instruments, and discretionary bonus payments. The capital regulations may also impact the treatment of accumulated other comprehensive income, or AOCI, for regulatory capital purposes.
The types of payments subject to this limitation include dividends, share buybacks, discretionary payments on Tier 1 instruments, and discretionary bonus payments. The capital regulations may also impact the treatment of accumulated other comprehensive income (“AOCI”) for regulatory capital purposes.
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.
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.
(2) Banking office opened in the fourth quarter of 2022. 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.
(2) 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.
We provide a full range of banking services, including traditional deposit and credit services, mortgage banking, asset management, trust, merchant services, bankcards, securities brokerage services and financial advisory services, including the sale of life insurance, risk management and asset protection services. The Bank has 58 banking offices and 89 ATMs/ITMs in Florida, Georgia, and Alabama.
We provide a full range of banking services, including traditional deposit and credit services, mortgage banking, asset management, trust, merchant services, bankcards, securities brokerage services and financial advisory services, including the sale of life insurance, risk management and asset protection services. The Bank has 63 banking offices and 103 ATMs/ITMs in Florida, Georgia, and Alabama.
If a financial institution’s capital conservation buffer falls below the minimum requirement, its maximum payout amount for capital distributions and discretionary payments declines to a set percentage of eligible retained income based on the size of the buffer. See “Capital Regulations,” below for additional details on this new capital requirement.
If a financial institution’s capital conservation buffer falls below the minimum requirement, its maximum payout amount for capital distributions and discretionary payments declines to a set percentage of eligible retained income based on the size of the buffer. See “Capital Regulations” below for additional details on this capital requirement.
By way of amendments to the Bank Secrecy Act, or “BSA,” the USA Patriot Act puts in place measures intended to encourage information sharing among bank regulatory and law enforcement agencies. In addition, certain provisions of the USA Patriot Act impose affirmative obligations on a broad range of financial institutions.
By way of amendments to the Bank Secrecy Act (the “BSA”), the USA Patriot Act puts in place measures intended to encourage information sharing among bank regulatory and law enforcement agencies. In addition, certain provisions of the USA Patriot Act impose affirmative obligations on a broad range of financial institutions.
Johns 0.7% 0.7% 0.6% Suwannee 7.0% 6.8% 7.1% Taylor 73.8% 73.2% 72.4% Wakulla 10.0% 10.5% 8.3% Washington 11.2% 11.2% 11.0% Georgia Bibb 3.2% 3.3% 3.2% Cobb (2) 0.0% 0.0% 0.0% Grady 16.3% 14.8% 14.0% Laurens 7.8% 7.9% 8.4% Troup 6.4% 6.1% 6.5% Alabama Chambers 9.3% 9.3% 9.6% (1) Obtained from the FDIC Summary of Deposits Report for the year indicated.
Johns 0.8% 0.7% 0.7% Suwannee 6.6% 7.0% 6.8% Taylor 75.0% 73.8% 73.2% Wakulla 8.4% 10.0% 10.5% Walton 0.3% - - Washington 9.2% 11.2% 11.2% Georgia Bibb 2.9% 3.2% 3.3% Cobb 0.1% 0.0% 0.0% Gwinnett (2) 0.0% - - Grady 13.8% 16.3% 14.8% Laurens 6.7% 7.8% 7.9% Troup 5.6% 6.4% 6.1% Alabama Chambers 8.6% 9.3% 9.3% (1) Obtained from the FDIC Summary of Deposits Report for the year indicated.
Privacy A variety of federal and state privacy laws govern the collection, safeguarding, sharing and use of customer information, and require that financial institutions have policies regarding information privacy and security. The Gramm-Leach-Bliley Act and related regulations require banks and their affiliated companies to adopt and disclose privacy policies, including policies regarding the sharing of personal information with third parties.
Privacy A variety of federal and state privacy laws govern the collection, safeguarding, sharing and use of customer information, and require that financial institutions have policies regarding information privacy and security. The GLBA and related regulations require banks and their affiliated companies to adopt and disclose privacy policies, including policies regarding the sharing of personal information with third parties.
These regulations provide for regulatory assessment of a bank’s record in meeting the credit needs of its market area. Federal banking agencies are required to publicly disclose each bank’s rating under the Community Reinvestment Act.
These regulations provide for regulatory assessment of a bank’s record in meeting the credit needs of its market area. Federal banking agencies are required to publicly disclose each bank’s rating under the CRA.
The FDIC may also prohibit any FDIC-insured institution from engaging in any activity it determines to pose a serious risk to the Deposit Insurance Fund (“DIF”). In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023.
The FDIC may also prohibit any FDIC-insured institution from engaging in any activity it determines to pose a serious risk to the DIF. In October 2022, the FDIC finalized a rule to increase the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023.
The information on our website is not incorporated by reference into this report. 20
The information on our website is not incorporated by reference into this report. 22
Approximately 52% of the revenue from CCHL is derived from our Georgia market areas while approximately 39% and 9% is derived from our Florida and other market areas, respectively. Below is a summary of our financial condition and results of operations for the past three fiscal years, which we believe is a sufficient period for understanding our general business development.
Approximately 48% of the revenue from CCHL is derived from our Georgia market areas while approximately 38% and 14% is derived from our Florida and other market areas, respectively. Below is a summary of our financial condition and results of operations for the past three fiscal years, which we believe is a sufficient period for understanding our general business development.
The Federal Reserve considers a bank’s Community Reinvestment Act rating when the bank submits an application to establish bank branches, merge with another bank, or acquire the assets and assume the liabilities of another bank.
The Federal Reserve considers a bank’s CRA rating when the bank submits an application to establish bank branches, merge with another bank, or acquire the assets and assume the liabilities of another bank.
These requirements will affect us because the Bank is chartered under Florida law and changes in control of CCBG are indirect changes in control of CCB. Prohibitions Against Tying Arrangements Banks are subject to the prohibitions of 12 U.S.C. 1972 on certain tying arrangements.
These requirements will affect us because the Bank is chartered under Florida law and changes in control of CCBG are indirect changes in control of CCB. Prohibitions Against Tying Arrangements Banks are subject to the prohibitions on certain tying arrangements.
Through Capital City Home Loans, LLC (“CCHL”), we have 33 additional offices in the Southeast for our mortgage banking business. The majority of the revenue (excluding CCHL), approximately 86%, is derived from our Florida market areas while approximately 13% and 1% of the revenue is derived from our Georgia and other market areas, respectively.
Through Capital City Home Loans, LLC (“CCHL”), we have 29 additional offices in the Southeast for our mortgage banking business. The majority of the revenue (excluding CCHL), approximately 85%, is derived from our Florida market areas while approximately 14% and 1% of the revenue is derived from our Georgia and other market areas, respectively.
At December 31, 2022, CCB’s ratio of construction, land development and other land loans to total risk-based capital was 71%, its ratio of total commercial real estate loans to total risk-based capital was 239% and, therefore, CCB was under the 100% and 300% thresholds, respectively, set forth in clauses (iii) and (iv) above.
At December 31, 2023, CCB’s ratio of construction, land development and other land loans to total risk-based capital was 77%, its ratio of total commercial real estate loans to total risk-based capital was 235% and, therefore, CCB was under the 100% and 300% thresholds, respectively, set forth in clauses (iii) and (iv) above.
Revenues from these principal services for the year ended 2022 totaled approximately 91.8% and 8.2% of our total revenue, respectively. In 2022 and 2021, Banking Services (CCB) revenue was approximately 93.2% and 94.7% of our total revenue for each respective year. 5 Capital City Bank CCB is a Florida-chartered full-service bank engaged in the commercial and retail banking business.
Revenues from these principal services for the year ended 2023 totaled approximately 93.5% and 6.5% of our total revenue, respectively. In 2022 and 2021, Banking Services (CCB) revenue was approximately 90.3% and 93.2% of our total revenue for each respective year. 7 Capital City Bank CCB is a Florida-chartered full-service bank engaged in the commercial and retail banking business.
Additionally, a staff of well-trained professionals serves individuals requiring the services of a trustee, personal representative, or a guardian. The market value of trust assets under discretionary management exceeded $1.082 billion at December 31, 2022, with total assets under administration exceeding $1.097 billion.
Additionally, a staff of well-trained professionals serves individuals requiring the services of a trustee, personal representative, or a guardian. The market value of trust assets under discretionary management exceeded $1.121 billion at December 31, 2023, with total assets under administration exceeding $1.136 billion.
We encourage our associates to volunteer their hours with service organizations and philanthropic groups in the communities we serve. We recorded 9,508, 8,697, and 8,169 community service hours in 2022, 2021, and 2020, respectively.
We encourage our associates to volunteer their hours with service organizations and philanthropic groups in the communities we serve. We recorded 10,526 community service hours in 2023, and 9,508, and 8,697 hours in 2022 and 2021, respectively.
Market Share as of June 30, (1) County 2022 2021 2020 Florida Alachua 4.9% 4.6% 4.5% Bay 0.3% 0.2% 0.0% Bradford 34.9% 32.4% 30.6% Citrus 4.7% 4.1% 3.6% Clay 2.3% 2.8% 2.0% Dixie 19.8% 18.9% 18.7% Gadsden 82.1% 81.1% 80.8% Gilchrist 41.2% 39.6% 38.7% Gulf 14.8% 14.6% 12.8% Hernando 5.0% 3.9% 3.5% Jefferson 24.8% 24.4% 23.0% Leon 15.4% 11.9% 13.3% Levy 25.4% 26.4% 24.2% Madison 14.0% 14.5% 14.0% Putnam 26.4% 23.2% 20.7% St.
Market Share as of June 30, (1) County 2023 2022 2021 Florida Alachua 5.1% 4.9% 4.6% Bay 0.3% 0.3% 0.2% Bradford 37.1% 34.9% 32.4% Citrus 4.4% 4.7% 4.1% Clay 2.4% 2.3% 2.8% Dixie 17.5% 19.8% 18.9% Gadsden 81.9% 82.1% 81.1% Gilchrist 42.2% 41.2% 39.6% Gulf 12.4% 14.8% 14.6% Hernando 4.9% 5.0% 3.9% Jefferson 28.3% 24.8% 24.4% Leon 16.9% 15.4% 11.9% Levy 26.4% 25.4% 26.4% Madison 13.5% 14.0% 14.5% Putnam 34.4% 26.4% 23.2% St.
The increased assessment is expected to improve the likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35% by the statutory deadline prescribed under the FDIC’s amended restoration plan.
The increased assessment is intended to improve the likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35% by the statutory deadline of September 30, 2028 prescribed under the FDIC’s amended restoration plan.
Our financial condition and results of operations are more fully discussed in our Management’s Discussion and Analysis on page 36 and our consolidated financial statements on page 63.
Our financial condition and results of operations are more fully discussed in our Management’s Discussion and Analysis on page 43 and our consolidated financial statements on page 73.
Most of Florida’s major banking concerns have a presence in Leon County, where our main office is located. Our Leon County deposits totaled $1.489 billion, or 38% of our consolidated deposits at December 31, 2022. 8 The table below depicts our market share percentage within each county, based on commercial bank deposits within the county.
Most of Florida’s major banking concerns have a presence in Leon County, where our main office is located. Our Leon County deposits totaled $1.272 billion, or 34.4% of our consolidated deposits at December 31, 2023. 10 The table below depicts our market share percentage within each county, based on commercial bank deposits within the county.
As a financial holding company, we are required to obtain prior approval from the Federal Reserve before (i) acquiring all or substantially all of the assets of a bank or bank holding company, (ii) acquiring direct or indirect ownership or control of more than 5% of the outstanding voting stock of any bank or bank holding company (unless we own a majority of such bank’s voting shares), or (iii) acquiring, merging or consolidating with any other bank or bank holding company.
Our common stock is registered under Section 12 of the Exchange Act so we are subject to these rules. 14 As a financial holding company, we are required to obtain prior approval from the Federal Reserve before (i) acquiring all or substantially all of the assets of a bank or bank holding company, (ii) acquiring direct or indirect ownership or control of more than 5% of the outstanding voting stock of any bank or bank holding company (unless we own a majority of such bank’s voting shares), or (iii) acquiring, merging or consolidating with any other bank or bank holding company.
In the case of a financial holding company, the Community Reinvestment Act performance record of all banks involved in a merger or acquisition are reviewed in connection with the application to acquire ownership or control of shares or assets of a bank or to merge with another bank or bank holding company.
In the case of a financial holding company, the CRA performance record of all banks involved in a merger or acquisition are reviewed in connection with the application to acquire ownership or control of shares or assets of a bank or to merge with another bank or bank holding company. An unsatisfactory record can substantially delay or block the transaction.
VITA is a nationwide IRS program that offers free tax preparation assistance to people who generally make $54,000 or less, persons with disabilities, the elderly, and limited English-speaking taxpayers who need assistance in preparing their own tax returns.
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.
As part of these efforts, we strive to offer a competitive compensation and benefits program, foster a community 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.
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.
In 2022, we made a commitment for a $7 million investment in SOLCAP 2022-1, LLC, a fund that was formed to make solar tax equity investments in renewable solar energy projects that will provide us with tax credits and other tax benefits. We plan to continue to review these investment opportunities as they arise.
In 2022, we made a commitment for a $7 million investment in SOLCAP 2022-1, LLC and, in 2023, we made a commitment for a $7 million investment in SOLCAP 2023-1, LLC. Each of these funds were formed to make solar tax equity investments in renewable solar energy projects that will provide us with tax credits and other tax benefits.
In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post- acquisition basis, and the companies’ records of addressing the credit needs of the communities they serve, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment Act of 1977. 12 Under Florida law, a person or entity proposing to directly or indirectly acquire control of a Florida bank must also obtain permission from the Florida Office of Financial Regulation.
In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post- acquisition basis, and the companies’ records of addressing the credit needs of the communities they serve, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the CRA.
Dollars in millions Year Ended December 31, Assets Deposits Shareowners’ Equity Revenue (1) Net Income 2022 $4,526.0 $3,939.3 $394.0 $226.0 $40.1 2021 $4,263.8 $3,712.9 $383.2 $213.9 $33.4 2020 $3,798.1 $3,217.6 $320.8 $217.4 $31.6 (1) Revenue represents interest income plus noninterest income Dividends and management fees received from the Bank are CCBG’s primary source of income.
Dollars in millions Year Ended December 31, Assets Deposits Shareowners’ Equity Revenue (1) Net Income 2023 $4,304.5 $3,701.8 $440.6 $252.7 $52.3 2022 $4,519.2 $3,939.3 $387.3 $207.1 $33.4 2021 $4,263.8 $3,712.9 $383.2 $213.9 $33.4 (1) Revenue represents interest income plus noninterest income Dividends and management fees received from the Bank are CCBG’s primary source of income.
Many AMLA provisions will 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.
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.
These laws and regulations mandate certain disclosures and regulate the manner in which financial institutions must deal with clients when taking deposits or making loans to clients. CCB must comply with these consumer protection laws and regulations as part of its ongoing client relations.
These laws and regulations mandate certain disclosures and regulate the manner in which financial institutions must deal with clients when taking deposits or making loans to clients.
Working with CCHL, 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.
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. During 2020 to 2023, we partnered with Habitat for Humanity and Warrick Dunn Charities to build and furnish four homes.
In these markets, 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, finance companies and other types of financial institutions.
Competition There is significant competition among commercial banks 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, finance companies and other types of financial institutions.
These laws may also require us to notify law enforcement, regulators or consumer reporting agencies in the event of a data breach, as well as businesses and governmental agencies that own data. 18 Overdraft Fee Regulation The Electronic Fund Transfer Act prohibits financial institutions from charging consumers fees for paying overdrafts on automated teller machines, or ATM, and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those type of transactions.
Overdraft Fee Regulation The Electronic Fund Transfer Act prohibits financial institutions from charging consumers fees for paying overdrafts on automated teller machines, or ATM, and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those type of transactions.
There is also increased scrutiny of compliance with the sanctions programs and rules administered and enforced by the Office of Foreign Assets Control of the U.S.
The priorities include corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and proliferation financing. There is also increased scrutiny of compliance with the sanctions programs and rules administered and enforced by the Office of Foreign Assets Control of the U.S.
At January 31, 2023, we had approximately 796 associates, which included approximately 763 full-time associates and approximately 33 part-time associates. None of our associates are represented by a labor union or covered by a collective bargaining agreement. At January 31, 2023, approximately 72% of our current workforce was female while 28% was male, and approximately 21% are ethnic minorities.
At February 8, 2024, we had approximately 811 associates, which included approximately 784 full-time associates and approximately 27 part-time associates. At February 8, 2024, approximately 70% of our workforce was female, 30% 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.
In addition, the Consumer Financial Protection Bureau issues regulations and standards under these federal consumer protection laws that affect our consumer businesses.
CCB must comply with these consumer protection laws and regulations as part of its ongoing client relations. 21 In addition, the Consumer Financial Protection Bureau (“CFPB”) issues regulations and standards under these federal consumer protection laws that affect our consumer businesses.
We have also invested in tools and capabilities that allow our team members to work remotely as appropriate. We work hard to ensure that our lending activities do not encourage business activities that could cause irreparable damage to our reputation or the environment.
We work to ensure lending activities do not encourage business activities that could cause irreparable damage to our reputation or the environment.
We continue to evaluate the impact of any changes to the regulations relating to the Community Reinvestment Act and their impact to our financial condition, results of operations, and liquidity, which cannot be predicted at this time.
We are planning for compliance with the final rules and continue to evaluate the impact of the final rules to our financial condition, results of operations, and liquidity, which cannot be predicted at this time.
The rules also created a Common Equity Tier 1 Capital conservation buffer of 2.5% of risk-weighted assets. This buffer is added to each of the three risk-based capital ratios to determine whether an institution has established the buffer.
This buffer is added to each of the three risk-based capital ratios to determine whether an institution has established the buffer. The rules provide for a minimum ratio of Tier 1 Capital to Risk-Weighted Assets of 6% and include a minimum leverage ratio of 4% for all banking organizations.
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 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.
In this respect, the final rules implemented strict eligibility criteria for regulatory capital instruments and improved the methodology for calculating risk-weighted assets to enhance risk sensitivity. Consistent with the international Basel III framework, the rules included a new minimum ratio of Common Equity Tier 1 Capital to Risk-Weighted Assets of 4.5%.
Consistent with the international Basel III framework, the rules include a minimum ratio of Common Equity Tier 1 Capital to Risk-Weighted Assets of 4.5%. The rules provide for a Common Equity Tier 1 Capital conservation buffer of 2.5% of risk-weighted assets.
The majority of our consumer loans are short-term and have fixed rates of interest that are priced based on current market interest rates and the financial strength of the borrower. Our policy establishes maximum debt-to-income ratios, minimum credit scores, and includes guidelines for verification of applicants’ income and receipt of credit reports.
The majority of the consumer loan portfolio consists of indirect and direct automobile loans. The majority of our consumer loans are short-term and have fixed rates of interest that are priced based on current market interest rates and the financial strength of the borrower.
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. 13 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 Office of Financial Regulation.
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 Office of Financial Regulation.
We require appraisals for loans in excess of $250,000 that are secured by real property. 7 Consumer Loans Our consumer loan portfolio includes personal installment loans, direct and indirect automobile financing, and overdraft lines of credit. The majority of the consumer loan portfolio consists of indirect and direct automobile loans.
For loans secured by real property that fall beneath the applicable thresholds above, we will generally use a third-party evaluation to assess the value of the real property used as security. Consumer Loans Our consumer loan portfolio includes personal installment loans, direct and indirect automobile financing, and overdraft lines of credit.
In addition to cash and equity compensation, we also offer associates benefits such as life and health (medical, dental & vision) insurance, paid time off, paid parental leave, a 401(k) plan, and a pension plan. Diversity and Inclusion .
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.
However, we believe that the larger financial institutions acquiring banks in our market areas 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.
We also believe clients who bank at community banks tend to prefer the relationship style service of community banks compared to larger banks.
We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns associate and shareowner interests, including by incentivizing business and individual performance (pay for performance), motivating based on long-term company performance and integrating compensation with our business plans.
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.
Short-term commercial letters of credit are converted at 20% and certain short-term unconditionally cancelable commitments have a 0% factor. 16 Under the final rules, minimum requirements increased for both the quality and quantity of capital held by banking organizations.
Short-term commercial letters of credit are converted at 20% and certain short-term unconditionally cancelable commitments have a 0% factor. 18 The rules implement strict eligibility criteria for regulatory capital instruments and improve the methodology for calculating risk- weighted assets to enhance risk sensitivity.
Furthermore, the CCBG Foundation donated $0.3 million, $0.2 million, and $0.3 million to various non-profit organizations in the communities we serve, during 2022, 2021, and 2020, respectively. Our community commitment to further financial literacy in our market remains an ongoing goal and focus for our associates and directors.
Furthermore, the CCBG Foundation donated $0.3 million in 2023 to various non-profit organizations in the communities we serve and $0.3 million and $0.2 million in 2022, and 2021, respectively. Since 2015, we have annually supported the United Way of the Big Bend in analyzing financial information for its annual grant review process.
An unsatisfactory record can substantially delay or block the transaction. We received a satisfactory rating on our most recent Community Reinvestment Act assessment.
We received a satisfactory rating on our most recent CRA assessment.
In addition, in response to emerging workplace practices, we made changes to our Flex – work/life balance program to assist our associates in maintaining a work/life balance consistent with their goals and to attract, retain, and motivate key associates. Health and Safety . The success of our business is fundamentally connected to the well-being of our people.
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. 12 We continue to follow local and federal guidance, including guidance prescribed by the Centers for Disease Control and Prevention (“CDC”), regarding COVID-19 precautions and health measures.
We continue to focus on ways to better our communities in which we operate through monetary resources and volunteer hours. 10 Access, affordability, and financial inclusion. In 2022, the CCBG Foundation made grants totaling $150,000 to Community Reinvestment Act eligible organizations in our market area.
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 2023, the CCBG Foundation made grants totaling $143,000 to Community Reinvestment Act of 1977 (“CRA”) eligible organizations in our market area.
Additionally, Georgia Trend recognized CCB in 2016 and 2017 as a Best Place to Work. Tenure statistics support these accolades and further demonstrate that associates enjoy working for CCB. Compensation and Benefits Program .
The average tenure of our associates is approximately 9.6 years, and the average tenure of our management team is 28 years. Tenure statistics support these accolades and further demonstrate that associates enjoy working for CCB. Compensation and Benefits Program .
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Expansion of Business See MD&A (Business Overview) for disclosures regarding the expansion of our Business. Competition We operate in a highly competitive environment, especially with respect to services and pricing, that has undergone significant changes. Since January 1, 2009, over 500 financial institutions have failed in the U.S., including many in Florida and Georgia.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditionally, our reputation may be harmed by failing to deliver products, subpar standards of service and quality expected by our customers, clients and the community, compliance failures, the inability to manage technology change or maintain effective data management, cyber incidents, internal and external fraud, inadequacy of responsiveness to internal controls, unintended disclosure of personal, proprietary or confidential information, conflicts of interest and breach of fiduciary obligations, the handling of health emergencies or pandemics, and the activities of our clients, customers, counterparties and third parties, including vendors.
Biggest changeNegative public opinion could result from our actual or alleged conduct and can arise from various sources, including (a) officer, director or associate fraud, misconduct, and unethical behavior; (b) security breaches; (c) litigation or regulatory outcomes; (d) compensation practices; (e) lending practices; (f) branching strategy; (g) the suitability or reasonableness of recommending particular trading or investment strategies, including the reliability of our research and models; (h) prohibiting clients from engaging in certain transactions; (h) associate sales practices; (i) failure to deliver products and services; (j) subpar standards of service and quality expected by our customers, clients, and the community; (k) compliance failures; (l) mergers and acquisitions; (m) the inability to manage technology change or maintain effective data management; (n) cyber incidents; (o) internal and external fraud (including check fraud and debit card and credit card fraud); (p) inadequacy of responsiveness to internal controls; (q) unintended disclosure of personal, proprietary or confidential information; (r) failure (or perceived failure) to identify and manage actual and potential conflicts of interest; (s) breach of fiduciary obligations; (t) the handling of health emergencies or pandemics, (u) the activities of our clients, customers, counterparties, and third parties, including vendors; (v) our environmental, social, and governance practices and disclosures, including practices and disclosures related to climate change; (w) our response (or lack of response) to social and sustainability concerns; and (x) actions by the financial services industry generally or by certain members or individuals in the industry.
Factors that can impact operations and expose us to risks varying in 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 employees 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.
Factors that can impact operations and expose us to risks varying in 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.
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. We may incur significant costs associated with the ownership of real property as a result of foreclosures, which could reduce our net income.
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. 26 We may incur significant costs associated with the ownership of real property as a result of foreclosures, which could reduce our net income.
Florida financial institutions, such as CCB, face a higher risk of noncompliance and enforcement actions with the Bank Secrecy Act and other anti-money laundering statutes and regulations. Since September 11, 2001, banking regulators have intensified their focus on anti-money laundering and Bank Secrecy Act compliance requirements, particularly the anti-money laundering provisions of the USA PATRIOT Act.
Florida financial institutions, such as CCB, face a higher risk of noncompliance and enforcement actions with the Bank Secrecy Act and other anti-money laundering statutes and regulations. Since September 11, 2001, banking regulators have intensified their focus on anti-money laundering and BSA compliance requirements, particularly the anti-money laundering provisions of the USA PATRIOT Act.
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 Capital conservation buffer requirement.
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.
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. 30 Reputational Risks Damage to our reputation could harm our businesses, including our competitive position and business prospects.
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. 36 Reputational Risks Damage to our reputation could harm our businesses, including our competitive position and business prospects.
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, 2022, a significant number of our loans secured by real estate are secured by commercial and residential properties located in Florida and Georgia.
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, 2023, a significant number of our loans secured by real estate are secured by commercial and residential properties located in Florida and Georgia.
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 2022 were checking accounts and other liquid deposits, which are generally payable on demand or upon short notice.
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 2023 were checking accounts and other liquid deposits, which are generally payable on demand or upon short notice.
In addition, an important aspect of managing our operational risk is creating a risk culture in which all employees 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.
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.
Pandemics (such as the COVID-19 pandemic), natural disasters, global climate change, 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.
Pandemics (such as the COVID-19 pandemic), severe weather, natural disasters, global climate change, 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 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. 21 Inflationary pressures and rising prices may affect our results of operations and financial condition.
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. 23 Inflationary pressures and rising prices may affect our results of operations and financial condition.
A deterioration in economic conditions in the United States and our markets could result in an increas e 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.
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.
There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control, or OFAC. Since 2004, federal banking regulators and examiners have been extremely aggressive in their supervision and examination of financial institutions located in the State of Florida with respect to the institution’s Bank Secrecy Act/anti-money laundering compliance.
There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control, or OFAC. Since 2004, federal banking regulators and examiners have been extremely aggressive in their supervision and examination of financial institutions located in the State of Florida with respect to the institution’s BSA/anti-money laundering compliance.
Revenues derived from transaction fees associated with overdraft protection programs offered to consumers represent a significant portion of our noninterest income. In 2022, the Company collected approximately $10.6 million in net consumer overdraft transaction fees. In 2022, certain members of Congress and the leadership of the CFPB have expressed a heightened interest in bank consumer overdraft protection programs.
Revenues derived from transaction fees associated with overdraft protection programs offered to consumers represent a significant portion of our noninterest income. In 2023, the Company collected approximately $9.6 million in net consumer overdraft transaction fees. 30 In 2022, certain members of Congress and the leadership of the CFPB have expressed a heightened interest in bank consumer overdraft protection programs.
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. At December 31, 2022, commercial loans comprised approximately 9.8% of our total loan portfolio. ● Construction Loans .
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. At December 31, 2023, commercial loans comprised approximately 8.2% of our total loan portfolio. ● Construction Loans .
The Gramm-Leach-Bliley 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.
The GLBA, 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.
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. At December 31, 2022, commercial mortgage loans comprised approximately 31.0% of our total loan portfolio. ● Commercial Loans . Repayment is generally dependent upon the successful operation of the borrower’s business.
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. At December 31, 2023, 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.
These loans are susceptible to adverse conditions in the real estate market and local economy. At December 31, 2022, vacant land loans comprised approximately 3.28% of our total loan portfolio. ● HELOCs .
These loans are susceptible to adverse conditions in the real estate market and local economy. At December 31, 2023, vacant land loans comprised approximately 3.5% of our total loan portfolio. ● HELOCs .
At December 31, 2022, HELOCs comprised approximately 8.2% of our total loan portfolio. 23 ● 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, 2023, HELOCs comprised approximately 7.7% 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.
In response to this increased congressional and regulatory scrutiny, and in anticipation of enhanced supervision and enforcement of overdraft protection practices in the future, certain banking organizations have begun to modify their overdraft protection programs, including by discontinuing the imposition of overdraft transaction fees.
In response to this increased congressional and regulatory scrutiny, and in anticipation of enhanced supervision and enforcement of overdraft protection practices in the future, certain banking organizations have begun to modify their overdraft protection programs, including by discontinuing the imposition of overdraft transaction fees and amending their payment priority policies and procedures.
Many issuers of debit and credit cards 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 against us or our clients and our third-party service providers is a serious issue.
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.
The increase in the federal funds rate could have an adverse effect on our net interest income and profitability. If market interest rates continue to rise rapidly, interest rate adjustment caps may also limit increases in the interest rates on adjustable rate loans, which could further reduce our net interest income.
The increase in the federal funds rate could have an adverse effect on our net interest income and profitability. If market interest rates start rising again, interest rate adjustment caps may also limit increases in the interest rates on adjustable-rate loans, which could further reduce our net interest income.
A portion of our investment securities portfolio (38.5%) at December 31, 2022 has been designated as available-for-sale pursuant to U.S. generally accepted accounting principles relating to accounting for investments.
A portion of our investment securities portfolio (35.1%) at December 31, 2023 has been designated as available-for-sale pursuant to U.S. generally accepted accounting principles relating to accounting for investments.
Our directors, executive officers, and principal shareowners beneficially owned approximately 23.3% of the outstanding shares of our common stock at December 31, 2022. William G. Smith, Jr., our Chairman, President and Chief Executive Officer beneficially owned 17.1% of our shares as of that date.
Our directors, executive officers, and principal shareowners beneficially owned approximately 19.2% of the outstanding shares of our common stock at December 31, 2023. William G. Smith, Jr., our Chairman, President and Chief Executive Officer beneficially owned 17.2% of our shares as of that date.
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.
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.
At December 31, 2022, approximately 33% and 44% of our $2.525 billion loan portfolio was secured by commercial real estate and residential real estate, respectively. As of this same date, approximately 9% was secured by property under construction.
At December 31, 2023, approximately 30.2% and 44.4% of our $2.7 billion loan portfolio was secured by commercial real estate and residential real estate, respectively. As of this same date, approximately 7.2% was secured by property under construction.
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 Office of Financial Regulation and Federal Reserve, declare a dividend from retained net income which accrued prior to the preceding two years.
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. 28 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 Office of Financial Regulation and Federal Reserve, declare a dividend from retained net income which accrued prior to the preceding two years.
At December 31, 2022, consumer loans comprised approximately 12.9% of our total loan portfolio, with indirect auto loans making up a majority of this portfolio at approximately 93.3% of the total balance.
At December 31, 2023, consumer loans comprised approximately 9.9% of our total loan portfolio, with indirect auto loans making up a majority of this portfolio at approximately 91.2% of the total balance.
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. 24 At December 31, 2022, our allowance for credit losses for loans held for investment was $24.7 million, which represented approximately 0.982% of our total loans held for investment.
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.
If CCB’s policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that it has already acquired or may acquire in the future are deficient, CCB would be subject to liability, including fines and regulatory actions such as restrictions on its ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of its business plan, including its acquisition plans. 27 Fee revenues from overdraft protection programs constitute a significant portion of our noninterest income and may be subject to increased supervisory scrutiny.
If CCB’s policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that it has already acquired or may acquire in the future are deficient, CCB would be subject to liability, including fines and regulatory actions such as restrictions on its ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of its business plan, including its acquisition plans.
Claims and legal actions, including 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.
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.
Additionally, if our CET1 to RWA 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.
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. 29 Capital and liquidity requirements are frequently introduced and amended.
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.
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.
At December 31, 2022, construction loans comprised approximately 9.3% of our total loan portfolio. ● Vacant Land Loans .
At December 31, 2023, construction loans comprised approximately 7.2% of our total loan portfolio. ● Vacant Land Loans .
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.
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.
During 2022, the Federal Reserve raised the federal funds rate seven times for a cumulative increase of 4.25% and has signaled that it expects not to reduce the federal funds rate in the near-term. Prior to 2022, the Federal Reserve had not raised the federal funds rate since December 2018.
During 2022 and 2023, the Federal Reserve raised the federal funds rate 11 times for a cumulative increase of 5.25% and there is no guarantee that it will reduce the federal funds rate in the near-term. Prior to 2022, the Federal Reserve had not raised the federal funds rate since December 2018.
Financial institutions and companies engaged in data processing have increasingly reported breaches 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. 31 We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses or to alleviate problems caused by security breaches or viruses.
Financial institutions and companies engaged in data processing have increasingly reported breaches 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 ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry. If we are unable to maintain adequate liquidity, it could materially and adversely affect our business, results of operations or financial condition.
Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry.
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. Shares of our common stock are not an insured deposit and may lose value.
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. Our profitability depends significantly on economic conditions in the States of Florida and Georgia.
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. 25 Liquidity Risks Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
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.
Many of these regulations are intended primarily for the protection of our depositors and the Deposit Insurance Fund and not for the benefit of our shareowners.
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.
Many of our competitors also have higher lending limits, more expansive branch networks, and offer a wider array of financial products and services.
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.
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. Securities analysts may not initiate coverage or continue to cover our common stock, and this may have a negative impact on its market price.
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.
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.
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.
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 loan losses and our results of operations.
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).
We collect and store sensitive data, including our proprietary business information and that of our clients, and personally identifiable information of our clients and employees, in our information technology systems . We also provide our clients the ability to bank online. The secure processing, maintenance, and transmission of this information is critical to our operations.
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 personally identifiable information of our clients and associates. The secure processing, maintenance, and transmission of this information is critical to our operations.
Any such losses could have a material adverse effect on our business, financial condition, and results of operations. Pandemics, natural disasters, global climate change, acts of terrorism and global conflicts may have a negative impact on our business and operations.
Pandemics, severe weather, natural disasters, global climate change, acts of terrorism and global conflicts may have a negative impact on our business and operations.
At December 31, 2022, approximately 77% 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.
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.
Nonetheless, if we fail to provide the appropriate environment that sensitizes all of our employees to managing risk, our business could be impacted adversely. 28 We are subject to certain operational risks, including, but not limited to, customer, employee or third-party fraud and data processing system failures and errors.
Nonetheless, if we fail to provide the appropriate environment that sensitizes all of our associates to managing risk, our business could be impacted adversely. 31 We are subject to certain operational risks, including, but not limited to risk arising from failure or circumvention of our controls and procedures.
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.
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.
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.
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. Fee revenues from overdraft protection programs constitute a significant portion of our noninterest income and may be subject to increased supervisory scrutiny.
Cybersecurity issues, such as security breaches and computer viruses, affecting our information technology systems or fraud related to our debit card products could disrupt our business, result in the unintended disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.
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.
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.
Insurance coverage may not be available for losses relating to such event, or where available, such losses may exceed insurance limits. 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.
We had $2.3 million in nonaccruing loans at December 31, 2022. The allowance is based on management’s reasonable estimate and may not prove sufficient to cover future loan losses.
At December 31, 2023, our allowance for credit losses for loans held for investment was $29.9 million, which represented approximately 1.10% of our total loans held for investment. We had $6.2 million in nonaccruing loans at December 31, 2023. The allowance is based on management’s reasonable estimate and may not prove sufficient to cover future loan 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.
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. 25 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.
If one or more of these analysts ceases to cover our Company or fails to publish regular reports on us, we could lose visibility in the financial markets, which may cause our stock price or trading volume to decline. We may be adversely impacted by the transition from LIBOR as a reference rate.
If one or more of these analysts ceases to cover our Company or fails to publish regular reports on us, we could lose visibility in the financial markets, which may cause our stock price or trading volume to decline. 24 Credit Risks Our loan portfolio includes loans with a higher risk of loss which could lead to higher loan losses and nonperforming assets.
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, 2022 was approximately 27,987 shares.
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.
Inflation rose sharply at the end of 2021 and continued rising in 2022 at levels not seen for over 40 years. Inflationary pressures are currently expected to remain elevated throughout 2023.
Inflation rose sharply at the end of 2021 and continued rising in 2022 at levels not seen for over 40 years. Inflationary pressures eased but remained elevated throughout 2023. 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.
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.
We originate commercial real estate loans, commercial loans, construction loans, vacant land loans, consumer loans, and residential mortgage loans primarily within our market area.
In addition to the regulations of the bank regulatory agencies, as a member of the Federal Home Loan Bank of Atlanta (“FHLB”), we must also comply with applicable regulations of the Federal Housing Finance Agency and the Federal Home Loan Bank. 26 Our failure to comply with these laws and regulations could subject us to 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.
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.
Further, any new laws, rules and regulations could make compliance more difficult or expensive or otherwise adversely affect our business and financial condition. Please refer to the Section entitled “Business – Regulatory Considerations” on page 10.
Further, any new laws, rules, regulations, policies, and supervisory guidance or changes in existing laws, rules, regulations, policies, and supervisory guidance (including changes in interpretation and implementation) could make compliance more difficult or expensive or otherwise adversely affect our business and financial condition.
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.
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.
In addition, adverse publicity or negative information posted on social media by employees, the media or otherwise, whether or not factually correct, may adversely impact our business prospects or financial results. We are subject to complex and evolving laws and regulations regarding privacy, know-your-customer requirements, data protection, cross-border data movement and other matters.
In addition, adverse publicity or negative information posted on social media by associates, the media or otherwise, whether or not factually correct, may adversely impact our reputation. Harm to our reputation may adversely and materially affect our competitive position, business prospects, and financial results.
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.
Strategic Risks Our future success is dependent on our ability to compete effectively in the highly competitive banking 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.
In addition, these or similar events may impact economic growth negatively, which 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.
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. 34 Litigation may adversely affect our results. We are subject to litigation in the ordinary course of business.
Additionally, fraud losses related to debit and credit cards have risen in recent years due in large part to growing and evolving schemes to illegally use cards or steal consumer credit card information despite risk management practices employed by the debit and credit card industries.
Additionally, fraud losses have risen in recent years due in large part to growing and evolving schemes.
Debit and credit card fraud is pervasive, and the risks of cybercrime are complex and continue to evolve.
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.
We may be unable to pay dividends in the future. In 2022, our Board of Directors declared four quarterly cash dividends.
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 2023, our Board of Directors declared four quarterly cash dividends.
Removed
Small to medium -sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
Added
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.
Removed
The United Kingdom’s Financial Conduct Authority and the administrator of LIBOR have announced that the publication of the most commonly used U.S. dollar London Interbank Offered Rate (“LIBOR”) settings will cease to be published or cease to be representative after June 30, 2023. The publication of all other LIBOR settings ceased to be published as of December 31, 2021.
Added
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.
Removed
Given consumer protection, litigation, and reputation risks, the bank regulatory agencies have indicated that entering into new contracts that use LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks and that they will examine bank practices accordingly.
Added
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.
Removed
Therefore, the agencies encouraged banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. Prior to December 31, 2021, we discontinued originating LIBOR-based loans. 22 At December 31, 2022, we have 112 loans totaling approximately $71 million that are indexed to LIBOR.
Added
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.
Removed
We believe our current portfolio of LIBOR based loan contracts contain the necessary fallback language, however, the timing and manner in which each customer’s contract transitions to a replacement index will vary on a case-by-case basis. We also have $33 million in floating rate investment securities that are indexed to LIBOR.
Added
The average daily trading volume of our common stock over the 12-month period ending December 31, 2023 was approximately 33,775 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.
Removed
We are currently evaluating fallback language for each investment security. Lastly, we have two floating rate subordinated debenture notes totaling $53 million and a related interest rate swap contract for $30 million that are indexed to LIBOR (Refer to Note 12 – Long Term Borrowings and Note 5 – Derivatives in our Consolidated Financial Statements).
Added
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, 2023, approximately 81.8% of our loans included real estate as a primary, secondary, or tertiary component of collateral.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOf these locations, we lease the land, buildings, or both at seven locations and own the land and buildings at the remaining 51. CCHL had 33 loan production offices, all of which were leased. Capital City Strategic Wealth, LLC. maintained five offices, all of which were leased.
Biggest changeOf these locations, we lease the land, buildings, or both at 13 locations and own the land and buildings at the remaining 50. CCHL had 30 loan production offices, 29 of which were leased. Capital City Strategic Wealth, LLC. maintained five offices, all of which were leased.
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, 2022, Capital City Bank had 58 banking offices.
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, 2023, Capital City Bank had 63 banking offices.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosure Not applicable. 32 PART II
Biggest changeMine Safety Disclosure Not applicable. 38 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosure 31 PART II Item 5. Market for the Registrant’s Common Equity, Related Shareowner Matters, and Issuer Purchases of Equity Securities 32 Item 6. Selected Financial Data 34 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 58
Biggest changeItem 4. Mine Safety Disclosure 36 PART II Item 5. Market for the Registrant’s Common Equity, Related Shareowner Matters, and Issuer Purchases of Equity Securities 38 Item 6. Selected Financial Data 41 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 43 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 68 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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. 2022 2021 Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter Common stock price: High $ 36.23 $ 33.93 $ 28.55 $ 28.88 $ 29.00 $ 26.10 $ 27.39 $ 28.98 Low 31.14 27.41 24.43 25.96 24.77 22.02 24.55 21.42 Close 32.50 31.11 27.89 26.36 26.40 24.74 25.79 26.02 Cash dividends per share 0.17 0.17 0.16 0.16 0.16 0.16 0.15 0.15 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.
Biggest changeThe 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. 2023 2022 Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter Common stock price: High $ 32.56 $ 33.44 $ 34.16 $ 36.86 $ 36.23 $ 33.93 $ 28.55 $ 28.88 Low 26.12 28.64 28.03 28.18 31.14 27.41 24.43 25.96 Close 29.43 29.83 30.64 29.31 32.50 31.11 27.89 26.36 Cash dividends per share 0.20 0.20 0.18 0.18 0.17 0.17 0.16 0.16 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.
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 1,124 shareowners of record at January 31, 2023.
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 1,080 shareowners of record at January 31, 2024.
“Liquidity and Capital Resources – Dividends” – in Management’s Discussion and Analysis of Financial Condition and Operating Results on page 56 and Note 17 in the Notes to Consolidated Financial Statements.
“Liquidity and Capital Resources – Dividends” – in Management’s Discussion and Analysis of Financial Condition and Operating Results on page 56 and Note 17 in the Notes to Consolidated Financial Statements. 39 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.
The graph assumes that $100 was invested on December 31, 2017 in our common stock and each of the above indices, and that all dividends were reinvested.
Small Cap Banks Index for the past five years. The graph assumes that $100 was invested on December 31, 2018 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.
Removed
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.
Added
Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Capital City Bank Group, Inc. $ 100.00 $ 133.95 $ 110.72 $ 121.82 $ 153.27 $ 142.32 Nasdaq Composite 100.00 136.69 198.10 242.03 163.28 236.17 SNL $1B-$5B Bank Index 100.00 125.46 113.94 158.62 139.85 140.55 40 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table contains information about all purchases made during the fourth quarter of 2023 by, or on behalf of, us and any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) of shares or other units of any class of our equity securities that is registered pursuant to Section 12 of the Exchange Act.
Removed
The shareowner return shown below represents past performance and should not be considered indicative of future performance. 33 Period Ending Index 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Capital City Bank Group, Inc. $ 100.00 $ 102.49 $ 137.30 $ 113.48 $ 124.86 $ 157.09 Nasdaq Composite 100.00 97.16 132.81 192.47 235.15 158.65 SNL $1B-$5B Bank Index 100.00 83.44 104.69 95.08 132.36 116.69 34
Added
Total number of Maximum Number of Total number Average shares purchased as shares that may yet be of shares price paid part of our share purchased under our share Period purchased per share repurchase program (1) repurchase program October 1, 2023 to October 31, 2023 4,000 $28.05 4,000 466,901 November 1, 2023 to November 30, 2023 16,391 $29.07 16,391 450,510 December 1, 2023 to December 31, 2023 - - - 450,510 Total 20,391 $30.24 20,391 450,510 (1) This balance represents the number of shares that were repurchased during the fourth quarter of 2023 through the Capital City Bank Group, Inc.
Added
Share Repurchase Program (the “Program”), which was approved on January 31, 2019 for a five year period, under which we were authorized to repurchase up to 750,000 shares of our common stock. The Program is flexible and shares are acquired from the public markets and other sources using free cash flow. No shares are repurchased outside of the Program. 41

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeSelected Financial Data (Dollars in Thousands, Except Per Share Data) 2022 2021 2020 Interest Income $ 131,348 $ 106,351 $ 106,197 Net Interest Income 124,460 102,861 101,326 Provision for Credit Losses 7,162 (1,553) 9,645 Noninterest Income 94,627 107,545 111,165 Noninterest Expense (1) 161,828 162,508 149,962 Pre-Tax Loss (Income) Attributable to Noncontrolling Interests (2) 135 (6,220) (11,078) Net Income Attributable to Common Shareowners 40,147 33,396 31,576 Per Common Share: Basic Net Income $ 2.37 $ 1.98 $ 1.88 Diluted Net Income 2.36 1.98 1.88 Cash Dividends Declared 0.66 0.62 0.57 Diluted Book Value 23.12 22.63 19.05 Diluted Tangible Book Value (3) 17.66 17.12 13.76 Performance Ratios: Return on Average Assets 0.93 % 0.84 % 0.93 % Return on Average Equity 10.58 9.92 9.36 Net Interest Margin (FTE) 3.13 2.83 3.30 Noninterest Income as % of Operating Revenues 43.19 51.11 52.32 Efficiency Ratio 73.76 77.11 70.43 Asset Quality: Allowance for Credit Losses ("ACL") $ 24,736 $ 21,606 $ 23,816 ACL to Loans Held for Investment ("HFI") 0.98 % 1.12 % 1.19 % Nonperforming Assets ("NPAs") 2,728 4,339 6,679 NPAs to Total Assets 0.06 0.10 0.18 NPAs to Loans HFI plus OREO 0.11 0.22 0.33 ACL to Non-Performing Loans 1,076.89 499.93 405.66 Net Charge-Offs to Average Loans HFI 0.18 (0.03) 0.12 Capital Ratios: Tier 1 Capital 14.53 % 16.14 % 16.19 % Total Capital 15.52 17.15 17.30 Common Equity Tier 1 Capital 12.64 13.86 13.71 Tangible Common Equity (3) 6.79 6.95 6.25 Leverage 9.06 8.95 9.33 Equity to Assets 8.71 8.99 8.45 Dividend Pay-Out 27.97 31.31 30.32 Averages for the Year: Loans Held for Investment $ 2,189,440 $ 2,000,563 $ 1,957,576 Earning Assets 3,989,248 3,652,486 3,083,675 Total Assets 4,332,302 3,984,064 3,391,071 Deposits 3,763,336 3,406,886 2,844,347 Shareowners’ Equity 379,290 336,821 337,313 Year -End Balances: Loans Held for Investment $ 2,525,180 $ 1,931,465 $ 2,006,426 Earning Assets 4,182,399 3,949,111 3,475,904 Total Assets 4,525,958 4,263,849 3,798,071 Deposits 3,939,317 3,712,862 3,217,560 Shareowners’ Equity 394,016 383,166 320,837 Other Data: Basic Average Shares Outstanding 16,950,810 16,862,932 16,784,711 Diluted Average Shares Outstanding 16,984,740 16,892,947 16,821,950 Shareowners of Record (4) 1,124 1,157 1,201 Banking Locations (4) 59 57 57 Full-Time Equivalent Associates (4)(5) 992 954 954 (1) For 2022 and 2021, includes pension settlement charge of $2.3 million and $3.1 million, respectively.
Biggest changeSelected Financial Data (Dollars in Thousands, Except Per Share Data) 2023 2022 2021 Interest Income $ 181,068 $ 131,910 $ 106,351 Net Interest Income 158,988 125,022 102,861 Provision for Credit Losses 9,714 7,494 (1,553) Noninterest Income 71,610 75,181 107,545 Noninterest Expense (1) 157,023 151,634 162,508 Pre-Tax Loss (Income) Attributable to Noncontrolling Interests (2) 1,437 135 (6,220) Net Income Attributable to Common Shareowners 52,258 33,412 33,396 Per Common Share: Basic Net Income $ 3.08 $ 1.97 $ 1.98 Diluted Net Income 3.07 1.97 1.98 Cash Dividends Declared 0.76 0.66 0.62 Diluted Book Value 25.92 22.73 22.63 Diluted Tangible Book Value (3) 20.45 17.27 17.12 Performance Ratios: Return on Average Assets 1.22 % 0.77 % 0.84 % Return on Average Equity 12.40 8.81 9.92 Net Interest Margin (FTE) 4.05 3.14 2.83 Noninterest Income as % of Operating Revenues 31.05 37.55 51.11 Efficiency Ratio 67.99 75.62 77.11 Asset Quality: Allowance for Credit Losses ("ACL") $ 29,941 $ 25,068 $ 21,606 ACL to Loans Held for Investment ("HFI") 1.10 % 0.98 % 1.12 % Nonperforming Assets ("NPAs") 6,243 2,728 4,339 NPAs to Total Assets 0.15 0.06 0.10 NPAs to Loans HFI plus OREO 0.23 0.11 0.22 ACL to Non-Performing Loans 479.70 1091.33 499.93 Net Charge-Offs to Average Loans HFI 0.18 0.18 -0.03 Capital Ratios: Tier 1 Capital 15.37 % 14.27 % 16.14 % Total Capital 16.57 15.30 17.15 Common Equity Tier 1 Capital 13.52 12.38 13.86 Tangible Common Equity (3) 8.26 6.65 6.95 Leverage 10.30 8.91 8.95 Equity to Assets 10.24 8.57 8.99 Dividend Pay-Out 24.76 33.50 31.31 Averages for the Year: Loans Held for Investment $ 2,656,394 $ 2,189,440 $ 2,000,563 Earning Assets 3,933,800 3,989,248 3,652,486 Total Assets 4,278,686 4,332,302 3,984,064 Deposits 3,669,612 3,763,336 3,406,886 Shareowners’ Equity 421,482 379,290 336,821 Year -End Balances: Loans Held for Investment $ 2,733,918 $ 2,547,685 $ 1,931,465 Earning Assets 3,957,452 4,177,177 3,949,111 Total Assets 4,304,477 4,519,223 4,263,849 Deposits 3,701,822 3,939,317 3,712,862 Shareowners’ Equity 440,625 387,281 383,166 Other Data: Basic Average Shares Outstanding 16,987,167 16,950,810 16,862,932 Diluted Average Shares Outstanding 17,022,922 16,984,740 16,892,947 Shareowners of Record (4) 1,080 1,124 1,157 Banking Locations (4) 63 59 57 Full-Time Equivalent Associates (4)(5) 970 992 954 (1) For 2023, 2022 and 2021, includes pension settlement gain of $0.3 million, charge of $2.3 million and $3.1 million, respectively.
(2) Acquired 51% membership interest in Brand Mortgage Group, LLC, re-named as Capital City Home Loans, LLC, on March 1, 2020 - fully consolidated. (3) 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 35. (4) As of January 31st of the following year.
(2) Acquired 51% membership interest in Brand Mortgage Group, LLC, re-named as Capital City Home Loans, LLC, on March 1, 2020 - fully consolidated. (3) 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 42. (4) As of January 31st of the following year.
(5) Reflects 992 full-time equivalent associates that includes 196 full-time equivalent associates at CCHL. 35 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.
(5) Reflects 970 full-time equivalent associates that includes 178 full-time equivalent associates at CCHL. 42 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.
Non-GAAP Reconciliation - Selected Financial Data (Dollars in Thousands, except per share data) 2022 2021 2020 Shareowners' Equity (GAAP) $ 394,016 $ 383,166 $ 320,837 Less: Goodwill and Other Intangibles (GAAP) 93,093 93,253 89,095 Tangible Shareowners' Equity (non-GAAP) A 300,923 289,913 231,742 Total Assets (GAAP) 4,525,958 4,263,849 3,798,071 Less: Goodwill and Other Intangibles (GAAP) 93,093 93,253 89,095 Tangible Assets (non-GAAP) B $ 4,432,865 $ 4,170,596 $ 3,708,976 Tangible Common Equity Ratio (non-GAAP) A/B 6.79% 6.95% 6.25% Actual Diluted Shares Outstanding (GAAP) C 17,039,401 16,935,389 16,844,997 Tangible Book Value per Diluted Share (non-GAAP) A/C 17.66 17.12 13.76 36
Non-GAAP Reconciliation - Selected Financial Data (Dollars in Thousands, except per share data) 2023 2022 2021 Shareowners' Equity (GAAP) $ 440,625 $ 387,281 $ 383,166 Less: Goodwill and Other Intangibles (GAAP) 92,933 93,093 93,253 Tangible Shareowners' Equity (non-GAAP) A 347,692 294,188 289,913 Total Assets (GAAP) 4,304,477 4,519,223 4,263,849 Less: Goodwill and Other Intangibles (GAAP) 92,933 93,093 93,253 Tangible Assets (non-GAAP) B $ 4,211,544 $ 4,426,130 $ 4,170,596 Tangible Common Equity Ratio (non-GAAP) A/B 8.26% 6.65% 6.95% Actual Diluted Shares Outstanding (GAAP) C 17,000,758 17,039,401 16,935,389 Tangible Book Value per Diluted Share (non-GAAP) A/C 20.45 17.27 17.12 43

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeBelow are Summary Highlights of our 2022 financial performance: ● Strong growth in net interest income of 21% reflected improved earning asset mix and strength of deposit franchise ● Loan growth of $594 million, or 30.7% (end of period) and $189 million, or 9.4% (year-to-date average) ● Average Deposits grew $356 million, or 10.5% ● CCHL contribution decreased $0.24 per share due to slower secondary market loan sales, but was more than offset by strong adjustable rate production for our loan portfolio, and higher wealth and deposit fees ● Noninterest expense included pension settlement charges totaling $2.3 million or $0.11 per share ● Tangible book value per share increased $0.54, or 3.2%, primarily due to strong earnings and a favorable re- measurement adjustment for pension plan, partially offset by higher unrealized investment security losses For more detailed information, refer to the following additional sections of the MD&A “Results of Operations” and “Financial Condition”. 38 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) 2022 2021 2020 Interest Income $ 131,348 $ 106,351 $ 106,197 Taxable Equivalent Adjustments 325 349 430 Total Interest Income (FTE) 131,673 106,700 106,627 Interest Expense 6,888 3,490 4,871 Net Interest Income (FTE) 124,785 103,210 101,756 Provision for Credit Losses 7,162 (1,553) 9,645 Taxable Equivalent Adjustments 325 349 430 Net Interest Income After Provision for Credit Losses 117,298 104,414 91,681 Noninterest Income 94,627 107,545 111,165 Noninterest Expense 161,828 162,508 149,962 Income Before Income Taxes 50,097 49,451 52,884 Income Tax Expense 10,085 9,835 10,230 Pre-Tax Income Attributable to Noncontrolling Interests 135 (6,220) (11,078) Net Income Attributable to Common Shareowners $ 40,147 $ 33,396 $ 31,576 Basic Net Income Per Share $ 2.37 $ 1.98 $ 1.88 Diluted Net Income Per Share $ 2.36 $ 1.98 $ 1.88 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.
Biggest changeBelow are Summary Highlights of our 2023 financial performance: ◾ Tax-equivalent net interest income totaled $159.4 million for 2023 compared to $125.3 million for 2022 driven by strong loan growth and higher interest rates, partially offset by higher deposit cost which was well controlled at 48 basis points for the year – net interest margin was 4.05% for 2023 compared to 3.14% for 2022 ◾ Credit quality metrics remained strong throughout the year – allowance coverage ratio increased from 0.98% to 1.10% - net loan charge-offs were 18 basis points of average loans for both periods ◾ Noninterest income decreased $3.6 million, or 4.8%, driven by lower wealth management fees reflective of lower insurance commissions (large policy sales in 2022) and mortgage banking revenues (lower residential loan originations attributable to the higher interest rate environment) ◾ Noninterest expense increased $5.4 million, or 3.6%, primarily due to higher compensation and occupancy expense reflective of the addition of staffing and banking offices in our new markets 45 ◾ Loan balances grew $467.0 million, or 21.3% (average), and $186.2 million, or 7.3% (end of period) ◾ Deposit balances (including repurchase agreements) declined by $81.9 million, or 2.2% (average), and decreased $217.1 million, or 5.5% (end of period) ◾ Tangible book value per share increased $3.18, or 18.4%, driven by strong earnings and favorable investment security and pension plan accumulated other comprehensive loss adjustments For more detailed information, refer to the following additional sections of the MD&A “Results of Operations” and “Financial Condition”. 46 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) 2023 2022 2021 Interest Income $ 181,068 $ 131,910 $ 106,351 Taxable Equivalent Adjustments 367 325 349 Total Interest Income (FTE) 181,435 132,235 106,700 Interest Expense 22,080 6,888 3,490 Net Interest Income (FTE) 159,355 125,347 103,210 Provision for Credit Losses 9,714 7,494 (1,553) Taxable Equivalent Adjustments 367 325 349 Net Interest Income After Provision for Credit Losses 149,274 117,528 104,414 Noninterest Income 71,610 75,181 107,545 Noninterest Expense 157,023 151,634 162,508 Income Before Income Taxes 63,861 41,075 49,451 Income Tax Expense 13,040 7,798 9,835 Pre-Tax Income Attributable to Noncontrolling Interests 1,437 135 (6,220) Net Income Attributable to Common Shareowners $ 52,258 $ 33,412 $ 33,396 Basic Net Income Per Share $ 3.08 $ 1.97 $ 1.98 Diluted Net Income Per Share $ 3.07 $ 1.97 $ 1.98 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.
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).
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).
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.
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 loss component of shareowners’ equity.
Finally, the methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan clients’ ability to service their debts, or the impact of rate changes on demand for loan and deposit products. The statement of financial condition is subject to testing for interest rate shock possibilities to indicate the inherent interest rate risk.
Finally, the methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan clients’ ability to service their debts, or the impact of rate changes on demand for loan and deposit products. 63 The statement of financial condition is subject to testing for interest rate shock possibilities to indicate the inherent interest rate risk.
We attempt to achieve this goal by balancing, within policy limits, the volume of floating-rate liabilities with a similar volume of floating-rate assets, by keeping the average maturity of fixed-rate asset and liability contracts reasonably matched, by managing the mix of our core deposits, and by adjusting our rates to market conditions on a continuing basis.
We attempt to achieve this goal by balancing, within policy limits, the volume of floating-rate liabilities with a similar volume of floating-rate assets, by keeping the average maturity of fixed-rate asset and liability contracts reasonably matched, by managing the mix of our core deposits, and by adjusting our rates to market conditions on a continuing basis. Analysis.
The net decrease in other expense was primarily due to lower pension plan related costs, including a decrease of $4.9 million for the non-service cost component of our pension plan (reflected in pension – other) attributable to the utilization of a lower discount rate for plan liabilities and a decrease of $0.8 million for pension plan settlement expense.
The decrease in other expense was primarily due to lower pension plan related costs, including a decrease of $4.9 million for the non-service cost component of our pension plan (reflected in pension – other) attributable to the utilization of a lower discount rate for plan liabilities and a decrease of $0.8 million for pension plan settlement expense.
(2) 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. (3) Weighted average yield calculated based on current amortized cost balances – not presented on a tax equivalent basis.
(2) 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. (3) Weighted average yield ("WAY") calculated based on current amortized cost balances – not presented on a tax equivalent basis.
The increase in the interest rate spread and net interest margin in 2022 reflected an improved earning asset mix, higher yields across a majority of our earning assets due to the rapid increase in interest rates, and good control of our deposit cost.
The increase in the interest rate spread and net interest margin in 2023 and 2022 reflected an improved earning asset mix, higher yields across a majority of our earning assets due to the rapid increase in interest rates, and good control of our deposit cost.
Lower mortgage banking revenues at CCHL, for 2022 generally reflected a reduction in refinancing activity and, to a lesser degree, lower purchase mortgage originations primarily driven by higher interest rates.
Lower mortgage banking revenues at CCHL in 2022 generally reflected a reduction in refinancing activity and, to a lesser degree, lower purchase mortgage originations primarily driven by higher interest rates.
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 2022 compares with prior years.
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 2023 compares with prior years.
Table 13 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. 51 Table 13 MATURITY DISTRIBUTION OF INVESTMENT SECURITIES Within 1 year 1 - 5 years 5 - 10 years After 10 years Total (Dollars in Thousands) Amount WAY (3) Amount WAY (3) Amount WAY (3) Amount WAY (3) Amount WAY (3) Available for Sale U.S.
Table 13 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. 61 Table 13 MATURITY DISTRIBUTION OF INVESTMENT SECURITIES Within 1 year 1 - 5 years 5 - 10 years After 10 years Total (Dollars in Thousands) Amount WAY (3) Amount WAY (3) Amount WAY (3) Amount WAY (3) Amount WAY (3) Available for Sale U.S.
We believe that, of our significant accounting policies, the following may involve a higher degree of judgment and complexity. Allowance for Credit Losses .
We believe that, of our significant accounting policies, the following may involve a higher degree of judgment and complexity. 67 Allowance for Credit Losses .
Throughout 2022, strong best efforts origination volume allowed us to book a steady flow of adjustable rate residential loans in our portfolio which contributed to loan growth and earnings. In addition, continued stability in our construction/permanent loan program partially offset the slowdown in secondary market originations.
Throughout 2023 and 2022, best efforts origination volume allowed us to book a steady flow of adjustable-rate residential loans in our portfolio which contributed to loan growth and earnings. In addition, continued stability in our construction/permanent loan program partially offset the slowdown in secondary market originations.
If interest on our loans classified as nonaccrual during 2022 had been recognized on a fully accruing basis, we would have recorded an additional $0.2 million of interest income for the year ended December 31, 2022. Other Real Estate Owned .
If interest on our loans classified as nonaccrual during 2023 had been recognized on a fully accruing basis, we would have recorded an additional $0.2 million of interest income for the year ended December 31, 2023. Other Real Estate Owned .
Through Capital City Home Loans, LLC (“CCHL”), we have 33 additional offices in the Southeast for our mortgage banking business. Please see the section captioned “About Us” beginning on page 4 for more detailed information about our business.
Through Capital City Home Loans, LLC (“CCHL”), we have 29 additional offices in the Southeast for our mortgage banking business. Please see the section captioned “About Us” beginning on page 4 for more detailed information about our business.
For 2022 and 2021, 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.
For 2023 and 2022, 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.
To expand our presence and commitment to our Gainesville market, we plan to open a third full- service banking office in the area in early 2023. During 2022, 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.
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.
Approximately 42% of the investor real estate category was secured by residential real estate at December 31, 2022. 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.
Approximately 41% of the investor real estate category was secured by residential real estate at December 31, 2023 compared to 42% at December 31, 2022. 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 composition of our HFI loan portfolio at December 31 for each of the past three years is shown in Table 7. Table 8 arrays our HFI loan portfolio at December 31, 2022, by maturity period.
The composition of our HFI loan portfolio at December 31 for each of the past three years is shown in Table 7. Table 8 arrays our HFI loan portfolio at December 31, 2023, by maturity period.
Based on the balances at the December 31, 2022 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 $2.2 million (after-tax).
Based on the balances at the December 31, 2023 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).
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. 37 Strategic Initiatives . In 2021, we initiated a new five-year strategic plan “2025 In Focus” that will guide us in the areas of client experience, channel optimization, market expansion, and culture.
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. 44 Strategic Initiatives . In 2021, we initiated a new five-year strategic plan “2025 In Focus” that guide s us in the areas of client experience, channel optimization, market expansion, and culture.
Net income attributable to common shareowners included a $6.4 million decrease in the deduction to record the 49% non-controlling interest in the earnings of CCHL.
Net income attributable to common shareowners included a $6.4 million increase in the deduction to record the 49% non-controlling interest in the earnings of CCHL.
Refer to the accompanying notes to consolidated financial statements elsewhere in this report for the expected timing of such payments as of December 31, 2022.
Refer to the accompanying notes to consolidated financial statements elsewhere in this report for the expected timing of such payments as of December 31, 2023.
We provide a full range of banking services, including traditional deposit and credit services, mortgage banking, asset management, trust, merchant services, bankcards, securities brokerage services and financial advisory services, including the sale of life insurance, risk management, and asset protection services. The Bank has 58 banking offices and 89 ATMs/ITMs in Florida, Georgia and Alabama.
We provide a full range of banking services, including traditional deposit and credit services, mortgage banking, asset management, trust, merchant services, bankcards, securities brokerage services and financial advisory services, including the sale of life insurance, risk management, and asset protection services. The Bank has 63 banking offices and 103 ATMs/ITMs in Florida, Georgia and Alabama.
The increase in overdraft fees was driven by higher utilization of our overdraft service which is closely correlated (inversely) with the consumer savings rate which has declined noticeably since it substantially increased during 2020 and 2021 due to the high level of governmental stimulus related to the COVID-19 pandemic.
The increase in overdraft fees was driven by higher utilization of our overdraft service which is closely correlated (inversely) with the consumer savings rate which has declined noticeably since it substantially increased in 2021 due to the high level of governmental stimulus related to the COVID-19 pandemic. Bank Card Fees .
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 2022 was 3.11%.
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 2023 was 5.63%.
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-for-Maturity (“HTM”). In 2022 and 2021, we purchased securities under both the AFS and HTM designations.
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 2023 and 2022, we maintained securities under both the AFS and HTM designations.
Furthermore, in the counties in which we operate, we maintain an 8.4% deposit market share in the Florida counties and 5.4% in the Georgia counties (excluding Northern Arc markets entered in 2022). Our markets provide for a strong core deposit funding base, a key differentiator and driver of our profitability and franchise value. Recent Acquisition/Expansion Activity .
Furthermore, in the counties in which we operate, we maintain an 7.7% deposit market share in the Florida counties and 5.5% 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. Recent Acquisition/Expansion Activity .
For 2022, the $0.4 million, or 1.1%, decrease was due to lower expenses at the Bank, primarily a decrease in pension related costs, including a decrease of $4.9 million for the non-service cost component of our pension plan (reflected in pension – other) attributable to the utilization of a lower discount rate for plan liabilities and a decrease of $0.8 million for pension plan settlement expense.
For 2022, the $1.6 million, or 4.2%, decrease was due to lower pension related costs, including a decrease of $4.9 million for the non-service cost component of our pension plan (reflected in pension – other) attributable to the utilization of a lower discount rate for plan liabilities and a decrease of $0.8 million for pension plan settlement expense.
The slight increase in 2022 reflected incremental revenues from growth in new checking accounts that was partially offset by transaction volume which reflected a slowdown in consumer spending.
The slight increase in 2022 reflected incremental revenues from growth in new checking accounts that was partially offset by lower transaction volume which reflected a slowdown in consumer spending. Wealth Management Fees .
Credit Quality Table 9 provides the components of nonperforming assets and various other credit quality and risk metrics at December 31 st for the last three fiscal years. Information regarding our accounting policies related to nonaccruals, past due loans, and troubled debt restructurings is provided in Note 3 – Loans Held for Investment and Allowance for Credit Losses.
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.
The reduction in compensation expense was primarily due to a decrease in salary expense of $1.6 million that was partially offset by an increase in associate benefit expense of $0.7 million.
The decrease in compensation expense was primarily due to a decrease in salary expense of $10.6 million that was partially offset by an increase in associate benefit expense of $0.6 million.
As part of our overall strategy, we will purchase newly originated 1-4 family real estate secured adjustable rate loans from CCHL. The strategic alliance with CCHL provides us a larger pool of loan purchase opportunities, including participation loans for construction/perm product, which in large part drove the aforementioned increases in residential real estate and construction loans.
As part of our overall strategy, we will purchase newly originated 1-4 family real estate secured adjustable-rate loans from CCHL. The strategic alliance with CCHL provides us a larger pool of loan purchase opportunities, which in large part drove the aforementioned increases in residential real estate loans.
In September 2021, Florida enacted a corporate tax rate reduction from 4.5% to 3.535% retroactive to January 1, 2021, with an expiration date of December 31, 2021, therefore, there was no material impact to our deferred tax accounts.
In September 2021, Florida enacted a corporate tax rate reduction from 4.5% to 3.535% retroactive to January 1, 2021, with an expiration date of December 31, 2021, therefore, there was no material impact to our deferred tax accounts. Our 2021 state tax rate was adjusted to reflect the two percentage point reduction.
As a percentage of average earning assets, our investment portfolio represented 27.6% in 2022, compared to 21.4% in 2021.
As a percentage of average earning assets, our investment portfolio represented 25.9% in 2023, compared to 27.6% in 2022, and 21.4% in 2021.
The estimated impact to 2022 pension expense of a 25 basis point increase or decrease in the discount rate would have been an approximate $0.9 million decrease or increase, respectively. We anticipate using a 5.63% discount rate in 2023.
The estimated impact to 2023 pension expense of a 25 basis point increase or decrease in the discount rate would have been an approximate $0.6 million decrease or increase, respectively. We anticipate using a 5.29% discount rate in 2024.
At December 31, 2022, we had $2.8 million in loans of this type which were not included in either of the nonaccrual, TDR or 90 day past due loan categories compared to $1.5 million at December 31, 2021. Management monitors these loans closely and reviews their performance on a regular basis. Loan Concentrations .
At December 31, 2023, we had $3.4 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, 2022. Management monitors these loans closely and reviews their performance on a regular basis. Loan Concentrations .
Specifically, due to the nature of our markets, a significant portion of our HFI loan portfolio has historically been secured with real estate, approximately 77% at December 31, 2022 and 72% at December 31, 2021 with the increase driven by a higher volume of 1-4 family residential real estate loans originated in 2022.
Specifically, due to the nature of our markets, a significant portion of our HFI loan portfolio has historically been secured with real estate, approximately 82% at December 31, 2023 and 78% at December 31, 2022 with the increase driven by a higher volume of 1-4 family residential real estate loans originated in 2023 in comparison to other loan types.
Table 16 ESTIMATED CHANGES IN NET INTEREST INCOME (1) Percentage Change (12-month shock) +400 bp +300 bp +200 bp +100 bp -100 bp -200 bp -300 bp -400 bp Policy Limit -15.0 % -12.5 % -10.0 % -7.5 % -7.5 % -10.0 % -12.5 % -15.0 % December 31, 2022 11.3 % 8.4 % 5.5 % 2.8 % -5.0 % -12.3 % -20.0 % -27.1 % December 31, 2021 36.6 % 27.2 % 17.8 % 8.7 % -6.2 % n/a % n/a % n/a % Percentage Change (24-month shock) +400 bp +300 bp +200 bp +100 bp -100 bp -200 bp -300 bp -400 bp Policy Limit -17.5 % -15.0 % -12.5 % -10.0 % -10.0 % -12.5 % -15.0 % -17.5 % December 31, 2022 31.3 % 25.2 % 19.0 % 13.1 % -2.0 % -13.8 % -25.7 % -36.3 % December 31, 2021 55.0 % 40.5 % 26.1 % 12.2 % -11.1 % n/a % n/a % n/a % The Net Interest Income at risk position was generally less favorable at December 31, 2022 compared to December 31, 2021 for the 12-month and 24-month shocks for rising rate scenarios.
Table 16 ESTIMATED CHANGES IN NET INTEREST INCOME (1) Percentage Change (12-month shock) +400 bp +300 bp +200 bp +100 bp -100 bp -200 bp -300 bp -400 bp Policy Limit -15.0 % -12.5 % -10.0 % -7.5 % -7.5 % -10.0 % -12.5 % -15.0 % December 31, 2023 3.0 % 2.1 % 1.3 % 0.7 % -1.2 % -3.6 % -7.5 % -12.8 % December 31, 2022 11.3 % 8.4 % 5.5 % 2.8 % -5.0 % -12.3 % -20.0 % -27.1 % Percentage Change (24-month shock) +400 bp +300 bp +200 bp +100 bp -100 bp -200 bp -300 bp -400 bp Policy Limit -17.5 % -15.0 % -12.5 % -10.0 % -10.0 % -12.5 % -15.0 % -17.5 % December 31, 2023 29.5 % 24.4 % 19.3 % 14.8 % 4.1 % -3.5 % -12.9 % -23.6 % December 31, 2022 31.3 % 25.2 % 19.0 % 13.1 % -2.0 % -13.8 % -25.7 % -36.3 % The Net Interest Income at risk position was generally less favorable at December 31, 2023 compared to December 31, 2022 for the 12-month and 24-month shocks for the rising rate scenarios and more favorable in the falling rate environments.
Provision for Credit Losses For 2022, we recorded a provision for credit loss expense of $7.2 million ($7.1 million expense for loans HFI and $0.1 million expense for unfunded loan commitments) compared to a provision benefit of $1.6 million for 2021 ($2.8 million benefit for loans HFI and $1.2 million expense for unfunded loan commitments), and provision expense of $9.6 million for 2020 ($9.0 million expense for loans HFI and $0.6 million expense for unfunded loan commitments ).
Provision for Credit Losses For 2023, we recorded a provision for credit loss expense of $9.7 million ($9.5 million expense for loans held for investment (“HFI”) and $0.2 million expense for unfunded loan commitments) compared to a provision expense of $7.5 million for 2022 ($7.4 million benefit for loans HFI and $0.1 million expense for unfunded loan commitments), and a provision benefit of $1.6 million for 2021 ($2.8 million benefit for loans HFI and $1.2 million expense for unfunded loan commitments ).
A TDR 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 in calendar years after the year in which the restructuring took place.
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, 2022, there were 928 positions (combined AFS and HTM) with pre-tax unrealized losses totaling $90.0 million. The GNMA mortgage-backed securities, U.S. Treasuries, and SBA securities held carry the full faith and credit guarantee of the U.S. Government, and are 0% risk-weighted assets.
At December 31, 2023, there were 878 positions (combined AFS and HTM) with pre-tax unrealized losses totaling $63.2 million. The GNMA 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.
Nonaccrual loans totaled $2.3 million at December 31, 2022, a $2.0 million decrease from December 31, 2021. 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.
Nonaccrual loans totaled $6.2 million at December 31, 2023, a $3.9 million increase over December 31, 2022. 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.
Noninterest Expense For 2022, noninterest expense totaled $161.8 million, a $0.7 million decrease from 2021 due to a decrease in compensation expense of $0.9 million and other expense of $0.4 million, partially offset by an increase in occupancy expense of $0.6 million.
For 2022, noninterest expense totaled $151.6 million, a $10.9 million decrease from 2021, due to a decrease in compensation expense of $10.0 million and other expense of $1.6 million, partially offset by an increase in occupancy expense of $0.6 million.
The increase in net income attributable to common shareowners for 2021 was attributable to a decrease in the provision for credit losses of $11.2 million, higher net interest income of $1.5 million and lower income taxes of $0.4 million, partially offset by higher noninterest expense of $12.5 million and lower noninterest income of $3.6 million.
The increase in net income attributable to common shareowners for 202 3 reflected higher net interest income of $34.0 million that was partially offset by higher noninterest expense of $5.4 million, higher income taxes of $5.2 million, lower noninterest income of $3.6 million, and a $2.2 million increase in the provision for credit losses.
These favorable variances were partially offset by an increase in the expense for other real estate expense of $1.2 million, travel/entertainment and advertising costs of $1.3 million (return to pre-pandemic levels and market expansion), other losses of $0.9 million (primarily debit card and check fraud), mortgage servicing right amortization of $0.6 million, VISA share swap conversion ratio payments of $0.4 million, FDIC insurance fees of $0.3 million, and other miscellaneous costs related to training, hiring, and variable costs related to loan production.
These favorable variances were partially offset by an increase in other real estate expense of $1.2 million, travel/entertainment and advertising costs of $1.3 million (return to pre- pandemic levels and market expansion), miscellaneous expense of $1.5 million (other losses of $0.9 million (primarily debit card and check fraud) and VISA share swap conversion ratio payments of $0.4 million), and insurance – other of $0.3 million (FDIC insurance fees).
Therefore, EVE is currently in compliance with policy in all rate scenarios. 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.
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.
Table 17 ESTIMATED CHANGES IN ECONOMIC VALUE OF EQUITY (1) Changes in Interest Rates +400 bp +300 bp +200 bp +100 bp -100 bp -200 bp -300 bp -400 bp Policy Limit -30.0 % -25.0 % -20.0 % -15.0 % -15.0 % -20.0 % -25.0 % -30.0 % December 31, 2022 11.0 % 9.0 % 6.4 % 3.6 % -7.4 % -18.8 % -30.9 % -40.1 % December 31, 2021 31.5 % 24.6 % 16.5 % 8.2 % -19.0 % n/a % n/a % n/a % EVE Ratio (policy minimum 5.0%) 21.7 % 21.0 % 20.1 % 19.2 % 16.6 % 14.3 % 12.0 % 10.2 % (1) Down 200, 300 and 400 bp rate scenarios have been added due to the current interest rate environment.
Table 17 ESTIMATED CHANGES IN ECONOMIC VALUE OF EQUITY (1) Changes in Interest Rates +400 bp +300 bp +200 bp +100 bp -100 bp -200 bp -300 bp -400 bp Policy Limit -30.0 % -25.0 % -20.0 % -15.0 % -15.0 % -20.0 % -25.0 % -30.0 % December 31, 2023 12.9 % 10.7 % 7.8 % 4.4 % -6.4 % -14.0 % -23.6 % -27.8 % December 31, 2022 11.0 % 9.0 % 6.4 % 3.6 % -7.4 % -18.8 % -30.9 % -40.1 % EVE Ratio (policy minimum 5.0%) 18.9 % 18.2 % 17.3 % 16.5 % 14.2 % 12.8 % 11.2 % 10.4 % (1) Down 200, 300 and 400 bp rate scenarios have been added due to the current interest rate environment. 64 At December 31, 2023, the economic value of equity was favorable in all rising rate scenarios and unfavorable in the falling rate scenarios.
Net income attributable to common shareowners included a $4.9 million decrease in the deduction to record the 49% non-controlling interest in the earnings of CCHL.
Net income attributable to common shareowners included a $1.3 million increase in the deduction to record the 49% non-controlling interest in the earnings of CCHL.
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 2022, our taxable equivalent net interest income increased $21.6 million, or 20.9%.
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.
At December 31, 2022, the net unrealized loss was $37.3 million compared to an unrealized loss of $4.6 million at December 31, 2021. Book value is also impacted by the recording of our unfunded pension liability through other comprehensive income in accordance with Accounting Standards Codification Topic 715.
Book value is also impacted by the recording of our unfunded pension liability through other comprehensive income in accordance with Accounting Standards Codification Topic 715. At December 31, 2023, the net pension liability reflected in accumulated other comprehensive loss was $0.4 million compared to $4.5 million at December 31, 2022.
At December 31, 2022, the economic value of equity was favorable in all rising rate environments and was within prescribed tolerance levels. 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.
EVE was within prescribed tolerance levels in all rate scenarios. 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.
The declining overnight funds position in 2022 reflected strong growth in average loans. We expect capital expenditures over the next 12 months to be approximately $8.0 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 capital expenditures over the next 12 months to be approximately $12.0 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.
The decrease in AUM in 2022 generally reflected lower account values/returns reflective of volatile market conditions during the year partially offset by new account growth. 42 Mortgage Banking Revenues . Mortgage banking revenues totaled $30.6 million in 2022 compared to $52.4 million in 2021 and $63.3 million in 2020.
The decrease in AUM in 2022 generally reflected lower account values/returns reflective of volatile market conditions during the year partially offset by new account growth. 51 Mortgage Banking Revenues . Mortgage banking revenues totaled $10.4 million in 2023 compared to $11.9 million in 2022 and $52.4 million in 2021.
Table 14 reflects the shift in our deposit mix over the last year and Table 15 provides a maturity distribution of time deposits in denominations of $250,000 and over at December 31, 2022. For 2022, noninterest bearing deposits represented 44.9% of total average deposits. This compares to 44.7% in 2021 and 44.1% in 2020.
Table 14 reflects the shift in our deposit mix over the last year and Table 15 provides a maturity distribution of time deposits in denominations of $250,000 and over at December 31, 2023. For 2023, noninterest bearing deposits represented 41.1% of total average deposits.
Government Treasury 457,374 42.6 115,499 11.6 5,001 1.0 Mortgage-Backed Securities 203,370 18.9 224,102 22.5 164,938 33.3 Total 660,744 61.5 339,601 34.1 169,939 34.3 Other Equity Securities 10 - 861 0.1 - - Total Investment Securities $ 1,074,048 100 % $ 995,073 100 % $ 494,809 100 % 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.
Government Treasury 457,681 47.4 457,374 42.6 115,499 11.6 Mortgage-Backed Securities 167,341 17.3 203,370 18.9 224,102 22.5 Total 625,022 64.7 660,744 61.5 339,601 34.1 Other Equity Securities 3,450 0.2 10 - 861 0.1 Total Investment Securities $ 966,374 100 % $ 1,074,048 100 % $ 995,073 100 % 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.
At December 31, 2022, 26 corporate positions had a total allowance for credit loss of $28,000 and 21 municipal positions had a total allowance for credit loss of $13,000. All of these positions maintain an overall rating of at least “A-”, and all are expected to mature at par.
At December 31, 2023, 14 corporate bond positions had a total allowance for credit loss of $17,000 and 17 municipal bond positions had a total allowance for credit loss of $8,000. All of these positions maintain an overall rating of at least “A-”, and all are expected to mature at par.
Table 10 REAL ESTATE LOANS BY PROPERTY TYPE 2022 2021 Investor Real Estate Owner Occupied Real Estate Investor Real Estate Owner Occupied Real Estate Vacant Land, Construction, and Land Development 15.0 % - 18.1 % - Improved Property 27.7 57.3 % 28.4 53.5 % Total Real Estate Loans 42.7 % 57.3 % 46.5 % 53.5 % A major portion of our real estate loan category is centered in the owner occupied category which carries a lower risk of non- collection than certain segments of the investor category.
Table 10 REAL ESTATE LOANS BY PROPERTY TYPE 2023 2022 Investor Real Estate Owner Occupied Real Estate Investor Real Estate Owner Occupied Real Estate Vacant Land, Construction, and Land Development 13.3 % - 14.8 % - Improved Property 27.2 59.5 % 27.4 57.8 % Total Real Estate Loans 40.5 % 59.5 % 42.2 % 57.8 % A major portion of our real estate loan category is centered in the owner occupied category which carries a lower risk of non- collection than certain segments of the investor category.
We have continued our expansion into the Northern Arc of Atlanta, Georgia by opening full-service offices in Marietta (Cobb County) in the fourth quarter of 2022 and Duluth (Gwinnett County) in the first quarter of 2023. Additionally, we expanded our presence in the Florida Panhandle by opening a full-service office in Watersound, Florida in the fourth quarter of 2022.
We have continued our expansion into the Northern Arc of Atlanta, Georgia by opening full-service offices in Marietta (Cobb County) in the fourth quarter of 2022 and Duluth (Gwinnett County) in the second quarter of 2023.
In 2022, we implemented initiatives in support of the strategic plan, including the implementation of an integrated marketing software aimed at deepening client relationships, initiation of a comprehensive review of our banking office network, continued expansion into new markets, and in 2020 and 2021 continued our efforts to diversify our revenues by expanding our residential mortgage banking and wealth businesses (discussed further below - Recent Acquisition/Expansion Activity ).
We have implemented initiatives in support of the strategic plan, including the implementation of an integrated marketing software aimed at deepening client relationships, continued our comprehensive review of our banking office network, continued expansion into new markets and further diversification of revenues by expanding our residential mortgage banking and wealth businesses . Markets .
Two advances matured, none were paid off, and no new fixed rate advances were obtained in 2022. The FHLB notes 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.
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. 65 We have issued two junior subordinated deferrable interest notes to wholly owned Delaware statutory trusts.
To a lesser extent, higher interest expense for our variable rate short-term borrowings (warehouse line of credit for mortgage banking) and subordinated notes contributed to the increase in 2022.
To a lesser extent, higher interest expense for our variable rate short-term borrowings (warehouse line of credit for mortgage banking) and subordinated notes contributed to the increase in 2022. Our cost of interest bearing deposits was 81 basis points in 2023, 17 basis points in 2022, and 4 basis points in 2021.
For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. We recognize interest and/or penalties related to income tax matters in other expenses.
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. We recognize interest and/or penalties related to income tax matters in other expenses.
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.
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.
Government Agency 186,052 17.3 237,578 23.9 208,531 42.2 States and Political Subdivisions 40,329 3.8 46,980 4.7 3,632 0.7 Mortgage-Backed Securities 69,405 6.5 88,869 8.9 515 0.1 Corporate Debt Securities 88,236 8.2 86,222 8.7 - - Other Securities 7,222 0.6 7,094 0.7 7,673 1.6 Total 413,294 38.5 654,611 65.8 324,870 65.7 Held to Maturity U.S.
Government Agency 145,034 15.0 186,052 17.3 237,578 23.9 States and Political Subdivisions 39,083 4.0 40,329 3.8 46,980 4.7 Mortgage-Backed Securities 63,303 6.6 69,405 6.5 88,869 8.9 Corporate Debt Securities 57,552 6.0 88,236 8.2 86,222 8.7 Other Securities 8,251 0.9 7,222 0.6 7,094 0.7 Total 337,902 35.1 413,294 38.5 654,611 65.8 Held to Maturity U.S.
Compensation . Compensation expense totaled $100.5 million in 2022 compared to $101.5 million in 2021, and $96.3 million in 2020. For 2022, the $0.9 million, or 0.9%, net decrease reflected a decrease in salary expense of $1.6 million that was partially offset by an increase in associate benefit expense of $0.7 million.
Compensation . Compensation expense totaled $93.8 million in 2023 compared to $91.5 million in 2022, and $101.5 million in 2021. For 2023, the $2.3 million, or 2.5%, net increase reflected an increase in salary expense of $4.7 million that was partially offset by a decrease in associate benefit expense of $2.4 million.
The estimated impact to 2022 pension expense of a 25 basis point increase or decrease in the rate of return would have been an approximate $0.4 million decrease or increase, respectively. We anticipate using a rate of return on plan assets of 6.75% for 2023.
The weighted-average expected long-term rate of return on plan assets utilized for 2023 was 6.75%. The estimated impact to 2023 pension expense of a 25 basis point increase or decrease in the rate of return would have been an approximate $0.3 million decrease or increase, respectively.
Strong loan growth and a reduction in our overnight funds balance during the year made us less asset sensitive, which is less favorable in rising rate environments, and more favorable in a falling rate environment.
Strong loan growth and a reduction in our overnight funds balance in 2023 resulted in less asset sensitivity, which is less favorable in rising rate environments, and more favorable in a falling rate environment.
The conversion, in the third quarter of 2021, of our remaining free checking accounts to a monthly maintenance fee account type drove the increase in service charge fees.
The $3.2 million, or 17.2%, increase in 2022 reflected higher account service charge fees and overdraft fees. The conversion, in the third quarter of 2021, of our remaining free checking accounts to a monthly maintenance fee account type drove the increase in account service charge fees.
The estimation process is designed to include amounts based on actual losses experienced from actual activity. 57 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).
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).
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.
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 increase in net income attributable to common shareowners for 202 2 was attributable to higher net interest income of $21.6 million and lower noninterest expense of $0.7 million, partially offset by an $8.7 million increase in the provision for credit losses, lower noninterest income of $12.9 million, and higher income taxes of $0.3 million.
The increase in net income attributable to common shareowners for 202 2 was attributable to higher net interest income of $22.2 million, lower noninterest expense of $10.9 million, and lower income taxes of $1.9 million, partially offset by a $9.0 million increase in the provision for credit losses and lower noninterest income of $32.4 million.
Our cost of interest bearing deposits was 17 basis points in 2022, 4 basis points in 2021, and 10 basis points in 2020. Our total cost of deposits (including noninterest bearing accounts ) was 9 basis points in 2022, 2 basis points in 2021, and 5 basis points in 2020.
Our total cost of deposits (including noninterest bearing accounts) was 48 basis points in 2023, 9 basis points in 2022, and 2 basis points in 2021.
Wealth management fees including both trust fees (i.e., managed accounts and trusts/estates) and retail brokerage fees (i.e., investment, insurance products, and retirement accounts) totaled $18.1 million in 2022 compared to $13.7 million in 2021 and $11.0 million in 2020. The increase in 2022 was primarily due to higher insurance revenues of $3.7 million and retail brokerage fees of $0.6 million.
Wealth management fees including both trust fees (i.e., managed accounts and trusts/estates) and retail brokerage fees (i.e., investment, insurance products, and retirement accounts) totaled $16.3 million in 2023 compared to $18.1 million in 2022 and $13.7 million in 2021.
Expansion into new markets in the Northern Arc of Atlanta, Georgia (Cobb and Gwinnett Counties) and Walton County, Florida drove incremental loan growth of approximately $65 million in 2022 as we added to those banking teams throughout 2022. In 2022, average loans held for sale (“HFS”) decreased $29.8 million, or 38.1%, from 2021 due to lower loan volume at CCHL.
Expansion into new markets in the Northern Arc of Atlanta, Georgia (Cobb and Gwinnett Counties) and Walton County, Florida drove incremental loan growth of approximately $43 million in 2023 as we added to those banking teams throughout 2023. In 2023, average loans held for sale (“HFS”) increased $7.0 million, or 14. 5%, from 2022.
Our total cost of funds (interest expense/average earning assets) was 17 basis points in 2022, 10 basis points in 2021, and 16 basis points in 2020. 39 Our interest rate spread (defined as the taxable-equivalent yield on average earning assets less the average rate paid on interest bearing liabilities) increased 23 basis points in 2022 and decreased 43 basis points in 2021.
Our total cost of funds (interest expense/average earning assets) was 56 basis points in 2023, 17 basis points in 2022, and 10 basis points in 2021. 47 Our interest rate spread (defined as the taxable-equivalent yield on average earning assets less the average rate paid on interest bearing liabilities) was 3.63% in 2023, 3.00% in 2022, and 2.75% in 2021.
The decrease in salary expense was primarily due to lower variable/performance-based compensation of $7.7 million and base salaries of $1.3 million at CCHL, partially offset by an increase in salary expense at the Bank, primarily variable/performance -based compensation totaling $2.5 million, base salaries (merit and new market staffing additions) of $3.1 million, and a decrease in realized loan cost of $1.4 million (credit offset to salary expense).
The variance in salary expense was primarily due to higher realized loan cost of $7.7 million and lower variable/performance-based compensation of $4.5 million, partially offset by higher base salary expense of $1.8 million (merit and new market staffing additions).
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 2022 was 6.75%.
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 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 $1.2 million (after-tax) decrease/increase, respectively. 58 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 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 $0.8 million (after-tax) decrease/increase, respectively.
EXECUTIVE OVERVIEW For 2022, net income attributable to common shareowners totaled $40.1 million, or $2.36 per diluted share, compared to net income of $33.4 million, or $1.98 per diluted share, for 2021 and $31.6 million, or $1.88 per diluted share, for 2020.
EXECUTIVE OVERVIEW For 2023, net income attributable to common shareowners totaled $52.3 million, or $3.07 per diluted share, compared to net income of $33.4 million, or $1.97 per diluted share, for 2022, and $33.4 million, or $1.98 per diluted share, for 2021.

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