UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________________
FORM
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
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Securities registered pursuant to Section 12(b) of the Act:
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the correction of an error to previously issued financial statements
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the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
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The aggregate market value of the registrant’s common stock, $0.01 par value per share, held by non-affiliates of the registrant on June 30, 2023, the last business day
of the registrant’s most recently completed second fiscal quarter, was approximately $
on that date). Shares of the registrant’s common stock held by each officer and director and each person known to the registrant to own 10% or more of the
outstanding voting power of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not a
determination for other purposes.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding at June 28, 2024
Common Stock, $0.01 par value per share
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our Proxy Statement for the Annual Meeting of Shareowners held on April 23, 2024, are incorporated by reference in Part III.
2
CAPITAL CITY BANK GROUP, INC.
ANNUAL REPORT FOR 2023 ON FORM 10-K/A
TABLE OF CONTENTS
PART I
PAGE
Item 1.
6
Item 1A.
22
Item 1B.
36
Item 1C.
36
Item 2.
36
Item 3.
36
Item 4.
PART II
Item 5.
38
Item 6.
41
Item 7.
43
Item 7A.
68
Item 8.
69
Item 9.
141
Item 9A.
141
Item 9B.
145
PART III
Item 10.
146
Item 11.
146
Item 12.
146
Item 13.
146
Item 14.
146
PART IV
Item 15.
147
Item 16.
148
149
3
4
INTRODUCTORY NOTE
This Annual Report on Form 10-K/A contains “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans,
objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to
change based on various factors, many of which are beyond our control. The words “may,” “could,” “should,” “would,”
“believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “vision,” “goal,” and similar expressions are intended to
identify forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ
materially from those set forth in our forward-looking statements.
In addition to those risks discussed in this Annual Report under Item 1A Risk Factors, factors that could cause our actual results
to differ materially from those in the forward-looking statements, include, without limitation:
●
our ability to successfully manage credit risk, interest rate risk, liquidity risk, and other risks inherent to our industry;
●
legislative or regulatory changes;
●
adverse developments in the financial services industry generally, such as bank failures and any related impact on depositor
behavior;
●
the effects of changes in the level of checking or savings account deposits and the competition for deposits on our funding
costs, net interest margin and ability to replace maturing deposits and advances, as necessary;
●
inflation, interest rate, market and monetary fluctuations;
●
uncertainty in the pricing of residential mortgage loans that we sell, as well as competition for the mortgage servicing
rights related to these loans and related interest rate risk or price risk resulting from retaining mortgage servicing rights and
the potential effects of higher interest rates on our loan origination volumes;
●
the effects of actions taken by governmental agencies to stabilize the recent volatility in the financial system and the
effectiveness of such actions;
●
changes in monetary and fiscal policies of the U.S. Government;
●
the effects of security breaches and computer viruses that may affect our computer systems or fraud related to debit card
products;
●
the accuracy of our financial statement estimates and assumptions, including the estimates used for our allowance for credit
losses, deferred tax asset valuation and pension plan;
●
changes in our liquidity position;
●
changes in accounting principles, policies, practices or guidelines;
●
the frequency and magnitude of foreclosure of our loans;
●
the effects of our lack of a diversified loan portfolio, including the risks of loan segments, geographic and industry
concentrations;
●
the strength of the United States economy in general and the strength of the local economies in which we conduct
operations;
●
our ability to declare and pay dividends, the payment of which is subject to our capital requirements;
●
changes in the securities and real estate markets;
●
structural changes in the markets for origination, sale and servicing of residential mortgages;
●
the effect of corporate restructuring, acquisitions or dispositions, including the actual restructuring and other related
charges and the failure to achieve the expected gains, revenue growth or expense savings from such corporate
restructuring, acquisitions or dispositions;
●
the effects of natural disasters, harsh weather conditions (including hurricanes), widespread health emergencies (including
pandemics, such as the COVID-19 pandemic), military conflict, terrorism, civil unrest or other geopolitical events;
●
our ability to comply with the extensive laws and regulations to which we are subject, including the laws for each
jurisdiction where we operate;
●
the impact of the restatement of the Impacted Statements of Cash Flows;
●
any inability to implement and maintain effective internal control over financial reporting and/or disclosure control or
inability to remediate our existing material weaknesses in our internal controls deemed ineffective;
●
the willingness of clients to accept third-party products and services rather than our products and services and vice versa;
●
increased competition and its effect on pricing;
●
technological changes;
●
The cost and effects of cybersecurity incidents or other failures, interruptions, or security breaches of our systems or those
of our customers or third-party providers;
●
the outcomes of litigation or regulatory proceedings;
●
negative publicity and the impact on our reputation;
●
changes in consumer spending and saving habits;
●
growth and profitability of our noninterest income;
5
●
the limited trading activity of our common stock;
●
the concentration of ownership of our common stock;
●
anti-takeover provisions under federal and state law as well as our Articles of Incorporation and our Bylaws;
●
other risks described from time to time in our filings with the Securities and Exchange Commission; and
●
our ability to manage the risks involved in the foregoing.
However, other factors besides those listed in Item 1A Risk Factors or discussed in this Annual Report also could adversely affect
our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any
forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake to update
any forward-looking statement, except as required by applicable law.
6
PART I
Item 1. Business
About Us
General
Capital City Bank Group, Inc. (“CCBG”) is a financial holding company headquartered in Tallahassee, Florida. CCBG was
incorporated under Florida law on December 13, 1982, to acquire five national banks and one state bank that all subsequently
became part of CCBG’s bank subsidiary, Capital City Bank (“CCB” or the “Bank”). 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. 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. 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. 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. 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 72.
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. Dividend payments by the Bank
to CCBG depend on the capitalization, earnings and projected growth of the Bank, and are limited by various regulatory
restrictions, including compliance with a minimum Common Equity Tier 1 Capital conservation buffer. See the section entitled
“Regulatory Considerations” in this Item 1 and Note 17 in the Notes to Consolidated Financial Statements for a discussion of the
restrictions.
Item 6 contains other financial and statistical information about us.
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. CCB has two primary subsidiaries, which are wholly owned, Capital City Trust Company
and Capital City Investments. CCB also maintains a 51% membership interest in a consolidated subsidiary, CCHL, which we
acquired on March 1, 2020. The nature of these subsidiaries is provided below.
Operating Segment
We have one reportable segment with two principal services: Banking Services and Wealth Management Services. Banking
Services are operated at CCB, and Wealth Management Services are operated under three separate subsidiaries (Capital City
Trust Company, Capital City Investments, and Capital City Strategic Wealth, LLC). 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. Significant services offered
by CCB include:
●
Business Banking
for a wide variety of general business purposes, including financing for commercial business properties, equipment,
inventories and accounts receivable, as well as commercial leasing and letters of credit. We also provide treasury
management services, and, through a marketing alliance with Elavon, Inc., merchant credit card transaction processing
services.
●
Commercial Real Estate Lending
developers and investors, residential builders and developers, and community development. Credit products are available
to purchase land and build structures for business use and for investors who are developing residential or commercial
property.
●
Residential Real Estate Lending
network of locations to help meet the home financing needs of consumers, including conventional permanent and
construction/ permanent (fixed, adjustable, or variable rate) financing arrangements, and FHA/VA/Government National
Mortgage Association (“GNMA”) loan products. We offer both fixed and adjustable-rate residential mortgage (ARM)
loans. We offer these products through our existing network of CCHL locations. We do not originate subprime
residential real estate loans.
●
Retail Credit
automobile loans, boat/RV loans, home equity loans, and through a marketing alliance with ELAN, we offer credit card
programs.
●
Institutional Banking –
We provide banking services to meet the needs of state and local governments, public schools
and colleges, charities, membership and not-for-profit associations including customized checking and savings accounts,
cash management systems, tax-exempt loans, lines of credit, and term loans.
●
Retail Banking
– We provide a full-range of consumer banking services, including checking accounts, savings programs,
interactive/automated teller machines (ATMs/ITMs), debit/credit cards, night deposit services, safe deposit facilities,
online banking, and mobile banking.
Capital City Trust Company
Capital City Trust Company, or the Trust Company, provides asset management for individuals through agency, personal trust,
IRA, and personal investment management accounts. Associations, endowments, and other nonprofit entities hire the Trust
Company to manage their investment portfolios. 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.
Capital City Investments
We offer our customers access to retail investment products through LPL Financial pursuant to which retail investment products
would be offered through LPL. LPL offers a full line of retail securities products, including U.S. Government bonds, tax-free
municipal bonds, stocks, mutual funds, unit investment trusts, annuities, life insurance and long-term health care. Non-deposit
investment and insurance products are: (i) not FDIC insured; (ii) not deposits, obligations, or guarantees by any bank; and (iii)
subject to investment risk, including the possible loss of principal amount invested.
Capital City Strategic Wealth, LLC.
We provide a multi-disciplinary strategic planning approach that requires examining all facets of our clients’ financial lives
through our business, estate, financial, insurance and business planning, tax planning, and asset protection advisory services.
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. We will also originate loans within our secondary
market area, defined as counties adjacent to those in which we have banking offices. There may also be occasions when we will
have opportunities to make loans that are out of both the primary and secondary market areas, including participation loans.
These loans are only approved if the underwriting is consistent with our criteria and generally the project or applicant’s primary
business is in or near our primary or secondary market areas. Approval of all loans is subject to our policies and standards
described in more detail below.
We have adopted comprehensive lending policies, underwriting standards and loan review procedures. Management and our
Board of Directors reviews and approves these policies and procedures on a regular basis (at least annually).
Management has also implemented reporting systems designed to monitor loan originations, loan quality, concentrations of
credit, loan delinquencies, nonperforming loans, and potential problem loans. Our management and the Credit Risk Oversight
Committee periodically review our lines of business to monitor asset quality trends and the appropriateness of credit policies. In
addition, we establish total borrower exposure limits and monitor concentration risk. As part of this process, the overall
composition of the portfolio is reviewed to gauge diversification of risk, client concentrations, industry group, loan type,
geographic area, or other relevant classifications of loans. Specific segments of the portfolio are monitored and reported to our
Board on a quarterly basis, and we have strategic plans in place to supplement Board approved credit policies governing exposure
limits and underwriting standards. We recognize that exceptions to the below-listed policy guidelines may occasionally occur and
have established procedures for approving exceptions to these policy guidelines.
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. Note 4 – Mortgage Banking Activities in the Notes to Our
Consolidated Financial Statements provides additional information on our servicing portfolio.
CCB also maintains a portfolio of residential loans held for investment and will periodically purchase newly originated 1-4
family secured adjustable-rate loans from CCHL for that portfolio. Residential loans held for investment are generally
underwritten in accordance with secondary market guidelines in effect at the time of origination, including loan-to-value, or LTV,
and documentation requirements.
Residential real estate loans also include home equity lines of credit, or HELOCs, and home equity loans. Our home equity
portfolio includes revolving open-ended equity loans with interest-only or minimal monthly principal payments and closed-end
amortizing loans. Open-ended equity loans typically have an interest only 10-year draw period followed by a five-year repayment
period of 0.75% of principal balance monthly and balloon payment at maturity. 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. Commercial loans are
primarily made based on identified cash flows of the borrower with consideration given to underlying collateral and personal or
other guarantees. We have established debt service coverage ratio limits that require a borrower’s cash flow to be sufficient to
cover principal and interest payments on all new and existing debt. The majority of 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.
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. Our policy establishes a maximum LTV specific to property type and minimum debt
service coverage ratio limits that require a borrower’s cash flow to be sufficient to cover principal and interest payments on all
new and existing debt. Commercial real estate loans may be fixed or variable-rate loans with interest rates tied to the Prime Rate
or U.S. Treasury indices. We require appraisals for loans in excess of $500,000 that are secured by real property unless we deem
the real property used as security to be a complex property type, in which case we require appraisals for loans in excess of
$250,000. 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. 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. Our policy establishes maximum debt-to-income ratios, minimum credit scores, and includes guidelines
for verification of applicants’ income and receipt of credit reports.
Expansion of Business
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section captioned
“Business Overview” for discussion related to the expansion of our Business.
Competition
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. Some of our competitors are larger financial
institutions with greater resources and, as such, may have higher lending limits and may offer other services that are not provided
by us. However, we believe that the larger financial institutions are less familiar with the markets in which we operate and
typically target a different client base. We also believe clients who bank at community banks tend to prefer the relationship style
service of community banks compared to larger banks.
As a result, we expect to be able to effectively compete in our markets with larger financial institutions through providing
superior client service and leveraging our knowledge and experience in providing banking products and services in our market
areas. See Item 1A. Risk Factors under the section captioned “Our future success is dependent on our ability to compete
effectively in the highly competitive banking industry” for further discussion related to the competitive environment in which we
operate.
Our primary market area consists of 21 counties in Florida, six counties in Georgia, and one county in Alabama. Most of Florida’s
major banking concerns have a presence in Leon County, where our main office is located. Our Leon County deposits totaled
$1.272 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.
Market Share as of June 30,
(1)
County
2023
2022
2021
Florida
5.1%
4.9%
4.6%
0.3%
0.3%
0.2%
37.1%
34.9%
32.4%
4.4%
4.7%
4.1%
2.4%
2.3%
2.8%
17.5%
19.8%
18.9%
81.9%
82.1%
81.1%
42.2%
41.2%
39.6%
12.4%
14.8%
14.6%
4.9%
5.0%
3.9%
28.3%
24.8%
24.4%
16.9%
15.4%
11.9%
26.4%
25.4%
26.4%
13.5%
14.0%
14.5%
34.4%
26.4%
23.2%
0.8%
0.7%
0.7%
6.6%
7.0%
6.8%
75.0%
73.8%
73.2%
8.4%
10.0%
10.5%
0.3%
-
-
9.2%
11.2%
11.2%
Georgia
2.9%
3.2%
3.3%
0.1%
0.0%
0.0%
(2)
0.0%
-
-
13.8%
16.3%
14.8%
6.7%
7.8%
7.9%
5.6%
6.4%
6.1%
Alabama
8.6%
9.3%
9.3%
(1)
Obtained from the FDIC Summary of Deposits Report for the year indicated.
(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.
Human Capital Matters
Our culture distinguishes us from our competitors and is the driving force behind our continued success. Our leadership is
committed to a culture that values people alongside results.
Our brand promise (“More than your bank. Your banker.”) and purpose (“We empower our clients’ financial wellness and help
them build secure futures”), together with our core values statement (“Do the Right Thing, Build Relationships & Loyalty,
Embrace Individuality & Value Others, Promote Career Growth, Be Committed to Community, and Represent the Star (our bank)
Proudly”), are the foundation on which our culture is built.
11
The bank has grown significantly since its beginnings in 1895. Our commitment to fostering a culture that values our associates
across our entire footprint remains unwavering. We have a Chief Culture Officer and a Chief Diversity Officer who make it a
priority to ensure our culture is maintained and associates exemplify our values.
Diversity and Inclusion
. Integral to our culture and values is a commitment to an equitable, diverse, and inclusive work
environment whereby respect, acceptance and belonging are practiced and experienced by all.
Our associates are our most valuable assets, and our differences make us stronger. The individual perspectives, life experiences,
capabilities and talents, which our associates invest in their work, represent a significant part of our culture, reputation and
collective achievements.
The Chief Diversity Officer and the Diversity, Equity, and Inclusion (DE&I) Council, which comprises diverse associates from
various levels and offices throughout our organization, connect the company’s diversity and inclusion initiatives with our broader
business strategies. A diverse team produces more creative solutions, offers better client service and is vital to attracting and
retaining talent—key factors that contribute to our success. We continue to build an inclusive culture through a variety of DE&I
initiatives for internal promotions and hiring practices.
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.
Our commitment to people and being an employer with integrity and heart has earned us numerous accolades including: one of
the “Best Companies to Work for in Florida” by Florida Trend for 12 consecutive years, a “Best Bank to Work For” by American
Bankers Association for 11 consecutive years and being named by Forbes in 2023 as one of “America’s Best-in-State Banks, a
selection made from direct consumer feedback and online reviews.
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
. To attract and retain experienced associates we offer a competitive compensation and
benefits program, foster a culture where everyone feels included and empowered to do to their best work, and give associates the
opportunity to give back to their communities and make a social impact.
Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our
business objectives, assist in the achievement of our strategic goals and create long-term value for our shareowners. We provide
our associates with compensation packages that include base salary and annual incentive bonuses, and certain associates can
receive equity awards tied to the Company’s performance.
Experience has taught us that a compensation program with both short- and long-term awards provides fair and competitive
compensation and aligns associate and shareowner interests by incentivizing business and individual performance. This dual
approach also encourages long-term company performance and integrates compensation with our business plans.
In addition to cash and equity compensation, we offer associates benefits including life and health (medical, dental & vision)
insurance, paid time off, an associate stock purchase plan, and a 401(k) plan. Associates hired prior to 2020 are eligible to
participate in a pension plan.
A core value is providing associates the ability to “grow a career.” To that end, we support and encourages associates to develop a
life-long habit of continuous learning that focuses on personal and professional development through higher education. We offer
an educational Tuition Assistance Plan to help eligible associates continue or begin post-high school education, develop skills,
increase knowledge and aid in career development.
We have invested in tools and capabilities that allow our team members to work remotely as appropriate.
Health and Safety
. Our business success is fundamentally connected to our associates’ well-being. We make available to our
associates a voluntary wellness program, StarFit that provides associates with resources and good-health opportunities through
exercise, diet and preventive care.
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.
Social Matters
Community Involvement
. We aim to give back to the communities where we live and work and believe that this commitment
helps in our efforts to attract and retain associates. Our commitment to help our community starts with our associates. Community
involvement is a hallmark for our organization, and it comes naturally to our associates. We encourage our associates to volunteer
their hours with service organizations and philanthropic groups in the communities we serve.
We recorded 10,526 community service hours in 2023, and 9,508, and 8,697 hours in 2022 and 2021, respectively. 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. 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. 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.
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.
Environmental Matters
We recognize the value of environmental stewardship and seek opportunities to reduce our carbon footprint and incorporate
energy efficiency products into business operations. We have implemented company-wide recycling programs and have
converted exterior lighting to LED at 64 offices. Further reducing our environmental impact, our office model design is reduced
from an average 5,500 square feet to 3,300 square feet. As we renovate or build new facilities, we employ energy efficient
equipment such as HVAC systems and lighting controls in offices.
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. These projects will produce
approximately 20,186,357 kw hours of clean power each year. The clean power produced is equivalent to removing
approximately 14,306 metric tons of greenhouse gas emissions. We plan to continue to review these kinds of investment
opportunities as they arise.
We work to ensure lending activities do not encourage business activities that could cause irreparable damage to our reputation or
the environment. In general, we evaluate each credit or transaction on its individual merits, with larger deals receiving more
attention and deeper analysis, including a review of environmental matters related to certain real estate loans, which is overseen
by our Credit Risk Oversight Committee.
To prepare for any climate-related occurrences, we have a business continuity plan that addresses how to maintain business
operations in the event of a disastrous event. We also offer disaster assistance to our associates, which includes
accommodation/shelter reimbursement in case of evacuations or sustained power outages.
Regulatory Considerations
We must comply with state and federal banking laws and regulations that control virtually all aspects of our operations. These
laws and regulations generally aim to protect our depositors, not necessarily our shareowners or our creditors. Any changes in
applicable laws or regulations may materially affect our business and prospects. Proposed legislative or regulatory changes may
also affect our operations. The following description summarizes some of the laws and regulations to which we are subject.
References to applicable statutes and regulations are brief summaries, do not purport to be complete, and are qualified in their
entirety by reference to such statutes and regulations.
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Capital City Bank Group, Inc.
We are registered with the Board of Governors of the Federal Reserve as a bank holding company under the Bank Holding
Company Act of 1956 (“BHC Act”) and have also elected to be a financial holding company. As a result, we are subject to
supervisory regulation and examination by the Federal Reserve. The BHC Act, the Dodd -Frank Wall Street Reform and
Consumer Protection Act (the “Dodd-Frank Act”), the Gramm-Leach-Bliley Financial Modernization Act (the “GLBA”), 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.
Permitted 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. The general effect of the law was to establish a
comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other
financial service providers. Activities that are financial in nature are broadly defined to include not only banking, insurance, and
securities activities, but also merchant banking and additional activities that the Federal Reserve, in consultation with the
Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities
that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.
In contrast to financial holding companies, bank holding companies are limited to managing or controlling banks, furnishing
services to or performing services for its subsidiaries, and engaging in other activities that the Federal Reserve determines by
regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the Federal Reserve must consider whether the performance of such an
activity reasonably can be expected to produce benefits to the public that outweigh possible adverse effects. Possible benefits
include greater convenience, increased competition, and gains in efficiency. Possible adverse effects include undue concentration
of resources, decreased or unfair competition, conflicts of interest, and unsound banking practices. Despite prior approval, the
Federal Reserve may order a bank holding company or its subsidiaries to terminate any activity or to terminate ownership or
control of any subsidiary when the Federal Reserve has reasonable cause to believe that a serious risk to the financial safety,
soundness or stability of any bank subsidiary of that bank holding company may result from such an activity.
Changes in Control
Subject to certain exceptions, the BHC Act and the Change in Bank Control Act (“CBCA”), together with the applicable
regulations, require Federal Reserve approval (or, depending on the circumstances, no notice of disapproval) prior to any
acquisition of “control” of a bank or bank holding company. Under the BHC Act, a company (a broadly defined term that includes
partnerships among other things) that acquires the power, directly or indirectly, to direct the management or policies of an insured
depository institution or to vote 25% or more of any class of voting securities of any insured depository institution is deemed to
control the institution and to be a bank holding company. A company that acquires less than 5% of any class of voting security
(and that does not exhibit the other control factors) is presumed not to have control. For ownership levels between the 5% and
25% thresholds, the Federal Reserve has developed an extensive body of law on the circumstances in which control may or may
not exist. Further, on January 30, 2020, the Federal Reserve finalized a rule that simplifies and increases the transparency of its
rules for determining when one company controls another company for purposes of the BHC Act. The rule became effective
September 30, 2020. It has and will likely continue to have a meaningful impact on control determinations related to investments
in banks and bank holding companies and investments by bank holding companies in nonbank companies.
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. Our common stock
is registered under Section 12 of the Exchange Act so we are subject to these rules.
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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 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.
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. The Florida Statutes define “control” as either (i) indirectly or
directly owning, controlling or having power to vote 25% or more of the voting securities of a bank; (ii) controlling the election of
a majority of directors of a bank; (iii) owning, controlling, or having power to vote 10% or more of the voting securities as well as
directly or indirectly exercising a controlling influence over management or policies of a bank; or (iv) as determined by the
Florida Office of Financial Regulation. 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. We are prohibited, subject to some exceptions, from
extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on
the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a
competitor of the institution.
Capital; Dividends; Source of Strength
The Federal Reserve imposes certain capital requirements on financial holding companies under the BHC Act, including a
minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets. These requirements are described
below under “Capital Regulations.” Subject to these capital requirements and certain other restrictions, we are generally able to
borrow money to make a capital contribution to CCB, and such loans may be repaid from dividends paid from CCB to us. We are
also able to raise capital for contributions to CCB by issuing securities without having to receive regulatory approval, subject to
compliance with federal and state securities laws.
It is the Federal Reserve’s policy that bank holding companies should generally pay dividends on common stock only out of
income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected
future needs and financial condition. It is also the Federal Reserve’s policy that bank holding companies should not maintain
dividend levels that undermine their ability to be a source of strength to their banking subsidiaries. Additionally, the Federal
Reserve has indicated that bank holding companies should carefully review their dividend policies and has discouraged payment
ratios that are at maximum allowable levels unless both asset quality and capital are very strong. The Federal Reserve possesses
enforcement powers over bank holding companies and their non-bank subsidiaries to prevent or remedy actions that represent
unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the
payment of dividends by banks and bank holding companies.
Bank holding companies are expected to consult with the Federal Reserve before redeeming any equity or other capital instrument
included in Tier 1 or Tier 2 capital prior to stated maturity, if such redemption could have a material effect on the level or
composition of the organization’s capital base. In addition, a bank holding company may not repurchase shares equal to 10% or
more of its net worth if it would not be well-capitalized (as defined by the Federal Reserve) after giving effect to such repurchase.
Bank holding companies experiencing financial weaknesses, or that are at significant risk of developing financial weaknesses,
must consult with the Federal Reserve before redeeming or repurchasing common stock or other regulatory capital instruments.
In accordance with Federal Reserve policy, which has been codified by the Dodd-Frank Act, we are expected to act as a source of
financial strength to CCB and to commit resources to support CCB in circumstances in which we might not otherwise do so. In
furtherance of this policy, the Federal Reserve may require a financial holding company to terminate any activity or relinquish
control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such
activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the
financial holding company. Further, federal bank regulatory authorities have additional discretion to require a financial holding
company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository
institution’s financial condition.
Safe and Sound Banking Practices
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Bank holding companies and their nonbanking subsidiaries are prohibited from engaging in activities that represent unsafe and
unsound banking practices or that constitute a violation of law or regulations. Under certain conditions the Federal Reserve may
conclude that some actions of a bank holding company, such as a payment of a cash dividend, would constitute an unsafe and
unsound banking practice. The Federal Reserve also has the authority to regulate the debt of bank holding companies, including
the authority to impose interest rate ceilings and reserve requirements on such debt. The Federal Reserve may also require a bank
holding company to file written notice and obtain its approval prior to purchasing or redeeming its equity securities, unless certain
conditions are met.
Capital City Bank
Capital City Bank is a state-chartered commercial banking institution that is chartered by and headquartered in the State of Florida
and is subject to supervision and regulation by the Florida Office of Financial Regulation. The Florida Office of Financial
Regulation supervises and regulates all areas of our operations including, without limitation, the making of loans, the issuance of
securities, the conduct of our corporate affairs, the satisfaction of capital adequacy requirements, the payment of dividends, and
the establishment or closing of banking centers. We are also a member bank of the Federal Reserve System, which makes our
operations subject to broad federal regulation and oversight by the Federal Reserve. In addition, our deposit accounts are insured
by the FDIC up to the maximum extent permitted by law, and the FDIC has certain supervisory enforcement powers over us.
As a Florida state-chartered bank, we are empowered by statute, subject to the limitations contained in those statutes, to take and
pay interest on savings and time deposits, to accept demand deposits, to make loans on residential and other real estate, to make
consumer and commercial loans, to invest (with certain limitations) in equity securities and in debt obligations of banks and
corporations and to provide various other banking services for the benefit of our clients. Various consumer laws and regulations
also affect our operations, including state usury laws, laws relating to fiduciaries, consumer credit and equal credit opportunity
laws, and fair credit reporting. In addition, the Federal Deposit Insurance Corporation Improvement Act of 1991, or FDICIA,
prohibits insured state-chartered institutions from conducting activities as principal that are not permitted for national banks. A
bank, however, may engage in certain otherwise prohibited activity if it meets its minimum capital requirements and the FDIC
determines that the activity does not present a significant risk to the Deposit Insurance Fund (“DIF”).
Safety and Soundness Standards / Risk Management
The federal banking agencies have adopted guidelines establishing operational and managerial standards to promote the safety
and soundness of federally insured depository institutions. The guidelines set forth standards for internal controls, information
systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees
and benefits, asset quality and earnings.
In general, the safety and soundness guidelines prescribe the goals to be achieved in each area, and each institution is responsible
for establishing its own procedures to achieve those goals. If an institution fails to comply with any of the standards set forth in
the guidelines, the financial institution’s primary federal regulator may require the institution to submit a plan for achieving and
maintaining compliance. If a financial institution fails to submit an acceptable compliance plan or fails in any material respect to
implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order
directing the institution to cure the deficiency. Until the deficiency cited in the regulator’s order is cured, the regulator may
restrict the financial institution’s rate of growth, require the financial institution to increase its capital, restrict the rates the
institution pays on deposits or require the institution to take any action the regulator deems appropriate under the circumstances.
Noncompliance with the standards established by the safety and soundness guidelines may also constitute grounds for other
enforcement action by the federal bank regulatory agencies, including cease and desist orders and civil money penalty
assessments.
The bank regulatory agencies have increasingly emphasized the importance of sound risk management processes and strong
internal controls when evaluating the activities of the financial institutions they supervise. Properly managing risks has been
identified as critical to the conduct of safe and sound banking activities and has become even more important as new
technologies, product innovation and the size and speed of financial transactions have changed the nature of banking markets. The
agencies have identified a spectrum of risks facing a banking institution including, but not limited to, credit, market, liquidity,
operational, legal and reputational risk. In particular, recent regulatory pronouncements have focused on operational risk, which
arises from the potential that inadequate information systems, operational problems, breaches in internal controls, fraud or
unforeseen catastrophes will result in unexpected losses. New products and services, third party risk management and
cybersecurity are critical sources of operational risk that financial institutions are expected to address in the current environment.
The Bank is expected to have active board and senior management oversight; adequate policies, procedures and limits; adequate
risk measurement, monitoring and management information systems; and comprehensive internal controls.
Reserves
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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. 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 Federal Reserve may
restrict the ability of CCB to pay dividends if such payments would constitute an unsafe or unsound banking practice.
Additionally, financial institutions are now required to maintain a capital conservation buffer of at least 2.5% of risk-weighted
assets in order to avoid restrictions on capital distributions and other payments. 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.
In addition, Florida law and Federal regulation place restrictions on the declaration of dividends from state-chartered banks to
their holding companies. Under the Florida Financial Institutions Code, the board of directors of a state-chartered bank, after it
charges off bad debts, depreciation and other worthless assets, if any, and makes provisions for reasonably anticipated future
losses on loans and other assets, may quarterly, semi-annually or annually declare a dividend of up to the aggregate net profits of
that period combined with the bank’s retained net profits for the preceding two years. In addition, with the approval of the Florida
Office of Financial Regulation and Federal Reserve, the bank’s board of directors may declare a dividend from retained net
profits which accrued prior to the preceding two years. Before declaring such dividends, 20% of the net profits for the preceding
period as is covered by the dividend must be transferred to the surplus fund of the bank until this fund becomes equal to the
amount of the bank’s common stock then issued and outstanding. However, a Florida state-chartered bank may not declare any
dividend if (i) its net income (loss) from the current year combined with the retained net income (loss) for the preceding two years
aggregates a loss or (ii) the payment of such dividend would cause the capital account of the bank to fall below the minimum
amount required by law, regulation, order or any written agreement with the Florida Office of Financial Regulation or a federal
regulatory agency. Under Federal Reserve regulations, a state member bank may, without the prior approval of the Federal
Reserve, pay a dividend in an amount that, when taken together with all dividends declared during the calendar year, does not
exceed the sum of the bank’s net income during the current calendar year and the retained net income of the prior two calendar
years. The Federal Reserve may approve greater amounts.
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. In order to
fund the DIF, all insured depository institutions are required to pay quarterly assessments to the FDIC that are based on an
institutions assignment to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other
factors. The FDIC has the discretion to adjust an institution’s risk rating and may terminate its insurance of deposits upon a
finding that the institution engaged or is engaging in unsafe and unsound practices, is in an unsafe or unsound condition to
continue operations, or violated any applicable law, regulation, rule, order or condition imposed by the FDIC or written
agreement entered into with the FDIC. 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 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. In November 2023, the FDIC adopted a final rule with respect to a
special assessment to recover the costs associated with protecting uninsured depositors following the closures of Silicon Valley
Bank and Signature Bank. The final rule does not apply to any banking organization with less than $5 billion in total consolidated
assets and therefore the special assessment is not expected to impact the Company.
Transactions with Affiliates and Insiders
Pursuant to Sections 23A and 23B of the Federal Reserve Act and Regulation W, the authority of CCB to engage in transactions
with related parties or “affiliates” or to make loans to insiders is limited. Loan transactions with an affiliate generally must be
collateralized and certain transactions between CCB and its affiliates, including the sale of assets, the payment of money or the
provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to CCB, as those
prevailing for comparable nonaffiliated transactions. In addition, CCB generally may not purchase securities issued or
underwritten by affiliates.
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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). Among other things, these loans must be made on terms substantially the same as those prevailing on transactions
made to unaffiliated individuals and certain extensions of credit to those persons must first be approved in advance by a
disinterested majority of the entire board of directors. Section 22(h) of the Federal Reserve Act prohibits loans to any of those
individuals where the aggregate amount exceeds an amount equal to 15% of an institution’s unimpaired capital and surplus plus
an additional 10% of unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral, or
when the aggregate amount on all of the extensions of credit outstanding to all of these persons would exceed our unimpaired
capital and unimpaired surplus. 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. 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 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. 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. We received a satisfactory rating on our most recent CRA assessment.
In October 2023, the Federal Reserve, along with the FDIC and OCC, issued a joint final rule that made significant amendments
to the regulations implementing the CRA to “strengthen and modernize” those regulations, including by creating rigorous data-
driven performance tests and growing the geographic areas in which a bank’s CRA performance may be evaluated. The final rules
are intended to achieve the following key goals, among others: strengthen the achievement of the core purpose of the CRA;
encourage banks to expand access to credit, investment, and banking services in LMI communities; adapt to changes in the
banking industry, including internet and mobile banking; provide greater clarity and consistency in the application of the CR
A
regulations; and tailor CRA evaluations and data collection to bank size and type. Although the effective date of the final rule is
April 1, 2024, the compliance date for the majority of the rule’s provisions is January 1, 2026. The remaining requirements,
including the data reporting requirements, will be applicable on January 1, 2027. 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.
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. These risk-based capital guidelines were designed to
make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to
account for off-balance sheet exposure, to minimize disincentives for holding liquid assets, and to achieve greater consistency in
evaluating the capital adequacy of major banks throughout the world. The resulting capital ratios represent capital as a percentage
of total risk-weighted assets and off-balance sheet items.
In computing total risk-weighted assets, bank and bank holding company assets are given risk-weights of 0%, 20%, 50%, 100%
and 150%. In addition, certain off-balance sheet items are given similar credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight will apply. Most loans will be assigned to the 100% risk category, except
for performing first mortgage loans fully secured by 1-to-4 family and certain multi-family residential property, which carry a
50% risk rating. Most investment securities (including, primarily, general obligation claims on states or other political
subdivisions of the United States) will be assigned to the 20% category, except for municipal or state revenue bonds, which have
a 50% risk-weight, and direct obligations of the U.S. Treasury or obligations backed by the full faith and credit of the U.S.
Government, which have a 0% risk-weight. In covering off -balance sheet items, direct credit substitutes, including general
guarantees and standby letters of credit backing financial obligations, are given a 100% conversion factor. Transaction -related
contingencies such as bid bonds, standby letters of credit backing nonfinancial obligations, and undrawn commitments (including
commercial credit lines with an initial maturity of more than one year) have a 50% conversion factor. Short-term commercial
letters of credit are converted at 20% and certain short-term unconditionally cancelable commitments have a 0% factor.
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The rules implement strict eligibility criteria for regulatory capital instruments and improve the methodology for calculating risk-
weighted assets to enhance risk sensitivity. 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. 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. If a financial institution’s capital conservation
buffer falls below 2.5% (e.g., if the institution’s Common Equity Tier 1 Capital to Risk-Weighted Assets is less than 7.0%), then
capital distributions and discretionary payments will be limited or prohibited based on the size of the institution’s buffer. 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. AOCI generally flows through to regulatory capital; however, community banks and their holding companies
were allowed a one-time irrevocable opt-out election to continue to treat AOCI the same as under the old regulations for
regulatory capital purposes. This election was required to be made on the first call report or bank holding company annual report
(on form FR Y-9C) filed after January 1, 2015. We made the opt-out election. Additionally, the rules also permitted community
banks with less than $15 billion in total assets to continue to count certain non -qualifying capital instruments issued prior to May
19, 2010, as Tier 1 capital, including trust preferred securities and cumulative perpetual preferred stock (subject to a limit of 25%
of Tier 1 capital). However, non-qualifying capital instruments issued on or after May 19, 2010, would not qualify for Tier 1
capital treatment.
Commercial Real Estate Concentration Guidelines
The federal banking regulators have implemented guidelines to address increased concentrations in commercial real estate loans.
These guidelines describe the criteria regulatory agencies will use as indicators to identify institutions potentially exposed to
commercial real estate concentration risk. An institution that has (i) experienced rapid growth in commercial real estate lending,
(ii) notable exposure to a specific type of commercial real estate, (iii) total reported loans for construction, land development, and
other land representing 100% or more of total risk-based capital, or (iv) total commercial real estate (including construction) loans
representing 300% or more of total risk-based capital and the outstanding balance of the institutions commercial real estate
portfolio has increased by 50% or more in the prior 36 months, may be identified for further supervisory analysis of a potential
concentration risk.
At December 31, 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. As a result, we are not deemed to have a concentration in
commercial real estate lending under applicable regulatory guidelines.
Prompt Corrective Action
The federal banking agencies are required to take “prompt corrective action” with respect to financial institutions that do not meet
minimum capital requirements. The law establishes five categories for this purpose: “well-capitalized,” “adequately capitalized,”
“undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” To be considered “well-capitalized,” an
insured depository institution must maintain minimum capital ratios and must not be subject to any order or written directive to
meet and maintain a specific capital level for any capital measure. An institution that fails to remain well-capitalized becomes
subject to a series of restrictions that increase in severity as its capital condition weakens. Such restrictions may include a
prohibition on capital distributions, restrictions on asset growth or restrictions on the ability to receive regulatory approval of
applications. The regulations apply only to banks and not to BHCs. However, the Federal Reserve is authorized to take
appropriate action at the holding company level based on the undercapitalized status of the holding company’s subsidiary banking
institutions. In certain instances relating to an undercapitalized banking institution, the BHC would be required to guarantee the
performance of the undercapitalized subsidiary’s capital restoration plan and could be liable for civil money damages for failure
to fulfill those guarantee commitments.
In addition, failure to meet capital requirements may cause an institution to be directed to raise additional capital. Federal law
further mandates that the agencies adopt safety and soundness standards generally relating to operations and management, asset
quality and executive compensation, and authorizes administrative action against an institution that fails to meet such standards.
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.
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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). Rapid growth, poor loan portfolio performance, or poor earnings
performance, or a combination of these factors, could change our capital position in a relatively short period of time, making
additional capital infusions necessary. Our capital ratios can be found in Note 17 to the Notes to our Consolidated Financial
Statements.
Interstate Banking and Branching
The Dodd-Frank Act relaxed interstate branching restrictions by modifying the federal statute governing de novo interstate
branching by state member banks. Consequently, a state member bank may open its initial branch in a state outside of the bank’s
home state by way of an interstate bank branch, so long as a bank chartered under the laws of that state would be permitted to
open a branch at that location.
Anti-money Laundering
The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (the “USA Patriot Act”), provides the federal government with additional powers to address terrorist threats through
enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money
laundering requirements. 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.
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.
The Anti-Money Laundering Act (“AMLA”), which amends the BSA, was enacted in early 2021. The AMLA is intended to be a
comprehensive reform and modernization of U.S. bank secrecy and anti-money laundering laws. In particular, it codifies a risk-
based approach to anti-money laundering compliance for financial institutions, requires the U.S. Department of the Treasury to
promulgate priorities for anti-money laundering and countering the financing of terrorism policy, requires the development of
standards for testing technology and internal processes for BSA compliance, expands enforcement- and investigation-related
authority (including increasing available sanctions for certain BSA violations), and expands BSA whistleblower incentives and
protections.
Many AMLA provisions require additional rulemakings, reports, and other measures, and the impact of the AMLA will depend
on, among other things, rulemaking and implementation guidance. In June 2021, the Financial Crimes Enforcement Network, a
bureau of the U.S. Department of the Treasury, issued the priorities for anti-money laundering and countering the financing of
terrorism policy required under the AMLA. The priorities include corruption, cybercrime, terrorist financing, fraud, transnational
crime, drug trafficking, human trafficking and proliferation financing.
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. Department of Treasury, or “OFAC.” OFAC administers and enforces economic and trade
sanctions against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities
related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of
the United States, based on U.S. foreign policy and national security goals. OFAC issues regulations that restrict transactions by
U.S. persons or entities (including banks), located in the U.S. or abroad, with certain foreign countries, their nationals or
“specially designated nationals.” OFAC regularly publishes listings of foreign countries and designated nationals that are
prohibited from conducting business with any U.S. entity or individual. While OFAC is responsible for promulgating, developing
and administering these controls and sanctions, all of the bank regulatory agencies are responsible for ensuring that financial
institutions comply with these regulations.
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. Some state laws also protect the privacy of information of state residents and require
adequate security of such data, and certain state laws may require us to notify affected individuals of security breaches of
computer databases that contain their personal information. 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.
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Cybersecurity
The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding
cybersecurity intended to enhance cyber risk management among financial institutions. Financial institutions are expected to
comply with such guidance and standards and to accordingly develop appropriate security controls and risk management
processes. If we fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions,
including financial penalties. In 2023, the SEC issued a final rule that requires disclosure of material cybersecurity incidents, as
well as cybersecurity risk management, strategy and governance. Under this rule, banking organizations that are SEC registrants
must generally disclose information about a material cybersecurity incident within four business days of determining it is material
with periodic updates as to the status of the incident in subsequent filings, as necessary.
Under a final rule adopted by federal banking agencies in 2021, banking organizations are required to notify their primary
banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is
reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver
banking products and services to a material portion of its customer base, its businesses and operations that would result in
material loss, or its operations that would impact the stability of the United States.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and
many states have also recently implemented or modified their data breach notification, information security and data privacy
requirements. We expect this trend of state-level activity in those areas to continue and are continually monitoring developments
in the states in which our customers are located.
Risks and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for
the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of
internet banking, mobile banking, and other technology-based products and services by us and our customers.
See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity and Item 1C. Cybersecurity for a further
discussion of risk management strategies and governance processes related to cybersecurity.
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. 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.
Before opting in, the consumer must be provided a notice that explains the financial institution’s overdraft services, including the
fees associated with the service, and the consumer’s choices. Financial institutions must provide consumers who do not opt in
with the same account terms, conditions and features (including pricing) that they provide to consumers who do opt in.
Consumer Laws and Regulations
CCB is also subject to other federal and state consumer laws and regulations that are designed to protect consumers in
transactions with banks. While the list set forth below is not exhaustive, these laws and regulations include the Truth in Lending
Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Check Clearing for the
21st Century Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Equal Credit Opportunity Act, the
Fair Housing Act, the Home Mortgage Disclosure Act, the Fair and Accurate Credit Transactions Act, the Mortgage Disclosure
Improvement Act, and the Real Estate Settlement Procedures Act, among others. 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.
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In addition, the Consumer Financial Protection Bureau (“CFPB”) issues regulations and standards under these federal consumer
protection laws that affect our consumer businesses. These include regulations setting “ability to repay” standards for residential
mortgage loans and mortgage loan servicing and originator compensation standards, which generally require creditors to make a
reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling
(excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from
liability under this requirement for loans that meet the requirements of the “qualified mortgage” safe harbor. 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. This legislation may change
banking and tax statutes and the environment in which our banking subsidiary and we operate in substantial and unpredictable
ways. We cannot determine the ultimate effect that potential legislation, if enacted, or implementing regulations with respect
thereto, would have upon our financial condition or results of operations or that of our banking subsidiary.
Legislative and Regulatory Responses to the COVID-19 Pandemic
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which came into law in 2020, was a $2.2 trillion
economic stimulus bill that was intended to provide relief in response to the COVID-19 pandemic. The CARES Act, among other
things, amended the SBA’s loan program, in which the Bank participates, to create a guaranteed, unsecured loan program (the
“PPP”) to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19. The PPP
authorized financial institutions to make federally guaranteed loans to qualifying small businesses and non-profit organizations.
These loans carry an interest rate of 1% per annum and a maturity of two years for loans originated prior to June 5, 2020 and five
years for loans originated on or after June 5, 2020. The PPP provides that such loans may be forgiven if the borrowers meet
certain requirements with respect to maintaining employee headcount and payroll and the use of the loan proceeds after the loan is
originated. Although the PPP ended in accordance with its terms on May 31, 2021, outstanding PPP loans continue to go through
the process of either obtaining forgiveness from the SBA or pursuing claims under the SBA guaranty.
There have also been a number of regulatory actions intended to help mitigate the adverse economic impact of the COVID-19
pandemic on borrowers, including several mandates from the bank regulatory agencies, requiring financial institutions to work
constructively with borrowers affected by the COVID-19 pandemic. 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. Changes in the discount rate on member bank borrowing, availability of borrowing at the “discount window,”
open market operations, changes in the Fed Funds target interest rate, changes in interest rates payable on reserve accounts, the
imposition of changes in reserve requirements against member banks’ deposits and assets of foreign banking centers and the
imposition of and changes in reserve requirements against certain borrowings by banks and their affiliates are some of the
instruments of monetary policy available to the Federal Reserve. These monetary policies are used in varying combinations to
influence overall growth and distributions of bank loans, investments and deposits, which may affect interest rates charged on
loans or paid on deposits. The monetary policies of the Federal Reserve have had a significant effect on the operating results of
commercial banks and are expected to continue to do so in the future. The Federal Reserve’s policies are primarily influenced by
its dual mandate of price stability and full employment, and, to a lesser degree by short-term and long-term changes in the
international trade balance and in the fiscal policies of the U.S. Government. Future changes in monetary policy and the effect of
such changes on our business and earnings in the future cannot be predicted.
Website Access to Company’s Reports
Our Internet website is www.ccbg.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, including any amendments to those reports filed or furnished pursuant to section 13(a) or 15(d), and reports filed
pursuant to Section 16, 13(d), and 13(g) of the Exchange Act are available free of charge through our website as soon as
reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. The
information on our website is not incorporated by reference into this report.
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Item 1A. Risk Factors
An investment in our common stock contains a high degree of risk. You should consider carefully the following risk factors before
deciding whether to invest in our common stock. Our business, including our operating results and financial condition, could be
harmed by any of these risks. Additional risks and uncertainties not currently known to us or that we currently deem to be
immaterial also may materially and adversely affect our business. The trading price of our common stock could decline due to
any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also refer to the other
information contained in our filings with the SEC, including our financial statements and related notes.
Market Risks
We may incur losses if we are unable to successfully manage interest rate risk.
Our profitability depends to a large extent on Capital City Bank’s net interest income, which is the difference between income on
interest-earning assets, such as loans and investment securities, and expense on interest-bearing liabilities such as deposits and
borrowings. We are unable to predict changes in market interest rates, which are affected by many factors beyond our control,
including inflation, recession, unemployment, federal funds target rate, money supply, domestic and international events and
changes in the United States and other financial markets. Our net interest income may be reduced if: (i) more interest-earning
assets than interest-bearing liabilities reprice or mature during a time when interest rates are declining or (ii) more interest-bearing
liabilities than interest-earning assets reprice or mature during a time when interest rates are rising.
Changes in the difference between short-term and long-term interest rates may also harm our business. We generally use short-
term deposits to fund longer-term assets. When interest rates change, assets and liabilities with shorter terms reprice more quickly
than those with longer terms, which could have a material adverse effect on our net interest margin. During 2022 and 2023, the
Federal Reserve raised the federal funds rate 11 times for a cumulative increase of 5.25% 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. 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. Further, increased price competition for deposits resulting from the
return to a historically normal interest rate environment could adversely affect our net interest margin.
Although we continuously monitor interest rates and have a number of tools to manage our interest rate risk exposure, changes in
market assumptions regarding future interest rates could significantly impact our interest rate risk strategy, our financial position
and results of operations. If we do not properly monitor our interest rate risk management strategies, these activities may not
effectively mitigate our interest rate sensitivity or have the desired impact on our results of operations or financial condition.
Interest rates and economic conditions affect consumer demand for housing and can create volatility in the mortgage industry.
These risks can have a material impact on the volume of mortgage originations and refinancings, adversely affecting mortgage
banking revenues and the profitability of our mortgage banking business.
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section captioned
“Net Interest Income” and “Market Risk and Interest Rate Sensitivity” elsewhere in this report for further discussion related to
interest rate sensitivity and our management of interest rate risk.
The fair value of our investments could decline which would cause a reduction in shareowners’ equity.
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. Such principles require that unrealized
gains and losses in the estimated value of the available-for-sale portfolio be “marked to market” and reflected as a separate item in
shareowners’ equity (net of tax) as accumulated other comprehensive income/losses. Shareowners’ equity will continue to reflect
the unrealized gains and losses (net of tax) of these investments. The fair value of our investment portfolio may decline, causing a
corresponding decline in shareowners’ equity.
Management believes that several factors will affect the fair values of our investment portfolio. These include, but are not limited
to, changes in interest rates or expectations of changes in interest rates, the degree of volatility in the securities markets, inflation
rates or expectations of inflation and the slope of the interest rate yield curve (the yield curve refers to the differences between
short-term and long-term interest rates; a positively sloped yield curve means short -term rates are lower than long-term rates).
These and other factors may impact specific categories of the portfolio differently, and we cannot predict the effect these factors
may have on any specific category.
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Inflationary pressures and rising prices may affect our results of operations and financial condition.
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.
Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may
occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period
of inflation could cause wages and other costs to further increase which could adversely affect our results of operations and
financial condition. Sustained higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price
pressures, which could push down asset prices and weaken economic activity. A deterioration in economic conditions in the
United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan
collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our
business, financial condition and results of operations.
The impact of interest rates on our mortgage banking business can have a significant impact on revenues.
Changes in interest rates can impact our mortgage-related revenues and net revenues associated with our mortgage activities. A
decline in mortgage rates generally increases the demand for mortgage loans as borrowers refinance, but also generally leads to
accelerated payoffs. Conversely, in a constant or increasing rate environment, we would expect fewer loans to be refinanced and a
decline in payoffs. Although we use models to assess the impact of interest rates on mortgage-related revenues, the estimates of
revenues produced by these models are dependent on estimates and assumptions of future loan demand, prepayment speeds and
other factors which may differ from actual subsequent experience.
Our profitability depends significantly on economic conditions in the States of Florida and Georgia.
Our profitability and the success of our business depends substantially on the general economic conditions of the States of Florida
and, to a lesser extent, Georgia, as well as the specific local markets in which we operate. Unlike larger national or other regional
banks that are more geographically diversified, we provide banking and financial services primarily to customers across northern
Florida and Georgia. The local economic conditions in these areas have a significant impact on the demand for our products and
services as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our
deposit funding sources. As a result, a significant decline in general economic conditions in Florida or Georgia, whether caused
by recession, inflation, unemployment, in-flows and out-flows of residents, shifts in political landscape, changes in securities
markets, acts of terrorism, pandemics, natural disasters, climate change, outbreak of hostilities or other occurrences or other
factors could have a material adverse effect on our business, financial condition and results of operations.
Shares of our common stock are not an insured deposit and may lose value.
The shares of our common stock are not a bank deposit and will not be insured or guaranteed by the FDIC or any other
government agency. Your investment will be subject to investment risk, and you must be capable of affording the loss of your
entire investment.
Limited trading activity for shares of our common stock may contribute to price volatility.
While our common stock is listed and traded on the Nasdaq Global Select Market, there has historically been limited trading
activity in our common stock. The average daily trading volume of our common stock over the 12-month period ending
December 31, 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. Similarly, significant sales of our common stock, or the
expectation of these sales, could cause our stock prices to fall.
Securities analysts may not initiate coverage or continue to cover our common stock, and this may have a negative impact
on its market price.
The trading market for our common stock will depend in part on the research and reports that securities analysts publish about us
and our business. We do not have any control over securities analysts, and they may not initiate coverage or continue to cover our
common stock. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect its
market price. If we are covered by securities analysts, and our common stock is the subject of an unfavorable report, our stock
price would likely decline. 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.
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Credit Risks
Our loan portfolio includes loans with a higher risk of loss which could lead to higher loan losses and nonperforming
assets.
We originate commercial real estate loans, commercial loans, construction loans, vacant land loans, consumer loans, and
residential mortgage loans primarily within our market area. Commercial real estate, commercial, construction, vacant land, and
consumer loans may expose a lender to greater credit risk than traditional fixed-rate fully amortizing loans secured by single-
family residential real estate because the collateral securing these loans may not be sold as easily as single-family residential real
estate. In addition, these loan types tend to involve larger loan balances to a single borrower or groups of related borrowers and
are more susceptible to a risk of loss during a downturn in the business cycle. These loans also have historically had greater credit
risk than other loans for the following reasons:
●
Commercial Real Estate Loans
. Repayment is dependent on income being generated in amounts sufficient to cover
operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing
over the loan period, but rather have a balloon payment due at maturity. A borrower’s ability to make a balloon payment
typically will depend on the borrower’s ability to either refinance the loan or timely sell the underlying property. 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. 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 risk of loss is largely dependent on our initial estimate of whether the property’s value at
completion equals or exceeds the cost of property construction and the availability of take-out financing. During the
construction phase, a number of factors can result in delays or cost overruns. If our estimate is inaccurate or if actual
construction costs exceed estimates, the value of the property securing our loan may be insufficient to ensure full
repayment when completed through a permanent loan, sale of the property, or by seizure of collateral. At December 31,
2023, construction loans comprised approximately 7.2% of our total loan portfolio.
●
Vacant Land Loans
. Because vacant or unimproved land is generally held by the borrower for investment purposes or
future use, payments on loans secured by vacant or unimproved land will typically rank lower in priority to the borrower
than a loan the borrower may have on their primary residence or business. These loans are susceptible to adverse
conditions in the real estate market and local economy. At December 31, 2023, vacant land loans comprised
approximately 3.5% of our total loan portfolio.
●
HELOCs
. Our open-ended home equity loans have an interest-only draw period followed by a five-year repayment
period of 0.75% of the principal balance monthly and a balloon payment at maturity. Upon the commencement of the
repayment period, the monthly payment can increase significantly, thus, there is a heightened risk that the borrower will
be unable to pay the increased payment. Further, these loans also involve greater risk because they are generally not fully
amortizing over the loan period, but rather have a balloon payment due at maturity. A borrower’s ability to make a
balloon payment may depend on the borrower’s ability to either refinance the loan or timely sell the underlying property.
At December 31, 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. 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.
The increased risks associated with these types of loans result in a correspondingly higher probability of default on such loans (as
compared to fixed-rate fully amortizing single-family real estate loans). Loan defaults would likely increase our loan losses and
nonperforming assets and could adversely affect our allowance for credit losses and our results of operations.
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Our loan portfolio is heavily concentrated in mortgage loans secured by properties in Florida and Georgia which causes
our risk of loss to be higher than if we had a more geographically diversified portfolio.
Our interest-earning assets are heavily concentrated in mortgage loans secured by real estate, particularly real estate located in
Florida and Georgia. At December 31, 2023, approximately 81.8% of our loans included real estate as a primary, secondary, or
tertiary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of
default by the borrower; however, the value of the collateral may decline during the time the credit is extended. If we are required
to liquidate the collateral securing a loan during a period of reduced real estate values to satisfy the debt, our earnings and capital
could be adversely affected.
Additionally, at December 31, 2023, a significant number of our loans secured by real estate are secured by commercial and
residential properties located in Florida and Georgia. The concentration of our loans in these areas subjects us to risk that a
downturn in the economy or recession in these areas could result in a decrease in loan originations and increases in delinquencies
and foreclosures, which would more greatly affect us than if our lending were more geographically diversified. In addition, since
a large portion of our portfolio is secured by properties located in Florida and Georgia, the occurrence of a natural disaster, such
as a hurricane, or a man-made disaster could result in a decline in loan originations, a decline in the value or destruction of
mortgaged properties and an increase in the risk of delinquencies, foreclosures or loss on loans originated by us. We may suffer
further losses due to the decline in the value of the properties underlying our mortgage loans, which would have an adverse
impact on our results of operations and financial condition.
Our concentration in loans secured by real estate may increase our credit losses, which would negatively affect our
financial results.
Due to the lack of diversified industry within some of the markets served by CCB and the relatively close proximity of our
geographic markets, we have both geographic concentrations as well as concentrations in the types of loans funded. Specifically,
due to the nature of our markets, a significant portion of the portfolio has historically been secured with real estate. At December
31, 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.
In the event we are required to foreclose on a property securing one of our mortgage loans or otherwise pursue our remedies in
order to protect our investment, we may be unable to recover funds in an amount equal to our projected return on our investment
or in an amount sufficient to prevent a loss to us due to prevailing economic conditions, real estate values and other factors
associated with the ownership of real property. As a result, the market value of the real estate or other collateral underlying our
loans may not, at any given time, be sufficient to satisfy the outstanding principal amount of the loans, and consequently, we
would sustain loan losses.
An inadequate allowance for credit losses would reduce our earnings.
We are exposed to the risk that our clients may be unable to repay their loans according to their terms and that any collateral
securing the payment of their loans may not be sufficient to assure full repayment. This could result in credit losses that are
inherent in the lending business. We evaluate the collectability of our loan portfolio and provide an allowance for credit losses
that we believe is adequate based upon such factors as:
●
the risk characteristics of various classifications of loans;
●
previous loan loss experience;
●
specific loans that have loss potential;
●
delinquency trends;
●
estimated fair market value of the collateral;
●
current and future economic conditions; and
●
geographic and industry loan concentrations.
At December 31, 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. Although
management uses the best information available to make determinations with respect to the allowance for credit losses, future
adjustments may be necessary if economic conditions differ substantially from the assumptions used or adverse developments
arise with respect to our nonperforming or performing loans. In addition, regulatory agencies, as an integral part of their
examination process, periodically review our estimated losses on loans. Our regulators may require us to recognize additional
losses based on their judgments about information available to them at the time of their examination. Accordingly, the allowance
for credit losses may not be adequate to cover all future loan losses and significant increases to the allowance may be required in
the future if, for example, economic conditions worsen. A material increase in our allowance for credit losses would adversely
impact our net income and capital in future periods, while having the effect of overstating our current period earnings.
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We may incur significant costs associated with the ownership of real property as a result of foreclosures, which could
reduce our net income.
Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and
may thereafter own and operate such property, in which case we would be exposed to the risks inherent in the ownership of real
estate.
The amount that we, as a mortgagee, may realize after a foreclosure is dependent upon factors outside of our control, including,
but not limited to:
●
general or local economic conditions;
●
environmental cleanup liability;
●
neighborhood values;
●
interest rates;
●
real estate tax rates;
●
operating expenses of the mortgaged properties;
●
supply of and demand for rental units or properties;
●
ability to obtain and maintain adequate occupancy of the properties;
●
zoning laws;
●
governmental rules, regulations and fiscal policies; and
●
acts of God.
Certain expenditures associated with the ownership of real estate, including real estate taxes, insurance and maintenance costs,
may adversely affect the income from the real estate. Furthermore, we may need to advance funds to continue to operate or to
protect these assets. As a result, the cost of operating real property assets may exceed the rental income earned from such
properties or we may be required to dispose of the real property at a loss.
Reliance on inaccurate or misleading financial statements, credit reports, or other financial information could have a
material adverse impact on our business, financial condition, and results of operations.
In deciding whether to extend credit or enter into other transactions, we rely on information furnished by or on behalf of
customers and counterparties, including financial statements, credit reports, and other financial information. We also rely on
representations of those customers, counterparties, or other third parties, such as independent auditors, as to the accuracy and
completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports, or other financial
information could have a material adverse impact on our business, financial condition, and results of operations.
Liquidity and Capital Risks
Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
Effective liquidity management is essential for the operation of our business. We require sufficient liquidity to meet client loan
requests, client deposit maturities and withdrawals, payments on our debt obligations as they come due and other cash
commitments under both normal operating conditions and other unpredictable circumstances causing industry or general financial
market stress. If we are unable to raise funds through deposits, borrowings, earnings and other sources, it could have a substantial
negative effect on our liquidity. In particular, a majority of our liabilities during 2023 were checking accounts and other liquid
deposits, which are generally payable on demand or upon short notice. By comparison, a substantial majority of our assets were
loans, which cannot generally be called or sold in the same time frame. Although we have historically been able to replace
maturing deposits and advances as necessary, we might not be able to replace such funds in the future, especially if a large
number of our depositors seek to withdraw their accounts at the same time, regardless of the reason. Our access to funding
sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us
specifically or the financial services industry or economy in general. Factors that could negatively impact our access to liquidity
sources include a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are
concentrated, adverse regulatory action against us, or our inability to attract and retain deposits. Our access to deposits may be
negatively impacted by, among other factors, periods of low interest rates or high interest rates. Periods of high interest rates
could promote increased competition for deposits, including from new financial technology competitors, or provide customers
with alternative investment options. Our ability to borrow could also be impaired by factors that are not specific to us, such 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.
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A significant decrease in our public fund deposit balances as a result of increased competition in the current higher
interest-rate environment and seasonal nature of these deposits could materially and adversely affect our liquidity.
The Company has many long-standing relationships with municipal entities throughout its markets and the deposits held by these
customers have provided a relatively attractive and stable (although seasonal) funding source for the Company over an extended
period of time. Public fund deposits from local government entities such as universities, counties, school districts, and other
municipalities generally have higher average balances and historically been more volatile than nonpublic deposits because they
are heavily impacted by the seasonality of tax collection, changes in competitive and market forces, and fiscal spending patterns,
as well as the longer-term financial position of local government entities, which can change from year to year. Such public fund
deposits are often subject to competitive bidding and in many cases must be secured by pledging a portion of our investment
securities.
The Company’s inability to retain public fund deposit balances due to increased competition in the current higher
interest-rate environment and seasonal nature of these deposits could materially and adversely affect our liquidity or result in the
use of higher-cost funding sources, which, in turn, could materially and adversely affect our business, results of operations or
financial condition.
Unrealized losses in our securities portfolio could materially and adversely affect our liquidity.
As market interest rates have increased, we have experienced significant unrealized losses on our available-for-sale securities
portfolio. Unrealized losses related to available-for-sale securities are reflected in accumulated other comprehensive income in
our consolidated statements of financial condition and reduce the level of our book capital and tangible common equity. However,
such unrealized losses do not affect our regulatory capital ratios. We actively monitor our available-for-sale securities portfolio
and we do not currently anticipate the need to realize material losses from the sale of securities for liquidity purposes.
Furthermore, we believe it is unlikely that we would be required to sell any such securities before recovery of their amortized cost
bases, which may be at maturity. Nonetheless, our access to liquidity sources could be affected by unrealized losses if securities
must be sold at a loss, tangible capital ratios decline from an increase in unrealized losses or realized credit losses, the Federal
Home Loan Bank of Atlanta (“FHLB”) or other funding sources reduce capacity, or bank regulators impose restrictions on us that
impact the level of interest rates we may pay on deposits or our ability to access federal funds lines or brokered deposits.
Additionally, significant unrealized losses could negatively impact market and customer perceptions of the Company, which
could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured
deposits.
We may need to raise additional capital in the future, and such capital may not be available on acceptable terms or at all.
We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our
commitments and business needs, particularly if our asset quality or earnings were to deteriorate significantly. Our ability to raise
additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside
of our control, and our financial condition. Economic conditions and the loss of confidence in financial institutions may increase
our cost of funding and limit access to certain customary sources of capital, including inter-bank borrowings, repurchase
agreements and borrowings from the discount window of the Federal Reserve.
Further, as a result of our failure to timely file our Quarterly Report on Form 10-Q for the three-month period ended September
30, 2023, we are currently ineligible to file new short form registration statements on Form S-3 and, absent a waiver of the Form
S-3 eligibility requirements, we are not currently permitted to use our existing registration statement on Form S-3D. If we seek to
access the capital markets through a registered offering during the period of time that we are unable to use Form S-3, we may be
required to publicly disclose the proposed offering and the material terms thereof before the offering commences and we will be
required to use a registration statement on Form S-1 to register securities with the SEC, which would hinder our ability to act
quickly in raising capital to take advantage of market conditions in our capital raising activities and would increase our cost of
raising capital.
As a result, we may be unable to raise capital on terms favorable to us, in a timely manner or at all, which could materially and
adversely affect our liquidity, business, results of operations, or financial condition. Moreover, if we need to raise capital in the
future, we may have to do so when many other financial institutions are also seeking to raise capital and would have to compete
with those institutions for investors.
We may be unable to pay dividends in the future.
In 2023, our Board of Directors declared four quarterly cash dividends. Declarations of any future dividends will be contingent on
our ability to earn sufficient profits and to remain well capitalized, including our ability to hold and generate sufficient capital to
comply with the Common Equity Tier 1 (“CET1”) Capital conservation buffer requirement. In addition, due to our contractual
obligations with the holders of our trust preferred securities, if we defer the payment of accrued interest owed to the holders of our
trust preferred securities, we may not make dividend payments to our shareowners.
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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. Additional
state laws generally applicable to Florida corporations may also limit our ability to declare and pay dividends. Thus, our ability to
fund future dividends may be restricted by state and federal laws and regulations.
Regulatory and Compliance Risks
We are subject to extensive regulation, which could restrict our activities and impose financial requirements or limitations
on the conduct of our business.
We are subject to extensive regulation, supervision and examination by our regulators, including the Florida Office of Financial
Regulation, the Federal Reserve, and the FDIC. Our compliance with these industry regulations is costly and restricts certain of
our activities, including payment of dividends, mergers and acquisitions, investments, lending and interest rates charged on loans,
interest rates paid on deposits, access to capital and brokered deposits and locations of banking offices. If we are unable to meet
these regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely
affected.
Our activities are also regulated under consumer protection laws applicable to our lending, deposit, and other activities. Many of
these regulations are intended primarily for the protection of our depositors, the DIF, and the banking system as a whole, and not
for the benefit of our shareowners. In addition to the regulations of the bank regulatory agencies, as a member of the FHLB of
Atlanta, we must also comply with applicable regulations of the Federal Housing Finance Agency and the Federal Home Loan
Bank.
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, 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.
Government authorities, including the bank regulatory agencies, are pursuing aggressive enforcement actions with respect to
compliance and other legal matters involving financial activities, which heightens the risks associated with actual and perceived
compliance failures. Directives issued to enforce such actions may be confidential and thus, in some instances, we are not
permitted to publicly disclose these actions. Any of the foregoing could have a material adverse effect on our business, financial
condition, and results of operations.
In addition, we anticipate increased regulatory scrutiny, in the course of routine examinations and otherwise, and new regulations
in response to recent negative developments in the banking industry, which may increase our cost of doing business and reduce
our profitability. Among other things, there may be increased focus by both regulators and investors on deposit composition, the
level of uninsured deposits, brokered deposits, unrealized losses in securities portfolios, liquidity, commercial real estate loan
composition and concentrations, and capital as well as general oversight and control of the foregoing. We could face increased
scrutiny or be viewed as higher risk by regulators and the investor community, which could have a material adverse effect on our
business, financial condition, and results of operations.
Please refer to the Section entitled “Business – Regulatory Considerations” on page 12.
U.S. federal banking agencies may require us to increase our regulatory capital, long-term debt or liquidity requirements,
which could result in the need to issue additional qualifying securities or to take other actions, such as to sell company
assets.
We are subject to U.S. regulatory capital and liquidity rules. These rules, among other things, establish minimum requirements to
qualify as a well-capitalized institution. If CCB fails to maintain its status as well capitalized under the applicable regulatory
capital rules, the Federal Reserve will require us to agree to bring the bank back to well-capitalized status. For the duration of
such an agreement, the Federal Reserve may impose restrictions on our activities. If we were to fail to enter into or comply with
such an agreement or fail to comply with the terms of such agreement, the Federal Reserve may impose more severe restrictions
on our activities, including requiring us to cease and desist activities permitted under the Bank Holding Company Act of 1956.
Additionally, if our CET1 to Risk Weighted Assets ratio does not exceed the minimum required plus the additional CET1
conservation buffer, we may be restricted in our ability to pay dividends or make other distributions of capital to our shareowners.
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Capital and liquidity requirements are frequently introduced and amended. It is possible that regulators may increase regulatory
capital requirements, change how regulatory capital is calculated or increase liquidity requirements. Requirements to maintain
higher levels of capital may lower our return on equity.
Further changes to and compliance with the regulatory capital and liquidity requirements may impact our operations by requiring
us to liquidate assets, increase borrowings, issue additional equity or other securities, cease or alter certain operations, sell
company assets or hold highly liquid assets, which may adversely affect our results of operations. We may be prohibited from
taking capital actions such as paying or increasing dividends or repurchasing securities.
Changes in accounting standards or assumptions in applying accounting policies could adversely affect us.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of
operations. Some of these policies require use of estimates and assumptions that may affect the reported value of our assets or
liabilities and results of operations and are critical because they require management to make difficult, subjective and complex
judgments about matters that are inherently uncertain. If those assumptions, estimates or judgments were incorrectly made, we
could be required to correct and restate prior-period financial statements. Accounting standard-setters and those who interpret the
accounting standards, the SEC, banking regulators and our independent registered public accounting firm may also amend or even
reverse their previous interpretations or positions on how various standards should be applied. These changes may be difficult to
predict and could impact how we prepare and report our financial statements. In some cases, we could be required to apply a new
or revised standard retrospectively, resulting in us revising prior-period financial statements.
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. 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. Consequently, numerous formal enforcement
actions have been instituted against financial institutions. 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.
We are subject to government regulation and oversight relating to data and privacy protection.
Our business requires the collection and retention of large volumes of customer data, including personally identifiable information
in various information systems that we maintain and in those maintained by third parties with whom we contract. We also
maintain important internal company data such as personally identifiable information about our associates and information
relating to our operations. The integrity and protection of that customer and company data is important to us.
We are subject to complex and evolving laws and regulations relating to the privacy of the information of our customers,
associates and others, and any failure to comply with these laws and regulations, or any misuse or mismanagement of such
information, could expose us to liability and reputational damage, which could adversely affect our financial condition and results
of operations. As new privacy-related laws and regulations are implemented, the time and resources needed for us to comply with
such laws and regulations, as well as our potential liability for non-compliance and reporting obligations in the case of data
breaches, may significantly increase. It is possible that these laws may be interpreted and applied by various jurisdictions in a
manner inconsistent with our current or future practices, or that is inconsistent with one another.
Fee revenues from overdraft protection programs constitute a significant portion of our noninterest income and may be
subject to increased supervisory scrutiny.
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.
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In 2022, certain members of Congress and the leadership of the CFPB have expressed a heightened interest in bank consumer
overdraft protection programs. In 2022, the CFPB piloted a supervision effort to collect key metrics from some supervised
institutions regarding the consumer impact of their overdraft and non-sufficient fund practices, with the intent of using this
information to identify institutions for further examination and review. The CFPB has indicated that it intends to pursue
enforcement actions against banking organizations, and their executives, that oversee overdraft practices that are deemed to be
unlawful, and indeed took action against a large bank for charging “surprise” overdraft fees known as authorized positive fee. In
October of 2022, the CFPB issued guidance to help banks avoid charging illegal surprise overdraft fees. In addition, the
Comptroller of the Currency has identified potential options for reform of national bank overdraft protection practices, including
providing a grace period before the imposition of a fee, refraining from charging multiple fees in a single day and eliminating fees
altogether.
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. These competitive pressures from our peers, as well as any adoption by our regulators of new rules or supervisory
guidance or more aggressive examination and enforcement policies in respect of banks’ overdraft protection practices, could
cause us to modify our program and practices in ways that may have a negative impact on our revenue and earnings, which, in
turn, could have an adverse effect on our financial condition and results of operations.
Operational Risks
Many types of operational risks can affect our earnings negatively.
We regularly assess and monitor operational risk in our businesses. Despite our efforts to assess and monitor operational risk, our
risk management framework may not be effective in all cases. Factors that can impact operations and expose us to risks varying 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.
While we have in place many controls and business continuity plans designed to address these factors and others, these plans may
not operate successfully to mitigate these risks effectively. If our controls and business continuity plans do not mitigate the
associated risks successfully, such factors may have a negative impact on our business, financial condition or results of
operations. In addition, an important aspect of managing our operational risk is creating a risk culture in which all associates fully
understand that there is risk in every aspect of our business and the importance of managing risk as it relates to their job functions.
We continue to enhance our risk management program to support our risk culture. Nonetheless, if we fail to provide the
appropriate environment that sensitizes all of our associates to managing risk, our business could be impacted adversely.
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We are subject to certain operational risks, including, but not limited to
risk arising from failure or circumvention of our
controls and procedures.
Our internal controls, including fraud detection and controls, disclosure controls and procedures, and corporate governance
procedures are based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives
of the controls and procedures are met. Notwithstanding the proliferation of technology and technology-based risk and control
systems, we rely on the ability of our associates and systems to process a high number of transactions, and we are subject to the
risk that our associates may make mistakes or engage in violations of applicable policies, laws, rules, or procedures that in the
past have not, and in the future may not, always be prevented by our technological processes or by our controls and other
procedures intended to prevent and detect such errors or violations. Any failure or circumvention of our controls and procedures,
failure to comply with regulations related to controls and procedures, failure to comply with our corporate governance procedures,
fraud by associates or persons outside our Company, the execution of unauthorized transactions by associates, or errors relating to
transaction processing and technology could have a material adverse effect on our reputation, business, financial condition and
results of operations, including subjecting us to litigation, customer attrition, regulatory fines, penalties, or other sanctions.
Insurance coverage may not be available for losses relating to such event, or where available, such losses may exceed insurance
limits.
We are subject to credit and/or settlement risk arising from the soundness of other financial institutions and
counterparties which may have a material adverse effect on our business, financial condition, and results of operations.
Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have
exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial
services industry, including commercial banks, brokers and dealers, investment banks, other institutional clients, and certain
vendors. Many of these transactions expose us to credit or settlement risk in the event of a default or other failure to adhere to
contractual obligations by a counterparty or client. In addition, our credit or settlement risk may be exacerbated when any
collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or
derivative exposure due to us. Increased interconnectivity amongst financial institutions also increases the risk of cyber-attacks
and information system failures for financial institutions. Any such losses could have a material adverse effect on our business,
financial condition, and results of operations.
The Company recently identified a material weakness in its internal control over financial reporting. If we are not able to
remediate this material weakness, or if we experience additional material weaknesses or other deficiencies in our internal
control over financial reporting in the future or otherwise fail to maintain an effective system of internal control over
financial reporting, we may not be able to accurately report our financial results, prevent fraud, or file our periodic
reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may
lead to a decline in our stock price.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses
in such internal control. Section 404 of the Sarbanes -Oxley Act requires that we furnish a report by management on, among other
things, the effectiveness of our internal control over financial reporting. This assessment requires disclosure of any material
weaknesses identified by our management in our internal control over financial reporting. Our independent registered public
accounting firm also needs to attest to the effectiveness of our internal control over financial reporting. Effective internal control
over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and
procedures, is designed to prevent fraud. Any failure to maintain or implement required new or improved controls, or difficulties
encountered in implementation could cause us to fail to meet our reporting obligations.
In the fourth quarter of 2023, management identified a material weakness in its internal control over financial reporting related to
certain inter-company transactions. As discussed in Item 9A. Controls and Procedures, the Company's management has re-
evaluated its assessment of the effectiveness of internal control over financial reporting and its disclosure controls and procedures
and concluded that they were not effective as of December 31, 2023. Management has implemented controls in accordance with a
remediation plan to address the material weakness. For additional information related to the material weakness in internal control
over financial reporting and the related remedial measures, see Item 9A. Controls and Procedures.
There can be no assurance as to when the material weakness will be remediated or that additional material weaknesses will not
arise in the future. If the Company is unable to maintain effective internal control over financial reporting, its ability to record,
process and report financial information timely and accurately could be adversely affected, which could subject the Company to
litigation, investigations, or breach of contract claims, require management resources, increase costs, negatively affect investor
confidence, and adversely impact its stock price.
We face risks related to the restatement of our Impacted Statements of Cash Flows.
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As discussed in the Explanatory Note, we determined to restate the Impacted Statements of Cash Flows. These restatements are in
addition to the restatements contained in our Form 10-K/A for December 31, 2022 and our Form 10-Q/A filings for March 31,
2023 and June 30, 2023, each of which were filed with the SEC on December 22, 2023. As a result, we have incurred
unanticipated costs for accounting and legal fees in connection with the restatements and become subject to some additional risks
and uncertainties, which could affect investor confidence in the accuracy of our financial disclosures and may cause reputational
harm to our business. We may face potential for litigation or other disputes, which may include, among others, claims invoking
the federal and state securities laws. In addition, the processes undertaken to effect the restatements may not have been adequate
to identify and correct all errors in our historical financial statements. If one or more of the foregoing risks persist, our business,
operations and financial condition could be materially and adversely affected.
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.
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.
breaches of information systems, attempts to access information, including customer and company information, malicious code,
computer viruses and denial of service attacks that could result in unauthorized access, theft, misuse, loss, release, or destruction
of data (including confidential customer information), account takeovers, unavailability of service, or other events. These types of
threats may derive from human error, fraud, or malice on the part of external or internal parties or may result from accidental
technological failure. Any failure, interruption, or breach in security of these systems could result in significant disruption to our
operations.
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 technologies,
systems, networks, and software have been and continue to be subject to cybersecurity threats and attacks, which range from
uncoordinated individual attempts to sophisticated and targeted measures directed at us. Our customers, associates, and third
parties that we do business with have been, and will likely continue to be, targeted in cybersecurity-related incidents by parties
using fraudulent e-mails, artificial intelligence, and other communications in attempts to misappropriate passwords, bank account
information, or other personal information or to introduce viruses or other malware programs to our information systems, the
information systems of our third-party service providers and our customers’ personal devices, which are beyond our security
control systems. Though we endeavor to mitigate these threats through product improvements, use of encryption and
authentication technology and customer and employee education, such cyber-attacks against us, our third-party service providers
and our customers remain a serious issue and have been successful in the past.
We may be required to spend significant capital and other resources to protect against the threat of cybersecurity-related incidents
or to alleviate problems caused by such incidents. Any failures related to upgrades and maintenance of our technology and
information systems could increase our information and system security risk. Our increased use of cloud and other technologies,
such as remote work technologies, also increases our risk of being subject to a cyber-related incident. The risk of a cybersecurity-
related incident has increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the
world have increased. A cybersecurity-related incident or other significant disruption of our information systems or those of our
customers or third-party vendors could (i) disrupt the proper functioning of our networks and systems and therefore our
operations and those of our customers; (ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation, or
release of confidential, sensitive, or otherwise valuable information of ours or our customers; (iii) result in a violation of
applicable privacy, data protection, and other laws, subjecting us to additional regulatory scrutiny and exposing us to civil
litigation, enforcement actions, governmental fines, and possible financial liability; (iv) require significant management attention
and resources to remedy the damages that result; or (v) harm our reputation or cause a decrease in the number of customers that
choose to do business with us, damaging our ability to generate deposits. The occurrence of any of the foregoing could have a
material adverse effect on our business, financial condition, and results of operations. Furthermore, in the event of a cyber-related
incident, we may be delayed in identifying or responding to the incident, which could increase the negative impact of the incident
on our business, financial condition, and results of operations. While we maintain “cyber” insurance coverage, which would apply
in the event of certain cyber-related incidents, the amount of coverage may not be adequate depending on the magnitude of the
incident. Furthermore, because cyber-related incidents are inherently difficult to predict and can take many forms, some incidents
may not be covered under our cyber insurance coverage.
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Increased fraudulent activity may cause losses to us or our clients, damage to our brand, and increases in our costs, in
turn, materially and adversely affecting our business, financial condition, and results of operations.
Additionally, fraud losses have risen in recent years due in large part to growing and evolving schemes. Fraudulent activity has
taken many forms, ranging from wire fraud, debit card fraud, credit card fraud, check fraud, mechanical devices attached to
ATMs, social engineering, and phishing attacks to obtain personal information, business email compromise, or impersonation of
clients through the use of falsified or stolen credentials. Many financial institutions have suffered significant losses in recent years
due to the theft of cardholder data that has been illegally exploited for personal gain. The potential for debit and credit card fraud,
as well as check fraud, against us or our clients and our third-party service providers is a serious issue. Debit and credit card fraud
and check fraud are pervasive, and the risks of cybercrime are complex and continue to evolve. While we have policies and
procedures, as well as fraud detection tools, designed to prevent fraud losses, such policies, procedures, and tools may be
insufficient to accurately detect and prevent fraud. A significant increase in fraudulent activities could lead us to take additional
steps to reduce fraud risk, which could increase our costs. Fraud losses could cause losses to us or our clients, damage to our
brand, and an increase in our costs, in turn, materially and adversely affecting our business, financial condition, and results of
operations.
We may not be able to attract and retain skilled people, which may have a negative impact on our business and
operations.
Our success depends, in large part, on our ability to attract and retain key people. Competition for the best people in many
activities engaged in by us is intense, including with respect to compensation and emerging workplace practices and
accommodations, and, as a result, we may not be able to sufficiently hire or to retain key people. We do not currently have
employment agreements or non-competition agreements with any of our senior officers. The unexpected loss of service of key
personnel could have a material adverse impact on our business, financial condition, and results of operations because of their
customer relationships, skills, knowledge of our market, years of industry experience, and the difficulty of promptly finding
qualified replacement personnel. In addition, the scope and content of U.S. banking regulators’ policies on incentive
compensation, as well as changes to these policies, could adversely affect our ability to hire, retain, and motivate our key
associates.
Issues we encounter with respect to external vendors upon which we rely could have a material adverse effect on our
business and, in turn, our financial condition and results of operations.
We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations. These
third-party vendors are sources of operational and informational security risk to us, including risks associated with operational
errors, information system failures, interruptions or breaches, and unauthorized disclosures of sensitive or confidential client or
customer information. If we encounter any of these issues in connection with our external vendors, or if we have difficulty
communicating with these vendors, we could be exposed to disruption of operations, loss of service, or connectivity to customers,
reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial
condition and results of operations.
In addition, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements
under service level agreements. Although we have selected these external vendors carefully, we do not control their actions. The
failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements could be
disruptive to our operations, which could have a material adverse effect on our business and, in turn, our financial condition and
results of operations. Replacing these external vendors could also entail significant delay and expense.
Pandemics, severe weather, natural disasters, global climate change, acts of terrorism and global conflicts may 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 events impact us negatively to the extent that they result in reduced capital markets activity, lower asset price levels, or
disruptions in general economic activity in the United States or abroad, or in financial market settlement functions. In addition,
such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the
value of collateral securing loans, cause significant property damage, result in loss of revenue, cause us to incur additional
expenses, and impact economic growth negatively. If any of these risks materialized, they could have an adverse effect on our
business and operations and may have other adverse effects on us in ways that we are unable to predict.
34
Litigation may adversely affect our results.
We are subject to litigation in the ordinary course of business. Claims and legal actions, including claims pertaining to our
performance of our fiduciary responsibilities as well as supervisory actions by our regulators, could involve large monetary
claims and significant defense costs. The outcome of litigation and regulatory matters as well as the timing of ultimate resolution
are inherently difficult to predict.
Actual legal and other costs of resolving claims may be greater than our legal reserves. The ultimate resolution of a pending legal
proceeding, depending on the remedy sought and granted, could materially adversely affect our results of operations and financial
condition.
In addition, governmental authorities have, at times, sought criminal penalties against companies in the financial services sector
for violations, and, at times, have required an admission of wrongdoing from financial institutions in connection with resolving
such matters. Criminal convictions or admissions of wrongdoing in a settlement with the government can lead to greater exposure
in civil litigation and reputational harm.
Substantial legal liability or significant regulatory action against us could have material adverse financial effects or cause
significant reputational harm, which adversely impact our business prospects. Further, we may be exposed to substantial
uninsured liabilities, which could adversely affect our results of operations and financial condition.
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. 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. To a
lesser extent, we also compete with other providers of financial services, such as money market mutual funds, brokerage firms,
consumer finance companies, insurance companies and governmental organizations, which may offer financial products and
services on more favorable terms than we are able to. Many of our non-bank competitors are not subject to the same extensive
regulations that govern our activities. As a result, these non-bank competitors have advantages over us in providing certain
services. The effect of this competition may reduce or limit our margins or our market share and may adversely affect our results
of operations and financial condition.
Our inability to adapt our business strategies, products, and services could harm our business.
We rely on a diversified mix of financial products and services through multiple distribution channels. Our success depends on
our and our third-party providers’ of products and services abilities to adapt our business strategies, products, and services and
their respective features in a timely manner, including available payment processing services and technology to rapidly evolving
industry standards and consumer preferences.
The widespread adoption and rapid evolution of emerging technologies, including artificial intelligence, analytic capabilities, self-
service digital trading platforms and automated trading markets, internet services, and digital assets, such as central bank digital
currencies, cryptocurrencies (including stablecoins), tokens, and other cryptoassets that utilize distributed ledger technology
(DLT), as well as DLT in payment, clearing, and settlement processes creates additional risks, could negatively impact our ability
to compete, and require substantial expenditures to the extent we were to modify or adapt our existing products and services. As
such new technologies evolve and mature, our businesses and results of operations could be adversely impacted, including as a
result of the introduction of new competitors to the payment ecosystem and increased volatility in deposits and significant long-
term reduction in deposits. In addition, cloud technologies are also critical to the operation of our systems, and our reliance on
cloud technologies is growing. Failure to successfully keep pace with technological change affecting the financial services
industry could have a material adverse effect on our business, financial condition, and results of operations.
35
Also, we may not be timely or successful in developing or introducing new products and services, integrating new products or
services into our existing offerings, responding, managing, or adapting to changes in consumer behavior, preferences, spending,
investing and saving habits, achieving market acceptance of our products and services, or reducing costs in response to pressures
to deliver products and services at lower prices. There are substantial risks and uncertainties associated with these efforts,
particularly in instances where the markets are not fully developed. In developing and marketing new products and services, we
invest significant time and resources. Initial timetables for the introduction and development of new products or services may not
be achieved, and price and profitability targets may not prove feasible. External factors, such as compliance with regulations,
competitive alternatives, and shifting market preferences, may also impact the successful implementation of new products or
services. The Company’s, or its third-party providers’, inability or resistance to timely innovate or adapt its operations, products,
and services to evolving industry standards and consumer preferences could result in service disruptions and harm our business
and adversely affect our results of operations and reputation.
Furthermore, any new products, services, or technology could have a significant impact on the effectiveness of our system of
internal controls. Failure to successfully manage these risks in the development and implementation of new products or services
could have a material adverse effect on our business, financial condition, and results of operations.
Our directors, executive officers, and principal shareowners, if acting together, have substantial control over all matters
requiring shareowner approval, including changes of control. Because Mr. William G. Smith, Jr. is a principal
shareowner and our Chairman, President, and Chief Executive Officer and Chairman of CCB, he has substantial control
over all matters on a day-to-day basis.
Our directors, executive officers, and principal shareowners beneficially owned approximately 19.2% 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. Accordingly, these directors, executive officers, and principal
shareowners, if acting together, may be able to influence or control matters requiring approval by our shareowners, including the
election of directors and the approval of mergers, acquisitions or other extraordinary transactions. Moreover, because William G.
Smith, Jr. is the Chairman, President, and Chief Executive Officer of CCBG and Chairman of CCB, he has substantial control
over all matters on a day-to-day basis, including the nomination and election of directors.
These directors, executive officers, and principal shareowners may also have interests that differ from yours and may vote in a
way with which you disagree, and which may be adverse to your interests. The concentration of ownership may have the effect of
delaying, preventing or deterring a change of control of our Company, could deprive our shareowners of an opportunity to receive
a premium for their common stock as part of a sale of our Company and might ultimately affect the market price of our common
stock. You may also have difficulty changing management, the composition of the Board of Directors, or the general direction of
our Company.
Our Articles of Incorporation, Bylaws, and certain laws and regulations may prevent or delay transactions you might
favor, including a sale or merger of CCBG.
CCBG is registered with the Federal Reserve as a financial holding company under the Bank Holding Company Act, or BHC Act.
As a result, we are subject to supervisory regulation and examination by the Federal Reserve. The GLBA, the BHC Act, and other
federal laws subject financial holding companies to restrictions on the types of activities in which they may engage, and to a range
of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.
Provisions of our Articles of Incorporation, Bylaws, certain laws and regulations and various other factors may make it more
difficult and expensive for companies or persons to acquire control of us without the consent of our Board of Directors. It is
possible, however, that you would want a takeover attempt to succeed because, for example, a potential buyer could offer a
premium over the then prevailing price of our common stock.
For example, our Articles of Incorporation permit our Board of Directors to issue preferred stock without shareowner action. The
ability to issue preferred stock could discourage a company from attempting to obtain control of us by means of a tender offer,
merger, proxy contest or otherwise. We are also subject to certain provisions of the Florida Business Corporation Act and our
Articles of Incorporation that relate to business combinations with interested shareowners. Other provisions in our Articles of
Incorporation or Bylaws that may discourage takeover attempts or make them more difficult include:
●
Supermajority voting requirements to remove a director from office;
●
Provisions regarding the timing and content of shareowner proposals and nominations;
●
Supermajority voting requirements to amend Articles of Incorporation unless approval is received by a majority of
“disinterested directors”;
●
Absence of cumulative voting; and
●
Inability for shareowners to take action by written consent.
36
Reputational Risks
Damage to our reputation could harm our businesses, including our competitive position and business prospects.
Reputation risk, or the risk to our earnings, liquidity, and capital from negative public opinion, is inherent in our business.
Negative public opinion could adversely affect our ability to attract and retain customers, clients, investors and associates and
expose us to adverse legal and regulatory consequences. Negative public opinion could result from our actual or alleged conduct
and can arise from various sources, including (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. 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.
Item 1B.
Unresolved Staff Comments
None.
Item 1C.
Cybersecurity
Risk Management and Strategy
Our enterprise risk management program is designed to identify, assess, and mitigate risks across various aspects of our
Company, including financial, operational, market, regulatory, technology, legal, and reputational. Cybersecurity risk is a critical
component of our technology risk management program, specifically our information security program given the increasing
reliance on technology and potential of cyber risk threats. Our Chief Information Security Officer (“CISO”) is primarily
responsible for coordinating the various aspects of the information security program with cross-functional support teams. The
Chief Operating Officer (“COO”), management risk committees, and the Board of Directors provide oversight of the program and
its activities.
Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to
penetrate, disrupt or misuse systems or information. Our cybersecurity risk management infrastructure is designed around
regulatory guidance, other industry standards and the National Institute of Standards and Technology (“NIST”) Cybersecurity
Framework, although this does not imply that we meet all technical standards, specification, or requirements under the NIST. Our
CISO and Information Security Officer (“ISO”) along with key members of their respective teams, regularly collaborate with peer
banks, industry groups, and policymakers to discuss cybersecurity trends and issues and identify best practices. Our information
security program and cyber risk management policies and procedures are periodically reviewed by the CISO and ISO with the
goal of addressing changing threats and conditions.
The parts of our information security program relating to cybersecurity are built on a multi-layered and integrated defense model
and include the following processes:
◾
Risk-based controls for information systems and information on our networks:
processes designed to identify, assess, and manage cybersecurity risks associated with external service providers and the
services we provide to our clients. We leverage people, processes, and technology as part of our efforts to manage and
maintain cybersecurity controls. We also employ a variety of preventative and detective tools designed to monitor, block,
and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats. We seek to
maintain a risk management infrastructure that implements physical, administrative and technical controls that are
designed, based on risk, to protect our information systems and the information stored on our networks, including personal
information, intellectual property and proprietary information of our Company and our clients.
37
◾
Incident response program:
We have an incident response program and dedicated teams to respond to cybersecurity,
physical and administrative incidents. When a cybersecurity incident occurs, we have cross-functional teams that are
responsible for leading the initial assessment of priority and severity and communicating material cybersecurity incidents
to the appropriate members of management and the Board of Directors.
◾
Training and testing:
We have established processes and systems designed to mitigate cybersecurity risk, including
regular and on-going education and training for associates, preparedness simulations and tabletop exercises, and recovery
and resilience tests. We also actively monitor our email gateways for malicious phishing email campaigns and monitor
remote connections.
◾
Internal and external risk assessments:
network architecture using internal experts and third-party specialists. Our internal auditor and other independent external
partners will periodically review our processes, systems, and controls, including with respect to our information security
program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management
processes.
Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe. Our internal systems,
processes, and controls are designed to mitigate loss from cyber-attacks and, while we have experienced cybersecurity incidents
in the past, to date, risks from cybersecurity threats have not materially affected our Company. For further discussion of risks
from cybersecurity threats, see Item 1A. Risk Factors under the section captioned “Cybersecurity incidents, including security
breaches and failures of our information systems could significantly disrupt our business, result in the unintended disclosure or
misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.”
Governance
Our CISO is responsible for managing our Corporate Security Department and overseeing our information security program,
including cybersecurity risks. The CISO reports the day-to-day status of the program to the COO who in turn reports to our Bank
President. On a quarterly basis, and as needed, the CISO reports the status of the program, notable threats or incidents, and other
developments related to information security and cybersecurity risks to our Operations Risk Oversight Committee (“OROC”) and
to our Enterprise Risk Oversight Committee (“ROC”). The CISO also provides reports to our Board of Directors at least annually
on the status of the information security program and risks, notable threats and incidents, and other developments related to
cybersecurity. In addition, the CISO provides more frequent reports to the Audit Committee on the aforementioned activities,
including remediation efforts and the status of incident response, as needed.
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. Of 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 3.
Legal Proceedings
We are party to lawsuits and claims arising out of the normal course of business. In management’s opinion, there are no known
pending claims or litigation, the outcome of which would, individually or in the aggregate, have a material effect on our
consolidated results of operations, financial position, or cash flows.
Item 4
.
Mine Safety Disclosure
Not applicable.
38
PART II
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.
The following table presents the range of high and low closing sales prices reported on the Nasdaq Global Select Market and cash
dividends declared for each quarter during the past two years.
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. See Item 1. “Capital; Dividends; Sources of Strength” and “Dividends” in the Business
section on page 14 and 16, Item 1A. “Market Risks” in the Risk Factors section on page 22, Item 7. “Liquidity and Capital
Resources – Dividends” – in Management’s Discussion and Analysis of Financial Condition and Operating Results on page 66
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. 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.
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.
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. 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.
</