# Capital City Bank Group Inc: Form 10-Q for the period ended Mar 31, 2024

- Company: [Capital City Bank Group Inc](/companies/ccbg.md) (CIK 726601)
- Form: 10-Q
- Filed: 2024-07-12
- Accepted by EDGAR: Jul 12, 2024, 16:25 ET
- Period: 2024-03-31
- Accession: 0000726601-24-000024
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/726601/000072660124000024/ccbg-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/726601/000072660124000024/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $8.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $3.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $12.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.74 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.74 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 16,969 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $14.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $2.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $3.6m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $2.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2024-03-31 | $4.26bn | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $3.81bn | us-gaap:Liabilities |
| Short-term borrowings | at 2024-03-31 | $31.9m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-03-31 | $448.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 2,021 characters.

#### Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table contains information about all purchases made 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

### Average

### Total number of shares

### Maximum Number of shares

### of shares

### price paid

### purchased under our

### remaining for purchase under

### Period

### purchased

### per share

### share repurchase program

### our share repurchase program

January 1, 2024 to

January 31, 2024

(1)

9,101

$29.49

9,101

441,409

February 1, 2024 to

February 29, 2024

(2)

63,162

28.01

63,162

686,838

March 1, 2024 to

March 31, 2024

(2)

10,277

28.21

10,277

676,561

Total

82,540

$28.19

82,540

(1)

The information reported in this row relates to shares that were repurchased during the first quarter of 2024 through the

Company’s predecessor share repurchase program that was approved on January 31, 2019 and was set to expire in 2024, under

which we were authorized to repurchase up to 750,000 shares of our common stock. The predecessor share repurchase program

was terminated in January 2024.

(2)

The information reported in this row relates to shares that were repurchased during the first quarter of 2024 through the Capital

City Bank Group, Inc. Share Repurchase Program (“the Program”), effective February 1, 2024, that was publicly announced on

February 2, 2024 and that expires on February 1, 2029, under which we were authorized to repurchase up to 750,000 shares of

our common stock. Under the Program, shares may be repurchased by the Company from time to time in the open market or

through private transactions, as market conditions warrant. The program does not obligate the Company to repurchase any

specified number of shares of its common stock. No shares are repurchased outside of the Program.

## Market risk

As filed, 355 characters.

See “Market Risk and Interest Rate Sensitivity” in Management’s Discussion and Analysis of Financial Condition and Results of

Operations, above, which is incorporated herein by reference. Management has determined that no additional disclosures are

necessary to assess changes in information about market risk that have occurred since December 31, 2023.

## Controls and procedures

As filed, 5,384 characters.

### Evaluation of Disclosure Controls and Procedures

At March 31, 2024, the end of the period covered by this Form 10-Q, our management, including our Chief Executive Officer and

Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the

Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded

that, as of the end of the period covered by this report our disclosure controls and procedures were ineffective due to the identification

of the material weakness discussed below.

### Previously Reported Material Weakness in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a

reasonable possibility that a material misstatement of the Company’s annual interim financial statements will not be prevented or

detected on a timely basis. As reported in our 2023 Form 10-K/A, we did not maintain effective internal control over financial

reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) as of December 31, 2023 as a result of

a material weakness in our internal control over financial reporting for the review of significant inter-company mortgage loan sales

and servicing transactions was not designed effectively. Specifically, management’s review control over the completeness and

accuracy of elimination entries in the consolidation process was not designed effectively, as the review was not sufficiently precise to

identify all the necessary elimination entries between CCB and its subsidiary, CCHL. The Company determined inter-company

transactions related to the sale of residential mortgage loans were not properly eliminated and net loan fees were not properly

recorded. Further, financial information obtained from CCHL for certain construction/permanent loan activity was not in sufficient

detail to appropriately classify this activity within the Statement of Cash Flows. Specifically, management’s review control over the

completeness, accuracy and review of financial information provided from CCHL related to the Statement of Cash Flows was not

designed effectively as the review was not sufficiently precise to identify all errors in financial reporting. Refer to our 2023 Form 10-

K/A for a description of our material weakness.

#### Remediation Plan

Since identifying the material weakness described above, management, with oversight from the Audit Committee and input from the

Board of Directors, has devoted substantial resources to the ongoing implementation of remediation efforts. These remediation efforts,

summarized below are intended to address both the identified material weakness and to enhance the Company’s overall internal

control over financial reporting and disclosure controls and procedures. Based on additional procedures and post-closing review,

management concluded that the consolidated financial statements included in this report present fairly, in all material respects, our

financial position, results of operations, and cash flows for the periods presented, in conformity with GAAP.

The internal control and procedural enhancements and remedial actions that have been implemented include:

1.

Enhance the precision level review of activity within existing accounts that are subject to elimination during consolidation, to

ensure appropriate elimination;

2.

Enhance review procedures to identify new inter-company accounts and activities subject to elimination during

consolidation;

3.

Increase the granularity of general ledger mapping for inter-company accounts subject to elimination during consolidation;

4.

Enhance financial close checklist and pre-close meeting agenda to assist the reviewer identifying and assessing inter-

company activities that are subject to elimination in a timely manner; and

5.

Enhance the detail of review procedures of financial information obtained from a subsidiary to identify, assess and validate

appropriate classification when preparing the consolidated financial statements, including when reviewing items in the

operating, investing or financing activity sections within the Statement of Cash Flows.

To remediate the material weakness, the Company implemented the internal control and procedural enhancements noted above in

items 1-4 during the fourth quarter of 2023 and implemented the enhancement noted above in item 5 during the first quarter of 2024.

The material weakness cannot be considered remediated until the applicable controls have operated for a sufficient period of time and

management has concluded, through testing, that these controls are designed and operating effectively. Accordingly, management will

continue to monitor and evaluate the effectiveness of our internal control over financial reporting and the disclosure controls and

procedures.

### Change in Internal Control

Except as identified above with respect to remediation of the material weakness, there have been no significant changes in our internal

control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably

likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 61,134 characters.

of our 2023 Form 10-K/A, as updated in our subsequent quarterly reports filed on

Form 10-Q, and in our other filings made from time to time with the SEC after the date of this report.

However, other factors besides those listed in our Quarterly Report or in our Annual Report also could adversely affect our results,

and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking

statements made by us or on our behalf speak only as of the date they are made. We do not undertake to update any forward-looking

statement, except as required by applicable law.

### BUSINESS OVERVIEW

We are a financial holding company headquartered in Tallahassee, Florida, and we are the parent of our wholly owned subsidiary,

Capital City Bank (the “Bank” or “CCB”). We offer a broad array of products and services through a total of 63 full-service offices

and 104 ATMs/ITMs located 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. 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 life insurance products , risk management and asset protection services.

Our profitability, like most financial institutions, is dependent to a large extent upon net interest income, which is the difference

between the interest and fees received on interest earning assets, such as loans and securities, and the interest paid on interest-bearing

liabilities, principally deposits and borrowings. Results of operations are also affected by the provision for credit losses, operating

expenses such as salaries and employee benefits, occupancy and other operating expenses including income taxes, and noninterest

income such as mortgage banking revenues, wealth management fees, deposit fees, and bank card fees.

We have included a detailed discussion of the economic conditions in our markets and our long-term strategic objectives as part of the

MD&A section of our 2023 Form 10-K/A.

### NON-GAAP FINANCIAL MEASURES (UNAUDITED)

We present a tangible common equity ratio and a tangible book value per diluted share that, in each case, removes the effect of

goodwill and other intangibles that resulted from merger and acquisition activity. We believe these measures are useful to investors

because it allows investors to more easily compare our capital adequacy to other companies in the industry. The generally accepted

accounting principles (“GAAP”) to non-GAAP reconciliation for each quarter presented is provided below.

### 2024

### 2023

#### (Dollars in Thousands, except per share data)

First

Fourth

Third

Second

First

Shareowners' Equity (GAAP)

448,314

440,625

419,706

412,422

403,260

Less: Goodwill and Other Intangibles (GAAP)

92,893

92,933

92,973

93,013

93,053

Tangible Shareowners' Equity (non-GAAP)

A

355,421

347,692

326,733

319,409

310,207

Total Assets (GAAP)

4,259,922

4,304,477

4,138,287

4,391,206

4,401,762

Less: Goodwill and Other Intangibles (GAAP)

92,893

92,933

92,973

93,013

93,053

Tangible Assets (non-GAAP)

B

4,167,029

4,211,544

4,045,314

4,298,193

4,308,709

### Tangible Common Equity Ratio (non-GAAP)

### A/B

### 8.53%

### 8.26%

### 8.08%

### 7.43%

### 7.20%

Actual Diluted Shares Outstanding (GAAP)

C

16,947,204

17,000,758

16,997,886

17,025,023

17,049,913

### Tangible Book Value per Diluted Share (non-GAAP)

### A/C

### 20.97

### 20.45

### 19.22

### 18.76

### 18.19

### SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

### 2024

### 2023

#### (Dollars in Thousands, Except Per Share Data)

First

Fourth

Third

Second

First

### Summary of Operations

Interest Income

46,820

46,184

45,753

45,205

43,926

Interest Expense

8,465

7,013

6,473

5,068

3,526

Net Interest Income

38,355

39,171

39,280

40,137

40,400

Provision for Credit Losses

920

2,025

2,393

2,197

3,099

Net Interest Income After

Provision for Credit Losses

37,435

37,146

36,887

37,940

37,301

Noninterest Income

18,097

17,157

16,728

19,967

17,758

Noninterest Expense

40,171

39,958

39,105

40,285

37,675

Income Before Income Taxes

15,361

14,345

14,510

17,622

17,384

Income Tax Expense

3,536

2,909

3,004

3,417

3,710

Loss (Income) Attributable to NCI

732

284

1,149

(31)

35

Net Income Attributable to CCBG

12,557

11,720

12,655

14,174

13,709

Net Interest Income (FTE)

(1)

38,435

39,264

39,367

40,224

40,500

### Per Common Share

Net Income Basic

0.74

0.69

0.75

0.83

0.81

Net Income Diluted

0.74

0.70

0.74

0.83

0.80

Cash Dividends Declared

0.21

0.20

0.20

0.18

0.18

Diluted Book Value

26.45

25.92

24.69

24.21

23.65

Diluted Tangible Book Value

(2)

20.97

20.45

19.22

18.76

18.19

Market Price:

High

31.34

32.56

33.44

34.16

36.86

Low

26.59

26.12

28.64

28.03

28.18

Close

27.70

29.43

29.83

30.64

29.31

### Selected Average Balances

Investment Securities

953,184

963,184

1,005,003

1,043,858

1,064,212

Loans Held for Investment

2,728,629

2,711,243

2,672,653

2,657,693

2,582,395

Earning Assets

3,849,615

3,823,980

3,876,980

3,974,803

4,062,688

Total Assets

4,190,623

4,166,777

4,218,855

4,320,601

4,411,865

Deposits

3,576,513

3,548,506

3,596,816

3,719,564

3,817,314

Shareowners’ Equity

456,014

435,116

427,580

418,757

404,067

Common Equivalent Average Shares:

Basic

16,951

16,947

16,985

17,002

17,016

Diluted

16,969

16,997

17,025

17,035

17,045

### Performance Ratios:

Return on Average Assets (annualized)

1.21

1.12

1.19

1.32

1.26

Return on Average Equity (annualized)

11.07

10.69

11.74

13.58

13.76

Net Interest Margin (FTE)

4.01

4.07

4.03

4.06

4.04

Noninterest Income as % of Operating Revenue

32.06

30.46

29.87

33.22

30.53

Efficiency Ratio

71.06

70.82

69.88

66.93

64.67

### Asset Quality:

Allowance for Credit Losses (“ACL”)

29,329

29,941

29,083

28,243

26,808

Nonperforming Assets (“NPAs”)

6,799

6,243

4,695

6,624

4,602

ACL to Loans HFI

1.07

1.10

1.08

1.05

1.01

NPAs to Total Assets

0.16

0.15

0.11

0.15

0.10

NPAs to Loans HFI plus OREO

0.25

0.23

0.17

0.25

0.17

ACL to Non-Performing Loans

431.46

479.70

619.58

426.44

584.18

Net Charge-Offs to Average Loans HFI

0.22

0.23

0.17

0.07

0.24

### Capital Ratios:

Tier 1 Capital

15.67

15.37

15.11

14.56

14.23

Total Capital

16.84

16.57

16.30

15.68

15.29

Common Equity Tier 1

13.82

13.52

13.26

12.73

12.40

Leverage

10.45

10.30

9.98

9.54

9.09

Tangible Common Equity

(2)

8.53

8.26

8.08

7.43

7.20

(1)

#### Fully Tax Equivalent

(2)

#### Non-GAAP financial measure. See non-GAAP reconciliation on page 34.

### FINANCIAL OVERVIEW

### Results of Operations

#### Performance Summary

. Net income attributable to common shareowners totaled $12.6 million, or $0.74 per diluted share, for the first

quarter of 2024 compared to $11.7 million, or $0.70 per diluted share, for the fourth quarter of 2023, and $13.7 million, or $0.80 per

diluted share, for the first quarter of 2023.

#### Net Interest Income

. Tax-equivalent net interest income for the first quarter of 2024 totaled $38.4 million compared to $39.3 million

for the fourth quarter of 2023, and $40.5 million for the first quarter of 2023. Compared to both prior periods, the decline was

primarily attributable to an increase in deposit interest expense, partially offset by higher loan interest income. Our net interest margin

for the first quarter of 2024 was 4.01%, a decrease of six basis points from the fourth quarter of 2023 and a decrease of three basis

points from the first quarter of 2023.

#### Provision and Allowance for Credit Losses.

We recorded a provision for credit losses of $0.9 million for the first quarter of 2024

compared to $2.0 million for the fourth quarter of 2023 and $3.1 million for the first quarter of 2023. The decrease in the provision

compared to the fourth quarter of 2023 was primarily attributable to a lower level of reserves required for new loans, favorable loan

grade migration, and lower loss rates. Compared to the first quarter of 2023, the decrease was driven by lower new loan growth in the

first quarter of 2024.

#### Noninterest Income

. Noninterest income for the first quarter of 2024 totaled $18.1 million compared to $17.2 million for the fourth

quarter of 2023 and $17.8 million for the first quarter of 2023. The $0.9 million increase over the fourth quarter of 2023 was due to a

$0.5 million increase in mortgage banking revenues and a $0.4 million increase in wealth management fees. Compared to the first

quarter of 2023, the $0.3 million increase was primarily attributable to higher wealth management fees of $0.7 million partially offset

by lower other income of $0.3 million.

#### Noninterest Expense

. Noninterest expense for the first quarter of 2024 totaled $40.2 million compared to $40.0 million for the fourth

quarter of 2023 and $37.7 million for the first quarter of 2023. The $0.2 million increase over the fourth quarter of 2023 reflected a

$0.6 million increase in compensation expense that was partially offset by decreases in occupancy expense of $0.1 million and other

expense of $0.3 million. Compared to the first quarter of 2023, the $2.5 million increase reflected higher other expense as we realized

a $1.8 million gain from the sale of other real estate (banking office) in the first quarter of 2023. Further, compensation expense was

$0.9 million higher primarily due to a lower level of realized loan cost (credit offset to salary expense) due to decreased new loan

production.

### Financial Condition

#### Earning Assets.

Average earning assets totaled $3.850 billion for the first quarter of 2024, an increase of $25.6 million, or 0.7%, over

the fourth quarter of 2023, and a decrease of $213.1 million, or 5.2%, from the first quarter of 2023. The variance for both prior

period comparisons was driven by change in deposit balances. Compared to both prior periods, the mix of earning assets improved as

overnight funds were utilized to fund loan growth.

#### Loans.

Average loans held for investment (“HFI”) increased $17.4 million, or 0.6%, over the fourth quarter of 2023 and $146.2

million, or 5.7%, over the first quarter of 2023. Compared to both prior periods, the increase was primarily due to an increase in

residential loans partially offset by a decline in consumer loans (primarily auto). Period end loans decreased $2.7 million, or 0.1%,

from the fourth quarter of 2023 and increased $74.0 million, or 2.8%, over the first quarter of 2023. Compared to the first quarter of

2023, the increase reflected growth in residential loans and to a lesser extent commercial real estate loans partially offset by lower

consumer (auto) loan balances.

#### Credit Quality

. Overall credit quality remained stable. Nonperforming assets (nonaccrual loans and other real estate) totaled $6.8

million at March 31, 2024 compared to $6.2 million at December 31, 2023 and $4.6 million at March 31, 2023. At March 31, 2024,

nonperforming assets as a percent of total assets equaled 0.16% compared to 0.15% at December 31, 2023 and 0.10% at March 31,

2023\. Nonaccrual loans totaled $6.8 million at March 31, 2024, a $0.6 million increase over December 31, 2023 and a $2.2 million

increase over March 31, 2023. Further, classified loans totaled $22.3 million at March 31, 2024, a $0.1 million increase over

December 31, 2023 and a $10.1 million increase over March 31, 2023.

#### Deposits

. Average total deposits were $3.577 billion for the first quarter of 2024, an increase of $28.0 million, or 0.8%, over the fourth

quarter of 2023 and a decrease of $240.8 million, or 6.3%, from the first quarter of 2023. Compared to the fourth quarter of 2023, the

increase reflected a higher average balance for public funds (municipal clients - primarily NOW accounts) which typically peak late in

the fourth quarter. Further, we realized growth in both our money market and certificates of deposit (“CD”) balances which reflected

a combination of balances migrating from noninterest bearing and savings accounts, in addition to receiving new deposits from

existing and new clients. Compared to the first quarter of 2023, the decrease was primarily attributable to lower noninterest bearing

and savings accounts, partially offset by increases in money market and CD balances. The decrease in noninterest bearing and savings

accounts reflected a combination of consumer/business spend of pandemic related stimulus funds and rate sensitive clients seeking

higher yields, partially offset by the aforementioned migration to higher rate deposit products (money market and CD).

#### Capital

. At March 31, 2024, we were “well-capitalized” with a total risk-based capital ratio of 16.84% and a tangible common equity

ratio (a non-GAAP financial measure) of 8.53% compared to 16.57% and 8.26%, respectively, at December 31, 2023 and 15.29% and

7.20%, respectively, at March 31, 2023. At March 31, 2024, all of our regulatory capital ratios exceeded the threshold to be “well-

capitalized” under the Basel III capital standards.

### RESULTS OF OPERATIONS

The following table provides a condensed summary of our results of operations - a discussion of the various components are discussed

in further detail below.

### Three Months Ended

#### (Dollars in Thousands, except per share data)

### March 31, 2024

### December 31, 2023

### March 31, 2023

Interest Income

46,820

46,184

43,926

Taxable Equivalent Adjustments

80

93

100

Total Interest Income (FTE)

46,900

46,277

44,026

Interest Expense

8,465

7,013

3,526

Net Interest Income (FTE)

38,435

39,264

40,500

Provision for Credit Losses

920

2,025

3,099

Taxable Equivalent Adjustments

80

93

100

Net Interest Income After Provision for Credit Losses

37,435

37,146

37,301

Noninterest Income

18,097

17,157

17,758

Noninterest Expense

40,171

39,958

37,675

Income Before Income Taxes

15,361

14,345

17,384

Income Tax Expense

3,536

2,909

3,710

Loss Attributable to Noncontrolling Interests

732

284

35

Net Income Attributable to Common Shareowners

12,557

11,720

13,709

Basic Net Income Per Share

0.74

0.69

0.81

Diluted Net Income Per Share

0.74

0.70

0.80

### Net Interest Income

Net interest income represents our single largest source of earnings and is equal to interest income and fees generated by earning

assets less interest expense paid on interest bearing liabilities. This information is provided on a “taxable equivalent” basis to reflect

the tax-exempt status of income earned on certain loans and state and local government debt obligations. We provide an analysis of

our net interest income including average yields and rates in Table I, “Average Balances & Interest Rates,” on page 47.

Tax-equivalent net interest income for the first quarter of 2024 totaled $38.4 million compared to $39.3 million for the fourth quarter

of 2023, and $40.5 million for the first quarter of 2023. Compared to both prior periods, the decline was primarily attributable to an

increase in deposit interest expense, partially offset by higher loan interest income. The increase in deposit interest expense was

primarily attributable to higher average money market balances and to a lesser extent CD balances and reflected a combination of re-

mix from other deposit categories and higher rates for these products. The increase in loan interest income reflected existing loans re-

pricing at higher rates and new loan volume at higher rates. Further, the first quarter of 2024 had one less calendar day compared to

the fourth quarter of 2023 and one additional calendar day compared to the first quarter of 2023.

Our net interest margin for the first quarter of 2024 was 4.01%, a decrease of six basis points from the fourth quarter of 2023 and a

decrease of three basis points from the first quarter of 2023. For the month of March, our net interest margin was 4.02%. The decrease

compared to both prior periods primarily reflected higher deposit cost related to re-mix within the deposit base and higher rates paid

on deposits, partially offset by higher yields from new loan volume and loan repricing at higher rates. For the first quarter of 2024, our

cost of funds was 88 basis points, an increase of 15 basis points over the fourth quarter of 2023 and an increase of 53 basis points over

the first quarter of 2023. Our cost of deposits (including noninterest bearing accounts) was 85 basis points, 66 basis points, and 26

basis points, respectively, for the same periods.

### Provision for Credit Losses

We recorded a provision for credit losses of $0.9 million for the first quarter of 2024 compared to $2.0 million for the fourth quarter of

2023 and $3.1 million for the first quarter of 2023. The decrease in the provision compared to the fourth quarter of 2023 was

primarily attributable to a lower level of reserves required for new loans, favorable loan grade migration, and lower loss rates.

Compared to the first quarter of 2023, the decrease was driven by lower new loan growth in the first quarter of 2024. We discuss the

allowance for credit losses further below.

### Noninterest Income

Noninterest income for the first quarter of 2024 totaled $18.1 million compared to $17.2 million for the fourth quarter of 2023 and

$17.8 million for the first quarter of 2023. The $0.9 million increase over the fourth quarter of 2023 was due to a $0.5 million

increase in mortgage banking revenues and a $0.4 million increase in wealth management fees. Compared to the first quarter of 2023,

the $0.3 million increase was primarily attributable to higher wealth management fees of $0.7 million partially offset by lower other

income of $0.3 million. For both prior period comparisons, the increase in mortgage banking revenues reflected a higher volume of

rate locks and third-party loan sales. A combination of higher trust fees, retail brokerage fees, and insurance commissions drove the

increase in wealth management fees over the fourth quarter of 2023. Higher retail brokerage fees of $0.4 million and trust fees of $0.2

million drove the increase over the first quarter of 2023. The decrease in other income was primarily due to lower loan servicing

income and miscellaneous income.

Noninterest income represented 32.06% of operating revenues (net interest income plus noninterest income) for the first quarter of

2024 compared to 30.46% for the fourth quarter of 2023 and 30.53% for the first quarter of 2023.

The table below reflects the major components of noninterest income.

### Three Months Ended

#### (Dollars in Thousands)

### March 31, 2024

### December 31, 2023

### March 31, 2023

Deposit Fees

5,250

5,304

5,239

Bank Card Fees

3,620

3,713

3,726

Wealth Management Fees

4,682

4,276

3,928

Mortgage Banking Revenues

2,878

2,327

2,871

Other

1,667

1,537

1,994

### Total Noninterest Income

18,097

17,157

17,758

Significant components of noninterest income are discussed in more detail below.

#### Deposit Fees

. Deposit fees for the first quarter of 2024 totaled $5.2 million, comparable to the fourth quarter of 2023 and the first

quarter of 2023. Compared to the fourth quarter of 2023, a $0.1 million increase in commercial account analysis fees was offset by a

$0.1 million decrease in overdraft fees. Compared to the first quarter of 2023, a $0.1 million increase in overdraft fees was offset by a

$0.1 million decrease in account maintenance fees.

#### Bank Card Fees

. Bank card fees for the first quarter of 2024 totaled $3.6 million, a $0.1 million decrease from both the fourth quarter

of 2023 and first quarter of 2023 and reflected lower debit card usage related to a decline in consumer spending.

#### Wealth Management Fees

. Wealth management fees, which include both trust fees (i.e., managed accounts and trusts/estates), retail

brokerage fees (i.e., investment, insurance products, and retirement accounts), and insurance commission revenues, totaled $4.7

million for the first quarter of 2024, an increase of $0.4 million, or 9.5%, over the fourth quarter of 2023 and an increase of $0.8

million, or 19.2%, over the first quarter of 2023. Compared to the fourth quarter of 2023, the increase reflected a combination of

higher trust fees and retail brokerage fees due to growth in assets under management, and higher insurance commission revenues. The

increase over the first quarter of 2023 was primarily attributable to higher retail brokerage fees reflective of increased assets under

management, and to a lesser extent higher trust fees and insurance commission revenues. At March 31, 2024, total assets under

management were approximately $2.686 billion compared to $2.588 billion at December 31, 2023 and $2.330 billion at March 31,

2023\. Compared to December 31, 2023, the increase was primarily attributable to growth in trust assets and the growth over March

31, 2023 was primarily in retail brokerage assets reflecting increases in investments in fixed income and annuity products, and higher

account values/returns reflective of the improved market returns.

#### Mortgage Banking Revenues

. Mortgage banking revenues totaled $2.9 million for the first quarter of 2024, an increase of $0.5

million, or 23.7%, over the fourth quarter of 2023 and comparable to the first quarter of 2023. Compared to the fourth quarter of

2023, the increase reflected a higher level of rate locks and third-party loan sales. We provide a detailed overview of our mortgage

banking operation, including a detailed break-down of mortgage banking revenues, mortgage servicing activity, and warehouse

funding within Note 4 - Mortgage Banking Activities in the Notes to Consolidated Financial Statements.

#### Other

. Other income totaled $1.7 million for the first quarter of 2024, a decrease of $0.1 million, or 8.5%, from the fourth quarter of

2023 and a decrease of $0.3 million, or 16.4%, from the first quarter of 2023. Compared to the first quarter of 2023, the decrease was

primarily attributable to lower loan servicing income (due to sale of mortgage servicing rights) and miscellaneous income.

### Noninterest Expense

Noninterest expense for the first quarter of 2024 totaled $40.2 million compared to $40.0 million for the fourth quarter of 2023 and

$37.7 million for the first quarter of 2023. The $0.2 million increase over the fourth quarter of 2023 reflected a $0.6 million increase

in compensation expense that was partially offset by decreases in occupancy expense of $0.1 million and other expense of $0.3

million. The increase in compensation expense was primarily attributable to higher payroll taxes (annual re-set) and 401k plan

matching expense. Compared to the first quarter of 2023, the $2.5 million increase reflected higher other expense as we realized a

$1.8 million gain from the sale of other real estate (banking office) in the first quarter of 2023. Further, compensation expense was

$0.9 million higher primarily due to a lower level of realized loan cost (credit offset to salary expense) due to decreased new loan

production.

The table below reflects the major components of noninterest expense.

### Three Months Ended

#### (Dollars in Thousands)

### March 31, 2024

### December 31, 2023

### March 31, 2023

Salaries

20,604

20,258

19,517

Associate Benefits

3,803

3,564

4,007

Total Compensation

24,407

23,822

23,524

Premises

3,173

3,402

3,245

Equipment

3,821

3,696

3,517

Total Occupancy

6,994

7,098

6,762

Legal Fees

435

573

362

Professional Fees

1,258

1,629

1,324

Processing Services

1,833

1,497

1,742

Advertising

815

759

874

Telephone

709

686

706

Insurance - Other

915

713

831

Other Real Estate Owned, net

18

(123)

(1,827)

Pension - Other

(419)

32

7

Miscellaneous

3,206

3,272

3,370

Total Other

8,770

9,038

7,389

### Total Noninterest Expense

40,171

39,958

37,675

Significant components of noninterest expense are discussed in more detail below.

#### Compensation

. Compensation expense totaled $24.4 million for the first quarter of 2024, an increase of $0.6 million, or 2.5%, over

the fourth quarter of 2023 and an increase of $0.9 million, or 3.8%, over the first quarter of 2023. Compared to the fourth quarter of

2023, the increase reflected an increase in salary expense of $0.3 million and associate benefit expense of $0.3 million. The increase in

salary expense was primarily attributable to an increase in payroll tax expense which reflected the annual re-set of this tax as well as

payroll taxes related to a high level of cash/stock incentives paid in the first quarter. The increase in associate benefit expense reflected

increases in stock compensation expense (higher expected pay-out for incentive plan) and other associate benefit expense (annual

sales/service awards event). Compared to the first quarter of 2023, the increase reflected an increase in salary expense of $1.1 million

partially offset by a $0.2 million decrease in associate benefit expense. The increase in salary expense was primarily due to a lower

level of realized loan cost (credit offset to salary expense) due to decreased new loan production and to a lesser extent base salaries

(annual merit) that was partially offset by lower commission expense at CCHL. Lower stock compensation expense drove the

decrease in associate benefit expense and reflected a higher pay-out for the prior year long-term incentive plan.

#### Occupancy.

Occupancy expense (including premises and equipment) totaled $7.0 million for the first quarter of 2024, a decrease of

$0.1 million, or 1.5% from the fourth quarter of 2023 and an increase of $0.2 million, or 3.4%, over the first quarter of 2023. The

decrease from the fourth quarter of 2023 was due to lower building maintenance, and the increase over the first quarter of 2023

reflected higher FF&E depreciation and maintenance agreement expense partially attributable to new offices opened in 2023.

#### Other

. Other noninterest expense totaled $8.8 million for the first quarter of 2024, a decrease of $0.3 million, or 2.9%, from the fourth

quarter of 2023 and an increase of $1.4 million, or 18.7%, from the first quarter of 2023. The decrease from the fourth quarter was

primarily due to lower pension-other expense (non-service component ) of $0.4 million and professional fees of $0.4 million that was

partially offset by higher processing fees of $0.3 million and insurance -other of $0.2 million. The increase over the first quarter of

2023 was primarily due to a $1.8 million increase in other real estate expense as we realized a $1.8 million gain from the sale of a

banking office in the first quarter of 2023. A $0.4 million decrease in pension-other expense was partially offsetting.

Our operating efficiency ratio (expressed as noninterest expense as a percent of the sum of taxable-equivalent net interest income plus

noninterest income) was 71.06% for the first quarter of 2024 compared to 70.82% for the fourth quarter of 2023 and 64.67% for the

first quarter of 2023. The decrease from the first quarter of 2023 was primarily attributable to lower noninterest expense which

included a $1.8 million gain from the sale of a banking office, and to a lesser extent lower net interest income.

### Income Taxes

We realized income tax expense of $3.5 million (effective rate of 23.0%) for the first quarter of 2024 compared to $2.9 million

(effective rate of 20.3%) for the fourth quarter of 2023 and $3.7 million (effective rate of 21.3%) for the first quarter of 2023. The

increase in our effective tax rate for the first quarter of 2024 compared to both prior periods was primarily due to a lower level of tax

benefit accrued from an investment in a solar tax credit equity fund. Absent discrete items or new tax credit investments, we expect

our annual effective tax rate to approximate 23% for 2024.

### FINANCIAL CONDITION

Average earning assets totaled $3.850 billion for the first quarter of 2024, an increase of $25.6 million, or 0.7%, over the fourth

quarter of 2023, and a decrease of $213.1 million, or 5.2%, from the first quarter of 2023. The variance for both prior period

comparisons was driven by change in deposit balances (see below – Deposits). Compared to both prior periods, the mix of earning

assets improved as overnight funds were utilized to fund loan growth.

### Investment Securities

Average investments decreased $10.0 million, or 1.0%, from the fourth quarter of 2023. Our investment portfolio represented 24.8%

of our average earning assets for the first quarter of 2024 compared to 25.2% for the fourth quarter of 2023. For the remainder of

2024, we will continue to monitor our overall liquidity position and market conditions to determine if cash flow from the investment

portfolio should be reinvested or allowed to run-off into overnight funds.

The investment portfolio is a significant component of our operations and, as such, it functions as a key element of liquidity and

asset/liability management. Two types of classifications are approved for investment securities which are Available -for-Sale (“AFS”)

and Held-to-Maturity (“HTM”). At March 31, 2024, $603.4 million, or 64.6%, of the investment portfolio was classified as HTM

and $330.7 million, or 35.4% was classified as AFS. The average maturity of our total portfolio at March 31, 2024 was 2.76 years

compared to 2.91 years at December 31, 2023. The duration of our investment portfolio at March 31, 2024 and December 31, 2023

was 2.39 years and 2.91 years, respectively. Additional information on unrealized gains/losses in the AFS and HTM portfolios is

provided in Note 2 – Investment Securities.

We determine the classification of a security at the time of acquisition based on how the purchase will affect our asset/liability strategy

and future business plans and opportunities. We consider multiple factors in determining classification, including regulatory capital

requirements, volatility in earnings or other comprehensive income, and liquidity needs. Securities in the AFS portfolio are recorded

at fair value with unrealized gains and losses associated with these securities recorded net of tax, in the accumulated other

comprehensive income component of shareowners’ equity. HTM securities are acquired or owned with the intent of holding them to

maturity. HTM investments are measured at amortized cost. We do not trade, nor do we presently intend to begin trading investment

securities for the purpose of recognizing gains and therefore we do not maintain a trading portfolio.

At March 31, 2024, there were 876 positions (combined AFS and HTM) with unrealized losses totaling $64.8 million. 85 of these

positions are U.S. Treasuries and carry the full faith and credit of the U.S. Government. 690 were U.S. government agency securities

issued by U.S. government sponsored entities. The remaining 101 positions (municipal securities and corporate bonds) have a credit

component. At March 31, 2024, corporate debt securities had an allowance for credit losses of $43,000 and municipal securities had

an allowance of $39,000. At March 31, 2024, all collateralized mortgage obligation securities, mortgage -backed securities, Small

Business Administration securities, U.S. Agency, and U.S. Treasury bonds held were AAA rated.

### Loans HFI

Average loans HFI increased $17.4 million, or 0.6%, over the fourth quarter of 2023 and $146.2 million, or 5.7%, over the first quarter

of 2023. Compared to both prior periods, the increase was primarily due to an increase in residential loans partially offset by a decline

in consumer loans (primarily auto). Period end loans decreased $2.7 million, or 0.1%, from the fourth quarter of 2023 and increased

$74.0 million, or 2.8%, over the first quarter of 2023. The decrease from the fourth quarter of 2023 was primarily due to lower

consumer (auto) loan portfolio balances partially offset by growth in residential loans. Compared to the first quarter of 2023, the

increase reflected growth in residential loans and to a lesser extent commercial real estate loans partially offset by lower consumer

(auto) loan balances.

Without compromising our credit standards , changing our underwriting standards, or taking on inordinate interest rate risk, we

continue to closely monitor our markets and make minor adjustments as necessary.

### Credit Quality

Overall credit quality remained stable. Nonperforming assets (nonaccrual loans and other real estate) totaled $6.8 million at March

31, 2024 compared to $6.2 million at December 31, 2023 and $4.6 million at March 31, 2023. At March 31, 2024, nonperforming

assets as a percent of total assets equaled 0.16% compared to 0.15% at December 31, 2023 and 0.10% at March 31, 2023. Nonaccrual

loans totaled $6.8 million at March 31, 2024, a $0.6 million increase over December 31, 2023 and a $2.2 million increase over March

31, 2023. Further, classified loans totaled $22.3 million at March 31, 2024, a $0.1 million increase over December 31, 2023 and a

$10.1 million increase over March 31, 2023.

### Allowance for Credit Losses

The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount

expected to be collected on the loans. The allowance for credit losses is adjusted by a credit loss provision which is reported in

earnings and reduced by the charge-off of loan amounts (net of recoveries). Loans are charged off against the allowance when

management believes the uncollectability of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts

previously charged-off and expected to be charged -off. Expected credit loss inherent in non-cancellable off-balance sheet credit

exposures is provided through the credit loss provision but recorded as a separate liability included in other liabilities.

Management estimates the allowance balance using relevant available information, from internal and external sources relating to past

events, current conditions, and reasonable and supportable forecasts. Historical loan default and loss experience provides the basis for

the estimation of expected credit losses. Adjustments to historical loss information incorporate management’s view of current

conditions and forecasts.

At March 31, 2024, the allowance for credit losses for HFI loans totaled $29.3 million compared to $29.9 million at December 31,

2023 and $26.8 million at March 31, 2023. Activity within the allowance is provided in Note 3 – Loans Held for Investment and

Allowance for Credit Losses in the Consolidated Financial Statements. The decrease in the allowance from December 31, 2023 was

primarily due to favorable loan grade migration, lower loss rates, and a combination of lower loan balances and shift in mix within the

portfolio. Compared to March 31, 2023, the increase was primarily driven by loan growth. At March 31, 2024, the allowance

represented 1.07% of HFI loans compared to 1.10% at December 31, 2023, and 1.01% at March 31, 2023.

At March 31, 2024, the allowance for credit losses for unfunded commitments totaled $3.1 million compared to $3.2 million at

December 31, 2023 and $2.8 million at March 31, 2023. The allowance for unfunded commitments is recorded in other liabilities.

### Deposits

Average total deposits were $3.577 billion for the first quarter of 2024, an increase of $28.0 million, or 0.8%, over the fourth quarter

of 2023 and a decrease of $240.8 million, or 6.3%, from the first quarter of 2023. Compared to the fourth quarter of 2023, the

increase reflected a higher average balance for public funds (municipal clients - primarily NOW accounts) which typically peak late in

the fourth quarter. Further, we realized growth in both our money market and CD balances which reflected a combination of balances

migrating from noninterest bearing and savings accounts, in addition to receiving new deposits from existing and new clients.

Compared to the first quarter of 2023, the decrease was primarily attributable to lower noninterest bearing and savings accounts,

partially offset by increases in money market and CD balances. The decrease in noninterest bearing and savings accounts reflected a

combination of consumer/business spend of pandemic related stimulus funds and rate sensitive clients seeking higher yields, partially

offset by the aforementioned migration to higher rate deposit products (money market and CD).

At March 31, 2024, total deposits were $3.654 billion, a decrease of $47.0 million, or 1.3%, from December 31, 2023 and $169.1

million, or 4.4% from March 31, 2023. The decrease from December 31, 2023 was primarily attributable to lower public funds

(municipal clients - primarily NOW accounts) partially offset by higher money market balances and to a lesser extent CD balances.

The decrease from March 31, 2023 was due to the same aforementioned factors driving the average variance. Total public funds

balances were $615.0 million at March 31, 2024, $709.8 million December 31, 2023, and $637.8 million at March 31, 2023.

Business deposit transaction accounts classified as repurchase agreements averaged $25.7 million for the first quarter of 2024, a

decrease of $1.1 million from the fourth quarter of 2023 and an increase of $16.4 million over the first quarter of 2023. At March 31,

2024, repurchase agreement balances were $23.5 million compared to $27.0 million at December 31, 2023 and $4.4 million at March

31, 2023.

We continue to closely monitor our cost of deposits and deposit mix as we manage through the current rate environment.

### MARKET RISK AND INTEREST RATE SENSITIVITY

### Market Risk and Interest Rate Sensitivity

#### Overview.

Market risk arises from changes in interest rates, exchange rates, commodity prices, and equity prices. We have risk

management policies designed to monitor and limit exposure to market risk and we do not participate in activities that give rise to

significant market risk involving exchange rates, commodity prices, or equity prices. In asset and liability management activities, our

policies are designed to minimize structural interest rate risk.

#### Interest Rate Risk Management.

Our net income is largely dependent on net interest income. Net interest income is susceptible to

interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. When

interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a given period, a significant increase in

market rates of interest could adversely affect net interest income. Similarly, when interest-earning assets mature or reprice more

quickly than interest-bearing liabilities, falling market interest rates could result in a decrease in net interest income. Net interest

income is also affected by changes in the portion of interest-earning assets that are funded by interest-bearing liabilities rather than by

other sources of funds, such as noninterest-bearing deposits and shareowners’ equity.

We have established what we believe to be a comprehensive interest rate risk management policy, which is administered by

management’s Asset Liability Management Committee (“ALCO”). The policy establishes limits of risk, which are quantitative

measures of the percentage change in net interest income (a measure of net interest income at risk) and the fair value of equity capital

(a measure of economic value of equity (“EVE”) at risk) resulting from a hypothetical change in interest rates for maturities from one

day to 30 years. We measure the potential adverse impacts that changing interest rates may have on our short-term earnings, long-

term value, and liquidity by employing simulation analysis through the use of computer modeling. The simulation model captures

optionality factors such as call features and interest rate caps and floors imbedded in investment and loan portfolio contracts. As with

any method of gauging interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology used by

us. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan

prepayments, and withdrawals of time and other deposits, may deviate significantly from assumptions used in the model. Finally, the

methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan clients’ ability to service their

debts, or the impact of rate changes on demand for loan and deposit products.

The statement of financial condition is subject to testing for interest rate shock possibilities to indicate the inherent interest rate risk.

We apply instantaneous, parallel rate shocks to the base case in 100 basis point (bp) increments ranging from down 400bp to up

400bps at least once per quarter, with the analysis reported to ALCO, our Market Risk Oversight Committee (“MROC”), our

Enterprise Risk Oversight Committee (“EROC”) and the Board of Directors. We augment our interest rate shock analysis with

alternative interest rate scenarios on a quarterly basis that may include ramps, and a flattening or steepening of the yield curve (non-

parallel shift). In addition, more frequent forecasts may be produced when interest rates are particularly uncertain or when other

business conditions so dictate.

Our goal is to structure the statement of financial condition so that net interest earnings at risk over 12-month and 24-month periods

and the economic value of equity at risk do not exceed policy guidelines at the various interest rate shock levels. We attempt to

achieve this goal by balancing, within policy limits, the volume of floating-rate liabilities with a similar volume of floating-rate assets,

by keeping the average maturity of fixed-rate asset and liability contracts reasonably matched, by managing the mix of our core

deposits, and by adjusting our rates to market conditions on a continuing basis.

#### Analysis.

Measures of net interest income at risk produced by simulation analysis are indicators of an institution’s short-term

performance in alternative rate environments. These measures are typically based upon a relatively brief period, and do not

necessarily indicate the long-term prospects or economic value of the institution.

### ESTIMATED CHANGES IN NET INTEREST INCOME

### (1)

### Percentage Change (12-month shock)

### +400 bp

### +300 bp

### +200 bp

### +100 bp

### -100 bp

### -200 bp

### -300 bp

### -400 bp

Policy Limit

-15.0%

-12.5%

-10.0%

-7.5%

-7.5%

-10.0%

-12.5%

-15.0%

March 31, 2024

10.0%

7.5%

4.8%

2.5%

-3.1%

-6.5%

-10.5%

-15.1%

December 31, 2023

3.0%

2.1%

1.3%

0.7%

-1.2%

-3.6%

-7.5%

-12.8%

### Percentage Change (24-month shock)

### +400 bp

### +300 bp

### +200 bp

### +100 bp

### -100 bp

### -200 bp

### -300 bp

### -400 bp

Policy Limit

-17.5%

-15.0%

-12.5%

-10.0%

-10.0%

-12.5%

-15.0%

-17.5%

March 31, 2024

38.2%

31.3%

24.4%

18.0%

3.5%

-5.4%

-15.4%

-26.0%

December 31, 2023

29.5%

24.4%

19.3%

14.8%

4.1%

-3.5%

-12.9%

-23.6%

The Net Interest Income (“NII”) at Risk position of an instantaneous, parallel rate shock indicates that in the short-term (over the next

12 months), all rising rate environments will positively impact the net interest margin of the Company, while declining rate

environments will have a negative impact on the net interest margin. Compared to the fourth quarter of 2023, these metrics became

more favorable in the rising rate scenarios and less favorable in the falling rate scenarios primarily attributable to the update of our

deposit beta assumptions which will vary depending on the rate shock. The instantaneous, parallel rate shock results over the next 12-

months are slightly outside of policy in the rates down 400 bps scenario and outside of policy over 24 months in the rates down 300

bps and 400 bps scenarios primarily due to change in our deposit beta assumptions discussed above.

The measures of equity value at risk indicate our ongoing economic value by considering the effects of changes in interest rates on all

of our cash flows by discounting the cash flows to estimate the present value of assets and liabilities. The difference between these

discounted values of the assets and liabilities is the economic value of equity, which in theory approximates the fair value of our net

assets.

### ESTIMATED CHANGES IN ECONOMIC VALUE OF EQUITY

### (1)

### Changes in Interest Rates

### +400 bp

### +300 bp

### +200 bp

### +100 bp

### -100 bp

### -200 bp

### -300 bp

### -400 bp

Policy Limit

-30.0%

-25.0%

-20.0%

-15.0%

-15.0%

-20.0%

-25.0%

-30.0%

March 31, 2024

19.5%

15.3%

10.4%

5.4%

-8.7%

-17.8%

-24.9%

-28.4%

December 31, 2023

12.9%

10.7%

7.8%

4.4%

-6.4%

-14.0%

-23.6%

-27.8%

EVE Ratio (policy minimum 5.0%)

20.6%

19.5%

18.4%

17.2%

14.4%

12.7%

11.4%

10.8%

At March 31, 2024, the economic value of equity was favorable in all rising rate environments and unfavorable in the falling rate

environments. Compared to the fourth quarter of 2023, EVE metrics were slightly more favorable in the rising rate environment and

less favorable in falling rate environments. EVE is currently in compliance with policy in all rate scenarios, and the EVE ratio

exceeds 5.0% in each shock scenario.

As the interest rate environment and the dynamics of the economy continue to change, additional simulations will be analyzed to

address not only the changing rate environment, but also the change in mix of our financial assets and liabilities, measured over

multiple years, to help assess the risk to the Company.

### LIQUIDITY AND CAPITAL RESOURCES

### Liquidity

In general terms, liquidity is a measurement of our ability to meet our cash needs. Our objective in managing our liquidity is to

maintain our ability to meet loan commitments, purchase securities or repay deposits and other liabilities in accordance with their

terms, without an adverse impact on our current or future earnings. Our liquidity strategy is guided by policies that are formulated and

monitored by our ALCO and senior management, which take into account the marketability of assets, the sources and stability of

funding and the level of unfunded commitments. We regularly evaluate all of our various funding sources with an emphasis on

accessibility, stability, reliability and cost-effectiveness. Our principal source of funding has been our client deposits, supplemented

by our short-term and long-term borrowings, primarily from securities sold under repurchase agreements, federal funds purchased and

FHLB borrowings. We believe that the cash generated from operations, our borrowing capacity and our access to capital resources are

sufficient to meet our future operating capital and funding requirements.

At March 31, 2024, we had the ability to generate approximately $1.542 billion (excludes overnight funds position of $231 million) in

additional liquidity through various sources including various federal funds purchased lines, Federal Home Loan Bank borrowings, the

Federal Reserve Discount Window, and brokered deposits. We recognize the importance of maintaining liquidity and have developed

a Contingent Liquidity Plan, which addresses various liquidity stress levels and our response and action based on the level of severity.

We periodically test our credit facilities for access to the funds, but also understand that as the severity of the liquidity level increases

that certain credit facilities may no longer be available. We conduct a liquidity stress test on a quarterly basis based on events that

could potentially occur at the Bank and report results to our ALCO, MROC , EROC, and Board of Directors. At March 31, 2024, we

believe the liquidity available to us was sufficient to meet our on-going needs and execute our business strategy.

We also view our investment portfolio as a liquidity source and have the option to pledge securities in our portfolio as collateral for

borrowings or deposits, and/or to sell selected securities. Additional information on our investment portfolio is provided within Note

2 – Investment Securities.

The Bank maintained an average net overnight funds (deposits with banks plus FED funds sold less FED funds purchased) sold

position of $140.5 million in the first quarter of 2024 compared to $99.8 million in the fourth quarter of 2023 and $361.0 million in

the first quarter of 2023. Compared to the fourth quarter of 2023, the increase was driven by average deposit growth and investment

portfolio run-off, partially offset by average loan growth. Compared to the first quarter of 2023, the decrease was attributable to lower

average deposit balances and growth in our loan portfolio, partially offset by investment portfolio run-off.

We expect our capital expenditures will be approximately $12.0 million over the next 12 months, which will primarily consist of

construction of new offices, office remodeling, office equipment/furniture, and technology purchases. Management expects that these

capital expenditures will be funded with existing resources without impairing our ability to meet our on-going obligations.

### Borrowings

Average short -term borrowings totaled $29.5 million for the first quarter of 2024 compared to $43.8 million for the fourth quarter of

2023 and $47.1 million for the first quarter of 2023. Compared to both prior periods, the decrease was attributable to a lower balance

maintained on CCHL’s warehouse line. Additional detail on these warehouse borrowings is provided in Note 4 – Mortgage Banking

Activities in the Consolidated Financial Statements.

We have issued two junior subordinated deferrable interest notes to our wholly owned Delaware statutory trusts. The first note for

$30.9 million was issued to CCBG Capital Trust I in November 2004, of which $10 million was retired in April 2016. The second

note for $32.0 million was issued to CCBG Capital Trust II in May 2005. The interest payment for the CCBG Capital Trust I

borrowing is due quarterly and adjusts quarterly to a variable rate of three-month CME Term SOFR (secured overnight financing rate)

plus a margin of 1.90%. This note matures on December 31, 2034. The interest payment for the CCBG Capital Trust II borrowing is

due quarterly and adjusts quarterly to a variable interest rate based on three-month CME Term SOFR plus a margin of 1.80%. This

note matures on June 15, 2035. The proceeds from these borrowings were used to partially fund acquisitions. Under the terms of each

junior subordinated deferrable interest note, in the event of default or if we elect to defer interest on the note, we may not, with certain

exceptions, declare or pay dividends or make distributions on our capital stock or purchase or acquire any of our capital stock.

During the second quarter of 2020, we entered into a derivative cash flow hedge of our interest rate risk related to our subordinated

debt. The notional amount of the derivative is $30 million ($10 million of the CCBG Capital Trust I borrowing and $20 million of the

CCBG Capital Trust II borrowing). The interest rate swap agreement requires CCBG to pay fixed and receive variable (three-month

CME Term SOFR plus spread) and has an average all-in fixed rate of 2.50% for 10 years. Additional detail on the interest rate swap

agreement is provided in Note 5 – Derivatives in the Consolidated Financial Statements.

### Capital

Our capital ratios are presented in the Selected Quarterly Financial Data table on page 35. At March 31, 2024, our regulatory capital

ratios exceeded the threshold to be designated as “well-capitalized” under the Basel III capital standards.

Shareowners’ equity was $448.3 million at March 31, 2024 compared to $440.6 million at December 31, 2023 and $403.3 million at

March 31, 2023. For the first three months of 2024, shareowners’ equity was positively impacted by net income attributable to

shareowners of $12.6 million, net adjustments totaling $0.5 million related to transactions under our stock compensation plans, stock

compensation accretion of $0.4 million, and a $0.3 million increase in the fair value of the interest rate swap related to subordinated

debt. Shareowners’ equity was reduced by a common stock dividend of $3.6 million ($0.21 per share), the repurchase of stock of $2.3

million (82,540 shares), and a $0.2 million increase in the net unrealized loss on available for sale securities.

At March 31, 2024, our total risk-based capital ratio was 16.84% compared to 16.57% at December 31, 2023 and 15.29% at March 31,

2023\. Our common equity tier 1 capital ratio was 13.82%, 13.52%, and 12.40%, respectively, on these dates. Our leverage ratio was

10.45%, 10.30%, and 9.09%, respectively, on these dates. At March 31, 2024, all our regulatory capital ratios exceeded the thresholds

to be designated as “well-capitalized” under the Basel III capital standards. Further, our tangible common equity ratio (non-GAAP

financial measure) was 8.53% at March 31, 2024 compared to 8.26% and 7.20% at December 31, 2023 and March 31, 2023,

respectively. If our unrealized held-to-maturity securities losses of $21.6 million (after-tax) were recognized in accumulated other

comprehensive loss, our adjusted tangible capital ratio would be 8.01%.

Our tangible capital ratio is also impacted by the recording of our unfunded pension liability through other comprehensive income in

accordance with ASC Topic 715. At March 31, 2024, the net pension liability reflected in other comprehensive loss was $0.4 million

compared to $0.4 million at December 31, 2023 and $4.5 million at March 31, 2023. This liability is re-measured annually on

December 31

st

based on an actuarial calculation of our pension liability. Significant assumptions used in calculating the liability

include the weighted average discount rate used to measure the present value of the pension liability, the weighted average expected

long-term rate of return on pension plan assets, and the assumed rate of annual compensation increases, all of which will vary when

re-measured. The discount rate assumption used to calculate the pension liability is subject to long -term corporate bond rates at

December 31

st

. These assumptions and sensitivities are discussed in the section entitled “Critical Accounting Policies and Estimates”

in Part II, Item7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our 2023 Form 10-K/A.

### OFF-BALANCE SHEET ARRANGEMENTS

We are a party to financial instruments with off-balance sheet risks in the normal course of business to meet the financing needs of our

clients.

At March 31, 2024, we had $753.5 million in commitments to extend credit and $6.3 million in standby letters of credit.

Commitments to extend credit are agreements to lend to a client so long as there is no violation of any condition established in the

contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since

many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily

represent future cash requirements. Standby letters of credit are conditional commitments issued by us to guarantee the performance

of a client to a third party. We use the same credit policies in establishing commitments and issuing letters of credit as we do for on-

balance sheet instruments.

If commitments arising from these financial instruments continue to require funding at historical levels, management does not

anticipate that such funding will adversely impact our ability to meet our on-going obligations. In the event these commitments

require funding in excess of historical levels, management believes current liquidity, advances available from the FHLB and the

Federal Reserve, and investment security maturities provide a sufficient source of funds to meet these commitments.

Certain agreements provide that the commitments are unconditionally cancellable by the bank and for those agreements no allowance

for credit losses has been recorded. We have recorded an allowance for credit losses on loan commitments that are not

unconditionally cancellable by the bank, which is included in other liabilities on the consolidated statements of financial condition and

totaled $3.1 million at March 31, 2024.

### CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements included in our 2023 Form 10-

K/A. The preparation of our Consolidated Financial Statements in accordance with GAAP and reporting practices applicable to the

banking industry requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and

expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates.

We have identified accounting for (i) the allowance for credit losses, (ii) goodwill, (iii) pension assumptions, and (iv) income taxes as

our most critical accounting policies and estimates in that they are important to the portrayal of our financial condition and results, and

they require our subjective and complex judgment as a result of the need to make estimates about the effects of matters that are

inherently uncertain. These accounting policies, including the nature of the estimates and types of assumptions used, are described

throughout this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 7,

Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2023 Form 10-K/A.

### TABLE I

### AVERAGE BALANCES & INTEREST RATES

### Three Months Ended

### March 31, 2024

### December 31, 2023

### March 31, 2023

Average

Average

Average

Average

Average

Average

(Dollars in Thousands)

Balances

Interest

Rate

Balances

Interest

Rate

Balances

Interest

Rate

Assets:

Loans Held for Sale

27,314

563

5.99

49,790

817

6.50

55,110

644

4.74

Loans Held for Investment

(1)(2)

2,728,629

40,196

5.95

2,711,243

39,679

5.81

2,582,395

34,342

5.39

Taxable Securities

952,328

4,238

1.78

962,322

4,389

1.81

1,061,372

4,912

1.86

Tax-Exempt Securities

(2)

856

10

4.34

862

7

4.32

2,840

17

2.36

Interest Bearing Deposits

140,488

1,893

5.42

99,763

1,385

5.51

360,971

4,111

4.62

Total Earning Assets

3,849,615

46,900

4.90

3,823,980

46,277

4.80

4,062,688

44,026

4.39

Cash & Due From Banks

75,763

76,681

74,639

Allowance For Credit Losses

(30,030)

(29,998)

(25,637)

Other Assets

295,275

296,114

300,175

TOTAL ASSETS

4,190,623

4,166,777

4,411,865

Liabilities:

Noninterest Bearing Deposits

1,344,188

1,416,825

1,601,750

NOW Accounts

1,201,032

4,497

1.51

1,138,461

3,696

1.29

1,228,928

2,152

0.71

Money Market Accounts

353,591

1,985

2.26

318,844

1,421

1.77

267,573

208

0.31

Savings Accounts

539,374

188

0.14

557,579

202

0.14

629,388

76

0.05

Other Time Deposits

138,328

924

2.69

116,797

553

1.88

89,675

52

0.24

Total Interest Bearing Deposits

2,232,325

7,594

1.37

2,131,681

5,872

1.09

2,215,564

2,488

0.46

Total Deposits

3,576,513

7,594

0.85

3,548,506

5,872

0.66

3,817,314

2,488

0.26

Repurchase Agreements

25,725

201

3.14

26,831

199

2.94

9,343

9

0.37

Short-Term Borrowings

3,758

39

4.16

16,906

310

7.29

37,766

452

4.86

Subordinated Notes Payable

52,887

628

4.70

52,887

627

4.64

52,887

571

4.32

Other Long-Term Borrowings

281

3

4.80

336

5

4.72

480

6

4.80

Total Interest Bearing Liabilities

2,314,976

8,465

1.47

2,228,641

7,013

1.25

2,316,040

3,526

0.62

Other Liabilities

68,295

78,772

81,206

TOTAL LIABILITIES

3,727,459

3,724,238

3,998,996

Temporary Equity

7,150

7,423

8,802

TOTAL SHAREOWNERS’ EQUITY

456,014

435,116

404,067

TOTAL LIABILITIES, TEMPORARY

AND SHAREOWNERS’ EQUITY

4,190,623

4,166,777

4,411,865

Interest Rate Spread

3.43

3.55

3.77

Net Interest Income

38,435

39,264

40,500

Net Interest Margin

(3)

4.01

4.07

4.04

(1)

Average Balances include net loan fees, discounts and premiums and nonaccrual loans. Interest income includes net loan costs of $0.1 million for the three months ended

March 31, 2024 and December 31, 2023, and net loan fees of $0.1 million for the three months ended March 31, 2023.

(2)

Interest income includes the effects of taxable equivalent adjustments using a 21% tax rate.

(3)

Taxable equivalent net interest income divided by average earnings assets.

Filed Jul 12, 2024.
Source: SEC EDGAR, the filing index for accession 0000726601-24-000024. Last ingested by Listed: Nov 3, 2026, 20:56 ET. No prices; not investment advice.