CAPITAL CITY BANK GROUP, INC. OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
Management's discussion
and analysis ("MD&A") provides supplemental information, which sets forth
the major factors that have affected our financial condition and results of operations
and should be read in conjunction with the Consolidated Financial Statements and related notes.
The following information should provide a better understanding of
the major factors and trends that affect our earnings performance and financial condition,
and how our performance during 2023 compares with prior years.
Throughout this section,
is referred to as "CCBG," "Company,"
"we," "us," or "our." CAUTION CONCERNING FORWARD -LOOKING STATEMENTS This Quarterly Report on Form 10-Q, including this MD&A section, 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.
Please see the Introductory Note of this quarterly report on Form 10-Q
as well as the Introductory Note and Item 1A. Risk Factors
of our 2022 Report on Form 10-K, as updated in our subsequent quarterly reports
filed on Form 10-Q, and in our other filings made from time to time with the
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
We offer
a broad array of products and services through a total of 60 full-service
offices
located in
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 2022 Form 10-K. 31 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.
2023
2022
(Dollars in Thousands, except per share data)
First
Fourth
Third
Second
First
Shareowners' Equity (GAAP)
$
411,240
$
394,016
$
373,165
$
371,675
$
372,145
Less: Goodwill and Other Intangibles (GAAP)
93,053
93,093
93,133
93,173
93,213
Tangible Shareowners' Equity (non-GAAP)
A
318,187
300,923
280,032
278,502
278,932
Total Assets (GAAP)
4,409,742
4,525,958
4,332,671
4,354,297
4,310,045
Less: Goodwill and Other Intangibles (GAAP)
93,053
93,093
93,133
93,173
93,213
Tangible Assets (non-GAAP)
B
$
4,316,689
$
4,432,865
$
4,239,538
$
4,261,124
$
4,216,832
Tangible Common Equity Ratio (non-GAAP)
A/B
7.37%
6.79%
6.61%
6.54%
6.61%
Actual Diluted Shares Outstanding (GAAP)
C
17,049,913
17,039,401
16,998,177
16,981,614
16,962,362
Tangible Book Value
per Diluted Share (non-GAAP)
A/C 18.66 17.66 16.47 16.40 16.44 32 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) 2023 2022 (Dollars in Thousands, Except Per Share Data) First Fourth Third Second First Summary of Operations : Interest Income$ 43,915 $ 41,226 $ 35,364 $ 29,320 $ 25,438 Interest Expense 3,526 3,122 2,037 987 742 Net Interest Income 40,389 38,104 33,327 28,333 24,696 Provision for Credit Losses 3,130 3,521 2,099 1,542 - Net Interest Income After Provision for Credit Losses 37,259 34,583 31,228 26,791 24,696 Noninterest Income 22,248 20,972 22,934 24,903 25,818 Noninterest Expense 40,455 42,287 39,810 40,498 39,233 Income Before Income Taxes 19,052 13,268 14,352 11,196 11,281 Income Tax Expense 4,133 2,599 3,074 2,177 2,235 Income Attributable to NCI 35 995 37 (306) (591) Net Income Attributable to CCBG 14,954 11,664 11,315 8,713 8,455 Net Interest Income (FTE) (1) 40,489 38,192 33,410 28,409 24,774 Per Common Share : Net Income Basic$ 0.88 $ 0.69 $ 0.67 $ 0.51 $ 0.50 Net Income Diluted 0.88 0.68 0.67 0.51 0.50 Cash Dividends Declared 0.18 0.17 0.17 0.16 0.16 Diluted Book Value 24.12 23.12 21.95 21.89 21.94 Diluted Tangible Book Value (2) 18.66 17.66 16.47 16.40 16.44 Market Price: High 36.86 36.23 33.93 28.55 28.88 Low 28.18 31.14 27.41 24.43 25.96 Close 29.31 32.50 31.11 27.89 26.36 Selected Average Balances :Investment Securities $ 1,064,212 $ 1,081,092 $ 1,120,728 $ 1,144,757 $ 1,059,145 Loans Held for Investment 2,582,395 2,439,379 2,264,075 2,084,679 1,963,578 Earning Assets 4,062,688 4,032,733 4,009,951 3,974,221 3,938,824 Total Assets 4,411,865 4,381,825 4,357,678 4,321,388 4,266,775 Deposits 3,817,314 3,803,042 3,769,864 3,765,329 3,714,062 Shareowners' Equity 404,067 380,570 379,305 373,365 383,956 Common Equivalent Average Shares: Basic 17,016 16,963 16,960 16,949 16,931 Diluted 17,045 17,016 16,996 16,971 16,946 Performance Ratios: Return on Average Assets 1.37 % 1.06 % 1.03 % 0.81 % 0.80 % Return on Average Equity 15.01 12.16 11.83 9.36 8.93 Net Interest Margin (FTE) 4.04 3.76 3.31 2.87 2.55 Noninterest Income as % of Operating Revenue 35.52 35.50 40.76 46.78 51.11 Efficiency Ratio 64.48 71.47 70.66 75.96 77.55 Asset Quality: Allowance for Credit Losses ("ACL")$ 26,507 $ 24,736 $ 22,510 $ 21,281 $ 20,756 Nonperforming Assets ("NPAs") 4,602 2,728 2,422 3,231 2,745 ACL to Loans HFI 1.01 % 0.98 % 0.96 % 0.96 % 1.05 % NPAs to Total Assets 0.10 0.06 0.06 0.07 0.06 NPAs to Loans HFI plus OREO 0.17 0.11 0.10 0.15 0.14 ACL to Non-Performing Loans 577.63 1,076.89 934.53 677.57 760.83 Net Charge-Offs to Average Loans HFI 0.24 0.21 0.12 0.22 0.16 Capital Ratios: Tier 1 Capital 14.51 % 14.53 % 14.80 % 15.13 % 15.98 % Total Capital 15.53 15.52 15.75 16.07 16.98 Common Equity Tier 1 12.68 12.64 12.83 13.07 13.77 Leverage 9.28 9.06 8.91 8.77 8.78 Tangible Common Equity (2) 7.37 6.79 6.61 6.54 6.61 (1) Fully Tax Equivalent (2) Non-GAAP financial measure. See non-GAAP reconciliation on page 31. 33 FINANCIAL OVERVIEW Results of Operations Performance Summary .
Net income attributable to common shareowners of
diluted share, for the first quarter of 2023 compared to$11.7 million ,
or
or
per
diluted share, for the first quarter of 2022.
Net Interest Income . Tax-equivalent net
interest income for the first quarter of 2023
totaled$40.5 million , compared to$38.2 million for the fourth quarter of 2022, and$24.8 million for the first quarter of
2022.
Compared to both prior periods, the increase reflected strong loan growth and higher interest rates across a majority of our
earning assets, partially offset by higher deposit costs.
Provision and Allowance for Credit
Losses.
We recorded
a provision for credit losses of
for the first quarter of 2022.
Compared to the fourth quarter of 2022, the decrease reflected a lower level of loan growth. The lack of provision for the first quarter of 2022 reflected lower required reserves needed post-pandemic. Noninterest Income .
Noninterest income for the first quarter of 2023 totaled
of$1.2 million , or 6.1%, over the fourth quarter of 2022 and a decrease of$3.6 million , or 13.8%, from
the first quarter of 2022.
The increase over the fourth quarter of 2022 was primarily due to higher mortgage banking revenues
(higher rate locks and gain on sale margin) partially offset
by
lower deposit fees (two less processing days).
The decrease from the first quarter 2022 was driven by lower wealth management fees due to lower insurance commissions - the first quarter of 2022 was higher
than normal due to closing of several large insurance policies.
Lower mortgage revenues (lower rate locks and gain on sale margin)
also contributed to the decrease, but was partially offset by an increase in other income (loan servicing fees).
Noninterest Expense .
Noninterest expense for the first quarter of 2023 totaled
million for the fourth quarter of 2022 and$39.2 million for the first quarter of 2022.
Compared to the fourth quarter of 2022, the
to a decrease in other real estate expense of
Further, pension expense (non-service-related
component) for the first quarter of 2023 totaled
a
Compared to the first quarter of 2022, the
compensation expense of$0.8 million and occupancy expense of$0.7 million that were partially off by a decrease
in other expense of
The addition of banking offices and staffing in new markets drove the variance
in salary and occupancy expenses.
Further, compensation expense reflected
a
by an increase in stock-based compensation expense of$0.4 million . Financial Condition Earning Assets.
Average earning assets totaled
or 0.7%, over the fourth quarter of 2022, and an increase of$123.9 million , or 3.1%, over the
first quarter of 2022.
The increase over both prior periods was primarily driven by higher deposit balances.
The mix of earning assets continues to improve driven by strong loan growth.
Loans.
Average loans held for investment
("HFI") increased
2 and increased$618.8 million , or 31.5%, over the first quarter of 2022.
Period end loans increased
million, or 4.4%, over the fourth quarter of 2022 and$651.4 million , or 32.8%, over the first quarter of 2022.
Compared to the fourth quarter of 2022, a majority of the increase was realized in the residential real estate category,
and to a lesser extent, the construction and commercial real estate mortgage categories.
Compared to the first quarter of 2022, loan growth was broad based, with increases realized in
all categories except consumer loans.
The slowdown in the secondary market residential loan sales has allowed us to book
a steady flow of CCHL's adjustable-rate production in our loan portfolio throughout 2022 and the first quarter of 2023. Credit Quality .
Overall credit quality remains stable.
Nonperforming assets (nonaccrual loans and other real estate) totaled
AtMarch 31, 2023 , nonperforming assets as a percent of total assets totaled 0.10% compared
to 0.06% at
Nonaccrual loans totaled
overDecember 31, 2022 , and a$1.9 million increase overMarch 31, 2022 . AtMarch 31, 2023 , the increase was primarily
due to the addition of one large business loan
relationship totaling
collection and is adequately secured and reserved for.
34 Deposits . Average total
deposits were
or 0.4%, over the fourth quarter of 2022 and$103.3 million , or 2.8%, over the first quarter
of 2022.
Growth over
the fourth quarter of 2022 was primarily attributable to an increase in NOW account balances, primarily
due to a seasonal increase in our public fund deposits that occurred late in the fourth quarter.
Compared to the first quarter of 2022, we had strong growth in our NOW accounts
and, to a lesser extent, our savings account balances.
Capital
.
At
of 15.53% and a tangible common equity ratio (a non-GAAP financial measure) of 7.37% compared to 15.52%
and 6.79%, respectively at
31, 2022.
At
RESULTS
OF OPERATIONS The following table provides a condensed summary of our results of operations - a discussion of the various components are discussed in further detail below. Three Months Ended (Dollars in Thousands, except per share data)March 31, 2023 December 31, 2022 March 31, 2022 Interest Income$ 43,915 $ 41,226 $ 25,438 Taxable Equivalent Adjustments 100 88 78 Total Interest Income (FTE) 44,015 41,314 25,516 Interest Expense 3,526 3,122 742 Net Interest Income (FTE) 40,489 38,192 24,774 Provision for Credit Losses 3,130 3,521 - Taxable Equivalent Adjustments 100 88 78 Net Interest Income After Provision for Credit Losses 37,259 34,583 24,696 Noninterest Income 22,248 20,972 25,818 Noninterest Expense 40,455 42,287 39,233 Income Before Income Taxes 19,052 13,268 11,281 Income Tax Expense 4,133 2,599 2,235 Income Attributable to Noncontrolling Interests 35 995 (591) Net Income Attributable to Common Shareowners$ 14,954 $ 11,664 $ 8,455 Basic Net Income Per Share$ 0.88 $ 0.69 $ 0.50 Diluted Net Income Per Share$ 0.88 $ 0.68 $ 0.50 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 on page 44. Tax-equivalent net
interest income for the first quarter of 2023
totaled
Compared to both prior periods, the increase reflected strong loan growth and higher rates across a majority of our earning assets, partially offset
by higher deposit costs. Our net interest margin for the first quarter of 2023 was 4.04%, an increase
of 28 basis points over the fourth quarter of 2022 and 149 basis points over the first quarter of 2022, both driven by higher interest rates and
an overall improved earning asset mix.
For the month ofMarch 2023 , our net interest margin was 4.07%.
For the first quarter of 2023, our cost of funds was 35 basis points, an increase of four basis points over the fourth quarter of 2022 and 27 basis points
over the first quarter of 2022.
Our cost of interest- bearing deposits was 46 basis points, 35 basis points, and 4 basis points, respectively,
for the same periods. Our total cost of deposits (including noninterest bearing accounts) was 26 basis points, 20 basis points,
and 2 basis points, respectively,
for the same periods. 35 Provision for Credit Losses We recorded
a provision for credit losses of
the fourth quarter of 2022 and no provision for the first quarter of 2022.
The decrease in the provision compared to the fourth quarter of 2022 was primarily attributable to a lower level of loan growth.
The credit loss provision for the first quarter of 2022 generally reflected
lower
required reserves needed post-pandemic.
We discuss the allowance
for credit losses further below. Noninterest Income Noninterest income for the first quarter of 2023 totaled$22.2 million compared
to
The
to
higher mortgage banking revenues at CCHL of
by lower deposit fees
The increase in mortgage banking revenues reflected a higher level of rate locks and
gain on sale margin.
The decrease in deposit fees was partially attributable to two less processing days in the first quarter.
Compared to the first quarter of 2022, the
of
The decrease in wealth management fees was due to lower insurance commission revenues
which reflected higher than normal revenues in the first quarter of 2022 related to the closing of several large
insurance policies.
The decline in mortgage banking revenues was attributable to a lower level of rate locks and gain on sale margin.
The increase in other income was primarily due to higher loan servicing income and miscellaneous income.
Noninterest income represented 35.52% of operating revenues (net interest
income plus noninterest income) for the first quarter of 2023 compared to 35.50% for the fourth quarter of 2022 and 51.11%
for the first quarter of 2022. The table below reflects the major components of noninterest income. Three Months Ended (Dollars in Thousands)March 31, 2023 December 31, 2022 March 31, 2022 Deposit Fees$ 5,239 $ 5,536 $ 5,191 Bank Card Fees 3,726 3,744 3,763 Wealth Management Fees 3,928 3,649 6,070 Mortgage Banking Revenues 6,995 5,497 8,946 Other 2,360 2,546 1,848 Total Noninterest Income$ 22,248 $ 20,972 $ 25,818
Significant components of noninterest income are discussed in more
detail below. Deposit Fees .
Deposit fees for the first quarter of 2023 totaled
million, or 5.4%, from the fourth quarter of 2022 and comparable to the first quarter of 2022.
The decline from the fourth quarter of 2022 reflected two less days of processing.
Bank Card Fees .
Bank card fees for the first quarter of 2023 totaled
fourth quarter of 2022 and a decrease of$0.1 million , or 1.0%, from the first quarter of 2022.
The decline from the first quarter of 2022 was primarily attributable to lower debit card usage and reflected lower 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
fourth quarter of 2022 and a decrease of$2.1 million , or 35.3%, from the first quarter of 2022.
The increase over the fourth quarter of 2022 was primarily attributable to higher retail brokerage fees.
The decrease from the first quarter of 2022 was due to lower insurance commission
revenues which reflected higher than normal revenues in the first quarter of 2022 related to the closing of
several large insurance policies.
AtMarch 31, 2023 , total assets under management were approximately$2.330 billion
compared to
Mortgage Banking Revenues .
Mortgage banking revenues totaled
2023, an increase of$1.5 million , or 27.3%, over the fourth quarter of 2022 and a decrease of$1.9
million, or 21.8% from the first quarter of 2022.
Compared
to the fourth quarter of 2022, the increase reflected a higher level of rate locks and
gain on sale margin.
The decrease from the first quarter of 2022 was attributable to lower rate lock volume and gain on sale margin.
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. 36 Other .
Other income totaled
million, or 7.3%, from the fourth quarter of 2022 and an increase of$0.5 million , or 27.7%, over the first quarter of 2022.
Compared to the first quarter of 2022, the increase was primarily attributable to higher loan servicing income and miscellaneous income.
Noninterest Expense Noninterest expense for the first quarter of 2023 totaled$40.5 million compared
to
Compared to the fourth quarter of 2022, the
a decrease in other expense of$2.4 million that was partially offset by an increase
in occupancy expense of
The decrease in other expense was primarily attributable to lower other real estate expense
of$1.6 million due to a gain on the sale of a banking office.
Compared to the first quarter of 2022, the
partially off by a decrease of
The addition of three banking offices and staffing in new markets
drove the variance in compensation and occupancy expenses.
The table below reflects the major components of noninterest expense.
Three Months Ended (Dollars in Thousands)March 31, 2023 December 31, 2022 March 31, 2022 Salaries$ 21,629 $ 21,113 $ 20,664 Associate Benefits 4,007 4,452 4,192 Total Compensation 25,636 25,565 24,856 Premises 3,245 2,907 2,759 Equipment 3,517 3,346 3,334 Total Occupancy 6,762 6,253 6,093 Legal Fees 362 390 349 Professional Fees 1,324 1,441 1,332 Processing Services 1,742 1,368 1,637 Advertising 874 729 773 Telephone 706 690 728 Insurance - Other 831 649 510 Other Real Estate Owned, net (1,827) (241) 25 Pension - Other 7 (761) (761) Pension Settlement - 1,841 209 Miscellaneous 4,038 4,363 3,482 Total Other 8,057 10,469 8,284 Total Noninterest Expense$ 40,455 $ 42,287 $ 39,233
Significant components of noninterest expense are discussed in
more detail below. Compensation .
Compensation expense totaled
of$0.1 million , or 0.3%, over the fourth quarter of 2022 and an increase of$0.8 million , or 3.1%, over
the first quarter of 2022.
Compared to the fourth quarter of 2022, the$0.1 million increase in compensation expense reflected an increase
in salary expense of
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 decrease in associate benefit expense reflected a decrease of
in pension service cost that was partially offset by increases in stock compensation (higher
expected pay-out for long-term incentive plan), associate insurance, and other associate benefit expense (annual sales/service awards event).
Compared to the first quarter of 2022, the increase
reflected higher salary expense of
by lower associate benefit expense of
million.
The increase in salary expense was due to the addition of banking offices
and staffing in new markets.
The decrease in associate benefit expense was
primarily due to a decrease in pension service cost of
offset by an increase in stock-based compensation expense of$0.4 million . 37 Occupancy.
Occupancy expense (including premises and equipment) totaled
million for the first quarter of 2023, an increase of
million, or 8.1% over the fourth quarter of 2022 and an increase of
or 11.0%, over the first quarter of 2022.
The
increase over both prior periods was primarily attributable
to the three recently opened full-service offices and the re-location of one office. Other .
Other noninterest expense totaled
2023, a decrease of
the first quarter of 2022.
The decrease from the fourth quarter of 2022
was primarily attributable a decrease in other real estate expense of
from the sale of a banking office and lower pension settlement expense of$1.8 million , partially offset
by higher pension expense (non-service-related component) of
Compared to the first quarter of 2022, the decrease was primarily driven by lower other real
estate expense of$1.8 million due to a gain in other real estate from the sale of a banking office
that was partially offset by higher pension expense (non-
service-related component) of
million and higher
expense as a percent of the sum of taxable-equivalent net interest income plus noninterest income) was 64.48% for the first quarter of 2023 compared
to 71.47% for the fourth quarter of 2022 and 77.55% for the first quarter of 2022.
The improvement over both prior periods reflected higher net interest income.
Income Taxes We realized income
tax expense of
2023 compared to$2.6 million (effective rate of 19.6%) for the fourth quarter of 2022 and$2.2
million (effective rate of 19.8%) for the first quarter of 2022.
A
discrete tax item of
the effective tax rate for the fourth quarter of 2022.
Absent discrete items, we expect our annual effective tax rate to approximate
21%-22% in 2023.
The increase in the effective tax rate for 2023 reflects a lower level of pre-tax income from CCHL in relation
to our consolidated income as the non-controlling interest adjustment for CCHL is accounted for as a permanent tax adjustment.
FINANCIAL CONDITION Average earning
assets totaled
the fourth quarter of 2022, and an increase of$123.9 million , or 3.1%, over
the first quarter of 2022.
The increase over both prior periods was primarily driven by higher deposit balances (see below - Deposits ). The mix of earning assets continues to improve driven by strong loan growth.Investment Securities Average investment s
decreased$16.9 million , or 1.6%, from the fourth quarter of 2022 and increased$5.1 million , or 0.5%, over the first quarter of 2022. Our investment portfolio represented 26.2% of our average earning assets for the first quarter of 2023 compared to 26.8% for the fourth quarter of 2022 and 26.9% for the first quarter of 2022. For the remainder of 2023, we will continue to monitor our overall liquidity position and allow cash flow from the
investment portfolio to run-off to 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
was classified as AFS, and$651.8 million , or 61.8%, classified as HTM.
The average maturity of our total portfolio at
was 3.34 years compared to 3.57 years atDecember 31, 2022 and 3.63 years at March
31, 2022.
The duration of our investment portfolio atMarch 31, 2023 was 2.99 years.
In the third quarter of 2022, to mitigate risk to accumulated other comprehensive income due
to higher interest rates, we reclassified 33 U.S.Treasury obligations
totaling
At
these 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. 38 AtMarch 31, 2023 , there were 896 positions (combined AFS and HTM) with
pre-tax unrealized losses totaling
detail by category). 87 of these positions areU.S. Treasury bonds and carry the full faith and credit of
the
684 are
We believe the
long history of no credit losses on government securities indicates that
the
expectation of nonpayment of the amortized cost basis is effectively
zero.
The remaining 125 positions (Municipal securities and corporate bonds) have a credit component.
At
and municipal securities had an allowance of
At
andU.S. Treasury bonds held were AAA rated. Loans HFI Average loans
held for investment ("HFI") increased
and$618.8 million , or 31.5%, over the first quarter of 2022.
Period end loans increased
million, or 4.4%, over the fourth quarter of 2022 and
Compared to the fourth quarter of 2022, a majority of the increase was realized in
the
residential real estate category,
and to a lesser extent, the construction and commercial real estate mortgage
categories.
Compared to the first quarter of 2022, loan growth was broad based, with increases realized in all categories
except consumer loans.
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 remains stable.
Nonperforming assets (nonaccrual loans and other real estate) totaled
million atMarch 31, 2023 compared to$2.7 million atDecember 31, 2022 and$2.7 million
at
AtMarch 31, 2023 , the increase was primarily due to the addition of one large business loan relationship
totaling
At
2.
Nonaccrual loans totaled
over
Further, classified loans totaled$12.2 million atMarch 31, 2023 , a$7.2 million decrease fromDecember 31, 2022 and a$10.2 million decrease fromMarch 31, 2022 . Allowance for Credit Losses The allowance for credit losses is a valuation account that is deducted from the
loans' amortized cost basis to present the net amount expected to be collected on the loans.
The 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
Activity within the allowance is provided in Note 3 to the consolidated financial statements.
The increase in the allowance over the prior periods was primarily driven by
loan growth.
AtMarch 31, 2023 , net charge- offs totaled$1.5 million , an increase of$0.2 million over
the fourth quarter of 2022, and
At
HFI loans and provided coverage of 578% of nonperforming loans compared to 0.98% and 1,077%, respectively,
at
at
At
totaled$2.8 million compared to$3.0 million atDecember 31, 2022 and$3.0 million atMarch 31, 2022 . The allowance for unfunded commitments is recorded in other liabilities. 39 Deposits Average total
deposits were
or 0.4%, over the fourth quarter of 2022 and$103.3 million , or 2.8%, over the first quarter of 2022.
Compared to the fourth quarter of 2022, the increase reflected higher NOW account balances, primarily due to a seasonal increase in our
public fund deposits that occurred late in the fourth quarter.
Compared to the first quarter of 2022, we experienced strong growth in our
NOW accounts, and to a lesser degree, our savings accounts.
Period end total deposits declined
from the fourth quarter of 2022, and reflected lower balances in noninterest bearing accounts, NOW accounts, and savings accounts, partially
offset by slight growth in money market accounts and certificates of deposit
Noninterest bearing accounts decreased
of 2022, largely due to the migration of two commercial clients into interest bearing NOW accounts, in addition
to clients seeking a higher yielding investment account at Capital City Investments (approximately$30 million ,
which is predominantly attributable to clients with higher balances).
Interest bearing deposits decreased
of 2022, including a
decline in public fund balances of
by
the previously mentioned migration of two clients from noninterest bearing
accounts.
Savings account balances decreased$20.1 million from the fourth quarter of 2022, primarily attributable to clients
seeking higher yielding investment products outside of the Bank.
Money market account balances increased
of 2022 (also due to some migration from noninterest bearing accounts), in addition to growth in our new markets which
offered a promotional rate.
We continue
to closely monitor our cost of deposits and deposit mix as we manage through the current
rising 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 prepare
a current base case and several alternative interest rate simulations (-400, -300, -200,
-100,+100, +200, +300, and +400 basis points (bp)), at least once per quarter, and
report the analysis to ALCO, our
The -400bp rate scenario was reintroduced into the model beginning in the fourth quarter of 2022 due to the higher interest
rate environment. We
augment our interest rate shock analysis with alternative interest rate scenarios on a quarterly basis that may include ramps,
parallel shifts, 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. 40
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, 2023 7.1% 5.2% 3.4% 1.8% -3.3% -8.8% -15.5% -21.2%December 31, 2022 11.3% 8.4% 5.5% 2.8% -5.0% -12.3% -20.0% -27.1% Percentage Change (24-month shock) +400 bp +300 bp +200 bp +100 bp -100 bp -200 bp -300 bp -400 bp Policy Limit -17.5% -15.0% -12.5% -10.0% -10.0% -12.5% -15.0% -17.5%March 31, 2023 28.0% 22.7% 17.2% 12.2% -0.5% -10.9% -22.5% -31.2%December 31, 2022 31.3% 25.2% 19.0% 13.1% -2.0% -13.8% -25.7% -36.3% The Net Interest Income ("NII") at Risk position indicates
that in the short-term, 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 2022, these metrics became less favorable
in the rising rate scenarios primarily due to loan growth, which reduced our level of overnight funds and made us slightly less asset sensitive.
The converse is applicable in the down rate scenarios where the metrics became more favorable due to loan growth which
increased asset duration and therefore protection against falling rates.
The percent change over both a 12-month and 24-month shock are outside of policy
in the rates down 300 bps and 400 bps scenarios
due to our limited ability to lower our deposit rates relative to the decline
in market rate.
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, 2023 11.6% 9.6% 7.0% 4.0% -7.1% -17.9% -31.3% -35.7%December 31, 2022 11.0% 9.0% 6.4% 3.6% -7.4% -18.8% -30.9% -40.1% EVE Ratio (policy minimum 5.0%) 20.6% 19.9% 19.0% 18.2% 15.6% 13.5% 11.2% 10.3% (1) The down 400 bp rate scenario was added in the fourth quarter of 2022. AtMarch 31, 2023 , 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 2022, EVE metrics became
slightly more favorable in all rate environments except the down 300 environment, primarily due to a change in the shape and position
of the yield curve, along with seasonal outflows of some rate sensitive funding sources (public funds).
EVE is currently in compliance with policy in all rate scenarios as the EVE ratio in each rate scenario exceeds 5.0%. 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. 41 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
liquidity through all of our available resources (this
excludes
In addition to the primary borrowing outlets mentioned above, we also have
the
ability to generate liquidity by borrowing from the Federal Reserve Discount
Window and through 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 ALCO, ourMarket Risk Oversight Committee ,Risk Oversight Committee ,
and the Board of Directors.
AtMarch 31, 2023 , 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.
Our portfolio consists of debt issued by the
governmental agencies, municipal governments, and corporate entities.
At
and the available-for-sale portfolio had a net unrealized pre-tax loss of
an average net overnight funds (interest deposits with banks plus FED funds sold less FED funds
purchased) sold position of$361.0 million in the first quarter of 2023
compared to
The declining overnight funds position reflects growth in average loans. We expect our
capital expenditures will be approximately
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
million for the fourth quarter of 2022 and$32.4 million for the first quarter of 2022. The variance compared
to both prior periods was primarily attributable to an increase in short-term repurchase agreements and the fluctuation in CCHL's
warehouse line.
Additional detail on these 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
The first note for$30.9 million was issued to CCBG Capital Trust I in
The second note for$32.0 million was issued to CCBG Capital Trust II
in
The interest payment for the CCBG Capital Trust I borrowing is due quarterly and adjusts quarterly to a variable rate of three-month
LIBOR plus a margin of 1.90%.
This note matures onDecember 31, 2034 .
The interest payment for the CCBG Capital Trust II borrowing is due
quarterly and adjusts quarterly to a variable rate of three-month LIBOR plus a margin of 1.80%.
This note matures on
EffectiveJune 30, 2023 , in accordance with the trust agreements
and the Adjustable Interest Rate (LIBOR) Act of 2021, LIBOR will be replaced
with 3-month CME Term SOFR (secured
overnight financing rate) as the interest rate index.
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.
42
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
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 (Libor
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 32.
AtMarch 31, 2023 , our regulatory capital ratios exceeded the threshold to be designated as "well-capitalized" under the Basel III capital standards. Shareowners' equity was$411.2 million
at
atMarch 31, 2022 .
For the first three months of 2023, shareowners' equity was positively impacted by net
income attributable to common shareowners of$15.0 million , a$5.8
million decrease in the unrealized loss on investment securities, the issuance
of stock of
Shareowners' equity was reduced by common stock dividends of
shares), net adjustments totaling
million related to transactions under our stock compensation plans, and a$0.6 million decrease
in the fair value of the interest rate swap related to subordinated debt.
At
to 15.52% at
Our common equity tier 1 capital ratio was 12.68%, 12.64%, and 13.77%, respectively,
on those dates. Our leverage ratio was 9.28%, 9.06%, and 8.78%, respectively,
on those dates.
At
Further, our tangible common equity ratio was 7.37%
at
31, 2022, respectively.
If our unrealized HTM securities losses of$29.5 million (after-tax) were recognized in accumulated
other comprehensive loss, our adjusted tangible capital ratio would be 6.69%. 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
million
compared to
31, 2022. This liability is re-measured annually on
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 atDecember 31 st .
These assumptions are sensitivities are discussed in our 2022 Form 10-K "Critical Accounting
Policies".
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
and
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 theFederal 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$2.8 million atMarch 31, 2023 . 43 CRITICAL ACCOUNTING POLICIES Our significant accounting policies are described in Note 1 to the Consolidated
Financial Statements included in our 2022 Form 10-K.
The preparation of our Consolidated Financial Statements
in accordance with GAAP and reporting practices applicable to the banking industry requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities.
Actual results could differ from those estimates. We have identified
accounting for (i) the allowance for credit losses, (ii) goodwill,
(iii) pension assumptions, and (iv) income taxes as our most critical accounting policies and estimates in that they are important
to the portrayal of our financial condition and results, and they require our subjective and complex judgment as a result of the need to make estimates about
the effects of matters that are inherently uncertain.
These accounting policies, including the nature of the estimates and types of
assumptions used, are described throughout this Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations, and
Part II, Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations included
in our 2022 Form 10-K. 44 TABLE I AVERAGE BALANCES & INTEREST RATES Three Months EndedMarch 31, 2023 December 31, 2022 March 31, 2022 Average Average Average Average Average Average (Dollars in Thousands) Balances Interest Rate Balances Interest Rate Balances Interest Rate Assets: Loans Held for Sale$ 55,110 $ 644 4.74 %$ 42,910 $ 581 5.38 %$ 43,004 $ 397 3.19 % Loans Held for Investment (1)(2) 2,582,395 34,331 5.39 2,439,379 31,418 5.11 1,963,578 21,811 4.52Taxable Securities 1,061,372 4,912 1.86 1,078,265 4,835 1.78 1,056,736 2,889 1.10Tax-Exempt Securities (2) 2,840 17 2.36 2,827 17 2.36 2,409 10 1.60 Federal Funds Sold and Interest Bearing Deposits 360,971 4,111 4.62 469,352 4,463 3.77 873,097 409 0.19 Total Earning Assets 4,062,688 44,015 4.39 % 4,032,733 41,314 4.07 % 3,938,824 25,516 2.63 % Cash & Due From Banks 74,639 74,178 74,253 Allowance For Credit Losses (25,637) (22,596) (21,655) Other Assets 300,175 297,510 275,353 TOTAL ASSETS$ 4,411,865 $ 4,381,825 $ 4,266,775 Liabilities: NOW Accounts$ 1,228,928 $ 2,152 0.71 %$ 1,133,733 $ 1,725 0.60 %$ 1,079,906 $ 86 0.03 % Money Market Accounts 267,573 208 0.31 273,328 63 0.09 285,406 33 0.05 Savings Accounts 629,388 76 0.05 641,153 80 0.05 599,359 72 0.05 Other Time Deposits 89,675 52 0.24 92,385 34 0.15 97,054 33 0.14 Total Interest Bearing Deposits 2,215,564 2,488 0.46 2,140,599 1,902 0.35 2,061,725 224 0.04 Short-Term Borrowings 47,109 461 3.97 50,844 690 5.38 32,353 192 2.40 Subordinated Notes Payable 52,887 571 4.32 52,887 522 3.86 52,887 317 2.40 Other Long-Term Borrowings 480 6 4.80 530 8 4.80 833 9 4.49 Total Interest Bearing Liabilities 2,316,040 3,526 0.62 % 2,244,860 3,122 0.55 % 2,147,798 742 0.14 % Noninterest Bearing Deposits 1,601,750 1,662,443 1,652,337 Other Liabilities 81,206 84,585 72,166 TOTAL LIABILITIES 3,998,996 3,991,888 3,872,301 Temporary Equity 8,802 9,367 10,518 TOTAL SHAREOWNERS' EQUITY 404,067 380,570 383,956 TOTAL LIABILITIES, TEMPORARY AND SHAREOWNERS' EQUITY$ 4,411,865 $ 4,381,825 $ 4,266,775 Interest Rate Spread 3.77 % 3.52 % 2.49 % Net Interest Income$ 40,489 $ 38,192 $ 24,774 Net Interest Margin (3) 4.04 % 3.76 % 2.55 % (1)
Average Balances include net loan fees, discounts and premiums and nonaccrual loans.
Interest income includes loan fees of
million and
the three months ended
2022 andMarch 31, 2022 , respectively. (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.
45 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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
sinceDecember 31, 2022 . Item 4. CONTROLS AND PROCEDURES AtMarch 31, 2023 , 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, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the end of the period covered by this report these disclosure controls and procedures
were effective. Our management, including our Chief Executive Officer
and Chief Financial Officer, has reviewed
our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange
Act of 1934).
During the quarter ended onMarch 31, 2023 , 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.
PART II. OTHER INFORMATION Item 1. Legal Proceedings We are party
to lawsuits arising out of the normal course of business.
In management's opinion, there is no known pending 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 1A.
Risk Factors In addition to the other information set forth in this Quarterly Report, you should carefully consider
the factors discussed in Part I, Item 1A. "Risk Factors" in our 2022 Form 10-K, as updated in our subsequent
quarterly reports. The risks described in our 2022 Form 10-K and our subsequent quarterly reports are not the only risks facing us. Additional
risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect
our business, financial condition and/or operating results. Item 2.
Unregistered Sales of
Proceeds
Purchases of
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 (1) our share repurchase programJanuary 1, 2023 toJanuary 31, 2023 25,000$32.39 25,000 548,048February 1, 2023 toFebruary 28, 2023 - - - 548,048March 1, 2023 toMarch 31, 2023 241 32.65 241 547,807 Total 25,241$32.39 25,241 547,807 46 (1) This amount represents the number of shares that were repurchased during
the first quarter of 2023 through the
onJanuary 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. Item 3.Defaults Upon Senior Securities None. Item 4.
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