Capital City Bank Group, Inc. — FY 2021 Form 10-K
Reporting period: Year ended December 31, 2021; filed March 1, 2022. The company is a Florida-based financial holding company operating primarily through Capital City Bank, with banking, mortgage, and wealth-management businesses in Florida, Georgia, and Alabama.
Financial performance and condition
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue (interest income plus noninterest income) | $213.9 million | $217.4 million |
| Net interest income | $102.9 million | $101.3 million |
| Net income attributable to common shareowners | $33.4 million; $1.98 diluted EPS | $31.6 million; $1.88 diluted EPS |
| Net interest margin, taxable-equivalent | 2.83% | 3.30% |
| Noninterest expense | $162.5 million | $150.0 million |
| Cash from operating activities | $115.9 million | $(48.6) million |
| Year-end assets | $4.264 billion | $3.798 billion |
| Year-end deposits | $3.713 billion | $3.218 billion |
| Year-end loans held for investment | $1.931 billion | $2.006 billion |
| Shareowners’ equity | $383.2 million | $320.8 million |
- Net income increased 5.8%, despite lower total revenue, primarily reflecting a $11.2 million improvement in credit-loss provision and higher net interest income. Return on average assets was 0.84% (0.93% in 2020); return on average equity was 9.92% (9.36%).
- The company recorded a $1.6 million provision benefit in 2021, versus $9.6 million provision expense in 2020. Year-end allowance for credit losses was $21.6 million, or 1.12% of loans held for investment; nonperforming assets were $4.3 million, 0.10% of assets.
- Cash and cash equivalents were $1.035 billion at year-end. Management reported approximately $1.287 billion of additional liquidity capacity beyond overnight funds. Deposits were the primary funding source.
- Year-end borrowings included $34.6 million short-term borrowings, $52.9 million subordinated notes, and $0.9 million other long-term borrowings. The company and bank exceeded applicable capital requirements; the bank was classified as well capitalized.
- Cash dividends declared were $0.62 per share, up from $0.57. No shares were repurchased in 2021.
Material changes versus 2020
- Net interest income rose $1.5 million, but the taxable-equivalent net interest margin fell 47 basis points to 2.83%, reflecting lower asset yields and growth in lower-yielding overnight funds. Interest expense declined as deposit costs fell.
- Noninterest income fell $3.6 million to $107.5 million as mortgage banking revenue declined $10.9 million, partly offset by increases in wealth-management, bank-card, and deposit fees. Mortgage production was $1.52 billion versus $1.56 billion; refinancing represented 30% of production versus 40%.
- Noninterest expense increased $12.5 million, including a $3.1 million pension settlement charge. The efficiency ratio worsened to 77.11% from 70.43%.
- Average deposits grew 19.8% to $3.407 billion, which management attributed partly to government-stimulus inflows. Average loans held for investment increased 2.2%, excluding the year-end decline in loans related in part to PPP repayment and forgiveness.
- The company acquired substantially all assets of Strategic Wealth Group in April 2021 for $4.5 million, recording $2.8 million goodwill and a $1.6 million customer-relationship intangible. Capital City Home Loans, acquired as a 51% interest in 2020, remained consolidated.
- Shareowners’ equity rose $62.3 million. A $34.1 million favorable pension remeasurement adjustment was a significant contributor; the change also included earnings, dividends, and a decline in unrealized securities gains.
Outlook, commentary, and risks
- No specific full-year 2022 earnings or revenue guidance is provided. The company’s five-year “2025 In Focus” strategy emphasizes client experience, channel optimization, market expansion, technology investment, revenue diversification, and profitability. Planned office openings include Walton County and Gwinnett County in late 2022 and Gainesville in early 2023.
- Management expected the effective tax rate to be approximately 19%–20% in 2022, absent discrete items. It estimated approximately $8.0 million of capital expenditures over the next 12 months, primarily for technology, security, and facilities.
- Interest-rate modeling indicated rising rates would benefit near-term net interest income, while a 100-basis-point decline would reduce it. The 24-month down-100-basis-point scenario was slightly outside policy limits; management said the economic-value-of-equity ratio remained within policy.
- Key risks include COVID-19 and borrower performance, concentrated real-estate lending in Florida and Georgia, interest-rate and liquidity risk, mortgage-volume sensitivity, cybersecurity and operational events, regulation, and potential pressure on overdraft-fee revenue. The company collected approximately $9.9 million in net overdraft transaction fees in 2021 and disclosed increased regulatory scrutiny.
- The LIBOR transition affects $77 million of loans, $34 million of floating-rate securities, $53 million of subordinated notes, and a $30 million interest-rate swap. Management discontinued new LIBOR-based loan originations before year-end 2021; transition outcomes and contract-specific effects remain uncertain.
- A $3.1 million pension settlement charge was recognized in 2021; management noted additional settlement expense could occur in 2022 if retirements remain elevated. The filing reports no known litigation expected to materially affect results, financial position, or cash flows.
- The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting. The acquired Strategic Wealth business was excluded from the internal-control assessment scope.
Investor verification priorities
- Check whether deposit growth persists as stimulus-related balances and seasonal public deposits change, and whether the large cash position can be redeployed at attractive yields.
- Track net interest margin, deposit pricing, and actual results as interest rates change, including the disclosed downside-rate sensitivity.
- Review mortgage banking profitability and gain-on-sale margins as refinancing activity and production mix shift.
- Monitor real-estate concentration, credit migration, loan-loss allowance assumptions, and performance of former COVID-19 extension borrowers.
- Assess sustainability of expense levels, pension costs, and overdraft-fee income, along with progress and returns from acquisitions and planned market expansion.
- Confirm capital, liquidity, dividend capacity, and LIBOR contract transition developments in subsequent filings.