CCBG - Capital City Bank Group Reports First Quarter 2022 Results

TALLAHASSEE, Fla., April 25, 2022 (GLOBE NEWSWIRE) -- Capital City Bank Group, Inc. (NASDAQ: CCBG) today reported net income attributable to common shareowners of $8.5 million, or $0.50 per diluted share, for the first quarter of 2022 compared to net income of $6.4 million, or $0.38 per diluted share, for the fourth quarter of 2021, and $9.5 million, or $0.56 per diluted share, for the first quarter of 2021.

First Quarter 2022 HIGHLIGHTS

• Period-end loan balances grew $54 million, or 2.8% sequentially
• Net interest income gained momentum driven by growth in investment portfolio and higher rates
• Noninterest income increased by 4.6% sequentially, driven by wealth management fees (insurance commission revenues)
• Noninterest expense decreased $1.0 million, or 2.4% sequentially, attributable to lower pension plan expense
• Continued strong credit quality resulted in no credit loss provision
  

“We begin 2022 with a quarter of solid financial performance,” said William G. Smith, Jr., Chairman, President and CEO of Capital City Bank Group.  “Loan growth, credit quality, rising rates, wealth management and lower expenses all contributed to this quarter’s strong performance.  Much has changed in a short period of time – rapidly escalating inflation, a pivot by the Federal Reserve toward a quicker tightening of monetary policy and the Russia-Ukraine war, along with the accompanying sanctions and questions around how the financial markets will respond to these macro-economic events. While much of this is out of our control, we believe we are well positioned to navigate through this year and beyond.  While acknowledging higher rates will generate unrealized losses in our investment portfolio, our asset-sensitive balance sheet and pension related other comprehensive loss should respond well to rising rates.  Capital City Strategic Wealth (“CCSW”) also had a strong first quarter and we continue our expansion efforts in west Florida and the northern arc of Atlanta.  While challenges remain, we continue to focus on identifying opportunities and executing strategies we believe are sustainable and add long-term value for our shareowners.”

Discussion of Operating Results

Net Interest Income/Net Interest Margin

Tax-equivalent net interest income for the first quarter of 2022 totaled $24.8 million, comparable to the fourth quarter of 2021, and $24.6 million for the first quarter of 2021. Compared to the fourth quarter of 2021, higher rates on overnight funds and growth in the investment portfolio was offset by two less calendar days during the quarter. Compared to the first quarter of 2021, the increase was due to growth in our investment portfolio which was funded by higher deposit balances.

Our net interest margin for the first quarter of 2022 was 2.55%, a decrease of five basis points from the fourth quarter of 2021 and a decrease of 30 basis points from the first quarter of 2021. Compared to both prior periods, the decrease was primarily attributable to growth in earning assets (driven by deposit inflows), which negatively impacted our margin percentage. Our net interest margin for the first quarter of 2022, excluding the impact of overnight funds in excess of $200 million, was 3.11%.

Provision for Credit Loss

We did not record a provision for credit losses for the first quarter of 2022 or the fourth quarter of 2021 and recorded a negative provision of $1.0 million for the first quarter of 2021. The lack of provision for the first quarter of 2022 reflected continued strong credit quality and slight improvement in the forecasted level of unemployment. We discuss the allowance for credit losses further below.

Noninterest Income and Noninterest Expense

Noninterest income for the first quarter of 2022 totaled $25.8 million compared to $24.7 million for the fourth quarter of 2021 and $29.8 million for the first quarter of 2021. The increase over the fourth quarter of 2021 was primarily attributable to higher wealth management fees of $2.1 million that were partially offset by lower mortgage banking revenues of $0.9 million. The increase in wealth management fees was attributable to higher insurance commission revenues. Lower loan production and a slightly lower gain on sale margin drove the decline in mortgage banking revenues. Compared to the first quarter of 2021, the decline was due to lower mortgage banking revenues attributable to lower loan production (primarily refinancing activity) and a lower gain on sale margin. Additional detail on our mortgage banking operation (CCHL) is provided on Page 11.

Noninterest expense for the first quarter of 2022 totaled $39.2 million compared to $40.2 million for the fourth quarter of 2021 and $40.5 million for the first quarter of 2021. The decrease from the fourth quarter of 2021 was primarily attributable to lower pension expense of $1.6 million (reflected in other expense) offset by higher commission expense of $0.7 million related to higher insurance revenues. The decrease in pension expense generally reflected a higher discount rate in 2022 for determining plan liabilities and strong asset returns in 2021. Compared to the first quarter of 2021, the decrease was attributable to lower commission expense of $2.6 million related to lower mortgage banking revenues offset by higher associate benefits of $0.5 million and a decrease in realized loan cost of $0.8 million (credit offset to salary expense).

Income Taxes

We realized income tax expense of $2.2 million (effective rate of 20%) for the first quarter of 2022 compared to $2.0 million (effective rate of 22%) for the fourth quarter of 2021 and $2.8 million (effective rate of 19%) for the first quarter of 2021. Tax expense for the fourth quarter of 2021 was unfavorably impacted by discrete tax expense of $0.1 million. Absent discrete items, we expect our annual effective tax rate to approximate 19%-20% in 2022.

Discussion of Financial Condition

Earning Assets

Average earning assets totaled $3.939 billion for the first quarter of 2022, an increase of $147.5 million, or 3.9%, over the fourth quarter of 2021, and an increase of $440.9 million, or 12.6%, over the first quarter of 2021. The increase over the fourth quarter of 2021 was primarily attributable to seasonal growth in our public fund deposits. The increase compared to the first quarter of 2021 was primarily driven by higher deposit balances (see below – Funding).

We maintained an average net overnight funds (deposits with banks plus FED funds sold less FED funds purchased) sold position of $873.1 million in the first quarter of 2022 compared to $789.1 million in the fourth quarter of 2021 and $814.6 million in the first quarter of 2021. The growth compared to the fourth quarter of 2021 primarily reflected higher seasonal public fund balances. The increase compared to the first quarter of 2021 reflected higher deposit balance (see below – Funding ).

Average loans held for investment (“HFI”) increased $15.3 million, or 0.8%, over the fourth quarter of 2021 and decreased $80.8 million, or 4.0%, from the first quarter of 2021. Excluding SBA PPP loans, average loans HFI increased $18.8 million compared to the fourth quarter of 2021, and increased $115.9 million compared to the first quarter of 2021. Compared to the fourth quarter of 2021, the increase in average loans (excluding SBA PPP loans) reflected growth in commercial loans (primarily institutional), residential loans, HELOCs, and consumer loans (indirect auto). Compared to the first quarter of 2021, we realized growth in commercial loans, construction loans, residential mortgages, and consumer loans (indirect auto). New loan production strengthened in the latter part of the first quarter of 2022 resulting in period end loan growth of $54 million over the fourth quarter of 2021. Increases were realized in most loan categories with the largest growth in commercial loans (primarily institutional) and consumer loans (indirect auto).

Allowance for Credit Losses

At March 31, 2022, the allowance for credit losses for HFI loans totaled $20.8 million compared to $21.6 million at December 31, 2021 and $22.0 million at March 31, 2021. Activity within the allowance is provided on Page 9. At March 31, 2022, the allowance represented 1.05% of HFI loans and provided coverage of 761% of nonperforming loans compared to 1.12% and 500%, respectively, at December 31, 2021, and 1.07% and 411%, respectively, at March 31, 2021.

Credit Quality

Overall credit quality is strong and continues to improve. Nonperforming assets (nonaccrual loans and other real estate) totaled $2.7 million at March 31, 2022 compared to $4.3 million at December 31, 2021 and $5.5 million at March 31, 2021. At March 31, 2022, nonperforming assets as a percentage of total assets totaled 0.06% compared to 0.10% at December 31, 2021 and 0.14% at March 31, 2021. Nonaccrual loans totaled $2.7 million at March 31, 2022, a $1.7 million decrease from December 31, 2021 and a $2.7 million decrease from March 31, 2021. The $4.4 million increase in classified loans over the fourth quarter of 2021, reflects one loan relationship that is in the loan workout process and has been reserved for at March 31, 2022.

Funding (Deposits/Debt)

Average total deposits were $3.714 billion for the first quarter of 2022, an increase of $164.9 million, or 4.6%, over the fourth quarter of 2021 and $474.6 million, or 14.6%, over the first quarter of 2021. Growth over the fourth quarter of 2021 was primarily attributable to an increase in seasonal public fund deposits. Compared to the first quarter 2021, strong growth occurred in our noninterest bearing deposits, NOW accounts, and savings account balances. Over the past few years, we have experienced strong core deposit growth, in addition to growth related to multiple government stimulus programs in response to the Covid-19 pandemic, such as those under the CARES Act and the American Rescue Plan Act. Given these increases, the potential exists for our deposit levels to be volatile into 2022 due to the uncertain timing of the outflows of the stimulus related balances, in addition to the frequency and degree to which the Federal Open Market Committee (FOMC) raises the overnight funds rate. It is anticipated that current liquidity levels will remain robust due to our strong overnight funds sold position. The Bank continues to strategically consider ways to safely deploy a portion of this liquidity.

Average borrowings decreased $14.6 million from the fourth quarter of 2021 and declined $36.6 million from the first quarter of 2021, as both periods reflected lower warehouse line borrowing needs to support CCHL’s loans held for sale.

Capital

Shareowners’ equity was $372.1 million at March 31, 2022 compared to $383.2 million at December 31, 2021 and $324.4 million at March 31, 2021. During the first quarter of 2022, shareowners’ equity was positively impacted by net income of $8.5 million, a $0.2 million decrease in the accumulated other comprehensive loss for our pension plan, a $1.4 million increase in the fair value of the interest rate swap related to subordinated debt, net adjustments totaling $0.5 million related to transactions under our stock compensation plans, and stock compensation accretion of $0.2 million. Shareowners’ equity was reduced by common stock dividends of $2.7 million ($0.16 per share) and a $19.1 million increase in the unrealized loss on investment securities.

At March 31, 2022, our total risk-based capital ratio was 16.98% compared to 17.15% at December 31, 2021 and 17.20% at March 31, 2021. Our common equity tier 1 capital ratio was 13.77%, 13.86%, and 13.63%, respectively, on these dates. Our leverage ratio was 8.78%, 8.95%, and 8.97%, respectively, on these dates. All of our regulatory capital ratios exceeded the threshold to be designated as “well-capitalized” under the Basel III capital standards. Further, our tangible common equity ratio was 6.61% at March 31, 2022 compared to 6.95% and 6.13% at December 31, 2021 and March 31, 2021, respectively. The slight reduction in our regulatory capital ratios was attributable to loan growth and higher asset levels.

About Capital City Bank Group, Inc.

Capital City Bank Group, Inc. (NASDAQ: CCBG) is one of the largest publicly traded financial holding companies headquartered in Florida and has approximately $4.3 billion in assets. We provide a full range of banking services, including traditional deposit and credit services, mortgage banking, asset management, trust, merchant services, bankcards, securities brokerage services and financial advisory services, including the sale of life insurance, risk management and asset protection services. Our bank subsidiary, Capital City Bank, was founded in 1895 and now has 57 banking offices and 86 ATMs/ITMs in Florida, Georgia and Alabama. For more information about Capital City Bank Group, Inc., visit www.ccbg.com.

FORWARD-LOOKING STATEMENTS

Forward-looking statements in this Press Release are based on current plans and expectations that are subject to uncertainties and risks, which could cause our future results to differ materially. The following factors, among others, could cause our actual results to differ: fluctuations in inflation, interest rates, or monetary policies; the accuracy of the our financial statement estimates and assumptions; legislative or regulatory changes; the effects of security breaches and computer viruses that may affect our computer systems or fraud related to debit card products; changes in consumer spending and savings habits; our growth and profitability; the strength of the U.S. economy and the local economies where we conduct operations; the effects of a non-diversified loan portfolio, including the risks of geographic and industry concentrations; natural disasters, widespread health emergencies, military conflict, terrorism or other geopolitical events; changes in the stock market and other capital and real estate markets; the magnitude and duration of the ongoing COVID-19 pandemic and its impact on the global economy and financial market conditions and our business; customer acceptance of third-party products and services; increased competition and its effect on pricing; negative publicity and the impact on our reputation; technological changes, especially changes that allow out of market competitors to compete in our markets; changes in accounting; and our ability to manage the risks involved in the foregoing. Additional factors can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and our other filings with the SEC, which are available at the SEC’s internet site (http://www.sec.gov). Forward-looking statements in this Press Release speak only as of the date of the Press Release, and we assume no obligation to update forward-looking statements or the reasons why actual results could differ.

USE OF NON-GAAP FINANCIAL MEASURES

We present a tangible common equity ratio and a tangible book value per diluted share that removes the effect of goodwill and other intangibles resulting 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 GAAP to non-GAAP reconciliations are provided below.