Business Overview and History Capital City Bank Group, Inc. (CCBG) is a prominent financial holding company headquartered in Tallahassee, Florida, with a rich history spanning over a century. Established in 1895, this Florida-based institution has evolved into one of the largest publicly traded financial holding companies in the state, boasting approximately $4.2 billion in assets as of September 30, 2024.
Capital City Bank Group's journey began in 1895 with the founding of Capital City Bank in Tallahassee. Over the decades, the company has undergone strategic expansion and diversification, establishing its presence across Florida, Georgia, and Alabama. In 1982, the company reorganized as a bank holding company, marking a significant milestone in its corporate development.
Throughout its 129-year history, Capital City Bank Group has demonstrated remarkable resilience in the face of economic challenges. During the early 2000s, the company successfully navigated the fallout from the housing crisis and recession, which impacted its loan portfolio and profitability. In response, Capital City Bank Group strengthened its risk management practices and diversified its revenue sources, with a particular focus on growing its wealth management and mortgage banking operations.
The COVID-19 pandemic in 2020 presented another significant challenge for the company. Capital City Bank Group responded by working closely with its customers, providing loan modifications and other forms of assistance to help them weather the economic storm. Internally, the company implemented cost-saving measures and utilized government lending programs to support its own liquidity and capitalize on opportunities presented by the low interest rate environment.
As of the end of 2023, Capital City Bank Group's network had expanded to include 63 full-service banking offices and 105 ATMs/ITMs across its three-state footprint. Additionally, through its subsidiary Capital City Home Loans, LLC (CCHL), the company operates 29 additional offices in the Southeast dedicated to its mortgage banking business. This expansion has solidified the company's position as a regional banking powerhouse, with total assets reaching approximately $4.3 billion by the end of 2023.
Today, Capital City Bank Group remains committed to its roots as a steadfast community bank. Through its wholly-owned subsidiary, Capital City Bank, the company provides a comprehensive 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.
Financial Performance and Ratios Capital City Bank Group's financial performance has been consistently strong, with the company reporting net income of $52.26 million in the fiscal year ended December 31, 2023, compared to $33.41 million in the prior year. This represents a significant year-over-year increase of 56.4% in net income. The company's revenue for the fiscal year 2023 stood at $223.61 million, a 15.5% increase from the $193.67 million reported in 2022.
The company's balance sheet remains well-capitalized, with a total risk-based capital ratio of 16.57% as of December 31, 2023, well above the regulatory minimum requirement of 10.5% to be considered a well-capitalized institution. The company's Tier 1 capital ratio, a measure of the bank's core capital, stood at 15.37% as of the same date, further demonstrating its financial strength and stability.
For the fiscal year 2023, Capital City Bank Group reported operating cash flow (OCF) of $54.78 million and free cash flow (FCF) of $47.74 million. These strong cash flow figures underscore the company's ability to generate cash from its operations and maintain financial flexibility.
The company's debt-to-equity ratio as of December 31, 2023, was 0.1215, calculated from total debt of $61.59 million and stockholders' equity of $448.03 million. This low debt-to-equity ratio indicates a conservative capital structure and low financial leverage.
Capital City Bank Group's liquidity position remains strong, with a cash and cash equivalents balance of $312.07 million as of December 31, 2023, representing 7.3% of the company's total assets. The company also maintains access to additional liquidity through credit facilities, including a $25 million master repurchase agreement with interest at SOFR +2% to 3% with a floor of 3.25% to 4.25%, and a $25 million warehouse line of credit expiring in December 2024, with interest at SOFR +2.75% to 3.25%.
The company's current ratio and quick ratio both stood at 1.12 as of December 31, 2023, indicating a solid ability to meet short-term obligations.
Recent Developments and Outlook In 2024, Capital City Bank Group continued to demonstrate its resilience and adaptability in the face of evolving market conditions. The company reported net income attributable to common shareowners of $39.83 million for the first nine months of 2024, compared to $40.54 million in the same period of 2023, reflecting a slight decrease of 1.7%.
The company's third-quarter 2024 results, reported on November 4, 2024, showed a net income attributable to common shareowners of $13.1 million, or $0.78 per diluted share, compared to $14.2 million, or $0.83 per diluted share, in the prior quarter. This performance was driven by a stable credit quality environment, leading to a consistent credit loss provision, as well as strong mortgage banking revenues and wealth management fees.
For the most recent quarter ended September 30, 2024, Capital City Bank Group reported revenue of $68.839 million, net income of $13.118 million, operating cash flow of $18.134 million, and free cash flow of $15.89 million. Notably, the company's net income for Q3 2024 increased by 3.7% compared to Q3 2023, primarily due to higher net interest income and noninterest income, partially offset by higher noninterest expense.
Looking ahead, Capital City Bank Group remains cautiously optimistic about its future prospects. The company continues to focus on organic growth, strategic acquisitions, and operational efficiency to drive long-term value for its shareholders. While the economic landscape remains challenging, the company's diverse business model, experienced management team, and solid financial foundation position it well to navigate the evolving financial industry.
Product Segments and Performance Capital City Bank Group operates through several key product segments:
1. Loans Held for Investment (HFI): This segment represents the core lending business of CCBG, including commercial, financial and agricultural loans, real estate construction loans, commercial mortgage loans, residential real estate loans, home equity loans, and consumer loans. As of September 30, 2024, the total loans HFI portfolio was $2.68 billion, a slight decrease of 1.9% from the $2.73 billion balance at the end of 2023. The decrease was primarily driven by lower balances in the consumer loan and commercial loan portfolios, partially offset by growth in residential real estate and construction loans.
2. Mortgage Banking: This segment encompasses CCBG's residential mortgage origination and servicing activities. During the third quarter of 2024, mortgage banking revenues totaled $4.0 million, a 9.5% decrease from the prior quarter but a 115% increase compared to the third quarter of 2023. The year-over-year increase was due to higher gain-on-sale margins on mortgage loan sales. As of September 30, 2024, the company had $130.29 billion in residential mortgage loans serviced for others.
3. Wealth Management: This segment includes trust services, retail brokerage services, and financial advisory services offered through CCBG's subsidiaries. Wealth management fees totaled $4.8 million in the third quarter of 2024, up 7.5% from the prior quarter and 19.7% higher than the year-ago period. This growth was driven by increases in both retail brokerage and trust fees, reflecting new account growth and higher account values from improved market conditions. At the end of the third quarter, total assets under management were approximately $2.95 billion.
Net interest income, which represents the largest source of the company's earnings, totaled $40.2 million in the third quarter of 2024, up 2.4% from the prior quarter and 2.3% higher than the third quarter of 2023. The net interest margin expanded to 4.12% in the third quarter, an increase of 10 basis points sequentially and 9 basis points year-over-year, primarily due to higher yields on loans and investments.
Geographic Markets and Industry Trends Capital City Bank Group operates primarily in Florida, Georgia, and Alabama, with a focus on the Southeastern United States. As a small-cap company, it does not have significant operations outside of this region. The banking industry in the Southeastern U.S. has seen steady loan growth and improving credit quality in recent years, with a compound annual growth rate (CAGR) of approximately 5% for the region.
Risks and Challenges As with any financial institution, Capital City Bank Group faces a variety of risks and challenges that could impact its future performance. These include, but are not limited to, interest rate risk, credit risk, regulatory changes, competition from larger national and regional banks, and potential disruptions from technological advancements in the banking industry.
The company's exposure to the real estate and construction sectors, which make up a significant portion of its loan portfolio, could also pose risks during periods of economic volatility or downturns in the housing market. Additionally, the company's reliance on mortgage banking and wealth management revenues, which can be more volatile than traditional banking activities, introduces some uncertainty in its revenue streams.
To mitigate these risks, Capital City Bank Group maintains a robust risk management framework, continuously monitors industry trends, and adapts its strategies to ensure the long-term sustainability of its operations. The company's diversified business model and disciplined approach to risk management have been instrumental in weathering past economic challenges and positioning it for future success.
Conclusion Capital City Bank Group, with its rich history, strategic vision, and financial strength, has emerged as a prominent player in the Florida banking landscape. The company's consistent financial performance, strong balance sheet, and diversified business model have enabled it to navigate the evolving financial industry with resilience and adaptability.
As Capital City Bank Group continues to leverage its deep-rooted presence in the Southeast region and capitalize on emerging opportunities, investors and stakeholders can take comfort in the company's proven track record of sustainable growth and its commitment to delivering long-term value. With its experienced management team, robust risk management practices, and strategic focus, Capital City Bank Group remains well-positioned to navigate the challenges and capitalize on the opportunities that lie ahead in the dynamic world of banking.