SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter:
June 30, 2001
-------------
Commission File Number 0-13358
-------
CAPITAL CITY BANK GROUP, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2273542
------- ----------
(State or other jurisdiction of (I.R.S. Employer
Identification No.)
incorporation or organization)
217 North Monroe Street, Tallahassee, Florida 32301
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(850) 671-0610
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes [X] No [ ]
At July 31, 2001, 10,685,028 shares of the Registrant's Common
Stock, $.01 par value, were outstanding.
1
CAPITAL CITY BANK GROUP, INC.
FORM 10-Q INDEX
ITEM PART I. FINANCIAL INFORMATION
PAGE NUMBER
- ---- ----------------------------- ---
- --------
1. Consolidated Financial Statements
3
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
12
3. Quantitative and Qualitative Disclosure for
Market Risk
20
ITEM PART II. OTHER INFORMATION
- ---- --------------------------
1. Legal Proceedings
Not Applicable
2. Changes in Securities and Use of Proceeds
Not Applicable
3. Defaults Upon Senior Securities
Not Applicable
4. Submission of Matters to a Vote of
Security Holders
22
5. Other Information
Not Applicable
6. Exhibits and Reports on Form 8-K
Not Applicable
Signatures
23
2
PART I. FINANCIAL INFORMATION
ITEM I. CONSOLIDATED FINANCIAL STATEMENTS
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED JUNE 30
(UNAUDITED)
(Dollars in Thousands, Except Per Share Amounts)
THREE MONTHS ENDED JUNE 30 SIX MONTHS
ENDED JUNE 30
-------------------------- ---------------
- ---------
2001 2000 2001
2000
------- ------- ------- -
- ------
INTEREST INCOME
- ---------------
Interest and Fees on Loans $26,418 $22,585 $51,090
$43,704
Investment Securities:
U. S. Treasury 115 161 242
409
U. S. Government Agencies/Corp. 1,731 2,193 3,772
4,461
States and Political Subdivisions 847 1,016 1,729
2,097
Other Securities 587 592 1,196
1,196
Funds Sold 1,181 342 1,986
732
------- ------- ------- -
- ------
Total Interest Income 30,879 26,889 60,015
52,599
INTEREST EXPENSE
- ----------------
Deposits 12,712 9,647 24,499
18,822
Short-Term Borrowings 495 1,205 1,606
1,989
Long-Term Debt 189 218 434
435
------- ------- ------- -
- ------
Total Interest Expense 13,396 11,070 26,539
21,246
------- ------- ------- -
- ------
Net Interest Income 17,483 15,819 33,476
31,353
Provision for Loan Losses 1,007 950 1,829
1,560
------- ------- ------- -
- ------
Net Interest Income After Provision
for Loan Losses 16,476 14,869 31,647
29,793
------- ------- ------- -
- ------
NONINTEREST INCOME
- -------------------
Service Charges on Deposit Accounts 2,656 2,314 5,079
4,650
Data Processing 586 650 1,087
1,330
Income from Fiduciary Activities 717 600 1,354
1,260
Securities Transactions 2 - 3
2
Mortgage Banking Revenues 1,010 318 1,575
456
Other 3,286 2,793 6,488
5,379
------- ------- ------- -
- ------
Total Noninterest Income 8,257 6,675 15,586
13,077
------- ------- ------- -
- ------
NONINTEREST EXPENSE
- -------------------
Salaries and Associate Benefits 9,131 7,485 17,565
15,040
Occupancy, Net 1,410 1,113 2,630
2,209
Furniture and Equipment 1,733 1,479 3,231
2,871
Merger Expense - 751 -
751
Other 5,857 4,426 10,545
8,735
------- ------- ------- -
- ------
Total Noninterest Expense 18,131 15,254 33,971
29,606
------- ------- ------- -
- ------
Income Before Income Taxes 6,602 6,290 13,262
13,264
Income Taxes 2,322 2,123 4,633
4,484
------- ------- ------- -
- ------
NET INCOME $ 4,280 $ 4,167 $ 8,629 $
8,780
======= ======= =======
=======
Basic Net Income Per Share $ .40 $ .41 $ .83 $
.86
======= ======= =======
=======
Diluted Net Income Per Share $ .40 $ .41 $ .83 $
.86
======= ======= =======
=======
Cash Dividends Per Share $ .1475 $ .1325 $ .2950 $
.2650
======= ======= =======
=======
Basic Average Shares Outstanding 10,713,034 10,195,637 10,506,033
10,195,449
========== ========== ==========
==========
Diluted Average Shares Outstanding 10,721,058 10,211,150 10,514,057
10,210,980
========== ========== ==========
==========
3
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF JUNE 30, 2001 AND DECEMBER 31, 2000
(Dollars In Thousands, Except Share Data)
June 30, December
31,
2001 2000
(Unaudited)
(Audited)
----------- -------
- ----
ASSETS
- ------
Cash and Due From Banks $ 78,883 $
73,367
Funds Sold 123,916
40,623
Investment Securities, Available-for-Sale 247,739
276,839
Loans, Net of Unearned Interest 1,210,141
1,051,832
Allowance for Loan Losses (11,978)
(10,564)
---------- -------
- ---
Loans, Net 1,198,163
1,041,268
Premises and Equipment 44,751
37,023
Intangibles 38,076
22,293
Other Assets 36,611
36,047
---------- -------
- ---
Total Assets $1,768,139
$1,527,460
==========
==========
LIABILITIES
- -----------
Deposits:
Noninterest Bearing Deposits $ 331,431 $
292,656
Interest Bearing Deposits 1,181,050
975,711
---------- -------
- ---
Total Deposits 1,512,481
1,268,367
Short-Term Borrowings 50,590
83,472
Long-Term Debt 16,826
11,707
Other Liabilities 18,512
16,307
---------- -------
- ---
Total Liabilities 1,598,409
1,379,853
SHAREOWNERS' EQUITY
- -------------------
Preferred Stock, $.01 par value, 3,000,000
shares authorized, no shares outstanding -
- -
Common Stock, $.01 par value; 90,000,000
shares authorized; 10,685,025 shares outstanding
at June 30, 2001 and 10,108,454 outstanding at
December 31, 2000 107
101
Additional Paid-In Capital 21,121
7,369
Retained Earnings 147,122
141,659
Accumulated Other Comprehensive Income (Loss),
Net of Tax 1,380
(1,522)
---------- -------
- ---
Total Shareowners' Equity 169,730
147,607
---------- -------
- ---
Total Liabilities and Shareowners' Equity $1,768,139
$1,527,460
==========
==========
4
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30
(Dollars in Thousands)
2001 2000
(Unaudited)
(Unaudited)
---------- ----------
- -
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net Income $ 8,629 $ 8,779
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses 1,829 1,560
Depreciation 2,047 2,021
Net Securities Amortization 589 700
Amortization of Intangible Assets 1,912 1,404
Gains on Sales of Investment Securities (2) (2)
Non-Cash Compensation Expense 763 50
Net Decrease (Increase) in Other Assets 653 (1,434)
Net Increase in Other Liabilities 307 243
-------- --------
Net Cash Provided by Operating Activities 16,727 13,321
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Proceeds from Payments/Maturities of
Investment Securities Available-for-Sale 84,012 31,666
Purchase of Investment Securities (2,482) (492)
Net Increase in Loans (67,796) (104,947)
Purchase of Premises & Equipment (2,988) (1,024)
Sales of Premises & Equipment 455 4
Cash & Cash Equivalents from Acquisition 80,420 -
-------- --------
Net Cash Provided By (Used In) Investing Activities 91,621 (74,793)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Net Increase in Deposits 40,225 30,492
Net (Decrease) Increase in Short-Term Borrowings (57,882) 14,681
Borrowing of Long-Term Debt 5,196 928
Repayment of Long-Term Debt (348) (1,328)
Dividends Paid (3,166) (2,702)
Repurchase of Common Stock (3,761) -
Issuance of Common Stock 197 29
-------- --------
Net Cash (Used In) Provided by Financing Activities (19,539) 42,100
-------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents 88,809 (19,372)
Cash and Cash Equivalents at Beginning of Period 113,990 93,072
-------- --------
Cash and Cash Equivalents at End of Period $202,799 $ 73,700
======== ========
Supplemental Disclosure:
Interest Paid on Deposits $ 25,542 $ 18,943
======== ========
Interest Paid on Debt $ 1,872 $ 2,460
======== ========
Transfer of Loans to ORE $ 968 $ 689
======== ========
Income Taxes Paid $ 6,018 $ 7,489
======== ========
5
CAPITAL CITY BANK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) MANAGEMENT'S OPINION AND ACCOUNTING POLICIES
--------------------------------------------
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules
and regulations of S-X and S-K of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to such
rules and regulations. Prior year financial statements have
been reformatted and/or amounts reclassified, as necessary, to
conform with the current year presentation.
In the opinion of management, the consolidated financial
statements contain all adjustments, which are those of a
recurring nature, and disclosures necessary to present fairly
the financial position of the Company as of June 30, 2001 and
December 31, 2000, the results of operations for the three and
six month periods ended June 30, 2001 and 2000, and cash flows
for the six month periods ended June 30, 2001 and 2000.
The Company and its subsidiaries follow accounting principles
generally accepted in the United States and reporting practices
applicable to the banking industry. The principles which
materially affect its financial position, results of operations
and cash flows are set forth in Notes to Consolidated Financial
Statements which are included in the Company's 2000 Annual
Report and Form 10-K.
(2) INVESTMENT SECURITIES
---------------------
The carrying value and related market value of investment securities at June 30,
2001 and December 31, 2000 were as follows (dollars in thousands):
June 30, 2001
-------------------------------------------
Amortized Unrealized Unrealized Market
Available-For-Sale Cost Gains Losses Value
- ------------------ --------- ---------- ---------- --------
U. S. Treasury $ 8,006 $ 52 $ - $ 8,058
U. S. Government Agencies
and Corporations 46,637 675 - 47,312
States and Political
Subdivisions 77,784 836 24 78,596
Mortgage-Backed Securities 73,138 538 335 73,341
Other Securities 39,996 453 17 40,432
-------- ------ ---- --------
Total $245,561 $2,554 $376 $247,739
======== ====== ==== ========
December 31, 2000
--------------------------------------------
Amortized Unrealized Unrealized Market
Available-For-Sale Cost Gains Losses Value
- ------------------- ---------- ---------- --------- --------
U. S. Treasury $ 10,016 $ 5 $ - $ 10,021
U. S. Government Agencies
and Corporations 69,683 49 516 69,216
States and Political
Subdivisions 85,744 192 695 85,241
Mortgage-Backed Securities 73,741 134 1,126 72,749
Other Securities 40,058 7 453 39,612
-------- ---- ------ --------
Total $279,242 $387 $2,790 $276,839
======== ==== ====== ========
6
(3) LOANS
-----
The composition of the Company's loan portfolio at June 30, 2001 and December
31, 2000 was as follows (dollars in thousands):
June 30, 2001 December 31, 2000
------------- -----------------
Commercial, Financial
and Agricultural $ 129,181 $ 108,340
Real Estate-Construction 78,707 84,133
Real Estate-Mortgage 266,553 231,099
Real Estate-Residential 522,869 444,489
Consumer 212,831 183,771
---------- ----------
Loans, Net of Unearned Interest $1,210,141 $1,051,832
========== ===========
(4) ALLOWANCE FOR LOAN LOSSES
-------------------------
An analysis of the changes in the allowance for loan losses for the six month
period ended June 30, 2001 and 2000, is as follows (dollars in thousands):
June 30,
----------------------
2001 2000
------- --------
Balance, Beginning of the Period $10,564 $ 9,929
Acquired Reserves 1,206 -
Provision for Loan Losses 1,829 1,560
Recoveries on Loans Previously
Charged-Off 435 329
Loans Charged-Off 2,056 1,340
------- -------
Balance, End of Period $11,978 $10,478
======= =======
Impaired loans are primarily defined as all nonaccruing loans for the loan
categories which are included within the scope of SFAS 114. Selected
information pertaining to impaired loans is depicted in the table below (dollars
in thousands):
June 30,
------------------------------------------
- ------
2001 2000
-------------------- ---------------
- ------
Impaired Loans: Valuation
Valuation
Balance Allowance Balance
Allowance
-------------------- ---------------
- ------
With Related Credit Allowance $ - $ - $ - $
- -
Without Related Credit Allowance 1,081 - 2,052
- -
Average Recorded Investment
for the Period 1,081 * 2,176
*
Interest Income:
Recognized $ 6 $ 63
Collected $ 6 $ 33
* Not Applicable
The Company recognizes income on impaired loans primarily on
the cash basis. Any change in the present value of expected
cash flows on impaired loans is recognized through the
allowance for loan losses.
7
(5) DEPOSITS
--------
The composition of the Company's interest bearing deposits at June 30, 2001 and
December 31, 2000 was as follows (dollars in thousands):
June 30, 2001 December 31, 2000
------------- -----------------
NOW Accounts $ 228,301 $207,978
Money Market Accounts 206,641 156,590
Savings Deposits 112,611 104,035
Other Time Deposits 633,497 507,108
---------- --------
Total Interest Bearing Deposits $1,181,050 $975,711
========== ========
(6) ACCOUNTING PRONOUNCEMENTS
-------------------------
In July 2001, the SEC released Staff Accounting Bulletin
("SAB") No. 102, "Selected Loan Loss Allowance Methodology and
Documentation Issues." SAB No. 102 expresses the SEC staff's
views on the development, documentation and application of a
systematic methodology in determining a GAAP allowance for loan
losses. The SAB stresses that the methodology for computing
the allowance be both disciplined and consistent, and
emphasizes that the documentation supporting the allowance and
provision must be sufficient. SAB No. 102 provides guidance
that is consistent with the Federal Financial Institutions
Examination Council's ("FFIEC"), "Policy Statement on Allowance
for Loan and Lease Losses Methodologies and Documentation for
Banks and Savings Institutions", which was also issued in July
2001. SAB No. 102 is applicable to all registrants with
material loan portfolios while the parallel guidance of the
FFIEC is applicable only to banks and savings institutions.
The adoption of this bulletin did not have a material impact on
reported results of operations of the Company.
In June 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No.
142, "Goodwill and Other Intangibles", which is effective for
fiscal years beginning after December 15, 2001. This statement
addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes Accounting
Principles Board ("APB") Opinion No. 17, "Intangible Assets."
This statement addresses how intangible assets that are
acquired individually or with a group of other assets (but not
those acquired in a business combination) should be accounted
for in financial statements upon their acquisition. This
statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially
recognized in the financial statements. The Company
anticipates the adoption of this standard to impact 2002
earnings by approximately $.06 to $.09 per diluted share.
In June 2001, the FASB issued SFAS No. 141, "Business
Combinations," which is effective for all business combinations
initiated after June 30, 2001. This statement addresses
financial accounting and reporting for business combinations
and supersedes APB Opinion No. 16, "Business Combinations", and
SFAS No. 38, "Accounting for Preacquisition Contingencies of
Purchased Enterprises." All business combinations in the scope
of this statement are to be accounted for using one method, the
purchase method. The adoption of this standard did not have a
material impact on the reported results of operations of the
Company.
In September 2000, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 140 "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities", a
replacement of SFAS No. 125. The statement revises the
standards for accounting for securitizations and other
transfers of financial assets and collateral and requires
certain disclosures. The statement is effective for fiscal
years ending after December 15, 2000. The adoption of this
standard did not have a material impact on reported results of
operations of the Company.
8
In June 1998, the FASB issued SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities" as amended. The
statement establishes accounting and reporting standards for
derivative instruments (including certain derivative
instruments imbedded in other contracts). The statement is
effective for fiscal years beginning after June 15, 2000. The
adoption of this standard did not have a material impact on
reported results of operations of the Company.
(7) COMPREHENSIVE INCOME
--------------------
Total comprehensive income is defined as net income and all other changes in
equity which, for Capital City Bank Group, consists solely of changes in
unrealized gains (losses) on available-for-sale securities. The Company
reported total comprehensive income, net of tax, for the three and six month
periods ended June 30, 2001 and 2000, was as follows (dollars in thousands):
THREE MONTHS ENDED JUNE 30 SIX
MONTHS ENDED JUNE 30
-------------------------- --------
- ----------------
2001 2000
2001 2000
------ ------ -----
- -- ------
Net Income $4,280 $4,166 $
8,629 $8,779
Other Comprehensive Income, Net of Tax
Unrealized Gains (Losses) on Securities:
Unrealized Gains (Losses) on Securities
During the Period 444 415
2,902 (429)
Less: Reclassification Adjustments for
Gains Included in Net Income 2 -
2 2
------ ------ -----
- -- ------
Total Unrealized Gains (Losses)
On Securities 446 415
2,904 (427)
------ ------ -----
- -- ------
Other Comprehensive Income, Net of Tax $4,726 $4,581
$11,533 $8,352
====== ======
======= ======
9
(8) ACQUISITIONS
------------
On March 9, 2001, the Company completed its purchase and
assumption agreement with First Union National Bank ("First
Union") and acquired six of First Union's offices which
included real estate, loans and deposits. The transaction
created approximately $11.5 million in intangible assets and is
being amortized over 10 years. The Company purchased $18
million in loans and assumed deposits of $104 million.
On March 2, 2001, the Company completed its acquisition of
First Bankshares of West Point, Inc., and its subsidiary First
National Bank of West Point. First National Bank of West Point
is a $155 million financial institution with offices located in
West Point, Georgia, and two offices in the Greater Valley area
of Alabama. First Bankshares of West Point, Inc., merged with
CCBG, and First National Bank of West Point merged with CCB.
The Company issued 3.6419 shares and $17.7543 in cash for each
of the 192,481 shares of First Bankshares of West Point, Inc.
The transaction was accounted for as a purchase and resulted in
approximately $5.5 million of intangibles, primarily goodwill.
These intangible assets are being amortized over fifteen years.
(9) CONTINGENCIES
-------------
As part of its card processing services operation, the Bank has
relationships with several Independent Sales Organizations
("ISOs"). A small number of one ISO's merchants have generated
large amounts of charge-backs, and have not reimbursed the ISO
for this charge-back activity. Should these charge-backs
exceed the financial capacity of the ISO, the Bank could face
related exposure. In addition, the ISO and certain merchants
may have disputes about reserves placed with the ISO. The Bank
is currently involved in a workout strategy with the ISO
related to charge-back issues, which Management believes
substantially mitigates the Bank's potential exposure. The
issues are still evolving and Management cannot reasonably
estimate potential exposure for losses, if any, at this time.
Management does not believe the ultimate resolution of these
issues will have a material impact on the Company's financial
position or results of operations.
10
QUARTERLY FINANCIAL DATA (UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
2001 2000
1999
---------------------- ----------------------------------
- ------------ ---------------------
Second First Fourth Third Second
First Fourth Third
---------- ---------- ---------- ---------- ----------
- ---------- ---------- ----------
Summary of Operations:
Interest Income $ 30,879 $ 29,136 $ 28,717 $ 28,018 $
26,889 $ 25,710 $ 25,366 $ 25,236
Interest Expense 13,396 13,143 12,949 12,039
11,070 10,176 10,171 10,287
---------- ---------- ---------- ---------- ---------
- - ---------- ---------- ---------
Net Interest Income 17,483 15,993 15,768 15,979
15,819 15,534 15,195 14,949
Provision for
Loan Loss 1,007 822 825 735
950 610 510 610
---------- ---------- ---------- ---------- ---------
- - ---------- ---------- ---------
Net Interest Income
After Provision
for Loan Loss 16,476 15,171 14,943 15,244
14,869 14,924 14,685 14,339
Noninterest Income 8,257 7,329 7,046 6,646
6,675 6,402 6,655 6,719
Merger Expense - - 12 (2)
751 - 10 74
Noninterest Expense 18,131 15,840 14,847 14,684
14,503 14,352 14,463 14,522
---------- ---------- ---------- ---------- ---------
- - ---------- ---------- ---------
Income Before
Provision for
Income Taxes 6,602 6,660 7,130 7,208
6,290 6,974 6,867 6,462
Provision for
Income Taxes 2,322 2,311 2,478 2,487
2,123 2,361 2,548 2,089
---------- ---------- ---------- ---------- ---------
- - ---------- ---------- ---------
Net Income $ 4,280 $ 4,349 $ 4,652 $ 4,721 $
4,167 $ 4,613 $ 4,319 $ 4,373
========== ========== ========== ==========
========== ========== ========== =========
Net Interest
Income (FTE) $ 17,937 $ 16,454 $ 16,134 $ 16,364 $
16,217 $ 15,962 $ 15,521 $ 15,435
Per Common Share:
Net Income Basic $ .40 $ .42 $ .46 $ .46 $
.41 $ .45 $ .42 $ .43
Net Income Diluted .40 .42 .46 .46
.41 .45 .42 .43
Dividends Declared .1475 .1475 .1475 .1325
.1325 .1325 .1325 .12
Book Value 15.87 15.62 14.56 14.08
13.51 13.20 12.96 12.78
Market Price:
High 25.00 26.13 26.75 20.50
20.50 23.00 25.00 30.00
Low 19.88 23.13 18.88 18.75
18.00 15.00 20.19 21.00
Close 24.87 25.19 24.81 19.56
19.50 19.63 21.50 22.75
Selected Average
Balances:
Loans $1,192,105 $1,082,960 $1,053,675 $1,025,943 $
989,695 $ 938,351 $ 915,194 $ 892,161
Earning Assets 1,556,195 1,416,968 1,359,345 1,318,698
1,303,633 1,277,894 1,280,746 1,297,481
Assets 1,732,661 1,570,673 1,503,811 1,465,455
1,454,098 1,430,620 1,446,815 1,446,505
Deposits 1,479,248 1,301,194 1,223,642 1,203,254
1,202,770 1,198,608 1,235,002 1,234,360
Shareowners' Equity 168,245 155,393 146,161 141,847
137,014 133,836 131,932 130,134
Common Equivalent
Shares:
Basic 10,713 10,297 10,162 10,192
10,196 10,195 10,179 10,179
Diluted 10,721 10,305 10,186 10,208
10,211 10,211 10,201 10,195
Ratios:
ROA .99% 1.12% 1.23% 1.28%
1.15% 1.30% 1.18% 1.20%
ROE 10.20% 11.35% 12.66% 13.24%
12.23% 13.86% 12.99% 13.33%
Net Interest
Margin (FTE) 4.62% 4.70% 4.73% 4.94%
5.00% 5.02% 4.82% 4.73%
Efficiency Ratio 65.08% 63.12% 61.03% 60.64%
60.30% 60.91% 60.67% 62.30%
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
The following analysis reviews important factors affecting the
financial condition and results of operations of Capital City
Bank Group, Inc., for the periods shown below. The Company,
has made, and may continue to make, various forward-looking
statements with respect to financial and business matters that
involve numerous assumptions, risks and uncertainties. The
following is a list of factors, among others, that could cause
actual results to differ materially from the forward-looking
statements: general and local economic conditions, competition
for the Company's customers from other banking and financial
institutions, government legislation and regulation, changes in
interest rates, the impact of rapid growth, significant changes
in the loan portfolio composition, and other risks described in
the Company's filings with the Securities and Exchange
Commission, all of which are difficult to predict and many of
which are beyond the control of the Company.
The following discussion sets forth the major factors that have
affected the Company's financial condition and results of
operations and should be read in conjunction with the
accompanying financial statements. The year-to-date averages
used in this report are based on daily balances for each
respective period.
The Financial Review is divided into three subsections entitled
"Results of Operations", "Financial Condition", and "Liquidity
and Capital Resources". Information therein should facilitate
a better understanding of the major factors and trends which
affect the Company's earnings performance and financial
condition, and how the Company's performance during 2001
compares with prior years. Throughout this section, Capital
City Bank Group, Inc., and its subsidiaries, collectively, are
referred to as "CCBG" or the "Company." Capital City Bank is
referred to as "CCB" and First National Bank of Grady County is
referred to as "FNBGC", or collectively as the "Banks".
On March 9, 2001, the Company completed its purchase and
assumption agreement with First Union National Bank ("First
Union") and acquired six of First Union's offices which
included real estate, loans and deposits. The transaction
created approximately $11.5 million in intangible assets and is
being amortized over 10 years. The Company purchased $18
million in loans and assumed deposits of $104 million.
On March 2, 2001, the Company completed its acquisition of
First Bankshares of West Point, Inc., and its subsidiary First
National Bank of West Point. First National Bank of West Point
is a $155 million financial institution with offices located in
West Point, Georgia, and two offices in the Greater Valley area
of Alabama. First Bankshares of West Point, Inc., merged with
CCBG, and First National Bank of West Point merged with CCB.
The Company issued 3.6419 shares and $17.7543 in cash for each
of the 192,481 shares of First Bankshares of West Point, Inc.
The transaction was accounted for as a purchase and resulted in
approximately $5.5 million of intangibles, primarily goodwill.
These intangible assets are being amortized over fifteen years.
RESULTS OF OPERATIONS
Net Income
- ----------
Earnings, including the effects of merger-related expenses and
intangible amortization, for the three and six months ended
June 30, 2001 were $4.3 million, or $0.40 per diluted share,
and $8.6 million, or $0.82 per diluted share. This compares to
$4.2 million, or $0.41 per diluted share, and $8.8 million, or
$0.86 per diluted share in 2000. The Company did not incur
merger-related expenses for the six month period ended June 30,
2001, versus $476,000, or $0.05 per diluted share, net of
taxes, for the comparable period in 2000. Amortization of
intangible assets, net of taxes, for the first six months in
2001 totaled $1.3 million, or $0.13 per diluted share, compared
to $1.0 million, or $.09 per diluted share in 2000.
12
Net income, excluding merger-related expenses, for the three
and six month periods ended June 30, 2001 decreased $347,000,
or 7.5%, and $627,000, or 6.8%, respectively. The Company
experienced an increase in noninterest expense of 18.9% for the
second quarter in 2001 and 14.7% for the first half of 2001,
versus the comparable periods in 2000. This was attributable
to continued geographic expansion and higher ongoing operating
costs. Operating revenues (defined as taxable equivalent net
interest income plus noninterest income) in 2001 grew $3.3
million, or 14.4%, and $4.7 million, or 10.4%, respectively,
over the three and six month periods in 2000. These and other
factors are discussed throughout the Financial Review. A
condensed earnings summary is presented below.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2001 2000 2001 2000
------- ------- ------- -------
Interest and Dividend Income $30,879 $26,889 $60,015 $52,599
Taxable-Equivalent Adjustment(1) 454 398 915 826
------- ------- ------- -------
Interest Income (FTE) 31,333 27,287 60,930 53,425
Interest Expense 13,396 11,070 26,539 21,246
------- ------- ------- -------
Net Interest Income (FTE) 17,937 16,217 34,391 32,179
Provision for Loan Losses 1,007 950 1,829 1,560
Taxable Equivalent Adjustment 454 398 915 826
------- ------- ------- -------
Net Int. Inc. After Provision 16,476 14,869 31,647 29,793
Noninterest Income 8,257 6,675 15,586 13,077
Merger Expense - 751 - 751
Noninterest Expense 18,131 14,503 33,971 28,855
------- ------- ------- -------
Income Before Income Taxes 6,602 6,290 13,262 13,264
Income Taxes 2,322 2,123 4,633 4,484
------- ------- ------- -------
Net Income $ 4,280 $ 4,167 $ 8,629 $ 8,780
======= ======= ======= =======
Percent Change 2.71% 43.94% (1.71)% 33.83%
Return on Average Assets(2) .99% 1.15% 1.05% 1.22%
Return on Average Equity(2) 10.20% 12.23% 10.75% 13.04%
(1) Computed using a statutory tax rate of 35%
(2) Annualized
Net Interest Income
- -------------------
Second quarter taxable-equivalent net interest income increased
$1.7 million, or 10.6%, over the comparable quarter in 2000.
Taxable-equivalent net interest income for the first half of
2001 increased $2.2 million, or 6.9%, over the first half of
2000. The increase in both periods is attributable to higher
earning assets, primarily loan volume and funds sold. The
higher loan volume was partially offset by declining yields on
earning assets and increased balances and rates on interest
bearing liabilities. Both earning assets and interest bearing
liabilities were higher as a result of the Georgia
acquisitions. Table I on page 19 provides a comparative
analysis of the Company's average balances and interest rates.
For the three and six month periods ended June 30, 2001,
taxable-equivalent interest income increased $4.0 million, or
14.8%, and $7.5 million, or 14.0%, respectively, over the
comparable prior year periods. Average loans, which represent
the Company's highest yielding asset, increased $173.8 million,
or 18.0%, and represented 76.5% of total earning assets for the
six months ended June 30, 2001 versus 74.7% for the comparable
period in 2000. Funds sold increased $491,000 and $829,000
from the comparable three and six months periods in 2001,
reflecting higher liquidity levels resulting from the recent
Georgia acquisitions. Partially offsetting these increases was
a decline in income from investment securities as maturities
were used to fund loan demand. The higher level of liquidity
and declining interest rates contributed to a decrease of 6
basis points in the yield on earning assets which declined from
8.32% for the first half of 2000 to 8.26% in 2001.
13
Interest expense for the three and six month periods ended June
30, 2001 increased $2.3 million, or 21.0%, and $5.3 million, or
24.9%, respectively, over the comparable prior year periods.
This was primarily due to an increase in average deposits and
higher rates paid on interest bearing liabilities. The recent
Georgia acquisitions added approximately $217 million in
deposits. Rising interest rates during 2000 and competitive
pressures contributed to a 35 basis point increase in the
average rate paid on interest bearing liabilities. The Company
continued to experience competition for deposits in terms of
both rate and product. Interest rates have declined 275 basis
points during the first six months of 2001. Management is
aggressively managing the cost of funds and has experienced a
39 basis point reduction in the average rate paid on interest
bearing liabilities during the second quarter of 2001 versus
the prior quarter. Certificates of deposit, which generally
represent a higher cost deposit product to the Company,
increased from 41.2% of average deposits in the first half of
2000 to 42.5% in 2001.
The Company's interest rate spread (defined as the average
federal taxable-equivalent yield on earning assets less the
average rate paid on interest bearing liabilities) decreased
from 4.13% in the first half of 2000 to 3.72% in the comparable
period of 2001. The Company's net interest margin percentage
(defined as taxable-equivalent net interest income divided by
average earning assets) was 4.66% in the first half of 2001,
versus 5.01% in the first half of 2000. The decrease in spread
and margin is attributable to the higher costs of funds and
lower yield on earning assets.
Provision for Loan Losses
- -------------------------
The provision for loan losses was $1.0 million and $1.8
million, respectively, for the three and six month periods
ended June 30, 2001, compared to $1.0 million and $1.6 million
for the comparable periods in 2000. While still at
historically low levels, the Company did experience slight
deterioration in credit quality. Net charge-offs increased
over the first half of 2000, but remain at low levels relative
to the size of the loan portfolio. Nonperforming loans
increased $142,000, or 4.8%, during the first six months of
2001. The Company's nonperforming asset ratio declined from
.37% at year-end to .32% at June 30, 2001. At June 30, the
reserve for loan losses was $12.0 million and represented 1.00%
of total loans, consistent with the prior year-end.
For a discussion of the Company's nonperforming loans, see the
section entitled "Financial Condition."
Based on current economic conditions, the low level of
nonperforming loans and net charge-offs, it is management's
opinion that the reserve for loan losses as of June 30, 2001,
is sufficient to provide for losses inherent in the portfolio
as of that date.
Charge-off activity for the respective periods is set forth below.
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -----------------------
2001 2000 2001 2000
-------- -------- ---------- ----------
Net Charge-Offs $809,000 $698,000 $1,621,000 $1,011,000
Net Charge-Offs (Annualized)
as a percent of Average
Loans Outstanding, Net of
Unearned Interest .27% .28% .29% .21%
14
Noninterest Income
- ------------------
Noninterest income increased $1.6 million, or 23.7%, in the
second quarter of 2001 versus the comparable quarter for 2000,
and $2.5 million, or 19.2%, for the six months ended June 30,
2001 versus the comparable period for 2000. During both
periods, service charge on deposit accounts, mortgage banking
revenues and other income items posted higher revenues.
Service charges on deposit accounts increased $342,000, or
14.8%, and $429,000, or 9.2%, respectively, over the comparable
three and six month periods for 2000. Service charge revenues
in any one year are dependent on the number of accounts,
primarily transaction accounts, the level of activity subject
to service charges and the collection rate. The increase in
the first half of 2001 compared to 2000, reflects an increase
in number of accounts, primarily attributable to the Georgia
acquisitions.
Data processing revenues decreased $64,000, or 9.8%, and
$243,000, or 18.3%, respectively, over the comparable three and
six month periods in 2000. The decrease primarily reflects a
reduction in the number of processing clients.
Revenue from fiduciary activities increased $117,000, or 19.5%,
compared to the second quarter of 2000, and $94,000, or 7.5%,
over the comparable six month period in 2000. Assets generated
through new production were partially offset by declining stock
market values. At June 30, 2001, assets under management
totaled $342.9 million compared to $320.7 million at June 30,
2000.
Mortgage banking revenues increased $692,000, or 217.9%, and
$1.1 million, or 245.4%, respectively, over the comparable
three and six month period in 2000. The increase was due to
the lower interest rate environment, resulting in fixed rate
loans being generated and sold in the secondary market.
Other income increased $493,000, or 17.7%, and $1.1 million, or
20.6%, respectively, for the three and six month periods ended
June 30, 2001 over the comparable prior year periods. The
increase is partially attributable to accounts receivable
financing of $110,000, credit card merchant fees of $235,000,
interchange commissions of $233,000, safe deposit revenues of
$102,000, gains on the disposal of bank assets of $113,000 and
miscellaneous recoveries of $91,000.
Noninterest income as a percent of average assets was 1.90% and
1.82%, respectively, for the first half of 2001 and 2000.
Noninterest Expense
- -------------------
Noninterest expense increased $2.9 million, or 18.9%, and $4.4
million, or 14.7%, respectively, over the comparable three and
six month periods in 2000. All expense categories experienced
increases attributable to the recent acquisitions.
Compensation expense increased $1.6 million, or 22.0%, and $2.5
million, or 16.8%, respectively, over the comparable three and
six month periods of 2000, reflecting the addition of
associates through the Georgia acquisitions, annual raises, and
increased pension and insurance costs for associates.
Occupancy expense, including premises, furniture, fixtures and
equipment increased $551,000, or 21.3%, and $781,000, or 15.4%,
respectively, over the comparable three and six month periods
in 2000. The increase was partially due to the addition of
nine offices acquired with the two Georgia acquisitions.
Office leases, maintenance/repairs and other FF&E increased
$176,000, $384,000 and $102,000, respectively.
15
For the three and six month periods ended June 30, 2001, the
Company did not incur any merger related expense. This
compares to $751,000 from the comparable periods in 2000.
Other noninterest expense (excluding merger related costs)
increased $1.4 million, or 32.3%, and $1.8 million, or 20.7%,
respectively, over the comparable three and six month periods
in 2000. The increase is attributable to higher intangible
amortization resulting from acquisitions of $508,000, credit
cards and ATM interchange costs of $302,000, legal costs of
$176,000, telephone costs of $138,000, postage of $107,000,
courier costs of $84,000, disposal of bank assets of $74,000
and advertising of $85,000.
Annualized net noninterest expense (noninterest income minus
noninterest expense, net of intangibles and merger expense) as
a percent of average assets was 2.01% in the first half of 2001
versus 2.00% for the first half of 2000. The Company's
efficiency ratio (noninterest expense, net of intangibles and
merger expense, expressed as a percent of the sum of taxable-
equivalent net interest income plus noninterest income) was
64.15% in the first half of 2001 compared to 60.60% for the
comparable period in 2000. The increase in the efficiency
ratio reflects rising costs as noted above.
Income Taxes
- ------------
The provision for income taxes increased $199,000, or 9.4%,
during the second quarter and $149,000, or 3.3%, during the
first six months of 2001, relative to the comparable prior year
periods. The Company's effective tax rate for the first half
of 2001 was 34.9% versus 33.8% for the comparable period in
2000. The increase in the effective tax rate is attributable
to a reduction in nontaxable municipal interest.
FINANCIAL CONDITION
The Company's average assets were $1.7 billion for the first
six months of 2001 and $1.4 billion for the comparable period
in 2000. Average earning assets were $1.5 billion for the six
months ended June 30, 2001, compared to $1.3 billion for the
first half of 2000. The increase, as well as the change in the
mix of earning assets, reflects the recent Georgia acquisitions
and continued loan generation, partially offset by a decline in
investment securities. Table I on Page 19 presents average
balances for the three and six month periods ended June 30,
2001 and 2000.
Average loans increased $173.8 million, or 18.0%, over the
comparable period in 2000. Price and product competition remain
strong. With the recent rate decline, there is an increased
demand for fixed-rate, longer term financing. Loan growth has
occurred in all categories, with the most significant increase
in real estate, primarily first mortgage residential loans.
Loans as a percent of average earning assets represented 76.5%
of total earning assets for the six months ended June 30, 2001
versus 74.7% for the comparable period in 2000.
The investment portfolio is a significant component of the
Company's operations and, as such, it functions as a key
element of liquidity and asset/liability management. As of
June 30, 2001, the average investment portfolio decreased $38.6
million, or 12.8%, from the comparable period in 2000. The
decrease in the investment portfolio was used to fund the
growth in loans. Securities in the available-for-sale
portfolio are recorded at fair value and unrealized gains and
losses associated with these securities are recorded, net of
tax, as a separate component of shareowners' equity. At June
30, 2001, shareowners' equity included an accumulated other
comprehensive gain of $1.4 million compared to a loss of $1.5
million at December 31, 2000. The increase in value reflects a
decrease in interest rates during the first half of 2001.
At June 30, 2001, the Company's nonperforming loans were $3.1
million versus $2.9 million at year-end 2000. As a percent of
nonperforming loans, the allowance for loan losses represented
389% at June 30, 2001 versus 360% at December 31, 2000 and 324%
at June 30, 2000, respectively. Nonperforming loans include
nonaccruing and restructured loans. Other real estate, which
includes property acquired either through foreclosure, or by
receiving a deed in lieu of foreclosure, was $837,000 at June
30, 2001, compared to $971,000 at December 31, 2000, and $1.2
million at June 30, 2000. The ratio of nonperforming assets as
a percent of loans plus other real estate was .32% at June 30,
2001, compared to .37% at December 31, 2000, and .43% at June
30, 2000.
16
Average deposits increased 15.8% from $1.2 billion for the
first half of 2000, to $1.4 billion for the first half of 2001.
The increase in deposits is primarily attributable to Georgia
acquisitions. Excluding acquisitions, existing markets
realized growth primarily in certificates of deposit, NOW
accounts and noninterest bearing demand accounts. The Company
continues to experience a notable increase in competition for
deposits, in terms of both rate and product.
The ratio of average noninterest bearing deposits to total
deposits was 21.0% for the first half of 2001 compared to 22.6%
for the first half of 2000. For the same periods, the ratio of
average interest bearing liabilities to average earning assets
was 79.4% and 78.9%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity, for a financial institution, is the availability of
funds to meet increased loan demand and/or excessive deposit
withdrawals. Management has implemented a financial structure
that provides ready access to sufficient liquid funds to meet
normal transaction requirements, take advantage of investment
opportunities and cover unforeseen liquidity demands. In
addition to core deposits, sources of funds available to meet
liquidity demands for the subsidiary banks include federal
funds sold, near-term loan maturities, securities held in the
available-for-sale portfolio, and the ability to purchase funds
through established lines of credit with correspondent banks
and the Federal Home Loan Bank. Additionally, the parent
company maintains a $25 million revolving line of credit. As
of June 30, 2001 there was $2.3 million outstanding under this
facility. The Company did not reduce the outstanding principal
on the line of credit during the first half of 2001.
The Company's equity capital was $169.7 million as of June 30,
2001, compared to $147.6 million as of December 31, 2000.
Management continues to monitor its capital position in
relation to its level of assets with the objective of
maintaining a "well capitalized" position. The leverage ratio
was 7.37% at June 30, 2001 versus 8.30% at December 31, 2000.
Further, the Company's risk-adjusted capital ratio of 11.50%
significantly exceeds the 8.0% minimum requirement under the
risk-based regulatory guidelines.
State and federal regulations, as well as the Company's long-
term debt agreement, place certain restrictions on the payment
of dividends by both the Company and its Group banks. At June
30, 2001, these regulations and covenants did not impair the
Company's (or its subsidiaries') ability to declare and pay
dividends or to meet other existing obligations.
During the first six months of 2001, shareowners' equity
increased $22.1 million, or 30.2%, on an annualized basis.
Growth in equity during the first half was positively impacted
by net income of $8.6 million and issuance of common stock of
$17.5 million and a change in the net unrealized gain (loss) on
available-for-sale securities from a loss at year-end of $1.5
million to a gain of $1.4 million. Equity was reduced by
dividends paid during the first quarter of $3.2 million, or
$.295 per share and the repurchase of common stock of $3.7
million.
The Company's common stock had a diluted book value of $15.87
per share at June 30, 2001 compared to $14.56 at December 31,
2000. On March 30, 2000, the Company announced the
authorization to repurchase 500,000 shares of its outstanding
common stock. The purchases will be made in the open market or
in privately negotiated transactions. To date, 281,134 shares
have been repurchased.
17
Other Matters
As part of its card processing services operation, the Bank has
relationships with several Independent Sales Organizations
("ISOs"). A small number of one ISO's merchants have generated
large amounts of charge-backs, and have not reimbursed the ISO
for this charge-back activity. Should these charge-backs
exceed the financial capacity of the ISO, the Bank could face
related exposure. In addition, the ISO and certain merchants
may have disputes about reserves placed with the ISO. The Bank
is currently involved in a workout strategy with the ISO
related to charge-back issues, which Management believes
substantially mitigates the Bank's potential exposure. The
issues are still evolving and Management cannot reasonably
estimate potential exposure for losses, if any, at this time.
Management does not believe the ultimate resolution of these
issues will have a material impact on the Company's financial
position or results of operations.
18
TABLE I
AVERAGE BALANCES & INTEREST RATES
(Taxable Equivalent Basis - Dollars in
Thousands)
FOR THREE MONTHS ENDED JUNE 30,
2001 2000
-------------------------- ------------------
- --------
Balance Interest Rate Balance
Interest Rate
---------- -------- ----- ---------- -------
- - -----
ASSETS
Loans, Net of Unearned Interest(1) $1,192,105 $26,488 8.91% $ 989,695
$22,631 9.20%
Taxable Investment Securities 173,497 2,433 5.63% 198,511
2,946 5.97%
Tax-Exempt Investment Securities(2) 80,772 1,231 6.11% 93,813
1,368 5.83%
Funds Sold 109,821 1,181 4.28% 21,614
342 6.36%
---------- ------- ---------- -----
- --
Total Earning Assets 1,556,195 31,333 8.07% 1,303,633
27,287 8.42%
Cash & Due From Banks 74,661 63,059
Allowance for Loan Losses (11,965) (10,442)
Other Assets 113,770 97,848
---------- ----------
TOTAL ASSETS $1,732,661 $1,454,098
========== ==========
LIABILITIES
NOW Accounts $ 215,941 $ 1,162 2.16% $ 170,322 $
1,025 2.42%
Money Market Accounts 208,621 1,867 3.59% 160,356
1,634 4.10%
Savings Accounts 111,345 535 1.93% 105,663
584 2.22%
Other Time Deposits 633,556 9,148 5.79% 491,178
6,404 5.24%
---------- ------- ---------- -----
- --
Total Int. Bearing Deposits 1,169,463 12,712 4.36% 927,519
9,647 4.18%
Short-Term Borrowings 52,291 495 3.80% 83,579
1,205 5.80%
Long-Term Debt 14,012 189 5.40% 13,970
218 6.28%
---------- ------- ---------- -----
- --
Total Interest Bearing
Liabilities 1,235,766 13,396 4.35% 1,025,068
11,070 4.34%
Noninterest Bearing Deposits 309,785 275,251
Other Liabilities 18,865 16,765
---------- ----------
TOTAL LIABILITIES 1,564,416 1,317,084
SHAREOWNERS' EQUITY
Common Stock 107 102
Surplus 21,730 9,400
Other Comprehensive Income 736 (7,318)
Retained Earnings 145,672 134,830
---------- ----------
TOTAL SHAREOWNERS' EQUITY 168,245 137,014
---------- ----------
TOTAL LIABILITIES & EQUITY $1,732,661 $1,454,098
========== ==========
Interest Rate Spread 3.72%
4.08%
====
====
Net Interest Income $17,937
$16,217
=======
=======
Net Interest Margin 4.62%
5.00%
====
====
FOR SIX MONTHS ENDED JUNE 30,
2001 2000
-------------------------- -----------------
- ---------
Balance Interest Rate Balance
Interest Rate
---------- -------- ----- ---------- ------
- -- -----
ASSETS
Loans, Net of Unearned Interest(1) $1,137,834 $51,222 9.08% $ 964,023
$43,792 9.14%
Taxable Investment Securities 181,411 5,210 5.79% 205,823
6,066 5.93%
Tax-Exempt Investment Securities(2) 82,229 2,512 6.16% 96,407
2,835 5.84%
Funds Sold 85,434 1,986 4.64% 24,511
732 6.01%
---------- ------- ---------- -----
- --
Total Earning Assets 1,486,908 60,930 8.26% 1,290,764
53,425 8.32%
Cash & Due From Banks 69,734 64,192
Allowance for Loan Losses (11,525) (10,263)
Other Assets 107,011 97,666
---------- ----------
TOTAL ASSETS $1,652,128 $1,442,359
========== ==========
LIABILITIES
NOW Accounts $ 209,925 $ 2,562 2.46% $ 169,092 $
1,973 2.35%
Money Market Accounts 189,030 3,573 3.81% 161,242
3,226 4.02%
Savings Accounts 108,635 1,147 2.13% 104,740
1,120 2.15%
Other Time Deposits 591,390 17,217 5.87% 494,237
12,503 5.09%
---------- ------- ---------- -----
- --
Total Int. Bearing Deposits 1,098,980 24,499 4.50% 929,311
18,822 4.07%
Short-Term Borrowings 65,563 1,606 4.94% 75,540
1,989 5.29%
Long-Term Debt 15,504 434 5.64% 14,069
435 6.22%
---------- ------- ---------- -----
- --
Total Interest Bearing
Liabilities 1,180,047 26,539 4.54% 1,018,920
21,246 4.19%
Noninterest Bearing Deposits 291,746 271,377
Other Liabilities 18,480 16,637
---------- ----------
TOTAL LIABILITIES 1,490,273 1,306,934
SHAREOWNERS' EQUITY
Common Stock 105 102
Surplus 16,897 9,358
Other Comprehensive Income 89 (7,127)
Retained Earnings 144,764 133,092
---------- ----------
TOTAL SHAREOWNERS' EQUITY 161,855 135,425
---------- ----------
TOTAL LIABILITIES & EQUITY $1,652,128 $1,442,359
========== ==========
Interest Rate Spread 3.72%
4.13%
====
====
Net Interest Income $34,391
$32,179
=======
=======
Net Interest Margin 4.66%
5.01%
====
====
(1) Average balances include nonaccrual loans. Interest income includes fees on
loans of approximately $1.2 million and $2.1 million, for the three and six
months ended June 30, 2001, versus $1.0 million and $2.0 million, for the
comparable periods ended June 30, 2000.
(2) Interest income includes the effects of taxable equivalent adjustments using
a 35% tax rate.
19
Item 3. Quantitative and Qualitative Disclosure for Market
Risk
Overview
- --------
Market risk management arises from changes in interest rates,
exchange rates, commodity prices and equity prices. The
Company has risk management policies to monitor and limit
exposure to market risk. Capital City Bank Group does not
actively participate in exchange rates, commodities or
equities. In asset and liability management activities,
policies are in place that are designed to minimize structural
interest rate risk.
Interest Rate Risk Management
- -----------------------------
The normal course of business activity exposes Capital City
Bank Group to interest rate risk. Fluctuations in interest
rates may result in changes in the fair market value of the
Company's financial instruments, cash flows and net interest
income. Capital City Bank Group's asset/liability management
process manages the Company's interest rate risk.
The financial assets and liabilities of the Company are
classified as other-than-trading. An analysis of the other-
than-trading financial components, including the fair values,
are presented in Table II on page 20. This table presents the
Company's consolidated interest rate sensitivity position as of
June 30, 2001 based upon certain assumptions as set-forth in
the notes to the Table. The objective of interest rate
sensitivity analysis is to measure the impact on the Company's
net interest income due to fluctuations in interest rates. The
asset and liability fair values presented in Table II may not
necessarily be indicative of the Company's interest rate
sensitivity over an extended period of time.
The Company is currently liability sensitive which generally
indicates that in a period of rising interest rates the net
interest margin will be adversely impacted as the velocity
and/or volume of liabilities being repriced exceeds assets.
However, as general interest rates rise or fall, other factors
such as current market conditions and competition may impact
how the Company responds to changing rates and thus impact the
magnitude of change in net interest income.
20
Table II
FINANCIAL ASSETS AND LIABILITIES MARKET RISK ANALYSIS(1)
(Dollars in Thousands)
Other Than Trading Portfolio June 30, 2001
- ---------------------------- ---------------------------------------------------
- --- Fair
Year 1 Year 2 Year 3 Year 4 Year
5 Beyond Total Value
------- ------- -------- -------- -----
- --- -------- --------- ----------
Loans
Fixed Rate $ 98,174 $ 35,186 $ 48,524 $ 44,542 $
42,073 $161,663 $ 430,162 $ 439,151
Average Interest Rate 8.69% 9.42% 9.45% 9.41%
9.44% 7.94% 8.70%
Floating Rate(2) 422,965 48,376 74,205 58,915
93,595 81,923 779,979 796,279
Average Interest Rate 8.56% 8.45% 8.18% 8.33%
7.83% 7.47% 8.30%
Investment Securities(3)
Fixed Rate 53,022 40,656 29,421 24,700
16,916 70,293 235,008 235,008
Average Interest Rate 5.90% 5.55% 5.33% 5.78%
5.95% 5.76% 5.75%
Floating Rate 2,384 - 9,844 -
- - 503 12,731 12,731
Average Interest Rate 4.68% - 6.45% -
- - 6.05% 6.10%
Other Earning Assets
Fixed Rates - - - -
- - - - -
Average Interest Rates - - - -
- - - -
Floating Rate 123,916 - - -
- - - 123,916 123,916
Average Interest Rates 3.86% - - -
- - - 3.86%
Total Financial Assets $700,461 $124,218 $161,994 $128,157
$152,584 $314,382 $1,581,796 $1,607,085
Average Interest Rates 7.53% 7.78% 7.94% 8.21%
8.07% 7.33% 7.66%
Deposits(4)
Fixed Rate Deposits $553,007 $ 59,253 $ 13,447 $ 5,535 $
2,249 $ 6 $ 633,497 $ 644,252
Average Interest Rates 5.53% 5.45% 5.22% 5.54%
4.77% 4.85% 5.52%
Floating Rate Deposits 547,553 - - -
- - - 547,553 547,553
Average Interest Rates 5.56% - - -
- - - 5.56%
Other Interest Bearing
Liabilities
Fixed Rate Debt 3,043 1,048 1,048 988
962 7,462 14,551 16,494
Average Interest Rate 5.50% 6.06% 6.05% 6.00%
6.01% 6.00% 5.90%
Floating Rate Debt 52,865 - - -
- - - 52,865 52,865
Average Interest Rate 3.30% - - -
- - - 3.30%
Total Financial Liabilities $1,156,468 $ 60,301 $ 14,495 $ 6,523 $
3,211 $ 7,468 $1,248,466 $1,261,164
Average interest Rate 5.44% 5.46% 5.28% 5.61%
5.14% 6.00% 5.44%
(1) Based upon expected cashflows, unless otherwise indicated.
(2) Based upon a combination of expected maturities and repricing opportunities.
(3) Based upon contractual maturity, except for callable and floating rate
securities, which are based on expected
maturity and weighted average life, respectively.
(4) Savings, NOW and money market accounts can be repriced at any time,
therefore, all such balances are included as
floating rates deposits in 2001. Other time deposit balances are classified
according to maturity.
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PART II. OTHER INFORMATION
Items 1-3.
- ----------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The Annual Meeting of Shareholders of Capital City Bank Group,
Inc. was held on April 24, 2001. Proxies for the meeting were
solicited pursuant to Regulation 14A under the Securities
Exchange Act of 1934, and there was no solicitation in
opposition to management's solicitations. The following
summarizes all matters voted upon at this meeting.
1. The following directors were elected for terms expiring as
noted. These individuals served on the Board of Directors
prior to the Annual Meeting. The number of votes cast were as
follows:
For terms to expire at Against/
Abstentions/
the 2004 annual meeting: For Withheld
Broker Non-Votes
Cader B. Cox, III 8,720,889 1,718
- -
William G. Smith, Jr. 8,720,889 1,718
- -
John B. Wight, Jr. 8,720,889 1,718
2. The shareowners ratified the selection of Arthur Andersen
LLP as the independent auditors for the Company for 2001. The
number of votes cast were as follows:
Against/ Abstentions/
For Withheld Broker Non-Votes
8,718,962 1,225 2,420
Item 5. Other Information
- -------------------------
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(A) Exhibits
Not applicable
(B) Reports on Form 8-K
Capital City Bank Group, Inc., filed no Form 8-K during the
second quarter 2001.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned Chief Financial Officer
hereunto duly authorized.
CAPITAL CITY BANK GROUP, INC.
(Registrant)
/s/ J. Kimbrough Davis
- -----------------------------
J. Kimbrough Davis
Executive Vice President and
Chief Financial Officer
Date: August 14, 2001
23