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:
March 31, 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)
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 April 30, 2001, 10,749,093 shares of the Registrant's Common
Stock, $.01 par value, were outstanding.
1
CAPITAL CITY BANK GROUP, INC.
FORM 10-Q I N D E X
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 11
3. Qualitative and Quantitative Disclosure of
Market Risk 18
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 Not Applicable
5. Other Information 20
6. Exhibits and Reports on Form 8-K 20
Signatures 20
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31
(Dollars in Thousands, Except Per Share Amounts)
2001 2000
(Unaudited)
(Unaudited)
----------- -------
- ----
INTEREST INCOME
- ---------------
Interest and Fees on Loans $ 24,672 $
21,119
Investment Securities:
U. S. Treasury 128
248
U. S. Government Agencies and Corporations 2,042
2,269
States and Political Subdivisions 883
1,081
Other Securities 607
604
Funds Sold 804
389
---------- ------
- ----
Total Interest Income 29,136
25,710
---------- ------
- ----
INTEREST EXPENSE
- ----------------
Deposits 11,787
9,175
Short-Term Borrowings 1,111
784
Long-Term Debt 245
217
---------- ------
- ----
Total Interest Expense 13,143
10,176
---------- ------
- ----
Net Interest Income 15,993
15,534
Provision for Loan Losses 822
610
---------- ------
- ----
Net Interest Income After Provision
for Loan Losses 15,171
14,924
---------- ------
- ----
NONINTEREST INCOME
- ------------------
Service Charges on Deposit Accounts 2,422
2,336
Data Processing 501
680
Income from Fiduciary Activities 638
660
Securities Transactions -
2
Mortgage Banking Revenues 565
138
Other 3,203
2,586
---------- ------
- ----
Total Noninterest Income 7,329
6,402
---------- ------
- ----
NONINTEREST EXPENSE
- -------------------
Salaries and Associate Benefits 8,434
7,555
Occupancy, Net 1,219
1,096
Furniture and Equipment 1,498
1,392
Other 4,689
4,309
---------- ------
- ----
Total Noninterest Expense 15,840
14,352
---------- ------
- ----
Income Before Income Taxes 6,660
6,974
Income Taxes 2,311
2,361
---------- ------
- ----
NET INCOME $ 4,349 $
4,613
==========
==========
Basic Net Income Per Share $ .42 $
.45
==========
==========
Diluted Net Income Per Share $ .42 $
.45
==========
==========
Cash Dividends Per Share $ .1475 $
.1325
==========
==========
Average Shares Outstanding - Basic 10,296,732
10,195,261
==========
==========
Average Shares Outstanding - Diluted 10,304,756
10,210,774
==========
==========
3
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF MARCH 31, 2001 AND DECEMBER 31, 2000
(Dollars In Thousands, Except Per Share Amounts)
March 31,
December 31,
2001 2000
(Unaudited)
(Audited)
----------- -------
- -----
ASSETS
- -----
Cash and Due From Banks $ 73,499 $
73,367
Funds Sold 153,910
40,623
Investment Securities, Available-for-Sale 265,741
276,839
Loans, Net of Unearned Interest 1,164,298
1,051,832
Allowance for Loan Losses (11,780)
(10,564)
---------- ------
- ----
Loans, Net 1,152,518
1,041,268
Premises and Equipment, Net 43,056
37,023
Intangibles 39,146
22,293
Other Assets 36,932
36,047
---------- ------
- ----
Total Assets $1,764,802
$1,527,460
==========
==========
LIABILITIES
- ---------
Deposits:
Noninterest Bearing Deposits $ 339,073 $
292,656
Interest Bearing Deposits 1,177,553
975,711
---------- ------
- ----
Total Deposits 1,516,626
1,268,367
Short-Term Borrowings 48,538
83,472
Long-Term Debt 14,018
11,707
Other Liabilities 17,636
16,307
---------- ------
- ----
Total Liabilities 1,596,818
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; 10,749,090 issued and outstanding
at March 31, 2001 and 10,108,454 issued and
outstanding at December 31, 2000 107
101
Additional Paid-In Capital 22,520
7,369
Retained Earnings 144,421
141,659
Accumulated Other Comprehensive Income (Loss),
Net of Tax 936
(1,522)
---------- ------
- ----
Total Shareowners' Equity 167,984
147,607
---------- ------
- ----
Total Liabilities and Shareowners' Equity $1,764,802
$1,527,460
==========
==========
4
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31
(Dollars in Thousands)
2001 2000
(Unaudited)
(Unaudited)
----------- -------
- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net Income $ 4,349 $
4,613
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses 822
610
Depreciation 961
983
Net Securities Amortization 274
363
Amortization of Intangible Assets 828
705
Gain on Sale of Investment Securities -
(2)
Non-Cash Compensation Expense 738
157
Net Increase in Other Assets 588
(1,833)
Net (Decrease) Increase in Other Liabilities (568)
1,344
-------- -----
- ---
Net Cash Provided by Operating Activities 7,992
6,940
-------- -----
- ---
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Proceeds from Payments/Maturities of
Investment Securities Available-for-Sale 63,588
19,237
Purchase of Investment Securities (449)
(492)
Net Increase in Loans (21,144)
(35,900)
Purchase of Premises & Equipment (81)
(488)
Sales of Premises & Equipment 330
6
Cash & Cash Equivalents from Acquisition 80,435
- -
-------- -----
- ---
Net Cash Provided by (Used In) Investing Activities 122,679
(17,637)
-------- -----
- ---
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Net Increase in Deposits 44,369
48,814
Net (Decrease) Increase in Short-Term Borrowings (59,934)
12,357
Borrowing of Long-Term Debt 2,196
928
Repayment of Long-Term Debt (156)
(1,130)
Dividends Paid (1,587)
(1,351)
Repurchase of Common Stock (2,183)
- -
Issuance of Common Stock 43
30
-------- -----
- ---
Net Cash (Used In) Provided by Financing Activities (17,252)
59,648
-------- -----
- ---
Net Increase in Cash and Cash Equivalents 113,419
48,951
Cash and Cash Equivalents at Beginning of Period 113,990
93,072
-------- -----
- ---
Cash and Cash Equivalents at End of Period $227,409
$142,023
========
========
Supplemental Disclosure:
Interest Paid on Deposits $ 12,782 $
9,170
========
========
Interest Paid on Debt $ 1,218 $
1,090
========
========
Transfer of Loans to ORE $ 305 $
363
========
========
Income Taxes Paid $ 539 $
1,865
========
========
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 March 31, 2001 and
December 31, 2000, the results of operations, and cash flows
for the three month periods ended March 31, 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 values and related market value of investment
securities at March 31, 2001 and December 31, 2000 were as
follows (dollars in thousands):
March 31, 2001
-------------------------------------------
Amortized Unrealized Unrealized Market
Available-For-Sale Cost Gains Losses Value
- ------------------ --------- ---------- ---------- -------
U. S. Treasury $ 8,011 $ 57 $ - $ 8,068
U. S. Government Agencies
and Corporations 56,658 468 2 57,124
States and Political Subdivisions 82,762 781 17 83,526
Mortgage-Backed Securities 75,343 312 309 75,346
Other Securities 41,489 212 24 41,677
-------- ------ ---- --------
Total $264,263 $1,830 $352 $265,741
======== ====== ==== ========
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 March 31,
2001 and December 31, 2000 was as follows (dollars in
thousands):
March 31, 2001 December 31, 2000
-------------- -----------------
Commercial, Financial
and Agricultural $ 119,457 $ 108,340
Real Estate - Construction 83,556 84,133
Real Estate - Mortgage 257,787 231,099
Real Estate - Residential 504,412 444,489
Consumer 199,086 183,771
---------- ----------
Loans, Net of Unearned Interest $1,164,298 $1,051,832
========== ==========
(4) ALLOWANCE FOR LOAN LOSSES
-------------------------
An analysis of the changes in the allowance for loan losses for
the three month period ended March 31, 2001 and 2000, was as
follows (dollars in thousands):
March 31,
--------------------------
2001 2000
------- -------
Balance, Beginning of the Period $10,564 $ 9,929
Acquired Reserves 1,206 -
Provision for Loan Losses 822 610
Recoveries on Loans Previously
Charged-Off 252 184
Loans Charged-Off (1,064) (497)
------- -------
Balance, End of Period $11,780 $10,226
======= =======
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):
March 31,
----------------------------------------------
2001 2000
--------------------- --------------------
Impaired Loans: Valuation Valuation
Balance Allowance Balance Allowance
--------------------- --------------------
With Related
Valuation Allowance $ - $ - $ - $ -
Without Related
Valuation Allowance 951 - 1,604 -
Average Recorded Investment
for the Period 951 * 1,602 *
Interest Income:
Recognized $ 4 $ -
Collected $ 4 $ -
* Not Applicable
The Company recognizes income on impaired loans primarily on the cash basis.
Any change in the present value of expected cash flows is recognized through
the allowance for loan losses.
7
(5) DEPOSITS
--------
The composition of the Company's interest bearing deposits at
March 31, 2001 and December 31, 2000 were as follows (dollars
in thousands):
March 31, 2001 December 31, 2000
-------------- -----------------
NOW Accounts $ 219,282 $207,978
Money Market Accounts 212,676 156,590
Savings Deposits 114,594 104,035
Other Time Deposits 631,001 507,108
---------- --------
Total Interest Bearing Deposits $1,177,553 $975,711
========== ========
(6) ACCOUNTING PRONOUNCEMENTS
-------------------------
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.
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 month periods
ended March 31, 2001 and 2000, as follows (dollars in
thousands):
THREE MONTHS ENDED
MARCH 31
-----------------
2001 2000
------ ------
Net Income $4,349 $4,613
Other Comprehensive Income, Net of Tax
Unrealized Gains (Losses) on Securities:
Unrealized Gains (Losses) on Securities
Arising During the Period 2,458 (844)
Less: Reclassification Adjustments for
Gains (Losses) Included in Net Income - 2
------ ------
Total Unrealized Gains (Losses)
On Securities, Net of Tax 2,458 (842)
------ ------
Total Comprehensive Income, Net of Tax $6,807 $3,771
====== ======
8
(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 $105 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 in their earliest stages and the Bank 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.
9
QUARTERLY FINANCIAL DATA (UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
2001 2000
1999
---------- ----------------------------------------------
- --------------------------------
First Fourth Third Second First
Fourth Third Second
---------- ---------- ---------- ---------- ----------
- ---------- ---------- ----------
Summary of Operations:
Interest Income $ 29,136 $ 28,717 $ 28,018 $ 26,889 $ 25,710
$ 25,366 $ 25,236 $ 24,816
Interest Expense 13,143 12,949 12,039 11,070 10,176
10,171 10,287 10,476
---------- ---------- ---------- ---------- ----------
- ---------- ---------- ----------
Net Interest Income 15,993 15,768 15,979 15,819 15,534
15,195 14,949 14,340
Provision for
Loan Loss 822 825 735 950 610
510 610 580
Net Interest Income
After Provision
for Loan Loss 15,171 14,943 15,244 14,869 14,924
14,685 14,339 13,760
Noninterest Income 7,329 7,046 6,646 6,675 6,402
6,655 6,719 6,634
Merger Expense - 12 (2) 751 -
10 74 1,277
Noninterest Expense 15,840 14,847 14,684 14,503 14,352
14,463 14,522 15,040
---------- ---------- ---------- ---------- ----------
- ---------- ---------- ----------
Income Before
Provision for
Income Taxes 6,660 7,130 7,208 6,290 6,974
6,867 6,462 4,077
Provision for
Income Taxes 2,311 2,478 2,487 2,123 2,361
2,548 2,089 1,182
---------- ---------- ---------- ---------- ----------
- ---------- ---------- ----------
Net Income $ 4,349 $ 4,652 $ 4,721 $ 4,167 $ 4,613
$ 4,319 $ 4,373 $ 2,895
========== ========== ========== ========== ==========
========== ========== ===========
Net Interest
Income (FTE) $ 16,440 $ 16,134 $ 16,364 $ 16,217 $ 15,962
$ 15,521 $ 15,435 $ 14,822
Per Common Share:
Net Income Basic $ .42 $ .46 $ .46 $ .41 $ .45
$ .42 $ .43 $ .28
Net Income Diluted .42 .46 .46 .41 .45
.42 .43 .28
Dividends Declared .1475 .1475 .1325 .1325 .1325
.1325 .12 .12
Book Value 15.62 14.56 14.08 13.51 13.20
12.96 12.78 12.56
Market Price:
High 26.13 26.75 20.50 20.50 23.00
25.00 30.00 25.00
Low 23.13 18.88 18.75 18.00 15.00
20.19 21.00 20.25
Close 25.19 24.81 19.56 19.50 19.63
21.50 22.75 25.00
Selected Average
Balances:
Loans $1,082,960 $1,053,675 $1,025,943 $ 989,695 $ 938,351
$ 915,194 $ 892,161 $ 878,976
Earning Assets 1,416,968 1,359,345 1,318,698 1,303,633 1,277,894
1,280,746 1,297,481 1,304,093
Total Assets 1,570,673 1,503,811 1,465,455 1,454,098 1,430,620
1,446,815 1,446,505 1,452,215
Total Deposits 1,301,194 1,223,642 1,203,254 1,202,770 1,198,608
1,235,002 1,234,360 1,247,452
Total Shareowners'
Equity 155,393 146,161 141,847 137,014 133,836
131,932 130,134 131,234
Common Equivalent
Shares:
Basic 10,297 10,162 10,192 10,196 10,195
10,179 10,179 10,172
Diluted 10,305 10,186 10,208 10,211 10,211
10,201 10,195 10,187
Ratios:
ROA 1.12% 1.23% 1.28% 1.15% 1.30%
1.18% 1.20% .80%
ROE 11.35% 12.66% 13.24% 12.23% 13.86%
12.99% 13.33% 8.85%
Net Interest
Margin (FTE) 4.69% 4.73% 4.94% 5.00% 5.02%
4.82% 4.73% 4.56%
Efficiency Ratio 63.16% 61.03% 60.64% 60.30% 60.91%
60.67% 62.30% 66.70%
10
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
"Earnings Analysis", "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 $105 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 intangible amortization,
were $4.3 million, or $.42 per diluted share, for the first
quarter of 2001. This compares to $4.6 million, or $.45 per
diluted share for the first quarter of 2000. Amortization of
intangible assets, net of taxes, totaled $566,000 and $479,000,
or $.06 per diluted share and $.05 per diluted share,
respectively, for the first quarter in 2001 and 2000. The
Company experienced an increase in noninterest expense,
attributable to continued geographic expansion and ongoing
operating costs. This increase was the most significant factor
contributing to the decline in net income.
11
For The Three Months Ended March 31,
------------------------------------
(Dollars in Thousands) 2001 2000
- ---------------------- ------- -------
Interest Income $29,136 $25,710
Taxable Equivalent Adjustment(1) 447 428
------- -------
Interest Income (FTE) 29,583 26,138
Interest Expense 13,143 10,176
------- -------
Net Interest Income (FTE) 16,440 15,962
Provision for Loan Losses 822 610
Taxable Equivalent Adjustment 346 428
------- -------
Net Int. Inc. After Provision 15,171 14,924
Noninterest Income 7,329 6,402
Merger Expense - -
Noninterest Expense 15,840 14,352
------- -------
Income Before Income Taxes 6,660 6,974
Income Taxes 2,311 2,361
------- -------
Net Income $ 4,349 $ 4,613
======= =======
Percent Change (5.72)% 25.86%
Return on Average Assets(2) 1.12% 1.30%
Return on Average Equity(2) 11.35% 13.86%
(1) Computed using a statutory tax rate of 35%
(2) Annualized
Net Interest Income
- -------------------
First quarter taxable equivalent net interest income increased
$377,000, or 2.4%, over the comparable period for 2000. This
increase is attributable to higher loan volume and yields.
Table I on page 17 provides a comparative analysis of the
Company's average balances and interest rates.
Taxable equivalent interest income increased $3.3 million, or
12.8%, due to growth in the loan portfolio and higher yields.
Average loans, which represent the Company's highest yielding
asset, increased $144.6 million, or 15.4%, and represented
76.4% of total earning assets in the first quarter of 2001
versus 73.4% for the comparable quarter in 2000. Interest on
funds sold increased $415,000, or 106.7%, reflecting higher
liquidity levels attributable to the recent Georgia
acquisitions. Partially offsetting these increases was a
decline in income from investment securities as maturities were
used to fund the Company's loan growth. The loan growth and
favorable shift in mix of earning assets contributed to an
increase of 23 basis points in the yield on earning assets
which improved from 8.22% in the first quarter of 2000 to 8.45%
in 2001.
Interest expense increased $3.0 million, or 29.2%, 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 70 basis
point increase in the average rate paid on interest bearing
liabilities. The Company continues to experience competition
for deposits in terms of both rate and product. Based on
averages, certificates as a percent of average deposits
increased from 41.5% in the first quarter of 2000 to 42.2% in
the first quarter of 2001.
The Company's interest rate spread (defined as the average
taxable equivalent yield on earning assets less the average
rate paid on interest bearing liabilities) decreased from 4.18%
in the first quarter of 2000 to 3.71% in the comparable quarter
for 2001 due to higher rates paid on interest bearing
liabilities. The Company's net interest margin percentage
(defined as taxable-equivalent net interest income divided by
average earning assets) was 5.02% in the first quarter of 2000
versus 4.69% in the first quarter of 2001. The decline in the
margin reflects the higher cost of funds partially offset by
increased yields on earning assets.
12
Provisions for Loan Losses
- --------------------------
The provision for loan losses for the three months ended March
31, 2001, was $822,000 versus $610,000 for the first quarter of
2000. While still at historically low levels, the Company did
experience slight deterioration in credit quality. Net charge-
offs increased over the comparable period in 2000, but declined
relative to the fourth quarter of 2000. Nonperforming loans
increased $849,000, or 28.9%, during the first quarter. The
Company's nonperforming asset ratio increased slightly from
.37% at year-end to .42%. As compared to year-end, the reserve
for loan losses increased to $11.8 million and represented
1.01% of total loans versus 1.00%.
For a discussion of the Company's nonperforming assets, 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 allowance for loan losses as of March 31,
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
March 31,
---------------------------
2001 2000
-------- --------
Net Charge-Offs $811,766 $312,875
Net Charge-Offs (Annualized) as a Percent
of Average Loans Outstanding, Net of
Unearned Interest .30% .13%
Noninterest Income
- ------------------
Noninterest income increased $928,000, or 14.5%, over the first
quarter of 2000, which included increases in service charges on
deposit accounts, mortgage banking revenues and other income
items discussed below.
Service charges on deposit accounts increased $86,000, or 3.7%.
Service charge revenues in any one period are dependent on the
number of accounts, primarily transaction accounts and the
level of activity subject to service charges. The increase in
the first quarter of 2001, compared to the comparable quarter
in 2000, reflects an increase in number of accounts partially
attributable to the Georgia acquisitions.
Data processing revenues decreased $179,000, or 26.3%, over the
first quarter of 2000. The decrease primarily reflects a
reduction in the number of processing clients.
Income from fiduciary activities decreased $22,000, or 3.4%,
over the comparable quarter in 2000. Assets generated through
new production were partially offset by declining stock market
values. At March 31, 2001, assets under management totaled
$327.3 million compared to $323.3 million at March 31, 2000.
Mortgage banking revenues increased $427,000, or 308.8%, over
the comparable quarter in 2000. The increase was due to the
lower interest rate environment, resulting in fixed rate loans
being originated and sold in the secondary market.
Other income increased $618,000, or 23.9%, over the comparable
quarter of 2000. The increase is partially attributable to the
gain on the sale of bank owned properties of $157,000, credit
card merchant fees of $105,000 and merchant and ATM interchange
fees of $134,000.
Noninterest income as a percent of average assets was 1.89% for
the first quarter of 2001 versus 1.66% for the comparable
quarter in 2000.
13
Noninterest Expense
- -------------------
Noninterest expense in the first quarter of 2001 increased $1.5
million, or 10.4%, over the first quarter of 2000, spread
across all expense categories.
Compensation expense increased $878,000, or 11.63%, over the
first quarter 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 $229,000, or 9.2%, over the first quarter
of 2000. The increase was partially due to the addition of
nine offices acquired with the Georgia acquisitions. Office
leases, maintenance/repairs and other FF&E increased $55,000,
$128,000 and $43,000, respectively.
Other noninterest expense increased $380,000, or 8.8%. The
increase is attributable to higher intangible amortization
resulting from acquisitions of $123,000, credit card and ATM
interchange costs of $83,000, legal costs of $102,000 and
advertising of $72,000.
Net noninterest expense (noninterest income minus noninterest
expense, net of intangible amortization) as a percent of
average assets was 1.98% in the first quarter of 2001 compared
to 2.04% in 2000. The Company's efficiency ratio (noninterest
expense, net of intangible amortization, expressed as a percent
of the sum of taxable-equivalent net interest income plus
noninterest income) was 63.43% in the first quarter 2001
compared to 60.16% for the comparable quarter in 2000. The
increase in the efficiency ratio is attributable to higher
operating costs.
Income Taxes
- ------------
The provision for income taxes decreased $49,000, or 2.1%, over
the first quarter of 2000 reflecting lower taxable income. The
Company's effective tax rate for the first quarter of 2001 was
34.7% compared to 33.9% for the same quarter 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 $1.6 billion in the first
quarter of 2001 and $1.4 billion for the comparable period in
2000. Average earning assets were $1.4 billion for the three
months ended March 31, 2001, compared to $1.3 billion for the
first quarter of 2000. 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 17 presents average balances for
the three months ended March 31, 2001 and 2000.
Average loans increased $144.6 million, or 15.4%, 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. Loans as a percent of
average earning assets increased to 76.4% for the first quarter
of 2001, compared to 73.4% for the first quarter of 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
March 31, 2001, the average investment portfolio decreased
$38.9 million, or 12.5%, from the first quarter of 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 March
31, 2001, shareowners' equity included a net unrealized gain of
$936,000 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 quarter.
14
At March 31, 2001, the Company's nonperforming loans were $3.8
million versus $2.9 million at year-end 2000. As a percent of
nonperforming loans, the allowance for loan losses represented
311% at March 31, 2001 versus 360% at December 31, 2000 and
563% at March 31, 2000. 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 $1.1 million at
March 31, 2001 and 2000, versus $971,000 at December 31, 2000.
The ratio of nonperforming assets as a percent of loans plus
other real estate was .42% at March 31, 2001 compared to .37%
at December 31, 2000 and .30% at March 31, 2000.
Average deposits increased 8.6% from $1.2 billion in the first
quarter of 2000, to $1.3 billion in the first quarter of 2001.
The increase in deposits is partially attributable to the
Georgia acquisitions. Excluding acquisitions, existing markets
realized growth primarily in certificates of deposit and
noninterest bearing demand accounts. The Company is continuing
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 21.1% for the first quarter of 2001 compared to
22.3% for the first quarter of 2000. For the same periods, the
ratio of average interest bearing liabilities to average
earning assets was 79.3%.
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 deposit growth, 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 $25.0 million revolving line of credit. As
of March 31, 2001, there was $2.3 million outstanding under
this facility. During the first quarter of 2001, the Company
did not make a principal reduction on the line of credit.
The Company's equity capital was $168.0 million as of March 31,
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 strong capital position. The leverage ratio was
7.25% at March 31, 2001 compared to 8.30% at December 31, 2000.
The lower ratio reflects the recent Georgia acquisitions.
Further, the Company's risk-adjusted capital ratio of 11.58% at
March 31, 2001, 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 agreements place certain restrictions on the payment
of dividends by both the Company and its subsidiary banks. At
March 31, 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 in the normal
course of business.
During the first three months of 2001, shareowners' equity
increased $20.4 million, or 56.0%, on an annualized basis.
Growth in equity during the first quarter was positively
impacted by net income of $4.3 million, issuance of common
stock of $15.2 million and a change in the net unrealized gain
(loss) on available-for-sale securities from a loss of $1.5
million to a gain of $900,000. Equity was reduced by dividends
paid during the first quarter of $1.6 million, or $.1475 per
share.
15
At March 31, 2001, the Company's common stock had a book value
of $15.62 per diluted share compared to $14.56 at December 31,
2000. On March 30, 2000, the Board of Directors authorized
management to repurchase up to 500,000 shares of the Company's
outstanding common stock. The purchases will be made in the
open market or in privately negotiated transactions. To date,
the Company has acquired 210,134 shares.
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 in their earliest stages and the Bank 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.
16
TABLE I
AVERAGES BALANCES & INTEREST RATES
(Taxable Equivalent Basis - Dollars in Thousands)
For Three Months Ended March 31 2001
2000
----------------------------- ---
- --------------------------
Average Average
Average Average
Balance Interest Rate
Balance Interest Rate
--------- -------- ------- ---
- ------ -------- -------
ASSETS
- ------
Loans, Net of Unearned Interest(1)(2) $1,082,960 $24,733 9.26% $
938,351 $21,161 9.07%
Taxable Investment Securities 189,530 2,777 5.94%
213,136 3,121 5.89%
Tax-Exempt Investment Securities(2) 83,701 1,269 6.06%
99,000 1,467 5.93%
Funds Sold 60,777 804 5.30%
27,407 389 5.71%
---------- ------- ---- ---
- ------- ------- ----
Total Earning Assets 1,416,968 29,583 8.45%
1,277,894 26,138 8.22%
Cash & Due From Banks 64,724
65,326
Allowance for Loan Losses (11,080)
(10,085)
Other Assets 100,061
97,485
---------- ---
- -------
TOTAL ASSETS $1,570,673
$1,430,620
==========
===========
LIABILITIES
- -----------
NOW Accounts $ 203,842 $ 1,400 2.79% $
167,862 $ 948 2.27%
Money Market Accounts 169,221 1,706 4.09%
162,129 1,592 3.95%
Savings Accounts 105,895 612 2.34%
103,817 536 2.07%
Other Time Deposits 548,757 8,069 5.96%
497,296 6,099 4.93%
---------- ------- ---- ---
- ------- ------- ----
Total Interest Bearing Deposits 1,027,715 11,787 4.65%
931,104 9,175 3.96%
Short-Term Borrowings 78,981 1,111 5.70%
67,502 784 4.67%
Long-Term Debt 17,013 245 5.83%
14,169 217 6.16%
---------- ------- ---- ---
- ------- ------- ----
Total Int. Bearing Liabilities 1,123,709 13,143 4.74%
1,012,775 10,176 4.04%
Noninterest Bearing Deposits 273,479
267,504
Other Liabilities 18,092
16,505
---------- ---
- -------
TOTAL LIABILITIES 1,415,280
1,296,784
SHAREOWNERS' EQUITY
Common Stock 103
102
Surplus 12,010
9,316
Other Comprehensive Income (566)
(6,935)
Retained Earnings 143,846
131,353
---------- ---
- -------
TOTAL SHAREOWNERS' EQUITY 155,393
133,836
---------- ---
- -------
TOTAL LIABILITIES & EQUITY $1,570,673
$1,430,620
==========
==========
Net Interest Rate Spread 3.71%
4.18%
====
====
Net Interest Income $16,440
$15,962
=======
=======
Net Interest Margin 4.69%
5.02%
====
====
(1) Average balances include nonaccrual loans. Interest income includes fees
on loans of approximately
$0.9 million and $1.0 million, for the three months ended March 31, 2001
and 2000, respectively.
(2) Interest income includes the effects of taxable equivalent adjustments using
a 35% tax rate.
17
Item 3. Qualitative and Quantitative 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
rate risk 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 18. This table presents the
Company's consolidated interest rate sensitivity position as of
March 31, 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.
18
Table II
FINANCIAL ASSETS AND LIABILITIES MARKET RISK ANALYSIS
(Dollars in Thousands)
Other Than Trading Portfolio March 31, 2001
- ---------------------------- ---------------------------------------------------
- --- Fair
Year 1 Year 2 Year 3 Year 4 Year
5 Beyond Total Value
-------- -------- -------- -------- -----
- --- -------- ---------- ----------
Loans
Fixed Rate $ 93,583 $ 62,182 $ 52,255 $ 48,660 $
44,414 $ 98,237 $ 399,331 $ 365,420
Average Interest Rate 9.07% 9.47% 8.97% 9.02%
9.54% 8.05% 9.05%
Floating Rate(2) 426,295 53,096 62,512 50,014
89,007 84,043 764,967 828,763
Average Interest Rate 9.27% 8.54% 8.36% 8.25%
8.10% 7.60% 8.76%
Investment Securities(3)
Fixed Rate 61,410 48,639 30,323 14,302
21,912 76,936 253,522 253,522
Average Interest Rate 5.92% 5.59% 5.36% 5.40%
5.84% 5.71% 5.71%
Floating Rate - - 4,289 7,427
- - 503 12,219 12,219
Average Interest Rate - - 6.35% 6.73%
- - 6.05% 6.57%
Other Earning Assets
Fixed Rates - - - -
- - - - -
Average Interest Rates - - - -
- - - -
Floating Rates 153,910 - - -
- - - 153,910 153,910
Average Interest Rates 5.21% - - -
- - - 5.21%
Total Financial Assets $ 735,198 $163,917 $149,379 $120,403
$155,333 $259,719 $1,583,949 $1,613,834
Average Interest Rates 8.12% 8.02% 7.91% 8.13%
8.19% 7.21% 7.98%
Deposits(4)
Fixed Rate Deposits $ 534,362 $ 70,617 $ 18,249 $ 5,509 $
2,084 $ 180 $ 631,001 $ 638,227
Average Interest Rates 5.60% 5.82% 5.33% 5.52%
5.27% 6.56% 5.62%
Floating Rate Deposits 546,552 - - -
- - - 546,552 546,552
Average Interest Rates 3.36% - - -
- - - 3.36%
Other Interest Bearing
Liabilities
Fixed Rate Debt 1,108 842 857 870
863 7,203 11,743 11,743
Average Interest Rate 6.22% 6.09% 6.08% 6.08%
6.09% 6.04% 6.07%
Floating Rate Debt 50,813 - - -
- - - 50,813 50,813
Average Interest Rate 5.51% - - -
- - - 5.51%
Total Financial Liabilities $1,132,835 $ 71,459 $ 19,106 $ 6,379 $
2,947 $ 7,383 $1,240,109 $1,247,335
Average interest Rate 4.52% 5.82% 5.36% 5.60%
5.51% 6.05% 4.62%
(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 Year 1. Other time deposit balances are
classified according to maturity.
19
PART II. OTHER INFORMATION
ITEMS 1-4.
Not applicable.
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
first quarter 2001.
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: May 14, 2001
20