Capital City Bank Group, Inc.
Reports Third Quarter 2008 Results

TALLAHASSEE, Fla. (October 21, 2008) – Capital City Bank Group, Inc. (NASDAQ: CCBG) today reported net income for the third quarter of 2008 totaling $4.8 million ($0.29 per diluted share) compared to $4.8 million ($0.28 per diluted share) in the second quarter of 2008 and $7.2 million ($0.41 per diluted share) for the third quarter of 2007.  Earnings for the third quarter of 2008 include a loan loss provision of $10.4 million ($.37 per diluted share) versus $5.4 million ($.20 per diluted share) in the second quarter of 2008 and $1.6 million ($.05 per diluted share) in the third quarter of 2007.  Earnings for the third quarter of 2008 also included a $6.25 million pre-tax gain ($0.22 per diluted share (after-tax)) from the sale of a major portion of the bank’s merchant services portfolio.

Earnings for the first nine months of 2008 totaled $16.9 million ($0.99 per diluted share) compared to $22.0 million ($1.22 per diluted share) for the same period in 2007.  Year-to-date 2008 earnings include a loan loss provision of $20.0 million ($0.72 per diluted share) versus $4.5 million ($.15 per diluted share) for the same period in 2007.  In addition to the third quarter gain from the sale of a portion of the bank’s merchant services portfolio, earnings for the first nine months of 2008 included a $2.4 million pre-tax gain from the redemption of Visa, Inc. shares related to its initial public offering and the reversal of $1.1 million (pre-tax) in Visa related litigation reserves.

“Net income did not meet our expectations for the third quarter as we provided a substantially larger provision for loan losses,” said William G. Smith, Jr., Chairman, CEO, and President.

“During the quarter, nonperforming assets increased by $19.9 million to $67.7 million, or 3.51% of total loans and other real estate.  We have committed the necessary resources to manage this portfolio and resolve the underlying credits.  Further, we recognize the urgency of the challenge before us and we are appropriately identifying our problems, determining values, and establishing reserves accordingly, as evidenced by the size of this quarter’s provision.”

“In this time of uncertainty and market turmoil, capital is king.  Fortunately, we have long focused on building a strong capital base to help protect the institution in times such as now.  Including the one-time gain of $.22 per share, net income covered our dividend and enabled us to again add to our already strong capital position, increasing our total risk based capital to over 15%.”

“Looking forward, we believe our overall financial strength will enable us to fully support our ongoing business development efforts as we manage through this challenging environment, and also capitalize on opportunities to expand our franchise both organically and potentially through acquisitions,” said Smith.

The Return on Average Assets was .76% and the Return on Average Equity was 6.34% for the third quarter of 2008.  These metrics were .73% and 6.43% for the second quarter of 2008 and 1.15% and 9.44% for the third quarter of 2007, respectively.

For the first nine months of 2008, the Return on Average Assets was .87% and the Return on Average Equity was 7.53% compared to 1.18% and 9.53%, respectively, for the same period in 2007.

 

Discussion of Financial Condition

Average earning assets were $2.208 billion for the third quarter, a decrease of $96.3 million, or 4.18% from the second quarter of 2008, and an increase of $16.4 million, or .75% from the fourth quarter of 2007.  The decrease from the linked quarter is primarily attributable to a $107.0 million decrease in short-term investments driven by the decline in client deposits (see discussion below), partially offset by a $6.2 million increase in average loans.  Compared to the fourth quarter of 2007, the increase primarily reflects an increase in average short-term investments ($3.2 million), investment securities ($3.2 million), and loans ($6.9 million).  Given our risk management practices, the relatively small loan growth in this current economic environment is not unexpected; however, management is encouraged by the stabilized trend realized in loan balances so far in 2008 which reflects our continued focus on the sales and service efforts of our bankers.

Nonperforming assets of $67.7 million increased from the linked second quarter by $19.9 million and from the fourth quarter of 2007 by $39.5 million.  For the same periods, nonaccrual loans totaling $61.5 million increased $19.8 million and $36.4 million, respectively.  The increase from the second quarter primarily reflects further migration to nonaccrual status of construction and residential real estate loans to builders and investors reflecting the current stress on that segment of our markets and consumers in general.  Restructured loans totaled $1.4 million at the end of the quarter.  Other real estate owned totaled $4.8 million at the end of the third quarter compared to $4.3 million at the end of the second quarter and $3.0 million at year-end 2007.  Other real estate owned properties are reviewed quarterly to assess market conditions and the reasonableness of the fair value for these assets, and adjustments to carrying values are made, as needed.  Nonperforming assets represented 3.51% of loans and other real estate at the end of the third quarter compared to 2.49% and 1.47% at the end of the prior quarter and year-end 2007, respectively.

Average total deposits were $2.031 billion for the third quarter, a decrease of $109.8 million, or 5.1%, from the second quarter and an increase of $13.9 million, or 0.7%, over the fourth quarter of 2007.   On a linked quarter basis, deposits declined primarily reflecting a lower level of public funds, which we believe is partially attributable to seasonality, and a reduction in certificates of deposit balances.  In managing our deposit base, we continue to focus on managing the overall mix of deposits rather than matching the rates of higher rate paying competitors.  Compared to the fourth quarter of 2007, a majority of the increase in deposits has come in the NOW account category which reflected strong growth in public funds deposits attributable to a migration of deposits from the Florida State Board of Administration’s Local Government Investment Pool, which began in the fourth quarter of 2007 and continued through the second quarter.  Partially offsetting the public funds growth were declines in noninterest bearing demand, money market accounts and certificates of deposit which resulted from management’s aforementioned strategy not to compete with higher rate paying competitors.

We had approximately $86.5 million in average net overnight funds sold for the third quarter of 2008 as compared to $195.5 million in the second quarter of 2008 and $84.1 million in the fourth quarter of 2007.  The reduction on a linked quarter basis reflects a decline in deposits, primarily public funds and certificates of deposit as noted above.
 
 
 Discussion of Operating Results

Tax equivalent net interest income for the third quarter of 2008 was $27.8 million compared to $28.1 million for the second quarter of 2008 and $28.5 million for the third quarter of 2007.  For the first nine months of 2008, tax equivalent net interest income totaled $83.0 million compared to $86.5 million for the comparable period in 2007.

The decrease in the net interest income on a linked quarter basis reflects higher foregone interest on nonaccrual loans and a decline in loan fees.  During this same period, the net interest margin expanded by 11 basis points to 5.01%, which is attributable to a lower cost of funds resulting from a favorable shift in the mix of deposits.  Management has responded aggressively to the federal funds rate reductions which began in September 2007, and believe we have successfully neutralized the overall impact.

The decline in net interest income for the three and nine months ended September 30, 2008, as compared to the same periods of 2007 was primarily the result of a higher level of foregone interest associated with the increased level of nonperforming assets, and an unfavorable shift in the mix of earning assets.  These factors, coupled with the influx of higher cost municipal deposits in 2008, led to compression in our net interest margin of 26 and 43 basis points, respectively.

Average negotiated deposits, which include public funds, grew from $290 million in the third quarter of 2007 to $490 million in the current quarter, but were down from $538 million in the second quarter of 2008.  We believe this change is partially attributable to local governments reaching the end of their fiscal year.  Although the growth in public funds has had a positive impact on net interest income, it has had an adverse impact on our margin percentage due to the relatively thin spreads.

The provision for loan losses for the current quarter was $10.4 million compared to $5.4 million in the second quarter of 2008 and $1.6 million for the third quarter of 2007.  The provision for the first nine months of 2008 totaled $20.0 million compared to $4.5 million for the same period in 2007.  The increase in the provision for the third quarter and for the first nine months of the year generally reflects declining economic conditions and the associated impact on consumers, housing, and real estate markets.  Compared to the prior quarter, the increase in the provision primarily reflects a higher level of reserves allocated to our residential real estate, construction, and consumer loan portfolios, all driven by a higher level of nonaccruals and past due loans within those portfolios as well as collateral valuation declines, which have increased the level of reserves held for impaired loans.  For the quarter, net charge-offs totaled $2.4 million, or ..50%, of average loans compared to $3.2 million, or .67%, in the second quarter of 2008 and $1.0 million, or .21%, in the third quarter of 2007.  The decline in net charge-offs for the current quarter primarily reflects a lower level of real estate loan charge-offs, which spiked during the prior quarter due to the write-down of larger problem loans that were working through the foreclosure process, but had permanent collateral shortfalls.  Management continues to perform a detailed review and valuation assessment of impaired loans on a quarterly basis and recognizes losses when permanent impairment is identified.  At quarter-end, the allowance for loan losses was 1.59% of outstanding loans (net of overdrafts) and provided coverage of 49% of nonperforming loans.

 
 
Noninterest income for the third quarter increased $4.5 million, or 28.6%, from the second quarter of 2008.  This change is attributable to a pre-tax gain of $6.25 million from the sale of a major portion of the bank’s merchant services portfolio on July 31, 2008.  The bank retained and will continue to service approximately forty percent of the merchant services portfolio.  This gain was partially offset by a reduction in merchant services fees of $1.5 million attributable to the portion of the merchant services portfolio sold, and lower mortgage banking revenues of $175,000.  Compared to the third quarter of 2007, noninterest income increased $5.8 million, or 40.1% due primarily to the same factors previously mentioned.  An increase in deposit fees of $724,000, or 11.3% also contributed to the improvement.  For the first nine months of 2008, noninterest income grew $10.3 million, or 23.6%, from the comparable period in 2007 due primarily to the aforementioned gain from the merchant services portfolio sale, a gain from the redemption of Visa, Inc. shares during the first quarter of 2008 ($2.4 million) and strong improvement in deposit fees ($2.1 million).

Noninterest expense for the third quarter decreased $840,000, or 2.7%, from the second quarter of 2008 primarily attributable to lower interchange fees ($1.4 million) related to the cost of processing and supporting the bank’s merchant services portfolio, a major portion of which was sold on July 31, 2008.  Higher expense for commission fees related to processing cost for our accounts receivable financing product and the write-down of several other real estate properties during the quarter partially offset the aforementioned decline.  Compared to the third quarter of 2007, the reduction in interchange fees associated with the partial sale of the merchant services portfolio were offset by a higher level of commission fees and other real estate owned write-downs.  For the first nine months of 2008, noninterest expense grew $92,000, or .10% from the comparable period in 2007 due to higher compensation and occupancy expense, and commission fees.  The increase in compensation expense is due to higher associate base salaries reflective of annual merit/market based raises and the opening of three new banking offices during 2007.  The increase in occupancy is due to higher depreciation expense also attributable to the aforementioned new banking offices and the implementation of a new telephone system in early 2008.  The reversal of a portion ($1.1 million) of our Visa litigation accrual and the reduction of interchange fees of approximately $596,000 partially offset the aforementioned increases in compensation, occupancy, and commission fees.  Management continues to work on expense reduction opportunities, improvement in cost controls, and enhancement of operating efficiencies as core strategic objectives.

About Capital City Bank Group, Inc.

Capital City Bank Group, Inc. (NASDAQ: CCBG) is one of the largest publicly traded financial services companies headquartered in Florida and has approximately $2.5 billion in assets. The Company provides a full range of banking services, including traditional deposit and credit services, asset management, trust, mortgage banking, merchant services, bankcards, data processing and securities brokerage services.  The Company's bank subsidiary, Capital City Bank, was founded in 1895 and now has 69 banking offices, one mortgage lending office, and 80 ATMs in Florida, Georgia and Alabama.  Since 2005, the Company has been named as a Dividend Achiever by Mergent, Inc., a leading provider of information on publicly traded companies.  To be named a Dividend Achiever, a public company must have increased its regular cash dividends for at least 10 consecutive years.  For more information about Capital City Bank Group, Inc., visit www.ccbg.com.


FORWARD-LOOKING STATEMENTS

Forward-looking statements in this Press Release are based on current plans and expectations that are subject to uncertainties and risks, which could cause the Company’s future results to differ materially.  The following factors, among others, could cause the Company’s actual results to differ: the frequency and magnitude of foreclosure of the Company’s loans; the effects of the Company’s lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; the accuracy of the Company’s financial statement estimates and assumptions, including the estimate for the Company’s loan loss provision; the Company’s ability to integrate acquisitions; the strength of the U.S. economy and the local economies where the Company conducts operations; harsh weather conditions; fluctuations in inflation, interest rates, or monetary policies; changes in the stock market and other capital and real estate markets; legislative or regulatory changes; customer acceptance of third-party products and services; increased competition and its effect on pricing; technological changes; the effects of security breaches and computer viruses that may affect the Company’s computer systems; changes in consumer spending and savings habits; the Company’s growth and profitability; changes in accounting; and the Company’s ability to manage the risks involved in the foregoing.  Additional factors can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and the Company’s other filings with the SEC, which are available at the SEC’s internet site (http://www.sec.gov).  Forward-looking statements in this Press Release speak only as of the date of the Press Release, and the Company assumes no obligation to update forward-looking statements or the reasons why actual results could differ.

 
 
 

EARNINGS HIGHLIGHTS
                              
   
Three Months Ended
    
Nine Months Ended
  
(Dollars in thousands, except per share data)
  
Sep 30, 2008
    
Jun 30, 2008
    
Sep 30, 2007
    
Sep 30, 2008
    
Sep 30, 2007
  
EARNINGS
                              
Net Income
   $ 4,838     $ 4,810     $ 7,171     $ 16,928     $ 22,019  
Diluted Earnings Per Common Share
   $ 0.29     $ 0.28     $ 0.41     $ 0.99     $ 1.22  
PERFORMANCE
                                        
Return on Average Equity
     6.34 %     6.43 %     9.44 %     7.53 %     9.53 %
Return on Average Assets
     0.76 %     0.73 %     1.15 %     0.87 %     1.18 %
Net Interest Margin
     5.01 %     4.90 %     5.27 %     4.87 %     5.30 %
Noninterest Income as % of Operating Revenue
     42.64 %     36.39 %     34.08 %     39.84 %     33.92 %
Efficiency Ratio
     59.27 %     66.89 %     66.27 %     62.98 %     66.18 %
CAPITAL ADEQUACY
                                        
Tier 1 Capital Ratio
     13.54 %     13.15 %     13.74 %     13.54 %     13.74 %
Total Capital Ratio
     15.15 %     14.35 %     14.76 %     15.15 %     14.76 %
Leverage Ratio
     11.21 %     10.54 %     11.36 %     11.21 %     11.36 %
Equity to Assets
     12.17 %     11.19 %     12.26 %     12.17 %     12.26 %
ASSET QUALITY
                                        
Allowance as % of Non-Performing Loans
     48.55 %     51.80 %     145.49 %     48.55 %     145.49 %
Allowance as a % of Loans
     1.59 %     1.18 %     0.95 %     1.59 %     0.95 %
Net Charge-Offs as % of Average Loans
     0.50 %     0.67 %     0.21 %     0.53 %     0.25 %
Nonperforming Assets as % of Loans and ORE
     3.51 %     2.49 %     0.74 %     3.51 %     0.74 %
STOCK PERFORMANCE
                                        
High
   $ 34.50     $ 30.19     $ 36.40     $ 34.50     $ 36.40  
Low
   $ 19.20     $ 21.76     $ 27.69     $ 19.20     $ 27.69  
Close
   $ 31.35     $ 21.76     $ 31.20     $ 31.35     $ 31.20  
Average Daily Trading Volume
     45,717       36,196       40,247       37,902       35,017  
 
 
 

CAPITAL CITY BANK GROUP, INC.
                                          
CONSOLIDATED STATEMENT OF INCOME
                                      
Unaudited
                                          
                                           
                                 
Nine Months Ended
  
                                 
September 30
  
(Dollars in thousands, except per share data)
  
2008
Third Quarter
    
2008
Second Quarter
    
2008
First Quarter
    
2007
Fourth Quarter
    
2007
Third Quarter
    
2008
    
2007
  
                                           
INTEREST INCOME
                                          
Interest and Fees on Loans
   $ 32,435     $ 33,422     $ 35,255     $ 37,730     $ 38,692     $ 101,112     $ 116,837  
Investment Securities
     1,744       1,810       1,893       1,992       1,968       5,447       5,851  
Funds Sold
     475       1,028       1,575       1,064       639       3,078       1,849  
Total Interest Income
     34,654       36,260       38,723       40,786       41,299       109,637       124,537  
                                                         
INTEREST EXPENSE
                                                        
Deposits
     5,815       7,162       10,481       11,323       11,266       23,458       33,364  
Short-Term Borrowings
     230       296       521       639       734       1,047       2,232  
Subordinated Notes Payable
     936       931       931       936       936       2,798       2,794  
Other Long-Term Borrowings
     488       396       331       343       453       1,215       1,451  
Total Interest Expense
     7,469       8,785       12,264       13,241       13,389       28,518       39,841  
Net Interest Income
     27,185       27,475       26,459       27,545       27,910       81,119       84,696  
Provision for Loan Losses
     10,425       5,432       4,142       1,699       1,552       19,999       4,464  
Net Interest Income after Provision for Loan Losses
     16,760       22,043       22,317       25,846       26,358       61,120       80,232  
                                                         
NONINTEREST INCOME
                                                        
Service Charges on Deposit Accounts
     7,110       7,060       6,765       7,256       6,387       20,935       18,874  
Data Processing Fees
     873       812       813       853       775       2,498       2,280  
Asset Management Fees
     1,025       1,125       1,150       1,100       1,200       3,300       3,600  
Retail Brokerage Fees
     565       735       469       619       625       1,769       1,891  
Gain on Sale of Investment Securities
     27       30       65       7       -       122       7  
Mortgage Banking Revenues
     331       506       494       425       642       1,331       2,171  
Merchant Fees
     616       2,074       2,208       1,743       1,686       4,898       5,514  
Interchange Fees
     1,073       1,076       1,009       962       934       3,158       2,795  
Gain on Sale of Merchant Services Portfolio
     6,250       -       -       -       -       6,250       -  
ATM/Debit Card Fees
     742       758       744       705       685       2,244       1,987  
Other
     1,600       1,542       4,082       2,153       1,497       7,224       4,358  
Total Noninterest Income
     20,212       15,718       17,799       15,823       14,431       53,729       43,477  
                                                         
NONINTEREST EXPENSE
                                                        
Salaries and Associate Benefits
     15,417       15,318       15,604       14,472       15,096       46,339       45,807  
Occupancy, Net
     2,373       2,491       2,362       2,378       2,409       7,226       6,969  
Furniture and Equipment
     2,369       2,583       2,582       2,534       2,513       7,534       7,356  
Intangible Amortization
     1,459       1,459       1,459       1,458       1,459       4,377       4,376  
Other
     8,298       8,905       7,791       10,772       8,442       24,994       25,870  
Total Noninterest Expense
     29,916       30,756       29,798       31,614       29,919       90,470       90,378  
                                                         
OPERATING PROFIT
     7,056       7,005       10,318       10,055       10,870       24,379       33,331  
Provision for Income Taxes
     2,218       2,195       3,038       2,391       3,699       7,451       11,312  
NET INCOME
   $ 4,838     $ 4,810     $ 7,280     $ 7,664     $ 7,171     $ 16,928     $ 22,019  
                                                         
PER SHARE DATA
                                                        
Basic Earnings
   $ 0.29     $ 0.28     $ 0.42     $ 0.44     $ 0.41     $ 0.99     $ 1.22  
Diluted Earnings
   $ 0.29     $ 0.28     $ 0.42     $ 0.44     $ 0.41     $ 0.99     $ 1.22  
Cash Dividends
     0.185       0.185       0.185       0.185       0.175       0.555       0.525  
AVERAGE SHARES
                                                        
Basic
     17,124       17,146       17,170       17,444       17,709       17,147       18,066  
Diluted
     17,128       17,147       17,178       17,445       17,719       17,149       18,077  


 
 
 

CAPITAL CITY BANK GROUP, INC.
                              
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                          
Unaudited
                              
                               
(Dollars in thousands, except per share data)
  
2008
Third Quarter
    
2008
Second Quarter
    
2008
First Quarter
    
2007
Fourth Quarter
    
2007
Third Quarter
  
                               
ASSETS
                              
Cash and Due From Banks
   $ 71,062     $ 108,672     $ 97,525     $ 93,437     $ 91,378  
Funds Sold and Interest Bearing Deposits
     27,419       192,786       241,202       166,260       19,599  
Total Cash and Cash Equivalents
     98,481       301,458       338,727       259,697       110,977  
                                         
Investment Securities, Available-for-Sale
     193,978       185,971       186,944       190,719       184,609  
                                         
Loans, Net of Unearned Interest
                                        
Commercial, Financial, & Agricultural
     189,676       196,075       202,238       208,864       205,628  
Real Estate - Construction
     148,160       150,907       152,060       142,248       145,343  
Real Estate - Commercial
     639,443       622,282       624,826       634,920       631,418  
Real Estate - Residential
     473,962       481,397       482,058       481,150       480,488  
Real Estate - Home Equity
     212,118       205,536       197,093       192,428       183,620  
Consumer
     252,743       244,071       238,663       243,415       246,137  
Other Loans
     7,378       9,436       10,506       7,222       8,739  
Overdrafts
     3,749       7,111       7,014       5,603       2,515  
Total Loans, Net of Unearned Interest
     1,927,229       1,916,815       1,914,458       1,915,850       1,903,888  
Allowance for Loan Losses
     (30,544 )     (22,518 )     (20,277 )     (18,066 )     (18,001 )
Loans, Net
     1,896,685       1,894,297       1,894,181       1,897,784       1,885,887  
                                         
Premises and Equipment, Net
     104,806       102,559       100,145       98,612       95,816  
Intangible Assets
     94,192       95,651       97,109       98,568       100,026  
Other Assets
     66,308       69,479       75,406       70,947       62,611  
Total Other Assets
     265,306       267,689       272,660       268,127       258,453  
                                         
Total Assets
   $ 2,454,450     $ 2,649,415     $ 2,692,512     $ 2,616,327     $ 2,439,926  
                                         
LIABILITIES
                                        
Deposits:
                                        
Noninterest Bearing Deposits
   $ 382,878     $ 416,992     $ 432,904     $ 432,659     $ 419,242  
NOW Accounts
     698,509       814,380       800,128       744,093       530,619  
Money Market Accounts
     368,453       387,011       381,474       386,619       399,578  
Regular Savings Accounts
     116,858       118,307       116,018       111,600       115,955  
Certificates of Deposit
     396,086       426,236       462,081       467,373       472,019  
Total Deposits
     1,962,784       2,162,926       2,192,605       2,142,344       1,937,413  
                                         
Short-Term Borrowings
     47,069       51,783       61,781       53,131       63,817  
Subordinated Notes Payable
     62,887       62,887       62,887       62,887       62,887  
Other Long-Term Borrowings
     53,074       36,857       29,843       26,731       29,725  
Other Liabilities
     29,841       38,382       47,723       38,559       47,031  
                                         
Total Liabilities
     2,155,655       2,352,835       2,394,839       2,323,652       2,140,873  
                                         
SHAREOWNERS' EQUITY
                                        
Common Stock
     171       171       172       172       176  
Additional Paid-In Capital
     36,681       36,382       38,042       38,243       50,789  
Retained Earnings
     267,853       266,171       264,538       260,325       255,876  
Accumulated Other Comprehensive Loss, Net of Tax
     (5,910 )     (6,144 )     (5,079 )     (6,065 )     (7,788 )
                                         
Total Shareowners' Equity
     298,795       296,580       297,673       292,675       299,053  
                                         
Total Liabilities and Shareowners' Equity
   $ 2,454,450     $ 2,649,415     $ 2,692,512     $ 2,616,327     $ 2,439,926  
                                         
OTHER BALANCE SHEET DATA
                                        
Earning Assets
   $ 2,148,626     $ 2,295,572     $ 2,342,604     $ 2,272,829     $ 2,108,096  
Intangible Assets
                                        
Goodwill
     84,811       84,811       84,811       84,811       84,811  
Deposit Base
     8,345       9,756       11,167       12,578       13,988  
Other
     1,036       1,084       1,131       1,179       1,227  
Interest Bearing Liabilities
     1,742,936       1,897,461       1,914,212       1,852,434       1,674,600  
                                         
Book Value Per Diluted Share
   $ 17.45     $ 17.33     $ 17.33     $ 17.03     $ 16.95  
Tangible Book Value Per Diluted Share
     11.94       11.74       11.67       11.30       11.28  
                                         
Actual Basic Shares Outstanding
     17,125       17,111       17,175       17,183       17,628  
Actual Diluted Shares Outstanding
     17,129       17,112       17,183       17,184       17,639  

 
 
 
 
CAPITAL CITY BANK GROUP, INC.
                              
ALLOWANCE FOR LOAN LOSSES
                              
AND NONPERFORMING ASSETS
                              
Unaudited
                              
   
2008
    
2008
    
2008
    
2007
    
2007
  
(Dollars in thousands)
  
Third Quarter
    
Second Quarter
    
First Quarter
    
Fourth Quarter
    
Third Quarter
  
                               
ALLOWANCE FOR LOAN LOSSES
                              
Balance at Beginning of Period
   $ 22,518     $ 20,277     $ 18,066     $ 18,001     $ 17,469  
Provision for Loan Losses
     10,425       5,432       4,142       1,699       1,552  
Net Charge-Offs
     2,399       3,191       1,931       1,634       1,020  
                                         
Balance at End of Period
   $ 30,544     $ 22,518     $ 20,277     $ 18,066     $ 18,001  
As a % of Loans
     1.59 %     1.18 %     1.06 %     0.95 %     0.95 %
As a % of Nonperforming Loans
     48.55 %     51.80 %     54.32 %     71.92 %     145.49 %
As a % of Nonperforming Assets
     45.10 %     47.12 %     49.34 %     64.15 %     128.05 %
                                         
CHARGE-OFFS
                                        
Commercial, Financial and Agricultural
   $ 275     $ 407     $ 636     $ 370     $ 279  
Real Estate - Construction
     77       158       572       58       -  
Real Estate - Commercial
     (35 )     1,115       126       133       245  
Real Estate - Residential
     797       817       176       209       161  
Consumer
     1,797       1,232       1,170       1,302       854  
                                         
Total Charge-Offs
   $ 2,911     $ 3,729     $ 2,680     $ 2,072     $ 1,539  
                                         
RECOVERIES
                                        
Commercial, Financial and Agricultural
   $ 68     $ 55     $ 139     $ 47     $ 44  
Real Estate - Construction
     4       -       -       -       -  
Real Estate - Commercial
     1       13       1       2       2  
Real Estate - Residential
     6       24       3       5       2  
Consumer
     433       446       606       384       471  
                                         
Total Recoveries
   $ 512     $ 538     $ 749     $ 438     $ 519  
                                         
NET CHARGE-OFFS
   $ 2,399     $ 3,191     $ 1,931     $ 1,634     $ 1,020  
Net Charge-Offs as a % of Average Loans(1)
     0.50 %     0.67 %     0.41 %     0.34 %     0.21 %
                                         
RISK ELEMENT ASSETS
                                        
Nonaccruing Loans
   $ 61,509     $ 41,738     $ 35,352     $ 25,120     $ 12,373  
Restructured Loans
     1,403       1,733       1,980       -       -  
Total Nonperforming Loans
     62,912       43,471       37,332       25,120       12,373  
Other Real Estate
     4,813       4,322       3,768       3,043       1,685  
Total Nonperforming Assets
   $ 67,725     $ 47,793     $ 41,100     $ 28,163     $ 14,058  
Past Due Loans 90 Days or More
   $ 50     $ 896     $ 842     $ 416     $ 874  
Nonperforming Loans as a % of Loans
     3.26 %     2.27 %     1.95 %     1.31 %     0.65 %
Nonperforming Assets as a % of
                                        
Loans and Other Real Estate
     3.51 %     2.49 %     2.14 %     1.47 %     0.74 %
Nonperforming Assets as a % of Capital(2)
     20.56 %     14.98 %     12.93 %     9.06 %     4.43 %
                                         
                                         
(1) Annualized
                                        
(2) Capital includes allowance for loan losses.
                                        

 
 
 
 
AVERAGE BALANCE AND INTEREST RATES(1)
                                                                                                                          
Unaudited
                                                                                                                              
                                                                                                                               
                                                                                                                               
   
Third Quarter 2008
    
Second Quarter 2008
    
First Quarter 2008
    
Fourth Quarter 2007
    
Third Quarter 2007
    
September 2008 YTD
    
September 2007 YTD
  
(Dollars in thousands)
  
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
    
Interest
    
Average
Rate
    
Average
Balance
    
Interest
    
Average
Rate
  
                                                                                                                               
ASSETS:
                                                                                                                              
Loans, Net of Unearned Interest
   $ 1,915,008       32,622       6.78 %   $ 1,908,802       33,610       7.08 %   $ 1,909,574       35,452       7.47 %   $ 1,908,069       37,969       7.89 %   $ 1,907,235       38,901       8.09 %   $ 1,911,142       101,684       7.11 %   $ 1,943,874       117,465       8.08 %
                                                                                                                                                                         
Investment Securities
                                                                                                                                                                        
Taxable Investment Securities
     93,723       940       3.99 %     93,814       1,028       4.38 %     94,786       1,108       4.67 %     99,055       1,226       4.93 %     102,618       1,224       4.75 %     94,106       3,076       4.35 %     105,453       3,723       4.70 %
Tax-Exempt Investment Securities
     98,966       1,234       4.99 %     94,371       1,200       5.09 %     90,790       1,207       5.32 %     87,358       1,178       5.39 %     85,446       1,142       5.35 %     94,725       3,641       5.13 %     84,003       3,269       5.19 %
                                                                                                                                                                         
Total Investment Securities
     192,689       2,174       4.50 %     188,185       2,228       4.73 %     185,576       2,315       4.99 %     186,413       2,404       5.15 %     188,064       2,366       5.02 %     188,831       6,717       4.74 %     189,456       6,992       4.92 %
                                                                                                                                                                         
Funds Sold
     99,973       475       1.86 %     206,984       1,028       1.96 %     206,313       1,574       3.02 %     96,748       1,064       4.31 %     49,438       639       5.06 %     170,831       3,077       2.37 %     47,602       1,849       5.12 %
                                                                                                                                                                         
Total Earning Assets
     2,207,670     $ 35,271       6.36 %     2,303,971     $ 36,866       6.43 %     2,301,463     $ 39,341       6.87 %     2,191,230     $ 41,437       7.50 %     2,144,737     $ 41,906       7.75 %     2,270,804     $ 111,478       6.55 %     2,180,932     $ 126,306       7.74 %
                                                                                                                                                                         
Cash and Due From Banks
     77,309                       82,182                       94,247                       85,598                       84,477                       84,552                       87,062                  
Allowance for Loan Losses
     (22,851 )                     (20,558 )                     (18,227 )                     (18,127 )                     (17,664 )                     (20,554 )                     (17,336 )                
Other Assets
     266,510                       269,176                       268,991                       260,981                       256,153                       268,220                       252,359                  
                                                                                                                                                                         
Total Assets
   $ 2,528,638                     $ 2,634,771                     $ 2,646,474                     $ 2,519,682                     $ 2,467,703                     $ 2,603,022                     $ 2,503,017                  
                                                                                                                                                                         
LIABILITIES:
                                                                                                                                                                        
Interest Bearing Deposits
                                                                                                                                                                        
NOW Accounts
   $ 727,754     $ 1,443       0.79 %   $ 788,237     $ 1,935       0.99 %   $ 773,891     $ 3,440       1.79 %   $ 608,347     $ 2,980       1.94 %   $ 525,795     $ 2,531       1.91 %   $ 763,164     $ 6,818       1.19 %   $ 539,777     $ 7,768       1.92 %
Money Market Accounts
     369,544       1,118       1.20 %     376,996       1,210       1.29 %     389,828       2,198       2.27 %     404,406       3,217       3.16 %     403,957       3,565       3.50 %     378,756       4,526       1.60 %     394,762       10,450       3.54 %
Savings Accounts
     117,970       30       0.10 %     117,182       29       0.10 %     113,163       34       0.12 %     113,527       57       0.20 %     117,451       70       0.24 %     116,112       93       0.11 %     121,781       222       0.24 %
Time Deposits
     410,101       3,224       3.13 %     443,006       3,988       3.62 %     467,280       4,809       4.14 %     471,454       5,069       4.27 %     471,868       5,100       4.29 %     440,019       12,021       3.65 %     475,831       14,924       4.19 %
Total Interest Bearing Deposits
     1,625,369       5,815       1.42 %     1,725,421       7,162       1.67 %     1,744,162       10,481       2.42 %     1,597,734       11,323       2.81 %     1,519,071       11,266       2.94 %     1,698,051       23,458       1.85 %     1,532,151       33,364       2.91 %
                                                                                                                                                                         
Short-Term Borrowings
     51,738       230       1.76 %     55,830       296       2.13 %     68,095       521       3.06 %     64,842       639       3.89 %     65,130       734       4.45 %     58,530       1,047       2.38 %     66,921       2,232       4.44 %
Subordinated Notes Payable
     62,887       936       5.83 %     62,887       931       5.86 %     62,887       931       5.96 %     62,887       936       5.91 %     62,887       936       5.91 %     62,887       2,798       5.85 %     62,887       2,794       5.94 %
Other Long-Term Borrowings
     43,237       488       4.48 %     34,612       396       4.60 %     27,644       331       4.82 %     28,215       343       4.83 %     38,269       453       4.70 %     35,194       1,215       4.61 %     41,212       1,451       4.71 %
                                                                                                                                                                         
Total Interest Bearing Liabilities
     1,783,231     $ 7,469       1.67 %     1,878,750     $ 8,785       1.88 %     1,902,788     $ 12,264       2.59 %     1,753,678     $ 13,241       3.00 %     1,685,357     $ 13,389       3.15 %     1,854,662     $ 28,518       2.05 %     1,703,171     $ 39,841       3.13 %
                                                                                                                                                                         
Noninterest Bearing Deposits
     405,314                       415,125                       404,712                       419,002                       435,089                       408,372                       449,436                  
Other Liabilities
     36,498                       40,006                       42,170                       47,660                       45,721                       39,547                       41,341                  
                                                                                                                                                                         
Total Liabilities
     2,225,043                       2,333,881                       2,349,670                       2,220,340                       2,166,167                       2,302,581                       2,193,948                  
                                                                                                                                                                         
SHAREOWNERS' EQUITY:
   $ 303,595                     $ 300,890                     $ 296,804                     $ 299,342                     $ 301,536                     $ 300,441                     $ 309,069                  
                                                                                                                                                                         
Total Liabilities and Shareowners' Equity
   $ 2,528,638                     $ 2,634,771                     $ 2,646,474                     $ 2,519,682                     $ 2,467,703                     $ 2,603,022                     $ 2,503,017                  
                                                                                                                                                                         
Interest Rate Spread
           $ 27,802       4.69 %           $ 28,081       4.55 %           $ 27,077       4.28 %           $ 28,196       4.50 %           $ 28,517       4.60 %           $ 82,960       4.50 %           $ 86,465       4.61 %
                                                                                                                                                                         
Interest Income and Rate Earned(1)
     $ 35,271       6.36 %           $ 36,866       6.43 %           $ 39,341       6.87 %           $ 41,437       7.50 %           $ 41,906       7.75 %           $ 111,478       6.55 %           $ 126,306       7.74 %
Interest Expense and Rate Paid(2)
             7,469       1.35 %             8,785       1.53 %             12,264       2.14 %             13,241       2.40 %             13,389       2.48 %             28,518       1.68 %             39,841       2.44 %
                                                                                                                                                                         
Net Interest Margin
           $ 27,802       5.01 %           $ 28,081       4.90 %           $ 27,077       4.73 %           $ 28,196       5.10 %           $ 28,517       5.27 %           $ 82,960       4.87 %           $ 86,465       5.30 %
                                                                                                                                                                         
                                                                                                                                                                         

(1) Interest and average rates are calculated on a tax-equivalent basis using the 35% Federal tax rate.
(2) Rate calculated based on average earning assets.