SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter:
June 30, 1997 Commission File Number 0-13358
CAPITAL CITY BANK GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2273542
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
217 North Monroe Street, Tallahassee, Florida 32301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(850) 671-0610
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirement for the past 90 days.
Yes __X___ No _____
At July 31, 1997, 5,830,366 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
CAPITAL CITY BANK GROUP, INC.
I N D E X
PART I. FINANCIAL INFORMATION PAGE NUMBER
Consolidated Statements of Condition --
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income --
Three and Six Months Ended June 30, 1997
and 1996 4
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1997
and 1996 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Index to Exhibits 14
Signatures 15
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CONDITION(1)
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
(Dollars In Thousands, Except Per Share Amounts)
June 30, 1997 December 31, 1996
(Unaudited) (Audited)
ASSETS
Cash and Due From Banks $ 61,627 $ 62,863
Funds Sold 6,873 26,043
Investment Securities, Available-for-Sale 184,666 207,189
Loans 712,806 674,675
Unearned Interest (2,021) (2,479)
Allowance for Loan Losses (8,448) (8,179)
Loans, Net 702,337 664,017
Premises and Equipment 32,448 34,006
Accrued Interest Receivable 6,694 6,877
Intangibles 7,893 8,398
Other Assets 11,067 12,006
Total Assets $1,013,605 $1,021,399
LIABILITIES
Deposits:
Noninterest Bearing Deposits $ 187,262 $ 196,486
Interest Bearing Deposits 665,791 670,210
Total Deposits 853,053 866,696
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 30,903 28,697
Other Short-Term Borrowings 6,371 7,260
Long-Term Debt 16,984 18,072
Other Liabilities 10,831 11,174
Total Liabilities 918,142 931,899
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value, 3,000,000
shares authorized, no shares outstanding - -
Common Stock, $.01 par value; 60,000,000
shares authorized; 5,830,363 shares
outstanding at June 30,1997 and 5,778,366
outstanding at December 31, 1996 58 58
Additional Paid In Capital 6,169 4,934
Retained Earnings 89,005 84,426
Net Unrealized Gain on Available-
for-Sale Securities 231 82
Total Shareholders' Equity 95,463 89,500
Total Liabilities and
Shareholders' Equity $1,013,605 $1,021,399
Book Value Per Share $ 16.37 $ 15.49
(1) Prior period share and per share data have been restated to
reflect a 2-for-1 stock split effective April 1, 1997.
The accompanying notes to Consolidated Financial Statements are an
integral part of these statements.
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (1)
FOR THE PERIODS ENDED JUNE 30
(UNAUDITED)
(Dollars in Thousands, Except Per Share Amounts)
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
1997 1996 1997 1996
INTEREST INCOME
Interest and Fees on Loans $15,806 $10,784 $31,204 $21,459
Investment Securities:
U. S. Treasury 1,011 985 2,039 2,029
U. S. Government
Agencies/Corp. 786 993 1,602 2,004
States and Political
Subdivisions 816 878 1,648 1,782
Other Securities 89 71 185 140
Funds Sold 357 430 616 888
Total Interest Income 18,865 14,141 37,294 28,302
INTEREST EXPENSE
Deposits $ 6,586 $ 4,593 $12,948 $ 9,363
Fed. Funds Purchased &
Securities Sold Under
Repurchase Agreements 377 257 750 540
Long-Term Borrowings 298 29 602 59
Other Short-Term Debt 99 9 136 21
Total Interest Expense 7,360 4,888 14,436 9,983
Net Interest Income 11,505 9,253 22,858 18,319
Provision for Loan Losses 446 262 902 523
Net Interest Income After
Provision for Loan Losses 11,059 8,991 21,956 17,796
NONINTEREST INCOME
Service Charges on Deposit
Accounts 2,041 1,630 4,054 3,149
Data Processing 937 845 1,737 1,512
Income from Fiduciary Activities 253 252 528 540
Securities Transactions - 4 (2) 16
Other 1,621 1,095 2,985 2,167
Total Noninterest Income 4,852 3,826 9,302 7,384
NONINTEREST EXPENSE
Salaries and Employee Benefits 5,890 4,746 11,684 9,531
Occupancy, Net 776 609 1,481 1,226
Furniture and Equipment 1,139 972 2,424 1,863
Other 3,173 2,525 6,190 5,010
Total Noninterest Expense 10,978 8,852 21,779 17,630
Income Before Income Tax 4,933 3,965 9,479 7,550
Income Tax Expense 1,657 1,183 3,161 2,201
NET INCOME $ 3,276 $ 2,782 $ 6,318 $ 5,349
Net Income Per Share $ .56 $ .48 $ 1.09 $ .93
Cash Dividends Per Share $ .15 $ .135 $ .30 $ .27
Average Shares Outstanding 5,796,290 5,724,584 5,794,300 5,722,272
(1) Prior period share and per share information have been restated to
reflect a 2-for-1 stock split effective April 1, 1997.
The accompanying notes to Consolidated Financial Statements are an
integral part of these statements.
CAPITAL CITY BANK GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30
(Dollars In Thousands)
1997 1996
(Unaudited) (Unaudited)
NET INCOME $ 6,318 $ 5,349
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses 902 523
Depreciation 1,579 1,245
Net Amortization (Accretion) 340 555
Amortization of Intangible Assets 505 118
Gain on Sale of Real Estate Loans (335) -
Gain on Sale of Bank Property (275) -
Non-Cash Compensation 184 90
Net (Increase) Decrease in Interest
Receivable 183 449
Net (Increase) Decrease in Other Assets 2,036 (1,330)
Net Increase (Decrease) in Other
Liabilities (343) (2,224)
Net Cash From Operating Activities 11,094 4,775
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Payments/Maturities of
Investment Securities, Available-for-Sale 26,053 55,884
Purchase of Investment Securities,
Available-for-Sale (4,205) (23,450)
Net (Increase) Decrease in Loans (39,222) (23,166)
Purchase of Premises & Equipment (976) (1,841)
Sales of Premises & Equipment 955 4
Net Cash from Investing Activities (17,395) 7,431
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Deposits (13,643) 461
Net Increase (Decrease) in Federal
Funds Purchased 2,206 3,414
Net Increase (Decrease) in Other Borrowed
Funds (889) (469)
Repayment of Long-Term Debt (1,088) (55)
Dividends Paid (1,739) (4,085)
Issuance of Common Stock 1,048 186
Net Cash From Financing Activities (14,105) (548)
Net Increase (Decrease) in Cash and
Cash Equivalents (20,406) 11,658
Cash and Cash Equivalents at Beginning of
Period 88,906 103,063
Cash and Cash Equivalents at End of Period $ 68,500 $114,721
Supplemental Disclosure:
Interest Paid $ 13,102 $ 11,366
Taxes Paid $ 3,696 $ 1,988
The accompanying notes to Consolidated Financial Statements are an
integral part of these statements.
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 the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles 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, including the restatement of share and per share
data to reflect a 2-for-1 stock split effective April 1, 1997.
In the opinion of management, the consolidated financial statements
contain all adjustments, which are those of a recurring nature, and
disclosures necessary to present fairly the financial position of the
Company as of June 30, 1997 and December 31, 1996, and the results of
operations for the three and six month periods ended June 30, 1997 and
1996, and cash flows for the six month periods ended June 30, 1997 and
1996.
The Company and its subsidiaries follow generally accepted accounting
principles 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 Financial
Statements which are included in the Company's 1996 Annual Report and
Form 10-K.
(2) INVESTMENT SECURITIES
The carrying value and related market value of investment securities
at June 30, 1997 and December 31, 1996 were as follows (dollars in
thousands):
June 30, 1997
Amortized Unrealized Unrealized Market
Available-For-Sale Cost Gains Losses Value
U. S. Treasury $ 33,424 $ 39 $ 48 $ 33,415
U. S. Government Agencies
and Corporations 49,322 47 226 49,143
States and Political
Subdivisions 69,767 449 117 70,099
Mortgage Backed Securities 26,667 283 64 26,886
Other Securities 5,123 - - 5,123
Total $184,303 $818 $455 $184,666
December 31, 1996
Amortized Unrealized Unrealized Market
Available-For-Sale Cost Gains Losses Value
U. S. Treasury $ 40,766 $ 75 $ 9 $ 40,832
U. S. Government Agencies
and Corporations 57,381 32 376 57,037
States and Political
Subdivisions 74,196 620 117 74,699
Mortgage Backed Securities 29,266 160 257 29,169
Other Securities 5,448 4 - 5,452
Total $207,057 $891 $759 $207,189
(3) LOANS
The composition of the Company's loan portfolio at June 30, 1997 and
December 31, 1996 was as follows (dollars in thousands):
June 30, 1997 December 31, 1996
Commercial, Financial
and Agricultural $ 74,781 $ 57,023
Real Estate-Construction 31,267 30,594
Real Estate-Mortgage 467,432 449,905
Consumer 139,326 137,153
Gross Loans $712,806 $674,675
(4) ALLOWANCE FOR LOAN LOSSES
An analysis of the changes in the allowance for loan losses for the
six month period ended June 30, 1997 and 1996, is as follows (dollars
in thousands):
June 30, 1997 June 30, 1996
Balance, Beginning of the Period $ 8,179 $ 6,474
Provision for Loan Losses 902 523
Recoveries on Loans Previously
Charged-Off 370 306
Loans Charged-Off (1,003) (894)
Balance, End of Period $ 8,448 $ 6,409
Impaired loans are primarily defined as all nonaccruing loans for the
loan categories which are included within the scope of SFAS 114.
Nonaccruing loans at June 30, 1997 were $1.9 million compared to $3.0
million at December 31, 1996.
The Company recognizes income on nonaccrual loans primarily on the
cash basis. Any change in the present value of expected cash flows on
impaired loans is recognized through the allowance for loan losses.
(5) DEPOSITS
The composition of the Company's interest bearing deposits at June 30,
1997 and December 31, 1996 was as follows (dollars in thousands):
June 30, 1997 December 31, 1996
NOW Accounts $111,259 $114,507
Money Market Accounts 79,361 79,352
Savings Deposits 85,352 91,986
Other Time Deposits 389,819 384,365
Total Interest Bearing Deposits $665,791 $670,210
(6) ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1997, Capital City Bank Group adopted SFAS No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This Statement establishes new rules
for determining whether a transfer of financial assets constitutes a
sale and, if so, the determination of any resulting gain or loss.
This Statement requires that an enterprise recognize only assets it
controls and liabilities it has incurred, to remove assets only when
control has been surrendered, and to remove liabilities only when they
have been extinguished. The adoption of the statement did not have a
material impact on the Company's financial condition or results of
operations.
In February 1997, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards (SFAS) No. 128, "Earnings
Per Share" which, when adopted, will replace the current methodology
for calculating and presenting earnings per share. Under SFAS No.
128, primary earnings per share will be replaced with a presentation
of basic earnings per share and fully diluted earnings per share will
be replaced with diluted earnings per share. Basic earnings per share
excludes dilution and is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is computed
similarly to fully diluted earnings per share. The Statement will be
effective for the Company's December 31, 1997 financial statements and
is not anticipated to have a material impact on the Company's
financial condition or results of operations.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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. All prior period share and per share data have been
adjusted to reflect a 2-for-1 stock split effective April 1, 1997.
The year-to-date averages used in this report are based on daily
balances for each respective period.
On July 1, 1996, the Company completed its acquisition of First
Financial Bancorp, Inc. and its wholly-owned subsidiary, First Federal
Bank (collectively referred to as "First Financial"). The acquisition
was accounted for as a purchase. Financial comparisons to prior year
periods are not necessarily comparable due to the impact of the
acquisition.
RESULTS OF OPERATIONS
Net Income
Net income was $3.3 million, or $.56 per share for the second quarter
of 1997, a per share increase of 16.7% over the $2.8 million, or $.48
per share for the comparable period in 1996. Net income was $6.3
million, or $1.09 per share for the six months ended June 30, 1997, a
per share increase of 17.2% over the $5.3 million, or $.93 per share
for comparable period in 1996. Operating revenue, which includes net
interest income and noninterest income, increased $6.5 million, or
25.1%, over the first half of 1996, and was the most significant
factor contributing to the increase in earnings.
For The Three For The Six
Months Ended Months Ended
June 30, June 30,
1997 1996 1997 1996
Interest and Dividend Income $18,865 $14,141 $37,294 $28,302
Taxable Equivalent Adjustment(1) 424 429 851 870
19,289 14,570 38,145 29,172
Interest Expense 7,360 4,888 14,436 9,983
Net Interest Income (FTE) 11,929 9,682 23,709 19,189
Provision for Loan Losses 446 262 902 523
Taxable Equivalent Adjustment 424 429 851 870
Net Int. Inc. After Provision 11,059 8,991 21,956 17,796
Noninterest Income 4,852 3,826 9,302 7,384
Noninterest Expense 10,978 8,852 21,779 17,630
Income Before Income Taxes 4,933 3,965 9,479 7,550
Income Taxes 1,657 1,183 3,161 2,201
Net Income $ 3,276 $ 2,782 $ 6,318 $ 5,349
Percent Change over comparable
prior year period 17.76% 28.74% 18.12% 22.99%
Return on Average Assets (2) 1.31% 1.42% 1.27% 1.36%
Return on Average Equity (2) 14.22% 13.33% 13.92% 13.05%
(1) Computed using a statutory tax rate of 35%
(2) Annualized
Net Interest Income
Second quarter taxable equivalent net interest income increased $2.2
million, or 23.2%, over the comparable quarter in 1996. Taxable
equivalent net interest income for the first half of 1997 increased
$4.5 million, or 23.6%, over the first half of 1996. The increase in
both periods is attributable to a higher level of earning assets and
growth in the loan portfolio. The acquisition of First Financial
contributed significantly to the Company's loan growth and higher net
interest income. Table I on page 13 provides a comparative analysis
of the Company's average balances and interest rates.
For the three and six month periods ended June 30, 1997, taxable-
equivalent interest income increased $4.7 million, or 32.4%, and $9.0
million, or 30.8%, respectively, over the comparable prior year
periods. Interest income for both periods has increased due to growth
in loan portfolio. Loans during the first half of 1997 averaged
$683.0 million, representing an increase of $224.4 million, or 48.9%,
over the comparable period in 1996, and loans as a percent of average
earning assets increased to 75.9% from 65.1%. This favorable shift in
the mix of earning assets led to a 23 basis point increase in the
yield on earning assets which rose from 8.32% during the first six
months of 1996 to 8.55% for the comparable period in 1997.
Interest expense for the three and six month periods ended June 30,
1997, increased $2.5 million, or 50.6%, and $4.5 million, or 44.6%,
respectively, over the comparable prior year periods. The increase in
both periods is due to higher levels of interest bearing deposits and
a shift in deposit mix. Average deposits through the first half of
1997 increased $167.8 million, or 24.9%, compared to the first half of
1996, reflecting the acquisition of First Financial. Certificates of
deposit, which generally represent a higher cost of funds than other
deposit offerings, increased as a percent of average deposits from
37.8% in the first half of 1996 to 45.7% in 1997. This shift in
deposit mix is attributable to the mix of deposits acquired from First
Financial, and led to a 33 basis point increase in the average rate
paid on interest bearing liabilities, which rose from 3.75% in the
first half of 1996 to 4.08% in 1997.
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 4.57% in the first half
of 1996 to 4.46% in the comparable 1997 period, reflecting the higher
cost of funds. The Company's net interest margin percentage (defined
as taxable-equivalent net interest income divided by average earning
assets) decreased from 5.47% in the first half of 1996 to 5.31% in the
first half of 1997, reflecting both an increase in the cost of funds
and a higher level of earning assets funded with interest bearing
liabilities.
Provision for Loan Losses
The provision for loan losses was $446,000 and $902,000, respectively,
for the three and six month periods ended June 30, 1997, compared to
$262,000 and $523,000 for the comparable periods in 1996. The
increase in the provision reflects the increase in the size of the
loan portfolio. Net charge-offs, while up slightly from 1996, remain
at historically low levels relative to the size of the loan portfolio.
Nonperforming loans declined $1.1 million, or 36.6%, during the first
six months of 1997. As compared to year-end, the reserve for loan
losses increased slightly to $8.4 million, and represented 1.19% of
total loans versus 1.22% as of December 31, 1996. For a discussion of
the Company's nonperforming loans, see the section entitled "Financial
Condition."
Based on current economic conditions, the low level of nonperforming
loans and net charge-offs, it is management's opinion that the reserve
for loan losses as of June 30, 1997, is sufficient to provide for
losses inherent in the portfolio as of that date.
Charge-off activity for the respective periods is set forth below.
Three Months Ended Six Months Ended
6/30/97 6/30/96 6/30/97 6/30/96
Net Charge-Offs $270,000 $283,000 $633,000 $588,000
Net Charge-Offs (Annualized)
as a percent of Average
Loans Outstanding, Net of
Unearned Interest .16% .24% .19% .26%
Noninterest Income
Noninterest income increased $1.0 million, or 26.8%, in the second
quarter of 1997 versus the comparable quarter for 1996, and $1.9
million, or 26.0%, for the six months ended June 30, 1997 versus the
comparable period for 1996. Although the acquisition of First
Financial positively impacted noninterest income, the increase is
principally attributable to the implementation of recommendations
resulting from a profit enhancement program conducted in the latter
half of 1995 and repricing of the Bank's service fees. Additionally,
the sale of a piece of bank property during the second quarter of 1997
resulted in a $275,000 pre-tax gain.
Service charges on deposit accounts increased $411,000, or 25.2%, and
$905,000, or 28.7%, respectively, over the comparable three and six
month periods for 1996. The increase in both periods reflects an
increase in the bank service fees which went into effect on July 1,
1996.
Data processing revenues increased $92,000, or 10.9%, and $225,000, or
14.9%, respectively, over the comparable three and six month periods
in 1996. The increase primarily reflects higher revenues associated
with processing for government agencies and third party banks.
Other income increased $526,000, or 48.0%, and $818,000 or 37.8%,
respectively, for the three and six month periods ended June 30, 1997
over the comparable prior year periods. The increase is primarily
attributable to gains on the sale of real estate loans during the
first six months of 1997 totaling $335,000 and a $275,000 gain on the
sale of bank property, which was recognized in the second quarter. In
addition, the repricing of service fees in July 1997, and new fee-
based products have contributed to the growth in other noninterest
income
Noninterest income as a percent of average assets was 1.88% for both
the first half of 1997 and 1996.
Noninterest Expense
Noninterest expense increased $2.1 million, or 24.0%, and $4.1
million, or 23.5%, respectively, over the comparable three and six
month periods in 1996. The comparison to the first half of 1996 is
substantially impacted by the acquisition of First Financial. In a
linked quarter comparison, noninterest expense is up $177,000, or
1.6%, over the first quarter of 1997.
Compensation expense increased $1.1 million, or 24.1%, and $2.2
million, or 22.6%, respectively, over the comparable three and six
month periods of 1996, reflecting annual raises and an increase in
full-time equivalent employees of 55 attributable to the First
Financial acquisition.
Occupancy expense, including premises, furniture, fixtures and
equipment increased $334,000, or 21.1%, and $816,000, or 26.4%,
respectively, over the comparable three and six month periods in 1996.
The increase is primarily attributable to the addition of five new
offices through the First Financial acquisition.
Other noninterest expense increased $648,000, or 25.7%, and $1.2
million, or 23.6%, respectively, over the comparable three and six
month periods in 1996. A significant portion of the increase reflects
operating expenses associated with the five new offices.
Additionally, advertising expense increased $261,000, or 93.6%, and
amortization of intangible assets increased $320,000, or 272%.
Annualized net noninterest expense (noninterest income minus
noninterest expense) as a percent of average assets was 2.52% in the
first half of 1997 versus 2.61% for the first half of 1996. The
decrease in this percentage is attributable to the Company's growth
and higher levels of noninterest income.
Income Taxes
The provision for income taxes increased $474,000, or 40.1%, during
the second quarter and $960,000, or 43.6%, during the first six months
of 1997, relative to the comparable prior year periods. The increase
in the provision over the prior year is attributable to higher taxable
income. The Company's effective tax rate for the first half of 1997
was 33.4% versus 29.2% for the comparable period in 1996. The
increase in the effective tax rate is attributable to a decrease in
tax exempt income as a percent of taxable income in the first half of
1997 as compared to the first half of 1996.
FINANCIAL CONDITION
Average balances for the first half of 1997 reflect the acquisition of
First Financial which was consummated on July 1, 1996. Table I on
Page 13 presents average balances for the three and six month periods
ended June 30, 1997 and 1996.
The Company's average assets increased to $999.9 million in the first
half of 1997 from $790.9 million in the first half of 1996. Average
earning assets were $899.6 million for the six months ended June 30,
1997 versus $704.7 million for the comparable period in 1996. The
most significant shift in the mix of earning assets occurred through
growth in the loan portfolio. Average loans were up $224.4 million,
or 48.9%, over the comparable six month period in 1996. The increase
in loans reflects the First Financial acquisition and a reduction in
the investment portfolio.
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. 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 shareholders' equity. At June 30, 1997,
shareholders' equity included a net unrealized gain of $231,000
compared to a net gain of $82,000 at December 31, 1996. The increase
in value reflects a slight decline in interest rates which occurred
during the second quarter.
At June 30, 1997, the Company's nonperforming loans were $1.9 million
versus $3.0 million at year-end 1996. As a percent of nonperforming
loans, the allowance for loan losses represented 442% at June 30, 1997
versus 276% at year-end 1996. 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 $2.0 million at June 30, 1997 versus $1.5 million at
December 31, 1996. The ratio of nonperforming assets to loans plus
other real estate was .54% at June 30, 1997 compared to .66% at
December 31, 1996.
Average deposits increased to $841.3 million for the first half of
1997, from $673.5 million for the first half of 1996. The growth in
deposits is attributable to the acquisition of First Financial. At
the time of acquisition, certificates of deposit constituted 75% of
the acquired deposits. As a result, the Company experienced a
significant shift in its deposit mix. During the first half,
certificates of deposit represented 45.7% of total deposits compared
to 37.7% for the comparable prior year period. This shift in mix has
contributed to a compression in the Company's net interest margin
which averaged 5.31% in the first half of 1997 versus 5.47% in 1996.
The ratio of average noninterest bearing deposits to total deposits
was 21.7% for the first half of 1997 compared to 24.4% for the first
half of 1996. For the same periods, the ratio of average interest
bearing liabilities to average earning assets was 79.3% and 75.9%,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity, for a financial institution, is the availability of funds
to meet increased loan demand and/or excessive deposit withdrawals.
Management has implemented a financial structure that provides ready
access to sufficient liquid funds to meet normal transaction
requirements, take advantage of investment opportunities and cover
unforeseen liquidity demands. In addition to core deposit growth,
sources of funds available to meet liquidity demands for the
subsidiary banks include federal funds sold, near-term loan and
investment maturities, including the "Available-for-Sale" investment
portfolio, and the ability to purchase federal funds through
established lines of credit with correspondent banks. Additionally,
the parent company maintains a $25 million revolving line of credit.
On July 1, the Company borrowed $15.0 million to fund the acquisition
of First Financial. During the first half of 1997, principal
reductions on the line of credit totaled $1.0 million. As of June 30,
1997, there was $14.0 million outstanding under this facility.
The Company's equity capital was $95.5 million as of June 30, 1997,
compared to $89.5 million as of December 31, 1996. The Company's
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 8.41% at June 30, 1997 versus 7.87%
at December 31, 1996. Further, the Company's risk-adjusted capital
ratio of 13.67% significantly exceeds the 8.0% minimum requirement
under the risk-based regulatory guidelines.
State and federal regulations as well as the Company's long-term debt
agreement place certain restrictions on the payment of dividends by
both the Company and its Group banks. At June 30, 1997, these
regulations and covenants did not impair the Company's (or its Group
banks') ability to declare and pay dividends or to meet other existing
obligations.
During the first six months of 1997, shareholders' equity increased
$6.0 million, or 13.5%, on an annualized basis. The net increase in
shareholders' equity reflects net income of $6.3 million, dividends of
$1.7 million, stock issuances of $1.3 million and an increase in the
Company's net unrealized gain on available-for-sale securities of
$149,000. Stock issuances totaling $1.3 million reflect 4,601 shares
issued under the Company's recently adopted Dividend Reinvestment and
Optional Stock Purchase Plan and 47,396 shares issued under other
various employee stock purchase and incentive plans.
The Company's common stock had a book value of $16.37 per share at
June 30, 1997 compared to $15.49 at December 31, 1996. Pursuant to
the Company's stock repurchase program adopted in 1989, the Company
has repurchased 527,160 shares (split adjusted) of its common stock.
In the first half of 1997, there were no shares repurchased.
IMPACT OF NEW ACCOUNTING STANDARDS
Effective January 1, 1997, Capital City Bank Group adopted SFAS No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This Statement establishes new rules
for determining whether a transfer of financial assets constitutes a
sale and, if so, the determination of any resulting gain or loss.
This Statement requires that an enterprise recognize only assets it
controls and liabilities it has incurred, to remove assets only when
control has been surrendered, and to remove liabilities only when they
have been extinguished.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings Per Share" which, when adopted, will replace the
current methodology for calculating and presenting earnings per share.
The Statement will be effective for the Company's December 31, 1997
financial statements.
TABLE I
AVERAGE BALANCES & INTEREST RATES
(Taxable Equivalent Basis - Dollars in Thousands)
FOR THREE MONTHS ENDED JUNE 30
1997 1996
Balance Interest Rate Balance Interest Rate
ASSETS
Loans, Net of Unearned
Interest $687,280 $15,842 9.24% $464,713 $10,812 9.36%
Taxable Investment
Securities 119,414 1,886 6.34% 132,218 2,049 6.23%
Tax-Exempt Investment
Securities 70,168 1,204 6.87% 74,361 1,279 6.88%
Funds Sold 26,108 357 5.47% 32,524 430 5.32%
Total Earning Assets 902,970 19,289 8.57% 703,816 14,570 8.32%
Cash & Due From Banks 44,635 50,713
Allowance for Loan Losses (8,362) (6,484)
Other Assets 60,645 42,622
TOTAL ASSETS $999,888 $790,667
LIABILITIES
NOW Accounts $100,006 $ 418 1.68% $ 95,918 $ 353 1.47%
Money Market Accounts 80,732 620 3.08% 84,319 664 3.17%
Savings Accounts 86,976 436 2.01% 78,305 399 2.05%
Other Time Deposits 389,801 5,112 5.26% 250,995 3,177 5.09%
Total Int. Bearing
Deposits 657,515 6,586 4.02% 509,537 4,593 3.62%
Funds Purchased 27,976 377 5.40% 21,536 257 4.80%
Other Borrowed Funds 6,490 99 6.17% 1,279 9 3.15%
Long-Term Debt 17,475 298 6.83% 1,941 29 6.04%
Total Interest Bearing
Liabilities 709,456 7,360 4.16% 534,293 4,888 3.68%
Noninterest Bearing Deposits 185,332 164,218
Other Liabilities 12,725 8,217
TOTAL LIABILITIES 907,513 706,728
SHAREHOLDERS' EQUITY
Common Stock 58 58
Surplus 5,464 4,134
Retained Earnings 86,853 79,747
TOTAL SHAREHOLDERS'
EQUITY 92,375 83,939
TOTAL LIABILITIES &
EQUITY $999,888 $790,667
Interest Rate Spread 4.41% 4.64%
Net interest Income $11,929 $ 9,682
Net Interest Margin 5.30% 5.53%
AVERAGE BALANCES & INTEREST RATES
(Taxable Equivalent Basis - Dollars in Thousands)
FOR SIX MONTHS ENDED JUNE 30
1997 1996
Balance Interest Rate Balance Interest Rate
ASSETS
Loans, Net of Unearned
Interest $683,035 $31,279 9.23% $458,645 $21,521 9.44%
Taxable Investment
Securities 122,020 3,826 6.32% 137,283 4,173 6.11%
Tax-Exempt Investment
Securities 71,203 2,424 6.81% 75,185 2,589 6.89%
Funds Sold 23,316 616 5.31% 33,592 889 5.32%
Total Earning Assets 899,574 38,145 8.55% 704,705 29,172 8.32%
Cash & Due From Banks 47,392 49,985
Allowance for Loan Losses (8,318) (6,495)
Other Assets 61,210 42,744
TOTAL ASSETS $999,858 $790,939
LIABILITIES
NOW Accounts $105,011 $ 923 1.77% $ 97,666 $ 783 1.61%
Money Market Accounts 80,310 1,199 3.01% 78,268 1,188 3.05%
Savings Accounts 89,075 887 2.01% 78,762 808 2.06%
Other Time Deposits 384,722 9,939 5.21% 254,240 6,584 5.21%
Total Int. Bearing
Deposits 659,118 12,948 3.96% 508,936 9,363 3.70%
Funds Purchased 29,866 750 5.06% 22,772 540 4.77%
Other Borrowed Funds 6,386 136 4.30% 1,294 21 3.41%
Long-Term Debt 17,753 602 6.83% 1,955 59 6.07%
Total Interest Bearing
Liabilities 713,123 14,436 4.08% 534,957 9,983 3.75%
Noninterest Bearing Deposits 182,208 164,556
Other Liabilities 13,029 8,962
TOTAL LIABILITIES 908,360 708,475
SHAREHOLDERS' EQUITY
Common Stock 58 58
Surplus 5,382 4,051
Retained Earnings 86,058 78,355
TOTAL SHAREHOLDERS'
EQUITY 91,498 82,464
TOTAL LIABILITIES &
EQUITY $999,858 $790,939
Interest Rate Spread 4.46% 4.57%
Net interest Income $23,709 $19,189
Net Interest Margin 5.31% 5.47%
(1) Average balances include nonaccrual loans. Interest income
includes fees on loans of approximately $480,000 and $956,000, for the
three and six months ended June 30, 1997, versus $238,000 and
$697,000, for the comparable periods ended June 30, 1996.
(2) Interest income includes the effects of taxable equivalent
adjustments using a 35% tax rate.
PART II. OTHER INFORMATION
Items 1-3.
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Capital City Bank Group, Inc.
was held on April 24, 1997. Proxies for the meeting were solicited
pursuant to Regulation 14A under the Securities Exchange Act of 1934,
and there was no solicitation in opposition to management's
solicitations. The following summarizes all matters voted upon at
this meeting.
1. The following directors were elected for terms expiring as noted.
These individuals served as the Board of Directors prior to the Annual
Meeting. The number of votes cast were as follows:
For terms to expire at Against/ Abstentions/
the 1998 annual meeting: For Withheld Broker Non-Votes
Cader B. Cox, III 1,234,450 2,107 0
William G. Smith, Jr. 1,234,450 2,107 0
For terms to expire at Against/ Abstentions/
the 1999 annual meeting: For Withheld Broker Non-Votes
Godfrey Smith 1,236,450 107 0
Thomas A. Barron 1,236,450 107 0
For terms to expire at Against/ Abstentions/
the 2000 annual meeting: For Withheld Broker Non-Votes
John K. Humphress 1,236,450 107 0
Payne H. Midyette, Jr. 1,236,450 107 0
DuBose Ausley 1,236,450 107 0
2. The shareholders ratified the selection of Arthur Andersen LLP as
the independent auditors for the Company for 1997. The number of
votes cast were as follows:
Against/ Abstentions/
For Withheld Broker Non-Votes
1,236,238 0 319
Item 5. Other Information
Not Applicable
Item 6