32
Form 10-K
Securities and Exchange Commission
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act
of 1934
For the Fiscal Year Ended December 31, 1997
Commission File Number 0-13358
CAPITAL CITY BANK GROUP, INC.
Incorporated in the State of Florida in 1982
I.R.S. Employer Identification Number 59-2273542
Address: 217 North Monroe Street, Tallahassee, FL 32301
Telephone: (850) 671-0610
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock - $.01 par value
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 for shorter
period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.( X)
As of March 2, 1998, there were issued and outstanding 5,886,678 shares of
the registrant's common stock. The registrant's voting stock is listed on
the National Association of Securities Dealers Automated Quotation ("Nasdaq")
National Market under the symbol "CCBG." The aggregate market value of the
voting stock held by nonaffiliates of the registrant, based on the average
of the bid and asked prices of the registrant's common stock as quoted on
Nasdaq on March 2, 1998, was $102,171,274.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement (pursuant to
Regulation 14A), to be filed not more than 120 days after the end of
the fiscal year covered by this report, are incorporated by reference
into Part III.
CAPITAL CITY BANK GROUP, INC.
ANNUAL REPORT FOR 1997 ON FORM 10-K
TABLE OF CONTENTS
PART I PAGE
Item 1. Business 3
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters To a Vote of Security Holders 12
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 12
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 35
Item 8. Financial Statements and Supplementary Data 37
Item 9. Changes in and Disagreement with Accountants on Accounting
and Financial Disclosure 61
PART III
Item 10. Directors and Executive Officers of the Registrant 61
Item 11. Executive Compensation 61
Item 12. Security Ownership of Certain Beneficial Owners and
Management 61
Item 13. Certain Relationships and Related Transactions 61
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 62
PART I
Item I. Business
General
Capital City Bank Group, Inc. ("CCBG" or "Company"), is a bank holding
company registered under the Bank Holding Company Act of 1956, as
amended. At December 31, 1997, the Company had consolidated total
assets of $1.0 billion and share owners' equity of $100.5 million.
Its principal asset is the capital stock of Capital City Bank (the
"Bank" or "CCB"). The Bank accounted for approximately 99.9% of the
consolidated assets at December 31, 1997 and approximately 100% of
consolidated net income of the Company for the year ended December 31,
1997. In addition to its banking subsidiary, the Company has four
other indirect subsidiaries, Capital City Trust Company, Capital City
Securities, Inc., Capital City Mortgage Company (inactive) and Capital
City Services Company, all of which are wholly-owned subsidiaries of
Capital City Bank.
On January 1, 1995, the Company merged seven of its ten separately
chartered banks into a state-chartered bank headquartered in
Tallahassee, Florida. The reorganization consisted of merging Capital
City First National Bank, Capital City Second National Bank,
Industrial National Bank, City National Bank, First National Bank of
Jefferson County and Gadsden National Bank into Havana State Bank and
changing the name and headquarters from Havana State Bank, Havana,
Florida to Capital City Bank, Tallahassee, Florida.
On July 1, 1996, the Company completed its acquisition of First
Financial Bancorp, Inc. ("First Financial"), parent company of First
Federal Bank, a federal savings bank headquartered in Tallahassee,
Florida. First Financial was acquired for $20 million in cash. The
Company borrowed $15 million to fund the acquisition. Subsequent to
the acquisition of First Financial, First Federal Bank was merged into
Capital City Bank on December 6, 1996. As of June 30, 1996, First
Financial had approximately $244 million in assets, $192 million in
loans, $205 million in deposits, $15 million in equity and operated
five branch locations in North Florida.
On October 18, 1997, the Company consolidated its three remaining bank
affiliates, Levy County State Bank, Farmers & Merchants Bank of
Trenton and Branford State Bank into Capital City Bank. The
consolidation enabled the Company to present a consistent image to a
broader market and to better serve its clients through the use of a
common name with multiple, convenient locations.
On October 29, 1997 the Company entered into a definitive purchase and
assumption agreement with First Federal Savings & Loan Association of
Lakeland, Florida ("First Federal") to acquire five of First Federal's
branch facilities. The Company agreed to pay a deposit premium of $3.3
million, or 6.33%, to assume approximately $55 million in deposits and
purchase loans equal to 80% of deposits at closing. The transaction
was consummated effective January 31, 1998.
The Company and Capital City Bank are headquartered in Tallahassee,
Florida, the state capital. State government and two major state
universities employ a large percentage of the local work force and
help to provide a strong and stable economy for Tallahassee and the
surrounding area.
Dividends and management fees received from the Bank are the Company's
only source of income. Dividend payments by the Bank to CCBG depend
on the capitalization, earnings and projected growth of the Bank, and
are limited by various regulatory restrictions. See the section
entitled "Regulation and Supervision" and Note 4 in the Notes to
Consolidated Financial Statements for additional information.
The Company had a total of 593 (full-time equivalent) employees at
March 2, 1998. Page 16 contains other financial and statistical
information about the Company.
Banking Services
Capital City Bank is a state chartered, full service bank, engaged in
the commercial and retail banking business, including accepting
demand, savings and time deposits, extending credit, originating
residential mortgage loans, providing data processing services, trust
services, retail brokerage services and a broad range of other
financial services to corporate and individual customers, governmental
entities and correspondent banks.
The Bank is a member of the "Honor" system which enables customers to
utilize their "QuickBucks" or "Quickcheck" cards to access cash at
automatic teller machines ("ATMs") or point of sale merchants located
throughout the state of Florida. Additionally, customers may access
their cash outside Florida through various interconnected ATM networks
and merchant locations.
Data Processing Services
Capital City Services Company provides data processing services to
financial institutions (including CCB), government agencies and
commercial customers located throughout North Florida and South
Georgia. As of March 2, 1998, the services company is providing
computer services to 9 of the 19 correspondent banks which have
relationships with Capital City Bank.
Trust Services
Capital City Trust Company is the investment management arm of Capital
City Bank. The Trust Company provides asset management for
individuals through agency, personal trust and IRA accounts personal
investment management. Pension, profit sharing and 401(k) Plans
administration are significant product lines. Associations,
endowments and other non-profit entities hire the Trust Company to
manage their long-term investment portfolios. Individuals requiring
the services of a trustee, personal representative, or a guardian are
served by a staff of well trained professionals. The market value of
trust assets under discretionary management exceeded $185 million as
of December 31, 1997, with total assets under administration exceeding
$254 million.
Brokerage Services
The Company offers access to retail investment products through its
wholly-owned subsidiary, Capital City Securities, Inc. These products
are offered through FSC Securities Corporation, a registered
Broker/Dealer, member NASD and SIPC. Insurance products are provided
by FSC Agency, Inc. Non-deposit investment and insurance products
are: not FDIC insured, not bank guaranteed, and may lose value.
Capital City Securities, Inc.'s brokers are licensed through FSC
Securities Corporation and FSC Agency, Inc., and offer a full line of
retail securities products, including U.S. Government bonds, tax-free
municipal bonds, stocks, mutual funds, unit investment trusts and
annuities.
Competition
The banking business in Florida is rapidly changing and CCBG and its
subsidiaries operate in a highly competitive environment, especially
with respect to services and pricing. The recent acquisition of
Barnett Banks, Inc. by NationsBank Corporation significantly alters
the competitive environment within the State of Florida and,
management believes, further enhances the Company's competitive
position and opportunities in many of its markets. CCBG's primary
market area is in North Florida and consists of Leon, Gadsden,
Jefferson, Levy, Gilchrist, Suwannee, Taylor, Hernando, Madison,
Pasco, Citrus and Dixie counties. In these markets, the Bank competes
against a wide range of banking and nonbanking institutions including
savings and loan associations, credit unions, money market funds,
mutual fund advisory companies, mortgage banking companies, investment
banking companies, finance companies and other types of financial
institutions.
All of Florida's major banking concerns have a presence in Leon
County. Capital City Bank's Leon County deposits totaled $429
million, or 51.4%, of the Company's consolidated deposits at December
31, 1997.
The following table depicts CCB's market share percentage within each
respective county, based on total commercial bank deposits within the
county.
Market Share
as of September 30*
1997 1996 1995
Capital City Bank:
Citrus County 4.4% 4.4% 4.6%
Dixie County ** ** **
Gadsden County 29.8% 27.5% 28.2%
Hernando County 2.0% 2.0% -
Jefferson County 28.2% 27.3% 27.6%
Leon County 22.8% 23.9% 22.2%
Pasco County 1.3% 1.5% -
Madison County 22.6% 28.5% -
Taylor County 36.0% 43.3% -
Levy County 25.6% 27.9% 33.7%
Gilchrist 45.1% 47.4% 53.7%
Suwannee 16.6% 16.2% 16.3%
* Obtained from the September 30 Office Level Report published by the Florida
Bankers Association for each year.
** Entered the market on January 31, 1998.
The following table sets forth the number of commercial banks and
offices, including the Company and its competitors, within each of the
respective counties as of September 30, 1997.
Number of Number of Commercial
County Commercial Banks Bank Offices
Citrus 10 35
Dixie 3 4
Gadsden 4 9
Gilchrist 2 4
Hernando 11 37
Jefferson 2 2
Leon 13 68
Levy 4 12
Madison 4 5
Pasco 13 80
Suwannee 4 6
Taylor 3 5
Supervision and Regulation
The Company and the Bank are subject to state and federal banking laws
and regulations which impose specific requirements and restrictions,
and provide for general regulatory oversight with respect to virtually
all aspects of operations. These laws and regulations are generally
intended to protect depositors, not shareholders. To the extent that
the following summary describes statutory or regulatory provisions, it
is qualified in its entirety by reference to the particular statutory
and regulatory provisions. Any change in applicable laws or
regulations may have a material effect on the business and prospects
of the Company. The operations of the Company and the Bank may be
affected by legislative changes and the policies of various regulatory
authorities. The Company is unable to predict the nature or the
extent of the effect on its business and earnings that fiscal or
monetary policies, economic control, or new federal or state
legislation may have in the future.
The Company
General. As a result of its ownership of the Bank, the Company is
registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended ("BHCA") and is regulated by the Board of
Governors of the Federal Reserve System ("FRB").
The Bank Holding Company Act of 1956. Under the BHCA, the Company
will be subject to periodic examination by the FRB and will be
required to file periodic reports of its operations and such
additional information as the FRB may require. The Company's
activities are limited to managing or controlling banks, furnishing
services to or performing services for its subsidiaries, and engaging
in other activities that the FRB determines to be so closely related
to banking or managing or controlling banks as to be a proper incident
thereto.
In addition, and subject to certain exceptions, the BHCA and the
Change in Bank Control Act, together with regulations thereunder,
require FRB approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a
bank holding company, such as the Company. Control is conclusively
presumed to exist if an individual or company acquires 25% or more of
any class of voting securities of the bank holding company. Control
is rebuttably presumed to exist if a person acquires 10% or more but
less than 25% of any class of voting securities and either the Company
has registered securities under Section 12 of the Exchange Act or no
other person will own a greater percentage of that class of voting
securities immediately after the transaction. The regulations provide
a procedure for challenge of the rebuttable control presumption.
The BHCA requires, among other things, the prior approval of the FRB
in any case where a bank holding company proposes to (i) acquire all
or substantially all of the assets of a bank, (ii) acquire direct or
indirect ownership or control of more than 5% of the outstanding
voting stock of any bank (unless it owns a majority of such bank's
voting shares), or (iii) merge or consolidate with any other bank
holding company. Additionally, the BHCA prohibits a bank holding
company, with certain limited exceptions, from (i) acquiring or
retaining direct or indirect ownership or control of more than 5% of
the outstanding voting stock of any company which is not a bank or
bank holding company, or (ii) engaging directly or indirectly in
activities other than those of banking, managing or controlling banks,
or performing services for its subsidiaries unless such non-banking
business is determined by the FRB to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto.
The FRB imposes certain capital requirements on the Company under the
BHCA, including a minimum leverage ratio and a minimum ratio of
"qualifying" capital to risk-weighted assets. These requirements are
described below under "Capital Regulations." Subject to its capital
requirements and certain other restrictions, the Company is able to
borrow money to make a capital contribution to the Bank, and such
loans may be repaid from dividends paid from the Bank to the Company
(although the ability of the Bank to pay dividends will be subject to
regulatory restrictions as described below under "The Bank -
Dividends"). The Company is also able to raise capital for
contribution to the Bank by issuing securities without having to
receive regulatory approval, subject to compliance with federal and
state securities laws.
In accordance with FRB policy, the Company is expected to act as a
source of financial strength to the Bank and to commit resources to
support the Bank in circumstances in which the Company might not
otherwise do so. Under the BHCA, the FRB may require a bank holding
company to terminate any activity or relinquish control of a nonbank
subsidiary (other than a nonbank subsidiary of a bank) upon the FRB's
determination that such activity or control constitutes a serious risk
to the financial soundness or stability of any subsidiary depository
institution of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank
holding company to divest itself of any bank or nonbank subsidiary if
the agency determines that divestiture may aid the depository
institution's financial condition.
The Financial Institutions Reform, Recovery and Enforcement Act of
1989. The Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA") was enacted in August 1989. FIRREA contains major
regulatory reforms which include stronger civil and criminal
enforcement provisions applicable to all financial institutions.
FIRREA allows the acquisition of healthy and failed savings and loans
by bank holding companies, and removes all interstate barriers on such
bank holding company acquisitions. With certain qualifications,
FIRREA also allows bank holding companies to merge acquired savings
and loans into their existing commercial bank subsidiaries.
The FRB, the Florida Department of Banking and Finance (the "FDBF")
and the Federal Deposit Insurance Corporation ("FDIC") collectively
have extensive enforcement authority over depository institutions and
their holding companies, and this authority has been enhanced
substantially by FIRREA. This enforcement authority includes, among
other things, the ability to assess civil money penalties, to issue
cease-and-desist or removal orders, to initiate injunctive actions,
and, in extreme cases, to terminate deposit insurance. In general,
these enforcement actions may be initiated for violations of laws and
regulations and unsafe or unsound practices. Other actions or
inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with the federal banking
agencies. FIRREA significantly increased the amount of and grounds
for civil money penalties and generally requires public disclosure of
final enforcement actions.
FIRREA further requires a depository institution or holding company
thereof to give 30 days' prior written notice to its primary federal
regulator of any proposed director or senior executive officer if the
institution (i) has been chartered less than two years; (ii) has
undergone a change in control within the preceding two years; or
(iii) is not in compliance with the minimum capital requirements or
otherwise is in a "troubled condition." The regulator would have the
opportunity to disapprove any such appointment.
Economic Growth and Regulatory Paperwork Reduction Act of 1996. The
enactment of the Economic Growth and Regulatory Paperwork Reduction
Act of 1996 ("EGRPRA") streamlined the nonbanking activities
application process for well capitalized and well managed bank holding
companies. Under EGRPRA, qualified bank holding companies may
commence a regulatory approved nonbanking activity without prior
notice to the FRB; written notice is merely required within 10 days
after commencing the activity. Also, under EGRPRA, the prior notice
period is reduced to 12 business days in the event of any nonbanking
acquisition or share purchase, assuming the size of the acquisition
does not exceed 10% of risk-weighted assets of the acquiring bank
holding company and the consideration does not exceed 15% in Tier 1
capital. This prior notice requirement also applies to commencing a
nonbanking activity de novo which has been previously approved by
order of the FRB, but not yet implemented by regulations.
The Bank
General. The Bank is a banking institution which is chartered by and
operated in the State of Florida, and it is subject to supervision and
regulation by the FDBF. The Bank is a member bank of the Federal
Reserve System and its operations are also subject to broad federal
regulation and oversight by the FRB. The deposit accounts of the Bank
are insured by the FDIC which gives the FDIC certain enforcement
powers over the Bank. Various consumer laws and regulations also
affect the operations of the Bank including state usury laws, laws
relating to fiduciaries, consumer credit and equal credit laws, and
fair credit reporting.
The FDBF supervises and regulates all areas of the Bank's operations
including, without limitation, making of loans, the issuance of
securities, the conduct of the Bank's corporate affairs, capital
adequacy requirements, the payment of dividends and the establishment
or closing of branches.
In addition, the Federal Deposit Insurance Corporation Improvement Act
of 1991 prohibits insured state chartered institutions from conducting
activities as principal that are not permitted for national banks. A
bank may, however, engage in an otherwise prohibited activity if it
meets its minimum capital requirements and the FDIC determines that
the activity does not present a significant risk to the deposit
insurance funds.
As a state chartered banking institution in the State of Florida, the
Bank is empowered by statute, subject to the limitations contained in
those statutes, to take savings and time deposits and pay interest on
them, to accept checking accounts, to make loans on residential and
other real estate, to make consumer and commercial loans, to invest,
with certain limitations, in equity securities and in debt obligations
of banks and corporations and to provide various other banking
services on behalf of the Bank's customers.
The FRB requires all depository institutions to maintain reserves
against their transaction accounts (primarily NOW and Super NOW
checking accounts) and non-personal time deposits. The balances
maintained to meet the reserve requirements imposed by the FRB may be
used to satisfy liquidity requirements.
Institutions are authorized to borrow from the Federal Reserve Bank
"discount window," but FRB regulations require institutions to exhaust
other reasonable alternative sources of funds before borrowing from
the Federal Reserve Bank.
Dividends. The Bank is subject to legal limitations on the frequency
and amount of dividends that can be paid to the Company. The FRB may
restrict the ability of a bank to pay dividends if such payments would
constitute an unsafe or unsound banking practice. These regulations
and restrictions may limit the Company's ability to obtain funds from
the Bank for its cash needs, including funds for acquisitions and the
payment of dividends, interest and operating expenses.
In addition, Florida law also places certain restrictions on the
declaration of dividends from state chartered banks to their holding
companies. Pursuant to Section 658.37 of the Florida Banking Code,
the board of directors of state chartered banks, after charging off
bad debts, depreciation and other worthless assets, if any, and making
provisions for reasonably anticipated future losses on loans and other
assets, may quarterly, semi-annually or annually declare a dividend of
up to the aggregate net profits of that period combined with the
bank's retained net profits for the preceding two years and, with the
approval of the FDBF, declare a dividend from retained net profits
which accrued prior to the preceding two years. Before declaring such
dividends, 20% of the net profits for the preceding period as is
covered by the dividend must be transferred to the surplus fund of the
bank until this fund becomes equal to the amount of the bank's common
stock then issued and outstanding. A state chartered bank may not
declare any dividend if (i) its net income from the current year
combined with the retained net income for the preceding two years is a
loss or (ii) the payment of such dividend would cause the capital
account of the bank to fall below the minimum amount required by law,
regulation, order or any written agreement with the FDBF or a federal
regulatory agency.
Insurance of Accounts and Other Assessments. The Bank's deposit
accounts are insured by the Bank Insurance Fund ("BIF") of the FDIC to
a maximum of $100,000 for each insured depositor. The federal banking
agencies require an annual audit by independent accountants of the
Bank and make their own periodic examinations of the Bank. They may
revalue assets of an insured institution based upon appraisals, and
require establishment of specific reserves in amounts equal to the
difference between such revaluation and the book value of the assets,
as well as require specific charge-offs relating to such assets. The
federal banking agencies may prohibit any FDIC-insured institution
from engaging in any activity they determine by regulation or order
poses a serious threat to the insurance fund.
Under federal law, BIF and the Savings Association Insurance Fund
("SAIF") are each statutorily required to be recapitalized to a 1.25%
of insured reserve deposits ratio. In view of the BIF's achieving the
1.25% ratio during 1995, the FDIC reduced the assessments for most
banks by adopting a new assessment rate schedule of 4 to 31 basis
points for BIF deposits. The FDIC further reduced the BIF assessment
schedule by an additional four basis points for the 1996 calendar year
so that most BIF members paid only the statutory minimum semiannual
assessment of $1,000. During this same period, the FDIC retained the
existing assessment rate schedule applicable to SAIF deposits of 23
cents to 31 cents per $100 of domestic deposits, depending on the
institution's risk classification.
On September 30, 1996, the Deposit Insurance Funds Act of 1996
("DIFA") was enacted and signed into law. DIFA was intended to reduce
the amount of semi-annual FDIC insurance premiums for savings
association deposits acquired by banks to the same levels assessed for
deposits insured by BIF. To accomplish this reduction, DIFA provided
for a special one-time assessment imposed on deposits insured by SAIF
to recapitalize SAIF and bring it up to statutory required levels.
This one-time assessment occurred in the third quarter of 1996. As a
result, beginning in 1997 and continuing through the year, both BIF
and SAIF deposits were assessed at the same rate of 0 to 27 basis
points depending on risk classification.
Effective January 1, 1997, however, DIFA also separated from the SAIF
assessments the Financing Corporation ("FICO") assessments which
service the interest on its bond obligations. According to the FDIC's
risk-related assessment rate schedules, the amount assessed on
individual institutions by the FICO will be in addition to the amount
paid for deposit insurance. By law, the FICO rate on BIF-assessable
deposits must be one-fifth the rate on SAIF-assessable deposits until
the insurance funds are merged as specified in DIFA or until January
1, 2000, whichever occurs first.
Transactions With Affiliates. The authority of the Bank to engage in
transactions with related parties or "affiliates" or to make loans to
insiders is limited by certain provisions of law and regulations.
Commercial banks, such as the Bank, are prohibited from making
extensions of credit to any affiliate that engages in an activity not
permissible under the regulations of the FRB for a bank holding
company. Pursuant to Sections 23A and 23B of the Federal Reserve Act
("FRA"), member banks are subject to restrictions regarding
transactions with affiliates ("Covered Transactions").
With respect to any Covered Transaction, the term "affiliate"
includes any company that controls or is controlled by a company that
controls the Bank, a bank or savings association subsidiary of the
Bank, any persons who own, control or vote more than 25% of any class
of stock of the Bank or the Company and any persons who the Board of
Directors determines exercises a controlling influence over the
management of the Bank or the Company. The term "affiliate" also
includes any company controlled by controlling stockholders of the
Bank or the Company and any company sponsored and advised on a
contractual basis by the Bank or any subsidiary or affiliate of the
Bank. Such transactions between the Bank and its respective
affiliates are subject to certain requirements and limitations,
including limitations on the amounts of such Covered Transactions that
may be undertaken with any one affiliate and with all affiliates in
the aggregate. The federal banking agencies may further restrict such
transactions with affiliates in the interest of safety and soundness.
Section 23A of the FRA limits Covered Transactions with any one
affiliate to 10% of an institution's capital stock and surplus and
limits aggregate affiliate transactions to 20% of the Bank's capital
stock and surplus. Sections 23A and 23B of the FRA provide that a
loan transaction with an affiliate generally must be collateralized
(but may not be collateralized by a low quality asset or securities
issued by an affiliate) and that all Covered Transactions, as well as
the sale of assets, the payment of money or the provision of services
by the Bank to an affiliate, must be on terms and conditions that are
substantially the same, or at least as favorable to the Bank, as those
prevailing for comparable nonaffiliated transactions. A Covered
Transaction generally is defined as a loan to an affiliate, the
purchase of securities issued by an affiliate, the purchase of assets
from an affiliate, the acceptance of securities issued by an affiliate
as collateral for a loan, or the issuance of a guarantee, acceptance
or letter of credit on behalf of an affiliate. In addition, the Bank
generally may not purchase securities issued or underwritten by an
affiliate.
Loans to executive officers, directors or to any person who directly
or indirectly, or acting through or in concert with one or more
persons, owns, controls or has the power to vote more than 10% of any
class of voting securities of a bank ("Principal Shareholders") and
their related interests (i.e., any company controlled by such
executive officer, director, or Principal Shareholders), or to any
political or campaign committee the funds or services of which will
benefit such executive officers, directors, or Principal Shareholders
or which is controlled by such executive officers, directors or
Principal Shareholders, are subject to Sections 22(g) and 22(h) of the
FRA and the regulations promulgated thereunder (Regulation O).
Among other things, these loans must be made on terms substantially
the same as those prevailing on transactions made to unaffiliated
individuals and certain extensions of credit to such persons must
first be approved in advance by a disinterested majority of the entire
board of directors. Section 22(h) of the FRA prohibits loans to any
such individuals where the aggregate amount exceeds an amount equal to
15% of an institution's unimpaired capital and surplus plus an
additional 10% of unimpaired capital and surplus in the case of loans
that are fully secured by readily marketable collateral, or when the
aggregate amount on all such extensions of credit outstanding to all
such persons would exceed the Bank's unimpaired capital and unimpaired
surplus. Section 22(g) identifies limited circumstances in which the
Bank is permitted to extend credit to executive officers.
Community Reinvestment Act. The Community Reinvestment Act of 1977
("CRA") requires a financial institution to help meet the credit needs
of its entire community, including low-income and moderate-income
areas. On May 3, 1995, the federal banking agencies issued final
regulations which change the manner in which the regulators measure a
bank's compliance with the CRA obligations. The final regulations
adopt a performance-based evaluation system which bases CRA ratings on
an institution's actual lending, service and investment performance,
rather than the extent to which the institution conducts needs
assessments, documents community outreach or complies with other
procedural requirements. Federal banking agencies may take CRA
compliance into account when regulating and supervising bank and
holding company activities; for example, CRA performance may be
considered in approving proposed bank acquisitions.
Capital Regulations
The FRB has adopted capital adequacy guidelines for bank holding
companies and their subsidiary state-chartered banks that are members
of the Federal Reserve System. Bank holding companies and their
subsidiary state-chartered member banks are required to comply with
FRB's risk-based capital guidelines. The risk-based capital
guidelines are designed to make regulatory capital requirements more
sensitive to differences in risk profiles among banks and bank holding
companies, to account for off-balance sheet exposure, and to minimize
disincentives for holding liquid assets. Under these guidelines
assets and off balance sheet items are assigned to broad risk
categories each with designated weights. The resulting capital ratios
represent capital as a percentage of total risk-weighted assets and
off-balance sheet items.
The current guidelines require all bank holding companies and
federally-regulated banks to maintain a minimum risk-based total
capital ratio equal to 8%, of which at least 4% must be Tier 1
Capital. Tier I Capital, which includes common stockholders' equity,
noncumulative perpetual preferred stock, and a limited amount of
cumulative perpetual preferred stock, less certain goodwill items and
other intangible assets, is required to equal at least 4% of
risk-weighted assets. The remainder ("Tier II Capital") may consist
of (i) an allowance for loan losses of up to 1.25% of risk-weighted
assets, (ii) excess of qualifying perpetual preferred stock, (iii)
hybrid capital instruments, (iv) perpetual debt, (v) mandatory
convertible securities, and (vi) subordinated debt and
intermediate-term preferred stock up to 50% of Tier I Capital. Total
capital is the sum of Tier I and Tier II Capital less reciprocal
holdings of other banking organizations' capital instruments,
investments in unconsolidated subsidiaries and any other deductions as
determined by the FRB (determined on a case by case basis or as a
matter of policy after formal rule making).
In computing total risk-weighted assets, bank and bank holding company
assets are given risk-weights of 0%, 20%, 50% and 100%. In addition,
certain off-balance sheet items are given similar credit conversion
factors to convert them to asset equivalent amounts to which an
appropriate risk-weight will apply. Most loans will be assigned to
the 100% risk category, except for performing first mortgage loans
fully secured by residential property, which carry a 50% risk rating.
Most investment securities (including, primarily, general obligation
claims on states or other political subdivisions of the United States)
will be assigned to the 20% category, except for municipal or state
revenue bonds, which have a 50% risk-weight, and direct obligations of
the U.S. Treasury or obligations backed by the full faith and credit
of the U.S. Government, which have a 0% risk-weight. In covering
off-balance sheet items, direct credit substitutes, including general
guarantees and standby letters of credit backing financial
obligations, are given a 100% conversion factor. Transaction-related
contingencies such as bid bonds, standby letters of credit backing
non-financial obligations, and undrawn commitments (including
commercial credit lines with an initial maturity of more than one
year) have a 50% conversion factor. Short-term commercial letters of
credit are converted at 20% and certain short-term unconditionally
cancelable commitments have a 0% factor.
The federal bank regulatory authorities have also adopted regulations
which supplement the risk-based guidelines and require banks and bank
holding companies to maintain a minimum level of Tier I Capital to
total assets less goodwill of 3% (the "leverage ratio"). The FRB
emphasized that the 3% leverage ratio constitutes a minimum
requirement for well-run banking organizations having diversified
risk, including no undue interest rate risk exposure, excellent asset
quality, high liquidity, good earnings and a composite regulatory
rating of 1 under the regulatory rating system for banks. Banking
organizations experiencing or anticipating significant growth, as well
as those organizations which do not satisfy the criteria described
above, will be required to maintain a minimum leverage ratio ranging
generally from 4% to 5%. The FRB also continues to consider a
"tangible Tier I leverage ratio" in evaluating proposals for expansion
or new activities. The tangible Tier I leverage ratio is the ratio of
a banking organization's Tier I Capital, less deductions for
intangibles otherwise includable in Tier I Capital, to total tangible
assets.
Federal law and regulations establish a capital-based regulatory
scheme designed to promote early intervention for troubled banks and
require the FDIC to choose the least expensive resolution of bank
failures. The capital-based regulatory framework contains five
categories of compliance with regulatory capital requirements,
including "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." To qualify as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1
risk-based ratio of no less than 6%, and a total risk-based capital
ratio of no less than 10%, and the bank must not be under any order or
directive from the appropriate regulatory agency to meet and maintain
a specific capital level.
Under the regulations, the applicable agency can treat an institution
as if it were in the next lower category if the agency determines
(after notice and an opportunity for hearing) that the institution is
in an unsafe or unsound condition or is engaging in an unsafe or
unsound practice. The degree of regulatory scrutiny of a financial
institution will increase, and the permissible activities of the
institution will decrease, as it moves downward through the capital
categories. Institutions that fall into one of the three undercapitalized
categories may be required to (i) submit a capital restoration plan;
(ii) raise additional capital; (iii) restrict their growth, deposit interest
rates, and other activities; (iv) improve their management; (v) eliminate
management fees; or (vi) divest themselves of all or a part of their
operations. Bank holding companies controlling financial institutions can
be called upon to boost the institutions' capital and to partially guarantee
the institutions' performance under their capital restoration plans.
It should be noted that the minimum ratios referred to above are merely
guidelines and the FRB possesses the discretionary authority to require
higher ratios with respect to bank holding companies and state-member banks.
The Company and the Bank currently exceed the requirements contained in FRB
regulations, policies and directives pertaining to capital adequacy, and
management of the Company and the Bank is unaware of any violation or alleged
violation of these regulations, policies or directives.
Interstate Banking and Branching
The BHCA was amended in September 1994 by the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act").
The Interstate Banking Act provides that, effective September 29, 1995,
adequately capitalized and managed bank holding companies were permitted to
acquire banks in any state. State laws prohibiting interstate banking or
discriminating against out-of-state banks are preempted as of the effective
date. States were not permitted to enact laws opting out of this provision;
however, states were allowed to adopt a minimum age restriction requiring
that target banks located within the state be in existence for a period of
years, up to a maximum of five years, before such bank may be subject to the
Interstate Banking Act. The Interstate Banking Act establishes deposit caps
which prohibit acquisitions that result in the acquiring company controlling
30 percent or more of the deposits of insured banks and thrift institutions
held in the state in which the target maintains a branch or 10 percent or
more of the deposits nationwide. States have the authority to waive the 30
percent deposit cap. State- level deposit caps are not preempted as long as
they do not discriminate against out-of-state companies, and the federal
deposit caps apply only to initial entry acquisitions.
The Interstate Banking Act also provides that as of June 1, 1997, adequately
capitalized and managed banks will be able to engage in interstate branching
by merging with banks in different states. States were permitted to enact
legislation authorizing interstate mergers earlier than June 1, 1997, or,
unlike the interstate banking provision discussed above, states were
permitted to opt out of the application of the interstate merger provision
by enacting specific legislation before June 1, 1997.
Florida has responded to the enactment of the Interstate Banking Act by
enacting the Florida Interstate Branching Act (the "Florida Branching Act")
which became effective on May 31, 1997. The purpose of the Florida Branching
Act was to permit interstate branching, effective June 1, 1997, through
merger transactions under the Interstate Banking Act. Under the Florida
Branching Act, with the prior approval of the FDBF, a Florida bank may
establish, maintain and operate one or more branches in a state other than
the State of Florida pursuant to a merger transaction in which the Florida
bank is the resulting bank. In addition, the Florida Branching Act provides
that one or more Florida banks may enter into a merger transaction with one
or more out-of-state banks, and an out-of-state bank resulting from such
transaction may maintain and operate the branches of the Florida bank that
participated in such merger. An out-of-state bank, however, is not permitted
to acquire a Florida bank in a merger transaction unless the Florida bank
has been in existence and continuously operated for more than three years.
Future Legislative Developments
Because of concerns relating to competitiveness and the safety and soundness
of the industry, Congress is considering a number of wide-ranging proposals
for altering the structure, regulation and competitive relationships of the
nation's financial institutions. Among such bills are proposals to prohibit
banks and bank holding companies from conducting certain types of activities,
to subject banks to increased disclosure and reporting requirements, to alter
the statutory separation of commercial and investment banking and to further
expand the powers of banks, bank holding companies and competitors of banks.
It cannot be predicted whether or in what form any of these proposals will
be adopted or the extent to which the business of the Company may be affected
thereby.
Effect of Governmental Monetary Policies
The commercial banking business in which the Bank engages is affected not
only by general economic conditions, but also by the monetary policies of the
FRB. Changes in the discount rate on member bank borrowing, availability of
borrowing at the "discount window," open market operations, the imposition
of changes in reserve requirements against member banks' deposits and assets
of foreign branches and the imposition of and changes in reserve requirements
against certain borrowings by banks and their affiliates are some of the
instruments of monetary policy available to the FRB. These monetary policies
are used in varying combinations to influence overall growth and
distributions of bank loans, investments and deposits, and this use may
affect interest rates charged on loans or paid on deposits. The monetary
policies of the FRB have had a significant effect on the operating results of
commercial banks and are expected to do so in the future. The monetary
policies of the FRB are influenced by various factors, including inflation,
unemployment, short-term and long-term changes in the international trade
balance and in the fiscal policies of the U.S. Government. Future monetary
policies and the effect of such policies on the future business and earnings
of the Bank cannot be predicted.
Item 2. Properties
Capital City Bank Group, Inc., is headquartered in Tallahassee, Florida.
The Company's offices are in the Capital City Bank building located on the
corner of Tennessee and Monroe Streets in downtown Tallahassee. The building
is owned by Capital City Bank but is located, in part, on land leased under
a long-term agreement.
Capital City Bank's Parkway Office is located on land leased from the
Smith Interests General Partnership in which several directors and officers
have an interest. Lease payments during 1997 totaled approximately $64,875.
As of March 2, 1998 the Company had thirty-seven banking locations.
Of the thirty-seven locations, the Company leases either the land or
buildings (or both) at four locations and owns the land and buildings
at the remaining thirty-three.
Item 3. Legal Proceedings
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
PART II
Item 5. Market for the Registrant's Common Equity and Related Share
Owner Matters
The Company's common stock trades on the Nasdaq National Market under
the symbol "CCBG". "The Nasdaq National Market" or "Nasdaq" is a
highly-regulated electronic securities market comprised of competing
market makers whose trading is supported by a communications network
linking them to quotation dissemination, trade reporting, and order
execution. This market also provides specialized automation services
for screen-based negotiations of transactions, on-line comparison of
transactions, and a range of informational services tailored to the
needs of the security industry, investors and issuers. The Nasdaq
National Market is operated by The Nasdaq Stock Market, Inc, a wholly-
owned subsidiary of the National Association of Securities Dealers,
Inc.
The following table presents the range of high and low closing sales
prices reported on the Nasdaq National Market and cash dividends
declared for each quarter during the past two years. The Company had
a total of 1,194 share owners of record at March 2, 1998.
1997 (1) 1996 (1) (2)
Fourth Third Second First Fourth Third Second First
Qtr. Qtr. Qtr. Qtr.(2) Qtr. Qtr. Qtr. Qtr.
Common stock price:
High $41.00 $35.25 $32.25 $32.00 $21.00 $21.00 $19.00 $18.00
Low 34.50 31.25 29.00 21.00 21.00 19.00 18.00 15.00
Close 40.50 34.75 31.25 30.25 21.00 21.00 19.00 18.00
Cash dividends
declared per share .165 .150 .150 .150 .150 .135 .135 .135
Future payment of dividends will be subject to determination and declaration by the
Board of Directors.
(1) All share and per share information have been adjusted to reflect a two-for-one
stock split effective April 1, 1997.
(2) Prior to February 3, 1997, there was not an established trading market for the
common stock of the Company.
Item 6. Selected Financial & Other Data
(Dollars in Thousands, Except Per Share Data) (1)
For the Years Ended December 31,
1997 1996 1995 1994 1993
Interest Income $ 75,664 $ 66,171 $ 54,477 $ 47,891 $ 46,395
Net Interest Income 46,524 40,752 33,989 33,166 31,555
Provision for Loan Losses 1,788 1,463 293 1,246 960
Net Income 12,438 11,360 9,522 8,825 8,244 (2)
Per Common Share:
Basic Net Income $ 2.14 $ 1.98 $ 1.67 $ 1.55 $ 1.41 (2)
Diluted Net Income 2.13 1.97 1.67 1.55 1.41 (2)
Cash Dividends Declared .615 .555 .500 .455 .415
Book Value 17.17 15.49 14.22 12.72 11.78
Based on Net Income:
Return on Average Assets 1.24% 1.25% 1.25% 1.18% 1.14%(2)
Return on Average Equity 13.15 13.48 12.32 12.51 12.43 (2)
Dividend Payout Ratio 28.75 28.03 29.94 29.34 29.44
Averages for the Year:
Loans, Net of Unearned
Interest $ 692,691 $ 560,986 $ 432,313 $ 406,873 $ 381,807
Earning Assets 900,824 815,467 681,186 666,919 651,042
Assets 1,001,110 910,658 763,697 745,334 722,286
Deposits 836,862 770,492 657,384 647,254 630,324
Long-Term Debt 17,202 10,120 71 1,144 1,381
Share Owners' Equity 94,591 84,287 77,259 70,563 66,328
Year-End Balances:
Loans, Net of Unearned
Interest $ 697,726 $ 672,196 $ 443,973 $ 420,804 $ 399,424
Earning Assets 898,759 905,428 716,170 645,832 675,273
Assets 1,009,673 1,021,399 813,659 742,630 762,335
Deposits 834,812 866,696 699,579 648,174 662,745
Long-Term Debt 15,896 18,072 1,982 - 1,900
Share Owners' Equity 100,450 89,500 81,158 72,400 67,140
Equity to Assets Ratio 9.95% 8.76% 9.97% 9.75% 8.81%
Other Data:
Basic Average Shares
Outstanding 5,814,367 5,732,798 5,706,468 5,694,984 5,848,044
Share Owners of Record* 1,194 1,005 933 761 754
Banking Locations* 37 36 30 29 30
Full-Time Equivalent
Associates* 593 573 503 489 476
*As of March 2nd of the following year.
(1) All share and per share data have been adjusted to reflect a 2-for-1 stock split effective April 1, 1997.
(2) Income before the effect of a change in accounting for income taxes was $8,728 or $1.50 per share. Return
on average assets and return on average equity, both before the accounting change, were 1.21% and 13.15%,
respectively.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL REVIEW
The following analysis reviews important factors affecting the fianancial
condition and results of operations of Capital City Bank Group, Inc., for
the periods shown below. The Comapny, has made, and may continue to make,
various forward-looking statements with respect to fianancial 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 from 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
Compnay.
This section provides supplemental information which should be read in
conjunction with the consolidated financial statements and related
notes. 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 1997 compares with prior years.
Throughout this section, Capital City Bank Group, Inc., and its
subsidiary, collectively, are referred to as "CCBG" or the "Company."
The subsidiary bank is referred to as the "Bank" or "CCB".
The year-to-date averages used in this report are based on daily
balances for each respective year. Annual averages in 1997 and 1996
are significantly impacted by the acquisition of First Financial. The
averages include the addition of First Financial for only six months
in 1996 versus a full twelve months in 1997. In certain circumstances,
comparing average balances for the fourth quarter of consecutive years
may be more meaningful than simply analyzing year-to-date averages.
Therefore, where appropriate, fourth quarter averages have been
presented for analysis and have been noted as such. See Table 2 for
annual averages and Table 14 for financial information presented on a
quarterly basis.
All prior period share and per share data have been adjusted to
reflect a two-for-one stock split effective April 1, 1997.
On October 18, 1997, the Company consolidated its three remaining bank
affiliates into Capital City Bank. The bank is headquartered in
Tallahassee and, as of December 31, 1997, had thirty-six offices
covering eleven counties. See Note 20 in the Notes to Consolidated
Financial Statements for further information.
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. Operating results of First Financial
are included in the Company's consolidated financial statements
presented herein for all periods subsequent to June 30, 1996. On
December 6, 1996, First Federal Bank was merged into the Company's
lead bank, Capital City Bank. Financial comparisons to prior year
periods are not necessarily comparable due to the impact of the
acquisition.
On October 29, 1997, the Company entered into a definitive purchase
and assumption agreement with First Federal Savings & Loan of
Lakeland, Florida ("First Federal") to acquire five of First Federal's
branches facilities which include loan and deposits. The Company
agreed to pay a deposit premium of $3.3 million or 6.33%, to assume
approximately $55 million in deposits, purchase loans equal to 80% of
deposits and acquire certain real estate. Four of the five offices
were merged into existing offices of Capital City Bank. The
transaction was completed on January 31, 1998.
EARNINGS ANALYSIS
In 1997, the Company's earnings were $12.4 million, or $2.14 per basic
share. This compares to earnings of $11.4 million, or $1.98 per share
in 1996, and $9.5 million, or $1.67 per basic share in 1995. The
Company's diluted per share earnings were $2.13 in 1997, $1.97 in 1996
and $1.67 in 1995, respectively.
On a per share basis, earnings increased 8.1% in 1997 versus 18.6% in
1996. The First Financial Bancorp, Inc. acquisition favorably
impacted the Company's financial performance in both 1997 and 1996.
Growth in operating revenues (defined as net interest income plus
noninterest income) of $ 8.0 million, or 14.1%, was the most
significant factor contributing to strong earnings in 1997. This and
other factors are discussed throughout the Financial Review. A
condensed earnings summary is presented in Table 1.
Table 1
CONDENSED SUMMARY OF EARNINGS
(Dollars in Thousands, Except Per Share Data) For the Years Ended December 31,
1997 1996 1995
Interest Income $ 75,664 $ 66,171 $ 54,477
Taxable Equivalent Adjustments 1,610 1,771 1,591
-------- -------- --------
Total Interest Income (FTE) 77,274 67,942 56,068
Interest Expense 29,140 25,419 20,488
-------- -------- --------
Net Interest Income (FTE) 48,134 42,523 35,580
Provision for Loan Losses 1,788 1,463 293
Taxable Equivalent Adjustments 1,610 1,771 1,591
-------- -------- --------
Net Interest Income After Provision
for Loan Losses 44,736 39,289 33,696
Noninterest Income 18,591 16,316 13,170
Noninterest Expense 44,765 39,255 33,466
-------- -------- --------
Income Before Income Taxes 18,562 16,350 13,400
Income Taxes 6,124 4,990 3,878
-------- -------- --------
Net Income $ 12,438 $ 11,360 $ 9,522
-------- -------- --------
Basic Net Income Per Share $ 2.14 $ 1.98 $ 1.67
======== ======== ========
Diluted Net Income Per Share $ 2.13 $ 1.97 $ 1.67
======== ======== ========
Net Interest Income
Net interest income represents the Company's single largest source of
earnings and is equal to interest income and fees generated by earning
assets less interest expense paid on interest bearing liabilities. An
analysis of the Company's net interest income, including average
yields and rates, is presented in Tables 2 and 3. This information is
presented on a "taxable equivalent" basis to reflect the tax-exempt
status of income earned on certain loans and investments, the majority
of which are state and local government debt obligations.
In 1997, taxable-equivalent net interest income increased $5.6
million, or 13.2%. This follows an increase of $6.9 million, or 19.5%
in 1996, and $757,000, or 2.2%, in 1995. During 1997, higher levels
of earning assets, coupled with a more favorable mix, were the primary
factors contributing to the Company's increase in taxable equivalent
net interest income as the general level of interest rates had minimal
impact. The higher level of average earning assets is attributable to
the acquisition of First Financial Bancorp, Inc., which the Company
owned for twelve months in 1997, versus only six months in 1996.
Table 2
AVERAGE BALANCES AND INTEREST RATES
(Taxable Equivalent Basis - Dollars in Thousands)
1997 1996 1995
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
Assets:
Loans, Net of
Unearned
Interest (1) (2) $ 692,691 $64,153 9.26% $560,986 $51,999 9.27% $432,313 $40,872 9.45%
Taxable Investment
Securities 110,947 6,959 6.27 138,982 8,648 6.22 139,936 7,966 5.69
Tax-Exempt Investment
Securities (2) 68,948 4,634 6.72 73,857 5,106 6.91 70,773 4,989 7.05
Funds Sold 28,238 1,528 5.41 41,642 2,189 5.26 38,164 2,241 5.87
-------- -------- ----- -------- ------- ----- -------- -------- -----
Total Earning
Assets 900,824 77,274 8.58 815,467 67,942 8.33 681,186 56,068 8.23
Cash & Due
From Banks 48,654 50,302 49,075
Allowance For
Loan Losses (8,396) (7,374) (7,374)
Other Assets 60,028 52,263 40,810
---------- -------- ---------
TOTAL ASSETS $1,001,110 $910,658 $763,697
========== ======== =========
Liabilities:
NOW Accounts $ 104,190 $ 1,765 1.69% $102,453 $ 1,877 1.83% $ 91,060 $ 1,806 1.98%
Money Market
Accounts 80,435 2,407 2.99 85,256 2,523 2.96 70,188 2,108 3.00
Savings Accounts 85,503 1,718 2.01 86,437 1,813 2.10 85,408 1,942 2.27
Other Time Deposits 382,398 20,105 5.26 325,453 16,867 5.18 249,827 13,526 5.41
-------- -------- ----- -------- -------- ----- --------- -------- -----
Total Interest Bearing
Deposits 652,526 25,995 3.98 599,599 23,080 3.85 496,483 19,382 3.90
Funds Purchased 31,518 1,659 5.26 25,181 1,229 4.88 19,308 1,053 5.45
Other Short-Term
Borrowings 5,976 315 5.27 7,016 422 6.01 1,159 49 4.23
Long-Term Debt 17,202 1,171 6.81 10,120 688 6.80 71 4 5.63
-------- -------- ----- -------- -------- ----- --------- -------- -----
Total Interest Bearing
Liabilities 707,222 29,140 4.12 641,916 25,419 3.96 517,021 20,488 3.96
Noninterest Bearing
Deposits 184,336 170,893 160,901
Other Liabilities 14,961 13,562 8,516
-------- -------- --------
TOTAL LIABILITIES 906,519 826,371 686,438
Share Owners' Equity:
Common Stock 58 58 62
Additional Paid
In Capital 5,823 4,817 5,836
Retained Earnings 88,710 79,412 71,361
-------- -------- -------
TOTAL SHARE OWNERS'
EQUITY 94,591 84,287 77,259
-------- -------- -------
TOTAL LIABILITIES
AND SHARE OWNERS'
EQUITY $1,001,110 $910,658 $763,697
========== ========= =========
Interest Rate Spread 4.46% 4.37% 4.27%
====== ====== ======
Net Interest Income $48,134 $42,523 $35,580
======== ======== ========
Net Interest Margin (3) 5.34% 5.21% 5.22%
====== ====== ======
(1) Average balances include nonaccrual loans. Interest income includes fees on loans of approximately $2,913,000, $2,241,000
and $1,469,000 in 1997, 1996, and 1995, respectively.
(2) Interest income includes the effects of taxable equivalent adjustments using a 35% tax rate for 1997 and 1996, and 34% for
1995 to adjust interest on tax-exempt loans and securities to a taxable equivalent basis.
(3) Tax-equivalent net interest income divided by earning assets.
Table 3
RATE/VOLUME ANALYSIS(1)
(Taxable Equivalent Basis - Dollars in Thousands)
1997 Changes from 1996 1996 Changes from 1995
----------------------------- --------------------------
Due To Due To
Average Average
------------------- -------------------
Total Volume (3) Rate Total Volume (3) Rate
-------- ---------- ------ -------- ---------- ------
EARNING ASSETS:
Loans, Net of Unearned Interest (2) $12,154 $12,209 $ (55) $11,127 $12,160 $(1,033)
Investment Securities
Taxable (1,689) (1,744) 55 682 (54) 736
Tax-Exempt (472) (339) (133) 117 217 (100)
Funds Sold (661) (705) 44 (52) 204 (256)
------- ------- ------- -------- -------- -------
Total 9,332 9,421 (89) 11,874 12,527 (653)
Interest Bearing Liabilities:
NOW Accounts (111) 32 (143) 71 226 (155)
Money Market Accounts (116) (143) 27 415 452 (37)
Savings Accounts (95) (20) (75) (129) 23 (152)
Other Time Deposits 3,238 2,950 288 3,341 4,091 (750)
Funds Purchased 430 309 121 176 320 (144)
Other Short-Term Borrowings (107) (63) (44) 373 248 125
Long-Term Debt 482 482 0 684 566 118
------- ------- -------- ------- ------- -------
Total 3,721 3,547 174 4,931 5,926 (995)
Changes in Net Interest Income $ 5,611 $ 5,874 $ (263) $ 6,943 $ 6,601 $ 342
======== ======== ======== ======== ======== ========
(1) This table shows the change in net interest income for comparative periods based on either changes in average volume or
changes in average rates for earning assets and interest bearing liabilities. Changes which are not solely due to volume
changes or solely due to rate changes have been attributed to rate changes.
(2) Interest income includes the effects of taxable equivalent adjustments using a 35% tax rate in 1997 and 1996, and 34% for
1995 to adjust interest on tax-exempt loans and securities to a taxable equivalent basis.
(3) A significant portion of the average volume increase can be directly attributed to the acquisition of First Financial on
July 1, 1996.
For the year 1997, taxable equivalent interest income increased $9.3 million,
or 13.74%, over 1996, compared to an increase of $11.9 million, or 21.2% in
1996 over 1995. The Company's taxable equivalent yield on average earning
assets of 8.58% represents a 25 basis point increase over 1996, compared to
a 10 basis point improvement in 1996 over 1995. In both 1997 and 1996,
interest income was positively impacted by loan growth and the acquisition of
First Financial. The higher yield in 1997 reflects a more favorable earning
asset mix as the loan portfolio, which is the largest and highest yielding
component of earning assets, increased from 72.6% in the fourth quarter of
1996 to 77.9% in the comparable quarter of 1997.
Interest expense increased $3.7 million, or 14.63%, over 1996, compared to an
increase of $4.9 million, or 24.1%, in 1996 over 1995. The higher level of
interest expense in 1997 is attributable to a full year of expense (versus
only six months in 1996) on the deposits acquired through the 1996
acquisition of First Financial. The average rate paid on interest-bearing
liabilities was 4.12% in 1997, compared to 3.96% in 1996 and 1995,
respectively. The increase in the average rate during 1997 is a direct result
of the mix of deposits acquired from First Financial. Certificates of deposit
represent a higher cost deposit product to the Company. Based on averages,
certificates as a percent of total deposits were increased to 45.7% in 1997,
42.2% in 1996, and 38.0% in 1995.
The Company's interest rate spread (defined as the taxable equivalent yield
on average earning assets less the average rate paid on interest bearing
liabilities) increased nine basis points in 1997 and increased ten basis
points in 1996. The increase in both 1997 and 1996 is attributable to the
higher yield on earning assets, which was driven by a more favorable mix of
earning assets.
The Company's net interest margin (defined as taxable equivalent interest
income less interest expense divided by average earning assets) was 5.34% in
1997, compared to 5.21% in 1996 and 5.22% in 1995. Although the Company
experienced an increase in the cost of funds during 1997, the increase in
interest income enabled the Company to improve the margin to 5.34%.
A further discussion of the Company's earning assets and funding sources can
be found in the section entitled "Financial Condition."
Provision for Loan Losses
The provision for loan losses was $1.8 million in 1997 versus $1.5 million in
1996 and $293,000 in 1995. The provision approximates total net charge-offs
for 1997 and 1996. The Company's credit quality measures continue to improve
with a nonperforming assets ratio of .41% compared to .44% at year-end 1996,
and a net charge-off ratio of .24% versus .27% in 1996.
At December 31, 1997, the allowance for loan losses totaled $8.3 million
compared to $8.2 million in 1996. At year-end 1997, the allowance
represented 1.19% of total loans and 512% of nonperforming loans. Management
considers the allowance to be adequate based on the current level of
nonperforming loans and the potential for loss inherent in the portfolio at
year-end. See the section entitled "Financial Condition" for further
information regarding the allowance for loan losses. Selected loss coverage
ratios are presented below:
1997 1996 1995
Provision for Loan Losses as a
Multiple of Net Charge-offs 1.1x 1.0x .2x
Pre-tax Income Plus Provision
for Loan Losses as a Multiple
of Net Charge-offs 12.4x 11.7x 10.0x
Noninterest Income
In 1997, noninterest income increased $2.3 million, or 13.9%, and
represented 28.6% of operating income, compared to $3.1 million, or
23.9% and 28.6%, respectively, in 1996. The increase in the level of
noninterest income is principally attributable to the implementation
of recommendations resulting from a profit enhancement program placed
into effect in late 1995 and early 1996, and several one-time gains
incurred throughout the year. Factors affecting noninterest income
are discussed below.
Service charges on deposit accounts increased $470,000, or 6.1%, in
1997, compared to an increase of $2.0 million, or 35.8%, in 1996.
Although service charge revenues in any one year are dependent on the
number of accounts, primarily transaction accounts, and the level of
activity subject to service charges, the increase in 1997 is primarily
attributable to receiving a full year benefit from an increase in bank
service fees which went into effect on July 1, 1996.
Data processing revenues increased $191,000, or 6.4%, in 1997 versus
an increase of $361,000, or 13.8%, in 1996. The data processing
center provides computer services to both financial and non-financial
clients in North Florida and South Georgia. In recent years, revenue
gains have been attributable to growth in processing for both
financial and non-financial clients. In 1997, processing revenues for
non-financial entities represented approximately 51% of the total
processing revenues, down from 55% in 1996, reflecting growth in
processing revenues for financial entities.
In 1997, trust fees increased $38,000, or 3.3%, compared to $222,000,
or 23.6% in 1996. The 1997 increase is attributable to growth in
managed assets. At year-end 1997, assets under management totaled
$185.7 million, reflecting growth of $54.4 million, or 41.4%. The
1996 increase was attributable to a new fee structure placed into
effect January 1, an increase in assets under management and
nonrecurring fees of approximately $100,000. In 1995, the Company
changed its method of income recognition for Capital City Trust
Company from cash to the accrual method. This change in method
resulted in a one-time adjustment which increased trust fees by
$166,000.
Other noninterest income increased $ 1.6 million, or 36.6%, in 1997
versus a increase of $500,000, or 12.6% in 1996. The increase in 1997
is attributable to ATM fees, gains recognized on the sale of real
estate loans and gains on the sale of bank assets. The Company
realized gains on the sale of loans totaling approximately $803,000
during the year versus $109,000 in 1996. Gains of $275,000 were
recognized on the sale of bank properties and a gain of $182,000 was
recorded on the sale of other assets. The increase in 1996 was
attributable to gains on the sale of real estate loans and check
printing income.
Noninterest income as a percent of average assets was 1.86% in 1997
compared to 1.79% in 1996 and 1.72% in 1995.
Noninterest Expense
Noninterest expense for 1997 was $44.8 million, an increase of $5.5
million, or 14.0%, over 1996, compared with an increase of $5.8
million, or 17.3% in 1996 over 1995. Factors impacting the Company's
noninterest expense during 1997 and 1996 are discussed below.
The Company's aggregate compensation expense in 1997 totaled $24.0
million, an increase of $3.0 million, or 14.2% over 1996. Salaries
increased $2.3 million due to normal raises, the full year impact of
First Financial associates and a $317,000 charge associated with
restructuring. Additionally, a 93% increase in the
Company's stock price contributed to a $460,000, or 62.1%, increase in
stock compensation covered under the Company's Associate Incentive
Plan. In 1996, total compensation increased $3.1 million, or 17.1%,
over 1995. Salaries increased $2.1 million, or 14.4%, primarily due
to the First Financial acquisition. Retirement expense increased
$473,000, or 52.5%, due to the higher cost associated with the
Company's pension plan and adoption of a Supplemental Employee
Retirement Plan. Other compensation increased $316,000, or 74.5%, due
to the increase in the number of associate participating in the
Associate Incentive Plan and an increase in the value of the Company's
stock.
Occupancy expense (including furniture, fixtures & equipment)
increased by $914,000, or 13.2%, in 1997, compared to $1.1 million, or
18.1%, in 1996. Both years were impacted by occupancy expense
associated with the former First Financial offices. The increase in
1997 over 1996 was attributable to higher depreciation expense which
increased $398,000 and other FF&E which increased $450,000.
Offsetting these increases was a reduction in maintenance and repairs
of $102,000. The increase in 1996 over 1995 was due to higher
depreciation of $446,000 and maintenance and repairs of $272,000,
respectively. First Financial added approximately $470,000 to total
occupancy expense in 1996.
Other noninterest expense increased $1.6 million in both 1997 and
1996, or 14.3% and 17.1%, respectively. The increase in 1997 was
attributable to: (1) an increase in amortization expense of
approximately $300,000 due to the acquisition of First Federal; (2) a
one-time restructuring charge of $338,000 incurred by the Company to
consolidate its three remaining subsidiary banks into Capital City
Bank; (3) an increase in advertising expense of $180,000 due to the
Company's enhanced focus on promoting products and the acquisition of
First Financial; and (4) an increase in credit card processing fees,
ORE expense and other miscellaneous expenses of $259,000, $130,000 and
$225,000, respectively, over the prior year. The increase in 1996 is
attributable to the acquisition of First Financial which added $1.3
million to other noninterest expense. For 1996, deposit insurance
premiums were substantially eliminated for well-capitalized banks,
resulting in a reduction in premiums of $600,000 from 1995. The
reduction was offset by a $607,000 increase in professional fees
attributable to the hiring of consultants to assist with various
corporate initiatives including data processing conversions,
technology, restructuring and the development of a strategic plan.
Net noninterest expense (defined as noninterest income minus
noninterest expense) as a percent of average assets was 2.61% in 1997
compared to 2.52% in 1996 and 2.66% in 1995. The Company's efficiency
ratio (expressed as noninterest expenses as a percent of taxable
equivalent operating revenues) was 64.8% (excluding restructuring
charges), 66.7% and 68.6% in 1997, 1996, and 1995, respectively.
Income Taxes
The consolidated provision for federal and state income taxes was $6.1
million in 1997 compared to $5.0 million in 1996 and $3.9 million in
1995. The increase in the tax provision over the last three years is
primarily attributable to the higher level of taxable income.
The effective tax rate was 33.0% in 1997, 30.5% in 1996, and 28.9% in
1995. These rates differ from the statutory tax rates due primarily
to tax-exempt income. The increase in the effective tax rate is
primarily attributable to the decreasing level of tax-exempt income
relative to pre-tax income and an increase in the statutory tax rate
for income greater than $10 million. Tax-exempt income (net of the
adjustment for disallowed interest) as a percent of pre-tax income was
16.0% in 1997, 20.1% in 1996, and 23.0% in 1995.
FINANCIAL CONDITION
Average assets increased $90.5 million, or 9.93%, from $910.7 million
in 1996 to $1.0 billion in 1997. Average earning assets increased to
$900.8 million in 1997, a $85.4 million, or 10.47% increase over 1996.
Average loans increased $131.7 million, or 23.5%, and accounted for
154% of the total growth in average earning assets. Loan growth in
1997 was funded primarily through maturities in the investment
portfolio.
All annual averages have been significantly impacted by the
acquisition of First Financial. Due to the timing of the acquisition,
July 1, 1996, the averages for 1996 reflect the acquisition for only six of
the twelve months, whereas a full twelve months is reflected in 1997.
Table 2 provides information on average balances while Table 4
highlights the changing mix of the Company's earning assets over the
last three years.
Loans
Local markets were generally improved during 1997. Loan demand was
steady and growth was spread evenly throughout the year. The First
Financial acquisition completed in 1996 increased the number of
markets served and enhanced the Company's line of mortgage products
and services. Price and product competition remained strong during
1997 and there continues to be an increased demand for fixed rate
financing. Real estate lending, an area of primary focus, continued
to improve. Other areas reflecting stronger demand included home
equity and indirect automobile lending. The Company continues to
place an increased emphasis on product marketing.
Although management is continually evaluating alternative sources of
revenue, lending is a major component of the Company's business and is
key to profitability. While management strives to grow the Company's
loan portfolio, it can do so only by adhering to sound banking
principles applied in a prudent and consistent manner. Management
consistently strives to identify opportunities to increase loans
outstanding and enhance the portfolio's overall contribution to
earnings.
Table 4
SOURCES OF EARNING ASSET GROWTH
(Average Balances - Dollars in Thousands)
1996 to Percentage Components
1997 of Total of Total Earning Assets
Change Change 1997 1996 1995
Loans:
Commercial, Financial
and Agricultural $ 2,908 3.4% 6.8% 7.1% 7.1%
Real Estate - Construction 8,506 10.0 4.4 3.9 3.7
Real Estate - Mortgage 105,781 123.9 50.5 42.8 37.7
Consumer 14,510 17.0 15.2 15.0 15.0
-------- ------ ------ ------ ------
Total Loans 131,705 154.3 76.9 68.8 63.5
======== ====== ====== ====== ======
Securities:
Taxable (28,035) (32.8) 12.3 17.0 20.5
Tax-Exempt (4,909) (5.8) 7.7 9.1 10.4
-------- ------ ------ ------ -----
Total Securities (32,944) (38.6) 20.0 26.1 30.9
-------- ------ ------ ------ -----
Funds Sold (13,404) (15.7) 3.1 5.1 5.6
-------- ------ ------ ------ ------
Total Earning Assets $ 85,357 100.0% 100.0% 100.0% 100.0%
======== ====== ======= ====== ======
The Company's average loan-to-deposit ratio increased from 72.8% in
1996 to 82.8% in 1997. It reached a level of 84.5% in the fourth
quarter of 1997 compared to 78.4% in the fourth quarter of 1996.
This compares to an average loan-to-deposit ratio in 1995 of 65.8%.
The loan-to-deposit ratio was significantly impacted by the purchase
of First Financial, which at the time of acquisition had a ratio of
93.6%.
Real estate construction and mortgage loans, combined, represented
72.0% of total loans (net of unearned interest) in 1997 versus 71.5%
in 1996. See the section entitled "Risk Element Assets" for a
discussion concerning loan concentrations.
The composition of the Company's loan portfolio at December 31, for
each of the past five years is shown in Table 5. Table 6 arrays the
Company's total loan portfolio as of December 31, 1997, based upon
maturities. Demand loans and overdrafts are reported in the category
of one year or less. As a percent of the total portfolio, loans with
a fixed interest rate have increased slightly from 29.0% in 1996 to
30.3% in 1997.
Allowance for Loan Losses
Management attempts to maintain the allowance for loan losses at a
level sufficient to provide for potential losses inherent in the loan
portfolio. The allowance for loan losses is established through a
provision charged to expense. Loans are charged against the allowance
when management believes collection of the principal is unlikely.
Management evaluates the adequacy of the allowance for loan losses on
a quarterly basis. The evaluations are based on the collectibility of
loans and take into consideration such factors as growth and
composition of the loan portfolio, evaluation of potential losses,
past loss experience and general economic conditions. As part of
these evaluations, management reviews all loans which have been
classified internally or through regulatory examination and, if
appropriate, allocates a specific reserve to each of these individual
loans. Further, management establishes a general reserve to provide
for losses inherent in the loan portfolio which are not specifically
identified. The general reserve is based upon management's evaluation
of the current and forecasted operating and economic environment
coupled with historical experience. The allowance for loan losses is
compared against the sum of the specific reserves plus the general
reserve and adjustments are made, as appropriate. Table 7 analyzes
the activity in the allowance over the past five years.
Table 5
LOANS BY CATEGORY
(Dollars in Thousands)
As of December 31,
1997 1996 1995 1994 1993
Commercial, Financial and
Agricultural $ 53,888 $ 57,023 $ 46,149 $ 39,288 $ 46,963
Real Estate - Construction 45,563 41,389 28,391 24,314 22,968
Real Estate - Mortgage 456,499 439,110 259,503 255,755 242,741
Consumer 143,256 137,153 113,736 106,656 93,895
-------- -------- -------- -------- --------
Total Loans $699,206 $674,675 $447,779 $426,013 $406,567
======== ======== ======== ======== ========
Table 6
LOAN MATURITIES
(Dollars in Thousands)
Maturity Periods
Over One Over
One Year Through Five
Or Less Five Years Years Total
Commercial, Financial and
Agricultural $ 39,161 $ 14,143 $ 584 $ 53,888
Real Estate 305,259 155,894 40,909 502,062
Consumer 38,025 101,938 3,293 143,256
------- -------- -------- --------
Total $382,445 $271,975 $ 44,786 $699,206
======== ======== ======== ========
Loans with Fixed Rates $ 28,634 $142,143 $ 41,287 $212,064
Loans with Floating or
Adjustable Rates 353,811 129,832 3,499 487,142
-------- -------- -------- --------
Total $382,445 $271,975 $ 44,786 $699,206
======== ======== ======== ========
The allowance for loan losses at December 31, 1997 of $8.3 million compares
to $8.2 million at year-end 1996. The allowance as a percent of total
loans was 1.19% in 1997 versus 1.22% in 1996. There can be no assurance that
in particular periods the Company will not sustain loan losses which are
substantial in relation to the size of the allowance. When establishing
the allowance, management makes various estimates regarding the value of
collateral and future economic events. Actual experience may differ from
these estimates. It is management's opinion that the allowance at
December 31, 1997, is adequate to absorb losses from loans in the
portfolio as of year-end.
Table 8 provides an allocation of the allowance for loan losses to
specific loan categories for each of the past five years.
The allocation of the allowance is developed using management's best
estimates based upon available information such as regulatory
examinations, internal loan reviews and historical data and trends.
The allocation by loan category reflects a base level allocation derived
primarily by analyzing the level of problem loans, specific reserves and
historical charge-off data. Current and forecasted economic conditions,
and other judgmental factors which cannot be easily quantified (e.g.
concentrations) are not presumed to be included in the base level
allocations, but instead are covered by the unallocated portion of the
reserve. The Company faces a geographic concentration as well as a
concentration in real estate lending. Both risks are cyclical in nature
and must be considered in establishing the overall allowance for loan losses.
Reserves in excess of the base level reserves are maintained in order to
properly reserve for the losses inherent in the Company's portfolio due
to these concentrations and anticipated periods of economic difficulties.
Table 7
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(Dollars in Thousands)
For the Years Ended December 31,
1997 1996 1995 1994 1993
Balance at Beginning of Year $8,179 $6,474 $7,551 $7,594 $7,585
Acquired Reserves - 1,769 - - -
Charge-Offs:
Commercial, Financial
and Agricultural 392 466 520 575 556
Real Estate-Construction 31 - - - -
Real Estate-Mortgage 120 91 139 315 81
Consumer 1,887 1,585 1,237 865 884
------ ------ ------ ------ ------
Total Charge-Offs 2,430 2,142 1,896 1,755 1,521
------ ------ ------ ------ ------
Recoveries:
Commercial, Financial
and Agricultural 340 200 157 104 198
Real Estate - Construction - 3 - - -
Real Estate - Mortgage 55 - - 12 8
Consumer 390 412 369 350 364
------ ------ ------ ------ ------
Total Recoveries 785 615 526 466 570
------ ------ ------ ------ ------
Net Charge-Offs 1,645 1,527 1,370 1,289 951
------ ------ ------ ------ ------
Provision for Loan Losses 1,788 1,463 293 1,246 960
------ ------ ------ ------ ------
Balance at End of Year $8,322 $8,179 $6,474 $7,551 $7,594
====== ====== ====== ====== ======
Ratio of Net Charge-Offs During
Year to Average Loans Out-Standing,
Net of Unearned Interest .24% .27% .32% .32% .25%
====== ====== ====== ====== ======
Allowance for Loan Losses as a
Percent of Loans, Net of
Unearned Interest, at End of Year 1.19% 1.22% 1.46% 1.79% 1.90%
====== ====== ====== ====== ======
Allowance for Loan Losses as a
Multiple of Net Charge-Offs 5.06x 5.36x 4.73x 5.86x 7.99x
====== ====== ====== ====== ======
Risk Element Assets
Risk element assets consist of nonaccrual loans, renegotiated loans,
other real estate, loans past due 90 days or more, potential problem
loans and loan concentrations. Table 9 depicts certain categories of
the Company's risk element assets as of December 31, for each of the
last five years. Potential problem loans and loan concentrations are
discussed within the narrative portion of this section.
The Company's nonperforming loans decreased $1.4 million, or 45.1%,
from a level of $3.0 million at December 31, 1996 to $1.6 million at
December 31, 1997. During 1997, loans totaling approximately $6.0 million
were added, while loans totaling $7.4 million were removed from nonaccruing
status. Where appropriate, management has allocated specific reserves
to absorb anticipated losses. Of the $7.4 million removed from the
nonaccrual category, $2.8 million consists of principal reductions,
$1.1 million represented loans transferred to ORE, $3.1 million consists
of loans brought current and returned to an accrual status and loans
refinanced, and $400,000 were charged off. A majority of the Company's
charge-offs in 1997 were in the consumer portfolio where loans are charged
off based on past due status and are not recorded as nonaccruing loans.
Table 8
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars in Thousands)
1997 1996 1995 1994 1993
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
in Each in Each in Each in Each in Each
Allow- Category Allow- Category Allow- Category Allow- Category Allow- Category
ance To Total ance To Total ance To Total ance To Total ance To Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
Commercial, Financial
and Agricultural $ 573 7.7% $ 524 8.5% $ 609 10.3% $ 442 9.3% $ 936 11.6%
Real Estate:
Construction 329 6.5 237 6.1 152 6.3 187 5.7 501 5.6
Mortgage 1,790 65.3 2,841 65.1 2,484 58.0 2,938 60.0 2,459 59.7
Consumer 1,841 20.5 1,623 20.3 1,044 25.4 963 25.0 420 23.1
Not Allocated 3,789 - 2,954 - 2,185 - 3,021 - 3,278 -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total $8,322 100.0% $8,179 100.0% $6,474 100.0% $7,551 100.0% $7,594 100.0%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Table 9
RISK ELEMENT ASSETS
(Dollars in Thousands)
As of December 31,
1997 1996 1995 1994 1993
Nonaccruing Loans $1,403 $2,704 $2,996 $4,278 $ 9,353
Restructured 224 262 1,686 1,694 65
------- ------- ------- ------- -------
Total Nonperforming Loans 1,627 2,966 4,682 5,972 9,418
Other Real Estate 1,244 1,489 1,001 1,581 3,466
------- ------- ------- ------- -------
Total Nonperforming Assets $2,871 4,455 $5,683 $7,553 $12,884
======= ======= ======= ======= =======
Past Due 90 Days or More $ 972 $ 536 $ 273 $ 258 $ 104
======= ======= ======= ======= =======
Nonperforming Loans to Loans,
Net of Unearned Interest .23% .44% 1.05% 1.42% 2.36%
======= ======= ======= ======= =======
Nonperforming Assets to Loans,
Net of Unearned Interest,
Plus Other Real Estate .41% .66% 1.28% 1.79% 3.20%
======= ======= ======= ======= =======
Nonperforming Assets to Capital(1) 2.64% 4.56% 6.49% 9.45% 17.24%
======= ======= ======= ======= =======
Reserve to Nonperforming Loans 511.59% 275.76% 138.27% 126.44% 80.64%
======= ======= ======= ======= =======
(1) For computation of this percentage, "capital" refers to Share Owners' equity plus
the allowance for loan losses.
The majority of nonaccrual loans are collateralized with real estate.
Management continually reviews these loans and believes specific reserve
allocations are sufficient to cover the loss exposure associated with
these loans.
Interest on nonaccrual loans is generally recognized only when received.
Cash collected on nonaccrual loans is applied against the principal balance
or recognized as interest income based upon management's expectations as to
the ultimate collectibility of principal and interest in full.
If nonaccruing loans had been recognized on a fully accruing basis, interest
income recorded would have been $67,000 higher for the year ended
December 31, 1997.
Restructured loans are those with reduced interest rates or deferred
payment terms due to deterioration in the financial position of the borrower.
Other real estate totaled $1.2 million at December 31, 1997 versus
$1.5 million at December 31, 1996. This category includes property
owned by Capital City Bank which was acquired either through foreclosure
procedures or by receiving a deed in lieu of foreclosure. During 1997,
the Company added properties totaling $2.7 million (including parcels of
bank premises) and partially or completely liquidated properties totaling
$3.0 million, resulting in a net decrease in other real estate of $300,000.
Management does not anticipate any significant losses associated with
other real estate.
Potential problem loans are defined as those loans which are now current
but where management has doubt as to the borrower's ability to comply
with present loan repayment terms. Potential problem loans totaled
$3.5 million at December 31, 1997.
Loan concentrations are considered to exist when there are amounts
loaned to a multiple number of borrowers engaged in similar activities
which cause them to be similarly impacted by economic or other
conditions and such amounts exceed 10% of total loans.
Due to the lack of diversified industry within the markets served
by the Bank and the relatively close proximity of the markets,
the Company has both geographic concentrations as well as concentrations
in the types of loans funded. Further, due to the nature of the Company's
markets, a significant portion of the portfolio is associated either
directly or indirectly with real estate. At December 31, 1997,
approximately 72.0% of the portfolio consisted of real estate loans.
Residential properties comprise approximately 65% of the real estate
portfolio.
Management is continually analyzing its loan portfolio in an effort to
identify and resolve its problem assets as quickly and efficiently as
possible. As of December 31, 1997, management believes it has identified
and adequately reserved for such problem assets. However, management
recognizes that many factors can adversely impact various segments of
its markets, creating financial difficulties for certain borrowers.
As such, management will continue to focus its attention on promptly
identifying and providing for potential losses as they arise.
Investment Securities
Due to strong competition for deposits, proceeds from maturities in the
investment portfolio have been used to fund loan growth rather than
purchase additional securities. In 1997, the Company's average investment
portfolio decreased $32.9 million, or 15.5%, compared to an increase of
$2.1 million, or 1.0% in 1996. As a percentage of average earning assets,
the investment portfolio represented 20.0% in 1997, compared to 26.1% in
1996.
In 1997, average taxable investments decreased $28.0 million, or 20.2%,
while tax-exempt investments decreased $4.9 million, or 6.6%. Since the
enactment of the Tax Reform Act of 1986, which significantly reduced the
tax benefits associated with tax- exempt investments, management has
monitored the level of tax-exempt investments. The tax-exempt portfolio,
as a percent of average earning assets, has declined from 18.9% in 1986
to 7.7% in 1997. Management will continue to purchase "bank qualified"
municipal issues when it considers the yield to be attractive and the
Company can do so without adversely impacting its tax position.
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 may be classified as
held-to-maturity, available-for-sale or trading. Following a determination
by the regulatory agencies during 1995 that the net unrealized gain (loss)
would be excluded from the computation of regulatory capital, management
transferred all securities classified as held-to-maturity to
available-for-sale. As of December 31, 1997, all securities are classified
as available-for-sale. Classifying securities as available-for-sale
offers management full flexibility in managing its liquidity and interest
rate sensitivity without adversely impacting its regulatory capital levels.
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 share owners' equity.
At December 31, 1997, share owners' equity included a net unrealized gain
of $567,000, compared to $82,000 at December 31, 1996. It is neither
management's intent nor practice to participate in the trading of
investment securities for the purpose of recognizing gains and therefore
the Company does not maintain a trading portfolio.
The average maturity of the total portfolio at December 31, 1997 and 1996,
was 1.93 and 2.35 years, respectively. See Table 10 for a breakdown of
maturities by portfolio.
The weighted average taxable-equivalent yield of the investment portfolio
at December 31, 1997, was 6.44% versus 6.40% in 1996. The quality of the
municipal portfolio at such date is depicted in the chart below.
There were no investments in obligations, other than U.S. Governments,
of any one state, municipality, political subdivision or any other issuer
that exceeded 10% of the Company's share owners' equity at December 31, 1997.
Table 10 and Note 3 in Notes to Consolidated Financial Statements present
a detailed analysis of the Company's investment securities as to type,
maturity and yield.
MUNICIPAL PORTFOLIO QUALITY
(Dollars in Thousands)
Amortized Cost
Moody's Rating Percentage
AAA $40,912 64.3%
AA-1 961 1.5
AA-3 316 .5
AA 3,641 5.7
A-1 3,237 5.1
A 5,386 8.5
BAA 433 .7
Not Rated(1) 8,775 13.7
------- ------
Total $63,661 100.0%
======= ======
(1) Of the securities not rated by Moody's,
$3.1 million are rated "A" or higher by S&P.
Table 10
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
(Dollars in Thousands) As of December 31, 1997
Weighted
Amortized Cost Market Value Average Yield(1)
U. S. GOVERNMENTS
Due in 1 year or less $ 26,865 $ 26,868 5.63%
Due over 1 year thru 5 years 28,517 28,553 6.14
Due over 5 years thru 10 years 999 993 6.27
Due over 10 years - - -
-------- -------- -----
TOTAL 56,381 56,414 5.89
STATE & POLITICAL SUBDIVISIONS
Due in 1 year or less 13,094 13,132 6.91
Due over 1 year thru 5 years 48,611 49,122 6.69
Due over 5 years thru 10 years 1,956 1,990 7.02
Due over 10 years - - -
-------- -------- -----
TOTAL 63,661 64,244 6.75
MORTGAGE BACKED SECURITIES (2)
Due in 1 year or less 2,641 2,680 5.50
Due over 1 year thru 5 years 20,003 20,242 6.94
Due over 5 years thru 10 years - - -
Due over 10 years - - -
-------- ------- -----
TOTAL 22,644 22,922 6.82
OTHER SECURITIES
Due in 1 Year or less 500 501 6.28
Due over 1 year thru 5 years 497 497 6.09
Due over 5 years thru 10 years - - -
Due over 10 years* 3,936 3,936 6.47
-------- -------- -----
TOTAL 4,933 4,934 6.41
-------- -------- -----
Total Investment Securities $147,619 $148,514 6.44%
======== ======== =====
*Federal Home Loan Bank Stock and Federal Reserve Bank Stock do not have stated maturities.
(1) Weighted average yields are calculated on the basis of the amortized cost of the security. The weighted
average yields on tax-exempt obligations are computed on a taxable-equivalent basis using a 35% tax rate.
(2) Based on weighted average life.
AVERAGE MATURITY (In Years) AS OF DECEMBER 31, 1997
U.S. Governments .95
State and Political Subdivisions 2.32
Mortgage Backed Securities 3.44
TOTAL 1.93
Deposits And Funds Purchased
Average total deposits increased from $770.5 million in 1996 to $836.9
million in 1997, representing an increase of $66.4 million, or 8.6%,
compared with an increase of $113.1 million, or 17.2%, in 1996.
The year-over-year increase in annual averages in both 1997 and 1996 is
attributable to the acquisition of First Financial. During 1997,
anticipated deposit run-off associated with the First Financial transaction
and strong competition for deposits resulted in an overall decline in total
deposits.
In the fourth quarter of 1997, deposits averaged $828.2 million,
compared to $858.3 million for the same period in 1996. Over the past
several years, the Company has experienced a notable increase in competition
for deposits, in terms of both rate and product.
In recent years, a significant portion of the Company's growth has been
in certificates of deposit. At the time of the First Financial acquisition,
certificates of deposit constituted 75% of the acquired deposit base,
further accentuating the shift in the deposit mix. In the fourth quarter
of 1997, certificates of deposit represented approximately 45% of the
Company's total deposits compared to 39% in the fourth quarter of 1995.
Table 2 provides an analysis of the Company's average deposits, by category,
and average rates paid thereon for each of the last three years. Table 11
reflects the shift in the Company's deposit mix over the last three years
and Table 12 provides a maturity distribution of time deposits in
denominations of $100,000 and over.
Average funds purchased, which include federal funds purchased and
securities sold under agreements to repurchase, increased $6.3 million,
or 25.2%. See Note 8 in the Notes to Consolidated Financial Statements
for further information.
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements
(Dollars in Thousands)
1997 1996 1995
Year End Balance $44,622 $28,697 $17,367
Rate at Year End 4.46% 5.97% 4.79%
Average Balance $31,518 $25,181 $19,308
Average Rate 5.26% 4.88% 5.45%
Maximum Outstanding
at Month-End $44,621 $33,349 $27,806
Table 11
SOURCES OF DEPOSIT GROWTH
(Average Balances - Dollars in Thousands)
1996 to Percentage
1997 of Total Components of Total Deposits
Change Change 1997 1996 1995
Noninterest Bearing
Deposits $13,443 20.3% 22.0% 22.2% 24.4%
NOW Accounts 1,737 2.6 12.5 13.3 13.9
Money Market Accounts (4,821) (7.3) 9.6 11.1 10.7
Savings (934) (1.4) 10.2 11.2 13.0
Other Time 56,945 85.8 45.7 42.2 38.0
------- ------ ------ ------ ------
Total Deposits $66,370 100.0% 100.0% 100.0% 100.0%
======= ====== ====== ====== ======
Table 12
MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 OR OVER
(Dollars in Thousands)
December 31, 1997
Time Certificates of Deposit Percent
Three months or less $22,305 43.2%
Over three through six months 13,576 26.3
Over six through twelve months 11,840 22.9
Over twelve months 3,925 7.6
------- ------
Total $51,646 100.0%
======= ======
LIQUIDITY AND CAPITAL RESOURCES
Liquidity for a banking institution is the availability of funds to meet
increased loan demand and/or excessive deposit withdrawals. Management
monitors the Company's financial position to ensure it has 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 include cash received through ordinary business activities
(i.e. collection of interest and fees), federal funds sold, loan and
investment maturities, bank lines of credit for the Company and approved
lines for the purchase of federal funds by CCB.
As of December 31, 1997, the Company has a $25.0 million credit facility
under which $12 million is currently available. The facility offers the
Company an unsecured, revolving line of credit for a period of three years
which matures in November 1998. Upon expiration of the revolving line of
credit, the outstanding balance may be converted to a term loan and repaid
over a period of seven years. The term loan is to be secured by stock of a
subsidiary bank equal to at least 125% of the principal balance of the term
loan. The Company, at its option, may select from various loan rates
including Prime, LIBOR or the Certificate of Deposit ("CD") rate, plus or
minus increments thereof. The LIBOR or CD rates may be fixed for a period
of up to six months. The Company also has the option to select fixed rates
for periods of one through five years. On July 1, 1996, the Company borrowed
$15.0 million in connection with the acquisition of First Financial.
In 1997, the Company reduced the amount of debt to $13.0 million. The average
interest rate during 1997 was 6.81%.
The Company's credit facility imposes certain limitations on the level of
the Company's equity capital, and federal and state regulatory agencies
have established regulations which govern the payment of dividends to a
bank holding company by its bank subsidiaries. Based on the Company's
current financial condition, these limitations and/or regulations do not
impair the Company's ability to meet its cash obligations or limit the
Company's ability to pay future dividends on its common stock.
At December 31, 1997, the Company had $2.9 million in long-term debt
outstanding to the Federal Home Loan Bank of Atlanta. The debt consists
of two loans. The interest rates are fixed and the weighted average rate
at December 31, 1997 was 6.10%. Required annual principal reductions
approximate $176,000, with the remaining balances due at maturity in 2005
and 2006. The debt was used to match-fund selected lending activities
and is secured by first mortgage residential real estate loans which
are included in the Company's loan portfolio.
The Company is a party to financial instruments with off-balance-sheet
risks in the normal course of business to meet the financing needs of its
customers. At December 31, 1997, the Company had $150.8 million in
commitments to extend credit and $1.9 million in standby letters of credit.
Commitments to extend credit are agreements to lend to a customer so long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. Standby
letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. The Company uses
the same credit policies in establishing commitments and issuing letters of
credit as it does for on-balance-sheet instruments. If commitments arising
from these financial instruments continue to require funding at historical
levels, management does not anticipate that such funding will adversely
impact its ability to meet on-going obligations.
It is anticipated capital expenditures will approximate $3.0 to $4.0 million
over the next twelve months. Management believes these capital expenditures
can be funded internally without impairing the Company's ability to meet its
on-going obligations.
Share owners' equity as of December 31, for each of the last three years
is presented below.
Share Owners' Equity
(Dollars in Thousands)
1997 1996 1995
Common Stock $ 58 $ 58 $ 58
Additional Paid-in-Capital 6,537 4,934 3,884
Retained Earnings 93,288 84,426 76,248
------- ------- -------
Subtotal 99,883 89,418 80,190
Net Unrealized Gains on
Available-for-Sale Investment
Securities, Net of Tax 567 82 968
------- ------- -------
Total Share Owners'
Equity $100,450 $89,500 $81,158
======== ======= =======
The Company continues to maintain a strong capital position. The ratio
of share owners' equity to total assets at year-end was 9.95%, 8.76%,
and 9.97% in 1997, 1996, and 1995, respectively. The lower capital ratio
in 1996 reflects the acquisition of First Financial which was accounted
for as a purchase.
The Company is subject to risk-based capital guidelines that measure
capital relative to risk weighted assets and off-balance-sheet financial
instruments. Capital guidelines issued by the Federal Reserve Board require
bank holding companies to have a minimum total risk-based capital ratio of
8.00%, with at least half of the total capital in the form of Tier 1 capital.
Capital City Bank Group, Inc., significantly exceeded these capital
guidelines, with a total risk-based capital ratio of 15.10% and a Tier 1
ratio of 13.86%, compared to 13.51% and 12.27%, respectively, in 1996.
In addition, a tangible leverage ratio is now being used in connection
with the risk-based capital standards and is defined as Tier 1 capital
divided by average assets. The minimum leverage ratio under this standard
is 3% for the highest-rated bank holding companies which are not undertaking
significant expansion programs. An additional 1% to 2% may be required for
other companies, depending upon their regulatory ratings and expansion plans.
On December 31, 1997, the Company had a leverage ratio of 9.19% compared
to 7.87% in 1996. See Note 13 in the Notes to Consolidated Financial
Statements for additional information as to the Company's capital adequacy.
Dividends declared and paid totaled $.615 per share in 1997. During the
fourth quarter of 1997 the quarterly dividend was raised ten percent from
$.150 per share to $.165 per share. In 1996, the Board of Directors
converted the Company's dividend schedule from semi-annual to quarterly
payments. The Company declared dividends of $.555 per share in 1996 and
$.500 per share in 1995. The dividend payout ratio was 28.8%, 28.0%, and
29.9% for 1997, 1996 and 1995, respectively. Dividends declared per share
in 1997 represented a 10.8% increase over 1996.
At December 31, 1997, the Company's common stock had a book value of $17.17
per share compared to $15.49 in 1996. Beginning in 1994, book value has
been impacted by the net unrealized gains and losses on investment
securities available-for-sale. At December 31, 1997, the net unrealized
gain was $567,000. At December 31, 1996, the Company had a net unrealized
gain of $82,000 and thus the net impact on equity for the year was an
increase in book value of $485,000, or $.08 per share.
The Company began a stock repurchase plan in 1989, which remains in effect
and provides for the repurchase of up to 600,000 shares. As of December 31,
1997, the Company had repurchased 527,160 shares under the plan. No shares
were repurchased during 1997.
The Company offers an Associate Incentive Plan under which certain
associates are eligible to earn shares of CCBG stock based upon achieving
established performance goals. The Company issued 20,722 shares in 1997
under this plan.
The Company also offers stock purchase plans to its associates and directors.
In 1997, 42,199 shares were issued under these plans.
The Board of Directors approved a Dividend Reinvestment and Optional Stock
Purchase Plan for the Company in December, 1996. Share owners were able to
participate in this plan beginning in the second quarter of 1997. In 1997,
9,368 shares were issued under this plan.
The Company offers a 401(k) Plan which enables associates to defer a portion
of their salary on a pre-tax basis. The plan covers substantially all of the
Company associates who meet the minimum age requirement. The Plan is designed
to enable participants to elect to have an amount withheld from their
compensation in any plan year and placed in the 401(k) Plan trust account.
Matching contributions from the Company can be made up to 6% of the
participant's compensation. During 1997, no contributions were made by the
Company. The participants may choose to invest their contributions into
seven investment funds which include CCBG common stock.
Inflation
The impact of inflation on the banking industry differs significantly from
that of other industries in which a large portion of total resources are
invested in fixed assets such as property, plant and equipment.
Assets and liabilities of financial institutions are virtually all monetary
in nature, and therefore are primarily impacted by interest rates rather
than changing prices. While the general level of inflation underlies most
interest rates, interest rates react more to change in the expected rate of
inflation and to changes in monetary and fiscal policy. Net interest income
and the interest rate spread are good measures of the Company's ability to
react to changing interest rates and are discussed in further detail in the
section entitled "Earnings Analysis."
Year 2000 Compliance
In 1996, Capital City Bank Group initiated the process of preparing its
computer systems and applications for the Year 2000. This process involves
modifying or replacing certain hardware and software maintained by the
Company as well as communicating with external service providers to ensure
they are taking the necessary action steps required to remedy their
Year 2000 issues. The Company expects to have substantially all of the
system and application changes completed by the end of 1998. The Company
believes that its level of preparedness is appropriate and will have a year
to test in 1999.
The Company estimates the total cumulative cost of the Year 2000 project
will be approximately $400,000. This total includes external personnel
costs related to modifying the systems and the cost of purchasing or leasing
certain hardware or software. Personnel and all other operating costs
related to the Year 2000 project are being expensed as incurred.
The expected completion date and costs of the project are based upon the
Company's current best estimates.
Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." SFAS 125 provides new accounting and reporting standards for
sales, securitizations, and servicing of receivables and other financial
assets, for certain secured borrowing and collateral transactions, and for
extinguishment of liabilities. The adoption of this standard on January 1,
1997, did not have a material impact on the financial condition or results
of operations of the Company.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share".
SFAS 128 provides new accounting and reporting standards for reporting basic
and diluted earnings per share. The adoption of this standard on January 1,
1997 did not have a material impact on the reported results of
operations of the Company.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
About Capital Structure". SFAS 129 provides new accounting and reporting
standards for disclosing information about an entity's capital structure.
The adoption of this standard on January 1, 1997 did not have a material
impact on the reported results of operation of the Company.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
Statement 130 provides new accounting and reporting standards for reporting
and displaying comprehensive income and its components in a full set of
general-purpose financial statements. The adoption of this standard on
January 1, 1998 did not have a material impact on the financial condition or
results of operation of the Company.
Item 7A. Quantitative and Qaulitative Disclosure About 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 13.
This table presents the Company's consolidated interest rate sensitivity
position as of year-end 1997 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 values
presented in Table 13 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.
Table 13
FINANCIAL ASSETS AND LIABILITITES MARKET RISK ANALYSIS (1)
(Dollars in Thousands)
Other Than Trading Portfolio December 31, 1997
Fair
1998 1999 2000 2001 2002 Beyond Total Value
Loans
Fixed Rate $ 28,634 $ 24,708 $ 35,554 $ 44,508 $ 37,373 $ 41,287 $212,064 $213,640
Average Interest Rate 9.07% 10.11% 10.02% 9.07% 8.99% 8.76% 9.27%
Floating Rate (2) 353,811 77,325 28,336 11,663 12,508 3,499 487,142 490,763
Average Interest Rate 8.96% 8.06% 8.56% 8.02% 8.59% 8.82% 8.76%
Investment Securities (3)
Fixed Rate 69,762 17,133 16,925 12,346 6,720 8,833 131,719 131,719
Average Interest Rate 6.02% 6.35% 6.55% 6.55% 6.70% 6.11% 6.22%
Floating Rate - - 1,106 3,591 11,602 496 16,795 16,795
Average Interest Rate - - 5.92% 7.55% 6.92% 6.28% 6.97%
Other Earning Assets
Fixed Rates - - - - - - - -
Average Interest Rates - - - - - - -
Floating Rates 49,200 - - - - 3,319 52,519 52,519
Average Interest Rates 5.35% - - - - 5.01 5.33%
Total Financial Assets $501,407 $119,166 $ 81,921 $ 72,108 $ 68,203 $ 57,434 $900,239 $905,436
Average Interest Rates 8.20% 8.24% 8.75% 8.39% 8.34% 8.12% 8.28%
Deposits (4)
Fixed Rate Deposits $320,835 $ 26,611 $ 18,672 $ 2,961 $ 1,287 $ - $370,366 $372,550
Average Interest Rates 5.26% 5.43% 5.96% 5.38% 5.78% - 5.31%
Floating Rate Deposits 272,649 - - - - - 272,649 272,649
Average Interest Rates 1.92% - - - - - 1.92%
Other Interest Bearing
Liabilities
Fixed Rate Debt 176 176 176 176 176 2,016 2,896 2,896
Average Interest Rate 6.14% 6.14% 6.14% 6.14% 6.14% 6.14% 6.14%
Floating Rate Debt 59,114 - - - - - 59,114 59,114
Average Interest Rate 5.54% - - - - - 5.54%
Total Financial Liabilities $652,774 $ 26,787 $ 18,848 $ 3,137 $ 1,463 $ 2,016 $705,209 $707,547
Average interest Rate 3.89% 5.43% 5.96% 5.42% 5.82% 6.13% 4.02%
(1) Based upon expected cash flows, 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 1998. Other time deposits balances are classified according to maturity.
Item 8. Financial Statements and Supplementary Data
Table 14
QUARTERLY FINANCIAL DATA
UNAUDITED
(Dollars in Thousands, Except Per Share Data) (1)
1997 1996
Fourth Third Second First Fourth Third Second First
Summary of Operations:
Interest Income $ 19,008 $ 19,362 $ 18,865 $ 18,429 $ 18,850 $ 19,019 $ 14,141 $ 14,161
Interest Expense 7,302 7,402 7,360 7,076 7,651 7,785 4,888 5,095
---------- ---------- -------- -------- ---------- ---------- -------- --------
Net Interest Income 11,706 11,960 11,505 11,353 11,199 11,234 9,253 9,066
Provision for Loan Loss 437 449 446 456 606 334 262 261
---------- ---------- -------- -------- ---------- ---------- -------- --------
Net interest Income
After Provision
for Loan Loss 11,269 11,511 11,059 10,897 10,593 10,900 8,991 8,805
Noninterest Income 4,895 4,394 4,852 4,450 4,497 4,436 3,826 3,558
Noninterest Expense 12,012 10,974 10,978 10,801 10,740 10,885 8,852 8,778
---------- ---------- -------- -------- ---------- ---------- -------- --------
Income Before
Provision for
Income Taxes 4,152 4,931 4,933 4,546 4,350 4,451 3,965 3,585
Provision for
Income Taxes 1,299 1,664 1,657 1,504 1,384 1,405 1,183 1,018
---------- ---------- -------- -------- ---------- ---------- -------- --------
Net Income $ 2,853 $ 3,267 $ 3,276 $ 3,042 $ 2,966 $ 3,046 $ 2,782 $ 2,567
========== ========== ======== ======== ========== ========== ======== ========
Net Interest
Income (FTE) $ 12,059 $ 12,366 $ 11,929 $ 11,780 $ 11,676 $ 11,638 $ 9,682 $ 9,527
Per Common Share:
Basic Net Income $ .49 $ .56 $ .56 $ .53 $ .52 $ .53 $ .48 $ .45
Diluted Net Income .48 .56 .56 .53 .51 .53 .48 .45
Dividends Declared .165 .15 .15 .15 .15 .135 .135 .135
Book Value 17.17 16.84 16.37 15.83 15.49 15.00 14.57 14.38
Market Price (2):
High 41.00 35.25 32.25 32.00 21.00 21.00 19.00 18.00
Low 34.50 31.25 29.00 21.00 21.00 19.00 18.00 15.00
Close 40.50 34.75 31.25 30.25 21.00 21.00 19.00 18.00
Selected Average
Balances:
Loans, Net of Unearned $ 700,158 $ 704,222 $687,280 $678,730 $ 672,672 $ 651,752 $464,713 $452,579
Earning Assets 898,383 905,722 902,970 896,130 926,169 923,828 703,816 705,517
Total Assets 1,001,661 1,003,170 999,888 999,837 1,029,891 1,026,111 790,667 791,194
Total Deposits 828,239 838,732 842,847 839,959 858,301 874,603 673,755 673,231
Total Share Owners'
Equity 98,920 96,448 92,375 90,621 87,580 84,788 83,939 82,003
Basic Average Common
Shares 5,838 5,830 5,796 5,792 5,744 5,742 5,724 5,720
Ratios:
ROA 1.13% 1.29% 1.31% 1.23% 1.15% 1.18% 1.42% 1.30%
ROE 11.45% 13.44% 14.22% 13.61% 13.47% 14.20% 13.33% 12.59%
Net Interest
Margin (FTE) 5.33% 5.42% 5.30% 5.32% 5.03% 5.02% 5.53% 5.43%
(1) All share and per share data have been adjusted to reflect the two-for-one stock split effective April 1,
1997.
(2) Prior to February 3, 1997, there was not an established trading market for the common stock.
CONSOLIDATED FINANCIAL STATEMENTS
39
Report of Independent Certified Public Accountants
40
Consolidated Statements of Financial Condition
41
Consolidated Statements of Income
42
Consolidated Statements of Changes in Share Owners' Equity
43
Consolidated Statements of Cash Flows
45
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Share Owners and Board of Directors of
Capital City Bank Group, Inc.
We have audited the accompanying consolidated statements of financial
condition of Capital City Bank Group, Inc. (a Florida Corporation) and
subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, changes in share owners' equity and
cash flows for each of the three years in the period ended December
31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Capital
City Bank Group, Inc. and subsidiaries as of December 31, 1997 and
1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Jacksonville, Florida
January 28, 1998
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (1)
(Dollars in Thousands, Except Per Share Data) As of December 31,
1997 1996
ASSETS
Cash and Due From Banks $ 61,270 $ 62,863
Federal Funds Sold 49,200 21,300
Interest Bearing Deposits in Other Banks 3,319 4,743
Investment Securities Available-for-Sale 148,514 207,189
Loans 699,206 674,675
Unearned Interest (1,480) (2,479)
Allowance for Loan Losses (8,322) (8,179)
---------- ----------
Loans, Net 689,404 664,017
Premises and Equipment 31,613 34,006
Accrued Interest Receivable 6,293 6,877
Intangibles 7,703 8,398
Other Assets 12,357 12,006
---------- ----------
Total Assets $1,009,673 $1,021,399
========== ==========
LIABILITIES
Deposits:
Noninterest Bearing Deposits $ 191,797 $ 196,486
Interest Bearing Deposits 643,015 670,210
---------- ----------
Total Deposits 834,812 866,696
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements 44,622 28,697
Other Short-Term Borrowings 1,492 7,260
Long-Term Debt 15,896 18,072
Other Liabilities 12,401 11,174
---------- ----------
Total Liabilities 909,223 931,899
SHARE OWNERS' EQUITY
Preferred Stock; $.01 par value, 3,000,000 shares
authorized; no shares issued and outstanding - -
Common Stock, $.01 par value; 60,000,000 shares
authorized; 5,850,723 and 5,778,360 shares
issued and outstanding 58 58
Additional Paid In Capital 6,537 4,934
Retained Earnings 93,288 84,426
Net Unrealized Gain on Available-
for-Sale Investment Securities,
net of tax 567 82
---------- ----------
Total Share Owners' Equity 100,450 89,500
Total Liabilities and
Share Owners' Equity $1,009,673 $1,021,399
========== ==========
========== ==========
(1) All share and per share data have been adjusted to reflect the
two-for-one stock split effective April 1, 1997.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data) (1)
For the Years Ended December 31,
1997 1996 1995
INTEREST INCOME
Interest and Fees on Loans $64,001 $51,857 $40,826
Investment Securities:
U.S. Treasury 1,943 3,089 4,205
U.S. Government Agencies and Corporations 2,840 4,054 3,087
States and Political Subdivisions 3,176 3,477 3,444
Mortgage Backed Securities 1,826 1,173 413
Other Securities 350 332 261
Deposits in Other Banks 194 233 2
Federal Funds Sold 1,334 1,956 2,239
------- ------- -------
Total Interest Income 75,664 66,171 54,477
INTEREST EXPENSE
Deposits 25,995 23,080 19,382
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 1,659 1,229 1,053
Other Short-Term Borrowings 315 422 49
Long-Term Debt 1,171 688 4
------- ------- -------
Total Interest Expense 29,140 25,419 20,488
------- ------- -------
Net Interest Income 46,524 40,752 33,989
Provision for Loan Losses 1,788 1,463 293
------- ------- -------
Net Interest Income After Provision for
Loan Losses 44,736 39,289 33,696
------- ------- -------
NONINTEREST INCOME
Service Charges on Deposit Accounts 8,140 7,670 5,649
Data Processing 3,160 2,969 2,608
Income from Fiduciary Activities 1,202 1,164 942
Securities Transactions (6) 50 8
Other 6,095 4,463 3,963
------- ------- -------
Total Noninterest Income 18,591 16,316 13,170
------- ------- -------
NONINTEREST EXPENSE
Salaries and Employee Benefits 24,022 21,036 17,959
Occupancy, Net 3,074 2,681 2,538
Furniture and Equipment 4,787 4,266 3,346
Other 12,882 11,272 9,623
------- ------- -------
Total Noninterest Expense 44,765 39,255 33,466
------- ------- -------
Income Before Income Taxes 18,562 16,350 13,400
Income Taxes 6,124 4,990 3,878
------- ------- -------
NET INCOME $12,438 $11,360 $ 9,522
======= ======= =======
BASIC NET INCOME PER SHARE $ 2.14 $ 1.98 $ 1.67
======= ======= =======
DILUTED NET INCOME PER SHARE $ 2.13 $ 1.97 $ 1.67
======= ======= =======
Basic Average Common Shares Outstanding 5,814 5,732 5,706
======= ======= =======
Diluted Average Common Shares Outstanding 5,836 5,759 5,707
======= ======= =======
(1) All share and per share data have been adjusted to reflect the two-for-one stock split
effective April 1, 1997.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHARE OWNERS' EQUITY
(Dollars in Thousands, Except per Share Data) (1)
Unrealized Gains (Losses)
on Investment
Additional Securities Available-
Common Paid In Retained for-Sale
Stock Capital Earnings Net of Taxes Total
Balance, December 31, 1994 $58 $3,647 $69,579 $(884) $ 72,400
Net Income 9,522 9,522
Cash Dividends
($.500 per share) (2,853) (2,853)
Issuance of Common Stock 237 237
Transfer of Held-to-Maturity
Securities to Available-for-Sale 503 503
Net Change In Unrealized
Gains (Losses) 1,349 1,349
_____ ______ _______ ______ _______
Balance, December 31, 1995 58 3,884 76,248 968 81,158
Net Income 11,360 11,360
Cash Dividends
($.555 per share) (3,182) (3,182)
Issuance of Common Stock 1,050 1,050
Net Change In Unrealized
Gains (Losses) (886) (886)
_____ ______ _______ ______ ________
Balance, December 31, 1996 58 4,934 84,426 82 89,500
Net Income 12,438 12,438
Cash Dividends (3,576) (3,576)
($.615 per share)
Issuance of Common Stock 1,603 1,603
Net Change In Unrealized
Gains (Losses) 485 485
______ ______ _______ ______ ________
Balance, December 31, 1997 $58 $6,537 $93,288 $ 567 $100,450
(1) All share and per share data have been adjusted to reflect the two-for-one stock split effective April 1, 1997.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the Years Ended December 31,
1997 1996 1995
Cash Flow From Operating Activities:
Net Income $ 12,438 $ 11,360 $ 9,522
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 1,788 1,463 293
Depreciation and Amortization 3,243 4,336 2,613
(Gain) on Sale of Properties (275) (40) (83)
(Gain) on Sale of Mortgage Loans (803) (194) -
Non-Cash Compensation 563 589 206
Deferred Income Taxes 213 1,043 893
Net (Increase) Decrease in
Interest Receivable 584 (2,018) (1,793)
Net (Increase) Decrease in
Other Assets (563) 3,403 1,450
Net Increase in
Other Liabilities 1,226 4,198 3,817
------- ------- -------
Net Cash Provided by Operating Activities 18,414 24,140 16,918
-------- ------- -------
Cash Flows From Investing Activities:
Proceeds from Payments/Maturities of
Investment Securities Held-to-Maturity - - 32,486
Proceeds from Payments/Maturities of
Investment Securities Available-for-Sale 62,453 74,113 48,529
Proceeds from Sales of Investment
Securities Available-for-Sale 293 1,139 -
Purchase of Investment Securities
Held-to-Maturity - - (27,000)
Purchase of Investment Securities
Available-for-Sale (2,925) (54,356) (24,539)
Net Increase in Loans (26,372) (36,558) (83,621)
Purchase of Premises & Equipment (1,921) (2,550) (4,482)
Proceeds From Sales of Premises & Equipment 1,379 1,570 89
Net Cash Used to Fund Acquisition - (16,167) -
-------- -------- --------
Net Cash Provided By (Used in)
Investing Activities 32,907 (32,809) (58,538)
-------- -------- --------
Cash Flows From Financing Activities:
Net Increase (Decrease) in Deposits (31,884) (37,988) 51,405
Net Increase in Federal
Funds Purchased 15,925 11,330 3,403
Net Increase (Decrease) in Other
Short-Term Borrowings (5,768) 10,340 1,401
Borrowings of Long-Term Debt - 17,180 1,982
Repayment of Long-Term Debt (2,176) (1,090) -
Dividends Paid (3,576) (5,721) (2,590)
Issuance of Common Stock 1,040 461 15
-------- -------- --------
Net Cash Provided by (Used in) Financing
Activities (26,438) (5,488) 55,616
-------- -------- --------
Net Increase (Decrease) in Cash
and Cash Equivalents 24,883 (14,157) 13,996
Cash and Cash Equivalents at Beginning
of Year 88,906 103,063 89,067
-------- -------- --------
Cash and Cash Equivalents at End
of Year $113,789 $ 88,906 $103,063
======== ======== ========
Supplemental Disclosures:
Interest on Deposits $ 27,844 $ 25,959 $ 18,441
======== ======== ========
Interest Paid on Debt $ 3,145 $ 2,339 $ 1,106
======== ======== ========
Taxes Paid $ 6,309 $ 3,722 $ 2,868
======== ======== ========
Investment Securities Transferred from
Held-to-Maturity To Available-for-Sale $ - $ - $122,630
======== ======== ========
Loans Transferred To Other Real Estate $ 2,687 $ 2,192 $ 647
======== ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Notes to Consolidated Financial Statements
Note 1
SIGNIFICANT ACCOUNTING POLICIES
Basic of Presentation
The consolidated financial statements include the accounts of Capital
City Bank Group, Inc., and its subsidiaries (the "Company"), all of
which are wholly-owned. All material intercompany transactions and
accounts have been eliminated.
The Company follows generally accepted accounting principles and
reporting practices applicable to the banking industry. Prior year
financial statements and other information have been reclassified to
conform to the current year presentation and to reflect a two-for-one
stock split effective April 1, 1997. The principles which materially
affect the financial position, results of operations and cash flows
are summarized below.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could vary
from these estimates; however, in the opinion of management, such
variances would not be material.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks, interest-
bearing deposits in other banks, and federal funds sold. Generally,
federal funds are purchased and sold for one-day periods and all items
have an initial maturity of ninety days or less.
Investment Securities
Investment securities available-for-sale are carried at fair value and
represent securities that are available to meet liquidity and/or other
needs of the Company. Gains and losses are recognized and reported
separately in the Consolidated Statements of Income upon realization
or when impairment of values is deemed to be other than temporary.
Gains or losses are recognized using the specific identification
method. Unrealized holding gains and losses for securities available-
for-sale are excluded from the Consolidated Statements of Income and
reported net of taxes as a separate component of share owners' equity
until realized.
Loans
Loans are stated at the principal amount outstanding, net of unearned
income. Interest income is generally accrued based on outstanding
balances. Fees charged to originate loans and loan origination costs
are deferred and amortized over the life of the loan as a yield
adjustment.
Allowance for Loan Losses
The reserve is that amount considered adequate to absorb possible
losses in the portfolio based on management's evaluations of the size
and current risk characteristics of the loan portfolio. Such
evaluations consider the balance of impaired loans (which are defined
as all nonperforming loans except residential mortgages and groups of
small homogeneous loans), prior loan loss experience as well as the
impact of current economic conditions. Specific provision for loan
losses is made for impaired loans based on a comparison of the
recorded carrying value in the loan to either the present value of the
loan's expected cash flow, the loan's estimated market price or the
estimated fair value of the underlying collateral. Specific and
general provisions for loan losses are also made based on other
considerations.
Loans are placed on a nonaccrual status when management believes the
borrower's financial condition, after giving consideration to economic
conditions and collection efforts, is such that collection of interest
is doubtful. Generally, loans are placed on nonaccrual status when
interest becomes past due 90 days or more, or management deems the
ultimate collection of principal and interest is in doubt.
Long-Lived Assets
Premises and equipment are stated at cost less accumulated
depreciation, computed on the straight-line method over the estimated
useful lives for each type of asset. Additions and major facilities
are capitalized and depreciated in the same manner. Repairs and
maintenance are charged to operating expense as incurred.
Intangible assets consist primarily of goodwill which was recognized
in connection with the various acquisitions and core deposit assets.
All intangible assets are being amortized on the straight-line method
over various periods ranging from five to 25 years with the majority
being written off over an average life of approximately 15 years.
The amortization of all intangible assets was approximately $856,000
in 1997, $570,000 in 1996, and $250,000 in 1995.
The Company adopted SFAS No. 122, "Accounting for Mortgage Servicing
Rights" on January 1, 1996 and SFAS No. 125 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities"
on January 1, 1997. The adoption of SFAS Nos. 122 and 125 did not
have a significant impact on the financial condition or results of
operations of the Company.
Long-lived assets are evaluated regularly for other-than-temporary
impairment. If circumstances suggest that their value may be impaired
and the write-down would be material, an assessment of recoverability
is performed prior to any write-down of the asset.
Income Taxes
The Company files consolidated federal and state income tax returns.
In general, the parent company and its subsidiaries compute their tax
provisions as separate entities prior to recognition of any tax
expenses which may accrue from filing a consolidated return.
Deferred income tax assets and liabilities result from temporary
differences between the tax bases of assets and liabilities and their
reported amounts in the financial statements that will result in
taxable or deductible amounts in future years.
Note 2
BUSINESS COMBINATION
Effective July 1, 1996, the Company acquired all of the outstanding
shares of First Financial Bancorp, Inc.("First Financial"), parent
company of First Federal Bank, for $20 million in cash. At the time
of the acquisition, First Financial had approximately $244 million in
assets, $192 million in loans, $205 million in deposits, $15 million
in equity and operated five branch locations in North Florida. The
acquisition was accounted for under the purchase method of accounting.
Accordingly, the Company's consolidated results of operations only
reflect First Financial's operations for the periods subsequent to
June 30, 1996.
The purchase price of First Financial has been allocated to the
underlying assets and liabilities based on the estimated fair values
as of the acquisition date. The Company recorded approximately $7.5
million of intangibles, primarily goodwill related to this
acquisition. These assets are being amortized over periods not
exceeding 15 years for financial reporting purposes. A significant
portion of the amortization of the intangible assets is not deductible
for tax purposes.
The following table sets forth the unaudited pro forma summary results
of operations for the years ended December 31, 1996 and 1995, assuming
the acquisition of First Financial, including the related debt
financing, had been consummated as of January 1, 1995. The pro forma
results are not necessarily indicative of the results that would have
been achieved had the acquisition occurred on January 1, 1995, or that
may occur in the future.
(Dollars in Thousands) 1996 1995
Net Interest Income $43,951 $39,457
Net Income 11,444 9,858
Net Income Per Share 3.99 3.46
Note 3
INVESTMENT SECURITIES
The amortized cost and related market value of investment securities
at December 31, were as follows:
(Dollars in Thousands)
1997
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Treasury $ 24,345 $ 42 $ 4 $ 24,383
U.S. Government Agencies
and Corporations 32,036 55 60 32,031
States and Political
Subdivisions 63,661 593 10 64,244
Mortgage Backed Securities 22,644 326 48 22,922
Other Securities 4,933 1 - 4,934
-------- ------ ---- --------
Total Investment Securities $147,619 $1,017 $122 $148,514
======== ====== ==== ========
1996 _
Amortized Unrealized Unrealized Market
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 Investment Securities $207,057 $891 $759 $207,189
The total proceeds from the sale of investment securities and the gross
realized gains and losses from the sale of such securities for each of the
last three years is as follows:
(Dollars in Thousands)
Total Gross Gross
Year Proceeds Realized Gains Realized Losses
1997 $32,014 $ 6 $12
1996 $40,864 $80 $30
1995 $25,296 $11 $ 3
Total proceeds include principal reductions in mortgage backed securities
and proceeds from securities which were called of $29,091,000, $37,359,000,
and $22,546,000, in 1997, 1996, and 1995, respectively.
As of December 31, 1997, the Company's investment securities had the
following maturity distribution based on contractual maturities:
(Dollars in Thousands)
Amortized Cost Market Value
Due in one year or less $ 40,459 $ 40,501
Due after one through five years 77,625 78,172
Due after five through ten years 2,955 2,983
Over ten years 3,936 3,936
Mortgage Backed Securities 22,644 22,922
-------- --------
Total Investment Securities $147,619 $148,514
======== ========
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Securities with an amortized cost of $53,398,000 and $52,074,000 at
December 31, 1997, and 1996, respectively, were pledged to secure public
deposits and for other purposes.
Note 4
LOANS
At December 31, the composition of the Company's loan portfolio was
as follows:
(Dollars in Thousands)
1997 1996
Commercial, Financial and
Agricultural $ 53,888 $ 57,023
Real Estate - Construction 45,563 41,389
Real Estate - Mortgage 456,499 439,110
Consumer 143,256 137,153
-------- --------
Total Gross Loans $699,206 $674,675
======== ========
Nonaccruing loans amounted to $1,403,000 and $2,704,000 at December 31,
1997 and 1996, respectively. Restructured loans amounted to $224,000 and
$262,000 at December 31, 1997 and 1996, respectively. If such nonaccruing
and restructured loans had been on a fully accruing basis, interest income
would have been $67,000 higher in 1997 and $195,000 higher in 1996.
Note 5
ALLOWANCE FOR LOAN LOSSES
An analysis of the changes in the allowance for loan losses for the years
ended December 31, is as follows:
(Dollars in Thousands)
1997 1996 1995
Balance, Beginning of Year $8,179 $6,474 $7,551
Acquired Reserves - 1,769 -
Provision for Loan Losses 1,788 1,463 293
Recoveries on Loans
Previously Charged-Off 785 615 526
Loans Charged-Off (2,430) (2,142) (1,896)
------- ------- -------
Balance, End of Year $8,322 $8,179 $6,474
======= ======= =======
Selected information pertaining to impaired loans, at December 31,
is as follows:
(Dollars in Thousands)
1997 1996
Valuation Valuation
Balance Allowance Balance Allowance
With Related Credit Allowance $ 21 $ 10 $ 592 $ 165
Without Related Credit Allowance 949 - 2,374 -
Average Recorded Investment for
the Period 2,894 - 1,419 -
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. For the years ended December 31, 1997, 1996
and 1995, the Company recognized $140,000, $26,000, and $93,000 in interest
income on impaired loans, of which $138,000, $25,000 and $75,000 was
collected in cash, respectively.
Note 6
PREMISES AND EQUIPMENT
The composition of the Company's premises and equipment at December 31,
was as follows:
(Dollars in Thousands)
1997 1996
Land $ 8,279 $ 9,138
Buildings 24,042 23,186
Fixtures and Equipment 24,062 23,245
------- -------
Total 56,383 55,569
Accumulated Depreciation (24,770) (21,563)
------- -------
Premises and Equipment, Net $31,613 $34,006
======= =======
Note 7
DEPOSITS
Interest bearing deposits, by category, as of December 31, are as follows:
(Dollars in Thousands)
1997 1996
NOW Accounts $113,163 $114,507
Money Market Accounts 79,010 79,352
Savings Accounts 80,476 91,986
Other Time 370,366 384,365
-------- --------
Total $643,015 $670,210
======== ========
Time deposits in denominations of $100,000 or more totaled $51,646,000 and
$71,292,000 at December 31, 1997 and 1996, respectively.
At December 31, 1997 the scheduled maturities of other time deposits are
as follows:
1998 $320,835
1999 26,611
2000 18,672
2001 2,961
2002 and thereafter 1,287
---------
$370,366
=========
The average balances maintained on deposit with the Federal Reserve Bank
for the years ended December 31, 1997 and 1996, were $27,007,000 and
$25,249,000, respectively.
Interest expense on deposits for the three years ended December 31,
is as follows:
(Dollars in Thousands)
1997 1996 1995
NOW Accounts $ 1,765 $ 1,877 $ 1,806
Money Market Accounts 2,407 2,523 2,108
Savings Accounts 1,718 1,813 1,942
Other Time Deposits 20,105 16,867 13,526
------- ------- -------
Total $25,995 $23,080 $19,382
======= ======= =======
Note 8
SHORT-TERM BORROWINGS
Short-term borrowings included the following at December 31:
(Dollars in Thousands)
Securities
Federal Sold Under Other
Fund Repurchase Short-term
Purchased Agreements Borrowings
1997
Balance $29,190 $15,432 $ 1,492
Maximum indebtedness at any month end 29,660 18,930 7,043
Daily average indebtedness outstanding 17,542 13,976 5,976
Average rate paid for the year 5.34% 5.17% 5.27%
Average rate paid on period-end borrowings 4.24% 4.88% 5.36%
1996
Balance $15,865 $12,832 7,260
Maximum indebtedness at any month end 21,150 18,018 28,790
Daily average indebtedness outstanding 14,156 11,025 7,016
Average rate paid for the year 5.22% 4.45% 6.01%
Average rate paid on period-end borrowings 6.38% 4.86% 6.35%
Note 9
LONG-TERM DEBT
Long-term debt included the following at December 31:
(Dollars in Thousands) 1997 1996
Federal Home Loan Bank Note
Due on December 19, 2005, fixed rate of 6.04% 1,762 1,872
Due on December 13, 2006, fixed rate of 6.20% 1,134 1,200
Revolving credit note, due on November 16, 1998,
rates ranging from 6.18% - 7.22% 13,000 15,000
------- -------
Total outstanding $15,896 $18,072
======= =======
The contractual maturites of long-term debt for the five years
succeeding December 31, 1997, are as follows:
1998 $13,176
1999 176
2000 176
2001 176
2002 and thereafter 2,192
-------
$15,896
=======
The Federal Home Loan Bank advances are collateralized by a blanket
security agreement on the Company's real estate loans. Interest on the
Federal Home Loan Bank advances is paid on a monthly basis. Subsequent
to year-end, the Company collarterized these borrowings with U.S. Treasury
Securities, replacing the blanket security agreement.
Upon expiration of the revolving credit, the outstanding balance may
be converted to a term loan and repaid over a period of seven years.
The Company, at its option, may select from various loan rates
including the following: Prime, LIBOR, or the Certificate of Deposit
("CD") rate, plus or minus increments thereof. The LIBOR or CD rates
may be fixed for a period up to six months. The revolving credit is
unsecured, but upon conversion is to be collateralized by common stock
of the subsidiary bank equal to 125% of the principal balance of the loan.
The existing loan agreement places certain restrictions on the amount of
capital which must be maintained by the Company. At December 31, 1997,
the Company was in compliance with all of the terms of the agreement and
had $12 million available under a $25 million line of credit facility.
Note 10
INCOME TAXES
The provision for income taxes reflected in the statement of income is
comprised of the following components:
(Dollars in Thousands)
1997 1996 1995
Current:
Federal $5,054 $3,494 $2,646
State 857 453 339
Deferred:
Federal 182 891 762
State 31 152 131
------ ------ ------
Total $6,124 $4,990 $3,878
====== ====== ======
The net deferred tax asset and the temporary differences comprising
that balance at December 31, 1997 and 1996, are as follows:
(Dollars in Thousands)
1997 1996
Deferred Tax Asset attributable to:
Allowance for Loan Losses $2,514 $2,506
Stock Incentive Plan 764 383
Write down of Real Estate Held for Sale - 196
Other 158 142
------ ------
Total Deferred Tax Asset $3,436 $3,227
Deferred Tax Liability attributable to:
Employee Benefits $1,055 $ 693
Premises and Equipment 883 705
Deferred Loan Fees 392 382
Unrealized Gains on Investment Securities 328 50
Acquired Deposits 177 225
Securities Accretion 94 154
Other 143 163
------ ------
Total Deferred Tax Liability 3,072 2,372
------ ------
Net Deferred Tax Asset $ 364 $ 855
====== ======
Income taxes provided were less than the tax expense computed by
applying the statutory federal income tax rates to income. The
primary differences are as follows:
(Dollars in Thousands)
1997 1996 1995
Statutory Rate 35% 35% 34%
Computed Tax Expense $6,497 $5,722 $4,556
Increases (Decreases)
Resulting From:
Tax-Exempt Interest Income (1,037) (1,100) (1,046)
State Income Taxes,
Net of Federal Income
Tax Benefit 327 293 310
Other 337 75 58
------ ------ ------
Actual Tax Expense $6,124 $4,990 $3,878
====== ====== ======
Note 11
ASSOCIATE BENEFITS
The Company sponsors a noncontributory pension plan covering
substantially all of its employees. Benefits under this plan
generally are based on the associate's years of service and
compensation during the years immediately preceding retirement. The
Company's general funding policy is to contribute amounts deductible
for federal income tax purposes.
The following table details the components of pension expense, the
funded status of the plan, amounts recognized in the Company's
consolidated statements of financial condition, and major assumptions
used to determine these amounts.
(Dollars in Thousands)
1997 1996 1995
Components of Pension
Expense:
Service Cost $ 1,517 $ 1,241 $ 774
Interest Cost 1,331 1,156 983
Actual Return on Plan Assets (4,458) (2,781) (3,029)
Net Amortization and Deferral 2,780 1,532 2,173
------- ------ ------
Total $ 1,170 $ 1,148 $ 901
======= ======= ======
Actuarial Present Value of
Benefit Obligations:
Accumulated Benefit Obligations:
Vested $12,831 $10,753 $ 8,353
Nonvested 1,982 1,816 1,695
------- ------- -------
$14,813 $12,569 $10,048
======= ======= =======
Plan Assets at Fair Value
(primarily listed stocks and
bonds, U.S. Government securities
and interest bearing deposits) $25,826 $20,041 $15,946
Projected Benefit Obligation (21,159) (17,551) (14,565)
Plan Assets in Excess of
Projected Benefit Obligation 4,667 2,490 1,381
Unrecognized Net (Gain) Loss (957) 852 1,636
Unrecognized Net Asset (940) (1,176) (1,412)
-------- -------- --------
Prepaid Pension Cost $ 2,770 $ 2,166 $ 1,605
======== ======= =======
Major Assumptions:
Discount Rate 7.00% 7.50% 7.50%
======= ======= =======
Rate of Increase in
Compensation Levels 5.50% 5.50% 5.50%
======= ======= =======
Expected Long-Term Rate
of Return on Plan Assets 8.25% 8.25% 7.50%
======= ======= =======
In 1996, the Company adopted a Supplemental Employee Retirement Plan
covering selected executives. Benefits under this plan generally are
based on the associate's years of service and compensation during the
years immediately preceding retirement. The Company recognized
expense during 1997 and 1996 of $201,000 and $145,000, respectively,
and recorded a minimum liability of $19,148 at December 31, 1997 and
1996, respectively.
The Company has an Associate Incentive Plan under which shares of the
Company's stock are issued as incentive awards to selected
participants. Five hundred thousand shares of common stock are
reserved for issuance under this plan. The expense recorded related
to this plan was approximately $1,200,000, $740,000 and $424,000 in
1997, 1996 and 1995, respectively. The Company issued 20,722 shares
under the plan in 1997.
The Company has an Associate Stock Purchase Plan under which
associates may elect to make a monthly contribution towards the
purchase of Company stock on a semi-annual basis. Three hundred
thousand shares of common stock are reserved for issuance under the
Stock Purchase Plan. The Company issued 33,419 shares under the plan
in 1997.
In 1996, the Company adopted a Director Stock Purchase Plan. One
hundred thousand shares have been reserved for issuance. In 1997, the
Company issued 8,780 shares under this plan.
In 1997, the Company adopted a 401(k) Plan which enables associates to
defer a portion of their salary on a pre-tax basis. The plan covers
substantially all associates of the Company who meet minimum age
requirements. The plan is designed to enable participants to elect to
have an amount from 1% to 15% of their compensation withheld in any
plan year placed in the 401(k) Plan trust account. Matching
contributions from the Company can be made up to 6% of the
participant's compensation at the discretion of the company. During
1997, no contributions were made by the Company. The participant may
choose to invest their contributions into seven investment funds
available to CCBG participants, including the Company's common stock.
In 1997, the Company adopted a Dividend Reinvestment and Optional
Stock Purchase Plan. Two hundred and fifty thousand shares have been
reserved for issuance. The Company issued 9,368 shares under this
plan in 1997.
Note 12
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
(Dollars in Thousands, Except Per share Data) (1) 1997 1996 1995
Numerator:
Net Income $12,438 $11,360 $9,522
Preferred Stock Dividends - - -
------- ------- -------
Numerator for Basic Earnings Per Share
Income to Common Share Owners' 12,438 11,360 9,522
------- ------- -------
Effect of Dilutive securities:
Preferred stock dividends - - -
------- ------- -------
Numerator for Diluted Earnings Per Share
Income Available to Common Share Owners'
After Assumed Conversions $12,438 $11,360 $9,522
======= ======= =======
Denominator:
Denominator for Basic Earnings Per Share
Weighted-Average Shares 5,814,367 5,732,798 5,706,468
Effects of Dilutive Securities:
Associate Stock Incentive Plan 21,824 26,209 1,030
--------- --------- ---------
Dilutive Potential Common Shares 21,824 26,209 1,030
--------- --------- ---------
Denominator for Diluted Earnings Per Share
Adjusted Weighted-Average Shares and
Assumed Conversions 5,836,191 5,759,007 5,707,498
========= ========= =========
Basic Earnings Per Share $2.14 $1.98 $1.67
========= ========= ==========
Diluted Earnings per Share $2.13 $1.97 $1.67
========= ========== ==========
(1) All share and per share data have been adjusted to reflect the two-for-one stock split
effective April 1, 1997.
The Company adopted SFAS No. 128, "Earnings Per Share" on December 31,
1997. The adoption of the SFAS No. 128 did not have a significant
impact on the financial condition or results of operation.
Note 13
CAPITAL
The Company is subject to various regulatory capital requirements
which involve quantitative measures of the Company's assets,
liabilities and certain off-balance sheet items. The Company's
capital amounts and classification are subject to qualitative
judgments by the regulators about components, risk weightings, and
other factors. Quantitative measures established by regulation to
ensure capital adequacy require that the Company maintain amounts and
ratios (set forth in the table below) of total and Tier I capital to
risk-weighed assets, and of Tier I capital to average assets. As of
December 31, 1997, the Company meets all capital adequacy requirements
to which it is subject.
A summary of actual, required, and capital levels necessary to be
considered well-capitalized for Capital City Bank Group, Inc. ("CCBG,
Inc.") consolidated and its banking subsidiary, Capital City Bank
("CCB") as of December 31, 1997 and December 31, 1996 are shown below:
(Dollars in Thousands)
To Be Well
Required Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 1997:
Tier I Capital:
CCBG, Inc. $ 92,748 13.86% $26,772 4.00% $40,157 6.00%
CCB 101,386 15.18% 26,707 4.00 40,078 6.00
Total Capital:
CCBG, Inc. 101,070 15.10% 53,543 8.00 66,929 10.00
CCB 109,708 16.43% 53,416 8.00 66,796 10.00
Tier I Leverage:
CCBG, Inc. 9.19% 3.00 5.00
CCB 10.05% 3.00 5.00
As of December 31, 1996:
Tier I Capital:
CCBG, Inc. $ 81,102 12.27% $26,439 4.00% $39,658 6.00%
CCB 77,393 13.38% 23,129 4.00 34,694 6.00
Total Capital:
CCBG, Inc. 89,281 13.51% 52,878 8.00 66,097 10.00
CCB 84,382 14.59% 46,258 8.00 57,823 10.00
Tier I Leverage:
CCBG, Inc. 7.87% 3.00 5.00
CCB 8.74% 3.00 5.00
Note 14
DIVIDEND RESTRICTIONS
Substantially all the Company's retained earnings are undistributed
earnings of its banking subsidiary, which are restricted by various
regulations administered by Federal and state bank regulatory
authorities.
The approval of the appropriate regulatory authority is required if
the total of all dividends declared by a subsidiary bank in any
calendar year exceeds the bank's net profits (as defined) for that
year combined with its retained net profits for the preceding two
calendar years. In 1998, the bank subsidiaries may declare dividends
without regulatory approval of $9.5 million plus an additional amount
equal to the net profits of the Company's subsidiary banks for 1998 up
to the date of any such dividend declaration.
Note 15
RELATED PARTY INFORMATION
The Chairman of the Board of Capital City Bank Group, Inc., is
chairman of the law firm which serves as general counsel to the
Company and its subsidiaries. Fees paid by the Company and its
subsidiaries for these services, in aggregate, approximated $295,000,
$347,000, and $225,000 during 1997, 1996, and 1995, respectively.
Under a lease agreement expiring in 2024, a bank subsidiary leases
land from a partnership in which several directors and officers have
an interest. The lease agreement provides for annual lease payments
of approximately $65,000, to be adjusted for inflation in future
years.
At December 31, 1997 and 1996, certain officers and directors were
indebted to the Company's bank subsidiaries in the aggregate amount of
$13,556,000 and $13,469,000, respectively. During 1997, $12,565,000
in new loans were made and repayments totaled $12,478,000. These
loans were made on similar terms as loans to other individuals of
comparable creditworthiness.
Note 16
SUPPLEMENTARY INFORMATION
Components of noninterest income in excess of 1% of total interest
income and noninterest expense in excess of 1% of total interest
income and noninterest income, which are not disclosed separately
elsewhere, are presented below for each of the respective years.
(Dollars in Thousands) 1997 1996 1995
Noninterest Income:
Merchant Fee Income $1,123 $ 976 $1,227
Gains on the Sale of
Real Estate Loans 803 194* 94*
Noninterest Expense:
Associate Insurance 1,250 1,163 1,068
Payroll Taxes 1,253 1,112 963
Maintenance and Repairs 2,179 2,227 1,955
Professional Fees 1,216 1,172 565*
Printing & Supplies 1,511 1,547 1,634
Commission/Service Fees 1,078 819* 878
*Less than 1% of the appropriate threshold.
Note 17
FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISKS
The Company is a party to financial instruments with off-balance-sheet
risks in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and standby letters of credit.
The Company's maximum exposure to credit loss under standby letters of
credit and commitments to extend credit is represented by the
contractual amount of those instruments. The Company uses the same
credit policies in establishing commitments and issuing letters of
credit as it does for on-balance-sheet instruments. As of December
31, 1997, the amounts associated with the Company's off-balance-sheet
obligations were as follows:
(Dollars in Thousands)
Amount
Commitments to Extend Credit(1) $150,765
Standby Letters of Credit $ 1,851
(1) Commitments include unfunded loans, revolving lines of credit
(including credit card lines) and other unused commitments.
Commitments to extend credit are agreements to lend to a customer so
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
The credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities. In general,
management does not anticipate any material losses as a result of
participating in these types of transactions. However, any potential
losses arising from such transactions are reserved for in the same
manner as management reserves for its other credit facilities.
For both on- and off-balance-sheet financial instruments, the Company
requires collateral to support such instruments when it is deemed
necessary. The Company evaluates each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained upon
extension of credit is based on management's credit evaluation of the
counterpart. Collateral held varies, but may include deposits held in
financial institutions; U.S. Treasury securities; other marketable
securities; real estate; accounts receivable; property, plant and
equipment; and inventory.
Note 18
FAIR VALUE OF FINANCIAL INSTRUMENTS
Many of the Company's assets and liabilities are short-term financial
instruments whose carrying values approximate fair value. These items
include Cash and Due From Banks, Interest Bearing Deposits with Other
Banks, Federal Funds Sold, Federal Funds Purchased and Securities Sold
Under Repurchase Agreements, and Short-Term Borrowings. In cases
where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. The
resulting fair values may be significantly affected by the assumptions
used, including the discount rates and estimates of future cash flows.
The methods and assumptions used to estimate the fair value of the
Company's other financial instruments are as follows:
Investment Securities - Fair values for investment securities are
based on quoted market prices. If a quoted market price is not
available, fair value is estimated using market prices for similar
securities.
Loans - The loan portfolio is segregated into categories and the fair
value of each loan category is calculated using present value
techniques based upon projected cash flows and estimated discount
rates. The calculated present values are then reduced by an
allocation of the allowance for loan losses against each respective
loan category.
Deposits - The fair value of Noninterest Bearing Deposits, NOW
Accounts, Money Market Accounts and Savings Accounts are the amounts
payable on demand at the reporting date. The fair value of fixed
maturity certificates of deposit is estimated using the rates
currently offered for deposits of similar remaining maturities.
Long-Term Debt - The carrying value of the Company's long-term debt
approximates fair value as the current rate approximates the market
rate.
Commitments to Extend Credit and Standby Letters of Credit - The fair
value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into
account the present creditworthiness of the counterparts. Fair value
of these fees is not material.
The Company's financial instruments which have estimated fair values
differing from their respective carrying values are presented below:
(Dollars in Thousands)
At December 31,
1997 1996
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
Loans, Net of Allowance
for Loan Losses $689,404 $696,081 $664,017 $669,683
Financial Liabilities:
Deposits 834,812 836,996 866,696 883,643
Certain financial instruments and all nonfinancial instruments are
excluded from the disclosure requirements. The disclosures also do
not include certain intangible assets such as customer relationships,
deposit base intangibles and goodwill. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of
the Company.
Note 19
PARENT COMPANY FINANCIAL INFORMATION
The following are condensed statements of financial condition of the
parent company at December 31
Parent Company Statements of Financial Condition
(Dollars in Thousands)
1997 1996
ASSETS
Cash and Due From Group Banks $ 4,167 $ 2,622
Investment in Subsidiary Bank 109,799 102,362
Other Assets 967 704
-------- --------
Total Assets $114,933 $105,688
======== ========
LIABILITIES
Long-Term Debt $ 13,000 $ 15,000
Other Liabilities 1,483 1,188
------- -------
Total Liabilities 14,483 16,188
------- -------
SHARE OWNERS' EQUITY
Preferred Stock; $.01 par value, 3,000,000 shares
authorized; no shares issued and outstanding - -
Common Stock, $.01 par value; 60,000,000
shares authorized; 5,850,723 and 5,778,366
shares issued and outstanding 58 58
Additional Paid in Capital 6,537 4,934
Retained Earnings 93,288 84,426
Net Unrealized Gain on Investment Securities
Available-for-Sale, Net of Tax 567 82
------- -------
Total Share Owners' Equity 100,450 89,500
------- -------
Total Liabilities and Share Owners' Equity $114,933 $105,688
======== ========
The operating results of the parent company for the three years ended
December 31, are shown below:
Parent Company Statements of Income
(Dollars in Thousands)
1997 1996 1995
OPERATING INCOME
Income Received from Subsidiary Banks:
Dividends $ 6,600 $ 9,600 $3,884
Overhead Fees 3,845 3,106 2,702
Total Operating Income 10,445 12,706 6,586
OPERATING EXPENSE
Salaries and Employee Benefits 2,445 2,353 2,064
Interest on Debt 988 523 -
Professional Fees 617 332 243
Advertising 597 430 391
Restructuring Charge 338 - -
Legal Fees 126 85 48
Other 515 471 354
------ ------ ------
Total Operating Expense 5,626 4,194 3,100
------ ------ ------
Income Before Income Taxes and Equity
in Undistributed earnings of Group Banks 4,819 8,512 3,486
Income Tax Benefit (675) (380) (135)
------ ------ ------
Income Before Equity in Undistributed
Earnings of Subsidiary Banks 5,494 8,892 3,621
Equity in Undistributed Earnings
of Group Banks 6,944 2,468 5,901
------- ------- -------
Net Income $12,438 $11,360 $9,522
======= ======= =======
The cash flows for the parent company for the three years ended December 31,
were as follows:
Parent Company Statements of Cash Flows
1997 1996 1995
Cash Flows From Operating Activities:
Net Income $12,438 $11,360 $9,522
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Equity in undistributed
earnings of Subsidiary Bank (6,944) (2,468) (5,901)
Non-Cash Compensation 563 589 206
Amortization of Goodwill 25 29 52
(Increase) Decrease in Other Assets (295) (477) 140
Net Increase in Other Liabilities 294 137 114
------ ------ ------
Net Cash Provided by Operating Activities 6,081 9,170 4,133
------ ------ ------
Cash From Financing Activities:
Borrowings of Long-Term Debt - 15,000 -
Acquisition of First Financial - (20,666) -
Repayment of Long-Term Debt (2,000) - -
Payment of Dividends (3,576) (5,721) (2,590)
Issuance of Common Stock, Net 1,040 461 15
-------- -------- -------
Net Cash Used in Financing Activities (4,536) (10,926) (2,575)
-------- -------- -------
Net Increase in Cash 1,545 (1,756) 1,558
Cash at Beginning of Period 2,622 4,378 2,820
------- ------- -------
Cash at End of Period $ 4,167 $ 2,622 $ 4,378
======= ======= =======
Note 20
CORPORATE REORGANIZATION
On October 18, 1997, the Company consolidated its three remaining bank
affiliates, Levy County State Bank, Farmers & Merchants Bank of
Trenton and Branford State Bank into Capital City Bank. The
consolidation enabled the Company to present a consistent image to a
broader market and to better serve its clients through the use of a
common name with multiple, convenient locations. The Company's
operating results for 1997 included pre-tax charges of $655,000, which
were attributable to the corporate reorganization.
Note 21
SUBSEQUENT EVENTS
On October 29, 1997, the Company entered into a definitive purchase
and assumption agreement with First Federal Savings & Loan of
Lakeland, Florida ("First Federal") to acquire five of First Federal's
branches facilities which include loan and deposits. The Company
agreed to pay a core deposit premium of $3.3 million, or 6.33%, to assume
approximately $55 million in deposits, purchase loans equal to 80% of
deposits, and acquire the real estate. Four of the five
offices were merged into existing offices of Capital City Bank. The
transaction was completed on January 31, 1998.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures.
Not applicable.
Part III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference to the sections entitled "Election of
Directors" and "Executive Officers, Compensation and Other
Information" in the Registrant's Proxy Statement dated April 3, 1998
to be filed on or about April 3, 1998.
Item 11. Executive Compensation
Incorporated herein by reference to the section entitled "Executive
Officers, Compensation and Other Information" and the subsection entitled
"Director Compensation" under the section entitled "Meetings and Committees
of the Board of Directors" in the Registrant's Proxy Statement dated April 3,
1998, to be filed on or about April 3, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Incorporated herein by reference to the section entitled "Share Ownership
of Management and Principal Share Owners" in the Registrant's Proxy Statement
dated April 3, 1998, to be filed on or about April 3, 1998.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the subsection entitled
"Compensation Committee Interlocks and Insider Participation" under
the section entitled "Meetings and Committees of the Board of Directors" and
the subsection entitled "Transactions With Management and Related Parties"
under the section entitled "Executive Officers, Compensation and Other
Information" in the Registrant's Proxy Statement dated April 3, 1998
to be filed on or about April 3, 1998.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K
14(a)(1) List of Financial Statements
Report of Independent Certified Public Accountants
Consolidated Statements of Financial Condition for the years ended
December 31, 1997 and 1996
Consolidated Statements of Income for each of the three years ended
December 31, 1997
Consolidated Statements of Changes in Share Owners' Equity for each of
the three years ended December 31, 1997
Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1997
Notes to Consolidated Financial Statements
Other schedules and exhibits are omitted because the required
information either is not applicable or is shown in the financial
statements or the notes thereto.
14(a)(3) Exhibits
2(a) Agreement and Plan of Merger, dated as of December 10, 1995, by
and among Capital City Bank Group, Inc.; a Florida corporation to be
formed as a direct wholly-owned subsidiary of the Company; and First
Financial Bancorp, Inc., is incorporated herein by reference to the
Registrant's Form 10-K dated March 29, 1996.
2(b) Merger Agreement and Plan of Merger, dated October 18, 1997, by
and among Capital City Bank, Levy County State Bank, Farmers &
Merchant Bank of Trenton and Branford State Bank, is filed herewith.
3(a) Articles of Incorporation, as amended, of Capital City Bank
Group, Inc., are incorporated herein by reference to Exhibit B of the
Registrant's 1996 Proxy Statement dated April 12, 1996.
3(b) By-Laws, as amended, of Capital City Bank Group, Inc. are
incorporated herein by reference to Exhibit 3(b) of the Company's Form
10-Q for the period ended September 30, 1997 (File No. 0-13358).
10(b) Promissory Note and Pledge and Security Agreement evidencing a
line of credit by and between Registrant and SunTrust, dated November
18, 1995, is incorporated herein by reference to the Registrant's Form
10-K/A dated April 9, 1996.
10(c) Capital City Bank Group, Inc. 1996 Associate Incentive Plan, as
amended, is incorporated herein by reference to Exhibit 10 of the
Registrant's Form S-8 Registration Statement, as filed with the
Commission on December 23, 1996 (File No. 333-18543).
10(d) Capital City Bank Group, Inc. 1996 Director Stock Purchase
Plan, as amended, is incorporated by reference to the Registrant's
Form S-8 filed on December 23, 1996 (Registration No. 333-18557).
10(e) Capital City Bank Group, Inc. 1996 Dividend Reinvestment and
Optional Stock Purchase Plan is incorporated herein by reference to
the Registrant's Form S-3 filed on January 30, 1997 (Registration No.
333-20683).
21 A listing of Capital City Bank Group's subsidiaries is file
herewith.
23(a) Consent of Independent Certified Public Accountants
27 Financial Data Schedule
14(b) REPORTS ON FORM 8-K
Capital City Bank Group, Inc. ("CCBG") filed no Form 8-K during the
fourth quarter of 1997.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on March 27, 1998, on its behalf by the undersigned, thereunto
duly authorized.
CAPITAL CITY BANK GROUP, INC.
/s/ William G. Smith, Jr.
William G. Smith, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on March 27, 1998 by the following persons
in the capacities indicated.
/s/ William G. Smith, Jr.
William G. Smith, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
/s/ J. Kimbrough Davis
J. Kimbrough Davis
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Directors:
/s/ DuBose Ausley
DuBose Ausley
/s/ Thomas A. Barron
Thomas A. Barron
/s/ Cader B. Cox, III
Cader B. Cox, III
/s/ John K. Humphress
John K. Humphress
/s/ Lina S. Knox
Lina S. Knox
/s/ Payne H. Midyette, Jr.
Payne H. Midyette, Jr.
/s/ Godfrey Smith
Godfrey Smith
/s/ William G. Smith, Jr.
William G. Smith, Jr.