SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter:
June 30, 1999
Commission File Number 0-13358
CAPITAL CITY BANK GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2273542
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
217 North Monroe Street, Tallahassee, Florida 32301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(850) 671-0610
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days.
Yes X No _____
At July 31, 1998, 10,179,137 shares of the Registrant's Common Stock, $.01
par value, were outstanding.
CAPITAL CITY BANK GROUP, INC.
FORM 10-Q INDEX
ITEM PART I. FINANCIAL INFORMATION PAGE
NUMBER
1. Financial Statements 3
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
3. Qualitative and Quantitative Disclosure of
Market Risk 20
ITEM PART II. OTHER INFORMATION
1. Legal Proceedings Not Applicable
2. Changes in Securities and Use of Proceeds Not Applicable
3. Defaults Upon Senior Securities Not Applicable
4. Submission of Matters to a Vote of
Security Holders 22
5. Other Information Not Applicable
6. Exhibits and Reports on Form 8-K Not Applicable
Signatures 22
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED JUNE 30
(UNAUDITED)
(Dollars in Thousands, Except Per Share Amounts)(1)
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
1999 1998 1999 1998
INTEREST INCOME
Interest and Fees on Loans $19,388 $19,367 $38,141 $38,000
Investment Securities:
U. S. Treasury 336 485 756 896
U. S. Government Agencies/Corp. 2,349 888 4,685 1,866
States and Political Subdivisions 1,088 737 2,154 1,491
Other Securities 587 120 1,256 208
Funds Sold & Interest Bearing Deposits 1,068 805 2,092 1,672
Total Interest Income 24,816 22,402 49,084 44,133
INTEREST EXPENSE
Deposits $ 9,776 $ 7,995 $19,448 $15,688
Short-Term Borrowings 399 514 731 1,051
Long-Term Borrowings 301 313 611 612
Total Interest Expense 10,476 8,822 20,790 17,351
Net Interest Income 14,340 13,580 28,294 26,782
Provision for Loan Losses 580 618 1,320 1,164
Net Interest Income After Provision
for Loan Losses 13,760 12,962 26,974 25,618
NONINTEREST INCOME
Service Charges on Deposit Accounts 2,455 2,159 4,901 4,233
Data Processing 747 988 1,495 1,841
Trust Fees 439 454 962 781
Securities Transactions - 16 - 24
Other 2,544 2,230 4,930 4,174
Total Noninterest Income 6,185 5,847 12,288 11,053
NONINTEREST EXPENSE
Salaries and Employee Benefits 7,605 6,809 15,083 13,666
Occupancy, Net 1,111 841 2,148 1,666
Furniture and Equipment 1,394 1,288 2,791 2,510
Merger Expense 1,277 - 1,277 -
Other 4,481 3,809 8,561 7,247
Total Noninterest Expense 15,868 12,747 29,860 25,089
Income Before Income Tax 4,077 6,062 9,402 11,582
Income Tax Expense 1,182 2,065 2,842 3,966
NET INCOME $ 2,895 $ 3,997 $ 6,560 $ 7,616
Basic Net Income Per Share $ .28 $ .39 $ .64 $ .75
Diluted Net Income Per Share $ .28 $ .39 $ .64 $ .75
Cash Dividends Per Share $ .12 $ .11 $ .24 $ .22
Average Shares Outstanding - Basic 10,171,693 10,139,975 10,170,626 10,130,881
Average Shares Outstanding - Diluted 10,187,224 10,139,975 10,186,157 10,130,881
(1) Prior period financial information has been restated to reflect the
pooling-of-interests of Grady Holding Company and it subsidiaries.
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
AS OF JUNE 30, 1999 AND DECEMBER 31, 1998
(Dollars In Thousands, Except Share Data)(1)
June 30, December 31,
1999 1998
(Unaudited) (Unaudited)
ASSETS
Cash and Due From Banks $ 67,879 $ 68,399
Funds Sold and Interest Bearing Deposits 83,218 72,625
Investment Securities, Available-for-Sale 327,552 371,597
Loans, Net of Unearned Interest 885,820 844,216
Allowance for Loan Losses (10,060) (9,827)
Loans, Net 875,760 834,389
Premises and Equipment, Net 37,822 37,171
Intangibles 26,211 28,772
Other Assets 32,102 30,722
Total Assets $1,450,544 $1,443,675
LIABILITIES
Deposits:
Noninterest Bearing Deposits $ 261,877 $ 287,904
Interest Bearing Deposits 988,985 965,649
Total Deposits 1,250,862 1,253,553
Short-Term Borrowings 39,649 25,199
Long-Term Debt 17,640 18,746
Other Liabilities 14,327 17,315
Total Liabilities 1,322,478 1,314,813
SHAREOWNERS' EQUITY
Preferred Stock, $.01 par value, 3,000,000
shares authorized, no shares outstanding - -
Common Stock, $.01 par value; 90,000,000
shares authorized; 10,171,612 shares outstanding
at June 30,1999 and 10,163,922 outstanding at
December 31, 1998 102 102
Additional Paid-In-Capital 8,818 8,561
Retained Earnings 122,934 119,521
Accumulated Other Comprehensive
(Loss) Gain, Net of Tax (3,788) 678
Total Shareowners' Equity 128,066 128,862
Total Liabilities and Shareowners' Equity $1,450,544 $1,443,675
(1) Prior period financial information has been restated to reflect the
pooling-of-interests of Grady Holding Company and it subsidiaries.
CAPITAL CITY BANK GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30
(Dollars in Thousands)(1)
1999 1998
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 6,560 $ 7,616
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses 1,320 1,164
Depreciation 1,804 1,703
Net Securities Amortization 646 402
Amortization of Intangible Assets 1,389 513
Gains in Sales on Investment Securities - (24)
Non-Cash Compensation 74 1,677
Net (Increase) Decrease in Interest
Receivable (98) (74)
Net (Increase) Decrease in Other Assets 2,251 (5,192)
Net Increase (Decrease) in Other
Liabilities (2,988) 192
Net Cash Provided by Operating Activities 10,958 7,977
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Payments/Maturities of
Investment Securities 77,272 41,797
Purchase of Investment Securities,
Available-for-Sale (40,701) (35,832)
Net Increase in Loans (42,690) (11,541)
Net Cash Received from Acquisition - 7,022
Purchase of Premises & Equipment (2,604) (1,011)
Sales of Premises & Equipment 149 278
Net Cash Provided by (Used in)
Investing Activities (8,574) 713
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Decrease in Deposits (2,691) (2,425)
Net Increase in Short-Term Borrowings 14,450 2,345
Borrowing from Long-Term Debt 2,262 1,000
Repayment of Long-Term Debt (3,368) (1,168)
Dividends Paid (3,147) (2,282)
Issuance of Common Stock 183 143
Net Cash Used in Financing Activities 7,689 (2,387)
Net Increase (Decrease) in Cash and
Cash Equivalents 10,073 6,303
Cash and Cash Equivalents at Beginning of
Period 141,024 125,670
Cash and Cash Equivalents at End of Period $151,097 $131,973
Supplemental Disclosure:
Interest Paid $ 19,102 $ 15,708
Interest Paid on Debt $ 611 $ 612
Transfer of Loans to ORE $ 865 $ 483
Income Tax Paid $ 3,486 $ 3,843
(1) Prior period financial information has been restated to reflect the
pooling-of-interests of Grady Holding Company and it subsidiaries.
CAPITAL CITY BANK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) MANAGEMENT'S OPINION AND ACCOUNTING POLICIES
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of S-X
and S-K of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Prior year
financial statements have been reformatted and/or amounts reclassified, as
necessary, to conform with the current year presentation, including the
restatement of share and per share data to reflect the pooling-of-interests
of Grady Holding Company and it subsidiaries.
In the opinion of management, the consolidated financial statements contain
all adjustments, which are those of a recurring nature, and disclosures
necessary to present fairly the financial position of the Company as of
June 30, 1999 and December 31, 1998, and the results of operations for the
three and six month periods ended June 30, 1999 and 1998, and cash flows
for the six month periods ended June 30, 1999 and 1998.
The Company and its subsidiaries follow generally accepted accounting
principles and reporting practices applicable to the banking industry. The
principles which materially affect its financial position, results of
operations and cash flows are set forth in Notes to Consolidated Financial
Statements which are included in the Company's 1997 Annual Report and Form
10-K.
(2) INVESTMENT SECURITIES
The carrying value and related market value of investment securities at
June 30, 1999 and December 31, 1998 were as follows (dollars in thousands):
June 30, 1999
Amortized Unrealized Unrealized Market
Available-For-Sale Cost Gains Losses Value
U. S. Treasury $ 22,574 $ 44 $ - $ 22,618
U. S. Government Agencies
and Corporations 76,577 7 1,718 74,866
States and Political
Subdivisions 102,136 307 1,287 101,156
Mortgage-Backed Securities 91,330 239 2,373 89,196
Other Securities 40,702 - 986 39,716
Total $333,319 $597 $6,364 $327,552
December 31, 1998
Amortized Unrealized Unrealized Market
Available-For-Sale Cost Gains Losses Value
U. S. Treasury $ 30,604 $ 217 $ - $ 30,821
U. S. Government Agencies
and Corporations 74,518 176 312 74,382
States and Political
Subdivisions 94,917 1,159 24 96,052
Mortgage-Backed Securities 92,762 195 431 92,526
Other Securities 77,722 207 113 77,816
Total $370,523 $1,954 $880 $371,597
(3) LOANS
The composition of the Company's loan portfolio at June 30, 1999 and
December 31, 1998 was as follows (dollars in thousands):
June 30, 1999 December 31, 1998
Commercial, Financial
and Agricultural $ 99,714 $ 91,246
Real Estate-Construction 57,124 51,790
Real Estate-Mortgage 565,885 542,043
Consumer 163,097 159,137
Loans, Net of Unearned Interest $885,820 $844,216
(4) ALLOWANCE FOR LOAN LOSSES
An analysis of the changes in the allowance for loan losses for the six
month period ended June 30, 1999 and 1998, is as follows (dollars in
thousands):
June 30,
1999 1998
Balance, Beginning of the Period $ 9,827 $ 9,662
Provision for Loan Losses 1,320 1,164
Recoveries on Loans Previously
Charged-Off 418 469
Loans Charged-Off 1,505 1,155
Balance, End of Period $10,060 $10,140
Impaired loans are primarily defined as all nonaccruing loans for the loan
categories which are included within the scope of SFAS 114. Selected
information pertaining to impaired loans is depicted in the table below
(dollars in thousands):
June 30,
1999 1998
Impaired Loans: Valuation Valuation
Balance Allowance Balance Allowance
With Related Credit Allowance $2,072 $194 $2,972 $305
Without Related Credit Allowance 518 - 1,297 -
Average Recorded Investment
for the Period 3,592 - 4,680 *
Interest Income:
Recognized $ 57 $ 48
Collected $ 46 $ 12
The Company recognizes income on impaired loans primarily on the cash
basis. Any change in the present value of expected cash flows on impaired
loans is recognized through the allowance for loan losses.
(5) DEPOSITS
The composition of the Company's interest bearing deposits at June 30, 1999
and December 31, 1998 was as follows (dollars in thousands):
June 30, 1999 December 31, 1998
NOW Accounts $164,460 $154,069
Money Market Accounts 155,335 124,691
Savings Deposits 114,252 118,570
Other Time Deposits 554,938 568,319
Total Interest Bearing Deposits $988,985 $965,649
(6) ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments of Hedging Activities". The statement establishes accounting
and reporting standards for derivative instruments (including certain
derivative instruments imbedded in other contracts). The statement, as
amended, is effective for fiscal years beginning after June 15, 2000. The
adoption of this standard is not expected to have a material impact on
reported results of operations of the Company.
(7) COMPREHENSIVE INCOME
Total comprehensive income is defined as net income and all other changes
in equity which, for Capital City Bank Group, consists solely of changes in
unrealized gains (losses) on available-for-sale securities. The Company
reported total comprehensive income, net of tax, for the three month
periods ended June 30, 1999 and 1998, was as follows (dollars in
thousands):
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
1999 1998 1999 1998
Net Income $2,895 $3,997 $6,560 $7,616
Other Comprehensive Income, Net of Tax
Unrealized Gains (Losses) on Securities:
Unrealized Gains (Losses) on Securities
During the Period (3,493) (119) (4,466) (90)
Less: Reclassification Adjustments for
Gains (Losses) Included in Net Income - 16 - 24
Total Unrealized Gains (Losses)
On Securities (3,493) (135) (4,466) (114)
Other Comprehensive Income, Net of Tax $ (598) $3,862 $2,094 $7,502
These changes reflect a market value decrease in available-for-sale
securities for three and six months ended June 30, 1999 and 1998,
respectively.
(8) ACQUISITION OF GRADY HOLDING COMPANY
The Company completed its acquisition of Grady Holding Company and its
majority-owned subsidiary First National Bank of Grady County on May 7,
1999. First National Bank is a $112 million asset institution with offices
in Cairo and Whigham, Georgia. The transaction was accounted for as a
pooling-of-interests. First National Bank shareowners received 21.5 shares
and Grady Holding Company shareowners received 115.885 shares of CCBG
common stock in exchange for each of their respective shares. A total of
1,309,560 shares of CCBG were issued in the transaction.
QUARTERLY FINANCIAL DATA (UNAUDITED)
(Dollars in Thousands, Except Per Share Data)(1)
1999 1998 1997
Second First Fourth Third Second First Fourth Third
Summary of Operations:
Interest Income $ 24,816 $ 24,267 $ 22,904 $ 21,974 $ 22,402 $ 21,730 $ 21,431 $ 21,733
Interest Expense 10,476 10,313 9,224 8,673 8,822 8,529 8,261 8,320
Net Interest Income 14,340 13,954 13,680 13,301 13,580 13,201 13,170 13,413
Provision for
Loan Loss 580 740 657 618 618 546 597 709
Net interest Income
After Provision
for Loan Loss 13,760 13,214 13,023 12,683 12,962 12,655 12,573 12,704
Noninterest Income 6,185 6,103 6,260 5,271 5,847 5,206 5,066 4,581
Merger Expense 1,277 - 115 - - - - -
Noninterest Expense 14,591 13,992 13,150 12,090 12,747 12,342 12,757 11,790
Income Before
Provision for
Income Taxes 4,077 5,325 6,018 5,864 6,062 5,519 4,882 5,495
Provision for
Income Taxes 1,182 1,660 2,146 2,057 2,065 1,901 1,563 1,861
Net Income $ 2,895 $ 3,665 $ 3,872 $ 3,807 $ 3,997 $ 3,618 $ 3,319 $ 3,634
Net Interest
Income (FTE) $ 14,822 $ 14,420 $ 14,046 $ 13,640 $ 13,922 $ 13,557 $ 13,523 $ 13,819
Per Common Share:
Net Income Basic $ .28 $ .36 $ .38 $ .37 $ .39 $ .36 $ .33 $ .37
Net Income Diluted .28 .36 .38 .37 .39 .36 .32 .37
Dividends Declared .12 .12 .12 .11 .11 .11 .11 .10
Book Value 12.59 12.82 12.69 12.43 12.10 11.80 11.45 11.23
Market Price:
High 25.00 27.63 31.00 33.13 32.67 32.67 27.33 23.50
Low 20.25 22.00 24.13 19.00 29.75 29.25 23.00 20.83
Close 25.00 23.31 27.63 29.13 31.38 31.67 27.00 23.17
Selected Average
Balances:
Total Assets $1,452,215 $1,430,533 $1,257,934 $1,148,404 $1,156,186 $1,147,054 $1,108,788 $1,106,713
Earning Assets 1,304,093 1,282,679 1,131,933 1,038,981 1,043,578 1,035,971 998,037 1,003,039
Loans, Net of Unearned 878,976 850,161 834,315 819,755 823,432 809,949 777,895 784,116
Total Deposits 1,247,452 1,232,816 1,059,192 954,652 962,719 952,511 916,952 924,297
Total Shareowners'
Equity 131,234 130,929 128,250 123,728 121,686 119,455 113,752 112,591
Common Equivalent
Shares:
Basic 10,172 10,170 10,158 10,158 10,140 10,123 10,067 10,055
Diluted 10,187 10,185 10,179 10,158 10,140 10,123 10,167 10,055
Ratios:
ROA .80% 1.04% 1.22% 1.32% 1.39% 1.28% 1.19% 1.30%
ROE 8.85% 11.35% 11.98% 12.20% 13.18% 12.28% 11.58% 13.01%
Net Interest
Margin (FTE) 4.56% 4.56% 4.92% 5.21% 5.35% 5.31% 5.38% 5.47%
(1) All financial information has been adjusted to reflect the pooling-of-
interests of Grady Holding Company and it subsidiaries.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following analysis discusses important factors affecting the financial
condition and results of operations of Capital City Bank Group, Inc., for
the three and six month periods ended June 30, 1999 and 1998. This report
incorporates forward-looking statements based on current plans and
expectations of CCBG, relating to, among other matters, analyses, and
estimates of amounts that are not yet determinable. These forward-looking
statements involve risks and unknown factors beyond our control which may
cause actual future activities and results of operations to be materially
different from those suggested in this document. Among others, the risks
and unknown factors described herein.
The following discussion sets forth the major factors that have affected
the Company's financial condition and results of operations and should be
read in conjunction with the accompanying financial statements. All prior
period financial information has been restated to reflect the pooling-of-
interests of Grady Holding Company and its subsidiaries. The year-to-date
averages used in this report are based on daily balances for each
respective period.
The Financial Review is divided into three subsections entitled Earnings
Analysis, Financial Condition, and Liquidity and Capital Resources.
Information therein should facilitate a better understanding of the major
factors and trends which affect the Company's earnings performance and
financial condition, and how the Company's performance during 1999 compares
with prior years. Throughout this section, Capital City Bank Group, Inc.,
and its subsidiaries, collectively, are referred to as "CCBG" or the
"Company."
On May 7, 1999, the Company completed its acquisition of Grady Holding
Company and its majority-owned subsidiary First National Bank of Grady
County. First National Bank is a $112 million asset institution with
offices in Cairo and Whigham, Georgia. The transaction was accounted for
as a pooling-of-interests. First National Bank shareowners received 21.5
shares and Grady Holding Company shareowners received 115.885 shares of
CCBG common stock in exchange for each of their respective shares. A total
of 1,309,560 shares of CCBG were issued in the transaction.
On December 4, 1998, the Company completed its purchase and assumption
transaction with First Union National Bank ("First Union") and acquired
eight of First Union's branch offices which included deposits. The Company
paid a deposit premium of $16.9 million, and assumed $219 million in
deposits and acquired certain real estate. The deposit premium is being
amortized over ten years.
On January 31, 1998, the Company completed its purchase and assumption
transaction with First Federal Savings & Loan Association of Lakeland,
Florida ("First Federal-Florida") and acquired five of First Federal-
Florida's branch facilities which included loans and deposits. The Company
paid a deposit premium of $3.6 million, or 6.33%, and assumed $55 million
in deposits and purchased loans equal to $44 million. Four of the five
offices were merged into existing offices of Capital City Bank. The
deposit premium is being amortized over fifteen years.
RESULTS OF OPERATIONS
Net Income
Net income was $2.9 million, or $.28 per basic and diluted share for the
second quarter of 1999, a per share decrease of 28.2% over the $4.0
million, or $.39 per basic and diluted share for the comparable period in
1998. Net income was $6.6 million, or $.64 per basic and diluted share for
the six months ended June 30, 1999, a per share decrease of 14.7% over the
$7.6 million, or $.74 per basic and diluted share for comparable period in
1997. A one-time charge for merger expenses related to the acquisition of
Grady Holding Company reduced earnings $787,000 (after tax), or $0.08 per
share, for the three and six months ended 1999. Additionally, earnings for
the three and six month periods ended June 30, 1998 include a one-time
increase in interest income of $400,000 ($246,000, after taxes), related to
a recovery of a previously charged-off loan. Operating revenue, which
includes net interest income and noninterest income, increased $1.2
million, or 6.3%, over the first half of 1998. Offsetting this increase
was higher noninterest expenses primarily attributable to the addition of
eight offices acquired from First Union.
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Interest and Dividend Income $24,816 $22,402 $49,084 $44,133
Taxable Equivalent Adjustment(1) 482 342 949 697
Interest Income (FTE) 25,298 22,744 50,033 44,830
Interest Expense 10,476 8,822 20,790 17,351
Net Interest Income (FTE) 14,822 13,922 29,243 27,479
Provision for Loan Losses 580 618 1,320 1,164
Taxable Equivalent Adjustment 482 342 949 697
Net Int. Inc. After Provision 13,760 12,962 26,974 25,618
Noninterest Income 6,185 5,847 12,288 11,053
Noninterest Expense 15,868 12,747 29,860 25,089
Income Before Income Taxes 4,077 6,062 9,402 11,582
Income Taxes 1,182 2,065 2,842 3,966
Net Income $ 2,895 $ 3,997 $ 6,560 $ 7,616
Percent Change (27.58)% 5.21% (13.87)% 2.50%
Return on Average Assets(2) .80% 1.39% .92% 1.33%
Return on Average Equity(2) 8.85% 13.18% 10.09% 12.81%
(1) Computed using a statutory tax rate of 35%
(2) Annualized
Net Interest Income
Second quarter taxable equivalent net interest income increased $900,000,
or 6.5%, over the comparable quarter in 1998. Taxable equivalent net
interest income for the first half of 1998 increased $l.8 million or 6.4%,
over the first half of 1998. The increase in both periods is attributable
to a higher level of earning assets, primarily investment securities. The
favorable impact of asset growth was partially offset by declining yields.
Table I on page 19 provides a comparative analysis of the Company's average
balances and interest rates.
For the three and six month periods ended June 30, 1998, taxable-equivalent
interest income increased $2.6 million, or 11.2%, and $5.2 million, or
11.6%, respectively, over the comparable prior year periods. Loans which
represent the Company's highest yielding asset, increased (on average)
$55.5 million, or 6.8% and represented 67.4% of total earning assets for
the six months ended June 30, 1999 versus 78.9% for the comparable period
in 1998. The Company's investment income increased significantly due the
purchase of $200 million of investment securities during the fourth quarter
of 1998 as a result of the assumption of deposits from First Union. This
shift in the mix of earning assets, resulting in a higher level of
liquidity, contributed to a 96 basis point decrease in the yield on earning
assets which declined from 8.74% during the first six months of 1998 to
7.78% for the comparable period in 1999.
Interest expense for the three and six month periods ended June 30, 1999,
increased $1.7 million, or 18.8%, and $3.4 million, or 19.8%, respectively,
over the comparable prior year periods. The increase in both periods is
primarily due to the assumption of $219 million of deposits from First
Union during the fourth quarter of 1998. The 23 basis point decline in the
average rate is the result of a lower rate environment. Partially
offsetting the lower rate environment was the Company's continued success
of a higher yielding money market product. Certificates of deposit, which
generally represent a higher cost deposit product to the Company, decreased
from 47.8% of average deposits in the first half of 1998 to 45.4% in 1999.
The Company's interest rate spread (defined as the average federal taxable
equivalent yield on earning assets less the average rate paid on interest
bearing liabilities) declined from 4.39% in the first half of 1998 to 3.73%
in the comparable period of 1999 due to the lower yield on earning assets.
The Company's net interest margin percentage (defined as taxable-equivalent
net interest income divided by average earning assets) was 5.33% in the
first half of 1998, versus 4.56% in the first half of 1999. The decrease in
margin represents the lower yield on earning assets resulting from the high
level of liquidity.
Provision for Loan Losses
The provision for loan losses was $580,000 and $1.3 million, respectively,
for the three and six month periods ended June 30, 1999, compared to
$618,000 and $1.2 million for the comparable periods in 1998. Net charge-
offs were up from the first half of 1998, but remain at low levels relative
to the size of the loan portfolio. The increase was attributable to one
specific credit relationship. Nonperforming loans decreased $440,000, or
8.8%, during the first six months of 1999. The Company's nonperforming
asset ratio declined from .79% at year-end to .69% at June 30, 1999. As
compared to year-end, the reserve for loan losses increased slightly to
$10.1 million, and represented 1.14% of total loans versus 1.16%.
For a discussion of the Company's nonperforming loans, see the section
entitled "Financial Condition."
Based on current economic conditions, the low level of nonperforming loans
and net charge-offs, it is management's opinion that the reserve for loan
losses as of June 30, 1999, is sufficient to provide for losses inherent in
the portfolio as of that date. While the company anticipates providing
loan loss provisions in the second half of 1999 due to continued growth in
the size of the loan portfolio, these amounts could be lower than that
posted in the first half of 1999 due to continuing improvements in credit
quality.
Charge-off activity for the respective periods is set forth below.
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Net Charge-Offs $728,000 $399,000 $1,087,000 $686,000
Net Charge-Offs (Annualized)
as a percent of Average
Loans Outstanding, Net of
Unearned Interest .33% .19% .25% .17%
Noninterest Income
Noninterest income increased $337,000, or 5.8%, in the second quarter of
1999 versus the comparable quarter for 1998, and $1.2 million, or 11.2%,
for the six months ended June 30, 1999 versus the comparable period for
1998. All major categories except data processing revenues posted gains in
both periods.
Service charges on deposit accounts increased $296,000, or 13.7%, and
$667,000, or 15.8%, respectively, over the comparable three and six month
periods for 1998. 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 the first half on
1999 compared to 1998, reflects a service fee increase implemented in the
fourth quarter of 1998 and an increase in the number of accounts.
Data processing revenues decreased $242,000, or 24.4%, and $346,000, or
18.8%, respectively, over the comparable three and six month periods in
1998. The decrease reflects lower processing revenues associated with
government agencies.
Revenue from trust activities declined $15,000, or 3.3%, compared to the
second quarter of 1998, and increased $181,000, or 23.2%, over the
comparable six month period in 1998. The decline in revenues during the
second quarter were attributable to timing differences which will favorably
impact the third quarter. At June 30, 1999, assets under management
totaled $292.3 million compared to 246.3 million at June 30, 1998.
Other income increased $313,000, or 14.0%, and $756,000, or 18.1%,
respectively, for the three and six month periods ended June 30, 1999 over
the comparable prior year periods. Gains on the sale of residential real
estate loans increased $278,000, which continues to reflect the increased
volume of loans attributable to the low rate environment and a higher level
of fixed rate lending. Additionally, the Company recorded a $126,000 gain
on the disposal of assets during the second quarter. ATM fees, interchange
commissions, safe deposit rentals and check printing income account for the
remaining favorable variance.
Noninterest income as a percent of average assets was 1.72% and 1.94%,
respectively, for the first half of 1999 and 1998. The decrease reflects
the asset growth associated with the acquisition of the First Union
offices.
Noninterest Expense
Noninterest expense increased $3.1 million, or 24.5%, and $4.8 million, or
19.0%, respectively, over the comparable three and six month periods in
1998. The increase reflects higher costs in all major expense categories
plus merger expense associated with the Grady Holding Company acquisition.
Compensation expense increased $796,000, or 11.7%, and $1.4 million, or
10.4%, respectively, over the comparable three and six month periods of
1998, reflecting annual raises and an increase in full-time equivalent
employees of 41. During the fourth quarter of 1998, the Company increased
staff due to the addition of eight offices as a result of the assumption of
deposits from First Union.
Occupancy expense, including premises, furniture, fixtures and equipment
increased $376,000, or 17.7%, and $763,000, or 18.3%, respectively, over
the comparable three and six month periods in 1998. The addition of the
eight offices acquired from First Union resulted in higher costs in all
occupancy categories. The most significant increases have occurred in
premises rental, utilities and maintenance costs.
Other noninterest expense increased $1.9 million, or 51.2%, and $2.6
million, or 35.8%, respectively, over the comparable three and six month
periods in 1998. Merger expense of $1.3 million, attributable to the
acquisition of Grady Holding Company and its subsidiaries, was recognized
in the second quarter. The remaining increase was attributable to
telephone expense of $221,000, resulting from the addition of new offices
and implementing a wide-area network, intangible amortization of $876,000,
postage of $102,000 and commission/service fees of $92,000.
Annualized net noninterest expense (noninterest income minus noninterest
expense, net of intangibles and merger expense) as a percent of average
assets was 2.09% in the first half of 1999 versus 2.36% for the first half
of 1998. The Company's efficiency ratio (noninterest expense, net of
intangibles and merger expense, expressed as a percent of the sum of
taxable-equivalent net interest income plus noninterest income) was 65.48%
in the first half of 1999 compared to 63.78% for the comparable period in
1998. The increase in the efficiency ratio reflects rising costs as noted
above.
Income Taxes
The provision for income taxes decreased $883,000, or 42.8%, during the
second quarter and $1.1 million, or 28.4%, during the first six months of
1999, relative to the comparable prior year periods. The Company's
effective tax rate for the first half of 1999 was 30.2% versus 34.2% for
the comparable period in 1998. The decrease in the effective tax rate is
attributable to an increase in tax-exempt income as a percent of pre-tax
income which was 22.9% in the first half of 1999 as compared to 12.9% in
the first half of 1998.
FINANCIAL CONDITION
Average balances for the first half of 1999 reflect the assumption of
deposits from First Union completed during the fourth quarter of 1998.
Table I on Page 19 presents average balances for the three and six month
periods ended June 30, 1999 and 1998.
The Company's average assets increased to $1.4 billion at the end of the
second quarter of 1999 from $1.2 billion in the first half of 1998.
Average earning assets were $1.3 billion for the six months ended June 30,
1999 versus $1.0 billion for the comparable period in 1998. The change in
the mix of earning assets reflects the purchase of $200 million in
investment securities to offset the deposits assumed from First Union.
Average loans increased $55.5 million, or 6.8%, over the comparable period
in 1998. Price and product competition remain strong and there continues
to be an increased demand for fixed-rate, longer term financing. Loan
growth has occurred in all of the portfolios, with the most significant
increase in real estate. Loans as a percent of average earning assets
decreased to 67.4% for the second quarter of 1999, compared to 78.9% for
the second quarter of 1998.
At June 30, 1999, the Company's nonperforming loans were $4.6 million
versus $5.2 million at year-end 1998. As a percent of nonperforming loans,
the allowance for loan losses represented 220% at June 30, 1999 versus 187%
at December 31 and June 30, 1998, respectively. Nonperforming loans
include nonaccruing and restructured loans. Other real estate, which
includes property acquired either through foreclosure, or by receiving a
deed in lieu of foreclosure, was $1.6 million at June 30, 1999, compared to
$1.5 million at December 31, 1998, and $1.8 million at June 30, 1998. The
ratio of nonperforming assets as a percent of loans plus other real estate
was .69% at June 30, 1999, compared to .79% at December 31, 1998, and .87%
at June 30, 1998.
The investment portfolio is a significant component of the Company's
operations and, as such, it functions as a key element of liquidity and
asset/liability management. As of June 30, 1999, the average investment
portfolio increased $172.4 million, or 106.3%, from the comparable period
in 1998. The increase in the investment portfolio was used to invest the
deposits acquired from First Union. Securities in the available-for-sale
portfolio are recorded at fair value and unrealized gains and losses
associated with these securities are recorded, net of tax, as a separate
component of shareowners' equity. At June 30, 1999, shareowners' equity
included an accumulated other comprehensive loss of $3.8 million compared
to a net gain of $678,000 at December 31, 1998, reflecting the rise in
interest rates.
Average deposits increased 29.5% from the $958 million for the first half
of 1998, to $1.24 billion for the first half of 1998. The growth in
deposits is attributable to the assumption of deposits acquired from First
Union and the success of the CashPower money market account. The Company
continues to see a noticeable increase in competition for deposit accounts,
in terms of both rate and product.
The ratio of average noninterest bearing deposits to total deposits was
21.3% for the first half of 1999 compared to 21.2% for the first half of
1998. For the same periods, the ratio of average interest bearing
liabilities to average earning assets was 79.7% and 78.3%, respectively.
The change in both ratios is primarily attributable to the assumption of
First Union deposits and the CashPower money market account.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity, for a financial institution, is the availability of funds to
meet increased loan demand and/or excessive deposit withdrawals.
Management has implemented a financial structure that provides ready access
to sufficient liquid funds to meet normal transaction requirements, take
advantage of investment opportunities and cover unforeseen liquidity
demands. In addition to core deposits, sources of funds available to meet
liquidity demands for the subsidiary banks include federal funds sold, near-
term loan maturities, securities held in the available-for-sale portfolio,
and the ability to purchase federal funds through established lines of
credit with correspondent banks. Additionally, the parent company maintains
a $25 million revolving line of credit. As of June 30, 1999 there was $6.0
million outstanding under this facility. During the first half of 1999,
principal reductions on the line of credit totaled $2.0 million.
The Company's equity capital was $128.1 million as of June 30, 1999,
compared to $128.9 million as of December 31, 1998. Management continues
to monitor its capital position in relation to its level of assets with the
objective of maintaining a "well capitalized" position. The leverage ratio
was 7.05% at June 30, 1999 versus 7.23% at December 31, 1998. Further, the
Company's risk-adjusted capital ratio of 11.85% significantly exceeds the
8.0% minimum requirement under the risk-based regulatory guidelines.
During the first six months of 1999, shareowners' equity decreased
$800,000, or 1.2%, on an annualized basis. The decline was primarily
attributable to a $4.5 million reduction in accumulated other comprehensive
income. This was a result of an unrealized loss in the investment
portfolio due to a rise in interest rates. Partially offsetting the
accumulated other income decline, was growth in equity during the first six
months as a result of net income of $6.6 million and stock issuances of
$300,000. Dividends declared during the first six months totaled $3.1
million, or $.24 per share.
State and federal regulations as well as the Company's long-term debt
agreement place certain restrictions on the payment of dividends by both
the Company and its Group banks. At June 30, 1999, these regulations and
covenants did not impair the Company's (or its subsidiary's) ability to
declare and pay dividends or to meet other existing obligations.
The Company's common stock had a book value of $12.59 per share at June 30,
1999 compared to $12.68 at December 31, 1998. Pursuant to the Company's
stock repurchase program adopted in 1989, the Company has repurchased
790,740 shares (split adjusted) of its common stock. In the first half of
1999, there were no shares repurchased.
YEAR 2000 COMPLIANCE
Introduction
The YEAR 2000 issue creates challenges with respect to the automated
systems used by financial institutions and other companies. Many programs
and systems are not able to recognize the year 2000, or that the new
millennium is a leap year. The problem is not limited to computer systems.
YEAR 2000 issues will potentially effect every system that has an embedded
microchip containing this flaw.
The YEAR 2000 challenge impacts the Company as many of its transactions are
date sensitive. The Company also is effected by the ability of its
vendors, suppliers, customers and other third parties to be YEAR 2000
compliant.
State of Readiness
The Company is committed to addressing the YEAR 2000 challenges in a prompt
and responsible manner and has dedicated significant resources to do so.
An assessment of the Company's automated systems and third party operations
was completed and a plan has been implemented. The Company's YEAR 2000
compliance plan ("Y2K Plan") has nine phases. These phases are (1) project
management, (2) awareness, (3) assessment, (4) renovation, (5) testing and
implementation, (6) risk assessment, (7) customer awareness, (8)
contingency planning, and (9) verification. The Company has substantially
completed phases one, two, three, four, five, six, and eight, although
appropriate follow-up activities are continuing to occur. The Company will
continue the testing and implementation phases of the Y2K Plan throughout
the remainder of the year, and has adopted a comprehensive customer
awareness program (phase seven).
(1) Project Management: The Company has assigned primary responsibility
for the YEAR 2000 project to the President of Capital City Services
Company, a wholly owned subsidiary of Capital City Bank Group, Inc. Also,
the Company has hired an outside consultant to assist in project
administration. Monthly updates are provided to senior management and
quarterly updates are provided to the Board of Directors in order to assist
them in overseeing the Company's readiness.
(2) Awareness: The Company has defined the YEAR 2000 problem and gained
executive level support for allocation of the resources necessary to
renovate and/or upgrade all systems. A YEAR 2000 team has been established
and meets regularly. The strategy developed for YEAR 2000 compliance
covers in-house systems, service bureaus for systems that are outsourced,
vendors, auditors, customers, and suppliers.
(3) Assessment: The Company has completed this phase of the compliance
plan. Information Technology "IT" and non-IT systems have been assessed
and mission critical applications that could potentially be affected have
been identified. Mission critical is defined as anything that may have a
material adverse effect on the Company if not YEAR 2000 compliant.
(4) Renovation: The Company is upgrading and replacing IT and non-IT
systems where appropriate, and all such replacements were complete by June
30, 1999.
(5) Testing and Implementation: The Company's testing of Mission Critical
systems was approximately 99% complete by June 30, 1999. Throughout 1999,
the Company will continue to test IT and non-IT systems and applications
already implemented for YEAR 2000 compliance. As systems test successfully
for YEAR 2000 compliance, they will be certified as compliant and accepted
for implementation.
(6) Risk Assessment: Lending officers have been trained on YEAR 2000
issues and have documented YEAR 2000 readiness of borrowers. Significant
borrowers were mailed a questionnaire and have been assigned a YEAR 2000
risk rating by the Company. Appropriate response to current and future
credit requests will take their YEAR 2000 status into consideration. A
similar assessment was conducted of deposit customers relative to liquidity
risk. Investment and funding strategies have been planned to ameliorate
any potential risk in this area.
(7) Customer Awareness: During the second quarter of 1999, the Company
initiated a comprehensive plan to increase customer awareness of the YEAR
2000 issue and to inform customers of the bank's efforts to become
compliant. This plan includes posting information on the Company's web
site, distribution of quarterly press releases, statement stuffers and
lobby brochures. Associate training was conducted to assure that customers
are provided with accurate information about the Company's Y2K readiness.
(8) Contingency Planning: The Company has drafted a Business
Resumption/Contingency Plan for the YEAR 2000. This plan will incorporate
back-up systems and procedures for Core business processes, should any
unforeseen disruptions occur. This plan was substantially completed by
June 30, 1999.
(9) Verification: The Verification process will take place subsequent to
the actual Century Date Change. This will involve verifying successful
transition to the YEAR 2000 of all systems and applications, at all
critical dates and functions to the YEAR 2000. Monitoring and reporting
protocol has been established for this phase.
Estimated Costs to Address the Company's YEAR 2000 Issues
Costs directly related to YEAR 2000 issues are estimated to be $780,000
from 1998 to 2000, of which approximately 85% has been spent as of June 30,
1999. Approximately 75% of the total spending represents costs to modify
existing systems. Costs incurred by the Company prior to 1998 were
immaterial. This estimate assumes that the Company will not incur
significant YEAR 2000 related costs on behalf of its vendors, suppliers,
customers and other third parties.
Risks of the Company's YEAR 2000 Issues
The YEAR 2000 presents certain risks to the Company and its operations.
Some risks are present because the Company purchased technology
applications from other parties who face YEAR 2000 challenges and
additional risks that are inherent in the business of banking. Management
has identified the following potential risks which could have a material
adverse effect on the Company's business.
1. The Company's subsidiary bank may experience a liquidity problem if
there are a significant amount of deposits withdrawn by customers who have
uncertainties associated with the YEAR 2000. The Company has implemented a
contingency plan to ensure there are appropriate levels of funding
available.
2. The Company's operations could be materially affected by the failure of
third parties who provide mission critical IT and non-IT systems. The
Company has identified its mission critical third parties and will monitor
their Y2K Plan progress. In response to this concern, the Company has
identified and contacted the third parties who provide mission critical
applications. The Company has received YEAR 2000 compliance assurances
from third parties who provide mission critical applications and will
continue to monitor and test their efforts for YEAR 2000 compliance.
3. The Company's ability to operate effectively in the YEAR 2000 could be
adversely affected by the ability to communicate and to access utilities.
The Company is in the process of incorporating a contingency plan for
addressing this situation.
4. The Company's subsidiary bank lends significant amounts to businesses
and contractors in our market area. If the businesses are adversely
affected by the YEAR 2000 issues, their ability to repay loans could be
impaired and increased credit risk could affect the Company's financial
performance. As part of the Company's Y2K Plan, the Company has identified
its significant borrowers, and has documented their YEAR 2000 readiness and
risk to the Company.
5. Sanctions could be imposed against the Company if it does not meet
deadlines or follow timetables established by the federal and state
governmental agencies which regulate the Company and its subsidiaries. The
Company has incorporated the regulatory guidelines for YEAR 2000 into its
Y2K Plan.
Contingency Plan
Contingency plans for YEAR 2000 related interruptions have been developed
and will include, but not be limited to, the development of emergency
backup and recovery procedures, remediation of existing systems parallel
with installation of new systems, replacing electronic applications with
manual processes, and identification of alternate suppliers. All plans
were substantially completed by June 30, 1999.
TABLE I
AVERAGE BALANCES & INTEREST RATES
(Taxable Equivalent Basis - Dollars in Thousands)
FOR THREE MONTHS ENDED JUNE 30
1999 1998
Balance Interest Rate Balance Interest Rate
ASSETS
Loans, Net of Unearned Interest(1)$ 878,976 $19,455 8.88% $ 823,432 $19,431 9.46%
Taxable Investment Securities 232,585 3,278 5.65% 99,090 1,493 6.04%
Tax-Exempt Investment Securities(2) 101,991 1,498 5.89% 63,091 1,015 6.45%
Funds Sold 90,541 1,067 4.73% 57,965 805 5.57%
Total Earning Assets 1,304,093 25,298 7.78% 1,043,578 22,744 8.74%
Cash & Due From Banks 63,430 52,651
Allowance for Loan Losses (10,229) (9,990)
Other Assets 94,921 69,947
TOTAL ASSETS $1,452,215 $1,156,187
LIABILITIES
NOW Accounts $ 151,844 $ 844 2.23% $ 116,794 $ 618 2.12%
Money Market Accounts 154,690 1,404 3.64% 80,555 568 2.83%
Savings Accounts 115,316 598 2.08% 98,159 545 2.23%
Other Time Deposits 560,804 6,930 4.96% 464,959 6,264 5.40%
Total Int. Bearing Deposits 982,654 9,776 3.99% 760,467 7,995 4.22%
Short-Term Borrowings 40,151 399 3.99% 38,844 514 5.31%
Long-Term Debt 18,424 301 6.55% 18,465 313 6.80%
Total Interest Bearing
Liabilities 1,041,229 10,476 4.04% 817,776 8,822 4.33%
Noninterest Bearing Deposits 264,798 202,252
Other Liabilities 14,954 14,473
TOTAL LIABILITIES 1,320,981 1,034,501
SHAREOWNERS' EQUITY
Common Stock 101 101
Surplus 8,801 7,904
Other Comprehensive Income (1,044) 543
Retained Earnings 123,376 113,138
TOTAL SHAREOWNERS' EQUITY 131,234 121,686
TOTAL LIABILITIES & EQUITY $1,452,215 $1,156,187
Interest Rate Spread 3.74% 4.41%
Net Interest Income $14,822 $13,922
Net Interest Margin 4.56% 5.35%
FOR THE SIX MONTHS ENDED JUNE 30
1999 1998
Balance Interest Rate Balance Interest Rate
ASSETS
Loans, Net of Unearned Interst(1)$ 864,648 $38,289 8.93% $ 816,728 $38,151 9.42%
Taxable Investment Securities 237,428 6,697 5.69% 98,689 2,969 6.07%
Tax-Exempt Investment Securities(2) 101,548 2,955 5.87% 63,033 2,038 6.52%
Funds Sold 89,821 2,092 4.70% 61,346 1,672 5.50%
Total Earning Assets 1,293,446 50,033 7.80% 1,039,796 1,672 5.50%
Cash & Due From Banks 63,731 52,739
Allowance for Loan Losses (10,143) (9,874)
Other Assets 94,400 68,984
TOTAL ASSETS 1,441,434 1,151,645
LIABILITIES
NOW Accounts $ 148,491 $ 1,507 2.05% $ 119,527 $ 1,189 2.01%
Money Market Accounts 149,025 2,723 3.68% 80,497 1,128 2.83%
Savings Accounts 115,430 1,175 2.05% 96,811 1,057 2.20%
Other Time Deposits 562,734 14,043 5.03% 458,167 12,314 5.42%
Total Int. Bearing Deposits 975,680 19,448 4.02% 755,022 15,688 4.19%
Short-Term Borrowings 36,706 731 4.02% 41,251 1,051 5.14%
Long-Term Debt 18,627 611 6.61% 18,335 612 6.73%
Total Interest Bearing
Liabilities 1,031,013 20,790 4.07% 814,588 17,351 4.30%
Noninterest Bearing Deposits 264,494 202,641
Other Liabilities 14,845 13,839
TOTAL LIABILITIES 1,310,352 1,031,068
SHAREOWNERS' EQUITY
Common Stock 101 101
Surplus 8,750 7,682
Other Comprehensive Income (215) 651
Retained Earnings 122,446 112,143
TOTAL SHAREOWNERS' EQUITY 131,082 120,577
TOTAL LIABILITIES & EQUITY 1,441,434 1,151,645
Interest Rate Spread 3.73% 4.39%
Net Interest Income $29,243 $27,479
Net Interest Margin 4.56% 5.33%
(1) Average balances include nonaccrual loans. Interest income includes fees on loans of approximately
$847,000 and $1.6 million, for the three and six months ended June 30, 1999, versus $819,000 and
$1.7 million, for the comparable periods ended June 30, 1998.
(2) Interest income includes the effects of taxable equivalent adjustments using a 35% tax rate.
Item 3. Quantitative and Qualitative Disclosure for Market Risk
Overview
Market risk management arises from changes in interest rates, exchange
rates, commodity prices and equity prices. The Company has risk management
policies to monitor and limit exposure to market risk. Capital City Bank
Group does not actively participate in exchange rates, commodities or
equities. In asset and liability management activities, policies are in
place that are designed to minimize structural interest rate risk.
Interest Rate Risk Management
The normal course of business activity exposes Capital City Bank Group to
interest rate risk. Fluctuations in interest rates may result in changes
in the fair market value of the Company's financial instruments, cash flows
and net interest income. Capital City Bank Group's asset/liability
management process manages the Company's interest rate risk.
The financial assets and liabilities of the Company are classified as other-
than-trading. An analysis of the other-than-trading financial components,
including the fair values, are presented in Table II on page 21. This
table presents the Company's consolidated interest rate sensitivity
position as of June 30, 1999 based upon certain assumptions as set-forth in
the notes to the Table. The objective of interest rate sensitivity
analysis is to measure the impact on the Company's net interest income due
to fluctuations in interest rates. The asset and liability fair values
presented in Table II may not necessarily be indicative of the Company's
interest rate sensitivity over an extended period of time.
The Company is currently liability sensitive which generally indicates that
in a period of rising interest rates the net interest margin will be
adversely impacted as the velocity and/or volume of liabilities being
repriced exceeds assets. However, as general interest rates rise or fall,
other factors such as current market conditions and competition may impact
how the Company responds to changing rates and thus impact the magnitude of
change in net interest income.
Table II
FINANCIAL ASSETS AND LIABILITIES MARKET RISK ANALYSIS(1)
(Dollars in Thousands)
Other Than Trading Portfolio June 30, 1999 Market
Year 1 Year 2 Year 3 Year 4 Year 5 Beyond Total Value
Loans
Fixed Rate $102,910 $ 34,722 $ 46,043 $ 45,321 $ 45,503 $ 57,904 $ 332,303 $332,452
Average Interest Rate 9.21% 9.70% 7.69% 8.53% 8.02% 7.73% 6.34%
Floating Rate(2) 377,663 47,507 42,150 16,188 29,316 40,692 553,516 553,763
Average Interest Rate 8.43% 8.09% 8.05% 8.68% 7.94% 7.48% 8.28%
Investment Securities(3)
Fixed Rate 58.325 67,804 20,642 34,901 22,752 112,984 317,407 $317,407
Average Interest Rate 5.87% 5.72% 5.79% 5.67% 5.79% 6.06% 5.83%
Floating Rate 0 0 9,639 0 0 505 10,144 10,144
Average Interest Rate 0 0 5.93% 0 0 6.29% 5.95%
Other Earning Assets
Fixed Rates 0 0 0 0 0 0 0 0
Average Interest Rates 0 0 0 0 0 0 0
Floating Rates 70,500 0 0 0 0 12,718 83,218 83,218
Average Interest Rates 4.53% 0 0 0 0 3.81% 4.42%
Total Financial Assets $609,398 $150,033 $118,474 $ 96,410 $ 97,471 $224,803 $1,296,589 $1,296,985
Average Interest Rates 7.87% 7.39% 7.35% 7.52% 7.48% 6.62% 6.92%
Deposits(4)
Fixed Rate Deposits $485,660 $ 47,761 $ 12,868 $ 5,392 $ 3,066 $ 192 $ 554,938 556,268
Average Interest Rates 4.83% 5.06% 5.26% 5.21% 5.09% 6.17% 4.87%
Floating Rate Deposits 434,047 0 0 0 0 0 434,047 434,047
Average Interest Rates 2.63% 0 0 0 0 0 2.63%
Other Interest Bearing
Liabilities
Fixed Rate Debt 790 740 662 678 698 8,041 11,641 11,705
Average Interest Rate 6.18% 6.01% 6.10% 6.10% 6.09% 5.98% 6.00%
Floating Rate Debt 45,649 0 0 0 0 0 45,649 45,899
Average Interest Rate 4.34% 0 0 0 0 0 4.34%
Total Financial Liabilities $966,146 $ 48,501 $ 13,530 $ 6,070 $ 3,764 $ 8,233 $1,046,275 $1,047,919
Average interest Rate 3.82% 5.07% 5.30% 5.31% 5.28% 5.99% 3.93%
(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 rate deposits in 1998. Other time deposit
balances are classified according to maturity.
PART II. OTHER INFORMATION
Items 1-3.
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Capital City Bank Group, Inc. was
held on April 27, 1999. Proxies for the meeting were solicited pursuant to
Regulation 14A under the Securities Exchange Act of 1934, and there was no
solicitation in opposition to management's solicitations. The following
summarizes all matters voted upon at this meeting.
1. The following directors were elected for terms expiring as noted.
These individuals served on the Board of Directors prior to the Annual
Meeting. The number of votes cast were as follows:
For terms to expire at Against/ Abstentions/
the 2002 annual meeting: For Withheld Broker Non-Votes
Thomas A. Barron 7,415,259 2,491 0
Lina S. Knox 7,412,298 5,450 0
Godfrey Smith 7,415,859 1,891 0
2. The shareowners ratified the selection of Arthur Andersen LLP as the
independent auditors for the Company for 1999. The number of votes cast
were as follows:
Against/ Abstentions/
For Withheld Broker Non-Votes
7,411,373 2,750 3,628
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
Not applicable
(B) Reports on Form 8-K
On May 20, 1999, the Company filed a Form 8-K to report on May 7, 1999,
it completed its acquisition of Grady Holding Company and its subsidiary,
First National Bank of Grady County in Cairo, Georgia. First National Bank
of Grady County is a $112 million asset institution with offices in Cairo
and Whigham, Georgia. The transaction was accounted for as a pooing-of-
interests.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned Chief Financial Officer hereunto duly authorized.
CAPITAL CITY BANK GROUP, INC.
(Registrant)
/s/ J. Kimbrough Davis
J. Kimbrough Davis
Executive Vice President and
Chief Financial Officer
Date: August 16, 1999